Q1 2027 Alkem Laboratories Ltd Earnings Call
Speaker #1: Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on a touch-tone phone. Please note that this conference is being recorded.
Speaker #1: I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.
Speaker #2: Thanks, Yusuf. And sorry for the delay in the start of the call. Good evening, everyone, and a warm welcome to the first quarter FY27 earnings call of Alkem Laboratories.
Speaker #2: From management's side, we have Mr. Sandeep Singh, Managing Director; Mr. Nitin Agarwal, CFO; and Ms. Purvi Shah, Head of Investor Relations. Over to you, Purvi.
Speaker #3: Thank you, Tushar. Good evening, everyone. On behalf of Alkem Laboratories, I welcome you all to our Q1 FY27 earnings call. Earlier today, we announced our financial results, along with the press release and investor presentation.
Speaker #3: All of which are filed with the stock exchanges and are also available on our website. We hope you have had an opportunity to review them.
Speaker #3: Before we begin, I would like to remind everyone that this call is being recorded. The audio recording and the transcript will be made available on the stock exchanges and our website shortly after the conclusion of the call.
Speaker #3: Please also note that today's discussion may include certain forward-looking statements, and these statements should be viewed in conjunction with the risks and uncertainties associated with our business and the environment in which we operate.
Speaker #3: With that, I would now like to hand over the call to our MD, Mr. Sandeep Singh, for his insights. Over to you, sir.
Speaker #2: Thank you, Purvi. Good evening, everyone. Thank you for joining our call. The period under review has been one of continued execution of our strategy, while the operating environment remains dynamic.
Speaker #2: We have stayed focused on the fundamentals: strengthening our core business, improving our operational efficiency, and investing selectively in areas that can support sustainable and profitable growth.
Speaker #2: We are encouraged by the progress we are making across these priorities. At the same time, we remain conscious of external challenges and are maintaining a disciplined approach to capital allocation, costs, and risk management.
Speaker #2: I will briefly walk you through the key developments and our outlook, after which we will be happy to take questions and engage. The key highlights are that our revenue from operations was ₹3,740 crore, with a year-on-year growth of close to 11%.
Speaker #2: India sales were ₹2,497 crore, with year-on-year growth of 10.3%. International sales were ₹1,222 crore, with year-on-year growth of 16%. EBITDA margin was 20.5%. The growth was 3.7% year-on-year.
Speaker #2: R&D expenses were 4% of our total revenue. Profit before tax was more or less flattish—technically, 1.8% growth. And the net profit, there was a degrowth of 21.7%.
Speaker #2: This is purely because of taxation reasons, and I'm sure our CFO will deep dive into this later on. According to EPIA data, the company registered a growth of 13.2% year-on-year versus the Indian pharmaceutical market, which grew by 12.2%.
Speaker #2: This is 100 basis points outperformance, just as we had guided you earlier. The acute segment reported a growth of 12.3% versus the IPM, which grew by 10.1%.
Speaker #2: Which is a 220 basis point outperformance. Rolling segment out reported a growth of 17.9%, versus the IPM, which grew by 15.4%—a 250 basis point outperformance.
Speaker #2: We have outperformed IPM in seven key focus therapies: anti-infectives grew by 1.1 times the market, gastro grew by 1.2 times the market, vitamins and minerals grew by 1.4 times, pain by 1.8 times, anti-diabetic by 1.4 times, and respiratory by 1.6 times.
Speaker #2: And last but not the least, derma 1.6. During the quarter, for the US market, the company received five ANDA approvals. One of them was a tentative approval.
Speaker #2: Recently, our government facility has received an OAI status. We have already initiated comprehensive corrective and preventive actions, and remain fully engaged with the regulator to address the observations.
Speaker #2: While this represents an important regulatory development, approved product supplies from the facility continue to the US market without any interruption. With this, I open the floor for Q&A.
Speaker #2: Thank you.
Speaker #1: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.
Speaker #1: If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use a handset while asking a question.
Speaker #1: Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Sayon Mukherji from Nomura. Please go ahead.
Speaker #2: Hi. Good evening. Sandeep, you mentioned about growth in India being higher than IQVIA. Market growth, as per IQVIA, has shown some improvement in growth rates, but at 10.3%, it is lower than most of the pharma companies have reported so far.
