Viyash Scientific Limited (VIYASH) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to VR Scientific Limited Q1F527 Earnings Conference Call, hosted by Seatman Scientific Limited. As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touchstone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Abhishek Singles from Sequence Scientific Limited. Thank you and over to you, sir.

Thank you, Pari. A very good evening to all of you and thank you for joining us today for the R.S.E.A.R.S.E.C.E.L.E.S. conference call for the first quarter of financial year 2027. Today, we have with us Dr. Haripabu, Managing Director and Group CEO, Mr. Rajaram, Exeter Director and CEO of Animal Health, and Mr. Ramakhan, CFO of the company, to share the highlights of the business and financials of the quarter. I hope you have gone through our results release and the investor presentation, which have both 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 may be forward-looking in nature and must be viewed in relation to the risk pertaining to our business. At the end of this call, in case you have any further questions, please feel free to reach out to the Invested Edition team. I now hand over the call to Dr. Hariwabu to make his opening remarks.

Thank you, Abhishek. Good afternoon, everyone. Welcome to VI's Scientific Investor Call for the Q1FI27. Thanks for taking the time to join us today. I am happy to say that Q1FI27 is again a very good quarter for us, and it shows that not a one-quarter story, but a company which delivers consistent results quarter after quarter. Our integration is now complete. This will be one of the few successful integrations you can find in the industry and set to two in record time period. Starting with the quarter performance, revenue from operations for Q1 FY27 was 946 crores, grown by 20% year-on-year. EBITDA was 205 crores, grown by 59% year-on-year. With EBITDA margin at 21.6%, expanding by almost 530 basis points over last year. Profit after tax was 79 crores. which has more than doubled year-on-year. Our EBITDA to past conversion is showing good improvement both year-on-year as well as quarter-on-quarter. Our balance sheet continues to show improvement. Net debt has come down to 86 crores. And net debt to EBITDA is now 0.1x versus 0.24x last quarter. And almost 1x a year back. So, in four quarters, we have gone from a leverage combined entity to a company which is virtually debt-free on a net basis. This gives us tremendous opportunity with respect to brownfield expansion as well as exploring inorganic opportunities. Coming to segment performance, our animal health formulation business continues to grow very strong across all regions. And we believe the growth will continue with our continuous focus on new product launches, geo-extension for our existing products to other countries, expanding R&D and accelerating new product development. We continue to invest in expanding our manufacturing operations. We are also seeing strong growth in domestic market as well up to 60%, and here we are looking to expand our field force. Coming to human formulation, our U.S. business has grown 60% showing results of our efforts to moving towards backward integrated, more complex products. That is now translating into real growth along with profitability improvement. API revenue has been broadly Normally flat, quarter and quarter due to... Timing issues on account of raw material price volatility as customers were in wait-and-watch approach. As all you guys know, the war is continuing. Nobody knows when it's going to end. During the June, most of the customers wanted to wait and see how it's going to work out, but now we see good traction. A lot of orders are coming back, and I can see this quarter is going to be the best quarter for APA for us. Coming to where we are investing for growth. We have signed SPI for Bio4Life acquisition in Italy, and we are expecting to close the acquisition in the next few months. This is on fulfillment of certain conditions as per the agreement. This acquisition, as I mentioned on previous call, aligns with our focus on component animal as number one strategic growth area for the next five years. Bio4Life gives us direct market access in Italy, one of the largest component animal markets in Europe. It comes with a component animal portfolio of about 85 products, which can be extended to other, our core markets, and sales force with about 85% wet clinic coverage in Italy, plus strong local talent. Combined with our BI partnership in India, Which is now scaling up our own R&D and manufacturing investments in company and animals. This is a very meaningful step in building the entire company and animals platform across the world. On farm animals, we are focusing on filing the white spaces in our current portfolio, as well as expanding the market for existing products to other geographies. We want to focus on new product development and molecules, which have potential across multiple geographies. For human formulations, as I mentioned earlier, we will continue to focus on first-of-file opportunities, with focus on more on high-potent complex formulations, with fully backward integration support on key molecules. In API and CDMA focus, is on day one launch, complex molecules, expanding our stadium of business to create differentiation. We have strong relationship built with innovators across human as well. We are very well positioned to keep investing, both organic in R&D and manufacturing, and selectively organic wherever we find the right side, while maintaining the discipline on margins. With that, I will now hand over to Ramakant, our CFO, to take you through the detailed financials. After that, we will be happy to open the floor for questions and answers. Thank you.

