Good morning, everyone. Thank you for joining the Q1 FY27 earnings conference call of Fredun Pharmaceuticals Limited.

We have with us today Mr. Fredun Medhora, Managing Director of the company.

Before handing over to Fredun sir, let me briefly walk you through the company's performance for the first quarter of FY27. During Q1 FY27, standalone total income stood at ₹228.25 crores, registering a strong year-on-year growth of 90.44%.

EBITDA stood at ₹32.78 crores, reflecting a growth of 92.90% year-on-year growth. EBITDA margin improved to 14.36%, expanded by 18 bps year-on-year.

Net profit of the quarter stood at ₹13.17 crores, registering a growth of 94.63% year-on-year growth. Net profit margin improved to 5.77%, expanded by 12 basis points.

Overall, the company delivered a strong earnings growth during the quarter along with an improvement in operating margins and profitability. With that brief overview, I would now like to hand over to Mr.

Fredun Medhora. We can open the floor for the Q&A.

Good morning, sir.

Good morning.

Am I audible?

Yeah.

Sir. Congrats on good set of numbers.

You have almost delivered FY23's full-year revenue in this quarter only. Where can we see Fredun in next three to five years?

As I've been always saying, there are two parts of the growth story. One is our new-age brands, which are growing at around 35% to 45% year-on-year.

Some are growing even faster because they're at a lower base. Our vintage business is growing at around 15% to 20% year-on-year.

A blended growth of somewhere around 35% to 30% for the next three years is kind of on the charts, and it's going to be a combination of all the new brands and our existing ones plus the increase in the capacities that we are building currently at our own facility. Also, along with our five plants in Palghar, we have added around 43 locations where we are manufacturing.

Those product portfolios will also add in. It will give a very good boost to the sales and the product line in the coming three to five years.

Sir. Thank you.

That's all.

Yeah. Hi, good morning.

Can you hear me?

Yes, I can hear you. Good morning.

Yeah. I just wanted to know, can you just throw some light on the company's domestic growth opportunity?

Fredun is currently present across 17 states, and our strategy mentions that deeper penetration into Tier 2 and 4 cities. How large could this opportunity become over next two to three years?

GX is currently now in around 19 states, and we are at a very small base of this year about ₹100, ₹110 crores only. We have a very long way to go in terms of GX.

Our goods are very well accepted in the market. Plus, along with our promoted brands such as our pet care brand, our nutrition brand, our mobility brand, our other products, which are also sold in common chemist shops.

The pharmacies, the people, the distribution line feel very confident that there is a vast array of products across therapeutic ranges coming from this company, and they are more than willing to hold more and more of our goods and actually sell them. Plus, the repeatability of those products is quite high.

We are, again, it's the same thing, we are very under-promise kind of people. We expect 30 to 25% to 35% growth in this business year-on-year even for the next five years.

We don't anticipate any hiccup because we are at a very small base. We have a long foresight ahead.

We have planned for the next 3.5 to four years. Anything more than that, I would not want to commit, but for the next four years, you can easily consider around 30% to 35% growth on the GX line as well.

The market potential is huge. Some big companies are doing thousands of crores of GX.

I'm talking about pharma penetration itself is very poor in our country even in 2026. There are a lot of people under poverty line as well.

Many people are not even having access to medicine, forget Fredun or anything. In the next 10 years, definitely, as India progresses, as people come out of the poverty line, even 1% of the people is like a small country in Europe.

We have a long way to go. Our aim is to ensure that our supply chain is robust.

Our aim is to ensure that our products reach the customers in time. The product basket keeps on enhancing itself with the latest molecules and with the addition of further products to enhance the product basket as an overall offering.

Okay. Got it.

Thank you for answering.

Congratulations, Fredun, for excellent set of numbers. Your new website waggre.in looks super interesting.

If you could expand upon what kind of developments have happened and what you're seeing this pan out like? It's looking excellent, website.

Thank you. As we've taken over the website and the company last year, first we spent about three to four months creating the team.

Because a strong team who has built websites and e-commerce platforms for a long period of time and made successful e-commerce platforms to get that kind of team engaged and formed, it takes time. Luckily, we were lucky enough to find the right kind of people.

Then we started onboarding all of our brands. Almost all the brands are complete.

I think within the next 20 to 25 days, practically every single big brand in the country will be onboarded. We also have now onboarded our pharmacies.

We have a huge, almost a 1,500, 2,000 product range of medicinal products also that you can order from various brands across companies. It is already one of the most comprehensive pet care portals right now even in our beta phase.

