Thank you, Ryan. Good morning, everyone.

I welcome you all to our post-results earnings conference call to discuss our Q3 FY26 results. Our results material have been uploaded on our website, and you may like to download and refer 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 this, I would like to hand it over to Ms.

Nandini Piramal to share her thoughts.

Good day, everyone, and thank you for joining us on our post-results earnings call. As guided earlier, FY26 has been a muted year for the company, impacted by the inventory destocking in one of our large on-patent commercial products by the customer, slower early-stage order inflows in H1 FY26 due to an inconsistent recovery in US biopharma funding, and regulatory delays in the inhalation anesthesia for the ex-US markets from the Digwal facility.

However, recently, we are seeing early signs of a recovery with pick-up in RFPs and order inflows on the back of improved biopharma funding and increased M&A activities in the US healthcare space. Sustenance of this momentum, along with the faster decision-making by the customers, would be the key to healthy growth in FY27.

Complementing our complex hospital generics portfolio, yesterday, we entered into an agreement to acquire Kenalog from Bristol Myers Squibb. Kenalog is a branded commercial injectable containing triamcinolone acetonide, a synthetic corticosteroid with anti-inflammatory, antipruritic, and antiallergic properties.

It is indicated as an adjunctive therapy in acute gouty and rheumatoid arthritis, as well as other inflammatory conditions. Kenalog is a branded commercial injectable product with complex manufacturing requirements complementing our existing CHG portfolio.

This complexity limits competition and enables the product to deliver EBITDA margins comparable to existing CHG portfolio. The acquisition also broadens our CHG offerings and adds revenues without significant incremental cost, particularly in the US, Europe, and the Asia-Pacific markets.

This is an all-cash transaction with an upfront consideration of $35 million, along with an additional contingent consideration of up to $65 million tied to the achievement of agreed upon operational and financial milestones. Talking about our performance during the quarter and nine months of FY26, we reported revenues of ₹2,140 crores and ₹6,117 crores for the quarter and nine months, which is a YoY decline of 3% to 4%.

Despite lower revenues, impact on EBITDA was partially offset by our efforts towards cost optimization and operational excellence. During the quarter and nine months, we reported EBITDA margins of 11% and 10%, respectively.

Talking about our quality and regulatory track record, we cleared 30 inspections, including two US FDA inspections, without any OAIs during the nine months of FY26, therefore maintaining our best-in-class track record of zero OAIs. In addition to regulatory inspections, we have also undergone 170 customer audits so far this year compared to 142 in the same period last year.

On sustainability, we showed a meaningful increase in our sustainability scores from global rating agencies such as S&P Global and EcoVadis with a 15% to 18% increase over last year. This improvement underscores our continued commitment to responsible operations and sustainable growth.

Moving on to business-specific highlights. Starting with our CDMO business, our CDMO business reported revenues of ₹1,166 crores and ₹3,207 crores during the quarter three and nine-month FY26, respectively, impacted by inventory destocking and slow early-stage order inflow due to muted biopharma funding in the first half of the year.

However, as mentioned earlier, we're seeing some early signs of recovery in the last three to four months. US biopharma funding environment has witnessed a sharp rebound in the second half of calendar year '25, supported by increased M&A activity across the US healthcare space.

According to industry reports, US biopharma funding in H2 calendar year '25 was nearly double that of H1 and more than 50% higher compared to H2 calendar year '24. Sustenance of this funding momentum would be a key factor to support faster decision-making by the customers and increase order inflow velocity, helping us build visibility for healthy growth in FY27.

During the quarter, we saw significant improvement in RFPs, coupled with a good pick-up in orders from both large pharma and mid-sized biotech companies. Order inflows at our onshore facilities such as Grangemouth and Riverview were particularly encouraging.

Our onshore facilities with differentiated capabilities have superior gross margin profile, which at optimum revenue scale can deliver healthy EBITDA margins. Despite a challenging year, we continue to believe in the long-term growth prospects of our CDMO network and continue to back them with timely investments in capacities and capabilities.

Our $90 million investment to expand our sterile injectables and payload linker capabilities at our Lexington and Riverview facilities is on track. We're seeing very good customer interest for our North American sites, especially those looking for onshoring in North America.

During the year, we also strengthened our business development team to adapt to evolving market dynamics and to deepen engagements with customers across key markets. We're seeing some positive results from the same.

