Q1 2027 Caplin Point Laboratories Ltd Earnings Call
Speaker #1: Ladies and gentlemen, good day, and welcome to Caplin Point Laboratories Q1 FY27 earnings conference call. 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.
Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.
Speaker #1: I now hand the conference over to Ms. Candice Perera. Thank you, and over to you, ma'am.
Speaker #2: Thank you, Atharva. Good evening, everyone. I'm Candice Perera, on behalf of Daulat Capital. I welcome you all to the Q1 FY27 earnings call of Caplin Point Laboratories Limited.
Speaker #2: Today, from the management team, we have with us Mr. C.C. Parteepan, Chairman; Mr. Vivek Parteepan, Vice Chairman; Mr. Ashok Parteepan, Vice Chairman; Dr. Sridhar Ganeshan, Managing Director; and Mr. D.
Speaker #2: Murali Dharan, CFO. I would now like to hand over the call to the management for their opening remarks. Over to you, sir.
Speaker #3: Thank you, Candice, and thank you to Daulat Capital. Welcome, everyone, to our earnings call to discuss the results of Q1 FY27. Please note that a copy of all our disclosures is available on the investor section of our website, as well as on the stock exchanges.
Speaker #3: And do know that anything said on this call which reflects our outlook for the future, or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces.
Speaker #3: The conference call is being recorded, and the transcript along with the audio will be made available on the company's website as well as the exchanges.
Speaker #3: Please note that this conference call is the copyrighted material of Caplin Point and cannot be copied, rebroadcast, or attributed in press or media without specific written consent from the company.
Speaker #3: With that, I would like to hand over the floor to our Chairman for his opening remarks.
Speaker #4: Thank you. Good evening, all. Welcome to the investor call for the quarter ended June 2026. When everyone said Caplin was no more, we proved that we are still here.
Speaker #4: You know, our CISA turnaround story today—we are neither a parrot that talks too much but can't fly, nor an eagle which has the power to touch the sky.
Speaker #4: However, Caplin is generous and fearless, aiming to fly like an eagle, and eventually, it makes it also. Now, let me present to you the operating architecture of our manufacturing and marketing.
Speaker #4: And my colleagues will present to you about the various factories that are being built and have been built for the regulated markets. Further, our restitution in smaller and larger geographies has created a compounding effect for our company.
Speaker #4: The proof of the competitive motives for free cash flow stands at free cash results standing at ₹1,500 crore, and the total liquid assets are in the region of ₹2,875 crore.
Speaker #4: Our assets, in the form of actual factories and others, will become the engine of growth in the years to come. And now, we encourage actual women empowerment on our shop floors.
Speaker #4: We are more obedient and disciplined. That has really brought actual productivity also on the shop floors compared to the earlier days. Now, most of our machines are totally automated.
Speaker #4: Either they are imported from Germany or Italy for our future facilities, and also for the expansion in the current facilities. And we digitize the entire factory; in fact, CSL, we have completed it to 80–90 percent, and in the next six months, it will become paperless.
Speaker #4: We will try to replicate the same in all our facilities so that digitalization will be completed and the factories will become paperless. In addition to that, we are also introducing the video masters for visual learning.
Speaker #4: Which will help the individual actually from the individual memory to the institutional memory. And also that will give us the institutional intelligence. Video masters will help us actually to capture the entire qualifications so that what will happen, even if the person who actually involved in the qualification leaves the company, the knowledge will remain in the video in the company.
Speaker #4: And we have also further introduced the AI cameras, and we are planning to go for digital twins maybe in one or two years from now. This will help us to do remote monitoring, which alone can actually help us to understand the transparency in the facilities as well.
Speaker #4: Ours is also vertically integrated infrastructure, with intermediate APIs and finished threads for the regulated masters. Most of the APIs that we want to manufacture will be for factory consumption.
Speaker #4: And for the commodity APIs, we will not go for our own manufacturing. We'll rather buy either from India or China for our regulated market business.
Speaker #4: Now, today, products may get commoditized, but if the business model is unique, it will never get commoditized. That’s a recent note. Our cash flow and profit continue to actually grow, in spite of our presence in the smaller geographies of Latin America.
Speaker #4: We have created a compounding effect for our business, as I told you before. Now that we are entering into the bigger geographies, we currently have a mix of tender and private market business.
Speaker #4: However, we'll focus more on the private market so that there is less competition for generics from India and China. We now plan to buy a distribution company in Mexico, which will make our job easier to understand product selection and customer identification.
Speaker #4: Our current challenge is not in the form of a lack of orders, but rather a lack of capacities in our two major factories, which are CP1 in Pondicherry and CSL in Jubilee City.
Speaker #4: And we are expanding to new factories. It is a question of time before we complete these factories. Once we complete these factories, although it may take one, two years, or two and a half years, we are sure of increasing our business many folds.
Speaker #4: Our profits and cash flow will continue to be there because of our business model, and most of the time our business, as I told you, continues to be flourishing because 20 percent of our products, the fast-moving products, always stay in the warehouses which are next to the customer.
Speaker #4: And the goods—20 percent—which I say is always for six months of goods in the warehouses, which helps the customer, and it has actually created a fan club for Caplin products.
