Torrent Pharmaceuticals Ltd (TORNTPHARM) Q3 FY23 Earnings Concall Transcript

Torrent Pharmaceuticals Ltd (NSE: TORNTPHARM) Q3 FY23 Earnings Concall dated Jan. 25, 2023

Corporate Participants:

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Aman Mehta — Executive Director and Chief Marketing Officer

Sanjay Gupta — Executive Director, International business

Analysts:

Saion Mukherjee — Nomura — Analyst

Damayanti Kerai — HSBC. — Analyst

Sumit Gupta — Motilal Oswal Securities — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Prakash Agarwal — Axis Capital — Analyst

Nitin Agarwal — DAM Capital — Analyst

Neha Manpuria — Bank of America — Analyst

Krishnendu Saha — Quantum Mutual Fund — Analyst

Cyndrella Carvalho — JM Financial — Analyst

Tushar Manudhane — Motilal Oswal — Analyst

Kumar Saumya — Ambit Capital — Analyst

Saion Mukherjee — Nomura Securities — Analyst

Prashant Kothari — Pictet — Analyst

Kunal Randeria — Nuvama — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Torrent Pharmaceuticals Q3 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sudhir Menon. Thank you and over to you, sir.

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Thank you. Good evening, and welcome to Quarter Three FY ’23 Earnings Call. Quarter three registered revenue growth of 18%, led by strong growth in the branded generic markets and steady performance of the generic markets. Branded generic markets constituted 70% of the total revenue base. The growth in the branded generic markets were primarily driven by new launch momentum, performance of the top brands, and integration of acquired portfolio.

In terms of financial performance during the quarter, the revenues were INR2,491 crores, up by 18% on Y-o-Y basis. Operating EBITDA was INR724 crores with operating EBITDA margins at 29.1%. There is a one-offs impact on gross margins by around 0.6% for the quarter due to under absorption of manufacturing cost as there was a temporary stoppage of manufacturing in the month of October for around 15 days to 20 days for carrying out cleaning validation of certain equipment’s as a follow-up to the USFDA audit. Today, the Board of Directors have approved an interim dividend of INR14 per share.

With this, I would request Aman to give his insights on India Business.

Aman Mehta — Executive Director and Chief Marketing Officer

Thanks, Sudhir. India revenues at INR1,259 crores grew by 17% and included revenues from the integration of Curatio Healthcare. As per the AIOCD dataset, the Torrent’s growth in Q3 was at 12%, in line with the IPM growth of 12%. Our growth was led by new launch performance, particularly in the chronic segment, performance of our top brands and strong growth of the Curatio portfolio.

At the end of the quarter, Torrent has 19 brands in the top 500 of the IPM with 13 brands now more than INR100 crores sales and match December 2022. Our field force has been further expanded and MR strength now stand at 5,300. This is inclusive of the Curatio division. Our base business MR strength stands at 4,700, which has also been expanded in the current quarter. For YTD December FY ’23, revenues were INR3,728 crores, up by 15%. We expect the India business to continue its growth momentum, backed by new launch performance, top brand performance, increase in field force productivity of the expanded field force, and continued performance of the acquired portfolio of Curatio Healthcare.

I’ll now hand over to Mr. Sanjay Gupta for the International business.

Sanjay Gupta — Executive Director, International business

Thanks, Aman. Let’s start with our biggest branded generics business outside of India, which is Brazil. So Brazil revenue was at INR248 crores, up by 36% on a Y-on-Y basis. Constant currency revenue was in Brazilian Real, BRL159 million, was up by 17%. As for secondary dataset, Torrent’s growth is 19%, versus the branded generic market growth of 13% for the quarter ended November ’22.

On a MAT December 22 basis, Torrent’s growth is at 15% versus a BGx market growth of 12%. Strong contribution to growth has come from our CNS franchise and the generic business, which now contributes about 14% to our Brazilian revenues. We have launched six products in the last 12 months. The two biggest markets are for Desvenlafaxine and Rivaroxaban, where our market share in prescriptions in the month of December is at 8% for Desvenlafaxine and 9% for Rivaroxaban.

Our plans to increase our coverage of CNS in cardio markets from the current 19% to 35% by 2025 are on track. This year we have received seven approvals. There are 10 products pending approval with ANVISA, and we would be filing an additional 10 plus products before the end of this fiscal year. IQVIA projects a retail market growth of 11% in 2023 and 2024, and we should be growing at a rate higher than this.

Moving on to Germany, our German revenues were INR241 crores, up by 1% on a Y-on-Y basis. Constant currency revenue were at EUR29 million, up by 4%,. W have started growing again, thanks to the start of business of some new tenders that where won earlier in the year, as well as four new launches in Q3. For the coming year, we anticipate single-digit growth coming from tender wins, some of which have been realized already. In 2022- ’23, we would have launched more than 10 new products in Germany. The new products help us compensate the pricing pressures due to increased competition in the market.

On the US side, US revenues were at INR291 crores, were up by 24%. Constant currency revenue was a $35 million, up by 13%. We have received OAI classification for our Indrad facility. For Dahej and Indrad facility, we continue to wait for the USFDA inspection. Future outlook of the US business is linked to our ability to get new products on the market. We expect to file about five to six products in the current fiscal year. As of December 31, ’22, 48 ANDAs were pending approval with the USFDA.

