Piramal Pharma Ltd (PPLPHARMA) Q3 FY23 Earnings Concall Transcript

Piramal Pharma Ltd (NSE: PPLPHARMA) Q3 FY23 Earnings Concall dated Feb. 09, 2023

Corporate Participants:

Gagan Borana — General Manager, Investor Relations and Sustainability

Nandini Piramal — Chairperson

Vivek Valsaraj — Chief Financial Officer

Peter DeYoung — Chief Executive Officer Global Pharma

Analysts:

Prakash Agarwal — Axis Capital — Analyst

Vivek Ramakrishnan — DSP Investment Managers — Analyst

Rahul Jain — IIFL Wealth — Analyst

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Venkat Nageswar Chalasani — SBI — Analyst

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Chintan Shah — JM Financial — Analyst

Alok Dalal — Jefferies — Analyst

Suraj — — Analyst

Yesil Lakdawala — Emkay Investment — Analyst

Sumit Kamani — Shubh Enterprise — Analyst

Vinod Jain — WF Advisors — Analyst

Ranveer Singh — — Analyst

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

Shashikiran Jain — — Analyst

Avinash Kumar — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q3 FY23 Earnings Conference Call of Piramal Pharma Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. I now hand the conference over to Mr. Gagan Borana, General Manager, Investor Relations and Sustainability from Piramal Pharma Limited. Thank you and over to you sir.

Gagan Borana — General Manager, Investor Relations and Sustainability

Thank you, Ashish. Good evening, everyone. I welcome you all to our Post Result Earning Conference Call to discuss our Q3 and Nine Months FY23 Results. Our results material have been uploaded on our website, and you may like to download and refer them during our discussion. On the call today with us we have Ms. Nandini Piramal, Chairperson, Piramal Pharma Limited, Mr. Peter DeYoung, CEO Global Pharma, and Mr. Vivek Valsaraj, CFO of the company.

Before proceeding with the call I would like to update everyone that the Board of Directors of the company has approved the recommendation to allot equity shares for an amount up to INR1,050 crores subject to receipt of requisite regulatory approvals, market conditions and other considerations. Given this event, we would have to abide by the statutory guidelines issued by the regulator. In regards to our disclosures and external communications. Hence, we would request — hence we would not be able to answer any forward-looking statements, not disclose any further details on the proposed fund-raise doing a deal window period. Therefore, I request everyone on this call to restrict your today’s discussion to Q3 FY 23 and Nine-Month FY23 performance.

For those since last evening post declaring our quarterly results we have received several investor queries. In alignment with the regulatory jurisdictions, we have drafted a response to these queries. We will share our responses to these queries first and then open up the floor for any other questions that you may have. With that — with this. I would like to hand over the call to Ms. Nandini Piramal to share her thoughts.

Nandini Piramal — Chairperson

Good evening, everyone, and thank you for joining our call for Q3 and Nine Months FY 23. Starting with the performance of the company in Q3 and nine months FY23. During the quarter we registered a year-on-year revenue growth of 11% with revenues of INR1,716 crores. Our year-on year revenue growth of nine months was also 11% and with revenues of INR4,918 crores. Our CDMO business grew by 14% and 12% respectively during the quarter and the nine months backed by our growth at Turbhe, Grangemouth and North-America facilities.

Our complex hospital generics grew by 6% during the quarter and nine months for the financial year. Our inhalation anesthesia sales continued its healthy momentum in the U.S. with volume growth driving market-share gains. Our India Consumer Healthcare Businesses registered a growth of 37% for the quarter and 19% for the nine months of the financial year driven by our power brands. EBITDA during the quarter and nine months was 10% impacted by higher operating margins, including raw-material costs, energy prices, wage inflation and marketing costs.

Also during the year, owing to the tight funding situation and the markets, some of our CDMO customers delayed making payments against receivables due to us and as per policy. We have made provisions from the same. We maintained our high-quality track-record of zero OAI as we successfully clear 29 regulatory inspections, including the U.S. FDA and 155 customer audits for the nine months.

Moving onto business-specific highlights, starting with our CDMO business. In our CDMO business, we’re seeing healthy RFPs requests for proposal inflows, an increasing number of customer visits and audit. However, the delay in decision-making at the customers end continues given the macroeconomic and [Technical Issues] and prioritization of our R&D pipeline due to limited capital availability. We’re also seeing some softer demand for our existing generic and API and — portfolio, while we are working on developing new products. We’re seeing good demand in the niche areas of high potent API peptides an antibody-drug conjugates as we continue to invest fixed — capacities.

Our growth capex planned over the next 12 to 18 months are well on-track. Some of the important capex that have gone live in the last few months includes a new in vitro lab at our Ahmedabad PDS site. Capacity expansion at our peptide facility at Turbhe and capacity addition at our Riverview facility in the US.

We have also had a successful quarter in terms of regulatory inspections with a successful USFDA inspection at our Riverview facility in the US. At the sellers will in Lexington facilities where the USFDA inspection concluded in the month of January, we received Form 483 with the VAI classification. We continue to maintain our zero OAI status across our sites in last 12 years.

Navigating the current inflationary environment on account of higher raw-material, energy prices and wage inflation is an important challenge for us in hand and we’re trying to offset that through judicious price increases and work out several cost optimization and operational excellence.

Moving onto our complex hospital generics business. Our inhaled anesthesia portfolio continued its healthy performance in the U.S.market. In the non-U.S. market we’re seeing good demand from our products. And accordingly, increasing our capacity to service this market. Our intrathecal portfolio in the U.S. continues to come command the leading market-share.

In the injectable pain management segment, our performance was impacted by supply constraints at our CMO. We are working towards improving the supply of these products and have seen improved traction in production in the past few months. We continue our focus on building a pipeline of injectable products and have 34 SKUs currently in the pipeline. We also launched two new products during the quarter.

