Thank you, Ryan. A very good morning, and thank you for joining us today for Sequent Scientific's earnings conference call for the second quarter and half year ended financial year 2026.

Today, we have with us Mr. Rajaram, MD and CEO, Sequent Scientific; Dr.

Haribabu, Whole-Time Director and CEO, Viyash Lifesciences; Mr. Saurav Bhala, CFO, Sequent Scientific; and Mr.

Ramakant, CFO, Viyash Lifesciences, to share the highlights of the business and financials for the quarter. I hope you've gone through our results release and the quarterly investor presentation, which have been uploaded on our website as well as the stock exchange website.

The transcript for this call will be available in a week's time on the company's website. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business.

After the end of this call, in case you have any further questions, please feel free to reach out to the investor relations team. I now hand over the call to Mr.

Rajaram to make his opening remarks.

Thank you, Abhishek. Good morning, everyone, and a very warm welcome to all the participants.

Joining me on the call is Dr. Haribabu, Whole-Time Director and CEO of Viyash, along with Saurav, CFO for Sequent, and Mr.

Ramakant, CFO for Viyash. Let me begin today with some good news.

Yesterday, the National Company Law Tribunal, the NCLT, has allowed the petition for merger and approved the scheme of merger between Sequent and the Viyash group of companies. The NCLT approval marks the beginning of a new chapter for the combined entity as we build towards delivering a fundamental transformation for the company to leapfrog into the next orbit of growth.

We released results of the quarter ended September 30th, 2025 last Friday, which are available on our website. I hope you have had an opportunity to go through the presentations.

Coming to the performance for this quarter, I'm pleased to announce that we continued our strong performance in the second quarter of FY '26 with revenues of ₹4,240 million, reflecting a healthy double-digit year-on-year growth at 15%. We remain committed to sustainable, profitable growth, and during the quarter, there was a 270 bps improvement in gross margin, and the pre-ESOP EBITDA rose to ₹657 million, and that came in at a 15.5% EBITDA in terms of the ESOP margins.

You would recall that a few quarters ago, we had set ourselves the target of crossing 15% EBITDA and moving to high teens. We are now firmly on that path while also improving our profit after tax substantially.

Big thanks to all our teams and partners for their unwavering support, efforts, and resilience. This consistent improvement in financial performance, along with the benefits of a strong balance sheet resulting from the merger, provides us with ample headroom to support investments to build our portfolio in new segments such as companion animals.

While Saurav will delve deeper into the financials, let me briefly cover some business aspects. Our formulations business, which accounts for about 75% of our sales, continued to trend very well, growing over last year by 18% quarter on quarter.

Now, this was driven by a strong performance across all business geographies. In Europe, the business grew with a healthy double-digit growth of 14% year-on-year during the quarter, maintaining sequential performance as well.

This upswing in performance was led by a strong resurgence in the Spanish business and increased exports from Spain. In emerging markets, the 27% year-on-year growth was supported by a strong growth across many key countries.

We have established our front-end presence in Mexico, which is a large global market for animal health. We launched Tulajet, which is a tulathromycin injection, in Brazil, and we will eventually expand it to the rest of the Latin American market.

Our operations in Turkey, both domestic and exports, continue to grow as we retain our position amongst the top five players in the market for ruminant animals. Our India formulations business has progressed well.

Quarter two is relatively a large quarter for the industry, and our business grew 6% over last year. We expect the impact of our field force expansion to kick in during the second half of the year.

As we have said earlier, India remains a key market for us to develop. Coming to our API business, we are very pleased with the transformation efforts undertaken by the team, and our business clocked sales of ₹830 million during the quarter, which represents a 7% growth vis-à-vis the same quarter last year.

Throughout this period, we have had successful customer audits as we position ourselves as a reliable, high-quality partner for APIs. During this quarter, we also commercialized one new API partnership with a launch in the US, and we completed the US FDA audit for our analytical lab, Sequent Research Limited.

I will now hand over to Saurav to share the financial details of Sequent, and then invite Dr. Haribabu to share the highlights of the Viyash performance and also the merger going ahead.

Over to you, Saurav.

Thank you, Raja. Good morning, everyone, and thanks again for joining us today.

It's a privilege to present key insights into our financial performance for quarter two and first half of financial year '26. I'll start with financial highlights for quarter ended September 2025.

Total revenue delivered is ₹4,240 million, reflecting a 15% year-on-year growth. Formulation segment revenue delivered ₹3,351 million, which is a growth of 18% on a year-on-year basis.

Our API segment revenue was ₹830 million, which is a growth of 7% year-on-year basis. Gross margin, a healthy improvement of 270 basis points on a year-on-year basis, rising from 47% to 49.7%.

