Thank you, Steve. Good morning, everyone.

I welcome you all to our post-results earnings conference call to discuss our Q1 FY '27 results. Our results materials have been uploaded on our website, and you may like to download and refer to them during our discussion.

The discussion today may include some forward-looking statements, and these must be viewed in conjunction with the risks that our business faces. On the call today, we have with us our Chairperson, Ms.

Nandini Piramal; CEO, Global Pharma, Mr. Peter DeYoung; and our CFO, Mr.

Vivek Valsaraj. With that, I would like to hand it over to Ms.

Nandini Piramal to share her thoughts.

Good morning, everyone, and thank you for joining our Q1 FY '27 earnings call. We have started FY '27 on a strong and encouraging footing with all three businesses delivering mid-to-high teen revenue growth along with meaningful EBITDA margin expansion.

During the quarter, revenue from operations grew 17% year-on-year to ₹2,270 crore, while EBITDA increased 72% to ₹285 crore. EBITDA margins also expanded by approximately 400 basis points to 12.5%.

Our profitability improved significantly, driven by all-round revenue growth, higher capacity utilization, operating leverage, pricing discipline, and continued focus on operational excellence. Our CDMO business delivered broad-based growth across India and the overseas sites.

Over the last year, we have strengthened our commercial team, deepened customer engagement, and sharpened our go-to-market approach. Combined with the continued signs of recovery in U.S.

biopharma funding, these efforts contributed to healthy RFP activity and robust order inflows during the quarter. Our Complex Hospital Generics business delivered a resilient performance while maintaining leadership positions across key therapies.

We're seeing encouraging traction in ex-U.S. inhalation anesthesia markets.

Kenalog supplies, which remain an important growth driver for FY '27, are expected to start from Q2 FY '27. Our Consumer Healthcare business delivered yet another quarter of strong mid-teen growth, led by continued momentum in power brands and e-commerce.

Expansion in distribution, disciplined brand investments, premiumization, and cost optimization initiatives supported both growth and profitability during the quarter. Quality and compliance continue to remain a key differentiator for us.

During the quarter, Sellersville facility in the U.S. received an EIR from the U.S.

FDA, successfully concluding the inspection. We're also proud of our longstanding quality track record across the global network, having maintained a strong compliance culture and a zero OAI classification day.

Moving to our business-specific performance, starting with our CDMO business. Our CDMO business delivered 19% year-on-year revenue growth during the quarter.

Growth was broad-based with a healthy contribution from both India and overseas sites, supported by strong execution, improved demand conditions, and good order inflows across the network. Over the past year, we have made significant investments in strengthening our commercial capabilities.

We've expanded our commercial team, enhanced customer engagement, and refined our commercial strategy to improve market coverage and win rates. Combined with the continued recovery in U.S.

biopharma funding over the last few quarters, these initiatives have contributed to a meaningful increase in RFP activity across most of our sites. While customer decision-making timelines remain extended, we remain encouraged by both the quality and the breadth of RFPs entering our funnel.

Importantly, a significant portion of these RFPs are directed towards our overseas sites, which have a favorable margin profile and offer meaningful scope for margin expansion as utilization levels continue to increase. Geopolitical and trade-related uncertainties are reinforcing the importance of supply chain resilience and diversification efforts across the pharmaceutical industry.

Increasingly, customers are seeking reliable CDMO partners with differentiated capabilities, high-quality standards, and manufacturing footprints spanning multiple geographies. Our global network positions us well to capture these emerging opportunities.

Operationally, strong execution drove growth across most of our sites. Higher utilization levels, pricing discipline, and operational excellence initiatives supported profitability improvement despite ongoing inflationary pressures.

We continue to strengthen our differentiated capabilities, particularly in the ADC space. During the quarter, we inaugurated a new commercial-scale payload-linker development manufacturing suite at our Riverview facility.

Equipped with advanced containment, automation, and analytical capabilities, the facility enhances our ability to support customers from development through commercial manufacturing. The expansion of sterile injectable capacity at Lexington also remains on track.

Together, the Riverview and Lexington investments form part of our $90 million expansion program and significantly strengthen our integrated ADC platform, spanning payload, linker manufacturing, and sterile fill-finish capabilities. We continue to witness encouraging customer interest in these capabilities.

During the quarter, we also announced a strategic collaboration with Ajinomoto Bio-Pharma Services, combining their AJICAP site-specific conjugation technology with our ADC manufacturing expertise. This collaboration will provide customers with a more seamless pathway from early development through commercial manufacturing, while simplifying technology transfer and scale-up.

