Laurus Labs Limited (LAURUSLABS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Loris Labs Q4 FY26 Earnings Conference Call hosted by Dam Capital Advisors. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Payal Shah from Dam Capital Advisors. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone, and a very warm welcome to Loris Labs Q4 F526 Earnings School, hosted by Dan Capital Advisors. On the call today, we have representing Loris Labs Management, Dr. Satya Narayan Chava, Founder and CEO, Mr. V. V. Ravi Kumar, Executive Director and CFO, Mr. Krishna Chaitanya Chava, ED, Head CDMO, Mrs. Soumya Chava, ED, Kendrix and Commercial, and Mr. Vivek Kumar, ABP, Investor Relations. Before we proceed, I would like to remind you that some of the statements made during the call today could be forward-looking in nature, and a safe harbor statement to this effect has been included in the press release that has been shared on the company's website. I hand over the call to Dr. Chava to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir.

Good afternoon to all our stakeholders. Our company's purpose of chemistry for better living guides us everything what we do. In 2026, we significantly accelerated our performance reflecting sustained demand in technology-driven commercial offerings. The transformation of our portfolio is well underway. The momentum is building as we continue to execute on our strategy, the clear focus. In 2026, our business benefited from successful clinical and commercial supplies for complex NCE compounds, ramp-up of supplies of the new launches, and sustained global leadership in antiretroviral therapy, where we continue to service one-third of the global HIV population. We continue to advance our well-recognized development and manufacturing platform capabilities with global customers. I'm confident in our ability that this will further expand business opportunities in coming years. The company has exceeded 8200 cubic meters of reactor volume for small molecule, API, and intermediate manufacturing in FI26. As we progress, We are making significant investment behind important technologies, high growth modalities, large scale manufacturing infrastructure to support our clients' needs. Currently, we are managing several CAPEX growth projects, which will be executed in the next two years. 90% of project spend is towards mid and large scale manufacturing. I will just make a few areas where we are investing. We are creating a large manufacturing greenfield project, unit 7, and the first production block will be ready for commercial validation by March 27, and four additional manufacturing during the next financial year of A28, with a combined reactor volume of over 2000 meter cube. Second, commercial scale captured manufacturing block will be ready for commercial scale validation during Q2 of this financial year of A27. Animal Health Edison Capacity is at Unit 10, which is Edison to LSPL, Unit 2. Fourth, a fermentation greenfield site for our Laras Bio. Phase 1 will start by end of 2026. Lastly, we are also spending on formulation facility under our Karkar Giant Venture and we expect Phase 1 will be completed by mid-2027. Moving on to our financial results. Flores maintained its business momentum and delivered robust operational and financial performance for the financial year 2026. The company's revenues were 6,813 crore with a growth of 23% over previous year. This was mainly driven by significant growth in CGM of business, supported by affordable medicine portfolio, which is genetics. Grass margins were healthy and maintained around 60% range, and EBITDA margins expanded by 6.7 percentage points to 26.8%. Our product mix within business division and operating leverage have continued to do well, supporting our healthy margins overall. When we look back at our last six years, a lot of us has delivered on successful transformation across both business and product portfolio. Today, our share of CDMO business has increased from 13% six years back to over 30% right now. The contribution from ARV revenues has come down from 67% to 41% in the current financial year, while sustaining absolute sales and global leadership in HIV therapy. And we are deepening our CMO partnership based on consistent supply track record of large-volume API and FDF. I would request Krishetan to share key updates on our CDMO business.

The CDMO business delivered robust operational execution for the full year, clocking at a little over 2,000 crores at 2,080 crores. For the small molecule CDMO, we have clocked a growth of about 38% with the sales for the full year at 1896 crores. The growth essentially came from late-stage pipeline programs, commercial NCAPI supplies, to several global partners, and also ramp-up of the growth projects. For the small molecule side, at Q4, our sales stood at about 524 crores. As I said, majority of the business has come from the commercial revenues, which are programs that are very early in their commercial journey. The underlying demand momentum for complex APIs remains strong, driving increase of outsourcing activities with trusted partners like Loris, which operates in advanced technology platforms. Our small molecules pipeline continues to expand with focus on high-value programs and projects and fully integrated programs across technologies such as biocatalysis, flow chemistry, hydrogenations, continuous manufacturing of drug products, high-potent APIs, amongst others. There is continued investment into capacity creation at WISAC, and also we are advancing quite well, as Dr. mentioned, on commercial peptide manufacturing capabilities based on customer demand. Coming to Lawrence Bayou, the Bayou division reported a Q4 sales of about 65 crores. On a near-earnier basis, that's about 124%, partly due to the lower base that was there last year. If you look at our full year numbers, sales has increased by about 15%, which is largely along the expectations of the year. The good part is that this growth is supported by customer revenue diversification and also continued pipeline progress on global accounts, both in your animal origin free portfolio and the CDMO. Construction work for the commercial scale fermentation facility in RISAC is progressing well and is along the plan. And we expect the phase one capacity to be operational by the end of 2026. Now I'd like to request Ms. Ongitava to share key updates on our affordable medicines portfolio.