We had a soft launch around 15th of June. We are testing the deliveries and small bits and issues, the hiccups.

Again, as I was telling you, we are creating a pet parenting platform. It is not just an e-commerce platform.

Many people have started now latching on to it and started changing their websites to calling pet parenting, but we are already having a list of breeders, a list of trainers, a list of groomers, a list of dog walkers, and a list of doctors, plus we have our own diagnostics. That will link on the website to offer those services.

We are also tying up for pet blood collection, and we are also creating a profile and an online portal within the Waggre thing for blood collection and blood donation for pets. It will be one of the most comprehensive websites in coming time.

I think within the next 60 to 65 days, all our beta testing and all those things will be done. We are already live.

People are already ordering from it, but we are still creating a stronger backend. Warehousing is done.

Our supply chain is done. I think within the next say 90 days, you will see campaigns coming out, partnership with various key players in the industry coming up, and a lot of exciting things coming up.

Waggre is something to look out for. It's something personally I'm involved in on a regular basis because I really feel it is the need of the hour for pet parents, especially as a pet parent, I know how important it is to have a 24/7 helpline, and that is also what we are creating.

Even the look and the feel of the website even from the current one will be slightly different in the next 60 to 90 days.

That's great to listen, Fredun. Thank you.

Thank you.

My question is already answered, but just to add, what is the

My question is already answered, but just to add that, can you guide capex for FY27?

Yeah. In terms of capex, as we are growing, we're expanding, our goal by end of December 2028 and early '29 is to be one of the largest manufacturing units at a single location in the country.

We have a plan of about ₹30 to ₹40 crores of capex in this financial year from now onwards. Maybe the same plan for the next year as well, about ₹30 to ₹40 crores.

At around ₹1,000 crores of revenue, about 2% is generally a maintenance capex in itself because we have to constantly upgrade our facilities and machineries and create the latest, what do you say, protocols for our upgraded rules and regulations as per cGMP. Some capex will always be there for the plant for perpetually.

For the next two years, you're looking at around ₹35 to ₹45 crores per year for the next two years.

Okay. Got it.

Thanks a lot for giving this opportunity and congratulations for the great set of results, Fredun sir. Historically, I have seen that always the Q1 has always been weaker than the Q4.

Just had one question. For the current Q1, we have seen an exponential increase vis-a-vis the last year.

What were the factors driving that, and do we see the future quarters to be maintaining this growth rate or it could be better than Q1?

Sure. As you have noticed, last 20 years, our first quarter is always weaker amongst the four quarters, and that is because of the nature of the business.

As we have sale targets, people have import targets and distribution targets, there's a lot of purchase that happens in the last quarter. Then when the orders start rolling in, it is around April end, by the time the dispatches happen, the first quarter is always slightly it optically weaker.

However, for many years, the numbers can talk for itself, the first quarter is always improved versus the first quarter before. This time we have got a slightly higher growth, yes, because during last year, in the last quarter, because of the price fluctuation increase, we generally carry more stock.

We as a company used to always have a slightly higher number of stock. We could book orders at old prices with our customers, and we got a better order book.

We, in fact, told our customers that we will add in another if you give us further orders, we can kind of hit you with a very lower price increase than the world is giving. We definitely got a slight boost from there as well.

In terms of the coming quarters, yes, will we see growth? Yes, we'll see growth.

It will be somewhat around the same kind of numbers that is there for the first quarter as well. Again, our growth and our numbers are something that we don't look at.

What we look at is consistency in terms of our product availability in the market and also the new product additions that we are doing. We will see a growth in all our numbers coming in from the next quarter, maybe the later the quarter on, but it would be around the same level as the first quarter for this year.

Next year also, we are anticipating almost the same kind of growth in revenue. This first quarter, we had a slight boost because we booked extra additional orders in the last quarter of last year giving our buyers a good price which they would have not got elsewhere, and we asked them to book further orders as well.

We are on track. We're doing well.

I think next two to three years, we will be on the same kind of growth trajectory as we have been right now. I also want to add that though people are congratulating us for the numbers that we have shown this quarter, my highest growth was in 2008 and '09 when I've increased 110% year-on-year and 115% year-on-year.

Because my numbers were so small, nobody congratulated me that time. I really would want people to understand that we are consistently showing growth not for the last three years, four years, but for the last 19 years.

As a company, we are 38, 39 years in the industry, and these numbers we have achieved after 39 38, 39 years in the business. Yes, I understand that people are seeing our journey for the last five years, but honestly, I'm very proud of what we have been doing from the day I joined and from the day this company is incorporated, because that is what is allowing us to grow right now.

