CIPLA — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
LIMITED · MR. KEDAR UPADHYE – GLOBAL CFO, CIPLA LIMITED
MR. KEDAR UPADHYE – GLOBAL CFO, CIPLA LIMITED MR. R.
ANANTHANARAYANAN – GLOBAL CHIEF OPERATING OFFICER, CIPLA LIMITED MR. NAVEEN BANSAL – INVESTOR RELATIONS TEAM, CIPLA LIMITED
Moderator · Conference Operator
MR. CHIRAG TALATI – KOTAK SECURITIES LIMITED May 22, 2019
Thank you very much.
We will now begin the question and answer session.
The first question is from the line of Prakash Agarwal from Axis Capital.
Please go ahead.
Prakash Agarwal
I am just trying to understand the U.S. business better.
You did mention about the base business at $120 million, $125 million.
How do you see this opportunity of generic Sensipar, given the fact that it is a phased launch, at-risk launch and how sustainable do you think it is versus other players not being able to launch?
So, I mean, what gives us confidence, is it the Teva pulling back us triggering that or if you could just through some broad-level highlight?
Umang Vohra
Prakash, we are not commenting on Cinacalcet due to the nature of the litigation that we are involved in but as we mentioned, we have done a phased launch and it is our belief that there is value that can serve the market in the U.S., so we can't give more details than this at this stage.
I'm sorry about that.
Prakash Agarwal
So, the other way, if you can help me understand on the base of $120 million, $125 million and given the pipe that we are expecting for 20, how do we expect the U.S. business to ramp up?
Kedar Upadhye
Prakash, Umang alluded to in his speech that for the full year, factoring for whatever contribution we get from cinacalcet, we do expect to grow in double digit.
We are continuing to focus on the trajectory.
We do expect some ramp up in existing launches and then we will come up with new launches as we progress on the review as well.
We are also likely to see our first inhaler launch in the U.S. towards the end of this year.
So, I think we should consider all these factors and model, Prakash.
So, at this time, specifically on Sensipar beyond is because of the nature of the product, we won't like to comment beyond what we have spoken.
Prakash Agarwal
And second question on the India business, we, particularly, have done much better than the peers, especially for the 4Q.
We did take one inventory correction in 2Q, if I am not wrong.
So, how is the market changing?
I mean, most bigger companies, smaller companies, we see they are taking 1 inventory correction in the last 7 quarters post the GST, so what is the sense on the industry and for ourselves that is the channel correction largely done and are we seeing consumption and demand coming back because the volume growth doesn't seem to suggest that?
Umang Vohra
We have 2 lines of business, our prescription business and our generics business.
We would like to believe that on the prescription side of the business, which is the results that you have been seeing across competitors that I think that destocking is probably more or less done.
On the generic side of the business, we do see that there is some scope still for destocking to happen.
May 22, 2019
Moderator · Conference Operator
Thank you.
The next question is from the line of Anubhav Aggarwal from Credit Suisse.
Please go ahead.
Anubhav Aggarwal
Umang, question on the India business.
When we have grown this year at 7% overall, what would have trade generic business grown for us, would it have been single digit or double digit?
Umang Vohra
We are probably slightly higher than our prescription business, but not hugely different, if that is your question.
Anubhav Aggarwal
So, basically, it is single digit only, you would say, because we have grown 7% overall?
Umang Vohra
Well, it could be double digits, but remember the base of this business is a lot lesser than the Rx business.
It is almost one fourth or one third of our Rx business overall.
Anubhav Aggarwal
In just previous response, you mentioned that there is some destocking scope is still there in the trade generic business, can you just elaborate on that, what is driving that?
Umang Vohra
No. I think across the trade this year we have seen, especially in the prescription business, we saw the trade had destocked quite significantly in areas for us at least that concern the acute therapy.
And on the Gx business, we are still seeing that destocking is continuing to happen.
