Ladies and gentlemen, good day and welcome to the Q3 and 9 months FY26 earnings conference call of Shaily Engineering Plastics Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touchtone phone. Please note that this conference is being recorded.

Before we begin, a brief disclaimer: this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance, and it may involve risks and uncertainties that are difficult to predict.

I now hand the conference over to Mr. Amit Sanghvi, Managing Director of Shaily Engineering Plastics Limited.

Thank you, and over to you, sir.

Thank you very much. Good afternoon and a very warm welcome to all of you to our quarter three earnings call.

I have with me Mr. Sanjay Shah, Chief Strategy Officer, and SGA, our investor relations advisors.

I hope you've had a look at our financial results and the investor presentation that is uploaded on our website as well as the stock exchange. Let me begin by giving you highlights of our key business development over the quarter.

In Q3 FY26, we delivered strong revenue growth along with meaningful margin expansion. Revenue stood at 251 crores, up 27% year-on-year, and EBITDA came in at 66 crores, up 43% year-on-year, with a margin of 26.5%, representing an expansion of 310 basis points year-on-year.

The growth was driven by the continued momentum across our business verticals. Importantly, the healthcare segment's contribution to our overall revenue mix, which has now doubled to 42% compared to last year, reflecting the increasing scale of this business.

During the quarter, there have been two important updates in healthcare that strengthen our future outlook. First and the most important, I'm very happy to announce that we're establishing a new scalable facility in Abu Dhabi for manufacturing of pen and auto-injectors.

This is a strategic move to build capacity in the fast-growing drug delivery segment and places us in close proximity to our international clientele. The planned investment is in the range of 130 to 150 million AED, translating to about 300 to 350 crores, to build a capacity of approximately 75 million pen/auto-injectors per year.

We expect this facility to be operational by Q4 FY28, significantly scaling our global manufacturing footprint in GLP-1 and other advanced therapies. With this addition, our total pen injector capacity will increase substantially to 150 million units from the current 80 million units per year.

We are also in discussions with the governments in Abu Dhabi for potential financial support, and we will provide an update as those discussions progress. Second, we are very pleased to announce the appointment of Mr.

Joe Chan as Chief Operating Officer of Healthcare Division in Shaily, effective 1st March 2026. Joe brings over 20 years of international experience in manufacturing and operations across highly regulated, process-driven industries.

Prior to joining Shaily, he held senior leadership roles at SHL in Taiwan, managing their entire device manufacturing operations across seven sites. Previous to SHL, he's worked at Flextronics in manufacturing of high-end medical devices, including electronics.

He holds an Executive MBA from the Chinese University of Hong Kong and advanced qualifications in automation systems and engineering management. At Shaily, Joe will lead our global healthcare operations with a clear mandate to drive operational excellence, further strengthen quality and compliance, accelerating automation scale-up, and building high-performance teams to support our next phase of growth.

In the healthcare segment, beyond the upcoming facility, we have onboarded two new customers for GLP-1s and have also additionally signed two new contracts with global pharma for the manufacture and supply of pen injectors. In the consumer segment, we received a new product mandate from an existing home furnishings customer, and within industrial segment, we commenced supplies of power tool components for a new client and added applications in LED lighting as well.

With that, I will now hand over the call to Mr. Sanjay Shah to take you through the operating and the financial highlights of the quarter.

Thank you very much. Over to you, Sanjay bhai.

Thanks, Amit. Good afternoon, everyone.

I will start with operating metrics for the quarter and the 9-month period and then move to the financial performance. During Q3 FY26, we processed 5,541 tonnes of polymers as compared to 6,308 tonnes in Q3 FY25, a decline of 12%.

For 9 months FY26, polymer process stood at 19,209 tonnes versus 18,396 tonnes last year, a growth of 4.4%. Machine utilization was flat at about 47.1 in Q3 and 47.818 for 9 months FY26.

With the ramp-up of new programs, we expect utilization to improve going forward. Exports continued to remain strong and contributed approximately 71% of total revenue in both Q3 and 9 months FY26.

Let me now summarize the consolidated financial highlights for Q3 FY26. Revenue stood at 251 crores as compared to ₹198 crores during Q3 FY25, a growth of 27% year-on-year.

EBITDA has doubled to ₹66 crores as compared to ₹46 crores during Q3 FY25. EBITDA margins stood at 26.5%, an increase of 310 bps over Q3 FY25.

PAT stood at 37 crores as compared to ₹25 crores during Q3 FY25, a growth of 48% year-on-year. PAT margins stood at 14.9%, an increase of 220 basis points over Q3 FY25.

Coming to segmental revenue break-off for Q3 FY26: in the consumer segment, revenue stood at 123 crores as compared to 141 crores during Q3 FY25, a degrowth of 13%. In the healthcare segment, revenue stood at 104 crores as compared to 44 crores during Q3 FY25, a growth of 139%.

In the industrial segment, revenue stood at 23 crores as compared to 13 crores during Q3 FY25, a growth of 87%. Now coming to 9-month FY26 consolidated highlights: revenue stood at 754 crores as compared to 569 crores during 9-month FY25, a growth of 32%.

EBITDA stood at 218 crores as compared to 124 crores during 9-month FY25, a growth of 76% on a YoY basis. EBITDA margins stood at 29%, an increase of 720 basis points over 9-month FY25.

PAT stood at ₹130 crores as compared to ₹65 crores during 9-month FY25, a growth of 101% on YoY basis. PAT margins stood at 17.2%, an increase of 590 basis points over 9-month FY25.

