Divi's Laboratories Limited (DIVISLAB) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Earning Conference Call of Divi's Laboratories Limited for Q4-FI-256. As a reminder, all participant line 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. I now hand the conference over to Mr. M. Satish Chaudhary. Thank you. Anuva to you, sir.

Good afternoon to all of you. I am M. Satish Chaudhary, Company Secretary and Chief Investor Relations Officer of Devis Laboratories Limited. I welcome you all to the earnings call of the company for the quarter and year ended 31st March 2026. From Divi's lab, we have with us today, Dr. Kiran S. Divi, Whole Time Director and Chief Executive Officer, Ms. Neelima Prasad Divi, Whole Time Director Commercial, and Mr. Venkatesha Perumaldu Pasumarti, Chief Financial Officer. During the day, our board has approved audited financial results for the quarter and year ended 31st March 2026, and we have released the same to the stock exchanges as well as updated the same in our website. Please note that this conference call is being recorded and a transcript of the same will be made available on the website of the company. Please note that the audio of the call is a copyright material of Divis Laboratories Ltd. and cannot be copied, rebroadcasted, or attributed in press or media without the specific and written consent. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements. These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi's lab or its official does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise. Now, I hand over the conference to Dr. Kiran Divi for opening remarks. Over to you, sir.

Good afternoon, everyone, and welcome to Divi Laboratory's earning call for the fourth quarter and year ending 25-26. Thank you for joining us today. I hope you and your family are in good health. With the year now behind us, I would like to briefly take you through our performance and key developments across our business, along with the priorities we have continued to execute on. While Q4 was characterized by a complex and uncertain global backdrop, We continue to remain focused on execution discipline, supply reliability, and long-term view of capacity and capability requirements. These anchors have helped us to maintain continuity across all segments to support our growth initiatives. Let me begin with the generic business. Volumes across our key products have maintained and remained stable through the quarter and full year. While the pricing environment remains competitive, we have seen steady demand across markets and healthy volume fraction in our products. Moving to our Custom Senses segment, customer engagement has remained strong and progressive across the year. As we have shared earlier, the strength of our CS business lies in our diversified product offering. As usual, our project pipeline remains active with molecules progressing through development to near commercialization. We are well positioned to participate meaningfully in these opportunities. Coming to our peptide business, we continue to deepen our capabilities during the year. With our long-standing capabilities in protected amino acids and our strategic investment in both solid-phase and liquid-phase synthesis capabilities, we are well positioned to support our customer requirements across multiple phases of development. During the quarter, we have successfully validated several fragments with few more in the pipeline. DBs has remained closely engaged with several customers across different therapeutic categories in the peptide segment. With focus on execution and quality, we have continued to invest in the capacity required to meet customer and portfolio-specific needs. On the manufacturing front, operations at Unit 3 have been steadily progressing. And the facility is now playing an increasingly important role in our overall operations by supporting our backward integration capacity. Through the year, we have gradually transferred select activities from Unit 1 and Unit 2, freeing up GMP space while strengthening our supply chain and enabling better capacity optimization to support future growth in both generic and custom synthesis. Technology remains another key area of focus. During the year, we have continued advancing commercial activities across platforms such as continuous flow chemistry, biocatalysis, and various automation layers within our plants. The objective is to enhance safety, minimize variability, and to create scale and future-ready systems aligned with emerging customer needs and complex chemistries. Beyond our business operations, we remain deeply committed, creating long-term value for the communities we serve. I am proud to share that our core CSR initiatives have positively impacted over 1 lakh children this year, while our safe drinking water programs now have reached to more than 11 lakh individuals each day across the states of Telangana and Andhra Pradesh. To sum up, this has been an year where consistent diligent execution made all the difference. The external environment had its share of challenges, but we remained stability across our operations, strength, and our capabilities. It has kept our long-term investments on track. The underlying focus has not changed, which is to be reliable, to be responsive, and invest ahead of future demand. Thank you. I will now hand over the call to Ms. Neel Madhiri.

