Tarsons Products Limited (TARSONS) Q2 FY23 Earnings Concall Transcript

Tarsons Products Limited (NSE:TARSONS) Q2 FY23 Earnings Concall dated Nov. 07, 2022

Corporate Participants:

Rohan Sehgal — Whole Time Director

Santosh Agarwal — Chief Financial Officer & Company Secretary

Analysts:

Praveen Sahay — Edelweiss Wealth — Analyst

Jaiveer Shekhawat — Ambit Capital — Analyst

Rishabh Parekh — Sunidhi Securities — Analyst

Sonal Gupta — L&T Mutual Fund — Analyst

Harsh — Marcellus Investment Managers — Analyst

Ashish — IIFL AMC — Analyst

Ashutosh Garud — Ambit Private Limited — Analyst

Santhosh — Shivanssh Holdings LLP — Analyst

Tanmay Gandhi — Investec — Analyst

Apurva — PhillipCapital — Analyst

Hardik Vora — Union Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the Q2 FY’23 Earnings Conference Call of Tarsons Products Limited, hosted by Edelweiss Finance.

This conference call may contain forward-looking statements about the company, which based on the beliefs, opinions and expectations of the company as on-date of this call. These statements do not guarantee the future performance of the company and it may involve risks and uncertainties that are difficult to predict.

Now I hand over the conference to Mr. Praveen Sahay from Edelweiss Wealth. Thank you, and over to you.

Praveen Sahay — Edelweiss Wealth — Analyst

Thank you, Yashashri. Good afternoon, everyone, and welcome to the Q2 FY’23 earning conference call of Tarsons Products Limited. Today we have with us Mr. Rohan Sehgal, Whole Time Director and Mr. Santosh Agarwal, CFO of the company to discuss the result and to address queries.

So now I hand over the conference to Mr. Rohan Sehgal. Thank you and over to you Mr. Sehgal.

Rohan Sehgal — Whole Time Director

Good afternoon and a very warm welcome to everyone present on the Q2 FY’23 earnings conference call for Tarsons Products Limited. Along with me Mr. Santosh Agarwal, Chief Financial Officer and Company Secretary for Tarsons Products Limited, and SGA, our Investor Relations Advisors. We have uploaded our quarterly investor presentation on the stock exchanges and company’s websites. I hope all of you had an opportunity to go through the same.

Let me begin with the industry opportunities, followed by our performance and highlights for the first half of FY’23. The life science industry is fast evolving and we see enhanced demand for our products. Healthcare services in pharmaceutical market is growing due to improving healthcare infrastructure, which is driving the labware market. The growth of the pharmaceutical sector, investment into R&D and the rising diagnostic centers in India, we’ve seen the demand for laboratory products.

COVID pandemic has acted as a catalyst for growing demand for research, academia, pharma, diagnostics and healthcare-related sectors. With the increasing focus on the pharmaceutical and biotech sectors, healthcare research and development, initiatives and extensive clinical trials, the end users undisputed to witness a robust growth.

Speaking on the financial performance in H1 FY’23, our revenues stood at INR140 crores compared INR145 crores in H1 FY’22, which is a regrowth of 3.8% year-on year. As mentioned in our previous calls, the dip in revenues was on account of the higher share of COVID-related revenues in the first half of FY’22 due to the ongoing pandemic and demand for related products and consumables. This had an impact on our conventional business, which is non-COVID-related products, due to implementing lockdowns across the country.

If we compare on a like-to-like basis after getting the impact of higher share of COVID-related revenues, our conventional business has shown a substantial for quarter two and first half of FY’23. Having said that, the demand scenario remains robust and we expect our revenues to grow owing to the demand for our conventional business products from multiple end user industries we cater to. With continuous addition to new products and SKUs, we envisage, we will be able to increase our market share in the domestic market.

We are also enhancing our focus on the export markets to tap in enormous potential of the export business by delivering our best-in-class products. The export market for our products is estimated at an approximate to INR3,000 crores and we’re just like a drop in the ocean. We have been showcasing our products on the global platforms through multiple channels and we have been receiving very positive response. We have participated in various ways and exhibitions in the global markets to showcase our capabilities and have been receiving regular inquiries.

Owing to this, our export revenue has grown by 11% y-o-y in the quarter two FY’23 and has now on computing to about 38% of our total revenue. We would be investing more time and efforts increase our revenue share from the exports, which will be an important driver of growth going forward. With our dedicated efforts with the right products of global standards and the trust and the brand created for our products, we are confident of gaining market share in the international markets.

On gross margins Q2 FY’23 GP margin stood at 77% as compared to 79% in Q2 FY’22. This because majorly [Technical Issues] product mix, inflationary environment, disruptions in the supply chain on account of geopolitical tensions across the globe had an impact on our raw-material cost, freight cost and other input costs have been putting pressure on our GP margins. On the EBITDA front, we have seen — we have been constantly investing in manpower in various areas of sale generation, marketing, production and other important function, which have led to increased employee cost.

We have also been investing in manpower for our upcoming facilities for which the revenues will start coming in the next financial year. We are taking various initiatives and investing in improving the cost efficiency of our manufacturing process, this includes cost rationalization and efficiency improvement strategies such as investment in advanced automation solutions to avoid human error, enhance throughput and increase the productivity of our manufacturing operations. Along with operating leverage, productivity enhancement and automation will help us increase our margins going forward.

We have a few ongoing capital expenditure programs for the next wave of growth. And the entire capital expenditure is expected to be completed by Q2 of FY’24. The new Panchla facility will allow us to cater to a completely new product segment for Tarsons such as bioprocess and cell culture. We entered this segment because the Indian cell culture market is developing and is entirely catered by multi-national players. We’ve been in the plastic labware industry for the last four decades and with the right quality products we are optimistic of gaining market share in the new product category as well. Along with the revenue growth, we are focusing on improving our operational strength for which we are developing a fulfillment center in Amta, West Bengal to consolidate our warehouse operation that has been new centralized location in order to better manage our inventories and achieve cost synergies. In order to reduce our reliance on third-party, the company’s cost realization of our products, we are developing in-house stabilization plant for captive assumption.

Before handing over the call to Santhosh, I’d like to mention that we are seeing growth from both existing and new business, the Indian plastic labware market is still maturing and growing at a healthy rate. We being one of the industry’s dominant players in India will undoubtedly capitalize on this opportunity along with the domestic market we see immense potential for our products globally and with the addition of new range of products and with our upcoming facility we are very pleased to cater the growing needs of the plastic labware market globally.

