Q1 2027 Divi's Laboratories Ltd Earnings Call
Speaker #1: Riti, and Chief Investor Relations Officer of Divi's Laboratories Ltd. I welcome you all to the earnings call of Divi's Laboratories Ltd. For the first quarter of FY27, from Divi's Labs we have with us today Dr. Kiran S.
Speaker #1: Divi, full-time Director and CEO; Ms. Neelima Prasad Commercial; and Mr. Venkatesh Perumalu, Consumer Lead, Chief Financial Officer. During the day, our board has approved unaudited financial results for the quarter ended June 30, 2026, and we have released the same to the stock exchanges as well as updated in our website.
Speaker #1: Please note that this conference call is being recorded, and the transcripts of the same will be made available on the website of the company.
Speaker #1: Please also note that the audio of the concall is the copyright material of Divi's Laboratories Ltd. and cannot be copied, rebroadcasted, or attributed in press or media without the specific and written consent.
Speaker #2: 200.
Speaker #1: Let me draw your attention to the fact that on this call, our discussions will include certain forward-looking statements which have predictions projections or other estimates about future events.
Speaker #1: These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties, that could cause our actual results to differ materially from what is expressed or implied.
Speaker #1: Divi's Labs or its officials does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise.
Speaker #1: Now, I hand over the conference to Dr. Kiran Divi for opening remarks. Over to you, sir.
Speaker #3: Good afternoon, everyone. And welcome to Divi's Laboratories earnings call for the first quarter of the financial year 2026-27. Thank you for joining us today.
Speaker #3: I will begin with an update on the business and the key operational developments during the quarter. Our focus continues to be on execution, manufacturing reliability, discipline capital deployment, and strengthening the capabilities required to support long-term customer programs.
Speaker #3: Beginning with our generic business, volumes remain stable during the quarter, while pricing continued to reflect competitive market conditions across products and geographies. Overall, the business remained resilient based on our ability to manufacture certain key starting materials and intermediates in-house, which continues to strengthen our supply assurance and operational efficiency.
Speaker #3: This year, also marks 20 years of Divi's in the nutraceutical segment, a journey that began with just 2 products has grown into a portfolio of over 100 offerings across human health, animal health, and dietary supplements, a multiple forms today.
Speaker #3: As we look ahead, we are actively expanding in both capabilities and capacities to meet the demand of a rapidly evolving global market. Within custom synthesis, projects actively continued across all diverse portfolio of customer programs covering multiple therapeutic areas and stages of development.
Speaker #3: We are supporting customers across clinical development, validations, and commercial supply preparations. With manufacturing activities aligned to individual regulatory and filing requirements, likewise the 3 major CAPEX programs are nearing completion and validations are going on.
Speaker #3: As our projects progress, we remain focused on timely execution while continuing to build the infrastructure and technical capabilities required to support future commercial requirements.
Speaker #3: Peptides remain a strategic area of investment for the company. Customer programs continue to progress across multiple stages of development during the quarter. While qualification and validation activities for several peptide fragments are expected to advance over the coming quarters, alongside capacity expansion in both solid-state and liquid-state peptide synthesis, we continue to strengthen the process development and liquid and manufacturing capabilities required for increasingly complex peptide chemistries.
Speaker #3: Our objective is to establish a scalable and reliable manufacturing platform capable of supporting a broad range of customer requirements while maintaining the highest standard of quality compliance and operational excellence.
Speaker #3: On the manufacturing front, Unit 3 continues to assume a large role within our production network. The facility is supporting our backward integration strategy through selected 3 chemistry operations while enabling the phase transfer of manufacturing activities from our existing facilities.
Speaker #3: This enhances supply assurance for critical intermediates, improving network flexibility and support more efficient capacity utilization across our manufacturing operations. The transfer program continues to be executed in line with qualification timelines customer commitments, product demand, and overall manufacturer planning.
Speaker #3: Technology development also remains an important area of execution during the quarter. Progress continues across initiatives involving continuous flow chemistry, biocatalysis, and advanced automation within the manufacturing operations.
Speaker #3: These technologies are contributing to improved process safety enhanced product producibility, reduced process variability, and more sustainable manufacturing routes for complex chemistries. We also continue to implement process intensification initiatives across selected products to improve productivity and support efficient commercial scale manufacturing.
Speaker #3: Across our manufacturing network, ongoing investments in green chemistry, energy efficiency, and continued process improvement remain an integral part of our long-term operational strategy. Collectively, these initiatives strengthen our technical capabilities and enhance our ability to develop and deliver increasingly complex projects with consistency and reliability.
Speaker #3: Beyond our business operations, we remain committed to create long-term social value through focused community development activities. During the year 2026, our CSR programs reach more than 1.8 million beneficiaries across the states of Andhra Pradesh and Telangana through initiatives in healthcare, education, livelihood development, and community welfare.
Speaker #3: These programs remain an integral part of our long-term approach to be a responsible and sustainable growth. Thank you. I will now hand over the call to Ms. Neelima Divi, who will present the operational financial highlights of the quarter.
