Windlas Biotech Limited (WINDLAS) Q4 FY23 Earnings Concall Transcript

Windlas Biotech Limited (NSE:WINDLAS) Q4 FY23 Earnings Concall dated May. 08, 2023.

Corporate Participants:

Hitesh Windlass — Managing Director

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Analysts:

Yogesh Tiwari — Arihant Capital Markets — Analyst

Raghav Vedanarayanan — JM Financial — Analyst

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Gaurav Gandhi — Glorytail Capital Management — Analyst

Dipti Kothari — Kothari Securities — Analyst

Akash Mehta . — Capaz Investments — Analyst

Keshav Garg — Counter Cyclical Investments PMS — Analyst

Miten Lathia — Fractal Capital Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Windlas Biotech Limited Q4 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] Please note that this conference is being recorded.

I now hand the conference over to Mr. Hitesh Windlass, Managing Director at Windlas Biotech Limited. Thank you and over to you, sir.

Hitesh Windlass — Managing Director

Thank you and good morning everyone and thank you for joining us today for our financial results for quarter and full year ended March 31st, 2023. We have uploaded the press release and investor presentation on our website as well and the exchanges. I hope everybody must have gotten an opportunity to go through it.

Initially, I would like to discuss the outlook and way forward for Windlas Biotech, followed by financial highlights for Q4 and FY ’23, which will be shared by our CEO and CFO, Ms. Komal Gupta.

The overall Indian pharma market grew at around 9.3% in FY ’23 while Windlas grew at a slightly faster rate with revenues growing 10% for the fiscal. I am delighted to announce that the company continued to achieve growth across various operational and financial parameters notwithstanding the challenging business environment of low IPM volume growth in most of the therapeutic areas. The company’s focus on operational excellence, strict cost management and customer satisfaction has enabled it to maintain its profitability.

In line with our goal of creating value for stakeholders, company has successfully completed share buyback, generated healthy operating cash flows completely utilized IPO proceeds, paid a dividend, all while maintaining a healthy liquidity position. We have utilized the complete proceeds raised for injectables facility by March ’23 and plant construction is in full swing. As mentioned in the Q3 earnings call, we expect to achieve mechanical completion by end of Q2 of this fiscal year.

As guided on multiple occasions in the past, company is actively looking at prospective inorganic growth opportunity to obtain synergies, diversify its product line and achieve scale. The company has a healthy liquidity position and is well-placed to seize these opportunities.

Looking beyond the short-term challenges, which are transient in nature, we remain sanguine about the overall Indian pharma market landscape. We are witnessing multiple green shoots in all business verticals in which the company is present. Company’s unique value proposition and strong customer connect makes the company well-positioned to achieve its long-term goals sustainably.

I will now request Ms. Komal Gupta, our CEO and CFO, to discuss the strategic and financial performance highlights. Over to you, Komal.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Thank you, Hitesh. Good morning, everyone. The company delivered healthy operational and financial performance with its highest-ever revenue and profitability quarter and year. We have recalibrated our focus on key strategic priorities with a renewed vigor. We will continue to take all the efforts for increased reach, profitability and efficiency across verticals.

The company remains committed to its predetermined strategic objective for its generic formulations contract development and manufacturing organization segment, that is CDMO segment. The strategy involves the detection of products that are encountering an upsurge in demand and concurrent broadening of market for the same products, procurement of novel customers and augmentation of revenue from company’s current customer base.

Financial highlights for CDMO vertical are: for FY ’23 and Q4 FY ’23, revenue for CDMO vertical stood at INR398.3 crores and INR110.4 crores up 5% and 14% Y-o-Y, respectively. CDMO vertical contributed approximately 78% for both financial year FY ’23 and Q4 FY ’23, respectively to the consolidated revenue.

The company’s domestic Trade Generics & Institutional vertical is experiencing rapid growth, which can be attributed to the company’s strong distribution network. We continue to execute on our strategy of providing accessible, affordable and authentic medicines to underserved small towns and cities. The growth of the domestic trade generics market in India is expected to be propelled by government initiatives aimed at promoting the adoption and reliance on generic drugs. The company’s primary focus is on enhancing brand development, refining marketing strategies, exploring new distribution channels, introducing innovative products and expanding into unexplored territory.

Financial highlights for Trade Generics vertical are: for FY ’23 and Q4 FY ’23, revenue for this vertical stood at INR90.5 crores and INR22 crores, up 49% and 50% Y-o-Y, respectively. Trade Generics & Institutional vertical contributed approximately 18% and 16% for FY ’23 and Q4 FY ’23 to consolidated revenue.

