Solara Active Pharma Sciences Limited (SOLARA) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Solara Active Pharma Sciences Limited Q1F527 Earnings Conference Call. As a reminder, all participant lines will be in the listening room mode and there will be an opportunity to ask questions after the presentation conference. Should you need assistance during the conference call, please signal an operator by pressing start and zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek. Thank you, and over to you, sir.

Thank you, Anishka. Good evening, and thank you all for joining us today for Solara, the earnings call for QNFI 27. Today we have with us Sandeep, MD and CEO, and Sharad, CFO of the company, to share the highlight of the business and financials for the quarter. I hope you have gone through our results release and a quarterly investor presentation that have been uploaded on our website as well as the Stock Exchange website. The transcript for this call will be available in a week's time on the company's website. Please note that today's discussion will be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team. I now hand over the call to Sandeep to make his opening comments.

Thank you, Abhishek. Firstly, good evening, and thank you for all who are joining in the call today on our Q1 27 earnings call. I sincerely appreciate your time and your presence on this call. As you must have seen, Q1 FI 27 has been another quarter of stellar execution. Our overall revenues stand at 384 crores, up 20% year-on-year. EBITDA stands at 63.5 crores, which is up 10% year-on-year. Our PAT is at 16.3 crores, which is up 55% year-on-year. This is the highest EBITDA and PAT that we have achieved in the last 18 quarters. These results underscore the strength of our core business. It is an outcome of discipline execution. It also shows our continued focus on profitable growth. Now, coming to the Bayes business, our Bayes business continues to exhibit strong momentum supported by consistent operational execution. And I reiterate the focus on profitable growth. Our base business revenues stand at 307 crores, up 24% year-on-year. Cross margins at 158 crores, up 10% year-on-year. And EBITDA at 72 crores, up 8% year-on-year. In spite of all the cost pressures we face resulting from higher raw material prices, which was triggered by the ongoing geopolitical developments in West Asia. The sustained performance of the Bayes business reinforces our confidence in our long-term growth potential. Now coming to the commodity ibuprofen business, this business continues to face profitability challenges. We reported an EBITDA margin of negative 12% amidst what we think is a difficult operating environment. While profitability remains under pressure, we witnessed a marginal sequential improvement during the quarter. Now, looking forward, looking ahead, we remain committed to building on this strong foundation by driving sustainable profitability growth, enhancing our margins, and creating long-term value for all our stakeholders through a combination of disciplined execution, operational excellence, and prudent capital allocation. Despite the significant headwinds given by the West Asia crisis and its impact on all global businesses, the underlying fundamentals of our Bayes business continue to remain strong, supported by a sound operating model and a healthy product mix across regulated markets. I would like to thank our shareholders again for your continued support and your continued faith and trust in Solara. With this, I will now hand over to Sarath, our CFO, for his opening remarks.

Thank you, Sandeep. Good morning, good afternoon, and warm good evening, ladies and gentlemen. And thank you for joining in today's Q&F 527 earnings call for solar active pharma sciences limited. As shared by Sandeep, despite facing headwinds due in by the ongoing West Asia crisis, which led to significant challenges in terms of Input cost pressures, as well as supply chain challenges with respect to raw material availability. The overall business has recorded a strong quarterly result in Q127, with the business recording its highest EBITDA and PAT in the previous 18 quarters. Although our gross margins were marginally lower on a Q1Q basis driven by the raw material pricing and supply challenges, which was actually triggered by the West Asia crisis, The business has delivered an EBITDA margin of 17 percent with an absolute EBITDA value of 635 million, which reflects an improvement in EBITDA margins by 18 basic points Q on Q, in addition to what Sandeep already mentioned that we have grown a 10 percent YOY business. As a business, we continue to focus our efforts on operating cost leverage and margin expansion in a pursuit of chasing incremental business growth at a healthier margin profile. Our ongoing efforts on strengthening the balance sheet has led to reduction of net debt by roughly 135 odd pros during the quarter, which reflects around 22% reduction in the net debt. Roughly 100 pros of that coming in from the final call money of the rights issue realized in May 26th, and the balance 35 pros were delivered from our operational cash flows. As we speak, our net debt as on 30th of June stands at roughly 479 crores, which reflects a net debt to EBITDA multiple of roughly 1.9x, considering the annual SQ1 EBITDA numbers what we have reported. Further, we have a line of sight to reduce the debt to sub 450 crores, somewhere around close to 440 odd crores by end of March 27, considering the scheduled requirements what we have for the debt. Which will further improve the net rate to become multiple to roughly 1.7x, considering the Q1 annualized run rate. At the end, we actually want to thank you for your support and patience as we work towards turning around the company, and look forward to engaging with you all in the upcoming quarters. I will be happy to take your questions, if any.