In addition, we announced a manufacturing and supply agreement with Botanix to support development and commercial supply of Sofpironium. This arrangement highlights the strength of our integrated North American network and our ability to offer customers supply continuity, operational flexibility, and potential dual-site manufacturing.

Overall, improving market conditions, strengthening commercial capabilities, differentiated offerings, and strong execution position the CDMO business well for continued growth and progressive profitability improvement. Moving on to our Complex Hospital Generics business.

Our Complex Hospital Generics business delivered a resilient performance over the quarter with revenue growing 17% year-on-year to ₹743 crore. We maintained our leadership positions across key therapies, including sevoflurane, intrathecal baclofen in the United States, while continuing to expand our presence in the ex-U.S.

market. In inhalation anesthesia, we retained our leadership position in the U.S.

sevoflurane market with a 48% market share, while witnessing encouraging traction across select ex-U.S. markets.

We expect these markets to become an increasingly important contributor to growth over time. In intrathecal therapy, we continue to maintain our leadership position in the baclofen market, reinforcing our strength in differentiated hospital products.

Within injectable pain, we're making steady progress in addressing supply constraints and improving product availability. Enhanced supplies should enable us to better capitalize on demand opportunities across key markets going forward.

Kenalog supplies, which are an important growth driver for FY '27, are expected to start from quarter two FY '27. We also remain focused on building a differentiated specialty portfolio through a combination of 505(b)(2) products, complex generics, branded products, in-licensing opportunities, and co-development partnerships.

These initiatives are aimed at not only broadening our product portfolio, but leveraging our customer relationship and worldwide supply network to support long-term growth. Overall, the business delivered strong growth while maintaining cost discipline amidst supply-related challenges and input cost pressures.

Moving to our Consumer Healthcare business. Our Consumer Healthcare business continued its strong momentum, delivering another quarter of mid-teen revenue growth.

Growth was driven by the continued strength of power brands, rapid expansion in e-commerce, wider distribution reach, and disciplined investments behind our brands. Power brands grew 23% year-on-year, contributing to 53% of Consumer Healthcare sales during the quarter, reflecting the success of our focused brand-building efforts and consumer engagement initiatives.

Our e-commerce business grew 40% year-on-year and contributed 28% of sales. E-commerce remains a key strategic growth channel and an important source of long-term value creation.

During the quarter, we launched iChoose, a new master brand that brings together our women's intimate care portfolio under a unified identity. The platform addresses consumer needs across multiple life stages and represents another step in our strategy of building scale and differentiated brands.

We continued to invest behind our brands and allocated approximately 12% of sales towards media and trade promotions during the quarter. Our approach combines traditional and digital media channels to maximize reach, engagement, and effectiveness.

Our innovation strategy remains focused on fewer, better, and bigger launches. We continued to prioritize high-potential opportunities that can scale meaningfully, while also driving premiumization across the portfolio through higher-margin offerings.

In addition, judicious pricing actions and cost optimization initiatives helped mitigate raw material inflation and supported profitability despite a challenging input cost environment. Overall, strong brand momentum, channel expansion, premiumization, and disciplined execution position the business well for sustained growth and continued EBITDA improvement.

Summarizing the performance. To conclude, we're very pleased with our strong and encouraging start to FY '27.

All three businesses delivered mid-to-high teen revenue growth, supported by favorable long-term industry dynamics, focused investments, and disciplined execution. Importantly, this growth translated into meaningful EBITDA expansion and improved profitability.

Our diversified portfolio, strong customer relationships, quality track record, and global manufacturing network continues to strengthen our competitive positioning. Looking ahead, we remain focused on deepening customer engagement, driving operational excellence, maintaining financial discipline, and judiciously investing behind select long-term opportunities.

We will continue strengthening our differentiated CDMO capabilities, expanding our specialty product portfolio in Complex Hospital Generics, and investing behind priority brands and channels within the Consumer Healthcare space. Based on our strong start and current business momentum, we look forward to delivering sustained revenue growth and expansion during FY '27 while staying agile in a fluid external environment.

With that, I'd like to open the floor for questions.

Thank you for taking my question, and congrats to the management on a good set of numbers. First question I have on the CDMO business.

We have delivered good numbers during first quarter. Typically, we have seen the trend in CDMO particularly that quarter-on-quarter growth is always there from 1Q to 4Q.

We keep on seeing the gradual improvement in the numbers. Considering the first quarter of this year has been quite good, do you expect that trend to continue for following quarters during the year?

Do you intend to upgrade your top-line guidance for the year considering we have done well during 1Q?

Amey, thank you for the question. Yes, historically, what we have seen is that our CDMO business has seen higher quantum of revenues being delivered in H2 versus H1.

