Aarti Drugs Limited — Q3 FY26

Aarti Drugs Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=3y6Diq0cdUM Published: 3 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to Q3 and 9 months FY26 earnings conference call of RT Drug Limited. As a 0:09 9 seconds reminder, all participant line will be in listenonly mode and there will be an opportunity for you to ask question after the presentation concludes. Should 0:18 18 seconds you need assistance during this conference call, please signal an operator by pressing star then zero on your Touchstone phone. Before we begin, 0:26 26 seconds a brief disclaimer. This call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. 0:36 36 seconds These statements are not guarantee of future performance and it may involves risk and assertities that are difficult to predict. I now hand over the 0:46 46 seconds conference to Mr. Adish Patil, COO and CFO from RT Drugs Limited. 0:53 53 seconds Thank you and over to you sir. Uh thank you and good morning to all our stakeholders. 1:00 1 minute We appreciate your participation in RT drugs Q3 and 9 months FI26 earnings conference call. Joining me today are Mr. Hershit Sa joint managing director. 1:13 1 minute, 13 seconds Morning Mr. Harit Sha fulltime director Mr. Vishwra Sawa, managing director, 1:22 1 minute, 22 seconds Pinnacle Life Sciences, along with our investor relations advisor, SGA. 1:30 1 minute, 30 seconds We trust that you had the opportunity to review our financial results and investor presentation for the quarter 1:37 1 minute, 37 seconds and 9 months ended 31st December 2025 which have been uploaded with stock 1:44 1 minute, 44 seconds exchanges and are also available on our website. 1:49 1 minute, 49 seconds I will begin by outlining the key operating and business highlights for the period following which we will discuss financial performance. 1:58 1 minute, 58 seconds On the business side, it is important to note that several factors weighed on this quarter's 2:06 2 minutes, 6 seconds performance. Utilization levels remained low impacting overall performance and operating leverage. First weaker 2:14 2 minutes, 14 seconds antibiotic demand reduce overall market pool leading to lower capacities being utilized and creating margin pressure. 2:22 2 minutes, 22 seconds Secondly, we faced delays in shipments from China that disrupted supply chains and extended lead times straining 2:29 2 minutes, 29 seconds production schedules and added to cost pressures. Third, a one-time voluntary shutdown was undertaken in one of our 2:37 2 minutes, 37 seconds plants for refurbishment ahead of the European audit which temporarily constrained production. Finally, the new 2:45 2 minutes, 45 seconds green field facilities operated below optimal utilization as they are in the initial rampoff phase that also put pressure on profitability. 2:55 2 minutes, 55 seconds Now on the positive side on year-on-year basis we witnessed 7% volume growth in standalone business segment and a negative rate variance of around 5%. 3:07 3 minutes, 7 seconds Export markets especially formulations emerged as a key growth driver supporting overall business stability and contributing positively to margins. 3:18 3 minutes, 18 seconds Our diversified product portfolio continues to play an important role in navigating such category specific demand fluctuations. 3:27 3 minutes, 27 seconds The facility of Sika which operationalized in September 25 has transitioned into the 3:36 3 minutes, 36 seconds scaleup phase. It has achieved nearly 30% utilization in its first quarter of operations and we expect to ramp this up 3:46 3 minutes, 46 seconds to nearly 50% by March and April 2026 and upwards to that uh in the following quarters. 3:54 3 minutes, 54 seconds Importantly, the facility is currently meeting only 10 to 15% of our capture requirements for critical intermediates 4:02 4 minutes, 2 seconds used in our anti-diabetic portfolio. But going forward, it will significantly enhance supply reliability and reduce 4:10 4 minutes, 10 seconds dependence on external sourcing in line with our backward integration strategy. 4:16 4 minutes, 16 seconds We expect to become fully self-reliant for these supplies in coming couple of quarters. Our salicylic acid facility at 4:26 4 minutes, 26 seconds Tarapur also achieved an important milestone as of now scaling production to about 300 tons per month currently. 4:35 4 minutes, 35 seconds However, the overall December 25 quarter utilization for this product was still lower than expected. The facility has 4:43 4 minutes, 43 seconds achieved improved operational stability in terms of quality parameters and solid waste management with further improvements planned in the technology. 4:56 4 minutes, 56 seconds In terms of the business segments, our formulations business showed encouraging traction during the quarter particularly 5:05 5 minutes, 5 seconds in exports market. The increasing contribution of formulations with the higher share of exports aligns with our 5:12 5 minutes, 12 seconds strategy of moving towards higher value offering and improving overall business quality. 5:19 5 minutes, 19 seconds As new markets and products scale up, we expect formulations to play a progressively larger role in our growth trajectory. 5:29 5 minutes, 29 seconds On the regulatory front, certification and approval processes are progressing as planned. Audit observations are under 5:38 5 minutes, 38 seconds review and inspections were conducted at one of our facilities as a part of ongoing regulatory initiatives including preparations for European uproar. 5:48 5 minutes, 48 seconds This forms a part of our broader road map to expand presence in regulated and semi-regulated markets. 5:56 5 minutes, 56 seconds After several quarters of pricing pressure, we believe the business has reached an inflection point supported by 6:04 6 minutes, 4 seconds stabilizing realization and improving volume momentum. 