The company continues to work towards Exports vertical such as filing of numerous dossiers and entry into newer semi-regulated market. Financial highlights for Exports vertical are: for FY ’23 and Q4 of FY ’23, revenue for Exports stood at INR19.8 crores and INR7 crores, down 5% and 26% Y-o-Y, respectively. This vertical contributed approximately 4% and 5% for FY ’23 and Q4 of FY ’23 to the consolidated revenue.

Let’s look at the consolidated financial highlights of the company. For FY ’23, consolidated revenue, EBITDA and PAT grew by 10%, 15% and 12% to INR513.1 crores, INR60.2 crores and INR42.6 crores, respectively. For Q4 of FY ’23, the same stood at INR140.7 crores, INR16.4 crores and INR11.4 crores, respectively. Gross margin for FY ’23 were 160 bps higher Y-o-Y at 36.6% and EBITDA margins were up by 50 bps at 11.7%. Gross margin for the quarter were 191 bps higher Y-o-Y 36.8%, and comparable EBITDA margin 40 bps higher at the quarter end. EBITDA margin increased to 11.7% from 11.3% Y-o-Y in Q4 FY ’23.

In line with our goal of creating long-term value for all our shareholders and stakeholders, the company announced a buyback for INR25 crores in third quarter of FY ’23. I am pleased to inform you that the buyback has been completed. Furthermore, a dividend payout of INR7.6 crores, that is rupees INR3.5 per share, related to FY ’22, was disbursed to all the shareholders during the year.

At the end of the FY ’23 — fiscal year ’23, the company had a strong liquidity position totaling INR138 crores and generated a healthy net cash flow from operations of INR61 crores. The company has also utilized the entire proceeds of INR165 crores obtained through IPO on the stated purposes that were outlined in the prospectus.

That’s all from our side. We can now begin Q&A session. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We have our first question from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yeah, good morning, sir. Am I audible?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Yes, you are.

Hitesh Windlass — Managing Director

Yes.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Thank you, sir, for the opportunity. My first question is on your — on the upcoming injectables facility. So we are expecting about like 1.3 times — we have invested about INR50 crores and we would target about INR70 crores, INR80 crores from this facility at I.3 times asset turnover. So what would be the timeline? Like, by when can we achieve these numbers?

Hitesh Windlass — Managing Director

So, Yogesh Ji, it’s difficult to give an exact timeline, but I can tell you some actions that we’re taking. We are — we have already introduced some injectable products in our trade generics vertical. So we are growing those in volume. So we believe that some part of that, when it comes in-house from our own unit, will add to that. There is — I mean as a new business, however, it will serve all our three verticals, so CDMO, where we will have to get it approved by each customer, Exports, where we will have to take dossiers once we have the WHO GMP. My sense is that any new dosage form starting from scratch like we are, probably a good timeframe is around two and a half to three years.

Yogesh Tiwari — Arihant Capital Markets — Analyst

So, sir, from September onwards when the mechanical work will be over, so will the — this commercialization start or it will take some more time from September, the injectable facility?

Hitesh Windlass — Managing Director

So since the injectables are sterile products that are put into the body directly, there is a huge amount of qualification work that goes on after the injectable. So this is called as media fill and validation and this can take anywhere from four to six months. If you are lucky and everything happens [Indecipherable], it can be four months or if it is out of sight [Phonetic], I would say six months. So this is where that activity we will be launching into. And thereafter, and we are hoping that in this financial year, we are able to actually make the first commercial batches out of the plant.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And sir, this will be entirely in the — the initial part will be entirely for trade and generics?

Hitesh Windlass — Managing Director

No, the injections that we manufacture will — this facility will serve all the three verticals, the CDMO vertical, Trade Generics & Institutional vertical, and also the Exports vertical.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Okay. But currently, we have not received like any approval or inspection from CDMO clients, right, for the new facility — injectables facility?

Hitesh Windlass — Managing Director

No, Yogesh Ji. So the process of this is to finish the facility validation, then the customers will come and audit it, then the regulatory authority of different countries will submit the dossiers. So it’s a sequential process. Without having the facility ready, we cannot get the approvals.

Yogesh Tiwari — Arihant Capital Markets — Analyst

So just for modeling purpose, like the major revenue contribution would come from like FY ’25 onwards from this facility. Am I correct?

Hitesh Windlass — Managing Director

Yeah. I would say, major — you can assume FY ’25 onwards.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sure, sir. And sir, the margins of injectables are higher. So what would be the premium on — like if we have like 11.5% EBITDA margin on a consolidated basis? So what would be like an approximate premium to this margin from injectable facility?