This year, we began with a more stronger opening order book, which we had referenced to during our last investor call, and which is why we began on a stronger note. Between the quarters, there may be some ups and downs depending upon how delivery patterns emerge throughout the course of the year.

On a full-year basis, we continue to stand with the original guidance that we had given at that point in time. At this stage, it's early days, Amey, and we don't want to revise any guidance.

We'll come back with anything fresh maybe after the September quarter results. We're maintaining the annual guidance at this stage.

Sure. Just one more thing on CDMO side.

We have, I think, couple of contracts which will get commercialized during the course of the year like NewAmsterdam, et cetera. When exactly it's likely to start adding up in our numbers?

Again,

we discuss this from time to time on our investor calls. We don't really comment on specific contracts.

We would suggest the best way to look at if it's a publicly traded customer, they have their own analyst reports and investor calls, and you can make your own conclusions from those because they're covered very well by very strong analysts, and I would suggest you read those materials for predictions on when they would expect to have revenue from the different offerings that they have.

Sure. Just one more last question on Complex Hospital Generics.

There, our trend for last few quarters have been muted for at least last five to six quarters. This quarter has, we have delivered something like 17-18% kind of a growth.

You mentioned in your opening remarks it is largely driven by non-U.S. market.

The issue which we are facing in this segment, which was from the Chinese competition, should we assume that has been subsided, and should we expect this growth trend to continue for the rest of the year?

I would say that we started to take actions over the course of last year to respond to the Chinese competitive situation. The Chinese competitive situation remains; however, our actions have started to bear fruit.

We would expect to, as Vivek mentioned, we reaffirm our guidance for the full year for the business. I wouldn't necessarily assume that the exact percentage rate we had in Q1 will be the full-year number.

I would look back at the full-year guidance we gave for the business, and I would take the Q1 base business growth that you noticed in the particularly in the ROW market as a positive indication that we have our plan to execute that this year throughout the year.

Sure. Thank you so much.

I will join back the queue.

Hi. Thank you for the opportunity.

Hi, team. Got couple of questions.

In CDMO, many companies initially win isolated development or manufacturing assignments, but over time, the stronger platforms become embedded partners across multiple molecules and multiple stages of the development and commercial manufacturing life cycle. When you look at your top 10 CDMO customers today, is the average customer spending meaningfully more with Piramal every three to five years, or is the growth still largely driven by continuously replacing completed projects with new ones?

I think we cover some of this in our annual report breakup where we do a bunch of demographics, but we're particularly proud of our growth rate with our top 20 customers over a multi-year period. Also, we break up and share in that the fact that many of our top 20 customers are working with us across multiple sites because they see value in our network.

Even further, we give a breakdown showing that it's not just multiple sites, a lot of them see the East-West benefit where they're working at least one of our Indian sites and one of our Western sites. We think that these demographics are meaningful and significant in terms of the top 20 customers demonstrating that they're buying multiple things from us and that they're growing faster than the rest of our business.

Peter, are you saying that they actually expand their relationship by giving us multiple molecules over multiple sites or over time? We get and they're in the door, do one with them and then one becomes five and seven?

I'd say that I was trying to draw the fact that we have absolute revenue growth higher for this segment. The second point was that we have multiple offerings we give them.

Very rarely would you get a whole bundle at once; you'll get that over time. We use the concept of land and expand.

You often would begin with a single offering at a single site or maybe a single integrated project. Yes, we have track record of growing and adding projects with our larger customers over time.

It's a core part of our strategy where we're trying to obviously, we like to grow across different segments, but we would like to make our larger customers become more larger.

That's helpful. In your experience, what are the common characteristics of customers who expand their relationships with Piramal or who have expanded their relationship with Piramal from a single project to multiple programs, more complex programs for commercial manufacturing?

Part of it is us, and part of it is them. I'd start with what the part that is in our control is that we deliver on what we committed to and delight them.

We have a whole customer satisfaction program to ensure that we're delighting, we call delivery to delight, and how do we ensure that we are delighting our customers and get to the point where they'd want to give us a referral or a reference. That's our measure of success, is the emotional in addition to the objective outcomes.

That's under our control. Then what would be under the customer's control is that they need to have enough needs that are not being met or that we could meet that are in their portfolio, and so that would need to have enough things in their pipeline or their offering that would be needing services.

We would see this strategy work best with the medium to larger-sized customers that have multiple pipeline offerings for whom we are delivering on our promises.

That's helpful, Peter. Thank you so much.

Thank you.

Hi. Thanks for the opportunity.

Just a few questions. First, in terms of the operating in terms of the gross margin expansion actually at the subsidiary level, I can see that it is going from 72 year-on-year ago to 68.