Cash PAT for 9-month FY26 is ₹166 crores as compared to 96 crores during 9-month FY25, a growth of 73% year-on-year. Our ROCE and ROE stood at 38.4% and 29.1% respectively as on 31st December 2025.

The growth in business has been achieved with disciplined use of capital. Our debt to equity stands at 0.3x and fixed asset turnover ratio at 2.0x as on 31st December 2025.

Now coming to segmental revenue break-up for 9-month FY26: in the consumer segment, revenue stood at 409 crores as compared to 413 crores during 9-month FY25, a degrowth of 1%. In the healthcare segment, revenue stood at 280 crores as compared to 109 crores during 9-month FY25, a growth of 158%.

In the industrial segment, revenue stood at 65 crores as compared to ₹48 crores during 9-month FY25, a growth of 36%. That concludes the update from my side.

We can now open the floor for questions.

Thank you very much. We will now begin the question and answer session.

Anyone who wishes to ask a question may press * and 1 on your touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2.

Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

We take the first question from the line of Shaleen Kumar from UBS India. Please proceed.

Hi. Thank you so much.

Congratulations to the management for a fairly good set of numbers. Amit and Sanjay bhai, two questions.

First on the capacity side. Can we get update if I missed the initial part?

We are having two lines coming up, right, of 25 million each. Is the first one operational?

The first line is going through operational qualification, should be completed next week, and then we'll go into supply immediately after. The second line is scheduled to arrive end of April, beginning of May '26, it will get commercialized by end of July '26.

Fair to assume, Amit, that our commercial production from that new line will do commercial production in March onwards?

We will have some commercial production in March, but we'll do the proper scale-up from April.

Got it. For that one, maybe August-September, right?

No, that one end of July we should be in production. I guess consider a month for getting the line up to speed that it's intended.

We typically start at 50, 60 parts per minute on an 80 part per minute line and then scale it up to 80.

Got it. Amit, we are setting up two lines with 50 million, and now we have also setting up 75 million line which will coming up by end of FY28.

You have also highlighted that you have signed up two more customers, etc. Is it again fair to assume that you have pretty confident on at least these existing lines 50 million to be able to fully utilize in next 12 to 24 months, and that's the reason you're looking for 75 million line?

Listen, all the capacity expansion we're doing, let's look at the capacity expansion in India, are more or less fully backed by commercial contracts. The Abu Dhabi expansion, I would say, is somewhere around 50% to 60% secure in terms of capacity commitments, not fully, but it's anticipated to be 18 months out from now.

We anticipate that we will be fully backed by contracts even on the Abu Dhabi setup. Fair.

Yeah.

Basically, you're saying that 50 million is fully backed, we should be fully utilized in 12 to 24 months, right?

24 months, yes.

Yeah. Fair.

And 75 million, you're saying that you already have a commitment for more than 50%?

Around 50% to 60%, but somewhere in between that. Now, you will sometimes see pen cannibalizing auto-injectors or vice versa, but that's a risk we have to live with.

Got it. On the GLP-1 side, now how should we think about your supply given there's a likelihood of launches coming in 1Q?

Should we expect that you will be started supplying GLP-1 injectors in this quarter, fourth quarter?

We've already started supplying in the last quarter itself for commercial launches which are planned in Canada, Brazil, India, Middle East, Turkey. Supplies have already started.

We're struggling right now because our high-speed line is still not up and running, it's still in qualification. As soon as that happens, we'll be in a better position to supply the volume that is needed.

Right. Basically you're saying it will only ramp up from here.

You already have a demand coming from customers.

Absolutely. The customers breathing down our necks for supply.

That's a good news. Canada we have a lion's share, right?

Can we say that? For you to qualify what kind of a share you have amongst the customers you have signed up, or the number of customers who have filed?

Without breaching any confidentiality, I believe Canada, if I look at potentially the first six, seven filers, I would say we have upwards of 65%, 75% of that share. Okay.

You think 75% of the customers who have filed are with you?

If I look at the first six, seven, yeah, first filers. Yeah.

Effectively, basically there is likelihood that anyone who gets an approval will be using a Shaily's pen in Canada, most likely, there's a good likelihood.

Very good likelihood.

Good to hear that. Now moving on to the consumer electronics bit.

If we can get to know what's the status on that front, when are we done with the qualification? When can we expect commercial deliveries to go for the consumer electronic clients?

I think we're coming closer to the end of the qualification cycle. I don't have anything that I will be able to share beyond that.

We should come to an end of qualification either end of this month or early March, and hopefully from there on, we will have a little bit more visibility on supplies.

Most likely you're saying the supply will probably begin fourth quarter end or the 1Q? Can we assume that?

That's also my assumption at the moment, but like I said, I don't have any Yeah.

The product is mostly qualified, right? That most of the qualification is done, if I understand it is correct.

There's a long qualification cycle. You have to always consider that one is to qualify a component, then it's to qualify the component at site, at the assembly site.

Then beyond that, there's a testing period for verification that everything works. It's not a very short process, especially for a new supplier to enter.

We assume that we're at the end of that cycle at the moment. Hopefully, we will start supplies soon.

Got it, sir. Last question from my side, and then I'll go back in the queue.

Or last two question actually. On the semiconductor casings, that's another excitement area you highlighted.

If we can get some status update on that as well, right, where we are, what kind of customers are we looking at, and when can we start seeing the commercial supplies happening on that front?

Look, plants in India are still are not up, right? The chip manufacturing companies are not fully up and operational.

I think it's going to likely be 12 months before they come up. We should see some small quantities in the new FY for sure.

