Limited (POLYMED) Q2 FY23 Earnings Concall Transcript

Poly Medicure Limited (NSE:POLYMED) Q2 FY23 Earnings Concall dated Nov. 07, 2022

Corporate Participants:

Himanshu Baid — Managing Director

Naresh Vijayvergiya — Chief Financial Officer

Analysts:

Rohan John — Analyst

Aditya — HDFC Securities — Analyst

Karan Khanna — AMBIT Capital Private Limited — Analyst

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Prateek Rathi — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Q2 FY ’23 Earnings Conference Call of Poly Medicure Limited hosted by ICICI Securities Limited. [Operator Instructions]

I now hand the conference over to. Mr. Rohan John from ICICI Securities. Thank you, and over to you, sir.

Rohan John — Analyst

Yeah. Thank you, Michelle. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all to the quarter two and half year FY ’23 earnings Conference Call of Poly Medicure Limited. So we have the senior management of the company with us today, represented by Mr. Himanshu Baid, Managing Director; Mr. Naresh Vijayvergiya, CFO; and Avinash Chandra, Company secretary.

With this, I hand over the call to Mr. Baid for the opening remarks. Over to you, sir.

Himanshu Baid — Managing Director

Thanks, Rohan, and thank you once again everybody for joining this call, and I really appreciate your time. I’ll take you through the quarter earnings — quarter two earnings. And for this particular quarter, as you’re aware, the revenue — standalone revenue was around INR264 crores, roughly INR263.99 crores. And if you look at quarter-on-quarter growth, we were able to do around 10% over quarter-on-quarter growth, whereas if we compare from the quarter of last year to this year, we’ve done a growth of around 24%. So that’s a very good growth current looking at the current situation in the markets. And just to inform all the listeners, the export under current quarter grew by around 22% and domestic business grew by around 27%. So both the businesses have done well. As you all know that exports contribute to around two thirds of the business and one-third contribution comes from the domestic business.

If you look at the H1-to-H1 performance, the revenue has grown from around INR415 crores to around 503 crores roughly in that range and the year-on-year growth is around 21% plus. So our guidance for current FY ’23 which was for 20% plus growth, I think we are on track to deliver that growth and that guidance.

And I’ll now take you through some of the significant numbers. So as you all know that EBITDA margin also increased in the current quarter to around INR62 crores. Basically, that was INR63 crores roughly and PAT was INR45.22 crores for the quarter ended September 2022. In the previous quarter PAT was around INR28.8 crores. So there’s a significant jump in the PAT numbers. And in terms of EBITDA, I think we have been around 24% EBITDA, so that’s a constant number.

The current raw metal pricing is still — we’re actually using the material which was procured at higher price because the normal delivery cycle from booking to consumption is almost 3.5 months. The time we booked the raw materials, it comes to the factory — because most of it is imported — and then we always maintain an inventory of around 45 to 60 days. So, by the time, it’s consumed it’s around almost 3.5 months. So now from November onwards we’ve started using material which are lower priced which we started buying in August, and we will definitely see an impact in the costing of the products going forward, though there’s a slight increase in procurement cost due to exchange rate, but I think that is already been factored in, and we hope that in quarter three and quarter four we will see some impact in terms of improved profitability for most of the products we manufacture.

On the currency front, there is no major impact because 60% to 65% revenue is in U.S. dollar, balance in GBP and euro and also some export revenue also in INR is exported to — started exporting to some countries in INR also and there are also some local exporters who buy in INR and export. So if you look at the currency impact in revenue, it’s very minimal, maybe less than 1%. So there is no — practically no impact of dollar appreciating against the INR because other currencies have devaluated, so the net impact is almost negligible. But I think overall we will see quarter three, quarter four doing better in terms of margin. Freight costs have also — costs started coming down and you will see their impact also in quarter three and quarter four.

In terms of — if you look at H1 to H1 performance, last year H1 there were some COVID products which we were selling like VTM and some oxygen therapy products, but that revenue is completely off, so that was close to around INR15 crores, INR20 crores. So that is already zero in this current financial year. So if you remove that, the growth is still higher than 20%, but as we have normalized it, so we are at 21% plus right now between H1 to H1 of previous year and this year.

On the U.S. FDA front, I think we are in the process of completing the new bioequivalence studies and reports to be submitted to U.S. FDA by November end. That’s the current target. And we are expecting the approval to come in 60 to 90 days. That will be our first approval and hopefully the revenue will start coming in — first order should start flowing out of the company maybe end of quarter four.

