Concord Biotech Limited (CONCORDBIO) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, welcome to the Q2 and H1 F527 earnings conference call of Concord Biotech Limited, hosted by Choice Institutional Equity. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company, as on the date of this call. These statements are not guarantees of the company's future performance and involve risks and uncertainties that are difficult to predict. 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 assist in during the conference call, please signal an operator by pressing star and then zero on your touch-down phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Mahitri Sheth from Choice Institutional Equities. Thank you, and over to you, ma'am.

Good afternoon, everyone. On behalf of Choice Institutional Equity, we welcome you all to Q2 and H1 FI 21-Cellar Common Sponsors of Comfort Biotech Limited. Today on the call, we are joined by Mr. Ankur Webb, Joint Managing Director and Chief Executive Officer, Mr. Radhira Skaria, Chief Financial Officer, and Mr. Prakash Sajinani, Assistant Vice President's Accounts, along with LGA, their Investor Relations Advisor. We will begin the call with opening remarks from the management, followed by a question and answer session.

Thank you and welcome to all on our Q2 and H1 FY27. We are pleased to report a strong performance for the quarter ended 30th September 2026. Q2 FY27 grew 25% year-on-year. For the first half of the year, the six months ended 30th September 2026. Revenue grew 26% over the same period last year, so the momentum has held through both quarters. What is particularly encouraging has been, it came from immunosuppressant in percentage terms for the products commercialized in the last couple of years. These newer segments, antifungal, grew in line with the company average growth compared to the corresponding period last year. This shows a healthy, well-balanced portfolio, leaving us well-paced as we move into the second half of the year. Speaking of highlights for H1FY27, we received A&D approvals for Tofacitinib and Mycophenolate Mophetyl Oral Suspension portfolio. We also filed a drug master file for Fidaxomycin in the US, which adds to our API opportunities in that market. We successfully completed the USFDA inspection of our Unit 2 formulation facility at Valtaira Ahmedabad. We also received NVISA approval for our Unit 3 facility at Limbasi. Outcomes reflected our continued focus on regulatory compliance and strengthened our position to serve customers in regulated markets. It takes us beyond our existing portfolio into science-led skin health solutions. Changing patient needs and build stronger relationships with dermatologists and other healthcare has been a proof-take effect in the coming weeks. In delivering sustained work during the quarter percent in Q2, attributable to a shift in the procurement strategies across emerging markets, increasingly opting to procure API instead of finished formulations. Advergent to our wholly-owned subsidiary in the U.S., Stellon Biotech, with several large domestic and global customers for our injectables business, and we expect to finalize contracts in the near term. That would drive higher utilization of our injectables manufacturing facility, expected to support revenue, more appropriate to evaluate the overall business growth rather than view API and formulation revenues in isolation. Our focus remains on expanding end-customer sales and increasing our wallet share, irrespective of whether the business is routed through API or formulations. Depending on individual customers' procurement strategies, we continue to see an improvement in our share of their overall procurement. ...revenue grew by 42% year-on-year in Q2 FY27, while export revenue increased by 8%. However, including deemed exports, the overall contribution from exports would be significantly higher. This is because several customers are increasingly shifting their procurement to Indian subsidiaries from where the products are subsequently exported to regular by individual customer procurement strategies. Meaningful metric is the overall growth in our share of customers' total procurement supported by deeper customer relationships and customer additions across both domestic and international markets. For the current year, we witnessed a gross margin contraction of approximately 400 basis points year on year. An increase in raw material prices, uncertainties, temporary in nature, and have impacted our quarterly performance. We expect to recover the margin impact through an improvement in revenue coupled with effective cost optimization measures and optimum inventory management. Fueled cost. This was partly offset by the renewable energy sources in which we invested last year. To stabilize, we expect to realize the full benefits of these renewable energy investments, providing further support to our overall margin profile. On the EBITDA front, we were at 33.8% in Q2-FI27. For H1-FI27, EBITDA margins remained fairly stable at 33.0 compared to 33.2 in H1-FI26, despite the contraction in gross margins. This demonstrates the inherent operating leverage and resilience of our business model. The expenses associated with our new injectable facility in Stellon, where revenues are yet to ramp up, our H1 F527 EBITDA margin would have been approximately 37.8% closer to our historical margin levels. Investments begin to contribute to revenue and the input cost environment normalizes. We expect our margins to progressively improve. Opportunities that position Concord well for the future. Establish itself as a leading research-driven biopharmaceutical company with deep expertise in fermentation technology. Our extensive portfolio of fermentation-based APIs, supported by a robust pipeline, strong R&D capabilities, and established manufacturing capacities, provides us with a solid foundation to capitalize on growth opportunities ahead. In addition to strengthening our core API business, we are actively exploring CDMO opportunities and fermentation-based APIs. Our established technical capabilities, process expertise, and manufacturing infrastructure position us favorably to pursue these opportunities and create additional avenues for growth. We are also building a presence in the U.S. formulation market through Stellon, our front-end distribution platform. While the business is currently at a nascent stage, we believe it has significant potential to emerge as a meaningful contributor to our growth over the coming years. Looking ahead to FY27, I am confident in our ability to sustain our growth momentum, supported by strong business visibility from our pipeline and the execution of our long-term growth strategy. Fermentation-based products and leadership position in key molecules continue to provide us with a distinct competitive advantage with existing customers' core capabilities. Confident of further strengthening Concord's market position and transitioning our capabilities and emerging opportunities into sustainable long-term business growth. To take you through the financial performance.