Hitesh Windlass — Managing Director

My sense is that typical injectables businesses should give around 18% to 20% EBITDA. But that should happen at optimal capacity utilization. So this is what we are trying — we will be trying to reach toward as soon as the facility is ready to manufacture. But yes, the expected margin from injectables is significantly better than oral solids.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And sir, this optimum utilization would be 80% approximately, for injectables?

Hitesh Windlass — Managing Director

My sense is that — anywhere, 55%, 60% optimum utilization.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Okay, sure. And sir, in terms of Exports, what are the new dossiers which we are filing to expand the Exports market?

Hitesh Windlass — Managing Director

Yogesh Ji, we are not providing the product or market information due to competitive reasons. So — but there is the markets that we are present in, Southeast Asia, Africa, we are continuously adding products over there to increase our footprint and gain more marks in our exports.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And sir, finally on the capex program. So apart from the injectables facility, any other major capex we’re planning for rest of FY ’24 and FY ’25, sir?

Hitesh Windlass — Managing Director

No, we are not planning anything major. But as I said that our current oral solid facility is able to — will support us still about INR600 crores of revenue. Beyond that, we will need one more expansion. So currently, my sense is that at least FY ’24, we should not need the expansion, but…

Komal Gupta — Chief Executive Officer & Chief Financial Officer

For FY ’24 sales, we might not need. But the end of the year, we might have to be ready…

Hitesh Windlass — Managing Director

With something.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Yeah, for the next year.

Hitesh Windlass — Managing Director

Yeah.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sure sir. That’s all from my side. Thank you very much.

Operator

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

Raghav Vedanarayanan — JM Financial — Analyst

Yeah, hello, am I audible?

Operator

Yes.

Raghav Vedanarayanan — JM Financial — Analyst

Yeah, hi, good morning. So couple of questions from my side. So first is regarding the domestic business. Can we get some guidance and like a breakup for the CDMO and for the Trade Generics business? And second question is, so your gross margins have been improving, so would this be a sustainable number or how should we look at this going ahead? Thank you.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Raghav, sorry, we did not understand first part of your question — the first question.

Raghav Vedanarayanan — JM Financial — Analyst

Yeah, so first question is, if we can get some domestic guidance and also like a split of the CDMO business and the Trade Generics, a guidance for both of these.

Hitesh Windlass — Managing Director

So Raghav, we are already providing the segment-wise revenue with the three verticals, right? You are asking for separate segment-wise guidance?

Raghav Vedanarayanan — JM Financial — Analyst

Yes, correct.

Hitesh Windlass — Managing Director

So Raghav, we are not providing separate segment-wise yearly guidance. As a long-term goal, we have said that our idea is to double the Trade Generics business, triple the — sorry, double the CDMO business, triple the Trade Generics business and quadruple the Exports business. In some cases, we are ahead of the curve, in some cases, we are a little behind, but that is the long-term guidance that we are still maintaining our efforts towards.

Raghav Vedanarayanan — JM Financial — Analyst

Okay, so is there any timeline for this — for these goals?

Hitesh Windlass — Managing Director

Sorry, could you repeat?

Operator

Raghav, can you use your handset, please?

Raghav Vedanarayanan — JM Financial — Analyst

Yeah, can — is there a timeline that you have in mind for these targets?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Yeah, so I think four years is what we are looking at from the current. In four years, we are expecting to go there, the base of double, triple and quadruple were FY ’21 numbers. We were — originally, we are — we were thinking of reaching there in five years. Now we think that we are a little behind by about a year.

Raghav Vedanarayanan — JM Financial — Analyst

Okay, and also the second question is regarding the gross margin. So there has been an uptick for this, for this year. So is this trend sustainable?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Yeah, so the current EBITDA margins, they are — also the material margins, they are sustainable ones. There can be a — there can be some upward trend with the mix of the kind of sales happening like Trade Generics, Exports, if we are able to increase them as a percentage of total sales and also with injectables infusion, there can be an upward trend in this.

Raghav Vedanarayanan — JM Financial — Analyst

Okay, thank you so much.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from the line of Naman Bhansali from Perpetuity Ventures LLP. Please go ahead.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Hi, sir, just following up on the previous question, during the IPO we’ve guided about various vertical, like doubling and quadrupling. So this implies almost doubling of the total revenues from a base of FY ’21. And as per your previous answer, you are telling that it is delayed by one year, also in terms of achieving the guidance. FY ’23, where we’re standing today, this implies almost 17%, 18% growth based on the four-year projection that we are taking. So where do we stand on it today on a company-level basis? Are we able to confidently grow on that trajectory? That is my first question.

