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Blue Jet Healthcare Ltd
NSE:BLUEJET
Blue Jet Healthcare Ltd
NSE:BLUEJET
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Earnings Call Transcript
Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to Blue Jet Healthcare Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Advait Bhadekar from EY. Thank you, and over to you, sir.
Thank you, Manav. Good evening, and a warm welcome, everyone, to Q1 FY '25 Earnings Call of Blue jet Healthcare Limited. Please note investor presentation and the financial results are available on the company website and the stock exchanges. Also anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces.
The conference call is being recorded and the transcript along with the audio of the same will be made available on the website of the company as well as on the stock exchanges. Please also note that the audio of the conference call is the copyright material of Blue Jet Healthcare Limited and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company.
From the management side [indiscernible] today: Mr. Shiven Arora, Managing Director; Mr. V. K. Singh, Chief Operating Officer; Mr. Ganesh Karuppannan, Chief Financial Officer; Mr. Sanjay Sinha, Deputy Chief Financial Officer. Now I would request Mr. Shiven Arora, Managing Director of Blue Jet Healthcare Limited, to provide you with the updates for the quarter ended 30th June 2024. Thank you, and over to you, sir.
Thanks, Advait. Good afternoon, and a warm welcome to all. We continue to be an export-led regulated market-focused company. Our customers are market leaders in the MedTech, FMCG space and innovators for new products in different therapeutic areas. We believe to have strong abilities in capital management with the key ratios of ROCE at 22% annualized basis, EBITDA at 27.2% and PAT at 23% as on Q1 FY '25. The fixed asset turnover is over 3x.
We continue to be a debt-free and cash treasury investments over INR 380 crores. The other financial matrices remain steady. During this quarter, we did see an impact on our logistics cost and transit time due to the Red Sea situation. Our production and dispatches during this quarter exceeded the previous quarter. Due to longer transit time, we could not recognize sales during this quarter, resulting in a degrowth of 11% compared to Q4 '24. Our CFO will explain more in detail on this.
Apart from this transit time, there are no other threats as of now. We continue to closely monitor the geopolitical situation that can impact input material prices or revenue stream. I would like to share a few highlights about the business. During June 2024, we added 120 KL capacity dedicated for intermediates for the cardiovascular drug for our innovator customer in Unit 2 Ambernath. Currently, we are in the validation phase. Things are looking positive, and we hope to go commercial shortly. We believe that this capacity addition will result in meeting our customers' order backlog placed with us.
In the same production block, we will be adding additional capacity, which is expected to go commercial by Q3 for Contrast Media Intermediate for the innovator in the MRI space. Enquiries for new products in all the 3 product segments are encouraging. Our sites are being inspected by existing and new customers for new products. We believe we are well placed to lock in certain new products, which can sustain our growth in the medium to long term.
We will keep you updated on our CapEx plan for the long term in the coming quarters. On the pipeline, we have a strong pipeline in Contrast Media. Coming from the expansion we are doing in the MRI space, we are also forward integrating into more advanced intermediates in the iodinated segment. On the high-intensity sweetener segment, we have recently commercialized another salt in the saccharine family. We are also working on a couple of new candidates, which are currently in the development phase.
The third vertical, the PI segment or the CRAMS business, the company is actively seeking 7 to 8 CRAMS opportunities with innovators or global CDMOs for oncology and CNS, which are in advanced discussions. With a focus on expanding its portfolio in these therapeutic areas, the company is also focused on gaining expertise in amino acid-based elevators. On this note, I would like to pass it on to Mr. V.K. Singh, for more highlights on the business. Thank you.
Hi, and good evening to all of you attending the call. I'll just take you very quickly through the capacity expansions that we are doing. I will also touch upon R&D and talk a bit about our sustainability initiatives. Capacity for our CDMO business is a key pivot, and we are adding capacity to keep in step with the growth that we envision over the next few years. Our current CapEx cycle is mostly in step with what we had indicated in the past. We have added about 120 KL capacity in Unit 2 at Ambernath at a cost of about INR 90 crores. This capacity went on stream in July this year.