Speaker #4: Once we complete all our regulated market factories, with all kinds of pharmaceutical formulations, in two to two and a half years from now, we are, as I told you, sure to reach greater heights.
Speaker #4: The compounding effect will build our business, and the strategic redundancies that it created in our factories will protect our business. We are moving from a manufacture-to-customer model towards a customer proximity inventory model by planning to buy restitution in the bigger geographies too.
Speaker #4: The proximity plus strategic redundancy plus compounding effect model of Caplin will continue to actually flourish in the future too. Also, the manufacture far away—that is, either India or China—with inventory close to demand, and intelligence even closer to demand, with data dominance of facilities, are going to be our marketing philosophy for Caplin Point.
Speaker #4: We define our business; our business is not defined by others. Let me end with a nice narrative: a flame of a campfire does not fear the dark.
Speaker #4: It defines us. It defines it. We are sure of creating the right transition from 'good' to 'great.' Thank you.
Speaker #1: Thank you for giving this presentation. Thank you. Thank you, Chairman. Once again, welcome to everyone for joining us on this call. We have always believed the real strength of Caplin is not just in any individual product or geography or any particular quarter—it is the consistency of the underlying business model.
Speaker #1: Our ability to grow across existing markets and new markets, while at the same time generating healthy cash flow, profitability, and growing our top line as well.
Speaker #1: And meticulously reinvest in capabilities that will support our next phase of growth. I think Q1 is another good reflection of that. Our emerging market business continues to be a very dependable growth engine for us.
Speaker #1: Latin America has been built over two decades by Caplin through a combination of a strong distribution network, supply chain consistency, and, more importantly, a deep understanding of the markets in which we operate.
Speaker #1: We continue to see opportunities virtually across all the existing markets, which goes to show you how Caplin's existing markets continue to grow. What is particularly encouraging is that we are not just trying to extract more growth from existing businesses.
Speaker #1: We expand the addressable opportunity through new areas such as the oncology segment, branded generics, and also new markets such as Chile and Mexico. Coming to Mexico, we have a substantial pipeline of our internally developed products and also in-licensed products planned for filing. Chile and Central America continue to see good traction in both tender and private market business.
Speaker #1: Coming to the US, we continue to see robust growth in cash flow, bottom line, and top line, which are the three most watched parameters for us, in that particular order.
Speaker #1: We have spent several years building the capabilities to participate meaningfully in the U.S. sterile injectable space, and we are slowly starting to see the results of that now.
Speaker #1: We have a very good blend of critical care injectable products that are used in every health system in the US, and in other markets as well, supplemented by a growing ophthalmic products portfolio.
Speaker #1: Going forward, we will also see products with a lot more complexity coming out of CSM, which should add to our bottom line. The important point for us is that this is no longer about only supplying products into the US.
Speaker #1: We are gradually building a much more integrated platform—from R&D and manufacturing to regulatory capabilities—and also having our own label for commercial operations and direct relationships with customers.
Speaker #1: This will shortly be augmented by our own API, which will also give us very good control of our supply chain, which is a critical area in this space.
Speaker #1: Caplin Steriles US is an important part of our evolution. We have already launched a meaningful number of products under our own label, and we are increasingly developing direct relationships with the large and small IDNs.
Speaker #1: In addition to the big wholesalers in the US, we believe this gives us greater control over the commercial side of the business, longevity on products, and, over time, it should allow us to capture more of the value we are creating.
Speaker #1: And this brings me to the most important part of our strategy. We are investing ahead of our growth, as Chairman was saying, about the capex we are putting in. The next phase of Caplin is going to be very different from simply adding more products to our existing platform.
Speaker #1: We are building capabilities across the entire value chain. We are increasing our sterile manufacturing capacity, and we have already expanded into oncology. We are developing API capabilities to increase backward integration, and we are expanding our oral solids and dermatology capabilities also.
Speaker #1: Soon enough, we are also planning to build manufacturing capabilities closer to the market in Mexico. We are also investing in the expansion of our Ameris Clinical for a larger number of BE studies for our growing portfolio of products.
Speaker #1: And importantly, we are doing this from a position of financial strength. We have not taken a single dollar from outside in the form of a bank loan.
Speaker #1: Our CFO will throw more light on our balance sheet strength. So, when we talk about being future-ready, this is what we mean. And as we look ahead, our ambition is not just to become a larger pharmaceutical company.
Speaker #1: We want to build more into a platform with a strong presence across geographies, a broader portfolio, and greater vertical integration, as well as strength across manufacturing and R&D capabilities.
Speaker #1: The first phase of Caplin was about building a successful business model. The next phase is about scaling that model and building capabilities around it.
Speaker #1: So, we try to identify what patterns have worked for us in the past and aim to repeat those patterns for our growth and future as well.
Speaker #1: With that, I will hand it over to our CFO to take us through the financial performance for this quarter. We will open up the floor for questions after this.
Speaker #1: Thank you.
Speaker #2: Yeah. Thank you. Thank you, Mick. Good afternoon, ladies and gentlemen. Let's take this opportunity to thank everyone for taking time off to participate in this call.
Speaker #2: I am pleased to reiterate what I said during our Q1 investors' call for FY26. What is well begun is half done. So, we have begun this quarter well, with a few of the highlights which I would like to share.