With this, I would like to hand over the call to Mr. Santosh Agarwal, CFO For Tarsons for his comments on the operational and financial highlights.

Santosh Agarwal — Chief Financial Officer & Company Secretary

Good afternoon, everyone. And a warm welcome to our Q2 FY’23 Earning call. On the revenue front, revenue from operations for Q2 FY’23, it stood at INR71.2 crore, as compared to INR76 crore fiscal in Q2 FY’22, a de-growth of 6% on Y-o-Y basis. For H1 FY’23, revenue from operations for H1 FY’23 stood at INR140 crore, as compared to INR145 crore in H1 FY’22, a degrowth of 3.7% on Y-o-Y basis.

Just to iterate what Rohan said, we had COVID related revenues in Q2 of FY’22, which are negligible in Q2 FY’23, but we still maintained our revenue run rate and has grown in our conventional product range. Revenue from exports stood at INR27.2 crore, a growth of 11% and domestic sales de-grew by 14% to INR44.5 crore on a Y-o-Y basis in Q2 FY’23. For H1 FY’23, export stood at INR47 crore, of growth of 12% and domestic sales was INR93 crore, de-grew by 10% on Y-o-Y basis. For Q2 FY’23, exports sales contributed around 38% and domestic sales contributed around 62%. And for H1 FY’23, export sales contributed around 34% and domestic sales contributed around 66%.

On gross profit level, our gross profit for Q2 FY’23 stood at INR55 crore as compared to INR60.1 crore in Q2 FY’22, a de-growth of 9%. For H1 FY’23, GP stood at INR109 crore, as compared to INR117 crores in H1 FY’22, de-growth of 7%. GP margin for Q2 FY’23 stood at 77% as compared to 79% in Q2 FY’22 and for H1 FY’23, it was 78% [indecipherable] 80.5% in H1 FY’22. Gross margins were impacted due to the change in product mix, higher raw material costs, rate and other ancillary costs, with respect to procurement on the back of supply chain disruptions.

On EBITDA level, EBITDA for Q2 FY’23 stood at INR33 crore as against INR39 crore in Q2 FY’22, a Y-o-Y de-grown of 15%. EBITDA for H1 FY’23 stood at INR64 crore was against INR75 crore in H1 FY’22 of Y-o-Y de-growth of 15%. EBITDA margin for Q2 FY’23 is 46% and for Q2 FY’22 EBITDA margin stood at 50.6% and EBITDA margin for H1 FY’23 were 45.6% and for H1 FY’22 EBITDA margin stood at 51.8%.

Our investment in manpower costs for future growth resulted in lower EBITDA margin. Furthermore, a higher tier of sales promotion marketing and travel expenses to assets, export geography, had an impact on EBITDA margin. This will be compensated for one — we see higher growth in our export revenue. At a PAT level, profit-after-tax for Q2 FY’23 was INR21.5 crore and Q2 FY’22 had INR25 crore, which indicates a de-growth of 13%. Profit-after-tax for H1 FY’23 was INR42 crore and H1 FY’22 at INR450 crore, which indicates the de-growth of 16%. PAT margin for Q2 FY’23 stood at 30% and for Q2 FY’22, it was 32%. PAT margin for H1 FY’23 stood at 30% and for H1 FY’22, it was 34.3%.

On the balance sheet front, we are a zero net debt free company as on September 2022. Our receivable days stood at 75 days due to higher payer of export revenues for H1 FY’23. Since we had more than 300 product range and 1,700 SKUs we need to maintain inventory to cater to demand of our products. Our inventory days stood at 127 days approx. We have made a strong cash flow generation for H1 FY’23, despite a dip in revenues. Our cash flow from operations stood at INR34.4 crore as compared to INR27.7 crore in H1 FY’22.

With this, I would like to open the floor for Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure, thank you. Rohan, firstly, can you explain what is the reason behind the sequential decline in your domestic business? We understand Y-o-Y decline because they were negligible COVID revenues, but what explains is the sequential decline.

Rohan Sehgal — Whole Time Director

So sequentially, we have seen — from quarter one, we have seen a slight increase in our revenues in quarter two, but Y-o-Y, of course, we have explained even in our opening speech that, there was a higher level of COVID-related revenues and it’s taking time for the Indian industry as a whole to bounce back and we’re seeing a positive trend because if you look at non-COVID base which was there in 2020, there has been robust growth from there onwards and we expect further growth moving forward.

Jaiveer Shekhawat — Ambit Capital — Analyst

So I was asking only about the domestic business, so which end user segments are you seeing more softness in demand currently? And, was there any impact of the price hikes that you might have taken on the overall demand?

Rohan Sehgal — Whole Time Director

So not really, I think the — we have taken one single price hike, and we have not taken any further price hikes after that in this financial year and things have been pretty smooth. So far, in the — I think pharma and biotech are growing stronger than the rest of the segments diagnostic, of course, experiencing a lot of disruptions. So although, there are more players in the market, the business is still not where it should be, because there is increased competition in the diagnostics space, even the research in the government sector, we read some news of funds coming in but things are still yet to be implemented. So pharma and biotech looks very robust followed with CROs and then the rest of the industry is still looking to pick up.

Jaiveer Shekhawat — Ambit Capital — Analyst

Understood. And my next question was on the inventory days now given you already hold significant amount of inventory and there have been correction in the RM prices. So that could likely lead to inventory losses? So one, can you explain why you’re holding this much inventory?

Santosh Agarwal — Chief Financial Officer & Company Secretary

We are keeping 127 days of inventory across. It includes INR37 crore of raw materials, INR41 crore of finished goods, INR8.5 crore of traded goods and about to be INR4 crore of packing goods. So these are the raw materials we need to keep considering the number of SKUs we have and anticipation of the new orders, which we are expecting in the coming quarters. So this is a bare medium inventory we are keeping and we keep on doing the optimization of inventory on a regular basis. And going forward, we want to reduce this inventory on the basis of anticipated earnings.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure. The international market growth there has been quite encouraging. So is this coming from any new significant wins that, you might have had or is it largely from existing customers?

Rohan Sehgal — Whole Time Director

It’s a mix actually. I wouldn’t say, any significant wins, but we are trying to expand Tarsons’ brand to various countries, there is a lot of organic growth from our existing customers, various geographies have been seeing up in increased growth and various key geographies we are starting to win newer OEM contracts and also in discussion for various OEM contract. So the international business is very spread out it’s not related to one particular field. It’s a mix of the branded business of Tarsons in newer geographies, the existing branded business of Tarsons as well as new OEM wins.