Hello, everyone. Let me take you through the financial performance for the Q2 and H1. The revenue for Q2 F527 stood at 309.1 crore compared to 247.1 crore in Q2 F526. Registering a year-on-year growth of 25%. For HY27, revenue increased by 26% to 566.6 crores, compared to 451.1 crores in the same period HYF5. API revenue for the quarter stood at 250, a growth of 30% year-on-year, while formulation revenue stood at 58.9 crores, growing by 6%. Concorde's performance is best evaluated on the basis of overall business growth, rather than the quarterly revenue mix between domestic revenue grew by F527, while the export revenue increased by 8%. As discussed earlier, changes in the customer procurement patterns can influence the reported revenue mix between domestics and export markets. Gross margin for Q2 F527 stood at 76.2%, contracting by approximately 400 basis points on year-on-year basis, primarily due to higher raw material prices and changes in the product mix. For H1 F527, gross margin stood at 77.4% compared to 79.1% in HYF526. On a half-yearly basis, margins have remained relatively stable despite the input cost pressure experienced during the quarter. EBITDA for Q2 F527 stood at 104.4 crores, registering a year-on-year growth of around 18%. For HY F527, EBITDA increased by 25% to 187 crores. EBITDA margin stood at 33.8 crore, 33.8% for quarter 2 F527 and 33% for H1 F527. Excluding the expenses associated with our new injectable facility and Stellon, where the revenues are year to scale up, EBITDA margin would have been 37.1% for quarter 2 F527 and 37.8% for FY27 for the first half. This reflects the underlying profitability of our established business, excluding investments in the growth initiatives. When I talk about the PAT for Q2 F527, it stood at 69.6 crores, registering a year-on-year growth of 10.3%. For H1 F527, PAT increased by 19% to 127.3 crores. PAT margin for Q2 and H1 F527 stood at 22.5%. However, if we look at the PAT excluding the share of

profits from our GE, PAT for age was

3.2 crores with growth of 23% year-on-year. Lastly, Concord continues to maintain a zero-date balance sheet with cash and cash equivalents of around 445 crores as of September 30, 2026, reflecting our continued focus on financial discipline and balance sheet strength. With this, I would like to conclude my remarks on the financial performance and open the floor for questions and answers.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use or answer it while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have the first question from the line of Yash Tanna from ITOT PMS. Please go ahead.

Hi, good afternoon. Am I out of it? Hi, sir. So, my first question is, so the API revenue is bouncing back well. If you can highlight a few key products, geographies where you're seeing this traction, and also have there been any new customer wins which is leading to this growth? Also, from a medium-term perspective, let's say two to three years, how do you see the growth of this business and what could be the key drivers for this thing?