Amish, it would be good to open the Q&A session.

Thank you very much. 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 handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the fourth question from the line of Sarjan Kapoor from anti-fragile thinking. Please proceed.

Hi, team. Thank you for taking my questions and good evening to everyone on the call. And I have a few questions followed by a few bookkeeping questions, but for those, I'm happy to rejoin the queue and let others ask. A few questions for you, Sandeep. As you look ahead over the next 12 to 18 months, what are the kind of top two or three operational priorities that will determine the next phase of Solara's turnaround?

So, Sajjal, hi, Sajjal. Thanks for paying continued interest in Solara. I really appreciate that. You know, answer to your question is looking forward, I have three very important levers. Okay, so I'll make it three instead of two. First is expanding our existing business and seeding new businesses. And why I say that? Because our new pipeline. We'll take time to bring us revenue. So we have to depend on today's products, and we have to be able to expand the business. So expanding the existing business and seeding new business is priority number one. Priority number two is, of course, as our numbers improve, our revenues improve, and we manufacture more product to meet the market demand, we have to be able to drive operational efficiency and execution. And when I say that, I'm not talking of building any greenfield facilities. I'm only talking of deep bottlenecking capacities and finding ways to maximize the output so we can meet the commercial demands. And the third most important driver for me is how we use our working capital judiciously. So it's going to be all about working capital optimization and generating the free cash that we can use to fund our business.

No, that's helpful, Sandeep. And as a shareholder, I mean, none of us are doing any charity. The only reason we are staying invested and interested in Solaris is because we see the potential. The potential may not come in next quarter or even this year, but we nevertheless have our thesis, and that's the reason we remain patiently invested. And second, are you still comfortable with the Q2? FY27, the current fiscal September quarter, that is timeline for ibuprofen strategic review. And are there any key milestones we as investors should watch out before then?

So, Sajjal, as we announced in our earlier quarter as well, I think you should be expecting something coming your way in H1. All we can say today is we are working towards what we think is an optimum solution to the issue. We feel fairly confident that a solution will come out of it, and I would like to address this question in the September timeframe.

That's reassuring helpful. And finally, before I rejoin, as raw material costs and logistics normalized, what do you see as the biggest driver of profitability improvement over the next two quarters? Is it purely the gross margin mean reverting or going back to where we expect them to be? Or you expect some operating leverage in addition to gross margin?

Hi, Sejal. So, like, once we have this normalized pricing reworking back to the, like, kind of pre-West Asia crisis kind of pricing levels, most of our growth should come from a business expansion as well as cross-margin expansion driven by incremental volumes what we will be selling it. Because operating leverage is something that should play out a certain bit, but we will not have too much of a growth coming just because of operating leverage. From now on, it is more about to do how we can sustain that business growth combined with cross-margin expansion.

While our operating space remains the same, we have to try and see how we could move on the top of the funnel, because all of it will flow into a big deal.

Sure, Sandeep. And thank you for those responses. I will rejoin the queue. I've got some bookkeeping questions, but I'm happy to wait. Thank you. Thank you, Sato.

Thank you. We take the next question from the line of Akash Jain from Money Curves Analytics. Please proceed.

Yeah, hi. Just a couple of questions. One is, if I look at the gross margin, right, over the last few quarters, it has been a, it's a quite a big range, right? Even if I ignore the cost pressures and the gross margin impact for this quarter, in general, gross margins have been quite volatile. So any specific reason why our gross margins have been fluctuating over a much larger range, that is the first question. Second is, I'm assuming this raw material price pressure would have, on one hand, also helped us on the revenue growth side, because the pricing would have also gone up a little bit. So, how much of it was broadly volume-driven growth for this quarter, and how much was value growth, and what is our ability to pass on, because the Middle East crisis doesn't seem to be passing away anytime soon. So, what is our ability to pass on these increased prices to our customers? Because a business like us, I would assume that we have the ability to eventually pass on the increased prices. Thank you.