I think any scale-up will largely depend on how quickly these capacities come up and how quickly they then scale after setup. It's a direct link.

Can't do anything else with the product except supply to chip manufacturers.

Can there be an export opportunity in that beyond the domestic supply?

Not at the moment. Not at the moment.

It's it's not it's not friendly to international shipping. It's quite quite can be quite expensive.

In most regions, these are manufactured close to the end end customer.

All right. A last bit on the financials.

While I can observe that your gross margin has been stable, but I could see there are some cost increases a little bit on the employee side and the other expenses. Just want to understand what were they pertaining to.

I think largely admin and selling expenses have gone up. Sanjay bhai, if you want to take it, that's fine.

It's good, Amit. No problem.

As you can imagine, quarter three this particular year ended up with three very large, obviously, exhibitions, which is a very significant cost for us. Plus, we're doing these setups in Abu Dhabi and elsewhere in the world.

You've seen a temporarily cost increase on that, but the reason it's reflecting on the margins is because we had some income, the one-time income which has been delayed from quarter three to quarter four.

Okay. Can we get the nature of that income?

What was it like? You're saying the cost has already booked for that?

Shaleen, what happens is Yeah. Shalin, what happens is that, basically, from UK and Abu Dhabi, we basically license or give access to people to our platforms, where the fees are recovered over 12 to 18 months or 21 months in terms of agreed milestones with the customer.

Now, we would have submitted papers to the customer, customer would validate that and then confirm it, and then invoices would be raised. In this case, there have been some income which has not been booked in the quarter three because we have not got confirmations from the customer, we expect that we should be reasonably able to do that in quarter four.

Sanjay bhai, you're saying that the cost has been incurred, but the income has yet to receive for that?

Yes. Actually, you're right.

What happens is, as I mentioned earlier, you basically realize income once the customer confirmations come in. Now, these are long-term contracts with different agreed milestones at the start of the contract.

Now, basically we were expecting the customer approvals to come in for that milestone in say quarter three, some of them would have been deferred to quarter four or something like that. That's the reason that income has not come in.

You would see that when you look at the difference between the consolidated numbers and the standalone numbers. You would see that the revenue, compared in quarter one and quarter two and quarter three, the revenue in quarter three from UK and Dubai operations is lower as compared to quarter one and quarter two, and that's the reason for that.

While expenses have been there, you don't have corresponding revenue which has come in.

Got it, sir. Basically, as we move into 4Q, we will not have the exhibition cost, and also we will have a revenue coming from the work we have done in Q3.

Just to add to what Amit said, with exhibition cost, we also have had expenses on labor code implementation in terms of gratuity and leave encashment. That expense was about 90 lakhs to a crore.

Any chance on the exhibition cost, sir, if you can provide a figure how much it was?

That was substantial, because there were three large exhibitions which we took part in. One was CPHI in Europe, and then Pharmapack and PDA.

Okay. All right, sir.

Got it. Thank you so much, sir.

That's it from my side. I join back the queue.

Thanks, Shaleen. Thank you.

Thank you. Before we proceed with the next question, participants, please limit your questions to two per participant, as there are several participants waiting for their turn.

We take the next question from the line of Vishal Manchanda from Systematix. Please proceed.

Yeah.

Good evening, and thanks for the opportunity. Sir, regarding the consumer business, that continues to decline.

If you could share whether we can expect a rebound there sometime soon?

Vishal, when you look at the consumer business, the consumer business is seeing some decline because of overall demand slowdown, which is happening in Europe and US. As and when economy improves there, I think you should see a rebound.

The other thing is with the US FTA or US agreement happening and the EU FTA happening, once this gets signed and implemented, you should be able to see some advantage coming to India as compared to its peers in terms of exports. You would see, probably couple of quarters, but post that, you should see improvement happening on that part of the business.

Would this stabilize at current level or there can be further downside from current numbers?

Vishal, very difficult to say because, again, this would depend on how things pan out globally in the economies, which would be difficult for us to predict sitting here.

Do your customers Yeah.

If you look at quarter one, quarter two, quarter three, while we have taken on additional new business from home furnishings space from our customers, on existing businesses, we have seen a drop in volumes. That's something which will again depend on how does the revival happen in Europe and US.

Right. Is there not an annual commitment that these customers give you, or these are more need-based orders that you get from your customers?

In some cases, there would be commitments. In a lot of these cases, this would be regular orders which would be based on the demand.

We do have a 52-week rolling forecast, we have some sense of it, but then that forecast also will change with time.

Right. IKEA kind of, there are press articles saying IKEA is looking to source more from US for the US market.

Any signals that you're getting on this?

We have not seen that, Vishal Manchanda (Systematix):

Okay. See,

what happens is when you look at it, with tariff coming down from 50% to 18%, India will have a significant advantage against its peers for exports to the US.

Okay. Got it.

Sir, just one final one on the commitments that you say you have commitments for 50% of the capacity at Abu Dhabi, are these commitments in form of capital advances? Do they fund 50% of your CapEx?

Is that the way these commitments work?

No, I think I've mentioned this in two of my previous calls, but with every customer, it's different. In some customers, we do a structure where an advance is given.

Advance can range from anything from 20% 20% to 40%. In most cases, it'll always be a take-or-pay contract, every year, there's a certain volume guaranteed, a minimum volume guaranteed by the customer, which they have to purchase.

This volume guarantee is for multiple years that they provide, let's say for the next 5 years since inception? Okay.