Thank you, Doctor. Good afternoon, everyone, and thank you for joining us. I am pleased to present the financial performance of We Are Scientific Limited for the first quarter of FI27. We have started FI27 on a strong note with continued momentum in revenue growth. and sustained expansion in margin. Our performance reflects the benefits of initiatives undertaken over the past few quarters across businesses along with continuous focus on operational efficiency and discipline cost management. Revenue from operations stood at 946 crore, resisting a strong 19.5% year-on-year growth and a 2.9% sequential growth. Gross margin The call is 5.9% improved to 54.1%, compared to 51.9% in Q1 F5.26. Representing an improvement of approximately 220 basis points year over year. Adjusted EBITDA increased by 59.2% year-on-year to 205 crores, with EBITDA margin expanding to 21.6% compared to 16.2% in the corresponding quarter last year. Profit before tax increased by 132% year-on-year to 112 crores, compared with 48 crores in Q1 FI 26. Profit after tax increased by 115% year-on-year to 79 crores, compared with 37 crores in Q1FI26. Our finance costs declined to 12.5 crores from 20.4 crores in Q1FI26, reflecting the benefits of our continuous focus on balance sheet strengthening and debt reduction. Percent to the composite scheme of amalgamation and upon receipt of necessary approvals during the quarter-end of 30th June, company has granted 1.3 crores employee stock options representing 2.8% of post-amalgamation paid of share capital of the company. This has resulted in an incremental expense of 19 crores for the quarter-end of 30th June 2026. Profit before tax of 112 crores and profit after tax of 79 crores for the quarter end of 30th June 26 are after considering the expenses on account of these additional employee stock options. We remain encouraged by the strong start to apply 27 and continue to focus on discipline, execution, and capital allocation to deliver sustainable and profitable growth. With that, I conclude my opening remarks. Thank you for your attention. I would now request the moderator to open the floor for question and answer session.

Are you able to take questions?

Okay. 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 their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are assembled. The first question is from the line of Naman Baghdejo from IIFL Capital Services Limited. Please proceed with your question.

Hello. Can you hear me?

Yeah. Yeah.

Thanks. Thanks for the opportunity. I have a couple of questions. Starting with the EU region, if you look in terms of the YY approach on constant currency basis, EU revenue has been largely flat. Anything to highlight over here and what would be the outlook?

Raja, you want to ask? EU region, actually, Q1 is showing 13% euro, but it is saying, actually, conspecting.

In terms of the EU, our constant currency, if you look, 16.8 million euro would be the sales figure, versus 128526, 16.9 million euro. So, on a euro term, the EUR terms.

Yeah, but actually, if you look at the fourth quarter tends to be a little bit more of a management of how the sales have gone, because on a full year basis, if you look at it, the growth will be closer to 20% for the EU region. So some of it is more a bit of phasing between one quarter and another quarter. But by and large, you know, we are growing volume over there, and the volume growth is at. Market plus the pricing growth should get us back to the levels at which we have typically been, which should be in the close of the 18-20% growth. So this is more a question of how the quarter-on-quarter looks. But really the way to look at some of these businesses on a year-to-year basis because EU is a set of markets where one market may in one particular quarter show a little bit of a lower sale than the other quarter.

So, is there any seasonality in terms of whether 1-2 is lower versus, let's say, 4-3 or more?

Generally, third quarter is better.

So, we generally have a peaking around third quarter. It's also a question of some businesses which are tender linked or some of them are linked to outbreak of vaccination-related issues. So, you could have a bit of a movement on that. But yes, you tend to have a higher... Sort of growth coming typically in quarter three, a little bit in quarter one, yeah, than in quarter four. But you're really talking of growth. So from a growth point of view, if you look at it quarter on quarter, it is more a question of phasing of what was last year same quarter versus this quarter. But there's nothing which indicates that, you know, we are, this is anything that is disturbing. It's more like a steady volume plus. Pricing plus foreign exchange growth, yeah.

No, no, so actually I was comparing it on a YOI basis only, not just on the round-quarter basis. So YOI also, it is plattish only in EOR firms.

Why wasn't you saying on FI...

1-2-FI-26 versus 1-2-FI-27.

Yeah, yeah, yeah, but that's what I'm saying. So on the quarter, very specifically, is more a function of the phasing of what kind of contracts may have been there in the respective two quarters. The way to look at it is really on a full year basis, which is when you will have some movements between different quarters. And so EU continues for us to be a market which is, you know, closest to an 18-20% kind of a growth.