So, the Gx business trade is a lot more diffused and a lot bigger than the prescription trade in terms of the number of outlets and the chemists, etc. So, we are still seeing some destocking happening in that side of the business, but on the Rx side of the business, which is our prescription business, we believe that this is largely done.
Anubhav Aggarwal
And just last clarity on this 50-crores thing that you mentioned, this is there in the other expenses and what is this nature, you mentioned something related to litigation costs.
Is this part included in R&D or in other expenses?
Kedar Upadhye
Anubhav, it is in the other expense line.
This is partly litigation, partly some of the provisions we have taken in line with accounting standards for receivables and there has been certain other spends at the plants.
This is booked in other expense line.
Anubhav Aggarwal
When you say some provision for receivables, can you just elaborate what does it mean?
Why would it take that?
Is just like precautionary of taking provision for bad debts there?
Or what are you taking?
Kedar Upadhye
Absolutely, I think our accounting standards and internal policies dictate certain provisioning in case collections are delayed beyond a particular ageing bracket, so our attempt is always while we provide to recover it later, but at this stage, given our internal policies, we have provided for it.
Moderator · Conference Operator
Thank you.
The next question is from the line of Neha Manpuria from JP Morgan.
Please go ahead.
May 22, 2019
Neha Manpuria
Sir, given the 2 deals that you have announced in the specialty side, we get data read-out for one, at the end of first quarter and you mentioned, I think the Pulmatrix goes into trial sometime in the second quarter of this calendar year.
I am assuming that these investment requirements from Cipla towards these would increase significantly from next fiscal onwards.
Could you give us some colour on how the investment would pan out more from a longer-term perspective, not necessarily for FY20?
Kedar Upadhye
Neha, both these deals will near about $150 million to $175 million, largely in balance sheet, partly in P&L and this is over next 3 to 4 years.
We are comfortable to fund this kind of spends because business cases look pretty attractive and, in our view, that is something that we need to do as part of our specialty strategy for the U.S. market.
Neha Manpuria
And the P&L spend would start from next fiscal.
That assumption is correct, right?
Kedar Upadhye
Yes and the 7% and 8% to sales of R&D that we have spoken subdues these investments as well.
Umang Vohra
Actually, P&L spend has also started this quarter, right?
We have already taken a fairly large amount of spend on account of Avenue in this quarter.
Neha Manpuria
My second question is on the South Africa business.
Now that the South Africa tender business has been rebased or the CGA has been rebased, when should we see the impact of the TLE and TLD and private market growth, pricing, etc., any concern there that you could highlight?
Umang Vohra
No. I don't think we are concerned about private market at all.
In fact, private market doesn't have the pricing issue that we spoke about.
This South Africa tender process works.
It is a 3- year tender and so prices get reset every 3 years.
This is the first year of the 3-year tender.
So, from the last tender to this tender, the prices have moved South, which is usual of this business.
So, therefore, on the tender side, we may see a little softness in South Africa, but overall, the business is aiming to cover that softness with the strong growth on the private side of the market.
In the Global Access business, our business has kind of rebased.
A) We are not starting off a high base, and the TLE, TEE prices have moved significantly South, but we will only play the market for products where we think because we are margin accretive.
Neha Manpuria
I understand the pricing on the tender, sir.
I think last year, there was also issue with us taking price hikes in the private market because of currency, I was referring to that.
Does that concern still continue for South Africa?
Umang Vohra
Well, last year, average price increases, if I am not mistaken that were allowed in South Africa were closer to 1%, so I don't think there were any price increases per se.
It was what was allowed by the government and it was 1% increase.
Moderator · Conference Operator
Thank you.
Next question is from the line of Kulsun Shaikh who is an individual investor.
Please go head.
May 22, 2019
Kulsun Shaikh
Sir, I have one question about the consol balance sheet on other financial liabilities, there is a sharp increase in other financial liabilities, if you can throw some light over that?
Kedar Upadhye
The increase in other financial liabilities for the quarter is warranted by our investments in some of the joint ventures and subsidiaries.