Speaker #2: Overall revenue grew by 20%, supported by 18% growth in our conventional market and, more importantly, 26% growth in the US market. The latter business recorded strong growth, supported by a major tender won in El Salvador and supplied mostly in the last quarter.
Speaker #2: US revenue growth predominantly driven by the US subsidy victim survey convention, where revenue increased from 14.4 growth in the previous year to 43.1 growth in three times three-fold increase.
Speaker #2: An absolute growth of approximately ₹30 crores, or a base of 14.4% growth. The business is well positioned to make a significant contribution to CSM and the group's overall growth going forward.
Speaker #2: Gross margin spread was 59.8%, which is in line with our target and expectations, and we expect it to remain at a similar level through the year. The US contributed approximately ₹25 crore of the total ₹50 crore increase in gross profit.
Speaker #2: This shows how CSM is coming into play, and that they will be a more significant player in the future growth of the company. Operating expenses increased in absolute terms from ₹137 crore to ₹161 crore.
Speaker #2: However, as a percentage of revenue, they declined from 23.7% to 23.6%. This improvement in operating efficiency more than offset the movement in gross margin.
Speaker #2: Resulting in an increase in EBITDA margin from 37.7% to 38.4%. The depreciation increased by ₹5.3 crore, primarily due to the capitalization of Line 16 CSM and the oncology injectable project in Cochin and Vizag API plant from addition 4 under what we initially purchased.
Speaker #2: CBT grew by 22.1%, increasing from ₹184.5 crores to ₹228.2 crores. The effective tax rate stood at 20.5%, in line with the target of 20%. So, tax stood at ₹179 crores, representing a 19% increase over the previous year.
Speaker #2: Cash flow from operations has improved from the current ₹95 crores reported for the quarter. This is primarily due to a conscious, decent increase in various costs, from ₹429 crores in March to ₹505 crores, an increase of about ₹76 crores, which in terms of scale will be at least 2.5x.
Speaker #2: To shield against potential supply disruption and ensure supply chain continuity amid the ongoing geopolitical situation, and additionally to guard against potential increases in raw material prices arising from escalation in oil fluctuations, we have increased our RMPM inventory by ₹15 crore.
Speaker #2: Right? So these are the two factors. Apart from that, receivables have also gone up by about ₹46 crore as compared to March, primarily due to supplies to government in the quarter, and these are expected to be received by Q3 of FY27.
Speaker #2: So these are the primary reasons why you would see a separate moderation in the CFO as compared to our conventional increase. So these increases are not likely to repeat in the same quantum going forward from Q2 onwards.
Speaker #2: So the entire profit will flow into the CFO, right? Cash and cash returns have asked the Chairman to put it, an increase by ₹266 crore.
Speaker #2: We were at ₹1,307 crores versus ₹1,237 crores as of last June, and we are at ₹1,500 crores as of June 2026. Liquid assets increased by 30%, that is ₹668 crores, from ₹2,207 crores to ₹2,876 crores, primarily consisting of cash, receivables, and inventory.
Speaker #2: Shareholder spend, or net worth, has increased by 25% in the last one year, or by ₹762 crores—from ₹3,013 crores to ₹3,776 crores as of June 2026.
Speaker #2: So, we will also be modest in saying that, when we compare ourselves to our peers in terms of ratios like EBITDA, PBT, and PAT, we are way ahead of our comparable peers in the market.
Speaker #2: So, with these opening remarks, I would like to conclude and we will be able to answer any questions from the participants. Over to you, Mr. V.
Speaker #1: Thank you, Mr. Murli. We can open up the floor for questions now, please.
Speaker #3: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please start by pressing one on their touch-tone telephone.
Speaker #3: If you wish to remove yourself from the question queue, you may please press start and 2. Participants are requested to use handsets while asking a question.
Speaker #3: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Abhi Jain from AJ Capital.
Speaker #3: Please go ahead.
Speaker #1: Hi, good afternoon. How can I help you? Yes. First of all, sir, congratulations on a steady set of numbers. Good to see that the growth rate is maintained and you're on track to achieving your long-term goals.
Speaker #1: So, congratulations on that. I had two questions. First, I wanted to discuss the Rest of the World's profitability at the PBT level. If I look at the numbers year on year, in Q1 of FY26, that was at 37.5%, the PBT profitability for the Rest of the World.
Speaker #1: That came down to 34.6% and 7% in Q4 of FY26. This quarter, it is down again to about 33-odd percent. So, I just want to understand, what do you see this holding up to?
Speaker #1: Will you be able to guide us in terms of what this level would be for FY27 and for future purposes? Because we have seen that, quarter on quarter, it has been inching down by one to two percentage points in the last 12 months.
Speaker #1: So, can you guide us on that?
Speaker #2: Yes, got it. Okay. Do you have one more question to complete, or is it okay to answer?
Speaker #1: Yeah, your second question is on capital allocation. So I can ask, once you've answered this, we can get on to that.
Speaker #2: Okay, great. That 1% and a half percent which you're talking about, yeah, is actually true. But again, I would request you to look at the free cash reserves and the total liquid assets.
Speaker #2: See, it's quite normal actually for any company. There is a possibility of one or one and a half percent decrease because when the business actually, especially the generic business, is in a position to actually generate cash and generate profitability, which is substantial compared to our peers, I think it's fairly okay.
