Akums Drugs & Pharmaceuticals Ltd — Q3 FY26

Akums Drugs & Pharmaceuticals Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=H0oh-Y-Xtt8 Published: 2 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Q3 FI26 earnings conference call of Echomes Drugs and 0:08 8 seconds Pharmaceuticals Limited. As a reminder, Ekum's Drugs and Pharmaceuticals Limited hosted by Ambit Capital. As a reminder, 0:17 17 seconds all partsman lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:25 25 seconds you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that 0:32 32 seconds this conference is being recorded. I now hand the conference over to Mr. Gorav Tinani from Ambit Capital. Thank you and over to you Gar. 0:44 44 seconds Thank you Michelle. Uh good day everyone. On behalf of Ambbit Capital, I would like to welcome you all to the Q3 FY26 0:53 53 seconds earnings call for Akum's Drugs and Pharmaceuticals Limited. Uh I now hand over the call to Mr. Ankit J to 1:02 1 minute, 2 seconds introduce the Akum's management. Thank you and over to you Ankit. Thank you Garab for the introduction. 1:09 1 minute, 9 seconds Good afternoon everyone. Welcome to Akam's Q3 and 9month FI26 earnings call. 1:14 1 minute, 14 seconds I am Ankit Jan and I head investor relations at Husband Pharmaceuticals. On today's call, we are joined by Mr. 1:21 1 minute, 21 seconds Sanjiv Jan, managing director, Mr. Sep Jan, managing director, Mr. Sumit Sut, Chief Financial Officer, and Mr. Sahil Maheshwari, who is the head of our 1:29 1 minute, 29 seconds strategy. I will commence with our standard disclaimer that any discussion on today's call might include forward-looking statements which are predictions or projections of future 1:38 1 minute, 38 seconds events. Our b our business faces several risks and uncertaintities that could cause our actual results to differ. 1:44 1 minute, 44 seconds materially from what is expressed or implied in such statements. At AAMS, we do not undertake any obligation to publicly update any forward-looking 1:52 1 minute, 52 seconds statements whether as a result of new confirmation, future events or otherwise. Having said that, I hope you have you would have had the opportunity 2:00 2 minutes to review our investor presentations and financial results that we posted on Friday evening. I would now like to hand over to our managing director, Mr. Sundep Jan, to discuss our performance. 2:09 2 minutes, 9 seconds Thank you. 2:10 2 minutes, 10 seconds Namaskar. Supo. Uh thank you Mr. Thank uh and once again appreciate everyone for taking time out to join us uh for our Q3 and 9 months FY26 earning call. 2:24 2 minutes, 24 seconds Q3 FY26 was a strong quarter for AOMS. 2:27 2 minutes, 27 seconds Our healthy operating performance was characterized by strong execution across multiple key segments. CDMO registered a 2:36 2 minutes, 36 seconds healthy topline growth of more than 16% driven by strong volumes. The international branded formulation uh 2:43 2 minutes, 43 seconds business saw significant improvement led by demand recovery across key markets. 2:49 2 minutes, 49 seconds Domestic branded formulation continued its uh steady trajectory aided by portfolio expansion, improved field 2:56 2 minutes, 56 seconds coverage and sustained uh momentum in core therapy areas. The quarter also saw benefit of operating le leverage playing 3:05 3 minutes, 5 seconds out in the CDMO business with improved cap capacity utilization as well as steady ramp up of newer facility while 3:13 3 minutes, 13 seconds API pricing stayed under pressure stabilizing in uh select molecules and disciplined cost management has helped 3:20 3 minutes, 20 seconds mitigate impact on the CDMO margins. We continue to work towards reducing losses in the trade generic and API segment by 3:28 3 minutes, 28 seconds way of portfolio rationalization and tighter control over overheads. Our Europe European CDMO project is 3:34 3 minutes, 34 seconds progressing as per our stated plan. We successfully advanced on the regulatory and execution milestones. Uh following 3:43 3 minutes, 43 seconds the receipt of EUGMP accreditition for our oral liquids facility plant number two and are on track uh to start 3:50 3 minutes, 50 seconds supplies in FY28. Our oral solid facility F plant one also received renewal of EUGMP certification 3:58 3 minutes, 58 seconds showcasing our continued commitment towards global quality manufacturing. 4:03 4 minutes, 3 seconds Supply of finished finished oral formulation from plant one to Europe has already been commenced this fiscal. The Zambia project also remains on track 4:12 4 minutes, 12 seconds with commercial supplies from the Indian plants expected in H1 of FY27. 4:17 4 minutes, 17 seconds Uh these developments further showcase our progress towards establishing ACUMS as a global pharmaceutical company. 4:25 4 minutes, 25 seconds During Q3 FY26, the API business remained under pressure with pricing soft uh softness persistence across key 4:34 4 minutes, 34 seconds molecules. However, the piece of decline uh moderated and ongoing portfolio rationalization and cost optimization 4:42 4 minutes, 42 seconds initiatives help contain losses and improve sequential performance. 4:48 4 minutes, 48 seconds Building a future ready organization through automation is key focus for us. 4:53 4 minutes, 53 seconds We have recently initiated our SAP S4 HANA transformation which will enable improved efficiency automation and real 5:01 5 minutes, 1 second time and take across multiple functions within the organization. Similarly, we have implemented Darwin box to improve 5:09 5 minutes, 9 seconds our employee experience and automate the HR functions. These initiatives across various functions throughout the this 5:16 5 minutes, 16 seconds group will enable us to prepare for the future. While we continue to operate in a volatile business environment 5:24 5 minutes, 24 seconds marked by disruptions, we as a remain focused on our long-term growth drivers that include innovation, operational 5:32 5 minutes, 32 seconds efficiency, cost control, and strategic partnerships. We reiterate our commitment to creating long-term value 5:40 5 minutes, 40 seconds for our shareholders. Thank you for your continued trust and support. I shall now request our CFO Mr. Sunitsu to continue the discussion with the finance Mr. 5:51 5 minutes, 51 seconds Sumitsu. 5:53 5 minutes, 53 seconds Thank you Sundep sir. Uh good afternoon everyone. I will take you through the financial highlights for the quarter ended 31st December 2025. 