Hitesh Windlass — Managing Director

So I think, Naman, couple of things. In the past — if I look at the past data, there have been years where we have grown in single digits and there have been years where we have grown 20% also. And I’m not just talking about COVID past, I’m talking about almost, let’s say, 10-year history. So I think it’s important to understand that what are the underpinning factors — external factors that influence growth. On the domestic CDMO side, the volume growth of the overall pharma market is a representation of how much our customers are going to buy from us in terms of volume. Right? So that’s an important number. And I believe that there is signs of recovery happening. If you look at the last couple of quarters, the volume growth almost across therapeutic areas has improved. First two quarters were very poor, if you left antibiotics out. So there is — my sense is that if overall Indian pharma market volume grows, we will be able to utilize that momentum and do better.

In terms of new products associated growth, again in CDMO vertical, we are launching several new products. Number of DCGI permissions that we are getting has increased significantly from what it used to be last year or even before that. So these are all the ways of driving faster implementing greater customer connect and improving product match with customers. So CDMO is driven by that. Now as a small company, we are trying to see how we can outperform the market and grow faster. So that’s definitely the mandate of the whole team.

In the trade generics space, you can see a different trend. We grew almost by 50%, right, although it was a smaller base, but that growth is coming from our execution and our engagement with our distribution channels, our umbrella branding that we are doing for generics — Windlas generics across the space, and our much, much better execution because of our unique distribution structure, where we don’t have large distributors as intermediary. We are working with almost 600, 700 stockists directly across India. And we are able to do it because of our — the way we have built our IT system. So this is something that we are looking to capitalize and see how fast we can go. If you look at my guidance on — four-year guidance on Trade Generics, which is to triple that number from FY ’21, we are most likely going to exceed that, right, if we are able to maintain this kind of a momentum. And I see no reason to not have a strong momentum in this vertical.

On the Exports side, this is where we have some work cut out for us in terms of bringing in launches for dossiers that are already approved or have recently been approved, and also initiate new countries. This is a slightly longer or fag-ended kind of a growth that we will not see in every year. But it will — we are hoping it’ll line up by our fourth year, that is what we are aiming for.

So I mean the commentary that I can provide is that each of these three verticals have a different path to getting there and a straight-line path may not be there. And some are more driven by volume and some are — in Trade Generics, we are participating in both price increase as well as volume increase. So we are getting a better benefit there and so on and so forth. I hope I’ve been able to answer your questions.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

And also just to add, in case we are able to catch up through Trade Generics and Exports verticals for the overall number that we are talking about, four-year, we would be happier in that sense, because they are better profitability and better control verticals for us.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Got it, got it. Second question is regarding this — there’s been a sharp jump in the other expenses this quarter. So where exactly are we seeing the increases coming in from and what is the base which we can assume going forward that these other expenses can grow at?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

So expenses were higher in the other expenses. There was a higher research and development expense, power and fuel. Because of very high sales quarter, there were also increase in selling and distribution expenses, production and testing-related lab testing expenses. These are the various expenses that were on higher side in this quarter. Not necessarily all the expenses are quarterly equally distributed and there are a few which are linked to the higher sales. So in terms of trend for going forward, it’s better to look at the year number instead of a quarter-specific number.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Okay, that’s it from my end. Thank you.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

All right. Thank you.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Hi, sir, congratulations on the good set of numbers. Sir, how do you look at the export market in the coming year?

Hitesh Windlass — Managing Director

So, Gaurav Ji, thank you. I feel — I’m very bullish about exports from India to RoW, especially. We have seen that the developed markets across the board are facing very, very high customer consolidation and erosion of margin and some companies in the developed space are doing better by launching new products, different difficult-to-manufacture products and so on and so forth. The RoW space is a different space and in the rest of the world, which is between Southeast Asia, Africa, CIS, Middle East and so on, this space does not have very large batch sizes. And the number of SKUs required to serve a country with small batch sizes is very high. So it has a natural advantage for a CMO player like us, which are used to manufacturing a very large variety of SKUs. And that internal competence is built into our DNA. So we are really looking at it from this perspective of although it is slow to build, but better EBITDA, better exposure [Indecipherable]. So I mean, if you ask in terms of my subjective assessment, I think this is definitely a very good area to — for the company.

Gaurav Gandhi — Glorytail Capital Management — Analyst

And, sir, if we — we are focusing on semi — in semi-regulated market. So what if the regulations become more stricter, will it be a risk for us to grow our exports in that area?