Speaker #2: But now, our focus, in addition to this market, is moving to other markets as well. And then, the second most important thing is that our expenses are also slightly increasing in these places because the products that we have been marketing, you know, it's more of generics. And the second level of marketing, you know, it takes that—of course—increases the expenses also.
Speaker #2: So that 1% or half percent is not going to be like, you know, reduce getting reduced every year on year basis or every quarter on quarter basis.
Speaker #2: It might even improve—I'm sure it will improve, actually—after a point of time, when we are planning to go for actually more and more products, which will actually create value to our generic business also.
Speaker #2: The reason being is not only this is not a commodity kind of business, where no generics give you this kind of a property, but also because of the business model differentiation.
Speaker #2: Yes, please. Please go.
Speaker #1: Can I, can I get the permission?
Speaker #2: Yes. The Director of Finance will also give you some.
Speaker #1: Hey, one more, one more point.
Speaker #2: Please, please.
Speaker #1: Actually, if you recollect, what you said as a target or committee is about 50% of the contribution margin. Okay, we are way ahead, we have performed better. And then if you compare with the 55% that we had committed and 59.8%, there is nothing to worry about.
Speaker #1: And this is, as Captain rightly put it, it's a quarter-on-quarter thing. We can't say, because you have to see the year as a whole. It depends on what product you sell, which market you sell in for this particular quarter, and what contributions they give.
Speaker #1: So, please, just to suit, we have given—we have said that in my remarks also—it's 59.8%, is what we actually say, but around it, about 50% is what...
Speaker #1: So, those 55% and 25% are a pack we committed way ahead in both the parameters.
Speaker #2: No, I understand that, sir. You are obviously maintaining and achieving your overall numbers. I just wanted to get into, you know, the details of it.
Speaker #2: I wanted to understand the business a bit better, so I just wanted to ask: what is a steady-state level of profitability in Rest of the World that we can expect? That’s my question.
Speaker #2: So, this is coming to the second part of the question. Actually, you answered that, you know, the cash can result in a bit of a drag.
Speaker #2: I wanted to understand your capital allocation. Now I see that, you know, you have this 1,000 odd crores of cash in hand and most of them is invested in the ventures and bonds, et cetera.
Speaker #2: Any thoughts around improving the yield by investing in index funds? I mean, if you look at Nifty 50, Nifty 500, right, these have a steady compounding of 9 to 10 percent, give or take, over any four- or five-year horizon you see.
Speaker #2: So, any plans to invest part of it in index funds? These are relatively safe, you know—they provide a yield of 100 to 200 bps higher than corporate bonds.
Speaker #2: So, just wanted to, you know, keep it on the table if you could put it into consideration. It will help improve the profitability—also the annual profitability—by 100 to 200 bps.
Speaker #2: Looking at the ₹1,000 crores of cash reserves that you have. So just...
Speaker #1: Yeah, so this—no, thank you, and valid suggestion. In fact, this was discussed during our recent board meeting also. We've gone from a state of being ultra-conservative and having everything only in FDs, to slowly moving up the, you know, risk chain, if you want to call it that, you know.
Speaker #1: But your points are well taken. In fact, one of our directors also suggested that, you know, we can be slightly you know, I wouldn't call it adventurous, but we don't have to be right at the bottom in terms of the risk appetite when it comes to investing our reserves.
Speaker #1: I think, slowly, slowly, we'll be moving up. Already, I think we are into credit funds and debt funds and things like that. I think index funds could be the next in line for us to evaluate.
Speaker #1: Maybe what we can do is, over a period of time, work on having an investment policy, per se, you know, for excess funds. But again, we always want to make sure that capital protection is more important than the returns.
Speaker #1: But once again, point well taken. I think one or two percentage points, with this kind of a quantum, will certainly be a large number and we should not be ignorant of that.
Speaker #1: Yeah.
Speaker #2: Yes, sir. The biggest investor under—yes, sir, go ahead.
Speaker #1: Yeah, just one more point. So, in terms of long-term investment, as we have been discussing in every meeting, we are also keeping our eyes and ears open for inorganic opportunities as well.
Speaker #1: So, we would like to have the cash at our disposal at any point of time, yeah. So, part of your...
Speaker #2: portfolio or part of that ₹1,000 crores.
Speaker #1: Kind of an annual committee—we make a small, small beginning. Point well taken, we'll do that. And, yeah, capital protection.
Speaker #2: What's the biggest investor Dr. Warren Buffett uses his cash reserves investing in index fund investing in, you know, safe equities. So obviously, I mean, we shouldn't be so scared about it.
Speaker #2: And Indian equities, especially the index funds that, you know, have a long track record of over a four- to five-year period horizon, giving at least 9 to 10 percent return.
Speaker #2: So, I think we can be a bit more open about it. It helps improve our profitability by 1 to 2 percentage points every year.
Speaker #2: So why not do that? That's just a suggestion. You can start with maybe 200, 300-odd growth—20, 30 percent of the portfolio—and 70 percent you can use for, you know, inorganic growth and acquisitions, et cetera.
Speaker #2: But just thinking that one person can do it, certainly we can do it at our scale. So yeah, that's it.
Speaker #1: Thank you. Thank you.
Speaker #2: Point taken.
Speaker #1: Thank you.
Speaker #2: Thank you.