Thank you. Revenue from the Affordable Medicines Division formally generated at 1,223 costs in Q4, with the momentum sustained on an absolute basis, though the growth has been slightly moderated. For the full year, the division delivered 4,733 costs in revenue, reflecting a strong 18% growth. FY26's growth was driven by higher volumes across ARV and oncology portfolios, along with strong traction from recent launches in developed markets. We maintained a consistent supply track record despite global supply chain challenges. However, increasing geopolitical disruptions may impact raw material availability and logistics, potentially creating a near-term pressure on OTIF's performance across the industry. That said, the business outlook remains steady. We continue to focus on optimized capacity allocation, improved supply efficiency, ramp up of new product launches, integrated CMO opportunities, and expanding our footprint across developed and emerging markets, particularly in the non-ARV segments. The oral solid facility expansion is progressing well, with formulation capacity increased by 20% in FI26 to 12 billion units. On the regulatory front, we have filed a cumulative 92 DMFs to date. In developed markets, we filed seven dossiers and received six approvals in FI26, taking the total to 94 product filings cumulatives. Thank you.

Thanks, Krishna Swamy, for the overview of Genevix and CD Mobile segments. On R&D front, overall R&D spending to sales for FA26 was at 4.1%, increased by 10% year and year, including our expenditure on cell and gene therapy space. The spend is in line, and we expect a similar percentage going into the next year as well. We continue to invest in portfolio, focusing on product complexity, scale, and sustainable technology platforms. Let me share a brief on our quality and ESG side as well. In 2026, the company underwent close to 142 quality audits by multiple drug-regulated agencies and several customers. The company has successfully passed audit inspections without any critical findings. We remain committed to advancing quality systems, meeting highest compliance standards from clients and global regulators as well. Besides, we continue to advance on our EHS, ESG initiatives, which is getting sustained recognition from global rating agencies. You may refer to our IaaS presentation for more details. To conclude, our business model has proven as resilient, and we remain well positioned to execute on our growth strategy ahead. We will continue to focus on deepening strategic partnerships and integrated capabilities. Strengthening technology, platforms, and ecosystems, advancing pipeline, as well as focused investment into capacity creation that will sustain our success in the long term. I would like to again recognize the commitment and efforts of our dedicated teams towards strong R&D and operational execution enabling continuous transformation of our company. Now, I request Mr. Radhikumar, ED and CFO, to share overall financial highlights.

Thank you, Dr. Satya. A very warm welcome to everyone on quarter four and full year FI26 earning call. Let me quickly take out through the highlights. Total income from operations is 6813 crores with a growth of 23%. For the quarter four, we are at 1812 crores with a 5% growth. Despite the ongoing macroeconomic challenges, we have continued to see the high level of demand in our integrated offerings. Grass margin maintained at a healthy level of 60%, 60.4%, and for a quarter four, it is at a 61.4%, mainly due to better product mix and some of the improved process improvement efforts. EBITDA for the year stands at 1826 crores with a 26.8% margin, which is well in line with our broader outlook. For the quarter four, EBITDA reported 523 crores with a margin of 28.9% due to strong operating leverage. Profit after tax for the year 8089 crores with a growth of 148% and quarter four is at 279 crores. Proceeds around 17.7% improved from 9.7% for the previous year. On the capex front, which is a key enabler for the low risk for future growth and also a key focus for the organization now and going forward, we invested close to 335 crores for the quarter and 1070 crores for the full year. More than 75% investment. Expansion of CDMO and CMO capability rest in common infrastructure like ATP and maintenance. Our net debt stood at 2,285 crores due to, and EBITDA, debt by EBITDA is 1.25 versus 2.3 last year. On the back of strong internal cash flows. Of course, though there is a debt increase in the quarter 4, still we are at a 1.25 debted beta level. On the capital allocation front, our strategy remains unchanged, and we will continue to prioritize investment into high-value business segments to drive near and long-term growth and returns for our shareholders. You can refer our IR presentations for more details. And last, actually, because of this crisis today, we are able to manage our supply chain, and we don't have any supply disruptions for this quarter, and we are expecting not to have any disruptions even till the end of June. With this, I would request the moderator to open the lines for P&A.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sajjal Kapoor from Anti-Fragile Thinking. Please go ahead.