6:04 6 minutes, 4 seconds Our operating revenue stood at 1160 cr an increase of 14.8% 8% yearonear. The Q 6:12 6 minutes, 12 seconds Q3 FYI25 revenue stood at 1010 cr and increasing 6:20 6 minutes, 20 seconds 14% quarteron quarter which was 1,18 crores. The total operating aida for the 6:28 6 minutes, 28 seconds quarter was healthy at 147 crores an increase of 21% yearonear 6:35 6 minutes, 35 seconds and increasing 55.4% 4% quarteron quarter. 6:40 6 minutes, 40 seconds Margin was margins were at 12.7% improving 65 basis points year on year 6:47 6 minutes, 47 seconds and increasing 338 basis point quarteron quarter don improved profitability 6:54 6 minutes, 54 seconds across segments. AITA with other income stood at 181 crores increasing 7:01 7 minutes, 1 second significantly by 33% yearonear. Q3 FY25 7:07 7 minutes, 7 seconds was rupees 136 cr and increasing 42.8% quarteron quarter. Q2 FY 26 was 127 7:17 7 minutes, 17 seconds crores. AITA margins were at 15.2% increasing 191 basis point yearon year 7:24 7 minutes, 24 seconds and increasing 309 basis points quarteron quarter. 7:29 7 minutes, 29 seconds Profit after tax stood at 68 cr an increase of 2.1% and in Q3 FI25 it was 7:38 7 minutes, 38 seconds 66 cr and increase 58 5% quarter on quarter Q2 FY26 was 43 7:46 7 minutes, 46 seconds crores as you're all aware there was a labor code impact which came into the financials the one-time uh impact of 7:55 7 minutes, 55 seconds 18.2 2 cr has been included and an as an exceptional item for the past period and 8:03 8 minutes, 3 seconds for the current period 9 months it is 2.27 27 crores. If we look at the five segments that we we break down our 8:11 8 minutes, 11 seconds financials in the CDMO, the branded formulation exports, trade, generic and API. So if we look at the CDMO business, 8:19 8 minutes, 19 seconds the revenue stood at 916 crores, an increase of 16.3% yearonear, 8:27 8 minutes, 27 seconds it stood at 787 crores for the quarter FY25 and an increase of 13.8% 8% quarter on 8:35 8 minutes, 35 seconds quarter on during quarter 2 FY26 it was 804 crores revenue growth was driven by 8:43 8 minutes, 43 seconds doubledigit volume growth however decline in API prices continued this in this quarter as well on a 8:50 8 minutes, 50 seconds quarteronquarter basis API prices seem to be stabilizing a bit of for the quarter was 126 for for the CDM business 8:59 8 minutes, 59 seconds an increase of 3.7% yearonear and an increase of 49% 49.2% quarteron quarter 9:07 9 minutes, 7 seconds it stood at 84 crores in in the Q2 FY26 if we go to the domestic branded formulation business the revenue stood 9:16 9 minutes, 16 seconds at 115 crores an increase of 4.2% yearonear and a decrease of 5 5.8% 8% 9:23 9 minutes, 23 seconds quarter on quarter. A bit for the quarter stood at 25 cr and increase of 25.1% yearonear and a decrease of 35.5% 9:33 9 minutes, 33 seconds quarter on quarter. International branded formulation revenue stood at 50 crores an increase of 18% yearon year 9:42 9 minutes, 42 seconds and an increase of 20% quarteron quarter. A bitter for the quarter stood at 12.9 crores an increase of 65.9%. 9:52 9 minutes, 52 seconds year on year and an increase of 30 135% quarteron quarter for the API business revenue stood at 54 crores 10:01 10 minutes, 1 second an increase of 35.4% 4% yearonear and an increase of uh and an increase of 22% 10:08 10 minutes, 8 seconds quarter on quarter. EIDA for the quarter was -7 crores as hea prices continued to 10:16 10 minutes, 16 seconds trend lower. However, the losses were also cailed to 11 crores 10:23 10 minutes, 23 seconds for for the period Q3 of FY25 as well as for Q2 F26 were 14 crores. So the losses 10:31 10 minutes, 31 seconds have been brought down due to continued efforts toward cost reduction and portfolio rationalization. Trade generic 10:39 10 minutes, 39 seconds revenues stood at 25 cr a decrease of 18% yearonear and an increase of 1.7% quarteron quarter. The bitida for the 10:47 10 minutes, 47 seconds quarter was minus 3% similar to the Q2 FY26 uh quarter and significantly lower than Q3 FY25 which stood at 8 crores. 11:00 11 minutes We continue to have a very strong uh cash surplus of 1,573 crores. The cash flow from operations 11:09 11 minutes, 9 seconds stood at 119.5 crores and the free cash flow for the group was 944.5 cr. This 11:18 11 minutes, 18 seconds from our side conclude the financial highlight for the quarter. I would request the moderator to open the forum for question and answer session. 11:27 11 minutes, 27 seconds Thank you. 11:28 11 minutes, 28 seconds Thank you very much. Thank you. We will now begin the question or answer session. Anyone who wishes to ask questions may please press star and one 11:37 11 minutes, 37 seconds on the touchstone phone. If you wish to withdraw yourself from the question, you may press star and two. Participants are requested to use only handsets while 11:45 11 minutes, 45 seconds asking a question. Ladies and gentlemen, we will wait for a moment while the question ascends. You may please press star and one to ask questions at this time. 12:13 12 minutes, 13 seconds The first question is from the line of Abdul Kadar Puranwala from ICICI securities. Please go ahead. 12:21 12 minutes, 21 seconds Yeah. Hi sir, thank you for the opportunity. My first question is pertaining to your CDM growth especially on the volumes front uh this quarter. 12:31 12 minutes, 31 seconds So, so could you help us uh understand you know just a little better? 12:39 12 minutes, 39 seconds So Abdul you are trying to ask where the volume growth has come from. Hi this is Sahel. Yes. Yes sir. 12:47 12 minutes, 47 seconds So Abdul so this was broad-based right? 12:50 12 minutes, 50 seconds So existing customers whether through existing brands new brands existing channels so across therapies. So while 12:58 12 minutes, 58 seconds we tried to dig deeper but this kind of volume growth Abdul was has to come from 13:04 13 minutes, 4 seconds a base itself right we also could see that this came at a similar gross margin 13:11 13 minutes, 11 seconds profile so roughly 37% plus was the gross margin profile uh for uh the CDMO business which is also better than 36.6% 13:21 13 minutes, 21 seconds 6% which was for last Q3 right so a healthy volume growth driven by improved gross margins compared to last Q3 so 13:30 13 minutes, 30 seconds this was a broad-based recovery I think uh for the overall market uh only 13:38 13 minutes, 38 seconds to just understand this better so this uh CMO does not include any revenues from your milestone income or any 13:47 13 minutes, 47 seconds licensing fee or anything like that there's There's no one off numbers. 