Y 2011 Earnings Call - Opto Circuits India Dt-17 May’11 Operator Good evening ladies and gentlemen. I am Alvin, moderator for this conference. Welcome to the Conference Call of Opto Circuits India Ltd. We have with us today, the management and IR person of the company. At this moment, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is recorded. I would now like to hand over the conference to Ms. Shalaka Parab from Investor Relations. Shalaka Parab, Adfactors PR Pvt. Ltd Thank you, Arvind. Good afternoon and good evening everyone. Thank you for joining us today. We will be presenting numbers and developments related to the fourth quarter and the full year period ending 31 March, 2011 of Opto Circuits India Limited. Please note that today's call is copyrighted material of Opto Circuits India Limited, and no part of the call's transcripts can be reproduced or attributed to without the company's expressed written content. I have with me today, three members of the management Mr. Bodapati Bhaskar, Director of Finance; Mr. Jayesh Patel, Co-Founder and Director Engineering, and Mr. Thomas Dietiker, Co-Founder and Director OEM- Sales and M&A. Before we open the lines for Q&A with the management, I will be taking you through major financial highlights, key updates on to major subsidiaries and the company's estimates about it's business prospects and key segments. But before we begin we would like to disclaim; one, statement made in this call maybe forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied, profit and loss number, balance sheet numbers and any other financial highlights reported for the period are not comparable to the period ending 31 March, 2010 on account of the fact that we acquired three companies, that is Cardiac Science Corporation, Unetixs Vascular, N.S. Remedies Private Limited during FY2011, and the performance has been consolidated to reflect the FY2011 results. Three, Cardiac Science Corporation was acquired on 1 December, 2010 and therefore only four months of the company's performance have been consolidated with the Group's full year financials. We are pleased to announce that Opto Circuits had been successful in delivering a good performance yet again. Consolidated top-line for the full year is up Rs. 1,585.56 crores and consolidated bottom-line for the full year is at Rs. 367.21 crores. Earnings per share is at Rs. 19.70 for FY11. Opto Circuits standalone performance have been healthy with a 28% growth in the full year top-line and a 66% increase in the full year bottom-line. EBITDA margins are at 46%. For the first quarter FY2011, consolidated top-line is at Rs. 544.54 crores and profit after-tax is at Rs. 111.09 crores. Some key consolidated balance sheet numbers as on 31 March, 2011 are as follows: cash and cash equivalents are at Rs. 234.17 crores, debt is at Rs. 884.39 crores, effective interest rate is up 4%, goodwill is at Rs. 595.17 crores. The increase in the last corresponding reported balance sheet is on account of the three acquisitions made in the financial year under review. These entities were bought for roughly $100 million combined, that is, Cardiac Science was purchased at $89 million, Unetixs Vascular at $9.6 million, and N.S. Remedies at $1.3 million. This goodwill is representative of a rich intangible asset base, standing high net worth brand, important patent, strategic certifications and trademarks. Gross block is at Rs. 752.10, consolidated group additions of Rs. 395 crores to fixed assets during the year. Now let me present some general business highlights and updates. In FY2011, our medical equipment and supply business, that is a non-invasive segment accounted for 78% of the business. Geographically, North America continuous to be a largest market for the products in this segment, contributing nearly 61% to this segment in FY2011.