Perfect. Thanks a lot for the detailed answer.

I had one more question with regards to the functional food

Just one last question, if that's fine?

Okay.

Yeah. I just wanted to understand about the functional foods division.

How is it doing? How did it do this quarter?

I believe in the last con-call you mentioned about the Jain food which was a hit in the market. How is it progressing and how do you see the functional food growing over the next two, three years?

The functional food is part of the pet care, and we are adding, as I told in the last call also, we're adding about 42 kind of variants in functional foods. Our Jain variant has picked up very well, of course in certain pockets in the country, and has done exceptionally well.

We have also got our functional food response in all the metros very well. We also have a normal biscuit range which we are manufacturing and which has got very good response in Tier 2, Tier 3, Tier 4 cities.

We have a wide array of products, ones for the Tier 1 cities and then others for the Tier 3, Tier 4 cities. The functional foods are given by the doctors where the doctors say, 'Okay, if you give treats to the animals, please give a snacky iron or a snacky, say, for the bone and joint, snacky for the gut, on and so forth.'

We are also coming up with cat biscuits. I think we will be the second or the third ones who have cat biscuit treats coming in in the country.

That is also coming in, and we are creating a functional line even for the cats in the coming six to seven months. We are focused on it.

We are looking at penetration and we're looking at product acceptance right now. Again, we don't want to dump the sales.

We're not in the dumping game, we want people to slowly take it. Any good growth is exponential in nature.

We like to flatline, no problem, but our flatline in functional foods is also growing very fast because the treats are accepted. Many parents come and call our company directly saying that, 'We love your product.

My dog doesn't eat anything else. If I don't give him, he doesn't start eating his food also,' or she was having gut issues, but after taking your treats is doing well.

Those small wins are more valuable to us than any numbers.

Yeah. Thanks a lot.

Thank you. I will join back the queue.

Hi. Good morning, sir, and congratulations for the numbers.

Just one question I have on the working capital side. Could you just elaborate on the working capital side for this quarter and going ahead for next two years?

We are currently at run rate of around ₹850 crores, we have a working capital of somewhere around ₹170, ₹175 crores, which is not a high working capital for a company our size. We also have a lot of debtors, we have good stock, and we have almost 50% of our working capital as cash on hand.

Will our absolute number of working capital increase? Yes, it will increase.

No doubt about it. At ₹2,000 crores, at ₹3,000 crores of revenue, of course we're going to have a higher working capital, but that would be in line with most manufacturing companies.

Hopefully, we will have further positive cash flows which will deter the requirement of higher working capital need from other bankers. Our goal right now is to go into the market, add more states, add more demographics.

Next three, four years are quite dynamic, but through higher margins, through better cash flows, and through a strong repeatability that will reduce the customer acquisition cost, that will also improve the gross margins tremendously and net margins tremendously, actually. We're quite comfortable, actually, in terms of working capital.

Great, sir. Thank you, sir.

That was it, and congratulations once again.

Thank you.

Hello. Am I audible?

Yes, hi. Yes, sir.

Hi, Fredun. Congratulations on a good set of numbers.

My question was on the line of interest rates. I just wanted to understand, has that changed meaningfully because if we see year-on-year, savings have grown significantly, but quarter-on-quarter the interest cost has gone down?

Is it because the borrowings have gone down or the interest cost in itself has gone down?

Interest costs are slowly reducing. Our cash flows are getting better, we're using less and less of our limits.

That is also there. Of course, there are certain spurts in requirement when we do some procurements or when we do some penetration for certain states, but overall the need for working capital is reduced.

The interest spending versus the top line has also drastically reduced. If you see the numbers in the first quarter, it will reflect so.

We are on track to ensure that we spend very frugally in terms of interest. However, interest cost alone is not our focus.

Our focus is to ensure that our products reach the market. For that, if we have to have some temporary spending, we will do that.

Overall, we are improving. Overall, our sales versus our interest cost has gone down, yes, because of our credit approval also.

We went from a BBB to a BBB+. Hopefully, we'll have better ratings in the coming years.

That has helped reduce the interest rate even further. Overall factors also has helped.

It's a part of accumulation of a lot of things and not just one thing in particular.

Got it. Just one more thing.

Your inventory and inventory days have been on the higher side, and I see a lot of debt is there to support the growth. What kind of inventory days are you targeting for this year?

As you go to see, our inventory days were quite high four years ago. Then at that time people were asking, 'How come you have so many days of inventory?'