13:53 13 minutes, 53 seconds No, no. So Abdul, so we since we have not started the exports business uh for the European contract as of now. So this is uh all manufacturing income. 14:04 14 minutes, 4 seconds Got it. Perfect. Uh and uh one more on the domestic branded generation. So you know this particular segment has been 14:13 14 minutes, 13 seconds growing at the single digit kind of a growth rate but the margins have improved. So just uh you know wanted to understand uh you know how are we trying 14:23 14 minutes, 23 seconds to work on this I mean is margin a better focus here rather than topline growth. 14:30 14 minutes, 30 seconds So Abil so this is in line with what our overall uh strategy for the fiscal had been right. So topline growth was not a 14:37 14 minutes, 37 seconds key driver for us. It was how do we improve our profitability in this business, right? So a better control 14:45 14 minutes, 45 seconds over overheads, rationalization of where we uh the dattors or inventory where we could potentially lose money. So all of 14:53 14 minutes, 53 seconds those things have played out well for us this time and hence the while we still 15:02 15 minutes, 2 seconds make a loss in this segment, the loss is not as stark as it used to be last Q3. 15:09 15 minutes, 9 seconds Got it. And uh fin just on the EU supplies. So when you're talking about uh you know oral solid formulations, so 15:17 15 minutes, 17 seconds how big is this opportunity and uh is this also a part of your uh CDMO business only when you're recording revenues here? 15:26 15 minutes, 26 seconds So I'll go top down. So yes. So since we are manufacturing a brand uh owned by someone else, so it will be classified under CDMO, right? 15:35 15 minutes, 35 seconds Then secondly, how big is the opportunity? So as the as the discussions with the customer so this 15:43 15 minutes, 43 seconds will largely be uh 35 million euro annually for us 15:50 15 minutes, 50 seconds and uh as was stated in the initial commentary we have already received our approval for our plan to from which 15:57 15 minutes, 57 seconds we'll be supplying this uh to the Europe. uh now the process of filing and registering uh the product across 16:04 16 minutes, 4 seconds multiple European countries will begin and subsequently in the next financial year we should start the commercial surprise. 16:12 16 minutes, 12 seconds Okay. Okay. And uh so just last one on the cash part so it's sitting on cash 16:20 16 minutes, 20 seconds accounts for some time. So any thoughts around that? How are you going to deploy that? 16:26 16 minutes, 26 seconds So Abdul rightly So we are uh actively evaluating multiple uh things which will complement our existing business. Uh 16:35 16 minutes, 35 seconds right there are few discussions but nothing as of now is binding in nature. 16:39 16 minutes, 39 seconds Uh so while uh we are evaluating the the idea is to remain uh cognizant of uh 16:47 16 minutes, 47 seconds what we are buying at what price we are buying and whether or not it will be incremental to our current business. So that remains a key filter. 16:56 16 minutes, 56 seconds Okay, thank you sir and thanks Steve. Thank you. 17:04 17 minutes, 4 seconds We'll take the next question from the line of Vive Kagarval from Chitty Group. Please go ahead. Yeah. Uh thanks for the opportunity. 17:12 17 minutes, 12 seconds Just trying to understand uh the CDMO volume better. So is it a kind of a uh 17:20 17 minutes, 20 seconds one-off kind of situation or how sustainable actually uh if you can help understand the current performance uh as far as the volume growth is 17:28 17 minutes, 28 seconds concerned can it sustain the next uh few quarters few years as well. Thank you. 17:34 17 minutes, 34 seconds Sure. So I'll probably address in two parts thanks for the question. First of all the CDMO is a make to order uh right? So we cannot stock the stock 17:42 17 minutes, 42 seconds quarterly right? So it's a make to order. So it's market driven. Secondly on sustenance since we are uh already 17:50 17 minutes, 50 seconds have a visibility of Q4 in Q4 as well we see a double digit volume growth. So this as of now looks um sustainable in the near term at least. 18:02 18 minutes, 2 seconds And so what has uh uh suddenly changed right so in the last uh I think three four quarter or maybe I think more than that we have consistently seeing issues 18:10 18 minutes, 10 seconds in the volume right and not just at the company level but at industry I'm sorry to interrupt you Mr. Raarwal can you kindly use your handset your audio is not that clear sir. 18:21 18 minutes, 21 seconds Okay sorry so just uh trying again. So if you look at uh last uh one to two years right so the volumes uh across the 18:30 18 minutes, 30 seconds industry as well as for the company right so it was under problem under problem some challenges was also there so what has changed uh in this 18:37 18 minutes, 37 seconds particular quarter if you can highlight so while I won't be able to comment on what the recorded data looks like right 18:46 18 minutes, 46 seconds so they largely cover branded there's a portion of the market which is not covered but what we manufacture is ultimately getting uh stocked up and 18:53 18 minutes, 53 seconds then the results show up in that uh market analysis. Right? So what has changed? I think there are two things which we can think through have a 19:01 19 minutes, 1 second positive impact on us. First and foremost is there might be some play of enforced regulations being uh stricter. 19:08 19 minutes, 8 seconds Right? So that is uh that is one. Uh the second uh the second is also uh the play 19:16 19 minutes, 16 seconds across generic side. So right so that is also a channel which is uh growing and it is growing well for us u right so that is 19:25 19 minutes, 25 seconds there but having said that the branded business also saw good volume growth so it's an overall volume growth across 19:32 19 minutes, 32 seconds all therapeutic areas all uh largely all uh channels of uh distribution 19:39 19 minutes, 39 seconds understood but if you look at the margins right uh although you have seen sequential improvement uh in the CDMO 19:46 19 minutes, 46 seconds business but it is still below So uh y right close to around 170 180 basis point. So how you see the margin 19:54 19 minutes, 54 seconds trajectory uh going forward maybe next uh three four quarters. Thank you. 20:01 20 minutes, 1 second So uh so if you look at it Vive so the gross margins we have been able to have a good gross margin 20:08 20 minutes, 8 seconds profile. We were largely at 36 odd% which means we have moved 37 uh 345%. So that has been the track rate 20:16 20 minutes, 16 seconds right? So the below expenses we as Sumiji mentioned there was one of two odd kes in the employee expenses but 20:24 20 minutes, 24 seconds beyond that as well we continue to um invest in uh technological upgrades which was also mentioned in an initial 20:31 20 minutes, 31 seconds commentary and also continue to invest in our R&D which boils down to our margin profile. Uh right. Having said that as of now these current level of 20:40 20 minutes, 40 seconds margins are ones which looks uh um predictable in the near term. Uh while the aspiration is how we can further 20:48 20 minutes, 48 seconds enhance these margin profiles but at least looking at this this is what we think uh would uh be a 20:58 20 minutes, 58 seconds right margin profile for this uh segment. 