Yeah, hi. Good evening, team, and thanks for taking my questions. Dr. Satya, as we commission and scale the upcoming WISAC 400KL fermentation, what could be the single biggest source of yield variability from... Things such as contamination, oxygen transfer, strain stability to even downstream recovery, and how tight do we expect the batch-to-batch variance when we actually commercialize that 400K in capacity?

I think the initial batches what we are going to take up in our expanded fermentation capacity is non-pharmaceutical, non-food also. It is mostly industrial chemical surfactants and then polymers. So where the titer is very, very high. And we don't, see, the biggest challenge in any fermentation, you know, contamination, and we don't have a very long, tedious downstream processing for the products, what we intend to manufacture in that facility. We don't expect any challenges in downstream manufacturing, Sahaja. Right.

Okay. So, just a quick follow-up on that one. So, clearly, we are moving into the world of material sciences and biomaterials. I mean, what does it mean for the steady-state economic model for Lauras? I mean, in terms of utilization, yields, pricing structure, and customer concentration, and which of these kind of variables are most sensitive in achieving the aspirational return thresholds?

The products that are moving to Vizac are from our Bangalore facility. So, the commercials are achieved. And we made those products in our 45,000 liters fermenters. And then those are moving to 110,000 liters fermenters here. We believe that is the optimum size for these products that we are making. So this unit will see the early commercial stage production for those products. So. We have crossed multiple lines of multiple gates, I would say, in the commercialization of those products. The uncertainty of the commercial success for those products is very, very less. So we have very good visibility. Once those products are commercialized, we have to move to much bigger facility, and that is not the commercial size for the products what we intend to initially manufacture.

Sure, sure. That's helpful, Dr. Sathen. My second question is, so beyond the R2 at Bengaluru and this 400KL at WISAC, looking at... The horizon beyond 2030, if I may, is biotech getting the attention it truly deserves? Because that's the sort of coming wave. We may or may not accept it publicly, along with the AI, of course. So just to understand the capex better, I mean, how much of what we are planning over the next few years, say three to five years, is already backed by committed or highly visible demand versus any speculative capacity we may be building ahead of demand.

Our biotech initiatives spread across many things. Biocatalysis, enzyme manufacturing, animal origin-free cell culture ingredients, precision fermentation, cell therapy, gene therapy, fermentation of pharmaceutical intermediates. So, what we are talking right now in our Unit 4 Bio-Expansion at WISAC is only for non-phoropsitical one. As you are aware, we are also investing in our gene therapy and ADC manufacturing facility in Hyderabad, and our subsidiary in Bombay, they are also investing further in our cell therapy, CAR-T manufacturing. So, there are multiple fronts going on, Sajalji.

Sure, sure. Just a quick follow-up on that one, Dr. Satya, for the capacities we commissioned about, let's say, two, three years back. Where is the utilization level at the moment on those capacities versus, you know, what you or the team initially expected? Are we broadly in line with the utilization for the capacities that went live about two years, three years back? Or are we below that aspirational threshold or above that threshold?

In R2, our 4 into 45,000 litre fermenters are fully occupied. And that is the reason we quickly expanded capacity by that. And we expect this capacity, current capacity, we expect to manufacture two products. And once the commercialization happens and the first two commercial production is delivered, we expect to expand there itself to one million liters. There we have space. And one product is downstream. Without any chemical operations, the one product we have to do some chemical operations, that also will be done by us. So, we don't see any capacity un-utilization challenges for the plant, which will go online by end of this year.

Super, super. Thank you so much. I'll rejoin the queue, Dr. Sathya. Thank you.

Thank you. The next question comes from the line of Bharat. Siripurapu from Quest for Value Capital. Please go ahead.

Hi, sir. So, if you see our Indian TDMO landscape, some of the TDMOs are getting impacted due to inventory de-stocking. So, this is common scenario because TDMOs are dependent on ordering cattle of innovators. So, more we are concentrated on few products, there is more risk of de-stocking. So, can you say that, do we have enough number of CDMO commercial products to say that we do not have product concentration risk, and, you know, we are insulated from this inventory talking risk?