To conclude, while the BGX markets shall continue to lead the growth, Germany shall continue to witness steady sequential recovery. For the Indrad facility, we are actively engaged with the regulators for resolution of issues at the earliest.

Operator, we can now open the call for Q&A, please.

Questions and Answers:

Operator

Thank you very much, Sir. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Saion Mukerji from Nomura Securities. Please go ahead.

Saion Mukherjee — Nomura — Analyst

Yeah, hi, good evening. Sir, can you Indicate the growth without Curatio? What is the organic growth for India in this quarter?

Sanjay Gupta — Executive Director, International business

The base business growth is 12% and reported growth that we have is 17%, so the remainder 5% is coming from Curatio.

Saion Mukherjee — Nomura — Analyst

Okay, thank you. And on the Indrad facility, is there any communication that you’ve received from the FDA, and what’s your outlook there in terms of timeline, and if you can indicate what’s the level of contribution from that side to the overall revenues?

Sanjay Gupta — Executive Director, International business

So what we have received is a letter stating the status of the facility as OAI. So, obviously, the agency kind of will take some official action in a time period of 45 days to 90 days from the date of the letter, which was day before yesterday. And the official action ranges from a regulatory meeting or a warning letter or something of that sort. So we shall wait for them to decide before company getting further, and Indrad revenue contribution i — we haven’t disclosed the revenues by plant So far, right?

Saion Mukherjee — Nomura — Analyst

Correct, correct.

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Saion, maybe I can come back to you on that.

Saion Mukherjee — Nomura — Analyst

Okay. Thank you.

Operator

Thank you. We’ll take our next question from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC. — Analyst

Hi. Thank you for the opportunity. First on India, can you split the base India growth into volume price and new launches contribution? And related question is, what I understand, price increase has been the significant driver for India sales this year. So from this high base of price increase, how should we see a growth scenario in the coming year?

Sanjay Gupta — Executive Director, International business

So the AIOCD growth is 12% for Torrent in Q3, out of that volume is 0.2%, prices 8.1%, and new products is 3.5%. So this 8.1% is against 7% of the market price growth. So it’s pretty much in line with the market growth and we think this range will continue. This has been pretty much our MAE range for price increase and we think next few quarters also this should continue.

Damayanti Kerai — HSBC. — Analyst

Okay, Sir. Coming quarter also 7% to 8% price increases they will generate?

Sanjay Gupta — Executive Director, International business

That’s right — that’s right.

Damayanti Kerai — HSBC. — Analyst

Okay. And on the new launches can you comment on some of the key launches which has supported the 3.5% contribution, because I think in the past we have mostly improved and took a 0.5% contribution from new products…

Sanjay Gupta — Executive Director, International business

Yeah, so as the new launch contribution is calculated on a trailing 24-month basis. So in this period, we have launched relatively high number of brands in the chronic segment. Recently, the launch has been of Sitagliptin as shared last quarter, where we continue to be the number one franchise of the newly launched brands. We should be doing roughly around INR4.8 crores to INR5 crores a month based on AIOCD. So this is strengthening our market share in diabetes.

Similarly, in CNS, we had launches this time last year in the Pregabalin franchise, which continue to do quite well and remain the number one market share. So these are the key three, four launches are adding the incremental new product growth.

Damayanti Kerai — HSBC. — Analyst

Okay, that’s helpful. And secondly, Curatio integration. So can you talk about the progress with which you are integrating the portfolio to your India business? So you mentioned you have a separate team and then you have added more people, etc. So a few more color would be helpful.

Sanjay Gupta — Executive Director, International business

So the business is on track. It’s been 2.5 months in the quarter that we have got the sales from Curatio. October 14th is when we had integrated, so 2.5 months of sales in Q3. Pretty much continuing the same division, same strength in the business. We have started realizing synergies on the cost front in distribution where there were overlapping cost, let’s say distribution and CFA warehouse setup, which has all been merged, and some back end functions which were overlapping.

So this synergy has started playing out, I think about 3% to 4% margin improvement has already seen in the first quarter. Topline delivery continues as per the exist — the ongoing performance and we think this should sustain. So I would say better to wait another quarter, at least Q4 once we have the entire quarter under our performance, we can share further insight to the performance of Curatio.

Damayanti Kerai — HSBC. — Analyst

Okay. That’s helpful. My second question is on Germany. So you mentioned now the supplies have started for the new tender. So, this tender is for what period? And do you anticipate any more tenders coming in next two or three quarters?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

So in Germany, how it works is the tender duration is two months and usually you win some tenders and they start six months later. So what happens is that the Q3 increase in sales, we flagged a few months ago. And saying that you had tenders which would start in Q3. So subsequently, each quarter we win a few tenders and which is what has led me to tell you that we expect single-digit growth next year.

Damayanti Kerai — HSBC. — Analyst

Okay. That’s helpful. Thank you. All the best. I’ll get back in the queue.

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Sumit Gupta from Motilal Oswal Securities. Please go ahead.

Sumit Gupta — Motilal Oswal Securities — Analyst

Hi. Good evening. Just want to know on the price erosion update in the US market. So what kind of trajectory [Technical Issues]

Operator

Mr. Gupta. Sorry to interrupt. If you are on a hands free mode, can you switch to a handset and speak? Your audio is not very clear.