21:03 21 minutes, 3 seconds Understood. One question on API business. So uh how the business is shaping up right over the next uh one to two years although the losses have come 21:12 21 minutes, 12 seconds down in this particular quarter. So is it like that uh uh have you added more customers products uh how the things are 21:20 21 minutes, 20 seconds moving towards additional regulatory approvals etc. So if you can just simple uh help us understand that how to look at the trajectory of this particular business. Thank you. 21:30 21 minutes, 30 seconds So, so the API business was struggling because largely it was dependent on surplus which had extensive price 21:36 21 minutes, 36 seconds erosion of over 30%. Right? So last year we had u last year we had uh almost 90% 21:44 21 minutes, 44 seconds plus cogs in this business right so that cogs today has come down slightly at Q3 21:52 21 minutes, 52 seconds we were at roughly 87% cogs right so this is where we are uh focusing more on 22:01 22 minutes, 1 second other products apart from cphlus borins right within cphloins the idea is how we can only focus on products which make uh 22:09 22 minutes, 9 seconds business case for us. Uh secondly, we uh also expect that uh in the coming quarter we should uh sometime uh go for 22:19 22 minutes, 19 seconds European audit as well and start supplying the CPS as we announced in the last quarters a couple of CPS have 22:26 22 minutes, 26 seconds already been filed. Uh then moving to the regulated market play within sephilos will give us a better margin and focusing on non-IFIA products will 22:35 22 minutes, 35 seconds also enhance our bottom line. So the focus is how can we reduce our overhead improve our uh gross margins either 22:43 22 minutes, 43 seconds through different portfolio or through different geographies. So that's how we look at the API business. 22:50 22 minutes, 50 seconds Understood. Thanks. That's that's from my side. 22:58 22 minutes, 58 seconds Thank you. The next question is from the line of Madav Marda from FIL. Please go ahead. 23:10 23 minutes, 10 seconds Mr. Mard, I have unmuted your line. Please proceed with your question. 23:20 23 minutes, 20 seconds Hello Mr. Mardab. Yes, please proceed. 23:23 23 minutes, 23 seconds Yeah. Yeah. My question was on the Zambia contract and the EU CDMO contract. Could you give an update on the timelines when we expect the business to start ramping up and uh both 23:32 23 minutes, 32 seconds the revenue and margin outlook could be in the next couple of years? Sure. Uh mad. So I'll take Zambia first. 23:39 23 minutes, 39 seconds So Zambia we expect as you mentioned in our initial commentary in H1 we should expect the supplies of $25 million which 23:46 23 minutes, 46 seconds was a part of the contract which will happen from the Indian uh company uh to the Zambia. uh right in parallel we are 23:56 23 minutes, 56 seconds actively doing the project uh planning of it and uh will soon start the erection of the facility along with 24:03 24 minutes, 3 seconds commissioning which will uh take um roughly 2 years from now right so 26 24:10 24 minutes, 10 seconds we'll have a $25 million US of revenue in the calendar year 26 coming in and then similarly in in calendar year 27 as 24:18 24 minutes, 18 seconds well we'll have $25 million of revenue coming in in the CDMO and sometime in calendar period 2028 we should start 24:25 24 minutes, 25 seconds with the supplies from the Zambia facility only uh to Zambia and then further explore 24:32 24 minutes, 32 seconds what all we can do with that uh in the other neighboring nations. Uh so that is it margin profile. So this will be 24:39 24 minutes, 39 seconds similar to our largely similar to our existing CDMO business for the current 24:46 24 minutes, 46 seconds uh two years and then we'll see uh how the margin profile plays out when we start doing it from the Zambia. Uh on 24:55 24 minutes, 55 seconds the European contract as we said we have in January received uh the EUGMP audit of plan 2 which was successfully inspected in October of 2025. 25:06 25 minutes, 6 seconds uh we'll now start with uh the regulatory filings and country registrations which uh might take uh an 25:13 25 minutes, 13 seconds year or so. Uh once it is there uh the clients will start placing us the order and then we'll start the commercial supplies. Uh as we said this will also 25:22 25 minutes, 22 seconds be um this will slightly be better from the existing 13% of CDMO margins but will remain in the teens only. 25:32 25 minutes, 32 seconds Okay. And the annual the revenue size is how much? if you could just remind us for the EU CDMO contract. 25:38 25 minutes, 38 seconds Sure. So, uh once we start commercializing the annual run rate for the orders will be in the tone uh tune 25:44 25 minutes, 44 seconds of 35 million and uh the contract is still December of 2032. 25:53 25 minutes, 53 seconds Okay. Okay. Got it. Got on this one. Um all right. Great. All right. Thank you so much. Thank you. 26:00 26 minutes Thank you. The next question is from the line of Ishkit Naredi from Nared Investments. Please go ahead. 26:08 26 minutes, 8 seconds Hi, good afternoon sir. So my first question is uh can you please elaborate on marketwise performance in international branded segment? Uh I 26:16 26 minutes, 16 seconds recall we had a disruption in some markets. How have they recovered? 26:22 26 minutes, 22 seconds So uh thanks for the uh question. So if you see we have almost double our revenue from Q right. So um so the 26:30 26 minutes, 30 seconds markets have performed well most of the important markets uh which were of focus to us have uh done well if you even look 26:38 26 minutes, 38 seconds at the gross margins something this in this business we were operating at a 25% uh gross margins which we have expanded 26:45 26 minutes, 45 seconds to 35 odd% right uh in this quarter right so the recovery has come both in terms of margins as well as in terms of 26:54 26 minutes, 54 seconds topline to us and uh the recovery looks stable as of now. So in Q4 as well we 27:02 27 minutes, 2 seconds expect uh uh decent performance from this segment. 