Aarti Drugs Limited — Q2 FY26

Aarti Drugs Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=6GpKiZLxoM8 Published: 6 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Q2 and H1 FY26 earnings conference call of RT Drugs Limited. As 0:10 10 seconds a reminder, all participant lines will be in the listenonly mode and there will be an opportunity for you to ask questions after the presentation 0:18 18 seconds concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0:25 25 seconds zero on your touchtone phone. Please note that this conference is being recorded. Before we begin, a brief disclaimer. This conference call may 0:34 34 seconds 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. 0:43 43 seconds These statements are not the guarantees of future performances and it may involve risks and uncertainties that are difficult to predict. I now hand the 0:52 52 seconds conference over to Mr. Adesh Patel, COO and CFO from RT Drugs Limited. Thank you and over to you sir. 1:01 1 minute, 1 second Thank you. Good morning to all stakeholders and thank you for joining us today for RTX Q2 and H1 FY26 earnings 1:11 1 minute, 11 seconds conference call. Joining me on the call today are Mr. Harshit Salah, our joint managing director. 1:18 1 minute, 18 seconds Morning everyone. A full-time director Architect Limited, Mr. [clears throat] Misha Sala, managing 1:27 1 minute, 27 seconds director, Pinacle Life Sciences, and HA, our investor relations advisors. 1:33 1 minute, 33 seconds I hope you have had the opportunity to view our financial results and investor presentation for the quarter and the 1:40 1 minute, 40 seconds half year ended 30th September 2025 which are available on the stock exchanges and our websites. 1:49 1 minute, 49 seconds Let me begin with some notable operational and business highlights before moving to the financial highlights. 1:58 1 minute, 58 seconds U2 FI26 marked continued progress on our strategic priorities of backward integration, capacity expansion and 2:06 2 minutes, 6 seconds strengthening cost competitiveness even as the broader industry witnessed soft domestic demand trends particularly in 2:14 2 minutes, 14 seconds the antibiotic category. Export demand however remained robust offsetting the weakness in the domestic market and 2:22 2 minutes, 22 seconds contributing to improvement in overall margin performance. To begin with, our new manufacturing facility at Saiaka, 2:29 2 minutes, 29 seconds Gujarat commenced commercial production on September 4, 2025 and is currently in 2:36 2 minutes, 36 seconds its early operational phase. This facility manufactures dimethylamine, monomethylamine, trimethylamine and their derivatives. 2:46 2 minutes, 46 seconds Key intermediate used in the production of various downstream APIs and specialty chemicals including anti-diabetic products such as metformin. 2:56 2 minutes, 56 seconds The facility has already commenced operations and achieved expected performance benchmark during initial ramp up. 3:06 3 minutes, 6 seconds Around 40 50% of captive requirements are now being met internally and once the facility reaches full utilization by 3:14 3 minutes, 14 seconds the end of FY26, we expect to achieve 100% captive consumption for our anti-diabetic 3:21 3 minutes, 21 seconds series. The MMA and TMA output are being monetized through external sales, further diversifying our revenue mix. 3:31 3 minutes, 31 seconds As this facility stabilizes, it will structurally enhance raw material security, improve cost efficiency, and 3:38 3 minutes, 38 seconds contribute meaningfully to margin expansion over the medium term. The plant is expected to scale up to fulfill the entire cap over next 6 to 12 months. 3:49 3 minutes, 49 seconds At present, production is primarily catering to domestic demand. However, we aim to expand into export markets as volume scales and opportunities rise. 4:02 4 minutes, 2 seconds This facility marks a significant milestone in our backward integration journey aimed at reducing external raw material dependency, enhancing supply 4:10 4 minutes, 10 seconds chain reliability, and improving long-term margin resilience. 4:15 4 minutes, 15 seconds Looking ahead, our focus will remain on ramping up capacity utilization at Saika and stabilizing production of new 4:23 4 minutes, 23 seconds intermediates, particularly those supporting our antid-diabetic portfolio. 4:28 4 minutes, 28 seconds This is expected to bring structural implementing cost efficiency and gross margin stability in the coming quarter. 4:34 4 minutes, 34 seconds Moving to the salicylic acid chain, our Tarakur facility continues to progress through its stabilization phase with 4:43 4 minutes, 43 seconds consistent improvement in operational performance and capacity ramp up. 4:47 4 minutes, 47 seconds Production visibility is improving with 300 tons per month achievable in the near term and a targeted ramp up to 500 tons per month for Q4 A FI26. 5:00 5 minutes We expect the plant to turn evida positive once it crosses around 800 tons per month. This vertical will also 5:09 5 minutes, 9 seconds supply for upcoming 400 tons per month salate line enabling downstream integration better overhead absorption and improved margin stability. 5:20 5 minutes, 20 seconds Together these projects aim to convert the India's import dependence into domestic supply with the salicellate chain emerging as a key value driver. 5:31 5 minutes, 31 seconds Moving back to our API segment, we are also witnessing early signs of stability in global API pricing which should 5:39 5 minutes, 39 seconds support both volume growth and price recovery in H2 FI26. 5:45 5 minutes, 45 seconds On the regulatory and compliance front, we are in the process to receive EU certifications for several key products from our large scale plants, allowing us 5:54 5 minutes, 54 seconds to shift EU registered products to lower cost facilities and thereby expand export margins. 