We have also appointed a new person in U.S., Heyward Powe. He has joined the company on 1st September 2022. He’s joined as VP of Sales and Business Development and Heyward is also helping us to connect to large customers in the U.S. and also is helping us to build the business in the U.S. right now.

In terms of regulation in India, I think as we’re all aware that 1st October 2022 all Class A and B products have been now regulated and that’s very good news for industry because for a long time we were looking for this to come. And finally, government has acted on this and regulated the industry. And Class C and D products, which are more critical, we regulated by 1st October 2023, but now all medical devices are classified as drugs, and there’s a price monitoring by NPPA since 1st April 2020. So that’s a big change in the industry which has come in.

Also, government is coming with a new medical device and drugs bill, which is going to be — it’s called for 2022. The government has already taken industry comments, and they are looking to bring this new bill in the Parliament. Hopefully it is tabled in the winter session and hopefully maybe early next year this bill is passed, and the industry will be having a new regulation, which will be more smoother and medical devices will be having a completely separate chapter. Currently we’re under drugs, but they are denotifying medical devices out of the drugs. There will be a separate chapter to regulate medical devices, which is positive for the industry.

In terms of the construction activities at three Faridabad plants and one plant in Jaipur. So due to current pollution situation in Delhi, as you are all aware in the NCR region, construction activities have been stopped. So that has put some delay in our plans. But as we see right now, Jaipur Mahindra SEZ plant which was supposed to start sometime in end of this year will go to early next year, Q1 — sorry, Q4 of FY ’23. And the Faridabad plant, the EOU plant, is still on track. We are doing final finishing work, so we’ll be able to start partial this plant in Q1 of FY ’23 and two other plants in IMT and Sector 56 in Faridabad are slated for Q2 of FY ’24. We may have few months delay here and there due to current situation and pollution issues, but I think we are on track. We’ll be able to partially start some plants at the due date which we had announced earlier. So partial operations but not full but partial may start on the due dates.

On the capex front, in H1 — till H1, this current financial year, we’ve invested close to INR100 crores, and we are on track to invest around INR175 crores to INR200 crores, as I had mentioned earlier. So all this investment is going into new plants, new capex to build the capability. I think in last few months we have seen a lot of traction on India in terms of China plus one strategy. A lot of companies have got a mandate to move away from China some of their production. Though it will take some time, but I think PolyMed is very well positioned to look at those opportunities because as we will have infrastructure — new infrastructure which will be ready, and we will have spare capacity to look at new projects, I think this investment has come at a very appropriate time to help — to really grab this business, which is opportunity which is coming to India I think in the long run.

Also, if you look at the PLI scheme, we are on track on the PLI scheme. Investments under PLI schemes are on track. This is the first year of operation of PLI scheme. So in the renal space, we had to invest around close to INR15 crores, INR20 crores, which we’ve already done in new capex, new machinery over last 18 months. We have already invested in in vitro diagnostics sector where we are committed to invest around INR10 crores every year on plant and machinery, which we’re already doing to increase capacity. So all the investments are on track. In terms of growth, already as I mentioned, the things are good, export markets are still active. Though there has been a little bit of crisis in emerging markets, I think for us, there’s little slowdown in Africa and Southeast Asia, but they don’t contribute too much to the revenue. So as you know, one-third revenue comes from Europe, one-third from India, and one-third from rest of the world. So other markets have done well.

So if you look at the current growth in exports in H1 to H1, the growth is almost close to 27%. So it’s a very healthy growth in exports, and domestic business H1 to H1 if we see, it has grown by around 11%. So domestic business, of course, there was a lot of COVID products sale in that period in the previous year. So if you normalize that, the other products have grown by around 20% to 22%, but in terms of absolute numbers, it’s around 11%.

So this is the update and I’m happy to take questions from people on the call and thank you very much once again for your patience and time.

Questions and Answers:

Operator

Thank you, sir. Shall we begin the Q&A session?

Himanshu Baid — Managing Director

Yeah, please. Go ahead.

Operator

Thank you very much. [Operator Instructions] We have the first question from the line of Aditya [Phonetic] from HDFC Securities. Please go ahead.

