Aarti Drugs Limited — Q4 FY26

Aarti Drugs Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=rgr0YZ1WWt4 Published: 3 hours ago

0:01 1 second Ladies and gentlemen, good day and welcome to RT Drups Limited Q4 FI26 earnings conference call. This conference call may contain 0:09 9 seconds forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of 0:17 17 seconds future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode 0:24 24 seconds and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start then zero on your touchstone phone. 0:34 34 seconds Please note that this conference is being recorded. I now hand the conference over to Mr. Aish Patil, COO 0:41 41 seconds and CFO from RTX Limits. Thank you and over to you Mr. Patil. Thank you. 0:48 48 seconds A very good morning and welcome to the Q4 and FI26 earnings conference call of RT Limited. Joining me today are Mr. 0:58 58 seconds Harshit Sa joint managing director Mr. Harit Sha wholetime director 1:06 1 minute, 6 seconds Mr. Visha Tawa, managing director of Pinnacle Lifeense Private Limited, along with our investor relations advisor, HGA. 1:15 1 minute, 15 seconds We trust that you have had the opportunity to review our financial results and investor presentation for 1:23 1 minute, 23 seconds the quarter and full year ended 31st March 2026 which have been uploaded with the stock 1:30 1 minute, 30 seconds exchanges and are also available on our website. Let me start by outlining the key business and financial highlights for the period. 1:41 1 minute, 41 seconds FI26 was an important execution year for RT drugs as we moved from the investment phase into the operational scale of 1:49 1 minute, 49 seconds phase. From a broad broader industry perspective, FYI26 remained challenging due to multiple macroeconomic and 1:58 1 minute, 58 seconds geopolitical uncertainties including global trade disruptions, trade tariffs and GST changes and pricing volatility 2:07 2 minutes, 7 seconds and towards the end of the FI26 by elevated input cost, crude and gas-based raw material supply chain constraints 2:14 2 minutes, 14 seconds due to the waste Asia war. During the quarter, freight packaging, utility and 2:21 2 minutes, 21 seconds energy related cost also remain elevated while availability of certain key raw materials remain inconsistent at various points. 2:31 2 minutes, 31 seconds Despite a challenging operating environment for the industry, the business exited the year on a much 2:38 2 minutes, 38 seconds stronger footing with a sharp sequential recovery in Q4 FI26. 2:44 2 minutes, 44 seconds Operational initiatives such as process optimization, alternate sourcing strategies, energy 2:52 2 minutes, 52 seconds efficiency measure and tighter planning help us mitigate part of these pressures and ensure continuity of operations. 3:02 3 minutes, 2 seconds Consolidated Now we'll talk about consolidated financial highlights. Q4 FI26 revenue stood at rupees 721.1 3:12 3 minutes, 12 seconds cr as compared to rupees 678.6 crores in Q4 FI25 3:18 3 minutes, 18 seconds and rupees 62.9 crores in Q3 FI26 reflecting a growth of 3:25 3 minutes, 25 seconds 6% yearonear and 20% quarteron quarter respectively. 3:30 3 minutes, 30 seconds Ibida stood at rupees 96.6 6 crores versus 95.2 crores in Q4 FI25 and rupes 3:39 3 minutes, 39 seconds 56.3 crores in Q3 FI25 indicating flattish year-on-year growth and a growth of around 72% on quarteron 3:49 3 minutes, 49 seconds quarter basis. IDIA margin stood at 13.4%. 3:54 3 minutes, 54 seconds Pat stood at rupees 55.3 cr as compared to rupees 62.8 8 cr in Q4 FI25 4:03 4 minutes, 3 seconds and 40.5 cr in Q3 FI26 a deg growth of 12% yearon year and up to 36% Q on Q Q 4:12 4 minutes, 12 seconds increase that margin translated to 7.7% for Q4 FI 26 4:21 4 minutes, 21 seconds with respect to the standalone business highlights for Q4 FI26 revenue stood at rupees 631.7 4:29 4 minutes, 29 seconds Kores versus rupes 623 kores in Q4 by25. 4:35 4 minutes, 35 seconds Standalone business contributed around 88% to the consolidated revenue. 63% of the standalone revenue came from the 4:42 4 minutes, 42 seconds domestic market and 37 from the export market. Domestic revenue grew by 7% yearon year whereas export revenue declined by 7% yearon year. 4:54 4 minutes, 54 seconds Within the API business, the antibiotic therapy therapeutic category contributed around 37.8% 5:02 5 minutes, 2 seconds antiprotool around 19.6% anti-inflammatory around 11.9% anti-diabetic 15%. 5:11 5 minutes, 11 seconds Antifungal around 10% and the rest contributed around 5.7% to the total API sales. 5:19 5 minutes, 19 seconds Now let's talk about formulation segment highlight. Revenue from formulation stood at rupees 91.3 crores compared to 5:27 5 minutes, 27 seconds 64.8 crores in Q4 FI25 up by 41% year-on-year basis. Exports contributed 69% to this revenue. 5:38 5 minutes, 38 seconds For FI26 formulation revenue was rupes 330.5 cr compared to rupees 284.9 cr in FI25 5:49 5 minutes, 49 seconds up by 16%. with exports accounting for 65% of total formulation sales. 5:57 5 minutes, 57 seconds Volume growth in the domestic market remained healthy and we witness momentum in select non- antibiotic and export 6:06 6 minutes, 6 seconds products. Export market especially formulations emerged as a key key growth driver supporting overall business 6:13 6 minutes, 13 seconds stability. As highlighted in slide 10 of our investor presentation, Arctess has consistently delivered positive volume 6:22 6 minutes, 22 seconds growth over last five years despite sharp price pricing corrections across the industry. While this pricing 6:29 6 minutes, 29 seconds pressure impacted realizations and topline growth across the sector, our ability to sustain volumes and maintain 6:37 6 minutes, 37 seconds customer relationships reflects our trust with the clients. 6:42 6 minutes, 42 seconds Encouragingly, rising trend started stabilizing from September 2025 onwards and this recovery strengthened further 6:50 6 minutes, 50 seconds during Q4 FI26 supported by increasing crude prices and is expected to improve realizations in 6:58 6 minutes, 58 seconds the short run. A key pillar of our performance during the quarter was the continued ramp up of our new 7:06 7 minutes, 6 seconds manufacturing facility. most notably our backward integration plant for methylamines at SA. 7:13 7 minutes, 13 seconds The facility ramped up meaningfully and was tested at higher utilization level where operational performance remain encouraging. 