Good afternoon, everyone, and on behalf of Ambit Capital, I thank the management of Akums Drugs and Pharmaceuticals for the opportunity to host their Q1 FY '27 earnings conference call. Joining from the management today, we have Mr.

Sanjeev Jain, Managing Director; Mr. Sandeep Jain, Managing Director; Mr.

Sumeet Sood, CFO; and Mr. Sahil Maheshwari, Head Strategy.

We now begin with opening remarks from the management, post which the forum will be open for question-and-answer session. Thank you, and over to you, Ankit sir.

Thank you, Umesh, for the introduction. Good afternoon, everyone, and welcome to Akums' Q1 FY '27 earnings call.

I am Ankit Jain, and I head Investor Relations at Akums Drugs and Pharmaceuticals Limited. I will commence with a standard disclaimer that any discussion on today's call might include certain forward-looking statements, which are predictions or projections of future events.

Our business faces several risks and uncertainties that could cause our results to differ materially from what is expressed or implied in such statements. At Akums, we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new confirmations, future events, or otherwise.

I hope you would have had the opportunity to go through our financial results and reviewed our investor presentation that was shared on Saturday. I would now like to hand over to our Managing Director, Mr.

Sandeep Jain, to discuss our performance. Thank you.

Namaste, everyone, and thank you for joining us today for our Q1 FY '27 earning call. With Q1 FY '27, we have begun FY '27 on a strong and encouraging note.

We registered a healthy revenue growth of over 13% with EBITDA increasing by more than 30%. The growth was primarily led by CDMO segment, characterized by double-digit volume growth along with improvement in API prices.

The consistent performance of CDMO showcases healthy demand and environment as well as our clients' trust in Akums as the preferred manufacturing partners. Marketing segments, domestic as well as export, saw muted quarterly performances.

With multiple initiatives underway, we are confident of these segments returning to growth path in coming quarters. Our API and trade generic segments performed in line with prior guidance, with Zambia order to likely reflect during current financial year.

Akums is well-placed to deliver a robust operating performance during FY '27. On 23rd of July, we announced the acquisition of Oriflame India's manufacturing business.

The transaction covers two manufacturing facilities, one at Roorkee, Uttarakhand, and other one at Noida, Uttar Pradesh, along with a leased warehouse situated at Noida, Uttar Pradesh. With the acquisition, we expand our manufacturing footprint in skincare, cosmetics, and wellness products manufacturing.

This is in line with our strategy of tapping into niche formulations to improve our positions among existing as well as prospective clients and augment our margins. Coming to operating performances for our quarter, CDMO once again delivered a healthy top-line growth of over 18%, aided by both volume growth and improvement in API prices.

API segment continued on its journey towards becoming EBITDA positive as higher share of non-cepha products led to better gross margin. The trade generic segment remained EBITDA positive during the quarter.

Akumentis, our domestic branded formulations segment, restarted its growth journey with a healthy 7% revenue growth during the quarter. Margins were impacted due to increase in employee strength.

We expected improved performance from the segment from quarter three onwards. Our international branded formulation business had a muted quarter, but is expected to return to growth as we remain confident on the structural attractiveness of our chosen geographies.

I shall now request our CFO, Mr. Sumeet Sood, to take you through the detailed financials for the quarter.

Over to you, Mr. Sumeet.

Thank you, sir. Thank you, Sandeep ji.

Good afternoon, everyone. I would now take you through the financial highlights for the quarter ended 30th June 2026.

Our operating revenue stood at ₹1,167 crore, an increase of 13.9% year-on-year. Quarter one FY '26, the revenue was ₹1,024 crore, and increasing 0.8% quarter-on-quarter.

Quarter four FY '26, our revenue was ₹1,158 crore. The operating EBITDA for the quarter was ₹175 crore, an increase of 35.4% year-on-year.

Quarter one FY '26, our EBITDA was ₹129 crore, and 15.1% quarter-on-quarter. Q4 FY '26, our EBITDA was ₹152 crore.

Margins were robust at 15%, improving 230 basis points year-on-year. Quarter one FY '26, we were at 12.6%, and 187 basis points quarter-on-quarter.