At what level of revenues in the subsidiary levels or any guidance that you can give in terms of when the subsidiary gross margin start to show meaningful improvement towards, can we put a target of say 80% gross margin?

Okay. Raj, firstly, if you look at gross margins for a quarter, they are not necessarily indicator of what the annual gross margins for the respective geographies would be.

Therefore, there's some mix impact that normally affects gross margins. Typically, on an average, our gross margins for our overseas facilities are in the range of north of 75, 75 between 75 to 85, whereas in India, if you look at it, gross margins are on the lower side, around 55 to 65%.

That's how the blended average comes to about 64-65% for the overall company as a whole. Typically, gross margins tend to be higher in our overseas facilities.

The margin profile is high, but of course, expenses will also be high. At an EBITDA level, at scale, the EBITDA margins are comparable whether it's India or whether it's overseas.

Don't go by one quarter gross margin; it's not indicative of how the gross margin profile for the geography is.

Sure. Thank you.

You mentioned in terms of mix, again, not necessarily for only for CDMO, but just if we can get some color on both qualitative, quantitatively in terms of the split between standalone and consol for basically your CHG, the CHG split between standalone. I think sevoflurane in the U.S.

is made in the subsidiaries, and I think the ex-U.S. is in the standalone.

What would roughly be that mix first for CHG and then for CDMO?

Yeah. Yeah.

Currently, for our CHG business, predominant portion of the business continues to reside outside of India. The standalone has a very small component of the overall CHG business.

It's predominantly outside of India. As far as our CDMO is concerned, it is roughly 48% outside of India and the balance is India.

Okay. Just one last bookkeeping question.

I think last quarter, you mentioned about the FY '26 ADC sales of $64 million. Any sense that we can get this quarter Q1 either a exit rate or annualized rate for ADC this quarter?

We're not providing this on a quarterly basis. You will see another update coming later during the fiscal year, Raj, not on a quarterly basis.

Sure. Thank you.

Congratulations. The position continues to be adverse in this quarter, too, of taxation.

How will it pan out in the coming three quarters? Secondly, is there any thinking on business reorganization to reduce the tax impact?

Yeah. Vinod, there are couple of questions that you have asked, let me take them one by one.

The first is on the tax for the quarter. There are two components to it.

Firstly, the tax for the quarter, if you're comparing that versus the corresponding period last year, is on the higher side, and that's predominantly due to two factors. The first being higher incidence of profit in tax-paying jurisdictions, and therefore, you have a higher absolute value of tax.

The second is, last year, we had created a deferred tax asset on the R&D tax credit that we get in our overseas facilities. This year, we actually had to take a disallowance for some of those R&D work, and we are going to file an appeal for that.

Pending that, that impact is there. You'll see a negative tax last year and a positive tax impact this year, creating that delta.

To answer your larger question, which is how are we thinking about it in structure, let me just assure you that we don't pay tax higher than the tax rate applicable to the respective jurisdiction, which means tax in India is less than 25%, tax in the U.S. is less than 21%.

The overall effective tax rate appears higher because some of the overseas facilities currently are not to scale, which means their PBT is lower, which is why the tax outflow divided by the PBT looks on the higher side. As we have said that as our overseas operations scale up, EBITDA margins will improve and you will see a reduction in the tax.

Our normalized tax rate should be in the range of 24 to 25% when we are at scale. Currently, it will look inflated because of this anomaly.

You can expect a sharp reduction in the coming quarters? No,

not a sharp reduction in the coming quarters. As we have guided, tax rate will remain elevated in this financial year, but as we scale up on revenues in the years ahead, you will see a reduction.

Very well. Thank you.

That's all from myself.

Hi. Congratulation, Piramal team, and thanks for the opportunity.

I have question for Peter. Peter, when we are referring our annual report where we have stated that our differentiated offering within CDMO space has increased from say 32% to 40 to 47% in FY '26.

How with now several again CapEx that we are entering and which is likely to get over in near time. How do we see this differentiated offering really start contributing over next two, three-year timeframe in CDMO, and hence, improvement in the EBITDA in on the within the CDMO business?

I'll try and tackle that in two parts. The first is if you look over the last few years, our contribution from differentiated offerings has been increasing, and we expect that and growing at a higher rate than our overall business, and we expect that trend to continue.

That's because of, I guess, some obvious points, but we will restate it. First is they're differentiated and therefore more attractive to our customers.

Second, we're putting more of our investments behind the differentiated offerings than the non-differentiated offerings. Our overall capacity is aligning towards differentiated offerings, and customers want them because they're differentiated.

We would expect over the forecast period in our LRP, this percentage should go up. If you ask the question about our EBITDA margins improving, I think we've discussed in the multiple calls over the past, there's the single largest driver for our EBITDA margins to improve will be operating leverage and related to getting more of our facilities at the target scale.