Customer delight remains our key focus area with strong execution across our network, superior quality, and robust supply chain. During the year, we've seen an increase in our customer satisfaction scores across multiple sites, which should help us win repeat business and cross-sell differentiated capabilities.

Moving on to our complex hospital generics. Talking about our performance in the inhalation anesthesia segment, we continue to maintain our leadership position in the majority of US market, with our market share increasing to 47% versus 44% in March 2024.

We've also commenced sevoflurane supplies from our lower-cost Digwal facility for the rest of world markets. However, the initial ramp-up has been slower than expected due to regulatory delays.

In the intrathecal segment, we continue to maintain number one position in intrathecal baclofen in the US with a 75% market share. In our injectable pain management segments, our efforts to resolve supply constraints have begun to yield results.

On the differentiated and specialty products, we're continuing to invest in 505(b)(2)s, complex generics, differentiated generics, and branded products through in-licensing deals and co-development projects to enable long-term growth. Moving on to our consumer healthcare business, we continue to develop strong growth momentum this quarter as well.

The ICH sales grew by 20% in quarter three and 16% over the nine-month period, driven by both broad-based performance across the portfolio. Our power brands once again led the growth engine, delivering around 30% growth in Q3 and 23% over nine months.

Key brands, including Littles, Lacto Calamine, CIR, and I-range, outperformed and continued strong traction across markets. On the distribution channel side, our e-commerce business remained a standout performer, growing at over 50% during the nine-month period and now contributing 26% to total ICH sales.

This reflects increasing strength of our digital capabilities and the continued shift in customer preference towards online platforms. We have maintained a calibrated and disciplined approach to media and trade promotion investments with a clear focus on scaling up our power brands into established and profitable brands.

In nine months of FY26, our media and promotion spend was around 12% of ICH sales, broadly similar to last year, reflecting consistency in our brand building strategy. In terms of new product introductions, we launched 13 new products and SKUs in the last nine months.

Thus summarizing our performance and the outlook going forward, I'd like to say, while FY26 has been a muted year for the company, we continue to believe in the long-term growth prospects of our businesses and back them with timely investments in capacities and capabilities. We're seeing some early signs of recovery in our CDMO business with a significant increase in RFPs and pick-up in order inflows since October, primarily on the back of improved biopharma funding in the US.

Our overseas sites, which have a superior gross margin profile, are witnessing good customer interest, especially those looking to onshore in North America. On achieving optimum scale, we're positive that our overseas sites will start contributing meaningfully to EBITDA going forward.

We've also enhanced our BD team to better engage with customers and simultaneously strengthen our execution to deliver customer delight. With a good foundation in place in terms of capacity, capability, and global network, we're looking forward to optimizing them to deliver better value.

In the CHG business, while we maintain our leadership position, sevoflurane, baclofen in the US market, we're looking to broaden our product portfolio and expand our presence into ex-US markets to drive growth going forward. Adding differentiated and specialty products to our portfolio with limited competition will be an important lever for us.

Acquiring niche brands like Kenalog is an important step in this direction. Finally, in our consumer business, we expect to continue our outperformance in our representative markets, led by our power brands and penetration of our distribution network.

Before I end, I'd like to reiterate that Q4 has been historically the strongest quarter for the company, and we expect this trend to continue as well. With this, I'd like to open the floor for the Q&A.

Thank you.

Thanks for the opportunity. With respect to Kenalog, while this product do not have patent, but interestingly there are still no generics.

If you could also share what kind of sales this product generates currently, and where will this get manufactured once you've acquired this product?

With respect to the sales, we expect annualized revenues between $30 to $40 million for the product.

On the manufacturing side, it's made on behalf of the seller at the moment by one CDMO, and it's in the process of being transitioned to a second CDMO by the seller, and we will assume responsibility for that through the transition and integration.

This product has been growing or has been pretty stable currently?

The product is generally in a value decline, and overall, it's stable in terms of volumes, and that is typical for generics even with limited competition.

Got it, sir. That is it from my side.

Thank you.

Thank you for the opportunity. Sir, my first question is in regards to the CDMO business.

For the quarter and nine-month, if I exclude the inventory destocking, would it be fair to assume that the portfolio has grown in single digit?

Yes, that's right. If you were to look on a like-to-like basis, the portfolio has grown in a low single digit.

Okay. Second, just on this acquisition again.

For Kenalog, just wanted to understand the rationale for purchasing this. I understand it's being done at quite a reasonable valuation in terms of the upfront payment.