So 18-20% kind of growth on an INR basis, right?

Yes, on an INR basis.

And also, as you know, few of the European countries, we started building last few years. But our major countries like Spain is doing extremely good. But few other countries like Bremer, Benelux, where we are building. So, that's taking some time, but we are very confident this year will grow much better.

And in terms of the emerging market, is the emerging market that actually surprised positively in terms of growth this quarter? I mean, we were looking at more of a kind of a growth, but on a constant currency, let's say, if I go on a dollar term, it has grown almost around 23%. Do you expect this momentum to continue or what, I mean, what are the drivers of this?

So, emerging markets, mainly Turkey, Brazil, we have very strong product pipeline, of course, so a few launches also. We are seeing the volume growth earlier, you know, that we used to be only pricing. So, looking at the volume, looking at all our product launches, we are confident to go close to that. That's how we see. Both markets are doing extremely well. You know, these are the three countries, Turkey, Brazil, Mexico. So, all are doing extremely good on this business.

Got it, got it. If I may, I mean, there are a couple of questions. In terms of let's say the U.S. business also has. I'll be on a lower base. Anything particular to highlight

So, as I mentioned earlier, calls also, yes, we've been trying to restructure a little bit last two. We have a little bit of pricing issues since we had manufacturing in the US. That's how we started moving volume products to India, and also Coqlo products we tried to fully vertically integrate. So those actions happened last year, Coqlo products. We started shipping from India with our API, that's where the margin profile improved, and also we were able to maintain our market share. And last year, of course, we had one good launch. We were able to make goods, but still we are having 50-55% market share. So, these are the few things. Changing the strategy, moving volume products to India, full integration with APIs, and adding a few new products. And R&D also stepped up, actually. Our R&D revenue also is... But if you ask me, is it going to 60%, the answer is no. So, but it's pretty stable. We have very confident now, actually, to grow this business on that. Because all, most of the products, whatever we develop or commercially launch, goes with fully integrated thing. And all volume products, we tied up with Indian manufacturers. There's a strong growth potential in this business.

To summarize in terms of whether my understanding is correct, so basically, earlier, we, or let's say for few products, Thank you. I mean, if I look at APCO's statement, I mean, the EBITDA margins have sharply, you know, improved. Do you expect this to continue, this kind of a beta margin for this, for the U.S. to use?

So, we are expecting this will continue.

Also, if you could highlight in terms of how has been the animal API growth and the human API growth.

Today, as you see, it's a flat because of a few reasons. We don't see any business loss in this. Basically, last quote, In fact, it stopped in a few weeks, you know that. So when the raw metal prices were high in last quarter, we also increased the price. So most of the guys where they have inventory, they try to actually a little bit postpone their procurements. So it happened one month, but when they realized after July, now it's not going to over, now we are getting back all product. And this quarter is going to be a very good quarter for API. I can see, I think this quarter is going to be the best quarter in the history for us. We see a lot of traction, a lot of inquiries to get back those APIs. It's the only timing issue that few weeks. Everybody wanted to take that advantage. Okay, if the raw metal solvent price has come down, we may reduce that. But now it's stabilized. Everybody understood, realized. So now this quarter is going to be good. So it's the only timing issue, nothing wrong in that type of business. And this quarter is going to be the best quarter for both animal health and human health. Of course, animal health, always as well, we have been talking capacity expansion a couple of approvals. Now we have expanded capacity. We got US approval also for YJAX side. We also expanded at YJAX side. It just started commercialization from July. And this quarter is going to be the best quarter for the UK.

Any color in terms of what would be the revenue conflict for the animal UK business? If I remember we had crossed our 100 crore mark.

I said, I mentioned earlier, we'll grow 20 plus, but we'll grow a little more than that. Thank you.

One for Damakhan, sir. Sir, if you could highlight in terms of how should you look at ESOP costs going ahead, whether it should be like 5 crore, the sequence ESOP plus now the VH employee is getting at 19 crore kind of additional ESOP for this year? On a quarterly basis, or it will increase from the Q1 years.

Yeah, so as I mentioned, this 1.3 crore additional options were granted during the quarter. So, charge for the quarter was about 19 crores. In total, lease of cost for Q1 was about 25 crore. Q2, Q3, and Q4, the number in total would be about 40 crores. And from next year onwards, this will come down.