That is the accounting, as per standards we are required to do for our investments and some of our subsidiaries and joint ventures, it is noncurrent and noncash in nature.
Kulsun Shaikh
Sir my question is about the women health portfolio that you are launching in consultation with LG Lifesciences?
Kedar Upadhye
Yes.
It is a portfolio of product.
Some of them have been launched in quarter 4, balance few, you will see launches in subsequent years.
Umang Vohra
It is in the area of hormones and women's health.
Kulsun Shaikh
Any colour on the commercialization, that when would you expect it?
Umang Vohra
It is already commercialized.
Moderator · Conference Operator
Thank you.
The next question is from the line of Nitin Agarwal from IDFC Securities.
Please go ahead.
Nitin Agarwal
Umang, on the Albuterol launch which is there or that you just mentioned towards the end of the year, how do you guys see the competitive landscape in the market post these authorized generic moves by the innovators?
Umang Vohra
First of all, I think these markets just formed recently with the AG.
There are 3 AGs.
Each brand has launched the other, so there are 2 things that we see happening in the market.
The first is that we think that as long as your Albuterol, you can take share from any of the other 3 brands that are available, so the launch of the 3 authorized generics has actually helped doing that somewhat.
The second is it is a 55 million or 54 million units market and right now, our understanding is that the unit price of each is significantly higher than $20, so if you were to look at what price we could come in with, there is still a significant potential depending on the share we take.
Nitin Agarwal
And you haven't seen the pricing dynamics worsen a whole lot even after the AGs come in?
Umang Vohra
Yes, because right now, the 3 AGs are by themselves and they have priced higher than the $20 mark and our math says that we have cost competitiveness to price this significantly lower than that and possibly take a fair share of the market.
Nitin Agarwal
And secondly, Gilead launched, talked about this early Truvada launch next year, so is this launched earlier than what was the initial expectations were?
May 22, 2019
Umang Vohra
No. I think, we were aware of this.
Nitin Agarwal
And lastly, you have talked about the biosimilar being an important business for us going forward.
I mean, the fact that we have not invested much on our own either in development or manufacturing, how competitive does it make us to compete in this market?
How do we see this thing playing out for us?
Umang Vohra
Maybe I could answer saying that in the regulated markets, we don't know because we have no product for the regulated markets and those dynamics are playing out.
In the Rest-of-the-World markets, we believe we are competitive because it is not solely about price, it is also about your reach in the market and what you can do with the product and we have seen that in India.
We are likely to see that in several of the other markets where we made these filings.
So, I think where we stand competitive.
What we have not invested in biosimilars is not in our own facility and not in our own development because we believe there are many players who can do that and are already doing it in the marketplace.
Nitin Agarwal
And when do you see this business become to be meaningful for you in size?
Umang Vohra
I think bulk of our launches will probably only start scaling up may be a year, year and a half later, so at this stage, depending on when we get approvals in most of these markets and the competitive intensity at that stage, that is the best time for us to make a guess.
Right now, we are just focusing on completing our portfolio offering for most of the 5 or 7 biosimilars across our range of emerging markets.
Moderator · Conference Operator
Thank you.
The next question is from the line of Shyam Srinivasan from Goldman Sachs.
Please go ahead.
Shyam Srinivasan
Just back on generic Sensipar again.
I am not going to ask specifics, but can you help us size the risk, if there is any in this launch per se?
What could be the tail risk here because I am just trying to understand, do we have to pay very heavy penalties in case the next few quarters change this?
I am just trying to understand, is there something that we can kind of fall back on?
Umang Vohra
I am sorry.
I can't answer that question.
We are in litigation with the branded company and I can't answer that question.
All I can say is that Cipla has declared that this is a launch at risk and there is a risk element to it.
There is a threshold that the company has set as the path for its risk and based on that, we had indicated we have done a phased launch.
Shyam Srinivasan
My second question is on the U.S. part, both the DTM and the Invagen.
Can you just tell us if you see the chart there clearly things that are coming off?
So, what is the outlook for these 2 businesses?