Yeah. Look, it's to the customer's benefit to do that because if someone's taking a pen from us for semaglutide, and they only have a contract for 1 year, next year, I may not have supply for them because this market is like that.

There's more demand than supply.

Right. I'll come back in the queue.

Thank you.

Thanks.

Thank you. We take the next question from the line of Harshh Shah from JM Financial PMS.

Please proceed.

Yeah. Thank you for the opportunity.

Few questions from my side. Firstly, once again on the consumer business.

As I understand, as you mentioned that demand is kind of changing both in US and Europe. From a modelling perspective, would it be right or assumption to kind of take as mid-single-digit kind of growth annually in this business, or you probably feel that post this treaties, things could materially change in our favor?

Harshh, it'll depend. I I think it's a little too early to talk about it.

The EU needs to be ratified. In the US, still the India-US is still there are a lot of discussions going on, while there's a some sort of a free book agreement agreed upon.

There's still some discussions which are going on, it's a little too early to talk about it.

Got it. Okay.

No worries. On the pens guidance in terms of volumes which you had given probably at the start of this financial year of almost around 30 million odd, would you retain that guidance for FY26?

Yes.

Okay. Got it.

It'll be a little lower given our qualification activities are delayed by 3 months, it'll be slightly lower, but generally

Broadly, it's the same, right?

Yeah.

Okay.

Yeah.

Got it. On the new capacity expansion in the UAE, right, if you could kind of walk us through in terms of the rationale why UAE was chosen as the location?

Correct me if I'm wrong, is it that your focus would be more on the regulated markets where the IP protection on the pens would be much stronger vis-a-vis markets like India, where there is lot of Chinese competition as well coming in? Also some color on the revenue and the payback period you would have assumed at the current juncture for the UAE plant?

We'll not talk about revenue and payback in this call. I think when we get closer to taking the call on finalizing this, maybe we can announce it then.

On the rationale for the UAE plant, if you look at the business for healthcare particularly, we import resin, we import equipment, and in Shaily's case, we're also importing people, right? Key senior engineering talent within Shaily running the healthcare business are expats.

Now maybe, there's certainly a savings when you do all of these imports within the country. More than anything else, the expats we hire come from regions in Asia where personal income tax is a lot lower.

It's less than 50% of what it is in India. We actually end up paying someone 2x what they should be getting paid just to bring them to India.

We're not able to at the end of it, justify the cost of gaining this capability, given the scale that we want to grow at. There's a lot of benefit of being there.

There's also, I never wanted to mention this, but we lost out on a particular very large contract a year ago when Operation Sindoor happened just because the customer saw risk in their clinical program. We have a very nice base in India.

We'll continue to operate and grow that, but we need to have a business continuity plan in place, and there are large customers who will look at that very, very closely and not want to have all their eggs in one basket. That's the rationale.

Got it. One last question before I get back in the queue.

The thing that you all mentioned in the PPT with respect to the two new contracts with global companies for pen injectors, would these be completely newer customers or how should one read this?

One's an existing customer new project, one's a completely new customer.

Got it.

That is Both European.

Sure. That is from my side, and get back in the queue.

Thank you.

Thanks.

Thank you. We take the next question from the line of Ritesh Shah from Investec.

Please proceed.

Hi. Thanks for the opportunity.

Quick questions. Sanjay bhai, you indicated around 30 million pens for this year.

Can you give guidance for '27, '28 if it's possible?

Ritesh, probably, I would say wait till the end of the year and then we can probably give an idea on that.

Okay. Second question is the consumer business has reported a decline on a year-on-year basis.

Now, in a way, this should be a good thing for a gross margin if we look at it on a sequential basis. Despite stellar growth what we have seen in healthcare, how should we comprehend the gross margin profile on a sequential basis?

If you look at on a standalone basis, the gross margins have improved on a sequential basis. The Q2 margins were at about 55%, the Q3 margins are at about 56%, you've seen a 1% increase in terms of gross margins.

It's been marginal, but yeah, it has been there.

Correct. On consol basis, basically, you did indicate about the revenue which has not been booked, the cost was there.

If it's possible for you to quantify that number, basically probably at a consol level, it will help us better appreciate the numbers?

I already indicated number on the labor cost, which is about 90 lakhs to a crore, and then there will be cost related to exhibitions and other costs, which is there, which I think when you look at the numbers, you should be able to arrive at the number.

I'm referring to at the gross margin level, you indicated there was a revenue which was there between consol and standalone you were explaining which was not booked in Q3

and

that some income will be actually booked in Q4. Would it be possible for you to qualify that income number?

Again, Ritesh, I would basically refrain from giving a number here because a lot of this is milestone-based, but you will see some of this revenue getting booked in quarter four.

Sure. Okay.

Few questions for Amit. Amit, you indicated high-speed line under qualification.

This was with respect to the first question that you answered about the next line by next week and the other one by July end. Okay.

Can you detail what are we referring to over here?

Sorry, Ritesh. I didn't understand the question.

What are we referring to in terms of the line or

You said high-speed line under qualification. Which qualification are we

Pen assembly. Yes,

pen assembly. Okay.

It's more procedural. That's fine.

With respect to the UAE capacity what we have announced, how should we read into this capacity? Is this on a four-capacity cavity mold or a eight-cavity mold, and how does it stack up versus the facility that we have in Baroda from a technological standpoint?

Baroda, we currently run a combination, again, different on different products, but it's a combination of 4, 8-cavity, 4-cavity, 8-cavity, and 16-cavity, right? So 16-cavity is only there for the lines which are supplying for GLP-1s, and there's only two lines doing that, right?

