Q1 2027 Aarti Drugs Ltd Earnings Call

Speaker #1: Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings conference call of Aarti Drugs Limited. As a reminder, all participant lines are in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator: Ladies and gentlemen, good day and welcome to Q1 FY27 earnings conference call of Aarti Drugs Limited. As a reminder, all participant lines will be in 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 touching star then zero on your touch-tone phone. Before we begin, a brief disclaimer. This conference call contains forward-looking statements by 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 involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Adhish Patel, COO and CFO from Aarti Drugs Limited. Thank you, over to you, Mr. Patel.

Operator: Ladies and gentlemen, good day and welcome to Q1 FY 2027 earnings conference call of Aarti Drugs Limited. As a reminder, all participant lines will be in 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 touching star then zero on your touch-tone phone.

Speaker #1: Should you need assistance during the conference call, please signal an operator by touching star then zero on your touch-tone phone. Before we begin, a brief disclaimer: this conference call contains forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as of the date of this call.

Operator: Before we begin, a brief disclaimer. This conference call contains forward-looking statements by 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 involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Adhish Patel, COO and CFO from Aarti Drugs Limited. Thank you, over to you, Mr. Patel.

Speaker #1: These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Adish Patil.

Speaker #1: COO and CFO from Aarti Drugs Limited. Thank you, and over to you, Mr. Patil.

Speaker #2: Good morning, everyone, and thank you for joining us today for the Aarti Drugs Q1 FY27 earnings discussion. Joining me today is Mr. Harshit Chawla, Joint Managing Director.

Adhish P. Patil: Good morning, everyone, thank you for joining us today for Aarti Drugs Q1 FY27 earnings discussion. Joining me today are Mr. Harshith Savla, Joint Managing Director.

Adhish Patil: Good morning, everyone, thank you for joining us today for Aarti Drugs Q1 FY27 earnings discussion. Joining me today are Mr. Harshith Savla, Joint Managing Director.

Speaker #3: Good morning.

Harshit M. Savla: Good morning.

Harshit Savla: Good morning.

Speaker #2: Mr. Harit Shah, Whole Time Director; Mr. Vishwa Chawla, Managing Director of Pinnacle Life Science Private Limited; along with our investor relations advisors, etc. We hope you have had the opportunity to go through our financial results and investor presentation for the quarter ended 30th June 2026, which have been uploaded with the stock exchanges and are also available on our website.

Adhish P. Patil: Mr. Harit Shah, Whole-Time Director. Mr. Vishwa Savla, Managing Director of Pinnacle Lifesciences Private Limited, along with our investor relations advisors, LHD. We hope you have had the opportunity to go through our financial results and investor presentation for the quarter ended 30 June 2026, which have been uploaded with the stock exchanges and are also available on our website. Before discussing our quarterly performance, let me begin by providing some perspective on the operating environment during the quarter. Q1 FY27 continued to be influenced by a dynamic global landscape. Geopolitical developments, particularly the ongoing conflict in West Asia, remained an important factor affecting international trade, logistics, and supply chains. The industry also continued to witness elevated freight costs on certain routes, longer procurement cycles in a few regions, and increased volatility in raw material pricing.

Adhish Patil: Mr. Harit Shah, Whole-Time Director. Mr. Vishwa Savla, Managing Director of Pinnacle Lifesciences Private Limited, along with our investor relations advisors, LHD. We hope you have had the opportunity to go through our financial results and investor presentation for the quarter ended 30 June 2026, which have been uploaded with the stock exchanges and are also available on our website. Before discussing our quarterly performance, let me begin by providing some perspective on the operating environment during the quarter. Q1 FY27 continued to be influenced by a dynamic global landscape. Geopolitical developments, particularly the ongoing conflict in West Asia, remained an important factor affecting international trade, logistics, and supply chains. The industry also continued to witness elevated freight costs on certain routes, longer procurement cycles in a few regions, and increased volatility in raw material pricing.

Speaker #2: Before discussing our quarterly performance, let me begin by providing some perspective on the operating environment during the quarter. The first quarter of FY27 continued to be influenced by a dynamic global landscape.

Speaker #2: Geopolitical developments, particularly the ongoing conflict in West Asia, remained an important factor affecting international trade, logistics, and supply chains. The industry also continued to witness elevated freight costs on certain routes, longer procurement cycles in a few regions, and increased volatility in raw material prices.

Speaker #2: At the same time, these developments created a favorable pricing environment across several API products. As availability tightened in certain markets and customers prioritized supply reliability, API prices witnessed an upward movement across the industry.

Adhish P. Patil: At the same time, these developments created a favorable pricing environment across several API products. As availability tightened in certain markets and customers prioritized supply reliability, API prices witnessed an upward movement across the industry. This translated into significantly better realizations for us during the quarter. While such disruptions can often create uncertainty, they also reinforce the importance of being a dependable and integrated manufacturing partner. Customers today are increasingly looking beyond just pricing. They are placing greater emphasis on supply security, manufacturing consistency, and long-term partnerships. These are areas where Aarti Drugs has built strong capabilities over several years, and we believe this positions us well to capitalize on evolving market opportunities. What is particularly encouraging is that despite this challenging external environment, our operations remained completely stable throughout the quarter. We did not experience any production disruptions, material shortages, or supply-related interruptions.

Adhish Patil: At the same time, these developments created a favorable pricing environment across several API products. As availability tightened in certain markets and customers prioritized supply reliability, API prices witnessed an upward movement across the industry. This translated into significantly better realizations for us during the quarter. While such disruptions can often create uncertainty, they also reinforce the importance of being a dependable and integrated manufacturing partner. Customers today are increasingly looking beyond just pricing. They are placing greater emphasis on supply security, manufacturing consistency, and long-term partnerships. These are areas where Aarti Drugs has built strong capabilities over several years, and we believe this positions us well to capitalize on evolving market opportunities. What is particularly encouraging is that despite this challenging external environment, our operations remained completely stable throughout the quarter. We did not experience any production disruptions, material shortages, or supply-related interruptions.

Speaker #2: This translated into significantly better realizations for us during the quarter. While such disruptions can often create uncertainty, they also reinforce the importance of being a dependable and integrated manufacturing partner.

Speaker #2: Customers today are increasingly looking beyond just pricing; they are placing greater emphasis on supply security, manufacturing consistency, and long-term partnerships. These are areas where Aarti Drugs has built strong capabilities over several years, and we believe this positions us well to capitalize on evolving market opportunities.

Speaker #2: What is particularly encouraging is that despite these challenging external environments, our operations remained completely stable throughout the quarter. We did not experience any production disruptions, material shortages, or supply-related interruptions.

Speaker #2: All our manufacturing facilities continue to operate efficiently, enabling us to meet customer commitments across both domestic and international markets without any significant delays. This operational resilience is a direct outcome of the investments we have made over the years in strengthening our manufacturing footprint, expanding our backward integration capabilities, and maintaining disciplined inventory and procurement practices.

Adhish P. Patil: All our manufacturing facilities continued to operate efficiently, enabling us to meet customer commitments across both domestic and international markets without any significant delays. This operational resilience is a direct outcome of the investments we have made over the years in strengthening our manufacturing footprint, expanding our backward integration capabilities, and maintaining disciplined inventory and procurement practices. Moving to our business performance, I am pleased to share that we delivered a strong start to the financial year. Our performance during the quarter was driven by a healthy combination of improved API realizations and volume growth across key products. Demand remained healthy across API and Spec Chem portfolio, supported by strong consumption across key therapeutic categories and continued traction in both domestic and international markets. Our export business continued to perform well as customers increasingly sought reliable and compliant suppliers capable of ensuring uninterrupted deliveries.

Adhish Patil: All our manufacturing facilities continued to operate efficiently, enabling us to meet customer commitments across both domestic and international markets without any significant delays. This operational resilience is a direct outcome of the investments we have made over the years in strengthening our manufacturing footprint, expanding our backward integration capabilities, and maintaining disciplined inventory and procurement practices. Moving to our business performance, I am pleased to share that we delivered a strong start to the financial year. Our performance during the quarter was driven by a healthy combination of improved API realizations and volume growth across key products. Demand remained healthy across API and Spec Chem portfolio, supported by strong consumption across key therapeutic categories and continued traction in both domestic and international markets. Our export business continued to perform well as customers increasingly sought reliable and compliant suppliers capable of ensuring uninterrupted deliveries.

Speaker #2: Moving toward business performance, I am pleased to share that we delivered a strong start to the financial year. Our performance during the quarter was driven by a healthy combination of improved API realizations and volume growth across key products.

Speaker #2: Demand remained healthy across API and spec Chem portfolio, supported by strong consumption across key therapeutic categories and continued traction in both domestic and international markets.

Speaker #2: Our export business continued to perform well, as customers increasingly sought reliable and compliant suppliers capable of ensuring uninterrupted deliveries. We also witnessed steady demand across our domestic formulation business.

Adhish P. Patil: We also witnessed steady demand across our domestic formulation business. Equally important, our focus on cost optimization and manufacturing efficiencies continued to yield positive results, and we witnessed improvement in EBITDA margins in Q1 FY27. This margin expansion came despite continued pressure from higher raw material prices and elevated freight costs, highlighting the resilience of our operating models. Our regulatory track record also continues to strengthen our competitive position. Our manufacturing facilities continue to hold approvals from leading global regulatory authorities, including the US FDA and UK regulatory agencies. These approvals not only validate our quality systems and manufacturing standards, but also enable us to strengthen our presence in regulated markets over the long term. Another area where we continue to make steady progress is our manufacturing expansion strategy. During Q1 FY27, our Saykha facility continued its planned ramp-up and operated at nearly 65% utilization.

Adhish Patil: We also witnessed steady demand across our domestic formulation business. Equally important, our focus on cost optimization and manufacturing efficiencies continued to yield positive results, and we witnessed improvement in EBITDA margins in Q1 FY27. This margin expansion came despite continued pressure from higher raw material prices and elevated freight costs, highlighting the resilience of our operating models. Our regulatory track record also continues to strengthen our competitive position. Our manufacturing facilities continue to hold approvals from leading global regulatory authorities, including the US FDA and UK regulatory agencies. These approvals not only validate our quality systems and manufacturing standards, but also enable us to strengthen our presence in regulated markets over the long term. Another area where we continue to make steady progress is our manufacturing expansion strategy. During Q1 FY27, our Saykha facility continued its planned ramp-up and operated at nearly 65% utilization.