On Q4 FY '26, we were at 13.1%. The EBITDA including other income stood at ₹205 crore, increasing 31.7% year-on-year.

Quarter one FY '26, we were at ₹156 crore, and increasing 9.6% quarter-on-quarter. Quarter four FY '26, we were at ₹187 crore.

EBITDA margins stood at 17.1%, increasing 231 basis points year-on-year. Q1 FY '26, we were at 14.8%, and quarter-on-quarter, Q4 '26, we were at 15.7%.

The PAT of the company stood at ₹101 crore, an increase of 56.1% year-on-year. We were at ₹65 crore on quarter one FY '26, and increasing 24.1% quarter-on-quarter.

Q4 '26, we stood at ₹81 crore. If you were to look at the various segments and their performance, if we start with the CDMO, the revenue stood at ₹964 crore, an increase of 18.6% year-on-year.

We were at ₹813 crore, Q1 FY '26, and increase of 1.3% quarter-on-quarter. Q4 FY '26, we were at ₹952 crore.

Revenue growth was driven by healthy volume growth and rebound in API prices. In Q2 as well, API prices seem to be on an increasing trend.

EBITDA for the quarter stood at ₹163 crore, an increase of 36.8% year-on-year. Quarter one FY '26, it stood at ₹119 crore, and increase of 19% quarter-on-quarter.

FY '26, it was ₹137 crore. The margin were further aided by improved capacity utilization.

Domestic branded formulations stood at ₹115 crore, an increase of 7.3% year-on-year and an increase of 12.9% quarter-on-quarter. EBITDA for the quarter was ₹12 crore, a decline of 25.4% year-on-year and a decrease of 46.5% quarter-on-quarter.

For the international branded formulation business, revenue stood at ₹35 crore, a decline of 1.5%. At Q1 of '26, we were at ₹35 crore, and a decline of 3.6% quarter-on-quarter.

Q4 FY '26, the revenue stood at ₹36 crore. EBITDA for the quarter stood at ₹6.9 crore, a decline of 14.4% year-on-year and a decline of 31% quarter-on-quarter.

API revenues stood at ₹32 crore, a decline of 29.7% year-on-year. Q1 FY '26, it was ₹45 crore, and a decline of 22.3% quarter-on-quarter.

Q4 '26, the revenue stood at ₹41 crore. EBITDA for the quarter was at -₹4 crore.

The losses were lower than Q1 FY '26, which stood at -₹6 crore, as well as Q4 FY '26, which stood at -₹12 crore. This was largely driven by an increase of non-cepha products in our overall portfolio.

Trade generic business stood at ₹21 crore, a decrease of 9.5% year-on-year and a decrease of 23.4% quarter-on-quarter. EBITDA continued to remain at break-even for the second quarter in a row.

It is generally higher than the break-even of ₹0.1 crore compared to -₹5 crore, quarter one FY '26, and ₹1.1 crore in quarter four FY '26. Our balance sheet continues to remain very healthy with a cash surplus of ₹1,616 crore.

The operating cash flow for the company for the quarter one stood at ₹65 crore. This concludes the financial highlights for the quarter.

I would request the moderator to open the forum for the question-and-answer session. Thank you, everyone.

Thanks for the opportunity, and congrats on a good set of numbers. On the CDMO segment, is it possible if you can highlight how to think overall growth in terms of volume and value this year as well as the next year?

Second, if you can also give some color as far as the margin tracker is concerned? Thank you.

Sure. Hello everyone.

This is Sahil. Vivek, look at the volumes for Q2, right?

The volumes also look healthy in high teens, at least for this quarter as well. As the momentum continues, we can update how the rest of the year also goes, but whatever visibility we have today, Q2 also looks extremely encouraging.

API prices, they are volatile, right? At this point in time, they are volatile moving upwards.

Practically, if you look at it, Q2 also looks steady, and we expect to end this year as well on a good note.

Understood. Any color on the margin trajectory?

Margins are expected to remain in similar levels, right? We have always guided for a 14% to 15% margin.