How well does this product fit into our portfolio? Secondly, from here on, how should we look at this CHG business growth entirely with this inorganic and organic in place?

The first is the strategic rationale is the underlying customer alignment. If you look at how we go to market in this business, we are very strong in the hospital and, I guess, that channel.

Our existing sales, marketing, and distribution capabilities would be aligned with that channel, and so this product could be sold and distributed through our existing capabilities, particularly in the relevant markets where this is being sold with the largest revenue contribution. We see significant synergies because we can add the revenue and add this to our basket of offerings without significant additional operational cost.

The ultimate customer or buyers would be the similar buyers and customers as what are buying our current portfolio and offerings. We see this as being in line with our overall ambitions.

If you look at the underlying product, while it's not a 505(b)(2), it does have limited competition due to certain complexities in the manufacturing requirements that make it difficult for large numbers of competitors to offer it. We again think that that's in line with our overall strategy and approach.

We see this as a highly synergistic and strategy-aligned addition to our portfolio. As you mentioned, we found the overall value to be beneficial in line with our financial metrics.

In terms of the overall mix, we will continue to look at co-development, licensing, and acquisitions to add to the portfolio for the growth in our overall plan in addition to growing the existing base business to the elements we described in our LRP. By the existing base business, it would be, for example, leveraging growth of our inhalation portfolio outside the US as we get the additional registered markets from the Digwal facility.

Sir, any color on what would be the sales contribution outside the US for the $35, $40 million you talked about? Abdul,

we're not giving a specific guidance at this stage, and we'll come back on that at a later stage.

Okay. Fair enough.

Just on the $90 million investment, what you're doing towards Lexington and Riverview facility, so, sir, what is the timeframe here in terms of when does this capacity get added? In terms of the kind of asset turns you would be looking on this incremental capacity?

For the coming online, the linker payload expansion at Riverview is expected to come online this quarter. In fact, it's nearly ready.

For the purposes of the Lexington facility, I think that's the end of calendar year '27. In both cases, we have strong interest and strong demand for those offerings, which is why we had embarked on those expansions.

In terms of asset turns, I don't believe we give individual production train-specific returns, but I'll let Vivek comment on our overall goals for asset turns.

As you're aware, the asset turns currently are below one for our overseas facilities. Eventually, depending upon the levels of utilization, we do expect it to go to between two to two and a half at scale.

Got it. And...

Just one more additional point maybe is that as covered in the talk track by Nandini, that the overseas sites are inherently structured with high gross margin, and so incremental revenue is highly beneficial to the financial metrics you described as it flips over on the assets.

Sure, understood. Just final one from my end.

When we talk about Q4 being stronger for us, in terms of, say, the YoY performance, are we expecting some kind of growth there as well, or we're more talking about a sequential improvement vis-à-vis what we have done in Q3? I think

Q4 is always historically strong quarter, we're expecting sequential growth. Obviously, last year, Q4 was helped by the large order, removing that, I think we should be okay.

Understood. Thank you.

Hi, good morning. I just wanted any incremental feedback on the 30-plus products which we have in phase 3.

Do we have in calendar year '26 any readouts for these products? I know you cannot name names, but just in terms of how many products have the phase 3 readout or potential for commercialization?

We generally don't comment on that number, and we find it more useful to kind of give an annual update on the portfolio of phase 3s. I would just comment that we were recently at a J.P.

Morgan meeting with a lot of our current and prospective clients that there did seem to be general positive momentum for both our clients and the market in terms of progressing some of the late-stage clinical assets as per their anticipation or desires. I'd say the overall sentiment for our portfolio and for the market and people's ability to raise money to progress the market for the clinical efforts, particularly late-stage programs like the ones that we are working on, was generally positive.

Sorry, I can't give you something more specific, but I think that we have had a general feeling of overall for us and for the market the progress of the clinic and I think also the FDA making timely decisions, and finally, the clients' ability to make fundraising actions.

Right. I'm just thinking from perspective of the investment community, how we should get confidence on the ramp-up of the CDMO business given we obviously have a very large phase 3 pipeline.

If we had to think from a 3-4-year perspective, how should we kind of think about it? That was the thing I was trying to understand.

I think we've demonstrated over, we think, a period of time that the phase 3 pipeline has turned into sales in due course with the regular expectations around attrition and progression. I think that maybe the second element to think about would be the general improvement in funding for our client base given that we do target the emerging or the biotech customer segment.