I'll take this question, Akash. See, so you had broadly two questions. One, you wanted to understand what of this particular growth has come because of price, increased pass-through cost what we had, correct? So on that particular number, on a console level, roughly 30-odd gross of that particular revenue numbers is actually driven by because of incremental cost pass-through what we had. Okay, so now if you adjust those numbers, right, then my gross margin profile for a console level is close to like 53% already, which is more or less in the range what we had always reported in the past few quarters.

Okay.

And the last question you had asked, Akash, is about us being able to pass these two customers. I think we have a very good relationship with customers. Most customers have been accepting over this price increase because we have been extremely transparent. In many cases, we shared with them our consumption norms and how much the solvent prices have gone up. So a lot of customers have been accepting. A few customers, it's always a challenge, but we are managing the dynamic situation. It's been challenging, but I think we've done a fairly good job at managing this with customers.

My first question was actually, why is such a large, long range in the sense that we have been, gross margin over the last many quarters have been over a much wider range, which is not typical what we see in an API company. So, I just want to understand what drives this big difference quarter on quarter on gross margin, even if I ignore what has happened this quarter.

So, when you actually talk about gross margin range, are you talking about only the base business, or are you talking about overall?

No, only the base business, right? Even there, 52%, 58%, we have seen that in the last quarter, in the last four quarters, right? Even last year, Q1, 58%, then 52% this year, so this quarter. So, I'm just trying to understand that there seems to, on the base business also, there seems to be a wide range on gross margins, right?

See, again, when you talk about base business, right, so we have reported 51.3%, which is at an absolute value close to 158-odd crores of gross margin, okay. Specific to base business, we had an increased pass-through of cost to the, you know, 17-18-odd crores, okay. So, if you adjust for that particular number, you will be already talking about a number of 44.5 kind of gross margin profile. So, 44, sorry, 54.59 of a level in terms of gross margin profile. As compared to what we had reported in number, 51.3%. So, that 54.5 is more or less reflective of whatever we had in the previous quarter as well, 55 plus minus so far.

Q2, 26 was 53%. Q3, 26 was 55%. Q4, 26 was 54%. And Q1, 27 is 52%. Even the math you said, we should include. So I think we are almost there. We are comfortable with the 50 to 55 percent range. Of course, the aspiration is to try and get as close to 55.

Okay, and you are saying that we should be able to pass on any more increases or the current environment, some gross margin we should be able to claw back going forward.

Yeah, all of it we may not be able to claw back the price impact, but a large amount of it customers are accepting because we've been extremely transparent.

Thank you so much.

Thank you. We take the next question from the line of Anand Madhra from SOR 12. Please proceed.

Hello. Hello. Thank you, sir. Thanks for the opportunity. Sir, I wanted to check how much capital we have deployed in the iBlue Filthin business.

Currently, our deployed capital will be close to 700-odd crores. Sorry, we lost your voice.

Sir, this includes both debt and equity both?

Yes.

Okay.

And, sir, I wanted to check about the profitability of the business. Are these levels likely to sustain, which we have reported this quarter, and can we expect some more improvement going forward?

See, to be honest, this particular quarter, what we have witnessed is ibuprofen as a commodity business, there was some shortfall of ibuprofen because most of this ibuprofen manufacturing is actually driven by solvent availability. So because of shortage in supplies overall, some of the pricing increases, customers were more willing to accept those particular price increases. At the same time, we also had a hit on the volumes on that particular piece. So, although we have reported almost similar kind of numbers on a top-line basis for Iboopun business, adjusted for the price increase, that numbers are slightly down. So, if not exactly in the same range, we will be comfortable to have a kind of a run rate somewhere between 12-13W kind of a loss on a quarterly basis. Somewhere between 10-12 each quarter.

We take the next question from the line of Ayush, an individual investor. Please proceed. Before we proceed with the next question, participants, in order to ask a question, please press star and one on your touchtone telephone. We take the next question from the line of Parth, Mehta from Antic Stock Broking. Please proceed.

Hi, my questions are more from macro perspective. So, could you elaborate on the impact that fuel cost

volatility has had on the business over the past few months?

So, the fuel prices have increased again recently. How should we think about the potential impact on profit and profitability in coming quarters? And my second question is, also with the new tariff schemes introduced by the US President,

what sort of an impact do you see on the business?