Good afternoon, everyone, and thank you for joining us as we review our fourth quarter and full year FY2025-26 performance. It is a pleasure to connect with you once again, and we sincerely appreciate the continued trust, engagement, and support from all our stakeholders. Before discussing the financial performance, I would like to begin with an update on the procurement, supply chain, and logistics, as these areas had an influence on our operating environment towards the end of our fourth quarter. As many of you are aware, the escalation of geopolitical tensions in West Asia created disruptions across several global trade routes and logistics corridors. This led to congestion at key ports, extended transit timelines, and operational uncertainty for suppliers and logistic providers alike. During this period, a number of suppliers invoked force measure clauses, while freight rates across both ocean and air transportation started increasing considerably. At the same time, container and tank availability was somewhat constrained during the end of the quarter, adding further complexity to the movement of materials. Despite these external challenges, the availability of critical raw materials and solvents remained broadly manageable. This was largely due to resilience and preparedness of our procurement and supply chain teams. who responded with agility and discipline throughout the period. Over the past few years, we have consciously worked towards strengthening our sourcing ecosystem, broadening our supplier base, and increasing the depth of our domestic procurement network. These initiatives is playing an important role in helping us navigate the volatility more effectively. Our teams adopted proactive procurement planning measures well in advance, enabling us to secure supplies and manage inventory efficiently despite uncertain lead times. For time-sensitive materials, such as solvents, where extended storage is neither practical nor economically viable, we implemented tighter coordination between procurement, production, and planning teams to ensure continuity without disruption to manufacturing schedules. Currently, we are focusing material availability on a quarterly basis. On the logistics side, shipments were planned and executed proactively to minimize delays. We continue to work closely with reliable and long-standing logistics partners, which helped us maintain consistency in deliveries despite market conditions. As a result, we were able to honor our customer commitments and maintain supply reliability. While external environment remains dynamic, we believe the actions taken over the past several years to strengthen operational resilience are proving effective. At the same time, we remain cautious in our outlook. Freight-related cross-pressures are expected to continue in the near term, and we have incorporated these factors into our planning for the coming quarters. We will continue to closely monitor geopolitical developments, logistics conditions, and supply chain dynamics, while ensuring that our internal planning, sourcing strategies, and operational execution remains aligned with business requirements and customer expectations. With that, I will now move on to financial performance for the quarter and full year. For the quarter, the company recorded a consolidated total income of Rs. 2986 crores. Profit before tax for the quarter stood at Rs. 963 crores as against Rs. 864 crores for the corresponding quarter of previous financial year. Profit after tax for the current quarter stands at Rs. 751 crores. The company also reported a forex gain of 90 crores for the Q4. For the financial year 2025-26, the company recorded a consolidated total income of Rs. 11,067 crores compared to 9,712 crores in the previous financial year. Profit before tax for the year stood at 3,388 crores after accounting for the impact of labor codes amounting to 74 crores as against 2,916 crores in the previous financial year. Profit after tax for the current financial year was 2,568 crores compared to 2,191 crores in the previous year. The company also reported a forex gain of Rs.211 crores during the year against a gain of Rs.48 crores in the previous financial year. Persuant to the notification of the four labor codes effective from November 21, 2025, and consequent revision in the definition of wages, the company assessed a one-time incremental impact of Rs.74 crores towards employee benefits during and post-employment. The same has been fully provided for in the current financial year and disclosed as an exceptional item in the Statement of Financial Results. Material consumption during the current financial year stood at approximately 38.8% of sales revenue compared to 39.8% in the previous year. Exports contributed nearly 89% of the total sales revenue, with Europe and United States together accounting for approximately 74% of the export revenue. The product mix between generics and custom census for the year was at 45% and 55% respectively. Constant currency growth for the year was 6.82%. Revenue from nutraceutical business for the current financial year amounted to 946 crores compared to 781 crores in the previous financial year. During the year, the company capitalized assets worth 1,544 crores, out of which approximately 800 crores is capitalized in the last quarter. Capital work in progress, as of March 31st, 2026, stood at 2,113 crores. As on March 31st, 2026, the company's cash and cash equivalents stood at 3,414 crores, receivables at 2,984 crores, and inventories at rupees 3,954 crores. Thank you.

Thank you, Madam. With this, we would request the moderator to open the lines for Q&A.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, please limit your questions to only two questions per participant. You should have a follow-up question. We request you to rejoin the queue. First question is from the line of Surya Patra from Philip Capital. Please go ahead.

Yeah, thanks for the opportunity.

Okay, first question is on the supply chain issue.