The performance in this segment was really aided by exploiting orient opportunities and launches of new products. We are extremely happy to report that Cardiac Science are wholly owned subsidiary has posted a soft line of Rs. 235 crores for the four months, December 2010 to March 2011, that is, since we acquired the company till the end of the reporting period 31 March, 2011. Cardiac Science has posted a profit after tax margin of 9% for the same period. The acquisition has been EPS accretive as estimated in the earnings call for quarter three. We continued to expect EBITDA margin for Cardiac Science to be in the range of 10 to 12% for FY12. These results are indicative of the speed with which we are moving to restrict the Cardiac Sciences' operations, preserving our customer faith in assets, while aggressively rationalizing cost and exploiting efficiencies in other areas of our business. Operationally, we have now firstly to improve financial performance via the following cost contentment measures. One, Cardiac Science no longer operates as a publicly traded company and hence leasing fees, statutory expenses, IR program expenses have been dispensed with. Two; we consolidated our many sales organizations under a single leader, eliminating management redundancy. We reduced the size of the overall executive team substantially, plotting the organization and empowering our next level leaders, but at the same time, protecting a subject resources and preserving our channel strength. No further sales representative positions were eliminated. Three; we began the process to integrate certain of our operations with those of Criticare Systems. These would be in the areas of engineering, finance, marketing, human resources and customer support. We also initiated efforts to consolidate production facilities across Cardiac Science and Criticare. We have rationalized multiple sales offices, USA offices and branch offices. Four; R&D spend have been rationalized and Sustenance Engineering centers have been moved to lower cost location. Five; marketing spend have been reduced by consolidating our presence at threshold conferences and sales meetings. Travel and the entertainment policies have been revised too. Six; IT systems across key organizations are being integrated. These six measures in concerned with disciplined spending allowed double-digit reduction in our trading expenses in the quarter. We expect this trend to continue going forward. Our these corrective actions is progressing according to plan. We expect to be substantially complete in the next few months with certain customer follow-up activities extending into calender year 2007. Let's move on to the interventional business now. Interventional device has been rather invasive segment accounted for 20% of the business. Geographically, Europe continues to be the largest market for the product in this segment, contributing nearly 52% to the segment revenues for FY2011. India contributed nearly 12% to the consolidated integrated revenues of the same period. Eurocor posted a healthy supply and net proceeds 331.5 crores, a growth of nearly 49%. This year market foray into the endovascular markets to the launch of three way, the drug eluting balloon for peripheral applications. I have seen that Eurocor have invested comfortable time and effort into multiple clinical shell, most of it have been widely presented and discuss the various international medical conferences and symposium. The result of the now famous Valentines Trial I anti-virus, the coronary drug eluting balloon offered by Eurocor has been followed by leading invested capital, really reflective of a high growth in phase numbers for the product in FY2011. Our partner in the United States Micell Technologies will be reporting under trial of it's Micell drug eluting stent at Europe this year, in Paris tomorrow. Micell uses Eurocor's Cobalt Chromium drug eluting stent and using it's fate in the technology closed it for the drug in a way that is fully absorbable. We are very excited about this stent and it has been receiving well reviews from industries at birth and is expected to be a breakthrough technology in coated stent in the coming period. We've entered the new financial year 2012 armed with more than 100 certified products, around 20 internationally recognized brands, 160 at product patents and addressable market opportunity of more than $20 billion. We have beginning to plus Cardiac Science to the sales message and other Opto Circuits product families in the multitude of sales channels worldwide. Gross selling will enable us to get outstanding leverage from our sales assets and fully exploited impressive weight of Opto Circuits

distribution capabilities across the globe. We expect the business to begin exploiting its gross selling opportunities in the course of FY2011. The full benefits of this are expected to be visible in the coming year. These realignment initiatives are expected to conclude by early calender year 2012, and would prepare the entity to effectively contribute revenues and profitably to the Group. We will continue working towards adding to a brand equity in the interventional sales and extending our geographic presence across existing product lines. In the financial year 2012, we expected a consolidated top-line to grow at the rate of 22 to 25%. The medical equipment and supply segment is expected to grow between 15 to 20% and the international devices segment is expected to grow between 35 to 40%. We would be investing Rs. 150 to 200 crores each year as CapEx to fund the growth as planned. I will now request Arvind to open the line for Q&A. Arvind?

Questions And Answers Operator Thank you, madam. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. First question comes from Mr. Amol Rao from Antique Stock. Amol Rao Good evening everybody. Congratulations on a great set of numbers. I just missed the number for Cardiac Science's total annual number, turnover for this year? Bodapati Bhaskar, Chief Financial Officer 235 crores for the four months. Amol Rao For the four months. Mr. Bhaskar, just wanted to ask you a couple of questions. While we have done very well on the P&L side, we seem to be straining on the working capital front because there is a increase in inventories, increase in debtors. I mean loans and advances are finally shot up by around Rs. 280 odd crore. So, I mean although, we have debt to match that but why all of a sudden this, because our working capital cycle seems to be around 300 days right now? Bodapati Bhaskar, Chief Financial Officer Well, see we are moving a lot of manufacturing and having new manufacturing centers out of India and Malaysia. Amol Rao Yes, sir. Bodapati Bhaskar, Chief Financial Officer Inventory is getting built up, so that we start shipments from these centers. So there is a order build up inventory for some time. So, that's... this get corrected in the next quarter. Amol Rao In the next quarter, is it sir? So I mean right now I mean by the time we start our operation in Malaysia it will be another six months,

so we hope to bridge the gap in production from this inventory build up, is it sir? Have I heard it correct? Bodapati Bhaskar, Chief Financial Officer Malaysia which will start in the next quarter. Amol Rao Okay. Bodapati Bhaskar, Chief Financial Officer And Vizag should also start in the next quarter. But there is lead time on the inventory, on the raw material that which we order. Amol Rao Okay sir. Bodapati Bhaskar, Chief Financial Officer So, we are building a parallel inventory so that the sales do not suffer. Amol Rao All right, sir. Sir, apart from that sir, just wanted to ask you sir when we are looking at our current liabilities also has significantly gone up. I mean are we getting favorable terms from our creditors, I mean - Bodapati Bhaskar, Chief Financial Officer See, it's a combination. We are getting good terms from our vendors also. Amol Rao Okay, sir. Bodapati Bhaskar, Chief Financial Officer To some extent and in some cases, of course, we don't get it, so it's a combination. Amol Rao Okay. Sir, just a couple of small bookkeeping questions. Sir, we have paid very miniscule tax in this quarter, sir. Any reason for that, sir? Why I mean we have paid only something like Rs. 60 lakhs of tax? Bodapati Bhaskar, Chief Financial Officer See, all of the quarters, there is a provision. Amol Rao Okay.