So, with respect to the first question, what you asked in terms of the ongoing crisis, what we are seeing as pricing challenges. Yes, this is something which is an ongoing challenge, both in terms of input cost pricing, as well as raw material availability. Now, if you have to appreciate that, most of this API key starting material or the starting material for raw materials are actually dependent on the petroleum products. And there's an overall shortage in terms of all the solvents what we use in our manufacturing process or what our vendors use in their manufacturing processes. So, one is raw material availability. Second is in terms of pricing. So, pricing challenges. Currently, what is our view is we have been very transparent with our customers in terms of sharing with them. So, what is the incremental cost being incurred by Solara driven by these short-term changes? And in those cases, we have been able to just get that particular pass-through. So, we are fairly confident of maintaining our absolute values of gross margin or, say, per se, in terms of business value. But having said that, in terms of gross margin, profile might get impacted because we will not be able to have a subsequent gross margin uptake on that particular increase cost price, what I may say.

And in terms of your second question part on the new tariffs, this is an announcement that has come in very recently. There is no formal policy that has been released. So from my perspective, if I look at this announcement, the current status for me is the intent has been announced. There is no legal implementing framework. And we are still awaiting clarification of what the product scope is. Is it only formulation? Is it APIs? Does it have more to it? So, as we get more clarity, I would be glad to sort of provide more clarity on this matter.

Okay. Thank you.

Thank you. We take the next question from the line of Amman Chakrabarty from AK Investment. Please proceed.

Good evening, Tim Kalara. I thank you for the good set of numbers, I would say. I have basically a couple of questions. So, first is to the management I would like to ask. The revenue increase that has been stated consistently, I think the revenue numbers are going up, but what it seems is that the revenue seems to be essentially flat quarter-on-quarter, even though ideally it should not be gaged quarter-on-quarter, but I would just say from the management. If there are any kind of issues relating to customer scheduling or capitalization or any kind of demand normalization or any kind of polymer APIs, because last time, Mr. Rao had promised that they were targeting polymer APIs. So that is my question. I'll join. After this is answered, I'll get back to the second question which I asked. Thank you.

Aman, thank you for this particular thing. We appreciate your insights into looking at these numbers slightly differently from what we look at. If I adjust for the numbers of increased cost price, my revenue numbers almost look like flat Q1Q, but at the same time, API as an industry also has certain cyclical in terms of Q1 offtake is normally slightly lower. Historically, and Q4 is normally slightly higher off-take for the formulation customers as well. Given these particular facts and given a point in terms of across quarters, because we are operating from a product basket of close to 50-odd products, in which roughly 15 to 16 products contribute to 75% plus of my overall business. So, any change in product mix Across these particular 15 products, as well as some factor of quarterly linearity which the industry normally exhibits. So, the most ideal way of comparing that particular growth will be on a year-on-year basis. So, when I look from a Q1-FI26 to Q1-FI27, growth in revenue is significantly higher in terms of 24%. Even if I adjust whatever increased pass-through cost, that number will be still more than 18-19% of growth, which we believe is a healthier as well as sustainable growth parameter.

Aman, if I look at the numbers for base business revenues, Q126, we were around 248 crores. Q226, we were around 240 crores. Q3, we were around 245 crores. I think we've hit a new plateau. And that's Q426 and Q127, we've crossed that magical 300 numbers. Of course, the aspiration is to do a lot more.

I think there is any kind of internal, I mean, like, strategic kind of recalibration or so on. I understand it is unfair to case on a quarter-on-quarter basis. So I just wanted to say that. My second question to you, sir, is regarding the application, which I have been possibly asking from the last question, any kind of explanation that is possible. I know, and this is the question which ideally should not also be asked on a quarter-on-quarter basis.

Sorry to interrupt, Mr. Rahman. Your voice is breaking. Could you please rejoin the queue for the next question? Thank you. We take the next question from the line of Gautami Agarwal. An individual investor, please proceed. Hello, sir. Am I audible?

Yes, we can hear you, Gautami.

So, the progress of delugging has been very impressive, with debt reducing further this quarter. Do you continue with becoming debt-free by 2029, or does this strong cash generation provide us an opportunity to achieve this even earlier? Send someone.

So, Gautam is...

Send someone.