All the rest of our products would be 4 and 8 cavities. In Abu Dhabi, we're looking at only 16 cavities.

There will be no 8-cavity production lines. It will be just basically all high-speed lines in Abu Dhabi.

Each set of capacity capable of producing somewhere around 25 to 28 million pens or devices per year, largely automated. Even our India facility is fairly automated, but this would be much higher level of automation than that.

Sure. In the presentation, we have indicated Q4 FY28 as commissioning.

If we had to read on the dispatches for FY29, FY30, I understand you won't probably give the number, but hypothetically if we are 100% booked, what is the dispatch quantum it can happen? I'm not looking at it from a commercial standpoint, I'm just looking at it from a manufacturing standpoint.

Can there be any startup issues, or is it something which is very, very smooth?

That's what we're having right now. We're having startup issues, right?

That's why qualification, which should have happened possibly in October last year, we're in Feb this year, it's still ongoing, because the line is a very, very, very complicated line, and, yeah, it's taking a lot more than we anticipated.

Sure. Would it be possible for us to give some more flavor on the consumer electronics supplies that we already started, basically how we entered in this business?

Because historically, we have looked at high margin, high ROCE SKUs. This could be high volume, probably low margin.

What is the thought process, and what is the scope of revenue margin profile opportunity that we have over here?

Look, it's a very, very big opportunity and very scalable opportunity, right? If you look at supply chain in China, each of these plastic guys that participate in consumer electronics opportunity, especially the high-end more high precision, small parts, high complexity, each of them do revenues of between $300 million to half a billion, $600 million, right, annually, and they've all kind of grown to that level maybe within a span of 10 10 years really.

What we see is that this particular opportunity is highly, highly scalable, it's long-term scalability. There's a very high amount of revenue that you can generate.

Because of the complexity, which takes out a lot of your competition, right? Not everybody can do it.

It's very, very difficult. You'll find a handful who will actually be able to do this.

Which means that there is also margin to be earned. The margin's not going to be healthcare margins, but I'd say certainly much I would say higher than our home furnishings business.

You've got better margin, high complexity, which means there's return for someone else to enter, and better margin profile. I think it's a good mix.

Sure. What sort of CapEx will we look for this particular business?

I would presume we'll be running out of capacity very quickly over here. How should we look at incremental capital allocation for this part of the business?

We're working on the CapEx plan. I think we don't have a very concrete answer yet, but it will be available shortly.

Sure. I'll join back the queue.

Thank you so much for the answers, and all the very best.

Thanks.

Thank you. Before we proceed with the next question, a reminder to the participants: please limit your questions to two per participant.

We take the next question from the line of Nirali Gopani from Unique PMS. Please proceed.

Hi, Amit and Sanjay bhai, and thank you for the opportunity. Congratulations on a good set of results.

Amit, my first question is on the capacity timelines. Now when we expect to sell around 30 million pens in the very near future, and the capacity to come up towards the end of FY28, do you see any capacity constraint that we might see in the next 2 years?

Is there an option to add further capacity in India if needed?

No, we did not intend to add the 25 million line, the 25 million pen line, which is being delivered in end April, beginning of May. We never intended that in India, but we had to do it because essentially you can't execute a full project in a foreign country in 10 months.

We can do it in India in 10 months, but outside of India, it's not possible to do it in such a short time. We decided to max out the capacity in India.

We don't have any more building space left. We don't have any more factory space left in India, we'd have to build new anyways.

When we talk about capacity, you probably have to understand that most of our contracts will stipulate a upside of 20% to 25% depending on what a customer is potentially signing. For example, if we have a capacity of 80 million pens in India, the guaranteed volume that we have is 80% of that, right?

We have to have spare capacity available for managing launches, managing seasonality, managing a sudden spike in demand on an ex-product versus a wide product. Capacity essentially never gets 100% utilized, and you expect that it will be around 80% utilized.

Perfect. Very clear.

Secondly, Amit, on axiem, I understand that the launch will be 3 years out and it's still far. Any directional update that you would like to share on onboarding of customer or signing any contract, any timeline that when can it happen?

We have quite a few advanced stage discussions ongoing, two in particular, to be honest, regarding GLP-1s for novel molecules. Hey, all of you keep your fingers crossed and pray for us.

It could be this year, we could look at potentially signing on a customer for one of our more innovative products this year.

Okay. Perfect.

That's right. This year, this calendar year, not financial year.

Right. Very interesting.

Amit, not looking at the quarterly numbers, but UK, we have a pipeline to grow substantially over the next 2, 3, 4 years, right? The pipeline in your view looks strong for the UK subsidiary to deliver numbers?

Absolutely. We've got 1, 2, 3, 4, 5, 6 We've got seven seven new products in the pipeline and each of them could have multiple customers, we've got seven new products in the pipeline.

In fact, we're discussing how quickly we can implement this because we don't have the resourcing available. UK pipeline is very strong.

I don't see any challenges for the next 3 3 to 4 years.

Okay. The last question on the numbers to Sanjay bhai.

Sanjay bhai, if I

Ms. Nirali, I would request you to join back the queue, as there are several participants waiting for their turn.

Absolutely fine. Thank you so much for answering.

All right. Thanks, Nirali.

Thank you. We take the next question from the line of Kunal Bhatia from Dalal & Broacha Stock Broking Limited.

Please proceed. Sir.

Thanks for the opportunity, sir. I just had two questions.

One was in regarding the Abu Dhabi facility which we would be starting there. You mentioned some bit about the funding on that, but if you could be more elaborate on how are we going to fund that?