So, regards the raw material availability you have elaborated for the quarter, but could you share or is it fair to believe that the host is behind us already? All the Q1 would be facing, would be seeing incremental challenges in terms of availability of the material. See, particularly, I wanted to know about the methanol because we are one of the leading consumers of methanol in the country and almost the entire of this country's demand is met from the imported things. So, how are we managing that and how would that situation be for the first half of current financial year?

So, a quick thing on the supply chain management and the procurement. In the year, since the war started on 28th February, I would say effect is there only on one month in the entire year. So we wouldn't see so much of an effect of what is happening on the yearly results, neither on the quarterly results, because it's only one third. But if you're asking me what we are currently going through, yes, we are having difficulty in sourcing material. But we are not having any production stoppages at our end. And it is not just methanol. We do import a lot of other solvents. We also procure domestic a lot of materials which require materials from the Middle East. For example, ammonia, which is imported from Middle East. And as I'm sure you are aware that there are certain domestic manufacturers who have declared force majeure. So, the impact is there on multiple products, not just on solvents. We are reviewing this on a quarter-on-quarter basis, and we are trying to secure every month for the next three months how to make sure that our production is continuously running for the next three months. So, we are keeping our customers also in the loop, and right now we can say it is difficult, but it is not something that we are completely worried about.

My next question is to Kiran sir. If the GLP opportunity hypothetically shifts towards orals more going ahead, then how will that impact our supply ability?

We are supported by long-term agreements, okay, with our customers. So, whether you are going by oral or by any category, okay, we don't see that to be an issue for us. Okay.

And another question, sir. Since the massive GLP-led capex that is going on worldwide, So, if you can give your plans for CAPEX plans for the next year, FI27, and also it would be great if you can share your margin outlook for FI27, given the kind of difficult scenario, how challenging happens, what is the kind of margin outlook that we would be having, whether it would be difficult to sustain this or. We can see a expansion considering the new dedicated project which will be commencing in the later part of the year.

See, right now, as we have shared, capital work in progress is about 2,113 crores. And, in fact, for CACNEDA, we did mention earlier that we are going to do a 1,500 crores expansion plan, out of which 600 crores has been capitalized. So, there is a lot of work in progress currently, and as and when we see an opportunity where there is material disclosure, we would definitely share it in the SEBI. Now, coming to the future outlook, we would say that, you know, as historically, that, you know, we always look for a double-digit growth in our revenues, and that's what we would also say today.

And in regards to marginments?

I mean, with the changes in our years, I would say it's difficult to project, but we would say it would remain stable, and we would, like, you know, it's also with the situation we are currently in, we wouldn't want to throw a figure on that.

Sure, ma'am. Thank you. Me too, all the best.

Thank you.

Thank you. Next question is from the line of Amit Chalki from JM Financial. Please go ahead.

Yeah, thank you for taking my question, and congrats to the management of the call. So, I have a first question on the cost and currency top-line growth, which has been around 6%, as you mentioned in the opening remarks. So, despite doing so much capex, having so much capacity available, what is it that led to mid-single-digit growth during the year, and how things can change going ahead in FY27?

We did have a capex, but most of the capex has capitalized in the last quarter. I would say more towards the end of last quarter is when we capitalized quite a bit of the capex. But coming to the constant currency growth of 6%, considering the growth in revenue and the growth as well as the growth in the exchange rate with which we are going since the last year, it's something that we foresee that we would look at a regular revenue growth rather than a constant currency growth rate at this point in time. Because the currency is fluctuating quite strongly, and looking at it from that point of view will not show you the real picture of the business. Rather, look at it from a complete revenue standpoint.

Okay. So, is there any big product like a lifecycle management project which has been slowed down during the year, or anything which has pulled down the revenue down, anything on the volume side? Which could have affected the growth for us during the year?

There is not a single product. See, we are a multi-product company. We have many products in our pipeline, and we have generics, and we have custom sensors. Generics, yes, we have large volumes, and we have multiple products under it, custom sensors as well. We have a lot of projects under it. We can't name that, you know, one single product. We are product heavy, wherein it would pull down our revenue to a considerable extent, which would reflect in the balance sheet. Yes, we did mention, Dr. Kirandivi has mentioned earlier many times that the generic business has been quite strong volume-wise, but yes, there has been rising pressures, and Dr. Kirandivi, would you like to elaborate on this?