Speaker #2: Equally important, our focus on cost optimization and manufacturing efficiencies continued to yield positive results, and we witnessed improvement in EBITDA margins in Q1 FY27.

Speaker #2: This margin expansion came despite continued pressure from higher raw material prices and elevated freight costs, highlighting the resilience of our operating models. Our regulatory track record also continues to strengthen our competitive position.

Speaker #2: Our manufacturing facilities continue to hold approvals from leading global regulatory authorities, including the US FDA and UK regulatory agencies. These approvals not only validate our quality systems and manufacturing standards, but also enable us to strengthen our presence in regulated markets over the long term.

Speaker #2: Another area where we continue to make steady progress is in our manufacturing expansion strategy. During Q1 FY27, our SICA facility continued its planned ramp-up and operated at nearly 65% utilization.

Speaker #2: This facility remains an important strategic investment for us. Beyond adding manufacturing capacity, SICA strengthens our backward integration capabilities, enhances supply chain reliability, and provides us with greater control over key intermediates.

Adhish P. Patil: This facility remains as an important strategic investment for us. Beyond adding manufacturing capacity, Saykha strengthens its backward integration capabilities, enhances supply chain reliability, and provides us with greater control over key intermediates, especially for the anti-diabetic segment. Once resolved, and as utilization levels continue to improve, we expect the facility to contribute further towards operational efficiency and long-term margin improvement. Alongside Saykha, we are also continuing to invest in expanding our formulation business. Our brownfield expansion at the Baddi facility in the adjacent land parcel is progressing as planned. Once completed, this project is expected to nearly double our oral solid dosage manufacturing capacity. This expansion is aligned with our long-term strategy of strengthening our formulations business, increasing manufacturing flexibility, and creating additional capacity to support future growth opportunities across both regulated domestic and export markets. Overall, our capital expenditure philosophy remains disciplined and growth-oriented.

Adhish Patil: This facility remains as an important strategic investment for us. Beyond adding manufacturing capacity, Saykha strengthens its backward integration capabilities, enhances supply chain reliability, and provides us with greater control over key intermediates, especially for the anti-diabetic segment. Once resolved, and as utilization levels continue to improve, we expect the facility to contribute further towards operational efficiency and long-term margin improvement. Alongside Saykha, we are also continuing to invest in expanding our formulation business. Our brownfield expansion at the Baddi facility in the adjacent land parcel is progressing as planned. Once completed, this project is expected to nearly double our oral solid dosage manufacturing capacity. This expansion is aligned with our long-term strategy of strengthening our formulations business, increasing manufacturing flexibility, and creating additional capacity to support future growth opportunities across both regulated domestic and export markets. Overall, our capital expenditure philosophy remains disciplined and growth-oriented.

Speaker #2: Especially for the anti-diabetic segment. Once resolved, and as utilization levels continue to improve, we expect the facility to contribute further towards operational efficiency and long-term margin improvement.

Speaker #2: Alongside SICA, we are also continuing to invest in expanding our formulation business. Our brownfield expansion at the Budbee facility, in the adjacent land parcel, is progressing as planned.

Speaker #2: Once completed, this project is expected to nearly double our oral solid dosage manufacturing capacity. This expansion is aligned with our long-term strategy of strengthening our formulation business, increasing manufacturing flexibility, and creating additional capacity to support future growth opportunities across both regulated domestic and export markets.

Speaker #2: Overall, our capital expenditure philosophy remains disciplined and growth-oriented. Every investment that we undertake is guided by a clear focus on enhancing competitiveness, improving operational efficiency, supporting backward integration, and creating long-term shareholder value.

Adhish P. Patil: Every investment that we undertake is guided by clear focus of enhancing competitiveness, improving operational efficiency, supporting backward integration, and creating long-term shareholder value. We remain confident that these investments will provide a strong foundation for sustainable growth for the coming years. Coming to the consolidated financial highlights. Q1 FY27 revenue stood at INR 703.6 crores compared to INR 590.8 crores in Q1 FY26, reflecting a growth of 19% year-on-year. EBITDA stood at INR 96.9 crores versus INR 74.7 crores in Q1 FY26, a growth of 30% year-on-year. EBITDA margin stood at 13.8%, an expansion of 120 basis points year-on-year. PBT stood at INR 69.2 crores as against INR 51.1 crores, a growth of 35% year-on-year. PBT margin stood at 9.9%, an expansion of 120 basis points year-on-year. Tax stood at INR 50.1 crores as compared to INR.

Adhish Patil: Every investment that we undertake is guided by clear focus of enhancing competitiveness, improving operational efficiency, supporting backward integration, and creating long-term shareholder value. We remain confident that these investments will provide a strong foundation for sustainable growth for the coming years. Coming to the consolidated financial highlights. Q1 FY27 revenue stood at INR 703.6 crores compared to INR 590.8 crores in Q1 FY26, reflecting a growth of 19% year-on-year. EBITDA stood at INR 96.9 crores versus INR 74.7 crores in Q1 FY26, a growth of 30% year-on-year. EBITDA margin stood at 13.8%, an expansion of 120 basis points year-on-year. PBT stood at INR 69.2 crores as against INR 51.1 crores, a growth of 35% year-on-year. PBT margin stood at 9.9%, an expansion of 120 basis points year-on-year. Tax stood at INR 50.1 crores as compared to INR.

Speaker #2: We remain confident that these investments will provide a strong foundation for sustainable growth in the coming years. Coming to the consolidated financial highlights, Q1 FY27 revenue stood at ₹703.6 crores compared to ₹590.8 crores in Q1 FY26.

Speaker #2: Reflecting a growth of 19% year on year. EBITDA stood at rupees 96.9 crores versus rupees 74.7 crores in Q1, FY26 a growth of 30% year on year.

Speaker #2: EBITDA margin stood at 13.8%, an expansion of 120 basis points year on year. EBITDA stood at ₹69.2 crore as against ₹51.1 crore, a growth of 35% year on year.

Speaker #2: EBITDA margin stood at 9.9%, an expansion of 120 basis points year on year. EBITDA stood at ₹50.1 crores as compared to ₹54 crores in Q1 FY26.

Adhish P. Patil: INR 54 crores in Q1 FY2026. Q1 FY2026 tax includes a principal tax in front of INR 15 crores. Excluding this, the growth in tax would be 29% year on year. With respect to the standalone business highlights in Q1 FY2027, revenue stood at INR 627.6 crores versus INR 521.3 crores in Q1 FY2026, a growth of 20% year on year. Standalone business contributed around 89% to the consolidated revenue. 68% of the standalone revenue came from the domestic market and 32% from the export market. Domestic revenue grew 25% year on year, and export revenue grew 12% year on year. Within the API business, the antibiotic therapeutic category contributed 35%, antiprotozoan around 18.5%, anti-inflammatory 11.9%, anti-diabetic 18.2%, anti-fungal 10.2%, and the rest contributed around 6.1% to the total API sales. Coming to formulation segment highlights. Revenue from formulation stood at INR 81.6 crores compared to INR.

Adhish Patil: INR 54 crores in Q1 FY2026. Q1 FY2026 tax includes a principal tax in front of INR 15 crores. Excluding this, the growth in tax would be 29% year on year. With respect to the standalone business highlights in Q1 FY2027, revenue stood at INR 627.6 crores versus INR 521.3 crores in Q1 FY2026, a growth of 20% year on year. Standalone business contributed around 89% to the consolidated revenue. 68% of the standalone revenue came from the domestic market and 32% from the export market. Domestic revenue grew 25% year on year, and export revenue grew 12% year on year. Within the API business, the antibiotic therapeutic category contributed 35%, antiprotozoan around 18.5%, anti-inflammatory 11.9%, anti-diabetic 18.2%, anti-fungal 10.2%, and the rest contributed around 6.1% to the total API sales. Coming to formulation segment highlights. Revenue from formulation stood at INR 81.6 crores compared to INR.

Speaker #2: Q1, FY26 PASS includes a principal tax refund of rupees 15 crores excluding this the growth impact would be 29% year on year. With respect to the standalone business highlights in Q1, FY27 revenue stood at rupees 627.6 crores versus rupees 521.3 crores in Q1, FY26 a growth of 20% year on year.

Speaker #2: The standalone business contributed around 89% to the consolidated revenue. 68% of the standalone revenue came from the domestic market, and 32% from the exports market.

Speaker #2: Domestic revenue grew 25% year on year and export revenue grew 12% year on year. Within the API business the antibiotic therapeutic category contributed 35% anti-protozoan around 18.5% anti-inflammatory 11.9% anti-diabetic 18.2% antifungal 10.2% and the rest contributed around 6.1% to the total API sales.

Speaker #2: Coming to the formulation segment, revenue from formulations stood at ₹81.6 crores compared to ₹75.8 crores in Q1 FY26, up 8% year-on-year.

Adhish P. Patil: 75.8 crores in Q1 FY2026, up 8% year on year. Exports contributed around 74% to this revenue. With that, I would now like to open the floor for questions.

Adhish Patil: 75.8 crores in Q1 FY2026, up 8% year on year. Exports contributed around 74% to this revenue. With that, I would now like to open the floor for questions.

Speaker #2: Exports contributed around 74% to this revenue. With that, I would now like to open the floor for questions.

Speaker #1: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may start by pressing one on a touch-tone telephone.

Operator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on a touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Avanish Borman from Recaria Funds. Please go ahead. Mr. Borman, please go ahead.

Operator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on a touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Avanish Borman from Recaria Funds. Please go ahead. Mr. Borman, please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Avinish Perman from By Career Funds. Please go ahead.

Speaker #1: Mr. Perman please go ahead.

Speaker #3: Can you hear me?

Avanish Borman: Can you hear me?

Avnish Burman: Can you hear me?

Speaker #2: Yes.

Adhish P. Patil: Yes.

Adhish Patil: Yes.

Speaker #3: Hello? Hello?

Avanish Borman: Hello? Hello.

Avnish Burman: Hello? Hello.

Speaker #2: Yes, we can hear you. Yes, we can hear you.

Adhish P. Patil: Yes, we can hear you.

Adhish Patil: Yes, we can hear you.