While the capacity is versatile, it has been specifically deployed for making intermediates for the CDMO cardiovascular opportunity that we were pursuing with the Innovator of the molecule. The molecule is showing great promise, and the end product being the only non-statin oral drug approved for both primary and secondary cardiovascular indications. The capacity that we have now established for this intermediate will be good to address the possible uptick in the volumes given the recent label updation and also the label expansion.
The validation batches for this product from the new capacity were successfully executed last month, and we expect an increase in offtake from quarter 3 onwards. In the same block, we are commissioning an incremental capacity of about 70 to 80 KL, and this capacity will go live by September or October this year when the validation batches for an advanced intermediate orientated towards the NCE in the MRI space will be shipped out.
In Unit 2, we have recommenced work on a small volume plant, which we envisage will be ready for commissioning in quarter 1 of FY '26. This plant will be primarily used for proof of concept, regulatory filings if the product requires that and supplies of small GMP validation quantities to innovators for the clinical development and trial requirements. With this small volume plant, we complete our stated objective of building robust bench-to-bulk and milligram to multi-ton capability.
Moving to Unit 3 at Mahad. In Phase I, the priority was to create common infrastructure for the site. The project work for the warehouse and effluent treatment plant is almost complete. At this site, we were creating a capacity for backward integration for the Contrast Media segment. We believe this new capacity will get commissioned as we had indicated in the past in quarter 1 FY '26. Suffice it to say that we are on schedule as far as that is concerned.
I'll quickly touch upon R&D. As you have seen that in the next 12 to 18 months, we are adding about 40% to 50% more capacity. To keep in step with the growth that we envision and the surge in the CDMO RFPs that we are witnessing, the number of R&D labs and scientific talent pool, both have been augmented. Some new chemistry platforms like the pyrophoric chemistry, the iodination platform, enzymatic platform and amino acid platform have been added. On sustainability, as a responsible and forward-looking company, we are continuously focusing on reducing our carbon footprint and GHG emissions.
Our solar plant was commissioned last year. And between our windmills and solar, we have built capability to generate about 70% of our energy from renewable sources. We also continuously strive to achieve a high level of atom efficiency in our chemistries and endeavor to make our industrial processes and plant designs environmentally friendly. With this, I will hand it over to my colleague, Ganesh, to take you to the financials in more detail.
Good evening, everybody. Q1 FY '25, we had a revenue of INR 163 crores, which is a drop of 11% compared to the previous quarter. So I will quickly explain the reasons why the turnover actually came down. If you look at Contrast Media, on a quarter-on-quarter basis, our turnover came down by 42%. Maybe I'll just give you the backdrop of the contracts we have with the customer. We need to recognize turnover once the material is received by the customer at their site.
So today, what happened in Q1, there were delays in transit, sea shipment because of Red Sea issues. The consignments, which used to take 35 to 40 days for transit, now is taking upwards of 65 to 70 days. I think this has actually -- while the production and dispatches were better than Q4. unfortunately, we couldn't recognize the entire dispatches as sale in this quarter, and this would be recognized in the next quarter. In the beginning of this quarter, in Q1, because our sale for one of the major customer dipped in Q4 of FY '24, we didn't get the same advantage in the beginning of the quarter. So to that extent, for us, Q1, while in terms of production, we are better than Q4. But in terms of recognizing sale, we have to actually take a higher cutoff, which will actually get into the subsequent quarter, which is Q2.
Moving on to Pharmaceutical Intermediate. If you recall, we kick started our commercial supplies to the cardiovascular customer way back in Q3. And this product, we are actually like -- you could actually see a growth happening. And in this particular quarter, you will see a 60% growth in PI segment. With this new capacity addition, we believe we could actually like increase our wallet share with this particular customer in the next coming quarters.
Artificial sweetener while today, we are actually focusing more on the FMCG customers, and we are slowly getting out of the spot market. To that extent, there is a small impact. But way forward, we would actually have a consistent sale in this particular segment. Coming to raw material costs. There is a little bit of easing. This I communicated in the last conversation. And one of our key raw material, there is a marginal dip in the price, so our margins improved. There is also a higher sale of one product with a higher gross margin. This product mix also helped us improve our gross margin by a percent.
