Viyash Scientific Limited (VIYASH) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Vyash Scientific Ltd's Q4FI26 earnings conference call. As a reminder, all Pirespin 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 conference over to Mr. Abhishek Singhal. Thank you, and over to you, Mr. Singhal.

Thank you, Michelle. A very good evening to all of you, and thank you for joining us today for Vyash Scientific Limiter's earnings conference call for the fourth quarter and financial year 2026. Today we have with us Dr. Hari Babu, managing director and group CEO, Mr. Rajaram, executive director and CEO, Animal Health. I'm Mr. Ramakhan, CFO of the company, to share the highlights of the business and financials of the quarter and financial year. I hope you've gone through our results release and the quarterly newsletter presentation, which have been uploaded on our website as well as 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 may 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 Dr. Hari Babu to make his opening remarks.

Thank you, Abhishek. Good afternoon, everyone, and welcome to the scientific investor call for the quarter 4 and financial year 26. Thanks for taking the time to join us today. Today is an important milestone for us as we are discussing first time combined entity 12 months annual results. Q4FI26 is the strongest quarter in the company history. EBITDA surpasses 200 crores. FI 26 EBITDA up by 59.6%, and PAT by 1324%, last year it was negative. With a good free cash flow, and most important, strong foundation for future growth. Fiscal year 2026 has been a transformative year for VIH Scientific Limited, marked by the successful integration of business, operations, and corporate functions into one unified, strong platform. The integrated platform has strengthened execution, improved operating leverage, Contributes sustainable growth, which reflects quarter-and-quarter results. As we enter FY27, we are very excited about our product pipeline, infrastructure, strong management team, and sustainable growth roadmap. With a significant leverage balance sheet, we are also actively evaluating Selective inorganic opportunities in addition to organic scalars to further strengthen our platform and create long-term value. As we explained earlier, operationally we have taken multiple actions across all the businesses over the last few quarters, which are reflecting in the results. On the animal health formulation business, all regions are growing very strong, and we believe the growth will continue. With our continuous focus on new product launches, geo-extension for all our existing products to various countries, expanding R&D, and accelerating new product development, manufacturing expansion at Spain, and de-bottle lacking capacity at Turkey, manufacturing, which are very important to grow for future business, we have initiated, we are working on that. Strengthen front-end team to expand business new markets, and scale up existing markets. Many existing markets, we try to add products, we try to add people, in addition to adding the new markets. Coming to the human health formulation business, I think it was a great year for human health formulation, yes. We have done fantastic job, FY26. Getting new product development and moving into complex products with internal APIs. As I mentioned earlier also, finished products, we changed our strategy last few years. One is changing our product mix, moving into little more complex products. And all mature products, volume products, we try to internalize APIs. And also bringing manufacturing into interior manufacturing. That's where we are able to sustain the products and grow. And also most important, margins are growing. Recently, we initiated dedicated, creating dedicated potent lab in R&D to take care of all our new oncology product development for finished product. Coming to API and CDMO business, this is again one of our core business and strong business. And most important to note this year, animal health, all you guys must be tracking last couple of years. The last five years, it was stable, neither growing nor actually de-growing. It was 350 plus or minus 10 crores business. The first year after five years, we are able to take it to 400 crores run rate, and we are very confident coming years it's going to grow very strong, and already we see the growth, and we are going to grow very strong in the next coming years. And most important, animal health, we re-looked at the entire strategy. Of course, that's a part of strategy or synergy exercise. We identified few areas, execution capability, especially on the manufacturing. And most important, R&D, speed, efficiency, and portfolio development. We initiated all those areas last six months. It's working very well on those things. We're able to develop a couple of products already last six months. And we are covering product development up to at least 2035 patent expiry. And we see the huge potential to grow on that business. Operational efficiency improvement, and we see tremendous improvement in animal-dense API operation last six months, and capacities are growing. We are able to optimize. That's where it shows growth as well as margins improvement. Coming to human APIs, like formulation business, last two, three years, we try to optimize in various aspects. Taking out commodity products, taking out little intermediates into taking out and converting into API business. We did a big exercise last two, three years. That's how we are able to improve the gross margins drastically. So last year also we did some optimizing of intermediates business. All intermets, whatever we are doing, either we are trying to convert into API, and which, in fact, is going to convert into finished products. We started last 18-24 months, and started getting approval. That's where you can see the growth in the near future. And other strong area for APIs are the continuous development of the new products. As I mentioned earlier, call also last 12-18 months. We moved out from general volume products to complex and little more high potent areas. We were able to do large number of products, validated and lock-in with many customers. Launches are going to come near future and also in the long-term perspective. Whatever we developed last 3-4 years, we acquired these companies in 2021 and started rebuilding R&D from 2022 and filing many products from 2023, 2024, 2025, which started coming approvals now. This year onwards, we are expecting a reasonable number of approvals which give good value for top line as well as bottom line. And another area where strategically we are focusing, of course, we were talking CDMO, different areas, one of the areas where we are strongly focusing with innovator business on the life cycle management. And all you guys are aware, animal health, almost 70-80% goes to innovators. And we see the strong potential to grow near future. Whatever we are doing this year, I can expect next year at least 30-40% growing innovative business. You know, innovative business is quite sustainable and reasonably profitable business. That's where we are focusing and we see good potential to grow and you can see 2017 itself growing that business. Finally, which is very important, of course, integration and synergies. As I mentioned earlier, teams have been integrated very well, whether it's operational or business, or most important, corporate functions. And most important thing is the entire team is fully charged up for future growth. That's where it's my excitement, personally. And coming to the center, J. Synergies are tracking pretty well. It's tracking better than what we anticipated during the merger, and we are continuously looking for additional synergies. At this point, I will stop, and today maybe we will allow time for more questions or clarifications. With this, I will hand it over to Ramadan to take care of finances. Thank you, everyone.