We've demonstrated that when our revenues go up, that our operating leverage pulls through, and we see the EBITDA margins expand. We've also demonstrated that as we increase the scale of our overseas sites that the EBITDA margins get more towards the target levels.

That will be the single largest driver for our overall margin expansion. A second important driver would be a combination of differentiated offerings and also our on-patent portfolio, and those would be a mix-related element that would be individually and together supporting the EBITDA margin expansion story on top of operating leverage.

Great. Second question on now with our NPS has improved to around 60% in CDMO, which was much lower in earlier years.

Where do we target, and with that NPS continuously improving and improving our deliverability to the various customers. How much new customer we have been able to onboard or within existing customer deepening, and that hence, we expect, some utilization of our international plant and then hence, improving EBITDA margin?

We have different approaches to trying to get the positive impression our customers have leading into business. The first is we have the NPS, which is an indicator of customer delight.

Just to remind the background, they can go from -100 to +100. A third-party benchmark demonstrated that the average CDMO has a negative Net Promoter Score.

I think the fact that we are in the 60 range is very favorable. Our targets are to maintain that as we grow and maybe modestly improve it.

We lay out those goals each year. The second point is, in terms of ammunition we have, we see that with these positive Net Promoter Scores, we can get referrals, references at each of our sites, and we find that that's a very useful tool.

Often, when you're down to the, let's say, the last three choices in an RFP process, a customer will ask for referrals, and we look for the people who had given us an a 9 or a 10, and they're very often the same ones that would be willing to give a reference. We see this is very good ammunition when we want to go after new business.

We have added a number of new logos, first-time clients this quarter, and we see that as a positive sign of our collective commercial efforts, of which the delighted customer base is one of the inputs.

Great. Thanks for the.

One more question on see, and it's very hearty to that we have announced a large ESOP for our customer, employee, who are key pillar of the growth and execution. With this kind of ESOP, can we what kind of roughly we assume in our financial model a cost within a P&L?

If you're referring to the ESOP cost, it's normally based on the accounting guidance in terms of how the ESOPs get valued using a Black-Scholes model that considers the impact of the ESOP across the three-year period over which the vesting happens. Accordingly, proportionate impact of that is taken in the P&L every year.

Now with this new ESOP was?

Nothing changes from that. This is just a process of continuation of the ESOP policy that already existed.

It's not like a new policy that's come in. We already had an ESOP policy in place.

These are just with respect to the additional grants for the upcoming years.

Thank you and all the best.

Thank you.

Thank you.

Yeah. Hi.

Thank you for the opportunity. My first question is with regards to your CDMO growth.

Possible to break it down between how the innovative portfolio would have grown versus generics, and within the innovative, how ADC would be a contributor for this particular quarter?

Abdul, I would say it's a more broad-based growth. It's across each of the sub-verticals within the CDMO, whether it is our North American assets or whether it's our Indian assets, it's been more broad-based.

Okay. Sir, with our partnership with Ajinomoto, what are the kind of investments were we planning to put into this partnership?

The way this particular partnership works is that it's more about us sharing our ability to work together on the technology, and so we already have examples where we're using their technology with clients. It's about signaling to the market, in particularly our customers or prospective customers, on both our side and their side that we know how to work with each other to progress their technology in our facilities.

It's really actually already capitalizing on work we had done with their technology for our clients to demonstrate that we can do it and that for them that they can use their clients could use our facilities. It's a positive signal that we know what we're doing with each other and that we are compatible.

Okay. My next question is on the Complex Hospital Generics business.

That business has grown fantastically well in this quarter. For the quarters ahead, I know we would have Kenalog contribution coming from Q2.

On an organic basis, do we see this kind of a revenue run rate flowing into the next few quarters as well?

We tried to address that, I think, in the first question in the queue, which was we would reaffirm our original guidance for the year, and that does include both organic growth and Kenalog-related growth. However, I wouldn't necessarily assume the exact organic percentage that we had in Q1 will continue through the rest of the year.

I would look back to the original growth we gave for the business overall.

Understood, sir. Thank you and all the best.

Good morning. Thank you for taking my question.

Just going back to your opening remarks, you mentioned higher capacity utilization and you also mentioned pricing discipline as some of the things that are driving growth. If you could illustrate say how our utilization levels have either moved Y-o-Y in our key plants or if there is an average number for the network as a whole.

From a pricing discipline perspective, what have we effected that's leading to better realizations?