R Ananth
So, clearly, as we have been mentioning about even the last quarters, our focus has been significantly to grow the DTM.
As you know, on B2B relationships and products that we have May 22, 2019 we continue to support, but we are not specifically focusing on increasing B2B in the U.S. because clearly, for us the opportunity is to launch our own ANDAs and be present and grow our DTM market.
Shyam Srinivasan
Okay.
And in Invagen as well, is there a plan to kind of divest these 2 parts?
KR Ananth
No, Invagen continues to be an important part of our overall U.S. strategy and will continue to be a part of our strategy there.
Shyam Srinivasan
And my last question is on the guidance for margin expansion next year.
What is the normalized EBITDA margin for fiscal 19?
Kedar Upadhye
Shyam, we wouldn't want to be specific on normalized EBITDA margin, but I think every year between the revenue growth, cost improvements and productivity capital and human resource and other elements productivity, there will always be effort to grow the margins.
We have been on this journey for the last 3 to 4 years.
It will continue next year as well.
There will be portfolio momentum also which will come handy and I would keep it at that for the time being.
Shyam Srinivasan
But Kedar, I am asking only fiscal 19 what your number is.
I am not asking for quantum on 20, but is it 19.4 the right margin number?
Kedar Upadhye
19.4 is what we reported.
That includes a benefit of Cinacalcet for the fourth quarter.
Outside that benefit, as we alluded on a year-on-year basis, there is very healthy double-digit strong improvement in the base level of EBITDA.
What we wouldn't like to do is to separate these elements for the sake of confidentiality.
Moderator · Conference Operator
Thank you.
The next question is from the line of Surya Patra from Phillip Capital.
Please go ahead.
Surya Patra
This is Surya here.
Kedar, can you just indicate what is the nature of the intangible impairment that we are witnessing?
I think a couple of times that we in the recent have witnessed, so is it relating to the kind of product withdrawal or the products were we are not finding any major hope there or something relating to that and any scope for further more impairment?
Kedar Upadhye
Surya, this is from the pipeline products category of the acquired intangibles in U.S. and one of the products where competitive situation has become adverse and our discounted cash flow was short as compared to the carrying value in the books.
This may change that we keep doing every year and having done it at this level, we can't guarantee, but the chances of any impairment of intangibles is pretty low henceforth.
Surya Patra
And about China, you have said that okay, there is a kind of well said thought process for the China business.
So, can you just provide some sense about it like what is your thought process there?
Have you identified product or you have started filing product or what all that you have already thought about it?
And what is your plan there?
May 22, 2019
Kedar Upadhye
In terms of organization, in terms of portfolio, in terms of the plants for manufacturing development, I think it has progressed at a stage where we feel quite good and energized and in the subsequent quarters, as specific, let us say third party agreements gets signed, specific filings are made, I think we will be happy to communicate, but there is a very dedicated work stream in the company which is working on China now.
Surya Patra
Can this influence the overall growth of the company and then, let us say, next 1 to 2-year period?
Kedar Upadhye
Probably not as much in 1 to 2 years, but after that this work stream could contribute in a very meaningful way.
Surya Patra
And just last question on the margin side again, Kedar, sorry for that.
See, on the margin front you would say that, okay, whatever the margins that we have reported that will be for following year that may not be the case because obviously, the adverse impact of the Sensipar going down that will be there and do you see any pressure on the domestic business side so far as margins are concerned?
Kedar Upadhye
See, our operating plans factor an expansion of the domestic business margins as well, Surya.
As far as the products like Sensipar are concerned, the company has worked on it.
There has been a fair degree of efforts by the development team, by manufacturing team, by legal team.
At this stage, as we said we can't talk too much about it.
We believe the residual litigation risk is minimal.
I also said that on a Y-o-Y basis, if I strip off cinacalcet, the base EBITDA margin have grown in healthy, strong double digits.
I will leave it here.
Surya Patra
And SAGA business, whether that is really going to add or your Y-o-Y basis whether the margin profile will improve given the kind of incremental business on the tenders that we are witnessing now?