Thank you, doctor. Good evening, everyone, and thank you for joining us. I am pleased to present the highlights of our strong financial performance for Q4 and full year Fi26. I begin with the highlights for Q4 Fi26. Total revenues stood at 920 crores, reflecting a year-on-year growth of 19.1%. Formulations revenue increased by 28% to 499 crores, while API revenues grew up to 5% to around 384 crores. Gross margin improved by around 236 basis points to 55.1% compared to 52.8% in the same period last year. Adjusted EBITDA rose sharply by about 64% to 200 crores, with EBITDA margins expanding by 593 basis points to 21.7%. Profit reported to improve significantly, moving from a loss of 37 crores to a profit of 125 crores in the current quarter. Profit after time also has brought a strong turnaround, rising from a loss of 32 crores to a profit of 66 crores a year-old year. Coming to FI 26 full year performance, total revenue for FI 26 reached 3,420 crores, representing a growth of 13.8% over 3,007 crores reported in FI 25. Combination revenue grew 18% to 1866 crores, while API revenue increased 8% to 1491 crores. Gross margins expanded by 321 basis points to 54.3% compared to 51.1% in FI 25. Adjusted EBITDA increased 59.6% to 702 crores, with margins improving by 590 basis points to 20.5%. Profit before that grew more than 26 times to 349 crores compared to 13 crores in the previous year. Profit after times increased more than 14 times to 225 crores, up from 16 crores last year. Our balance sheet remains strong, supported by healthy liquidity and comfortable leverage precision, which gives us flexibility to pursue growth opportunities, both organic and inorganic. We continue to focus on disciplined working capital management, ongoing improvements in operational efficiency across the business. These strong financial parameters were reflected in the external credit rating upgrade, with long-term rating moving from A to WA- and short-term rating improving from A1 to A1+. Looking ahead to FY27, our key priorities include strengthening merger synergies, improving operational performance, Allocating capital efficiently to drive sustainable growth, further reducing debt, and maximizing cash flow generation. With that, I conclude my opening remarks. Thank you for your attention. And I would like to invite the moderator to open the floor for question and answer session.

Thank you very much, sir. Yes, sure, sir. We will open the floor. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask questions, may please press star and 1 on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking our questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vishal Manchanda from Systematics. Please go ahead.

Hi. Good evening, everyone, and thanks for the opportunity. Congratulations on a very strong set of numbers. So, sir, could you kind of share some color on the CDMO business as to like how we are looking to build that and how we are placed currently in terms of either number of clients or number of products that we are doing on CDMO side and any potential leads that we have to take this forward in a meaningful manner?