So, next year, it's going to be small, maybe, after completing this 1.3 crores. You know that why it's happened. We had ESOP for scheme in VIASH. So, when we met part of amalgamation, of course, it was clearly mentioned in the Azure document also. Since, actually, it's allotted, it's delayed. So, when the trade price was high. So, it was at 230 rupees. That's the reason it's showing more, but it's going to complete by mostly this year, and the next year, first quarter, something, but after that, it's a routine very small. We don't see any big things or one-time things after that.

The next question is from the line of Tahil Sangri from Monarch Network Capital. Please proceed with your question.

Thank you for the opportunity, and congratulations. Excellent set of numbers. With respect to the kind of traction you're seeing on the API side, is it possible that we will exceed the 20% growth for, say, maybe a couple of quarters now? Going ahead, and would that mean you would do higher on the whole year basis?

On the API, I mentioned animal health, okay, we are going to grow to decrease percentage. But overall, I mentioned actual double digit 13-14% this year. Okay, mostly next year it's going to increase. We have a few launches, but this year we can expect double digit maybe mid-teens or that level. Because other API business is bigger, much bigger than animal health. But we see good traction. But human health, most of the products, big launches is going to come in the future. So this year we can expect that make teams 13-15 percent.

Got it. Secondly, there is an investor that you had also alluded upon adding new tablet capacity for companion animal and building some more R&D capabilities as well. How are those things tracking, I mean, progressing?

R&D already initiated last quarter. We hired people also, whatever approved, and equipment also we placed order. So, coming to the manufacturing, we finalized the design. Mostly, it's going to start next few weeks or next month, and target to complete by January, February to be ready for taking exhibit batch. So, we are on track on that. Mostly, it will be done by January, February.

Got it, got it. And just one clarification from Ramakantar, you, I think, what you said is the ESOP cost would be ranging in roughly 40 crores for the nine months. Is that correct understanding?

Yeah, yeah. For FI 27, the total would be about 150 crores. For FI 28, it will come down to around 25 seconds.

So, remaining three quarters, 40 crores is around. That's right.

Okay. Yeah, I get it now. Thank you. Thank you, sir.

Thank you. The next question is from the line of Bharat Seth from Quest Investment Manager, Rabbit Limited. Please proceed with your question.

Good afternoon and congratulations, Hari Babu, Rajaramji, and Makanji on excellent performance. Hello.

Yeah, yeah. Thank you, Bharat. Please continue.

Yeah, sir, I have two questions. One is particularly, you stated in your opening remark about, I mean, growing the business of high-potent human health care. So, if you can give little more color, what kind of a current run rate is, and how do we see, what is the capability that we have, and capacity also we have built up, and how do we see that Hypotent, I understand, is the more complex, and we'll have a better EBITDA margin also. So, if you can give little more color on that.

Sure. So, you know, Hypotent is mostly oncology products. We started building the capability two years back API. So last 18, 24 months, we build R&D Potent Lab, we build manufacturing, of course. We have three modules, and we started developing a lot of products last two years. That's the API thing, and started selling, and we partnered also with many customers in the form of partnership with CDMO and direct selling. That's one of the core business for future. And recently, last 12 months, we also initiated the formulation development and partnering with that. So, as I indicated earlier also, we are investing on formulation R&D iPotent lab. It's done now. It's going to be operational. In fact, last week, we completed iPotent formulation development lab. So, we started actually all iPotent products formulation now. And also, we tied up with one of the strategic manufacturers who is having oncology manufacturing. So, we aligned with R&D manufacturing, we started working with partners, but these things, you have to keep in mind, it's a long term. All these products, I410 products, unless you start developing minimum 5-7 years early patent expiry, we're not able to get the business. So, most of the revenues, whatever we developed, APIs and partners, it's going to start from 29. And the big product revenue with the formulation, it starts after 2013, so we get up now, we have R&D, we have manufacturing, and also we have a couple of partners, but we are waiting for filing and patent expiry, most important patent expiry. We filed at least five, six product APIs already. The first product we are expecting, 29, if you get, there also there's opportunity for exclusivity to that product. If you are likely, if you get extra, that's a big thing. But majority revenues are going to be long-term after 30.

Okay, so how many products are we have in the pipeline, first to file also, which you said?

I think last time I indicated API multiple products, first to file, and a few formulation, but I don't have a number, but at least 50% of our portfolio is either first to file or first to launch.

And one more question just only for Ramakandri. So, Ramakandri, how do we see interest costs from here onward, annualized, and second thing? I understand last time doctor mentioned that we see depreciation size.