Kedar Upadhye
Yes.
Probably, they may not improve and they may not worsen as well.
I think given the fact that this is once in a 3-year price adjustment we are doing on the tenders, I would be happy if this stay flat and that will come on the back of growth in private market revenues that will come on the back of some bit of cost improvement on the APIs and between tender and private market and the Global Access business.
Our target would be to keep it flat Y-o-Y while the U.S. business and India business supports margin expansion.
Moderator · Conference Operator
Thank you.
The next question is from the line of Chirag Dagli from HDFC Mutual Fund.
Please go ahead.
Chirag Dagli
Kedar, did I hear you correctly when you said, base business EBITDA has grown in healthy double digits for FY19 versus FY18?
Kedar Upadhye
Yes, primarily I said for quarter 4 but yes logically for the full year as well.
May 22, 2019
Chirag Dagli
For the full year as well, so margins would have logically expanded because this is on the back of single digit sales growth?
Kedar Upadhye
Yes.
Chirag Dagli
And you mentioned 2 respiratory products you will file.
Do these require clinical trials?
And have those costs been incurred already?
Umang Vohra
We are currently incurring those costs.
Chirag Dagli
So, both these products need clinical trials and both these are already on?
Umang Vohra
Yes, one is a larger trial, one is a smaller trial and yes, both need trials and the cost are incurred.
Kedar Upadhye
Chirag, we have spoken about Advair, we are public about it.
Chirag Dagli
I understand, sir.
And when you look at your specialty business, of course, you are taking small steps but as you look at the next 2 years, what are the kind of key milestones that you think we should sort of track as far as this whole speciality effort is concerned on the clinical side?
Umang Vohra
Clinical side will be clear.
It will be the initiation.
Right now, the objective is the initiation of trials both for Tizanidine patch as well as for inhaled itraconazole and for Tramadol, it would be the readout because Tramadol dosing pretty much will come to an end in another quarter or quarters from now.
Chirag Dagli
So, the results will be out in a couple of quarters?
Umang Vohra
Yes, the Tramadol results will be out in quarter 1 of next year, which means the dosing will ideally be stopping in this quarter or early next quarter and the other 2 will initiate their trials right now.
Moderator · Conference Operator
Thank you.
The next question is from the line of Nimish Mehta from Research Delta Advisors.
Please go ahead.
Nimish Mehta
I just have 1 question.
Are we likely to launch Atripla also along with the launch of Truvada?
And second is would these launches initially be through Teva or we will be on our own from the first day itself?
Umang Vohra
We are not giving that level of detail.
All we can say is that Cipla has been a strong player on both the API as well as the formulation side of the business when it comes to HIV medications.
Nimish Mehta
But will we be launching Atripla also around the time if that is what you… May 22, 2019
Umang Vohra
So, I think as the earlier person had mentioned and one earlier caller had raised a question on exclusivity related to some competitor, so obviously, there is a provision of exclusivity and therefore, that player will launch first.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anubhav Aggarwal from Crédit Suisse.
Please go ahead.
Anubhav Aggarwal
Just one question.
We talked about supply constraints in last 2 quarters, now those are fully resolved?
Umang Vohra
Ananth will take this question.
R. Ananth
Yes, certainly.
They are fully resolved as we said, getting into the last quarter, we gave the same commentary and broadly, all the challenges that we had in the first half of the year are behind us.
Anubhav Aggarwal
And second question is on the China market.
Initially, my sense was that we were targeting largely the respiratory portfolio, have we broadened our portfolio now?
And when we talk about accelerated approach, what does it exactly mean?
Are we trying to file more products than we were initially thinking?
R. Ananth
Yes, it is broadly respiratory products, but also, we are looking at Oncology segment as well and we are looking to increase the pipeline, increase the portfolio significantly from where it was in the past.
Anubhav Aggarwal
So, you already had a facility in China, which can do respiratory.
Can you do oncology as well?