In the last 18 months, we delivered three APIs for commercial. And those have patent life of several years. So they're very early in their commercial phase. And based on indications from our partners, they gave a very clear forecast for the next several years. And we don't see any stocking, de-stocking challenges for these molecules at this point of time.

Good. So we don't have any product concentration. It's like on single product or two, three products contributing more in a CDMO. Basically, that's what you're saying. Oh, yeah. That's right. Thank you. And my second question is like, if you see our yearly performance of our results, so last year, our EBITDA margin was 20%, and this year is around 26%. So there is an increase of around 600 basis points. And majority of this increase is coming from gross margin improvement, because our gross margins have improved from 65% last year to 60%. So, we did not see the operating leverage playing out significantly yet. So, is it right to assume that the operating leverage is going to play significantly over the next two years?

We expect so, Bharat. So, your point is very valid. So, operational leverage is coming. See, we keep on expanding capacities. So, we are at the border of leverages. But next year, we expect some operational leverage will come. And see, as you observed, the EBITDA margins are going up. Even looking at four quarters of the FI26, EBITDA margin continuously kept improving. So, if you look at the Q4, it is almost at the 29% EBITDA margin.

Yeah, good. Thank you. Thank you. That's it from my time. Thank you very much.

Thank you. Thank you. The next question comes from the line of Chirak Shah from White Pine Investment Management. Please go ahead.

Yeah, thank you for the opportunity and congratulations for good results. Sir, I have three questions. The question one on continuing the CDMO side. So, if you can indicate Thank you. That when you CDMO transitions to CMO, how does the gross margin and EBITDA margin interplay happen? Because, so that's question one. Question two, on the ARB business, anything on the pricing that you would like to comment, which has helped you on margin side or realisation side? And I'll come to the third question based on your response.

See, I would like to clarify on the two terminology what we use, CDMO and CMO. CDMO is proprietary brands, one customer, one product, and some development is also included. When we say CMO, CMO is a generic fully integrated project where we make API and coordinations to a generic customer. So, when we are saying our CDMO revenues, we are not including any CMO revenues coming from generic products.

I'm sorry to interrupt, Chelaag, you are not audible. Please use your handset on the handset mode. Yes, go ahead, please.

Hello.

Yeah, hello.

Yeah, sir, I was more referring to the development phase. How does the margin trajectory between gross and EBITDA margin play out, if you can educate us on that?

See, we are not publishing our EBITDA and gross margins segment-wise. So, that we don't want to do that. And the second, maybe on your ARV pricing, ARV pricing broadly were constant during the financial year. We improved our sales. We used to say 2,500 plus arm is 200, but we did 2,800. That was because of a full utilization of our ARV assets.

Grass margin improvement is on account of raw material price softening and process improvements.

Okay. Would it be fair to make an assumption that when you move from development to commercial, while your gross margin would be lower in commercial, the operating leverage will ensure that your EBITDA margins are similar to the development phase? Is it the right statement?

I would say whether it is development or commercial, in our opinion, grass margins will remain similar. But we make more profit in commercial rather than development because development, we apply more people during R&D, tech transfer and all. So I would say whether it is development or commercial, NCE programs will have similar grass margins.

Will have similar grass margins. And commercials would have a higher EBITDA margin because of more volumes. And just to follow up on this, so you indicated three projects have moved from development to commercials. How should we look at next two years of CDMO space given the stupendous growth that we have seen? Can we maintain that kind of journey given the pipeline that you have and what are the key monitorables if you would like to highlight?

From your perspective. Krishna, I would like to answer this question.

Yeah, I think while we are not giving any indicative numbers, we expect post-positive growth in the CDMO in the coming years as well.

Okay. Is it, what I was referring to, is it hinging on one or three large projects or it is more even spread so that concentration risk doesn't play out that significantly? I was more referring to that.

At this point in time, given the visibility that we have, we are not expecting a concentration risk or heavy reliance on one single program. So, yeah, from the current standpoint, I think we are fairly well de-risked from a concentration perspective.

Okay. Thank you very much.

Thank you. The next question comes from the line of Mihul Panjwani from 40 Cents. Please go ahead.

Hello, sir. Thank you so much for the opportunity. Am I audible?

Yes, you're audible.