6:02 6 minutes, 2 seconds We are targeting metforming filings in the US market post F26 once ongoing validation processes are completed. an 6:10 6 minutes, 10 seconds important milestone in our plan to re-enter regulated markets with higher margin products. 6:17 6 minutes, 17 seconds We are also advancing on our BI standard approval which will support domestic competitiveness and strengthen import subsidition efforts. 6:27 6 minutes, 27 seconds During the quarter, we also received a voluntary closure direction from the Maharash pollution control board for the 6:34 6 minutes, 34 seconds chlorosulonation process at our Tarapur T150 unit following an isolated HCL gas leakage incident on September 8, 2025. 6:45 6 minutes, 45 seconds Importantly, no injuries or casualties were reported. 6:50 6 minutes, 50 seconds The closure was a precautionary measure under applicable environmental regulations and we have already completed a comprehensive safety audit 6:58 6 minutes, 58 seconds and are working closely with the relevant authorities to secure the required approvals. 7:04 7 minutes, 4 seconds This has no material financial or operational impact as we have adequate inventory and alternate sourcing arrangement in place and all other 7:13 7 minutes, 13 seconds processes at the Tarakur unit continue to operate normally. 7:18 7 minutes, 18 seconds Additionally, Chrysil ESG ratings assigned an independent rating of Cryil ESG52 to RGs 7:27 7 minutes, 27 seconds reflecting the company's steady progress in environmental management, governance standards and social responsibility. 7:34 7 minutes, 34 seconds Our broader ESG road map remains focused on energy transition to renewable sources, waste reduction and safety 7:42 7 minutes, 42 seconds enhancement. The upcoming solar project being developed through our JV with closing green power is an important step 7:51 7 minutes, 51 seconds toward reducing our power cost and carbon footprint while supporting our long-term sustainability commitments. 7:59 7 minutes, 59 seconds Now let's discuss some consolidated financials for Q2 FI26. 8:06 8 minutes, 6 seconds Revenue stood at rupes 652.9 crores as compared to rupees 599.8 8 crores in Q2 8:13 8 minutes, 13 seconds FI25 reflecting a growth of 9% YI driven by favorable export volumes. IBITA stood 8:21 8 minutes, 21 seconds at rupees 84.4 K versus rupes 68.5 K in Q2 FI25 8:29 8 minutes, 29 seconds up 23% yearonear with IBIDA margin at 12.9% versus 11.4% 4% in Q2 FI25 an 8:38 8 minutes, 38 seconds expansion of 150 basis points add stood at rupes 45.2 cr as compared to 35 kores 8:46 8 minutes, 46 seconds in Q2 FI25 up 29% yearonear translating to a PAT margin of 6.9% versus 5.8% 8% 8:54 8 minutes, 54 seconds last year, an improvement of 110 basis points. The capex incurred during Q2 9:01 9 minutes, 1 second FI26 was rupees approximately rupees uh 45.6 crores. 9:09 9 minutes, 9 seconds For H1 FI26 revenue stored at rupes 1,243.7 9:16 9 minutes, 16 seconds crores as compared to rups 1,156.3 cr in H1 F525 reflecting a growth of 8% yearonear. 9:26 9 minutes, 26 seconds IIDA stood at rupes 158.8 cr versus rupes 134.6 cr in H1 FI25 up 18% 9:35 9 minutes, 35 seconds yearonear with IBIDA margin at 12.8%. 8% versus 11.6% in H1 FI25 and expansion of 120 basis points. 9:45 9 minutes, 45 seconds PAT stood at 99.1 K as compared to 68.3 crores in Q2 FI25 up 45% year-on-year 9:55 9 minutes, 55 seconds translating to a PAT margin of 8% versus 5.9% last year an improvement 210 basis points. Total debt during H1 FI26 also 10:05 10 minutes, 5 seconds reduced by rupees 41 crores to 571 crores in total leading to reduction in 10:13 10 minutes, 13 seconds our finance cost and a record low debt to equity ratio of 0.39 10:20 10 minutes, 20 seconds with respect to standalone business revenue stood for Q2 FI26 revenue stood 10:27 10 minutes, 27 seconds at rupees 578.9 K versus 543.1 KES in Q2 FI25 growth of 7% yearonear this 10:36 10 minutes, 36 seconds standalone business contributed 89% to the consolidated revenue 58% of the standalone revenue came from domestic 10:44 10 minutes, 44 seconds market and 42% from the export market within the API business the antibiotic 10:51 10 minutes, 51 seconds therapeutic category contributed 36.1% anti-diabetic around 15.3% 10:58 10 minutes, 58 seconds antiprotool 18.8% 8% anti-inflammatory 11.8% antifungal 11.7% and the rest contributed 6.4% to total APIs. 11:11 11 minutes, 11 seconds Let's discuss about formulation segment. 11:14 11 minutes, 14 seconds Revenues from formulation stood at rupes 82.4 crores in Q2 FI26 compared to 65.6 11:22 11 minutes, 22 seconds K in Q2 FI25 up 26% yearon-year. receive exports contributed 68% 11:30 11 minutes, 30 seconds uh to this revenue for H1 FI26 foreign nation revenue was rupes 162.8 crores 11:38 11 minutes, 38 seconds compared to 136.6 6 in H1 FY25 up 19% with exports accounting for 63% of total formulation sales. 11:48 11 minutes, 48 seconds With that I did now like to open the floor for questions. Thank you. 11:54 11 minutes, 54 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 the touchtone telephone. 12:04 12 minutes, 4 seconds If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use 12:10 12 minutes, 10 seconds handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. 12:20 12 minutes, 20 seconds The first question is from the line of Rahan say from Tineta Asset Managers. Please go ahead. 