Adjusted EBITDA reported is ₹657 million, showing robust 47% year-on-year growth, with a margin improvement of 330 basis points, rising from 12.1% to 15.5%. Profit after tax delivered ₹196 million for the quarter, nearly tripling from ₹63 million in the same quarter last year, with PAT margins significantly improving.

Coming to half-year performance of financial year 25-26, performance highlights as follows: Total revenue reported ₹8,654 million, reflecting a strong 14% year-on-year growth. Our formulation segment revenues stood at ₹6,734 million, up 15% on year-on-year basis.

API segment revenue, ₹1,884 million, growing 11% year-on-year basis. Gross margin, a significant improvement by 230 basis points, rising from 46% to 48.3%.

Adjusted EBITDA delivered ₹1,259 million with 35.4% year-on-year increase, with the margin expanding by 220 basis points, increasing from 12.3% to 14.5%. Profit after tax more than doubled to ₹372 million compared to ₹154 million in the prior year, and the margins improving from 2% to 4.3%, highlighting our operational strengths and focus on profitability.

Our balance sheet reflects stronger financial position driven by focused reduction in leverage and enhanced turnover ratios. Moving forward, our strategic focus remains on sustaining profitability, further deleveraging our balance sheet, maximizing the free cash flow, and improving return ratios as we progress.

Merger update already given by Raja, Honorable National Company Law Tribunal has allowed our petition and sanctioned the scheme on 18th November 2025, which was yesterday. With this approval, all the prerequisites for the merger are now complete, and the focus will shift entirely to integration and optimizing the synergy benefits.

To summarize, our continuous focus on reshaping product portfolio, expanding geographical reach, and focus on driving operational efficiencies has led to a sustained improvement in operating margins and a stronger and healthier balance sheet. As we embark on new chapter as a merged entity, we are committed to further enhancing our performance and creating greater value for all the stakeholders going ahead.

Thank you for your attention. I will now hand over the call to Dr.

Haribabu for sharing insights into the Viyash group performance. Thank you.

Thank you, Saurav and Rajaram. Good morning, everyone, and welcome to the call.

Congratulations to Sequent for great performance. As Rajaram and mentioned, actually we received NCLT yesterday.

Let me say thanks to everyone, stakeholders, for their support. First, actually thank you so much for shareholders for great support.

I think we got 99.9%. Then all our advisors and consultants who worked with us last 12 months, and most important, all our suppliers, customers, and all institutions to get all NOCs.

Most important, thank you so much for entire group, including Sequent team, Viyash team, and Carlyle team, for the great work actually for this merger. Now, let me take you through Viyash performance.

Of course, it's a record performance. It's the highest forever for Viyash, and also Sequent, I think, last quarter.

Q2 FY '27 Viyash, we did 428 crores top line, which grows around 17.8% year-on-year. EBITDA, of course, huge growth to 123 crores, which grows about 96% year-on-year.

EBITDA margin improved substantially. It's improved by 11.5%.

It's around 17.5 to now 28.8%, with the actually strong PAT growth. Of course, first half Viyash again, we grown actually 11% year-on-year revenue, which is equivalent to 780 crores.

EBITDA is grown by 59%, equal to 192 crores. EBITDA margin also is improved substantially by 7.4% to 24.6%.

Coming to the merger, two companies together, combined revenue, we did around 852 crores with a growth of 16% year-on-year, and again substantial growth of EBITDA, 289 crores. Margins also improved substantially to 22%.

The few things contributed for this last quarter substantial improvement. As Viyash started actually with a strong research-based company.

That's how we started last three, four years. Focus more on new products, focus on all cost improvements and business expansion to various markets.

One of the great thing actually Viyash did last four years, new product launches. We did almost 40-plus products developed in last three, four years API, and also around 30% 30 products finished products in US.

We have a formulation site in US, and we have R&D in India for finished products. Last four years, we developed almost 30 products FDF, and we filed around 40 products API and 30 30 products formulations.

Also, we continuously launching the products. Last 12 months, we launched a lot of products, finished products, six four six products finished dose, and also API eight products.

Last 12 months, API, we got 12, 13 products approved, and FDF, we got actually four products approved. Last year, we were the highest DMF filers in one of the quarter.

This contributed actually reasonable for last quarter. Coming to the second major focus area, CDMO business, even though we started little late, last 12, 18 months, we have been focusing a lot on CDMO.

Unlike regular CDMO, we focus in little bit different way. One is, of course, the major thing, start with innovators, building a relationship for their life cycle management products.

We have been supplying two, three customers on those commercial, and few initiatives last 12 months actually moving to the commercial maybe next few quarters on that. The second model, we partnered with many specialty generic companies to develop actually the little bit complex products, start partnering at R&D stage, co-development and manufacturing at our sites.

That's contributing a lot actually in last two, three quarters. The third area, contract manufacturing for specialty.