So, you know, in terms of products, as I mentioned that the immunosuppressant continues to grow where we are able to bring in new customers on board, and this is across geographies, particularly in the U.S. and in Latin America. However, the growth over the last six months has been significantly in the anti-infectives, anti-fungal, and the oncology. So last year, like around a year and a half back, we had commercialized Nistatin. And as I mentioned earlier also, we continue to gain traction there. So that's been doing very well for us. We also have several U.S. customers who have qualified Concord as their source. So we have provided them validation quantities. Commercial supplies are yet to begin. So once those supplies, once they are becoming commercial, we would see again a significant jump coming in in Nistatin as well, which is an anti-infective segment. And when it comes to antibacterial, you know, we have seen more traction coming in in products like mupyrosine, mupyrosine calcium. We are just in the process of launching fusidic acid as well, where, you know, we've just supplied some quantity. So that's a product that in the next coming few months to quarter, we would be commercializing in emerging markets and then extending it to global markets. With axiomycin, we have launched, we have just filed a U.S. DMF, so, you know, we are seeing good traction there as well. So, these are some of the products in the anti-infective, anti-bacterial segment. When it comes to oncology, products like romidepsin has picked up well because of some of the customers launching the products in the U.S. market. And products like Evrolimus continue to see traction. This is in addition to our core business of immunosuppressants where, you know, in addition to products like tacrolimus, mycophenolate, mafetil, mycophenolate, sodium, and cyclosporine, we are also seeing good growth coming in from other products like sirolimus and pimecrolimus. So I would say it's a holistic growth across all products and all segments. And in terms of geographies, key markets would continue to be the US, Latin America, and Japan. We have added quite a few customers as new product additions are happening, particularly in the anti-infectives, anti-fungal segments, and with the new launch in oncology products, there have been several new customers that have been added in the last six months. And as we continue to build on some of the new products that we expect to launch in the coming quarters, they are also mostly in the anti-infectives, anti-fungal segment. So, we would see significant customer additions also happening going forward. In terms of the growth, you know, over the next two to three years, I would say that, you know, there is no company like Concord, which has such a vast portfolio of fermentation-based APIs, and we continue to build on that portfolio. So, we already have around 30 plus products. We have another 10 to 15 in the pipeline, and significant capacities have been built to cater to the requirements for these products once they become commercial. So, you know, we see, you know, a lot of potential in these products, and I think they are going to be the growth driver when it comes to the API business, in addition to, of course, the other business segments, which are the formulation and the CDMO.

Sure, sir. Thanks. That was very helpful. And could we assume like a mid-team sort of a growth number for this business over the next few years?

So, I would say that one should expect, you know, slightly higher in terms of the API business. You know, historically, we have grown at around 18-19%. And I think it would be safe to kind of build on assuming, you know, our historical growth numbers. Of course, beyond that, there are contributors like the injectables, like the CDMO, and the finished formulations that we've been investing in, which would also drive the growth beyond the historical growth of 18-19% that we have given in the past.

Got it, sir. My second question was related to the formulation business, sir. We did close to 200-core revenue in FI24, and we are almost at a similar 100 now in FI27. So, also, I wanted to understand what is the capacity utilization for the oral solid unit, which is, I think, unit two, and the injectables unit, which is the new unit, and how are we planning to ramp both these units up? Because the sales number has not moved. And also, you mentioned about Topatinib and MMF approvals. And also, you spoke about a few injectable contracts in your opening remarks where you're talking to a few customers on the injectables front. So, a few timelines around those and how formulations will ramp up will be right at first.

Yeah. So, for the capacity, I would say that, you know, the unit 2 was, 21% was the capacity utilization for unit 2, and around 5% is for the injectable unit, unit 4.