Speaker #1: Yes go ahead.

Operator: Yes, go ahead.

Operator: Yes, go ahead.

Speaker #3: Yeah, yeah. As I said, I just wanted to understand how the realizations of metformin have moved. If you can just indicate something, and how, on a quarter-on-quarter or a year-on-year basis, they have moved.

Avanish Borman: Yeah. Adhish, I just wanted to understand how the realizations of metformin have moved. If you can just indicate something and how on a quarter on quarter, on a Y-o-Y basis they have moved.

Avnish Burman: Yeah. Adhish, I just wanted to understand how the realizations of metformin have moved. If you can just indicate something and how on a quarter on quarter, on a Y-o-Y basis they have moved.

Speaker #2: Yeah. Would you like to answer this question?

Adhish P. Patil: Yeah. Harish, would you like to answer this question? Yeah. What do you mean? The demand or the price for it?

Adhish Patil: Yeah. Harish, would you like to answer this question?

Speaker #1: Yeah.

Harshit Savla: Yeah. What do you mean? The demand or the price for it?

Speaker #2: What do you mean by demand or the price for it? No, no pricing movement of metformin.

Avanish Borman: No, pricing moment of metformin.

Avnish Burman: No, pricing moment of metformin.

Speaker #1: Yeah, pricing movement—yeah, it has gone up around 15 to 20% compared to before the war, you know, 20% upwards on regulation.

Adhish P. Patil: Yeah, pricing moment. Yeah, it has gone up by around 15% to 20% compared to before the war. 20% approximately.

Harshit Savla: Yeah, pricing moment. Yeah, it has gone up by around 15% to 20% compared to before the war. 20% approximately.

Speaker #2: Yeah so Avinish the year on year the growth has been quite stark in metformin quite high. But the major hike came during the start of the war around March and April and even now as Haritbhai pointed out it is still higher than before but it is slightly lower than what what the price was in the March month of March and April.

Avanish Borman: Yeah, okay.

Avnish Burman: Yeah, okay.

Adhish P. Patil: Year on year, the growth has been quite stark in Metformin, quite high. The major hike came during the start of the war, around March and April. Even now, as Harshit brother pointed out, it is still higher than before, but it is slightly lower than what the price was in the month of March and April.

Adhish Patil: Year on year, the growth has been quite stark in Metformin, quite high. The major hike came during the start of the war, around March and April. Even now, as Harshit brother pointed out, it is still higher than before, but it is slightly lower than what the price was in the month of March and April.

Speaker #3: Okay, okay, understood. And Avinish, if you can just help us understand—you know, you are backward integrating in the product, and it will obviously give you some leverage as compared to the competition.

Avanish Borman: Okay. Understood. Adhish, if you can just help understand, you're backward integrating in the product and it'll always give you some leverage as compared to the competition. How do you plan to use this in your, let's say, ambition to take market share? Because as I understand, it's a fairly mature molecule. The global growth rate for this product would not be very high. You have aspirations to grow much faster than the industry growth. Once the backward integration is streamlined, what are the plans?

Avnish Burman: Okay. Understood. Adhish, if you can just help understand, you're backward integrating in the product and it'll always give you some leverage as compared to the competition. How do you plan to use this in your, let's say, ambition to take market share? Because as I understand, it's a fairly mature molecule. The global growth rate for this product would not be very high. You have aspirations to grow much faster than the industry growth. Once the backward integration is streamlined, what are the plans?

Speaker #3: How do you plan to use this in your, let's say, ambition to take market share? Because as I understand, it's a fairly mature molecule—the global growth rate for this product would not be very, very high—but you have aspirations to grow much faster than the industry growth.

Speaker #3: So, how—how do you, I mean, once the backward integration is streamlined, what are the plans?

Speaker #2: Yeah. So see as of now about metformin capacity already is around 1400 tons per month. So and we are we are already utilizing it you know anywhere between in mid 80s you can say.

Adhish P. Patil: Yeah. As of now, our Metformin capacity already is around 1,400 tons per month. We are already utilizing it anywhere between mid-eighties, we can say. We are expecting that the demand for our Metformin will grow quite significantly in coming future due to more and more approvals which are getting. Already we have.

Adhish Patil: Yeah. As of now, our Metformin capacity already is around 1,400 tons per month. We are already utilizing it anywhere between mid-eighties, we can say. We are expecting that the demand for our Metformin will grow quite significantly in coming future due to more and more approvals which are getting. Already we have.

Speaker #2: So, we are expecting that the demand for our metformin will grow quite significantly in the coming future, owing to the increasing occurrences that we are seeing.

Speaker #2: Already we have US already we have for the product and in future we are planning for US FD as well for the metformin. So so so our current plan is to scale up metformin from 1400 tons per month to roughly up to 2200 tons per month out of which around 500 550 tons per month could be a US FDA capacity and the rest of the capacity would be for the other other market non-US FDA markets.

Avanish Borman: No. What I was trying to understand was that.

Avnish Burman: No. What I was trying to understand was that.

Adhish P. Patil: Already we have approval for the product and in future we are planning for USFDA as well for Metformin. Our current plan is to scale up Metformin from 1,400 tons per month to roughly up to 2,200 tons per month, out of which around 500, 550 tons per month would be a USFDA capacity and rest of the capacity would be for the other market or non-USFDA markets. Going forward, we will require lot of support from our backward integration, which we have already done in Saykha. That is why we feel that the Saykha facility will continue to be a very important, you can say, area where we want to streamline our production as soon as possible and support the growth of Metformin.

Adhish Patil: Already we have approval for the product and in future we are planning for USFDA as well for Metformin. Our current plan is to scale up Metformin from 1,400 tons per month to roughly up to 2,200 tons per month, out of which around 500, 550 tons per month would be a USFDA capacity and rest of the capacity would be for the other market or non-USFDA markets. Going forward, we will require lot of support from our backward integration, which we have already done in Saykha. That is why we feel that the Saykha facility will continue to be a very important, you can say, area where we want to streamline our production as soon as possible and support the growth of Metformin.

Speaker #2: So, going forward, we will require a lot of support from our backward integration, which we have already done in Saida, and that is why we feel that, you know, the Saida facility will continue to be a very important—you can say—area where we want to streamline our production as soon as possible and support the growth of metformin.

Speaker #2: So, metformin is already growing globally, and it's a huge market. There is a lot of potential for us to get more market share as well.

Adhish P. Patil: Metformin is already growing globally and it's a huge market and there is lot of potential for us to get more market share as well.

Adhish Patil: Metformin is already growing globally and it's a huge market and there is lot of potential for us to get more market share as well.

Speaker #3: Okay. By when are you expecting to supply to the US market? As in, when could we expect the approval to come?

Avanish Borman: Okay. By when are you expecting to supply to US market? As in, when could we expect the approval to come?

Avnish Burman: Okay. By when are you expecting to supply to US market? As in, when could we expect the approval to come?

Speaker #2: Yeah. So so it will take so the US DMS we have already filed so that is not a challenge. But the thing is the facility because we are constructing a finish or roughly around 500 plus tons per month capacity in the same in the same you can say land parcels in the same location.

Adhish P. Patil: Yeah. The USBLS we have already filed, that is not a challenge. The thing is the facility because we are constructing a fresh roughly around 500 plus tons per month capacity in the same location. It will take roughly around 10 to 12 months for that capacity to come up and immediately as it comes up, we will file for the USFDA inspection with the help of some customers.

Adhish Patil: Yeah. The USBLS we have already filed, that is not a challenge. The thing is the facility because we are constructing a fresh roughly around 500 plus tons per month capacity in the same location. It will take roughly around 10 to 12 months for that capacity to come up and immediately as it comes up, we will file for the USFDA inspection with the help of some customers.

Speaker #2: So it will take roughly around, you know, 10 to 12 months for that capacity to come up, and immediately as it comes up, we will file for the US FDA inspection with the help of some customers.

Speaker #3: Okay, so basically, you can't even supply—you can't supply the API until the facility gets approval. So, the API supply also, at the earliest, can happen only after 12 months.

Avanish Borman: Okay. Basically you can't supply the API till the facility gets approval. The API supplies also at the earliest can happen only after 12 months.

Avnish Burman: Okay. Basically you can't supply the API till the facility gets approval. The API supplies also at the earliest can happen only after 12 months.

Speaker #2: Correct, correct. Twelve months—it will take at least twelve months. Currently, we do have European approval for the same facility.

Adhish P. Patil: Correct. It will take at least 12 months. Currently, we do have European approval for the same facility.

Adhish Patil: Correct. It will take at least 12 months. Currently, we do have European approval for the same facility.

Speaker #3: And how much are you supplying to the European market?

Avanish Borman: How much are you supplying to European market?

Avnish Burman: How much are you supplying to European market?

Speaker #2: Actually, it is not much. It is not much; even the European market is untapped, though we are trying with the smaller players right now.

Adhish P. Patil: Actually, it is not much. Even the European market is intact, though we are trying with the smaller players right now. The key challenge what we faced so far is that many of the European clients of Metformin are also operating in the US market, so they need a supplier with both European as well as USFDA approval. That is the main reason why we are going in for USFDA approval because that will open up not only the US market but also the huge European markets for us as well.

Adhish Patil: Actually, it is not much. Even the European market is intact, though we are trying with the smaller players right now. The key challenge what we faced so far is that many of the European clients of Metformin are also operating in the US market, so they need a supplier with both European as well as USFDA approval. That is the main reason why we are going in for USFDA approval because that will open up not only the US market but also the huge European markets for us as well.

Speaker #2: The key challenge we have faced so far is that many of the European clients of metformin are also operating in the US market, so they need a supplier who is both European- as well as US FDA-approved.

Speaker #2: And that is the main reason why we are going in for US FDA approval, because that will open up not only the US market, but also the huge European markets for us as well.

Speaker #3: Okay, understood. Thank you so much. And Avinish, congratulations on the role elevation—many, many congratulations. Thanks. I'll get back.

Avanish Borman: Okay. Understood. Thank you so much. Adhish, congratulations for the role elevation. Many congrats.

Avnish Burman: Okay. Understood. Thank you so much. Adhish, congratulations for the role elevation. Many congrats.

Adhish P. Patil: Thank you.

Adhish Patil: Thank you.

Avanish Borman: Thanks. I will get back.