Okay, I can explain you a little bit. I am also learning little pronouns now. So, the depreciation, the goodwill amortization, you must have seen every quarter, 25 crores. So, this year, first quarter, 25 crores. Next quarter, it's going to be 10 crores, so close to 10, 11 crores. After that, you can see that 25 crores is not going to reflect depreciation. So, third quarter onwards, next quarter, I think you can see 15 crores benefit. Third quarter onwards, the 25 crores is going to be bad conversion. And the interest rates, today, we are working and optimizing a lot on those things. Of course, you can see our finance cost also is coming down continuously. We are trying to restructure where interest costs. Last year, we did sequent India debt. We restructured. Now, we are currently working with Ireland interest restructuring. So, we are working various things on that to reduce interest burden as well as tax portion. I think you can see next year it's good. But if we are at par with any big companies in the Tintest, we are not paying too much on those things, even today. But we are going to save more on that.

Thank you and all the best, sir.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, please press star and one now. Thank you. The next question is from the line of Sajal Kapoor from Anti-Fragile Thinking. Please proceed with your question.

Yeah, thank you for giving me the opportunity. Good afternoon, team. Just a couple of questions from my side. The first is as VIH moves from integration... Now into much more complex phase of R&D, manufacturing, geographic expansion, and M&A, hopefully. What are the few non-negotiable principles that management uses to ensure that growth does not compromise execution, quality, and cash generation? Thank you.

If I had to put it to three things, one is compliance. No second thought and discussion whether it is regulatory compliance, finance, statutory, or quality compliance, or EHS. There is no second thought on that, the governance thing. And as you mentioned, we are actually going in multiple complex areas, but in fact, it's not. Already we are in most of the things. And most of our team is very well-experienced on those things. If you see complex products like Omco, we have been doing last 2-3 years, and the entire team is very experienced. We know the market, we know the products. So that's not the thing. Then the second thing, if you see that combined company overlap is very limited to the API. And the formulation is still animal health and human health is going to run parallelly. So these are the two, three things. Compliance, we never compromise. Governance, we never compromise. Of course, the financial discipline also is most important. After seeing the sequence story four, five years back, we know what we can do. And we can see a lot of opportunities keep on coming on M&A's, but we always look at only... Whatever is going to fit into a strategic direction defined even our analyst day, whether companion animal or CDMO or actually complex areas, we are going to stick with that. It's not just go and acquire, since our balance is strong, go and acquire the ad numbers. That's not the plan. It's only whatever is going to fit into our strategic direction, it's going to be that, whether it is inorganic or organic expansion. Hope I think I clarified your concept.

Yes, yes. No, that explains. M&A is one of the key areas, obviously, because if you see the history of sequence, the earlier management used to pay single-digit EBITDA for most of the acquisitions. But again, it depends on the quality and the strategic fix. So, valuation alone can never be the criteria, but you answered all my questions, Dr. Hari Babu. Thank you. My second question is, Given the long gestation periods and uncertainty in pharma, where, you know, uncertainty in terms of where the downside from major capital allocation decisions can take years to emerge because the game is, the clock speed is such that it's a long cycle game. So capital allocation today may not deliver the desired outcome or may not even signal. You know, green or red for many years. What do you, in that context, what do you consider an appropriate level of personal economic exposure for those making such decisions? And does the current... How do you reflect that principle within the organization, not just at the senior management level, but also at the middle management level? Because whatever as a team, the decision is being made at the management level, then presented to the board, the downside, if any, may not emerge immediately. That's the kind of question I have. Thank you.

Long question, thank you for that. First thing is, this company, whatever decision we take to consider the long-term growth for the company, not based on the investor, whether the management or Carlyle, whatever we have been doing last two years' investment, we never compromise on the short-term and long-term benefits for the company. So, when you say the long gestation period use capital thing, when you are doing for new company, new setup, for example, if I am doing only iPotent separately as a separate vertical, Okay, that investment is huge. There's a lot of risk involved in that because of registration period is high. But in our case, if we see, today business is 90% is a mature business where we don't need to do too much capital allocation. And whatever we are doing, actually, if you look at existing business versus what capex we are going to put, it's not substantial that existing business is able to take care of all these things. So, because of that, we have a large portfolio, and we have multiple geographies, multiple businesses, where there is no dependency on either one country or one product or few products. That's where risk is already mitigated, and our new capital allocation is not that much compared to our existing business. That's where I don't see much risk. Whatever you're putting, the capex, whatever we indicated, I think, 250, 300 are close for a year. That's not the big looking at the company's size and business. So that's where I don't see any risk on that. One is investor perspective or the company perspective. I don't see any risk on that. Looking at our size, our investment.