So, you know, to answer your question, while we cannot point on a particular product, we have not lost any volumes or any supply or have any supply issues with any of our customers. Generally, there's slight pricing pressure, but our customers also understand what's happening in the market, and they've been very understanding, and we have been in constant discussion in how to manage the pricing at both ends. While in the custom synthesis, we have several projects. Now, you also know we do a lot of late lifecycle management for our customers. While the project is going through its patent phase, as it comes to an end, or closer to an end, we do support our customer in late lifecycle management, and the product continues to stay. Okay, maybe the volumes may go down, but at the same time we have several projects that come into the pipeline. So it's a continuous rotation. You have to remember, DBs has been in the business of CS from the inception. It's not something new that we got in today and the volumes have evolved. This is a constant cycle that keeps going on.

That explains. The second question I have on the margin side, like a few years back, we used to operate at 37%, 38% margins traditionally. What has changed since then over the last four odd years since our margins have settled down around 32%? Is there any possibility we can go back to the original levels and what can drive it? Thank you so much.

I would say that, you know, the two key things that we see, the margins going, you know, more than 32% historic figure. One is a generous rising pressure, for sure, and then the second one is mainly the cost of materials that have increased. I mean, we did see the increase happen mainly during the COVID period, and then it slowly started settling down in the recent past. But again, with the war, we are seeing rise in prices. When we would win, I mean, to answer your question about when would we go back to 32%, that's something we dearly wish for that, you know, we also go back to 32%, which also depends on the market condition.

Sure. Is it like going ahead if the business mix of custom synthesis increases, even by whatever projects you have already expecting to start? Will that drive these margins upwards?

So, it's very difficult for me to answer that, right? Because right now, we have done, some we are in the process of validation, like I explained, some we are going through pre-qualification, some are still in the R&D state. Now, these have to go to our customers, they have to go through their qualification cycle. It's very difficult for me to say the timeline of any project. When it would come, when it's the right time that these would jump in. Again, we have to see what this product is competing with and whether a new molecule is developed at the same time. So, there are several unforeseen challenges for me to comment on the margin at this point.

Sure, sir. I will chime in. Thank you.

Thank you. Next question is from the line of Neha Manipuria from Bank of America. Please go ahead.

Yeah, thanks for taking my question. I just wanted to check on the raw material availability that you talked about. Would it be fair to assume that obviously a lot of that availability is coming at a higher price, which would start reflecting, you know, in the first quarter fully? And also, if you could just comment on our ability to pass on this, you know, cost inflation, particularly in the generic segment. You know, have we started seeing generic API prices probably that have been under pressure bottom now, now that we're still facing the cost pressure, or you don't think it's too premature to sort of see that?

So, I could answer this for you. The generic segment, you know, while the raw metal prices, we are not immune to it, we are seeing rise in raw metal prices. But we have, most of our APIs on the generic segment are backed by long-term contracts, which are variability clauses which protects us from such situations. So these are reviewed based on the contract. Some of them would be reviewed every three months. There is a clause where it directly impacts on the raw material class. There are different scenarios where we have long-term contracts for most of our products. And this supports us and protects us, which is basically a carry forward which goes to our customers.

Understood. And Dr. Damien, is it fair to assume that not all of our contracts are long-term and there is some amount of spot supplies which could see, you know, this impact on, you know, from the spot pressure? Or would you say bulk of our contracts are long-term and therefore, you know, they have some flexibility in terms of being able to negotiate as and when the contract comes up, you know, renewals?

It is a fine balance between having contracts for our products and also we have some spot buys, quarterly buys from customers from the various regions, which again, it's on negotiate to negotiation basis, which happens mostly in countries like South America or parts of Europe, Eastern Europe or Asia.

And my second question, you know, now that there's so much discussion about raw material pressure, etc., have you started seeing customers probably increase, you know, an increase in demand from their customer side, which you think would bode well for API sizes? You know, has that phenomena started to reflect in your customers' demand, then wanting more volumes just to make sure there is supply security at their end?

To answer your question, I would say that, you know, our supply chain model is pretty stable. We proactively make sure that the material reaches our customer in time, and that's what Divis has been known for, and that we deliver on time to the customer. So that way, I don't think they are talking of any material that they are foreseeing the shortage.

Thank you so much.