Aditya — HDFC Securities — Analyst

Yeah, hi. Sir, just had a question on Europe. Obviously, it’s one of your largest markets and yet you’re seeing some war. So on the one hand companies are saying it’s a Europe plus one opportunity, but on the other hand there’s going to be some demand destruction. So can you just explain how should we look at the bigger picture?

Himanshu Baid — Managing Director

Yeah, I think there’s no demand destruction. I think the demand is pretty much intact. And I think because of the current supply chain constraints, there are still constraints — global constraints in supply chain. And specifically when you look at China, most of the companies were so dependent on China on 80% to 90% of their purchases. So that is a little bit — so most of these companies are looking at India and alternate sources to buy new products. So I think for us it’s a bigger opportunity than what it was probably a year or two years ago.

Aditya — HDFC Securities — Analyst

Okay, got it. So near term, you’re seeing the orders flow through happen [Phonetic]. There is no problem there.

Himanshu Baid — Managing Director

There’s no problem absolutely. In fact, Europe has done the best actually out of the whole lot in the whole first six months.

Aditya — HDFC Securities — Analyst

Okay. Second question is this medical devices bill is obviously a great initiative by the government and industry has been lobbying for it. So the where do you see yourself gaining market share? Because I believe there’s not much of an unorganized sector. So whom will you really gain market share from, both for you as well as the Indian medical devices industry?

Himanshu Baid — Managing Director

For us, I’ll first take PolyMed. So PolyMed, I think we are looking at market share from MNC companies. I think today with dollar getting so strong, so a lot of these companies import into India and sell the products. Very few companies are manufacturing in India, at least in our space. So I think for us that’s a bigger opportunity. And I think once we are fully regulated, then at least, see, earlier these big companies used to say, we are regulated, Indian industry is not regulated. So there was a huge gap in terms of perception. But now once we are regulated under the same law, same regulation, then the barrier reduces. And for us that is the market we are targeting with larger hospitals.

Now for the Indian industry, I think it’s a similar situation. Earlier because of unregulation, lot of these Chinese products were being flooded into the Indian market with very little oversight on regulation, and you have seen that in the past. I’m not going to talk about this product, but we have seen in the past for products like thermometers and pulse oximeters and masks and everything was coming from China completely unregulated. Now because of regulation, I think Indian companies who are making in India will benefit because then there will be a barometer to judge the quality and there will be a standard to follow. BIS has already made standards of 1,400 medical devices — plus medical devices. So people will have to follow standards and that is part of the regulation.

Aditya — HDFC Securities — Analyst

Got it. Just last question, so will you introduce new products or you expect to gain share from your renal portfolio?

Himanshu Baid — Managing Director

I think we’re also introducing a lot of new products, because every year it is your website also we add six to eight new products and that will continue to happen, and we are already — a lot of new products are in pipeline, as we speak. So it is a continuous innovation, continuous development cycle. We’ll have to increase the basket as we move along.

Aditya — HDFC Securities — Analyst

Okay. Got it. Thanks. Wish you all the best.

Himanshu Baid — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Karan Khanna from Ambit Capital. Please go ahead.

Karan Khanna — AMBIT Capital Private Limited — Analyst

Sir, hi. Thanks for the opportunity. So, sir, firstly on your renal business, you’ve highlighted in your interviews earlier that you plan to grow your renal revenues aggressively in line with your PLI targets.

Himanshu Baid — Managing Director

Correct.

Karan Khanna — AMBIT Capital Private Limited — Analyst

And are receiving good support from the government. So what portion of your renal sales would be coming from government hospitals?

Himanshu Baid — Managing Director

No, so government hospital, we don’t have direct sales to government hospital, and renal is still pretty much out of the government business right now. Government has set up dialysis centers, but they are running privately those dialysis centers. So government support means in terms of policy like PLI scheme that, they have added some duty on the product which were duty-free earlier, so that’s the support the government is giving for local manufacturing in the country, not as a direct support in terms of buying the product.

Karan Khanna — AMBIT Capital Private Limited — Analyst

Got it. And new products segments like renal care itself, how are you able to drive conversion across private hospitals where inhibition regarding Indian products is still present?