Obviously, quarterly, as you have always discussed, it's difficult to rate the business quarterly, but overall at a annual level, we expect that the margin should remain in the 14% to 15%. Given Q1 has been strong, we can incline towards the upper bracket of it.

Understood. The Q1 margins are a bit higher side, and this is a kind of aberration, right?

As I said, the prices of the API were also high, and if you remember, Q4, we also had built some inventory to protect ourselves, right? These were strategic calls we took, which helped us secure our margins.

Understood. Lastly, if you can help us understand, Sahil, what are the initiatives that you are taking in the branded and really the domestic and international formulation?

How to look at the growth trajectory in these markets as well? Thank you.

Sure.

Quickly, I'll tap both of these segments. First is domestic branded Akumentis.

As was mentioned in the initial note, we have added almost 200 people in our field force to tap through adjacent headquarters, which are of importance, where we can cap some growth, right? The focus here remains how do we expand our presence into prescription business.

The focus still remains on our key performing therapies, which is gynecology, cardiology, as well as pediatrics, and we also have presence in orthopedia and derma, which are follow-ups. Right, so that remains our focus within the Akumentis business, and we are very positive that over the next 2, 3 years, this will be a key segment for the company, both in terms of top-line as well as the profitability.

On Unosource, again, while this quarter was muted, we see good growth orders in our coming quarters. Right, there's a strategy which we are taking are twofold.

One is while we say we are present in 60-plus geographies, which are our star, focus, gold, whatever you call them, these markets where we have to drill down, right? There are a few set of markets which we have discussed that these are focus markets where most of our time, energy, resources will go.

Secondly, the product portfolio as well. We are filing niche, first-to-launch products in various markets, which will help us build sticky, high-margin businesses.

Understood. What exactly has been impacted growth of these segments in this quarter?

Akumentis, if you look, top-line growth was there, but bottom-line was not there given the additional EBITDA drain that we had in Q1 was largely on account of so almost 200 field force, right? That's almost 15% increase in our field force, right?

In the initial quarters, as you rightly understand, you don't generate PCPM out of them, right? That was a drain on our EBITDA.

On Unosource, that was one quarter where we saw limited, but Q2, Q3 onwards, we'll have the growth back on track.

Perfect. Thank you.

That's from my side.

Moderator? [unclear] Next questions, please.

Next question we have from Pooja.

Hello, sir. I wanted to ask that with the IPM growth accelerating, what is your outlook on the volume growth for the FY '27?

Pooja, thanks for the question. If you recollect quarter three of last year, quarter four of last year, then quarter one of this year, we have seen almost high teens of volume growth, right?

Q2 also looks strong at high teens, right? While the volume growth in the IPM has been in the range of 2%, 3% or something plus the new launches, right?

For us, this has always been the key driver for our business, and particularly over the last one year, this has been the key lever for our growth. While this could be a period where we have sizable volume growth, but we remain confident that our volume growths will at least be in double digits in the coming quarters.

Also, thank you.

Next question from Aanchal Maheshwari. [unclear]

I think there is some challenge with the moderator

Yes, we are also—

Hi. I just had one question on your domestic growth side.

Sir, can you give us a mix of how much was the volume growth and how much is the value growth mix? Also, are we planning any price increases for our domestic business this year?

The growth has been driven by a mix of new product launches, price growths, as well as volume, right? This, given the growth is only 7-odd percent, right?

All three have contributed their bits to this top-line growth. As far as price growth is concerned, we have already taken price growths, and this will also be reflected as we move on this quarter.

Sir, is it possible to quantify the numbers?

No.

Okay.

Hello. This is Sangeeta's partner, Andre.

Congratulations for a great set of numbers. My first question was on API.

This is a question I keep asking. Is there a time frame within which we will evaluate whether we want to continue with this business?

That's my first question.

The management is fully confident, right? This is a business we have been investing for over 3, 4 years now, the fruits of which are very visible as we speak, right?

The quarterly losses have been gradually coming down. As far as we speak as of now, we're fully into this business.

Our cepha business, we have been able to come out of the low-margin products, and as well as increase our basket of non-cepha products, including linezolid, montelukast, and so on, which are helping us improve our margins, right? I think at this point in time, it's not a question of whether we make a U-turn from here or not.