6:09 6 minutes, 9 seconds January month sales shows a trend which is encouraging and providing confidence 6:16 6 minutes, 16 seconds in a more positive trajectory for coming quarters. Going forward, our focus remains firmly on capacity ramp up, 6:25 6 minutes, 25 seconds operational efficiency and margin improvement while maintaining strict capital discipline and regulatory 6:32 6 minutes, 32 seconds compliance. We remain committed to executing our growth projects efficiently and building a stronger, 6:40 6 minutes, 40 seconds more resilient platform for sustainable long-term growth. 6:44 6 minutes, 44 seconds Now let's talk about financial performance. 6:48 6 minutes, 48 seconds At consolidated level for Q3 FY26 revenue stood at rupees 602.9 6:57 6 minutes, 57 seconds cr as compared to rups 557.1 cr in Q3 FI25 7:03 7 minutes, 3 seconds reflecting a growth of 8% ya stood at rupes 56.3 crores versus rups 7:12 7 minutes, 12 seconds 62.3 crores in Q3 FI25 down 10% Y c basis with IBIDA margin at 9.3%. 7:22 7 minutes, 22 seconds Ad stood at rupees 40.5 crores as compared to rups 25 7 crores in Q3 FI25 7:31 7 minutes, 31 seconds up by 58% on Y basis translating to a PAT margin of 6.7%. 7:40 7 minutes, 40 seconds On 9 months FI26 revenue stood at rupes 1846.6 6 crores as compared to rupes 7:48 7 minutes, 48 seconds 1713.4 crores in 9 months FY25 reflecting a growth of 8% by 7:58 7 minutes, 58 seconds stood at rupes 215 crores versus rups 196.9 crores in 9 months by 25 up 9% worldwide with ibida margin at 11.6%. 8:12 8 minutes, 12 seconds PAT stood at 139.7 cr as compared to 94 crores in Q3 FY25 up by 49% Y translating to a PAT margin of 7.6%. 8:27 8 minutes, 27 seconds With respect to standalone business for Q3 FI26 revenues stood at rupes 530 crores 8:35 8 minutes, 35 seconds contributing 88% to the consolidated revenue exports contributed 37% to this revenue 8:44 8 minutes, 44 seconds within the API business. The antibiotic therapeutic category contributed 35.1% 8:51 8 minutes, 51 seconds antiprotool 19.8% 8% anti-inflammatory 12.9% anti-diabetic 16.6% 8:59 8 minutes, 59 seconds antifungal 12.2% and the rest contributed 3.5% to the total APS 9:07 9 minutes, 7 seconds formulation segment revenue from formulation stood at rupees 76.6 6 9:14 9 minutes, 14 seconds crores in Q3 FY26 up 58% Y exports contributed 67% to this revenue. 9:25 9 minutes, 25 seconds Now with this uh we would like to open the floor for questions. Thank you. 9:32 9 minutes, 32 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 9:40 9 minutes, 40 seconds telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are 9:47 9 minutes, 47 seconds requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question assembles 10:13 10 minutes, 13 seconds Anyone who wishes to ask a question may press star and one on their touchstone telephone. 10:32 10 minutes, 32 seconds The first question is from the line of Vishal from systematics. Please go ahead. Uh hi good morning and thanks for 10:40 10 minutes, 40 seconds the opportunity. Uh so my question is on the uh formulation business. So just want to understand whether uh on the 10:49 10 minutes, 49 seconds formulation business the primary intention is to of do all the formulations of the existing APIs that 10:56 10 minutes, 56 seconds we large capacities for or we we would also do other formulations beyond beyond our APIs that we are traditionally strong at. 11:05 11 minutes, 5 seconds Uh Vishro would you like to answer this question? Yeah. Yeah. Yeah. I'll answer. 11:09 11 minutes, 9 seconds So, uh currently we are doing both. We are working on uh formulations of uh APIs that RT drugs uh is manufacturing 11:17 11 minutes, 17 seconds in house. But we are not restricting to that. Uh especially on our pipeline. Uh 11:23 11 minutes, 23 seconds we are focusing more on uh uh niche uh categories into the uh oncology and uh 11:31 11 minutes, 31 seconds cardiabetic range. uh wherever RP has an API uh obviously that is uh that is a priority but we are not uh restricting 11:40 11 minutes, 40 seconds only to drugs where uh RPA is manufacturing the API. 11:45 11 minutes, 45 seconds Okay. So oncology specifically would uh would need dedicated capacities. So those would be like uh uh separately uh 11:55 11 minutes, 55 seconds created right for so we have a we have a within formulation we have a dedicated oncology 12:01 12 minutes, 1 second USFD approved manufacturing site right and what is the uh so if you if you want to break up the formulation 12:09 12 minutes, 9 seconds capacity between oncology and non-oncology like uh in terms of the investment how 12:16 12 minutes, 16 seconds do you uh So the uh firstly the oncology is still pre-revenue. Uh we have not 12:25 12 minutes, 25 seconds started commercial sales from the oncology side yet because the products are still in pipeline and filing stage. 12:31 12 minutes, 31 seconds Uh the first product will be commercialized in in this quarter in Q4. 12:36 12 minutes, 36 seconds uh in terms of the capacities uh about in in absolute terms in terms of tablets about 90% of the capacity is in uh the 12:45 12 minutes, 45 seconds general plant. uh but in terms of the potential revenue um over the next three years about 40% of the revenue uh can be 12:54 12 minutes, 54 seconds generated from moncology and in terms of the investment would that be in the same proportion the 13:00 13 minutes revenue proportion or uh uh yeah it would be slightly higher because uh on the product development 13:08 13 minutes, 8 seconds part also we are investing more into the oncology uh so the investment would all would be probably about of 50% 40 to 50% 13:17 13 minutes, 17 seconds on oncology and on we'll primarily do contract manufacturing on both the fronts or 13:25 13 minutes, 25 seconds we'll kind of have uh so we'll have the doers owned on both these both these categories and then partners 13:33 13 minutes, 33 seconds yeah so we we we do both for primarily for the domestic market we do contract manufacturing uh whereas for 13:40 13 minutes, 40 seconds international markets we develop our products and doers and then we uh outlic 13:47 13 minutes, 47 seconds them. So we hold the IP and uh we work with local partners for the marketing and distribution. 13:55 13 minutes, 55 seconds Okay. Okay. Uh and just one on metformin uh so the backward integration capacities for the methileamines that we 14:04 14 minutes, 4 seconds are that we are creating would that also be used for glypins also or that that's only for metformin? 