Employee benefit costs went up marginally. This is on account of head counts that are added for new capacities and certain other corporate functions. This trend you would actually see in the next 12 months in terms of employee cost. Other expense, barring sea freight, we could actually control the cost on every other aspect. Sea freight, there was an impact in Q1 '25. With this, our EBITDA stands at 27% compared to Q4, which is at 29%. Now in terms of depreciation, I just wanted to highlight the change in the accounting policy, what we did. Earlier, we were following WDB method of depreciation. We couldn't change the method to SLM for certain reasons.
And today, we have actually -- we did a technical evaluation. Our reactors are actually like operating at more or less at similar capacities. And if I look at the utilization of our facilities, it is uniformly distributed. We actually decided to shift to straight-line method in line with most of the corporates who are actually like following straight-line method. This actually has a reduced impact of depreciation.
This quarter, we had a 35 -- INR 3.5 crores impact on depreciation, while Q4 had INR 7.7 crores. So there is actually a lower charge on depreciation because of straight-line method. Our profit after tax stood at 23%, which is marginally higher than Q4. Now coming back to on inventory. We talked about goods in transit, which are yet to be recognized as sale. Because of this, our inventory days went up almost by 60 days. Q4, we were at 136 days. Today, we are at 204 days, predominantly because of goods in transit. And the new product, the cardiovascular product, we will be commercial -- we will be actually using the new facility, so that needs a little bit of more raw material.
Now in terms of CapEx, we have capitalized INR 90 crores for this particular quarter. And we do expect another INR 200 crores which are committed, which would be spent between 12 to 18 months. So now I open up the floor for question and answers, and we are happy to answer your queries.
[Operator Instructions] We have our first question from the line of Sanjesh Jain from ICICI Securities.
My first question is on the largest product, which is in the Contrast Media, which has seen a dip. This is purely because of logistical issues. I believe they were also into the debottlenecking stage, and they were expecting that to be completed by June. I hope that is completed. How do you see the sales for the remaining 9 months? Do you think the Contrast Media for this particular product will we grow on that product? Because last year also, 2 quarters was impacted because of the debottlenecking exercise. That means there should be some step-up which we were anticipating. And how has been the market share trend for that product for us within the India suppliers?
Okay. I'll just take the question on Contrast Media. We actually had an impact in Q1, okay -- sorry, Q4, especially in the month of February and March. And that impact actually came in this particular quarter. See what happens is because of the sales cutoff, whatever cutoff we had in November, December got realized in January, February. But since there was an impact of lower sale in February, March, the impact in April, May was very little.
So today, way forward, our order book is consistent like whatever we have dispatched in this particular quarter, we expect similar number for the next 3 quarters. So starting Q2, Q3, there will not be any, what do you call, the offtake from the customer would be at similar levels. Today, whatever we are dispatching, that will continue till December. We do expect the next year forecast, which will be higher than what the current year forecast is. That is our expectation. It could be a single-digit number, but we do expect from next January, there would be a higher offtake as far as this particular product is concerned.
If I look at the customer, the largest customer, recently, they announced their results. Their Q2 is, as far as this particular segment is concerned, they have shown a 14% growth. And they have also talked a lot about capacity building for this particular product.
Okay. So in terms of market share?
For the global customer, I don't have the data. Maybe this is something we will have to actually like -- once we have it, we will actually share it with you. At this point of time, we don't have the data.
Second question, again, Ganesh, on the margin side, Contract Media, this quarter contributed 40% versus 62% in the [indiscernible] Generally, that is on higher margin...
Sorry to interrupt, sir. Maybe -- can you speak a little louder?
Is it good now?
Yes, yes. Now, it is good, yes.
So I was telling our Contrast Media contribution has fallen from 62% to 40%. And that is higher-margin business generally, right? And despite that, our gross profit margin has improved by 140 basis point quarter-on-quarter. While our belief was that once these new products comes in, whether it's a cardiovascular or the forward integration for the iodine chemistry, these were slightly margin dilutive versus the existing product while margin continues to improve despite the contribution coming down, what is driving this improvement in the margin despite inferior mix in terms of margin profile?