Thank you. Next question is from the line of Tishar Mandune from Motila Al-Auswal Financial Services. Please go ahead.

Thanks for the opportunity. First on the API segment, there has been healthy pickup in revenue over past two quarters, which probably in the earlier quarters it was pretty stable. So, while the pricing pressure remains, so this is like a decent volume pick-up, is that the safe assumption to make?

Yes, the volume has been picked up. We had steady growth in volume, and our customer base has been quite steady in the generic business.

So, is this driven by new molecule addition or the volume of the existing molecules?

This is from our existing portfolio itself. While we are still waiting for our customers to launch our new portfolio, what we have told you in 2026-27, as the products come off patent. For now, this is from our existing product portfolio.

Interesting. So, effectively, like, over coming couple of years, the new product will also sort of add to this volume of the existing product. Right?

That is correct.

So, secondly, with respect to unit 3, you alluded that the production level has steadily increased and then there has been some shift from unit 1 and unit 2. While, you know, not giving further details, but probably what further percentage in terms of the broad-based percentage shift which is possible from unit 1 and unit 2 to unit 3, where are we in that journey?

You see, it's quite difficult to say a percentage, okay, because it is on qualification to qualification basis, as in when, you know, we have a product in demand and the volumes are going up, which requires proper GMP, or we have a branded customer's product, which the volumes have increased, and we need to create space. That is the time we are moving one of our pre-chemistry products from unit 1 or unit 2 to unit 3, freeing up GMP spaces. So the qualification timeline is something we would know about 2 or 3 or 4 months in ahead. As in, we know that customers are getting approval. We proactively start working on moving those products.

And just lastly, I mean, the way the customs business has been built by DB's lab, really the customer satisfaction in terms of the supply of the material has been rock solid, made the, even if I look back at the COVID times as well. But just one thing to understand, like inventory, if I look at it. It has been stable quarter to quarter, as in from 3,600 crores moving to 3,900 crores, and given the way the situation has, you know, sort of spanned out in March, April, so would we see subsequently an increase in the inventory level in the coming quarter, or this is the kind of rate at which the inventory will be increasing?

I would say from an inventory standpoint, the March month has been mostly surfaced from the inventories of February, maybe early March, but most of the increase in inventory, I would say, you might be seeing from the Q1 of next year.

Any questions that you would like to post?

I wouldn't put any number on that because we are first trying to make sure that we run good capacity, we don't lose out on our production capacity, and we don't lose out on our outward logistics shipments. So for that, we are securing material and we are storing material to make sure that we are efficiently manufacturing and supplying our customers.

And just last, if I may squeeze in view, also commented on increased procurement from the domestic side. And correct me if I am wrong. So, is that resulting into relatively higher prices or this is so that you secure the wrong material in place or the prices are still largely stable despite getting procurement from the domestic side?

So, I would say it's not just domestic, but also it is with respect to imports. Like, we buy a lot of solvents, and we buy quite a few materials from imports, and we also... Try to buy from domestic. Yes, are we seeing price increases? We are seeing price increases like any other. Like you're seeing crude oil, crude increase. You're seeing multiple other factors in our daily lives also increase in prices. The same way, we are also not immune. We are seeing price increases. But we are factoring them in, and we are, you know, trying to pass on wherever season is.

Thank you very much, and thanks a lot for this experience.

Thank you. Ladies and gentlemen, please limit your question to only two questions per participant. Should have a follow-up question, we request you to rejoin the queue. Next question is from the line of Abhigyan Srivastava from Marcellus Investment Managers. Please go ahead.

Hello. Hi, am I audible?

Yes, sir. Yes.

Thank you for taking my question. So, my first question is, can you comment on the ramp-up of iodine contrast media and the status of gasoline-based contrast media that we are working on?

Could you repeat your question again, please?

Yes, I want to know the status of our IP contrast media ramp-up and our status on the gadolinium-based contrast media that we have been working on.

So, coming to the contrast media, we are working with the big pharma companies. So, I cannot disclose too much on the volume or how much we are producing or who we are working with because we are bound by CDAs, but we are working with most of the top companies. Players in the market at this point who are innovators. Coming to Galidium compounds, we are still, you know, we are still, you know, at qualification stage because these are new molecules which are in phase two, phase three. We are basically hanging along with our customers as and when they start getting approvals, we will start seeing revenues from that side.