27:06 27 minutes, 6 seconds Okay. Okay. And uh my second question is uh how will we benefit from the European FDA since that this is the next leg of growth for the CDMO business. 27:18 27 minutes, 18 seconds uh while it is too soon to comment but as we said for past 2 three years uh Europe is one market which outside of 27:27 27 minutes, 27 seconds India is a focus for us right so all these positive regulations and efforts which the government of India has undertaken will certainly help us and 27:36 27 minutes, 36 seconds the Indian community as a whole uh to do business in Europe 27:41 27 minutes, 41 seconds okay uh my next question is uh what are the margins for Zambia contract 27:49 27 minutes, 49 seconds currently how will they change once the plant is set up in Zambia Zambia so as you said this this will remain in 27:57 27 minutes, 57 seconds teams so largely 15 17 odd percent is what we expect so since this is also uh a government procurement right so these 28:05 28 minutes, 5 seconds are not the branded margins you expect but this will certainly be couple of margin points above than a CDMO business 28:13 28 minutes, 13 seconds uh once we start doing it from the Zambian plant only there might be some efficiencies in logistics uh procurement 28:22 28 minutes, 22 seconds uh cost reductions uh so that might uh give us few couple of percent points better a better beta uh so this is how 28:29 28 minutes, 29 seconds we look at it okay okay and my last question is uh any updates on the trade gen business windup 28:37 28 minutes, 37 seconds and for API business how long will it take to turn around and also is there any guidance you would like to give for 28:44 28 minutes, 44 seconds FI26 and FI 27 So three questions. So first trade generics. So uh trade genics as of now as you seen so this is recovering right. 28:54 28 minutes, 54 seconds Um so while the process is on how do we rationalize and minimize the uh the 29:00 29 minutes operations. Um we still see maybe Q4 we might have some uh hit on the bottom line but 29:08 29 minutes, 8 seconds much of the pain is a thing of past. on APIs we are still doing what we can do right 29:17 29 minutes, 17 seconds so I do not have a timeline in mind of when this will turn positive on a monthly basis but I can assure you that 29:25 29 minutes, 25 seconds the management actions are in uh the right direction to um bring it a break even at a break even um and uh by the 29:35 29 minutes, 35 seconds efforts I've just mentioned in the earlier question on the guidance for the here. I think as you said quarter four 29:44 29 minutes, 44 seconds we uh continue to see a good volume traction to us. Um the exports the acumentas and other businesses uh all 29:54 29 minutes, 54 seconds look in good shape. Right. So uh this is what I can summarize and then once we are through with quarter 4 we'll be able to do better guide on the next year. 30:04 30 minutes, 4 seconds Okay. Okay. Thank you. Thank you sir. 30:07 30 minutes, 7 seconds and yeah and the growth drivers for the next year are already in place as which were initially as not just the domestic but uh the Zambia and other contracts. 30:16 30 minutes, 16 seconds So so that's how we look at the business. Okay. Okay. Thank you. Thank you. 30:23 30 minutes, 23 seconds Thank you. A reminder to all the participants that you may please press star and want to ask questions. The next 30:30 30 minutes, 30 seconds question is from the line of Sangeita P from Kojito. Please go ahead. 30:38 30 minutes, 38 seconds Yeah. Hi. Can you hear me? Yes, ma'am. Please proceed. 30:42 30 minutes, 42 seconds Hello. And okay. Yeah. Um, so, uh, firstly, congratulations for a good quarterly performance. Um, I just wanted 30:51 30 minutes, 51 seconds to delve a little deeper into the reasons for your volume growth in the CDMO business. Um you've mentioned in 31:00 31 minutes the presentation that the market growth was about 1 and a.5%. But your volume growth has been significantly higher 31:07 31 minutes, 7 seconds which means that you've probably gained a lot of market share. Um is there any you know if you could give some color to 31:15 31 minutes, 15 seconds are there any forces acting on the industry which are um you know for players like you which are you know 31:22 31 minutes, 22 seconds leading to a market share gain or what really lies behind it or is it just something specific to you and your 31:30 31 minutes, 30 seconds customer relationships? Just a little bit more color on that. My uh second question was that you also mentioned in 31:39 31 minutes, 39 seconds your preamble that you would like to take the company and make it an international CDMO player. Now what we 31:46 31 minutes, 46 seconds see is that one large market which is the US is not at the moment in your uh 31:53 31 minutes, 53 seconds portfolio. So at some stage uh do you have plans to also extend the CDMO 32:00 32 minutes business to US players and how are you really uh uh thinking about it? Uh if you could answer these two please. 32:09 32 minutes, 9 seconds Sure. Thanks for your um questions on the first on volumes as we were discussing earlier. Uh this has been a 32:17 32 minutes, 17 seconds broad uh volume growth which we saw across client base across therapy areas. 32:23 32 minutes, 23 seconds Uh right. So while the market volume grew at roughly one odd percent which you rightly mentioned um this is a 32:31 32 minutes, 31 seconds historic growth I think uh one is we manufacture and then give it to the marketing company. So we might see an uptick that can be one or secondly um 32:40 32 minutes, 40 seconds while we don't exactly know the causes to be honest what drove it it could be uh a higher confidence uh for other 32:48 32 minutes, 48 seconds brands as well that our existing partners have shown in us. So this is a portfolio play uh right we have been able to take on most of the key things 32:57 32 minutes, 57 seconds uh this is what the business is uh across multiple product lines across dosage firms uh across therapeutic areas 33:04 33 minutes, 4 seconds across multiple clients over 1500 right so this is the strength of accom um uh this is uh where we stood right and as 33:14 33 minutes, 14 seconds we said quarter 4 also looks good um in terms of the volume traction um right so uh that is one not just across branded 