Sanjesh, there are four reasons. One, the key raw material used in the contrast media for the largest customer, there is a slight reduction in the price. That's number one. There is another contrast media, where we were able to actually get -- increase the volume, so that has actually contributed a higher margin. And this product mix, this particular building block also has contributed positively to our margins. The third reason is on the other segments due to efficiencies, we are able to actually like one is there is a general reduction in some of the chemical prices and some of the recoveries we were able to actually like achieve the targets, and that is contributing a reduction in this gross margin.
And the fourth is a little bit technical, like when you have a higher goods in transit or WIP finished goods, the cost gets inventorized and that has a marginal impact on the gross margin, which will actually show up in the next quarter. I think the fourth point is a bit technical, but the first three points, I would say, more or less straightforward why the gross margin has actually gone up.
But will it be a fair assumption that as the mix changes towards more new products versus the legacy product, margins should dive down, right?
I think both the product categories are for the innovators, and these are specialized products. And as we gain more experience in these categories and the specific products, our efficiencies are improving with time. So the aspiration would be around the same margin levels and be consistent in terms of suppliers.
Got it. Got it. My follow-up is on the new Ambernath facility, which we just commissioned. We haven't shipped anything from that, right? All this increase in the revenue for the Pharma Intermediate space is largely coming from our legacy fixed asset and this new asset is yet to yield any revenue. Is that right assumption?
We are yet to do any commercial invoice from this facility.
Okay. So we had that much of a capacity to drive, say, INR 60 crores of revenue from Pharma intermediate for a quarter?
We should.
That's correct. Having said that, I think the validations for this new commercial plant has shown positive results. And as far as the scale-up is concerned from Q3, we are on track.
Got it. Got it. Next on the new product within the Contrast Media where we were expecting some forward integration in iodine and into the MRI space, where are we in terms of commercial supply? Have we got the POs for this product now? Or still in the validation stage?
No. So validation stage is complete, and the results on the use test trials and stability data are positive. Maybe we'll have a more positive update in the next quarter on this.
Okay. Okay. We haven't received PO. That's right understanding as of today, right?
There is a supply agreement in place. But yes, formal PO is a matter of time is what we believe.
Got it. Got it. One on the accounting side of it. Ganesh, you said that DAS for the Contrast Media, it's limited to the 1 product for 1 customer, or it is as a policy, we follow for all the products, all the customers?
No. For 2 products, we have this [ DAP ] terms.
Okay. For 2 products?
Correct, yes.
Okay. 1 for cardiovascular, the other 1 for the...
No, no. This is within in the Contrast Media with 2 customers, we have this delivery in place.
But rest all is FOB, right?
Yes, CIF [indiscernible]
Right. CIF. Got it. Got it. Any update on the APD plant? That's -- if I heard it right, V.K. told that should be ready by 1Q '26. Is that right?
That's right, Sanjesh. So we are on track for that site. As I mentioned that a lot of work is happening on the common infrastructure and the APD plant is also -- the construction has recommenced. And I think by quarter 1 of FY '26, we should be up and about.
V.K., we are targeting -- this will be my last, I will come back on the queue. For APD, this is purely for captive we are looking right now? Or we also intend to sell it to the external clients?
The capacity that we are putting up for CPD and APD will exceed our consumption. And so that's where we will leave it. There are opportunities beyond captive consumption. The whole idea of putting up the capacity was for one strategic reasons, strategic independence, cost control, support to captive, but then the capacity that we are putting up is more than what we will consume.
But at current price, do you think it's feasible for us to sell it in the external market?
You Know these prices, there's an element of cyclicality. That's one. I mean the moment people know that you are putting up capacity, the prices start coming down, but that will not stay. The second part is that our costs because of the process that we have, because of the technology that we have, we will be able to meet any type of -- there's headroom for us to compete with the most aggressive players and the type of scale that we have put in.
So we are going in with a continuous process on this product. I don't think anybody else has got a continuous process. So I think our costs will be pretty much in control. We'll be one of the industry leaders as far as cost is concerned, and there will be a lot of headroom to fight.
We have our next question from the line of Sudarshan Padmanabhan from JM Financials.