Speaker #2: Can you throw some light on the dynamics here? What do you think is impacting the growth rate in India? And is there something that would help to improve growth rates in the coming quarters?
Speaker #2: Yeah. So, see, I think that India growth rate is kind of dragged down because of the trade generics. Trade generics' growth was flattish to a very mild growth.
Speaker #2: And trade generics now contribute reasonably to our domestic formulation. So that drags it downside. Okay. So when you say branded again, what was the branded growth this quarter?
Speaker #2: Branded generics? It was 12% — one two, twelve percent. Okay. And is it on, you know, the costs have gone up? I mean, you had, I think, guided earlier, employee cost and other expenses are on the higher side.
Speaker #2: So, if you can indicate how much of the cost is on account of CDMO, MedTech, which might not be contributing at this point, or, for that matter, if you can talk about the EBITDA loss from these businesses in this quarter.
Speaker #3: Sure, fine. So in terms of employee cost, yes, the growth is more than 16% in the quarter. There are two, three reasons. One is definitely the annual increment.
Speaker #3: The second is, we have added around 1,200 MRs in the last few quarters, so that also impacted the employee cost. And the CDMO business in India became operational from November 25.
Speaker #3: So that was, I think, the third impact on manpower. In terms of other expenses, yes, there were expenses on account of the Indian CDMO business, plus the conversion rate for the dollar has increased, which has also benefited us in terms of the top line.
Speaker #3: But the impact is also on other expenses, where all our foreign subsidiaries' expenses got converted at a higher rate. It's almost 10% higher than last year's rate.
Speaker #3: So these were the reasons. MedTech, yes, we have completed the acquisition of Octotech, but that was in mid-July. So our Q1 numbers are not impacted because of Octotech.
Speaker #3: Yes, the ORCO business which we acquired, but I think small in scale. At consolidated level, the impact is not that high. But just to share the numbers, yeah, there was between you can say if we exclude the diligence cost and all of Octotech, there was a EBITDA loss of around 5 to 7 crores.
Speaker #3: Because we are also investing into this business, we are filing our products outside India. So definitely, this business will break even maybe in the next 12 months.
Speaker #3: But the scale is small, like at the yearly level, we will do around ₹50 crore of sales from the ORCO business, other than Octotech.
Speaker #2: And the US CDMO operation—is it? I mean, how much is the drag from there?
Speaker #3: In the US, we incurred around ₹60 crores of operational expenses. So, definitely, it's a new business. We plan to break even in the next, say, four to five quarters.
Speaker #3: But yeah, for the quarter, it was around ₹60 crore.
Speaker #2: Okay. Thank you.
Speaker #1: Thank you. Next question is from the line of Sandeep Kumar S from Clindus. Please go ahead.
Speaker #4: Hi. Thank you for taking my question. So, the first question is: what is the current status of the maximum bias formula in the US?
Speaker #2: Yes, the bias formula approval is a little bit off. So we did not get the approval on the goal date, and that has been pushed off by at least a few months.
Speaker #4: Okay. So then my second question is on the EU region. So following the approval of OSCE, are there any specific targets or regional markets where the launch is being prioritized?
Speaker #4: Or is full EU availability expected simultaneously?
Speaker #2: Okay. No, no. Sorry, I didn't get you properly. You are asking about the Denosumab Europe plan, right?
Speaker #4: Yeah, OSCE. Yeah, OSCE is probably a biased formula. So is there like only targeting or like, yeah, probably.
Speaker #2: Okay. Okay. Yeah, we have your usual suspects. So, we have a partnership with a company called Theramex. They are our partners. We are not doing it directly.
Speaker #2: And as you know, it's very competitive. There are many, many players, even in Europe, just like in the US. So it's not going to be a very meaningful ramp-up for any one of us for some time.
Speaker #2: So, it's not something very significant. Yeah.
Speaker #4: Okay. So my last question is on the reason that I'm opining on the executor bias formula. So when can we expect the launch of executor bias formula in Europe?
Speaker #2: We could be, like, three months away.
Speaker #4: Three months. Okay. Thank you. Thank you for this update. Thank you.