That shows up through the significant increase in RFP inflow that we saw last quarter, and if that trend continues, we would expect to have the potential to add new customers. As also mentioned the talk track, we had a good bit of order booking in the third quarter, which didn't make up for the prior quarters where funding and decisions were muted, but Q3 does seem to be a leading indicator of clients' ability to raise money and spend it on CDMO services, and also our ability to capture some of that share of wallet.

Obviously, we'll have to see how a lot of the RFPs that came in last quarter play out. Just as a rule of thumb, it's about 180 days from when an RFP is quoted to a typical decision for a new client project that hasn't been with us before.

We will see that play out in the coming quarters. We do see a reason for cautious optimism or improved sentiment or improved outlook, particularly on the leading basis if what we saw last quarter continues into this quarter and the next.

Just one last clarification. Is there a fair understanding that of these 30-plus phase 3 products which we have, a lot of it are levered more to emerging biotech-type clients rather than big pharma, which is why a lot of our comments are steered towards recovery in the biopharma funding environment?

Is that a fair assessment to make?

I'd say that it's actually a reasonable mix for those programs because even if we sign them up as being a biotech, typically a common place of buyout from big pharma with M&A would be at that phase 3 pre-commercialization point. We have a couple instances in our phase 3 program where we sign them up when they were a biotech, and now they're in our same portfolio as a large pharma.

I'd just say that it's actually an even mix, and we would see that as these companies go commercial, a fair number of them may end up being big pharma by the time they launch. It's not obviously a hard and fast rule, but we do see that a lot of companies once they get that pivotal phase 3 data or they get that confidence that the target action date with the PDUFA date with the US FDA is going to be favorable, they view that as a value point in some cases, and then it flips.

I would say actually it's a reasonable mix. The reason why we keep talking about the biopharma funding environment is because that's how you add new clients to restock that 30 phase 3 pipeline with new winners.

That's really important for us. We call it fill-the-bucket sales.

It's how we keep adding new logos, new programs at a fact because that's where the innovation is. If you look at new drug approvals, the large majority would be still from this segment.

If you want to find the innovation, you got to go where the innovation is, and innovation is predominantly happening, particularly for the clinical phase, in that segment.

Got it. Do we think the longer-term guidance for CDMO holds, like to get to the $1-$1-plus billion sales in next 3-4 years?

Is that still, given the pipeline that we have?

At this moment, we continue to reaffirm our LRP guidance. We see no reason at this stage to change it.

We do obviously recognize that it will require more catch-up over the remaining years of the period, but this stage, we don't see reason to change that. Obviously, we recognize that we are further from that than we would like at this moment.

Okay. Yes.

Thank you.

Thank you very much for the opportunity. My first question on the complex health generics business about sevoflurane.

Would capturing the rest of the world markets come at a cost of margins for the first 1 to 2 years? Also, which countries are we initially targeting for rest of the world considering that the Digwal facility is accredited for US, UK, and Japan?

If you could first articulate on these, please.

We are seeing the overall market being a little bit increased competition for the ROW markets vis-à-vis China suppliers for sevoflurane, and we decided to not be overly aggressive on price to try and manage the margin growth trade-off. We do anticipate being able to grow there, but we didn't want to rush it at the expense of being undisciplined from our margin perspective.

We do have significant cost advantages in supplying from that site, and so we don't anticipate it being margin-dilutive, but we want to approach it in a stepwise and a disciplined manner. Therefore, we're willing to trade off a little bit slower revenue growth than our initial ambition to be appropriate on our margin.

We have an additional cost improvement program even at our Digwal site and combined with our Dahej site that should allow us to continue to see ourselves to be competitive with those markets. In terms of ROW, we are already approved in India for India through our partners and ourselves, and we have a number of what you would call the lesser-regulated markets that maybe earlier to provide approval.

While we do have approval to supply from India to the regulated markets, we're targeting the lesser-regulated markets first for the reasons mentioned. We would see those individual, I'd say, ROW markets outside of the ones you mentioned being approved as the individual regulators approve them over the coming, let's say, 12 to 18 months.

Thank you. Second question on the Kenalog acquisition again.

I understand that the limited competition and the cross-sell synergies, but do you anticipate any risks from non-steroidal anti-inflammatory immune regulatory solutions, because such therapies have been consistently increasing in other diseases, considering the side effects of the long-term use of corticosteroids?

We've looked at the overall market for this, and we feel that there will be room for a therapy of this category for some time. We have not anticipated it to grow, and in fact, we even assumed some moderate price decline.