Moving onto our India Consumer Healthcare business. Despite the high base of the previous year we had delivered a healthy growth in quarter three and first nine months of FY23. High-growth in AFFO brands has been a key contributor to performance with 39% growth in the first-nine months of FY23. Our power brands come to be at 41% to total Consumer Healthcare sales in the first-nine months.

The — our top brand grew 66% Y-o-Y and Lacto Calamine grew 44% over the last year in the nine months followed by new launches and traction in e-commerce. In-line with our stated strategy we reinvesting our profits in the consumer business to grow our power brands. We spent about 15% of our revenue in media and trade promotion, which are yielding good results as reflected in the performance.

Further, we launched 21 new product, 25 new SKUs during nine months FY23. New products launched over the last two years, contributed about 17% of the consumer business sales. We have good reach in the general trade with access to 2 lakh outlets. We’re also strengthening our presence in alternate channels of distribution, including e-commerce, modern trade and our own website.

E-commerce product contributes about 14% of our total consumer business sales and has been growing well. To summarize, I’d like to say that based on our recent increase in customer engagements and continued flow of RFPs, we believe that demand for CDMO services especially for our differentiated offerings remains strong. Our inhalation anesthesia portfolio is also seeing a healthy demand.

Further, our Indian consumer healthcare business is delivering high-growth driven by the power brands. Our team of over 6,500 multicultural employees, 17 manufacturing facilities worldwide and a global distribution network in over 100 countries gave us — gives us a solid platform to build scale. We take pride in our quality, track-record and focus on a patient customer and consumer-centricity.

We believe in the potential of our businesses and in-line with our aim to grow the Board has approved the recommendation to lock equity shares for an amount not exceeding, exceeding INR1,050 crores subject to requested regulatory approvals, market conditions and other considerations. Our focus over the next few months will be mainly on capturing demand, driving productivity through operational excellence and executing critical maintenance and planned growth capex. We also aim to execute our products in batches as per customer demand.

And finally, we also conscious of our responsibility towards our plan and society and all stakeholders and hence ESG aspects will always remain a key part of our DNA. With this, I’d like to hand over the call to Vivek, our CFO, who’ll response to the queries with [Indecipherable] evening. Post that we will open the floor for any questions that you may have. Thank you.

Vivek Valsaraj — Chief Financial Officer

Thank you, Nandini, and good evening to all. Thank you to those who have already shared your questions. We’ve tried to provide responses for all of those, however, in case any of your questions have not been responded please feel free to ask them after I finish.

The first question has been why the management decided to raise money? We believe in the potential of all our businesses. As Nandini, mentioned based on our recent increase in customer engagements and continued inflows of request for proposals. We believe that the demand for CDMO services especially for our differentiated offerings remains strong. Also in other hospitals generics business. We are witnessing a steady demand for inhalation anesthesia products and good opportunities in our injectable pipeline.

Our Consumer Healthcare business is also delivering consistent growth backed by our power brands. So in-line with our aim to grow the Board has approved the recommendation to allot equity shares for an amount of INR1050 crores. Subject to receipt of requisite regulatory approvals, market conditions and other considerations.

The next question was, we have mentioned about certain capex coming on-stream at a peptide facility in Turbhe, high potent API facility at Riverview and our Discovery Services facility at Ahmedabad, can you please help provide some details on this? With respect to our PDH facility this is largely addition of a new lab with a new capability for in-vitro testing. Our high potent API facility at Riverview. We have done an expansion of a bay with a 3KL and 4KL reactor. This will meaningfully increase the capacity and incidentally, we yesterday initiatives our first batch for our customer. Our peptide facility at the Turbhe, we’ve added a new 45 centimeter column, which will meaningfully increase capacity.

The next question have been, what were the reasons for slower-growth in our CDMO business? So firstly, we believe the underlying demand for CDMO business, especially for our differentiated offering remains strong. As we mentioned, we are seeing improved traction in customer engagement and our RFP inflows remained stable. Also some of the growth capex backed by customer demand have also come on-stream, as. I just mentioned, which will help drive growth going-forward. However, during this period, our growth was impacted largely because of continued delay in decision-making by customers due to macroeconomic environment and pipeline prioritization, based on the limited availability of capital. We’ve also seen a softer demand for generic API and the vitamins portfolio.

A similar question was, what was the reason for slower-growth in the consumer health — consumer hospital generic business in-quarter three FY23? Inhalation

Anesthesia portfolio the market demand outpace supplies. We are addressing the current supply constraints through debottlenecking exercises and investing in new capacities In our injectable pain management portfolio, we have scale-up challenges at our new CMOS as we transition to post-acquisition. This has now largely been addressed and we are seeing good ramp-up in our production.

The next question has been, what is the reason for sharp decline in EBITDA margins in the quarter and year-to-date? The primary reason for lower-margin is lower [Technical Issues] which led to suboptimal adoption of opex overhead. Historically, you will see that as revenues go up, our margins have increased quarter-on-quarter. We’ve had higher sales promotion expenses in a consumer product business, higher operating expenses in terms of energy costs, wage inflation and raw-material cost, and the right funding situation in the market meant that CDMO customers delayed making payments against receivables, we had as per policy made provisions for the same.

What are some of the remediation measures the company is taking to address the muted growth and profitability? So firstly on the demand front, we are focused on increasing productive selling capacity of our business development team, increasing the number of proposals velocity and win rate. Targeting new customers, new markets in both our CDMO and TAG business. Capacity expansion to address the supply constraints in CDMO in some of the sites and in operate generics business, both in the injectable pain and inhalation anesthesia portfolios. We are also focusing on improving cost process optimization through operational excellence.

So the question on what are the top five strategic priorities for the company right now? As some of these have already been mentioned, we are focused on capturing demand, executing as per customer expectation, driving productivity through operational excellence, executing on critical maintenance and strategic growth capex and continued compliance on quality and safety.