I'd say we don't disclose utilization on a plant-by-plant basis, but I would say that, this quarter, we, as Vivek said, we've seen broad-based growth, and that includes increased revenues from our overseas sites. In terms of pricing discipline, I think it's both a mixture of, especially in the Consumer Healthcare business, we have raised prices a little bit to combat input cost inflation, as well as even in the CDMO business, we are looking at different pricing measures and how to manage some of the rising input costs.

Helpful. Thank you.

Just my second question on the CapEx update. How much was, if I missed the number, of quarter, how much did we do?

What's our reiterated guidance for this year? I can see that we have completed the Riverview one, but what about Lexington?

If you could just give us the update on the CapEx plans and the qualitative updates. Thank you.

Shyam, we had guided for an annual CapEx of anywhere between $120 to $135 million of CapEx. Currently, we have spent about $21 million.

It's obviously CapEx also ramps up as we progress through the year. The Lexington CapEx is on track for getting completed by the end of 2027, and the spends on that as well has been progressing as per plan.

This would be calendar year 2027. End of the year.

Got it. Thank you.

All the best.

Thanks for the opportunity. This ADC facility now commercialized, what kind of revenue potential one can think and over what period of time?

This is the one at Riverview or at Grangemouth?

Riverview.

This is the linker-payload.

It's a meaningful additional capacity at that site. I would say it's in the single to low double-digit revenue potential.

It's immediately available for use, and we're already having customers that are sighting in it. We're seeing significant interest in it, and just to recap why we're doing it is that we had already sold out our existing capacity, and these are usually reasonably short lead time or comparatively shorter lead time projects that can go straight into that, and so we expect that to be beneficial in this year and also next year.

Single to low double-digit is the kind of potential for this site over a period of time, or this is the starting point

and then? Just to be clear, this is a single room in a large facility.

The facility is primarily a high-potent API facility with large reactors. That's the primary purpose of the facility.

This additional capacity was less than $5 million of investment that was to kit out a specific room with the linker-payload technology needed to allow us to do further scale production.

Understood. Just secondly, on employee expenses has increased sharply for the quarter.

How to think about it for the full year on absolute basis as well as as a percentage of sales?

Yeah. The correct measure of that would be to compare it versus the quarter one last year.

Sequential quarter might create some distortions because normally there would be some reversal of provisions for the short-term and the long-term incentives. If you look at from quarter one last year versus quarter one this year, you will notice that even after adjusting for forex, the increase is in very low single digits.

Got it. Sir, secondly, other income has increased sharply for the quarter, if you could.

There are basically three components to our other income. One includes the amortization of government grant for the CapEx subsidies.

The second is that there could be some reversal of prior-period expenses. The third would be related to forex.

These are the three components which are there. In this quarter, the increase is driven by a reversal of some provisions no longer required.

Basically, ₹45 to ₹50 crore is the run rate to think about rather than the number which we have achieved in 1Q?

That number could significantly vary because of the forex. Depending upon how the currency moves, you will see some forex-related gains appearing there.

It's difficult to give a exact number as to what that quantum will be.

Just lastly, with respect to exports, how much would have been the constant currency growth for us for the quarter? If you could give CDMO and CHG separate.

Benefit of currency across all businesses at a very high level would roughly be about 9 to 10%.

On a year-on-year basis, right?

Yes.

All right, sir. Thank you.

Hi, good morning, everyone. Sir, in the past, you have spoken about your integrated differentiated ADC offerings.

Currently, your ADC sales are more skewed towards conjugation. With the Riverview expansion done, say, over the next three to five years, should we expect more traction in winning integrated ADC contracts?

Yes, we would expect with both the Riverview expansion, which is our newest one of our newest offerings in the integrated bundle, that we can then handle larger scale and more in line with our capacity in Grangemouth. Also, as important, the commercial expansion at Lexington will also further allow us to have larger-scale ADC linkages.

We would expect the growth to continue at Grangemouth for conjugation, but to be complemented by higher growth probably in the other two offerings to get the overall package more balanced. We continue to expect the conjugation to be the anchor and the largest contributor to our offering where we think we have the most differentiation.

Got it. The second question is on the large contract where we had seen destocking.

You had spoken about excess stock in the system in the last quarter, and you had also mentioned about getting orders once inventory in the system is consumed. Can you update us on the current status of your discussions with the innovator, and realistically, can we expect any sales from next year, meaning FY '28'?

We don't currently anticipate anything this fiscal year. We think we communicated that was the expectation last quarter, and we are continually in touch with them because we serve them on other projects.

When their situation changes in a material manner, we would likely let you all know.

Fair enough. The final question from my side.

You mentioned earlier in the call that a significant portion of the RFPs are being directed towards overseas facilities. Apart from the fact that you have capacities available overseas with very low utilizations and you have some differentiated capabilities as well in those facilities, are you seeing a clear preference by Big Pharma towards nearshoring?

