Themis Medicare Ltd (THEMISMED) Q4 FY23 Earnings Concall Transcript

Themis Medicare Ltd (NSE: THEMISMED) Q4 FY23 earnings concall dated May. 15, 2023

Corporate Participants:

Sachin Patel — Managing Director and Chief Executive Officer

Tushar Dalal — Chief Financial Officer

Analysts:

Narendra — Whitehouse Capital — Analyst

Keshav Garg — Counter Cyclical PMS — Analyst

Dhwanil Desai — Turtle Capital — Analyst

Jagvir Singh — Shade Capital — Analyst

Nikhil Arora — Private Investor — Analyst

Harsh Sharma — Private Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Themis Medicare Limited Q4 and FY ’23 Earnings Conference Call.

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

[Operator Instructions]

I now hand the conference over to Dr. Sachin Patel, MD and CEO from Themis Medicare Limited. Thank you, and over to you, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Thanks very much. Good afternoon, everyone, and thank you for joining us on this call to discuss the fourth quarter and FY ’23 business and financial performance of Themis Medicare. With me, I have Tushar Dalal, who is our CFO; and Adfactors, our Investor Relations [Technical Issues]. Starting from where we left last quarter, we would like to bring to your notice that our focus on hospital business is intact and several steps have been taken in that direction. The recruitment of additional sales team, which had started earlier this year has now been completed and we also have recruited some tough professionals from the industry to lead the same. Additionally, new product launches for this division out on the table for discussion and will be finalizing that in due course of time. At this juncture, I would like to reiterate that last year, that is in FY ’22, we had a significant COVID-related one-time order under this business segment. The financials for this current year under discussions to be seen in that light.

Now, coming to our API segment, in our last call, we had discussed about the pressure points on this business due to high input costs. As these challenges persist, we had two halt manufacturing of these APIs in the quarter under discussion. This had some impact on our topline, which was compensated to a certain extent by the formulation segment. At the same time, we had also stated about improving our manufacturing process and taking an alternative route for manufacturing the same. This is now being commercialized in Q1 of FY ’24.

In terms of capex, we have incurred investments in certain areas to enhance our capabilities. We are upgrading our injectable line and investing in EU GMP certification which will open doors for export opportunities. Additionally, we have made investments in expanding our R&D base. At our Hyderabad facility and also establishing a new R&D lab at Baroda. We continue to invest in skilled manpower to enhance our R&D capabilities as a Company. R&D remains an important backbone for product development and our future growth strategies. For reasons mentioned above, an increase of sales force is a significant increase in manpower cost at the Company, which we believe it is an investment for future growth.

Apart from this, there have been a few more important and exciting developments to share. We have received DCGI approval to market Remifentanil Hydrochloride injections in India for the first time. This drug, which we will market under the brand name REMITHEM is a rapid-acting narcotic analgesic that fulfills a long-awaited need in Indian market. Additionally, we have also received a no objection certificate from DCGI for manufacturing and marketing our Diclofenac Injection, a 75 milligram per ml, which the Company has stopped three years ago. We were market leaders in this earlier and are now evaluating timing and other aspects to relaunch it in the Indian market.

Now, turning to our financial performance for Q4. We reported INR80.1 crores in revenue during the quarter, an increase of 0.9% year-on-year. Our EBITDA for the quarter stands at INR10.48 crores with an EBITDA margin of 13.08%. PAT for the quarter stood at INR8.41 crores as against INR9.95 crores in the fourth quarter of FY ’22, a year-on-year decline of 15.52%. PAT margin stood at 10.49% and the EPS for the quarter is at INR9.13.

For the full-year 2023, we reported INR354.32 crores in revenue during the financial year, as against INR394.61 crores in FY ’22. Our EBITDA for the period stands at INR67.45 crores with EBITDA margin at 19.04%. PAT for the full year is INR56.9 crores and the PAT margin stood at 16.06%. The EPS for the period is INR61.83.

This is all from my side. I would like to open the floor for Q&A now. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Narendra with Whitehouse Capital. Please proceed.

Narendra — Whitehouse Capital — Analyst

Thanks for the opportunity, sir. Hello? Can you hear me, sir?

Sachin Patel — Managing Director and Chief Executive Officer

Yeah, there’s a bit of echo coming in from your line. Let’s give it a try. Let’s give it a try.

Narendra — Whitehouse Capital — Analyst

Hello? Can you hear me now, sir?