33:23 33 minutes, 23 seconds pharma but uh across the trade pharma across non-farma like neutron cosmetics and other uh channels right so we have 33:32 33 minutes, 32 seconds been able to do uh and generate volumes across all of these fronts so that is on 33:39 33 minutes, 39 seconds volumes on the US on the US specifically uh so as we said our immediate focus in 33:45 33 minutes, 45 seconds regulated markets is Europe um I think this is a journey we are still a two decades young company uh right uh as we 33:54 33 minutes, 54 seconds go and set out our foots outside India into regulated markets we wish to first tab uh the opportunity which is there in 34:01 34 minutes, 1 second Europe we are not saying we'll not be in US or don't know when the right time will come as of now but we are positive 34:08 34 minutes, 8 seconds that one day we would have operations in US but as of now uh the focus is Europe 34:17 34 minutes, 17 seconds okay uh if I can squeeze in uh one more question. My understanding is that the way your pricing works with your clients 34:26 34 minutes, 26 seconds is that your markup is on a percentage basis which means that like in the past when the API prices have declined the 34:34 34 minutes, 34 seconds absolute amount of say EBIDA or gross margin whatever you earn um actually comes down and the reverse will happen 34:42 34 minutes, 42 seconds for your API prices to rise. um is that is this formula a cast in stone or is 34:50 34 minutes, 50 seconds that you know something that you would look to revise where maybe you make a certain amount of absolute profit per 34:57 34 minutes, 57 seconds volume also does the same formula apply for your European partners also 35:05 35 minutes, 5 seconds sure so on the first so there's nothing cast in stone but that's how the industry work not just us but our uh 35:13 35 minutes, 13 seconds peers and the other uh people in this industry. So it is usually how we the 35:21 35 minutes, 21 seconds model has been set out in the industry is a percent of the costs to us and uh whether the API prices come or down this 35:28 35 minutes, 28 seconds usually remains intact that the percent the percent might differ by the complexity of the product right so for a 35:36 35 minutes, 36 seconds complex product I might might charge a percent higher than a simple product with where my margin uh on the input 35:43 35 minutes, 43 seconds cost might be lower but it always remains as a percent of my input costs. 35:48 35 minutes, 48 seconds Um, that is one. Uh what was the second question? 35:56 35 minutes, 56 seconds Um, yeah. Does this apply to your European partners also? Is that how you pricing it with them for your 36:04 36 minutes, 4 seconds Sure. Sure. Sorry. Uh, yes. So, for the Europe, uh, no, no, for the Europe, it's a fixed pricing which we have currently agreed 36:11 36 minutes, 11 seconds for this particular contract. uh as we move ahead we get more experience and expertise it might change uh but for the 36:18 36 minutes, 18 seconds current one it is a fixed pricing uh contract right okay all right okay thank you 36:27 36 minutes, 27 seconds thank you very much thank you the next question is from the line of Aka Sha from BVD Asset Managers 36:37 36 minutes, 37 seconds please go ahead thank you for the opportunity sir sir on page Number 12 we have mentioned that 36:44 36 minutes, 44 seconds due to product mix change our revenue has decreased by 49 cr. So can you explain it what was the reason for it 36:51 36 minutes, 51 seconds and is it structural or one of so I think uh this is just a better way 37:00 37 minutes of we wanted to showcase our our growth into various key lever heads 37:08 37 minutes, 8 seconds right so uh as we said our gross margins compared to last year have largely improved right uh if you look at it the 37:17 37 minutes, 17 seconds adjusted a bita has a 1.1% improvement of the gross margins itself. 37:22 37 minutes, 22 seconds Honestly, it's a make make to order what we do. So right so if we track the last four quarters we have been able to uh uh 37:31 37 minutes, 31 seconds be in the range of 37 odd% gross margins in our CTMO business. U so this might fluctuate here and there in terms of 37:40 37 minutes, 40 seconds quarterly performance but uh nothing as a as a downward trajectory we expect. 37:47 37 minutes, 47 seconds Okay. So sir I wanted to understand that we are going from base formulation businesses to niche formulation business. So our product mix should 37:55 37 minutes, 55 seconds change upwards and our our revenue should grow from product mix and not decline. So this quarter it has 38:03 38 minutes, 3 seconds declined. So that's why I was asking the question rightly. So as I said so this all 38:12 38 minutes, 12 seconds depends on if you really look at it the 9 month it has largely remained stable. 38:17 38 minutes, 17 seconds If you flip to the next slide uh the impact of product mix is not there. uh so uh so uh uh this is a business right 38:26 38 minutes, 26 seconds so you have to look in larger uh periods to really assertain where the product mix is changing because as we continue to invest in R&D then we launch the 38:34 38 minutes, 34 seconds product then the it's the it's ultimately a prescription product for the marketing company they go and sell then the repeat business comes right so 38:42 38 minutes, 42 seconds it's best if we look at on a longer horizon and as you could see it has no impact on our aa 38:51 38 minutes, 51 seconds okay thanks Thank you. And sir on schedule M implementation as we know that uh the due date for implementation 38:57 38 minutes, 57 seconds was 31st December. So how are we seeing it on ground? Has the government become more enforcive in terms of regulation 39:06 39 minutes, 6 seconds and small players are becoming it is becoming unviable for them and they are closing down. Any thoughts of you on ground situation on that? 39:16 39 minutes, 16 seconds No comment. Okay. Okay. Thank you, sir. 39:29 39 minutes, 29 seconds Thank you. 39:31 39 minutes, 31 seconds You may please press star and want to ask questions. The next question is from the line of Ashto Parasar from MIT. 39:39 39 minutes, 39 seconds Please go ahead. 39:42 39 minutes, 42 seconds Yeah. Hi. Uh, hi S. Hi Ankit Vipin from Investment. Um I had a couple of 39:49 39 minutes, 49 seconds questions on one is on the I'm sorry to interrupt you sir. I'm sorry to interrupt you. Your voice is not clear sir. 39:58 39 minutes, 58 seconds Yeah. Hi. Um am I audible now? 40:01 40 minutes, 1 second Yes. Uh may I request you to please repeat I mean introduce yourself again sir. Uh so Van from Miraabulous Investments. 