And, you know, so when it comes to how are we seeing the ramp up, you know, again, we continue to add products. So, over the years, you know, as I mentioned that we have seen good traction even in the domestic market, which has been growing, you know, over and above the growth of the company, I would say. So, this quarter also, the domestic formulation business grew by 29%. And, you know, there is again, with our own manufacturing coming in the injectable business, we expect that our domestic formulation business will grow, you know, above our company average growth. And many of those products are in-house manufacturing. So, of course, this would also lead to ramping up the capacity utilization. And in addition to that, with Stellon coming in, you know, we expect that, and with new ANDA approvals coming in, we expect that facility utilization would also increase. So, for DOFA, we have already supplied our products to Stellon, and Muffetil Oral Suspension is something that we expect that in the coming quarter, I mean, in next quarter, we would be supplying the products to Stellon. So, Ceylon continues to make inroads for all the products that it has as approved and commercial, and the new launches, you know, the team is working to kind of gain market share when it comes to the oral solid dosiers in the U.S. Coming to the injectables, you know, many of the customers have taken the first step, which is in terms of auditing our facilities. So, in the last couple of months, we've had several inspections or audits by our potential customers, and we continue to engage with them. So, things are progressing quite well on that front, and we are quite optimistic that, as we've mentioned in the past as well, that in Edge 2, we should see some of these contracts materializing.

So, that's very helpful. I'll have more questions. I'll turn back.

Thank you. Thank you. We have the next question from the line of Divanjan Bhakta from USGI. Please go ahead. Yes, thank you for the opportunity.

What will be the effective tax rate for the rest of FY27 and FY28?

So, the tax rate would be in the range of 24-25%.

We have the

next question from the line of Abhishek Kamdar from Value Plus Advisors. Please go ahead.

Yeah, hi. Thanks for the opportunity. We just wanted to understand, in terms of pricing, I think in quarter one, we had mentioned that, you know, we gained some market share as we were able to offer competitive pricing to our customers, given our capacities. How has pricing worked out in this quarter and Q2? And, you know, around that, we also spoke about raw material cost increases. Have we been able to pass on any of these to our customers?

So, you know, when we say that we've been able to gain customers on account of better pricing, that pricing basically is to the customer. Um, because, uh, what I mean to say is that, you know, Concord, because of, uh, the economies of scale, because of, uh, the expertise that we have in fermentation, we have a much, and the kind of productivity that we have on the products, we are able to offer a significant price discount compared to their current suppliers. So, while maintaining the profitability, which is in line with our API business. So, it's like a win-win situation. So, we've been able to gain customers by reducing their procurement costs, but at the same time, it has been in line. So, we haven't seen any pricing pressure when it comes to Concord, but yes, you know, we've been able to gain customers because of the price reduction compared to their current existing suppliers. And I think this is something that we continue to do, not only for the new products, but also for the existing products where we hold a significant market share. Because some of the competitors that we see, you know, they are significantly priced higher compared to Concord. So, that gives us an opportunity to gain more market share, given our strength, as I mentioned earlier. When it comes to raw material pricing, you know, it is quite challenging, I would say, to pass on some of the costs that we have incurred to the customers. I think, you know, we would rather try to address these issues through R&D and through productivity improvements rather than passing these because these are, again, more of a short-term issue. They are not a longer-term issue that we need to think about passing these raw material costs increase to our customers. Had it been more of a long-term issue, I would have, you know, we would have still thought about kind of seeing that what could be the best way out. But this is more of a shorter-term issue, which I feel that, you know, we don't need to reach out to customers to kind of engage in those discussions is what, you know, we would be looking at. But as I mentioned again, that there has been no pricing pressure. It's been more of the benefit that we offer to our customers.

Any further questions? As of no further questions, we move on to the next speaker. We have the next question from the line of Chirag keynote. Please go ahead.

Yeah, thank you for the opportunity. I wanted to talk about the new API that we have manufactured for the dermatology as a target industry. So could you provide some more clarity on this Nsvera? Is it like a skin infection or autoimmune skin condition like psoriasis or something else? And will it be fair to assume that the TAM for Inspira is like, the TAM for this Inspira would be about 5,000 crores plus and not like the MMS that we have for U.S. which is about 300 crores if I'm not wrong.