Sachin Patel — Managing Director and Chief Executive Officer

It’s still there, but let’s give it a try.

Narendra — Whitehouse Capital — Analyst

I will join back the call, sir. I will join back.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Keshav Garg with Counter Cyclical PMS. Please proceed.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, I’m trying to understand so that last year FY ’22, sir, what were the COVID revenues that were absent during FY ’23.

Sachin Patel — Managing Director and Chief Executive Officer

We had a total revenue of slightly above INR60 crores, which was from — which was directly COVID-related, which was essentially revenues partly from the domestic market, but most importantly from the export market, where you can see we’re in dire need of some critical care products. So even though we did not have [Indecipherable] in those markets, those countries wanted those products from our end. So this is how the year resulted into a significantly higher spot business anyone would expect.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, so now from first quarter onwards of this financial year, there is a low base of last year. Sir, so you think that we can henceforth start locking a growth of 35% CAGR that we had basically predicted for the next three years?

Sachin Patel — Managing Director and Chief Executive Officer

So we are mostly definitely expecting that kind of a growth this year in a annual form. It may or may not start from Q1, but over the course of the year, we certainly expect.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, that is very heartening to know. And, sir, on the operating margins front, sir, from 25% expected margin in the fourth quarter, sir, we clocked 13%, which is maybe due to the operating deleverage in our API segment. So but now with the expected ramp-up from the first quarter onwards, when do you see our margins coming back to first 20% level and thereafter to 25%?

Sachin Patel — Managing Director and Chief Executive Officer

I think definitely before the H1 numbers coming. And the reason for the increase — or decrease rather in our margins in Q4, as I said in my opening remark, was twofold. One is, definitely the API in question have to stop selling and whatever we sold was also at a very high material cost, which was due to the contractual orders which were there. We have to supply them. And the second one was also if you look at our numbers, there’s been a significant increase in the manpower cost, in people cost. And that is because of the new teams that we have put into place, which we hope will become [Indecipherable] in this particular year.

Keshav Garg — Counter Cyclical PMS — Analyst

Great, sir. Sir, so basically, by the second quarter of this financial year, can we expect to come back at 20% margin?

Sachin Patel — Managing Director and Chief Executive Officer

We very much hope so.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay, sir. That’s great. And, sir, thank you very much and best of — sir, one more thing, sir, in the September call also, sir, this receivable — high receivable was discussed. And sir, but it is still at, I mean, INR145 crore level even though our revenues have declined by approximately over 10%. Sir, so — but our receivables are up basically 45% Y-on-Y. And, sir, if we see our debtor days, it is like we are giving some price credit over five months credit to our customer. Sir, so is this number expected to come down?

Sachin Patel — Managing Director and Chief Executive Officer

So, two points on that. One is, in the previous year, the entire spot business which was done, which was about INR60-odd crores was all done on advance. So, that is one big change, which is there from last year to this year. And in this particular year that we see we have given some extra credit to some customers in exports, which we are planning to definitely change. So we hope that, again, by — as quarter and quarter goes by, our debtors will increase, because we do not want to work at this level of debtors by any means.

Keshav Garg — Counter Cyclical PMS — Analyst

So, sir, what should the steady-state debtor days be like, sir? It should be 30 days, 60 days, 90 days?

Sachin Patel — Managing Director and Chief Executive Officer

So, because we have a mix of API, finished dosage form and various distribution network that we work under, I would say 90 days is a good target to have in the near-term?

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, and our suppliers of raw materials, sir, what kind of credit do we get from there on a steady-state basis?

Sachin Patel — Managing Director and Chief Executive Officer

It really depends from product to product, but average, I would say about 60 days.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay, sir. Sir, thank you very much and best of luck.

Sachin Patel — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Narendra with Whitehouse Capital. Please go ahead.

Narendra — Whitehouse Capital — Analyst

Hello, sir. Can you hear me now sir?

Sachin Patel — Managing Director and Chief Executive Officer

Yes, yes, I can.

Narendra — Whitehouse Capital — Analyst

Sir, you’re already into anesthesia and critical care [Technical Issues]. And when it comes to hospital business, in the presentation, you have mentioned that [Technical Issues] What type of products you are going to launch, sir, and how many [Technical Issues] revenue from these divisions?