Avnish Burman: Thanks. I will get back.

Operator: Thank you. Next question comes from the line of Parth Soda with Trinetra Asset Manager. Please go ahead.

Operator: Thank you. Next question comes from the line of Parth Sodha with Trinetra Asset Manager. Please go ahead.

Speaker #1: Thank you. Next question comes from the line of Parth Sodha with Trinitra Asset Manager. Please go ahead.

Speaker #4: Hello.

Parth Soda: Hello.

Parth Sodha: Hello.

Speaker #2: Yeah yeah.

Operator: Yes, you are. Please go ahead.

Operator: Yes, you are. Please go ahead.

Speaker #1: Yes, you are. Please go ahead.

Speaker #4: Yes, yes. So first of all, thank you for the opportunity. I wanted to know, do you believe the API industry has entered a sustained recovery phase, or is it still too early to call?

Parth Soda: Yes. First of all, thank you for the opportunity. I wanted to know, like do you believe the API industry has entered a sustained recovery phase or is it still too early to call?

Parth Sodha: Yes. First of all, thank you for the opportunity. I wanted to know, like do you believe the API industry has entered a sustained recovery phase or is it still too early to call?

Adhish P. Patil: The thing is the war scenario, we just thought that a month back that everything streamlined and everything will come back to normal. Again, the things are quite volatile as of now to say anything. The thing is the antibiotic, certain therapeutic categories, certain products, the demand of those products behave just when the prices are lower. For us, frankly speaking, even if prices are lower, but if they are stable, then we can definitely make handsome margins. Competing with China was never an issue for our product line, at least. Obviously, we always face pressure here and there, little bit from certain players for certain products at a given point of time because of inventories as well. They also act up sometimes. Overall, what we feel is, the API business, the kind of product segment we are operating in, the business is quite stable.

Adhish Patil: The thing is the war scenario, we just thought that a month back that everything streamlined and everything will come back to normal. Again, the things are quite volatile as of now to say anything. The thing is the antibiotic, certain therapeutic categories, certain products, the demand of those products behave just when the prices are lower. For us, frankly speaking, even if prices are lower, but if they are stable, then we can definitely make handsome margins. Competing with China was never an issue for our product line, at least. Obviously, we always face pressure here and there, little bit from certain players for certain products at a given point of time because of inventories as well. They also act up sometimes. Overall, what we feel is, the API business, the kind of product segment we are operating in, the business is quite stable.

Speaker #2: The thing is, the war scenario—just a month back, we thought that everything had streamlined and everything would come back to normal.

Speaker #2: But again, things are quite volatile as of now to say anything. But the thing is, in certain therapeutic categories, certain products—you know, the demand of those products behaves this way when the prices are lower. So for us, frankly speaking, even if, you know, prices are lower, but if they are stable, then we can definitely make handsome margins.

Speaker #2: Competing with China was never an issue for our product line, at least. Obviously, we always face pressure here and there, a little bit, from certain players for certain products at a given point of time.

Speaker #2: Because of inventories as well, we also act up sometimes. But overall, what we feel is, the API business—the kind of product profile we are operating in—is quite stable. And stable in the sense that we are not that worried about Chinese competition, at least.

Adhish P. Patil: Stable in the sense, we are not that worried about Chinese competition, at least.

Adhish Patil: Stable in the sense, we are not that worried about Chinese competition, at least.

Speaker #4: Okay, okay, got it. And my second question is, with the ₹600 crore capex now completed, what is the expected asset turnover and, let's say, revenue contribution over the next two to three years?

Parth Soda: Okay. Got it. My second question is, with the INR 600 crore CapEx now completed, what is the expected asset turnover and, let's say, revenue contribution over the next two to three years?

Parth Sodha: Okay. Got it. My second question is, with the INR 600 crore CapEx now completed, what is the expected asset turnover and, let's say, revenue contribution over the next two to three years?

Speaker #2: Yeah. So the asset from the Phase One Greenfield facility is roughly around one and a half times, roughly. About, say, around 50% of the capacities are being captured to utilize for captive consumption for the anti-diabetic portfolio.

Adhish P. Patil: Yeah. The asset turn from the phase I greenfield facility is roughly around 1.5 times. About Saykha, around 50% of the capacities are being captively utilized for capital consumption for our anti-diabetic portfolio. That will add to the gross margins more than the revenue itself. Having said that, the phase II brownfield CapEx, which will come in both these sites, Saykha as well as G60 in Dharakhu, their asset turn would be much higher, around three, four times, because most of the common facilities like ETPs and et cetera, all those things are already set up and running. All that OpEx and CapEx has already been done. The newer phase II CapEx will give higher returns, but the one which we just did, that will get us around 1.5 times.

Adhish Patil: Yeah. The asset turn from the phase I greenfield facility is roughly around 1.5 times. About Saykha, around 50% of the capacities are being captively utilized for capital consumption for our anti-diabetic portfolio. That will add to the gross margins more than the revenue itself. Having said that, the phase II brownfield CapEx, which will come in both these sites, Saykha as well as G60 in Dharakhu, their asset turn would be much higher, around three, four times, because most of the common facilities like ETPs and et cetera, all those things are already set up and running. All that OpEx and CapEx has already been done. The newer phase II CapEx will give higher returns, but the one which we just did, that will get us around 1.5 times.

Speaker #2: So that will add to the gross margins more than the revenue itself. Having said that, the Phase Two capex—brownfield capex—which will come in both these sites, Saida as well as G61 in Karakoram, their asset term would be much higher, around three to four times.

Speaker #2: Because most of the common facilities, you know, like ETPs and etcetera, all those things are already set up and running. So all that opex and capex has already been done.

Speaker #2: So the newer Phase Two capex will give higher returns, but the one which we just did—that will get us around one to one and a half times.

Speaker #4: Okay, got it. Got it. Thank you so much for the opportunity.

Parth Soda: Okay. Got it. Thank you so much for the opportunity.

Parth Sodha: Okay. Got it. Thank you so much for the opportunity.

Speaker #1: Thank you. The next question comes from the line of Rashmi Shetty with Dollar Capital. Please go ahead.

Operator: Thank you. Next question comes from the line of Rashmi Shetty with Dolard Capital. Please go ahead.

Operator: Thank you. Next question comes from the line of Rashmmi Shetty with Dolard Capital. Please go ahead.

Speaker #5: Yeah, thanks for the opportunity. Avinish, you mentioned that for metformin, you are constructing new lines at the Saida plant, right, for 500 to 550 tons, in the US?

Rashmi Shetty: Yeah, thanks for the opportunity. Adhish, you mentioned that metformin, you're constructing new lines at the Saykha plant, right? For 500 to 550 tons in the year.

Rashmmi Shetty: Yeah, thanks for the opportunity. Adhish, you mentioned that metformin, you're constructing new lines at the Saykha plant, right? For 500 to 550 tons in the year.

Speaker #2: No, no. So, the metformin expansion is being done in the same Sarigam facility where we already have around 1,400 tons per month. So that will be scaling up to around 1,700 tons per month—1,700 to 1,800, 1,700 tons per month.

Adhish P. Patil: No. The metformin expansion is being done in the same Sarigam facility where we already have around 1,400 tons per month. That we'll be scaling up to around 1,700 to 1,800 tons per month and additional 500 tons per month, we'll be putting up a USFDA block in the same location.

Adhish Patil: No. The metformin expansion is being done in the same Sarigam facility where we already have around 1,400 tons per month. That we'll be scaling up to around 1,700 to 1,800 tons per month and additional 500 tons per month, we'll be putting up a USFDA block in the same location.

Speaker #2: An additional 500 tons per month—we will be putting up a US FDA block in the same location.

Speaker #5: In the same location, okay. Then, what is the update on the E22 plant, you know, currently, which is already US FDA approved? How many products are we supplying currently and to which markets?

Rashmi Shetty: The same location. Okay. What is the update on E-22 plant currently, which is already USFDA approved? How many products are we supplying currently, and to which markets?

Rashmmi Shetty: The same location. Okay. What is the update on E-22 plant currently, which is already USFDA approved? How many products are we supplying currently, and to which markets?

Speaker #2: So, currently in our US FDA plant, we have two main production lines and one small product line with the high-value products.

Adhish P. Patil: Currently, in our current USFDA plant, we have two main production lines and one small product line with high-value products. Currently, we have around sedative, antibiotic, anti-inflammatory products, which are already doing very well, and we feel that within a year's time, our capacity will fall short, because these products are quite big in terms of tonnage. We are also planning a fresh, you can say, cause-like greenfield project of USFDA in the adjacent plot itself. It will have same API number. That will give us capacity enhancement. It will roughly slightly more than double our existing capacities. We will be putting up three more production lines to the tune of, let's say, around 10 per month each line, which will be a multipurpose line and from which we can cater to more products.

Adhish Patil: Currently, in our current USFDA plant, we have two main production lines and one small product line with high-value products. Currently, we have around sedative, antibiotic, anti-inflammatory products, which are already doing very well, and we feel that within a year's time, our capacity will fall short, because these products are quite big in terms of tonnage. We are also planning a fresh, you can say, cause-like greenfield project of USFDA in the adjacent plot itself. It will have same API number. That will give us capacity enhancement. It will roughly slightly more than double our existing capacities. We will be putting up three more production lines to the tune of, let's say, around 10 per month each line, which will be a multipurpose line and from which we can cater to more products.

Speaker #2: So, currently we have around and associative antibiotic and anti-inflammatory products which are already doing very well. We feel that within a year's time, our capacity will fall short because these products are quite big in terms of tonnage.

Speaker #2: So, we are also planning a fresh, you can say, casual Greenfield project for US FDA in the adjacent plot itself. So, it will have the same API number.

Speaker #2: So that will give us, you know, capacity enhancement of roughly—it will roughly, slightly more than double our existing capacities. We will be putting up three more production lines, with the tune of, let's say, around 10-odd tons per month each line.

Speaker #2: Which will be a multi-purpose line, and from which we can cater to more products. So, as of now, we have around four or five products which are active from the current US FDA plan.

Adhish P. Patil: As of now, we have around four, five products which are active from the current USFDA plant. Not all of them are going to US market. Some of them are also going to the European market.

Adhish Patil: As of now, we have around four, five products which are active from the current USFDA plant. Not all of them are going to US market. Some of them are also going to the European market.