14:12 14 minutes, 12 seconds No, that is uh dedicated to metformin uh API. 14:16 14 minutes, 16 seconds Okay. Okay. And uh any sense on metformin in terms of what would be India's share in the total metformin 14:25 14 minutes, 25 seconds capacities across the world? uh uh yeah it's uh we have to do the uh current 14:32 14 minutes, 32 seconds analysis but uh couple of years back uh we were roughly around uh 12 13% of the Indian capacities but right now we have 14:40 14 minutes, 40 seconds increased our capacities in last one year so with that increased capacity probably it might have gone up upwards of 15%. 14:51 14 minutes, 51 seconds Okay. Okay. 14:53 14 minutes, 53 seconds and and we have 180 crores sitting on CWIP. 14:57 14 minutes, 57 seconds Is that for the oncology block or uh so no so so it will be part part 15:06 15 minutes, 6 seconds would be the oncology do development and part is related to uh big 25 tons boiler 15:14 15 minutes, 14 seconds which will be going onstream uh in this quarter. It is a cogen boiler, big boiler. So it will be also generating uh 15:21 15 minutes, 21 seconds power along with the steam and it is part of one of the linfield projects. 15:27 15 minutes, 27 seconds Right? And uh finally if you can quantify with the backward integration projects uh so the mythile lamine 15:34 15 minutes, 34 seconds backward integration projects and all the other cost-saving investments that you've done in what like at peak 15:42 15 minutes, 42 seconds utilization like if we are able to sub uh kind of use it entirely 100%. what would be the savings that we'll generate in in the numbers? 15:51 15 minutes, 51 seconds Yeah. So, so so uh I understand uh it it's slightly difficult to give a projection because 16:00 16 minutes uh with additional capacity coming into picture the prices will definitely move as the margins of that product will 16:07 16 minutes, 7 seconds slightly change going forward as uh the new entrant has come in. uh but it will definitely help us in improving the 16:15 16 minutes, 15 seconds gross contribution further. Uh plus uh it will also help us in improving the 16:21 16 minutes, 21 seconds sales of uh couple of uh specialty chemicals which has already increased in this quarter as well and it will further 16:30 16 minutes, 30 seconds increase in March quarter and then next couple of quarters we'll be further ramping up the production at the Sika 16:36 16 minutes, 36 seconds facility. So overall uh what we expect is that it should 16:44 16 minutes, 44 seconds uh give a boost of say you know at least uh couple of percent in gross contribution at the company level when 16:51 16 minutes, 51 seconds it runs for the full when it runs at full scale like like if we assume current prices and not assume any volatility in going 17:00 17 minutes forward if there is an absolute number you can share if prices remain raw material and end product prices it's a very very very rough number very rough 17:09 17 minutes, 9 seconds number is if it's if run at full scale potential the can be slightly upward of 50 crores 17:17 17 minutes, 17 seconds understood thank you very much thank you thank you 17:25 17 minutes, 25 seconds the next question is from the line of Risham Jen from BBD Asset Managers please go ahead 17:33 17 minutes, 33 seconds uh hi uh good morning so I have a few questions. So first one is uh if it is 17:40 17 minutes, 40 seconds possible to quantify all the uh things which you have mentioned in your opening remarks with respect to shutdown and 17:49 17 minutes, 49 seconds some of the new facilities coming up. Uh I assume there will be losses related to that. So if each of those items if you 17:57 17 minutes, 57 seconds can just quantify how much impact would be there in this quarter because of all this thing. 18:04 18 minutes, 4 seconds uh you see a couple of the green field projects put together uh put together now now we don't have 18:12 18 minutes, 12 seconds any issues at the scika facility like we had in salin equa facility uh this is the first quarter of 18:21 18 minutes, 21 seconds ramp up and we have already ramped up to 30% and it is going very smoothly as far as the ramp up is concerned so both this 18:28 18 minutes, 28 seconds included uh probably at the iida level it could have created a drag of roughly 18:34 18 minutes, 34 seconds uh 8 or 8 8 8 and a half crores and at the PBT level probably it would be 18:40 18 minutes, 40 seconds around some 14 15 crores but that is uh it it will change soon for the Saika 18:47 18 minutes, 47 seconds facility for the salilic facility it will change gradually in uh this quarter and then uh June quarter 18:56 18 minutes, 56 seconds and uh as far as the other lower production capacity utilization I don't have an exact number but what 19:06 19 minutes, 6 seconds happened what has happened you know uh we have sold a lot from the FG stock in 19:13 19 minutes, 13 seconds this particular quarter. So if you see the numbers uh around 30 K of sale has 19:20 19 minutes, 20 seconds come from the existing stocks and not because of the fresh production and because of that we have estimated that 19:28 19 minutes, 28 seconds roughly it would have impacted around 1% in the gross margins because when we sell from stock uh you know the in the 19:37 19 minutes, 37 seconds inventory valuation typically has 80% uh raw material contain and 20% overhead component. So that 20% would be 19:44 19 minutes, 44 seconds amounting to six crores. So that has created a drag in gross margins which we see uh for the December quarter. 19:55 19 minutes, 55 seconds So uh so definitely there have been multiple factors. So all put together it has created a drag in the parent company 20:03 20 minutes, 3 seconds the standalone business which is the API and the spec company. Whereas uh the formulation department the division has 20:10 20 minutes, 10 seconds done uh quite well in uh December quarter. Uh but the good part is in Jan 20:17 20 minutes, 17 seconds uh for both the segments we are seeing good traction in the business. So hopefully this uh trend has already 20:24 20 minutes, 24 seconds reversed and we should see some positive numbers in the march quarter. 