Sumit Gupta — Motilal Oswal Securities — Analyst

Hello.

Sanjay Gupta — Executive Director, International business

Yeah, better.

Sumit Gupta — Motilal Oswal Securities — Analyst

Just want to know on the price erosion update in the US market. So what kind of trajectory that you are seeing?

Sanjay Gupta — Executive Director, International business

So year-on-year, we are seeing high-single-digit.

Sumit Gupta — Motilal Oswal Securities — Analyst

Okay, okay. And what is the capacity utilization overall?

Sanjay Gupta — Executive Director, International business

Overall, it depends upon the plant. So, Indrad is a multi country plant, right, much more than Dahej. So, Indrad capacity utilization is in the high 70s and for Dahej we are more in the mid 55%, 56% range.

Sumit Gupta — Motilal Oswal Securities — Analyst

Okay. Understood. Thank you, sir.

Operator

Thank you. Our next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Yeah. Thank you for taking my question. Just again focusing back on the Curatio acquisition, right? You talked about cost synergies, but I remember in our acquisition call we talked about revenue as well. At some point of time, we look at the top five brands, [Indecipherable] who all are there and just see where they are priced with respect to market and if necessary take price increases. So is that something that we — it’s early to comment about that or you think we have selectively started doing that as well?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

So, that’s also started. Already one round of price increase which was already taken before the acquisition, that was to offset the increased raw material cost. That has been affected and that new stock will be on the market in this quarter. So that should also start reflecting. And otherwise, I mean revenue, there will be a — Curatio revenue growth was about 20% for the quarter, the Curatio standalone. So the growth is pretty much on track.

Shyam Srinivasan — Goldman Sachs — Analyst

Sir, but I thought we were expecting to go faster relative to the segment, right? Or maybe it’s too early days for the two and half months you think for this 20% growth? I was under the impression that the segment is growing maybe 20% and Curatio is probably growing faster.

Sanjay Gupta — Executive Director, International business

No. I think the segment that we [Indecipherable] which is the prescription based. This is significantly faster than that. But either case, next quarter should give a better picture. I think this mid-to-high teens growth is something that we feel is sustainable for this portfolio and rest will be the levers that we mentioned earlier, which should start playing out probably by end of the next financial year.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Very helpful. And just on the — Sudhir, on the financial side. So what is the kind of debt position now after the deal? And if you could just reiterate some of the cash flow numbers that we are generating and how we plan to kind of reduce debt over time?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Yeah. So Shyam, I think by 31st March 2023 the net-debt position should be around INR4,300 crores. And as per the repayment schedule, next year we should be repaying roughly INR1,200 crores. And probably in FY’25, a major chunk of the cash flow will get allocated towards the prepayments of all these loans.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. So, and largely — so there is no — so largely from internal accruals, right? So essentially we are going to divert. What about capex, sorry. I think that’s the other question I had. INR100 crores you’re going to repay and what is the rest of the operating cash flow is going towards?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Right. So, roughly you can say the EBITDA should be close to around 3,000, let’s say. Of which, the conversion to operating cash flow should be 80%, which is 2,400. And capex over the next three years on an average should not be more than 250, max 300, I would say per annum.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Thank you, and all the best.

Operator

Thank you. Our next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital — Analyst

Yeah, hi, good evening. Thanks for the opportunity. Just trying to understand gross margin better. So 3Q gross margins are little down versus 2Q while our higher gross margin business, India and Brazil have done fairly well. Any explanation there?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Yeah. So, Prakash I don’t know if you’ve heard the opening speech where I had explained. [Indecipherable] what I said is there is a one-time impact of gross margin by 0.6% for the quarter and which is primarily because of under-absorption of manufacturing overheads in the month of October, wherein immediately after the USFDA audit which ended On 28th of September. There has to be some cleaning validation of certain equipment’s, which had to be done as a follow-up to the USFDA audit. Because of that, there has been an under absorption of overhead, which has impacted the gross margin by 0.6%.

Prakash Agarwal — Axis Capital — Analyst

Any other reason? I mean, because Brazil also done fairly well, which is a higher gross margin business.

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

No other reason, Prakash. This is only one time impact which we have seen.

Prakash Agarwal — Axis Capital — Analyst

And what do you attribute this Indrad facility, the [Indecipherable] have come now the OAI, it had warning that status earlier, so — and we seen other facilities where other companies also seeing observations coming back. So I mean, it’s been three, four years now. So what’s really that as a company or as an industry we are missing here?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Well, you’re right. I mean, As per this recent OAI is concerned, we are still working on it, right? I mean, trying to get in touch with the USFDA to understand better, so it would take couple of weeks I would say for us to get a better hang of what would be the next thing, which we should be looking at. So maybe, post one to two weeks we’ll have a better clarity to give you some feedback on that.

Prakash Agarwal — Axis Capital — Analyst

Okay. And one more for you on the interest cost side. So you mentioned INR3,000 crores EBITDA with 80% conversion. So, the debt repayment should be much higher than the INR1,200 crores you talked about or how do you think — that’s a conservative number or it’s a realistic number?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

No, so it’s a scheduled repayment which is there for the next year. And I agree, I mean, if this additional cash which is there on the balance sheet, it will be used for prepayment of the loans to the extent whatever is possible. But I was saying was even if I take scheduled repayment which is happening next year of INR1,200 crores, that should end most of my previous acquisition funding. And therefore, FY’25 whatever cash flows are getting generated considering the growth over the next two years, most of that can be allocated for prepayment of Curatio loans.