Okay, sir. My first question is about CDMO pipeline. Out of the expanding CDMO pipeline, how much is expected to convert into commercial revenues in FY27? And what is the revenue visibility from late-stage molecules?

Um, that's probably a, we're unfortunately not in a position to give you like very specifics in terms of what programs are we working on. But with that being said, there's multiple late stage programs that we are currently involved in. And, but as you're aware, given the clinical nature of the compounds, we can't necessarily accurately put in and say that Fi27 will be the commercialization of that molecule or not. But, yeah, the pipeline is quite, you know, robust and we are confident in continuing to post growing numbers in the CDMR side.

Right, sir. My second question is about the margins. How sustainable are the current 29% end-time margins and how much is driven by mixed versus temporary operating leverage?

We are very confident on maintaining or improving this EBITDA margin in F-A-27. We are comfortable in maintaining that.

My last question, you know, this is just not a very framed question, but kind of it is going to give us some visibility on the growth trajectory of LORUS in CBMO business. So, when would be Loras identified as a CDMO company and not as a, you know, all categories company kind of?

I think you have to say what is the revenue comes from CDMO segment determines how much exposure is to CDMO business rather than, see, we are at more, one third of revenue comes from CDMO business. But it is sizable, 2,000 crore. There are not many companies with 2,000 crore CDMO revenues, which they are well-recognized CDMO companies. So, it is up to see how much reactor capacity, how much R&D capacity, how many programs, what is the size of the program. Earlier, people used to ask us how many clinical programs we have. Say, clinical programs may confuse everyone. One program may give 500,000 dollars, one program may give 50 million dollars. So, giving a number of programs may not give you any perspective. The question is, is LARAS a strategic partner or a tactical partner to customers? So, we are a strategic partner for many big partners right now. So we have a flow of RFP, commercial, early stage, mid stage, late stage, commercial. So we have a robust pipeline. That's what we can tell you. It is up to the market to gauge how much revenue and who is doing well in Syria.

Right, sir. I obviously am with you in France. We are bigger than quite a few communities in the CDMA space. But when we compare ourselves with ourselves, what would be that your inflection point?

One good thing, we are happy, we are doing most of our clinical programs.

This was very helpful, sir. Thank you so much and all the best.

Thank you. The next question comes from the line of Abhijit, an individual investor. Please go ahead.

Hi, am I audible? Yeah. My first question is, what is the asset turnover currently?

Ravi, asset turnover? 0.89. 0.9. Okay.

So, considering this growth for the year, I think overall, CDMO business has grown 20% and it's reached a good base at the moment. What is the trajectory going forward? Can we expect this growth to growth momentum to maintain or do you see some sort of lumpiness or not? Because as another analyst mentioned, there are other CMO companies which are talking about destocking and a couple of variations in funding for alternative medicines from smart, you know, so keeping that in mind, you'll see lumpiness in the earnings.

If you compare year-to-year, we expect a good growth in CDMO segment. There could be lumpiness quarter-and-quarter, but we don't expect any challenges for us to record growth in FH27.

Okay. And I think Mr. Ravi Kumar mentioned that your EBITDA margins have gone up because of operational changes in the input costs and other softening, right? But I have two questions on this regard. Now, because of the geopolitical situation, etc., do you see any challenges in the next few months going forward in the operating, you know, cost to go up because of the raw material prices, etc.?

In Quattro Forum, February 26th, Some impact was there because of the solvent price increase. We will see some, but... I can tell you, our production hasn't been impacted so far, and we have enough visibility that in the next three months, we don't have any challenges of curtailing operation because of higher prices of solvents

or the availability of solvents.

There will be some pressure, but as our mix is going, operational level is going up, more capacity utilization, we will be able to weather that challenge well. Thank you.

Okay, so with regards to this gross margins going up, the gross margins right now are 61.4%. So, as and when the CDMO contribution of the business goes up, can we expect this to go substantially higher? I think this is the highest gross margin since the one-off CDMO contract that happened in 2021. Am I correct?

See, we... Our very comfortable set will maintain cross-marche for sure. Respect of challenges on the solving phase and all. We are confident.

Okay, that's good to know. And one last question with regards to the peptides opportunity that is available. Are you guys looking at the weight loss sector or are you looking at overall peptide revolution that is going around? And is it like, is it, is it? Like, the breakthrough is near term, or is it, like, still substantially time away, or, etc.? I'll just turn an insight, please. Krishna, do you want to answer?