Given the overall value equation for what we looked at, we think that the incremental benefit is meaningful to us given our position in our portfolio, but we aren't looking for this to be a grower. We're looking for this to be a near to medium-term contributor, and anything beyond that would be great.

I understand. On the CDMO business, please.

I know you mentioned that you cannot share much details on the phase 3 trial phase 3 trial molecules, but can you please mention any specific therapy TAM, for example, some molecules which are nearing approvals or have been anticipating since a while now? What kind of addressable markets for those therapies can we anticipate?

We see a lot of our work being in the area of oncology. We also see a lot being in the broad area of, let's say, metabolic disease, whether it be cardiovascular or obesity.

We see a lot in the area of rare disease. I think those would be three example categories.

I know they're very broad, but I'm trying to answer as generally as I can. I'd say, we're generally aligned with the areas where innovation is happening because we've invested in technologies that allow us to compete and provide services in those areas.

If you look where new drugs are being approved, frankly, that's a lot of where we're seeing our clients outside of biologics, mAbs where we aren't present.

I understand. On the on-patent commercial manufacturing, what are you anticipating the percentage share of the overall CDMO business for FY26, and what is the aspiration for FY27?

Essentially, I would like to understand the lost revenues from the customer with the inventory issues. Are we expecting that to reverse in the next year?

With respect to FY27 guidance of all sorts, we'll give that in the subsequent board meeting when we have laid out our plans for the year and we have the increased certainty. We would refrain from making forward-looking comments about the next fiscal year guidance.

In terms of the current year break-up, we're not really giving quantified break-ups of with and without that customer, and we're going to try and move away from that going forward. I would just try and articulate that we are seeing growth in our underlying like-to-like base business, obviously not at the level we'd like, but it is growth, and we anticipate even more significant growth as we look ahead.

The quantification of that, we would have to reserve for our subsequent board meeting when we give the guidance.

Okay. My final question, please.

What amount of growth capex have you anticipated or planned until your aspirational target of a $2 billion top line?

On an average, our spend of capex is anywhere between $70 to $100 million. It is slightly higher in the immediate term when we are doing big term expansions like in Lexington and Riverview, which we have announced, and we do expect this to be the momentum in the immediate term.

For slightly more longer term, we'll come back at a later stage.

I understand. Thank you very much.

I'll get back in the queue for any further questions.

Hi. Good morning.

Thank you for taking my question. Just one on the qualitative comment from your press release and your comments as well.

RFP, RFI trends for overseas facilities have started improving since October 2025. Maybe, what are the kind of conversations or discussions that are happening?

Whatever you can share qualitatively. Just the comment on onshoring as well, if you could double-click on this, please.

We've noticed starting in October, and maybe the backdrop, for many in the call it's obvious, but maybe just to restate, is we think that part of the sentiment increase was some of the industry arriving at MFN deals with the US administration may have created some amount of rerating in the sector and increased ability to raise money. We saw that start to happen in kind of that October time frame, and saw then also aligned with that an increased interest in overall RFPs across our network, but particularly strong in our US facilities, of which we have three in Sellersville, Pennsylvania for solid oral dose and liquid, cream, and ointment, in Riverview, Michigan for the high-potent API and linker payload for ADC, and then the Lexington sterile fill-finish site for liquid and lyo.

We've seen not just there, but also there an increased amount of proposals since October, and I would say it's a significant increase. We aren't quantifying it, but it's not trivial.

I would say it's large. I would also say that we did obviously encounter this before, and the proof will be in the won proposals, which will play out over the next 180 days.

We do get the feeling, and I can't give you data yet because the clock hasn't run out to the decisions, that people, because they've raised the money, this seems like there's a certain proportions of this that is genuine. We hope to translate it to decisions, and that's why we're seeing a little bit more optimistic outlook.

It only will be proven out when we have the decisions. The only other point I'd say is if you compare last year J.P.

Morgan, our experience to this year J.P. Morgan, our experience, we have a higher percentage of or count of clients who were with money and need to make a decision, and are needing to make a decision reasonably urgently to progress their ambitions.

We had a lot less of that last year. We're hoping that all of this factors into improved future numbers, but at the moment, it's to some degree a leading indicator, not a lagging indicator.

Thank you. Thank you, Peter.

Second question, just on the Kenalog acquisition, the contingent considerations of $65 million. While you said annualized sales of $30-$35, what triggers this contingent considerations?