Yeah, sure, Prishab. Thank you. I explained last call also the same thing, CDMO. You know, CDMO, there are three, four models. Working with innovators on NCE molecules, where we start with phase three, move to the commercial thing. And second thing is start with the life cycle management, whatever their products normally once it's paid and expires. They look for alternatives. That's the second business. And third business, now there's a lot of opportunities for speciality companies, both in Europe and also India-based companies, where they don't have infrastructure to develop or manufacture. So they're coming and looking for CDMO business for speciality products. First one, I'll come a little later. The second and third, life cycle management business. Now, I can say at least we work with 8 to 10 innovators, big innovators, both human health as well as animal health. And I see good traction last 6-9 months. Okay, you know, animal health, we were struggling a little bit on delivering their expectations, but now we have come out from those things. We are able to grow a lot lifecycle management products in the next one, two years. So with eight to ten customers, few products are waiting for approval what we initiated two, three years back. It's coming for approval start from end of this year. So started getting approval from a few markets, but I think it's a global thing. It's going to happen by end of this year. So like that, we see good growth potential near future. Okay, by 27, I can say at least innovative business on this life cycle management, I am expecting to grow 40% and the base is around 200, 225 growth from that. And the third thing, speciality companies last time also explained two, three models. We develop the product, we manufacture, and they file the product, and we have some profit share also. We did almost 16, 17 products. I don't know the number, but it's a little more than 16 products on that. Coming for, all these are complex products coming for little later launches. Start from maybe 29 to 30 kind of thing. And it goes up to 2035-37. So that's we are adding continuously on that. And we see the good potential on that. In the same category, we also adapted one more model on that. Instead of just working, developing, and doing for them with some profit share, we also initiated few products, complex products, joint development. Pure formulation players where they have strong presence on developed markets. We are working with the joint development program, so we take risk on the API development and the API quantities, and they develop formulation. So one way it's very fast, faster development, since they are reasonably strong on formulation, where we are strong on API. So the development cycle is faster and simple, and more important, it's efficient. So we initiated three, four products. Already we have done one product. In addition to that partnership, a few products last call, I mentioned matured products. These two areas are growing very fast, but we shall, you know, these things will take time. When you are looking for CDMO, always it's a longer term perspective. And any CDMO starts with lifecycle management. Once you have a strong relationship built with innovators, then go to the... First one, actually, where you can start with phase 3 and convert to the commercial. That's where we are building infrastructure. We are building, started building resources this year. Okay, that takes a couple of years, we shall. So that's our CDMO. I am not, I am very practical on this. It's easy to say CDMO, I can work with innovators, but I don't want to go into that. Whatever we say, we follow. So that's the second and third areas we are working very actively. But the first one, NCE, it takes time to be promised. So that's where we are building, we are looking at various opportunities. If we get something on that area, some inorganic option, we are open to look at. So we are looking continuously. But we don't want to acquire, but just for sake of showcase something, or showcase numbers, we are looking at the good asset if something comes out. So that's where we are looking at that. Hope I answered your question, Vishal.

Sir, just follow up on this, basically, so when you say speciality, you mean you do the, so you do only the API, right, not the formulation, but the API is basically, maybe it's a complex API, is that how we should look at the speciality?

So, the two things here, Vishal, formulation, we have our own setup already, most of our products we do that way. I will explain that. This is mostly these API CDMO partnered with our formulation partners are reasonably complex or high potent. Because as you know, we have two high potent dedicated facilities. Capability starts from as small as software kg or 1 kg to 100 kg batches. These capacities, very few companies are having that flexibility. That's where our strength with R&D scientists were able to do that. The formulation, as I mentioned in my remarks, we are moving into the complex. That's how we are building our R&D uncle lab, which is getting ready soon, mostly this quarter and our next quarter. We are moving into the complex products in formulation. The formulation is always partnership model, Vishal. What we do today? So, we develop the products, once we have, we identify the product, and once we come up with proof of concept, we go to the partners, all big companies, and we work with them. So, they pay for development, and we continue development, we get approval, and we do manufacture, and profit share is mostly 50-50%. So, formulation entire business, what we do is, please. Directly or indirectly comes into the CDMO business. But it's mostly with the big generic players like Slip, Sippler or Dr. Reddy is all big players in the U.S. That's what we do.

And, sir, like you said, about 200 crores of the business is currently CDMO. So, the top line in API is about 1,500 crores, so roughly 15%. So, over the next 2-3 years, would this become, I'll say, about 30-35% of your top line, the CDMO business? And are these relationships with innovators very old or you have recently built this relationship and hence there's a scope for you to ramp them up much larger?

Most of the relationships are very bold. Long, maybe last 10-15 years. There are two things. One is relationship with VIH, relationship with sequent animal health, and also our past relationships where we worked. Most of us, we worked in big companies, had experience with these guys. But most of the relationships are already commercially demonstrated. This 200K across business, it's coming from last 7-8 years, you know, the sequined bigger business is that. But last 6-9 months, the credibility of the relationship is improved for us. Where we focus on the quality of the R&D products or efficiencies, improving quality systems, that's where they started getting more comfort. And looking for more products on that vision. So, to answer to your question, maybe 90 plus percentage of existing relationships, two, three products, what we are anticipating approval this year, next year. Those are the relationships we built in the last two years.

Got it, sir. Thank you very much. I'll join back the queue. Thank you.

Thank you.

Thank you. The next question is from the line of Surbhi from NV Alpha. Please go ahead.

Yeah, so my first question is, you know, there's almost a 14 crore quarterly gap between the reported PAD and the PAD, the minority. So, wanting to understand which subsidiary accounts for this minority interest and what is the scale of the subsidiary in terms of revenue EBITDA and how is that going to grow in FY26? That's my first question.