Gautami, we are slightly hesitant in giving an outlook outlook per se, but your assumption of saying that we have an internal aspiration of becoming debt-free, like when I say debt-free, it has to be net debt-free by FY29. Obviously, we will have certain debt on the book, but from a net debt standpoint by FY29, we should be zero net debt.

Okay, okay, sir, understood. And in the previous call, you had guided for 25% EBITDA margin for the base business and actually exceeded it in the Q4. Can we expect that the similar trajectory will sustain in FY27?

Gautami, again, we will be slightly shying away from giving an output, but 25% plus minus 1% should be the margin profile what we are looking at in terms of EBITDA profile.

Okay. Okay. Thank you, sir. That was very helpful. Thank you. We take the next question from the line of Zakir Nasir from an individual investor. Please proceed.

Sir, good afternoon. And, Sanjeevi, would Solara reconsider the decision for the ibuprofen unit if the product bottoms up on the price front, sir?

Well, in business, all decisions can be reconsidered as long as something makes money for us and the shareholders. So we'll definitely reconsider, but it's a, look, at the end of the day, ibuprofen is a commodity business, right? The margins can never compare to what we have in the base business, right? So in that sense, we have an eye out for the ibuprofen business. I don't think the dynamics of the Agrofen business will change, and remember, we are not the only manufacturers of the product, there are a couple of other big manufacturers of the product in India as well.

And would we get back the capital invested in it, or are you expecting a small cut on that front, sir?

See, expecting entire capital invested on ibuprofen business will be slightly far-fetched, but as Sandeep mentioned, we are in the process of finalizing those next steps in Q2, and you will have to give us time till we come back with our Q2 results when we'll have more clarity on exactly what are the next steps and what is the cut-off or shaving which we are taking on.

Thank you, sir. Best wishes.

Thank you. Thank you. Thank you, sir.

Thank you. We take the next question from the line of Sajal Kapoor, from Anti-Fragile Thinking. Please proceed.

Yeah, thank you for the follow-up. And, Sarat, working capital discipline has been an important part of the turnaround. So, as the business grows from here, Should investors expect the current level of working capital efficiency to be broadly sustainable, or is some normalization kind of inevitable as revenues scale? And if so, I mean, which component, inventory, receivables, or payables is more likely to drive that?

So, as you rightly pointed out, working capital efficiency is something which you have worked on rigorously to have this so-called turnaround at this point of time. As Sandeep always says, until we are back-to-back three to four quarters giving consistently growth-oriented results, we will not be in that happy space wherein we will claim that particular turnaround to be actually taking in place. But the so-called turnaround, working capital efficiency has been one of that. Having said that, going forward as a revenue basis grows, to be honest, we don't feel our working capital efficiency will take a hit from the levels where we are operating from. In fact, we are working on putting in certain measures in terms of our SNOP planning and stuff, which are expected to improve our inventory norms towards the more healthier side. So, we will be like our aspiration and we are looking forward to actually more efficiently manage working capital rather than giving in certain part of working capital efficiency for growth.

No, understood. Thank you for that. And finally, on the operating cash flow that we expect to generate over the next three years with our aspiration to be no net debt or net debt free, right? So whatever debt we'll be having towards the end of FY29, broadly speaking, will be balanced or matched by the cash and other liquid assets. Is it fair to say that the majority of the operating cash flow will be utilized towards the maintenance capex broadly and some minor upgrades, or are we looking at some sort of an expansion? Because we are sitting on a big land parcel in WISEX, which is the newer facility. It has been twice USFD approved. So I'm just trying to understand, you know, what the capital allocation plan would be for the next three years in terms of both the maintenance, brownfield as well as greenfield kind of it. I don't think we need greenfield because we already have WISEX. So maybe between the maintenance capex and the brownfield.