We haven't really shared a lot of details about the specific triggers, but it would be linked to elements around financial performance and transition along the lines that would be expected. The way we've tried to structure it with the seller is that we are highly aligned.

As in, if we pay it, it's really good for us because we want to pay it, and it's really good for the seller because they get the benefit. We would see the structure is highly aligned such that we would have the financial metrics that we would want and the seller would want in a scenario where we pay it or we don't pay it.

As in, it's good for us to pay it, and it's good for the seller if we pay it. We believe that the structure is aligned, and it's related to financial performance of the asset post-close and some of the transition-related activities that need to happen.

Got it. Just last question, I know third, just if you could reiterate our fiscal '26 guidance, please, revenue, EBITDA.

Thank you.

I think we're not changing the guidance at the moment. We're recognizing that it is a stretch, but I think we're going to endeavor to meet it.

Thank you. Thank you.

I'm sorry, there's a lot of disturbance. I'll be a little louder.

I have two questions. My first question relates to the 2030 projections.

Do these stand, or would you like to revise them?

This is the 2030 guidance? We are like to continue to stand by it.

We're not changing it at the moment, and we are talking to a lot of customers in our CDMO business, and we hope to get that.

Okay. The second question relates to taxation.

We see that there is continued negative profit over the quarters, and yet the tax incidence continues. Now, we have been explained that this is because of the divergent profitability of the various plants.

Now, this argument, of course, is valid, but in the long run, how do you propose to mitigate this argument by ensuring profitability of the loss-making plants or closure or reduction of those plants?

Mr. Vinod, as you rightly identified, the reason for the tax outflow currently is because we are present in multijurisdictions.

The outflow happens at the tax rate which is prevalent in those jurisdictions. At our overseas facilities, currently our scale is suboptimal.

As the capacity utilization improves, because of the better gross margin profile, we do expect the profitability to improve thereafter. On a long-term basis, we've guided that our effective tax rate across all sites would be in the 24% to 25% region, ETR.

It's more about improving our capacity utilization, specifically in our CDMO business across overseas facilities, for which there are a lot of initiatives underway, which we spoke about in the earlier part of the call.

The 24%-25% guidance, is that inclusive of any brought-forward losses, income tax losses, or those would accrue separately?

There's a difference between the accounting and the cash flow. Because we have the carry-forward tax losses available, we will be able to utilize them.

From an accounting perspective, it should be in the range of 24% to 25%.

Okay. Thank you for answering my questions.

Good morning to the team. I have two forward-looking questions.

My first question is to Mrs. Piramal.

With global demand dynamics shifting in regulated markets and pressure on generic pricing still going on, how is Piramal Pharma prioritizing its portfolio tactics, particularly between complex generics, differentiated dosage forms, and specialty injectables, to sustain growth and keep the margins stable? Additionally, how are you aligning your R&D and business development efforts to capture emerging opportunities in high-growth segments while managing competitive intensity?

That's my first question. I'll ask my second question after this.

Thank you very much.

Thank you. I think we're continuing, when we look at our generic portfolio, we're looking at doing hard-to-manufacture or hard-to-distribute products.

The Kenalog product is one example. It is a complex molecule that is hard to manufacture, and while it has been generic for a long time, then there is still limited competition in the market.

We also, while we are strong in the regulated markets, there are some rest of world markets that we do not have a very good presence, which is why we actually invested in our Digwal facility and are looking to continue to focus on rest of world sales from there. We have both internal R&D, as well as BD, that are looking to develop on our own and in-license similar complex products, as well as differentiated sort of, I guess, presentations for the business.

Thank you. I believe Mr.

Vivek is also on the call today? Yes.

Yes. Yeah.

Good morning, sir. My question is, given the interplay of input cost volatility, pricing pressures across the globe, and capex and capital intensity of complex generic development, how are you thinking about margin growth and cash flow keeping in mind the near-term to medium-term targets, to be more specific?

Could you also elaborate on your capital allocation framework, especially as it pertains to balancing investments in R&D, capacity expansion, and while maintaining steady financial discipline? Thank you.

Sure. Firstly, to answer the first question with respect to margins, as you're aware that our complex hospital generic business already enjoys a stable and a high level of margin.

The enhancement in margin hereafter will largely come in from our CDMO business and our consumer products business. Our consumer products business has already broken even.

It's contributing with a small EBITDA margin right now, and will start showing expansion in margin hereafter. A predominant portion of the margin expansion in the CDMO space will come from our overseas facilities as the capacity utilization enhances.