Thank you, Dr. Hari Babu. The clarity of thought is amazing, and I really appreciate it. Thank you so much. That's all from my side. Thank you.

Thank you. The next question is from the line of Chintan Shail from Greek Capital. Please proceed with your question.

Yes, thank you for the opportunity, and congrats on the excellence at the center. Sir, one question is on the minority interest. You know, last year we had 18% minority share on a pre-minority topic, right? How should one look at minority interest going forward? So, we are evaluating...

No, we are evaluating continuously that, you know, we have minority share in two geographies. So we, since you know that last part, we were busy a few quarters with integration, we were busy a few quarters actually to finish our roadmap for strategic direction, now we have clarity what we are going to do. So we are evaluating continuously whether to, we can buy back, that's not an issue today. But still, we are exploring whether to buy back today or actually when there is an opportunity to invest, a mandate to do that now. We are exploring. But next one, two years, it's going to be acquired 100%. That's what. We never know. It may happen soon, but out of the limit, I can say to you.

Really, how much outlay we should have? Pre-minority charge profits, the last rate was around 80%.

So minority interest, if you look at further quarter, is around 17% and last year earlier was about 20%.

You mentioned around to 50 to 300 crores for the year. Thank you. The human API and the animal API within that, and formulation also if you can provide how much is human and how much is the animal.

No, you can see the formulation whatever we reported even the 10 list day. Europe, emerging markets, India together are the animal health. Only just is the human health what we reported. Out of, actually, 554 and 826 close to the human health formula. And the API, at this point, actually 100% of animal health, but it's going to grow now. So today bigger portion is human, but animal health is growing very fast this year.

Got it. And within the animal, sorry, human API, do you see the growth rate to increase? You mentioned some impacts likely to, positive impacts likely to be happening in Q2, but do you see stronger growth over there versus overall business?

So, human health, as I mentioned earlier, also since we moved to more complex areas where the products are coming out of patent a little later, but major growth is going to come from 28, 29 onwards, but till that time, we are anticipating 13, 14% growth. Sometimes, if you are lucky to get one or two products, you know, when you are targeting for day one launch. It's ended up actually one player or ten players. If you're lucky one player, I feel it's bigger, but looking at my experience, we expect next two years 13, 14 percent, but later 29, since most of the complex products, more than 50 percent are first to launch kind of things, we'll have bigger advantage on that. Animal health, since it was not, yeah, sorry.

And the 13-14% growth, you are talking about the overall consolidated revenue or just the new API?

Yeah, API. Overall, you can take 13-15, whatever it is. Animal health, it's going to be 20+, but since the contribution is small, actually, average, you can take 13-15% kind of thing. As I said, most of the products have 80% portfolio with all of the new products. Which are coming out patently. We don't do too many matured products, commodity products. That's not our job. So, we start developing volume matured products. We are more trying to do differentiated products, where we can have good margins on that perspective.

Right. And animal health formulation? How should one look at overall yeast growing?

It's good, but we mentioned to you billion dollar in 2032 all together. It's going to happen.

Got it. Got it. All the best, sir, and thank you, sir.

Thank you.

Thank you. The next question is from the line of Shubham Agrawal from Burman Capital. Please proceed with your question.

Yes. Hi, sir. Thank you for the opportunity. Sir, I just had one question on Europe. We talked about 18 to 20% growth this year. Is that including the benefits of the new acquisition, the buy-off for life, or will those be over and above this 18 to 20% growth?

Rajan, want to answer? No, this does not include anything of the acquisition. The acquisition is not yet. We expect it to complete in FY27, I think a general sort of growth of volume plus price, even leaving out the forex, should take us into double digits, and then we'll see what comes out of the forex.

Understood, understood. And one more question. The emerging markets business this quarter grew by 36%. Is it like possible for you to take out this between, you know, what was the volume growth and then the pricing growth and then there is some benefit from, you know, currency, favourable currency, if you can break that out?

So we say good volume growth last quarter. Emerging markets volume is grown by 25%, 25%. So, majority growth came from volume. Okay, of course, there is one or two new launches, but don't expect a volume is going to grow every quarter to 25, but we can see the good volume growth in these countries' markets.

Understood. Thank you, sir, for answering my questions.