7:21 7 minutes, 21 seconds While the initial ramp up phase witnessed temporary headwinds, the facility achieved a production rate of 7:29 7 minutes, 29 seconds nearly thousand tons per month during the month of March 2026 and we expect to make further progress on utilization ramp up during FI27. 7:41 7 minutes, 41 seconds Over time, the project is expected to significantly reduce dependence 7:48 7 minutes, 48 seconds on externally source inputs and improve self-sufficiency for the metformin portfolio thereby supporting margin improvement and operating leverage. 8:00 8 minutes Another important structural improvement during FI26 was the increasing contribution from regulatory and export oriented markets. 8:11 8 minutes, 11 seconds Exports contribution increased from 35% in FI25 to 38% in FI26 8:19 8 minutes, 19 seconds from which regulated market contribution also grew to 73% compared to 66%. 8:27 8 minutes, 27 seconds This gradual shift towards regulated markets and higher value products indicate the company's ability to meet stringent regulatory norm and adhere to international quality standards. 8:38 8 minutes, 38 seconds Overall, while FI26 remained a transition year operationally, the business ended the year with 8:47 8 minutes, 47 seconds significantly improved momentum supported by stabilizing pricing trends, stronger exports, improving product mix, 8:56 8 minutes, 56 seconds and a gradual ramp up across new newly commissioned facilities. 9:01 9 minutes, 1 second With that, I would like to now open the floor for questions. Thank you. 9:08 9 minutes, 8 seconds Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If 9:16 9 minutes, 16 seconds you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies 9:24 9 minutes, 24 seconds and gentlemen, we will wait for a moment while the question assembles. 9:31 9 minutes, 31 seconds The first question comes from the line of V K with securities. Please go ahead. 9:42 9 minutes, 42 seconds Mr. Go, please go ahead with your question. 9:48 9 minutes, 48 seconds Mr. Go, please unmute yourself and go ahead with the question. 9:52 9 minutes, 52 seconds Since there's no reply from the line of Mr. Go, we'll move to the next participant that is Mr. Shashank Coyle from Yumara Capital. Please go ahead. 10:02 10 minutes, 2 seconds Hello. Yes. Uh thank you so much for the uh presenting and uh answer a very good number. So my question is the first 10:11 10 minutes, 11 seconds question is how is the emin plant ramping up and what's about it? 10:18 10 minutes, 18 seconds Mr. Sorry for interrupting Mr. your voice is not clear. Can you just come in the range and talk? 10:25 10 minutes, 25 seconds Hello can you hear me? 10:28 10 minutes, 28 seconds Yes go ahead. Yeah. So my question is how is the plan ramping up? What sort ofation has 10:37 10 minutes, 37 seconds it reached and what do you expect over the next two years plant? 10:44 10 minutes, 44 seconds Are you talking about methylamine plant in Fria? Yeah. Yeah. 10:49 10 minutes, 49 seconds Okay. Yeah. So u we just started that plant in the month of September. 10:55 10 minutes, 55 seconds December quarter was the first quarter where we showed a utilization of around 29% roughly and then in the March quarter we 11:04 11 minutes, 4 seconds were able to achieve 40% upward little upwards of 40%. Uh we fell slight short of our target of 45 50% uh mainly 11:13 11 minutes, 13 seconds because of uh ammonia based uh raw materials in that plant because of the waste Asia war. uh but going forward uh 11:22 11 minutes, 22 seconds we are expecting that in June quarter we should easily cross around 55 60% of uh 11:29 11 minutes, 29 seconds utilization for that plant and uh within a year's time we believe that we should be uh operating upwards of 70% 11:39 11 minutes, 39 seconds utilization uh of the methylamide plants. 11:43 11 minutes, 43 seconds Okay. Okay. And my next question is on the uh added like what was your profitability 11:50 11 minutes, 50 seconds at a a level last quarter and what sort of margin and revenue profile can it reach over the next few quarters assuming there is no change in the duty stairs. 12:01 12 minutes, 1 second Yeah. So the salicylic acid still remains a lagard as we were talking uh in last quarter that you were expecting one equipment in the the deliver 12:10 12 minutes, 10 seconds delivery was expected in late April. So uh we took a call because because we were making uh variable losses in 12:18 12 minutes, 18 seconds salicylic acid because we were not able to recover and uh reduce the raw material cost because of lack of that equipment. We took a call to shut that 12:26 12 minutes, 26 seconds production and once the the all the equipments are operational once we test it when once the variable costs are in 12:34 12 minutes, 34 seconds check and then we will restart the production of salicylic acid. So that is the latest update of salicylic acid but we do expect and hope that we will 12:42 12 minutes, 42 seconds improve and uh and very quickly uh we should start with forward integration of salicylic acid as well because that 12:50 12 minutes, 50 seconds plant is already commissioned. Uh now we'll need to do piloting and scale up of of the deratus plant. 12:58 12 minutes, 58 seconds Okay. Thank you so much. That's all from Thank you. A reminder to all the 13:06 13 minutes, 6 seconds participants that is my best star and one to ask a question. Next question comes from the line of duanil desai with turtle capital. Please go ahead. 