Thanks for the elaborate explanation. Just taking forward what Sanjesh was discussing about. See, today, I mean, I agree that probably the sales is not being booked on the Contract Media side, and you are running at anywhere between 120 to 130 [ KLs ] per quarter. But when I look at the build up as far as this segment goes, I think, as you had alluded earlier, I mean, [indiscernible] also talked about better growth on this segment and more capacity. Then you have [indiscernible] of ethanol, which is an opportunity that you have. And in this segment, one is from this current run rate, say, if you are looking at the next year, what are the kind of volumes run rate that we are talking about?
And the second is in terms of capacity wise, we have been upgrading capacities inconsistently. I mean when I'm just looking at the opportunities ahead, I mean, we know about the label extension product, the cardiovascular product. But interestingly, there are also a couple of more products, which is in the oncology and CNS space, which is at the next stage. If we are lucky and we are able to see the commercialization on this, would we have capacities to take the kind of growth visibility if everything goes well? I mean what would be the CapEx that we'd be looking at?
So if you're talking of Contrast Media, then for the 2 Contrast Media products, the new launches, we have adequate capacity. So I mean that we have already provided for. And as far as the PI, API segment is concerned, you are right that we have some opportunities in oncology space and some in the CNS space and all that. To be able to track those opportunities also for the next couple of years, we have adequate capacity.
Having said that, there's a greenfield site that we are going to initiate development at. And maybe in 1 year, 1.5 years, there will be 1 or 2 blocks in that greenfield site also that will further augment the capacity. So we understand that as a pure-play boutique CDMO, capacity is one of the pivots for business. And therefore, we are ensuring that it is in step with the growth that we envision going forward in all 3 segments.
Sir, with respect to the scale up, I mean, as we move from clinical trials to commercial, the absolute profitability on a unitary basis might be less, which is compensated by economies of scale. But when I'm looking at two things here, one is you are also backward integrating with the APD, capacity is coming in. And also the fact that when you move up the scale, I mean, currently, if I look at the quarter, I'm happy to see that we are already running at INR 60-odd crores.
As the scale goes up, you also have operating leverage on the Pharma business. I mean, this was subscale, I would say, even a year ago, which is actually coming into a fair amount of growth pace and maturity in the next 2 to 3 years. So from that side, when you're looking at molecules transitioning from, say, pre-commercial to commercial, I mean I'm talking about including the oncology products, the cardiovascular products. So the scale would basically be much higher.
In the context of operating leverage and APD, I mean, how do we see the margins? I mean, I'm just trying to understand whether this trajectory would be more or less similar to what we are doing? Or Is There going to be a negative obtuse, but something which is very gradual? Because at one end, your operating leverage will offset the kind of absolute profitability in terms of unitary when you move from small scale to commercial.
See that could be certain corrections in the gross margin level. But as you rightly pointed out, at an EBITDA level, because of this operating leverage, we should be able to sustain this sort of EBITDA margin or a PAT margin. I think we would even be better than what has been reported currently. There are two factors when I talk about a gross margin. As we actually like introduce some of these new products, the margin profile could be slightly different. But if you really look at our operating expense, that is well under control, and we should be actually able to get this.
So for any new launches, -- in fact, one of our target is to sustain the existing level of EBITDAs and PAT.
Sure. I mean, the final question before I join back the queue. Sir, we have good cash on books and we would continue to generate good cash with the growth that we will be seeing in the next few years. We see a lot of opportunities as well. I mean, you talked about the greenfield. I'm just trying to understand greenfield versus M&A in the sense, there are also facilities that are available, which you can probably use. I mean, get just your sense on whether it also makes sense to look at an M&A in case, we are lucky to see some of the molecules scale up much faster than expected or we would still believe to build and operate the facility.
It depends on the target. So we are open for M&A or a greenfield. But end of the day, it should meet our expectation in terms of technology, location and the infrastructure. Because when we look at it, we also look at for the next 5 years to 10 years. And so in our type of scenarios, the utilities are very critical because we handle large volumes. So the question is it's not about -- we are not shying away from M&A, but the question is, it should meet all our expectation in terms of capacities and our ability to grow for the next 3 to 5 years.
And at this point of time, we are evaluating certain greenfield, probably either in Gujarat or in Maharashtra, or we are also open to M&A, but maybe in the next call, we will be in a better position to update you on our greenfield proposals.