Bodapati Bhaskar, Chief Financial Officer This is the final number that you asked. Amol Rao Okay. So on our annual basis - Bodapati Bhaskar, Chief Financial Officer Some of the data have listed in the provision. Amol Rao Okay. We expect to maintain the 6 to 10% range of tax? Bodapati Bhaskar, Chief Financial Officer That's right between 6 and 10% should be in the tax we expect to do. Amol Rao Okay. And sir, one final bookkeeping question sir, what in for the quarter could because we haven't received any presentation on the company yet. So, I was just wondering if you could give the invasive, non-invasive number for the quarter sir, if possible? Bodapati Bhaskar, Chief Financial Officer Namita has already sent the mail on that. Amol Rao Okay, sir. I will co-ordinate with Shalaka and the team for that. Sir, thank you so much, sir. All the best. Bodapati Bhaskar, Chief Financial Officer Thank you, Amol. Operator Thank you, sir. Next question comes from Mr. Sudarshan Padmanabhan from B&K Securities. Sudarshan Padmanabhan Congratulations on good set of numbers. Hello? Bodapati Bhaskar, Chief Financial Officer Yeah Sudarshan, how are you?

Sudarshan Padmanabhan Yeah, fine sir. Sir, I just wanted to know, see this quarter if you look at the employee cost has shot up. So, I think more or less that is because of CSC not getting consolidated. So, can you just give us a sense as to how much of employees are there in CSC and what is the kind of employee cost that we can see go ahead or whether there could be a reduction? Bodapati Bhaskar, Chief Financial Officer Sudarshan, I would not like to discuss the employees here. There is employee... there is a rationalization of employee. If you want more specific data, please put out a mail to department initial data. Sudarshan Padmanabhan Yeah, sure. Then one more thing sir, I mean I just wanted to know like because of this consolidation that is going on, what is the kind of one-time cost that was incurred because I think more or less the margins have come up substantially this quarter? Bodapati Bhaskar, Chief Financial Officer The consolidation expenses was incurred at about roughly 10 million for the whole exercise. 1% of it have been spent already on the entirely different for the next quarter. Sudarshan Padmanabhan Okay, $10 million. Bodapati Bhaskar, Chief Financial Officer Yes. Sudarshan Padmanabhan Okay, sir. Sir, thanks a lot. Bodapati Bhaskar, Chief Financial Officer Thanks Sudarshan. Operator Thank you, sir. Next question from Mr. Dinesh Harchandani from J.P. Morgan. Dinesh S. Harchandani Yeah, hello sir. Bodapati Bhaskar, Chief Financial Officer Hi, Dinesh. Dinesh S. Harchandani Hi. Sir, wanted to know more about on the kind of another working capital, just touching it again as you talked about the inventories.

Also the receivables have kind of an mood off slightly. So, what should be the trend? I mean I understand that this is kind of a business where you have to kind of lend out to the days and there is a kind of a considerable shipment delays. But I mean are there any... I mean should we expect these receivables days to come down going forward? Bodapati Bhaskar, Chief Financial Officer Receivable days could come down a bit. See, what happens is when you are building inventory 2,000 miles away from the U.S, actually we will have to build inventory in these centers. The other thing is we make this shipments by sea. So what really happens is once you before you will look it was, we always keep saying that we have a length of about 40 days for all shipments to U.S. on the IT, but as far as - Dinesh S. Harchandani Okay sir. Is it kind of... I mean can we say that since we are kind of in pushing up with the new products we have the kind of expected to give a longer credit bidder, vis-à-vis what others are offering? Bodapati Bhaskar, Chief Financial Officer No, credit is given to the customers, which is the good or should not dicey like I told you. So, we will have to lack of 45 days from this calculation, because it is dicey, it will major risk, manufacturer with the customers. So that's something that we have build with if we are trying to manufacture the offshore. Dinesh S. Harchandani Okay sir. And sir Cardiac Science what are your kind of and I mean you shell out and gave us the EBITDA margins if they are reach to you kind of an expected to make in FY12. But what is the kind of net numbers you are looking at? Bodapati Bhaskar, Chief Financial Officer Net numbers for the whole year should be in the double-digit range for this year. Dinesh S. Harchandani Double-digit margin range you mean, double-digit PAT margin range? Bodapati Bhaskar, Chief Financial Officer That is correct. Dinesh S. Harchandani Okay sir. Thank you. That's it from my side. Operator Thank you, sir. Next question comes from Mr. Bino Pathiparampil, IIFL Capital. Bino Pathiparampil Hi and thanks for my question... thanks for taking my question. I just looked Eurocor, the basic number Shalaka did you say 313.5?