13:16 13 minutes, 16 seconds Uh hi good morning uh Harish. Uh so my first question is uh you know your 13:23 13 minutes, 23 seconds comment mentioned that Q4 you ended on a strong north and realizations were also uh kind of stabilizing uh you know 13:31 13 minutes, 31 seconds because of this uh you know this conflict the you know there is some improvement. So uh given that uh you 13:40 13 minutes, 40 seconds know we have large capacity which is already in place uh and uh the negative rate variances behind us uh should we 13:47 13 minutes, 47 seconds expect you know 10 12% volume growth and maybe some four 5% positive uh rate variance because of the regulated market 13:56 13 minutes, 56 seconds contribution going up and overall incremental uh pricing that we are getting because of the hand. 14:05 14 minutes, 5 seconds Yeah. uh so the the the current situation is such that the API prices remain elevated because of uh West Asia 14:14 14 minutes, 14 seconds war. Uh if this persist for longer then definitely there will be a lot more positive rate variances. Uh nevertheless 14:23 14 minutes, 23 seconds we will always uh strive for achieving a volume growth of you know 8 to 10%. As you said we also have already built up 14:31 14 minutes, 31 seconds capacities from two greenfield expansion. So achieving those kind of volume that kind of volume growth would 14:37 14 minutes, 37 seconds be fairly uh easy and uh realizations it definitely it will be positive. The 14:44 14 minutes, 44 seconds longer the war stretches uh the the positive variance would be more. 14:52 14 minutes, 52 seconds Okay. So uh one follow up on this uh so uh you know we're talking about 8 to 10% volume growth uh but if you look at the 15:01 15 minutes, 1 second last two three years we have put up so much of uh capex and the new capacity is coming on screen so with that if we are 15:09 15 minutes, 9 seconds talking about 8 to 10% volume growth does which mean the existing base business uh you know there we are not 15:17 15 minutes, 17 seconds expecting much of a volume growth because that sounds slightly on the lower end with the new capacity on so many new products acid methylamine uh 15:27 15 minutes, 27 seconds spec uh so with all that why at a company level we will only you know grow 15:33 15 minutes, 33 seconds at 8 to 10% volume growth yeah so so the internal target would always be in the range of 10 to 15% 15:42 15 minutes, 42 seconds growth uh right now what is happening that we uh with a very high uh pricing 15:49 15 minutes, 49 seconds in the antibiotic segment last time what we observed because the domestic demand had gone down 15:56 15 minutes, 56 seconds and uh that is what we fear. If the crude prices remain elevated very high then uh the the the older generation 16:05 16 minutes, 5 seconds molecules which are already uh you know are being sold at a very uh cheaper rate in the market in the Indian market and 16:12 16 minutes, 12 seconds there's some kind of price regulation for the formulation players. So when the API become very expensive typically the 16:20 16 minutes, 20 seconds demand of those products uh uh goes goes down and that is what we have observed during Russia Ukraine war as well in uh 2023. 16:30 16 minutes, 30 seconds So that is the only challenge what we think uh we can face for antibiotic category in uh in the domestic market if the prices are too high. If the prices 16:39 16 minutes, 39 seconds are moderate then it won't affect the demand but if they're too high the crude remains too high then probably that might be the reason. 16:48 16 minutes, 48 seconds Okay. Got it. Uh and second question on the gross margin side of it. I think there is some improvement standalone 16:55 16 minutes, 55 seconds pages uh you know on gross margin. Um but how should we look at gross margin given that realizations are up but input 17:03 17 minutes, 3 seconds cost also is up. uh at the same time regulated thing is kind of scaling up uh you know rupee has depreciated so import 17:11 17 minutes, 11 seconds export so multiple factors uh kind of playing uh into this so are we expecting 17:18 17 minutes, 18 seconds any delta in gross margin uh for the coming year uh you know given all this 17:26 17 minutes, 26 seconds uh so the thing is uh we don't expect much movement in cross margins at such 17:34 17 minutes, 34 seconds anyway In Q4 we did uh fairly good in terms of gross margins. So what we would like is we would like to maintain this 17:42 17 minutes, 42 seconds kind of gross margins. In Q4 what happened our manufacturing costs were little higher but they can be reduced by a percent or so. Uh so which can lead to 17:52 17 minutes, 52 seconds improvement in the margin. uh however uh what I would so there are few factors like the more regulated sales uh what we 18:01 18 minutes, 1 second are targeting that will help in increasing the gross margin but on the flip side if the prices of the APS goes 18:08 18 minutes, 8 seconds too high because of the raw material prices typically what happens is that uh to maintain certain level of absolute 18:16 18 minutes, 16 seconds gross uh gross profit per kg of a product the margin tends to lower in terms of uh gross margin 18:24 18 minutes, 24 seconds You you you got my point mean for example uh if you're bleeding right yeah 36% so you're saying absolute uh I got your 18:31 18 minutes, 31 seconds point that the absolute number can go up but percentage it will look on the lower side because your uh you know your price is denominated 18:39 18 minutes, 39 seconds right right got so so my point is that okay so I in percentage terms it may not go up much maybe stabilize or slightly 18:48 18 minutes, 48 seconds lower but in absolute terms if the delta is higher does it mean that the flow through to the AITA will be significantly better and hence ITA can it can there is a possibility. 18:59 18 minutes, 59 seconds Okay. Got it. Got it. And third thing uh last question uh is on the formulation side. So we did very well on the 19:06 19 minutes, 6 seconds formulation side. So uh you know what are the contributing factors? Uh I think our oncology thing is still you know 19:15 19 minutes, 15 seconds those years are still in the approval stage. So it will take some time. uh so what is driving this growth and uh you 19:22 19 minutes, 22 seconds know going forward uh this kind of a run rate is uh you know possible to maintain how should we look at it? 19:30 19 minutes, 30 seconds Yeah Visha would you like to answer this question? 