Speaker #2: But not all of them are going to the US market. Some of them are also going to the European market.

Speaker #5: So, mainly, all these four to five products—we are currently supplying to the EU markets only, right?

Rashmi Shetty: Majorly, all these four to five products currently we are supplying to the EU markets only, right?

Rashmmi Shetty: Majorly, all these four to five products currently we are supplying to the EU markets only, right?

Speaker #2: Correct, correct. Yes, yes. So currently, the US market still hasn't started yet, but the business development has already started. The sample approval—we have already sent samples also to the customers.

Adhish P. Patil: Correct. Yes. The US market still hasn't started yet, but the business development has already started the sample approval. We have already sent samples also to the customers.

Adhish Patil: Correct. Yes. The US market still hasn't started yet, but the business development has already started the sample approval. We have already sent samples also to the customers.

Speaker #2: So as soon as they get the approval for vendor addition, then we can start the supplies.

Rashmi Shetty: Okay.

Rashmmi Shetty: Okay.

Adhish P. Patil: As soon as they get the approval for vendor addition, then we can start the supply.

Adhish Patil: As soon as they get the approval for vendor addition, then we can start the supply.

Speaker #5: Okay, okay. And at your Saida plant, specialty chemical products in your Greenfield plant—specialty chemical products are also manufactured, right?

Rashmi Shetty: Okay. At your Saykha plant, these specialty chemical products in your greenfield plant, specialty chemical products are also manufactured, right?

Rashmmi Shetty: Okay. At your Saykha plant, these specialty chemical products in your greenfield plant, specialty chemical products are also manufactured, right?

Speaker #2: In Saida yes.

Adhish P. Patil: In Saykha, yes.

Adhish Patil: In Saykha, yes.

Speaker #5: So your growth for the specialty chemicals was around 149%, you know, and the sales were around ₹82 crores. So is it because of this new plant which has come up and, you know, we have supplied newer products? Basically, how should we look at it for the full year—is it going to contribute significantly this year?

Rashmi Shetty: Your growth for the specialty chemical was around 149%. The sales were around INR 82 crores. Is it because of this new plant which has come up and we have supplied newer products? Basically, how should we look at it for the full year? Is it going to contribute significantly this year?

Rashmmi Shetty: Your growth for the specialty chemical was around 149%. The sales were around INR 82 crores. Is it because of this new plant which has come up and we have supplied newer products? Basically, how should we look at it for the full year? Is it going to contribute significantly this year?

Speaker #2: Yeah. So, this first quarter's performance will definitely repeat for the next three quarters, and in fact, we will be trying to improve it further.

Adhish P. Patil: Yeah. This Q1's performance will definitely repeat for the next three quarters. In fact, we will be trying to improve it further. The answer to your question was, yes, it is because of that Saykha facility which we have just put up.

Adhish Patil: Yeah. This Q1's performance will definitely repeat for the next three quarters. In fact, we will be trying to improve it further. The answer to your question was, yes, it is because of that Saykha facility which we have just put up.

Speaker #2: And the answer to your question was yes, it is because of that Saida facility which we have just put up.

Speaker #5: Okay. And how many tons per month have we reached for this second business in the Saida plant?

Rashmi Shetty: How many tons per month we have reached for this pecan business in Saykha plant?

Rashmmi Shetty: How many tons per month we have reached for this pecan business in Saykha plant?

Speaker #2: Yeah. So, Saida, for the methylamine plants, we have already reached around 65% utilization. There are a few other products where the utilization is lower. There, we are trying to improve, but for methylamine—the main gas—we have already reached around 64–65% as of the quarter of June.

Adhish P. Patil: Saykha, for the methylamine plant, we have already reached around 65% utilization. There are a few other products where the utilization is lower, where we are trying to improve. Methylamine, the main gas, that we already reach around 64% and 65% in Q1.

Adhish Patil: Saykha, for the methylamine plant, we have already reached around 65% utilization. There are a few other products where the utilization is lower, where we are trying to improve. Methylamine, the main gas, that we already reach around 64% and 65% in Q1.

Speaker #5: So that comes to how many tons per month?

Rashmi Shetty: That comes to how many tons per month?

Rashmmi Shetty: That comes to how many tons per month?

Adhish P. Patil: It is roughly around 60 tons per day.

Adhish Patil: It is roughly around 60 tons per day.

Speaker #2: It is, I will tell you, it is roughly around 60 tons per day. So, for the entire quarter, it was somewhere around 3,500 tons for the entire quarter.

Rashmi Shetty: Okay.

Rashmmi Shetty: Okay.

Adhish P. Patil: For the entire quarter, it was somewhere around 3,500 tons for the entire quarter. June quarter.

Adhish Patil: For the entire quarter, it was somewhere around 3,500 tons for the entire quarter. June quarter.

Speaker #2: June quarter.

Speaker #5: Okay, okay. So for this year, basically this will be the new quarterly run rate for the specialty chemicals if you want to model it in correctly, okay.

Rashmi Shetty: For this year, basically this will be the new quarterly run rate for the Specialty Chemicals if you want to model in our-

Rashmmi Shetty: For this year, basically this will be the new quarterly run rate for the Specialty Chemicals if you want to model in our-

Adhish P. Patil: Yes.

Adhish Patil: Yes.

Speaker #5: And related to your Tharapur facility, where are we currently with the salicylic acid supply?

Rashmi Shetty: Related to your Tarapur facility, where are we currently for the salicylic acid supply?

Rashmmi Shetty: Related to your Tarapur facility, where are we currently for the salicylic acid supply?

Speaker #2: Yeah, so the improvement is still awaited in that facility. Last quarter, in fact, we kept the production of salicylic acid very, very low.

Adhish P. Patil: The improvement is still awaited in that facility. Last quarter, in fact, we kept the production of salicylic acid very low. In fact, the entire quarter we produced only 67 tons of salicylic acid. One of the main reasons was we were waiting for that equipment which came, and it is installed now. The main purpose was to further reduce the raw material costing and also improve the effluent quality from the salicylic acid. We just commissioned the plant for manufacturing derivative of salicylic acid. That is methyl salicylate and few other salicylates can also be manufactured because it is a multipurpose plant. That capacity is roughly around 350, 400 tons per month. The trial batches have started. We got around 5, 10 tons of production, trial production, and we'll be ramping it up soon.

Adhish Patil: The improvement is still awaited in that facility. Last quarter, in fact, we kept the production of salicylic acid very low. In fact, the entire quarter we produced only 67 tons of salicylic acid. One of the main reasons was we were waiting for that equipment which came, and it is installed now. The main purpose was to further reduce the raw material costing and also improve the effluent quality from the salicylic acid. We just commissioned the plant for manufacturing derivative of salicylic acid. That is methyl salicylate and few other salicylates can also be manufactured because it is a multipurpose plant. That capacity is roughly around 350, 400 tons per month. The trial batches have started. We got around 5, 10 tons of production, trial production, and we'll be ramping it up soon.

Speaker #2: In fact, the entire quarter we produced only 67 tons for the salicylic acid. The main—one of the main reasons was that we were waiting for that equipment, which came and is installed now.

Speaker #2: The main purpose was to further reduce the raw material costing and also improve the excellent quality from the salicylic acid. Plus, we just commissioned the plant for manufacturing derivatives of salicylic acid, that is, methyl salicylate, and a few other salicylates can also be manufactured because it is a multi-purpose plant.

Speaker #2: So so that capacity is roughly around 350 400 tons per month. So the trial batches have started. We we got the you know around 5 10 tons of production trial production and we'll be ramping it up soon.

Speaker #2: So, what we'll be trying to do is produce the salicylic acid and then convert it into the derivatives, and then sell it to the market, because that will reduce our losses.

Adhish P. Patil: What we'll be trying to do is produce the salicylic acid and then convert it into the derivative, and then sell it to the market because that will reduce our losses. Unfortunately, what has happened to the antidumping duty part, it got delayed a little bit. Though the case was okay, the government asked that the injury period should be a year more. We'll have to wait most probably one more year for antidumping duty to come up. We are pretty much sure that it will come for salicylic acid. Till that point of time, I think it will be better for us that we manufacture the derivative of salicylic acid and then sell it to the market because then at least we will try to achieve breakeven for that location.

Adhish Patil: What we'll be trying to do is produce the salicylic acid and then convert it into the derivative, and then sell it to the market because that will reduce our losses. Unfortunately, what has happened to the antidumping duty part, it got delayed a little bit. Though the case was okay, the government asked that the injury period should be a year more. We'll have to wait most probably one more year for antidumping duty to come up. We are pretty much sure that it will come for salicylic acid. Till that point of time, I think it will be better for us that we manufacture the derivative of salicylic acid and then sell it to the market because then at least we will try to achieve breakeven for that location.

Speaker #2: Unfortunately, what has happened to the anti-dumping duty part is that it got delayed a little bit. Though the case was okay, the government asked that the injury period should be a year more.

Speaker #2: So we'll have to wait, most probably, one more year for the anti-dumping duty to come up. But we are pretty much sure that it will come for salicylic acid.

Speaker #2: But till that point of time, I think it will be better for us if we manufacture the derivative of salicylic acid and then sell it to the market, because then at least we will try to achieve break-even for the location.

Speaker #5: Okay. And generally, margins are higher in derivatives of salicylic acid compared to the products?

Rashmi Shetty: Okay. Generally, margins are higher in derivatives of salicylic acid compared to the same product?

Rashmmi Shetty: Okay. Generally, margins are higher in derivatives of salicylic acid compared to the same product?

Speaker #2: Yeah. So what happened was, before we started the production, salicylic acid itself had very high margins. And derivatives also had a decent margin, but then the thing is, for derivatives we have to venture into four or five products, whereas with salicylic acid you can just, you know, get all that margin in one product itself.

Adhish P. Patil: Yeah. What happened was, before we started the production, salicylic acid itself had very high margins, and derivatives also had a decent margin. The thing is, for derivatives, we have to venture it into four or five products, whereas salicylic acid, you can just get all that margin in one product itself. That was the initial plan, was to manufacture salicylic acid and supply that to the Indian consumers. After we launched the capacity, Chinese players drastically dropped the pricing of salicylic acid, mainly to drive the competition out. That is the main purpose. Because of that, salicylates became more attractive than the salicylic acid itself because of that price drop. Initially it was not like that, as of now, salicylates are more profitable than salicylic acid.