Shalaka Parab, Adfactors PR Pvt. Ltd That's right, yes. Bino Pathiparampil Yeah, so in the fourth quarter it seems to be there has been... it has come off from the previous three quarters levels significantly, which I think has impacted the margins as well as our expectations. Is that my calculation correct? Fourth quarter comes to early about 54 crores in my calculations, which has been - Shalaka Parab, Adfactors PR Pvt. Ltd That's about 91 crore for the fourth quarter. Bino Pathiparampil Okay. There is some calculation which we'll figure out later. The prime issue was last quarter's EBITDA was about 122 crores. And this quarter it is couple of crores below that despite Cardiac Science improving its operations. So, where does that come from? Shalaka Parab, Adfactors PR Pvt. Ltd No, we haven't exactly understood your question. Could it put it - Bino Pathiparampil Yeah, the three Q EBITDA number for the company was 122 crores. Shalaka Parab, Adfactors PR Pvt. Ltd First quarter EBITDA numbers. Bino Pathiparampil Three Q, third quarter's. Yeah, third quarter and this quarter is 120 crores. Bodapati Bhaskar, Chief Financial Officer We recently planned, just send a mail - Bino Pathiparampil Okay. And I mean, are these numbers wrong, 122 and 120? Shalaka Parab, Adfactors PR Pvt. Ltd Bino, I refer to you is this looking to what line items you have included. Bino Pathiparampil Yeah, this is sales minus expenses. The other income is not considered.

Shalaka Parab, Adfactors PR Pvt. Ltd You just sent us an e-mail. I will give a call towards the conference, yeah. Bino Pathiparampil Okay, alright. Can I also have the Criticare revenue? Shalaka Parab, Adfactors PR Pvt. Ltd Bino, we are sharing any quarter numbers for subsidiaries this time. Bino Pathiparampil Full year, Criticare numbers? Bodapati Bhaskar, Chief Financial Officer 41 million. Bino Pathiparampil 41. Okay. Thanks. Operator Thank you, sir. The next question comes from Mr. Prakash Kapadia from Alpha Enterprises. Analyst Congrats on the good set of numbers. Bodapati Bhaskar, Chief Financial Officer Hi, Prakash. How are you? Thank you. Analyst I am doing good. Could you give us some sense on the Bayer sales in the invasive products, how is Bayer doing and what has been the response on Bayer? Bodapati Bhaskar, Chief Financial Officer Bayer has been pretty good, Prakash. In fact, the result and the increase, driver let share exact number which is about 30% more than last quarter. I would not like to share the exact number of the Prakash. Analyst Okay. And on a year-on-year, that has been fairly consistent? Bodapati Bhaskar, Chief Financial Officer

Yeah, year-on-year that's how the revenues see the invasive side of the business has grown by about 59% or so. Analyst Right. Bodapati Bhaskar, Chief Financial Officer And possible it would - Analyst And how is the response been in India, if you could share some of the - Bodapati Bhaskar, Chief Financial Officer India has been pretty good. We have got a quite a few cardiologists are using this product. Analyst Okay. Bodapati Bhaskar, Chief Financial Officer And it is process where you have to educate them. But, and so that are roughly between 1,200 to 1,500 the Bayer have been sold in India. And, more we expect this year. Analyst Okay. And, how large would India be about 20-25% of the renewable sales currently? Bodapati Bhaskar, Chief Financial Officer Yeah. I think the number - Shalaka Parab, Adfactors PR Pvt. Ltd It's just 12% to - Analyst Invasive. Shalaka Parab, Adfactors PR Pvt. Ltd Invasive sales, yes and to excess. Analyst 12%, okay. Could you also share some of breakup in terms of the total debt of 884 crores. How much is that broken up into foreign

and Indian rupee debt? Bodapati Bhaskar, Chief Financial Officer Bulk of it is overseas basically for the acquisition. But, probably if you see the rate of interest that we are talking about it is pretty low between 6 and 10% for the whole year. And, I would say about 25% is borrowings in India. Analyst Okay. So, 75% would be - Bodapati Bhaskar, Chief Financial Officer Roughly. Analyst This would be LIBOR plus... 25% would be? Bodapati Bhaskar, Chief Financial Officer Can't disclose that Prakash. Analyst Yeah. Bodapati Bhaskar, Chief Financial Officer Would be there in competition or what. Analyst And, can Thomas give some of his thoughts on the synergies and opportunities for cross-selling given that we are now, we are now geographically expanded, we have more presence across the globe. So how will that shape up in the medium to longer run? Thomas Dietiker, Founder, Director, M&A and OEM Business We are obviously working on that. It's a work in progress, so we always saw that integrating the sales efforts for all product lines in the U.S. so that was the first step in our plan. And the same thing will happen in the global market to the fiscal year. So, we definitely expect an impact across all product lines in the earning basis segment to materialize to this integration process. Analyst Okay. And last question from my side is, how are the sensor sales picking up given that Cardiac Science has been on track and Criticare has now achieved what we are looking at. So are the sensor cells likely to shoot up in the coming year or - Thomas Dietiker, Founder, Director, M&A and OEM Business We don't look complete specific obviously. We are still seeing a trend. It is really, but it's helping us to expand the sales force globally and this will reflect itself across all product lines. So specifically, we can have engaged impact right now in this completely definitely