At that time I was explaining to people that, 'Boss, if I have to launch five brands with multiple SKUs, I require that kind of inventory to hold up, to bulk up, because they're 2,100 products.' Now, on a 30%, 40% growth on the revenue, the inventory increases by 10%.

That just shows that we are rationalizing. We are looking at around 140, 135 days of inventory.

Hopefully, within the next four quarters, it will come to around 120 days. It will always hover between 110 to 125 days because of the nature of the business and the number of SKUs that we have.

Also, next four years we are into a hyper-growth phase for our new-age products in pet care, in mobility, in Nutra, and in cosmetics, and so on and so forth. For those reasons, we will have to, and many of the products we manufacture ourselves apart from just outsourcing.

We have those things, but they are rationalizing. You've seen the trend.

Inventory days have gone down by almost 50% in the last two years, we are quite okay with that.

Got it. Thank you.

Hi. Thank you for the opportunity.

I have three questions. First one, I have on a margin lever.

What is the biggest margin lever over the next two to three years? Should we expect margin expansion to accompany the 30-35% growth that you've mentioned?

As I told you, various lines of products that we have launched have different kinds of gross margins in it.

Pet care works at around 40 to 45% to 55%. Mobility works at around 40 40% to 50%.

Nutra has a higher intrinsic margin, but right now we're expanding, we are looking at around 35% to 45%, maybe even 45% to 50%. Dermaceuticals has a gross margin of 70% to 75%.

The blend of those margins coming in helps us improve our bottom line. Again, our focus our our focus is not just solely to increase profits.

Right now, for the next three years, our focus is to increase penetration, increase product acceptance, increase the conversion rates in terms of repeat orders. For that, if we have to sacrifice on some of the margins, we will do it.

However, because our vintage business is also getting more and more efficient and we are achieving more and more new registrations which are of higher margins and in and in better geographies, and our GX also will cross about ₹110, ₹120, ₹130 crores, there you will have a slightly a few percentage basis points higher price acceptance in the market versus a new entrant. Straight growth of margins are kind of in in play, and and that is where it will head.

As a company, our margins are doing quite okay. We know the intrinsic margins.

Within the next eight to 11 quarters, I've been continuously saying now around seven to eight quarters, there will be a sudden spike in the profitability also because we will have demographic reach almost completed as we have planned, and then we'll slowly penetrate within those demographics further, add more products in those channels. Yes, we are going to accept expect the growth of the margins in in line of what we have been growing, and in terms of our top line, as the as the top line grows, then more and more new-age products and and higher-margin products are sold versus what was sold last year, definitely there will be an impact in the bottom line.

Fantastic. That was really helpful.

Second one, what revenue does

Sure. Thank you.

Hi. With the good start to Q1, can we target a revenue of ₹1,000 crores and a EBITDA of ₹100 crores this year?

No, I have never committed something like that. I will never commit.

Anything can be possible, but our roadmap for last year was 570, we achieved 635. This year, our target was somewhere around 800, I think we are in line to achieve that.

We will cross that, hopefully. 1,000, I do not want to comment.

I am a very, very, very under-promise kind of person. I hope you understand.

This is my trend since I have been doing these earning calls, since I have been giving guidances since 2016. Yes, it optically looks that we are going to definitely reach a good number.

We are hoping that we will overachieve our target. We are on track to overachieve our target.

Will we overachieve? Let's hope so.

We are working on it. I would want to give our partners, our investors, our people who believed in us something tangible and positive news at the end of the year rather than overpromise something now.

We are on track. Yeah.

Sure. A follow-up to that is the EBIT margins have improved a lot, and they stand at about 9%

to 10%.

Do we see that growing to about 12%, 13% in next say 15, 18 months?

Again, business cycle, reporting cycle in India in most of the places in the world is 90 days. Business cycle is not 90 days.

Accreting a fixed month to when the PATs are going to come in would be not correct on my part to give, but we are on line that within the next say 10 quarters, we should be comfortably near that number. We might do something even better.

We might reach there. It might take one quarter plus or minus, but one quarter is 90 days.

Even if we achieve that number about 100 days post the plan on a 40-year journey, it doesn't matter. We are okay with it.

We want our investors to strap in for a very long run. We are honestly not 1% of where we want to be as a company, not even 1%.

I'm talking not in terms of market cap or in terms of profitability, in terms of creating an impact in the industry. We are wanting to do that more than anything else.

In the process, if our margins improve, in the process we become a bigger company, yes, of course we will do that, but we are as a company more focused on the impact we have in the industries that we're present and something that lives beyond my lifetime as well.