Prakash Agarwal — Axis Capital — Analyst

Okay, lovely. And lastly for — if you can also give some color on the market formation of Sitagliptin with losartan. I understand not many players have come in or it’s too crowded as was seen in other diabetes products like Vilda, Sita, etc? Or still market is getting formed?

Sanjay Gupta — Executive Director, International business

The market is still getting formed. I think the matter is still sub judice, so would want to wait till this — further clarity.

Prakash Agarwal — Axis Capital — Analyst

Okay. And you expect that in next three, six months?

Sanjay Gupta — Executive Director, International business

It should be hopefully within this next six months.

Prakash Agarwal — Axis Capital — Analyst

Okay, great. Thank you so much.

Operator

Thank you. Our next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Hi. Thanks for taking my question. On the ROW market, there seems to be strong growth in this quarter, it’s INR90 crore number, like INR40 crores, INR50 crores we’ve been doing. Any particular driver for the growth in the quarter?

Aman Mehta — Executive Director and Chief Marketing Officer

I don’t think, Nitin. It’s been quite a good quarter I would say. There are one or two geographies where there were some incremental opportunities which was seen, which we were able to take it. That’s the reason for ROW the growth is little higher, but otherwise even a country like Mexico is doing fine I would say, growing double digit for almost last four to five quarters high-double digit. So yes, I mean to a certain extent there were some incremental opportunity which had come in quarter three in, I would say Russia basically, which has helped in getting such a strong growth.

Nitin Agarwal — DAM Capital — Analyst

But this shouldn’t be — we should not take this as a base to model going-forward numbers on the size.

Aman Mehta — Executive Director and Chief Marketing Officer

But Russia is a very small market for us Nitin. Although there is yes, possibly 1% or 2% contribution to the overall incremental growth, but not major.

Nitin Agarwal — DAM Capital — Analyst

So this 290, can we take this 290 as a base for this business from a modeling perspective?

Aman Mehta — Executive Director and Chief Marketing Officer

Nitin, it’s a little difficult for me to give any guidance on that. Maybe the two quarters or three quarters if that number is sustaining, then possibly I can confirm that, but I think it’s better to wait for one more quarter to see whether this number is sustaining. But nothing as of now which can indicate that this can go up or down.

Nitin Agarwal — DAM Capital — Analyst

On the Curatio, on H&A and staff costs, I mean, which is built in only 1.5 months of this cost, so some more costs we should pencil in for the next quarter?

Sanjay Gupta — Executive Director, International business

No, it’s almost 2.5 months which has been factored, not major even if you take a full quarter I would say.

Nitin Agarwal — DAM Capital — Analyst

So at least on the [Indecipherable]

Sanjay Gupta — Executive Director, International business

I wouldn’t think so.

Nitin Agarwal — DAM Capital — Analyst

And lastly on Brazil, Sudhir, you mentioned the market growth is now guided to be about 10% for the next couple of years, was it correct?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Yeah, so IMS projects generally next five years 8% to 12% growth. Next two years is the projected at 11%.

Nitin Agarwal — DAM Capital — Analyst

Okay, and given the fact that we are in the process of launching multiple new products, we should be in a position to comfortably outpace the market?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Correct. So we have three growth drivers. Essentially, last one year we’ve increased the number of CNS reps. So that has given a good momentum to our CNS franchise. Our generics business is doing very well and then thirdly, the new launches.

Nitin Agarwal — DAM Capital — Analyst

And what proportion on the business will be generic [Indecipherable]

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

It has risen 14%

Nitin Agarwal — DAM Capital — Analyst

14%

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

Yeah.

Nitin Agarwal — DAM Capital — Analyst

Okay. Thank you.

Sanjay Gupta — Executive Director, International business

Thanks.

Operator

Thank you. [Operator Instructions] We’ll take our next question from the line of Neha Manpuria from Bank of America. Please go ahead.

Neha Manpuria — Bank of America — Analyst

Thanks for taking my questions. On the Brazil business we saw will on good step up in this quarter. I heard the commentary that you mentioned. But it’s fair to assume this number is sustainable and as we launch more products, we should continue to see growth from Brazil?

Sanjay Gupta — Executive Director, International business

So, Neha the previous two quarters local currency growth had been 8% and essentially that growth was on the lower side, but IMS was showing this mid-teens growth, which is the underlying growth of the business. Q1 in Brazil generally gets impacted because of Q4. There is over stocking from the wholesalers. So Q4 of last year was showing a growth of 21%, so a Q1 is a little bit impacted number. Q2, we had some shelf stock adjustments because of which primary sales were on the lower side, but IMS sales continued in mid-teens. So I would say that double-digit north of 10% is given, given the market growth, and we should be reasonably higher. So I would tell you that it looks like this is the trend.

Neha Manpuria — Bank of America — Analyst

Understood. And did get correctly that you are planning to file 10 plus products by the end of the FY ’23

Sanjay Gupta — Executive Director, International business

We would file a total of 10 plus products in this fiscal year.

Neha Manpuria — Bank of America — Analyst

Okay. So the 10 pending which includes part of the filings, right?