Speaker #2: Good afternoon, everyone, and welcome to Divi's Laboratories earning call for the first quarter FY 2026-27. Thank you for joining us today and for your continued confidence in the company.
Speaker #2: Before reviewing the financial performance of the quarter, I would like to provide an update on the operating environment and measures we have taken to maintain supply continuity execution discipline and operational reliability across our business.
Speaker #2: As discussed during our previous earnings call, the external operating environment remained challenging during the quarter particularly across global trade routes and sourcing channels linked to West Asia.
Speaker #2: Raw material availability remained largely stable although input cost trends continue to vary across categories. While prices of certain raw materials moderated during the quarter, solvent costs remained elevated for a significant part of the period.
Speaker #2: We continue to engage closely with the customers to evaluate commercially appropriate mechanisms to mitigate these costs wherever feasible. At the same time, the evolving geopolitical situation in West Asia has introduced additional uncertainty into global supply chains.
Speaker #2: Accordingly, we continue to monitor developments closely and calibrate our procurement strategies sourcing plans and inventory positioning in line with changing market conditions. Maintaining supply continuity remains one of our key operational priorities.
Speaker #2: During the quarter, we continued to maintain strategic inventory buffers where appropriate to improve material availability and mitigate the risk of supply disruption. Our procurement, manufacturing, and logistics teams remained closely integrated particularly for time-sensitive materials such as solvents where storage flexibility is inherently limited.
Speaker #2: Material availability continues to be reviewed at frequent intervals with procurement decisions aligned to production schedules customer commitments and lead time assessment. We also maintained regular engagement with customers to ensure production planning and delivery schedules remain well-coordinated as market conditions evolved.
Speaker #2: Preferreds made over the past several years to strengthen procurement resilience diversify our global supplier base and expand domestic sourcing capabilities have continued to support manufacturing continuity across our network.
Speaker #2: These initiatives together with our backward integration programs have enhanced supply assurance for several critical raw materials and intermediates while reducing dependence on individual sourcing channels.
Speaker #2: This integrated approach continues to strengthen the resilience of our manufacturing operations and supports our ability to consistently meet customer commitments. Global logistic conditions also remain challenging throughout the quarter.
Speaker #2: Freight rates across both ocean and air transportation remained elevated while the availability of containers and ISO tanks continued to require careful planning and coordination.
Speaker #2: International supply chains experienced condition at several ports tighter vessel allocation cargo rollover blank sailing and extended transit times. All of which increased operational complexities across export logistics.
Speaker #2: Despite these conditions we continue to work closely with our logistics partners to ensure reliable execution of shipment schedules. While near-term external conditions remain uncertain we remain committed to investing in manufacturing capabilities supply chain resilience and enabling infrastructure to strengthen our long-term competitiveness.
Speaker #2: We believe these investments together with our integrated manufacturing model and disciplined approach to execution position the company well to support future customer requirements and create sustainable long-term value.
Speaker #2: With that I will now take you through the company's financial performance for the quarter ended June 30, 2026. For the first quarter of FY 2026-27 the company reported a consolidated total income of 3,144 crores compared to rupees 2,529 crores in the corresponding quarter of previous financial year.
Speaker #2: Profit before tax increased to rupees 1,180 crores compared to 733 crores in the corresponding quarter of last year. While profit after tax to that 902 crores compared with 545 crores in the same period of the previous year.
Speaker #2: On a standalone basis the total income of the quarter was 3,037 crores compared with 2,476 crores in the corresponding quarter of previous financial year.
Speaker #2: Profit before tax increased to rupees 1,165 crores from 747 crores while profit after tax increased to 895 crores from 557 crores on a constant currency basis the standalone revenue recorded a growth of 10% during the quarter.
Speaker #2: Exports continued to account for approximately 90% of the standalone revenue. Europe and North America accounted for 75% of our exports. The business mix for the quarter reflected customs emphasis contributing 60% of the revenue and generics accounting for 40% respectively.
Speaker #2: Net material consumption for the quarter was 31.2% of the revenue from operations on a standalone basis. Reflecting the continued benefits of our integrated manufacturing model and product mix.
Speaker #2: During the quarter the forex movements resulted in a net forex loss of rupees 7 crores compared with the net gain of 39 crores in the corresponding quarter of previous financial year.
Speaker #2: Our global nutraceutical business reported a revenue of rupees 298 crores compared with rupees 250 crores in the corresponding quarter of last year. During the quarter the company capitalized assets amounting to rupees 451 crores.
Speaker #2: While capital work in progress to that 2,034 crores as of June 30, 2026. Reflecting the continuous progress of our ongoing expansion projects. As of the end of the quarter cash and cash equivalents to that rupees 3,611 crores trade receivables were rupees 3,056 crores and inventories to that rupees 4,413 crores.
Speaker #2: Thank you.
Speaker #1: Thank you madam. With this we would request the moderator to open the lines for Q and A.
Speaker #3: Thank you sir. Ladies and gentlemen we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.