19:32 19 minutes, 32 seconds Yes. Yeah sure. So as you rightly said our oncology plant is still bre revenue uh but the current growth is coming from 19:40 19 minutes, 40 seconds our uh uh direct exports in the non-oncology portfolio. Uh since we have a growing uh uh list of products that we 19:49 19 minutes, 49 seconds are getting approvals across uh regulated markets. Um that is the business that is uh uh growing quickly 19:57 19 minutes, 57 seconds and uh that is why our export business is also uh increasing which is leading to better margins as well and uh going 20:04 20 minutes, 4 seconds ahead to we are expecting a good number of approvals and uh market extensions 20:11 20 minutes, 11 seconds which will help us uh keep increasing the export business. at a similar pace. 20:18 20 minutes, 18 seconds So, so this 90 k run rate that we got I think that number is something which is profitable to maintain in that by 27. Is that a fair way to look at? 20:28 20 minutes, 28 seconds Yeah. Yeah. Yeah. That's a fair assumption, right? Got it. That's it. And all the rest. 20:36 20 minutes, 36 seconds Thank you. 20:38 20 minutes, 38 seconds Thank you. A reminder to all the participants that you may press star and one to ask a question. 20:45 20 minutes, 45 seconds Next question comes on the line of JJ with JJ Capital. Please go ahead. 20:50 20 minutes, 50 seconds Hi sir. Sir I have a couple of questions. Firstly, regulated market contribution increased materially in 20:57 20 minutes, 57 seconds FY26 as you have highlighted. So what are the key geographies uh leading to these improvement and niche products? 21:05 21 minutes, 5 seconds Yeah. Uh I would like to highlight that uh uh this would be mainly uh Latin American markets. 21:13 21 minutes, 13 seconds Uh still uh this European market and US market uh would be our target market for 21:22 21 minutes, 22 seconds uh regulate means for more and more regulated sales going forward. So this hasn't seen an uptick yet. But uh it 21:29 21 minutes, 29 seconds looks very promising because uh we are seeing lot of business development activities mean lot of business development activities are going on uh 21:37 21 minutes, 37 seconds with these clients. Lot of approvals are coming in for the facility as as well as for the product. So mean within a year's 21:44 21 minutes, 44 seconds time uh at least by towards the end of the year we should start seeing some kind of flow in the regulated markets 21:51 21 minutes, 51 seconds from our recently reapproved USFDA plant as well as other other products. In fact uh in lot of our other dedicated plants 22:00 22 minutes as well we have taken CPS which are the European approaches for antifungal product then we have got for 22:06 22 minutes, 6 seconds anti-inflammatory as well. Uh so so uh 22:15 22 minutes, 15 seconds are you asking anything else? Yeah. So the second is what is the status update on timeline for key USB updations for APIs? 22:30 22 minutes, 30 seconds Yeah, for a so see uh for API we got the approval for uh uh USFDA already last 22:37 22 minutes, 37 seconds year the the plant approval and there are few antibiotic anti-inflammatory and few other therapies where we are 22:46 22 minutes, 46 seconds actively marketing those products in the mean US market and the flows will start within uh 12 to 18 months is what we 22:53 22 minutes, 53 seconds expect. uh then we have oncology as well for the US markets uh where we are 23:00 23 minutes filing those years in formulation business. 23:06 23 minutes, 6 seconds Yeah. So lastly also can you please highlight the status of anti-dumping products. 23:14 23 minutes, 14 seconds Uh can you repeat the question I was not able to hear. Lastly, can you please highlight the status of anti-dumping proposed light product? 23:26 23 minutes, 26 seconds Okay. Uh yeah, mean what I could make of your question was uh you are asking about anti-dumping regarding the anti-dumping materials for the products. 23:34 23 minutes, 34 seconds Yeah. So uh mean uh we we are in the process of application for our uh salicylic acid. 23:47 23 minutes, 47 seconds So that is ongoing means as we speak now the application is done and uh we are going ahead with the various stages of that uh anti duty application. 23:57 23 minutes, 57 seconds Okay. Okay. Thanks. Thank you. Thank you. 24:08 24 minutes, 8 seconds Thank you. A reminder to all the participants that you may press star and want to ask a question. 24:17 24 minutes, 17 seconds Next question. 24:20 24 minutes, 20 seconds Next question comes on the line of Sajal Kapoor with antifality. Please go ahead. Yes. 24:29 24 minutes, 29 seconds I joined the call a little late so I missed your opening remarks. I'm sorry about that. And maybe my questions are 24:38 24 minutes, 38 seconds um a little different. So firstly I mean what challenges in the MI ramp up were 24:45 24 minutes, 45 seconds kind of external and outside management control. 24:55 24 minutes, 55 seconds Sorry to interrupt you. Uh I would like there's a bit of 25:03 25 minutes, 3 seconds some disturbance uh from some of the one of the just checking please give me a moment. 25:21 25 minutes, 21 seconds Speaker the disturbance is coming from the line of Mr. Hit Sabla. Please go ahead. 25:26 25 minutes, 26 seconds Okay. Okay. Yeah. Thank you. So, so hi Adesh. What challenges um in the Saiyaka 25:33 25 minutes, 33 seconds ramp up were kind of you know outside your control or were external? I mean it could be ammonia shortage or raw material volatility 25:42 25 minutes, 42 seconds or some other factors and and which challenges were kind of internal execution issues where you know we or 25:50 25 minutes, 50 seconds the company underestimated timelines, utilization curves or operational complexity because green field plants 25:58 25 minutes, 58 seconds are always challenging in terms of um scaling up right. what often work is on the design doesn't actually show up in 26:06 26 minutes, 6 seconds the in the real production required challenges. So I mean if you can split your response in you know something 26:14 26 minutes, 14 seconds which was internal and could have been better managed and and the factors that were outside your controls and uh how we 26:21 26 minutes, 21 seconds should look at in um this particular amines green field going uh forward FI27 this fiscal thank you. Yeah. So, yeah. 26:30 26 minutes, 30 seconds So, uh we speak we spoke about the Saika plant little earlier. Uh so, so uh uh we 26:36 26 minutes, 36 seconds said that uh we started this plant the first quarter was uh December quarter where the the plant was operational at 26:45 26 minutes, 45 seconds at a full scale. Uh just give me a moment. So, so, so earlier we were just 26:52 26 minutes, 52 seconds able to uh hit the run date of around a little less than 30% utilization in the month of in the in the quarter of 26:59 26 minutes, 59 seconds December whereas in the quarter of March in spite of the fact that there were 27:06 27 minutes, 6 seconds slight raw material shortages we were able to achieve utilization upwards of 40% slightly above 40%. 