Sachin Patel — Managing Director and Chief Executive Officer

So, again, there was lot of echo, but I hope I’ve understood the question. So I’ll just quickly summarize. I think, the question was that we have anesthesia and then to critical care, we intend to get into more divisions. So what kind of products we are going to launch. Is that correct?

Narendra — Whitehouse Capital — Analyst

Correct, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Okay. So, I think, with anesthesia, we have, I would like to say that almost [Technical Issues] apart from gases. So we have done pretty well over there. This is a year building a critical care portfolio, because we feel that in critical care, there is a significant value proposition, that is there and we will also couple it up with some of our internal developments in terms of [Technical Issues] formulations, which are there. There’s so much disturbance in the background. Perhaps you can just move to yourself and make it easier. And as we go by [Speech Overlap] yes and as we go by, we intend to get into all the areas essentially that are possible in the hospital business, but it will not all happen in one year, it will happen over a period of next three to four years, where every year, we will keep on adding teams, like we added this year. Hopefully, by the end of this calendar year, we will start building upon a second — third team for the hospital business in an area that we feel there is enough potential. So it is a step-by-step process.

Narendra — Whitehouse Capital — Analyst

Sir, I was looking at the R&D pipeline for formulation. It has mentioned around 28 products. And out of 28 products, only four have completed validation. Does this mean [Indecipherable] will be launched too soon or should they go through any further approval process?

Sachin Patel — Managing Director and Chief Executive Officer

So it’s a mix. Our product — are you referring to the finished — I presume you’re referring to the finished dosage form, right?

Narendra — Whitehouse Capital — Analyst

Yes, sir.

Sachin Patel — Managing Director and Chief Executive Officer

In terms of the finished dosage form, the strategy is quite mixed. One part of the finished dosage form development works towards the export market. So we are targeting 40-odd emerging market where we see there is significant potential, so we are developing new genetics, which we feel would have significant value proposition years ahead. That is one particular strategy.

The second is, a strategy for the Indian market where we feel that we could have the first launch opportunity in India, like we are going to do with any sentiment. And the third area that we are working on in terms of product development is new drug delivery system. So if you see all these three areas, will require. It is not going to be a immediate — a market that we can get. So if it’s for export, the regulatory approval takes about a year to year-and-a-half. If it is for first time to India launch, we have to — we may have the clinical trials after that. And if it is MBBSs, we will also have to do study.

So this is where we are focused in terms of our R&D. We want to do high — if I may say, high return or high value proposition R&D internally. For our sales and marketing team, it is not necessary that the products need to come from our R&D only, we work with multiple manufacturers of products, which will align into our strategy for hospitals.

Narendra — Whitehouse Capital — Analyst

Sir, in continuation of the same question, all these formulations [Technical Issues] I mean, in the last call you have mentioned that probably looking at a gross margin of around 60%, 70%, 80%. Is it possible to get such high margins considering all these generics? I know there are special cases like new drug delivery system or [Indecipherable] injection, but is it possible to get such high gross margin?

Sachin Patel — Managing Director and Chief Executive Officer

Sorry, your question was, are we confident that we can get gross margins of 50%, 60%, 80% on the development pipeline that we have. Is that what the question was?

Narendra — Whitehouse Capital — Analyst

Correct, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Yes, we very much hope so, because if you see all the three areas that we are working in, we are working in projects for which are genetic for the emerging markets. We feel that the pricing is pretty high that is the reason why we have selected those products. If we look at MBBSs, we won’t definitely aim for those kind of margins, otherwise we will never be able to recover the development costs with regards to the same.

And if it’s a first launch opportunity in India, again, the margins would be pretty good. So I think, the products that we had low margins, strategically which used to source from outside and not necessarily manufactured ourselves. What we want to develop ourselves is most definitely something which gives us good margins.

Narendra — Whitehouse Capital — Analyst

Thanks, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Dhwanil Desai with Turtle Capital. Please proceed.

Dhwanil Desai — Turtle Capital — Analyst

Hi. Good morning. Sir, my first question is, so in your presentation you mentioned that API [Technical Issues] total production 98% [Technical Issues] while on the formulation side, I believe, large part of our business is domestic. So in terms of formulation business, do we [Technical Issues]

Sachin Patel — Managing Director and Chief Executive Officer

Sorry, I could not hear you. I understood the first part of it that as much as 33%-odd is our most of the exports comes from API and most of the domestic comes from finished dosage form, but what was the question after that?