So one last question. I mean how is your scenario on saccharine? I mean we have seen a lot of issues on competition and dumping from China. Has that situation improved? I mean it's still a smaller component of the business, but just wanted to get a sense on that.
With our FMCG customers, we have got it and lock in for -- it's generally an annual contract. We have got in and lock-in from all our FMCG customers. That should sustain our existing level of operations. We have also launched 1 new salt, calcium saccharine, and we need to see how this market will grow. While we work on a number of other opportunities, currently, we will be in a position to sustain the existing level of operations.
[Operator Instructions] We have our next question from the line of Gautam Rajesh from EverFlux Capital.
Am I audible?
Yes.
Sir, I had a question regarding your Pharma Intermediary business. So the question was what sort of asset turns do you typically expect in the Pharma Intermediary business? And how much investment do you have lined up, let's say, roughly for the Pharma Intermediary business?
See, the asset turn depends on our sales realization also. So we may actually get something with a very high per kg value. So today, like for all our incremental investment, we would be looking at anywhere between 3 to 4 times.
Understood. And how much investment do you have lined up for the Pharma Intermediate business?
We don't actually like invest based on product category. The capacities are fungible. So we look at the total investment, and we don't actually specify for any specific product. For example, the current investment is actually a combination of -- for both PI, API as well as for Contrast Media.
Understood. And my final question is, what sort of growth do you expect in the Pharma Intermediate business for, let's say, 3 years perspective?
We don't give future guidance. But our order book is quite interesting. That's what I would actually put it across.
The next question is from the line of Ritika from ValueQuest.
First question is, if I go to the opening remarks correct, you mentioned that this 120 KL plant, INR 90 crores the CapEx which was spent, though this plant is fungible, but this will be majorly used for the cardiovascular intermediate. And you are creating a separate 70, 80 KL plant for this [ MC ] MRI drugs. Would that be a correct understanding?
Yes, that's right, Ritika.
And on this 120 KL plant, as Ganesh sir was just mentioning, we should expect a 3 to 4x kind of asset turnover.
Possible. That's clearly one scenario. And we are targeting towards -- we are targeting that, yes.
Right. And has the validation process for this new cardiovascular intermediate started? Can there be a delay from the customer point of view since we are expecting the new supply to start from Q3?
Validations are complete, successfully conducted. The batches have been passed and orders are in hand. So we don't envisage any type of delay, hopefully.
Okay. I thought you mentioned the capacity has been operationalized, but the validation is pending from the customer point of view from this cardiovascular -- for this cardiovascular intermediate.
Validation batches have been taken.
Okay. Okay. So in our sense, we don't expect any delay and we expect a ramp up from Q3. And on this MC MRI drug 70, 80 KL expansion, what kind of CapEx are we expecting on this?
This number, we may not be able to share in this call...
This would be just an incremental. It won't be significant because all the infrastructure has already been built, and this is just not a significant investment.
So could you just help us with the CapEx number for Q1 '25?
Q1, it's close to INR 90 crores.
Okay. And last question on Contrast Media segment, with now validations being completed for this new contrast media drug, what is leading to delay in supplies or getting the PO in hand?
There's no specific delay actually. I think this is a complex molecule and has gone through a series of use test trials and validations and stability studies. Things like this typically can have a certain amount of delay. But overall outlook when it comes to this advanced intermediate and the necessity from a sourcing point of view by the customer is there. So I just believe it's a matter of time where we can scale up this molecule because the capacities are already live and are on warm standby.
Right. Again, what could be the risk of PO not -- the company not getting PO in like next 1 to 2 quarters? How confident or what kind of risk do you envisage over there?
The conviction and the confidence levels are high, but we'll keep you updated if there is any course correction.
[Operator Instructions] The next question is from the line of Meghana Agarwal from Mount Intra Finance.
I just want to know, I missed that, what is the salt that we are bringing in the FMCG sector? And what is the usage of that salt? Can you just brief me on that, please?
So up till now, we were manufacturing saccharine in the form of sodium saccharine. The other salt is calcium saccharine, which has been scaled up. The application is more or less similar, but that was the need by the customer for a specific formulation, and it's also high value.
So basically, now this -- the new salt that we have come up with is the calcium saccharine, right?