12:27 12 minutes, 27 seconds Oh yeah. Hi good morning and thank you for your opportunity. Uh so so my quick question 12:34 12 minutes, 34 seconds just a bit understanding on your R&D pipeline commercialization timeline on your API. So sir you have mentioned developing complex APIs and formulations 12:43 12 minutes, 43 seconds for regulated markets like the US and Europe. Could you so could you please highlight two to three key products expected to be commercialized in the 12:51 12 minutes, 51 seconds next 14 months and their potential contribution to revenue that we are expecting? Yes. 12:59 12 minutes, 59 seconds Yes. for the complex uh US and other regulatory markets products. Uh I would uh like to ask Vishua to highlight few of our R&D products in formulations. 13:10 13 minutes, 10 seconds Uh yeah so we will be commercializing u first product in US in this quarter uh which is balutmide 13:18 13 minutes, 18 seconds and uh we are also expecting to commercialize uh uh few anti-diabetic products in Europe UK and other 13:28 13 minutes, 28 seconds regulated markets X US uh between uh the next 6 to 9 months. So these uh products 13:36 13 minutes, 36 seconds these new products combined uh should give us an additional top line of uh uh anywhere between 70 to 70 crores. 13:47 13 minutes, 47 seconds Uh okay. Uh my second question okay you're continuing with the question sir. 13:54 13 minutes, 54 seconds uh yeah I would like to add upon that mean definitely uh this was a near-term we have a long pipeline for uh next two 14:01 14 minutes, 1 second to three years and uh as as far as uh yeah our standalone segment is concerned so there uh we are in the process of 14:10 14 minutes, 10 seconds formulating a new product portfolio uh for regulatory as well as for non-regulatory markets uh in the API segment but this is not restricted to 14:19 14 minutes, 19 seconds API segment we are also focusing on the derivatives of the two Greenfield projects which you have started and we 14:26 14 minutes, 26 seconds would try to identify few key key uh derivative products large derivative products from these two chemistry. Yeah. 14:35 14 minutes, 35 seconds Uh okay. Uh just a bit of follow up on this only on the domestic side. So like while export demand remain strong. So 14:43 14 minutes, 43 seconds like what we are seeing in the domestic side especially in the in antibiotics continues to stay. So are you witnessing 14:50 14 minutes, 50 seconds any recovery trends in the domestic API market enter therapy? 15:01 15 minutes, 1 second Okay. Uh so as far as uh overall demand is concerned it is fine but uh in the antibiotic category we did face uh 15:10 15 minutes, 10 seconds issues in few of the products. uh what what we now Q3 is typically a lean 15:17 15 minutes, 17 seconds quarter anyways for the acute therapy so we hope that uh from Q4 onwards there should be some slight pick up in the 15:24 15 minutes, 24 seconds domestic demand but uh we'll come to know within uh two to three months uh okay I'll ask one skipping question 15:33 15 minutes, 33 seconds then so like is there any any you have to put any margin guidance for going forward margin in your market. 15:42 15 minutes, 42 seconds Yeah. So right now uh on the standalone basis we slightly crossed 13% and uh 15:49 15 minutes, 49 seconds pre-COVID levels we we we were uh doing 15 to 16%. No doubt the industry has changed uh the markets have changed the 15:58 15 minutes, 58 seconds competitors have changed uh over past so many years but uh definitely uh we have certain drivers which we are working on 16:08 16 minutes, 8 seconds which can help us to take these IDA margins on a consolidated basis back to uh 15%. uh it will take some time maybe 16:17 16 minutes, 17 seconds in uh in [clears throat] sequentially quarter on quarter we hope to see continuous improvements in these margins. 16:25 16 minutes, 25 seconds Uh okay yeah thank you and thank you so much and good luck there. Thank thank you. 16:31 16 minutes, 31 seconds Thank you very much. The next question is from the line of Dangi from Ratmatra Investment Management LLP. Please go ahead. 16:41 16 minutes, 41 seconds Yeah. Hi, thanks uh and congratulations for the know good set of numbers in terms of recovery in the market. 16:49 16 minutes, 49 seconds Uh my question is on the two front I'm not promote I'm not able to hear you clearly 16:56 16 minutes, 56 seconds one is it better now? Yeah, much better. 17:01 17 minutes, 1 second Yeah. So I'm just saying uh uh on the uh pricing side uh what we are seeing today uh is the price bottomed out or year on 17:10 17 minutes, 10 seconds year they are flat they are going up uh quarter on quarter and year on year on the API side that's the first uh second 17:19 17 minutes, 19 seconds is it what what the volume growth in the API this quarter 17:26 17 minutes, 26 seconds uh okay so uh yearon-year basis uh if you talk about the volume growth 17:32 17 minutes, 32 seconds Um so domestic was quite flat frankly speaking because of lackluster demand in uh antibiotic category. In fact there 17:40 17 minutes, 40 seconds was slight degrowth of around couple of percent but export did fantastic means we we had more than 30% volume growth in 17:47 17 minutes, 47 seconds export sales. So it got compensated. So o overall uh we had around 9.33% volume 17:54 17 minutes, 54 seconds growth in the API segment in this quarter. 17:59 17 minutes, 59 seconds Okay. Okay. So there's been 2% so 2% around negative contribution from the uh 18:05 18 minutes, 5 seconds if I look at from the seven and 9 uh and second you said that our chang 18:14 18 minutes, 14 seconds business have changed but at the same time we have integration the new facility product. 