It's not the regular contract manufacturing for high-volume products. It's actually whatever products coming out of patent in near future after 2030, we partnered with many customers actually to do contract manufacturing, which includes, of course, optimizing of the products.

Almost 18, 20 products actually we were able to partner last 18 months in all these three areas, for the life cycle management with innovators or generic specialty partners, and most important, CDMO. Out of 20 products, whatever we partnered, 15 products of these actually today value is, market value is more than a billion dollar.

Of course, these are the coming launches with various phases start from '28, '29. Most of the products coming from '30, 2030, and we expect actually substantial revenue generation and also bottom line from 2030 onwards on these things.

Of course, short term, whatever we do, couple of validations and service income, we are able to sustain the revenue. That's a major stream is going to come out next three, four, three, five years.

Most important thing what we did last two years, of course, I explained last time also, product optimization and network optimization. This is very, very important for any business in the generic.

Also, we changed our strategy to move into the value-created products. Like earlier, we had a huge intermediate business.

We tried to convert into APIs, which improved gross margin a lot. Couple of non-strategic products, wherever there was a volume products like antiretrovirals, and couple of formulation products where actually it's become commoditized, we divested those things and moved to the value-driven products.

In that exercise, we also actually rationalized three manufacturing sites, which were manufacturing intermediates basically, low-value products, that's where we divested. Most important, last 12 months, couple of our finished dose products, we have manufacturing site in USA.

Since a lot of competition is coming out from India, we strategized to move out US products wherever there is a large volume products where we can improve gross margins, most of the products we moved to India. Of course, couple of products started qualifying.

We started shipping from India few products. All our key volume products actually is going to happen from India in the near future.

Already we started shipping one of the product. Second products also is going to be shifted very soon on that.

The next most important thing in this, since we acquired intermediate facilities, API, and formulation to become a fully integrated platform, what we did from beginning, we tried to do both forward integration and backward integration. What it mean by forward integration?

Wherever we are strong either in intermediates or API, we try to forward integrate. That's where we can take advantage of cost.

Already we did almost five products in that. The second thing is backward integration.

Wherever we are strong in the formulation, like few products we have strong market share in USA, but those are the reasonable volume products, we try to do backward integrate into API even actually the intermediate level. In that exercise, already we did seven products vertically integrated along moving into India, manufacturing low-cost base.

We also backward integrated into API, all our key products are going to be fully integrated. That makes a big difference in the gross margin.

All new products, whatever we do for finished products, almost 50-60% of the fully vertically integrated. That's where we can take advantage in future actually the cost.

These are the four areas actually. Of course, the product mix also contributed.

Most of our products, especially API, we are the leaders. Out of top 10 products, we are six, seven products are the market leaders.

It's continuously growing. We're able to maintain our market share continuously these products.

These are the four areas actually created actually good gross margin improvement in last quarter. Of course, it's a continuously is going to improve.

Of course, financial numbers, Saurav explained. I'm not going to take those things, but still, actually, this company is going to strongly focused on R&D-based.

With this integration, we can see actually a lot of synergies and opportunities. Let me take you to a little bit synergies.

As we explained last time, we identified few areas. One of the important area is R&D.

R&D has been relocated, Sequent R&D to Viyash Corporate R&D, and teams are working pretty closely, collaboratively. In that process, within short term, we're able to develop four new products for animal health, which are mostly actually companion animals, that's the key focus for us.

Four products have been developed already. The three products, whatever actually we can improve gross margins, these three are the volume drivers for us.

Still we are growing, and we see substantial growth in near future. Three products have been completed cost improvement on those things.

Of course, few other actions, whatever optimizing the sites. One of the site, we have analytical center located actually outside Hyderabad and Mumbai.

That has been moved to our internal sites, which bring actually sustainability in the quality compliance, and also it helps a lot on the cost improvement on that. All the analytical testing, including stability, analytical validations, have been moved to the site.

Manufacturing is also one of the key strengths for Viyash. We have large number of sites approved by FDA.

All sites are approved by FDA. Eight sites, out of eight, five are inter- three are intermediates, and five are API.

Already last six two, three quarters, we qualified couple of intermediates. Sequent was depending a lot on third party.

Those are the key intermediates which supply to API supply to innovators. We brought all those thing to internal sites.

Already six intermediates have been transferred to internal sites. We just validated.

Of course, it takes some time for regulatory qualifications, but it's moving pretty well, and all our clients are very happy with that initiative. Another most important thing in manufacturing optimization, Sequent actually struggling little bit capacity.

That's where Viyash is going to help a lot. We were able to build one new production line to support Sequent large-volume products.

Already we commissioned within short time, six months, and already we validated, and we started working with various clients for regulatory filing. As we mentioned earlier, whatever synergies we targeted next 12-18 months, it's pretty well on track, and we initiated regulatory actions, but we are very confident whatever we projected synergies, it's going to happen in 12-18 months because that's the biggest thing, new production block for Sequent products.