Sanjay Gupta — Executive Director, International business

10 plus we are as of today.

Neha Manpuria — Bank of America — Analyst

Okay. Understood. So by the end, we’ll have probably 20 products pending for approval?

Sanjay Gupta — Executive Director, International business

Yeah, I would say at least 16 to 17 products, maybe 20.

Neha Manpuria — Bank of America — Analyst

Okay, and by when can we start seeing commercializing, if you can tell what’s your presumed timeline now like in Brazil, has it improved?

Sanjay Gupta — Executive Director, International business

Yeah, yeah, it’s usually now 24 months and what you would see is five at least. See, its quite heavy to launch branded generics. So I think what you would see generally is four to six products a year.

Neha Manpuria — Bank of America — Analyst

Okay. Fair enough. Thank you so much.

Sanjay Gupta — Executive Director, International business

Thanks.

Operator

Thank you. [Operator Instructions] We’ll take the next question from the line of Krishnendu Saha from Quantum Mutual Fund. Please go ahead.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Sir, hi. [Indecipherable] questions. Just understanding the 24% growth in the US is mostly from the third-party filings, is it?

Sanjay Gupta — Executive Director, International business

No, no. This growth is because of base impact. So if you go back to the same period last year, the sales were on the lower side, $31 million. So, and while generally for the last, I would say six, seven quarters our sales have been $35 million. So that particular dip in the same period last year is what results in the percentage growth this year.

Krishnendu Saha — Quantum Mutual Fund — Analyst

How many products do we have in the market actually?

Sanjay Gupta — Executive Director, International business

So we sell about 55 products.

Krishnendu Saha — Quantum Mutual Fund — Analyst

[Technical Issues]

Operator

Mr. Saha, I’m sorry to interrupt, but audio is not very clear. Could you repeat your question?

Krishnendu Saha — Quantum Mutual Fund — Analyst

Can you hear me now?

Sanjay Gupta — Executive Director, International business

Yeah.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah, how many products will you have in Brazil itself?

Sanjay Gupta — Executive Director, International business

So, Brazil, we have about 22 products. Sir, did you get my answer? Its about 22.

Operator

Mr. Saha, are you still there?

Krishnendu Saha — Quantum Mutual Fund — Analyst

Hello.

Sanjay Gupta — Executive Director, International business

Yes, I answered your question. We have about 22 products.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah, yeah, I got that. Thank you. Just on the acquisition front, how much of our revenues will be on the OTC front in India right now?

Sanjay Gupta — Executive Director, International business

So right now would be small percentage because…

Krishnendu Saha — Quantum Mutual Fund — Analyst

With the acquisition also.

Sanjay Gupta — Executive Director, International business

With the acquisition. That’s right, yeah.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Any percentage that will be given?

Aman Mehta — Executive Director and Chief Marketing Officer

We’ll be able to share better next quarter because there is only 2.5 months. But the idea is to focus on the RX piece first and then ramp-up the OTC for the acquisition as well.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead.

Cyndrella Carvalho — JM Financial — Analyst

Thanks for the opportunity. Just wanted to know your thoughts on US market because of Indrad now. How do you see, what is your thought process in terms of getting the new launches to the market, what is the the plan going ahead? Any changes that you intend to make, any third party sourcing, any other thoughts that you can help us understand?

Sanjay Gupta — Executive Director, International business

Sure, so. So this OAI kind of is a setback for the organization. We would have greater visibility, 45 to 90 days down the line, right, as the range of options before the FDA is quite wide. There can be — so depending upon the decision they make, we are kind of building our various scenarios as to what is the best way forward. I would say that it looks challenging to bring new products to the US market in the near term, especially because of what happened to Indrad, but also that we have not yet had the inspectors come over to Dahej. So we are waiting for that inspection to happen.

As of today, I’m sitting on 55 filings for the US, out of which I think 19 up from Indrad and 16 are from Dahej. So there a lot of filings from these two facilities. And as with the passage of time, the value of these filings gets depreciated. So we’ll have to kind of decide how we want to proceed. But I won’t be able to share that with you today. It’s sufficient to say that we are in the scenario building phase depending on how the FDA outcome goes.

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

And I think, Cyndrella, the only thing I wanted to add to what Sanjay said. So, Dahej, we have enough capacity, its quite underutilized. And if things go positive as far as Dahej reinspection is concerned, many of the products which are there in Indrad can really shift to Dahej without any issue because the filings for getting approval for all these products have already been done or it’s just waiting for submission and this would take a very short time to get an approval.

And additionally, we are also looking at some of the same options for certain high-volume products which we initiated to optimize the overall cost and be more competitive. So there are options which we are looking, at least for the existing product base. But as Sanjay said, the new product filing which had been done from Indrad, that’s something which we need to understand whether something can be salvaged out of that plant.

Cyndrella Carvalho — JM Financial — Analyst

This is very helpful. Thank you so much for that. And one more question is on the Indian [Indecipherable]. You mentioned that the Rx market you will be focusing first. So what is — if any thoughts that you can share in terms of strategy that you are going in for the — specifically for the Curatio acquisition? It could highlight our strengths, what are we trying to build up would be helpful. Thank you so much.