18:24 18 minutes, 24 seconds So uh in terms of the margin if I look at uh 12 months of year or 18 months of year should we be you know uh crossing 18:31 18 minutes, 31 seconds the pre level yeah as far as margins are concerned so 18:38 18 minutes, 38 seconds on the standalone basis we already mean just crossed 13% not too much just you can say 13%. Uh so couple of percent uh 18:47 18 minutes, 47 seconds we we still see no doubt uh you know uh we are still uh absorbing around 3 and a half kes of losses in salicylic acid 18:56 18 minutes, 56 seconds plus uh we just commercialized our fa plant for just 1 month and you know initially always the capac utilization 19:03 19 minutes, 3 seconds would be low and that that expenses also we have absorbed. So in spite of doing all this uh the margin is 13%. So we are 19:11 19 minutes, 11 seconds quite confident that once we get every all these things in order uh you know sequential on a sequential quarter and 19:18 19 minutes, 18 seconds quarter basis sequentially our margin should steadily keep on increasing and our ultimate target should be somewhere between 15 to 16%. 19:29 19 minutes, 29 seconds Uh the line for the participant is disconnected. 19:33 19 minutes, 33 seconds The next question is from the line of Candace Pereira from Nat Capital. Please go ahead. Hi uh thank you for taking my question. 19:42 19 minutes, 42 seconds So uh I can see that the other income is very low compared to last year. So will it be in this range only for the second half as well? 19:54 19 minutes, 54 seconds Uh okay frankly speaking uh I don't have an I cannot comment on that. uh but more 20:02 20 minutes, 2 seconds or less uh if you add up the other income uh for the entire year it should be steady sometimes you know it might 20:10 20 minutes, 10 seconds shift from one quarter to another oh okay for the entire year it should be steady but uh I I can't comment I don't have 20:18 20 minutes, 18 seconds the number right now with me unfortunately uh okay uh and any tax rate guidance for 20:26 20 minutes, 26 seconds FI 26 and 27 yeah so our tax rate will continue to be uh in that means all all everything 20:34 20 minutes, 34 seconds inclusive around 25% tax. So we have already gone into that tax regime. Uh this year for the first quarter we had 20:42 20 minutes, 42 seconds uh some uh you know tax uh refunds from the previous years and that is the reason why for the first quarter our tax rate was so low. 20:53 20 minutes, 53 seconds Okay. Okay. Okay. 20:54 20 minutes, 54 seconds And we are expecting a little bit more refund but at at mostly that should be completed in this financial year only in Q3 Q4. 21:03 21 minutes, 3 seconds Okay. So that will be in the range of 25%. Correct. 21:06 21 minutes, 6 seconds Uh so but for the next year it should be ideally in the range of 25%. 21:11 21 minutes, 11 seconds Okay. For next year. So that is 25 FI 27. FI 27. Yes. 21:18 21 minutes, 18 seconds Okay. uh and in the uh overall revenue guidance range uh you're providing. 21:25 21 minutes, 25 seconds Yeah, actually uh uh we had targeted you know in early teens in terms of volume growth uh when we started the year when 21:34 21 minutes, 34 seconds we started the year uh definitely uh first two quarters I mean first quarter the demand was quite less quite low what 21:43 21 minutes, 43 seconds we saw uh in second quarter the export demand picked up really well but domestic demand still uh suffered a little bit mainly on the account of 21:52 21 minutes, 52 seconds antibiotic therapy uh So right now means for this quarter we made around 6% uh value growth. Uh 22:00 22 minutes for this H2 for H2 uh we will definitely aim towards you know uh high high singledigit value growth uh for H2 FY26. 22:13 22 minutes, 13 seconds Okay. Thank you so much. 22:17 22 minutes, 17 seconds Thank you. The next question is from the line of Sanel Jane from Abed Capital. Please go ahead. 22:27 22 minutes, 27 seconds Uh hello. Am I audible? Yes sir, you're audible. 22:31 22 minutes, 31 seconds Yeah. Uh hi sir, good morning. Uh congratulations on a good set of numbers. I just have a couple of questions regarding the backward integration. 22:40 22 minutes, 40 seconds So uh how much is the capacity that you have uh added for this backwards integration? 22:48 22 minutes, 48 seconds Uh okay. So the total methyl element plants is around uh 60 TPD. We can scale 22:55 22 minutes, 55 seconds it up to 80 TPD as well. Uh 60T. Yeah, that is the metal capacity. 23:04 23 minutes, 4 seconds And uh what is the total capeex amount that is spent on this capex and what can be the like uh asset turn? 23:15 23 minutes, 15 seconds So as uh so the thing is total mean roughly I mean just to give a ballpark figure we had told earlier that for both 23:23 23 minutes, 23 seconds our green field projects we had spent somewhere around 200 crores each but obviously not not everything in a green field project goes towards the single product. 23:33 23 minutes, 33 seconds There are a lot of common amenities which are developed as well. 23:36 23 minutes, 36 seconds Uh and this for both the green field projects this is the phase one of the investments. So still land parcel is little empty and we can still go for 23:44 23 minutes, 44 seconds phase two investments which will be at much lower capex but with much higher asset turn. So for the first phase uh I 23:51 23 minutes, 51 seconds would say the asset turn uh will not be great. It will be in the range of 1 to 1.5. But the thing is uh the reason for 24:00 24 minutes that is uh it is first phase. So a lot of common facilities are being constructed uh which which for which we require heavy capex in the phase one. 24:11 24 minutes, 11 seconds Okay. Okay. Understood. And will this uh capacity be fully utilized for captive consumption or will some things will be sold outside? 24:20 24 minutes, 20 seconds Uh so so our main idea was to go for captive consumption but this chemistry has side chain products you know which we will need to sell outside. 24:32 24 minutes, 32 seconds Okay. So can you give a ballpark range how much will be captively consumed and how much will be sold in? 24:38 24 minutes, 38 seconds Yeah. Yeah. ballpark would be our uh roughly 50 to 50% we will try to consume capital%. 