The sales, one of the other area where we focused on synergies, Sequent API business, most of the business comes from innovators. We started working with innovators to see the additional opportunity for Viyash.

That's working, started working, we have few leads on that thing, but it's going pretty positive momentum on that. Other area, cross-selling, of course, where there is no overlap between Sequent and Viyash.

Customers, very few customers we sell both sides. That's a huge opportunities we identified because most of these customers, especially in Europe, they sell both products.

They have both animal health and human health. That's where we see the opportunities.

People integrated pretty well both business teams and started working together. Of course, all other functions, shared services or administrative functions, one of the important area we identified, of course, supply chain.

With these things, bringing the most of the key starting materials to internal, and also actually combining two companies' strength on the procurements, and definitely we can see the good synergies on that perspective. With this, what I can say actually, with the combined company is going to do pretty well, and you can see our balance sheet.

Few areas we identified, Sequent growing areas, of course, pet care, companion animals. A lot of opportunities we see in near future, and I think this is a right time we received the approval.

This is a time we can actually grow a lot on actually the animal health business in addition, of course, whatever we are growing in human health. Combined company is going to do fantastic.

Not only the short term, of course, always our focus is mid-term and long-term. Maybe there's short term, there may be huge spikes, but we see actually the pretty sustainability on these both businesses.

With that, thank you. I think we'll allow for questions.

Thank you so much for everyone.

Ryan, can we open it for Q&A, please?

Hi, good morning. Thanks for the opportunity, and congratulations on a great set of numbers.

If you could guide when can we see the merger close? Q4, can we see the combined numbers?

Yes, we can see Q4 combined number. With this, once we receive NCLT final order, I think we can start putting combined number.

I think Q3 itself we can actually, Q3 we can do combined.

Okay. Just some color on your business, the Viyash business, how much is API and how much is formulation?

It's API intermediates together, we do around 65%, 65-70% API intermediate, around 35-40% actually formulation. Of course, this varies little bit here and there quarter-on-quarter.

That's the reason I said 65 to 70 API intermediate.

Are you seeing stronger growth in formulations versus API, in the most recent quarter, was formulations seeing stronger growth versus API?

It's both, I can say. As I explained to you, there's four areas contributed.

Of course, formulation, we see good growth from last quarter. The reason is actually few things, as I explained, couple of products we moved to India where actually we can see good gross margin, and of course, we also have good launches last quarter.

Both are growing. As I mentioned, actually, we're continuously focusing on the new product development launches actually, that's working pretty well.

In addition to the most important growth driver on gross margins, a cost optimization, product optimization, network optimization, these things.

Right. On the formulation front, you're primarily focused on the US, and that's the primary market?

Yes, at this point, US.

Okay. How many launches you would have done this year?

How many launches you would have done this year in the US?

Just a minute. I think we did around eight launches this year.

Okay. All right.

Got it. Just on the synergies between Sequent and Viyash, R&D, as you highlighted in your opening comments, is an important area.

How much is Sequent currently spending on R&D?

Sequent currently API R&D is spending, I think, Rajaram, 8-10 crores?

We spend about ₹8 to

₹10 crores on that. 8-10 crores on R&D, pure R&D.

Pure R&D on API.

Let me explain, API R&D is slightly different than combined company or formulation, because API R&D, whatever we do validation or exhibit quantities, most of the quantities we sell product commercially. The pure R&D spend is what we spend in R&D chemicals and manpower.

Sequent, they did around 8 to 10 crores.

Okay. On top of that, you will have synergies kind of from procurement also, supply chain as well?

Absolutely. Procurement, always when you go for combined procurement, there will be synergies, and also you can see our balance sheet strength, that will add definitely some improvement.

Most important for us is R&D and manufacturing. Substantial synergies are going to come from these things, because a lot of things can happen on the product optimization, that's one of the thing Sequent products we can improve, and of course, a new products addition and manufacturing.

Yes, supply chain is there, but major things is going to come from R&D and manufacturing.

Got it. Just on the formulation business, animal health formulation business, that is showing good progress.

Can you kind of give some color as to how we should look at this business next one or two years? Can we see double-digit growth on the formulation side?

I think we've been maintaining that kind of growth now in the recent quarters. I think if you look at the industry, by and large, it is a fairly resilient industry in terms of its growth, right?

We'd see anywhere between 5% to 8% at a global level, and if you start looking at specific markets, specific segments, the growth is in double digits. Therefore, and this is in spite of all kinds of geopolitical upheavals, etc.

The underlying factors which are driving the industry, which is, one, around an increasing requirement for animal protein and dairy products, and the second being for adoption of pets and spending of more on companion animals, these two are tailwinds that we have in the industry that we operate, and that's really been one of the big reasons why we believe that our formulations business, which is now present in a good set of markets, should continue to grow. Add to that the genericization of the industry, I think we are very well-positioned.