Jaiveer Shekhawat — Ambit Capital — Analyst

Understood. And last question on the CapEx, we have seen that you’ve already incurred about INR100 crores during the first half. So one, what will be the full year guidance and how much of the overall INR500 crore CapEx that you’ve guided is remaining to be incurred.

Santosh Agarwal — Chief Financial Officer & Company Secretary

Sure. We have given INR500 crores of CapEx yearly, out of that till now we have already incurred about INR300 crores and in the next 15 to 18 months, we are going to incur the remaining.

Jaiveer Shekhawat — Ambit Capital — Analyst

Understood. And this INR300 crores already includes INR100 crore that you have incurred this year right?

Rohan Sehgal — Whole Time Director

That’s correct.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure, thanks a lot.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Rishabh Parekh from Sunidhi Securities. Please go ahead.

Rishabh Parekh — Sunidhi Securities — Analyst

Hi, everyone. Just a couple of questions, one is on the domestic market growth, 14% year-on year de-growth was despite taking price hike was surprising, if you call out the growth in the non-COVID business numerically, I understand, you say it substantial, but can you put a number to it please.

Rohan Sehgal — Whole Time Director

So at this point, we don’t have any numbers, but which I explained in earlier earnings call, which was in the last quarter, we believe that about INR60 odd crores of our revenue in FY’22 came from COVID related business, which was between 17% to 20% of our revenues and the majority of that came in the first half. So the remainder would be all non-COVID business.

Rishabh Parekh — Sunidhi Securities — Analyst

Going forward now that the COVID basis is out of the way for the rest of the year, what kind of range growth are we expecting from the domestic market?

Rohan Sehgal — Whole Time Director

See, we expect the domestic — we are expecting the domestic market to bounce back. We’ve seen the growth that is slightly slower in certain sectors, which I answered in the post question, pharma, biotech, CROs are doing exceptionally well but the other sectors are yet to bounce-back from COVID-related business, it’s important to note that India is a single country and we are market leaders in this country and internationally, we have the benefit of catering to close to 60, 70 countries, so you have benefit of using other countries when certain countries are not doing well. But we are very, very confident about the Indian growth story and our entire investments — our entire CapEx plans always centered around Indian customer and the Indian scientists demand. So it’s very difficult to put a timeline as to within this quarter whether seem to bounce-back or in the quarter after that, but the long-term growth story of India looks very, very promising.

Rishabh Parekh — Sunidhi Securities — Analyst

And have we lost market share in any of our product lines in the domestic market over the last two quarters?

Rohan Sehgal — Whole Time Director

No I don’t think so. I think we are as good as the industry is and we would our numbers would be the better performing numbers compared to our industry peers in India. And now that the raw-material prices increase in scenario is not as severe as it was, do you expect over the second half of the year margins to revert back to 40% to 50% range that is historically maintained. So the good thing about the raw material prices is that, we are not seeing significant price increases in our raw material over the last few months, but having said that there are no significant decline in the raw material prices or raw material prices continue to remain stable. For us, since we were specialized magnitude rate and we cannot consider standard polypropylene or standard HDD prices as a benchmark for our raw material prices. Moving forward, I think with the Panchla and Amta coming into place and still coming in that that’s when we’re going to see significant improvement in our margins, because it allow investments have been incurred, six months, eight months prior to these facilities coming up in people and systems and processes and only with scale and these facilities coming up that we will start seeing significant improvement in margins.

Rishabh Parekh — Sunidhi Securities — Analyst

And Rohan, the European for our private equity investor opened in 22 any conversations with them or what their strategies or what they intend to do?

Rohan Sehgal — Whole Time Director

No. At this point of time, there is no conversations with them on that.

Rishabh Parekh — Sunidhi Securities — Analyst

Okay, okay. Thanks guys.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead.

Sonal Gupta — L&T Mutual Fund — Analyst

Yeah. Hi, good afternoon and thanks for taking my question. Just wanted to understand on exports these would largely be dollar-denominated, right?

Rohan Sehgal — Whole Time Director

It would a mix, it would be largely dollar-denominated but a lot of countries in and around Europe even outside the European Union, which are countries like, not present today, but CIS, Ukraine are euro-denominated and also certain countries in Africa also prefer euro, which have strong affinity towards European nations, but if you look at, Southeast Asia, Latin America in the Americas, which is Canada and U.S.A, yes. All U.S. denominated.

Sonal Gupta — L&T Mutual Fund — Analyst

So broadly, what is the split there right like Europe and euro-denominated versus dollar?

Rohan Sehgal — Whole Time Director

We don’t have that split readily available. But I would say maybe about 75, 25.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it.

Rohan Sehgal — Whole Time Director

75 in favor of the U.S. dollar.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. Then coming from in that again, I like a lot of the growth seems to be more again currency-led, right like year-on-year even the export growth and volume growth —

Rohan Sehgal — Whole Time Director

Not, not really, we have currency gains which you would see in our other income, but there is a lot of — our business is also based on a lot of credits, so it’s ongoing, but it is a mix of currency as well as volume. But having said that, we did not have the possibility of increasing prices in the international market, where we increase in domestic markets. So prices have remained fairly stable internationally and hence you see more on the volumes and the price increase, if you could not take was compensated by larger realizations on the weakening rupee.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. And so maybe you’ve mentioned it on previous calls, but what are the price increase you’ve taken this year on the domestic side?

Santosh Agarwal — Chief Financial Officer & Company Secretary

About 7%, we have taken the price increase in the domestic.

Sonal Gupta — L&T Mutual Fund — Analyst

About 7% and lastly, what is your — I mean, sense of what is your exposure to the diagnostics market in India. I mean, like, in terms of your revenues.

Rohan Sehgal — Whole Time Director

So it has significantly increased during the COVID period understandably so because, they were leading COVID testing but approximately one-fifth of our revenues — one-fifth of our revenues in India, which is about 65% or two-thirds of our revenue. So 20% of two-thirds of revenues will be coming in from the diagnostic space.

Sonal Gupta — L&T Mutual Fund — Analyst

Sorry 20%, two-zero?

Rohan Sehgal — Whole Time Director

20% of two-thirds of our revenues, because two-thirds of our revenues is domestic, right?

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. So basically 13% of the overall revenues, right.

Rohan Sehgal — Whole Time Director

Yeah.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. Great, thank you so much.