Hitesh Windlass — Managing Director

Yeah, so that’s an excellent question, Gaurav Ji. We are actually looking at the semi-regulated market from our facility, which is EU GMP-approved. So in that sense, I can say that we are already serving these markets from a high-quality facility and our — we should not face a sudden risk of that type. So overall, it will be a mix of things, some different facilities, different markets, but in all our facilities also, we are upgrading, we are bringing the electronic systems, EQMS, eTMS, e-learning management systems across the-board and we are building this capability and competency at the ground level to look at future, not only in exports, but also within India, and we are a leading quality-recognized name for everything that we manufacture.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Right. [Foreign Speech].

Hitesh Windlass — Managing Director

[Foreign Speech], we are not expecting any such sudden risks. This is as per my understanding.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Okay. And sir, can it be the case that because we are not in the API manufacturing process, clients might prefer some other leading players who provide CDMO plus API?

Hitesh Windlass — Managing Director

Even the largest manufacturers in our space are unable to achieve perfect vertical integration because of so many molecules, so many dosage forms and such a very wide variety of SKUs. So my sense is that — and that’s Windlas is also not chasing the biggest volume contributors. We are chasing value, which is between very small and very large molecules, somewhere in the middle. That’s how we are looking at building our portfolio. So my sense is that the vertical integration will have only marginal benefit in the [Speech Overlap].

Gaurav Gandhi — Glorytail Capital Management — Analyst

All right, sir. And the last question is, sir, what is your vision for the company or, say, where do you see this company 10, 15 years from now? Where do you want to take it?

Hitesh Windlass — Managing Director

So, in a long-term vision perspective, we want to be a very large player in India, having our own production, our own generic sales force being present in all the institutions, both in various dosage forms. Currently, we are only doing oral solids and liquids. Injectables will come and many other dosage forms are there. We want to be a player whose sort of three values of authenticity, affordability and accessibility are seen by all our patients as well as customers who we work with. That is one of our very important aspiration. We will continue to serve our B2B customers and grow with them and we will have one of the most modern facilities that are able to serve the increasing requirement of quality in this space. And we want to be a supplier of choice. So most of what I’m saying is taking our efforts and objectives and growing in scale. So that scale is very important, while maintaining quality for us. So that’s [Technical Issues] next, 10-years-or-so timeframe.

Gaurav Gandhi — Glorytail Capital Management — Analyst

All right. That’s great, sir. All the best for the future. Thank you very much.

Hitesh Windlass — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Dipti Kothari [Phonetic] from Kothari Securities. Please go ahead.

Dipti Kothari — Kothari Securities — Analyst

Thank you for the opportunity, sir. Sir, my first question was that do we have any update on inorganic opportunities front?

Hitesh Windlass — Managing Director

Dipti Ji, we have been evaluating several opportunities. And in some cases we did not know the quality of the plant or the quality of the business. We are being very selective because we know that as a company which has very strong operating cash flows as well as a good liquidity position, we are in space to do a good thing. And so we are being selective. So there is no immediate something that I can say is happening, but we are evaluating many ideas and many opportunities.

Dipti Kothari — Kothari Securities — Analyst

Okay, sir. And sir, what is the current market share in the domestic CDMO space of Windlas?

Hitesh Windlass — Managing Director

My sense is that we would be somewhere in the range of — I mean I think we did the study at the time of the DRHP where the market share evaluated by the external consultant at that time was somewhere in the range of 1% because it’s a very highly fragmented market after the first two players. But I don’t think anything would have changed drastically from then.

Dipti Kothari — Kothari Securities — Analyst

Okay, okay. Thank you, sir.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Akash Mehta from Capaz Investments. Please go ahead.

Akash Mehta . — Capaz Investments — Analyst

Hi, good morning, sir. My questions were around the Exports business. So just wanted to know what are the key reasons for the decline in the Exports vertical and how do we anticipate this outlook for the segment in the coming years?

Hitesh Windlass — Managing Director

So I think the base that we currently have, which is about INR18 crores to INR20 crores of sales is too small while — say, whether there is a uptick or downtick on this right now. Some of our exports, we could not ship because the customer was unable to renew their import permit in Myanmar. In some countries, last year we also had some challenge, we stopped some sales to Sri Lanka when Sri Lanka went into the foreign currency crisis. So some of those things are like that, but I think the growth we are looking for is going to come from not just the existing markets, but also new markets that we’re trying to open. And eventually, in the next couple of years timeframe, injectables will also play a very important role in bringing us access to these RoW markets because almost most of these RoW markets don’t have any local manufacturing in injectables.

So as I mentioned earlier also, the procedure is a little lengthy one. You apply, you take the batches, you generate the data, the dossiers, then you apply to the regulatory authorities and it takes about one and a half to two years for approval of each product and then you start the business. So that’s why we feel that this is going to be a fag-ended vertical in terms of growth appearing on top line. We are also looking at potential ways to accelerate it through inorganic because it takes long time to build internally, so this is also another area, specifically within our inorganic search that we are trying to see if there are opportunities to do that. So that’s sort of the general commentary I can give on this.