There are been certain question on cost. One of them has been why has your other expenses as seen in the P&L moved up in the sequential-quarter and year-on year? So firstly on the sequential-quarter, quarter three other expenses include the one-time provision for an accounts receivable pertaining to a biotech customer who had a funding challenge while the customer is in the process of seeking alternative funding options, we have as per our policy, made provision for the receivables that were due. This quarter also saw an increased FX impact due to weakening of the India INR against major currencies and also increase in the spend for sales promotion and marketing activities. This expense, it is not therefore a representative of the quarter.

On a year-to-date basis, on a comparable basis and excluding the impact of ForEx. The accounts receivable provision, the increase in other expenses of 15%. This was largely driven by higher sales promotion expenses in our consumer products business and marketing spend in our CDMO, excluding the growth in other expenses is 11%.

There was also a question on why employee expenses are up both sequential and year-on year quarter? So in the sequential-quarter the increase was largely on account of FX, because of the weakening of the INR versus key currencies. It also include an impact of higher average headcount recruited at our Riverview facility where expansion has now gone live as I mentioned, and at our Grangemouth facility where the capacity expansion is going to come on-stream later during this calendar year.

On a year-to-date basis, where if you compare on a like-for-like excluding the impact of ForEx, the year-on-year increase in employee cost for the nine-month period is about 15% and this largely includes impact of increments annualization of positions which were recruited midway through the previous year and positions which were recorded for training in advance of commercialization of our capital expenditure projects.

There was a question on what is the current net-debt in the books? The current net-debt is about INR2,800 crores.

We also had a question on the quantum of capex spend during the nine months period. it’s about $100 million.

So with this we will open the floor for questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. We have our first question from the line of Prakash Agarwal from Axis Capital. Please go-ahead.

Prakash Agarwal — Axis Capital — Analyst

Hi, thanks. Good evening to all. Thanks for the the Q&A and explanation. So, first one was on the [Technical Issues] etc. You said it’s largely from your growth CapEx, but your debt is sitting at INR4,800 crores and that is net-debt, not even gross. So if there are no thought with respect to reducing the debt?

Vivek Valsaraj — Chief Financial Officer

So. As you are aware that the entire fund-raise process has now commenced and obviously, the focus for us is to look at reducing the net-debt as well.

Prakash Agarwal — Axis Capital — Analyst

Yeah. And we had a call in November and I think there was a statement made, that we are looking second-half is usually stronger and margins are at least mid-teens. Between November to December I mean we see that you talked about cost being higher. Some of the costs had come because of higher capacity, but capacity maybe has not been productive as of now. So between November to December what has really gone wrong in terms of guidance?

Vivek Valsaraj — Chief Financial Officer

So because the guidance is largely be in for the second-half and not specifically for a quarter. Secondly, having said that, as we mentioned that there has been a continued delay in decision-making in our CDMO business customers due to which some of the orders did not transpire as expected. And we also saw a weakening or softer demand for our API Generics and vitamins portfolio.

Likewise in our TAG business as I’ve earlier alluded to. In our injectable pain portfolio there were some sluggish receipt of our products from the CMOs where the products were recently transitioned. All of this of course is being addressed through various initiatives across the organization.

Prakash Agarwal — Axis Capital — Analyst

Okay. So you mentioned it’s for second-half, so Q3 is gone. So is there any revision in guidance?

Vivek Valsaraj — Chief Financial Officer

So, Prakash, as you’re aware, we are in a deal window period so it may not be appropriate to make a forward-looking statement now.

Prakash Agarwal — Axis Capital — Analyst

Okay. And just a clarification, you mentioned that some of the costs related to capacity addition has been made. So I understand you can only charge it on the P&L once the revenue also starts. So has the corresponding revenue kick-started? And if so, I understand that the revenue portion would be much smaller versus the cost. And when does it start reversing?

Vivek Valsaraj — Chief Financial Officer

SO Prakash, this is not with respect to the capital expenditure, this is with respect to the workforce who have been hired who will be the operator running the plant when it goes live. They are in the process of being trained for the eventual commercialization that would happen in the near-future or has recently happened.

Prakash Agarwal — Axis Capital — Analyst

Yes, I understand that. But I’m trying to understand that when do they start covering the the top-line, start covering the cost and actually be EBITDA positive for the same? The new capacity that you’re building.

Vivek Valsaraj — Chief Financial Officer

So the commercialization have started the revenues will start flowing in. Once the batches are released and eventually — happens. The production for — facility as I mentioned has commenced yesterday.

Prakash Agarwal — Axis Capital — Analyst

Commenced yesterday, okay. Any other capacity commencement happening during this quarter?

Vivek Valsaraj — Chief Financial Officer

So, as I alluded discovery services in-vitro lab has gone live. Our peptide Turbhe to facility has also gone live in quarter three of FY23.

Prakash Agarwal — Axis Capital — Analyst

Okay, okay. I have more question, I’ll join back the queue.

Vivek Valsaraj — Chief Financial Officer

Thank you, Prakash.

Prakash Agarwal — Axis Capital — Analyst

Thank you.

Operator

Thank you. We have our next question from the line of Vivek Ramakrishnan from DSP Investment Managers. Please go-ahead.

Vivek Ramakrishnan — DSP Investment Managers — Analyst

Good evening. My question was on the net-debt — net-debt to EBITDA covenant on the bonds that you just recently released. Is there any scope I mean, I understand that it does this business in transition and there are pressures. But is there any scope to decrease the net-debt through working capital or delaying capex or creditors and so on, so that you can meet the net-debt, debt to EBITDA guideline of 4.5x? That’s my only question. Thank you.

Vivek Valsaraj — Chief Financial Officer

Yeah, Vivek, we’re looking at all measures to ensure that the net-debt situation is taken care of and our measures are underway.

Vivek Ramakrishnan — DSP Investment Managers — Analyst

Okay. Look-forward. Good luck.

Vivek Valsaraj — Chief Financial Officer

Thank you, Vivek.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants kindly restrict your questions to two at a time. We have our next question from the line of Rahul Jain from IIFL Wealth. Please go-ahead.