So, Sajal, as you rightly said, as a company, we are also kind of once bitten, twice shy. So, greenfield is something which we are currently not actively looking at at this point of time. But having said that, as a business entity, we can never say no for anything. It is something which has to evolve. But at this point of time, greenfield is not part of our plan. Now, when it comes to whatever CAPEX expansion or, say, usage of the operational cash flows, what we will be generating, we expect, on an average, close to 40 to 50-odd crores of CAPEX year-on-year from FY28 and FY29 as well. FY27, we have already committed to close to 55, 60-odd crores of CAPEX. Part of that is being for maintenance capex, and the balance part is something, what we call it as kind of an incremental capex, which is towards de-bottlenecking my capacity. So, there is one capex which is greenfield, which is entirely new facility. There is one which is brownfield, which is expansion of the existing facility. But we are more focused on the third category, which is... Within those lines, wherever we are having some bottleneck, which is actually restricting my production capacity for high-margin products, we are investing wisely on those particular lines. And we are looking to expand those lines' capacity by 20-30%, so that whatever capex I do, we can actually get that particular payback within, say, 2 or 3 quarters max. So, with that particular aim, both in, like, in FY27, also, whatever capex we have committed to close to 55 watercoats, out of that, 40 close is towards these kind of incremental, de-bottlenecking capex. Balance 10-15 is towards maintenance capex, which requires for the plant upgrade, into the utilities or stuff like that. And similar trajectory will continue for FY28 and FY29 as well.

No, that's helpful. Just double click on that point of de-bottlenecking. I think as a business, We will get the highest ROSE if we could remove the constraint and de-bottleneck is the fastest and the best strategy for any company. So, de-bottlenecking point, I understand, and 30%, if you could get from high-margin products purely by de-bottlenecking, I think the ROSE would be massive on that, incremental ROSE, that is. And on the maintenance CapEx, usually what happens is when you remove an old reactor and replace it with a new, you also get some efficiency benefits. So the sales that you are getting with an old or the yields that you are getting with an old reactor should probably improve even if you do a like-for-like replacement. Is that a fair understanding?

So, when you have old equipment, sometimes this old equipment could have some leaks or things like that, just normal wear and tear. So, when you replace it with newer reactors, for example, then the operational days of the newer reactor is much better than the older reactor. So, in that sense, forget the yield, just the operational days increase. So, in a way, you are right. If you replace the old with the new, you will have a higher absolute volume of output. Does that answer your question?

Yeah, it helps. Yeah, it helps, Sandeep. Thank you so much, both of you. Thank you.

Thank you.

Thank you. We take the next question from the line of Akash Jain from Money Curves Analytics. Please proceed.

Yeah, just one follow-up question. What is our capacity utilization on the base business? Thank you very much because we have a facility in YZ which we I think a few, much earlier we had mouth-balled, and then we had said that we will repurpose it for the API business. So, what is the capsule utilization of the base business? What can we use the whole BISAC facility for the base business? Because now the cranks business will, I'm assuming the cranks business is getting consolidated in the base business itself. We are not demerging that business anyway. So, I just want to understand what is the overall situation on the capsule utilization and on the BISAC facility.

Aakash, few hygiene checks. So, we have not yet decided what we will do with the cramps, whether we will demurge or not. As we shared earlier in the earnings call of Q4, you will have to give us time till our Q2 results are out, during which time we will come up with the next steps in terms of both ibuprofen, VISA, Qundi, and what we do with the cramps demurge or say retrofitting VISA into something. Okay, now when it comes to base business, whatever we are reporting base business for the past few quarters, base business, we are broadly looking at three sites, which is Kudlor, Manglor, and Ambarna's put together. Okay, so these three sites, on an average, are average capacity utilization across sites put together is close to 70% at this point of time. And why is it we are not using for the base facility at all? It is only for cramps. So, Vizag, we have not yet used for cramps as well. So, when we say that we will come for Vizag, the whole plan was we will re-modify Vizag for cramps. But as we said in our last earnings call, that plan is something which we have kept on hold till we finalize our entire plan what we want to do with both ibuprofen as well as cramps. And that is something which will come back to you when we have our Q2 results. So, as we speak, Vizag continues to be mothballed.

Understood. Thank you so much. Thank you so much for the clarity.

Thank you. We take the next question from the line of prints. An individual investor, please proceed. Hello, am I audible?

We can hear you.

Yeah, thank you. So, I'll be asking this question on behalf of Prince. Firstly, congratulations on the good set of numbers, sir. So, our company has appointed Mr. Ajit Manocha as the new CIO, who is from Singian International, a very reputed name with Innovator Pharma. It's a very big event for us. So, are we transitioning from a commodity product to Innovator Molecule following this onboarding? This could be a huge value creator for us, and I'm confident that we have an Innovator Pipeline here.

Just a minute.

I'll ask my second question after this, sir.