Not really. What I would say is that we are seeing I would want to actually pick four reasons why we think that we're optimistic about demand.

I'd say the first reason is that was covered is that our overall operational performance has improved. That's resulting in customers being delighted.

We cover that with the Net Promoter Score, so that's showing up in us having more references and positive sentiment in the market for what we have to offer. The second one is that we've substantially increased the size of our BD team, we have more feet on the street talking with customers, drumming up proposals.

The third is that we have made further progress in our commercial transformation, which is how we go to market in reorganizing our teams and approach to be aligned with customer types and how we communicate with them. Then the fourth one, I think, is external, which is more of our potential and current customers have money and need to spend it to progress the pipeline to meet their promises to their investors.

That's generating a broad-based increase in RFP flow across our network that is not limited to the U.S. for nearshoring.

That being said, we have a particular spike in interest in our nearshore offerings that is above and beyond that exciting, but I wanted to re-emphasize that all the prior points are affecting our network broadly, and we're seeing an increase in proposal inflow across nearly all of our sites.

That's helpful. That's it from my side.

Thank you.

Hi. My question on the CDMO side, how many active molecules pipeline we have?

Last quarter, you said 155 molecules and 25 is in the third phase, which is something commercial stage, right? How many molecules now in the commercial stage, and what is the potential revenue of those?

It's a fair question. I think, historically, we've updated those statistics annually.

We are evaluating from time to time how frequently to share those with you all, and we are evaluating whether we would do an interim update throughout the fiscal year. At the moment, that's been an annually updated set of figures because we find that you can have too many anomalies in a quarterly level, but we are and we will continue to evaluate whether we want to change the periodicity of sharing that, but right now, it's an annual update.

You can share also maybe six-monthly, but what the potential revenue that you are looking for those 25 molecules?

We don't, historically, again, share individual or aggregate forecasts for groups of programs. I would just indicate that the later-stage programs typically are larger than the early-stage programs because of the definition of them being at that stage.

The reason why we highlight that late-stage pipeline is that it's the, 50% chance on average it could make it to commercial, and they typically would have the potential to be larger recurring revenue streams. We would ask you to assume that most of the 25, if successful clinically and with their registration, would be meaningful contributors to our future growth, and that's why we've highlighted them.

Okay. One question on the margin side.

Just wanted to understand the margin trajectory going forward for the next two to three years as we have set up the capacity in U.S. Now how much the manufacturing capacity in percentage terms we have in India and in the U.S.?

As the scale of U.S. capacity, considering the labor cost and all the cost associated with those facilities, going forward for the CDMO specifically, how the margin trajectory will change, and any ballpark figure for the same?

For the same thing, you can also share details on CH, Consumer Healthcare and PCH business.

Karan, we had in our five-year strategy indicated what the margin profile for each of the business we are targeting. For both, all three businesses, the intent is to move on similar lines.

Currently, the overall capacity utilization at our India assets are relatively higher versus the overseas assets where we have newly created capacities, their utilization levels are lower. The overall margin obviously depends upon the level at which capacity utilization happens.

If you look at our North America or our European assets, as the capacity utilization ramp up, the margin will increase. At the company level, we had said that we are targeting EBITDA margins of 25% by FY '30, and likewise for the CDMO business also, we have said margins to move up in a similar range by FY '30, and that's what we are targeting over the next five years.

All of these details you can find in our strategy deck as well, which is available on the website.

Which is particular business will contribute more in terms of margin expansion? I can understand that the other two businesses, I think, more stable in terms of margins where the generics part and your PCH business.

Your CDMO business, I'm a bit concerned about how the margin trajectory will change in the CDMO business, right? As you said, you have a couple of molecules in the commercial stage, right?

What's the potential, basically, the revenue side of the molecules or the consistency of getting those molecules at the commercial stage? That is something.

Karan, CDMO is 60% of what we do, right? Also, the largest potential for margin expansion is in the CDMO business.

This drive of margin from where we are today to go up to 25% will largely be driven by the CDMO business, and more specifically driven because utilization at our overseas facilities is expected to improve, which will help drive this. At the same time, as you rightly mentioned, the pipeline of products with more innovator products with that kind of a differentiated mix becoming an increasing part of our business, that will drive the overall margin expansion.

As you rightly mentioned, Complex Hospital Generics margins are stable and will remain stable. For Consumer, also, we are expecting margin expansion to happen over the next few years.

Thank you very much for the opportunity, and I joined the call a little late, I'm asking a repeat question. First, on the CHG business, I wanted to check, you were moving into newer geographies, the rest of the world part of the landscape.

Has there been any updates on that?