Yeah, so I mean, you know, you write there that for the Inspira division, if you see the TAM is close, the India-based market itself is for the CONCORT range of products is close to around 5,000 crores. Here again, you know, we are the only company in India which is fully integrated right from API to finished. So definitely there are advantages in, you know, is what we see on the dermatology. And within the dermatology, the key segments that we would be working is towards eczema, you know, where we have products like tacrolimus, pemecrolimus, anti-infected, anti-fungal, where we continue to see products like fucidic acid, nistat, and muproxene, muproxene calcium, and also certain acne products. So, these are more, you know, there is some value that we are able to create for our stakeholders as well as for our patients.

And what would be a strategy to increase the size, like reaching from the initial 100 to 500 crores sort of revenue? What kind of target is there in the mind of the management for this particular segment?

So, typically, to kind of make inroads into, you know, currently, you know, we've launched certain markets, and I think we are also working towards expanding into different regions within India as well. So, this has just been a couple of months that we have launched the Inspira division, but the intent is that once, you know, by the coming years, we should be able to make quite significant inroads. Of course, going to the levels of close to 400, 500 crores, I would say it would take at least four to five years, you know, to kind of start building, having a significant market share in these products. But being fully integrated and having full control on the quality aspects and on the input costs, you know, we are fairly confident of having a significant market share on this. And that's the reason why, you know, the division has been launched with that.

We have the next question from the line of Stuti Bagadia. Please go ahead.

Hello. Thank you for taking my question. Am I on to this?

Yes. Yes, you can hear me.

Yes, so I wanted to ask, on terms of the EBITDA margin, what do you see as the drivers could lead to a margin expansion, and also if you could give some guidance on a sustainable EBITDA margin in the medium term?

So, you know, if you see EBITDA margin, you know, we have taken, like as I mentioned during this speech as well, that we've taken steps to kind of see that how we kind of, you know, continue to build on our EBITDA margins. One of the steps which was taken was investing into the renewable energy. And, you know, that has a positive impact on the EBITDA margins. Of course, you know, times like these, because of the global uncertainty and, you know, the increase in the cost, some of those benefits, you know, have kind of compensated the increase in the cost. But once I think these issues are resolved, we should see positive contributions coming from the kind of investments that we've done in the past when it comes to power and fuel costs. Similarly, we mentioned that Concord continues to invest in growth, so be it the Stellan business or the injectables, which are growth drivers for the future. So, as we see ramping up happening in these two business units, we should reach closer to our historical EBITDA margins. And, you know, in our presentation also, we have mentioned that without these, the EBITDA margin looks closer to around 38%. And as ramp-up happens also in our other businesses like at Unit 3 Limbasi, we would see more margin expansion happening there as well. So our sense is that, you know, over the next few years, we should be in the range of 38% to 40%, which has been our historical EBITDA margins once these business units start to contribute in the overall business.

That is awesome. Thank you. One more question that I had from my end. So what is the CAPEX that we are guiding for the next year and for the remaining half of FY27?

So, Suthi, we have been guiding that, you know, around 20 to 30 crore worth of maintenance CAPEX that we incur every year. And for this year and the next year, we expect around 50 to 60 crore each every year, the CAPEX, which is in the tune of 120 crores.

Okay, just one more question, if I could quiz them. So, in terms of the contracts that you mentioned about for the injectables facility that are ongoing, how big of an opportunity are these, and if you could give any qualitative color on them?

Discussing with quite a few customers, and, you know, these are, again, larger customers integrated on those APIs as well. So, you know, the opportunities are quite sizable. I would say that, you know, the time for the injectable products that we do is close to around 5000 crores, of which we have kind of built in around 300 crores top line over the next from the domestic markets, which I feel that if these customers are on board, that is something which is quite achievable in the timeframe that we have given.

Thank you, sir. Thank you for my question.

Thank you. We have the next question. Siddharth Negandhi from CWC. Please go ahead.