Sanjay Gupta — Executive Director, International business

So we had. I mentioned in the last call that Curatio has a strong presence in pediatric derma. And they also have a very strong presence in the south and west markets. There is a lot more opportunity in the north and east markets, but those markets are just smaller in size compared to the south and west. But there is still quite a big headroom for increasing the share in these regions as well. So overall while the existing markets will continue to grow, we can add a reasonable share from the non covered markets, which we’ll be taking up probably in the next couple of quarters. All the brands — the top five brands are continuing to do quite well as of now and we believe that the top three brands, whether its Tedibar or Atogla, they continue to see more and more market share gain even in the RX space. So hopefully that should continue in the same range of growth for the next couple of quarters and the additional initiatives should add to the incremental growth.

Cyndrella Carvalho — JM Financial — Analyst

Thank you so much.

Operator

Thank you. Question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.

Tushar Manudhane — Motilal Oswal — Analyst

Sir, just on this inspection at Indrad. So what regards this instructions and basically will that also help in getting the other site inspected?

Sanjay Gupta — Executive Director, International business

So one site is not linked to the other. And this inspection is actually a follow up on the inspection which happened in March of 2019. So it is second inspection post observations which were made in 2019.

Tushar Manudhane — Motilal Oswal — Analyst

Okay. So basically we still kind of wait for the other sites to get inspected?

Sanjay Gupta — Executive Director, International business

Yeah, yeah, that’s independent of the site.

Tushar Manudhane — Motilal Oswal — Analyst

And nearly the issue which we may will be highlighted beside is kind of taken care of at the other site, so that if at all inspection happens this does not recur.

Sanjay Gupta — Executive Director, International business

Absolutely. And even the observations this time at Indrad are not the same as the one from last time, right? They are not repeat observations.

Tushar Manudhane — Motilal Oswal — Analyst

Okay, okay. And how much of the gross block so to say is associated for the US business? I understand it’s a [Indecipherable] can be called out for US business.

Sanjay Gupta — Executive Director, International business

At Indrad plant.

Tushar Manudhane — Motilal Oswal — Analyst

Combining Indrad, Dahej, both.

Sanjay Gupta — Executive Director, International business

I think around 45% to 50%.

Tushar Manudhane — Motilal Oswal — Analyst

Okay. dedicated for US.

Sanjay Gupta — Executive Director, International business

Correct, correct.

Tushar Manudhane — Motilal Oswal — Analyst

All right, Thanks.

Operator

Thank you. Our next question is from the line of Kumar Saumya from from Ambit Capital. Please go ahead.

Kumar Saumya — Ambit Capital — Analyst

Yeah, hi sir, good evening. I just was booked [Technical Issues] What as the forex loss during the quarter?

Sanjay Gupta — Executive Director, International business

So forex loss during the quarter was roughly INR40 crores.

Kumar Saumya — Ambit Capital — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Just one more OCD question. On depreciation and interest costs [Technical Issues]

Sanjay Gupta — Executive Director, International business

So, amortization costs for two and half months, yes. Interest cost for two and half months, yes.

Nitin Agarwal — DAM Capital — Analyst

Okay. And in terms of cost optimization measures, aAre there anything that can look forward to from various cost with respect to next year?

Sanjay Gupta — Executive Director, International business

Well, absolutely, right. I mean what we said is — wo we’ve applied for the merger scheme, right, between Curatio and TPN. And once the merger is happening, maybe two or three or four months down the line, then the synergy value will start coming in.

Aman Mehta — Executive Director and Chief Marketing Officer

And additionally, procurement synergy is also — are likely in the next financial year. So, procurement synergy plus as the PCPM increases from this base should be further levers for margin expansion for the next at least two to three years.

Nitin Agarwal — DAM Capital — Analyst

I mean, this is from Curatio perspective. I was also interested ex of Curatio or are there [Indecipherable] are there any levers we are working on.

Sanjay Gupta — Executive Director, International business

So, Nitin, If I tell you anything wouldn’t be a scientific calculated number. But what I can tell you is that it’s a continuous process in trying to find out whatever cost efficiency is possible, so that happens in very continuous way I would say. But the only thing I recollect now is that the freight expenses which had gone up substantially since quarter three of last year, that’s still to normalize, I would say by 0.5%, 0.6%. So that’s one lever definitely going forward because the increase in freight expenses, which had happened in quarter three of last year, at least what we see is last one or two quarter it started falling, actually. But there is still some amount of recovery which is pending, which should happen probably over the next two to three quarters. So that’s something, which could be certain. But otherwise, on an overall basis we keep on working on whatever cost efficiency is possible.

Nitin Agarwal — DAM Capital — Analyst

Understood.

Operator

Thank you. Our next question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.

Saion Mukherjee — Nomura Securities — Analyst

Yeah. Thanks for the follow-up. Sudhir, just to follow-up, following up on the the cost pressures. So on the raw material side any trend you’re seeing — with China reopening and any color or any trend you want to highlight?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

No, Saion I mean the input cost increases, it was not a significant impact as far as we were concerned. So nothing much to talk about from that perspective. If I recollect, when the cost have started moving up, we said that the impact could be roughly 0.5%, 0.7%. But nothing significant I would say.