Thank you. The next question is from the line of Gaurak Shukla from Fininvestors. Please proceed with your question.

Thank you. Thank you, sir.

Thank you.

Mr. Gaurav, we can't hear you. Can you speak loudly?

Can we take the next question in the meantime?

Can we take the next question?

Okay.

Still, it's not clear.

The next question is from the line of Kumar Saurabh from Scientific Investing. Please proceed with your question.

Yeah, congrats on a great set of numbers, sir. My question is regarding Human EPA. You said we have almost 50% of first-to-file opportunity. If I'm not wrong, some of those AKs are Maverick, Tame, Neera, Tame. This brand time is around $2 billion, if I'm not wrong. So if you can highlight what is the target opportunity for us, sir, in terms of opportunity size for this virtual file, and what kind of market share we plan to take in each of us.

When you compare brand for API, that may mislead you. If I put it all our products or development pipeline, today, brand is more than 20 billion kind of thing. But API, always you have to discount depending on the API, how much actually it's going to price errors when it comes to generic launch. General APIs are going to price error by 95 percent. When it comes to oncology, we can expect at least 50-60 percent price error. And API contribution is around 20 percent of the formulation thing. So, all these things, we always, every product, whatever we try to do, we want to do as much as possible. Majority market share, at least 25-30%. At average, we are expecting 10-15% market share. And one product actually can do bigger, other product maybe actually, depending on the competition. We can expect, we target always 10-15% market share. But it's very difficult to see based on the 2 billion actually brand today, then formulation price erosion, then APA contribution, then 50-60 percent erosion. That we need to do product-wise. But we see our target is actually try to do day one where we take reasonable market share and most important is sustainability. So, if we enter day one, the chances of sustainability is high compared to coming as an alternate day-based supplier.

Got it. And my second and last question is, so, as you said, next two years, we should expect around 15 to 17 percent kind of growth, and then some of the first-to-five launches will happen. So, is it like we will have a better runway of growth? From 2029, given our 2032 aspiration, and this 2032 aspiration, is it something which we are fairly confident of, or this is something which is highly aspirational, or we feel this is the bare minimum we will do, given, you know, things, you know, will go on a better track from 2029, it better means, you know, some of these molecules going live.

So I will not go either way, either too ambitious or too conservative, but we see the realistic, if you calculate from 2527 numbers, 1 billion is actually working out to 18% CAGR. And we feel that's very comfortable, practical aspiration. We have clear plans on that, both organic and inorganic. There are two things, if I club, one is 18%. Second thing is, looking at our balance sheet, we have flexibility to do some MNDs, not just to stick up for doing the MNDs. Doing these together, I am personally very confident to achieve that. Okay, but if not, more, but definitely that. Thank you. Thank you.

Thank you.

Thank you. The next question is from the line of Mehul from 40Cent. Please proceed with your question.

Hello, sir. Good afternoon. Thank you so much for the opportunity. Sir, my first question is regarding the acquisition in EQB. Once the acquisition is complete and we are able to leverage the capabilities in other parts of How much would it add to the top line in the next one year and in the next two years?

So it takes normally two years. How the process works, you know, once we complete acquisition, mostly it will be done in next two months to three months. Once you start that, you have to start listing that product into other countries. So, our first phase of doing that is wherever we have print-in presents like Spain or Turkey or Brazil, whatever is accessible and have market, we are going to do that. So, all these processes normally take 24 months out. Okay, if you are lucky, a few things can happen early, but the minimum expectation is 18-24 months. We can see bigger revenue coming from after 24 hours. There's a two-way strategy. One is expanding those products into other regions wherever it's possible. And we are doing a lot of new products we started. Like we said, R&D is ramped up. Now it's started developing Company & Adipro products. We are getting ready our manufacturing plant by January. So we are preparing all bigger launches with fully integration from... 29 onward, these are the products mostly, one or two products are coming, 27, and also we are targeting launch, that one. So that's the two-way, it takes two, three years, practically. So you don't expect, actually, a gem from next year. Whatever it is, a natural growth from Italy, that's going to grow double digits, but bigger growth is going to happen after two years, by the time we complete all registrations and prepare for marketing.

Sir, after two to three years, what kind of top line will it contribute to?