Akash Mehta . — Capaz Investments — Analyst

Got it. In terms of the new markets, just a sense on what is the proportion of the export market in terms of the regulated and semi-regulated markets, if you have any insight? And what is the anticipated ratio if we can — say, in the future?

Hitesh Windlass — Managing Director

Currently, we are almost 100% semi-regulated. And in the near future, once our South Africa starts, so that will start contributing to sort of SRA — one of the SRA kind of a market. And as you know, our facility is EU-approved, so we are also evaluating various projects for that geography. So I think that some of these proportions will shift as we go forward. It’s hard to give a ratio or a number right now.

Akash Mehta . — Capaz Investments — Analyst

All right. Hitesh Ji, my last question is on the South African exports. So you had said in the Q3 call that you would be commencing that. So any updates on that front?

Hitesh Windlass — Managing Director

So far we have been following with our customer also and they have been saying one or two week — one or two weeks for the launches. So we are just also waiting for that — their launch. So no further updates other than that, what we have heard from our customer.

Akash Mehta . — Capaz Investments — Analyst

Got it, thanks a lot.

Operator

Thank you. We have our next question from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.

Keshav Garg — Counter Cyclical Investments PMS — Analyst

Sir, many congratulations for excellent set of numbers. And also thanks for healthy dividend on top of a share buyback. Sir, I wanted to get your view that in your judgment for the current financial year FY ’24, sir, what kind of growth are we looking at?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

We continue to work and put all our efforts to give the growth, but year-on-year growth, we do not really share any future-looking statements in that sense.

Keshav Garg — Counter Cyclical Investments PMS — Analyst

Sure, sir. And also one more thing that, sir, our injectable facility is expected to come onstream I think in the second quarter of this financial year. So till the time that facility is able to ramp up, for the initial few quarters, sir, should the shareholders be expecting any losses? Also, when exactly will this break even?

Hitesh Windlass — Managing Director

So one thing that we are thinking of doing is, once that facility becomes operational, we will try to separately provide the EBITDA that has been affected by the losses from that facility. For sure, anytime we start a new facility there will be a period of small operating loss. At the same time, we are also working to tie-up that capacity and see how fast — how can we minimize that figure. So — but we will try to give visibility as soon as that number starts to become part of P&L so that there is clarity and all shareholders are able to transparently see everything.

Keshav Garg — Counter Cyclical Investments PMS — Analyst

Sure. So much appreciated. Thank you very much and best of luck.

Hitesh Windlass — Managing Director

Thank you.

Operator

Thank you. We have a follow-up question from the line of Naman Bhansali from Perpetuity Ventures LLP. Please go ahead.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Hi, thanks for the opportunity. Sir, just one question, on the Slide 23, the client concentration side, so is it as a percentage of the overall revenues or as a percentage of some CDMO revenue?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Overall. It is as a percentage of overall revenue, yeah. We have been — so all the comparable numbers are as a percentage of total revenue.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Okay, and we see that in 2023 [Phonetic] there is very sharp decline in these percentages. So would you like to speak anything about what sort of customers are being added incrementally and this concentration risk going down? And secondly, I think on the above slide on Slide 21, there have been a sharp increase in 2023 in the number of generic formulations CDMO products too. So would you like to speak on these two points?

Hitesh Windlass — Managing Director

Okay, so let me take the question on Slide 21, you mentioned the sharp increase. See, any time we add an SKU or a customer, the customer doesn’t give us the largest of their brand or the most important of their SKUs, right? We engage and then they try us out for a few SKUs and as we deliver the right supplies at the right price, the right service, then we begin to grow. So this process of adding new brand is like a nuclearization in gross profit. So we add that and then we look to improve volumes on those that we have added and on those accounts where we can find traction we then increase — look to get the larger brands from those accounts. So this is a sort of a nucleating phase to increase the footprint and then adding harvesting phase to [Technical Issues]. That’s how this business moves. So the growth in SKUs is essentially a representation of that.

And what was your first question, Naman?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Client concentration, [Indecipherable].

Hitesh Windlass — Managing Director

You want to take that?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Yeah, so we have been consciously working to lower the client concentration from top 10 customers, and this is more by increasing the number of customers — revenue coming in from the new customers. And, yeah, so with a conscious effort this year, the results are there. So while we have been increasing the number of new customers, we have been able to increase the revenue from the new customers in the last couple of years. In fact, the level, that top 10 percentage has gone down below 50%. So it is not a specific, like Hitesh was mentioning, in terms of products mining, it’s similar in terms of customers mining. While there will be customers added in last two, three years and also in FY ’23, the revenue, it takes time to increase from that customer, they first introduce one product, they get the comfort and slowly we are able to increase the product portfolio. That is how we have been able to really see the growth also that we were able to deliver.