20:31 20 minutes, 31 seconds So uh what I understood is that uh 8 crore drag at a beta level which is almost like 30 odd crores 20:38 20 minutes, 38 seconds annualized number and uh could be more in the earlier quarters. What we could see next year is not just a break even 20:47 20 minutes, 47 seconds but possibly as we move in the uh uh in in the quarters it will become positive. 20:53 20 minutes, 53 seconds So the overall uh impact at a beta level will should be much positive uh in FI27. 21:02 21 minutes, 2 seconds Is that understanding correct? Yes, that is very true. 21:07 21 minutes, 7 seconds Okay, understood. The second question is with respect to the capex. Um uh this year I think uh you mentioned earlier uh 21:17 21 minutes, 17 seconds last quarter that uh we'll have close to 200 crores capex this year and that will bring uh an end to our overall 600 cr 21:27 21 minutes, 27 seconds capex which we have planned earlier. Um so what is the capex let's say in fi 27 beyond what we have earlier planned for? 21:37 21 minutes, 37 seconds Yeah. So, so, so uh what we had planned earlier uh except for one project we almost we are almost done with uh the 21:46 21 minutes, 46 seconds other projects. The one projects which was left out in this was expansion of metforming uh facility uh to almost 21:54 21 minutes, 54 seconds around 2 and a half to 3,000 tons per month. That was our long-term strategy. 22:00 22 minutes Uh however uh because of some uh land issues uh initially we ended up doing 22:06 22 minutes, 6 seconds the brownfield expansion. So we already have reached around 1,450 to 1500 tons per month. We'll be scaling it up to 22:14 22 minutes, 14 seconds 1,800 tons per month in the existing uh facility 18 to 1900 tons per month. Uh plus we are we are seeing some positive 22:22 22 minutes, 22 seconds signs uh on the land side. So that will also happen that and the main the main idea is to forward integrate in the 22:30 22 minutes, 30 seconds metformin. The first step uh is that we are going for USFD approval for the metformin. We have already prepared a 22:36 22 minutes, 36 seconds USDM. Uh we are in the process of filing it. Then we'll try to trigger the audit in the coming year and u take it from 22:45 22 minutes, 45 seconds there. So that should improve our regulated sales of metforming and but and definitely it will give a very good 22:53 22 minutes, 53 seconds IBIDA margin uh from those markets. Plus the plan would be for the US market uh 23:00 23 minutes through pinnacle we might be launching A&D as well uh for the metforming tablets. So forward integration of 23:07 23 minutes, 7 seconds metforming is on cards. So that was the one project which was left out from the initial plan which we will take up u in 23:14 23 minutes, 14 seconds the coming couple of years and apart from that there are certain expansion of cardiovascular products from our 23:21 23 minutes, 21 seconds existing line. Uh plus uh we have seen some increased demand for our antifungal products. So for that we are expanding uh capacity. 23:31 23 minutes, 31 seconds Plus uh we are thinking in the lines of uh doing some some level of CDMO in the 23:38 23 minutes, 38 seconds chlorosulonation chemistry where we are already strong at we are already doing u mean contract manufacturing for few 23:47 23 minutes, 47 seconds MNC's as far as few products are concerned so we want to expand in that line as well plus the methyl element 23:56 23 minutes, 56 seconds chemistry which was newly introduced uh through psycha plant uh we We are looking at exploring the options of 24:04 24 minutes, 4 seconds various derivatives uh uh which will be a part of uh that chemistry itself. Uh so it will help us 24:12 24 minutes, 12 seconds uh you know there will be synergies in the further expansion. So that should help us reduce cost also and plus get some value addition. So that is the 24:21 24 minutes, 21 seconds overall plan for the uh coming years for the capex and plus we are identifying new molecules as far as API and other specing segment is concerned that that 24:30 24 minutes, 30 seconds process also on and we will announce soon as soon as something is finalized. 24:35 24 minutes, 35 seconds uh having said that I would still uh maintain that you know around 150 to 200 24:42 24 minutes, 42 seconds kores of capex you can expect for the next two years each each every year mean every year 150 to 200 ks of capex uh 24:52 24 minutes, 52 seconds considering the formulation oncology expansion and the uh all the all all the ideas I've just spoke about 25:01 25 minutes, 1 second understood uh very clear Uh uh and what what is the uh current debt uh at on books? 25:10 25 minutes, 10 seconds Current debt uh is roughly around uh 540 kores total debt uh at the console level. On the standalone level it could 25:19 25 minutes, 19 seconds be around 392 kores and uh the uh in both the mean both the divisions the debt is equally split between long-term 25:27 25 minutes, 27 seconds and short-term. It's almost 50 something% each. 25:33 25 minutes, 33 seconds I miss you. Okay. Thank you so much. Uh all the best. Thank you. 25:39 25 minutes, 39 seconds Thank you. The next question is from the line of Dwani Desai from Turtle Capital. Please go ahead. 25:46 25 minutes, 46 seconds Uh hi, good morning Adesh. Uh uh Adish. 25:49 25 minutes, 49 seconds My first question is that you said that uh January seems promising and uh we are at the inflection point where the you 25:58 25 minutes, 58 seconds know the negative price variance is uh kind of coming to an end. So earlier we were expecting you know 15% kind of a 26:05 26 minutes, 5 seconds volume growth uh you know uh coming through in S2. So uh do we see similar trend and uh should we expect uh those 26:14 26 minutes, 14 seconds kind of volume and hence value growth uh you know going forward into FI27 also 26:22 26 minutes, 22 seconds uh we we can expect the the main reason is uh the growth which we expected in FI26 26:30 26 minutes, 30 seconds uh hasn't come to that extent so which means that the growth will be pushed ahead into FI27. So probably we can 26:38 26 minutes, 38 seconds expect around you know 12 to 15% volume growth in FY27 with both the projects uh going smooth the real project I'm talking about. 