It has an inherently high gross margin profile, and as the overall utilization improves, due to fixed-cost leverage, you will see an improvement as far as the margins are concerned. To the second question with respect to overall capital allocation, our consumer products business is self-funding, and therefore does not need any external capital infusion.

It manages its own growth. Between the CDMO and our complex hospital generics business, as a part of our strategy exercise, we have earmarked what would be the potential areas for investments in these spaces.

The Lexington expansion is one such investment that we have done in this business and which we have announced and is underway. Likewise, in our complex hospital generics, adding differentiated and niche products is part of the growth portfolio, and the Kenalog acquisition is another example of how we're doing it.

Each of them have got their own business rationale. We do use payback metric to see how this fits within the overall return on capital employed expected in these businesses, and the investments therefore will flow in line with the long-term plans that we have for these businesses.

Hi. Good morning, everyone.

First question, do you have any update from your client on the resumption timeline of supplies for the large contract? Typically, what is the lead time between getting visibility from the client and then starting supplies?

We don't have anything material to update on that. We're in regular touch with the client.

We have other ongoing business with them, and we anticipate that whenever they let us know, we will be able to act on that. I'd say it's rough rule of thumb would be three quarters.

All right. Just to get that right, three quarters is the lead time between getting visibility and then starting supplies.

Correct.

Got it. Secondly, you had mentioned, Peter, in the previous call that getting tech transfer projects is one of the key priorities for the sales team.

Can you provide any qualitative comments on your progress towards adding any incremental tech transfer projects?

Yeah. I think that I alluded to that a little bit in the discussion of the recent experiences we've had with new proposals, and also our J.P.

Morgan client interactions. I would say that, particularly, it used to be that you had to follow the molecule and you have to start at the beginning and wait for the client to progress.

We have seen increasingly varied entry points across all stages, and one such entry point is at the phase 3, where people want to have a second source. I think with the overall increased desire for supply chain security, a alternative to China, or an onshore desire, we are seeing a lot of RFPs for these phase 3 or late clinical programs.

That's a part of the RFP bolus we're seeing, and we have to see how our potential clients decide. We are seeing that is being an important part of the mix of proposals we're seeing, and perhaps maybe a more important mix than we would have seen 3 or 4 years ago by contrast.

That's part of why we are cautiously optimistic about the potential, and we hope that some of those translate in a favorable way in the next 180 days that I mentioned is a typical lead time from proposal to decision.

Got it. The final question, in the CHG segment, you spoke about regulatory approvals coming in from Digwal over the next 12 to 18 months.

The last 9 months have not been great in terms of pick-up from Digwal. Realistically, when should we expect a pick-up in growth led by Digwal in the CHG segment?

First, we were open to selling out of Bethlehem at a different margin structure if the opportunities met our medium-term price targets. We weren't not going after the revenue because we didn't have the approval.

We weren't comfortable with the pricing environment, and we want to go stepwise and sequentially to make sure we were disciplined. That being said, in addition, I agree that the ROW approvals did take longer than we had initially thought.

We would anticipate that the combination of the approvals coming in and our, I guess, experimentation with price decline should show some benefits in the next fiscal year. Again, we do anticipate it working, but we're really trying not to rush it so that we do the right decisions, but we do anticipate that benefiting us next fiscal year.

Fair enough. That's it from my side.

Thank you.

Hello?

Go ahead.

Yeah. Thank you for taking my question.

I wanted to understand your take on the India pharma exports to the European Union as to how much do you think time will take for these exports to double, because we can say that approximately one year will go for ratification. By 2030, do you think there will be a significant number there from Indian exports?

I think overall the EU trade treaty for formulations and end pharmaceuticals, the duties are actually not very high. There are kind of larger barriers to entry such as the EU wants all products to be tested within the EU, and they also want EU inspectors to visit.

There may be bigger changes in things like specialty chemicals and KSMs, but we'll have to see when we get more detail if there will be a significant difference in formulations and pharmaceuticals.

If we wanted to see a big change, the non-trade barriers, tariff barriers would have to be addressed, and I think just to summarize the ones that would make the biggest difference for Indian exporters of drug, it would be the requirement to have a European domiciled qualified person to do the release, to have a European domiciled QC testing, the lack of mutual recognition of Indian inspections. I think those elements I would say would be pivotal in driving a more rapid growth, and in the current understanding of the current trade deal, those would be not yet present.