Speaker #2: Thank you.
Speaker #1: Thank you. Before we move to the next question, a reminder to the participants: to ask a question, you may press star and one. The next question is from the line of Amlan Jyotidass from JP Morgan.
Speaker #1: Please go ahead.
Speaker #5: Hi, sir. So my question is regarding the India bias formula.
Speaker #1: Sorry to interrupt, Amlan. There is a background noise coming from your end.
Speaker #5: Yeah. Is it all right now?
Speaker #1: Yes. Please proceed.
Speaker #5: Yeah. So my question is regarding the India bias formula front. You have some six to seven-hour bias formulas in India launched. So the India entity, how has this portfolio done over the since launch?
Speaker #5: And what has been its contribution to the India revenues, per se?
Speaker #2: Yeah. Within your own thing, yeah?
Speaker #3: So, we have already launched seven products, as you said, and we do around ₹150 crore of annual sales. So I think we have done really well.
Speaker #3: And because of this backward integration, the margins have also improved for these products, at the consolidated level.
Speaker #5: So sir, this revenue is a part of your India revenues, is it?
Speaker #3: Yes. Yes.
Speaker #5: Okay. Then, next, on Octotech. So sir, since you have closed the deal in July this year, how do you see the growth for this business as a whole going forward?
Speaker #5: And how do you see the margins shaping up? I remember you guided to reaching 10% margins in the near term. So, does this guidance still hold?
Speaker #3: So this year, see, the original plan was to complete the acquisition and start integration sometime in the first quarter. But that got delayed, so we just completed the acquisition last in mid-July.
Speaker #3: And we have started the integration. So, this year, for around eight and a half months, our target for Octotech is around ₹400 crore of sales with break-even.
Speaker #3: EBITDA.
Speaker #5: Okay.
Speaker #3: Because of delays that happened in the case of integration, it will be a bit off from the guidance we gave last time.
Speaker #5: Okay. And sir, how should we view this margin going forward, say, in the next two to three years?
Speaker #3: So every year, you'll see a gradual improvement in margins. And as we discussed during our investor meet, a lot of, say, integration with India operations will start kicking off from next quarter.
Speaker #3: And, but yes, we will say you can see, say, 7% to 8% increment in EBITDA year on year. And we target to achieve our guidance over three to four years.
Speaker #3: Yes, but it will be a very healthy EBITDA business for us within, say, three to four years.
Speaker #5: Okay, so lastly, if I may squeeze in—regarding this OAI and the German unit—could you share the percentage of revenues from this unit to the U.S.?
Speaker #5: Because if it's available.
Speaker #2: I think 45% of our US revenue comes from this facility.
Speaker #5: And sir, all of this revenue or all of these products are still in supply?
Speaker #2: Yeah, yeah. Very much. Yes, yes.
Speaker #5: Okay, thank you. Those are my questions. Thank you.
Speaker #2: Welcome.
Speaker #1: Thank you. Next question is from the line of Kunal Damesha from Macquarie. Please proceed.
Speaker #6: Hi. Thank you for the opportunity. Can you shed some light on why the trade generic business is not growing? Is it due to industry dynamics?
Speaker #6: Is it company-specific dynamics?
Speaker #2: I think it's a combination of both. You know, the competition has become very intense. Four or five years back, you will remember that a lot of companies wanted to play in this segment.
Speaker #2: But now, a lot of big players have entered. And also, it's internal, because at a large number, you know, the law of large numbers, all this kicks in.
Speaker #2: We are maybe the number one or number two in this segment. And we also tightened our market practices slightly, where we are a little strict on the number of days outstanding.
Speaker #2: So, therefore, it is leading to this.
Speaker #3: Yeah, and if you look at our numbers for the January to June quarter—sorry, January to June period—we did well in terms of growth.
Speaker #3: But yes, from April to June, there were some strategic calls taken on outstanding DSOs and all. And also, we have increased our prices because of the increase in API prices.
Speaker #3: So, I think the inventory levels in the market have also gone down. So, in the coming quarters, the primary sales or the sales from this business should recover, unlike the lower growth which we saw in Q1.