Dhwanil Desai — Turtle Capital — Analyst

Question is that on the domestic portfolio, on the [Technical Issues] how much backward integration do we have from the pay-down?

Sachin Patel — Managing Director and Chief Executive Officer

That’s a good question. We don’t have significant backward integration as yet, but with time, we intend to make sure that we have more and more APIs produced in-house for us. We feel this is important from a strategic perspective.

Dhwanil Desai — Turtle Capital — Analyst

And if I remember correctly, earlier there was [Technical Issues] probably eventually disbursed. That plant [Technical Issues] or are we going to carry on at the same capacity?

Sachin Patel — Managing Director and Chief Executive Officer

Sorry, I really could not — are you talking about the demerger that we had proposed?

Dhwanil Desai — Turtle Capital — Analyst

Yeah.

Sachin Patel — Managing Director and Chief Executive Officer

So that particular thing is still not happened yet. That is for our API business, where we had proposed the demerger. But it has not happened as yet. There is a fair amount of regulatory process that we need to go through to be able to accomplish that.

Dhwanil Desai — Turtle Capital — Analyst

Yeah. But [Technical Issues] thought process as to have separate entity in [Technical Issues]

Sachin Patel — Managing Director and Chief Executive Officer

Yes, the idea there is that to grow the API business. We will have to invest quite significantly in infrastructure. We have a slew of products now that we have developed at the R&D level, but to take it to the market, there is — while right now we are able to do it, but we feel that there is a lot of potential in API business to make it grow significantly, if we are willing to put in the funds which are required in terms of the capex. So in all the finished dosage form, it’s more of a opex business, while the API business is more of a capex business. There are two different philosophy in terms of running both the business and hence we felt that it would be a good idea to do this. So that both the businesses can flourish and get the value proposition that is possible.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Second question is, you talked about one of the strategy for finished dosage form and [Technical Issues] products which are first to launch in India. My question is that compared to [Technical Issues]

Sachin Patel — Managing Director and Chief Executive Officer

Sorry, I’m missing you. I’m losing you. I’m losing you.

Dhwanil Desai — Turtle Capital — Analyst

Am I — you are able to hear me?

Sachin Patel — Managing Director and Chief Executive Officer

Yeah.

Dhwanil Desai — Turtle Capital — Analyst

Sir, my question is, you mentioned one of the [Technical Issues] large pharma company [Technical Issues] distribution network. Are we looking at very small niche products for [Technical Issues].

Sachin Patel — Managing Director and Chief Executive Officer

So you are actually right. Everyone wants to do first launches in the country and we don’t have the critical size as yet to be able to say that we are going to take the large molecules and have the opportunity to first — do first time launches [Indecipherable]. So we pick our — we pick the products that we see — we have a dominance, we feel that we are one of the leaders in look at that particular area like we did for Remifentanil. But you are very right that opportunities of these kind are seldom and few. But whatever we see, we have to go for. I think in terms of what we are doing, we feel that’s a significant value proposition.

Dhwanil Desai — Turtle Capital — Analyst

Okay. And one more last question, if you allow me. So, you said that we have hired a lot of [Technical Issues] And if I look at FY ’22 and FY ’23, the percentage [Technical Issues] has remained at around 11%. So with hiring of this new sales force and over next two, three years, how do you see that percentage on trade side moving from 11% to much higher number on will it remain [Technical Issues]?

Sachin Patel — Managing Director and Chief Executive Officer

So our — almost I would say predominantly most of the hiring that has happened is not on the trade side or on the hospital side. So if you see the hospital number last year was about INR113 crores or so. So this is where we expect a significant jump in the years ahead.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So the focus is on the hospital business?

Sachin Patel — Managing Director and Chief Executive Officer

That’s right.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Good. I have more question, but but I’ll come back in the queue.

Operator

Thank you. Our next question comes from the line of Jagvir Singh with Shade Capital. Please proceed with your question.

Dhwanil Desai — Turtle Capital — Analyst

Good afternoon, sir. Thanks for the opportunity. So, sir, in the presentation you have mentioned [Technical Issues] so in the presentation you had mentioned 35% CAGR growth for next two, three years. So how — so can you elaborate, that said, what is the strategy to achieve these numbers?

Sachin Patel — Managing Director and Chief Executive Officer

So, I think we are well-positioned in all the key areas that we are currently focusing on. The first one, by far being the hospital business. Our current team, I believe, is reasonably strong. We have added an additional team, which I feel is also pretty strong. So these two areas will give us the maximum jump that we are planning in this particular year.