it will expected to have some more questions. Analyst No, thank you. Operator Thank you, sir. Next question comes from Devyani Javeri of Edelweiss Securities. Devyani Javeri Hello? Bodapati Bhaskar, Chief Financial Officer Hi, Devyani. Devyani Javeri Hi, hello sir. I have two, three questions. Firstly just on this quarter's numbers, wanted to understand what would be the EBITDA margin for Cardiac Science? I believe Shalaka gave the PAT margin which was at around 9%, but any indication on the EBITDA margin this quarter? Bodapati Bhaskar, Chief Financial Officer EBITDA margins are inline with our what we have gave you in this, our last quarter. It's progressing as per the guidance which we given in last time. Devyani Javeri Okay, because I mean last quarter I believe it has broken even at the EBITDA levels. So, is it at roughly around the same number or there has been an improvement in margin? Bodapati Bhaskar, Chief Financial Officer Well, like Shalaka told you earlier, we didn't want to discuss individual subject. And obviously doing better, that's why they have a PAT margins, Devyani. Devyani Javeri Okay. And in terms of the... you guys were looking for a partner in the U.S in the interventional devices space. As a part of trying to expedite your USFDA approval process. So any progress on that front? Thomas Dietiker, Founder, Director, M&A and OEM Business This is Thomas. It's an ongoing problem. I think we discussed in the last call also, and we definitely hoping to have some relationship in place in the next few months and to dag them expedited process to market. So, it's progressing well, but we haven't reached to final structure yet. But the project is definitely progressing. Devyani Javeri

Okay. And in terms of the China SFDA approval, has that come in for the DEBs and have you started selling in the market over there, or it's still some time to go? Bodapati Bhaskar, Chief Financial Officer It will take some time. The process and the application is already been made. And it is through some partners in China, if we take... maybe if we expected very shortly, very shortly. Devyani Javeri Okay. But you will not be directly selling in the market? Bodapati Bhaskar, Chief Financial Officer In all these countries we need to have partners in that country to help ourselves, because that is the philosophy of most countries we need to have a country, joint business partner or a selling partner we need. So, the applications have been made to them and we expect the approvals too. Devyani Javeri Okay, sure. Thanks. That's all my side. Bodapati Bhaskar, Chief Financial Officer Thanks Devyani. Devyani Javeri Right. Operator Thank you, madam. Next question comes from Ashwan Agrawal from Demeter Advisors. Analyst Hi. I had a question on CSC. In four months, it did 235 crores of revenues. Yet, when I look at your top-line guidance of 20 to 25%, most of that should get accounted by analyzing the CSC revenues or am I missing something here? Bodapati Bhaskar, Chief Financial Officer You are not missing. That is the... we will be taking into account the whole year's revenues with Cardiac this year. Analyst Okay. Bodapati Bhaskar, Chief Financial Officer There will be a growth in our own organic business. So, given guidance with a low effect, but it will be a number that will better than that.

Analyst Could you share with me what the CSC revenues on a annualized basis could look like? I mean is annualizing them any indication of what the full year revenues should be, because there might be seasonality or some inventory issues I don't know? Bodapati Bhaskar, Chief Financial Officer See, between 130-140 million is what we're looking get for cardiac for this year. Almost same as last year because we will be doing a lot of other things to make sure that the inefficiencies are plucked. Analyst And that's included in the top-line guidance of 20 to 25% that Shalaka talked. Obviously, it's conservative as you said. Bodapati Bhaskar, Chief Financial Officer That's right. Analyst The second question I had was that you have this big swing in other income in the published accounts, the previous year was minus 758 lakhs and this year is 30.43 crores. Is this ForEx exchange gains and losses or is this something else? Bodapati Bhaskar, Chief Financial Officer Partly ForEx loss. Analyst Partly or what would be the other big contributor? Bodapati Bhaskar, Chief Financial Officer There is some sale of the business in Cardiac Science, which is and there is a that refunding in the invasive side of the business. All three together contribute for the 31. Analyst Okay. And on the sort of EBITDA margins, you would expect would remain stable or expand next year given all the efforts you are making towards consolidating presence across the different companies and cost containment et cetera. Bodapati Bhaskar, Chief Financial Officer Long-term EBITDA margins should be in the region of about 28 to 30%. Analyst 28 to 30%. Okay, thanks. All the best. Operator