Himanshu Baid — Managing Director

I think inhibition regarding Indian products is present in every segment. It’s not only renal. It’s in cardiology, it’s in infusion blood, everywhere — neuro, but I think as time progresses where if Indian companies start demonstrating clinical equivalence, see, for example, for renal, dialyzer is used seven times — reused seven times. If PolyMed dialyzer can be also reused seven times then that is a benchmark, though it should not be reused at all. But the benchmark currently is because dialysis is like more charitable than a curative business, so people say, okay, benchmark, Fresenius’s quality is good because it can be used seven times. So if our product is also used same time, they say, okay, the quality is okay. Or when they are using single-use factors, the clearing, everything — the endotoxin removability, everything is just — so I think for Indian companies it’s more clinical equivalence than anything else. If you prove that we are clinically equivalent that is where you will see the runway increasing.

Karan Khanna — AMBIT Capital Private Limited — Analyst

Sure. And secondly, if I see your gross margin, say, four, five years prior to FY ’22, you’ve maintained gross margins of 66% to 68%. When share of infusion therapy products and your domestic versus export mix was largely stable, sir, do you expect to reach those levels? And if so, by when are you expecting to again revert to 66%, 69% kind of gross margin?

Himanshu Baid — Managing Director

See, Karan, it’s very difficult to project the future in that long term and current scenario because you you’ve seen what’s happened in the last one or two years. But I think our target is to move to high 25s in terms of EBITDA margins. So that is 25 — in that range of 25%, 27%, that is what we are targeting. And if you can go back to that number that will be — that’s what our initial plan — internal plan is to do that. And I think if we achieve that number, then the gross margin will come back to that original level already.

Karan Khanna — AMBIT Capital Private Limited — Analyst

Sure. And lastly on your export business, you highlighted 20% plus YoY growth during the quarter. So has there been any significant — new significant wins during the quarter, or is it largely coming from your existing customer?

Himanshu Baid — Managing Director

No, it’s coming from existing clients, mostly 95%-plus is existing clients?

Karan Khanna — AMBIT Capital Private Limited — Analyst

Great. Thank you. I’ll come back in the queue. Thank you and all the best.

Himanshu Baid — Managing Director

Thanks, Karan. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Rashmi Sancheti from Dolat Capital. Please go ahead.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Yeah. Thanks for the opportunity and good evening, everyone. Sir, first a clarification on the breakup. When you said export 22% growth and domestic 27% growth, it is on YoY basis, right?

Himanshu Baid — Managing Director

No, this is on quarter-to-quarter basis, quarter-to-quarter comparison.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Okay. Sir, can you give us either a contribution or an absolute number for this quarter as well as for the last quarter Q1 FY ’23? And do you give the contribution on the standalone sales or on the consolidated sales?

Himanshu Baid — Managing Director

These are all standalone. The numbers are standalone right now. You’re right, Rashmi.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Okay.

Himanshu Baid — Managing Director

And already for the year as a whole, we have said around 20% growth, and out of that, exports will be close to INR700 crores. That’s the whole plan we have disclosed.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

INR700 crores, you’re talking about…?

Himanshu Baid — Managing Director

For the whole financial year.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Okay. For the whole financial year. So, basically 15% to 17% is something which we are on track, right?

Himanshu Baid — Managing Director

In terms of export growth?

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Yeah, export growth.

Himanshu Baid — Managing Director

No, export will be higher, Rashmi. Last year it was around INR575 crores or something. I don’t remember — recall number correctly, but it may be in that number. So if we’re touching INR700 crores, it will be over 20%.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Okay, sir. And sir, one domestic also. Earlier we guided that we will be doing around 24% to 25%. So that was something ex-COVID because in the first half you mentioned that we have done only 11% growth, right?

Himanshu Baid — Managing Director

Yeah, H1 is 11% because last year in quarter one and initial part of quarter two, there was a lot of spike because of respiratory care products and some VTMs and all that, which is already off the table now. It is already not there in this current financial year. Still we have grown the business. That business was taken out and some new things were added. So I think by the time we end the year, we should be between that 22% to 25% growth cycle in domestic business overall.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Sir, 20% to 25% you meant excluding COVID products or including COVID products?

Himanshu Baid — Managing Director

No, this is overall growth, overall, including COVID products, including everything.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Including COVID products.

Himanshu Baid — Managing Director

It’s a complete absolute number last year and absolute number this year. That was the growth we are looking at.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Understood, sir. And sir, on your GM, that is gross margins, on quarter on quarter also we have seen a contraction. Sir, this was also basically related to the KSM [Phonetic] prices which you mentioned that since you procured on the higher prices and that’s the reason we are seeing quarter-on-quarter contraction also or it is because of some other reason?