24:47 24 minutes, 47 seconds Understood. Understood. 24:49 24 minutes, 49 seconds Okay. That's from my side. Thank you so much sir. Thank you. Thank you. 24:53 24 minutes, 53 seconds Thank you very much. The next question is from Jam Gilani from Swan Investments. Please go ahead. 25:03 25 minutes, 3 seconds Hi sir, thank you for this opportunity. 25:05 25 minutes, 5 seconds So in our earlier call we had mentioned that uh we should be growing by 15% casar for fi 26 and fi 27 and now we are 25:14 25 minutes, 14 seconds saying that around fi26 revenue growth should be in the uh single digit. So do we expect that fi27 to be in the higher 25:22 25 minutes, 22 seconds uh 20% range and maintain our guidance or we expect uh to decrease our guidance for the years? 25:29 25 minutes, 29 seconds Yeah. Uh see it's interesting question. uh so the thing is uh the the negative rate 25:39 25 minutes, 39 seconds variance is now behind us so there won't be any negative rate varian so going forward 25:46 25 minutes, 46 seconds uh if if I compare fi 26 fi 27 versus fi 26 25:52 25 minutes, 52 seconds uh then we definitely feel that you know uh we can try to hit those mid teams of 26:00 26 minutes volume growth because of on the account of uh newer products your capacities which are installed. 26:07 26 minutes, 7 seconds So it does put us in a very favorable position to achieve that kind of growth if everything goes well. The key 26:15 26 minutes, 15 seconds challenge will remain um uh would be salicylic the ramp up of salicylic acid. If that happens very 26:23 26 minutes, 23 seconds quickly and very successfully uh then uh it would be that much easier to achieve those numbers. uh on along with that we 26:32 26 minutes, 32 seconds are also uh the the the Saika project is doing pretty well very well uh the customer acceptance of the product is good in fact even for salilic recently 26:41 26 minutes, 41 seconds in last 2 three months uh we were able to sell quite a bit of product so the market acceptance of the product quality 26:47 26 minutes, 47 seconds is now very good uh now it is just that we are mean you require multiple batteries for a bigger tonnage plant and 26:57 26 minutes, 57 seconds for we had done modific scale We had done some modifications in one or two batteries and tried to check the quality and we have achieved that. 27:06 27 minutes, 6 seconds Now that it is achieved uh what we foresee is one second. 27:15 27 minutes, 15 seconds Yeah, sorry. Uh now that we have achieved the quality uh so we are just uh putting up the batteries and uh 27:21 27 minutes, 21 seconds scaling up the plant. So definitely FI27 looks promising. If everything goes well 27:29 27 minutes, 29 seconds then we can try for uh 15 to 20% growth for next year. 27:35 27 minutes, 35 seconds So what what would be the utilization that we are aiming for the salicylic acid like if we were to meet our 15 20% growth aspirations what would be the 27:44 27 minutes, 44 seconds desired utilization for it? Um so more than I would say means uh let's 27:53 27 minutes, 53 seconds say what what our total potential was mean earlier what we had thought of uh as compared to that uh it should be at 28:01 28 minutes, 1 second least you know 60% utilization please okay and uh sir any year by which we 28:09 28 minutes, 9 seconds expect our 15 to 16% margin guidance that can be achieved any which year you're asking 28:17 28 minutes, 17 seconds No, so as you were guiding earlier that 15 to 16% margins can be achieved. So which year do you think that it can be FI 27 or FI 28? 28:28 28 minutes, 28 seconds So yeah, so the thing is uh if if uh we achieved all the volumes in FI27 as 28:36 28 minutes, 36 seconds promised then uh at least you know towards the end of FI27 we should start hitting that run rate of 28:43 28 minutes, 43 seconds 15%. that that is what we we target internally. 28:48 28 minutes, 48 seconds U depends on the market conditions but then we can target 15% by the end of FY27. I'm not talking about the entire 28:55 28 minutes, 55 seconds FI27 but let's say H2 or something again. Got it sir. That's it from my side. Thank you and all the best. 29:03 29 minutes, 3 seconds Thank thank you. 29:06 29 minutes, 6 seconds Thank you very much. The next question is from the line of AM Loda from Sati Consultants. Please go ahead. 29:14 29 minutes, 14 seconds Hello. Hello. Yes. Yes. Yes sir. 29:19 29 minutes, 19 seconds Ma'am just I wanted plan to be incurred in FY26 and FY27. 29:28 29 minutes, 28 seconds This is the question number one. Okay. 29:40 29 minutes, 40 seconds How much capex company is planning to incur in FY26 and FY27? 29:48 29 minutes, 48 seconds Yes. Um so for FY26 we already incurred some not [clears throat] entirely but near about 29:55 29 minutes, 55 seconds 100 KES for the H1 somewhere in late '90s. 30:00 30 minutes uh and we estimate around uh you know uh 150 200 K of uh capex investing cash flows in this particular year. 30:11 30 minutes, 11 seconds Total 200 total 200 KS and uh we have some expansion plans for metformin as well 30:19 30 minutes, 19 seconds for next year. uh if everything goes smoothly then uh we might require around that much uh similar kind of investment 30:28 30 minutes, 28 seconds uh in FY27 as well and for next round of big capex uh we we are doing we are you 30:36 30 minutes, 36 seconds know in the process of developing a product portfolio and as soon as we finalize the blueprint of that then we will be announcing it to the investors that what kind of further capex the 30:46 30 minutes, 46 seconds company plans to achieve growth from long-term perspective when I say long-term more for more of a like you know uh five to 10 year perspective. 