Got it. Thank you, sir. And my second question is, Thank you. You mentioned that we are seeing new project inquiries in CSM. Is there anything in particular that is driving that?

You mean to say in contrast media? No, in CSM as a whole, in your initial stage. Okay. In CSM we have several projects, which are either in phase two, phase three. Some, you know, the validations have been completed, and these have been submitted to our customers, and we are waiting for approvals for them to get either EU, EDQM, or USFTA, or different regulatory agencies to approve them. As and when they go through the approval process, you know, we will be a part of their journey. But as of now, we have a strong pipeline across different, what do you call, stages of development, some at phase 2, some at phase 3, some have done qualifications, some have done validations. I think that's what you have asked for, right?

Right, right. And lastly, has there been any loss of revenue in Q4 due to logistic issues?

Can you repeat the question again, please?

Yes, ma'am. Has there been any loss of revenue due to logistic issues that you mentioned in your initial speech?

No, we haven't had any loss of revenue because of the logistic issues in the last quarter.

Got it. Got it. Thank you, ma'am.

This is very helpful.

Thank you. Next question is from the line of Vivek Agargal from Citigroup. Please go ahead. Mr. Avaibar, you can go ahead.

Thanks for the opportunity. One question is on GLP-1. You have talked about that several of the fragments have been completed by Nisha. That's all right. So just one question, how far we are from the measure of Nisha.

Just a second, your background noise was way too much. We couldn't hear your question clearly.

One question on GLP-1, as you have talked about that, several of the projects, several of the fragments that...

Mr. Agarwal, we cannot hear you clearly. Please use your hand. No problem.

No. Thanks.

As Mr. Gawal, as there is no response, can you please repeat your question or use your handset motor? We cannot hear you.

I'm turning back to Gawal. Sorry.

Thank you. Next question is from the line of Fritika from ValueQuest Investment Advisors. Please go ahead.

Yeah, my first question is on... Could you help us understand broad timelines? So, when do we expect the three dedicated capacity to start utilization? Also, what will be our regulatory process that we need to go through for all these three new dedicated capacities?

Would you please repeat the question again?

Yeah, sure. So, my question is on, could you help us understand when do we expect broad timelines for these three dedicated capacities to start utilizations? Also, what kind of regulatory process we need to have to go through for these three new dedicated capacities?

So, uh... The three projects, I believe you're talking about the CS projects we have spoken in the past.

Yes, yes.

We have gone through, I mean, various stages of validation. And at this point, they are in the process of being supplied to our customers. As and when the customers get their regulatory approvals, either from, I don't know which countries and how they would apply. As we will be a part of their filing, we cannot comment on their regulatory submissions, but as and when they confirm and give us the volume indication that we need to start commercial production, we would then start producing commercial quantities.

Sure. Also, from USFDA or any other company or any other country point of view, do we need any inspection or any regulatory process that we need to go through?

So, to answer that question is very difficult, right? So, I cannot assume what the agency would be thinking, whether after my customer submits a file, whether they would prefer to audit us or they're happy with the previous audit report or they want to do a product-specific report and then come for an audit again. I cannot comment on that because that's a regulatory agency decision, right? So, it's something I cannot comment.

So, just last understanding would be when we had disclosed our first dedicated contract, which was in April 24, we had mentioned Jan 27 as the operations timelines. So, do we think that is on track or that could get delayed led by regulatory approvals with your customers?

See, as of now, like I explained, we have gone through validation phases. We have supplied it to our customers. We are hopeful by 2027 it will be commercialized or earlier or maybe later. Everything is subjected to regulatory approvals for our customers who intend would tell us as and when we need to supply commercial quantities. This is based on a prediction on what our customers give us. We have spoken in the past.

Sure. Sure. Last question would be, could you give us qualitative understanding on opportunity in the contrast media that you are seeing, both in generics as well on the innovator front?

So, on contrast media, we're substantially tied up with the innovative side of the business, where we have been supplying iodine-based contrast media in several multiples of tons to these customers, and as and when their demand, they want to increase it, they have been discussing with us actively and increasing their volumes, or in some of the customers have kept their volume quite stable. Coming to the generic side, we are not that active. We are more active with the innovators itself.

Got it. Also, you mentioned to the other participant that for gadolium, our contract is yet to start with the products being in phase two, phase three, but in the iodine space, we would have already started commercialization for molecules.