27:15 27 minutes, 15 seconds And uh what we are seeing a as as far as first half of Q1 is concerned uh we are already means uh we have already 27:24 27 minutes, 24 seconds utilized the plant uh around 60%. Uh the Saika plant so the methylamine scaleup 27:30 27 minutes, 30 seconds is going pretty well. Uh we did not face much issues in this plant like the 27:37 27 minutes, 37 seconds tarapur facility of salicylic acid. uh whereas the the better utilization of 27:44 27 minutes, 44 seconds this plant will go uh uh slightly depends on our expansion uh plants of metformin itself which are also on its 27:53 27 minutes, 53 seconds way as we speak right now. So we are expanding metformin production as well. 27:58 27 minutes, 58 seconds So more the metformin production more will be the ukaration of the friaka plant. As far as internal problems are concerned, there are very minor issues 28:07 28 minutes, 7 seconds uh uh at the drying of one of the derivatives of methile elements but uh we are not worried about that uh as of 28:15 28 minutes, 15 seconds now because uh still we are able to increase our utilization and uh probably within 28:23 28 minutes, 23 seconds uh 3 4 months the the the real profitability of SA plant will start showing you know results. 28:30 28 minutes, 30 seconds Sure. Now that's helpful um Az. So in terms of the metformin I mean how much of the value chain do we now control because see the the state of um India as 28:40 28 minutes, 40 seconds a whole in metformin especially was was the fact that no one absolutely no one was backward integrated right and 28:48 28 minutes, 48 seconds everyone was dependent on China. So how how is the situation on the ground today as far as RT drugs are concerned for metformin? 28:58 28 minutes, 58 seconds Yeah. So metformin there are two main intermediates. one is sourced from China and Europe and the other one is uh indigenous and appropriate domestically. 29:06 29 minutes, 6 seconds So the DCDA which is imported uh there are a lot of players in that. So uh not much to be made in that product as of 29:14 29 minutes, 14 seconds now plus it has a exclusive chemistry hazardous chemistry as well in terms of manufacturing. uh but whereas the the 29:22 29 minutes, 22 seconds indigenous intermediate was concerned permit there I believe now we are the only ones as of today uh with the 29:30 29 minutes, 30 seconds backward integration facility. So that puts us in a very good position you know to further reduce we were already very 29:37 29 minutes, 37 seconds cost competitive in metformin because we uh we were clearly uh leader means with handsome majority when it comes to 29:46 29 minutes, 46 seconds selling metformin in uh semi-regulated or un I won't call unregulated because none of the APA markets are unregulated 29:53 29 minutes, 53 seconds as of now but I would say uh other than the highly regulated markets uh the the RO market we were absolute leaders in 30:00 30 minutes metabolin where cost of production is very important important and with the advent of this backward integration our cost will further go down. Another 30:08 30 minutes, 8 seconds important update on metformin is that uh we have already uh filed a DMF with us 30:14 30 minutes, 14 seconds for metformin. Uh now slowly once we uh ramp up the capacity we would like to 30:21 30 minutes, 21 seconds invite FDA to inspect our dedicated metformin facility. So that could be the next stage for metformin. We already have this European approval but what we 30:29 30 minutes, 29 seconds feel is that US approval is the key even for selling the metform into European markets. 30:38 30 minutes, 38 seconds Okay. So right and so that's helpful. So given our backward in integration projects are now ramping up. Is it fair 30:46 30 minutes, 46 seconds to expect that every year should show y if not quarter over quarterarter improvement in terms of the margins? 30:53 30 minutes, 53 seconds Because see the the economics of the business are simple. the fixed costs are fixed right as the utilization improves 31:00 31 minutes uh and as long as the realizations are not suffering big time right uh then there is also anti-involution talk 31:08 31 minutes, 8 seconds happening coming from China so putting all that into perspective is it fair to expect at least 100 to 200 basis points 31:16 31 minutes, 16 seconds margin IA improvement in uh FI27 uh 31:25 31 minutes, 25 seconds Yes, that should uh we we can expect that in terms of gross contribution 31:32 31 minutes, 32 seconds 100 at least 100 basis point we can definitely target 31:38 31 minutes, 38 seconds and and where do we see uh going or when do we see us going back to the the sunny 31:45 31 minutes, 45 seconds days um scenario so we in 2015 1617 era we were having 16% um operating margins 31:54 31 minutes, 54 seconds pretty consistent ly we are way off that number. I I I know 2021 the the co year was an exception 32:01 32 minutes, 1 second where we hit 20% which was never sustainable but for our kind of a business with backward integration and now this formulation also ramping up and 32:10 32 minutes, 10 seconds you know at some point in time the enco facility will also come into play I mean do you do you really think that 16% 32:17 32 minutes, 17 seconds margin at an IITA level is a is a challenge even now no with so uh with all with more 32:26 32 minutes, 26 seconds regulated sales from our USFDA plant. Uh with metformin getting uh USF approval hoping that uh then with the advent of 32:35 32 minutes, 35 seconds formulation the more the exports of formulation is already increased and the EBIDA margins uh in the formulation business is now upwards of 32:43 32 minutes, 43 seconds 16 to 17%. So which is very good for us and it were consistent for the last two quarters and with uh incoming oncology 32:52 32 minutes, 52 seconds uh uh business definitely as the utilation go goes up uh we will start adding margins at the level because as 33:01 33 minutes, 1 second of now also we are experiencing some part of oncology cost developmental cost in some part uh in the P&L. So as the 33:09 33 minutes, 9 seconds oncology sales improve uh definitely uh ebida margin should improve. 