Speaker #3: I think in upcoming quarters, the growth should be higher than that. So, from January to June, we did well in trade generation. If you look at the six-month numbers...
Speaker #6: And sir, when you say double-digit growth, how do we put that into some form of quantification?
Speaker #3: So it was higher single-digit.
Speaker #6: High single-digit. Okay. And then we are seeing April to June was flat on a year-on-year basis.
Speaker #3: Yes. Yes.
Speaker #6: So, January to March would have been double-digit.
Speaker #3: Yes. You can say that.
Speaker #6: Okay. Okay. Secondly, on the CDMO business drag of, I don't know, ₹60 crore, right? That number looks quite big. So basically, we know what's the...
Speaker #6: And is this annual or quarterly?
Speaker #3: This is quarterly, and this is not—yeah. This is expense for CDMO. Yes.
Speaker #6: Okay. So, let's say for us to become break-even in the next 12 months, what kind of revenue do we need to generate? And then, in terms of the pipeline of projects, do we have that visibility now?
Speaker #2: Oh, good question. So, next 12 months, we're not break-even, just to be very clear. For the US, we will not break even. That's number one.
Speaker #2: The revenues that we need perhaps will be close to $20 million to break even.
Speaker #6: Sir, I didn't get your number. Sorry. $12 million?
Speaker #2: No, no. I said $30 million. Sorry, I said $20 million, but actually it's $30 million. $25 to $30 million will break even over there.
Speaker #6: Per quarter.
Speaker #2: Yes. No. Annualized. Annualized.
Speaker #6: Annualized. Okay.
Speaker #2: Yes. Yes. Yeah.
Speaker #6: Okay. Okay. And then for that— and then what? Because CDMO is a pretty big spectrum, right? So which is the part that we are initially targeting? Yeah, that would be helpful too.
Speaker #2: Yeah. As you know, Engine is into molecular antibodies, so precisely that. We are just trying to map, and we do the development to clinical trial supplies and hopefully commercial in the future.
Speaker #2: But right now, these are, most of the time, clinical trial batches and development batches.
Speaker #6: Sure. Sure. Sure.
Speaker #2: Yes.
Speaker #6: So let's say with that $30 million run rate, would you be like, you know, how many projects do we need to be working on?
Speaker #2: No, no. So, all that we know—it depends. You know, some projects are pretty large, so it's not the number of projects. I think we've got a decent pipeline.
Speaker #2: A CDMO has a sales cycle that is very different from what we traditionally do as, you know, branded pharma. So, I think we'll have to be patient over there.
Speaker #2: And the cycle time is pretty large. And to work with these companies who could be innovators, not necessarily large pharma, even small biotech, they take their own time and it's dependent on a lot of things, how well they get funded, how the clinical trial progresses, so I think it's a it's a it's a mixed bag where patients would be rewarded.
Speaker #2: And just like, I’m sure you’ll track a lot of CDMO companies—you all know that. So, you cannot measure it with the same yardstick with which we measure traditional Alkem Pharma or any pharma.
Speaker #2: But we are positive. Therefore, we have put the facility.
Speaker #6: Sure. And sir, lastly, let's say, what type of capacities do we have there? Is it currently more R&D-related, and then eventually, would it require for us to put some kind of capital expenditure?
Speaker #2: Yes, yes. So we have reasonable capacity. We are not very big; we have small capacity. But our technology is a little different, so if I tell you in KL, that will not really do justice to what we can produce over there.
Speaker #2: And, second part, at some point of time, it will require capex to happen over there as we ramp up. Because without it, we'll not really get economies of scale.
Speaker #2: Just like any API, CDMO, or biotech business.
Speaker #6: Sure. And just.
Speaker #2: That will not happen this year.
Speaker #6: Yeah. And this facility is GMP compliant? Like US FDA approved?
Speaker #2: Yeah, of course. It is not US FDA approved because that has to get triggered, but it is absolutely in the US, and we are working with a lot of good companies.
Speaker #2: And we'll have to trigger the US FDA.
Speaker #6: Okay. This will happen with some of the clients when they file, let's say.
Speaker #2: Yeah. Yeah. Absolutely, sir.
Speaker #6: Okay, and last question on the US plan. We said the revenue contribution is 45% from the US.