Yes, in the iodine base, we are already in commercial sales. I think I have mentioned this in my previous calls that we have commercialized these projects on the iodine base, and like I explained, there are about three major players, so a few of them are increasing their volume, some of them are keeping it steady with what they have signed with us, and these are backed up by long-term contracts. Now coming to gadolinium compounds, this is something where we are in phase 3, where they are buying quantities just for their studies to qualify their product. As and when they see light of approval from the agencies, then they would start talking to us for taking the next steps on validation.

Thank you so much for answering the question.

Thank you. Next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Good afternoon.

Please limit your question.

Yeah, sure. Good afternoon. Thank you. Please limit your question. Yeah, thank you. Yeah, I'll keep it to two questions. Don't worry. Just quick question first on the Capex. So we did 1,400 tour last year. We have done 2,500 tour this year at about 23, 24% of sales. So it's been a very high number, and I don't know whether you alluded to a 1,500 tour number for 27, but just checking. And typically, we have had a two-year correlation on when you convert KPEX to revenue, right, or some form of it. So, just want to understand whether the current batch of KPEX, including the long-term supply agreements, is it a slightly more prolonged revenue recognition cycle, you think, or you think the historical trends of when revenues accrue from these KPEX will be similar?

Can you just repeat your question again, please?

Yeah, so Capex is 2,500 crores this year. Last year was 1,400 crores. 2,500 crores is 24% of sales, right? Our historical average is 13% of sales is the Capex number. So I'm just saying it's significantly higher. I know we are doing three long-term supply agreements. But when does revenue accrue from KPEX being done? Is it a two to three year cycle when you start seeing commercialization leading to revenue recognition?

So, sorry, we were just discussing. So, to answer your question, right, while CAPEX has been, you know, allotted for various projects across the various units, either we are creating GMP capacities in Unit 1 and Unit 2, freeing up the space so that Unit 3 Kakinara can take up the pre-chemistry raw materials, and then qualifying these for our customers, all these is a cycle. The cycle is typically when we do an innovative product, we completely depend on the customer's timeline because we file in their CMC. We do not have control on when the product will be launched. It can be, you know, wishful thinking if you want it in six months or one year. It can take two years. We have seen time cycles all the way from six months when it's a fast approval project by the agencies and the product needs to be in the market, or we have seen as long as three years. So it is very difficult for us to predict saying, okay, in the next one year, we will see these being shown up into the revenue stream. So to be optimistic, we believe we would like to be in the two-year range, which is comfortable. We have seen sometimes these are slightly earlier or slightly delayed based on if the agencies ask our customers further questions, further data, we don't know, as we are not a part of it. We just have long-term contracts with supply commitments.

Yeah, helpful. My second question is just on an earlier participant's question on margins, 32%, 32.5% this year, excluding other income. But if you were to look at historically, I think during COVID, we did like 40%. And I recollect Milima saying it's because of generic pricing being the difference. But last time, at that time, there was also Munlupiravir, right? That was an expedited, accelerated CAPEX. And for me, it seems to remind us of the next three long-term supply agreements that are coming, right? So why wouldn't the new long-term supply agreements for CS, which may be higher scale, which may be larger quantities? Wooden bag drive margins higher.

See, at this point it's very difficult, right, to comment. You have to see how the product is going to do in the market. If you look at Molpanivir as an example, it was a COVID-driven drug. Okay, so it was specific, it was a therapeutic category which the market knows and the customer has driven it across, you know, all over the market. Now the products that the large, you know, long-term supply agreements we have is completely based on what our customers have signed with us. So, I am not at the liberty to comment on the volume, on the pricing, or the costing, because the technology is completely owned by the customer, and I am not at the liberty to talk about it. But what I can say is, with the ongoing increase in costs on raw materials, we are trying to minimize the impact by discussing with several of our customers and trying to stabilize it to keep the numbers almost close to what we are achieving right now.

Got it. Thank you.

Thank you. Participants, please limit your question to only two questions per participant, should have a follow-up question, we request to rejoin the queue. Next question is from the line of Kunal Dharmesha from Macquarie. Please go ahead.

Hi, thank you for the opportunity. First question on the stable kind of profitability output that you provided, is it fair to say, given that you don't know what time it will take for the customer orders to come for dedicated KPEX projects, is it fair to say the stable profitability guidance does not make any upside from

these projects as of now?