33:16 33 minutes, 16 seconds And just remind me again on the capex plan for this fiscal and the next fiscal because I might have missed that. Yeah. 33:24 33 minutes, 24 seconds So as of now uh uh means green field project uh we are not doing but you can 33:31 33 minutes, 31 seconds call it quai green field not means uh mix between a brownfield and a green field uh because uh the expansion the 33:39 33 minutes, 39 seconds new product production lines new production plants which are putting up are coming up more uh mainly in the 33:46 33 minutes, 46 seconds adjoining blocks of the existing facilities. 33:49 33 minutes, 49 seconds So overall the the requirement of uh capital would be slightly low as compared to the green field projects 33:58 33 minutes, 58 seconds because in green field projects plot development the your compound wall your utility setups your other admin setup QC 34:05 34 minutes, 5 seconds Q QC block setup that those occ those take up lot of funds whereas in uh this kind of expansion what we are doing 34:12 34 minutes, 12 seconds planning right now and uh overall plans are there in like uh three to four This 34:18 34 minutes, 18 seconds is so we'll require little lesser capex but the asset turn of of that capex should be slightly higher because it is 34:26 34 minutes, 26 seconds a cosai green field or brownfield you can say uh so overall budget what and this is this I was talking about the 34:34 34 minutes, 34 seconds standalone plus uh in formulations also we are uh coming up with additional block because we already got a EDQM 34:42 34 minutes, 42 seconds block in formulation for OSD I'm talking other than non-enco and we want to double that capacity and we want to make 34:49 34 minutes, 49 seconds that block as EDPM as well. Uh so all put together uh we feel that you know in 34:58 34 minutes, 58 seconds uh in next 2 to 3 years uh at least 2 to 3 years uh definitely around uh uh 3 to 35:06 35 minutes, 6 seconds 400 KES of capex might go in but again that will be a safe cap capex more of uh increasing the existing uh capability 35:15 35 minutes, 15 seconds rather than entering into altogether new new uh uh new new products Whereas in 35:22 35 minutes, 22 seconds formulation the part of this capex will also go in formulation uh for developing our basket of oncology products because 35:31 35 minutes, 31 seconds that requires heavy capex. So part of the capex of the will will flow into the formulation business and we are 35:38 35 minutes, 38 seconds expecting to grow our formulation business uh you know at least till thousand in next uh 3 to five years. 35:48 35 minutes, 48 seconds Right. And how much of this expansion is backed by customer discussions and demand or order visibility versus you 35:57 35 minutes, 57 seconds know we want to be ready with the capacity hoping that the demand will come. I mean is there a is 36:04 36 minutes, 4 seconds understood understood. So as far as a standalone business is concerned because it is a brownfield or coai green field kind of projects all these products are 36:13 36 minutes, 13 seconds the products which we are already working in. So we have pretty good visibility of the demand of that product. So it is backed up by customer 36:20 36 minutes, 20 seconds uh talks and discussion. As far as formulation is concerned, I would uh Visha can you just explain how how we are taking going forward for formulation demand? 36:32 36 minutes, 32 seconds Hello Misha, are you on the line? Mr. Sabla, please go ahead. 36:42 36 minutes, 42 seconds I the voice is breaking from me a bit. 36:44 36 minutes, 44 seconds Could you just repeat the last part? I could not hear that very clearly. 36:48 36 minutes, 48 seconds Yeah, I I will explain. Uh Visha uh the question is that uh whatever capex we are doing in next two years or 3 years. 36:58 36 minutes, 58 seconds Uh so as far as the formulation capex is concerned, how much of that capex is backed by the visibility of demand or 37:05 37 minutes, 5 seconds customer discussions and how much is like more visual like you know we will be ready with this and then probably the demand will come. That is the question. 37:14 37 minutes, 14 seconds Right. So, so just to break it down, you know, we are capex is in two parts. So, the capacity enhancement program that 37:21 37 minutes, 21 seconds we're doing is pretty much based on our uh uh forecast for the signed products or where we have clear visibility on 37:29 37 minutes, 29 seconds once our uh products are launched, we will need those kind of volumes. So, it's a brownfield expansion to meet our 37:37 37 minutes, 37 seconds uh forecasted growth from existing products as well as new products. And uh as far as our capex on R&D development 37:46 37 minutes, 46 seconds goes those are typically you know we look at developing products first and then when the products are at late stage 37:55 37 minutes, 55 seconds uh development either uh do those years are ready or near approval that's when we start to sign uh contracts. Uh so 38:03 38 minutes, 3 seconds apart from a few contracts which are uh signed at a very early stage, most of them are signed once uh uh products are almost uh ready to be marketed. 38:16 38 minutes, 16 seconds Okay. Okay. Well, that's helpful. Thank you. Thank you for answering all my questions team and all the very best. Thank you. Thank you. 38:23 38 minutes, 23 seconds Okay. Thanks. 38:27 38 minutes, 27 seconds Thank you. Next question comes from the line of Mea Agraal with Mount Indra. Please go ahead. 38:34 38 minutes, 34 seconds Uh hello. Thank you for the opportunity. Am I audible? 38:40 38 minutes, 40 seconds Uh Mr. Gal, can you just speak a little more louder? Yeah. Yeah. Hello. Hi. Am I audible? Yes, please go ahead. 38:48 38 minutes, 48 seconds Yeah. Thank you for the opportunity. Actually, can you share a few more? Uh I will not even catch you properly. 38:55 38 minutes, 55 seconds We are restarting the production. So, what happened actually? Can you please explain? 