Thank you, sir. Next question comes from Mr. Sandesh Shah from DSP Merrill Lynch. Analyst Sir, it is Sanjay --. Sir, can I just get sense of sort of fourth quarter number excluding the Cardiac Science number? Bodapati Bhaskar, Chief Financial Officer Well, you will have to knock off roughly -- and 170. 544 is the revenue for the quarter. Analyst Yeah. Bodapati Bhaskar, Chief Financial Officer Knock off 161 crores of that for Cardiac. Analyst Okay. So that means excluding Cardiac, your revenue has grown only 15% year-on-year and have declined, compared to that December quarter? Is that the right thing to understand? Bodapati Bhaskar, Chief Financial Officer What was that? Analyst Excluding Cardiac, your revenue grew 15% year-on-year. Is that the right way to look at it? Bodapati Bhaskar, Chief Financial Officer But the percentage is here Sanjay. For the quarter you are right, yeah. Analyst Yeah. And also it was a decline compared to that of December quarter. Bodapati Bhaskar, Chief Financial Officer Each quarter is different. See, what happens is some of these orders get into year-end orders and different countries of different ordering pattern. We can't expect it to grow every subsidiary to grow quarter obviously. Analyst Understood. And can I just ask that is, I mean, do you see at top-line level and the EBITDA or attributable can we get something, I mean basically I just wanted to understand excluding Cardiac, how the operating margin has changed? Bodapati Bhaskar, Chief Financial Officer Just repeat the question Sanjay.

Analyst I just wanted to understand the operating margin excluding Cardiac for the quarter and how has it changed, compared to previous quarter? Bodapati Bhaskar, Chief Financial Officer See, it is inline between 30 and 33% as for last quarter. It is not. Analyst Okay. So the entire decline is I mean margin is because of your Cardiac Science? Bodapati Bhaskar, Chief Financial Officer Obviously, yeah. Because it contributed about 30% of 10% of the -- quarter. Analyst And sir, the last question is on this inventory and the expansion and also the CapEx that you have given the guidance. On the inventory side is you just mentioned that because of entry into couple of new market, you have seen an expansion of inventory and so should we assume that excluding that that is the inventory towards those new markets is to working capital kind of akins to distributable level or has improved? Bodapati Bhaskar, Chief Financial Officer Working capital has improved, compared to last quarter, last year, last through whole it is improved. Analyst It has. So most of this thing is entirely because of this new market initiative? Bodapati Bhaskar, Chief Financial Officer Correct. Analyst And this CapEx guidance which you have given for next year and year after that, of about 152, 200 crores, does that include the amount that you'd be inventing I mean if at all for acquisitions or it is I mean acquisition will be overall above that? Bodapati Bhaskar, Chief Financial Officer We don't talk about acquisitions, we will talk of CapEx. CapEx is primarily to set up new facilities because we are going to grow from here to the next level and beyond, into set of new facilities. We are in the process of setting up couple of facilities; one in Malaysia and one in Mysore. So, we think those two facilities will require capital equipment and building with supply to that. Acquisition is not part of this. Analyst Okay. But are we going to look forward to some big ticker acquisitions going forward, or I mean is it the way I am trying to

understand -- how. Bodapati Bhaskar, Chief Financial Officer That's what we are trying right now. This acquisition is just four months old. We want to make sure that is completely falls inline with our business and margin level to utilize that. Acquisitions are ongoing process, but we don't see anything in this horizon right now. Analyst Okay, okay. But just wanted to kind of understand that considering that your debt level has gone up quite a lot between last year and this year. So, are we again going to see some kind of equity strength or something - Bodapati Bhaskar, Chief Financial Officer We do not expect any dilution at the Opto level this year. Analyst Okay, okay. Thanks a lot. Corporate Participant Thank you, Sanjay. Operator Thank you, sir. Next question comes from Mr. Anup Upadhyay from SBI. Analyst Good evening, sir. Bodapati Bhaskar, Chief Financial Officer Good evening Mr. Anup. Analyst I think you mentioned, could you help me to update us on the status of the Opto Hotel that has been in construction in the electronic city. Bodapati Bhaskar, Chief Financial Officer The hotel is under construction, should be completed in about a year time. Analyst How much have we invested till now in that project? Bodapati Bhaskar, Chief Financial Officer

See, it is about... the exact number is about 33. It will be a little... I don't have the number here Upadhyay. It's about 30 crores. Analyst Okay, sir. And do we plan to enter into the hospitality industry in an event. We are there any more projects that we are, that we plan to undertake? Bodapati Bhaskar, Chief Financial Officer No, nothing like that. Analyst Okay, sir. And can you also throw some light on - Bodapati Bhaskar, Chief Financial Officer Speak up a bit Mr,. Upadhyay. I can't here you. Analyst Can you also throw some light on why if we don't have any serious plan of undertaking more projects in our hospitality sector, why did we undertake just - Bodapati Bhaskar, Chief Financial Officer It is the project of up to infrastructure. Analyst Right, which is about? Bodapati Bhaskar, Chief Financial Officer And that basically infrastructure is in the process of developing our own SEZ in micro, and it is a interim activity that's taken up by there. Analyst So, what was logic taking up this one similar project, if we don't want to do it on a continuing basis. Bodapati Bhaskar, Chief Financial Officer That's a difficult infrastructure management. So, you can put out a question, we will answer it to you. I would like to take up next question on, people are expecting 100 questions from this quarter. Analyst Okay. Thanks a lot.