Rahul Jain — IIFL Wealth — Analyst

Hi, my question is regarding the loss-making plants which are in the U.S. and U.K. I mean, our U.S. plants are continuously making loss like Lexington or maybe in UK, Morpeth. I mean at the standalone level we have, I mean, net profit which is I mean pointed for the consolidated level the losses are increasing continuously. What is the management’s focus to bring these plants profitable and is there any plan to dispose of these [Technical Issues] or what’s the long-term vision?

Vivek Valsaraj — Chief Financial Officer

So, Rahul, firstly, as we have always been saying that it’s a game of scale. Then every site and especially sites in the overseas where the costs tend to be relatively higher, fixed-cost tend to be. As they get scale they will start making profits. The current challenges obviously been a subdued demand in our CDMO facilities, which is why margins currently has been under pressure. And as the demand comes back on-track and revenue start improving the margins will automatically start increasing. As of now we are not looking at in terms of any disposing of any of the site right now. There’s belief in the potential of what every site has to offer and we are working towards improving the demand situation.

Rahul Jain — IIFL Wealth — Analyst

Also, can I get at the plant-level, also. Are there any India plants losing continuously currently? At the plant-level?

Vivek Valsaraj — Chief Financial Officer

No.

Rahul Jain — IIFL Wealth — Analyst

That’s it from my side.

Operator

Thank you. We have our next question from the line of Subrata Sarkar from Mount Intra Finance Private Limited. Please go-ahead.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Hello. Hello.

Operator

Yes, sir. We can hear you.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Yes. So, madam this is [Technical Issues] longer time period perspective. So [Technical Issues] new company or at the present pharma sector this particularly CDMO space we are we are seeing unprecedented kind of the situation. We understand you, majority of your business is based out of Europe as the — patient situation. But if it is — there also there also — ratios, both in terms of as in terms of like margin and in terms of [Indecipherable]. So as per whatever my initial understanding this is — this situation. so in this context — some highly there — from the historical the piece. Generally, we all know since the standards –investment and then written comes there but still giving all those back. Is this normal is this one in a decade kind of situation?

Nandini Piramal — Chairperson

I think we believe in the medium-term potential because the underlying demand is there. There is R&D innovation happening and. I think customers will still outsource. So overall, I think it’s — I think the overall potential is there. I do think that, I mean, the next six months will be tough for everybody in the industry.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

But I’m not important from a six month perspective. There is CDMO is like as madam you comment the CDMO is something which we have observed. If you see the last decade also. So there is maybe growth like there can be ups and downs, but this is one of the irreversible trend for the big player, like big pharma players. So, I’m talking from that perspective, madam. So is this what my only — point is like what situation we are facing? Like is this once in a decade, kind of a situation or this kind of situation do arise frequently in CDMO space? Although I don’t think so. So from that perspective, madam I’m thinking.

Nandini Piramal — Chairperson

I think. I mean, there is a cycle. So it is a cyclical industry, to some extent. But overall, I think I mean, as I said is underlying demand is still strong. So. I think it will recover.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Okay.

Nandini Piramal — Chairperson

Overall the trend is up.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Perfect. And madam from — again from a business subsidy madam. It is, I’m not asking for very specific –, but what. I mean to say madam if there is a net-debt, 80% of reduction in our margins. What I mean, apart from the fixed cost component also. What I mean to say, madam, are we placing more of a pricing pressure from the like our partners or like is it because of elevated cost structure that’s creating more like reduction from a margin perspective?

Nandini Piramal — Chairperson

I think one of the things is that we have seen over the past few months has been inflation in inputs. So, and solvent as well as energy prices due to the. Russia, Ukraine and other supply-chain problems. So there has — that’s also been part of the pressure and general inflation.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Yes. That’s on the cost segement but are we placing any pricing pressure? Was the contracts in terms of — are we facing in terms of reduction?

Nandini Piramal — Chairperson

No. Our win rate is the same as before.

Subrata Sarkar — Mount Intra Finance Private Limited — Analyst

Okay. Thank you madam. That’s all from my.

Operator

Thank you. We have our next question from the line of Venkat from SBI. Please go ahead.

Venkat Nageswar Chalasani — SBI — Analyst

Yes, good evening. So can you [Technical Issues] to have in the balance sheet around — what is the — when if we can expect to become –. So how what the future plan?

Vivek Valsaraj — Chief Financial Officer

Sorry, Vankat if you could please repeat? I heard about you asking the quantum of debt on the balance sheet and then what is the next part?

Venkat Nageswar Chalasani — SBI — Analyst

Yes, yes, yes. So we are asking for Grangemouth so what is the future plan there? When we can expect to reduce debt and what is the plan to.

Vivek Valsaraj — Chief Financial Officer

So, as you have read, the initiatives have already begun. It has got its own timeframe and as soon as the procedures for this entire activity is completed we will move towards reducing the debt. So it will take up some time, we have to complete the entire process as per regulatory guidelines.

Venkat Nageswar Chalasani — SBI — Analyst

Yeah, yeah. So, yeah, but how often you predict. So what is the timeline to any you said at?

Vivek Valsaraj — Chief Financial Officer

It might, Q2 of FY24.

Venkat Nageswar Chalasani — SBI — Analyst

Q2 FY 24. Okay, thank you. So one more thing — we have in the — we have around 36 molecules to be commercial phase. So what — when we can expect the commercialization and how many markets — how many molecules we can expect to commercialize in near-future?

Vivek Valsaraj — Chief Financial Officer

The historical trend, our Phase III is typically 50% success rate. That’s what it is. So as and when it happens, it will happen, but definitely our focus is to ensure that more of the Phase III pipeline which will ensure stickiness of commercial revenues for the future.

Venkat Nageswar Chalasani — SBI — Analyst

In that with the next two quarters is there any possibility to come to the company. How many markets any [Technical Issues] to this?

Peter DeYoung — Chief Executive Officer Global Pharma

So we can’t give forward guidance as to the specific commercialization timelines of our clients clinical programs. But we do expect that most of our clients typically would contractors for at least one of the major markets. And so we would expect that or whatever we’re describing in our Phase II program. This will be meaningful.