Himanshu Baid — Managing Director

No, I think it was mainly because of the raw metal pricing because if you see, at peak level, most of the plastic prices were like $1,500 to $2,000 a ton. And now they have dropped around $1,000 a ton or maybe $1,200 in that range. But as I told you, we have a cycle of 3, 3.5 months if we could think really use material of lower pricing because we order today, the material is shipped at the end of the month, we get the material let’s say now — what I am ordering right now, I will get the material only in my factory by 15 January. And then we already have a 45 days inventory. So by the time we use it, it will be end of February basically. So it’s a 3.5-month to 4-month cycle.

By the time we get the material, let’s say, today’s current price — for example, now the prices have further dropped a little bit, but currency has gone a little bit up. So it normalizes, but still it is much lower than it was maybe in the beginning of the year. Still 40% down than from which was in the beginning of the year.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Understood. Sir, and about infusion therapy, if you can update how much of the contribution to the total sales or, let’s say, in the exports as well as in the domestic market, and what was the kind of growth that we have seen during the quarter, because I think exports we have done well and since 80% to 90% of the exports come from the infusion products only. And also on your renal sales contribution to the total sales, and are we on track of achieving INR100 crores in the renal segment as you guided earlier?

Himanshu Baid — Managing Director

Yeah. So we are on track. We don’t — we are not sharing revenues division wise in the half year period. So I don’t have the numbers, so I can’t share it with you right now. But we are on track because renal will grow towards INR100 crores number. That is — we are on track with that. And in terms of infusion, you’re right, absolutely. 85% contribution from exports comes in the infusion segment because that’s our core business in export, and we have a lot of patents and technology in that area. So we continue to grow in the export market. And overall if you see in the domestic market contribution will be around 65%.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Sir, you’re talking about infusion therapy to domestic is 65%.

Himanshu Baid — Managing Director

Exactly. And exports will be around 85%.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

Understood, sir. And sir, finally, on your dialysis machine installation, how much have you done so far till H1, and what is our expectations for this year as well as for the future?

Himanshu Baid — Managing Director

Yeah. So till September, we have totally installed from the beginning till now around 140 machines, and we expect to install around 60 to 70 machines in the current part of the — the balance part of the year. And next year, we are scaling up already manufacturing, so our target is to sell around close to 500 machines.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

500 machines.

Himanshu Baid — Managing Director

Yeah.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

And these machines are basically installed across — pan India or it is related to some particular regions only as of now?

Himanshu Baid — Managing Director

No, it’s pan-India. It’s gone pan-India.

Rashmi Sancheti — Dolat Capital Market Pvt. Ltd. — Analyst

It would be pan-India. Okay. All right, sir. Thank you. That’s it from my side.

Himanshu Baid — Managing Director

Thanks a lot. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Pankit Shah [Phonetic] from Dinero Wealth. Please go ahead. Hi, sir. Actually wanted to understand more on the U.S. business part. I think we should start some revenue contribution from the early next year by quarter one FY ’24. Can you indicate what would be the size of opportunity and how should we see the ramp up?

Himanshu Baid — Managing Director

See, U.S., we are still waiting for the U.S. FDA approval as I mentioned initially on the call. But I think when we see a three-, four-year window, I think definitely for us the opportunity is around $15 million to $20 million. So that is pretty much there. And I think that part is pretty much clear to us that once you have the approvals and once we start with one product, more products will follow in the U.S. market.

Operator

Initially you will be starting with infusion therapy, right?

Himanshu Baid — Managing Director

Yeah, that is our core business, so we’ll have to start with infusion. And then we’ll keep on adding more products, as time progresses. Because, see, once you enter the market with new product, then the customers starts — I think there is some traction already building for the U.S. right now, again, because of I think this China plus one strategy and a lot of companies have a mandate to move away from China, look for alternate suppliers. I think we are pretty much placed to really look at some of those opportunities.

Operator

Right. And any update on the new R&D center which you were planning in North Carolina?

Himanshu Baid — Managing Director

No, no, R&D is already there, R&D center is already there and there is nothing new. It was established already in 2017 or something the new center and it is still there and is functioning.

Operator

I think we had plans to set up a new center in North Carolina with an investment of INR20 crores [Phonetic].