Adhish Patil: Yeah. What happened was, before we started the production, salicylic acid itself had very high margins, and derivatives also had a decent margin. The thing is, for derivatives, we have to venture it into four or five products, whereas salicylic acid, you can just get all that margin in one product itself. That was the initial plan, was to manufacture salicylic acid and supply that to the Indian consumers. After we launched the capacity, Chinese players drastically dropped the pricing of salicylic acid, mainly to drive the competition out. That is the main purpose. Because of that, salicylates became more attractive than the salicylic acid itself because of that price drop. Initially it was not like that, as of now, salicylates are more profitable than salicylic acid.

Speaker #2: So that was the initial plan—to manufacture salicylic acid and supply that to the Indian consumers. But then, after we launched the capacity, Chinese players drastically dropped the pricing of salicylic acid.

Speaker #2: Mainly to drive the competition out—that is the main purpose. So, because of that, salicylates became more attractive than salicylic acid itself because of that price drop.

Speaker #2: So initially it was not like that, but as of now, things are—as of now, it is like salicylates are more profitable than salicylic acid.

Speaker #5: Okay, okay. And my last question is on volume growth and price growth for this quarter, and also if you can give an outlook on that for the remaining three quarters.

Rashmi Shetty: Okay. My last question is on volume growth and price growth for this quarter, and also if you can give an outlook on that for the remaining three quarters.

Rashmmi Shetty: Okay. My last question is on volume growth and price growth for this quarter, and also if you can give an outlook on that for the remaining three quarters.

Speaker #2: Yeah. So, most of the volume growth has come from this spectrum. At the overall company level, we still achieved around 3.5% aggregate volume growth for both domestic and local markets.

Adhish P. Patil: Yeah. Volume growth, most of the volume growth has come from this quarter. Overall company level, we still achieved around 3.5% aggregate volume growth on both domestic and local markets. Majority of the growth came from the price growth in the June quarter. The main reason for this is because there were certain price hikes because of the raw material prices went up due to that US-Iran war. Because of such sharp increase in the prices, typically what happens is formulation purchasers, they refrain from buying too much. They keep the stock to minimum because the prices are very high. That definitely impacts the quantity of the, you can say demand. The quantity sales goes down in such scenario. Still we were able to achieve 3.5% growth. Mainly it was driven by the price.

Adhish Patil: Yeah. Volume growth, most of the volume growth has come from this quarter. Overall company level, we still achieved around 3.5% aggregate volume growth on both domestic and local markets. Majority of the growth came from the price growth in the June quarter. The main reason for this is because there were certain price hikes because of the raw material prices went up due to that US-Iran war. Because of such sharp increase in the prices, typically what happens is formulation purchasers, they refrain from buying too much. They keep the stock to minimum because the prices are very high. That definitely impacts the quantity of the, you can say demand. The quantity sales goes down in such scenario. Still we were able to achieve 3.5% growth. Mainly it was driven by the price.

Speaker #2: But majority of the growth came from the price growth in the June quarter. And the main reason for this is because, you know, there were certain price hikes because raw material prices went up due to that USAID war.

Speaker #2: And because of such a sharp increase in prices, typically what happens is formulation purchasers refrain from buying too much; they keep the stock to a minimum because the prices are very high.

Speaker #2: And that definitely impacts the quantity of, you can say, demand. The quantity of sales goes down in such a scenario. But still, we were able to achieve three and a half percent growth.

Speaker #2: But mainly, it was driven by the price. As of now, the pricing has eased out compared to the months of March and April.

Adhish P. Patil: As of now, the pricing has eased out as compared to the month of March and April. It came down slowly from April, May, and now. Still the prices are high because the war restarted and we are not sure how long it will now get stretched.

Adhish Patil: As of now, the pricing has eased out as compared to the month of March and April. It came down slowly from April, May, and now. Still the prices are high because the war restarted and we are not sure how long it will now get stretched.

Speaker #2: So it came down slowly from April May and now. But still the prices are high because still you know the war restarted and we we are not sure how you know how long it will now get stretched.

Speaker #5: So, on my basis, do you know what was the pricing growth in absolute terms?

Rashmi Shetty: On YOY basis, what was the pricing growth in absolute terms?

Rashmmi Shetty: On YOY basis, what was the pricing growth in absolute terms?

Speaker #2: On a year-over-year basis, at the aggregate level, we saw somewhere around 16 to 17 percent aggregate growth.

Adhish P. Patil: In YOY basis, at the aggregate level, we saw somewhere around 16% to 17% aggregate growth.

Adhish Patil: In YOY basis, at the aggregate level, we saw somewhere around 16% to 17% aggregate growth.

Speaker #5: Okay. But you feel that this will not be sustainable, right? Because structurally, there is no easing in the pricing pressure.

Rashmi Shetty: Okay. You feel that this will not be sustainable, right? Structurally there is not easing in the pricing pressure.

Rashmmi Shetty: Okay. You feel that this will not be sustainable, right? Structurally there is not easing in the pricing pressure.

Speaker #2: Right now, again, pressure is still there, but as the war—you know, everything eases out—then, when the raw material prices go down, then probably the selling prices will come down.

Adhish P. Patil: Right now, again, the pressure is still there, but as the war, everything eases out, then when the raw material prices goes down, then probably the selling prices will come down.

Adhish Patil: Right now, again, the pressure is still there, but as the war, everything eases out, then when the raw material prices goes down, then probably the selling prices will come down.

Speaker #5: Okay, okay. And what is the outlook for the remaining three quarters in terms of volume growth and price growth? I mean, do you have any guess or estimate?

Rashmi Shetty: Okay. What is the outlook for the remaining three quarters in terms of volume growth and price growth? Then how do you see any guesses to that?

Rashmmi Shetty: Okay. What is the outlook for the remaining three quarters in terms of volume growth and price growth? Then how do you see any guesses to that?

Speaker #2: So, actually speaking, we are hoping that the volume growth should be much better than the June quarter, because in the June quarter there was a sudden hike in prices.

Adhish P. Patil: Actually speaking, we are hoping that the volume growth should be much better than June quarter, because June quarter there was sudden hike in the prices. As I said, the demand got affected because of that. When the prices stay high for a longer period of time, then the demand should come back. Once the inventory levels at the further end of the value chain goes down, the demand should come back. Export demand won't get impacted much. It is generally the domestic demand, what we have observed in past, as in three, four years back, that in the very high prices scenario, certain categories of products like mostly antibiotics and some anti-diabetics, they face demand pressure.

Adhish Patil: Actually speaking, we are hoping that the volume growth should be much better than June quarter, because June quarter there was sudden hike in the prices. As I said, the demand got affected because of that. When the prices stay high for a longer period of time, then the demand should come back. Once the inventory levels at the further end of the value chain goes down, the demand should come back. Export demand won't get impacted much. It is generally the domestic demand, what we have observed in past, as in three, four years back, that in the very high prices scenario, certain categories of products like mostly antibiotics and some anti-diabetics, they face demand pressure.

Speaker #2: So, as I said, the demand got affected because of that. But when the prices stay high for a longer period of time, then the demand should come back once the inventory levels at the further end of the valuation go down.

Speaker #2: The demand should come back. Export demand won't get impacted much. It is generally the domestic demand, what we have observed in the past—past as in three or four years back—in the very high prices scenario.

Speaker #2: Certain categories of products, like mostly antibiotics and some antibiotics, they face demand pressure.

Speaker #5: Okay, got it. Thank you, and congratulations on your new role.

Rashmi Shetty: Okay, got it. Thank you and congratulations on your new role.

Rashmmi Shetty: Okay, got it. Thank you and congratulations on your new role.

Speaker #2: Thank you. Thank you so much.

Adhish P. Patil: Thank you.

Adhish Patil: Thank you.

Operator: Thank you. Next question comes from the line of Dhwanil Desai with Turtle Capital. A reminder to all the participants to remember star and one to ask a question. Mr. Desai, please go ahead.

Operator: Thank you. Next question comes from the line of Dhwanil Desai with Turtle Capital. A reminder to all the participants to remember star and one to ask a question. Mr. Desai, please go ahead.

Speaker #1: Thank you. Next question comes from the line of Tonil Desai with Turkey Capital, and a reminder to all the participants that you may press star and one to ask a question.

Speaker #1: Mr. Desai please go ahead.

Speaker #3: Yeah. Good morning, Rajesh. Am I audible?

Dhwanil Desai: Yeah. Good morning, Adhish. Am I audible?

Dhwanil Desai: Yeah. Good morning, Adhish. Am I audible?

Speaker #2: Yes.

Adhish P. Patil: Yes.

Adhish Patil: Yes.

Speaker #3: Yeah. So Rajesh the first question is you talked about you know the volatility on the pricing side of the realization part of it. Now I think even when this pricing price increase was not there our eventually goal was to reach to 14 15 percent EBITDA margin you know in due course.

Dhwanil Desai: Yeah. Adhish, the first question is, you talked about the volatility on the pricing side of the realization part of it. I think even when this pricing increase was not there, our eventually goal was to reach 14% to 15% EBITDA margin in due course. Once the realization comes down, like the wall settles down and the realization and RM both comes down, do you think we are on path to reach 15% margin maybe by end of this year, or is that a longer journey?

Dhwanil Desai: Yeah. Adhish, the first question is, you talked about the volatility on the pricing side of the realization part of it. I think even when this pricing increase was not there, our eventually goal was to reach 14% to 15% EBITDA margin in due course. Once the realization comes down, like the wall settles down and the realization and RM both comes down, do you think we are on path to reach 15% margin maybe by end of this year, or is that a longer journey?

Speaker #3: So, if—if once the realization comes down, let's say war settles down and the realization and RM both come down, do you think, you know, we are on path to reach 15 percent margin maybe by end of this year, or is that a longer journey?

Speaker #2: Yeah. So there will so this quarter also we took some write offs of Asian Capital WIB but that way means we had cross around 14 percent EBITDA margin in Q1 as well.

Adhish P. Patil: Yeah. This quarter also we took some write-offs of aging capital WIP. That way we had crossed around 14% EBITDA margin in Q1 as well at consolidated level. 14% is quite doable, means we are almost there. Once the utilization of the two main greenfield projects, what we have put up, once that improves, definitely 15% should be very easy. Once the salicylic acid plant comes on track, that drag will reduce on the overall P&L. Above 14%, we are almost there already.