Speaker #3: 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 #3: Ladies and gentlemen we'll wait for a moment while question queue assembles. Our first question comes from the line of Kunal Dhamesha with my credit.
Speaker #3: Please go ahead.
Speaker #4: Hi. Thank you for the opportunity and congratulations on a very good set of numbers. The first one on the significant uptake in the customs emphasis business.
Speaker #4: I believe that the initial commentary alluded that it still doesn't have a component coming from the dedicated capex project. Instead the correct understanding?
Speaker #1: It is hard to define that because like I said we are undergoing validation of some of the capex projects so a certain amount product has also been shipped to the customer.
Speaker #1: And there are multiple projects underlying at this point. Yes.
Speaker #4: Okay. So then just from an understanding perspective sir between the let's say validation quantity to the capex that we have done what is the usual ramp up in terms of the quantities we can see?
Speaker #1: So you know once the validations are done we will have to send the materials to our customers where they have to do their own further qualification get it into their formulations and then the agencies different agencies have to approve only after that we would then start commercial quantities.
Speaker #1: So it's difficult for us to mention the quantities or the amounts because we are bound by CDAs at this point.
Speaker #4: But sir anything from history let's say can you share that you know from whatever validation quantity that's then commercial quantities are generally in this range?
Speaker #1: Could you repeat the question again please?
Speaker #4: Yes. From the history can you share some broader range as to let's say if you sent X quantity for validation then the commercial quantity when the project ramps up are in the range of let's say 5X to 10X or 5X to 15X.
Speaker #4: Just for historical experience.
Speaker #1: Okay. So to answer that right it depends on the product that we are manufacturing. Some products are annual demand is not more than 1,000 kgs.
Speaker #1: Some products we manufacture are 5 to 6,000 tons. So it's very difficult for me to answer this question. It totally depends on the product.
Speaker #1: Some products go at microgram dosing for the customer for the end patient population. So it's a very broad statement you have asked. I cannot generalize this statement.
Speaker #4: But sir we have dedicated capex right? So we would know like what's the total quantity we can produce to that extent.
Speaker #2: Can you repeat that again please?
Speaker #4: Like for the dedicated capex projects we know what capacities we have put up right? So then is it not fairly can you not provide some range as to what's the maximum capacity you can reach within those dedicated projects?
Speaker #4: From what you have supplied to let's say validation stages.
Speaker #1: You know like I said in my first statement right we are bound by CDAs on the quantities on how much we'll be supplying the product name and everything.
Speaker #1: I wish to share more but I'm bound by CDAs not to share. All I can say is the validations have been completed and we would be going commercial as and when the qualifications with the agencies are completed.
Speaker #1: The quantities how much we have order book value other topics I'm not at the liberty to discuss.
Speaker #4: Sure sir. So second question is on the peptide modality and you also talked in your initial remarks. So when you consider your backward integration into peptide building blocks amino acids your years of experience and the capacities that you have put up till now if you consider all these factors and then look at the overall global peptide landscape and then the number of players that are there which most of us are aware where how many global CDMOs do you think can actually compete with all the advantages you have with you in terms of cost and supply reliability over the next three to four years?
Speaker #1: See, I cannot talk about other manufacturers right? It's not right. But what I can talk about is the easiest and a unique situation because I think we are the only ones who start from basic raw materials build our own peptide building blocks.
Speaker #1: Okay? Then we have protected amino acids. We do dipeptides, tripeptides. We have gone into fragments. Okay? So we have a complete chain of backward integration which gives us a much more better opportunity compared to others.
Speaker #1: So I can only talk about why release is different. It's not fair of me to talk about how I will be more competitive than others.
Speaker #1: I mean we are seeing amazing opportunities in the fragment segment. And several opportunities. So I mean a lot of them are in pipeline. Some of them are in clinical phases.
Speaker #1: Some are going through validations right now. So as we speak there are good opportunities in this line. That's why we are even in my speech I mentioned that again expanding our capacity by acquiring a few more 3,000 liter SPPSs.
Speaker #4: Okay. Sure. And sir lastly if I may.
Speaker #1: Thank you Kunal. I'm sorry to interrupt you but you may please rejoin. Thank you for more questions. We have a lot of projects. Thank you.
Speaker #4: Ladies and gentlemen in order to ensure that the management will be able to address all the question from the participant we request you to kindly limit your question to two question only per participant.
Speaker #4: If you have a follow up question please rejoin the queue. Our first question come from the line of Surya Narayan Patra with Philip Capital.
Speaker #4: Please go ahead.
Speaker #3: Yeah. Thanks for the opportunity sir. And congrats for the great set of numbers. My first question is about the dedicated project again. So before we start commercial supply of this anytime in the later part of the current financial year so what are the key milestone that we should be seeing that whether any regulatory approval would be a kind of key monitorable here or being these are like intermediate FDA inspection and clearance that would not be a required aspect here?
Speaker #1: Yeah. All I can say is I'm a part of the innovator CMC filing. So I do not know it is of course it will definitely require regulatory clearances.
Speaker #1: It's not a raw material or basic material. So we'll come for an inspection. We'll actually not come for an inspection. We'll the agency agree and take the file in and say you can start buying from release.