30:55 30 minutes, 55 seconds Sir my second question is relating to depth. What is the present depth and how the company is planning to reduce the 31:03 31 minutes, 3 seconds depth? Yes. So um so steadily means quarteron quarter 31:10 31 minutes, 10 seconds yearon year uh our debt to equity ratio has been coming down. uh as we said for standalone it is.33 for consolidated it 31:18 31 minutes, 18 seconds is.39 debt to equity ratio and the total debt uh as it stands on 30th September 31:26 31 minutes, 26 seconds on a consolidated basis is around 571 crores long-term as well as working capital both 31:34 31 minutes, 34 seconds both inclusive both inclusive 570 571 71 how the whether what is the targets 31:44 31 minutes, 44 seconds of the company is reducing the depth in next FI27 and by the end of FI 26. 31:51 31 minutes, 51 seconds Yeah. Yeah. So, so uh historically means at RC we had always maintained a debt to equity ratio you know somewhere between 31:59 31 minutes, 59 seconds 0.5 to earlier it was much higher but what we u our targets is to keep the debt to equity ratio between 0.5 to 7. 32:09 32 minutes, 9 seconds The main reason for that is that it gives us a good leverage and it also help us enhance the roe. What we believe 32:17 32 minutes, 17 seconds here is that we we do give around you know 25% to 30% of our pat back to shareholders every year year one year. 32:26 32 minutes, 26 seconds uh so with that kind of shareholder payout in mind uh and with the higher roe target we we like to maintain the 32:33 32 minutes, 33 seconds debt to equity ratio at 04 to 7 because if the debt goes down too less then probably we'll do a shareholders payout 32:41 32 minutes, 41 seconds something like that so our target would be in 4 to 7 range debt to equity that means that means the company is not 32:50 32 minutes, 50 seconds planning any depth reduction you will keep no no we don't need no we are we don't need to Because if you don't do shareholder payouts within 32:58 32 minutes, 58 seconds 2 three years the debt would be wiped off. But then thing is uh we are we have always been for last 41 years uh 33:06 33 minutes, 6 seconds dividend paying company. So we'll continue to do that in future as well. Okay. Thank you sir. I have done you. 33:16 33 minutes, 16 seconds Thank you very much. The next question is from Milan Sajal Kapoor from Antifragile Thinking. Please go ahead. 33:24 33 minutes, 24 seconds Yeah. Hi. Thanks for taking my questions. Um Adesh, um how satisfied are you with the current yield and 33:31 33 minutes, 31 seconds purity profile of the output from both the Saiaka green field and the salicylic green field um compared to where the 33:39 33 minutes, 39 seconds Chinese players are today because basically we we using these as importit 33:48 33 minutes, 48 seconds uh so so there is one Sriaka. So in Saiaka we are doing metal amines. So methylamines is not uh a import 33:57 33 minutes, 57 seconds substitute product definitely salicylic acid which we had done in tarapur that green field is absolutely as you correctly said it is an import 34:04 34 minutes, 4 seconds substitute product. So as far as yield and purity profile of salicylic acid is concerned as against the Chinese quality 34:12 34 minutes, 12 seconds material now means earlier I would say in January in the start of this calendar year we were little behind frankly 34:19 34 minutes, 19 seconds speaking but then uh with great efforts from our R&D team now uh two months back I would say uh we we were able to 34:28 34 minutes, 28 seconds achieve the required purity profile for salicylic acid definitely we still have to work a lot on the uh process improve 34:35 34 minutes, 35 seconds improvement part because uh right now we are focusing on the achieving the uh quality parameters. So the quality 34:42 34 minutes, 42 seconds parameters are met. Fortunately now the the product is widely accepted in the market. We have sold to majority of the 34:49 34 minutes, 49 seconds salicylic acid customers in India. So the quality is very well accepted as of today. Uh now we we need to focus more 34:58 34 minutes, 58 seconds on the cost improvement part for salicylic acid. And as far as the SAKa project goes which we just commercialized in September month uh two 35:07 35 minutes, 7 seconds months back uh fortunately uh there the quality is spot on right from the day one. Uh obviously the derivative part uh 35:16 35 minutes, 16 seconds which is under cap which we are captively consum consuming. Uh I think we are pretty much there. Uh so scikitra 35:24 35 minutes, 24 seconds project would you know uh would be online in a much faster way than what happened to the salicylic acid project. 35:31 35 minutes, 31 seconds and and for the SIA project uh we are not competing with the imports but it is the domestic manu other domestic manufacturers with whom we are competing 35:41 35 minutes, 41 seconds yes absolutely so the the broader strategy at the Saiaka plant is to reduce dependence on the external suppliers and enhance the gross margins 35:49 35 minutes, 49 seconds by integrating backward correct and correct correct and when I look at the presentation so 35:56 35 minutes, 56 seconds I'm on slide seven h our gross margins have shown a significant improvement of um more than 300 basis points. Um the 36:05 36 minutes, 5 seconds question really is what is the driver behind this improvement? Is it the this backward integration or is it better 36:13 36 minutes, 13 seconds realization uh some sort of a process improvement? 