Speaker #3: Thank you. Ladies and gentlemen, to ask a question, please press star and one. The next question comes from the line of Prachal Sakariya from Sakariya Investment.
Speaker #3: Please go ahead.
Speaker #2: Hello. Hi. Am I audible?
Speaker #1: Yes. Yes, please.
Speaker #2: I have three questions. The first question is, I think Mr. Vivek mentioned that they are looking at a distribution company in Mexico. So, have we narrowed down to any right now?
Speaker #1: Yes, I am the one who pulled that one. There are opportunities, like, you know, three to four companies—the White Chess and another company Ashok Parthiban has looked at it—and of course, it's going to collect the details and send it to us.
Speaker #1: After that, you know, let's do the due diligence and take a call.
Speaker #2: Okay, so we can expect an acquisition soon. Maybe, if—
Speaker #1: It all depends if it is a meaningful acquisition. As I told you, the idea of going for a distribution company is to actually understand the product, mainly for the selection of products and selection of customers.
Speaker #1: And this will also give you an opportunity to assess the entire reach of the distributor. If the distributor covers the entire country, that's a major opportunity.
Speaker #1: So that we'll understand which are the pharmacies, which are the small chains, which are the small hospitals, which are the private hospitals, the distributor is covering.
Speaker #1: Then, accordingly, let's take a call. We'll let you take a decision. Those details are very crucial. If he is actually selling only multinational products, it doesn't make a difference to us.
Speaker #1: If he is selling the local company products, we'll be very keen. We would actually like to buy even at a little higher cost. But if he's only selling multinational products, you know very well multinational products have been sold in this kind of market for that matter, say, 100 years or 60-70 years and above.
Speaker #1: Own local companies means it will not be more than, actually, 20, 30, 35 years. So that also makes a lot of difference. Multinational products, most of them are actually, you know, patents, and they get expired, and that becomes actually a generic.
Speaker #1: Local companies, they only, you know, manufacture the patent-expired products, so something similar to our model—generic business.
Speaker #2: Okay. Okay. Understood. And my second question is to Mr. Vivek. I think we are right now running a 5 Tera line and moving towards a 17 Tera line, which will be one of the biggest in the country.
Speaker #2: So, I mean, what gives us the confidence about the healthy utilization of those 17 lines? Because 17 lines is huge. So, are we expecting that much demand from us?
Speaker #2: Are we—do we have—are we getting a lot of queries right now?
Speaker #1: Yeah. Can I get into it first, and then I'll actually ask?
Speaker #2: Yeah. To any I mean, anyone can answer. I mean, I want the answer.
Speaker #1: Yeah. Currently, for the last four years, I've been sitting in the factory, so I'd like to actually hear a bit of, you know, this thing— you know, the right question to you also.
Speaker #1: See, now, out of the seven lines that we have here today, we find it very difficult to handle, actually, the orders that are coming to us.
Speaker #1: One main reason is, when we were smaller, when we didn't know much about the technology, we didn't balance it properly. Most of our—like, you know, three of our lines—are a mix of TS and aseptic.
Speaker #1: And then whenever we expanded, we expanded in such a way that, you know, it was not actually very correct also. So it leads to a lot of complications in the sense, you know, it is not a major issue in the form of quality issues or integrity issues or a safety issue.
Speaker #1: But it leads to breakdowns. The first phase of our actual injectables took 10 to 12 years already. We got our first USFDA inspection in 2016.
Speaker #1: Then the second phase were all new lines actually, like line four, five, six. So, when we go for phase three, we will not go for all the seven lines.
Speaker #1: We will start with three lines and move all the aseptic to the aseptic—actually, this third line, where it will be with isolator. Which means the aseptic practices will be totally eliminated, because isolator lines don't require aseptic practices.
Speaker #1: Then, when we go for actual ophthalmic products, ophthalmic mission, which we are going to import from Germany, this one also is a very sophisticated line.
Speaker #1: And then it involves lesser human intervention. When the third one is, you know, as I told you, we are not only, you know, getting into the automated missions, we are also getting into digitization.
Speaker #1: Once you comprise digitization, especially the lens, then the entire digitized—in the form of ELOG, EBMR, EBPR—it becomes paperless. But the third one, as I told you, actually is the visual intelligence. People will learn everything through video, because seeing is believing.
Speaker #1: People can learn by, you know, if someone teaches. There is a possibility that if someone happens to see and do the work, it becomes easy also for them.
Speaker #1: So with all these additional advantages you mentioned today, cameras and all, when we go to the customer, we'll be one of the few custom few few companies of our size who has actually the where we tell.
Speaker #1: So I'm sure that we'll be in a position to get actually, you know, good business going forward. Because of A, the entire actually state of the art actually model that we told you in terms of mission and in terms of actually digitization, in terms of video way of doing things in the form of the entire qualifications, most of the time it was done by people.
Speaker #1: And people, when they leave, both leave. But now that it will actually remain in the video library. So, not necessarily you'll have to worry about the people.
Speaker #1: You'll have to bother more about the system. If the system is integrated with AI cameras, then the MA also comes to us easier.
Speaker #1: And it's easier to manage also. And then, someone who is actually in the US, if they want to see whether we have taken up the products for production, they can also see from the US when the production is actually on during the nights here.