Speaker #1: I do not I cannot answer for the agency. But what I can say is we are completely ready for all regulatory submissions. We are ready for inspection anytime if there is an inspection.
Speaker #1: And as the validations go through all the data goes through once the customer files we'll have more clarity on an assumption of timeline.
Speaker #3: Okay. Sure. Sure. My second question is about the kind of a margin trajectory that we might see going ahead. Because in the opening remark as ma'am indicated that the market environment remaining difficult only in terms of sourcing raw material availability procuring trade challenges and all that.
Speaker #3: But thanks to the kind of INR depreciation what we have seen significant this quarter we have surprised significantly in terms of the margin front.
Speaker #3: So given this tail wind that we have already witnessed so can you talk something about your margin trajectory with what if not on the number front at least qualitatively going ahead in the current financial year?
Speaker #2: See, currently I would say that we did have quite a bit of increase in our raw material costs on various trunks. Mainly we saw it on the solvent side which we never saw before.
Speaker #2: And few of the materials which are sourced which are dependent on those kind of solvents as well. And compared to Q4 Q1 did have a forex loss as well.
Speaker #2: But if I have to say like margin wise I would as we always historically say let's not look at it on a individual quarter basis rather we look at it on a year basis.
Speaker #2: Where sometimes there's a lumpiness in one quarter and there is not so much of a custom senses business but more of a general business in another quarter.
Speaker #2: Considering this quarter we did have more of custom synthesis which is 60%. We do see the margins slightly higher than the previous quarters but again as we always said there is lumpiness.
Speaker #2: We always look at year on year basis rather than just a quarter.
Speaker #3: Sure ma'am. Just one aspect from my last point here I wanted to check. About the generic portfolio we have been talking about entering into the new product post patent expiry opportunities.
Speaker #3: So anything that you would have added recently into our portfolio if you can talk something about either number of product or the name of any specific that you would have recently entered into.
Speaker #3: Anything on that front would be helpful sir.
Speaker #1: So in the last few years as we have been validating and then we have filed about 40 MS so far with various customers. And these are right now we are supplied validation quantities to them and they're undergoing qualifications as we speak.
Speaker #1: One of them actually is trying to look at having exclusivity with our long term so right now that negotiation is going on. And other than that products like I could mention one or two like Vivek which we have filed multiple customers are qualifying us as we speak.
Speaker #1: And once the qualification is done we're expecting the next three to six months slowly commercial volumes will move out.
Speaker #3: Oh sure. Great sir. Thank you. We see all that.
Speaker #4: Thank you. Any question come from the line of Damayanti Kerai with HSBC Bank. Please go ahead.
Speaker #2: Hi. Thank you for the opportunity. My question is actually on your cost. Basically on the change in inventory where for the June quarter the number which we are seeing is substantially larger than what we saw in the previous quarter as well as for the safe full year of March.
Speaker #2: So when we look at number change in inventory is around 500 crores compared to say 50 to 100 crores kind of number which we saw for the previous period.
Speaker #2: So can you help us understand what has basically led to this large swing and whether we see any reversal or normalization in coming quarters?
Speaker #2: Because I understand this is the major factor which led to substantial difference in the gross profit levels. Hello? Yes. So what you're like the increase on the stock is mainly I would say from two points.
Speaker #2: One as you are aware we in the last meeting as well I have mentioned that we are stocking the material to make sure that we wouldn't have any production stoppage or a production loss.
Speaker #2: So we are doing we are currently stocking it on a three monthly basis like any given point of day for the next three months.
Speaker #2: Are we secured for our production? And these we are securing at a higher cost to make sure there is no production stoppage and there is no shipments that are delayed to our customers.
Speaker #2: And secondly as Kiran has mentioned some of our projects new capex projects have gone into validation batches and even those materials are being reflected in this.
Speaker #2: So it's a combination of both that you have seen the increase in the stocks. Sure ma'am. That's helpful. So to secure your supplies as you mentioned you are doing on a three month rolling forward basis.
Speaker #2: So till the time uncertainty continues in the broader macro market similar strategy will continue right? You will talk of this three month rolling basis to secure your supplies.
Speaker #2: That should be the ongoing trend. That's something that we have consciously taken a decision that we would be like I think around March is the time when we decided we would be doing the rolling three month and we would secure the material and that's why we never had a production loss or a shipment stoppage in the last few months.
Speaker #2: Okay. That's helpful. My last question is on your statement on importance of unit three. In your entire supply chain so as we discussed previously also should we assume the key role which unit three will play is to free up capacity for unit one and unit two by helping you more on the KSM and intermediate part and we will unlikely see any commercial supplies till the time it's approved by key regulators.
Speaker #2: Will that be the case?
Speaker #1: So Kakinada right now is playing a key role by doing our backward integrated work because we have several projects online either with innovators or in-house generic molecules where we need additional capacity and quickly to enhance and utilize existing regulatory approved plants we are moving it certain amount of chemistry free chemistry works to Kakinada.