Venkat Nageswar Chalasani — SBI — Analyst

Okay, thank you. Thank you for the answer. Thank you.

Operator

Thank you. We have our next question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Yeah, thanks for the opportunity. So with respect to this commercialization of peptide facility and Riverview facility. What sort of employee cost increase can be accepted and even the other expenses? That’s my first question.

Vivek Valsaraj — Chief Financial Officer

So Tushar, that’s like a forward-looking statement. We would refrain from making a specific guidance on future.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay. What’s the current capacity utilization excluding these two new facilities?

Vivek Valsaraj — Chief Financial Officer

So, for, may we had reached a peak capacity utilization, which is why this entire 40% EBITDA column was put in and that will meaningfully expand capacity for the site. Likewise, for Riverview as well we had reached peak capacity utilization and we expect a meaningful release of capacity with the new block, which has gone live.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

I meant to ask the overall capacity utilization, including all the facilities.

Vivek Valsaraj — Chief Financial Officer

So that’s very difficult to give one number, Tushar. Because every facility, every line is different that we have got formulations, APIs, development, commercial. To give one number of capacity utilization is practically not correct.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay. And what kind of asset turn can be expected for this, the new facilities for peptide as well as the new Riverview facility?

Vivek Valsaraj — Chief Financial Officer

Eventually, it could go up to 2, 2.5.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it. And lastly, if you could just breakdown CDMO business into generics and — generic API retirements and the business for innovator?

Nandini Piramal — Chairperson

Got it. it’s about a third for big pharma, a third for biotechs and a third for genetic, generic pharma customers.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Thank you. That’s it from my side.

Operator

Thank you. We have our next question from the line of Chintan Shah from JM Financial. Please go ahead.

Chintan Shah — JM Financial — Analyst

Hello, hi, thanks for the opportunity. So I have a couple of questions. So on your opening remarks you mentioned that we have initiated various cost saving measures. If you can just highlight what exactly those measures are and what impact do you foresee from them?

Nandini Piramal — Chairperson

Is this cost-saving measures?

Chintan Shah — JM Financial — Analyst

Yes, that’s right.

Nandini Piramal — Chairperson

Yeah. I think we’re looking at a lot of operational improvement across the — across the site as well as procurement and even energy saving measures, things like that.

Chintan Shah — JM Financial — Analyst

Okay. And in terms of employees, I just wanted to understand the increases broadly on back opening is it that we — fully reflected in the current quarter numbers or could we see more impact from the same?

Vivek Valsaraj — Chief Financial Officer

So it’s fairly represented here in terms of the overall increase here, Chintan.

Chintan Shah — JM Financial — Analyst

Okay, sure. And just one last question from my side in the presentation if I see we have mentioned that we’re looking at inorganic opportunity. So looking at the current, that scenario, etc. I just wanted to understand the thought process. Are we actively looking or just like a more from a long-term target basically.

Nandini Piramal — Chairperson

I think as a company we’ve always, we’ve historically looked at acquisitions. But obviously in the last few months. Yeah, valuations have been very, very expensive. So. I would say in the next few months our focus would be more on what I talked about earlier and the strategic priorities. Which is capturing demand and executing on current plans.

Chintan Shah — JM Financial — Analyst

Okay. So what debt levels would be comfortable for you to pursue inorganic opportunity?

Nandini Piramal — Chairperson

I think we’ll have to see.

Vivek Valsaraj — Chief Financial Officer

Yeah. That’s again forward-looking. Chintan, whether not good.

Chintan Shah — JM Financial — Analyst

So I’m ask what number would be, I’m just saying as a strategy what you would be comfortable with to actually pursue those opportunities?

Nandini Piramal — Chairperson

I think it’s a mix of things, but right now I think the focus is — focus is on executing what we have.

Chintan Shah — JM Financial — Analyst

Okay, okay, sure. Thanks. Thanks for answering my questions.

Operator

Thank you. We have our next question from the line of Alok Dalal from Jefferies India Private Limited. Please go-ahead.

Alok Dalal — Jefferies — Analyst

Yeah. Sir, quickly price increases and cost optimization measures have already been undertaken or that will be undertaken now?

Nandini Piramal — Chairperson

It’s a mix and we’re doing both.

Alok Dalal — Jefferies — Analyst

So when do you expect that this to flow-through?

Nandini Piramal — Chairperson

I think it’ll — some things have started, that’s something will take a while. It’s sort of but it will, we should see it over the next year.

Alok Dalal — Jefferies — Analyst

And what is the mix of for generics and non-generics to revenue for CBMO for the quarter and nine months?

Vivek Valsaraj — Chief Financial Officer

Predominantly, generics actually. Non-generic is relatively a smaller portion.

Alok Dalal — Jefferies — Analyst

Okay. In the past, the mix for CDMO used to be 60%-40% in favor of genetics. Vivek, what’s going to mix this quarter and nine months?

Nandini Piramal — Chairperson

It will be around the similar lines.

Alok Dalal — Jefferies — Analyst

Similar. Okay, okay. Thank you so much.

Operator

Thank you. We have our next question from the line of Suraj, an Individual Investor. Please go-ahead.

Suraj — — Analyst

Hello. I hope I can, am I audible?

Nandini Piramal — Chairperson

Yes.

Vivek Valsaraj — Chief Financial Officer

Yeah.

Suraj — — Analyst

Yeah. In consolidated financial result I have seen that the expenses — contemplate that was 150% increase in year-on year. Can you give some color on it and that’s the only question I have sir. Thanks.

Vivek Valsaraj — Chief Financial Officer

Sorry Suraj, please repeat your question?

Suraj — — Analyst

Yeah. In expenses has been the purchase of stocking trade. From year-on-year I have seen a 150% increase. Last Q3 2021, we have [Technical Issues] growth line, this — this quarter. We have INR351 crores.