Saion Mukherjee — Nomura Securities — Analyst

Okay. And just one more question. You mentioned about one-off cost this quarter, 0.6%, that’s around INR150 crores. So I’m just wanting to understand how would you ascribe to say, you mean the lower revenues because of the shutdowns [Technical Issues]

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

No, no. So, 0.6 is roughly, Saion, I think INR12 to INR15 crores. So, Saion, I mean just to put it in a very simple way. Whatever direct cost you incur, right, for manufacturing has to be balanced with the revenue, right? So there has to be a cost revenue matching and how does that happen. So you have to inventorize all this cost on your manufacturing, right? So there is a balancing in by way of inventory or when it is sold, it is balanced by way of sales, right?

So what happens is, you determine on an annual basis the per unit cost for each product. So, what typically happens is when you manufacture, let’s say only 50% instead of 100%, the cost absorption is only 50% on the inventory, right? So the rest 50% is not getting absorbed. So that’s the one-time cost, which comes and sits in your P&L. So that’s what has happened in October basically after the USFDA audit was completed on 28th of September, there was a Shutdown which was taken for almost 15 to 20 days in the month of October for doing all those cleaning validation of equipment’s and stuff.

Saion Mukherjee — Nomura Securities — Analyst

Okay. Understood. And just one last question if I can on the US. We have a delayed resolution, I mean in both in Indrad and Dahej. How should we think about US revenues given the price erosion and do launch from other facilities, if you can just some color around the expectations in the US market?

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

So, I think it’s too early, Saion. So, I think one is the price erosion year on year which Sanjay spoke, right? I mean, high single digit. That’s something we believe should be the worst case as far as base business is concerned, okay. From a new product perspective, at least from Dahej and Indrad, those things cannot come in until, at least for Dahej with the reinspection is happening and getting clear then possibly, yes. Until that point in time there is no visibility on the new product coming in. There are few external products which will come, maybe a couple of them over the next two years, but not significant revenue contributor is what I can say. So, at the most I would say US would be flattish to declining sales for the next one year.

Saion Mukherjee — Nomura Securities — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Prashant Kothari from Pictet. Please go-ahead.

Prashant Kothari — Pictet — Analyst

Hi. My first question is on the on the India [Technical Issues] One of these thesis is that during COVID the diagnosis of patients [Technical Issues] and that should have picked-up in the last one year [Technical Issues]

Sanjay Gupta — Executive Director, International business

Yeah, when compared to last couple of quarters we are seeing an increase in the chronic growth trend. So on a MAT basis, the chronic market grew at about 8% or 9%, which in the quarter is 11%. So sequentially you can see that it’s increasing. So we do believe that it may stabilize at 11% 12% percent level. But it does provide a significant volume opportunity for a player like us, who is already got this much contribution from the chronic business.

Prashant Kothari — Pictet — Analyst

Okay, thanks. And on this US [Technical Issues] you mentioned that you can shift product form Indrad to Dajeh. What is common in regard to the existing third party or was it for new [Indecipherable]

Sudhir Menon — Executive Director, (Finance) and Chief Financial Officer

For the existing, for sure, subject to Dahej getting cleared is what I said. Sanjay, for the new products which have been filed from Indrad, a parallel filing can happen for the same product from Dahej.

Aman Mehta — Executive Director and Chief Marketing Officer

So for the filings which have been made, let’s say, a few years ago, I don’t think we will make the investment to ship them, but for forthcoming filings, yes.

Prashant Kothari — Pictet — Analyst

Okay. But for kind of existing large products coming out of India, you can ship them onto Dahej.

Sanjay Gupta — Executive Director, International business

Correct.

Prashant Kothari — Pictet — Analyst

Fine, sir. Thanks very much.

Operator

Thank you. Our next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Prakash, your line is unmuted, please go ahead with your question.

Prakash Agarwal — Axis Capital — Analyst

Yeah, apologies. So, couple of clarifications. So, one, you mentioned on Germany, you already started to see Q-on-Q with the corrective action and the new tenders, etc., that you won, but how do we see the fiscal ’24. I mean, do we see mid-teens kind of growth given the low-base and then normalize to-high single-digit, how do we see this business for next two years?

Sanjay Gupta — Executive Director, International business

So, Prakash, what. I have is visibility on the basis of the tenders which we have won. And we have a strategy in place to win more tenders every quarter, right? So what I indicated is as of today, for next year mid-single-digit is something that I have visibility to. If I win additional tenders, it could be high-single-digit to close to double-digit, but that is right now not in the bag.

Prakash Agarwal — Axis Capital — Analyst

Okay, okay. What’s in the bag is mid single-digit.

Sanjay Gupta — Executive Director, International business

Correct.

Prakash Agarwal — Axis Capital — Analyst

Despite the low base?

Sanjay Gupta — Executive Director, International business

The base is EUR29 million a quarter, which I think almost close, because I think at some point we have crossed 31, but not more.

Prakash Agarwal — Axis Capital — Analyst

Okay, fair enough. And secondly, I think Sudhir mentioned by giving example of INR3,000 crore EBITDA. I mean, if I see consensus my numbers, etc, 10%, 12% higher. So tis a rough number you are guiding or it is [Speech Overlap]

Sanjay Gupta — Executive Director, International business

Yeah, yeah, an approximately 3,000 I said. And that is the number, then this is the way to look at what I was trying to.

Prakash Agarwal — Axis Capital — Analyst

Okay, but if I look very broadly next year, So India, Brazil and other ROW market, 70% of your branded generic business, is good to grow 10%, 12% 13%. Is that fair assumption to build models?