36:16 36 minutes, 16 seconds What exactly is kind of contributing uh to this improvement in gross margins and uh what could perhaps be a sustainable 36:24 36 minutes, 24 seconds gross margin going into fiscal 27 um if you can. 36:29 36 minutes, 29 seconds Okay. Okay. So um as we are referring to that particular slide uh so what happened in last two to three years I 36:36 36 minutes, 36 seconds would say two to three years post FI mean from FYI 23 onwards 23 24 25 26 now 36:44 36 minutes, 44 seconds uh you know because of that Russian war uh in Jan 22 so March quarter uh 2022 36:51 36 minutes, 51 seconds after that the oil spiked quite the prices went up very sharply for first 9 months and then it started to pull off 37:00 37 minutes very sharply when India started purchasing oil from Russia. So the the prices cooled off and since then the prices of the raw metals have been 37:08 37 minutes, 8 seconds coming down slowly and steadily because it had been coming down slowly slowly slowly across the globe. Now in that 37:15 37 minutes, 15 seconds scenario what happened because we carry an inventory of around uh 90 to 100 days in total since including raw materials 37:22 37 minutes, 22 seconds wip and finished good. uh you know in the declining in mean uh declining prices scenario we always take a little 37:31 37 minutes, 31 seconds bit of heat on the mean the the gross margin always take a hit because of the FIFO basis of the accounting and that was the reason why the margins were 37:40 37 minutes, 40 seconds artificially compressed for last years mean for the last financial years not that our the our efficiency was less or 37:47 37 minutes, 47 seconds anything like that but now that the the the decline has stopped since last n almost 9 months I would say 9 to 12 months 37:54 37 minutes, 54 seconds uh the decline is so less now the volatility has gone down and because the volatility has gone down the true margins of the now coming up you know 38:04 38 minutes, 4 seconds the price variation effect in the gross margins have now now been going out and that is why we can see there is a steady increase in the gross margin however I 38:13 38 minutes, 13 seconds would like to point out that in spite of uh taking losses you know uh means you can say uh very little gross margin 38:21 38 minutes, 21 seconds salicylic acid kind of a product still we are able to maintain uh this profit margin numbers. So we are pretty much 38:29 38 minutes, 29 seconds hopeful that uh once salicylic acid gets on gets in line then our uh P&L statement will improve drastically. 38:39 38 minutes, 39 seconds Yes. So you mentioned the number of 800 tons if I heard it you correctly correctly but uh can you please rejoin the queue? 38:48 38 minutes, 48 seconds Sure. Sure. No problem. Thank you very much ladies and gentlemen. In order to ensure that the management is able to 38:55 38 minutes, 55 seconds address questions from all participants, I kindly request everyone to limit your questions to two per participant. 39:03 39 minutes, 3 seconds The next question is from the line of Aman Goyal from Access Securities. Please go ahead. 39:09 39 minutes, 9 seconds Yeah, thank you for the opportunity and and congratulation on great set of number. So my question is related to the next big big opportunity in the pharma 39:18 39 minutes, 18 seconds sector which is GLP1. So we are already in the API uh for anti-diabetics through 39:24 39 minutes, 24 seconds metamorphine. So are we seeing any uh potential in in entering into GLP1 39:32 39 minutes, 32 seconds intermediaries or API? Uh are there any internal discussion or early stage evaluation to entering into this opportunity? 39:43 39 minutes, 43 seconds Yeah. So as just few minutes back we we discussed that right now uh uh as we pointed out we are in the phase early 39:51 39 minutes, 51 seconds phase discussion uh to you know put a new product portfolio uh taking into account growth of you 40:00 40 minutes know next 5 to 10 years not not for next 3 four years because next 3 four years growth would be majorly driven by the the capacities what we have already 40:08 40 minutes, 8 seconds installed as of now with two green field projects and other brownfield expansions what been going on in last year and even in 40:15 40 minutes, 15 seconds this year. Uh so for the next round of uh growth you know uh let's say for 40:22 40 minutes, 22 seconds company to grow from uh 5,000 to 10,000 K of revenue uh we are forming a product portfolio we will take uh we will 40:31 40 minutes, 31 seconds consider these molecules as well what what you mentioned right now uh into account and looking at all strength and weaknesses and the kind of markets kind 40:41 40 minutes, 41 seconds of uh client profile this certain molecules has and whether we are already dealing with those clients. Based on all these factors, we will uh you know 40:50 40 minutes, 50 seconds narrow down the list and start working towards that goal. 40:54 40 minutes, 54 seconds Okay sir. Uh thank you. That's that's all from my Thank you. 41:01 41 minutes, 1 second Thank you very much. The next question is from the line of Nilles Kug from HTSC securityities. Please go ahead. 41:09 41 minutes, 9 seconds Yeah, thanks. Thank you [clears throat] sir. My question is regarding our uh psycha mind facility. See um as you 41:18 41 minutes, 18 seconds mentioned it's a a step in the backward integration and it will enhance your raw material security as well and the margin 41:25 41 minutes, 25 seconds resilience. So what kind of a benefit in terms of percentage or beeps uh in your 41:32 41 minutes, 32 seconds uh gross profit margin or at a bit level you expect because of this psycha once the plant is running at a full capacity. 