Himanshu Baid — Managing Director

No. Yeah, that is correct. So that was planned during last one, 1.5 years. But no, we are not going ahead with that. We had hired couple of people but then we let them go because it was very difficult to work during the COVID period. Travel was not possible, and we could not do much. So we continue to have R&D presence in India only.

Operator

Okay. Because if I see over a period of, say, last eight quarters, 10 quarters or two, three years, our R&D expense has been in the similar range of INR3 crores to INR4 crores.

Himanshu Baid — Managing Director

Yeah. So that is — you have to see the cost of hiring engineers, the cost of hiring, let’s say, microbiologists or people working in R&D team is much lower compared to the western world. Western world the same cost is 10 times. Here you can get a engineer for $15,000. In America, if you hire engineer, you hire for $1,50,000. If you want a R&D head in India, maybe you get for $50,000. U.S. it is $300,000. So that’s big difference in terms of cost. So I think for us we are still able to file patents, develop new products. We already have more than 300 patents, which is currently a testimony to our R&D efforts what we are doing right now in the organization. And as a Indian medtech company, I think we have highest number of patents today.

Operator

Right. No, I agree with that point. And when we say we introduce new products, so these new products are new to the market or it’s like existing products and we are adding to that product?

Himanshu Baid — Managing Director

Say again. Could you repeat that question? Sorry, there was some background noise, I could not hear.

Operator

I’m saying when we say we introduce the new product to the market, these products are like completely new to the market itself or there are existing products and we also add to our supplier base?

Himanshu Baid — Managing Director

See, it depends on the category. For example, there could be a product where we come with an increment innovation, there will be a product where we completely come with a completely new device altogether, and it could be — sometimes could be a process improvement or design improvement. So there are different categories where we’re operating. So let’s say in infusion category we have a very strong portfolio there. So there it is more on new product development focus. In other categories, it could be more focused on incremental innovation, or just a change in design and then working on that. So that’s how it works basically. It depends on product to product. Very hard to describe to you on phone.

Operator

And coming to this dialysis machine, so earlier the original plan was to do like 300, 500 machines in two, three years, and we will hit that number this year itself. So is there any — are we planning to get into any different type of machines where similar things can be replicated?

Himanshu Baid — Managing Director

No, I think this is only one type of machine which is used in hospital. They have different models and different levels in terms of what the machines can do. So I think we are going and comparing ourselves with the best available product in the market which is coming from Fresenius in Germany. So we are comparing ourselves with that because today almost 70% installations are done by Fresenius in India. So out of the 40,000 installations in India, almost 70% are by Fresenius. So we have to compare with them and then, of course, they have a very strong service backup. They have very strong after-sales service.

So we will have to move slowly in that direction and offer similar service, similar backup, and similar across the country because we can’t say we don’t have a service in Bangalore, we don’t have spares in Bangalore. See, it is a very cumbersome business, but we have seen that for dialysis business to grow it has to be equipment and consumables. So this is our first foray into equipments, and it is not easy to make a new equipment in India, where there’s a disadvantage of not finding PCB suppliers or touchscreen suppliers or hardware suppliers. So it has been a journey so far learning — big journey, but I think we have done that, and I think we are in a good space right now.

Operator

Great. All the best and thank you.

Himanshu Baid — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Prateek Rathi from Armour Capital Advisors. Please go ahead.

Prateek Rathi — Analyst

Hi, sir. Congratulations on the good set of numbers. Sir, I have a question. We do have a factory, a manufacturing unit in China. And then we have this China plus one policy that we are talking about. What about this China unit there? What’s the focus area and what sales build-up do we see in future from this?

Himanshu Baid — Managing Director

Prateek, China contributes to less than 1%, 1.5% of our total revenue, less than 1.5%. And in the long run, yes, China is more expensive. So it’s not a very big plant. So now you can understand from the number, 98.5% India, 1.5% China, if you look at India-China operation, so that’s not a much significant operation and maybe in due course of time as you see costs going up, maybe we’ll have to take a call. But right now, it is more strategically being there just to understand new technology, [Indecipherable] China maybe better sourcing and they’re making some critical components there. So that is what is happening in China.

Prateek Rathi — Analyst

So there won’t be any further investments in China over a period of time?

Himanshu Baid — Managing Director

We’ve not invested anything significant in the last four, five years in China.