Hitesh Windlass — Managing Director

But it is very healthy for us to have lower dependence on the top clients. And in fact, we look at it as a health metric as to how much concentration of revenue is there in any vertical by the top customer. And it allows us the flexibility and reduces the mutual dependence. It also allows us to make sure that our resources in business development, product development are not just getting concentrated in one bucket or one basket.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Got it, got it. And just a small question that, over the last year, do we see any meaningful customer being added, which can contribute significantly to our CDMO revenue or the overall revenue, which we can expect?

Hitesh Windlass — Managing Director

So, see, we are working with seven of the top 10 pharma companies in India. In the top — the next 20 and the next 30 companies, we are looking to add more customers. And yes, there have been additions, we have not been specifically calling out either customer names or product names as a matter of competitive this thing. But yes, there have been additions and those are what — which — basis of what we are thinking about the growth in the coming years.

Naman Bhansali — Perpetuity Ventures LLP — Analyst

Okay. That’s it from my side. Thank you.

Operator

Thank you. We have our next question from the line of Miten Lathia from Fractal Capital Investments. Please go ahead.

Miten Lathia — Fractal Capital Investments — Analyst

Good afternoon. We’ve sort of seen very good traction on the Trade Generics side [Technical Issues]. And so thought that we would sort of 3 times [Phonetic] Trade Generics [Technical Issues] in five-years’ time. Given what seems to be working for us, A, if you could sort of get more granular about what is working for us and, B, would we want to now be more aggressive and say it’s going to be a much bigger piece going forward for us versus our earlier…

Hitesh Windlass — Managing Director

Right. So, Miten Ji, see, for sure — so let me first give some context on what seems to be working for us. We are actually doing Trade Generics in a different way. We do not have large distributors as intermediary and we work directly with stockists in every zip code that we are working. So what it does is, it frees up some margin that we then share with both the distributor, the stockist as well as ourselves. And it also makes it visible — it gives us the visibility understanding what product is selling, how that party is working, what is his credit worthiness, how — what kind of products he’s able to liquidate how fast and what kind of other opportunities of adding new products is available in that geography in that space. So this is very valuable and that’s how we are driving our growth.

The second part is that we are not again different to most trade generic companies. We are actually doing umbrella-level branding of Windlas generics, so in selected places, for example, if you were in Bihar, and you were looking at a cinema hall, you will see some advertisements of some products in Windlas generics coming on that cinema screen. And these are some things that we are doing, there are some other things that we are planning and our goal is to sort of be a umbrella brand over there. And over the long-run, we want to build it.

Now, going back to your first question about whether it looks like we will exceed our aspirational goal of 3 times on Trade Generics, I’m absolutely sure that we will exceed that. And how to take it further? It has to definitely grow in scale. We are — even at INR90 crores that we did last year, we are a very small fraction of what the largest player in this space is. So easily there are companies operating at INR1,500 crores, INR2,000 crores in trade generics. So there is a huge amount of growth available here and that is what we will be gunning for.

Miten Lathia — Fractal Capital Investments — Analyst

In terms of management bandwidth itself, given that Exports has long gestation, slightly difficult versus Trade Generics being something that we have already figured out, already giving us growth and cash flow, would we not then sort of be better off sort of focusing our resources on that? Or do you think both are possible?

Hitesh Windlass — Managing Director

So both are possible, Miten, see, because just like the bandwidth is also not very continuous or high-demand in case of Exports, you take the batches and you file the dossiers and there is a waiting period. And it’s a different set of resources, the technical people, who are doing that. On the Trade Generic, it is more the business team which has to execute. So it is not a competing in demand on the management bandwidth and in some sense, it is like — allows us to build for long-term as well as build for medium-term. In the Trade Generics, one has to be very — on the — very much on top of your receivables and inventory and that requires management bandwidth. And so we are deploying our bandwidth as well as our capital appropriately making sure that both these are not sort of — none of them is lacking for attention or capital, so as to say.

Miten Lathia — Fractal Capital Investments — Analyst

Great. Congratulations on good set of numbers. Thank you very much.