And along along with that, we suffered last year in terms of almost about two quarters because of one of our key APIs coming under pricing pressure of not being able to produce it because for every kilo that we produce, we either made more profit at all even at the gross level or we in fact even lost some money. But we have to do it because we had gone back to obligations. So that API part should also show us a reasonably good jump with the new manufacturing process, improved manufacturing process in place, which has already started as we speak.

And third area is the trade area. I think we’ve made some corrective actions over there also. And we have seen some life of the day over there too. But I think if I have to put in the major emphasis in terms of growth for this year would come from hospital and API. And out of that also, more on hospital.

Dhwanil Desai — Turtle Capital — Analyst

And sir my second question is, in the presentation you have maintained new opportunities, so in the medical devices and [Technical Issues] what the Company will do in the medical devices.

Sachin Patel — Managing Director and Chief Executive Officer

So that’s something that I mentioned in the previous question. That’s — our endeavor is to get into all areas of the hospital. We’ve seen that this is a market which is growing and it’s going to grow continuously, essentially because more and more people in the country are having health insurance and they will choose to go to hospitals, nursing homes, etc. And in lieu of that, that is the reason why we are focused on this. Now, not all divisions will be launched on day one. I think [Technical Issues] our bottom-line also. So as they go back, as we see [Indecipherable] from our first and the second teams, we will build multiple teams to focus on the hospital business.

Now, your question was with regards to medical device, we’re are looking at multiple opportunities, some of them generic, some of them perhaps not launched in India yet. So quite a few things on the avenue. But I can tell you for sure that it will not be in this particular year that we will launch it, we will perhaps put a team in place, depending upon how progress in the Company is going in January or so as we did this year, because the team was really new team, the second team was setup in January this year. It can be ready by the following April to going into the market.

Jagvir Singh — Shade Capital — Analyst

Thank you. And I have a last question. So in intensive care in the hospital business who are our competitors?

Sachin Patel — Managing Director and Chief Executive Officer

I would put it this way that there are quite a few companies that visit hospitals. And each of the company specializes in separate areas. So, for example, with anesthesia, we focus on what happens inside the operation theater. In the second team that we are forming, we focus on the intensive care unit. So in anesthesia, I would put it this way that you have Neon, you have Abask [Phonetic], you have a couple of other companies that are based over there. In the intensive care unit, a lot of companies, I would say, so we need to be careful in terms of how we pitch ourselves and what is the value-added proposition that we bring to the hospital. So it has to be a build-in, otherwise it doesn’t work. So, I would say the entire pharmaceutical industry would be in the hospitals, but how we carve-out our care and belong over there is the key point over there.

Jagvir Singh — Shade Capital — Analyst

Sure. Thank you, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Nikhil Arora, an investor. Please proceed.

Nikhil Arora — Private Investor — Analyst

Yeah. Hi, sir. As mentioned in the speech, there has been significant capex incurred in the different aspects of the businesses. So if you could kindly throw some light on the total capex amount incurred in FY ’23?

Sachin Patel — Managing Director and Chief Executive Officer

Tushar, would you be able to give the exact number?

Tushar Dalal — Chief Financial Officer

Yes, sir. I’m Tushar Dalal. So in Haridwar, we have spent around, say, INR14.65 crore to upgrade our facilities for new GMP and making some edits on the line for the injectables. So that works out around, say, INR14.65 crore. In the Vapi factory, we have spent around, say, INR11 crores, that is also we have added into the plant and machinery and the construction of some buildings for the refermenting projects. And we also added some of the R&D equipments and all other thing in the Hyderabad nearly INR129 lakhs is there. So total works out to around, say, INR29 crores.

Nikhil Arora — Private Investor — Analyst

Sir, we also setup the new R&D lab in Baroda, if I’m not wrong. So [Indecipherable] setup this new lab?

Tushar Dalal — Chief Financial Officer

So, that is at around, say, INR117 lakhs. That is — that we will show it at [Indecipherable] particular Baroda. So INR117 lakhs is there.

Nikhil Arora — Private Investor — Analyst

Okay. Thank you, sir. And one last question. As we see the Company is changing its focus on hospital business, so how do we see it as benefiting the company and what is the current EBITDA margin and the target EBITDA margin that we are planning to achieve for this segment, the hospital segment?