Yeah, I mean, we don't want to comment about individuals, so I think we will skip this question, ma'am.

Okay, sir. So, my second question is that as per July 2025, we had developed ibuprofen via enzymatic growth. So, what is the update on that?

So, I will correct you there, Prince. We do not have an ibuprofen that is manufactured through an enzymatic group.

Okay, okay. Thank you.

Our ibuprofen is not manufactured in an enzymatic group.

Okay. Thank you.

Thank you.

Thank you. We take the next question from the line of Shashwant Singh from Bajaj. Please proceed.

Good afternoon, sir. Thank you for the opportunity. So, I had two set of questions. First one was that excluding the ibuprofen business, the base business delivered a 24% growth on this quarter. Could you highlight the key driver behind this performance? And do you believe this growth trajectory will be sustainable going ahead?

Shashwar, if you adjust that particular price increase what we had passed through in terms of revenue growth number, so that growth should be coming around to close to… So that number will be close to 18-19% of year-on-year growth as compared to Q1 of 26. Now when it comes to say growth drivers, if you recall a few of the quarters whenever we spoke about our business we said that order book visibility is something we are working on and we are working on a geographic expansion as well as new business seeding. So some of this particular growth has come because of incremental business what we could secure at different geographies wherein we were not earlier present. Second growth factor is right from FY26, we have started investing in certain incremental capex, which will de-bottleneck my capacity and lead to higher business volumes for my high-margin products. So part of that has played out for certain products. Since we don't give you individual products information, I'll actually refrain from that. But, so if I have to put those broad... Growth drivers, one is de-bottlenecking capacity, which led to increased volumes in high-margin products, as well as certain geographic expansion, which we did over the last one year. And when it comes to sustainability in the future, we are fairly confident that we should be able to, as we said earlier also, we are fairly confident of growing this business by at least 10% year-on-year kind of a number. So, we are currently trending at a slightly higher than that. So, we are comfortable with it.

Okay, thank you, sir. My next question would be looking solely at the base business. What would we consider to be a sustainable revenue growth like you said was 10%. So will that be for next five years easily? And what would be the range for EBITDA margins going ahead?

So we will refrain from giving a five-year outlook because the external environment, as you have noted, is so dynamic. The world has changed in the last 12 months. So we will refrain from doing that. And in terms of revenue, all I can say is you've probably seen our last five quarters. We are now operating at a very different level in the last two quarters than we've been in the three quarters prior to that. So, we are hoping that we can, in the least, sustain or grow on that new levels that we have reached, new revenue levels.

Thank you, sir. What about the margin front?

Margin front, I think, sir, I've answered some time before.

So, we are actually comfortable of maintaining close to 50% to 55% kind of a margin, depending on the product profile, what we'll have for that particular quarter.

Okay.

Thank you, sir. That's all from my side. Thank you.

Thank you. We take the next question from the line of Sheikhar, an individual investor. Please proceed. I would request Mr. Shaker to unmute and then speak.

Can we take the next question, please?

All right, sir. We take the next question from the line of Neeraj Shah, an individual investor. Please proceed.

Hello, my question is on

ibuprofen business. So, in the previous call, you have indicated that the strategy

preview of the ibuprofen business would be concluded by the first half of 27. Are you on the track to meet that timeline, and could you share any progress made so far?

As of now, Neeraj... I think we can say that we are on track to be resolving this matter by H1. We have given a guideline of H1. We are hopeful we can find a solution to it in that time. You'll have to please bear with us on that.

Okay, and my other question is on profitability outlook.

So the ibuprofen business witnessed an improvement in both gross margins while the EBITDA losses also tapered this quarter compared to previous quarter. Are this level likely to sustain

or can we also expect some improvement going ahead?

As we commented earlier, ibuprofen business has seen certain kind of a tactical play during Q1 because of reduced demand in the market, which led to slightly higher pricing levels. This is something which we don't have a long-term strategic view about how this will play out because this is something which is very dynamic depending on the solvent availability and stuff like that. But on an average, we expect that number to be slightly range-bound in somewhere between 10-0 close to 15-0 of negative emitter loss in each water.

Okay.

Okay, thank you. This was Ertu.

Thank you. We take the next question from the line of Japreed Singh, an individual investor. Please proceed.

Thank you. Am I obligal?

Yes, we can hear you.

