Bajaj Healthcare Limited (BAJAJHCARE) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Bajaj Healthcare Q1SY27 Orange Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the consent over to Mr. Ashia on this job, and we have the intent. Thank you and over to you, ma'am.

Thank you, Shruti. Good afternoon, everyone. On behalf of Bajaj Healthcare Limited, I extend a warm welcome to all the participants on the Q1 FY27 Financial Results Discussion Call. Today on the call, we have Mr. Anil James, Managing Director, Mr. Rowan Fareed, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call contains some of the forward-looking statements which are completely based on our expectations, beliefs, and opinions as of today. These statements are not a guarantee of our future performance and involve unfortunate risks and uncertainties. With this, I would like to hand over the call to Mr. Anil Jain for his opening remarks. Over to you, sir. Thank you.

Thank you. A very good afternoon to everyone. On behalf of Bajaj Healthcare team, it's a privilege to welcome all of you to our annual conference call. Statistically, we see our business under two verticals. The first one is our API business, our foundation business, where we manufacture various APIs intelligents. We are also expanding into High-value, science-led API like peptides and Ongo, where we have already developed four molecules with two scales to pilot level and six more under development. To commercialize this pipeline, we are getting up a dedicated peptide manufacturing facility with an installed capacity of approximately 250 kg per annum, targeted for commissioning by Q4-2027. Another key focus area is Oncology, where we are building a dedicated manufacturing facility, which will commercialize and the target date by Q4-2028. Next comes our commercial business, where we are constantly shifting our mix towards high-margin, branded, and specialized products. We are pleased to share that Bajaj Healthcare has become the first company in India. to secure SCC recommendation for manufacturing and marketing of Stenovermit tablets and we have also successfully completed the B i.e. biochemical studies of scubarism tablets and are processing towards the regulatory approval procedures. These are meaningful first-mover regulatory milestones in C&S therapy space. On oncology side, Our dedicated platform, Bajaj Oncocare, was launched in 2024, already has a presence across 23 states and 3 union charities, with 15 plus brands, and we are the first in India to launch Poso-Gonagul 300mg tablet, a differentiated formulation aimed to improvise treatment, engineering, and patient experience. We also continue to strengthen our position as a trusted supplier to institute and government healthcare programs, including Indian Railways, Japan, ESIT, and GenoCity. This requires exclusive licensing rights from the innovators for manufacturing and commercializing of magnesium-alphionic capsule. which is sold globally at the Mactin, a specific nitrocytical ingredient, which we believe represents a new growth avenue. We are also supplying this nitrocytical magnesium and sodium to our patent holder in US. We expanded our DSIR approval R&D center at Kavli with a team of experienced scientists. A new large R&D facility spanning over 10,000 square feet expected to be operationalized by August 2026, which will house more than 100 research under one roof. Our R&D spending as a percentage of sales has scaled meaningfully from 0.4% in 2024 to 2.2% in 2026. We strengthen our formulation business through the acquisition of General Rights Pharmaceuticals, Managing Facility in NAPIC, which is currently under the NCLT approval process. The facility enhance our capacity across prodigy-tosis firms and provides a strategic platform for spending our formulation and oncology businesses. Following the receipt of the request, approval, and licensing, commercial production is expected to commence by second half of 2027. With that list, now let me have a call to Mr. Ron Farris, our CFO, who will be walking through the financial performance of the quarter in detail. Ron, over to you.

Thank you Energy, and good afternoon to everyone. Let me take you through our financial performance, starting with the quarter, and then provide some context from the historical trends. In quarter 1 FY 2027, we reported a revenue of 165.6 crores, compared to 148.8 crores in quarter 1 FY 26, and 153.1 crores in quarter 4 FY 26. It is a growth of 11.3% year-on-year and 8.2% sequentially. Growth topic for the quarter stood at 80.4 crores, up by 16.2% year-on-year, compared to 69.1 crores in quarter 1 at 26. Growth margin percentage expanded by 210 basis points to 48.3%. In minutes of the quarter is at the board. 29.6 crores, 17.8%, an improvement of 70 basis points year-on-year, as compared to 17.1% in quarter 1 last year, and 110 basis points sequentially over quarter 4 of last year. Profit after tax from continuing options stood at about 13.9 crores, up by 14.1% year-on-year, from 12.2 crores in quarter 1 last year, and broadly remaining stable versus 13.8 crores in quarter 4. Translating into a path margin from continuing options of 8.4%. Domestic API was a key growth driver during the quarter, growing to 27% year-on-year, which is about 92.3 crores, while export and promising business contributed to 50.1 crores and 23.3 crores, respectively. We expect the revenue mix to gradually normalize. As of 31st March 2026, our net worth stood at 533 crores, up from 466 crores last year, and our debt equity improved further to 0.45 as compared to 0.48 in FY25 and 1.19 in FY24. It is a meaningful legal averaging from over the last three years. On cash flows, net cash from operating activities for F26 was at about 58.1 crores. Then we ended the year with taxing cash requirements of Rs. 37.2 crores, up from 2.6 crores at the start of the year. Overall, we remain focused on sustaining our margin profiles as we scale, continue to delay over the balance sheet, and improve our capital allocation. It will define our growth over the coming few years. With that, we will now open the floor for questions. Thank you once again for joining us on this first turning call to Bada Healthcare.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question assembles. The first question is from the line of Aram Sukhila from Ambit. Please proceed.