Sachin Patel — Managing Director and Chief Executive Officer

So the question how is the capex that we have done last years going to assist our focus on the hospital business?

Nikhil Arora — Private Investor — Analyst

No, sir. As you are changing our focus towards the hospital business, so overall point of view, like how it is going to benefit the Company? What is the current EBITDA margin or what EBITDA margins are you targeting at?

Sachin Patel — Managing Director and Chief Executive Officer

We are — so if you see the year that passed by, for the full-year, we had a EBITDA margin of about 19%, just slightly over 19%. I believe that a healthy EBITDA margin would be anywhere above 25%. So that is what we would be focusing on and targeting. And we believe that, as our people start giving us more productivity, we should be in a position to attain this. At the end of the day, the fixed cost will remain the same. We don’t intend to increase our fixed cost beyond where it is right now. There would [Technical Issues] increment, etc, but besides that, we don’t intend to increase the headcount as we speak. So, automatically, the additional business that they bring in will add to the EBITDA margin. And of course, this EBITDA margin was under pressure for the last quarter and as was case in the quarter before, because of one of our APIs not contributing at all. So, I think, both these factors should be the largest contributors to the EBITDA margins.

Nikhil Arora — Private Investor — Analyst

[Indecipherable] Thank you so much and all the best.

Operator

Thank you. Our next question comes from the line of Harsh Sharma, an investor. Please proceed.

Tushar Dalal — Chief Financial Officer

Hi, sir. Sir, my first question is that if we see, there has been a slight increase in long-term borrowings. Like, could you please explain like what is the purpose of this borrowing.

Sachin Patel — Managing Director and Chief Executive Officer

So, we have patient line-of-credit in form of a term loan from our current bankers in order to do this capex plan which is there. As Tushar, as mentioned, it went into the following areas. One is to upgrade our facility in Haridwar, so that we can have new GMP qualification. The second was in Vapi, our API facility and the third partly was in Hyderabad to have our R&D labs capacity increase and fourth was to setup a small lab in Baroda with hospital technician. So, this is where the long-term borrowings are coming from.

Harsh Sharma — Private Investor — Analyst

I understand. Thank you. Sir, and if you see, the PPE investment is also increased and it’s INR19 crores there’s been an investment in PPE. Could you like throw some light from the [Indecipherable]?

Sachin Patel — Managing Director and Chief Executive Officer

Sorry, what investment?

Harsh Sharma — Private Investor — Analyst

There’s been a INR19 crores of investment in the PPE. So what is the reason for that, sir?

Sachin Patel — Managing Director and Chief Executive Officer

PPE?

Tushar Dalal — Chief Financial Officer

Sachin bhai, he’s talking about the additions to the fixed assets. PPE means plant — property, plant and equipment.

Sachin Patel — Managing Director and Chief Executive Officer

Tushar bhai, can you shed light on this?

Tushar Dalal — Chief Financial Officer

Yeah. So my gross investment in the current year is around, say, INR29 crore. So the INR19 crore is after the [Indecipherable] depreciation. So this is a net of depreciation, addition of INR19 crores. So in fact, we have added the machinery and building work around, say, INR29 crores, as I mentioned in the earlier query. So INR29 crore minus INR10 crore, INR10 crore is accumulated depreciation. So that works out to INR19 crores.

Harsh Sharma — Private Investor — Analyst

Okay, sir. And sir, directly, if we see, topline has decreased by 10% Y-on-Y.

Sachin Patel — Managing Director and Chief Executive Officer

Yes.

Harsh Sharma — Private Investor — Analyst

So, like, what is the reason for this?

Sachin Patel — Managing Director and Chief Executive Officer

So then, I had put on in my opening remarks that in the previous year we had a one-time COVID-related business of INR60 odd crores. And this business was obviously not there in the current year and most of the business that we had in the COVID year was in terms of exports. So that business was essentially zero. In fact, I would say, to a certain extent, it was minus. And the reason why I say minus is, because some people who had — our usual customers, who had bought the material did not buy anything in the current year, because they had inventory from the previous year.

Harsh Sharma — Private Investor — Analyst

Thanks, sir. Thank you.

Operator

Thank you. Our next question comes from the line of Narendra with Whitehouse Capital. Please go ahead.