Secondly, also will this facility be used only for the GLP-1 opportunity or even for other therapies? The final question is also if you could give some sense, now since that global capacities have also increased, how are you facing the pricing for the pens?

Yeah.

I'll probably answer the first part of the question in terms of funding. We basically look at funding it by a mix of internal accruals and debt.

The implementation time, as Amit indicated in his opening remarks, is 18 months, we will have enough of accruals which we would be able to generate. We will be approaching our bankers as well as bankers in Abu Dhabi for funding the same.

Thanks,

Sanjay bhai. On the other two, pricing, yeah, there is pressure on pricing, but it's not crashing down or anything.

Anyways, of course, you guys don't have this information and we cannot provide it, but from what we had quoted when we first submitted proposals on high volume offtake, it's not a whole lot different. We've seen essentially a 15% 10% to 15% price erosion on those numbers, but that's a given.

When you sit down to negotiate large-volume contracts, you will see that happen anyways. Pricing will be under pressure for sure, but I think most companies now have their COGS for semaglutide somewhere in the range of $5 to $7 or $6 to $7, $6 to $8.

Let's take a low point of $6, high point of $8. I'm not sure if a 30, 40 cents difference really makes that much of an impact and is it worthwhile taking the risk.

To be honest, yeah, we anticipate some further price erosion, but it'll probably stabilize after the first 24 months of supply. Sir,

this was much lesser than what was anticipated earlier, if I'm not wrong?

Can you repeat that?

Sir, I'm saying the erosion is lesser than what we were anticipating earlier, right?

The erosion is lesser. You see pen capacities are limited.

If you look at API prices eroded very significantly. The most complex part of the entire combination product is the device.

Right, sir. Thank you so much.

There are not too many players also who are there on the device front.

Right. Yeah.

Thank you.

Thanks, Kunal.

Thank you. A request to all the participants: please limit your questions to two per participant, as there are several participants waiting for their turn.

We take the next question from the line of Pritesh from Lucky Investments. Please proceed.

Hi. I have two questions.

One on the bridge of the capacity addition in India. You were supposed to add 25 million, two lines, take it to 80.

Did I hear correctly that one of the line is slated to come in quarter one of '27? Is that correct?

One line is already at Shaily, Pritesh, and is under qualification. It arrived in Shaily in December.

It's currently under qualification. The second line will arrive end of April, beginning of May, and should be qualified by end of July.

The line which was supposed to be qualified in quarter three, current quarter, is yet to be qualified, and then there another line will come in quarter two next year.

That

will take it to the 80 million.

Correct.

Okay.

That's right.

Second question is we are seeing some movements on the oral GLPs. Novo launched Rybelsus, and then there was a rip-off in the form of Hims & Hers.

There was a launch there. You had some assessment of the oral GLP for a market of the sema or of the GLP.

Any comment there? Any observation?

Any changes on the oral as a percentage of the total GLP?

Look, as far as Hims & Hers is concerned, there's ongoing litigation. My information is that it will be very difficult for them to come out with that product.

Again, I don't want to speculate, but you'll see what happens. The fundamental is that the oral GLP-1 is not as effective and has more side effects because of bioavailability and the API content that goes in a product, right?

It's a daily API content of 14 mg versus once a week of 2.4 mg, right? You can imagine you do 14 * 7, and you have your math of API comparison between oral and injectable.

Oral will have a market share. They even currently do, but it's not going to impact our business.

This qualification is what you're mentioning about these lines, what are you referring from that qualification? Basically, what has to happen?

Oh, so much. First, you have to assemble the whole line, then you have to qualify each and every station.

An 80-parts-per-minute line conducting 25 to 30 operations on the line has a lot of equipment, and you have to qualify each of those equip

Amit, we lost you. Hello?

It seems like the line for sir has been disconnected.

Please reconnect him. Yeah.

The line for the management has been connected. Thank you for waiting patiently.

Sir, you can go ahead.

Thank you.

I don't know if Pritesh is still on. Yeah.

It's a very complex piece of equipment, you have to qualify each and every operation separately. Then you have to qualify the whole thing together, right?

We're at a stage right now where the line runs. We've been running the line at 60 parts per minute, 70 parts per minute.

We're getting high levels of rejection, 30 30% rejection. That's doesn't have to do with the quality of the product, but has to do with the settings of why the machine is rejecting it.

We're probably in the last stage of that process right now. We should be able to get that up and running over the next few weeks.

This rejection is from a customer or from the US FDA?

No, the line, a qualification of the line.

Pritesh, this is an internal qualification which Shaily does, and certifies that the product is meeting our specifications. This is a qualification which we end up doing it internally.

Okay. My last question is on the margins.

Let's say

Sorry to interrupt, Mr. Pritesh.

I would request you to join back the queue.

Let him finish. He just reinitiated.

Let him be. We won't follow this.

Sir, the question is

There are several participants waiting for their turn.

That's okay. Let him continue.

It's okay.

Sir.

Just on the margin side, I did some assessment of the margin based on the 30 million devices that you are selling. When you move towards larger scale, and this line is obviously fully utilized and also when you move towards a larger scale of volume between what is today and then, will there be a margin differential?

Sorry, Pritesh, are you talking about between India and Abu Dhabi or

No, just healthcare. I'm talking about healthcare in general, the healthcare business in general.

When you move from the current scale to the higher scale and then will there be a margin difference between what you're doing today and what you do then, considering the scale and, on the other hand, considering the pricing of the product?