Hitesh Windlass — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yeah, thank you, sir, for the follow-up. So my question is basically around the inorganic opportunity. So given the cash flow we had, we are about INR60 crores in FY ’23 cash flow from operations and, given our balance sheet spike [Phonetic], if you can share some more color on what sort of inorganic opportunity you’ll be looking at in terms of what would be the size like and any specific segments like CDMO or API, anything on those lines.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

In terms of size, really, we do not have a restriction because we, as you rightly mentioned, we have — we generated INR60 crores and in spite of making payment on buyback, dividend and the capex money that we spent, in spite of that, at the year end, we have solid liquidity position in close. In addition to that, we have zero debt and there is obviously a debt generating capacity. So in terms of the size, really, we are flexible. The kind of opportunities that we are generating are manifold. We are open for acquisition in any segment for the right kind of opportunity. However, it has to be a good fit and they have their — we don’t want to fix many issues, we want to really have a good addition and we are okay and we are okay being patient to wait for the right kind of opportunity.

Hitesh Windlass — Managing Director

And just to add to what Komal shared, you basically see — at least I have always believed that the business that we are in, trade generics and the space of formulations that we are in including CDMO is not a cyclical business as such. Even through the uptick in COVID and downturn after COVID in pharma, we have continued to sustainably maintain our margins and perform. And while — so API is a very different animal. And so, something — I mean, actually you mentioned API, so I’m just responding that definitely that’s not a space that we are looking for. We are looking to do things where — if we can get a shot in the arm by something on exports or something on dosage forms which are not with us. Injectable, we decided to build from scratch on our own because we had to build something for future and a modern plant is needed for that. So that’s how we are looking at things. So other dosage forms are always there and that’s how we are being very, very careful that we do not adopt somebody’s problem. It’s good to adopt a challenge, but not a problem. So that’s how we are thinking about it.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And just to continue on that, sir, like what would be the — like any metrics, like what would be the any targeted ROCE from the acquisition or any other metrics you look at before the acquisition or any valuation?

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Really, it depends — so we would like to have strong ROCEs in place, but it depends on the kind of opportunity. Honestly, we are also acquiring something that in the long-term is building something for us, is a great strategic and synergy fit. So there is no particular formula that we are chasing. It depends on the kind of opportunity, Yogesh.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes, and since we mentioned about injectables, so if we take about a three-year view or maybe three to five-year view, what would be the proportion of injectables to the overall revenue? Any target we have for this?

Hitesh Windlass — Managing Director

See, the injectables facility that we have built, typically in injectables, the asset turn of 1.2 to 1.3 is achievable. So in terms of a full — and we have space on the second floor in this plant to increase capacity in the next phase. So my sense is that, currently, this — what we have installed or what we are installing is going to take us to somewhere around INR65 crores, INR75 crores. And then we will, by augmenting capacity, we should be able to cross about INR110 crores, INR120 crores finally from this facility.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sure,sir. And one question on the CDMO space since that is the major space we have. So just to understand a little bit on the industry, like are you seeing any pricing pressure when you negotiate with clients because it is a very fragmented industry? So are you seeing anything of those sort happening in the CDMO business?

Hitesh Windlass — Managing Director

So what we’re seeing is a pressure in terms of quality demand. The regulator has begun to really seriously enforce very strong whatever the Drug Act was originally meant to say. The new regulator is also there, DCGI, — new DCGI is there, he is very known in the industry for that. We are seeing actions against defaulting firms, becoming very, very strict. So clients are also demanding much better quality standards and it is actually to, in some sense, playing out what we expected to play out couple of years ago when we talked about quality standards going up and potentially an opportunity for good players to outperform. So we see that and that is mirroring in our efforts. We are getting some advantage also from that and we continue to invest in our facilities to make them the best-in-class. So that is something that we are also continuing to do.

Yogesh Tiwari — Arihant Capital Markets — Analyst

And sir, since in the CDMO space, the normal contract would be like between two to five years, any major contract which is coming for renewal in the CDMO space?

Hitesh Windlass — Managing Director

No, Yogesh Ji, I have spoken in the past about this. Typically, we have a contract which is a master services agreement and in most cases it’s a five to seven-year agreement and this keeps getting renewed. In some cases, there is no end date and we have actually never lost a customer in the last 21 years history of the company in CDMO. We might have said no to a customer, because it doesn’t work for us, it doesn’t meet our ability to support them, but we have never lost a customer.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Okay, thank you, sir, that’s all from my side. Thank you.

Operator

Thank you. As there are no further questions, I now hand the conference over to Ms. Komal Gupta for closing comments. Over to you, ma’am.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

Thank you very much everyone for taking out time and to discuss the financial results of the company. I wish you…

Hitesh Windlass — Managing Director

A great day ahead.

Komal Gupta — Chief Executive Officer & Chief Financial Officer

…a great day ahead. Thank you.

Hitesh Windlass — Managing Director

Thank you.

Operator

[Operator Closing Remarks]