Or will you make oncology products in India and export to China?
R. Ananth
We don't have a facility currently.
Anubhav Aggarwal
But not even for respiratory?
R. Ananth
For respiratory, we are in the process of creating it.
Anubhav Aggarwal
So, for oncology pipeline, you will manufacture in India and export?
R. Ananth
We would look at both the routes, manufacturing in India and export as well as look at potential facilities in China for manufacture.
Moderator · Conference Operator
Thank you.
The next question is from the line of Damayanti Kerai from HSBC.
Please go ahead.
Damayanti Kerai
My question is regarding Advair trial progress, so how much of the planned R&D spend has been incurred so far?
And if you can also update us on potentially when we will be completing the trials and then potential submission timing for the product?
May 22, 2019
Umang Vohra
So, I think the trials started very early part of this year, mid-last year and the very early part of this year, the calendar year and the trial will be almost 12 to 14 months trial.
So, if you look at it from that perspective, the expenditure is already in our numbers and for Advair, it will probably continue to be in the numbers for the next 8 to 10 months.
Damayanti Kerai
So, 12 to 14 month for the trial?
Umang Vohra
From the time it started, which was late last year and early this year.
Damayanti Kerai
My second question is regarding your CAPEX outlook for next year?
Kedar Upadhye
Yes.
Damayanti, I think the spends next year broadly would be same as this year.
I think this year our total cash flow spend is below 500 crores.
Our attempt would be to keep it at that level in FY20 as well.
Damayanti Kerai
And how much of that will be maintenance?
Kedar Upadhye
Large part of that will be maintenance.
We do not have plans for a large greenfield or brownfield expansion as of now.
Damayanti Kerai
And one clarity on that 50 crores, one of you said that is in other expenses, right?
Or other income?
Kedar Upadhye
It is in other expenses and the nature of that is litigation, the lawyer fee for cinacalcet and some of it is provisioning that I alluded to for delayed receivables and couple of other items.
Damayanti Kerai
Finally, your tax guidance for next year, if you can provide?
Kedar Upadhye
We are at ETR of 27%.
For the next year, we will be somewhere between 27% to 29%.
Moderator · Conference Operator
Thank you.
The next question is from the line of Tushar Manudhane from Motilal Oswal Securities.
Please go ahead.
Tushar Manudhane
So, just on the U.S. base business excluding Sensipar with the kind of run rate which we will be having in FY20. At least till FY19, I guess, we were breakeven or slightly below breakeven, so how do we see the profitability improving in the base business?
And so let us say incremental revenue will fetch what kind profitability?
Kedar Upadhye
We have turned positive, Tushar.
Post R&D, EBITDA for the U.S. business is positive and it is in single digit percentages, it will keep jumping up as we get a contribution from each new launch.
Our operating plans for next year factor an expansion in U.S. business profitability.
Tushar Manudhane
So, is it like safe to assume like the incremental revenue to fetch 25%, 30% margin, for the incremental revenue, I am saying?
May 22, 2019
Kedar Upadhye
It depends on the quality of every new launch and most of our new launches are of high quality in terms of margin profile.
Moderator · Conference Operator
Thank you.
The next question is from the Pratika Aggarwal from Quest Investment.
Please go ahead.
Pratika Aggarwal
Sir, my question is on limited launches per quarter guidance.
Could you highlight on important launches coming out for the company in the next 2 years?
Umang Vohra
We are not public about the specific products and molecules, but I think the target to keep adding to our limited competition bucket in that stage.
Pratika Aggarwal
And we expect this to continue for the next 2 to 3 years, the limited launches per quarter?
R Ananth
Limited competition launches, you mean, yes.
Pratika Aggarwal
Sir, my next question is on the Mirren portfolio that we acquired.
We acquired that 150 million RAND in FY18, so if you could highlight on how it has performed in FY19?
And how do we see it going forward being a very high margin and good growth profile?
Kedar Upadhye
It has been few months of integration.
In our hands, it has been about 3 to 4 months till now.