If you look at just manufacturing margin, what will happen is we know that manufacturing higher-volume product is at a lower price, right? Because of the scale, once we stabilize the operations it's fully automated, not a lot of manual intervention.

Far, we've been doing a lot manually, right? The overhead cost is high.

We should essentially be at a point where we're able to maintain the same margins or there could be a time that we increase them. Generally speaking, these are the margins that we will maintain on the pharma business.

Perfect. This was very helpful.

Thank you, guys. Thank you very much.

Thank you, ma'am.

All right. Thank you.

Thank you.

We take the next question from the line of Lucky Agarwal from Equirus Securities. Please proceed.

Hello?

Yes, sir. Go ahead.

We can hear you. Hello, Mr.

Lucky, are you on the line?

Let's move to the next one.

Yes. I would request Mr.

Lucky to join back the queue again. Till then, the next question is from the line of Aman from Astute Investment Management.

Please proceed.

Yeah. Good evening, sir.

Yeah. Aman, good evening.

Yeah. Yeah.

Sir, my question is on the India launch. How many customers of ours do we have today in India, and how many do you think will be able to launch in March itself?

Are they using mostly Harmony, or are some of them also using Mio?

No, they're using both. We have customers that use Harmony, customers that use Mio.

I think if I look at the guys who've received approval from CDSCO, I think there's both Harmony and Aman, whether it's March, Harmony will go live March for sure in India. Mio might be April, could be March, could be May.

I really don't know, but sometime in the first 3 months of launch.

Sure. Continuing with this, we had read about that after India launch, it's automatic approval in almost 50 to 100 countries, except the big ones.

Do you expect that after India launch in March, most of our customer is also launching in whatever 50, 100 geographies, which is opening up directly after that, using the same COPP?

I would assume wherever these guys have reach and partnerships already in place, they will launch. Everybody will prioritize volume for Canada, but beyond that, I think they will launch in all countries.

Sure, sir. Any update on teriparatide launch in EU or US?

I think approval is there, but focus is on sema right now. Teriparatide launch will happen at some point once this sema launch is completed.

That is my assumption, and all possibly the latest information I have, so.

Sure. Among the other geographies like Turkey and Brazil, do you expect it to be launched in quarter two or do you see there can be further delays in that?

I'd say there's very high probability of quarter one launches, but I don't think it will get delayed beyond quarter two.

Sure, sir.

You have to understand my information is probably just as accurate as yours, similar sources. I'm assuming that everybody will be able to launch, will get approvals.

Sure, sir. That makes sense.

On the semiconductor side, you've talked about that the product has to be near the fabs, and in my understanding, there are four fabs in Gujarat. Are we in talks with at least two to three of them, because some are maybe expected to commercialize their fabs in CY27 itself?

Are we in conversation with all, and do you think that do we require all three or four for this product to scale, or even one is good enough for it to scale massively?

Sanjay bhai, you want to take this?

Yeah. Aman, basically, we would be looking at working with all the four.

is where we would talk about it. Most of these guys, basically, as you rightly said, will look at starting commercial operations by next year.

That's when we would basically be looking at supplies. There'll be some supplies which can probably happen towards the end of the year.

Okay. We are in talks with all four?

Yeah.

Sure. Final question is on the margin side for this quarter in healthcare.

My understand that one-off because of delay, but was there any mix change also and maybe more contract manufacturing and more insulin versus GLP-1s? Do you expect say quarter four with the GLP-1 scaling and maybe quarter one back, maybe even more, do you expect it to go back like quarter two, the margin for overall business?

I'd expect quarter one to go back for sure. Quarter quarter four, we're still, like I said, we're still qualifying the line.

We're not going to have a lot of lot coming from the high-speed line in quarter four. Margins will certainly go up in quarter four, but you will see full normalization only in quarter one.

Sure, sir. These were my questions.

Thank you.

Thank you.

Thanks.

Thank you. We take the next question from the line of Akhil Parekh from BNK Securities.

Please proceed.

Hi. Thanks for the opportunity.

I have two questions. Amit, you a couple of time mentioned that there is a difference between the supply and demand, right, the demand continues to be way higher for the GLP-1 devices.

Any ballpark difference between the supply and demand you would like to highlight, specifically from a near-term like next 12 to 18 months, what that percentage would be?

Demand is higher, sorry. Look, when we look at capacity build and demand, we always look at a sort of a minimum offtake plus an upside, right?

Given that if you look at players in globally for pens, you really have barring maybe some new Chinese entrants, which will supply into limited markets on account of IP infringement, you really have only four four four players globally. I would assume that supply is limited, and supply will only happen with firm commitments.

Is it fair to assume no big capacities would be coming at least in near term, basically?

We know the capacities which are already set up or in progress of being set up. Even with those capacities, you're not necessarily looking at a scenario where there's an overcapacity.

Okay. Got it.

That's helpful. Second and last question, you mentioned that capacity expansion is backed by orders from our clients.

What are the terms, like if a client don't oblige and they don't buy the required order, any penalties which are there as a part of the contract? That's my second and last question.

They're full take-or-pay contracts. Now that doesn't mean that we're not going to help our customers out in periods when they need it.

Essentially, if you don't buy, you still have to pay the same value.

Got it. That's all from my side.

Best wishes for the coming quarters. Yeah.

Thanks.

Thank you.

We take the next question from the line of Ankit Gupta from Bamboo Capital. Please proceed.

Yeah. Thanks for the opportunity.

Sir, on the Turkey and Brazil market, when do we expect to see Shaily devices being launched there, any update that we have from our clients?

Not really. We assume quarter one, quarter two next year.