Prateek Rathi — Analyst

Okay. And sir, on the dialysis machines part especially, what market do you see say after once you run your manufacturing unit at full capacity?

Himanshu Baid — Managing Director

So India is close to 3,000 to 4,000 machines a year right now. But I think as everybody talks about dialysis that is underpenetrated today, so maybe in five years the market grows to around 6,000 machines or 7,000 machines. That is my current estimate with…

Prateek Rathi — Analyst

What’s the number of machines?

Himanshu Baid — Managing Director

6,000 to 7,000 machines could be a market in — per annum could be in next 5 years from now from the current 3,000 to 4,000 number.

Prateek Rathi — Analyst

Okay. And what’s the market price of one machine like what’s it going to be?

Himanshu Baid — Managing Director

Margin? No, we haven’t — I can’t disclose it on the call, sorry.

Prateek Rathi — Analyst

Okay. And sir, so on the dialysis machine part, so it’s only going to be direct sales to the customers. So there won’t be any service…

Himanshu Baid — Managing Director

It depends on the contracts also. See, it is — some machines are placed sometimes, some are sold directly. It depends on the contract how you operate your business. Sometimes you would place the machines, sell the consumables, have a contract for consumable, and then you take out the cost of machine from consumables. It could be anything. It depends from customer to customer how you want to address that.

Prateek Rathi — Analyst

All right. Thank you. Thank you, sir. Thank you very much.

Himanshu Baid — Managing Director

Thank you.

Operator

We have the next question from the line of Girish Jain from KJMC Capital. Please go ahead. Yeah. Thank you for this opportunity and congratulations on a good set of numbers, Himanshu ji. I just wanted to understand the rollout of the plants. In the earlier call you had mentioned that the Faridabad IV plant would be operational by this quarter, but now I believe there might be some delay because of the fog issue and the smog issue.

Himanshu Baid — Managing Director

Yeah.

Operator

If you could just tell about the Faridabad IV and Jaipur II.

Himanshu Baid — Managing Director

Yeah. So one plant is coming in Jaipur, so that should be — though it was earlier we had mentioned around quarter three but I think it will go to quarter four some time, so that is what we see right now. Few months of delay, but we are on track. But partially it will be starting by end of this year. Faridabad two plants, one plant will start early next year, quarter one, end of quarter — beginning of quarter four — I’m sorry, quarter four ending or quarter one next year. So between March and April, this plant should be operational. One plant would be operational in quarter two and also Faridabad 56 Sector plant will be also operational in quarter two of next financial year.

Operator

So Faridabad IV is focusing on infusion products or renal products?

Himanshu Baid — Managing Director

No, Faridabad IV has some diagnostic products there where we’re expanding our diagnostic product range. So Faridabad Plant IV is basically for the expansion of some diagnostic products.

Operator

And Jaipur 2 would be, I believe, for the exports.

Himanshu Baid — Managing Director

Exports. Exactly, sir. It is in SEZ, so it will be in exports.

Operator

Okay. And if you could just give some sense of the cash position of the company from the money which had been raised in the QIP, how much has been used and how much is balance?

Himanshu Baid — Managing Director

So, yeah, absolutely. Girish ji, currently we are having maybe a cash balance of close to INR300 crores on the balance sheet. And out of the QIP proceeds of INR400 crores, around INR85 crores was used for working capital and retiring some existing loans and around INR250 crores was close to used in capex over last 18, 19 months in that range. So overall, with current cash flows of the company and the QIP money, we are still having a cash balance of close to INR300 crores. Naresh ji, please correct me if I’m wrong.

Naresh Vijayvergiya — Chief Financial Officer

Yes, sir. We have INR300 crores. The QIP particularly breakup is out of INR400 crores, we have done a capex of around INR250 crores.

Himanshu Baid — Managing Director

Okay, perfect. So that’s what it is, Girish. Girish ji, any further questions on this?

Operator

No. Thank you so much and all the best.

Himanshu Baid — Managing Director

Thank you, Girish ji. Thanks a lot. Thank you, sir.

Operator

Thank you. [Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Himanshu Baid — Managing Director

I’d like to thank all the joinees on the call, and I think it was a very interactive participation by everybody. Thanks, again, everyone for your encouragement and support, and definitely we’re on track to deliver the growth he had promised to all our investors and our stakeholders and look forward to talk to you in quarter three once again. Thanks a lot.

Operator

[Operator Closing Remarks]