Operator

Thank you. We have our next question from the line of Praveen Sahay from Edelweiss Finance. Please go ahead. Mr. Sahay?

Praveen Sahay — Edelweiss Wealth — Analyst

Yeah, yeah. Yeah, I was on-mute, sorry. So hi, Rohan, so the first question is related to the mix and as you had already said that pharma, biotech is doing well, but what I believe research, academic contribution is on the higher side. So what exactly like going on there is there uptake or the from the government side or in the procurement happening?

Rohan Sehgal — Whole Time Director

So if you see, the research sector in India is predominantly government-funded all is public research, there is not so much of private research in terms of research institutes in the country and it is predominantly fund-based, government fund-based, and there have been lot of positive news coming in of increased government expenditure to boost research in India. And we expect the same to be implemented in the coming quarters. However, putting an exact date of timeline to that be very difficult.

Praveen Sahay — Edelweiss Wealth — Analyst

Okay. Okay. So but [Technical Issues] business they are doing that’s going on.

Rohan Sehgal — Whole Time Director

Absolutely. It’s not that, there is no business, the business is there. But we expect better and more business coming in the near future.

Praveen Sahay — Edelweiss Wealth — Analyst

Okay. Okay. And the next thing on the — as the export has growth [indecipherable] faster than the domestic and the contribution has increased, what are the target to get the contribution?

Rohan Sehgal — Whole Time Director

So as we said in the opening speech that it’s now become 62:38. It was actually 68:32. So there is a 6% movement were domestic proportion is decreased by 6% and the export proportion has increased by 6% but I think this is because India is taking slightly longer to recover post the pandemic into its standard businesses, I still believe that India is a very, very strong and growing healthcare market, growing research market for the entire industry and Tarsons being the leader will be at the forefront to capitalize on that. So it’s just a matter of time before these ratios come back into place. So unless something dramatic happens for us in the international market that we win a very, very large contract of if there is any kind of subsidiary play for us, I don’t see this ratio has been changed too much. It’s just very, very temporary and short-term, were you see 62:38 I think it would swing back to its original ratios.

Praveen Sahay — Edelweiss Wealth — Analyst

Okay. And related to that [Technical Issues] similar to what within.

Rohan Sehgal — Whole Time Director

Can you just repeat your question? You were breaking up.

Praveen Sahay — Edelweiss Wealth — Analyst

Export OEM margin, so whatever the margin you are generating. So it’s a similar to the company [Technical Issues]

Rohan Sehgal — Whole Time Director

As mentioned earlier, as well in my calls, it’s not about the export OEM but it’s about international business as a whole. International business as a whole we see the gross margins because the product price realizations are lower than the domestic, product price realizations because of a variety of factors, such as different geographies, different tax structures and different countries and different competitive advantages and pressures in different countries. So overall the international price realizations are lower and hence you see a slightly lower gross margin that’s one of the factors for lower gross margins because the proportion of international business has increased.

Praveen Sahay — Edelweiss Wealth — Analyst

Okay, thank you. Thank you for taking my question.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Harsh from Marcellus Investment Managers. Please go ahead.

Harsh — Marcellus Investment Managers — Analyst

Yeah, hi Rohan, just a couple of questions from my side. So we have been present in the PCR segment for quite some time now, so anyway data point about how you are doing in this segment?

Rohan Sehgal — Whole Time Director

So the segment, we don’t have exact data at this point on what the numbers and revenues are, but the product lines have been well accepted and the numbers in India on the non-COVID basis are growing very, very strong, of course, there was the huge influx of PCR products demand internationally as well as in India during COVID times, because it’s a direct — it’s a direct plastic vessel, which is used for COVID testing and for COVID research, but that having dried out. We are seeing increased demand for these PCR products, but on a different base which is the non-COVID basis.

Harsh — Marcellus Investment Managers — Analyst

Sir, maybe in the non-COVID base, how much was PCR revenue in this quarter compared to last quarter?

Rohan Sehgal — Whole Time Director

See, we launched this product in COVID, right. So for us, it’s — it won’t be a right statement to make, because prior to COVID, we don’t have any revenues in PCR. PCR was developed pre-COVID, but launched and ready during COVID.

Harsh — Marcellus Investment Managers — Analyst

Yeah, I agree that. But PCR revenue in the non-COVID segment this quarter was this Q1, will that data will be available?

Rohan Sehgal — Whole Time Director

Yeah. So we don’t have that readily available at this point of time but it’s on the uptrend.

Harsh — Marcellus Investment Managers — Analyst

Okay. Okay.

Rohan Sehgal — Whole Time Director

Yeah. And profitability in the PCR segment was passing materially different from our liquid handling segment. It would not be drastically different, it would be on the similar line but if it would be slightly above liquid handling, not lower.

Harsh — Marcellus Investment Managers — Analyst

Okay. Okay. But the per kg margins would be higher, right? Because [Technical Issues]

Rohan Sehgal — Whole Time Director

So we don’t really calculate on a per kg basis. We calculate more on product SKU basis, but yeah, PCR SKUs compared to liquid handling SKUs would be slightly more profitable.

Harsh — Marcellus Investment Managers — Analyst

Okay, okay. And the second question was around inventory. So inventory has increased from INR82 crores to INR99 crores, while I understand that there are very high number of SKUs with erratic demand and higher inventory is the norm, but why the increase from Q4 to Q2.

Rohan Sehgal — Whole Time Director

See, Inventory increase has been increased considering we have many orders are there in our order book. And we are also anticipating some more orders also. So on the basis of that, we always keep on — keeping about three months to four months of inventory. And we always keep on doing the analysis of our inventory on the basis of anticipated orders and on the basis of whatever backlog order we have. So just to add to Santhosh, we have a lot of new product launches as well. For example in this quarter, we are launching products, which are PEG [Phonetic] bottles, which are used for bioprocess and pharma. So these are bottles which are heavy duty bottles consuming a lot of raw material. So when you launch a new product, you need to — we can’t really anticipate that we get orders and then we start producing. So a launch of a new product means, setting up inventory levels at a very, very high-level initially, because it’s product launch time. So you bring in containers of raw material, you bring in containers of packaging material. So everything is in order. It’s only after six months or eight months of selling that catch onboard trend and that’s when your supply chain department can start planning inventories accordingly.

Santosh Agarwal — Chief Financial Officer & Company Secretary

And just to add whenever we are receiving any kind of domestic or pulled [Phonetic] order, the lead time is so soft, that if you don’t keep the inventory then we cannot apply on that.