41:42 41 minutes, 42 seconds Uh so this is means uh as we all know that this particular uh 41:49 41 minutes, 49 seconds product means chemistry the product line as of today the margins look fantastic no doubt about that. uh 41:57 41 minutes, 57 seconds but uh as we scale up you know uh the the additional capacity which will come 42:04 42 minutes, 4 seconds in the market uh probably it would be prudent to expect some bit of price deduction 42:12 42 minutes, 12 seconds uh in these products. But in spite of that the main reason for us going backward integrated was because we are 42:19 42 minutes, 19 seconds heavily dependent on one of these uh raw materials and that is a big chunk of our overall business. [clears throat] 42:26 42 minutes, 26 seconds So mean easily I would say it it will be taking care of 10 to 13% of backward 42:34 42 minutes, 34 seconds integration of the revenues the product which we are contributing 10 to 14% of our revenues that will be further backward integrated by this particular 42:42 42 minutes, 42 seconds facility and plus we'll be selling the side chain products outside which are quite profitable as well definitely the profit margin what we expect is much 42:50 42 minutes, 50 seconds better than our current uh aggregate profit margin of the company um I I'm so 42:57 42 minutes, 57 seconds I'm actually sorry because I cannot u estimate you know exactly how much it will uh add on if everything goes well 43:06 43 minutes, 6 seconds definitely the profit looks very high but I would not like to you know uh point out that number it's but because 43:14 43 minutes, 14 seconds uh we don't feel that the things will remain as they are right now it slowly slowly the selling process should come 43:21 43 minutes, 21 seconds down but what we still expect is you know from this project At least we 43:27 43 minutes, 27 seconds should try to make around u 18 to 20% ebida margins is what we feel from this uh from this project cycle project. 43:38 43 minutes, 38 seconds Okay. 18 to 20. Okay. And and um uh are we looking for a merchant sale of this product as well or just the for the 43:46 43 minutes, 46 seconds captive consumption? Uh I mean I'm talking about the yeah methile derivatives. 43:52 43 minutes, 52 seconds You're talking about specific derivatives. So if it is uh specifically for which we have if it is you're talking about specific intermediate then 44:01 44 minutes, 1 second the intention is not to sell that uh intermediate outside the intention is to captively consume that 44:08 44 minutes, 8 seconds uh but the side chain products you know because to to manufacture that product there couple of side chain products are 44:15 44 minutes, 15 seconds automatically produced so that we will have to sell out there is no option and fortunately one of the side chain product is going to our group companies 44:23 44 minutes, 23 seconds itself you know they a heavy demand for that uh FM product. So, so fortunately from the demand 44:30 44 minutes, 30 seconds perspective we have seen a very good response from the market. Two products are already selected because one because of factory connection, second because of 44:37 44 minutes, 37 seconds group company sale and the third one we we are seeing very good uh acceptance in the market. So we hope that uh this 44:45 44 minutes, 45 seconds project uh will do uh [clears throat] better lot quicker than what we saw in salad. 44:55 44 minutes, 55 seconds So the second product you mean the case of the caffeine the the key. 44:59 44 minutes, 59 seconds No no no no what I'm trying to say that there are three methylamines which are being manufactured MMA DMA and TMA. So 45:07 45 minutes, 7 seconds what I was talking about the DMA derivatives that will go in for anti-diabetic uh therapy for reason 45:14 45 minutes, 14 seconds uh for MMA and TMA uh those uh will be sold out. 45:20 45 minutes, 20 seconds Okay. And and uh any uh I mean you can tell the volume how much volume you were 45:27 45 minutes, 27 seconds procuring earlier and how much is the replacement as of now. 45:32 45 minutes, 32 seconds So uh I gave one number that you know around 40 40 or roughly mean it's a plus 45:41 45 minutes, 41 seconds 5% around 40% of the captive consumption requirement as of today uh we are 45:47 45 minutes, 47 seconds satisfying uh but but we are trying to ramp it up very quickly. We have to resolve certain issues equipment 45:55 45 minutes, 55 seconds delivery issues. Once they are done then uh you know we we can uh uh mean ramp up 46:03 46 minutes, 3 seconds pretty fast but main thing is our metformin capacities as of today it stands at 1400 metric tons per month as 46:10 46 minutes, 10 seconds of today but uh we plan to expand that as well you know going forward. So once we expand that then our requirement for 46:19 46 minutes, 19 seconds captive consumption will go up and even that we have taken care of in the existing facility. 46:26 46 minutes, 26 seconds Okay, got it. Got it. Thanks. Thanks a lot, sir. That's all for my side. Yeah. 46:32 46 minutes, 32 seconds Thank you very much. As there are no further questions, I would now like to hand the conference over to management for closing comments. 46:40 46 minutes, 40 seconds Okay. Thank you. Uh so before we conclude, I did like to reiterate that RTR is entering a key growth phase where 46:48 46 minutes, 48 seconds multiple strategic initiatives undertaken over last two years are starting to converge. We expect to see 46:55 46 minutes, 55 seconds the impact of these efforts more visibly in the coming quarters as utilization improves, product mix strengthens and 47:03 47 minutes, 3 seconds new capacities begin contributing meaningfully to profitability. Our focus remains on discipline execution, operational excellence and continuous 47:12 47 minutes, 12 seconds enhancement of technological capabilities across our value chains. 47:16 47 minutes, 16 seconds Thank you for your continued support and trust in Arthr. For any further queries, please reach out to SJ, our investor 47:24 47 minutes, 24 seconds relations advisor. Thank you and have a nice day. 47:28 47 minutes, 28 seconds Thank you very much. On behalf of RT Drugs Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.