We should expect that this is a double-digit growth business, for sure. As we accelerate our new launches, and we keep expanding in some markets, and also begin to grow in companion animals, that should be incremental to this growth.

We're fairly bullish on the formulations business.

Any major CapEx that we need to put on the formulation side here?

We are working on that, but definitely we are going to do both inorganic as well as organic. Mid-term, definitely we are going to add, especially on the companion animals, we are going to put on that.

You're targeting the nutritional aspect, or you're targeting the medicinal aspect of the industry?

There are three or four different components to it. We're clearly not targeting pet food, but therapeutic and nutritional, which is also supplements to therapeutics, that is something that we would be looking at.

That's really our focus, which is pure therapeutics and supplements to therapeutics. This is a fast-growing sort of segment where we believe we have both the experience, and more importantly, now, with the R&D backbone that we have, we should be able to build that even better.

Also, most of the products are similar to human health. Whatever pet care is going to happen, most of the products are similar to human health, that's our R&D can help a lot on that.

Viyash platform can also be leveraged from both manufacturing and R&D perspective for animal health products?

Yeah. API, yes.

Formulation, of course, we need to have different facilities, but we can leverage on that.

Understood, sir.

Thank you.

Thank you very much. Thank you.

Hi. Good morning.

Thank you for the opportunity, and congratulations on a really good set of numbers. My first question is, how do you see the business impacting because of the US tariffs?

What steps would we take to de-risk the uncertainty over here?

At this point, our business, there's no impact on tariffs. Our dependency on US is not much.

Only 35% of the Viyash business we do formulation, that's, of course, it's a good scenario since we have manufacturing at US. At this point, we don't see any tariffs impact for entire our business.

API business or Sequent business, actually, we don't do much on that perspective. Of course, there's no tariffs at this point for generics.

Even going forward, actually, with our US base and our strong network, we don't see any impact on our business. We see that maybe positive, if really something happens actually, we're going to benefit from our US manufacturing network.

Right, sir. Sir, for the Sequent API sales, while they're higher Y-o-Y, they are also lower than the 100 crore run rate you are targeting.

Anything to read over here, or we are on track?

We are on track. Since Sequent do business with innovators, actually, sometimes actually they push to other quarters, but we are in pretty well track.

We can see good visibility to grow from actually fourth quarter onwards. Definitely actually 100 crores run rate is going to be maintained, but next year, we can see good growth.

Already we started seeing some opportunities, but it's going to grow pretty well. I can say from fourth quarter onwards, you can see different Sequent API business.

Not fourth quarter, but definitely FY '27, we're going to grow substantially on that. That's how we are build new production line also, especially that product, we see a lot of opportunity to grow next year.

Right, sir. How is the albendazole sales progressing?

Albendazole?

It's very good. Albendazole is growing, and I don't know whether you guys aware, one of the site LATAM, they shut down.

That's where we see more opportunity. It's coming more business.

That's how we created new production line also. It's going to grow.

That's one of the key products going to grow both top line and also margin improvement, since we're bringing it to internal now.

Right, sir. Understood, sir.

Sir, Carlyle has been invested almost five years now. Is there any exit they are looking for, or they have a longer plan to be staying invested?

I can't say Carlyle side, but what we see is, real growth started from now, this company. Even though Carlyle invested four years back, their investment horizon five, six years.

Whatever we have some preliminary our internal discussions, they're not going to exit soon. It's going to continue, because real growth started maybe last few quarters, but next couple of years, it's going to grow a lot.

I don't see any exit plan in near future.

What could be the sustainable margins for both the entities going forward? Where do you stop now?

Do we have a number to that, or it's still a discovery as we keep exploring the synergies?

I can say actually, we have good visibility now. Of course, we can't give anyway guidance to the market, but whatever we indicated earlier 2027, we indicated actually 20% EBITDA margin, but we see 20% is going to come soon, but with this quarter actually 20-plus.

I'm pretty confident 20-plus is going to sustain. Whatever we indicated '27, actually it's going to happen from now.

Right, sir. Thank you so much, and I'll come back in the queue.

Thank you.

Good morning to everybody, and congrats to both the Sequent and Viyash team on getting the NCLT approval as well as for the excellent numbers that you reported on a combined basis. We have very much elaborated on how the next four, five years are looking very, very good post the merger, now that we have received the approvals.

There was a previous question where you mentioned that we were looking at 20% margin, and you said that that's now the base. This quarter, we did 22% margin.

Is there some one-off in this, or we are being little conservative in being 20, and with the synergies now really starting to flow in, probably we could see some upside to the FY '27 number that we've been discussing?

It's a good question. Thank you for that.