Vivek Valsaraj — Chief Financial Officer

Yes. So if you’re comparing the overall, — you actually combine all the three items of — which is cost of materials, purchase and changes in inventory for a meaningful comparison. And if you’re comparing it versus the December quarter it may not fully be compatible because we had certain transactions that time as we had mentioned in the earlier Investor call with PEL on account of the certain government tenders, as well as DFA network. If you actually compare it with the sequential quarter you will find that the overall. Material cost as a percentage of sales is actually nearly the same or in fact slightly lower.

Suraj — — Analyst

Yeah, okay. Great, thank you.

Operator

Thank you. We have our next question from the line of Yesil Lakdawala [Phonetic] from Emkay Investments. Please go-ahead.

Yesil Lakdawala — Emkay Investment — Analyst

Hi, good evening everyone. My first question was regarding the commercial products on the patent that we sort of supply and I think our revenues about 56 million last year. Are we the primary source of supply or are we the second source of supply in those 19, 18 odd products. If you could give us an idea there?

Peter DeYoung — Chief Executive Officer Global Pharma

It’s a mix, I think. It’s a set of products and some of which we are one of multiple sources and in others where we are the only source. And I would, that’s all we can probably say that level.

Yesil Lakdawala — Emkay Investment — Analyst

And. Among this 18 odd products that we commercialized. Could you give us a better understanding do this involve newer modalities like A, B, C or are there more traditional small-molecule?

Peter DeYoung — Chief Executive Officer Global Pharma

We haven’t historically given a technology or therapeutic area cut to this. We have described how that pipeline in the past across the different dimensions has grown and that’s been our explanation as to the future is to look at the past trend. And so I would just continue to look at that overall trajectory in the past.

Yesil Lakdawala — Emkay Investment — Analyst

Just continuing on the CDMO side. So, as you said that 50% are usually Phase III tend to go towards commercialization. What is sort of the the feedback we got customers? Are those 50%, about 17 odd molecules. Is there — are they — have they been say interest of purchasing potential commercialization with that or will be just be partners with them during the discovery and development phase?

Peter DeYoung — Chief Executive Officer Global Pharma

So our understanding of the business model is that if someone decides to pursue the clinical work registration with us, their intention and our intention is to be their commercial partner on successful approval and launch. The costs involved for a customer to qualify a company for development and registration and and not later make an order after that would be a very poor investment decision for them because they would have invested a lot of money to qualify us as a CDMO and then not to use it would be a rare if not almost improbable outcome. So the most likely course, a general contract of which we’ve had many in the past is that we do the registration work with them, they get the approval and then we provide the supplies for that. That’s the most frequent, not just us but the overall industry.

Yesil Lakdawala — Emkay Investment — Analyst

Thanks for that. I think in the last call there was some directional guidance given that the we are as a consolidated entity, we’re looking at achieving EBITDA margins of 24%, 26% in the next three to five year. Considering the fact that I think in the genetics beta for CDMO are probably margins a lot lot lower than some of the large scale peers in India. How do you see the mix of the innovator — led CDMO and genetics business changing? Because that will have to have a meaningful change over the next three to five years for us to achieve our margin guidance, right? If you could help me understand that.

Peter DeYoung — Chief Executive Officer Global Pharma

So we’re somewhat restricted in the forward-looking comments. What we could try to maybe point to is that in many of our communications we’ve discussed a lot of effort to train onboard innovative portfolio and progress that pipeline along with our clients and then leave that’s a commercialization. I think that is probably the past actions you can look to guide for the future direction in terms of the mix.

Yesil Lakdawala — Emkay Investment — Analyst

And what our capex can lead.

Operator

Mr. Lakdawala I request you to come back-in the queue sir.

Yesil Lakdawala — Emkay Investment — Analyst

So it’s just the last question is just to add there. I just wanted to set the direction of a capex will be more towards supporting the innovator led initiatives versus being in the traditional generics space.

Peter DeYoung — Chief Executive Officer Global Pharma

So if you look at our locations where the significant capex has been deployed or we’ve made public commitments for the capex, it would be places like Aurora, Riverview, Grangemouth, these are all places that have received or are receiving significant capex. These are also locations that are operating near or at capacity before the capex went in and these are all facilities that predominantly serve on patent clients, whether they be development or later commercial. So these would be — these are all facilities that we would describe as being in differentiated category. These are all facilities that are generally capacity constrained and these facilities generally serve on patent client work.

Yesil Lakdawala — Emkay Investment — Analyst

Thanks a lot, Peter. Thanks a lot. That’s really helpful. Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants kindly restrict your questions to two at a time. We have a question from the line of Sumit Kamani from Shubh Enterprise [Phonetic]. Please go-ahead.

Sumit Kamani — Shubh Enterprise — Analyst

Yes. My question is more or less delivered to the macro levels. Is it the wrong time when we deem as the company. And my second question is why Mr. Ajay Piramal and Dr. Swati Piramal, are not on the board of Piramal Pharma who drove the company right from the 98 rank to the 4th rank in the Indian Pharmaceutical Industry? And that mentors are not with us? So is it the wrong time when is — the market? When is the company in a way that it all the values that we create?

Nandini Piramal — Chairperson

I’ll say that I think they’re very much with us and they’re quite as shareholders, active shareholders and who guided the strategy of the company. And unfortunately, we can’t control the market, and we will leave it at that.

Sumit Kamani — Shubh Enterprise — Analyst

Even we split demerging company entity and. I am the investors since it was the Soumitra Pharmaceutical — later on is Piramal Enterprise. I mean St. Nikola Piramal then Piramal Pharma. I don’t understand what was the purpose behind demerging the company. I mean the pharmaceutical, which is the immense value over the. And after the demerging it’s just vanished all the values. Even the performance of the company is diminishing quarter-on-quarter.

Nandini Piramal — Chairperson

Well, I hope you can keep faith with us. I think we will 0- we believe in the potential of the company.