All put together, we mentioned 150 to 200 million company and animals by 32. So, we didn't work out this particular thing, because one is that this is going to be used as a launch pad for Europe. You know Europex, how it's going to work. When you develop and file the product, you have to start filing one product. And that country, when the regulator is reviewing, it's extended to other markets. So this is going to be the bigger portion, not only Bio4 products. The intent of accusation is not only promoting those products. It's using as a launch pad for all those things. I may not be able to give you that separately those Bio4 products, but we are going to grow bigger actually, maybe you can expect actually definitely 25-30% growth after 28-29. Of course, today also we are growing bigger than that, but the base is small. So, we see good potential there.

Sir, this is very helpful. Sir, how much does API contribute to our top line overall?

Overall, API contributes if I put... It's all maybe put together 40% yearly, maybe 40%, 40%, around 40% you can expect.

Around 40% is the current contribution of API to our top line.

Yes, yes, whatever we assume this year close to both of those, you can expect 40% in between 40 to 40.

Right, sir. And, sir, this API, it is partly animal health and partly human?

Yes, yes, yes. Majority human at this point, but animal we are growing. So, today it's maybe two-third human, one-third animal. Animal is growing to grow faster now.

And, whatever products we have for animal health is only 100% API or is there anything else?

Animal health, you have bigger formulation, right?

Okay.

I'm not getting your answer. Animal health, if you see, our bigger question is the formulation. And we are expanding API now. We have API, but bigger thing is formulation.

The next question is from the line from Kiran from Table 3. Please proceed with your question.

Yeah, thank you so much for the opportunity. Sir, a couple of questions. The first question is our acquisition buyer for life. So last time Sequent acquired Alvira, I mean, we had, apart from the Coaches Prize, obviously, we had a lot of issues, structural changes, local market stresses, restructuring, insurance payout, there were too many issues. And that's an experience that India Inc., right, not just Parma or Viash in particular, but everybody who acquires Europe has an issue, right? The purchase price looks too cheap, but eventually the costs are too high to pay eventually, right, in the life cycle of the business. So, in general, what are the guardrails you've had to purchase Bio4Life? Because our past experience, both in sequence of Alvira acquisition, and the India Inc. experience for acquiring Europe has been terrible.

Yeah, you're right, five, ten years back. So all we experienced from that, right? Even from my side also we have seen one acquisition. So those days always Indian companies... We want to acquire cheaper and try to manage like India car. It never works out. Now all we experienced on that, what is the complication of it works actually. You can't actually indianize Europe operations. So when you are working in Europe, you have to understand that Europe business is right and do it that way. So earlier 5-10 years back when everybody acquired, we thought products can move to India. And it never happens. So we have very clear strategy on that. Of course, it's a small thing. Most important is utilize our launchpad. And we know. And also there is no manufacturing. It's mostly brands there. We have clear idea with earlier experience. We have taken care of everything. We don't see any issue on that. But now, you can see last, I don't know, whether you have reviewed last few years, Indian companies operating in Europe doing pretty well. It's not only us, but we know fully on that sense Got it.

Got it. Very heartening to hear, sir. So, second question, sir, the rate of growth will increase because of patent relief both on the animal side and the pharma side, and animal side patent relief is happening 28-29, and pharma side is 29-30. Is that the right way to think about why the growth will accelerate beyond this?

Talking API, most of the human API, we have our portfolio development. It's up to 2040. Most of the products are coming up to 2030. Animal health API, since there was some lag, we have taken product development up to 2035. Majority of the products in animal health, the bigger products are coming out from 27 to 30. After 33, mostly biological is going on. So we are attacking both animal health as quickly as possible. And most important, try to vertically integrate also formulation in that. But any product, API, whether it is human or animal health, once you start developing the product, it's a minimum gestational period is 3 to 5 years. So, this company is a new company. We started two years. We can expect the registration period three to five years minimum kind of thing. So, that's how I always say the majority revenue is going to come from 29. We can develop and manufacture. That's not an issue. But the registration, tying up with somebody, all, and more than that patent expiry, these things will take its own time. It takes minimum five years kind of thing. That's where we see from 29 onwards, real new product revenue is going to come for us.

Got it. Got it. Very helpful, sir. Thank you so much. Congrats.

Thank you. Ladies and gentlemen, that was the last question from the participants. Now, I would like to hand over the conference to Manisham for their closing comments. Over to you.

Thank you. Thank you, everyone, for our continuous support. I can tell we are in a good position. Our team is committed. We are going to do good. That's what I can tell you. Thank you so much.

Thank you. On behalf of Sequence Scientific Limited, that concludes this conference. Thank you for joining us and you may now disconnect your line. Thank you.