26:48 26 minutes, 48 seconds Okay. So is it uh is it fair to assume that large part of volume growth uh will come from the new projects and existing 26:56 26 minutes, 56 seconds basket of products uh you know there uh you know we are not expecting much of a volume growth or maybe single digit 27:04 27 minutes, 4 seconds volume growth. Is that a fair uh way to look at it? 27:08 27 minutes, 8 seconds Yeah. So, so the existing product basket should give a single digit volume growth but the main growth driver for the 27:15 27 minutes, 15 seconds volumes would be the new products both salicylic acid and the cycles the methylamines. 27:23 27 minutes, 23 seconds Okay. Okay. Got it. Uh second question is uh on the gross margin side even if we adjust adjust for the 100 basis point 27:31 27 minutes, 31 seconds uh because of the inventory challenges uh you know that is still below that you know 36 37% mark that we wanted to hit 27:40 27 minutes, 40 seconds uh so uh you know how should we look at this margin trajectory uh going into FY27 27:48 27 minutes, 48 seconds uh and because lot of backward integration that that will also come into play chlorosulonation also So you know will kind of pick up this 27:56 27 minutes, 56 seconds speciality part of it. So how should we look at that number going forward? 28:01 28 minutes, 1 second Yes. Yes. So this particular quarter for the on a console basis uh what we can see it is roughly around 36%. 35.9 28:11 28 minutes, 11 seconds uh the main as I was talking about the we have sold from inventory. So that has also impacted the gross contribution by 28:18 28 minutes, 18 seconds around 1% is what what we feel. Uh that and another thing is the export content 28:25 28 minutes, 25 seconds of the standalone business in December quarter was slightly lower and typically the export market yields better selling prices. Yes. 28:33 28 minutes, 33 seconds So when the export percentage is higher the gross margin is automatically bit higher. So um penetrating more into 28:41 28 minutes, 41 seconds export market is also one of the very critical u strategy of our along with that pushing our existing product basket 28:49 28 minutes, 49 seconds uh into the European markets because we are already strong in those products and we are in the process of getting European for those products from our 28:57 28 minutes, 57 seconds regular volume plants. So from there if we supply to Europe markets that will definitely add to gross margin backward 29:04 29 minutes, 4 seconds integration definitely yes as I I was telling that currently in December we were only able to achieve around 12 odd% of backward integration for the 29:12 29 minutes, 12 seconds anti-diabetic I'm talking about specifically so that will go to you know almost 90% in two three quarters so that 29:20 29 minutes, 20 seconds will also definitely help uh to improve the gross contribution and along with that the formulation business uh formulation business uh will impact 29:29 29 minutes, 29 seconds growth cost contribution positively uh probably from second and third year may not be in 27 immediately but as the 29:36 29 minutes, 36 seconds oncology starts flowing into the sales uh then that should also definitely improve our gross notification 29:45 29 minutes, 45 seconds okay so uh so a follow up on this so on a standalone API uh FI27 should we 29:52 29 minutes, 52 seconds expect 35 36% kind of a gross margin or uh you know should we pencil in loan But 30:00 30 minutes no I think 36% growth margin is fair to assume it is not that tough to achieve 36%. 30:10 30 minutes, 10 seconds Okay. And when we when you are saying 36% is achievable what are the underlying assumption that we are building in that calmic acid plant will 30:18 30 minutes, 18 seconds kind of you know stabilize. Definitely that's that's a major assumption or the European uh you know supply picking up is also a part of it. 30:28 30 minutes, 28 seconds Yeah. Uh overall means uh one is the regulated market sales plus the sales 30:36 30 minutes, 36 seconds pick up from uh our E22 plant which is USFDA plant. uh and the backward integration mean improvement in 30:44 30 minutes, 44 seconds salicylic acid will definitely uh give lot of impact on the overall gross margin. 30:52 30 minutes, 52 seconds These are the main assumptions. 30:54 30 minutes, 54 seconds Got it. And last question. So we we said you said that we we should expect 150 to 200 K of capex for next uh you know 31:03 31 minutes, 3 seconds every year for next two years while we are just come out of a large capex cycles where plants are still scaling up 31:10 31 minutes, 10 seconds uh you know translating into you know gross margin and numbers are yet to take place. So uh um why is it that you know 31:19 31 minutes, 19 seconds uh we don't want to kind of first uh you know stabilize and get to the good uh operational efficiency level and then do 31:27 31 minutes, 27 seconds the capex rather than getting into newer projects where we'll again continue to hit our margin. No uh you are absolutely 31:35 31 minutes, 35 seconds uh correct in that uh analysis. So there are couple of factors to that. Uh one is the tika plant uh that has 31:45 31 minutes, 45 seconds operationalized uh very smoothly mean we have scaled up very smoothly. Uh so we haven't seen any issues. So and plus 31:53 31 minutes, 53 seconds that is a captive consumption mainly more than 50% is captive consumption from that plant. So scaling up of that project will happen very quickly since 32:02 32 minutes, 2 seconds uh so we are talking more from 24 months and this uh sika results will start coming in 6 months itself. So we'll know 32:10 32 minutes, 10 seconds within 6 months we'll come we'll come to know whether one of the greenfield capex is fully operationalized or not. So that will give us one comforting factor after 32:18 32 minutes, 18 seconds 6 months and salicylic acid we are uh almost at the means towards the end of 32:25 32 minutes, 25 seconds improvement. And one more thing uh that one 150 to 200 crores a part of that 32:32 32 minutes, 32 seconds will also go for oncology uh dosia development you know so that is also important because we have already oncology means approved formation plant 32:41 32 minutes, 41 seconds USFD approved plant uh in Bhi uh so we want to capitalize on that plus we got European approvals for our OSD uh 32:49 32 minutes, 49 seconds facility in Bhi so we also want to capitalize on that by having more doses on regular uh uh therapies is 32:57 32 minutes, 57 seconds formulation and plus uh this will also include the maintenance capex plus the incremental 33:04 33 minutes, 4 seconds uh uh expansion what we do brownfield expansion that will also be the part of this and plus we are uh doing a bit of 33:12 33 minutes, 12 seconds capex uh both in uh that solar power plant also and and some uh energy 33:20 33 minutes, 20 seconds related improvements what we want to do so that will also be taken care of uh in this capage. 