Hi, thank you for taking my question. So, my first question is, can you just provide some indication as to how the API prices have been this quarter and how you expect them to be through the best of the year?

The APF price has been more or less stable during this last quarter as compared to last quarter, and it all depends upon the geopolitical situation, how it moves ahead. Then only we can have something what we call, everything depends on the oil and price. So right now, this quarter was fair enough with the stable APF price.

Yes, so then the growth in the domestic APL segment primarily came from volume growth and non-application? No. Okay. And, so, in your opening statement, you were mentioning details of some facilities, and you mentioned one of them, which is to commercialize, to target commercialization for which is Q4SY28. Which one is that? I kind of missed that in the opening statement.

That is the Oncology API unit.

And could you give any revenue and profitability guidance for FY27?

The growth rate is around 10-15% for the next this quarter, this year, 2020-2070.

Okay, and this is revenue growth here at all? Revenue growth, revenue growth. Okay, and can you expect a similar growth rate for the profits? Okay. Okay, sure. Thanks for answering my questions.

Thank you. The next question is from the line of Yogesh from Highton Securities. Please proceed.

Yeah, hi. Thank you for the opportunity. I hope I am audible.

Yes, you are audible.

First question, sir, on the peptide synthesis part, I wanted to understand which are the peptide molecules that you are working on and when it is likely to get commercial help from Yogesh?

So, we are working on almost like six to seven molecules. I can give the name one of the peptide that is semabrutide. Rest are little confidential, so we cannot share right now over this conference call. Our plant is going to commercialize in quarter four of this year. So, the first production would be semabrutide production.

Understood. And Sema would be for India market or how it would be?

Right, right now we are working for the India market but the plan which is designed is for the global market.

Okay, understood. And on the Onco API part, if you could help us understand what kind of plans you have, when is the commercialization likely to start?

As I mentioned that this plan will be ready in quarter 4 of 2028.

Understood, sir. And if you could just help me understand what is Bajaj Oncocare as this is the first time I have attending your conco and not aware about Oncocare.

Bajaj Oncocare is a division of Bajaj Healthcare where we market our own brands of food and oncology patients. It goes directly to the, it's like a B2C business with our own 15 brands working in 23 states and 3 in entire space.

Okay, understood. Thank you, sir. If you could help me understand what kind of a capital allocation policy are you looking at over the next two to three years, whether the capex cycle for the company is completed or are we likely to see capex continue for the company?

So the capex will be, every year, we are allocating around 40 to 50 crores. For next year, every year it will be like 40 to 50 crores capital expansion.

And any kind of acquisition that you are looking for?

Right now, Nasi. We already acquired this GenXRX, which is under administrative. First, we will commercialize that plan, then we will see how we move forward.

Okay, and given that you are expecting commercialization of, let's say, peptides and the oncology as well, so are you expecting margin going forward to improve from the current mid to high team level that you are seeing?

Yeah, yeah, there will be, because we are seeing a mixed product, there will be a lot of mixed product changes. From high volume to low volume products, peptide agency, oncology, there will be some improvement in the market.

Okay, okay. Thank you, sir. I'll get back in the future.

Thank you.

Thank you. The next question is from the line of Shantanu Basu Transmiss Ltd. Please repeat.

Hello, can you hear me? Yes, I can hear you.

Okay, congratulations for a decent quarter. I have few questions. So, firstly, basically, I am aware that your receivable days were higher because of the opium business and the institutional sales business, but you were working on reducing it. So, what is the current receivable days, and is there scope for further reduction?

Yeah, I am Sandrojee.

Rovan, you have a decrease, transfer. So, there is an improvement in the receivable days as compared to last financial year. We have come down from 145 days to 131 days as of quarter one of this year. We continue to work with our customers to improve this much further, but we anticipate it to be around 110 to 120 days going forward.

Okay.