Don't know. Don't quote me on that.

Are these like do you think we'll have a significant market share our partners will have a significant market share in these markets or and how many, players are you planning to supply there?

I think, look, certainly, three, four of our large customers have partnerships, we would assume that they will be successful in those regions.

Sure. Amit, with both the lines commencing operations by Q1 of next year, should we expect that for the expanding capacity in India, we should be looking at at least 70% to 80% capacity utilization by FY27?

No. '28.

It takes time to scale up. It's not easy, technically also not easy.

Sure. By that time, we'll also have the UAE expansion coming up at least by the end of FY28?

Equipment lead times have now become 15 months, and if you have to build a facility, it goes to 18 18, 20 months. It's hard to predict.

You could always have a scenario where you have very low utilization in the first year, but I think generally the business plan is solid. We need the capacity, so that's what we're doing.

Sure.

Just one last question on the innovator side. You did talk about keeping fingers crossed on getting some contracts with at least one of them in this current year.

In terms of scalability and the timelines, if you can give an indication how big can this be for Shaily and when can we expect some supplies to start for that?

With innovator, from the time you engage with them with an official agreement in place, minimum timeline for launch will be 3 years, 2 to somewhere between 2 and 3 years. Then it really depends on their success and how well the molecule does.

We're bullish. We think that a minimum 50 million pens to 100 million pens is the potential for innovators to come in.

Now we don't know whether it happens in '30, '29, '31. I really don't know, but that's part of the journey.

Okay.

Just one follow-up on this. With this UAE expansion coming in, let's say if for the innovator also, we might have to if hopefully, we get that contract.

For innovator supplies also, are we looking for further expansion apart from the Abu Dhabi, or this expansion might also cater to that if

If a very large volume commitment comes in, where we have to do 50 million additional pens, then we will need to expand that also.

Okay. Thank you, and wish you all the best.

Thanks.

Thank you. We take the next question from the line of Bhavika Jain from Niveshaay.

Please proceed.

Hi. Thank you for taking my question.

Basically, I want understanding on the consumer electronics side. Want to understand management view what exactly we are planning to do in the consumer electronics and from which region this is expected to come, the business?

We are planning to participate in anything in consumer electronics where there is high complexity, high precision, and small parts, including combination parts where you have metal and plastic. The business is obviously going to come primarily from customers setting up their final assembly in India.

Just a follow-up that because of my understanding, there are a lot of value chain shifting happening because of China plus one, and a lot of things are coming to India. Basically, understand that are we participating in that thing, or we are doing something totally different, are we trying to cater this shift happening in the value chain, or we are going to do something other than this?

I'd say a combination. We certainly are part of the shift wanting to participate because of the shift.

I think what's different is only the parts or the type of products in which we participate. We likely will not do simple stuff, because simple stuff Yeah.

We'll look

Yeah.

Relatively speaking, yes, it's a relative

It's a loaded statement, yeah.

In line with your business margins? Look,

it'll be higher than our current consumer business, and that's where I will end that. Yeah.

Okay. When we are expecting this consumer electronics segment coming live?

Hopefully, over the next 12 to 18 months.

Okay. Thank you so much.

Thank you. We take the next question from the line of Shubham Agarwal from Vardhman Capital.

Please proceed.

Hi, sir. Thank you for the opportunity.

Sir, I just want to understand the supply and the competition side globally. Who are the large players, if you comment on that?

Since you mentioned that the demand will outstrip supply in the next 12 to 18 months, I just want to understand why then are we talking about price erosion in the large-volume contract, and from that angle, if you can answer?

Sorry, Shubham. You were very choppy.

I actually didn't get all of it. You asked something about price erosion?

Yes, sir. Just wanted to understand the competition and supply globally, specifically for the GLP-1 drugs, and why are we looking at price erosion if you are kind of mentioning that the demand for these GLP-1 drugs that does outstrip the supply part.

Just want to understand both of these angles together.

Price erosion will not happen because of a demand constraint. The reason for price erosion will be end-market competition, right?

You need to support your customer so that they get more market share. They get more market share, you get more market share.

It's as simple as that. If you look at the number of filers in GLP-1s in general for semaglutide, the number is exceptionally high.

Everybody, the end customers are going to fight for volume, for market dominance, and that's why you will see all of this play out in the first 24 months. After 24 months, it likely will consolidate and stabilize.

Understood, sir. Got it.

Secondly, sir, if you can comment on what's the capacity utilization that you currently have on the 30 million capacity currently for the healthcare space?

Sanjay bhai, you want to take this? Shubham, we don't report individual capacity.

You can assume that we're adding 25 + 25, 50 million, which takes us to a total of 80 80 million capacity. If we're planning to supply 30 million, then we're nearly tapped out.

Understood. Got it.

Sir, lastly, I think you mentioned that the semaglutide price for most of your customers will be $6 to $8. This is the price per pen or

No, I didn't say prices. I said COGS.

I did not say prices. I said cost of goods.

Understood. So $6 to $8 including all the ferrying finish costs as well as the pen device and any other cost, right?

That's the current COGS cost, yeah.

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

Thank you.

Thank you. Ladies and gentlemen, due to time constraints, we take that as the last question, and would now like to hand the conference over to the management for closing comments.

Over to you, sir.

Thank you, everyone, for joining the call. We hope that we've been able to answer your questions adequately.

For any further information, I request you to get in touch with SGA, our investor relations advisors. Thank you, and have a great evening.

Thank you, everybody.

Thank you. On behalf of Shaily Engineering Plastics Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.