Sumit Kamani — Shubh Enterprise — Analyst

Yeah, it is our — from the investor community at large is fraternity humble request to bring them back on the Board. That’s it from my side.

Operator

Thank you. We have our next question from the line of Vinod Jain from WF Advisors. Please go-ahead.

Vinod Jain — WF Advisors — Analyst

Good evening. My question again relates to the operating expenses which have increased very significantly over the quarter. But the turnover has not increase commensurately. It has just increased by 11%. Now, does it mean that the higher replacement cost of employees due to attrition is one of the pains or what is the real reason for the increases being so significantly higher that the profitability of the company has diminished significantly sir?

Vivek Valsaraj — Chief Financial Officer

That’s Mr. Jain. As I pointed in my question earlier you look at the other expenses on a YTD basis. It had a one-time impact of certain receivables that was provided as per company policy. It also has an impact of a very volatile ForEx with INR weakening against key currencies. And of course, the numbers are not strictly comparable because post-demerger some of the prior-period items are not aligned with the way currently, the accounting for the same is being done. Having said that, if we were to exclude these and make the numbers on a like for like basis our overall expenses increased by 15%, And this — if we were to exclude the impact of the higher sales promotion and the marketing expenses our increase in expense was 11%, in-line with the top-line growth. So that’s how it is. I understand that the statements to read as they are right now is challenging and therefore, probably it can it can mislead. If you see on the face of it.

Vinod Jain — WF Advisors — Analyst

Very well. My next question relates to the pricing of the rights issue, were there any comment can be made as to what would be the discount or what could be the pricing you are looking at in this difficult times to go-ahead with the rights issue?

Vivek Valsaraj — Chief Financial Officer

Not yet Mr. Vinod, as you can imagine. Certain procedures need to be followed at appropriate time. All of those will be disclosed.

Vinod Jain — WF Advisors — Analyst

Very well. Thank you.

Vivek Valsaraj — Chief Financial Officer

Yeah, thank you so much.

Operator

Thank you. We have our next question from the line of Ranveer Singh. Please go-ahead.

Ranveer Singh — — Analyst

Thanks. Thanks for taking my question. Sir, just two things I wanted to understand. Basically, in historical perspective and now what we see for last few quarters. So, especially in CDMO side what exactly we are, why we are struggling here in terms of margin? And basically what I wanted to understand that INR157 million we are going to invest. The current asset — fixed asset turnover is less than 1%,, 0.7 times something. So, I wanted to understand that whether the utilization even for a newer capex also the same asset turnover ratio is likely to happen? Or why it could not have been done that in an existing facility the better value products would have been substituted? Or is there any disconnect in my understanding that you have some dedicated block there which you cannot change. So what is actually happening in CDMO side and why we are not able to improve the asset turnover ratio? Because they compare with other peer players, they all have much, much bigger –better turnover ratio there. So just if you could highlight something.

Vivek Valsaraj — Chief Financial Officer

Sure, Mr. Singh. So, firstly the question with respect to the CDMO business and margin. The current reason why the margins, overall margins for Piramal Pharma had been suppressed is basically because of a lower scale of turnover. And as we have alluded in CDMO business because customers are taking time to make decisions and issue orders slowed down in the generic and the vitamins portfolio is where we are seeing slowdown in terms of order inflow for the business per se.

There was also an impact of increase in cost, inflationary impact, as you’re aware, increase in the price of raw materials, the utilities which led to margin compression. As far as the site specific asset turnover issues are concerned, as you aware, we are present across 15 sites globally, each of this site has its own distinct capabilities and offerings for the customer and they are not necessarily fungible. So while there could be a small amount of fungibility that may happen within an API within a formulation site. Predominantly, these are dedicated sites, so having dedicated needs of customers and having very differentiated capabilities. And therefore, you cannot pile up all the incoming demand into one particular site and optimize the revenues from that site. Every site has got its own level of operating costs and needs own level of turnover to be able to enhance margins. So. I hope that helps answer your question.

Ranveer Singh — — Analyst

Yes. So, I think in your last call, we mentioned that there was some inventory buildup also from customer side, that was also the reason. But I think it’s not a quite a few few quarters now. Because these regions, we can understand for two-three quarters or four quarters. I can understand the last year or during COVID period, everybody was struggling. Then I think about two or three quarters there was some inventory built-up with the customers. Gradually that got liquidated and people have started showing some improvement there.

So my question is that even if we have a dedicated block and if our block is given a turnover ratio much, much lower rate of 0.5 or 0.7. Isn’t it possible to have a better value products there or substitute the customer there or it is a long-term contract or we are constrained here?

Peter DeYoung — Chief Executive Officer Global Pharma

This is actually gets back to the question from one of the earlier callers, where one of our strategies has been and continues to be to add innovative products to our offerings and have clients place their innovative business at our locations. And this relates to the point that was made earlier about some of the slowdown in decision-making and the subsequent privatization of those clients of new projects that would use up the capacity there is as you described not fully used.

And so, our big push has been and is to execute on the innovative business growth so that we can utilize the capacity in the best way possible. And those do take time to develop and also transfer in or and that is a major focus of our customer acquisition strategy and we believe that as that executes the elements you described will obviously become more favorable for us.

Ranveer Singh — — Analyst

Okay, okay. Okay, fine. And last one, I see that inventory turnover has increased significantly on Q-on-Q this is also. So last quarter is to 181 days from there it has increased to 205 days. Last year it was 151 days. So, that inventory is something, is it in — side product inventory or this is raw material side inventory?

Vivek Valsaraj — Chief Financial Officer

So inventory is both the semi-finished goods, as well as the raw-material inventory predominantly. And you would have historically seen that our quarter-four tends to be higher in terms of revenues which is why the inventory as on the end-of-quarter three, is normally higher to be able to cater to the demand for quarter four.

Ranveer Singh — — Analyst

Okay, okay. Thanks. All the best.

Operator

Thank you. We have our next question from the line of Nitin Gandhi from KIFS Trade Capital Private Limited. Please go-ahead.