39:00 39 minutes Yeah. Uh so in salicylic acid uh lot of improvements are to be made at 39:08 39 minutes, 8 seconds the process level uh one was regarding the phenol recovery which was uh going west uh on the mother liquor side. So we 39:17 39 minutes, 17 seconds have mean we already did trials few months back we had ordered the equipment as well but uh before that equipment is 39:26 39 minutes, 26 seconds installed mean it will be installed any time now. So before that is installed and uh we operate and check that it is 39:33 39 minutes, 33 seconds uh you know working properly. Uh though we have taken the pilot batches so it ideally it should work properly. So once 39:40 39 minutes, 40 seconds that is done only then we feel that you know there is a scope for us to come in variable profit for salicylic acid. So 39:49 39 minutes, 49 seconds unless we install that equipment there is no point in going ahead with higher production of salicylic acid because 39:55 39 minutes, 55 seconds then that will in turn uh you know uh cause more losses for us. At the same 40:02 40 minutes, 2 seconds time in salicylic acid what we have done we have already commissioned uh means it's almost in the late stage uh we have 40:11 40 minutes, 11 seconds commission we are going in for derivatives of salicylic acid. So because the the the selling prices of derivatives of salicylic acid is much 40:19 40 minutes, 19 seconds higher you know the the scope for margin expansion is more if you go if we sell derivatives directly. 40:26 40 minutes, 26 seconds Secondly we are also going in for anti-dumping for salicylic acid and thirdly uh we we we have uh there is one 40:34 40 minutes, 34 seconds more scope of improvement in salicylic acid uh and that is at the part of effluent. So in China what is happening 40:42 40 minutes, 42 seconds the effluent stream uh is just a saline water this high saline water which they are allowed to drain into the sea 40:51 40 minutes, 51 seconds because other impurities are not there in that. So if so we are checking the possibility with the government because 40:57 40 minutes, 57 seconds if in if we have to evoporate all that thing then you know that p put puts us little bit behind when it comes to 41:05 41 minutes, 5 seconds competing with China. So, so that is that so there are two three challenges we are uh mean tackling all of them 41:12 41 minutes, 12 seconds together. So once so one one is your uh liquid liquid extractor what I was talking about for improvement in uh 41:20 41 minutes, 20 seconds phenol phenol recovery uh second was means uh reducing cost at the effluent side third is anti-dumping duty and 41:30 41 minutes, 30 seconds fourth is your derivatives plant which is will come up by the may end or max by mid mid of June there is a severe lab uh 41:39 41 minutes, 39 seconds fabrication labor shortage what we observed uh in in in summer season partly also because of lack of cooking gas and all. 41:49 41 minutes, 49 seconds So the labor in the area is not there. 41:51 41 minutes, 51 seconds So so that is why the plant got little delayed but uh anyways it will be done soon. So these are the you know multi-prong approach what we are 41:59 41 minutes, 59 seconds following up to improve the salicylic acid and then restart the facility. 42:05 42 minutes, 5 seconds Okay. And also just wanted to any revenue writings and margin for FYI 27 like what are we expecting? 42:14 42 minutes, 14 seconds Yeah. So uh uh we see we already uh did around uh 13 more than little 13% uh IBIDA margins. 42:27 42 minutes, 27 seconds uh we would they will see the war is one big challenge uh how it will shape up how how far the crude prices will go up 42:36 42 minutes, 36 seconds whether they will stay up that that high for a very long period of time or they will stay around say let's say 1900 which is okay which is fairly decent so 42:45 42 minutes, 45 seconds there is slight uncertainty but uh hoping for the best uh we would still like to target IBIDA margins 42:53 42 minutes, 53 seconds anywhere between 13 and a half to 14% for this uh FI27 H had this war not been there uh the our earlier targets were 43:02 43 minutes, 2 seconds definitely 14 to 14 and a half% Ebida margin for FI27 okay and also one more large question I 43:10 43 minutes, 10 seconds wanted to understand like what is happening in the antibiotic segment like are we seeing any recovery or what is the one antibiotic set please 43:19 43 minutes, 19 seconds so uh there was some recovery on a sequential basis mean March versus December quarter 43:27 43 minutes, 27 seconds But uh you know uh one thing which can hurt this antibiotic demand a bit more is the elevated prices 43:36 43 minutes, 36 seconds of antibiotics means the of the raw materials and all. So uh if the crude remains too high of it's like more than 43:44 43 minutes, 44 seconds $110 $120 then probably uh in short run it might affect the de domestic demand of antibiotics. That is what we feel. 43:56 43 minutes, 56 seconds Mr. Art are you seeing any uh volume growth or price growth in antibiotic sector how are we seeing for our company? 44:08 44 minutes, 8 seconds So there is price growth right now means if we talk year on year we are expect in FI27 we are expecting a very big price 44:14 44 minutes, 14 seconds growth in antibiotics uh def uh volumes probably can be bit flattish because uh I'm saying flattish 44:23 44 minutes, 23 seconds because uh anyways the volumes of API 26 were not that great for antibiotics so uh it won't go further down is what we believe. 44:33 44 minutes, 33 seconds Okay. Thank you. Thank you so much and all the best. Okay. Thank you. 44:39 44 minutes, 39 seconds Thank you. Next question comes from the line of Nlesh Kay with the HCSC securities. Please go ahead. 44:50 44 minutes, 50 seconds Mr. Go, please go ahead with the question. 44:54 44 minutes, 54 seconds Mr. K, please unmute yourself and go ahead with the question. 44:59 44 minutes, 59 seconds Since there's no reply from the line of Mr. Kay, we'll move to the next participant and that is from the line of Rishab Jen with Modi Capital. Please go ahead. 45:09 45 minutes, 9 seconds Uh hello. Am I audible? Yes. Yeah. Uh thank you for the opportunity. 45:15 45 minutes, 15 seconds Uh so my question is uh management indicated selective API price increase during the quarter. Uh which products 45:23 45 minutes, 23 seconds have witnessed price hikes and how sustainable are these increase and uh do we expect to see further increases? 