Speaker #1: But eventual long term plan is to qualify Kakinada with all regulatory clearances. And Scott qualifying that plan too. But every regulatory clearance also takes time.
Speaker #1: Even after you validate a certain new project FDA will take its own time one or two years since it's a new place and then they will qualify.
Speaker #1: So in the meantime we are filling the plant with free chemistry products.
Speaker #2: Sure. And what is the utilization level at your unit one and unit two plants? Around 85% I would say. Across all the three units.
Speaker #2: Across three units. Okay. Thank you. I'll get back in the queue. All the best.
Speaker #4: Thank you. Reminder to all the participants kindly restrict the question to two question only per participant. Next question come from the line of Shyam Srinivasan with Goldman Sachs.
Speaker #4: Please go ahead.
Speaker #3: Yeah. Good afternoon. Thank you for taking my question. I don't think in the call out you had given the new to physical absolute number.
Speaker #3: We typically give that. Can you please?
Speaker #2: It is 298 crores this quarter.
Speaker #3: About 300 crores. So it was 250 crores last year same time and maybe 240 crores Q4.
Speaker #2: Yes. That is right.
Speaker #3: Yeah. So when I then back out the generic generic business we still have probably single digit kind of a growth and maybe flattish growth.
Speaker #3: When I look at the industry data ma'am I'm now starting to see at least in the month of June pricing for generics API exports overall I'm talking about is starting to see positive inflection.
Speaker #3: Right? It's now maybe 7 or 8 kind of a growth. I'm doing a very rudimentary way as you can imagine what is available. Are you seeing any signs that generic pricing is maybe one month is not the right extrapolation you need to do but are you seeing any signs that we are at the end of a long generic pricing pressure cycle and even from a China perspective are you seeing some of your companies?
Speaker #1: Yeah. Coming to the generic pricing right. So you have to understand two things. One there is a substantial increase in raw material. Cost itself.
Speaker #1: I mean we have solvents have become almost double or triple the price. Certain solvent based raw materials have increased substantially because of the issue in the Middle East.
Speaker #1: Because of this the direct pass on is also being shared with the end customers. Right? Most of the generic houses. This is the increase you're seeing in the pricing factor that's going on.
Speaker #1: Even we have increased our price slightly wherein ever possible with our customers because otherwise the products become unviable to even produce. So whatever you're seeing right now is a market correction based on the raw material prices that have taken a substantial hit.
Speaker #1: It's not based on the markets have corrected and the pricing pressure has gone down.
Speaker #3: Got it. Kiran, any quantification of what is the solvent lead pricing change or adjustments that we have taken?
Speaker #1: I mean that would be very difficult right? Because we manufacture close to 60 products now. I cannot generalize that statement. I would go usually our calculations are product to product basis.
Speaker #1: Because every product uses a different solvent. Some are water based. Some are heavily solvent based. If you take a peptide it's almost like use about 2000 liters per one kilo.
Speaker #1: So it's hard for me to answer that question.
Speaker #3: No problem. Thank you. Just on the second question on customs synthesis strong growth this quarter 60% of total revenue. How should we look at the reminder of the year?
Speaker #3: Is this going to be is there an element of lumpiness in Q1 that you would kind of ask us to be less optimistic about and talk about full year where if I remember in end of quarter four we had given like a double digit maybe I'm extrapolating 10% dollar revenue growth for us.
Speaker #3: Do you think there are upside to that following how Q1 has panned out?
Speaker #1: I would like to stick to my statement saying that we will show double digit growth. No matter what. Lumpiness I cannot see everything depends on after these validations are done how the regulatory approvals will take place.
Speaker #1: Will it go really fast? Whether the agencies will fast track these drugs. And the approval process. I mean there are a lot of hits in these situation right?
Speaker #1: So it's hard for me to say will it be 60/40 in the coming months too? Will it be 50/50? Or I would like a healthy mix always.
Speaker #1: But for now I would like I would say that we would assure a double digit growth for sure.
Speaker #3: Got it. Thank you and all the best.
Speaker #4: Thank you. Next question come from the line of Tushar Manudhane with Motila Laws for a financial services. Please go ahead.
Speaker #2: Thanks for the opportunity and congratulations. So just on this new progress which have gone into validation are there any further validation batches which are going to come in the subsequent like in FY27 process?
Speaker #2: Or we are largely supplying?
Speaker #1: Yeah. So we have like I explained right? Apart from these three projects we have several other projects which are in different stages in different stages of our pipeline.
Speaker #1: Either they're in chemical studies that our customers we are producing small volume. Some of them are on pre-validation. Some of them are undergoing validations.
Speaker #1: They may not require large investments. We may also use our existing facilities we have. So I cannot we do have several projects which are coming up in the next quarters which will require validations as we go forward.
Speaker #2: But like if I have to quantify are there without going into projects specific detail the revenues of those validation batches are are they sort of in size similar to what you have done in Q1 of FY27?
Speaker #2: Would that be able to.
Speaker #1: Would you repeat your question? It's not clear please.