Hi. Thanks for the opportunity. Just wanted to clarify on how much is the CDMO revenue and what's the status in terms of user CDMO contracts? Last quarter, you mentioned about $2 million in revenue. Was that the lifetime revenue or was that the revenue in the last quarter? And, you know, what's the revenue in quarter two on CDMO? And second, just continuing some of the previous participants' questions, how do we see the gross margin trajectory in context of, you know, Formulations being heavier on growth going forward, considering injectables, considering that 4-year. And in that context, would you believe that we can also see this as the lower point on gross margin?

So let me first answer on the gross margin part. So, if you see that for the quarter two and also for the full year, the API to formulation has been pretty much in the same lines of 78 to 22, and I think for the six months, it's around 80-20. So, it has been pretty much in line with what we have, which is the 80-20 split. And even the facilities that have been designed both at the API and the formulation, you know, the capacities have been designed such that, you know, we would be in the range of the 80-20 split between APIs and formulation. That being said, it's not something that we kind of monitor and say that, okay, it has to be in this ratio because, you know, we are driven by how we can capitalize and how we can work towards maximizing our market share, you know, at the API level, be it through API or formulation. But historically, we have been in the range of 80-20 split. So, you know, we expect gross margins to be pretty much in line with what we have seen historically. I think, as everybody would, you know, would agree with us that in the last six, eight months, you know, because of the rising fuel prices, because of all the other things, the operating costs, not only for Concord, but for I think many of the companies have increased. And that is something that, you know, I would say impacted us, but not that much because being in fermentation, only a certain portion of our raw materials gets consumed, which are impacted by the increase in the power and, you know, because of the oil, such as the solvents and all. Most of the other products, which are agro-based products, there we do not see these kind of significant impacts that are there. So, in some way, we have been impacted, but not as much as, I would say, companies which are focused on using a lot of solvents and all. So, we expect that as things would improve, we should get back on the gross margins in terms of what we have seen historically. When it comes to CDMO business, the $2 million that we mentioned was more so from an annual perspective because currently we have, you know, one project where we are commercial. Of course, you know, we do not classify contract manufacturing for third parties as CDMO. We only classify CDMO wherein the IPR is with the third party primarily being the innovators here. And we have undertaken smaller projects as well, which are more in the development stages rather than on the commercial front. So they may not have an impact on the top line, but there are quite a few projects that we are working with when it comes to R&D development activities. So, you know, I would say that they may not be a true reflection of the kind of work that we're doing. But from a revenue perspective, I would say we have one commercial project, and we are exploring to work with a couple more on those fronts.

Just to follow up on that, you had alluded to the mix being a challenge on the gross margin. Could you clarify on what that meant, what part of the mix was unfavorable on gross margins? And then the $2 million that you're talking about, is that the FY27 annual revenue guidance on CDMO?

So, again, you know, when we say the gross margins, sorry, I did not get your first point on the mix.

So, the presentation mentions that gross margin has been impacted by an adverse mix. So, could you help me understand what the mix? Yeah, which product mix? Because you're saying the API formulation is more or less, I mean, there is a 2-3% change. Is that the mix that you're referring to? Because that logically would have actually improved gross margins. So what's the product mix that went against gross margins, if you could help us understand that? And then $2 million, is that the FI27 guidance, or how should one think of that?

Sure, sure. So, the mix that we mentioned was a product mix at the API level. So, you know, as I say that not all products are at exactly the same margins as one would say. So, there are some products where, you know, there could be slight change in the margin profile if there is one product being sold over and above the other, but they are more or less in the same bracket but not the same. So there is some impact which does come through the change in the product mix at the API level. But the significant contributor to this has been primarily the raw material pricing with a smaller impact coming in from the change in the product mix which has been sold in that particular time period is what we meant by that. And when it comes to the CDMO, you know, again, on specific CDMOs, we are not giving any guidances, as you would say, but, you know, the opportunity that we see currently in discussion with our customer has been around the $2 million mark, whereas they still continue to build on that opportunity because, as per them, the opportunity size is quite big there. But, you know, they have been building on the platform in the US because it is a new product that they've launched almost a year and a half back now. So they continue to build and make inroads because being an NCE product, which is there. So as for them, the opportunity could be much larger, but, you know, we are their only, we are their exclusive manufacturer for them. So, any opportunity or any volume that will come would come exclusively to Concord there.