Speaker #2: Of the month. Of the month.
Speaker #6: The month, yes. What's the number of pending ANDAs, and what's the total pending ANDAs right now?
Speaker #2: Of the month, we'll come back. We don't have the exact number. We'll come back to it. Yeah. We'll put it when we can come back.
Speaker #6: Okay.
Speaker #2: Yeah. Thank you.
Speaker #1: Thank you. Participants, if you wish to join the question queue, you may press star and one. The next question is from the line of Kunal Randeria.
Speaker #1: From Access Capital, please go ahead.
Speaker #5: Yeah. Hello, good afternoon. First question on the India business. Last year, you made a foray—also FedEx—by making a couple of small acquisitions.
Speaker #5: Would you still be kind of looking to expand this business, or would you rather wait until maybe a CEO is appointed? Last year, you were doing a couple in India.
Speaker #5: So, just to repeat my question:
Speaker #2: Okay, sorry, sorry. Orthopedics, we have not acquired. This is a medtech cut-off one, medical tech.
Speaker #5: No, no, no.
Speaker #2: Medical devices.
Speaker #5: No, sorry. You had acquired a couple of small companies, right? Bombay Ortho and...
Speaker #2: No, Bombay Ortho is a medical device company, sir. It's not your prescription pharmacy.
Speaker #5: So, my bad. Apologies. So, would you be still expanding into this, or would you be, you know, waiting for maybe a new CEO to join and then see how to expand?
Speaker #2: No, it depends. So we are not looking to acquire anything in orthopedics or medtech right now. So that's the first thing. Yes. So there's no question of waiting or not waiting.
Speaker #2: I think it is very early. The ramp-up is happening, and there's no need to acquire anything over there right now. Yes.
Speaker #5: All right. Right. Okay. Sure. So, but any plans? You know, now we have 50,700 stores cash. Any, you know, plans that you would like to share?
Speaker #2: No, no, nothing. Everything is the same as before. Nothing changed from last quarter.
Speaker #5: Okay, got it. And just one more—would you be launching Tolvaxin in the US, delivering Hilark in the US this quarter?
Speaker #2: Yes. Yes, sir, we would be.
Speaker #5: Okay. Perfect, sir. Thank you, and all the best.
Speaker #2: Thank you.
Speaker #1: Thank you. Next question is from the line of Abdul Qadir Puranwala from ICICI Securities. Please proceed.
Speaker #4: Hi, thank you for the opportunity. So, my first question is with regards to the trade generic business. I understand it had got impacted because of your receivable policies or your credit period.
Speaker #4: But, I mean, you know, we have been the business has been growing at a slow rate for the last couple of quarters. So any timeline you would like to share with us by which you expect, you know, growth in this particular segment to bounce back?
Speaker #2: No, as in bounce back—what does bounce back mean? So, like, how much do you think we should be doing?
Speaker #4: Say, at least in line with what your branded pharma business is growing.
Speaker #2: No, no. That's very hard. So we still want to see if we also think it's a matter of discipline. We'll have to reset it, and we'll have to figure things out.
Speaker #2: And we'll see how the market also evolves. So I think, personally, as a promoter and MD, I'll be happy with late single digits.
Speaker #2: It's perfectly all right. We just need execution and discipline in that business more for the next one to two years.
Speaker #5: There is no capex requirement there. I received.
Speaker #2: Yeah. ROC is good because, yeah, the CFO always reminds me of that. So yeah, we'll have to be careful on that. Yes.
Speaker #4: Sure. Forgot it. And so, my second question is with regards to any thoughts on, you know, hiring a CEO. I mean, so.
Speaker #2: Yes, we told you last time. We are looking out, so thoughts are the same. And hopefully, next time when we have the quarterly meeting, he'll be there with you.
Speaker #2: So we are looking out, sir. As you know, it's a critical hire. We can't hurry up, but we are looking out, sir. It's very clear.
Speaker #2: Yeah.
Speaker #4: Got it, sir. And just, you know, a couple of bookkeeping questions. So, for the tax rate, I think last quarter we had guided for 27 to 28 percent.
Speaker #4: Are we still kind of maintaining that for the full year?