And my next question is, basically, any progress on the CDMO front on behalf of the UK and EU clients that you were working on?

Like, we have already filed a DMS in UK and Europe. And we have already got 6 CDP approval recently. Hope we run in last 6-8 months. So, these six molecules will be commercialized. It will take at least one year. Because once you get approved from the authority, that is UPM or the agencies, it takes another one to one and a half years to get a customer approval. This is a timeline that is required for them, for the customer to make a bag, keep on stability, and then commercialize.

So, the first batch of revenue can be expected in FY29. That's what you think?

28.

28.

And 28 end.

28 end. And what would the quantum be?

Quantum we are just analyzing it. How the things are moving, how, what time, what, that time, how much revenue we can get, what is the price. It depends after one and a half year, what will be the price of the molecules. It all depends upon that. But the volume is good, then we can come in.

Okay, okay. And going forward, for FY27, you have guided 10-15% top-line growth. Can a similar rate of growth be expected for FY28 as well?

Yes.

Okay. And my last question is, you were supposed to sell off 3 loss-making plants in Tarapur. So what's the progress? Have you sold off all 3 of them? No, two are only left.

That's all we have sold.

So you have sold one and two are left, right?

Correct.

And how much save proceeds can be expected from those two?

We are expecting around... And from the remaining two units, we are still going to look out from a buyer. So once we are able to negotiate...

Okay.

Okay. I see. Okay. Thank you. Those were the questions from Maya. Thank you very much.

Thank you. The next question is on the line of Nirali Shah from Ashika Investment Managers. Please proceed.

Hi, thank you for the opportunity. First of all, congratulations on becoming the first company in India to receive the SEC recommendation. If you come back several hundred tablets, you own the regulatory milestone, which will help us understand the commercial opportunity, where we should focus primarily considering this opportunity.

So, we have got this tech committee approval. We are still awaiting the approval from their DCGI that is NOC and the state license. After that, the product will be commercialized. We have already tried with the eight companies in India who will be marketing this product. We will be a CDO partner for them.

Okay, and if you can quantify this opportunity.

So, the launching quantity and put towards this year, it will be around 10 to 12 rupees.

In FY27?

Yeah, FY27.

Okay. And my second question is on the peptide facility. Could you help understand what milestones remain between the commissioning and the commercial revenues inflow?

So... The commercialization will be last quarter of 2027, as I mentioned, and the revenue will be in 2028.

So we can expect customer qualifications and validation to extend in 2018, where everything of that will be done before that?

No, no, no. Without planned commercialization, nothing happens. Only samples will be done, but actual production has to go to the customer.

Yes, so probably commercial revenues could start coming in in the second half of 2018. Is that fair in the sense? Yeah, yeah, yeah. Okay, thank you.

Thank you. The next question is from the line of Sudden Company, from Anti-Petal Thinking. Please proceed.

Yes, thank you for hosting the first-ever earnings call, Rohan and Anilji. Hopefully, this becomes a permanent part of Bajaj Healthcare's governance. In India, we have seen companies begin investor calls during good periods only to discontinue them when business conditions become more challenging. To my mind, consistency across the cycle builds far more trust than consistency only during good times. That said, I have three questions for you, Rohan. So first is, since joining, what are the two or three biggest changes you have made to the finance function that investors may not immediately see in the reported numbers?

Thank you, Rajalji. Tough question to answer on the links call. The top three would be, one is to re-look at our debt cost, the finance cost, and to re-align. The second is to look at our working departure allocation, and the third is to work on the discontent units. One more point, I would like to pick the cost optimization for operating costs across the plans.

Sure, no, that's helpful. And second is, you know, following last year's write-off, what has changed in the way you recognize revenue and manage the conversion of EBITDA into operating cash flow, please?

Just to give a feedback on last year's write-off, it was a one-off and one-time write-off that we took. From a revenue standpoint, the revenue is recognized once we dispatch. Just to give a feedback on the last year's write-off, there was no cash loss, it was write-back of an income. I hope I have answered your question.

Yeah, yeah. So going forward, can we expect over the next, let's say, five years, the conversion of EBITDA into operating cash flow to be materially better than what we have done in the last five years? That's precisely what I'm asking. Yes, sir. We can expect that. Okay, sure, that's helpful. That's very encouraging. And finally, you know, if you compare Bajaj Healthcare, let's say three years from now, which balance sheet metric do you want investors to judge the performance of the group on? Any one metric, three years from now, not immediately, not about next quarter or even this year, let's say three years out.

Sir, three years down the line, written on equity, and written on assets is what I would look at.

Sure, that's helpful. Thank you so much. Thank you.