Operator Thank you, sir. Next question comes from Mr. Nitin Doshi from Enam AMC. Analyst Good afternoon, and congratulations on a good set of numbers. Bodapati Bhaskar, Chief Financial Officer Thanks, Nitin. Analyst We were very pleased to see turnaround of Cardiac Sciences. Couple of questions, one is just wanted to know what was the last quarter's EBITDA margin at Cardiac Science? Bodapati Bhaskar, Chief Financial Officer Nitin, I would like to take this offline, because some of sensitive issues, we have lot of people from the U.S. also here. I would like to take it offline please. Analyst Okay. If I take your turnover of 235 crores for four months from Cardiac Sciences out of your total turnover, then the minus in Cardiac Sciences you have done about 1,345 crores last year? Bodapati Bhaskar, Chief Financial Officer Correct. Analyst On this, you are expecting about 25% growth, am I right? Bodapati Bhaskar, Chief Financial Officer Between 20, 25%, correct. Analyst And on Cardiac Sciences, what sort of growth you are expecting? Bodapati Bhaskar, Chief Financial Officer No growth. We are at the same level as last year. Analyst Okay. So, that's about annualized number is 700 odd crores?

Bodapati Bhaskar, Chief Financial Officer Of course, 6, 7.. Analyst Yeah, 6, 700 crores. So, you are saying this 1,345 will grow at about 20-25%, and we can expect this to be a flat kind of revenue from Cardiac Sciences, am I right? Bodapati Bhaskar, Chief Financial Officer Right. Analyst And you have guided for margins of about 12% in Cardiac Sciences? Bodapati Bhaskar, Chief Financial Officer Double-digits we said, yeah. Analyst And what sort of margins one can expect if the business is the minus in Cardiac Science? Bodapati Bhaskar, Chief Financial Officer This should be the region of about 23.4% PAT level. Analyst Okay. And EBITDA should be the normal, it's about 33% odd that you have been maintaining in the past? Can I take that as 30% odd as you've been doing in the past? Bodapati Bhaskar, Chief Financial Officer 30. Analyst Okay. Bodapati Bhaskar, Chief Financial Officer If you go the right way, balance sheet for next year looks like healthy. Analyst No, no. So just trying to figure out where we stand in the whole thing. And what should be your tax rate for the next two years? Bodapati Bhaskar, Chief Financial Officer

Between 6 and 7%. Analyst So we are not affected by the new provisions of MAT on SEZ? Bodapati Bhaskar, Chief Financial Officer MAT is not... it's only a cash flow issue. It's not a tax product for next five years or 10 years, because it's only a provisioning and it could be adjusted against future profit. Analyst Okay. And can you also tell me as far as your production in Malaysia is concerned, how much have we shifted there? What turnover you are doing from the Malaysian operations? Bodapati Bhaskar, Chief Financial Officer I beg you pardon? Analyst What is the turnover that is accruing from Malaysian operations? Bodapati Bhaskar, Chief Financial Officer We have to come back to you on that. I don't have the exact number we have to give numbers. We can do it offline. Analyst Okay. And what is the depreciation that you are all roughly providing the on the gross block, wanted to know that as a percentage? Bodapati Bhaskar, Chief Financial Officer About both 10% last month. Analyst Okay, 10%. So, what is that... have you taken any decision on writing off goodwill in the current year or - Bodapati Bhaskar, Chief Financial Officer No, no decision taken. Analyst Okay. Not so far. Bodapati Bhaskar, Chief Financial Officer

Not so far. Analyst Okay, fine. Wish you all the best and have a great year ahead. Thank you so much. Operator Thank you, sir. Next question comes from Sameer Narayan from BNP Paribas. Sameer Narayan Yeah. Actually I just want to understand about the debt. You mentioned that as of March 2011, our consolidated debt would be how much? Bodapati Bhaskar, Chief Financial Officer About 883 crores. Sameer Narayan So compared to Q3, it is up from 750 odd to 880, right? Bodapati Bhaskar, Chief Financial Officer Correct, correct. Sameer Narayan Okay. Now if you could just throw some light that in case in this quarter, our basic business operation is pretty much as one of the earlier participant mentioned that on a Q-on-Q basis we are actually lower, and some other what would be basically the requirement for so much of debt in case I am sure that we have not done any acquisition in Q4, right? Bodapati Bhaskar, Chief Financial Officer If you look at the number in December, we had only a part of the acquisition cost of Cardiac Sciences accounted for by December 31st. About 20 million of it has been accounted in this quarter, okay. That's how the numbers have gone up by there. Sameer Narayan All right. Okay. Thank you and wish you all the best. Bodapati Bhaskar, Chief Financial Officer Thanks Sameer. Sameer Narayan Thank you. Operator