I think we shared in the opening remarks that much of the growth in this quarter over the prior year was our ex-U.S. growth for our base business.

We think that that's a positive signal that some of the actions we began to take at the back end of last year were showing some fruit. That is and will remain an important part of our growth this year in addition to Kenalog, and we expect this is a positive signal for the remainder of the year.

Just a quick follow-up on this. The contracts that you mentioned two quarters ago that you were negotiating and entering geographies which had relatively less stringent regulations, are these the same the growth that has come is this from the same contracts that you were mentioning then?

It's maybe less binary than what you're describing. We sell in a hundred countries, and in many of those countries, we have some existing business, but we were not at our target market share percentages.

When we look at the growth this year over last year, we've had some market share gains in some of those countries where we, historically, maybe didn't have quite the same share that we have in this period. We're hopeful that we can continue to get some wins like this going forward based on other discussions we're having.

It's when you have that large of a ROW market landscape, we continue to play across the field and see where we can get wins.

This is helpful. A second question.

In terms of sevoflurane, I wanted to check for the U.S. directed batches, is it completely manufactured from scratch in the U.S.

or some part of it is pre-manufactured, say, for example, in the Digwal facility in India? I'm only asking this question because of the recent announcement of a potential two-year, 0% tariff on India and then maybe a 100% on the generics portfolio.

I know it's still in the works, but I just wanted to check any risks that we had over here.

We think that we're reasonably well-positioned with that particular product to meet the wide range of possible outcomes with the U.S. perspective on this.

At the moment, we are making the API and the drug product for sevoflurane in Bethlehem, Pennsylvania. We do have inputs that are provided to that from India, and for supply chain resilience, we have had we could either send an input from Dahej straight to processing at Digwal and then send it on to Bethlehem, but in both cases, the API is made and the final stages are made in the U.S.

Understood. On the tie-up with NewAmsterdam for the cholesterol metabolism drug, is there any update on that, please?

That was asked by one of the other participants before you joined, and we repeated what we may have shared on prior calls, which is that we encourage you to look for a publicly traded clients that we have announced or that they've chosen to say they're working with us. We encourage you to look at the analyst reports that are published on them because those analysts would be very well-informed as to the timing of each of those different companies, and that one being an example.

Understood. On the CDMO business, you've mentioned that going forward, a product mix and better utilization strategy would help uplift margins.

I just wanted to check in terms of ADCs, what kind of percentage share are we at the present moment, and given our FY '30 guidance, what would be the percentage share that we have baked in our assumptions?

There's a small percentage share of a very large and rapidly growing market. In order to achieve our long-range plan, we would not need to have any crazy or aggressive assumptions around market share gains.

I think we are hoping to participate in what is a large and growing market with what we think is a differentiated offering, particularly for clients who are open to and interested in a non-China oriented supply chain. We don't need to achieve our LRP ambitions, which we are excited about, we don't need to have any heroics around massive market share gains.

We're not currently at a very high percentage in the market share also, we think there's a lot of headroom.

Hi. Congratulations for some good set of numbers.

There are only two questions regarding my concerns are regarding the overseas subsidiaries. I think so there are 11 overseas subsidiaries, and the loss we accumulated over that was around ₹146 crore or something like that, right?

What are the utilization rates are having today, or do they need some percentage of utilization rate to come to the break-even?

Yes, I think we are expecting that increased utilization will help us to get scale and get operating leverage, which will help us to break even. I think this quarter, you will have seen that increase we'll see an increase in revenue in the overseas subsidiaries, which has helped improve our EBITDA margin.

The next question and my last question is we paid a tax on a pre-tax loss. How much accumulated overseas tax loss is currently unrecognized on the balance sheet?

We do have a if you look at our overseas subsidiaries' financials, which are available in public domain, we do have significant carry-forward tax losses, which are available across our North American, UK, and European facilities, some of which we have recognized deferred tax assets over a period of time. For the ones which are yet to move to PBT positive, we are yet to recognize, and those figures are available on the balance sheet.

No, sir, that by '27, FY '28, can we expect that that will nullify it out, or it's going to get extended till FY '29 and '30 also?

It will be a gradual shift depending upon the jurisdiction we're talking about. It won't be upfront at one go across all the locations.

Different sites are at different level of utilization and profitability as we speak. As and when we see demonstrable profit, sustainable profits that happens, we will start utilizing those.

It is more rapid towards utilization in our North America versus our European assets at this stage.

That's fine. That's all from my side.

Thank you very much. We appreciate you taking our time out to join us for today's call.

We hope that we were able to answer most of your questions. In case you have any follow-up questions or need any clarification, please feel free to reach out to us.

Thank you, and have a good day.