Of course, I can tell you straight there's no one-off. Okay?

When I said 20-plus actually, minimum is 20. Few things when I said actually last quarter revenue, both one is gross margin improvement because of optimization, and other two things, CDMO contracts.

CDMO, actually, initial contracts promise some service income, some validation income, and also new launches, whatever we did launches did pretty well. There may be few spike, but I don't see any major difference.

It's going to be sustained pretty well. Whatever actually we have growth opportunities other areas, I don't see any of those things.

It's not pure one-off. We don't see anything.

There may be few things here and service income maybe, okay, can go up, okay, or launch maybe once we launch, actually, once you see the competition, there may be a little impact, but we don't see much on those things.

Sure. Secondly, is it possible for you to give us some, because you mentioned that you see significant synergies, especially on manufacturing and on R&D, and plus we also So, if you could give us some sense as to what is the type of benefits we could see there in some quantifiable numbers as a percentage of revenues or some absolute number, that would be very helpful, because you did mention that the real benefit will now come now that we have approved the merger approval.

Few things. These are the mostly comes in the mid-term and long-term.

When I say R&D, there are two two buckets. One is the new products R&D.

Whatever we initiate developing products, it's going to come for launch. A lot of pet care products also is coming out of patent from '28, '29 onwards.

Whatever we initiate development new products, major revenue is going to come maybe '28, '29 onwards. The second thing R&D where we can help actually is the product optimization.

That's basically to improve the gross margins and also to improve market to some extent. That's mostly, I can say, near term or mid-term.

Why? Because actually, the today regulatory scenario, even for animal health, any development we do, even cost optimization, it takes 12 to 18 months.

We have to do at lab, then tech transfer to the plant, validate, and file. All these things, it takes maybe 12 to 18 months.

That's going to happen maybe R&D synergies we can see after 12 months. Especially product optimization synergy will come maybe 12 months, and the new products will start from, majority will start from '28.

These new products actually can bring Sequent to the top player in animal health. I don't think any company you will see many products in portfolio as we have in Sequent.

That's a bigger opportunity for our. When it comes to manufacturing, whatever I said intermediates, we try to bring from outside to internal, that helps on two ways.

One is actually the sustainability, and also to give a lot of comfort to the clients. Since we do business with innovators, there was some hiccups actually when you go for actually third-party players.

That's where they had some concerns, now we can minimize those concerns, or avoid completely. Also, of course, it adds little cost improvement on that.

The major thing actually whatever we do big products cost optimization or capacity optimization. Today Viyash capacity utilization is around 65-70%.

Sequent, they have only two sites. One is small site.

That's a site we're debating. We have opportunity to expand those products and also to improve that cost.

This synergy is going to come maybe again 12-18 months, because we validated already product, but some customers take two years, since innovators, they file for entire global market. They wait for all countries' regulatory approvals, but major approvals we can see from FY '27 second quarter onwards.

You can see actually good synergies on this manufacturing in FY '27, whereas R&D maybe can see from '28 onwards all those things. '27 definitely '27 definitely Sequent API business is going to do pretty good on that because of these initiatives.

Sure, that's very encouraging. Sir, you mentioned about some CapEx plans.

If you could quantify how should we look at the combined CapEx for financial year '26 and '27 for both the entities? Secondly, you had also mentioned that we could also look at some inorganic opportunities.

If you give a sense in terms of what is the size of those opportunities, and what is it like, key things we look for, and what are the financial metrics one should look in those type of acquisitions?

CapEx perspective, API, okay, last quarter we spent around 60 crores, Viyash. Since we have strong balance sheet with internal accruals, we're able to support 60 crores on that.

API perspective, I don't see any major CapEx in next two years, okay, for this whatever we have current strategic business. Of course, when we do for new opportunities, when I said CDMO, we're trying to do some complex molecules, okay, that may require some CapEx, but otherwise, we don't see any substantial CapEx for FY '26, and also first two quarters of FY '27.

Formulation perspective, we are working on the strategy now. Definitely, we want to go bigger and bigger in animal health, especially companion animals.

We are looking at both inorganic as well as organic. One of the thing is we don't have much manufacturing base in India, that's one of the area we are looking at.

That may start actually investing CapEx sometime in FY '27, it can spill to FY '28. Of course, it's all depending on inorganic.

We are exploring, if we get something inorganic, we may do faster, but otherwise, actually, we're going to do some CapEx second half of FY '27. It's not much actually looking at the combined balance sheet next year.

I don't see much CapEx even in FY '27. If you go for inorganic option, maybe we will do 100-150 crores CapEx '27, '28.

Of course, we are looking at various options on exploring inorganic, whether small or bigger, actually which fits into our strategy.

Sure. Which would mean that unless we do an inorganic, we should see a significant reduction in debt in the next two years?

Yes.

Okay. This inorganic, which areas are we looking for, if you could?