45:30 45 minutes, 30 seconds Uh Har would you like to answer this question? 45:34 45 minutes, 34 seconds The prices are not stable. We don't we are not expecting any further increase in the price. Uh depends this will definitely depend on the raw material 45:42 45 minutes, 42 seconds and crude oil level prices. Basically all solvents and other chemicals are at 45:50 45 minutes, 50 seconds peak level now and we don't expect further going up unless crude goes beyond 140 you know 130 $40 45:59 45 minutes, 59 seconds bar but okay so since you mentioned crude so are we seeing a crunch in any of the key raw 46:07 46 minutes, 7 seconds materials right now because of war and is there any impact of the business? 46:12 46 minutes, 12 seconds No, only in March we had some issue uh sourcing raw material mainly ammonia but otherwise raw materiality is not an issue as of now. 46:21 46 minutes, 21 seconds Okay. Okay. Thank you. That will be all from my side. Thank you. 46:29 46 minutes, 29 seconds Thank you. Next question comes from the line of Ra Jen with VBD Asset Manager. Please go ahead. 46:36 46 minutes, 36 seconds Hi uh good morning sir. So uh I have three questions. First one is uh with 46:43 46 minutes, 43 seconds respect to uh the overall capex which you mentioned uh uh 300 to 400 crores over the next three four years. Uh given 46:52 46 minutes, 52 seconds that the cash generation is quite healthy and we always maintain some level of uh debt equity 47:00 47 minutes uh is there any other capex which you're planning beyond this uh because then uh it will not match the overall calculation over the next three years. 47:12 47 minutes, 12 seconds Uh so so uh if at all we feel something is more lucrative probably we might end 47:18 47 minutes, 18 seconds up replacing some of the capex uh and if the current projects you know the current two greenfield projects the 47:25 47 minutes, 25 seconds site and the salicylic one. If there is stark improvement in the cash flow from these two uh projects then probably we 47:33 47 minutes, 33 seconds can have a bigger budgets as well because then the cash generation would be a lot higher uh than what it is today. So based on today's uh financials 47:43 47 minutes, 43 seconds this much is quite easily doable as of today also our long consolidated long-term debt is around 328 crores and short-term would be around 248 crores. 47:55 47 minutes, 55 seconds So that way and and the debt to equity ratio is also historically lowest as of today in this quarter. 48:03 48 minutes, 3 seconds Yeah, that's right. That's why I so maybe by the end of the year you may further uh uh basically fine-tune the overall capex budget. 48:12 48 minutes, 12 seconds Correct. Correct. Correct. That that is absolutely correct. 48:15 48 minutes, 15 seconds Okay. The second question uh is with respect to CWIP of 214 crores which is currently sitting that is related to 48:24 48 minutes, 24 seconds which project uh how much uh so uh CW IP what amount 48:32 48 minutes, 32 seconds you said 214 crores I could see yeah yeah so so so a part part of that was related to the coin boiler uh and 48:41 48 minutes, 41 seconds and some uh uh brownfield expansions what we are doing And also a major part of it is related to the uh formulation 48:50 48 minutes, 50 seconds uh R&D the dosius oncology dosius what we are developing you know that also requires a huge uh capex and as on and 48:58 48 minutes, 58 seconds on and on and on and on and on and on and on and on and on and on when uh we will get the approval then we will start the amotization of those uh capex. 49:06 49 minutes, 6 seconds So most of it should be capitalized this year right 527 maybe first half uh 49:12 49 minutes, 12 seconds except oncology it it uh a lot would uh visha can you uh give an fair idea about in oncology uh how much we would uh Mr. 49:23 49 minutes, 23 seconds projects will go live this year and next year mean in terms of percentages I think she's I think he's asking except oncology but for basically for the 49:31 49 minutes, 31 seconds formulation part uh the project life cycles are quite long so most of the CWIP will start getting amortized over 49:41 49 minutes, 41 seconds the next 24 months there might be some portions that will be advertised this year and next year 49:48 49 minutes, 48 seconds but the major chunk would be post 24 months Okay. Understood. Understood. Uh and so 49:57 49 minutes, 57 seconds the last one this year um all the projects which have started uh like uh the methylamines and the salicylic acid 50:06 50 minutes, 6 seconds and all what was the total loss which is there in this year because lot of ramp up related cost will be there. 50:16 50 minutes, 16 seconds Mhm. 50:17 50 minutes, 17 seconds uh for the entire year you're asking FY26 for the entire year what is the total IITA lost because of new projects 50:29 50 minutes, 29 seconds uh a very rough estimate if you ask me uh only the IITA loss would be somewhere in 50:36 50 minutes, 36 seconds the range of uh 18 to 20 kores for the entire year. 50:44 50 minutes, 44 seconds Understood? Okay sir. Thank you. All the best. Thank you. Thank you. 50:51 50 minutes, 51 seconds Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I now hand the conference over to the management for closing comments. 51:02 51 minutes, 2 seconds Thank you. So, uh thank you for asking the questions and showing the increase in art as utilization act. Hello. 51:12 51 minutes, 12 seconds Hello. 51:14 51 minutes, 14 seconds Yeah. As utilization improves across our newly commissioned facilities and the benefits of our strategic investment starts reflecting more meaningfully in 51:23 51 minutes, 23 seconds operations, we expect a gradual improvement in profitability and return ratios for the coming years. We remain 51:31 51 minutes, 31 seconds committed to discipline execution, operational excellence and sustainable long-term value creation for all our stakeholders. 51:39 51 minutes, 39 seconds Thank you once again for your continued support and confidence in Ritz. For any further questions, please please reach 51:46 51 minutes, 46 seconds out to SGA, our investor relations advisor. Thank you and have a nice day. 51:54 51 minutes, 54 seconds Thank you. On behalf of RTX Limited, that concludes this conference. Thank you for joining us. You may not dislike.