It is how do we improve the profitability and then scale this business into a profitable venture.

Okay. Just so I'd like to give some feedback as a minority shareholder that we would be delighted if you actually got rid of this business.

You have an absolutely outstanding CDMO business, and you have a lot of traction in the exports business as well. If you were to focus on that, it would delight us.

Just a comment that I wanted to leave with you.

Sure. Perfect.

Fair point. I think we work in the best interest of the shareholders and the company, right?

Being a minority or a majority, we'll take decisions which are best for the company in terms of capital allocation as well as management bandwidth. Right.

As far as the Europe and Zambia business is concerned, I think you've given a guidance of 15% to 17% EBITDA margins on Zambia. Now, do you have any actual numbers to share with us in terms of the EBITDA margins?

Is there any updated margins guidance that you can give us on the European business?

Rightly, on both the Zambia as well as Europe, these will be margins which are similar, maybe tad higher than in the higher teens compared to our current CDMO business, right? That's what we can speak as of now.

Zambia is something we expect in the H2 that will deliver for this fiscal the $25 million, which will roughly translate to almost 240-odd crores in our revenue, and similar in the next financial year as well. Within the next financial year, we will kick-start our European business as well.

Both of these businesses will uplift the corporate margins. Okay.

As far as the capacity utilization strategy is concerned, you've always invested in a lot of capacity, and you believe in having a lot of spare capacity. Having said that, your utilization has gone up in the previous quarter.

Going forward, what is your strategy going to be like? Can we look forward to better capacity utilization, or are you going to continue with your strategy of having a lot of spare capacity because that gives you a competitive edge over others?

Our style has always remained to be prepared for market opportunities, right? If you really look at, Q2 was a weak volume quarter last year, and then Q3, we suddenly had a almost a high-teens, 20% odd volume growth, which was again seen in quarter four, again seen in quarter one, right?

Our spare capacity was of real help, right? As we've always said, we could move up to 55%, 58%, 60% odd percent as our total peak utilization.

We are already at 50-odd percent, right? The strategy remains given there's a continuous focus on better-quality drugs in the market, there are increasing opportunities of volume growth, we are in process of further expanding our capacities.

Right. Last time we spoke about the need to recruit certain amount of senior talent.

Where are we on that front, either in terms of actually having people come on board or work-in-progress in terms of senior talent being onboarded?

Senior talent, I don't know which conversation last time, but senior talent, the company today is very well-run by professionals across all domains, right, right from quality, R&D, business development, and so on, right? There is always a need in an organization to bring in fresh blood, but as of now, given you could see in our financials as well, there is ample leadership and talent which is there, and rightly so, we stem a lot into our homegrown leadership as well.

We are fully ready. You have seen orders across Zambia, across Europe, across domestic volume growth, right?

Across all fronts, we have great industry talent, which is still with us.

Last time we spoke about the fact that a lot of your people are about 12th class pass, right? That there is perhaps a need to attract in more educated and more experienced, more senior talent.

That was the context in which I was making this query.

I don't think that kind of conversation had ever happened. We do have all MPharms, PhDs, doctorates.

You will find that we are having, see, best percentage of pharmaceutical graduates and postgraduates if you compare it with the rest of the industry.

Thank you.

I don't think where the conversation had came.

This is also a feedback that I've shared I think on a one-on-one with someone, and this is some feedback that has also been given to us by some of your ex-employees. That's why I'm taking the liberty of sharing this with you.

No, sure, sure, sure. You can ask anything.

We do have lot many PhDs and MPharms and MScs, and all doctorates are there.

Okay. Thank you.

Thank you very much.

All the heads are from top industries like Dr. Reddy's or like that.

Right, right. Thank you.

Thank you. Hm.

Good afternoon, sir. Congrats to the management team for a strong growth numbers.

Sir, the Zambia sales was supposed to start from Q2 onwards. Has that started?

I think we always maintained FY which is there, right? It will likely be in Q3 and maybe some parts in Q4.