Harsh — Marcellus Investment Managers — Analyst

Okay. So you start saving revenue flowing from next quarter onwards, okay.

Rohan Sehgal — Whole Time Director

Absolutely, absolutely. Yeah.

Harsh — Marcellus Investment Managers — Analyst

Thank you.

Operator

Thank you. We have our next question from the line of Ashish from IIFL AMC. Please go ahead.

Ashish — IIFL AMC — Analyst

Yeah. Thanks. Sorry, I’ve joined late, so sorry if I missed this question. So on our new capex for INR400 crores, what are the timelines? When can we see the commercial operations beginning?

Rohan Sehgal — Whole Time Director

So for our facility at Panchla, the construction it is approximately, 80% to 85% complete. Based on the last meeting what we had which was two weeks ago, we’ve almost 85% completed, the building is completely done and now the parallel infrastructure which is the roads and other infrastructure around the facility are being developed. So we expect this entire facility to be up and running in the next few months. In terms of the readiness of the facility and the infrastructure then post that we would have clean loom [Phonetic] developments and equipment coming in.

So we expect Panchla to be up and you know billing exposed revenue in the next three-and-a-half months, four months and scaling up to full capacity to what we have planned by around Q2 of FY ’24. And Amta would be around in and around the same time as well. But Amta is more on storage and radiation and less on production. So our main focus is on partial outages more an output and revenue.

Ashish — IIFL AMC — Analyst

Okay. So you’re saying by second quarter of next fiscal, the first revenues should start to kicking in, right?

Rohan Sehgal — Whole Time Director

Not by next quarter, by — I think Q4, we should start seeing first revenues.

Ashish — IIFL AMC — Analyst

Q4 of FY ’24?

Rohan Sehgal — Whole Time Director

No. Q4 of FY ’23, right, in the next four months, but you should see everything scaled up to what we have planned in our capex for Panchla by Q2 of FY ’24.

Ashish — IIFL AMC — Analyst

And typically sir, what would be the asset turns that you guys are targeting?

Rohan Sehgal — Whole Time Director

Sorry, could you just repeat your question, please.

Ashish — IIFL AMC — Analyst

The asset turns, what kind of asset turns are we targeting from this investment?

Rohan Sehgal — Whole Time Director

We expect somewhere in the region of 0.6 to 0.65.

Ashish — IIFL AMC — Analyst

Okay. And just a bookkeeping question. So how much time would it take for this facility to do similar margins as what we are doing currently on our existing basket?

Rohan Sehgal — Whole Time Director

So it all depends on the scale up, I believe two years, two-and-a-half years to completely scale up to the capacities what we are planning out then, because maybe little lesser because even if you reach 70%, 75% of installed capacity we could managed similar margins, because we will be moving in with a lot of newer level and more efficient automation, which will bring down our costs significantly. So it’s all about the product, the procedures are there to give us good returns. It’s all about being able to scale up and build that sort of a market for ourselves.

Ashish — IIFL AMC — Analyst

So sir, in first half you did 45.5% EBITDA margin, so would it be safe to assume that at least this kind of margins we would maintaining the system and probably the future margins won’t go below this mark?

Rohan Sehgal — Whole Time Director

I don’t think the future margins should go below this mark. See, we are investing a lot into a company, which is going to look significantly different from where we are today from this 300 crore level. So we are investing deeply into the future and you know there could be some pain points in the current two quarters, three quarters what we might see. But the future looks very, very strong for us for the way we are investing and for what we are envisaging for the company.

Ashish — IIFL AMC — Analyst

Yeah. That’s helpful. Just one last question on the raw material side. So PPE like we are sourcing majorly from US and Europe. So, okay is the situation better now in terms of — because all are derivatives of crude.

Rohan Sehgal — Whole Time Director

So see as I’ve said earlier, it’s more medical-grade resin. So there is a reliance on crude, but there is also reliance on-demand and supply. So if there is enough demand for the raw material and the suppliers stagnated then the pricing doesn’t come down. And unfortunately we do not see scale up of medical-grade production of our polymers globally. So that is always a waiting period, whenever you order. So hence you need to always be very vigilant with our orders and maintain sufficient inventory so that we don’t pay deliveries to our customers. And hence we never — we see slowing down on price increases, but we never see price reductions that’s a very rare situation, prices start falling down. And sometimes when price starts falling down as well you see the rupee weakening, right. So it’s always higher realizations for us when we buy the product when the dollar been consistently getting stronger by the day [Phonetic].

Ashish — IIFL AMC — Analyst

Yeah. Fair enough. And just in case, okay. So I’m done, yeah. Thanks.

Rohan Sehgal — Whole Time Director

Thank you.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Ashutosh Garud from Ambit Private Limited. Please go ahead.

Ashutosh Garud — Ambit Private Limited — Analyst

Hello, am I audible?

Operator

Yes.

Rohan Sehgal — Whole Time Director

Yes.

Ashutosh Garud — Ambit Private Limited — Analyst

Yeah, hi. I just wanted to ask since we’ve mentioned about the COVID base impacting the revenue growth. So is there some more COVID base impact for Q3 and Q4 as well, because even in Q3 and Q4 of last year, last year’s financial year, you had a decent revenue base. So just wanted to understand that.

Rohan Sehgal — Whole Time Director

I feel the majority of the COVID revenues last year came in the first half and we would not consider more than 20% — maximum 25% of that entire COVID related revenue what we had taken last year in Q3 and Q4. So the major impact was in Q1 and Q2, because that’s when the lockdowns were and the second wave was and the higher demand was.

Ashutosh Garud — Ambit Private Limited — Analyst

Okay. So 80% of it is behind is what I believe in that case.

Rohan Sehgal — Whole Time Director

75% to 80% is behind, yeah.

Ashutosh Garud — Ambit Private Limited — Analyst

Great. And just on the margin front, just wanted to — I understand you mentioned 45 — in the medium-to-long term 45%, 46 percentage of margins as enable, in the near-term you were saying there could be some pain point, but over three years to five years you are confident of maintaining these margins. Is this interpretation, right?

Rohan Sehgal — Whole Time Director

Absolutely. See, today, we have to be worry [Phonetic] about our margins, but we are trying to build — as we build these two new facilities, as we look to scale-up in the international markets and become a stronger brand in the country, we might look to boost our leadership team. You might look to — you know debt, various organizations, companies on-board to help improve our processes, our systems, our operations and all that is all past. So we are doing that for the long-term stability of our business and to make it a more robust brand and company than what it is today. So while we have one eye on our margins, but we won’t look at it too seriously, we have produce something for the betterment of the company for the long-term.