Adhish Patil: Yeah. This quarter also we took some write-offs of aging capital WIP. That way we had crossed around 14% EBITDA margin in Q1 as well at consolidated level. 14% is quite doable, means we are almost there. Once the utilization of the two main greenfield projects, what we have put up, once that improves, definitely 15% should be very easy. Once the salicylic acid plant comes on track, that drag will reduce on the overall P&L. Above 14%, we are almost there already.

Speaker #2: At consolidated level. So so 14 percent is quite doable. Means we are almost there almost there. Now once the utilization of the exist the two main greenfield projects what we have put up once that improves then definitely 15 percent is you know should be very easy once once the salicylic acid plant comes on track.

Speaker #2: Then that drag will reduce on the overall P&L. So, so, so, 14—so, above 14 percent, we are almost there already.

Speaker #2: I would say.

Dhwanil Desai: Right. The realization may not stay at the same level, right? It will come down.

Dhwanil Desai: Right. The realization may not stay at the same level, right? It will come down.

Speaker #3: Right. But then the realization may not stay at the same level, right? So it will come down.

Speaker #2: Right.

Adhish P. Patil: Right.

Adhish Patil: Right.

Speaker #3: So, that means the 14 percent that we see today in Q1 may eventually ease out as the prices come down.

Dhwanil Desai: That means that the 14% that we see today in Q1 eventually may ease out as the prices come down. Is that a fair way to think?

Dhwanil Desai: That means that the 14% that we see today in Q1 eventually may ease out as the prices come down. Is that a fair way to think?

Speaker #3: Is that a fair way to think?

Adhish P. Patil: In short term, yes. What will happen, ideally the volume growth should pick up once the pricing rate goes down, because our March quarter volumes were much higher than our June quarter. Overall, we are almost there. I still say we are almost there. In the quarter of December and March, the main thing was our Saykha plant was also not operational, so the utilization was much lower, 30% and 40% respectively. This is the Q1 that utilization went above 60%. That is also one of the reasons why the EBITDA margins have gone up a little.

Adhish Patil: In short term, yes. What will happen, ideally the volume growth should pick up once the pricing rate goes down, because our March quarter volumes were much higher than our June quarter. Overall, we are almost there. I still say we are almost there. In the quarter of December and March, the main thing was our Saykha plant was also not operational, so the utilization was much lower, 30% and 40% respectively. This is the Q1 that utilization went above 60%. That is also one of the reasons why the EBITDA margins have gone up a little.

Speaker #2: In the short term, yes, but then what will happen is that ideally, the volume growth should pick up once the pricing rate goes down.

Speaker #2: Because our March quarter volumes were much higher than our June quarter, overall we are almost there. I would still say we are almost there.

Speaker #2: In in in the quarter of December and March the the the main thing was our Saica plant was also not means not operational fully.

Speaker #2: The utilization was much lower, you know, 30 and 40 percent, respectively. And this is the first quarter that utilization went above 60 percent.

Speaker #2: So, that is also one of the reasons why the EBITDA margins have gone up a little.

Speaker #3: Okay. Got it. Second question Rajesh is that you know we have done a very large capex in last two years across various products. And so based on that you know our aspiration of double digit volume growth or maybe 15 percent volume growth should that be the base because seven eight percent volume growth anyway we were clocking even without capex right?

Dhwanil Desai: Okay, got it. Second question, Adhish, is that we have done a very large CapEx in last two years across various products. Based on that, our aspiration of double-digit volume growth or maybe 15% volume growth, should that be the base? Because 7% to 8% volume growth anyway we were clocking even without CapEx, right? All these new products and new CapEx coming into play, are we aiming for 15% kind of a volume growth or you think it will be more closer to high single-digit, low double-digit kind of a number?

Dhwanil Desai: Okay, got it. Second question, Adhish, is that we have done a very large CapEx in last two years across various products. Based on that, our aspiration of double-digit volume growth or maybe 15% volume growth, should that be the base? Because 7% to 8% volume growth anyway we were clocking even without CapEx, right? All these new products and new CapEx coming into play, are we aiming for 15% kind of a volume growth or you think it will be more closer to high single-digit, low double-digit kind of a number?

Speaker #3: So all these new products and new capex coming into play, are we aiming for 15 percent kind of volume growth, or do you think it will be closer to high single-digit, low double-digit kind of a number?

Speaker #2: Yeah. So, the thing is, for the next two years, we are very well poised for that 10 to 15 percent kind of volume growth.

Adhish P. Patil: Yeah. The thing is, for next two years we are very well poised for that 10% to 15% kind of volume growth. Because right now even if I consider salicylic acid capacity as just 600 tons per month, we are sitting roughly at around 70% utilization, mainly on the account of that project. There is lot of scope for existing products as well as with a bit in the Saykha facility and a lot in salicylic facility. Capacities are there. Achieving 10% to 15% volume growth in next two years should not be a problem. Only challenge will be how fast we streamline the salicylic acid and the derivative part.

Adhish Patil: Yeah. The thing is, for next two years we are very well poised for that 10% to 15% kind of volume growth. Because right now even if I consider salicylic acid capacity as just 600 tons per month, we are sitting roughly at around 70% utilization, mainly on the account of that project. There is lot of scope for existing products as well as with a bit in the Saykha facility and a lot in salicylic facility. Capacities are there. Achieving 10% to 15% volume growth in next two years should not be a problem. Only challenge will be how fast we streamline the salicylic acid and the derivative part.

Speaker #2: Because right now, even if I consider salicylic acid’s capacity as just, you know, 600 tons per month, we are sitting roughly at around 70 percent utilization.

Speaker #2: Mainly on account of that project. So, you know, there is a lot of scope for existing products as well, as a bit in the Saica facility and a lot in the salicylic facility.

Speaker #2: So capacities are there, so achieving 10 to 15 percent volume growth in the next two years should not be a problem. The only challenge would be how fast we streamline the salicylic acid and the derivative part.

Speaker #3: Okay. So so it is so if the salicylic acid part let's say if we assume that until the anti-dumping duty comes into play you know next worst case maybe the even the derivative part doesn't pick up then without that is it possible to get to that you know 10 12 percent volume growth?

Dhwanil Desai: Okay. If the salicylic acid part, let's say if we assume that until the antidumping duty comes into play, next worst case maybe even the derivative part doesn't pick up, then without that is it possible to get to that 10% to 12% volume growth?

Dhwanil Desai: Okay. If the salicylic acid part, let's say if we assume that until the antidumping duty comes into play, next worst case maybe even the derivative part doesn't pick up, then without that is it possible to get to that 10% to 12% volume growth?

Adhish P. Patil: Yes, still 10% should be doable.

Adhish Patil: Yes, still 10% should be doable.

Speaker #2: Yeah, still 10% should be doable.

Speaker #3: Okay, got it. Got it. And if you can help us understand the mix—how it has progressed over time between, let's say, regulated and unregulated markets. I think Europe was quite small for us.

Dhwanil Desai: Okay. Got it. If you can help us understand the mix, how it has progressed over time between, let's say, regulated and unregulated market. I think Europe was quite small for us. US was non-existent, which are generally better realization markets. How it has progressed for us and how do you see that going forward now that the US FDA thing, at least for one plant, is in place?

Dhwanil Desai: Okay. Got it. If you can help us understand the mix, how it has progressed over time between, let's say, regulated and unregulated market. I think Europe was quite small for us. US was non-existent, which are generally better realization markets. How it has progressed for us and how do you see that going forward now that the US FDA thing, at least for one plant, is in place?

Speaker #3: US was non-existent, which are generally better realization markets. So, how has it progressed for us, and how do you see that going forward now that the US FDA thing, at least for one plant, is in place?

Speaker #2: Yes, so that is one of the key focus areas for us going forward—how to increase our regulated market sales. Definitely, getting US FDA approval for our API facility after a long wait of 10 years has opened up scope for us, not only for the US but for the European market as well.

Adhish P. Patil: Yes. Yes, that is one of the key focus area for us going forward, that how to increase our regulated market share. Definitely getting US FDA approval for API facility after a long wait of 10 years, now that scope has opened up for us, not only for US but for Europe market as well. Plus we got around for European markets for nine products. As I was speaking before that, we have already filed for some of them to be shifted to a bigger WHO kind of a GMP plant, which will be transforming to the European approved plant. Our cost structure will go down, the pricing will go up, there will be expansion in the margin. Plus we will get more volumes also because of the European markets.

Adhish Patil: Yes. Yes, that is one of the key focus area for us going forward, that how to increase our regulated market share. Definitely getting US FDA approval for API facility after a long wait of 10 years, now that scope has opened up for us, not only for US but for Europe market as well. Plus we got around for European markets for nine products. As I was speaking before that, we have already filed for some of them to be shifted to a bigger WHO kind of a GMP plant, which will be transforming to the European approved plant. Our cost structure will go down, the pricing will go up, there will be expansion in the margin. Plus we will get more volumes also because of the European markets.

Speaker #2: Plus, we got approval for Europe in products for European markets for nine products. And as I was speaking before, we have already filed for some of them to be shifted to a bigger WHO kind of a GMP plant, which will be transforming into the European-approved plant.

Speaker #2: So our cost structure will go down, the pricing will go up, so there will be expansion in the margin. Plus, we will get more volumes also because of these newer European markets.

Speaker #2: And plus, other than that, we have also got good—means all regulatory approvals for our formulation business as well. We got US FDA approval for the oncology; we also got European approval for the oral solid dosage.

Adhish P. Patil: Plus, other than that, we have also got good approval, all regulatory approved for our formulation business as well. We got US FDA approval for the oncology. We also got European approval for the oral solid dosage. There also we are filing a lot for regulated markets. Already formulation has demonstrated that we are doing more than 70% of our formulation business in exports market now. We are tapping regulated markets in that division as well. Both in formulation as well as in APIs, we are targeting regulated markets. Having said that, I would say that still the current sale doesn't reflect that profitability which will come through regulated market. It is still in the business development phase. Some success we got, but then, as the pie becomes meaningful, then it will meaningfully reflect in the overall EBITDA margins of the company.