33:28 33 minutes, 28 seconds Got it. Uh very clear. Thanks and wish you all the best. Thank you. 33:35 33 minutes, 35 seconds Thank you. The next question is from the line of Yoshi from UNIC Capital Private Limited. Please go ahead. 33:44 33 minutes, 44 seconds Thank you. Am I audible? 33:46 33 minutes, 46 seconds Yes. Yeah. uh in the sacic acid plant if I remember last quarter we said that uh 33:54 33 minutes, 54 seconds we break around uh around 800 metric tons per month and we also talked about Chinese dumping. So have the 34:03 34 minutes, 3 seconds realizations stabilized or they are still the dumping is still on and the relations have come down. 34:12 34 minutes, 12 seconds Uh yeah uh can you answer the salic selling prices? 34:17 34 minutes, 17 seconds Yeah. So Chinese dumping is still on uh but due to dollar dollar going up we are getting little 34:27 34 minutes, 27 seconds better realization than last quarter but uh we are also trying to apply duty from 34:35 34 minutes, 35 seconds beginning of next year against Chinese imports. So which will take of course 6 to 8 months 9 months whatever time after 34:44 34 minutes, 44 seconds you know so because we are not eligible as of now. So maybe from we are eligible to apply for NTWD also. 34:53 34 minutes, 53 seconds Let's hope that you know and on operational side we are trying we are improving our overall efficiency so that 35:02 35 minutes, 2 seconds you know we come out of this break even for next year. 35:10 35 minutes, 10 seconds Yeah sorry yeah just for confirmation. So the sacrylic acid plan and sika plant both 35:17 35 minutes, 17 seconds combined reported 8.5 crores of evita loss this quarter or it's a single plant 8.5 loss it's a combined combined 35:26 35 minutes, 26 seconds combined okay and uh regarding uh next year uh uh 35:33 35 minutes, 33 seconds if you look at the ITA margins like this quarter because of multiple headwinds we reported 9%. So next year steady state 35:41 35 minutes, 41 seconds what uh will be around see uh first of all initially uh we 35:49 35 minutes, 49 seconds would like to hit the target of 12 to 13% because right now it was struck down uh well below that 35:56 35 minutes, 56 seconds uh right now it is around 9.3 but uh just previous quarter September uh it was around 12.9%. 36:04 36 minutes, 4 seconds uh so first we'll come there 12 to 13% and then from there the ideal steady state margins when everything starts 36:11 36 minutes, 11 seconds going smoothly should be somewhere uh in 14 to 15% range 36:19 36 minutes, 19 seconds okay and uh on the uh psycha uh psycha plant uh uh 36:29 36 minutes, 29 seconds what we are targeting next initially targeting 50% I think Q4 exit rate will be around 50%. 36:35 36 minutes, 35 seconds So next year what is your target? Yeah. 36:40 36 minutes, 40 seconds So, so like first quarter first quarter we were able we were able to do around uh 30% utilization. Immediately in this 36:49 36 minutes, 49 seconds current quarter March quarter we are planning to uh ramp up to around uh 50% utilization 36:57 36 minutes, 57 seconds and then in the subsequent quarter uh we are planning uh 75% utilization of the facility. 37:07 37 minutes, 7 seconds So the ramp up should be pretty fast. So within hopefully within 12 months uh we should be almost there till 80 90%. 37:18 37 minutes, 18 seconds And uh same for the salicylic acid plan next year we are targeting around 800,000 metric tons. 37:27 37 minutes, 27 seconds Yes. Uh so salicylic acid we are going slightly slowly. Uh there have been lot 37:33 37 minutes, 33 seconds of changes. Uh so it so what happened the story is like this we started the 37:40 37 minutes, 40 seconds plant almost uh in April 24 and this is rank uh 25 37:49 37 minutes, 49 seconds uh we we saw sorry uh so so around one year 37:55 37 minutes, 55 seconds back we saw there were drastic changes in the specifications of salicylic acid since the time we commissioned the 38:03 38 minutes, 3 seconds plant. So we had to take care of that uh quality parameters as well. So we had to tweak our processes a little bit and 38:11 38 minutes, 11 seconds currently what we are observing is that uh in I'm talking about the industry and the competitors 38:19 38 minutes, 19 seconds uh the process the physical chemistry of the organic chemistry has remained same but the physical chemistry is slightly 38:26 38 minutes, 26 seconds uh the new technology is coming in for salicylic acid. So we are also exploring uh that part to adopt that technology in 38:35 38 minutes, 35 seconds our plants. So that that and that is important for us to be competitive going future in going forward. So that is the 38:42 38 minutes, 42 seconds only reason why salicylic acid I'm saying still we are going a bit slowly but within 12 months probably we should 38:50 38 minutes, 50 seconds uh try to hit that uh 1,000 tons per month mark that that that should be our target but we are also cautious about 38:59 38 minutes, 59 seconds the new technologies which are coming in which are which haven't been adopted yet but they are in the discussion of getting adopted at plant scale so that also we are exploring. 39:10 39 minutes, 10 seconds Okay, understood. Yeah, that's from my side. All the best. Thank you. 39:21 39 minutes, 21 seconds Thank you. Coming. 