Ashutosh Garud — Ambit Private Limited — Analyst

So just to understand from a business angle, we are trying to consolidate from a investment angle at this juncture and we will typically see the fruits from a growth angle in the next three quarters to four quarters.

Rohan Sehgal — Whole Time Director

Absolutely. See, I would be worried about my margins if I have to drop prices to compete with competition, and if — my price realizations are going down. But if my price realizations are on-track and I’m just investing for the future, then I would look at a look more long-term view.

Ashutosh Garud — Ambit Private Limited — Analyst

But in the near-term, I mean, since we have seen your margins being at around 40% also in FY ’19, FY ’20, so to say, so in the near-term we can touch those kind of margins, but eventually they will come up to 45%, 46%.

Rohan Sehgal — Whole Time Director

I won’t be commenting on that, because I don’t expect — I hope that the margins won’t go that low. I don’t expect to be — even with all these investments won’t go that low, because the company was smaller than the company’s scaling up and becoming bigger. So a big factor would be on the revenues. As the revenues keep coming in, I think margins will get more-and-more robust.

Ashutosh Garud — Ambit Private Limited — Analyst

Okay. Thank you. Thanks a lot. Thanks a lot and all the best.

Rohan Sehgal — Whole Time Director

Thank you.

Operator

Thank you. We have our next question from the line of Santosh from Shivanssh Holdings LLP. Please go ahead.

Santhosh — Shivanssh Holdings LLP — Analyst

Hello, am I audible?

Rohan Sehgal — Whole Time Director

Yes.

Santhosh — Shivanssh Holdings LLP — Analyst

Yeah, yeah. Good afternoon, and thank you for the opportunity. I have a small question. I just want to understand what is the percentage contribution from the various sectors we have — in a descending order can you, let me know that from academic pharma and all what is the highest contribution for each sector?

Rohan Sehgal — Whole Time Director

So basically pharma and biotech are the highest contributors and about, we believe that around 35% of our revenue followed by 25% each of 20% each approximately from diagnostics and research. And then schools, colleges, other industries, hospitals CROs would probably account for the remainder 20% to 25-odd percent. That’s the standard revenue mix what we have seen over the years. But of course, it keeps changing depending on how — which industry is doing well at a particular period of time. Of course, these are indicative statements because we do most of our business through distribution partners and having identical end-customer datas, not in our scope at this point of time, because we do — we are basically billing to distribution more than 95% of our revenue.

Santhosh — Shivanssh Holdings LLP — Analyst

Okay. Got it. And second question is that, I just want understand what will be your market share domestic, market share for example, if I look into your presentation FY ’20 numbers, Indian labware and all these, it comes around 3,600 crores. And FY ’22 which is around 300 crores, it comes around 5%, for example if I take only domestic. So what is your domestic market share? And also I was saying that for example, if we are on 5% to 6%, so the remaining are — they are saying that around 30 players who have small percentage or there big players who has higher contribution to the remaining market-share.

Rohan Sehgal — Whole Time Director

I’m not sure about the data, because the plastic labware market is approximately, 1,200 odd crores and —

Santhosh — Shivanssh Holdings LLP — Analyst

Yeah. If you take that — [Speech Overlap]

Rohan Sehgal — Whole Time Director

Sorry?

Santhosh — Shivanssh Holdings LLP — Analyst

So — yeah, if you take only plasticware which is in the presentation 1,200 crores, we did around 200 crores of revenue domestic [Indecipherable] 15% market share we have. So remaining competitors and all you are seeing there — if you can let me known that, there are like 10, 15 people who have small market-share or there are few big people who have major market share kind of.

Rohan Sehgal — Whole Time Director

I think another five to six major players and then 10 to 15 smaller players after that. And in our previous call, admin cost we clarified that out of 1,200 crores, our addressable market is just 50 [Phonetic] crore, so we have done 200 out of that 50 [Phonetic] crores. So actually we have 25% market share.

Santhosh — Shivanssh Holdings LLP — Analyst

Okay. Got it. Thank you. So — and final question, I just want to understand our raw material which is our integral part and a lot of thought goes into it. So what is so unique about the reason that only we have to procure from US and Europe like for example if I take a hypothetical situation that if — so what are the constraints for example is that capital or the natural resources or technology, which is like why it can’t be strictly domestic [Phonetic], if we take hypothetical education just want to understand.

Rohan Sehgal — Whole Time Director

So basically a lot of that is confidential in nature as well as R&D department does a lot of research on what would be the right selection and what would be the right ingredients, which are required for a particular raw material grade to be used to produce a particular SKU or a particular product group. And when we look for similar characteristics we don’t find a similar grade or raw material in India, or in Southeast Asia, or Middle East and the closest where you find is in Europe or the US. Also we haven’t gone into so much of research as to why India does not produce that, but unfortunately those grades are not available and that’s only available in the US and Europe.

Santhosh — Shivanssh Holdings LLP — Analyst

Okay, okay. Got it. Thank you so much for answering the question. Thank you.

Operator

Thank you. We have our next question from the line of Tanmay Gandhi from Investec. Please go ahead.

Tanmay Gandhi — Investec — Analyst

Hi. Thanks for taking my question. Sir, my question is on domestic front, domestic business. So if you look at sequential growth it’s negative 8%, right. And during the last call, we had highlighted that we have taken price hikes, which will be realizing coming quarters. So my question is that whether have we realized the full impact of the price hikes or we expect some impact to come in next few quarters as well.

Rohan Sehgal — Whole Time Director

I think there could be certain impact because as I’d mentioned in earlier calls that we can’t just announce a price hike and get it from day-one. There are various contracts sometimes you can’t get 100% of the price hikes. Sometimes contracts are ending on a certain period and customers you know you have a long-term relationship with customers. They are large customers. They are important customers for the company. And you know we need to bite the bullet sometimes wait for certain periods of time. So it’s a mix. There is no right or wrong answer, but I believe overall quarter three, quarter four, maybe even next year quarter one, we keep seeing certain implementations made which could not have been made in these first two quarters.

Tanmay Gandhi — Investec — Analyst

Okay. So basically the price hikes will play out till first quarter of next year, is that understanding, right?

Rohan Sehgal — Whole Time Director

Yeah. It all depends on the agreement what we have in-place with the customer and when that agreement is ending. And at the end-of-the day, we have to keep in mind the interests of our large customers as well. And keep in mind the interests of long-term business relationships as well as the agreements what we’ve had over the years. So many of these customers are two decades, three decade old customers.