Thank you. So, we have, I will start, maybe Ramakant can add if something I miss. We have two subsidiaries. One is in USA, which is the human health formulation. We have manufacturing in the US, of course, R&D, and Hyderabad. So, manufacturing is the subsidiary. We have majority control on that. And the revenue, I think we reported that revenue is around 300, sorry, 425 crores revenue. And I don't know, EBITDA, Ramakana, Patty, you can tell. And other subsidiaries is in Spain. Both are having majority. We are working on that next one, two years, actually, to get that remaining thing. We are working closely with that. We have option to buy back that. I think Spain, Rajay, correct me if I am wrong, Spain by 28, I think there is option to buy back. And yes, we have option to excise any time. We are looking at various options. Maybe we look at next one, two years on that. The numbers specific to, I don't know whether you factored specific PAD numbers, but overall percentage is, maybe Ramad Khan, you can explain.

Yeah, so as Dr. mentioned, the APCO, we own the U.S. formulations business, we own 60% of the state, and minority remains at around 40%, and annual revenue is about 400-425 floor. In Spain, again, we own 60% and the revenue from Spain is about 550 crores per FI 26. So currently, whatever you just mentioned, about 20% of the EBITDA or the profit margins are coming from minorities. 20% of PACT. 20% of PACT is from these minorities.

Got it. And just if you could throw some more color on the animal health portfolio, you know, you mentioned that since the last five years, it was kind of stable. And this year, you're going to grow and more contribution from the innovators. So what kind of products and geographies are you targeting? And how much of it will be companion in this? And also some, you know, color on the distribution partnership with the Boehringer Ingram for You know, the India portfolio.

Sir, two or three things in animal health portfolio what I mentioned. One is API. API, you know, we do majority business with innovators. It goes to everywhere, every geography in the world. So, most of the products what we have been doing till today, last year, are the mature products, like alcohol, benzene, pen, benzene. Okay, there are a few mix of large animals as well as companion animals. Most of the products are matured products. Last two years, of course, we started a few new products which are coming out of Patron from 28 onwards. That's where our focus is going to be on API, while expanding that existing makeshift product business, adding most important on the new API products, which are coming out of patients, up to 2035, we looked at, our R&D started working up to 25. We identified almost 50 Lodi products, and five, six products are... Very large products coming out of patents. If you know a little bit on the laners, those are the big products on that. Another advantage of developing in APIs is since we are in the formulation of these things, we can extend to the formulation development also. That's what we are doing. So that's where API business, few products, existing clients are adding. And a few products, it's adding geography. One or two products they're doing for only India. Now they started qualifying last year for all other geographies, which are bigger geographies like China or some of the Europe countries. That's where that 100 art course, whatever I mentioned, is an existing product, so adding geography on that. All new products, whatever is coming, it reflects from maybe 28, 29 on that. And also, it helps us to protect and lead formulation business with internal APIs. A couple of products are specialized in APIs. It's not easy to get sourcing, and even if you get very limited sources. That's how to protect and grow the product formulation, we are doing that. Coming to the formulation, there are two segments. One is the large animal thing, where we had a lot of focus till last year. From last year, we are extending that focus to companion animals. One large animal, we are adding a few geographies, like we are very strong in Spain, we are very strong in Turkey. Last two years, we started expanding geo-expansion, trying to add all European countries, because both sides are approved by EU GMPs, and whatever products we are manufacturing, injectables at Turkey, and powder solutions at Spain, we are expanding to Europe markets on the large animals. The same way, you know, the Brazil, we have manufacturing site for large animals, that we are expanding to the Latin countries, and we see... Good growth from Mexico this year. Other areas, a few other countries, Southeast Asia countries, like Vietnam, we just started our front-end activity. That's one of the bigger markets for large animals. And also, we are exploring for Africa, all those things, large animal products. Large animal products, the advantage is we covered almost 80-90% of the entire portfolio in that segment. So... The growth comes on the market expansion on that. Coming to the companion animal, which is the strategic growth area for us next five, six years. Multiple things we are doing. One is with partnership with BI. That's the first time we started last quarter. We want to expand entire our companion animal platform to entail through this partnership. We are going to distribute entire BI segment, whichever are coming, given feature also, we are going to do that. With that platform, we are able to develop and get into the market. And we are expanding a lot in the company anonymous. We already initiated R&D expansion. It's going to happen next six months. And the product development is going to increase by five, six times, whatever we are doing. A few products today, it's going to add a large number. At least we are looking at 7 or 8 products per year. And most important, the products are coming out of 8 and maybe 29 or 30. And some of those products are differentiated products. As you guys know, cat and dog requires various combinations on that. So we are working on that little bit differentiation and new products. R&D started expansion. We gave Apex clearance for R&D on the company. People we started hiring. And most important, manufacturing infrastructure also we're adding this year. That gives a lot of opportunity to expand the company. So India, we're expanding. Whatever product portfolio we are doing, we are going to Launch everywhere. Most focus areas are at first phase Europe and India. And where we have presence today, strong presence like Turkey and Brazil. So this year, FI27 is a building, platform building for company animals. R&D, manufacturing and front end wherever is required. And also we are looking at some inorganic options for these things. We are looking at few options. So, that's the broader area of the company. So, this is the focus area on that.