Speaker #1: You know, actually, the night here is day there. Injectable is one thing, you know, which goes 24/7. So, like that, I can tell you there are a lot of advantages every customer will have.
Speaker #1: And most of the CMOs of our size may not actually have these types of advantages. And on top of it, we also have R&D.
Speaker #1: Both for API and formulation, we'll be in a position to also do something actually for the R&D and the other things in the form of, you know, tech transfers and everything.
Speaker #1: These are a few advantages which we have. So I’m sure, you know, we’re very confident we’ll be in a position to increase our business.
Speaker #1: Now, I'll invite the Vice Chairman to say a few words about it also.
Speaker #2: Yeah, so from the commercial side, if you see, we are actually booked out till almost February of next year. You know, so we've been just barely able to keep up with demand, and we know that expansion of capacity is extremely crucial for us to keep up with the growing demand.
Speaker #2: Number two, out of the 60-odd ANDAs that we have, only 39 have been launched. We have to continue working on launching the remaining products as well.
Speaker #2: Number three is, we have another 40-plus products in the pipeline, including pre-filled syringes, ophthalmic suspensions, and all of that, which also need to come into play.
Speaker #2: And in the new facility, we're also getting into two very niche areas such as blow-fill-seal products and inhalation products, and potentially also getting into other sterile dosage forms. All put together, it will be close to 15-plus lines, you know.
Speaker #2: So, and I'm not even taking into account any of the capacity requirements that we will need when we get into full-scale operations in Brazil and Mexico and stuff.
Speaker #2: So, by no means do we think this is overexpansion or anything like that. In fact, we are expanding a little bit ahead of time.
Speaker #2: Finally, the last one is we've always had an eye on getting into early-stage biosimilars, especially with a partnership with large Chinese companies that we've already been in touch with over the last couple of decades from our presence in China.
Speaker #2: So, all of these put together, we feel that with all the automation that the Chairman has been talking about, we feel very confident that the sterile space is going to be an important space for us to expand in.
Speaker #1: And the most important point, which I forgot to mention, is that it's actually not date-driven. It's all from internal cash flow. Which means, you know, suppose if it's slightly delayed also, you don't have to worry too much about it.
Speaker #1: Of course, which will not happen. However, this is not actually a date-driven infrastructure that we have created.
Speaker #2: Just to draw a parallel, without mentioning names, the largest capacity of injectables in India has close to 30 lines—like 29 or 30 lines, you know.
Speaker #2: And that company also continues to invest in more, just to draw a parallel.
Speaker #1: Okay. Okay. Thank you so much for such a, you know, detailed answer. And I just have one last question. I have been tracking the company for the past five years.
Speaker #1: And I have this, you know, I really look up to you, but I just want to know one thing: as a visionary, where do you see the company in the next three to four years, maybe by 2031 or 2032?
Speaker #1: You always say that we will be a big company, a big company. How do you define big? And how do you see the company in the next three or four years?
Speaker #1: Okay. This is actually something what you are asking is actually, you know, like far more help to future self. So what is that? See, it's not that how much you have grown, what kind of a company are we becoming?
Speaker #1: So if I want you to actually tell me the size—more than the size, look at actually the kind of infrastructure we are building.
Speaker #1: Be it injectables, be it tablets and capsules, be it ointments, be it any area, we'll have all the facilities, which will be in line with actual international standards.
Speaker #1: So that we can get into the regulated markets worldwide. It could be a global dossier in future. The second important thing, in addition to that, is we also have plans to go for markets like—sorry, countries like Mexico to start our factory.
Speaker #1: Where we have already bought the land. The advantage is, if you set up a factory there, you get a 16% price advantage for getting into the tenders.
Speaker #1: Then, the business that we do, we are not only interested in doing business within tenders; we are also interested in doing more business in the private market, which, of course, is not easily replicable by companies of our size.
Speaker #1: And the big companies are not very keen to get into the private market. You can even verify, maybe a few products they import or buy and sell to the local people.
Speaker #1: And even if they have an office there, they will sell to actually the top distributors. Whereas we will go to the length and breadth of these countries, because my son, who is the Vice Chairman of the company, has been there in this part of the world for the last 22 years.
Speaker #1: Our maximum actual focus will be there in Mexico and Brazil by Ashok, and in the US by Vivek. So even in the US, 70% will be controlled by, actually, you know, the top three companies.
Speaker #1: But there is 30%. You look at the 30%. If you do at least 10, 15% of 30%, that itself is a huge market. So once you create the infrastructure, once you digitalize it and modernize everything, once they understand this is going—these four pillars in the form of integrity, quality, safety is ensured—the product will not—productivity will not be an issue.
Speaker #1: I'm sure. So, if you ask me to quantify it, see, I would prefer to be one among the top 20 companies of the country.
Speaker #2: Okay. Okay. Okay. Okay. Got it. Got it. Thank you. Thank you so much for answering. Thank you.
Speaker #1: Thank you. Thank you.
Speaker #2: Thank you, and good luck. Good luck.
Speaker #1: Thank you. A reminder to all the participants to ask your questions. Please start and watch. Please enter to ask your question. Please start and watch.
Speaker #1: The next question comes from the line of a big change from AJ Capital. Please go ahead.