40:10 40 minutes, 10 seconds Uh hope you're doing well. Ankit and su uh I had a couple of questions on the injectables facility. Uh so one on 40:18 40 minutes, 18 seconds injectables and the other one on the minimum import price which was recently announced. Uh so the first one on the injectables facility 40:27 40 minutes, 27 seconds uh so this was commercializing phases uh as per my understanding in Q4 Q2 last year was the first phase and then 40:36 40 minutes, 36 seconds lialized while were commercialized in Q3 and then further further FSS in Q4. So 40:43 40 minutes, 43 seconds can you can you help us uh quantify the uh like first the current utilization across all these lines and uh second on 40:51 40 minutes, 51 seconds the revenue contribution so far from this facility. 40:56 40 minutes, 56 seconds So so the utilization as you rightly said this has been uh in phases. Uh we are still ramping up right we are doing 41:04 41 minutes, 4 seconds the client audits the utilization is relatively low. It is in teens as of now. uh right uh and uh hence the 41:11 41 minutes, 11 seconds utilization and the revenue contribution to the overall CDMO P&L is uh minimal uh but what we expect is as we proceed in 41:20 41 minutes, 20 seconds the next financial year over Q2 Q3 this should start ramping up well and should contribute to our overall injectable CDMO business. 41:32 41 minutes, 32 seconds All right. what would be the profitability here and like as per I think last quarter there were some uh we 41:39 41 minutes, 39 seconds were I think doing some 17 growth or so losses uh so how far is it from break even and what's the current profitability 41:49 41 minutes, 49 seconds so for the 9 months hi this is sumit for the 9 months s was explaining that the business has not been uh as much because 41:59 41 minutes, 59 seconds it's to still peak out so there on an IPITA level the you know we have a 17.9 42:06 42 minutes, 6 seconds cr loss in the AHL overall business right so once we have the revenue uh you know triggering this should this should 42:15 42 minutes, 15 seconds turn around so so does that mean is it has it broke has it break even because until last 42:22 42 minutes, 22 seconds quarter it was 70 cr loss in the first half and if it's uh if it's the same in 42:30 42 minutes, 30 seconds 9 months in sorry so this is an uh so H2 till H1 there were three plants that we had mentioned 42:38 42 minutes, 38 seconds 17 but Sumits has stated this for two plants okay all okay uh okay and uh the next 42:46 42 minutes, 46 seconds one was on this uh on the uh government had recently moved PNG and 6 APA from restricted list uh two to the restricted 42:55 42 minutes, 55 seconds list and implemented a MIP on those uh so these are I believe upstream products for the seaser end. So how do you see 43:03 43 minutes, 3 seconds this uh influencing our API business in terms of maybe pricing or volumes or margins? 43:12 43 minutes, 12 seconds So uh so essentially MIP this is a industrywide phenomena right so any movement in the prices will apply to all whether it is to our CDM business API 43:20 43 minutes, 20 seconds business or to any of our peers or partners or competitors right so this will ultimately get absorbed passed on 43:27 43 minutes, 27 seconds as per the various cases and we don't see MIP to really impacting any of our 43:33 43 minutes, 33 seconds business units okay this will be positive impact right so because prices the the restricted 43:42 43 minutes, 42 seconds price MIP is higher than the current prevailing price. So any idea on like what what percentage of positive impact 43:49 43 minutes, 49 seconds can can be expected on API on the API business or or let's say the CDMO business where we have semantic 43:56 43 minutes, 56 seconds CDMO is a larger piece right so API is but within CDMO as well if you as you know that we have 44:05 44 minutes, 5 seconds limited dependence on any one product class or therapy right so while there's a marginal increase that might yield result into marginal positive upside for 44:14 44 minutes, 14 seconds but this will not certainly move the needle um for us. So the business uh whether or without MIP should uh be similar. 44:26 44 minutes, 26 seconds Got it. Okay, that's it from Thank you. 44:31 44 minutes, 31 seconds Thank you. The next question is from the line of Bhavin Shira from Inam Holdings. Please go ahead. 44:39 44 minutes, 39 seconds Yes, congratulations on a good set of number and very good volume growth. Uh the question on the volume growth was uh 44:46 44 minutes, 46 seconds does part of the volume growth was uh adding a new product segment or your existing past product uh also have seen doubledigit volume growth. 44:58 44 minutes, 58 seconds So this is our base the existing business only uh bhavin. So as you said the new the new facilities 45:06 45 minutes, 6 seconds are still ramping up and there was no major product launch in the quarter right so these were our existing 45:13 45 minutes, 13 seconds portfolios for which we received uh a better order book and somewhere I saw overall utilization 45:21 45 minutes, 21 seconds was at 47% in the presentation correct so uh is there uh also you mentioned 45:28 45 minutes, 28 seconds there was partial operating leverage benefit on the margin expansion because volume growth and capacitation going up 45:36 45 minutes, 36 seconds which means uh and quarter 4 also looks good and the base is going up. So we still have a significant operating 45:44 45 minutes, 44 seconds leverage uh in terms of margin expansion when uh this reach reaches a critical size. 45:53 45 minutes, 53 seconds So I think we are already at a critical size. So as we had mentioned in our initial calls uh right so 55 60 odd% is 46:01 46 minutes, 1 second something which we can uh reach in our uh utilization level. So we still have 46:07 46 minutes, 7 seconds few uh points here from uh growth for us right but having said that the business of CDMO as today we speak is at a mature 46:16 46 minutes, 16 seconds stage and these are largely the margin profiles which we'll operate in. 46:22 46 minutes, 22 seconds Uh second is on uh the interest cost which also includes a a notional portion of 20 crores in Q3 and 58. 46:34 46 minutes, 34 seconds So Europe contracts will start from next year. Uh I mean your voice can you please repeat this question? 46:41 46 minutes, 41 seconds Yeah on the interest cost I think I believe that the interest also includes around 20 crores in quarter 3 and 58 46:48 46 minutes, 48 seconds crores in 9 months which is a notional interest charge on Europe contract liabilities. So this will start 46:56 46 minutes, 56 seconds reversing from entire amount will start reversing from next year when the European contract start. 