Got it. This is helpful. Last question again on the gross margin bit. Sorry to harp on this. There would have also been a benefit from in-housing the injectables formulations, right? So, is that material in this quarter and it's so, you know, safer that what would have been the further dent on account of the,

So, it hasn't played out yet because as Raviraj mentioned that the capacity utilization for unit 4 has been around 5% only. So, you know, while it will play out significantly once, you know, the volume starts to pick up, but being in currently at utilization of 5%, you know, it has not As a matter of fact, at times, it can play slightly on the other side, slightly opposite, because, you know, all the API that we do transfer to the formulations is basically at the market price. So, you know, at times it can kind of start looking only at gross margins. And that's why we say that you should look at however EBITDA margins are moving rather than looking at the gross margins because the gross margin also has a component in terms of the API being transferred to the formulation units at market prices rather than at cost.

And that is a volume-weighted price, and therefore, at lower utilization, they would actually end up paying more prices.

Correct, correct. So, that's why we say that, you know, as formulation business at times grows, you could see some impact on that happening on the gross margin side, and hence, you should look at it from a totality perspective rather than looking at it from, say, you know, line item, because it has that impact.

Thanks. I'll get back in with you.

Thank you. We have the next question from the line of Alankar from Kotak. Please go ahead.

Hi, thank you for the opportunity. Alankar's first-half growth top line is about 26%, and you had spoken about the 18% plus growth in FY27. Would you like to revisit the guidance?

You know, we've mentioned that the growth in FY27 would be slightly better than our historical numbers. And yes, I think, you know, H1 has been 26%. We have a fair amount of visibility also on our quarter three numbers. And, you know, I would say that, you know, we would continue to kind of consider the growth for this financial year slightly better than our historical...

Got it. Anghar, just a follow-up there, right? So, if I look at specifically for this quarter and the two-year, three-year overall sales kegers are relatively quite low. So, two-year sales have been flat, three-year overall growth is around 5.5%, 6%. Now, the question is, once the base normalizes in FY28, should we expect you to continue to report that 18-20% plus growth that Concord used to report till FY25?

So, I mean, if you take out the last year's degrowth, Alankar, that was there, I would say that over the three-year period, five-year period, and the 25-year period, we have grown at 18-19%. So, and I think we've discussed during our various phone calls as well on what were the challenges that we saw in what we experienced in the last year. And during the last year also, we had mentioned that the impact which was there in the last year was more from a global phenomena effect and nothing structural in nature. And I think, you know, the kind of growth that we have seen in quarter two and the kind of visibility that we have for quarter three, you know, it kind of also shows that, you know, the last year was more from a global impact rather than something structural in nature. And if you take out the last year, I think, as I mentioned, that any time point, we would have grown at least by 18-19%. And this year also, you know, we are saying that, you know, we should be growing slightly better off than the 18-19% because some of the challenges which were there led to somewhat of, you know, or the kind of work that we did in the last year, which did not fructify in the last year, because of the risk aversion of our customers is getting fructified in this financial year. And that's why I say that we should do slightly better than our historical that we have seen. And for the coming, for the next two to three years, as I mentioned earlier, that, you know, we have the right product mix. We have the right, you know, we have the ample capacities in place. We have a very strong pipeline of products, which nobody in India is developing. And I think our competition coming from Europe or Southeast Asia, we see a good position that we will be able to take significant market share on those products. So I think we are quite well positioned to kind of gain more market share on those products, which would lead to the kind of growth that, you know, we have spoken about.

Understood, Ankur. Just one follow-up there. When you talk about new products, would it be fair to say that the contribution of new products, say if I take a 3-4 year view, will be higher than what we have seen in the last 2-3 years?