Speaker #2: Yeah. So just one follow-up question on capital allocation. Do you foresee an increase in dividend payout going ahead, or do you think that you can deploy the capital better in acquisitions and investment by yourself?
Speaker #2: Just some clarity around that.
Speaker #1: It it is difficult to answer to this question. Because if you have a very good opportunity if you find a very good opportunity, definitely you will you would like to put our money actually in acquisition if it is a meaningful.
Speaker #2: Obviously. Obviously. Yeah. Yeah.
Speaker #1: Otherwise, you know, you would like to share actually this thing in the form of dividend also. I'm sure, you know, we'd be able to continue this way.
Speaker #1: That's not going to dent our actual cash flow.
Speaker #2: Right. Okay. No, obviously you should prioritize acquisitions and increasing your capital base, for sure. But in any year you see that you don't have that opportunity, then probably a special dividend or an interim dividend, you know, can be better. That is up to you and the board.
Speaker #2: So just a suggestion.
Speaker #1: Correct. Correct. Correct. Hello? Thank you. The next question comes from the line of Rachel Zakaria from Zakaria Investment. Please go ahead.
Speaker #2: Hi. Just a follow-up question. When are we expecting all the 17 lines to be running completely? And when can we start expecting numbers from those 17 lines?
Speaker #1: Yeah. It will start from one and a half years to three years. Like, you know, at the end of six to seven months, we will start our Line 7.
Speaker #1: And then, you know, in one and a half years, actually, we will start. See, at the end of the day, when we say we start, the commercials will start.
Speaker #1: But again, the registration of the products—even if you have extra, actually A and D—it has to be transferred to the other facility, which is totally a different company.
Speaker #1: It's not actually a part of CSL. It's a subsidiary of Caplin Point, but it's not part of CSL. So that registration and, sorry, the changes in those—how to change the dossier—all these things, of course, Vivek will be in a position to tell you.
Speaker #1: Please go ahead, Vivek, and share your thoughts.
Speaker #2: Yeah. So, right now we have six lines in the facility, and the seventh one is coming up. And then, if you look at our oncology facility, we have a line over there as well.
Speaker #2: So at this point, you're talking about eight lines already. By this time next year, we should have five more lines at the new facility. That is what we call phase three.
Speaker #2: And then finally, we have provision for three or four more lines, which we will activate potentially by 2029 and beyond only. So I would say we have complete visibility on when 13 lines are going to be around, including the oncology side.
Speaker #2: But the provision for the last four lines will be the provision for the last three-four lines. I think we will have to take a call closer to commissioning of the existing one.
Speaker #2: Revenue-wise, see, when you're talking about moving a product from a current line to a new line, especially in the US market, you're looking at at least around 9 to 10 months.
Speaker #2: For that to start, because there is something called a post-approval supplement, where you need to run batches, put them in stability for three months, and then file it.
Speaker #2: That takes six months to get approved and all of that. So, any product that gets converted from the current facility to a new one will take about nine to ten months for it to start getting commercially operational from there.
Speaker #2: Okay. Okay. Okay. Okay. Got it. Thank you.
Speaker #1: Thank you. The next question comes from the line of Ajay, an individual investor. Please go ahead.
Speaker #2: Hello. Hello. Yes. Yes. Yeah. So I had a couple of questions. The first one: I think last quarter you mentioned that we had a 10K tender in, I think, it was in the Ecuadorian market.
Speaker #2: So, I just wanted to know what the spillover from that tender would be in this quarter, and what we can expect from next quarter onward?
Speaker #2: Like, is that tender then completely done?
Speaker #1: Yeah, I think this is El Salvador, not Ecuador. And, yeah, our CFO can throw some light on it. It might not be completely accurate, please, because these are—you know, you continue to have, you know, get replenishment tenders, and all of that.
Speaker #1: So we can give you a basic picture. Go ahead. Yeah, thank you, sir. The original tender has been processed and has been completely supplied.
Speaker #1: And then there are supplementary tenders which we have been getting in, though not in the original volume—say, 10 to 15 percent of the original volume.
Speaker #1: We expect that repeat, so we have, obviously, the part facility, and then we are expecting that to be decided in a couple of months.
Speaker #1: Hopefully, we should get it also. But we are not committing anything as of now. Supplementary tenders will keep coming—whatever product is supplied, additional quantities keep coming quarter on quarter.
Speaker #2: Okay, understood. And can we throw some light on Amaris Clinical and its contribution to the company right now, as well as how you see its contribution two to three years down the line?
Speaker #1: Yeah. So, Amaris will be, by and large, a backward integration for us. We used to have some commercial operations out there with third-party companies, but right now, with the existing 17 beds and our increase up to 120 beds in the near future, it will be largely to cater to our internal biosimilar series.
Speaker #1: Just to give you an idea, if we did bio-series at an external BE center, if something cost us around, let's say, $100,000 per study at Amaris, it would cost around 50 percent of that.
Speaker #1: So the value addition will be indirect, not directly in terms of numbers.
Speaker #2: And in the future, do you expect it to be internal, or will you be willing to offer?
Speaker #1: In future as well, at least, for the next couple of years, we expect this to be the case because we have a significant number of products that we are developing from our oncology side, from our soft gel side, and also, in future, if we get into the inhalation space, this is something that we envision doing internally as well.