Well, thank you so much. Thank you. A reminder to all the participants that you may please press star and want to ask questions. The next question is from the line of Sajal Kapoor from Anti-Fragile Thinking. Please go ahead.

Yeah, hi, thank you. Dr. Hari, PurePlay intermediates and API companies such as Alivus Life Sciences have been reporting gross margins in the 55 to 60% range. Now, given Vyash's exposure to formulations, APIs, CDMO, complex intermediates, how should we think about the sustainable gross margin profile, you know? I mean, over the next three to five years, do you see gross margins inching up from here? We are already at a decent level, but when you add formulations, you expect a higher gross margin. Otherwise, there is absolutely no point doing formulations in addition to APIs.

Yeah, I think you answered Kusneva's help when he said it's a decent gross margin, as I explained. Intermediate and API standalone. Maintaining 55% gross margin for generic play. It's not easy unless we have different strategies. That's how we followed last two years. Our gross margin is three years back. If you compare our EBITDA gross margin or PAT three years back, which was completely different. Why? Because mix of intermediates and API where we sell. And large business, actually, intramet contribution used to be much more. That's how we changed our strategies to maintain or improve gross margins. What we have adopted, wherever there are intramets where we have strong presence, try to do forward-forward integration. What it means? Forward-forward, intramet, take it to API, take it to APA, take it to formulation, wherever we can do that. The similar way, wherever we are strong in the formulation of APA, try to that would indicate. So we try to optimize continuously, taking out commodity products where we will not be able to make good grass margins. Generally, commodity grass margins are 30-35%, and making those products in highly regulated neuron band. You're able to survive, but it's not easy to improve. That's how we try to optimize the product mix. We did very well last two years. So with that mix, we sell intermets with reasonable gross margins. And also sell intermediates wherever we are using API so that we can utilize the capacity. That's how we are trying to do that. So with this mixed strategy, moving to API, API to formulation, formulation to back, we are able to manage that gross margin, but knowing this business lasts 30 years. Even if it improves, plus or minus 1, 2%, but unless, maybe after five, six years, unless, till we go to that, I think these gross margins will be maintained. Once you move to CDMO and CE, it may be improved, but otherwise, at this stage, I feel this is reasonable, and we are confident to maintain those gross margins. Here are their plus or minus 1, 1.2%.

That's helpful.

And I was following the commentary from Zoetis Management, the animal innovator leader in the US, and they sounded cautious in terms of generic opportunity. And the reason is that some of the American consumers are consciously shifting into generic or more affordable drugs for their companion animals. This was not a trend that was seen earlier. So in this changing landscape, I mean, logically thinking companies like us should be able to gain more traction maybe through lifecycle management and even directly offering our own IP. The generic molecules, that is. I mean, what is your thought process?

So, that's exactly what we are trying to do. It's an entire component animal segment, what we are projecting, what we are strategically working next five years. Europe, component animals, it's moving a little faster, genericization. You know, today, developed markets, innovative controls fully animal-led segments. Whether it's animal or companion animals. And underdeveloped countries have moved into the generic business, but developed countries are still controlled by innovators. For the companion animals, it's moving fast. Last two, three years, if you say, still it's a large opportunity. Because the volume is growing. So there's no rocket science here. Last three, four years, post-COVID. Pets are growing day by day. Okay, pets is like it. So every country is growing. I was surprised to see, yes, there were 9.4 crores dogs and 9.2 crores cats. So they're together 18.6 crores. That means each family is having at least one. And Europe is growing every day. Surprisingly, cats are growing much faster than dogs. When the volume is growing, and another issue in this, especially Europe, unlike human health, insurance coverage is not full. It's covered by 25%. We visited all distribution centers and hospitals, everything. So, insurance covered is by only 15%. And so, volume is growing. It's naturally it has to convert into generic. That's where we see the bigger opportunities. That's how we want to do. Start with Europe, India, where the bigger markets are growing. And next step is go to U.S. U.S. is still little complicated, especially component animals. Guidance is not very clear, is it actually? Some of the solutions, we do something for human. But B.A.B.E. sometimes is not acceptable, same as human. It requires little more studies. So, it's a little complex guidance in years. That's where actually our next two, three years focuses on where we can do faster growth. Europe phase, since we have experience, exposure, actually, we see that's a faster growth. Next phase is going to years by doing ourselves or look for something else. So, exactly we are doing that. That's the area where we are accelerating. That's the reason we decided to go quickly R&D expansion as well as manufacturing expansion for company and animals.