Sure, sir. Thank you and best of luck for the future.

Thank you.

Thank you.

Hello, sir. Meri aawaz aa rahi hai?

Am I audible?

Ji. Aa rahi hai.

Good morning, sir. Congratulations for a great set of numbers.

Sir, my question is regarding the pet care business. Presently, the business is currently generating around ₹40, ₹43 crore in revenue.

What revenue scale are you targeting for this year over the next 3, 5 years? What kind of margin for

the business? Yeah.

Pet care, We're one of the only companies to have nutraceuticals, allopathic formulations, functional foods, therapeutics, grooming, and also now diagnostics. We have our India's first center in Mumbai.

In Worli, we are starting one more in Malad, and we are creating one more center in Vashi as we speak. The growth in the pet care industry is going to come from all of these individually as well.

We are also launching cat food by the third quarter of this financial year or around the fourth quarter of this financial year. That itself, we are planning to be a ₹100 crore sale within three years from launching or within 3.5 years from launching.

Our plants that we are building right now for increasing functional food capacity, that itself we are going to also start OEM for other companies as well, so that we're looking at a positive growth in the numbers. Waggre is also technically part of our Fredun ecosystem.

Of course, it's a separate company, but it's into pet care, if you add that, we're looking at a good growth in those numbers as well. Our on-field penetration is increasing.

This year, we are looking at around ₹18 to ₹24 crores to sell only functional foods, but that will also include what we are doing right now as a product basket. Overall, we're looking, again, at 40% to 50% growth in those numbers for the next three, four years.

We're a very small base of ₹40, ₹45 crores overall with this. Growing at 40%, 50% year-on-year in pet care is not a big thing, at least for the next three years.

We might have a further spurt once the cat food revenues start adding, once the diagnostics revenues start adding. We have also in line certain acquisitions coming in.

We will be updating our investors. We'd be updating the markets and everything for those acquisitions which are coming in, which some are small, some are big, but they are all fundamental parts of the long-term growth story.

Some exciting stuff is coming in the pet care. Let's understand what we're doing as a business and why we're doing that.

I think then derivating those numbers will be quite easy. Fine with that.

Hi. Good afternoon, Mr.

Medhora. Hope I am audible.

Yes.

Sir, congratulations on good set of numbers. As you have always underpromised and overdelivered, you're continuing in that trend, which is heartening to see.

I just want to understand one thing, sir. In the last call, you had mentioned about as the company is going through this explosive growth, you would want to put in a formal structure in place in terms of finance, accounting, and slowly have an execution team which caters to your CEOs of different divisions so that

we

have independent division to each of the business. Could you throw some light on that?

Also, I think I missed your comment on the margin improvement that you were talking about. Could you throw some light on that as well?

Okay. In terms of the team, you have to realize that already every single division and new-age business has a separate CEO in place who have 10, 15 years of experience, some have 20 years of experience, some have 25 years of experience.

Our team in pet care, India's number one pet nutritionist is also part of our team. Our cat team has people in the industry who are stalwarts.

Even in our nutrition and our other people who have launched products for various MNCs in not only India, but across the world. The team is very strong.

We are having a very strong internal team also, our operations, our in terms of finances, and in terms of new product development. We have a very strong R&D team as well.

On all fronts, yes, we have been building teams, and I would proudly say that we have one of the lowest attrition rates in the country. My team is with me.

Practically every single core team member I had hired when I joined the company 19 years ago is still with me, every single one. Our team is good.

We are a crazy bunch of people, and everyone wants to grow. You come to our office at 9:30 in the night, you will feel it's 4:00 in the afternoon and the packed house.

Everyone just is geared up because so many exciting things happening. Yes, team is in place.

Further strong, I would say, management will automatically form as a part of the process. We are very well organized compared to where we were 10 years ago, compared to where we were five years ago, and where we will be in the next five to seven years, we will be better organized than what we are now.

It's a part of the process. I would want you to come if you ever get time to hit our office and meet everyone in person.

I would love for you to come and introduce you and you can check their energy levels post meeting them. Yeah.

Sure, sir. I'll talk to Kiran and arrange a meeting.

Sir, just to your last point on the margin, you had always been guiding

Sorry. It was part of a first question only, but anyway.

Thank you, everyone, for joining the conference call of Fredun Pharmaceuticals Limited. If you have any further queries, write to us at [email protected].

Thank you, Fredun sir, for your time. Once again, thank you, everyone, for joining the conference call.

Good day.