Speaker #1: The bioseries of it, you know. So we expect, for the next couple of years, for it to be catering only to Caplin's requirements.
Speaker #2: Thanks.
Speaker #1: Thank you. Thank you. Thank you. Thank you.
Speaker #2: Thank you. The next question comes from the line of Ashish Srivastav, an individual investor. Please go ahead.
Speaker #1: Hi. And is my line audible?
Speaker #2: Yeah.
Speaker #1: First of all, congratulations on the set of numbers. You have been very consistent quarter-on-quarter. Great set of numbers. Sir, my question is around the last Q4 result, where we mentioned about GLP-1 products approval for the Central American region.
Speaker #1: We were pursuing. I did not see any update for the same in this current quarter.
Speaker #2: Yeah, so it's a work in progress. The GLP-1 products, right? The question was about GLP-1 products. They are under registration. We don’t have any commercial business out of those products yet.
Speaker #2: As and when we have some updates on that, we will let you know. They continue to be under registration at the moment.
Speaker #1: Okay. Thank you, sir. That's all my questions. Thank you. Thank you very much.
Speaker #2: Thank you. The next question comes from the line of Ketan Cheda, an individual investor. Please go ahead.
Speaker #1: Yeah, hi. Thanks for the opportunity. I really don't have any questions. I just want to convey my compliments for a wonderful performance. You keep delivering quarter on quarter.
Speaker #1: So, wish you God's health. Thank you so much.
Speaker #2: Thank you. Thank you so much. Thank you so much.
Speaker #1: Thank you.
Speaker #2: The next question comes from the line of Ajay, an individual investor. Please go ahead. Yeah, so, hello.
Speaker #1: Yeah. Can you speak a little louder, please? You are not fully audible.
Speaker #2: What about now? Hello?
Speaker #1: Yes. Yes. Yes. Much better.
Speaker #2: Okay. So I just had a follow-up on our organic growth strategy. Are we also looking at some opportunities in the Indian market and distribution, or otherwise, like normal generation?
Speaker #1: No, we are not looking for any distribution company in India. But if there is an opportunity for us to go for a meaningful acquisition in the Indian market, we will also look at it.
Speaker #1: But not a distribution company, because in generics in India, you don't make money in generics. Only in brand marketing, which of course you are also aware of.
Speaker #1: And we always prefer to actually go for a distributor in Latin America, mainly. Or maybe in the US, but of course, no, the US will be in a position to decide.
Speaker #1: We have been taking care of that area. And coming to Latin America, we know that leads value to our entire business in the entire business that we are doing currently, you know.
Speaker #1: That will add some value to it that can help us to increase our base from one level to the next level, because the country is currently— we are into, in the form of Mexico, Chile, and later actually in Colombia and Brazil and all.
Speaker #1: These are all huge countries, and once you get this distribution company, you'll be in a position to understand the entire client list. That's why we are interested in a distribution in Latin America.
Speaker #2: So, should I take it as it's not in our main plans to enter the Indian market, but if there is an opportunity, then we might?
Speaker #1: Yeah. To the Indian market, to be very honest, you know, we don't have that kind of expertise actually to take care of brand marketing in India.
Speaker #1: And moreover, you also will agree with us that it's better to focus on our core competence. We have been doing well in Latin America. The pattern, of course—as you know, and which you have seen also—is that we continue to grow well.
Speaker #1: So, we will focus more on that one, actually. That's what we are planning to do, and we will do more, actually, in the US too.
Speaker #1: So it will be more of North and South America, which will be our focus in the future.
Speaker #2: Okay. And just one last question on the new tariffs that have been announced on pharma companies by the Trump administration—who is down the line?
Speaker #2: How do we look at it, and are we?
Speaker #1: But you know, I could not hear it properly. Please, please tell me.
Speaker #2: So recently, the American administration announced a wave of tariffs on generics, right, which will come in two years later. So I know it's two years down the line, but.
Speaker #1: You see, you must be knowing also. He has been announcing a lot of tariffs, and of course, we'll cross the bridge when we reach there.
Speaker #1: And every country, of course, every country will go for—they have to protect their own industries. That's why, you know, they will defend, because it's a deglobalized world.
Speaker #1: Definitely, there will be opportunities when we go for our own factories in various bigger geographies. But we would like to see whether it's the ideal time to go.
Speaker #1: It's probably going to take some more time because starting a generic factory in the US will not be cost-effective enough. And maybe when machine learning in the form of, you know, I was saying, what do you call them?
Speaker #1: I was saying robots. When the robots come into manufacturing of generics, yes, every country—even if you manufacture in the US or in any other country where the cost of production is high—will also be more or less the same as in India.
Speaker #1: So, we should wait and watch, should wait and watch.
Speaker #2: Understood. Thank you.
Speaker #1: Thank you very much.
Speaker #2: Thank you. Participants who wish to ask a question may press star and one. I repeat, participants who wish to ask a question may press star and one.
Speaker #2: As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you, and over to you.
Speaker #3: Yeah. Thank you. Thanks
Speaker #1: Once again, thank you to everybody who participated in the investors call. We also appreciate Donut Capital for hosting it, and we look forward to more interactions in the near future with all of you.
Speaker #1: Thank you. Thank you. Thank you very much.
Speaker #2: Thank you. On behalf of Donut Capital Markets Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