Correct, correct.
[Operator Instructions] We have our next question from the line of Pradeep Rawat from Yogya Capital.
So what would be the capacity utilization as of now?
It's about 70 -- between 70%, 75%.
Okay. And how much of the head count have we increased year-over-year?
Numbers. we won't have ready, but then the manpower expense has gone up by about 14% in the quarter. So distributed across segments, starting from production. We've added people in production because of new block. We have added people in the project team because we needed more execution bandwidth. We have added people in EHS because that's the orientation that we have going forward. And we've also strengthened the business development team.
So there's a certain corporate functions. So there's an all round, but then this will not be as much as the growth that we have because there will be some amount of operating leverage that will kick in. But overall, I would say that the type of growth that we envision in anticipation of that growth, we have to create strong teams with quality, talent and caliber.
Yes, understood. And my last question was regarding -- I missed it earlier. So when is the commissioning of the Unit 3rd plant?
So Unit 3, we are -- we plan to have 2 blocks. The first block, that's the vertical integration, backward integration block for Contrast Media should get commissioned in quarter 1 of FY '26.
[Operator Instructions] The next question is from the line of Nikhil from SIMPL.
I hope I am audible?
Yes.
Just two questions. In fact, in the previous question you talked about, you are creating team bandwidth and all in the anticipation of a strong growth. Two parts to it. One is, if we have to understand what are the industry drivers which are giving you confidence of such a strong growth? And secondly, on the CDMO, if you have to understand our pipeline trajectory or development, how do you see that pipeline trajectory evolving? So if we compare ourselves 6 months back to today, how has the pipeline improved for us?
And in continuation, there was one thing you said, we are also looking at greenfield CapEx. Now I understand that CDMO business requires capacities to be in place initially before we get the business, but we also carry the risk of underutilization of capacity if the business doesn't turn up. So how do you balance between these two? What gives you the confidence to put a new capacity?
So I think I'll just -- so your question has three parts. The first one was that something about the industry and where we get the confidence of the growth. So as you know that being a pure-play CDMO, we are in contact with a lot of innovator companies. And for whatever reason you attribute it to, China plus 1 or whatever you call it, they are tailwinds for Indian companies. And within Indian companies, we have certain very specific capabilities based upon the chemistry platforms that we have and extremely long-term relationships with most of our clients and therefore, a very high possibility of repeat business. So I think all this augurs pretty well for charting a sustainable growth for the business.
The second part is about the capacity. So normally, as you would have seen that we are one of the industry-leading companies as far as our asset turns are concerned. One of the reasons for that is -- I mean, there are other reasons as well. One of the reasons for that is that our gestation period is low. Why is the gestation period low? Because normally, we -- our businesses are contractual businesses and our customers being mostly innovators, they give us a good visibility for the next several years. And therefore, you would see that our capacity in Unit 2, which we call Plant 6 has been just established. And in 2 months of commissioning, the commercialization or industrialization will start.
When we talk of building future capacity, that is based upon the visibility that we already have, and much of that visibility is from our existing customers. So there is a decent amount of probability and positive correlation based upon which we are planning our future capacities. These capacities that we plan will be [indiscernible] with the growth that we have [indiscernible] to a very large extent contractually backed.
I get that point, sir. Just a continuous here. See when you talked about the 2 capacities in Unit 2, 1 was for a product where just clinical trials and everything is already done and commercial launch is there. So you have a clear visibility on the product getting commercially -- commercially launch commercially scale up of the product. And similarly, on the Contrast Media. But for the future molecules, the success rate for molecules from Phase II, Phase III keeps on reducing.
So if you have to understand, is it like we have a good pipeline of Phase III molecules, which gives us confidence that probably we can keep doing a CapEx of INR 80 crores, INR 100 crores every year to meet their demand? Or -- I'm trying to understand on the future products in the pipeline.
Okay. So firstly, if you look at our business and the 3 main product categories, we, I think, have a reasonably good pipeline in all 3 product verticals. On Contrast Media, we have -- we are entering new segments as well as there is a forward integration [indiscernible]. So our pipeline caters to both these growth drivers. In saccharine, Shiven mentioned about product line extension. Besides that, we have a couple of very credible opportunities that we are working on, which would be significantly large.