Narendra — Whitehouse Capital — Analyst

Sir, thanks for the opportunity again. When you say you’re entering into intensive care division, the products will be similar to what you are already marketing under anesthesia like [Indecipherable] or will there be any specific products you are introducing for the intensive care?

Sachin Patel — Managing Director and Chief Executive Officer

So, I would put it this way that the product overlap between the two divisions would probably be 4%, 5%, but otherwise, it will be all separate products from what we are marketing right now.

Narendra — Whitehouse Capital — Analyst

Can you mention few products, sir, which will be launched in intensive care?

Sachin Patel — Managing Director and Chief Executive Officer

It would essentially be a lot of antimicrobials and many other things along with that as time goes by. Again, the focus would be that like we had in anesthesia, anything that anesthesialogist uses or goes into a surgery, we’ll launch. Similarly, will be the case in intensive care. We have currently taken the antimicrobial basket launch, but then ultimately whatever is used in the intensive care, our team will be launching.

Narendra — Whitehouse Capital — Analyst

Sir, can you update on your [Indecipherable] what is the current input cost? I think you are [Technical Issues] is there any update on that?

Sachin Patel — Managing Director and Chief Executive Officer

I think we are — as I mentioned, we have restarted the production. And the cost is better than what it was before. I would not be comfortable with giving exactly what the costing of the product is. It is better than before.

Narendra — Whitehouse Capital — Analyst

Okay. Thank you, sir.

Sachin Patel — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Dhwanil Desai with Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capital — Analyst

Hi, Sachin. Thanks for the opportunity again. So, one part to understand with respect to hospital business on [Indecipherable]. So in terms of thinking about this business compared to a normal trade business, is it a right way to think that the gross margins are typically lower because the bargaining power of hospital is slightly higher, but when your productivity of your sales force is much higher, because you can tell in quantity. So is that a right way to think?

Sachin Patel — Managing Director and Chief Executive Officer

Overall, it’s a fair statement. It’s a fair statement to make. It has a little bit of basis to it, but I think overall what you’re saying is correct. And then the whole challenge is how do you make this team also give you a good margin as a trade team. That is where I believe that we possibly have track how to do that. I will not say anything more than that, but I will say that we need to make sure that margins are good and we don’t discount the product beyond the particular level. And I think we are managing that reasonably well, as we speak. What happens in the future, we’ll have to see.

Dhwanil Desai — Turtle Capital — Analyst

Okay. And one point you mentioned, Sachin, is about the productivity. You said that without much increase in the fixed cost at the sales force, you will be still be able to grow at a decent curve. So, typically in this segment, the [Indecipherable] one parameter that everybody uses. So any sense on where we are today and any kind of a target that you had set for yourself in terms of where you want to be in couple of years, somewhere?

Sachin Patel — Managing Director and Chief Executive Officer

We are pretty low, if I have to be honest. We are low in terms of PCPL. Hence I see a significant upside. So from here, there is only one way we can go in terms of PCPL. And the reason I’m not giving you exact number is because we have multiple teams and some teams would be doing extremely well, some teams would not be doing very well, but this is a year for us to essentially consolidate and make sure that as a company, we come up to a particular level in PCPL, because we brought in a lot of people last year. The number of people that we increased in the team was almost about 150, and we need to make sure that we have at least 90%, 95% of our team goes productive.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So it that a fair way to understand that the incremental margin improvement to a large extent will come from this productivity improvement?

Sachin Patel — Managing Director and Chief Executive Officer

Absolutely.

Dhwanil Desai — Turtle Capital — Analyst

Okay. And just a request, since this is one of the major driver of margin improvement, if you can give some quantitative signs in presentation or call that would be very helpful to understand how [Indecipherable] have been shaping up.

Sachin Patel — Managing Director and Chief Executive Officer

I think it’s a fair point. We will look into this.

Dhwanil Desai — Turtle Capital — Analyst

Sure. Thanks.

Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to hand the conference over to Dr. Sachin Patel for closing comments.

Sachin Patel — Managing Director and Chief Executive Officer

Thanks. Thanks very much. So finally, I would like to thank the entire team of Themis Medicare for their untiring effort, hard work and dedication, which strives the Company forward to various market conditions. And also thank you everyone for your participation in our earnings call. In case of any further queries, you may get in touch with Adfactors PR or feel free to get in touch with us. We look forward to interacting with you. Thank you again. They care. Bye-bye.

Operator

[Operator Closing Remarks]