As we speak, we are already in advanced stages where we have agreed upon the volumes and the prices with the government over there of almost 100-plus products that we would be supplying in Zambia. That is completely on track, and this fiscal, we'll recognize the revenue.

Okay. On the overall net cash number, you mentioned on the call was around 1,600 crores now?

Or that was the cash

position? Net of debt.

That was net of debt, right? 1,600 crores?

Yes,

that is

net of debt.

Thank you. Yeah.

Thank you.

Hello, good afternoon, sir. Am I audible?

Yes.

Yes.

Yes.

Thanks for the opportunity, and congratulations on the good set of the numbers. Sir, can you explain on the acquisition which we have done recently, whether it's a capability acquisition or a capacity acquisition, what we are seeing there, and how it's going to add to us?

Sure. If you look at the overall style of our acquisition has always been to enter into novel niche formulations, right?

Cosmetics, we have already been doing for over a decade now. Our Plant 5 is devoted and dedicated to cosmeceuticals, which has good profitability as well as we were almost at peak utilizations, right?

The acquisition rationale behind this is to expand our capacities into the skincare cosmetics as well as this will enable us to venture out into the color cosmetics as well, which is a fast-growing space. The strength and the moat that Akums today has is formulations R&D, right?

We'll build on to this to tap to additional niche market within the cosmeceuticals, and this will help us expand our presence in that area as well. While this whole BPC market is growing rapidly, our aim remains how can we serve markets which add meaning to our top-line and bottom-line.

Sir.

Sir, on the last participant, you said the capacity utilization was already around 50% and we can maximum go up to 55%. With this European and Zambian orders coming in, we can see some increase in capacity utilization going forward.

Would we be resorting this low-margin profile orders to subcontracting, or how are we planning to optimize the orders going forward, sir, with us already reaching 50% utilization?

There is no concept of subcontracting, honestly. We are in the business of delivering manufacturing volume to the clients, obviously.

While there would be some chunk of portfolio which would be low margins, but there is no rationalization as such, right? If you really look at today, the gross margins are well above 40%, and you don't really wish to lose any of them.

The business you do with a lot of customers is through a basket approach as well. Right, we are in the process of setting up one more facility in Baddi, which will go live almost at the end of this financial year itself, which will significantly boost our oral manufacturing capabilities, right?

Right, sir. What would be the capex for that, sir?

We are still discussing. As we go live, we'll update you with it.

Sir. We are adding one more facility in overall, and we are not resorting to this subcontracting and all.

Okay. Thanks for that, sir.

Thank you. Thank you, sir.

That's it from me.

Thank you for the opportunity, sir, and congratulations for the fantastic set of performance in CDMO business. Sir, my question is that we have increased our gross margin by 1.5%.

Can you quantify how much is due to value addition that we are going in high-value products and how much is due to inventory gains?

Very limited would be of inventory gains per se. Most of it is largely through high-value products being getting added.

Okay. These kind of gross margin is sustainable going forward?

Plus or minus 0.5%?

Yes, that's the expectation. Also, within the overall corporate gross margins, there's also been a positive from the API gross margins.

API, we used to operate last year at almost -90% plus gross margins, which in this quarter, we are almost at -75% gross margins. Right, this has also been a positive, and obviously CDMO is the one which is torchbearer is inching forwards.

Okay. Sir, we have done good work in API where our EBITDA is reducing month-on-month basis.

Is it expected going forward, or there is any seasonality in that?

There's no seasonality. If you really look at it, two quarters we have been able to do it.

This quarter as well, we are completely in control of it. This is expected to gradually come down and we should achieve break-even.

Okay. Thank you so much, sir, and best of the luck for future.

Thank you.

Thank you.

Am I audible now?

Okay. I just have one question.

I want to know what can be the volume growth next year? What are we expecting?

Divya, very difficult as of now to quantify the volume growth. We have always been significantly better than the market.

We expect the volume growth in the industry to sustain and continue. This is what we have received the feedback.

As of now, the expectation is we'll at least be double digits in our volume growth for this year, the next of the year. As just mentioned previously, we are also adding capacities in oral tablets, which should go live by the end of this year.

The volume growths should continue in the foreseeable future.