Speaker #2: I'm asking the size of the revenue is these validation batches you have generated in one Q of FY27. The subsequent projects at least in the near term would that be of similar size?
Speaker #3: See. It's difficult to say that because size is different for each product and it's not like one size fits all. It differs for every product different sizes different costing different what do you say?
Speaker #3: Chemistry capabilities that would require. But I would say overall as an organization we always look at a double digit growth. That's how our revenue model is being built.
Speaker #3: And healthily we would want a good product mix wherein we don't have heaviness of one product or one customer or one supply chain. So that's where we are at.
Speaker #3: We would say if you want to look at a revenue projection we are looking at a double digit growth.
Speaker #2: Okay. So can we do three major projects if we were sort of refresh in terms of the total amount that we have spent on this project?
Speaker #2: Combine three.
Speaker #3: Your voice is not very clear.
Speaker #2: I'm asking three major projects three major projects which are towards completion. How much overall you would have spent on this? Hello?
Speaker #3: Yes. Just a second please. You can say we are almost there around 70% here and there depending on which project it is.
Speaker #2: And so amount ma'am if you could please say 70% assembled to what number in absolute?
Speaker #4: Thank you.
Speaker #3: So that's about I would say the one that we declared to the stock market earlier. Was the three projects together about if I remember correctly 2000 crores.
Speaker #3: So I would say 70% of that has been capitalized so far.
Speaker #4: Thank you. Next question come from the line of Vivek Agarwal from City Group. Please go ahead.
Speaker #3: Yeah. Thank you. Thanks for taking this question. In this quarter have you made any commercial quantities supply of commercial quantities of any GLP-1 program or is this just a pickup in the existing small molecule or any new small molecule products that is where the commercial supplies have begun?
Speaker #3: Just want to understand what has given the growth in the consumption table.
Speaker #1: Yeah. I cannot answer that question but if you ask me about GLP-1s or small molecules I can just tell you that we have done we have gone through validations of the three large projects we have done and several other projects are on the pipeline.
Speaker #1: Right now peptide is one of our key portfolio that we are going strongly. We have several fragments which have been validated supplied and also several fragments are in the line of being validated.
Speaker #1: We're also expanding our capacity by installing several multiple 3000 liter SPTSs because we see a lot of future opportunity.
Speaker #3: Understood. So in peptides again as you have highlighted that you are installing multiple 3000 liter SPTS lines and in one of the previous calls you stated that an ambition to be one of the largest players globally.
Speaker #3: So what exactly does that signify? Are you aspiring to reach a scale compared to comparable to the current largest player or are you looking to establish yourself on a leading other leading player given that the largest incumbent is significantly bigger?
Speaker #1: See. Based on our statement what we said in the past and we stick by the statement saying that we want to be the largest integrated player when we say integrated we are backward integrated from basic raw materials from making protected amino acids.
Speaker #1: We do our own resins. We manufacture our own FMOC box protected amino acids. Okay. Tags. So with all these being manufactured in-house we have an advantage on supply.
Speaker #1: Which gives us a stronger and faster approach to deliver product. That is and this gives us a competitive edge along with others in the global market.
Speaker #1: I do not want to comment about why I'm different than others. That is not right. But what we can say is we are always we do not compete with our customers.
Speaker #1: We are actually playing a complementary role. That's why our customers like us.
Speaker #3: Understood. And is it possible for you to quantify the overall capacity SPTS that you put so far?
Speaker #2: You weren't audible towards Anthony. Please repeat that question again.
Speaker #3: No problem. Thank you. That's from my side.
Speaker #4: Thank you. Next question come from the line of Neha M from Bank of America. Please go ahead.
Speaker #2: Yeah. Thanks for taking my question. On the solvent pricing that you mentioned how are the trends right now? Are they softened after what we've seen in the first quarter levels?
Speaker #2: Are you seeing some normalization in cost as yet?
Speaker #3: Well as of now I would say we see a few weeks of flat trend and then again suddenly we see a rise in it.
Speaker #3: It all depends on the situation that's happening in the Middle East. I mean you are seeing the news every day. It's a different news and the news does affect the supply and it does affect the pricing.
Speaker #3: So and it is not something in our hands either because it is it comes in bulk and affects the entire country at the same way.
Speaker #2: And Neha would it be fair to assume that you haven't seen any issues in being able to meet a supply commitments because of solvent not being available?
Speaker #2: So pricing is the only issue at the moment right? That would be a fair assumption.
Speaker #3: See. I wouldn't say that the supply is easily available every day. I would say this that we were proactive in securing the material three months in advance.
Speaker #3: Rather than procuring it just in time. The organization always went towards procuring material just in time and making sure there is no overstocking of material.
Speaker #3: But in the last few months we decided we would go for a three month rolling inventory stocking just to make sure that there is suppose there is no shipment coming in.
Speaker #3: My production doesn't stop in the factory.
Speaker #2: Understood. And for Unit 3 what is the utilization level it is at currently? In case you provide that detail.
Speaker #3: I cannot comment unit by unit because each unit is quite different. But I would say across all the three units it is about 80% to 85% utilization.