We are happy with this.
We have factored a stronger growth on this part of the portfolio.
It is in the cough and cold category, OTC segment as you are aware and our business gets factored market expansion, synergy and relatively higher growth than our existing private market business.
Pratika Aggarwal
Sir, my last question would be on the U.S. piece.
From the FY19 levels, how do we expect to add on our base business the revenue growth?
R Ananth
So, as we said earlier, we do expect some launches during the year and as mentioned by Kedar earlier, we do expect double-digit growth on the U.S. business.
Moderator · Conference Operator
Thank you.
The next question is from the line of P.
Srihari from PCS Securities.
Please go ahead.
P. Srihari
In the Indian concept, what is the share of the chronic portfolio currently and how do you see this going over the next 2 to 3 years?
And what is the scenario on the U.S. base business and how do you see that panning out?
Kedar Upadhye
The share of chronic in our prescription segment is about 40% to 45% now.
P. Srihari
And how do you see this growing?
Kedar Upadhye
All chronic therapies put together, which is respi, urology and cardiology.
All of that put together is around 60% in the prescription segment of the India business.
May 22, 2019
P. Srihari
And how do you see this growing?
Kedar Upadhye
Yes.
So, I think chronic segment, as you know, has higher co-relation in terms of growth and profitability growth and the market trends also suggest that the chronic therapies will have higher growth compared to acute and that is playing out for us as well.
P. Srihari
Okay and on the U.S. base business?
Kedar Upadhye
U.S. base business, Ananth just made a comment to a previous question.
I think, there are 2, 3 levers.
One is new launches of the year; second is share expansion; and thirdly, full year effect of what we have launched last year.
I think between all these three, our target is to see a double digit growth for the U.S. business.
P. Srihari
I am talking about the older product basically.
I mean how is the pricing pressure on the older products?
Kedar Upadhye
The older products, we do not have too much of product concentration risk and we do see erosion in the normalized manner now, which is around 6% to 10% per year.
Our operating plans do factor that kind of erosion.
Moderator · Conference Operator
Thank you.
The next question is from the line of Charulatafrom Dalal & Broacha.
Please go ahead.
Charulata
My question pertains to India business.
What type of growth do you expect overall in India?
Kedar Upadhye
We said we would like to beat the market.
I think the market is somewhere between 8% to 10% and our attempt between both our prescription generic segments, again on the back of several efforts that we have done, therapy-shaping initiatives, field force execution efforts, new launches, in-licensing.
Based on all these levers, our attempt is to outperform the market.
Charulata
And my second question pertains to the raising of funds of 3,000 crores.
Is this largely for the trials?
Kedar Upadhye
That is not for the trials, Charulata.
Trials can be funded by our operating cash.
This is for inorganic initiatives and other capital expenditure requirements.
As you are aware, we have been taking this enabling resolution from the board and shareholders for the last 2 years.
This time is also in the same spirit.
Charul Datta
So, do you envisage expenses in the current year?
Kedar Upadhye
I did not get the question, so if it is linked as I said this is an enabling resolution, this in total about 6,000 crores; 3,000 crores for debt and 3,000 crores for equity.
It is not for operating expenses, it is largely for capital expenses, either organic or inorganic.
May 22, 2019
Charul Datta
So, do you expect inorganic acquisition in the current year?
Kedar Upadhye
No. We keep scanning various targets based on our evaluation whether these targets meet our strategic needs and based on our evaluation whether they are coming at a price at which we can consume transaction, a transaction could happen.
Moderator · Conference Operator
Thank you very much.
We will take that as the last question.
I would now like to hand the conference back to the management team for closing comments.
Naveen Bansal
Thank you, everyone for joining us today on this call.
In case you have any follow-on questions, please reach out to the Investor Relations Team at Cipla.
So, once again, thank you so much for joining us.
Have a good evening.
Moderator · Conference Operator
Thank you very much.
On behalf of Kotak Securities, that concludes the conference.
Thank you for joining us.
You may now disconnect your lines.