Thank you. The next question is from the line of Nishan Paho from GreenPortfolio. Please proceed.

Hello. Thank you for the support, teacher. Sir, I want to know how much revenue do you expect from the 250 kg peptide fund, and will the margin be higher than the current 17 percent, sir?

Again, this peptide is all different. Once we start this commercialization, The entire 2 to 3 matrix plan will not be started in one day. It is built to give not only one API, but the API will be coming in the next four years. So we have designed the plan that will cover and that will have our capacity up to two to three years.

Okay, you are slowly ramping up the capacity and utilization over the years.

Hello. Hello.

You will slowly ramp up the capacity and utilization over the years, over 2-3 years, over the next 2-3 years. Yes. Sir, I want to know this, in peak demand or in peak utilization, how much you are expecting?

Once we are to a peak and full utilization of plants, we can expect anything around 200 to 300 crores of revenue.

And the margin would be, sir, around 20 percent we can expect, or more than 20 percent?

18 to 20 percent.

18 to 20 percent? Okay.

Thank you, sir.

It's the margin. Yes, sir. Thank you, sir.

Thank you. The next question is on the line of Madhu Zadhi from Countercyclic Investment. Please, thank you.

Thank you for the question. I wanted to understand, sir, what is the backward integration level for our API business currently?

So, right now, we are working on a molecule, like 8 to 10 molecules, where we are going to a backward integration. So, this will help us to increase a little of margins in the product. And also, the dependency on China will reduce.

Right. So, I was reading your effort in this annual report and in that we mentioned that for vitamin C, we are like one of, we signed some MOU with ICT for like the production and like going very backward integrated into this product. So, if you could help us understand. How many of our, so you mentioned 8 to 10 products, so what percentage of our revenue would these products be, and what kind of margin improvement can we expect in your next one or two years from this backward integration that we are planning on doing?

First one, what we plan on is, NOU with GICT, Institute of Chemical Technology, is totally backward integration of vitamin C. This is, uh, uh, uh, uh, Long way to go because this is a fermentation product and no one is manufacturing in India from this group. So this will be a patented technology where we will be manufacturing vitamin C from the basic raw materials. So we expect this to complete in 2029.

Thank you very much, everyone. Sorry, let me go.

Yeah, you can tell me.

Yeah, sir, so what portion of your revenue comes from vitamin C currently?

Anything between 8 to 9 percent.

Okay, got it. And, sir, the other 8 to 10 products where we are implementing backward integration measures, what percentage of our revenue would come from that, and what is the margin improvement, can we ask?

You can put together around 20 to 25 percent will come from that 8 to 10 products, and there will be a marginal increase from 1 to 2 percent.

Got it. Sir, now coming up to the opioid processing segment, sir, we were planning to sell some of the derivatives from that, so whatever, peppy seed and opium gum, whatever. So, what is the status of those products currently?

Opium gum we are doing for the government of India. So, we are processing for them. So, we are not selling any opiates.

No, sir, sorry sir, I think my question is okay. Sir, so we, there were like two or three molecules or derivatives of these products that we could sell out to, like, as an intermediates to, I think, some foreign companies or pharma companies. So, I was asking on that.

Sir, we are still working on that molecule. The product is still under R&D. The two molecules from the OPA.

Are there any discussions with the government for increasing this business opportunity in terms of parties with the government?

Yeah, yeah, we are still working on it. We have put our brief note to them and they are still thinking because they have lot of what you call raw material lying with them. Hopefully we should get something.

Got it. Now, sir, just a final question from my end. Sir, on the working capital intensity, I think pre-COVID, our business used to be very lean, and data has ballooned. I think the inventory, although recently, I understand that because of this government contract, but our inventory holdings must also increase. So, why, what has led to this increase, and what are we going to reduce it going forward?

Yeah, hi, this is Grover here. So the inventory is increased as part of our internal policies because in quarter 4 we saw this war situation developing and we chose to order in few amount of inventory to ensure that we have our production going on for next couple of quarters. So going forward, we expect this to get better and not on the same lines as quarter 4 or quarter 1 of this year.

No, sir, I was asking about, sir, FI 21 and FI 26, if I compare the inventory holding period of our business, if I ballooned, like, on similar revenue levels, it has almost doubled the inventory number. So why is that? My question is more than that.

One, because of the product mix in April 21, or I would say before COVID, We had a few less than 10 products which were all the companies which were the product basket, and now we have delivered from that products to having many more products in the inventory.

Okay, got it.

And, sir, for FY27 and 28, what kind of margin profile can we expect to maintain on an EBITDA level?

18 to 20%. 18 to 20%. Okay, sir.