Okay. I just have one last question.

For our new acquisition, what can its number be in coming years? How big do we see it?

Can you please elaborate more?

Inorganic. How much are we

supposed

to spend? How big could it get?

If you really look at it, this Oriflame acquisition, or in general?

Overall

in our acquisition,

what is our appetite?

In general, so as Sumeet ji mentioned in his opening remark, we have almost 1,600 crores of cash with us and then the whole balance sheet is not leveraged, right? We'll look it from the angle of is it value accretive and making business rationale to the group.

I think that's how we'll look at it. Obviously, we'll be cautious in making very large bets, but it should make business sense, and we have all the ammunition and gunpowder to latch on to such opportunities.

Okay. Thanks so much, sir.

Hi, thank you for the opportunity, and congratulations on good set of numbers. My first question is with regards to your CDMO business.

Sir, in terms of this entire API prices going up, how are we seeing the reactions of our customers in terms of what is the kind of inventory they are now having and how well are we able to pass this on completely to them?

Sure. Two parts to it.

I'll address the B part first. The model has always remained a cost-plus, right?

It is at every purchase order, whatever is the prevailing price of the input materials that gets passed through. On the inventory, this honestly differs even by the similar set of companies and across.

Some see it as a rising API environment and try to hold on to inventory, while some wait and pause to see if they can defer the inventory decisions, right? This inflationary environment, we see even start from February, March, we have been almost 5, 6 months into it and the volume growth still continues, right?

Whatever inventory someone would have thought to build in one quarter would now have liquidated, right? This volume growth I think is a phenomena where the secondary in the market continues to pick up, and people are used to putting a normal inventory of 45, 60-odd days, whatever is the company policy for them.

Right, so that's there.

Sure, quite understood. Second question is with regards to the API business.

I understand we are trying to inch up our profitability. Earlier, I think we have been guiding about that by end of FY '27, we should turn that segment profitable.

Are we still holding on to that guidance? In terms of growth, then, by FY '28, should we see that business starting at least reporting a single-digit kind of a growth?

Absolutely right, Abdul. The whole target is on a monthly level, at least by the end of February, March, we should be monthly EBITDA positive in this business.

Then next year, we should start positively contributing to the corpus from this segment.

Sure. Last one question from my end.

The 1,600 crores of cash what you have on your balance sheet, where is that parked currently? If you could also help us charter a map that how do you plan to spend this, maybe on giving some out as dividend or some M&A, if you can highlight, please?

Abdul, I'll answer the first part of the question. Most of the money, in fact, 98% of the money is parked in fixed deposits with nationalized banks, right?

The money is safely with these banks. There was another question on inorganic.

Our net worth sits at more than 3,400 crores, and there is no debt on the company. I think what Sahil was mentioning was if we get a right acquisition and there are synergies, I think the company has the appetite and DNA to look at an acquisition.

I think largely, Abdul, the money is well secured, and it will be put to good use for business synergies. We continuously explore, and once we have it, we will let everyone know about it.

Understood, sir. Thank you, and all the best.

Thank you.

Thank you for the opportunity again, sir. Sir, as per my limited knowledge of the business, our field force productivity in our domestic formulation business is lower than the industry for MRs.

Now we are increasing the MRs, what is the rational behind that strategy?

As you rightly said, we are lower than the industry average benchmarks, right? The strategy has always been to have a strong clinical presence across our focus power products, right?

The expansion was in line where we wanted to tap additional geographies, headquarters, cities through our Akumentis, right? While PCPM is one metric to look at businesses, I think this is more of an outcome of a mature marketing business.

We're still in the phase where building this business, right? We are cautious of how do we do our investments into field force and products, right?

Gradually, as the business will scale up, we'll certainly inch up to the industry averages and hopefully surpass them. At this point in time, we'll have to appreciate that this is a phase where we are building the business.

Okay. Thank you so much, sir.

Thank you, everyone, for attending the Q1 FY '27 earning call for Akums. If you have any remaining questions, you can reach out to the investor relations team.

Thank you, and have a good day.

Thank you. Thank you, everyone.

Thank you.