Very, very helpful.

Thank you.

And lastly, this time around the receivables growth, and that's common. I mean, receivables, you know, often outpace the revenue growth in a scaling business. It's a common observation, nothing unique to us, but it has happened this time around. So, as manufacturing eases and next constraint may shift somewhere else, what is the next bottleneck you see in the system and what operating discipline will keep cash conversion and execution quality intact as the complexity increases going forward? Thank you.

Few things when you are, when you want to grow faster and pick, okay, these are the natural things, sometimes inventory, receivables, few countries, you know, countries like Turkey, all these countries, credit period is very high when you are growing bigger thing, where we don't see any risk. But looking at various things, we always look at networking capital things, and this year our focus area, you might have seen this quarter, when our EBITDA is 200 crores versus PAD 60 crores, that's one of the key focus area, how can we convert into EBITDA to PAD better. Various options, of course, our finance pattern is going to come down. And we are looking at the tax structure also differently. That's how we are moving a couple of subsidiaries from whole tax regime to new tax regime. Whole tax regime, you know, India, 34%, 35%, it's moving to 25%. So we are looking at the various options, but sometimes it's exceptions receivable when the market demand. We are working closely on all these things. Ramakant, if you want to add something, you can.

Yeah, so just to add, I think absolute number does reflect the growth in revenues. Absolute number of receivable CPCs that increase is majorly because of the revenue growth, but if you look at the number of days, it has been within a small range, maybe about five, six days of increase that we have seen in Q4, which we believe is in control. We don't see any concerns there. But as doctor said, the focus continues to remain on how do we convert from EBITDA to EBITDA.

Thank you. Thank you so much for answering all my questions. Thank you.

Thank you. We'll take the next question from the line of Kumar Saurabh from Scientific Investing. Please go ahead.

Hello, sir. So, in last phone call, you had spoken about companion animals' generic penetration being just 15-20%. If you can talk more about that data in terms of what is the total addressable market, both in India and globally, and what is relevant for us, how this market is growing, if you can give more details on this.

I think I would... Where we are focusing market, Raja, maybe you can add, if I miss something, company animals, mainly Europe is a thing. US, we are not, of course, bigger market is US, since most of the market is the branded market, innovators. I think Europe is close to a billion dollar market, right, Raja?

Yeah, with more, the addressable market would be that if you leave out vaccines, yeah.

Yeah, so without accidents, where we are planning, it's close to a billion. And most of the products, we are working on that. That's the thing. And also, we see that genericization also is improving on that market. That's a more developed market. India. The market is not big, but we see at least it's going to grow. In India, we are also looking at various things near future. At this point, mostly we look at medicines. That's what we distribute vaccines for BA, all products. But it's going to be a few hundred crores in India. But the weather addressable, what we are looking at, the billion dollar market in Europe, at this point. And we are preparing all for that, whether it is R&D, print-end, or manufacturing on that perspective. US is the next stage. That's the bigger market. So, we take it in the next phase. If in between, if something comes up, right opportunity, inorganic, we may look at it. But our first priority is to address Europe. And also to address countries like Brazil, the East Country.

And if I may just add, I think the important thing is that unlike human generics, where the pricing drops very drastically to almost 10-15% of the innovator's price, I mean, what happens in animal health generics is that the pricing drop to the generics is far slower. It tends to be more like 60-70% of the innovator's price. And therefore, you're right in observing that, one, there is a 15, you know, genetization is much less in animal health. It is increasing very fast. Europe's an interesting opportunity. And also because, you know, there is an opportunity, if you have a front end, to actually distribute branded generics at reasonably good margins. So I think that's the other piece with success. Thank you.

The good thing about our strategy is now we have understanding on everything. Front end, we have great understanding since already we are doing. And we are very strong on API. We are strong on operations. So with the integrated play, definitely we believe we can differentiate this and grow bigger.

Great. Thanks for the detailed response. One last question. And our performance has been commendable, I think, what you guided for FY28 you achieved much before. And we are much above the 20% guided margin. But do you see further scope for synergies and cost advantages or like this is the optimal we should consider or is there more to, you know, extract in terms of optimizing the margins?

It's the two things. We have to balance margin versus growth. So, this year we are going to invest a lot. As I mentioned, our R&D investments are growing a lot. Okay, substantial investment is going to happen on finished product formulation, both human health and company and animals. And most of these are complex molecules. We are going to invest a lot on R&D. And also, when you are building additional capacities, there will be some free effects on that. So, it's a try to balance, but we are very confident to maintain these margins. But once you actually, next phase is the investment phase. Whatever we did last two, three years, optimizing existing infrastructure existing. But next two years, we are going to build and invest on the R&D or no things. But we are very confident to maintain these levels. I am always trying to be practical on that. Okay. If we get some few products, good thing, we may. But we are thinking at this level, gas margin.