39:23 39 minutes, 23 seconds The next question is from the line of Adita from Soilo Investments. Please go ahead. 39:29 39 minutes, 29 seconds Thanks for the opportunity. Uh I just wanted to understand like you know the API pricing as such. a couple of 39:37 39 minutes, 37 seconds quarters ago there were discussions that that could be uh the bottom and uh but 39:44 39 minutes, 44 seconds looks like you know uh dumping is going on and price is also there has been pressure. So what kind of trajectory are we seeing uh especially for API? 39:56 39 minutes, 56 seconds Yeah. So uh see what we have observed is that uh overall rate uh negative rate 40:03 40 minutes, 3 seconds variance in December quarter with respect to September 25 that is quarter on quarter it is roughly around uh 2 to 2 and a half%. 40:14 40 minutes, 14 seconds But having said that it is mainly not mainly the entire reason for that is the antibiotic segment. 40:22 40 minutes, 22 seconds Uh the other segments frankly speaking in some of the other segments we have seen positive growth as well in the prices. So it is product specific. So we 40:32 40 minutes, 32 seconds will still maintain the stance that the prices have stabilized from September onwards. uh just product specific 40:40 40 minutes, 40 seconds variations are there little bit but more or less the prices have already stabilized so we don't see any uh 40:47 40 minutes, 47 seconds reduction of prices from this point okay and uh this recent um um I mean I'm 40:56 40 minutes, 56 seconds just trying to understand whether that affects us or no this recent we had the government uh establish MIP for pencilin 41:05 41 minutes, 5 seconds uh right uh so uh would that have any kind bearing in terms of our input costs 41:13 41 minutes, 13 seconds uh not not now mean uh right now we don't deal in that segment but the concept of MIP 41:21 41 minutes, 21 seconds uh we are trying to explore that uh in few of the cases which will help us benefit to get better realizations for 41:29 41 minutes, 29 seconds our for the products which we sell as important understood Okay, thank you. Dr. 41:41 41 minutes, 41 seconds Thank you. Thank you. 41:45 41 minutes, 45 seconds The next question is from the line of Sashi Ranjin from Sashi Ranjin Hospitality Private Limited. Please go ahead. 41:54 41 minutes, 54 seconds Uh good morning. Thank you for the opportunity. 41:59 41 minutes, 59 seconds I would like to understand uh the molecule that was banned on 31st December 205. talking about limesite so 42:06 42 minutes, 6 seconds how it's going to impact our up to 100 mig so how it's going to impact our revenue in future 42:14 42 minutes, 14 seconds uh regarding yes sir okay uh har can you yeah basically the 42:22 42 minutes, 22 seconds recent ban was for nimmuside more than 100 mg and typically in India 42:28 42 minutes, 28 seconds uh uh this product we have all formulations where we are selling is 42:34 42 minutes, 34 seconds less than 100 mg. So we are not affected as far as demand is concerned. These are for very high dosages which only two or 42:42 42 minutes, 42 seconds three four companies were doing it actually. So all our customer base are within the range and so there is no no 42:50 42 minutes, 50 seconds problem with the demand for that molecule as of now. 42:55 42 minutes, 55 seconds Uh just a clarification on that like can you quantify the revenue that we get from Nicolite from the below 100 mgram 43:02 43 minutes, 2 seconds uh formulations most of our sales in imite is less than 100. Yeah. 43:11 43 minutes, 11 seconds No I'm asking about the revenue sir that okay we don't have that number right now 43:18 43 minutes, 18 seconds probably we can get it to get it get back to you later on. 43:23 43 minutes, 23 seconds Thank you. So my next question if you may allow what is the capacity utilization uh currently in API and FDF uh is it again 20% 50% which you answered right a while ago. 43:33 43 minutes, 33 seconds Yes. So so what I was yeah I was talking about that uh in the opening remarks that this particular quarter mean even 43:41 43 minutes, 41 seconds when we compare to our capacity utilization for the first two quarters of this current year that is the H1 H526 43:49 43 minutes, 49 seconds uh we were almost down by four to 5%. uh even from what we achieved in the first two quarters. So and and we also highlighted the reasons why it happened. 43:59 43 minutes, 59 seconds Uh so most of the reasons are behind us. 44:01 44 minutes, 1 second So going forward we don't see such uh disruptions for coming quarters at least. 44:08 44 minutes, 8 seconds Uh coming to the last question what is the gross margin and the revenue that we're getting from CDMO and uh are we going to use the backbone integrated 44:16 44 minutes, 16 seconds products in the CDMO products that we are currently operating? 44:20 44 minutes, 20 seconds So uh back no so backward integr so whatever products we are doing in spectin 44:27 44 minutes, 27 seconds u mean you can call it CDMO or CMO um uh so they are okay this chlorosphonation 44:35 44 minutes, 35 seconds chemistry we are already backward integrated in chlorosphonation uh so these are all derivatives of that 44:43 44 minutes, 43 seconds chlorosulonation chemistry so we are that way backward integrated already uh it cannot quantify in terms of 44:52 44 minutes, 52 seconds percentage uh because right now it is not that big for us. So that is the reason why we still club it under 45:00 45 minutes spectum segment as of now. Okay. So now coming to the last question uh the European approval 45:08 45 minutes, 8 seconds that we got from product in body is it related to oncology or any other molecule that is OS can you do you want to answer this? 45:18 45 minutes, 18 seconds Yeah, it's for the general tablet and capsules facility. It is uh uh as well as the oncology facility. So, it was an 45:26 45 minutes, 26 seconds uh joint inspection for both the facilities and now we have uh EOGMP for both the oncology as well as the general oral solid site. 45:35 45 minutes, 35 seconds Thank you so much sir. That's that's all from my side. I'll get back into Thank you. Thank you. Thank you. 45:43 45 minutes, 43 seconds The next question is from the line of Vishal from Systematics. Please go ahead. Yeah. Hi, thanks. 