Speaker #2: See, that was for standalone, but in the console at the consolidated level, it will be in the range of around 30 to 32 percent, because a few of the entities—like our SA, Engine US and all—which are reporting losses, and currently we are not creating a deferred tax asset.
Speaker #2: On those entities, because of which our consolidated tax rate looks a bit higher as compared to standalone. So, at the consolidated level, it will be in the range of 30% to 32%.
Speaker #4: Understood, sir. Thank you, and all the best.
Speaker #1: Thank you. Participants, if you want to join the question queue, you may press star and one. Next question is from the line of Tushar Manudhane from Motilal Oswal.
Speaker #1: Please go ahead.
Speaker #2: Yeah, thanks, Yusuf. Sir, just with respect to the India business, did you share price, volume, new launches, and growth for the quarter?
Speaker #5: So, in terms of price, the growth was around 6 percent. This we had only, talking about other than the trade generic business. New launches were around 3 percent.
Speaker #5: And volume was around 2%.
Speaker #2: And so, in general, the industry growth rate has sort of improved over the last, I would say, few months. Is there anything—any change you've seen or experienced—which is sort of driving this growth, and how sustainable do you think these numbers are in terms of overall IPM growth?
Speaker #2: May it be chronic, may it be accurate.
Speaker #5: No, sir. According to us, I think there's nothing dramatically changed. I think, you know, semaglutide has gone off patent, and so those kinds of things are driving chronic, I think, by and large.
Speaker #5: And so, we think it's quite sustainable, whatever we are doing, at least.
Speaker #2: Got it. And how much benefit would Alkem Labs have got from semaglutide?
Speaker #5: It's very small right now, sir. Yeah, small. But we are among the top three in generics. I can share that with you.
Speaker #2: Got it. And so, just sitting on US CDMO, this opex—how do you see this over the full year '27? Will there be a 60 crore surplus?
Speaker #5: Yeah, you can analyze that. OPEX will remain the same. We'll have to get business, and that's how we can break even and eventually make money.
Speaker #5: We can't cut OPEX too much, because, you know, the complexities of the US plant.
Speaker #2: Got it, sir. So some business opportunities got pushed which is why the break even is sort of a little taking time? Or this is the this is the way it was it has been sort of tracking?
Speaker #5: Well, I think it's a combination of both, sir, because, you know, sometimes reality comes and delays things. So I think we knew that it was going to be expensive, and business would be tough.
Speaker #5: But it's taking more than, let's say, a couple of quarters to reach the numbers we were targeting. And also, CDMO is a lumpy business, sir, as you know.
Speaker #5: So, when it rains, it pours kind of thing. We don't — whenever it comes, it will come big, we'll see.
Speaker #2: Got it. So the new contracts are probably where the efforts are, so there will be some gestation period before we sort of get the fruits of that.
Speaker #5: Yes. Absolutely.
Speaker #2: Thanks. Thanks a lot for answering my questions, sir.
Speaker #5: Welcome.
Speaker #1: Thank you. The next question is from the line of Rashmi Shetty from Dalot Capital. Please go ahead.
Speaker #3: Yeah, thanks for the opportunity. Sir, just from the US part—you know, if we are converting to the dollar business—in constant currency terms, we see some softness in the US sales during the quarter.
Speaker #3: So, if you can specify the reasons for that, both year-on-year and quarter-on-quarter, I'm seeing that. And earlier we guided that, you know, for the entire year, US will be in high single digits.
Speaker #3: So now, after this quarter, what is your outlook, also taking into consideration the Daman Plant OAI?
Speaker #5: Yeah, so I think the last thing I'll answer first. I think Daman Plant OAI is a concern, but we don't see it as impacting our business because, you know, nothing is stopping.
Speaker #5: And the adapting has kind of gone through, so we feel confident that this year will not be impacted. Also, we believe that we'll come out of this in 6 to 12 months' time, hopefully.
Speaker #5: So Daman should not have an impact on business this year. And I think the price NRV erosion was just close to flattish. So price erosion has kind of bottomed out, we feel, for us.
Speaker #5: And maybe for the industry—I’m not sure. So, the US is challenging. We really don’t have volume growth; it’s more because of currency. And that remains a reality in these products.