We are not at a liberty to comment on the upside-downside at this point in time, but however, as we always said, we are looking for a double-digit revenue growth, and that's the projection that, you know, we would like to assume we would achieve.

And in terms of the RM cost increases, rate rate increases, etc.,

Is it also fair to say that the

I&R depreciation against a major currency like USD, Euro, where we derive our majority of the revenue, should be more than able to offset some of these increases?

See, if you are talking about our imports, am I correct?

No, I'm just saying at a company level, the kind of currency depreciation we have seen versus, you know, the pull factors in terms of increase in RM costs, rate costs, etc. So, there is a benefit from currency and then there is negative impact of all other factors. Would you say the currency benefit would more than offset all these, you know, dark clouds?

See, the currency benefit because we are mostly an export-oriented company. It would definitely benefit is what we would foresee. Say, for example, currently this year our revenue is about 11,000 crores, but our raw material is about 4,000 to 5,000 crores, and in that about 40% would be our imports. So how much of our export effect is there and how much of our export effect is there is easier for you to calculate from there. I don't need to say it out. Would the fluctuations benefit? Yes, it would. But when tomorrow the rupee drops, would it also impact? Yes, it would. Because we are heavily on exports and we are not in the domestic that much.

So, and lastly for Dr. Kiran, my understanding is typically the regulatory agencies only inspect API formulation and advanced intermediate facility. Correct me if I'm wrong. This is my understanding. And by virtue of that, given that on peptide side, we are doing more like 8 or 10 amino acids in a team.

Would it be counted as more like advanced intermediate or intermediate?

What is your sense on that?

See, the manufacturing has to be done under GMP, okay? So, these are qualified materials for our customers, okay? Now, which one do they call starting material, which one do they call advanced intermediate, only my customer knows. But we are prepared for any, all the plans, that is both Unit 1 and Unit 2 is a general CGMP facility, which is under all guidelines of EDQM, USFTA, or NVSA, across all Japanese authorities. It basically covers all regulatory requirements. So it's difficult for us to say whether, you know, which one is the starting material for him, which one is the advanced material, because as and when he keeps adding the fragment, you know, the fragment sits at a certain place, higher the GMP level goes up.

So, and last one, if I may squeeze in, in terms of, you know, let's say once our peptide facility is commercialized, we have not given the scale, but would you say once it is commercialized, we would be in the top two player global in terms of scale of the capacity?

I would say, in terms of scale, I can give you a rough thing. We have several 3,000-litre SPPSs, which by far in India, nobody has. We are quite strong and committed towards this segment, and we are targeting to be one of the largest global players in the world.

Sure. Thank you, and all the best.

Thank you. Next question is from the line of Dhawal Kuth from Jefferies. Please go ahead.

Hi, thank you for taking my question. I hope I'm audible. So, my first question is I wanted to know the guidance on CAPEX. For the next fiscal year, that's first.

And secondly, again on peptide division, wanted to get some more details on the products that we have validated.

Like, what is the maximum length of the chain that we have validated? And are these fragments for one single product?

Or the validated fragments are for multiple products?

What was your first question?

Outlook on Capex.

I would say the capex, like right now we have capital work in progress of 2,000 odd crores, so I would say the capex for the following year, unless we see any major custom census project or any new project that's in our way, it would be a constant capex. Now, Kiran would answer your second question.

So, coming to Peptides, right, we have, I mean, we have several customers, like I explained to you, where we are at various stages. Either some are in validation, some are in qualification, some are in R&D stages where we are doing small quantities for them, the fragments, basically. And these are various fragments, according. It's very difficult for me to say, you know, whether it's for a single customer or multiple customers, because I'm bound by CDA, but all I can tell you is that, you know, we have a healthy pipeline, and we see much more opportunities in different therapeutic segments.

Okay, thank you.

For the last question of the day, I now hand the conference over to Mr. Satish Chaudhary for closing comments. Over to you, sir.

Thank you all for joining us today for the earnings call of DVC Laboratories Limited. In case you need any further clarification, please reach out to our investor relations. Thank you.

Thank you. On the behalf of DVC Laboratories Limited, that concludes this conference. Thank you for joining us, and you may not disconnect your lines.