You know, new products have to be classified into two categories. One is that the new products that we've launched in the last three to four years, and then the products that we've just commercialized within that year. Of course, products like Nistatin, if you see, or products like Fucidic Acid, you know, they've been growing quite significantly. And, you know, as we would gain approvals in some of the regulated markets as their files would get approved by the FDA, we should see significant surge in volume pickup for those products as well. So, it's a life cycle that, you know, it would go through, but Concord has a strong positioning on these products and can significantly gain market share on a very shorter period of time because of the strength that we have, whether it is capacity, expertise in fermentation and all. So, these products will grow faster than the rest of the business, but having a smaller base, it will take time for them to kind of reach to the levels of, say, certain mature products.

Understood. The second question is, you mentioned about growth over the last six, eight months being driven more by anti-infective, anti-fungal, and oncology. Again, if I look at the next few years, do you expect to gain further share in some of the key immunosuppressant products as well? And, yeah, what would be the key driving factors out there?

So, immunosuppressant continues. So, if you see, you know, for these six months also, the growth in the immunosuppressant business has been, you know, in line with the company growth rate. And the historical growth rate that's been there. So immunosuppressant in these six months has also grown significantly. And that has been a function of us gaining market share, us gaining wallet share with our customers. You know, certain markets like Latin America is opening up for us because of the InVisa inspections that has happened. So all the inspections, you know, they do play out. Maybe they play out four or five months down the line after the inspection takes place. But, you know, these are steps that we are taking to kind of see that how, you know, we can grow business in those regions. So, and that would lead to like second source conversions. So, and there are, again, a lot of discussions, advanced stages that are happening with our customers on some of the immunosuppressant products also, Given that we have a leadership position on many of those APIs. So I would say immunosuppressants will continue to grow. And for that, the growth not only comes from the market growth, which is around 10%, but also from us gaining the second source, which actually is a much bigger contributor to the growth of the immunosuppressant business.

Got it. And with your permission, a couple of final questions. Firstly, on margins, see you had spoken about reverting to the 40% reported margins in FY28. Historically, Concord has generally been above 40% margins. But if you look at the gap right now, it's pretty wide. When should we expect the reported margins moving meaningfully towards the 40% bank? And specifically, if you can help us assist the profitability of Stellon, that would be helpful.

So, Stellon, currently, you know, we have supplied them the material. So, currently, you know, I would say that you should start seeing meaningful contributions coming from Stellon in the second half of the year, because the first half of the year has been more about providing them the quantities and them trying to get, you know, traction with the customers, Because it is not that, you know, we have our front end and we have the formulations getting ready and the customer is ready to kind of qualify Confort. So, while, you know, all the things have been done, I think even the materials have been supplied, the finished products have been supplied to the U.S. We have started seeing traction coming now in the U.S. for our products, and H2 is where we see that, you know, things will start building up in terms of the revenues from Stellon. Till that, I think we have given our cost structures in terms of what's the expense that we incur from Stellon and the injectables. So once Ceylon kind of starts ramping up its sale, we should see positive contributions coming up, which will then help us move slightly from the 33-34% slightly towards our numbers. And, you know, we are putting all our efforts on the injectable front as well. So, you know, we spoke about the contracts. Our own division, which is the Inca division, continues to kind of engage with the doctors that now we are a fully integrated company. So, I would say efforts are being put to kind of see that how fast the ramp-up can happen on both of these two units. And once that does take place, we should be moving from the 33-34% to 38-39%. And that's one of the reasons why we report so that people can understand the gap which is there and then what are the efforts that are being taken to kind of move from our current levels.

I had enough. Final question, can you help me with the utilization rates for all the facilities?

So, Alankar, the utilization for Unit 1 stood at 75%, and Unit 3 at 55%, and I mentioned earlier that Unit 2 is 21%, and Unit 4 is 5%.

Got it, sir. That's it from my side. Thank you, and all the best.

Thank you.

Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now have the conference over to the management for closing comments.

So thank you, everyone, for joining our Q2 and H1F527 earnings call. We hope you've been able to address all your queries. For any further information, please feel free to get in touch with us or with SGA, our investor relation advisors. Thank you once again. Have a good evening.

Thank you.

Thank you. On behalf of Concord Biotech and Choice Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.