Adhish Patil: Plus, other than that, we have also got good approval, all regulatory approved for our formulation business as well. We got US FDA approval for the oncology. We also got European approval for the oral solid dosage. There also we are filing a lot for regulated markets. Already formulation has demonstrated that we are doing more than 70% of our formulation business in exports market now. We are tapping regulated markets in that division as well. Both in formulation as well as in APIs, we are targeting regulated markets. Having said that, I would say that still the current sale doesn't reflect that profitability which will come through regulated market. It is still in the business development phase. Some success we got, but then, as the pie becomes meaningful, then it will meaningfully reflect in the overall EBITDA margins of the company.

Speaker #2: And there also, we are filing a lot for regulated markets. Also, already formulation has demonstrated that we are doing more than 70% of our formulation business in export markets now.

Speaker #2: And we are tapping regulated markets in that division as well. So both in formulations as well as in APIs, we are targeting regulated markets.

Speaker #2: But having said that, I would say that still, the current sale doesn't reflect the profitability which will come through the regulated market. It is still in the business development phase.

Speaker #2: Some success we got, but then, as it becomes—as the pie becomes meaningful—then it will meaningfully reflect in the overall EBITDA margins of the company.

Speaker #3: Got it. Thank you. That's it.

Dhwanil Desai: Got it. Thank you. That's it.

Dhwanil Desai: Got it. Thank you. That's it.

Speaker #2: Hello?

Adhish P. Patil: Hello.

Adhish Patil: Hello.

Speaker #1: Thank you. Next question comes from the line of Sajal Kapoor with Anditra Wealth Thinking. Please go ahead. Mr. Kapoor, please go ahead.

Operator: Thank you. Next question comes from the line of Sajal Kapoor with Axiom Health Thinking. Please go ahead. Mr. Kapoor, please go ahead.

Operator: Thank you. Next question comes from the line of Sajal Kapoor with Antifragile Thinking. Please go ahead. Mr. Kapoor, please go ahead.

Speaker #2: Yes.

Sajal Kapoor: Yeah, thank you for the opportunity. Yeah, hi.

Sajal Kapoor: Yeah, thank you for the opportunity. Yeah, hi.

Speaker #1: Thank you for the opportunity. Yeah, hi.

Speaker #2: Yeah. Sorry.

Speaker #1: Yeah. Hi. I can I can hear you. The question is yeah. The question is how much of Saica's benefit is visible in revenue today and how much is invisible because it replaces intermediates that were previously procured externally.

Adhish P. Patil: Yeah.

Adhish Patil: Yeah.

Sajal Kapoor: Yeah. Hi, I can hear you. The question is, how much of Saykha's benefit is visible in revenue today, and how much is invisible because it replaces intermediates that were previously procured externally?

Sajal Kapoor: Yeah. Hi, I can hear you. The question is, how much of Saykha's benefit is visible in revenue today, and how much is invisible because it replaces intermediates that were previously procured externally?

Speaker #2: Yeah, so I would say in the last quarter, still around 60–70 percent we must have procured from outside. Last quarter, in the June quarter.

Adhish P. Patil: Yeah. I would say the last quarter still, around 60% to 70% we must have procured from outside. Last quarter, in Q1. Already that percentage has gone down drastically in this quarter. Increasingly in Q2 and then by Q3, I think hopefully around 80% to 90% of the captive consumption will happen through Saykha plant. Though we will always need to keep around 10% external supply for diversification case. Yeah, in Q2 and Q3, the captive consumption will go up drastically as compared to Q1.

Adhish Patil: Yeah. I would say the last quarter still, around 60% to 70% we must have procured from outside. Last quarter, in Q1. Already that percentage has gone down drastically in this quarter. Increasingly in Q2 and then by Q3, I think hopefully around 80% to 90% of the captive consumption will happen through Saykha plant. Though we will always need to keep around 10% external supply for diversification case. Yeah, in Q2 and Q3, the captive consumption will go up drastically as compared to Q1.

Speaker #2: But already that percentage has gone down drastically in this quarter. So increasingly in the September quarter and then by the December quarter, I think hopefully around, you know, 80–90 percent of the conversion will happen through Saica fund.

Speaker #2: Though we will always need to keep around 10 percent additional supplies, you know, for diversification in case. But, yeah, in the September quarter and December quarter, the captive consumption will go up drastically.

Speaker #2: As compared to June quarter.

Speaker #1: So so so I guess the the question really is the captive consumption should improve our gross margins right? Because it's a backward integration it gives us not only more control of the value chain but it also makes in the eyes of the customer it makes us as a source more secure because we are not reliant on external yes 10 percent is fine for the sake of diversification but gross margins what's your what's your take on the gross margins as utilization improves beyond 65 percent where we are today to let's say reaching closer to 90 percent?

Sajal Kapoor: I think the question really is the captive consumption should improve our gross margins, right? Because it's a-

Sajal Kapoor: I think the question really is the captive consumption should improve our gross margins, right? Because it's a-

Adhish P. Patil: Yes

Adhish Patil: Yes

Sajal Kapoor: backward integration. It gives us not only more control of the value chain, but in the eyes of the customer, it makes us as a source more secure because we are not reliant on external. Yes, 10% is fine for the sake of diversification. What's your take on the gross margins as utilization improves beyond 65%, where we are today, to, let's say, reaching closer to 90%?

Sajal Kapoor: backward integration. It gives us not only more control of the value chain, but in the eyes of the customer, it makes us as a source more secure because we are not reliant on external. Yes, 10% is fine for the sake of diversification. What's your take on the gross margins as utilization improves beyond 65%, where we are today, to, let's say, reaching closer to 90%?

Speaker #2: Yeah. So so it will I I I we are hoping that it should add another percent or so in the gross contribution at the peak level.

Adhish P. Patil: I would be hoping that it should add another 1% or so in the gross contribution at the peak level.

Adhish Patil: I would be hoping that it should add another 1% or so in the gross contribution at the peak level.

Speaker #1: Right. So, that gross contribution, coupled with better utilization of the network, should naturally improve the EBITDA margins. I think the other participant's question was also along the same lines, exploring how soon or when we can get back to 15 percent.

Sajal Kapoor: That gross contribution, coupled with better utilization of the network, should naturally improve the EBITDA margins. I think the other participant's question was also along the same lines, exploring how soon or when we can get back to 15%. Those two things put together, improving gross margins and improving utilization, should result in a much better EBITDA margins. I mean, it could even be 200 basis point improvement, no?

Sajal Kapoor: That gross contribution, coupled with better utilization of the network, should naturally improve the EBITDA margins. I think the other participant's question was also along the same lines, exploring how soon or when we can get back to 15%. Those two things put together, improving gross margins and improving utilization, should result in a much better EBITDA margins. I mean, it could even be 200 basis point improvement, no?

Speaker #1: So, those two things put together—improving gross margins and improving utilization—should result in much better EBITDA margins. I mean, it could even be a 200 basis point improvement, no?

Speaker #2: Yeah, I mean in the current condition, yes. But then what happened in the June quarter was because of that ammonia shortage and the derivative compound shortages, the prices had gone up quite drastically for this chain of products.

Adhish P. Patil: Yeah. In the current condition, yes. What happened in Q2 was because of that ammonia shortages and the derivative compound shortages, the prices had gone up quite drastically for this chain of products. Once it settles down, we need to see whether 200 basis points will come or not.

Adhish Patil: Yeah. In the current condition, yes. What happened in Q2 was because of that ammonia shortages and the derivative compound shortages, the prices had gone up quite drastically for this chain of products. Once it settles down, we need to see whether 200 basis points will come or not.

Speaker #2: So, once it settles down, we need to see whether 200 percent will come or not—sorry, 200 basis points will come or not.

Operator: Sure. That's all. Thank you so much.

Sajal Kapoor: Sure. That's all. Thank you so much.

Speaker #1: Sure. Sure. That's all. Thank you so much. Thank you.

Adhish P. Patil: Okay. Thank you.

Adhish Patil: Okay. Thank you.

Speaker #2: Okay, okay. Thank you, thank you.

Speaker #1: Thank you. Ladies and gentlemen, as there are no further questions, we have come to the end of the question and answer session. I would now like to hand the conference over to the management for closing comments.

Operator: Thank you. Ladies and gentlemen, as there are no further questions, we have come to the end of question and answer session. I would now like to hand the conference over to the management for closing comments.

Operator: Thank you. Ladies and gentlemen, as there are no further questions, we have come to the end of question and answer session. I would now like to hand the conference over to the management for closing comments.

Speaker #2: So, our diversified presence across APIs, formulations, and specialty chemicals, together with our long-standing customer relationships and broad product portfolio, along with our ongoing investments in capacity expansion and operational excellence, makes us believe we are well-positioned to capture these opportunities and sustain our growth momentum in the years ahead.

Adhish P. Patil: Our diversified presence across APIs, formulations, and Specialty Chemicals, together with our longstanding customer relationships and broad product portfolios, along with our ongoing investments in capacity expansion and operational excellence, we believe we are well-positioned to capture these opportunities and sustain our growth momentum in the years ahead. Thank you once again for your continued support and confidence in Aarti Drugs. For any further questions, please reach out to H.A., our investor relations advisor. Thank you so much, and have a nice day.

Adhish Patil: Our diversified presence across APIs, formulations, and Specialty Chemicals, together with our longstanding customer relationships and broad product portfolios, along with our ongoing investments in capacity expansion and operational excellence, we believe we are well-positioned to capture these opportunities and sustain our growth momentum in the years ahead. Thank you once again for your continued support and confidence in Aarti Drugs. For any further questions, please reach out to H.A., our investor relations advisor. Thank you so much, and have a nice day.

Speaker #2: Thank you once again for your continued support and confidence in Aarti Drugs. For any further questions, please reach out to HEA, our investor relations advisor.

Speaker #2: Thank you so much, and have a nice day.

Speaker #1: Thank you for attending the Aarti Drugs Limited conference call. Thank you for your participation. You may now disconnect. The conference has now concluded.

Operator: Thank you for attending Aarti Drugs Limited conference call. Thank you for your participation. You may now disconnect. The conference has now concluded.

Operator: Thank you for attending Aarti Drugs Limited conference call. Thank you for your participation. You may now disconnect. The conference has now concluded.

Adhish P. Patil: Thank you.

Adhish Patil: Thank you.

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