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

Yeah, thank you for offering opportunity. I have two questions. This plants which have gone live operational. What was the capex on that and when do you see the optimal capacity utilization happening? I understand, you said 2.5 is a potential of this asset turnover.

And the second question is related to the fundraising. When do you think whether we should be able to finish the — in one or two quarters or you think it could be little more?

Vivek Valsaraj — Chief Financial Officer

So the overall investments across the three capexes that have gone live is roughly about 42 million. I won’t comment on in terms of when they go live because that’s forward-looking statement. And as far as the right is concerned as we mentioned, based on the that we expect and it all depends upon regulatory approvals coming in place. It could be somewhere around quarter two of FY24.

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

Sorry to continue. I have asked for the capacities which has gone live, not the one which are yet to come out of 40.

Vivek Valsaraj — Chief Financial Officer

Correct. Yes. So the capacity I was referring to the same. The capacities which have gone live. The revenues for those have started, but again they reach peak, I cannot your specific period for that at this point in time because of the deal window.

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

Okay. And any breakeven possibly? Not if the peak.

Peter DeYoung — Chief Executive Officer Global Pharma

I guess the only point is that we only are putting capex on the growth side in applications where they were capacity constrained before with the assumption that there is demand for those. That’s why we put the capex in.

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

Yeah. So that’s why seeking based on the time when new plant, when the current scenario. Do you think that breakeven could be deferred by another year or so or whether it will be same like what you initially planned and it could be within 18 months?

Nandini Piramal — Chairperson

I think right now we — as some of these are growth capex so we will expect they’re on-track right now for expectation. With regard the expectations.

Nitin Gandhi — KIFS Trade Capital Private Limited — Analyst

No issues. Thank you very much.

Operator

Thank you. We have our next question from the line of Shashikiran Jain, an Individual Investor. Please go-ahead.

Shashikiran Jain — — Analyst

Well, thank you for the opportunity.. Can you please help me with the past acquisition that has been done like Hemmo Pharmaceutical, CCPL and more. How this is going to synergize into or complement our existing operations and the products that we have? Thank you.

Peter DeYoung — Chief Executive Officer Global Pharma

So, CCPL was a JV where we were making a critical input into one of our lead products for the complex hospital generics business. And the places one can get their input from the market are limited. And by taking control of that JV we can backwardly integrate and assure supply to allow us to meet the growing demand. And so that one is — the synergies about margin enhancement and also revenue surety in a place where we’re growing volumes.

In the case of the Turbhe facility or in the Hemmo Pharmaceuticals, this is an area that is considered more attractive than traditional small molecules. There are limited people who can provide it. It is a high-margin business with significant historical growth, I can’t make forward-looking comments about growth, but we obviously made assumptions in that area. And also we see synergies with our current customers who we were approaching with other business and they would be interested to say well, can you also offer peptide. And I think finally one can fill a peptide in an injectable facility and we have actually a situation where even at the time of the diligence we had a customer that was getting the peptide made and filling it at our Kentucky facility.

And so there are integrated projects synergies you see there. And I think your last question was on the — acquisition, I believe. And in that case, we have a number of customers who Increasingly post the pandemic would like to have an onshore operating for drug product particularly for innovative business. You see a significant demand for that offering and the absence of that demand meant that we would be providing them with drug substance work in one of our North American facilities and he will be handing off to a competitor the drug product work now by being able to offer integrated package. We don’t have to introduce a competitor into our client relationship and we can provide either standalone or integrated services in a geography where there is currently a very-high interest for that offering. So I think those are the — the three I think you asked about and the rationale behind each of them.

Shashikiran Jain — — Analyst

And just a follow-up on that, In case, we are going for any further acquisition. Will you [Indecipherable] possible to generates or and the quantifiers, yes.

Nandini Piramal — Chairperson

I think that will depend on the opportunities. I think we take each opportunity as it comes. But I think the near term focus is on maximizing current assets.

Shashikiran Jain — — Analyst

Thank you. That, that was my last question. Thank you.

Operator

Thank you. We’ll take our last question from the line of Avinash Kumar, an individual investor. Please go-ahead, sir.

Avinash Kumar — — Analyst

Good afternoon, this is Avinash. Congratulation for revenue growth. But there is two-question from my side. One is what is planned capex. I’m searching but it is not concrete given anywhere it’s a total planned capex for FY24 are or one how much?

Vivek Valsaraj — Chief Financial Officer

So, Avinash, we can’t make a forward statement. In terms of what will be the spend in the future. In the past for this particular financial year our capex has been about $100 million.

Avinash Kumar — — Analyst

$100 million?

Vivek Valsaraj — Chief Financial Officer

Yeah.

Avinash Kumar — — Analyst

Yes, okay. And second question is, out of this capex done — already done. How much visibility — revenue visibility is there?

Vivek Valsaraj — Chief Financial Officer

So each of our growth capex has obviously done — been done in anticipation of potential demand that we’ve seen in the areas in which we have invested in. And as we have mentioned, we have invested in high-growth areas in the differentiated offerings that we have whether it’s high potent API, whether it’s in peptides or whether it is at our Discovery Services facilities which all of which have gone live now. So that that is a good visibility that each of these facilities have.

Avinash Kumar — — Analyst

Expected growth percentage, can you?

Vivek Valsaraj — Chief Financial Officer

Sorry. That’s a forward-looking statement again, Avinash. This call we won’t be able to.

Avinash Kumar — — Analyst

Okay, okay, no issue, no issue. Thank you. Thank you for letting me. Thank you.

Vivek Valsaraj — Chief Financial Officer

Thank you so much Avinash.

Operator

Thank you. I now hand the conference over to Mr. Gagan Borana for closing comments. Over to you sir.

Gagan Borana — General Manager, Investor Relations and Sustainability

Thank you, everyone. In case you have any follow-up questions, please feel free to reach-out to me. Thank you once again and have a good day.

Operator

[Operator Closing Remarks]