Speaker #2: Understood. And last question there is no inventory gain that you have in this quarter right? There's no inventory gain that is recorded in the gross margin right?
Speaker #3: Can you repeat that question again? Is there any inventory gain that we have recorded in this quarter? Would there be any inventory gains at all in this quarter?
Speaker #3: No. That's not the case.
Speaker #2: Okay. Thank you so much.
Speaker #4: Thank you. Next question come from the line of Binu. Pati Parampil with Elara Capital. Please go ahead.
Speaker #3: Hi. Good afternoon. Just a follow-up question on margins. When earlier question you said that you look at margins on a year-on-year basis. And not quarterly because of the lumpiness.
Speaker #3: So would you give some idea about how the full-year margins can be compared to last year? Is it significantly better or so at the gross level and EBITDA level?
Speaker #2: At gross level I would say it was approximately 60% all over the year. And frankly speaking if I'm looking at EBITDA margin it would be the similar as last year.
Speaker #2: But my as we normally say we are the growth that we see will always be a double digit growth. And it won't we would say don't look at it at this quarter and say our gross margin is so much.
Speaker #2: So this is what is going to be for the rest of the year. It's going to be those are 68% this quarter. Approximately. But I would not look at that as something consistent throughout the year.
Speaker #2: I would say there would be lumpiness next quarter could be lower or higher. It's something that we need to wait and see.
Speaker #3: Understood. So if I got your answer correctly this year's gross margin would be comparable or slightly better than last year?
Speaker #1: So to answer this question right everything depends on once we finish the validations or the validations ongoing right now. If the approvals come faster then things will change.
Speaker #1: The ratio will be higher in terms of CS because commercial volumes will start moving. So all this is subjected to all regulatory approvals. So we would just like to stick to the double digits and as and when things change quarter on quarter and the moment we know something is happening we will definitely inform.
Speaker #3: So thank you.
Speaker #4: Thank you. Next question come from the line of Saurabh Bank with Devas Consultant. Please go ahead.
Speaker #2: Good afternoon sir. Thank you so much for taking my question. So I'd like to know few things about the contract media. Like how is the status as of today?
Speaker #2: The Iodine and Gadolinium. And how we actually think this one for FY27. So if you just put few colors on it so that would be too much helpful.
Speaker #1: Sure. So on the Iodine-based contract media we have we are in the process of signing long-term contract with two of the customers. And this will be for multiple years.
Speaker #1: And commercialization has for one of them has already started. The second one we will start in the next few months. And this will be substantial quantities going forward.
Speaker #1: The coming to Gadolinium like I told you we are still working on a clinical phase project. As and when we see the customer sees likes with it we will also start moving on that segment.
Speaker #2: Okay. So sir in our last phone call you have discussed that the Gadolinium is in pre-commercial and qualification phase. So as on today I mean in this quarter can we say that pre-commercial is done and the qualification phase is completed?
Speaker #2: Or if you give us any guidelines so when this will be totally completed?
Speaker #1: No see. Coming just one second please.
Speaker #2: Huh.
Speaker #1: See. Right. See what I have told you is the Gadolinium compounds we are still at the qualification stage. Which is in Phase 2 and Phase 3.
Speaker #1: That's what I said last time. I didn't say that we did validations. So we are tagging along with the customer and as and when they get approval for the next phase we will again start seeing further in.
Speaker #1: Right now the project is on slow phase with them. On the Gadolinium side. That's why still we are waiting for it. They are waiting for regulatory approvals and we are waiting.
Speaker #1: Once they get their approval then it will be clinical phase 3.
Speaker #2: Okay. Okay. Thank you so much sir. For the clarifications. And wish you all the best for the full year as well. Thank you so much sir.
Speaker #4: Thank you. Next question come from the line of Thirumala Reddy with Individual Investor. Please go ahead.
Speaker #3: Hi. Am I audible?
Speaker #2: Yes you are.
Speaker #4: Yes sir you are.
Speaker #3: Yeah. Yeah. Yeah. Thank you for taking my question. So will it be possible to give a split between phase-wise molecules in the customs synthesis?
Speaker #2: See the customs synthesis we are bound by the confidentiality agreement. So we cannot talk about the quantities or the volumes or the value in the past.
Speaker #3: No. No. No. I'm not asking about any quantities or volumes. It is just number of projects in each phase. Like phase 2, phase 3, commercial.
Speaker #3: So that's the breakup between.
Speaker #1: We have that. We have done several right now we have several projects in the pipeline. That's all I can answer. And also close to about 18 to 20 projects are actually commercialized or being commercialized as we speak.
Speaker #1: So we have a healthy pipeline along with projects which are already in the portfolio.
Speaker #3: Thank you. On the my next question is about competitive landscape. So in India there are a lot of companies are starting CDMO segment. And they are consolidating into CDMO do you see any margin pressure in CDMO segment going forward?
Speaker #3: Or is there any indication from customers for negotiating hard on pricing?
Speaker #1: See. I cannot answer about why others how others are joining in. But what I can say Divi has a track record. I mean we are close to I would say 30-year-old company.