45:52 45 minutes, 52 seconds Uh can you uh share what would be the total investment including the dozier development cost we'll be making in the oncology business? 46:02 46 minutes, 2 seconds uh Misha. 46:05 46 minutes, 5 seconds Yeah. So the uh uh facility capex in both phases what we initially did and we have a brownfield expansion going on uh 46:13 46 minutes, 13 seconds would be about uh uh 50 crores and in terms of the uh product development and 46:20 46 minutes, 20 seconds uh regulatory related uh it would be uh about again 50 to 60 crores uh every year uh for the next three years. 46:31 46 minutes, 31 seconds Okay. 46:31 46 minutes, 31 seconds That is what we spending on the product development. Yeah. 46:34 46 minutes, 34 seconds So, broadly 200 crores u right including yeah 200 crores spread over time. Yeah. 46:40 46 minutes, 40 seconds Including uh uh capex as well as product development and regulation. 46:46 46 minutes, 46 seconds Okay. And we can can we expect an asset turn of 1.5 here? 46:52 46 minutes, 52 seconds Uh yes we can expect um about 1.5 to 1.75 peak capacity. 46:59 46 minutes, 59 seconds Okay. And do we already have partners uh for the those years that we are filing? 47:06 47 minutes, 6 seconds Uh yes, usually we in most of the territories we are having uh uh B2B partners before we file. 47:15 47 minutes, 15 seconds Okay. 47:15 47 minutes, 15 seconds And our our capacity roughly would be 300 million uh pills uh for uh oncology. 47:23 47 minutes, 23 seconds Uh yes, that's right. 300 million. 47:26 47 minutes, 26 seconds Okay. Okay. And just one on uh salicylic acid. If you could uh give some sense on 47:32 47 minutes, 32 seconds why we kind of uh went to kind of why why kind of we why why we kind of chose 47:39 47 minutes, 39 seconds salicylic as a import substitute option while there were so many you could have also chosen a backward integration 47:46 47 minutes, 46 seconds project for metformin and why did we go for salicylic acid? 47:50 47 minutes, 50 seconds Yeah. Yeah. So, so uh we studied uh pricing trend of salilic acid for the five five to six years when we selected 47:59 47 minutes, 59 seconds that product. Uh that time no one was manufacturing that product and the technology what we had developed you 48:07 48 minutes, 7 seconds know uh it showed very high profit margin mean IRS of the project were upwards of 20% for that product. uh but 48:16 48 minutes, 16 seconds what happened was um when we entered the market that that is the time when China started uh uh crashing the prices uh 48:25 48 minutes, 25 seconds probably because they they were fearful that the new entrance will come. So if they keep the prices to rock bottom for the initial period that will discourage 48:34 48 minutes, 34 seconds us from uh going it you know uh going ahead with salicylic. So uh we we we 48:41 48 minutes, 41 seconds foresee that as a you you can say entry barrier or or a temporary uh entry barrier what they're trying to create. 48:50 48 minutes, 50 seconds Uh fortunately uh this also becomes the case of anti-dumping because they crashed the prices when the Indian 48:57 48 minutes, 57 seconds manufacturer came in. Uh so if we get that benefit even for you know the uh first few years uh we are sure that we 49:06 49 minutes, 6 seconds will turn it up because the same thing had happened for metro and cypro foxes also in past we had got anti-dumping 49:13 49 minutes, 13 seconds duties for four five years and by the next round uh when it came we were so profitable that we did not qualify for 49:20 49 minutes, 20 seconds anti-dumping duty. So we feel this will turn around and the thing is uh 49:26 49 minutes, 26 seconds salicylic acid also opens up a big uh uh opportunity for us to enter into uh 49:34 49 minutes, 34 seconds cosmetic and uh healthcare line of business and not just restrict oursel to that is one another advantage what we 49:42 49 minutes, 42 seconds have through salicylic acid. It is a base product used to manufacture salicellates which goes in uh flavor and fragrances uh industry as well. 49:53 49 minutes, 53 seconds So we'll do downstream products uh from this uh uh so the thing is right now the situation is such that uh we are 50:01 50 minutes, 1 second compared to do we have already developed technology for that we have done piloting also for the downstream products. So uh we are coming up with 50:10 50 minutes, 10 seconds the salate uh block as well uh very recently uh in a quarter or two. So let's see how how that picks up. 50:21 50 minutes, 21 seconds Sir, have you made an application for anti-dumping duty? 50:26 50 minutes, 26 seconds uh so uh as Harita was pointing out that earlier we did not qualify but now uh I 50:34 50 minutes, 34 seconds think by April or so right Harai we will be filing for the yeah yes yes by April we'll be filing the application 50:42 50 minutes, 42 seconds probably so April onward first quarter end of first quarter 50:50 50 minutes, 50 seconds okay sir okay uh thank you thank you very much thank Thank you ladies and gentlemen. Due to 51:00 51 minutes time constraints that was the last question for today. I now hand over the conference to management for closing comments. 51:08 51 minutes, 8 seconds Uh thank you. 51:10 51 minutes, 10 seconds So the strategic investments and initiatives we have implemented over past year is beginning to align setting the stage for new phase of growth for 51:19 51 minutes, 19 seconds our products. We anticipate a more pronounced impact on our financial performance in the upcoming quarters as capacity utilization scales up and our 51:28 51 minutes, 28 seconds enhanced product mix begins to deliver drive higher profitability. We appreciate your continued support and 51:35 51 minutes, 35 seconds trust in Arthur. Should you have any further question, please reach out to SGA, our investor relations advisor. 51:43 51 minutes, 43 seconds Thank you and have a nice day. Thank you on behalf of RT Drugs Limited. 51:49 51 minutes, 49 seconds That concludes this call. Thank you for joining us and you may now disconnect your lines. Thank you.