Sure, sir. Thanks a lot, and I will come back in the queue. Wish you all the best, sir.

Thank you. Thank you, sir.

Thank you. Thank you, sir. We'll take the next question from the line of Chintan Modi from Oak Lane, Capitan. Please go ahead.

Hi, sir. Thank you very much for the presentation. Sir, my first question is with respect to the energy benefits. I think we are targeting something like 60-70 crore. Can you tell us, and you mentioned that there could be some more energy benefits. How much has been accrued and how much more we can see in the next year?

So, rough math, I can say, annualized. What you mentioned, 50-60 growth. Initially, when we decided this measure, we anticipated 50-60 growth overall. But now, we are going to do much more. So, at this point, I think tracking 50-60 growth, annualized numbers. But again, the bigger portion also is coming to come in next 12-18 months. So, because it's been at least... Operations, you know, we have to develop and file approval. All these things will take its own time. And as you know, last quarter, also I mentioned, we invested CapEx for all benefits of capacity increase in VIH. So we are waiting for approval. Once that comes, it's going to have further synergy.

Next question is, because of the recent geopolitical issues, many chemical companies have been facing raw material availability issues as well as volatility in prices. Could you throw some, you know, color on that, on how we are placed over next one, two quarters, and is the raw material availability secure for us?

So, as you know, it started at the beginning of the March. There was a small impact in March, but it's not material. Two things. We were able to manage, one is inventory, all the materials we have enough inventory to manage, say, one or two quarters. The bigger impact on two things, one is the solvent, where we cannot keep inventory for months together. And the second one is the fright. Fright impacted a little bit, one to close in fourth quarter. Solvent, there was impact. But we are able to, how we are balancing, since we are recovering very efficient solvents, that's the consumption is, we are trying to minimize whatever best possible. And another area, we are trying to increase the prices. We are able to increase the prices to balance these things. So far, we are able to manage very well till now. This quarter also we are confident to manage. But if it continues further, Okay, maybe next one, quarters, we need to see that how much we can increase the price, but at this point, I don't see any material impact on that. Whatever we do, price increase versus raw material increase or fried increase, we are able to balance, but there may be little impact, but I don't see bigger thing, at least for this quarter. Next quarter, we need to work on that. We are managing very efficiently on that way.

Understood.

Sir, with respect to tax rate, how much should we model for FY27 and FY28 as a percent of TBD?

I think around 27%.

Yeah, average tax rate should be around 27%.

27%.

So, this quarter was more because of we are moving from old regime to new regime. World regime, some of the areas are 35%. There was some tax adjustments because of integration or moisture. So all these things are going away. That's also, we are trying to optimize that. I think next year onwards, it's going to be 26-27% levels.

And so one last question is with respect to, let's say, over next five years, and given that we have multiple levers for growth lined up across formulation, API, and CDMO, can we expect a growth rate of, in the range of, let's say, 15 to 20% kind of, is it possible, given the market search conditions also and the initiatives that we are taking?

Yes, 15% definitely quite possible. Still we are working on the detailed strategy. Maybe sometime in June. We are trying to hold an investor meeting with the detailed strategy plan, what we are going to do, how we are going to do that. I am able to tell you that looking at our current business and what I have idea, I think 15% is possible.

Got it, sir. That answers all my questions. Thank you very much, sir.

Thank you. The next question is from the line of Shreya Vazir from BMSPL Capital. Please go ahead.

Yeah, hi. Sir, I want to understand how you see the company's journey from a bit of 700 crores that we do today to 1,000 crores and then to 1,500 crores. So, in how many years can we achieve these EBITDA growth targets, and how does margin volatility due to raw material costs, volatility in different geographies that we do business in, volatility in different business segments we operate in, impact our EBITDA growth targets?