Speaker #5: Yeah.
Speaker #2: Yeah.
Speaker #3: So, you mean to say that you have not seen any major volume expansion in the products which you all have launched in the last 12 to 24 months?
Speaker #5: I would say so. That's a fair assumption. Yeah.
Speaker #3: Okay, so then what will be the outlook for the whole year? Do we still maintain our guidance of around high single digits, or do you feel it will be flattish?
Speaker #5: I think it will be high single-digit to mid.
Speaker #3: Okay. Mid to high single digits.
Speaker #5: Yeah, yeah. And we'll be helped by currency, for sure.
Speaker #3: Okay. And this $30 million revenue, you know, which we are expecting from the CDMO business, when can we anticipate that? In which year can we expect the revenue to kick in?
Speaker #5: 27, 28.
Speaker #3: FY 28.
Speaker #5: Yes.
Speaker #3: Okay. And again, on the India business, you know, putting together the trade generic business and the branded formulation business, what kind of growth can we expect for the entire year?
Speaker #5: It's roughly what we discussed last time, but we could improve that by, let's say, 100 basis points.
Speaker #3: So you feel that in the subsequent quarters, we'll be able to cover whatever growth we have lost in the trade generic business, and branded formulation will continue to perform.
Speaker #3: Is that a right assumption?
Speaker #5: Yes. Yeah. We could end up between close to 12 percent. Yes.
Speaker #3: Okay. Okay. Thank you, sir. That's it from my side.
Speaker #5: You're welcome.
Speaker #1: Thank you. Participants, to ask a question, you may press star and one. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone.
Speaker #1: Next follow-up question is from the line of Amlan Jyotidas from JP Morgan. Please go ahead.
Speaker #4: Yeah, thank you, sir, for the follow-up. I remember a couple of years ago, you mentioned in your annual report that you were focusing exclusively on the non-US markets and international business.
Speaker #4: So, ultimately, any significant development in that? So, this double-digit growth that we're seeing—how sustainable do you think this is?
Speaker #5: So this is quite sustainable—more than sustainable. Yeah. We are seeing good double-digit growth.
Speaker #4: And any.
Speaker #5: This will continue.
Speaker #4: That you would like to highlight?
Speaker #5: I mean, see, the thing is, the US is so big that everything else, even if they grow extremely high, it will not really move the needle for the next two years.
Speaker #5: But there are some countries at a low base; they continue to grow at very, very healthy double digits. But that's beyond the small base, so like Germany, you know, grows by 35–40%.
Speaker #5: But it's so small that I don't feel like talking too much about it. It might not be a good use of our time right now. Even in Chile and Australia, we did that.
Speaker #5: Yeah, Chile and Australia are both big markets for us, and we have been doing well in them.
Speaker #4: Okay, sir. Sir, my last question is on the gross margins. We see an improvement in the gross margins this quarter. So, sir, any particular reason for this?
Speaker #4: And how do you see margins sustaining in the near term, in FY27 and FY28?
Speaker #5: So, in Q1, there were three or four reasons. One is that, as we discussed, our trade generic growth was lower. And our discretionary business did really well.
Speaker #5: Then there was also, in fact, an impact on account of currency, because in the US and other markets, even in Australia, the currency supported us. So overall, the mix was better.
Speaker #5: For us, because of lower trade generic business and also support from the currency side, it helped us. For the full year, we maintained the same guidance because there may be some impact on account of DPA price increases, which we have already seen.
Speaker #5: But since we had inventories—old inventories—at old rates, the impact was not that high in the current quarter. But in subsequent quarters, there will be an impact because of API prices.
Speaker #5: So, we maintained the same guidance of 66.5 to 67 percent of gross margins for the balance part of the year.
Speaker #4: Got you, sir. Thank you, sir. Thank you very much.
Speaker #1: Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for the closing comments.
Speaker #2: Thank you, Yusuf, and thank you, everyone, for joining today's call. Should you have any follow-up questions or require any clarification, please feel free to reach out to us.
Speaker #2: Thank you. Have a pleasant weekend as well.
Speaker #1: Thank you, ma'am. On behalf of Motilal Oswell Financial Services Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