So, sir, I wanted to understand what is the difference between our base business and I2 profane business. Why base business have that type of pricing power? What is the difference between customer relationships in these two businesses? Is there any?

What is the difference between Bayes and Hygiene?

So, when it comes to difference between the base and I do business from a customer relationship standpoint, that is something which is almost equivalent to each other because we normally work with customers who have good standing in the business and based on our historically strong quality record as well as compliance record, we also enjoy very good customer relationships. So, when it comes to customer relationship, that is not something which can be differentiated on that particular front. Having said that, why we look into both this business separately is ibuprofen is purely commodity driven business, which is slightly at the lower end of the value chain in terms of the API industry. Whereas there are the other base business consists of molecules which are not high volume, but which are significant volume, but with a better pricing and a better margin profile because the entire manufacturing process of that molecules what we sell in as part of base businesses are. Slightly complex as compared to ibuprofen.

Okay. Yes, yes. So my second question is, in this 20, 26 years, 6, 7 months, what the gas we have made?

So, we actually have, we actively have a basket of 50 to 60 products, and every quarter, on an average, we normally manufacture at least 40 of those particular products, manufacture and we sell close to 50 or products.

No, no, sorry, you don't understand. I said in this six, seven months of this 2026, what progress we have made?

What progress? Okay.

Yes.

So, again, if I have to post my... Put the company's progress on three pillars. One is in terms of revenue growth. So, if you see, over the last two, three quarters, we have grown our revenue base from a level of close to, like, say, 250 to 45 odd, close to 300 plus growth level for the base business. Okay? Now, when it comes to gross margin profile, we have sustained the entire gross margin profile at a healthier margin rate of 52 percent plus. Now, the second pillar is in terms of profitability, driven by this gross margin profile of 52% plus, as well as an operating cost leverage. We have increased an absolute EBITDA margins from a range of close to 55W close for the base business to currently we are operating at 70 plus close of absolute value for each quarter. Now, the third pillar can be in terms of health care balance sheet. So, we have reduced our net debt by close to 135 odd crores, which is 22% reduction in net debt in the last six months.

Okay, thank you, sir.

Thank you. We take the next question from the line of Achut from Rockstar Equity Research. Please proceed.

First question is on ibuprofen. Like, how much amount we can get from ibuprofen business science? What do you want to do with that, Manita, going ahead?

We haven't made any strategy decision on ibuprofen yet. All we said is we are looking at options, Achyut. So I think in the end of H1, as we had promised last quarter, we should be having further clarity and we'll come back to it.

Can you provide any guidance for...

Could you please rejoin the queue as there are several participants waiting for their turn. We take the next question from the line of Abhay Amrutia from Credence Wealth. Please proceed.

Hi, am I audible? Yeah, we can tell you Abhay. Yeah, so thank you so much for taking my question. So I just wanted to understand what are the potential risks that can, you know, that could derail the turnaround over the next 12 to 24 months.

Well, the first and foremost risk is what will happen in the West Asia crisis. I think, honestly, I think we managed it. It's been very challenging because, as you know, we have limited working capitals, so every rupee has to be used judiciously. So far, I think we've got a workable solution given the crisis, but we never know what the macroeconomic environment can look like. What this crisis has done for us is raw material availability has become a challenge. So sometimes our lines are shut intermittently till we can get one of the raw materials. Second is the raw material prices have gone up. Some customers have been kind enough to accept these prices. Some customers have not been so willing. So that risk always exists, but that is a risk that is not in our control. Okay, okay. Thank you. Thank you. That helps.

Thank you. We take the next question from the line of Hitayin. From Sequent Investments, please proceed.

Yeah, sir, I have a clarification question. So, you mentioned 10% growth for the base business or for the ibuprofen business?

Ethan, we have not given an outlook per se, but when we had our last Q4 call also, when most of the questions were towards what is our outlook for FR27, we said we are looking forward to 10% growth in our business somewhere. So that is mostly towards the base business, what we are talking about.

Okay, okay. Thank you.

Thank you. Ladies and gentlemen, we take that as the last question for the day, and would now like to hand the conference over to the management for closing comments.

Thank you, everybody. Very interesting set of questions. As you know, we are working very hard to try and make these numbers possible, and hopefully we'll continue on this trajectory as we meet again next quarter. Thank you.

Thank you. On behalf of Solara Active Pharma Sciences Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.