So, that is from mine. Thank you so much, and all of us.

Thank you.

Thank you. The next question is from the line of Spark from PNASA asset managers. Please proceed.

So, good evening, everybody, and thank you for the opportunity. So, going forward, where do you see the biggest growth opportunity?

Romantic APIs, export APIs, formulations, specialty products. How do you expect the revenue mix to evolve over the years?

Let's say three to five years.

So, it will be like a mixed revenue because we work on a different vertical. So, we have peptides, we have export, formulations, the metric. So, if you see today's current revenue, almost 18% is export, 18-20% is export, and rest is APN formulation. So, in near picture, you can see export going to around 30-35% and rest will be domestic and formulation.

Okay.

Okay. Thank you for the opportunity. Thank you. Thank you.

Thank you. The next question is on the line of Rudra Shreya from I Thought Financial. Please proceed.

Yeah, thank you for the opportunity, sir.

Sir, I wanted to ask about top three products that we have under each of the three segments that we report, API domestic, API exports, and formulations, and what would be their concentration in revenue mix.

We are the leading manufacturer of escopic acid and it's called. So, it is contributing to around 9 to 10 percent or 8 to 10 percent. In export, we have magnesium alternative and nutraceutical products, which is the biggest product right now. We are selling this to a innovator in U.S. And formulation, it is a mixed product because it cannot be one product because we are doing the CDMO and industry business.

Got it. And, sir, this magnational 308 business, could you quantify, like, how much did we do in FY26, both in domestic and export markets?

So, right now, we are doing only for the export market where we sell our statistical raw materials to the innovator. Last year, we did around, in quantity, we can say around 350 metric tons.

Sir, how much would that be in value terms, if that is possible?

10% of total revenue.

Got it, got it. And sir, are plans for this product, for FY27?

There is a growth of around 15 to 20%.

Got it, got it. And, sir, if I recall, we were also trying to supply formulations to some other Indian players for Magnetian 3-on-8. Any updates on that project?

Yeah, we already got an approval from the U.S. counterpart, and we have approached almost six to seven companies in India. So, hopefully, in next quarter, quarter three, we'll be launching at least two brands with two of our C-GMO partners.

Got it, got it, sir. And what kind of incremental revenues could we expect from this?

This will be a first branch in a nutristical segment. So, the value they have given is almost like 1 to 2% of total revenue.

Got it, got it, sir. And, sir, on the semaglutite part, could you help us with the current API prices as of now?

Uh, today peptide on the chemo side?

Yes, sir.

Sir, today's market is anything between 120 to 150 dollars per gram.

Got it, sir. Got it. And, sir, any volume expectations that we have for SEMA for next year?

Not yet, because our plant is still under construction. It will be commercializing in quarter 4 of this year. Then only we can have the numbers.

Got it. And sir, out of 250 kg, how much are we allocated for semaglutide?

It is not defined. The plant has been designed to manufacture altogether all the peptides, which has different time cycles. So, it depends upon which peptide has a margin and which has a quantity. So, it is not like defining schedule management only 10 degrees or 20 cases, it is not like that. It depends upon the requirement.

Got it. Got it, sir. Got it. Sir, broadly, 3-4 years down the line, if you want to get to a top line of, let's say, 1,000 pros, and you have mentioned that peptide plan could easily do 200 to 250 pros. So, any stents on what would be the other key drivers that would generate the rest of 100 and 150 pros?

From our new development, We have the new product development, which we will be doing next one to two years, and the mixed product change from low value to high value.

Got it. Also, these novel drugs that we have mentioned, like Senobamate, we have got the approval and are on track for commercialization. Any expectations this year revenue-wise that we have for this product?

Thank you. We only mention, like, it is between 10 to 12 crores.

Got it. And, sir, do we expect fewer exam to commercialize next year, then?

Next year, quarter 4, because the pattern is still there for severe exam.

Got it. And, sir, any indications that you could give us about the market size for that product?

We can send you offline all the details.

Sure, understood.

Got it. Thank you so much. Thank you.

Thank you. In the interest of time, we take Praneet from S.A. Investment as the last question. We will proceed.

Thank you for the opportunity because she is your first control. So I wanted to understand in terms of the long-term potential of our revenues. So where do you think we can end up at? Because you mentioned that next year is going to be 10% and then we're going to commercialize one of our plans in two years down the line. So I just wanted to understand this.

In the next two to three years, you can expect anything around 900 to 1,000 crores.

To time constraints, I would like to have the conference room to be myself for the closing comments.

Thank you everyone. Once again, I would like to say thank to our investors for having us on the call.

Thank you.

Thank you. On behalf of Bajaj Healthcare Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.