Sir, I will answer the second question first. Market volatility raw material. As you know, We do most of our business, API business especially, is the quality markets, download markets, or regulatory markets. The pricing was reasonable, little bit sustainable, we were able to pass it on here and there. But with my experience last 5-10 years, these are the things sometimes it comes, we have to manage time to time, with our base, with our product pipeline, with our market access. I don't see any volatility in going forward these businesses, what we do, API. Formulations, there are few businesses, you know, like U.S. business, post-COVID, there were three, four years, it was a bad time. Large number of players came from India, which became highly accommodative business. That's how we restructured our business, tried to move to entire internal API and also move manufacturing. That's where we are able to manage that. Few markets, other markets like Tuskegee, volatile, hyperinflation, whatever it is. We see the good growth last one year, 526 also, we see the good volume growth in addition to whatever adjusting inflation. So, in all looking at our product pipeline, market access, all those things, I don't see much volatility or impacting margins or growth. The first one, whatever you asked, 700 crores versus going to 1,000 crores and 1,500 crores. You know, we indicated 800 crores by 27 or 28. Somebody says 28, somebody says 28, but 27, my internal target was 27. But we are able to achieve that run rate now. You have seen the last two, three quarters start from quarter two numbers. That's where we started integrating two companies. So couple of things, synergies and market access happened better than what we anticipated. So thousand crores we are targeting. So maybe next two, three years, of course. Next session when we come in June, there is a June meeting. So, mostly we will be able to indicate, but at this point, 1000 crores. But I will confirm this, don't take it, maybe 29 or whatever it is.

You already said that annual growth rate could be 15% from there. Easy guess on when we will hit 1000 crores.

But anyway, we'll come up during that investor meeting.

Okay, okay.

Thank you and all the best.

Thank you.

Thank you. The next question is from the line of Krisha Shah from Mangalkesha. Please go ahead.

Hello, sir. Yeah. So, post the merger, we have been bullish on API as a business, but if we see the numbers recently on a quarterly and year-on-year basis, growth has been around 7% to 8%, like a single-digit growth. So, is there any particular reason for this, like taking into consideration that our business may be lumpy, or is it sustainable, or do we look forward to double-digit growth in the API business?

Yeah, two things. Synergis is not only API, first of all, to answer to. Second thing is API, why this growth is single digit for this year? As I explained earlier, we try to optimize low-hanging or actually commodity business, intermittent business. So we are growing API business, which is a quality business, like animal health business. It has gone from 350R crores to 400 crores. And APIs are growing double digit. And intermets actually we purposefully reduce that sales. So that's the reason the quality of the business is growing. But going forward, you can see double digit growth. Now we are seeing a large number of approves coming this year, next year on human health APIs. And we see Animal Health API step up this year. So you can see comfortably double-digit growth. Next year, more or less same as formulation growth.

Sir, one more question that I have is that now that we are expanding, do we have any plans on hiring more R&D talent or investing in R&D expansion or taking forward the scientists?

We are, APR&E, we have a big team. We are together close to, including analytical process, all together close to 250 scientists. It's a very strong team, which is enough for APR&E. And fish formulation, we are expanding the team, as I explained. Large expansion in animal health, and Formulation also, we have reasonable, good number of team, human health, around 55, 60 scientists, that's good enough. Only wherever it requires specialized talent, we are adding a human health formulation. But animal health formulation, we are expanding a lot. That's the focus area this year. R&D, scientists, CAPEX, everything we are adding on that. So we are going to add at least. Big thing, CAPEX also, and R&D resources for NMLL.

Okay, sir. Thank you. And just one last question on the bookkeeping side. So, if you could give some color on the depreciation going forward, like if we see this quarter, our depreciation extends to a slightly on the higher side. So, if we are doing further capex in the future, do we see it increasing or, yeah, some color on the depreciation?

There are two things in this depreciation this quarter of this year, okay. Every quarter, there's close to 25 crores depreciation on goodwill amortization. That's going to be reduced next quarter onwards. So, last year, it was 100 crores on that. This year, it's going to be 35 crores. Second half, it's going to be 0.25 crores, 50 crores. Second quarter, maybe 10.15 crores. In that case, depreciation is going to come down around 65 crores from existing base annually. And the new capex, whatever we are adding, I don't think it will increase substantially because I think the run rate is going to go same level. Whatever is the new capex, the existing depreciation, I don't see much difference on that.

Yeah, that's right. As doctor mentioned, the current numbers, if you look at the annual number, about 100 crores is depreciation or amortization coming from amortization of intangibles. That will go away, and the next year it is going to be at about 35 crores, and the depreciation excluding this amortization, we believe that it will be similar to the current year.

Thank you, sir. Okay, sir.

Yeah, thank you, sir. That was helpful. Thank you. Thank you. Ladies and gentlemen, in the interest of time, we'll take that as the last question for today. I now hand the conference back to the management for closing comments. Thank you, and over to you, sir.

Thank you, guys, sir. Thank you. First of all, let me say thank you so much for your continuous support. I know you guys had a lot of patience for the last four or five years. And it's hard to believe also when we said this guy company is going to go turn around, but fortunately we have fantastic team. We are working as one team, both companies, and things are going well. I'm very confident this company will have great potential in future. Thank you. Thank you so much for your support, and we are always available if somebody needs any clarification or anything. Whatever we can do. You know the timing is sensitive. Wherever it is, we can explain, explain. Thank you, everyone.

Thank you.

Thank you, sir. Thank you, members of the management. On behalf of We Are Scientific Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.