What are the areas where you think there is a gap in terms of either capability or in terms of synergy that you would like to target? Are there predominantly any geography that you are looking at?

Sequent business have everything. We do API, we do business with API for innovators, we do formulation manufacturing, we distribute our own, we distribute even innovators' also few countries actually.

We have manufacturing in Europe, Turkey, and Brazil. We started shipping from Turkey to Europe since it's Europe-approved site.

We are working on those geographies, especially US and some LATAM actually. We are looking at various things.

If we get some front-end expansion in few of the European countries, yes, we are looking at. We are looking at actually the few products where we can actually in-license and promote those products, we're looking.

Of course, the manufacturing base mostly it will come to India, because that's most important, because animal health also, unlike human health, genericization is very slow. We are seeing only last two years actually it's moving from innovator to generic once patent expired, and we see good opportunity next three to five years.

That's where we want to build capability from India low-cost base to take that advantage. All areas, it's not specific to one.

We are completely relook at actually how can we become global animal health player. Whatever are the small, small gaps actually, we want to fill those things.

If you ask me today, we don't have right now anything, but we are going to work very closely on that.

Sure. Just one last thing on this ESOP cost.

This first half also, as per the combined P&L, we had a 23 crore charge. Is this going to be a recurring thing, or is it something specific for one or two years?

If you could give some clarity on that.

No, it's not 23 crores. Is it 23 crores?

Sorry, just one minute.

It's slightly more. Current year ESOP is going to go down.

Saurav, you can answer.

Yeah. Saurav?

Just a sec.

Hello? Yeah.

Yeah. ESOP last year was ₹32 million, and some new ESOPs were ₹32 million.

32 crores. 32.

Because as per the

presentation, it says 40.6 crores. Sequent, yeah, 32 crores.

Sorry. Last year,

if I see the FY '25 combined P&L which is uploaded, that shows as 40.6 crores for last year and 23 crores for the first half, slide number seven.

Correct. That is combined together.

I was talking about Sequent, which was 32 crores. This year, it would be slightly more, because some more ESOPs were issued for Sequent.

This year, the expected number would be in the same range, 34-35 crore roughly. Post-merger, there would be a new ESOP scheme which NRC has to approve for Viyash team, which is being worked out.

Once the numbers are finalized, we can share the details probably in the next call or sometime when it is finalized.

While the numbers may vary, we can assume this ESOP as a recurring thing at least for the next two, three years. That will continue to remain part of the P&L.

Yeah.

Definitely, next one, two years, it's going to be recurring. To what extent, still we are working on the scheme.

Sure.

Sure. Thank you very much, and all the best.

Thank you.

Thank you.

Thank you.

Hi. Good morning, Sequent and Viyash team, and congratulations on the strong set of numbers.

Haribabu sir, on the Viyash, as you described, the three growth engines: CDMO, generics, and the CMO part. With the kind of the growth engines that you are envisaging, is it fair to assume that from next three to four years' perspective, the Viyash can grow more than 20% CAGR rate?

Three years, yes. As I explained earlier also, the initial last two years focus mostly on improving gross margins and profitability.

That's how you can see actually more growth on profitability than actually the top line. Of course, whatever we initiated, new products are going to come actually the near future continuously, but definitely three years, we can take comfortably 20 20% CAGR growth top line.

Okay. Yeah.

As you said, there were no one-off during this quarter's performance. Is it fair to assume that from now onwards, the quarterly run rate in terms of EBITDA would be more than 115 crores?

Is it a fair assumption, sir, or you foresee some lumpiness there?

You are saying combined, right?

In Viyash, sir, Viyash. No, it's both.

No, only Viyash you're saying 150-plus? You're

saying combined Sequent combined entity EBITDA, Harshit? What exactly is the No,

no. In Viyash, sir.

During this quarter, we reported around 117, 118 crores EBITDA.

123. Yeah.

So, 123. Yeah.

Is this fair to assume that this is the quarterly level sustainable run rate for the Viyash?

We can assume reasonably, as I said, actually, since we had good CDMO revenue and also new launches. Definitely, we can assume close to that, but we can continuously grow on that.

Absolutely. We can't give the number, but definitely, we are pretty confident.

Basically, trend will improve only, or may be sustainable at this level in terms of the quarterly numbers, if we can understand?

As I mentioned, actually, there may be small spikes, but definitely we are going to grow, okay, whatever it is. Okay.

Of course, combined number, as I mentioned, actually, we are going to do now onwards 20-plus actually, minimum we are going to do that. Let me clarify, guys.

It's not one time where it's completely differentiate. There's a small portion actually the service income or the new product launches, but it's not going to change substantially.

It's going to improve actually, maybe few quarters maybe small thing, but definitely still we are very confident actually to achieve those numbers.