Tanmay Gandhi — Investec — Analyst

Understood. And for diagnostics we have mentioned that there is a lot of competition. And so that should actually be helping a company like Tarsons, right because they would not be able to procure from MNCs [Phonetic], which because of their smaller scale in the beginning and probably once they ramp-up then actually the supply base for them increases, but initially it should be benefiting a company like Tarsons, right.

Rohan Sehgal — Whole Time Director

I think I would say in both ways because the increased amount of competition we see a lot of diagnostic companies also trying to cut a lot of cost. And that could did play very favorably because they’re looking for lower priced alternatives whether that could be working alternative or not only time will tell, but the diagnostic industry is definitely seeing a lot of pressure to cut costs at this point of time.

Tanmay Gandhi — Investec — Analyst

So basically the consumption at the — in the diagnostic industry would be stable, right. But probably they are procuring more from — more-and-more from the smaller competitors, which probably would have lower-quality lower-cost products, is that right?

Rohan Sehgal — Whole Time Director

No. I think the consumption in the diagnostic industry would be more spread-out now. As an industry overall it would be stable, but we still see numbers are lower than what it was pre-COVID. There was a big spike during COVID understandably so, but the numbers have not returned back. I think for standard testing which was beyond COVID testing the numbers are still not the same. Of course, the spread outcome from a few players, many more players, but it’s still not in the same level or the same volumes as an industry not only for Tarsons, but at an industry level for all the company’s available as suppliers to the diagnostic industry in the plastic segment.

Tanmay Gandhi — Investec — Analyst

Understood. That’s all from my side. Thanks.

Rohan Sehgal — Whole Time Director

Thank you.

Tanmay Gandhi — Investec — Analyst

Thank you. We have a next question from the line of Harsh from Marcellus Investment Managers. Please go ahead.

Harsh — Marcellus Investment Managers — Analyst

Yeah. Hi, Rohan. Just follow-up on asset turns. So our current asset turns are around 0.75 to 0.8, however in the Panchla facility, 2.6 [Phonetic], 2.65?

Rohan Sehgal — Whole Time Director

Because there are two or three reasons. One is, increased cost of capex, increased cost of infrastructure, increased cost of land, increased cost of building everything, all costs have increased. And secondly, which is one of the major reasons is that we are doing capex, which would basically utilize 50% to 60% of Panchla. So to see enhanced asset turn, we should — we’d have to post ensure that the — the future capex by 100% of Panchla’s flow areas spaces utilized. So at this point of time, we are building Panchla, so we spending 100% on building an infrastructure, but the capex is only occupying maybe, 55% or 60% of Panchla’s floor space.

Harsh — Marcellus Investment Managers — Analyst

Okay, sir. Both these points are maybe utilizing 100% of capex and the cost wouldn’t [Phonetic] have gone up, then the asset turns would have been more like 0.75 to 0.8.

Rohan Sehgal — Whole Time Director

Yeah, absolutely. For example we are doing some capacity expansions and we are spending EUR2 million [Phonetic] on multiplying certain mortgage and machines which we bought 15 years ago. And 15 years ago for the euro needs to be at 32, and now the euro is at 82. So — and that EUR2 million over the years — over 15 years has become EUR3.5 million. So the same machines where you’re doing capacity expansion has been at the same output. The old machine is giving us the same output as the new machine, but the cost of acquiring that the machines in a 15-year period is drastically different.

Harsh — Marcellus Investment Managers — Analyst

Okay, yeah. Thank you.

Operator

Thank you. We have our next question from the line of Apurva from PhillipCapital. Please go ahead.

Apurva — PhillipCapital — Analyst

Yes, Rohan and Santhosh, thanks for the opportunity. Sir, two things. So I just want to understand the seasonality. So in H1 we did almost 140 crores of revenue. So H2 would be a similar line because historical number indicates both are roughly equal. So what is your sense in the current year?

Santosh Agarwal — Chief Financial Officer & Company Secretary

See, generally, ideally Q4 is the strongest quarter and hence it’s not that Q1, Q2, Q3 are drastically different, but Q4 is definitely stronger than the rest. And hence there is a slight variation, right, so it should be on an ideal situation 42% to 44% Q1, and the remainder in Q2. So not a huge difference, but yeah, I would say, 40 [Phonetic] to 58, 43, 57 in that range would be an ideal year.

Apurva — PhillipCapital — Analyst

Okay. Got it. And I think in last call we mentioned we are on-track to achieve 500 crores by FY ’25. So despite of this COVID late and maybe that was not anticipated in the like this year. So do we still rank [Phonetic] that revenue guidance or would there be any change in that guidance?

Santosh Agarwal — Chief Financial Officer & Company Secretary

It’s too early to say whether we would stand or there would be any change. See as a — what we can do as a company is we can prepare ourselves and have everything in order, in order to reach those numbers, but there must be support from the industry as well. So like if the industry grows the way it has always grown over the last three-and-a-half, four, four-and-a-half decades we’ve been present. I don’t see any reasons that we don’t achieve. But if something drastically goes upward or downward then the guidance to be higher or lower. So at this point of time we stick to that, because we don’t see any big threat or the number you know the industry not playing up to those numbers because we asked whereas the industry. We are supplier to these industries which is pharma, biotech, diagnostics, research and we asked [Indecipherable].

Apurva — PhillipCapital — Analyst

Got it. Got it. And one more thing, just a clarity. So, like is it possible for us to give a volume sense because I think because of this COVID laid and maybe domestic and export and percentage revenue growth that gives some sort of a confusion in our mind. So like can we — is it possible to say revenue I can understand we have like high number of SKUs, but from a like category point-of-view, what is the overall volume growth for particular categories or set of categories. So that would give a more clarity on incremental basis as well. So is it possible for us?

Santosh Agarwal — Chief Financial Officer & Company Secretary

No, we wouldn’t be in a position to share that industry is quite competitive and that would be sending out confidential data, which would be for the rest of the industry to witness. So all we can give is, revenues and geographical mix between India and the rest of the world, but giving product volumes based on categories or product lines would be highly sensitive in nature.

Apurva — PhillipCapital — Analyst

Got it. And lastly, like some participant ask about the market share. So what could be our markets in the H1 versus if you can highlight in FY ’22 or FY ’21 and for the domestic market?