And on the PI side also, we are focusing on oncology, CNS and cardiovascular. So the cardiovascular opportunity has kicked in. The onco and CNS opportunities, there are a couple of which are currently commercial and a couple that we are tracking. Now coming to your question of the success rate of NCEs, that's a very valid point that you bring out. And because we are a little selective in our product -- in the products that we choose or the customers that we partner with, but nevertheless, having said that, I agree that if we are tracking 10 opportunities, 2 will materialize.
But then these opportunities, the 8 that don't materialize, we are not planning capacities for those. I mean, that will till the time they get approved will be catered from -- like I said, we were building milligram to multi-ton capability. And that's specifically the purpose for that. So we have an R&D and we have a kilo lab, and we are constructing a new kilo lab and a new small volume plant.
So for these -- I mean, the initial supplies will go from there. And it's only the opportunities that finally click or kick in, that's where the capacities are going to get added. For this uncertain period when the molecule is not approved, for that period, the volumes will go from the small volume plant. You could call it a pilot plant.
And just to [indiscernible] some of the opportunities that we are tracking are Phase III and beyond. So the uncertainty risk is much lower.
Okay. So for those opportunities, this CapEx would probably kick in from next year? Or like how should we understand? Because you mentioned the 2 CapEx which we have done this year for these 2 molecules, which are largely commercial. But for the future molecules which you are talking, probably will get commercial. So how should we track your CapEx? So because I think somewhere you mentioned that every year, we would be doing INR 100 crores kind of a CapEx for next 2, 3 years. So I'm just trying to attach that CapEx visibility with the pipeline visibility.
So with our existing customers, based on their forecast, we have to add capacity for them. Today, our [indiscernible] to take care of the future needs of the existing products. So partly, the capital expenditure is going for that. And we also have clear visibility of at least 3 to 4 products, partly commercialized, partly in the validation. So that also has a clear visibility how we should look at it.
So like the next FY '26 CapEx, we more or less know the product and the requirement. For FY '27, already, there are indications like based -- so it all depends how the dialogue with the customer picks up. And we have a visibility what the customers expect for FY '27. So we need to be at least a 1 year or 1.5 years in advance before the customer comes with the contract.
Okay. And just last question. So as you said, partly it would be for existing pipeline and partly for newer molecules. So would it be right to say it would be a 2/3, 1/3 kind of a split between existing and new? And this greenfield is basically to diversify the plant risk? Or is it like a completely larger plant than what we have as of now? What's the idea behind this greenfield?
So the greenfield will be required because now existing capacities are saturated. There is no further debottlenecking or addition of blocks in the existing capacity is possible. So therefore, we need a greenfield. And as Ganesh mentioned, the capacities that we put up as a stated policy, they are all fungible capacities. So they are -- I mean, while they may be dedicated to a particular product, but it's not that nothing else can be made in those capacities. So there is business visibility for which the greenfield will be needed. And maybe we'll update you in the next call, but then we are looking at a significantly large land parcel this time.
[Operator Instructions] The next question is from the line of Keval, our shareholder.
Can you please guide us as to what was the amount of -- or the quantum of goods which were shipped out, but we could not recognize the sales in this quarter?
No, this -- we are not allowed to actually like disclose it. Maybe just to give a -- like this would be almost equal to more than -- at least 50% of the turnover -- quarter turnover.
50% of the...
Quarterly turnover.
Quarterly turnover. So if it's INR 160 crores, we can assume it's around INR 80 crores.
Yes.
Okay. So this will a spillover for the next quarter.
It will not be a full spillover, but it will be a partial spillover.
Partial spillover. Okay. And is the freight issue now getting resolved? Or it is still -- it's taking still the same time?
It is still around 60, 65 days. And also the ocean freight has gone up in the last quarter. The last 2, 3 months, we could see that there is -- because of the longer route, the ocean freight has gone up. So we expect things to get resolved maybe in a quarter or so.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
We would like to thank all the participants, and we will -- you can get the transcript by tomorrow, and we hope to see you in the next conference call. Thank you very much.
Thank you. On behalf of Blue Jet Healthcare, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.