I'd say it's modest in our view, the benefit to kind of the end formulations for an exporter.

Okay. My second question is on the impact on China.

What do you think would be the impact on the exports that China does to European Union in the pharma that can be affected due to this agreement?

I don't think we can comment on that.

Hi. This increased demand conditions you have observed in December quarter versus prior periods, is this in the research and development area of CDMO or even in the manufacturing area as well?

I think

so overall it can be traced to the improvement in biopharma funding, and that would be primary fundraising, but also M&A that has been happening. When our clients such as biopharma companies get funding, they are more likely to do both R&D and manufacturing.

I'd say it's both.

Okay. Great.

Thank you.

Hi. This is Amit from JM Financial.

Thank you for taking my question. Most of my questions have been answered.

Just one question on one of the product which you had disclosed last year or last quarter back, you have 7 products. When should we see revenue coming in from this product?

Also, will it start from our overseas facility first, and then Indian facility? How it will happen?

Thank you so much.

For the future of that client, they are publicly traded. I would encourage you to look at their public filings and investor communications as being a primary source.

While we are really pleased that they chose to do a joint announcement with us that we're working together and really pleased with what we can do for their patients, I would encourage you to look at their public disclosures around their plans, and we've made it clear what we're doing for them in that joint announcement, and you can deduce the impact of the timing as we are, per our understanding, the only supplier for that particular combination for them. We've listed out the sites where the supply will be coming from.

I would encourage you to look at them as the primary source.

Sure. I believe the approval is expected somewhere in first half of next FY27.

Is this product going to be as big as the product where we are witnessing destocking? Is any color you can provide on that?

I would make one observation that the work we're doing for this client would be on the formulation side, and the work we were doing for the other client was on the API side, and so from a proportion of value, the steps in the value chain are different in terms of the activity being done. As you would know, APIs typically can be a larger part of the overall value chain.

In terms of specific revenue guidance, we aren't giving that, but we do think this is a meaningful customer for us, and we look forward to growing with them as they succeed. In terms of specific timings, I would encourage you to read their investor presentations a little bit more carefully because there's different times for different markets, and they're currently pursuing directly and through partners a strategy, and so I'd encourage you to kind of look through those communications.

Sure. Just last thing on the debt, is it possible to tell how much is the debt right now, and what is the guidance towards that?

Thank you so much.

Amey, the debt levels are the same as it was in March.

We are at about ₹4,200 crores of net debt. We would see a slight increase in the debt towards the close of the financial year.

Sure. Thank you so much.

Thank you.

Hi. Good morning.

I just have one question regarding this large product for which we are seeing the inventory destocking. I just wanted to know whether the specs are fungible within markets as in across markets, which means basically what I'm trying to understand is that is the same product, if it can be sold in the US, can it be sold in China also?

If you see, let's say, a lesser of a demand in China, can that product be then sold in the US? Is that a possibility, or the specs are different for different markets?

I think this may be a level of detail that's beyond our ability to disclose on behalf of our client, and I think we have to respect our agreements with them.

All right. Okay.

Just one more question. I was just going back to the comment made that the base CDMO business has grown in low single digits.

It seems, and I'm also tying this up with your earlier comment that in the base year FY25, the revenue were almost evenly spread across the four quarters. These two statements are not aligning.

It seems that for a low single-digit base business growth in CDMO, the third quarter of FY25 should have a much lower contribution from this large PO. Can you just align these statements for me?

Is that true that third quarter of FY25 had a unusually low quarter for the large drug?

That's right, that the third quarter had relatively lesser contribution from this large product, and then it resumed back in quarter four.

Okay. Great.

Thanks. I'll get back in the queue.

Most of my questions have been answered. Just one last clarity, if you could share, while you indicated you'll have year-over-year growth in revenue for fourth quarter, given the visibility of the contracts, will also that convert to growth in EBITDA as well?

It is sequential growth from quarter three to quarter four. As we mentioned, quarter four last year had a large portion of the large customer growth, therefore there won't be a Q4 Q versus Q4 growth.

Both in terms of revenue as well as EBITDA, right?

Yes. Okay.

Thanks.

That's it.

Thanks for the follow-up. Just one question.

What is the timeline for closure of this Kenalog acquisition?

Approximately three months, give or take.

Okay. Thank you.

Thank you very much. We appreciate you taking time and joining us for the call.

In case you have any follow-up questions or any clarification that you need, please feel free to reach out to us. Thank you, and have a good day.