Right. In Sequent also, we are continuously improving the gross margins.

Going forward, is it fair to assume that the gross margins are sustainable above 50% or close to 50% level? Is this a fair assumption?

Absolutely. Absolutely.

Absolutely. You can see good growth in near future, absolutely.

Sir. Thanks a lot for the opportunity.

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

First is, looking beyond this quarter's numbers, I would want to understand the bigger picture that the company has in mind. Sequent is India's largest pure-play animal health company, and the industry is changing with the new regulations and global demands shifting.

There is some innovation in veterinary medicines also. Over the next 1 to 2 years, what is the one big change that you are driving that will make Sequent stronger and more trusted across the globe?

Is it through expanding your product pipeline or building deeper customer relationships, something that makes it hard for your competitors to copy your model? Thank you.

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

Thank you for that question. If I put it actually, whatever we initiated last one year, I can see three areas.

Of course, Sequent today is a differentiated company. I don't see any other company which is closely to Sequent capabilities on whether it is API portfolio or actually finished product distribution or actually the markets where we offer.

Next two years actually, and also, as you mentioned actually, market scenario also is changed. Animal health also is moving towards the more regulatory scenario like human health.

That's where we have bigger advantage. Our API plant is pure-play animal health approved by FDA, and all our facilities, wherever we operate actually, facilities is pretty well-maintained on the compliance for those markets.

Next two years actually, we want to grow definitely the CDMO, whatever actually it's lagged little bit last four, five years with innovators. That's going to grow.

Second is the big thing in the formulation business. Especially on the companion animals, whatever we mentioned that actually the pet care, whether it is front-end or manufacturing capability, we are going to improve substantially.

That's going to the differentiating factor for entire Sequent, I can say. Rajaram, you can add little bit if you want.

No, I think, for us, what you should expect in the next two years is certainly we'll over-index on companion animals, both in terms of our own growth as well as any kind of inorganic. I think that because of the merger, we will be seen to be a far more sort of R&D and science-driven animal health company, and I think that will be a big differentiator for us.

In many markets which are less regulated, the regulations are getting tighter on animal health products, and I think that, for that, we are very well-positioned compared to some of the other players who may not have the kind of quality and regulatory capability that we have right now. That's going to be a big plus for us.

Most important, with our combined balance sheet, can leverage actually to expand all these areas. You can see the free cash flow how we are generating quarter-on-quarter.

Of course, we said '27, it's going to be debt-free. That's going to happen.

Unless we do some mergers. Balance sheet is going to help a lot on actually expanding these areas.

Thank you. My second question is to Mr.

Saurav Bhala. I believe he is also on the call today.

Yeah.

Yes.

Yes. Again, a forward-looking question, because you have given good guidance on the margins and everything.

My specific question is to margins and cost planning only. Margins in pharma are always under pressure when costs rise, whether it is through raw materials, compliance, R&D, or any other specific things.

Just want to understand how you think about protecting the profits without slowing down growth. Is there any smart way that you have put into place, maybe it's pricing discipline or operational efficiencies?

How do you balance these levers in practice so that the company can stay strong even when sometimes things get out of control or you may plan something, but it may go in some different directions? Thanks.

Want to understand on that.

That's a good question. In fact, we have been addressing them for last many, many quarters.

The work started about two years back, where we kind of rejig our portfolio by seeing the product mix, by looking at each of the product country-wise very carefully, key where our efficiency is there and where it needs to be improved. A very detailed action was taken over many quarters, the result of which is already visible, and that has led us to quarter-on-quarter improvement in the gross margins, irrespective of all the geopolitical turmoil going around.

We are very confident key this is the base which has been established. It is not a one-off thing.

It is not dependent on external factors. We will maintain and kind of grow over this margins by improving the product mix.

There is a lot of investment going on in R&D globally for us. That is helping us to improve our costing profile, addition of new products.

Product mix is going to improve going ahead also. This margin, I think, is a base which has been created and which we are very hopeful to improve going ahead.

Dr. Hari may want to add.

I'll add little bit actually. If you see that, of course, Viyash is constantly improving gross margin.

Sequent also, you can see good improvement near future API. Formulation also, if you see where we operate, where we compete, we compete most of the companies with innovators in Europe, all those things.

Our cost base is low. Wherever we do manufacturing actually, formulation activities, cost is not very high, highly competitive.

Of course, we are continuously working on that, whatever. API is fully set up now, even formulation also bringing more and more internal wherever it's possible.

That's a continuous activity to improve the gross margins.

Thank you.

Thank you very much for joining this call in morning. I hope you had an idea about how the performance has evolved over the last couple of quarters, but also importantly, the direction going ahead.

We'd be happy to take on any other queries that you have, and you can write to us directly for that, yeah? Thank you very much, and have a good day.

Thank you.

Thank you very much.

Thank you, all.