47:04 47 minutes, 4 seconds So, so the way it will start reversing is with the basis that we will make the supplies. 47:11 47 minutes, 11 seconds So, the entire uh sum will not go at one go but based on the supplies it will go away because that much of advance will 47:18 47 minutes, 18 seconds keep getting adjusted because part of the money has been received in advance and part of the supplies 47:26 47 minutes, 26 seconds will get paid from there. So based on the pro proportion of the amount being adjusted this will also get adjusted. 47:34 47 minutes, 34 seconds Yeah. So uh just my question was notional interest provided there won't be any cash outgo on the same right? 47:42 47 minutes, 42 seconds No no there is there is no cash out. There is no cash out. My last question. Yeah. Yeah. Accounting entry. 47:49 47 minutes, 49 seconds Accounting entry. My last question. What was the capital expenditure in uh uh this quarter and 9 months? 47:58 47 minutes, 58 seconds So the total capital expenditure that the company has made till now is 165 crores for the 9 months. 48:09 48 minutes, 9 seconds Okay. 48:09 48 minutes, 9 seconds And around and 57 crores for this quarter. Sorry 57 crores for the quarter. 48:18 48 minutes, 18 seconds Yes. 48:20 48 minutes, 20 seconds Okay. And FI27 any guidance on numbers? 48:27 48 minutes, 27 seconds I uh you know we we've been stably investing based on the requirement of business the maintenance and 48:34 48 minutes, 34 seconds modernization capex we we we think our capex investment will be in in 48:42 48 minutes, 42 seconds our trend of of what we've done in the past. Okay. Thank you sir. 48:49 48 minutes, 49 seconds Thank you. The next question is from the line of Naredi from Nared Investments. Please go ahead. 48:57 48 minutes, 57 seconds So uh one more question. Uh I can see that domestic business grew 4% and previously gave the guidance of mid 15 49:06 49 minutes, 6 seconds digits but yet data margins in domestic business grew well. So can you please explain about this? 49:15 49 minutes, 15 seconds So sure. So to do any incremental so since we operate on high gross margins in that business and to do incremental 49:24 49 minutes, 24 seconds business my other costs largely remain the same. Right? So my manpower costs largely remain the same which is the other second chunk of the cost. Right? 49:32 49 minutes, 32 seconds So any improvement in the top line gives uh an extensively positive benefit on the bottom line. 49:42 49 minutes, 42 seconds and and your uh this top line only. So uh can you explain about this? 49:54 49 minutes, 54 seconds Sure. So as we mentioned in a couple of calls earlier and this as well right so the focus has been for now on growing 50:03 50 minutes, 3 seconds volumes and new products and how we can improve our HQ wise headquarter wise 50:10 50 minutes, 10 seconds performance right so we are reducing a few HQs where in line with our overall strategy and price growths which we have 50:19 50 minutes, 19 seconds took over the this current fiscal has been minimal uh which if you remove from the overall IBM as well, you will see a 50:27 50 minutes, 27 seconds similar kind of growth from next uh fiscal as well. What we uh think we should be at par with the industry growth. 50:38 50 minutes, 38 seconds Thank you. Thank you. Thank you. Thank you. 50:45 50 minutes, 45 seconds The next question is from the line of Sangeita from Kojito. Please go ahead. 50:54 50 minutes, 54 seconds Hello. Can you hear me? Yes. Yes, ma'am. Hello. 51:00 51 minutes Yeah. Um, so my question was regarding your capacity utilization. 51:06 51 minutes, 6 seconds Um, you know, at the moment it's uh less than 50%. Now, how do you actually think 51:12 51 minutes, 12 seconds about capacity utilization? Is this um some kind of a strategic tool that you use that you will always keep some level 51:21 51 minutes, 21 seconds of excess capacity in order to meet requirements of your clients or you know you have just invested in anticipation 51:30 51 minutes, 30 seconds of the growth that you see and what is this likely to go up to uh going forward. 51:39 51 minutes, 39 seconds Sure. So as you saw this quarter right so uh there was an increased demand right so we always keep a buffer 51:48 51 minutes, 48 seconds capacity uh to serve uh quarters and demands of uh excessive growth right uh 51:55 51 minutes, 55 seconds so that always remains the core of our capex investing um on the second while we operate at 47 odd% the peak we can do 52:04 52 minutes, 4 seconds is uh roughly 55 60% right so uh it's not uh wherein we can achieve or double 52:11 52 minutes, 11 seconds from here on right uh so we'll continue to invest in capeex as sumi was mentioning in line with our previous 52:19 52 minutes, 19 seconds years of uh investing uh into cex and this will be to serve uh the dosage forms where we currently see that we are 52:28 52 minutes, 28 seconds stretching out on capacities uh right so sir could you just help me 52:35 52 minutes, 35 seconds understand that why is it that your peak capacity ity can only go up to 55 60% and can't go higher than that. 52:45 52 minutes, 45 seconds Sure. So, so we manufacture over 20,000 SKUs annually, right? And this is across 52:53 52 minutes, 53 seconds 1500 customers, right? So, the changeovers are extensive in this business, right? So, whenever I produce, so this is a capacity which has been 53:02 53 minutes, 2 seconds calculated on the total number of hours the machines can operate, right? And then I have changeovers after every involves cleaning changeovers and so on. 53:12 53 minutes, 12 seconds And then I also have preventive maintenance schedules. Right? So hence the overall uh effective utilization comes down to these levels. 53:24 53 minutes, 24 seconds Okay. Thank you. 53:26 53 minutes, 26 seconds Thank you ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to Mr. 53:32 53 minutes, 32 seconds Ankit Jan for closing comments. Thank you and over to you sir. 53:36 53 minutes, 36 seconds Thank you everyone for attending the Q3 earning calls for AOMS. If you have any remaining questions, you can reach out to the investor relation teams. Thank you and have a good day. 53:46 53 minutes, 46 seconds Thank you members of the management. 53:48 53 minutes, 48 seconds Thank you sir. Thank you sir. On behalf of Ambbit Capital that concludes this conference. We thank you for joining us and you may now disconnect your lines. 53:56 53 minutes, 56 seconds Thank you.