Sanjay Gupta — Executive Director, International business

I would think so.

Prakash Agarwal — Axis Capital — Analyst

And on the margin side, you see levers for margin expansion given profitability of Curatio will increase plus costs are coming down. Would that be fair?

Sanjay Gupta — Executive Director, International business

I would think so, Prakash. What we have been saying is because of this branded generic piece there are one or two levers which keep on coming every year provided other things have been constant, right? So, one is the price increase driven gross margin improvements and the other is the operating leverage which should continue I believe, that’s the Curatio upside on the margins here.

Prakash Agarwal — Axis Capital — Analyst

Perfect. And lastly for, Aman. So for next year if we see India, what are the — I mean last year you mentioned about the CNS launch, one in diabetes, one in cardio. So how is the pipe looking in terms of decent size brands which you plan to launch, which gives us confidence of 12% 13% growth?

Aman Mehta — Executive Director and Chief Marketing Officer

The upcoming financial year won’t have as many launches as the previous year in terms of number. There are a few significant opportunities in diabetes which will still be there, but the numbers will definitely be lower. Instead, the focus will be on increasing the traction and size of the recently launched brand. So there is still enough headroom for us to continue the new launch momentum in the next year from the existing launches.

Prakash Agarwal — Axis Capital — Analyst

You mean the line extensions, etc., from the…

Aman Mehta — Executive Director and Chief Marketing Officer

No, no, even the recently off-patent launches that have been done. So the new launches take time to gain reasonable scale. So, like for example, we’ve INR5 crores now of sitagliptin in about six months, INR5 crores monthly. We would hope that maybe by the end of next year we cross INR100 crores overall. And that should continue growing at a high-grade. So that contribution should continue to increase on the new launches. The New year — for next financial year we don’t have as many number of launches. So that new contribution will probably be lower than the previous year.

Prakash Agarwal — Axis Capital — Analyst

Okay, so I’m just trying to dissect it here. So 12%, so we would again see about say 8% price and about 3% kind of new products. and maybe 1%. 2% volume?

Aman Mehta — Executive Director and Chief Marketing Officer

Yes, that should be doable in the next year.

Prakash Agarwal — Axis Capital — Analyst

Okay, great. Thank you.

Operator

Thank you. Our next question is from the line of Krishnendu Saha from Quantum Mutual Fund. Please go ahead.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Yeah, just a follow-up on the last question I asked. You remember correctly a couple of years back we had 36 odd o 40 odd products in what we call — in Brazil. So the right now we’re at 22. I’m just wondering that. And this is the fact that we’ll be having some supply procurement benefits for acquisition, but I believe that we also had a three manufacturing contract with them, if I’m right. So could you just elaborate on these two, please.

Aman Mehta — Executive Director and Chief Marketing Officer

So on the first part. So Brazil, we have more approvals but we focus on 22 products which are in our lead build brand category. So essentially the idea is to follow the model which has worked well for us in India, which is to build large brands and invest behind those that have the potential to grow. And we have taken a series of brands into a kind of automatic mode where we don’t promote them and we kind of let them — let them just continue on the base that they have because it’s not worth putting money and resources behind them. So I would say 22 brands are actively promoted and invested behind in Brazil [Speech Overlap] I believe build products as we call them inside the company. The rest are more in the maintain or I would say category. And then your second question was, what?

Krishnendu Saha — Quantum Mutual Fund — Analyst

We had a sourcing agreement for acquisition in India. So we talk about the fact that we will be having some sourcing benefits next year. How do we see that and to see how the sourcing agreement for three years with the acquired companies.

Sanjay Gupta — Executive Director, International business

That would not be for all products. So for the full portfolio there is still enough headroom for finding alternate suppliers and getting better pricing.

Krishnendu Saha — Quantum Mutual Fund — Analyst

And just the last question. The EBITDA margin is far better than our overall company, that’s what I realized last-time on the call. Is it — not far better than the overall Torrent Pharma.

Sanjay Gupta — Executive Director, International business

Yeah, so what we’ve said is, it’s not dilutive to the overall margins of Torrent Pharma, which would mean that Curatio has similar margins. That was the thing which was spoken last time.

Krishnendu Saha — Quantum Mutual Fund — Analyst

Okay, thank you. Thank you for the color.

Operator

Our next question is from the line of Kunal Randeria from Nuvama. Please go ahead.

Kunal Randeria — Nuvama — Analyst

Hi, good evening. Just one question. Any visibility you can give us on Revlimid launch timelines.

Sanjay Gupta — Executive Director, International business

So we are not in the initial phases. So for us it’s a it’s a little bit of a distant launch. So it’s not in the next 12 months.

Kunal Randeria — Nuvama — Analyst

Got it. And should I assume that it’s nothing to do with plant issues.

Sanjay Gupta — Executive Director, International business

No-no, no, it’s not made at Torrent. Its made at a third party.

Kunal Randeria — Nuvama — Analyst

Okay, perfect. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now request Mr. Sanjay Gupta, to add a few closing comments. Over to you, sir.

Sanjay Gupta — Executive Director, International business

So, I would just like to thank you for your interest in Torrent and for joining today’s call. For any additional questions, please feel free to call our Investor Relations Group. Thank you very much, and look forward to hearing from you soon. Bye-bye.

Operator

[Operator Closing Remarks]