Thank you, sir. Next question comes from Mr. Mayur Bakhadia from Wealth Managers. Analyst Good evening and thank you for taking my question. A very hearty congratulations to the entire management. Bodapati Bhaskar, Chief Financial Officer We can't hear Mayur. You got to speak up a bit Mayur. Analyst I said a hearty congratulation to the management for excellent set of numbers. Bodapati Bhaskar, Chief Financial Officer Thanks Mayur, thanks. Analyst Sir, just couple of questions, most of the questions I think were quite. Just to confirm, you said top-line guidance that we are looking at 20 to 25% is excluding Cardiac, right? Bodapati Bhaskar, Chief Financial Officer Correct. Analyst Okay. Bodapati Bhaskar, Chief Financial Officer It is a conservative estimate. Analyst I understand, but that is excluding Cardiac, right? Bodapati Bhaskar, Chief Financial Officer Including. See Cardiac itself we will be adding the whole year revenue. Analyst Sir, Cardiac would be around 650 crore for the whole year, and this year we did only 235, so around 400 crore delta would come only because of Cardiac, which is more than 20% on our 1,500 to around 1,600 crore turnover. Bodapati Bhaskar, Chief Financial Officer What's your point, yeas. See according to this earlier I think Mr. -- tell me what is the point you are trying to make?

Analyst Yeah, just wanted to clarify, is this 20 to 25 is excluding Cardiac, because otherwise if it is including Cardiac then the turnover would be actually falling on a like-to-like. Bodapati Bhaskar, Chief Financial Officer See, it won't fall, it will only grow further. Take a 20% over Cardiac revenues as growth for this year. Analyst Okay. And sir, one more clarification is, if we look at invasive turnover for the whole year, it is 20%, which is around 313 crores odd, which is entirely contributed by Eurocor. I believe we had some invasive -- sales from Opto also. Was there a right understanding? Bodapati Bhaskar, Chief Financial Officer What is that? Analyst There were some invasive sales from Opto itself or you know from the standalone entity also. On this if we look at 20% is broadly and entirely by Eurocor, this 313 crores. So - Bodapati Bhaskar, Chief Financial Officer What is -- the revenues have grown by about 59% to the whole year. Analyst Yeah. And that is entirely accounted by Eurocor? Bodapati Bhaskar, Chief Financial Officer Correct, yeah. Analyst Okay, okay, okay, right. And sir, just one last question, if we look at a broad picture of our P&L and cash flow, we would be generating around 400 plus crores of cash flows on the consolidated basis, if the working capital I am assuming is broadly in the same region. Now, with 150 crores only of CapEx which we have guided, do we see... will we see a substantial reduction of debt in the next two years, and can you throw some light on what kind of net reductions we would be looking at? Bodapati Bhaskar, Chief Financial Officer See debt that taken is for a period of between four and five years. Analyst

Okay. Bodapati Bhaskar, Chief Financial Officer Because it will be as per that and the cash system will be used for going forward for the working capital, Because debt level will not go up. It will be used for working capital, because if the revenue will not grow from here to say 30% or 45% or whatever you are saying, mainly for working capital there. And rest of it is there in the... because our debt cost is not very high. It was 6 and 10% for the whole... for the entire borrowing. So, we should be okay. Analyst And sir since these debt stand in the foreign subsidiaries itself, we would not be... have we taken any hedge or are we... is there any kind of separate protection, which we are taking, because those revenues will also be there and - Bodapati Bhaskar, Chief Financial Officer It's not required to take a hedge, because of the revenues. Analyst Right. Bodapati Bhaskar, Chief Financial Officer And the loans are both in U.S. dollars. Analyst Correct, okay. Bodapati Bhaskar, Chief Financial Officer So, need to take it then. Analyst Okay. My last question is, is there any kind of loss benefit on cardiac, which we have, which has helped us to or which is going to help us bring forward for our tax rate? I know on individual entity we'll end up being that tax rate but let's say on a consolidated basis, is there any kind of benefit which will flow because of any previous loss or because of any - Bodapati Bhaskar, Chief Financial Officer Yeah, see the predictions will be as per the law. We are allowed to write-off the certain percentage of the profits for the particular year. We will be following but that's not a very big number. Analyst So, when you give the guidance around 6 to 10% it is - Corporate Participant

Included everything correct. Analyst Okay. Sir, thank you very much and wish you all the best. Bodapati Bhaskar, Chief Financial Officer Thank you, Mayur. Analyst Thank you, sir. Next question comes from Mr. Vineet Agrawal from Religare Capital. Vineet Agrawal Thanks. All my questions have been answered. Bodapati Bhaskar, Chief Financial Officer Thanks Vineet. Shalaka Parab, Adfactors PR Pvt. Ltd Arvind, we would like to close the call. Operator Thank you, madam. There are no further questions. I hand over the floor to Ms. Shalaka Parab for closing comments. Shalaka Parab, Adfactors PR Pvt. Ltd Thank you everyone for participating. If you'll have any further questions please write to us at ir@optoindia.com. Thank you and have a good night. Operator Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you and have a pleasant day.