Speaker #1: We have been in CDMO. We are one of the first CDMOs in India. And we come with a lot of reputation. Customers trust us over period of several deliverables we have given.
Speaker #1: Okay. And where we have been in the critical projects where we have handheld them. We have supported them. So customers value us for who we are.
Speaker #1: And we come with a history. So we have a lot of it's not about pricing. It's not the only thing. Innovators look at. They look at sustainability.
Speaker #1: They look at safety issues. They look at your EHS capabilities. Your equipment management system. Your employee healthcare system. They look at all the aspects if they ever want to work with a particular customer.
Speaker #1: And Divi always meets all their requirements. That's why most of them come to us. They give us opportunities. And they work with us.
Speaker #3: Yeah. Yeah. Thanks again. That helps a lot. And wish you all the best for the rest of the year.
Speaker #4: Thank you. Next question come from the line of Dhawal Khut with Jeffrey. Please go ahead.
Speaker #2: Hi sir. I wanted to know what is the growth in our top five product let's say in constituent currency as well as in INR terms for this quarter overall as a company.
Speaker #2: We don't disclose product-wise information. Okay. Okay. And secondly whatever validation product that we have supplied in the first quarter how many end market molecules do they belong to?
Speaker #1: No. That is so right now like I explained right. We have done validations for a few projects. And we have gone into the customer's filings.
Speaker #1: Okay. We are a part of their CMC. So it goes into their filings. So from there by the time they the regulatory bodies approves it and do they want an inspection they're okay with the previous inspection data.
Speaker #1: They have review. And then they will give us approval. So it does go into the end patient population project. So but we have to wait and see when the commercialization will take place.
Speaker #2: Yeah. Yeah. So what I'm trying to ask is how many different molecules do they end up supporting? There might be three different fragments. But they might be supporting just the same molecules.
Speaker #2: There could be two intermediates for the same small molecule project. So how many different molecules are we supporting through these validation methods?
Speaker #1: So to answer your question right if your question is towards the three major projects with the CAPEX is involved it's three different products completely.
Speaker #1: Okay. And we have other projects also in line which we have validated. I'm not at the liberty to disclose too much. So all I can say is we have several projects which are going to individual molecules which will attain to the patient population as and when regulatory approvals take.
Speaker #2: Okay. Okay. Thank you.
Speaker #4: Thank you. Next question come from the line of Rahul Jeevani from IFL Securities Limited. Please go ahead.
Speaker #3: Yeah. Thanks sir for taking my question. So coming back to this inventory change and margins again. Now this quarter the inventory change number was 500 crore.
Speaker #3: And the usual quarterly run rate has been around let's say 50 to 100 crore kind of a number. So if we adjust for let's say this 300 to 400 crore of incremental inventory change then our gross margins this quarter would have been between 55 to 58 percent.
Speaker #3: And our EBITDA margins would have been 28 to 30 percent. So probably indicating the pressure from the solvent increases which you have seen. So is that the correct way to assess let's say the sustainability of margins?
Speaker #3: Or would you want to qualify in any other way?
Speaker #2: See. I would say this is also because of the increase in the production volume that the validation projects are going through. There is also not just the raw material right.
Speaker #2: There is also working process. There is intermediates. There are finished products. So it's a combination of all those that you are seeing here. Along with the increase in the prices of the materials.
Speaker #2: So when there is an increase in the price of the raw materials the cost of your intermediates and your work in progress and your finished goods also would go up substantially.
Speaker #2: So it's a combination of all those.
Speaker #3: Okay. And let's say this 500 crore kind of an inventory change which we saw this quarter what kind of a number let's say do you anticipate for the rest of fiscal 27?
Speaker #3: Because last year this number was around 300 crore odd. So yeah. If you can just help in terms of that so that it becomes easier for us to model in terms of what the sustainable margins are for the company.
Speaker #3: Thank you.
Speaker #2: See. The it's a very difficult question to answer considering the what's happening in Middle East currently. I mean if tomorrow everyone decides okay we are going to cease and we are not going to have a war at all.
Speaker #2: Things would be again back to normal. The cost would go down. And the inventory cost of inventory itself will go down. And our cost of our intermediates and work in progress would go down.
Speaker #2: Would our volumes go down? Yes. They would because we wouldn't be stocking so much as well. So it all depends on the macroeconomic factors on which we don't have any control on.
Speaker #3: Okay. Sure. That's just so nice. Thank you.
Speaker #4: Thank you so much sir. Ladies and gentlemen due to the time constraint that was the last question for today. I now hand the conference over to Mr. Surpesh Chaudhury for closing comments.
Speaker #4: Thank you and over to you sir.
Speaker #1: Thank you all for joining us today. For the earnings call of Divi's Laboratories Limited. In case you need any further clarification please reach out to our investor relations.
Speaker #1: Thank you.
Speaker #4: Thank you so much Surpesh sir. Ladies and gentlemen on behalf of Divi's Laboratories Limited that concludes today's conference call. Thank you for joining us and you may now disconnect your lines.