Santosh Agarwal — Chief Financial Officer & Company Secretary

So I believe that the market-share has not changed dramatically, because as I mentioned earlier as well, I don’t see a position where we are leasing market. We are performing exactly as per market standards. And if our numbers come down slightly slow [Phonetic], the market, the domestic market also looks slightly depressed. So the numbers in the domestic market would also come down drastically in the total market size. So I believe in percentage wise, we are on-track. We are performing as well as the industry performing and we are one of the better performance in the industry that’s my belief. So no question of us losing any market share, it’s just that the industry, especially the Indian industry as a whole it’s taking time to recover post the pandemic and we should see enhanced demand and numbers coming in over the next few quarters.

Apurva — PhillipCapital — Analyst

Got it. I have one more question, shall I ask.

Santosh Agarwal — Chief Financial Officer & Company Secretary

Yes, please.

Apurva — PhillipCapital — Analyst

Yeah. So for the exports so, I think this quarter we did almost 38 percentage of total revenue as export. So was that because of some one-off number or maybe some particular segment is contributing either ODM or our brand or something like that, can you just clarify it?

Santosh Agarwal — Chief Financial Officer & Company Secretary

No. As I’ve said earlier, it just that — it looks stronger at 38% because the domestic revenues are down, right. Once domestic revenues are back on track this number — the number as a whole would remain the same in exports but the proportion would again go back somewhere to 34% or 33%, to 67-33, 68-32, something like that. So domestic not doing well, is just showing exports to have a higher proportion.

Rohan Sehgal — Whole Time Director

And just to add, if you see the Q2 number then it’s probably showing 38%, but when you see the H1 number it is 34%. So we need to either longer horizon, rather than shorter horizon.

Apurva — PhillipCapital — Analyst

Rohan, I got it, but the point is in export we are not able to take that price increase what seven percentage we take — took in the domestic market. So if that is taken, then probably that number would change again, right that would in favor of export market, right because not in H1, but maybe in H2 or maybe early next year we would again take price increase in the export market. So that would again balance it out with the volume increase. So maybe that 33%, 34% kind of export number, which we were doing earlier that would move up gradually, right because this number is that is without increasing price increase in export market.

Rohan Sehgal — Whole Time Director

See the thing is, the entire international markets you know especially the larger institutions which account for major of our business are well aware of like only in the situation right and the weakening rupee to the dollars. So it’s not easy to get up our dollar increase when they have already seen that there is a 3% to 4% or 5% rupee to dollar movement over the year. So it’s not — it’s very difficult to get hold your price increases in international markets at best we get 1%, 1.5% on selected years. The market is much more competitive. We are a newer entrant. In India the situation is very different more of a leading player with a very, very strong brand image and a brand recall value. So the strategies domestically and internationally are very, very different.

Apurva — PhillipCapital — Analyst

Okay. So is it fair to conclude in export market whatever price realization we are getting that should be correlated with the rupee movement, right? Is it fair to —

Rohan Sehgal — Whole Time Director

Not really, not really. Rupee movement is an added bonus to us when the rupee is getting deeper, the rupee is getting stronger than it’s a disadvantage to us. But generally whether — even if the rupee is stable getting increase in product, in international markets needs to be justified by a very, very strong rationale and sometimes increasing product — increasing raw material costs may not be enough, because there could be other companies during the bite the bullet. And since we are a newer entrant, it becomes very difficult for us to command certain things which we could in the Indian market.

Apurva — PhillipCapital — Analyst

Got it. Thank you very much and all the best. Thank you.

Rohan Sehgal — Whole Time Director

Thank you.

Operator

Thank you. We have our next question from the line of Kartik Vora [Phonetic] from Union Mutual Fund. Please go ahead.

Hardik Vora — Union Mutual Fund — Analyst

Yeah. Thank you. This is Hardik here. No, I just wanted to clarify just, I don’t know if that was already discussed in the call. We had a guidance of 500 crores of revenue by FY ’25 with 45% to 50% EBITDA margin. You’re retaining that guidance, right.

Rohan Sehgal — Whole Time Director

At this point of time, yes, but we’ll take a call as the quarters move ahead. But at this point of time, I don’t see any reason why we should not be able to achieve that.

Hardik Vora — Union Mutual Fund — Analyst

Okay. I just wanted to follow-up on this. So, Rohan, what gives us this — our confidence of wanted to get a sense on that because you’re putting up this Panchla capacity in FY ’24 and the confidence we have is that by making in a year’s time we will be able to utilize it optimally. So is it the order visibility maybe the customers are telling us what we can — can you just throw some light on what basis the confidence of utilizing the capacity?

Rohan Sehgal — Whole Time Director

So, here we are building in two kinds of products, one is capacity expansion for existing products and one is newer product lines. And we see that the markets have not really fully recovered from the COVID period. So it’s — this entire joining from 300 crores to 500 crores is not only going to be consumed by new products, which are going to be tougher to sell-in the first year as we are trying to prove ourselves in those products. A lot of it will come from organic growth of existing product lines as well as capacity expansions as well as newer geographies step in the international market as well and — as well as newer products in the domestic market, because newer product acceptance in the domestic market is going to be far quicker than new product acceptance in the international markets. So it’s a combination of factors which will play out for us to help achieve this number.

Hardik Vora — Union Mutual Fund — Analyst

Okay. And this —

Rohan Sehgal — Whole Time Director

In terms of order guidance — guidance from our customers or orders in-hand that’s not the way our industry works. So we do not generally receive orders before we start any product lines or we don’t have any order book as such. The order book is always for products which we are unable to deliver, which is pending on its.

Hardik Vora — Union Mutual Fund — Analyst

Understood. And this 500, how will this split between domestic and export in your opinion?

Rohan Sehgal — Whole Time Director

I believe that two-third, one-third should look likely. So maybe about 65%, 66% coming domestically and the rest coming from international business.

Hardik Vora — Union Mutual Fund — Analyst

Okay. Thank you that’s all from my side. All the best.

Rohan Sehgal — Whole Time Director

Thank you.

Hardik Vora — Union Mutual Fund — Analyst

Thank you. Ladies and gentlemen, due to time constraints that was the last question for today. I would now like to hand the conference over to Mr. Rohan Sehgal for closing comments. Over to you, sir.

Rohan Sehgal — Whole Time Director

I take this opportunity to thank everyone for joining the call. We will keep updating the investor community on regular basis for incremental updates on your [Phonetic] company. I hope we have been able to address all your queries. For any further information kindly get in touch with us or Strategic Growth Advisors, our Investor Relation Advisors. Thank you once again.

Operator

[Operator Closing Remarks]