Yeah, we have a, so, diving into too much details, we are in, currently working in several sectors in peptides, including weight loss and a few other sectors. With that being said, there are some medium-term opportunities that we are already collaborating on, and of course, there are several other opportunities that we are also in active discussions with, but as soon as we have something meaningful coming out of that investment, we will certainly make our partners aware of here.

Okay. Thank you so much. Congratulations on the great set of numbers. Thank you.

Thank you. The next question comes from the line of Tushar Manu Dhani from Motilal Oswal Financial Services. Please go ahead.

Thanks for the opportunity. Am I audible?

Yes, sir.

Sir, just on firstly, if you could give the breakup of ARV business into API and formulations, please.

It is two-thirds, one-third. Two-thirds API, one-third is roughly formulation. We are not giving exact split, but it is broadly that. Two-thirds, one-third.

Okay. So, effectively, just trying to understand the non-ARV formulation business, has that grown or declined for the quarter?

Actually, non-ARV formulation is going up. Yes.

The growth number, if you could, so, if, correct me if I'm wrong, so 683 crores of ARB business for fourth quarter, 26, effectively, and you're saying two-thirds is formulation, which means 450 crores of formulation business, is that the way to understand?

No, no, two-thirds is API, one-third is formulation. My answer was for the overall year, I mentioned. So, it is around that number. It may change one month, one quarter, but broadly, two-thirds of the year, you only come from APSL, one-third comes from our own foreign business sales.

Got you, sir. And on the balance sheet side, how much would be the customer advances at the end of FI26?

Do not discuss specifically, Kushar.

Well, has that increased compared to last year? Direction, if you could, while the annual report will disclose that.

On a full year basis, there is an increase.

Okay, good. And, yeah, that's it for me. Thanks.

Thank you. Thank you. The next question comes from the line of Jeevan Patoa from Sahasarad Capital. Please go ahead.

Yeah, thank you, sir. So, congratulations first. One question on the CDMO side. So, was there any revenue from the crop science business in F526?

Krishna, there has been some, but very marginal, I would say. There has been some.

Okay, and animal health is still, I would say, not too meaningful yet in the CDMO side, or it is not, now it is meaningful. So, basically, the context is FY27, can we see meaningful contributions from crop science and animal health both?

In the animal space, within this year as well, we've had some meaningful API shipments that we had undertaken, and in FI27 also, we'll see a good contribution from that space. But in the crop science segment, I think we need a couple more financial years to really ramp that up, but we have a few ongoing projects that are in the registration phase or in the development phase, so yes.

Okay, and on the electronic side, the one customer that we have, so I think, as I understand, it's still in the development stage, but they have got the breakthrough some months back. So, any visibility on, you know, the kind of shipment of the delivery from their side, any contract, have you signed with them?

We are in active discussion with them, but as you've rightly said, it's still in the development phase. And application phase. So it's, it will take a few more quarters for us to see the actual demand outlook from them.

Perfect. And on the formulations, one question on the formulations. So this, the facility, new facility that's coming up and going to commission in June. So that's for the new CMO contract, right, that we have. The 3 billion tablet content.

Yeah, that's for an existing partner. Most of the capacity came online, and we are using it commercially, not additional capacity.

So, after we have a tertiary packaging capacity, it will be coming in June, right?

Most of the proposed capex has been implemented, and then we started generating a revenue out of it in the back end of the year.

Okay, okay. So, basically, the majority revenue will start from Q1?

Yes.

Okay, okay. Perfect. Thanks a lot.

Thank you. The next question comes from the line of Venkat Velipali, an individual investor. Please go ahead.

Okay. Thank you. Good evening, sir. My question is related to fermentation capacity. Given that we have acquired RichCore in 2021, why are we not able to, I mean, scale it up to 2 million? And if you are able to scale it up to 2 million, what could be the revenue?

Hello. See, we thought we'll... Expand to 2 million, but we are doing in a phased manner. We have 250,000 litres right now. By end of this year, another 400,000 litres will come, and that facility can accommodate another 600,000. Overall, we are inching towards the number. See, if you look at when we acquired them in 21, majority stake, their revenues were about 50 crores.

Okay.

Now, they are gone significantly. We are closer to 185-194 revenue with 35-40 crore EBITDA levels now. So, then significant improvement happened, but creating capacity will take its own time. See, R1 to R2, it took one year. R2 to R4, it took two years for us to create that capacity. So, we are... Gazing of market dynamics there, and we have interesting projects. I think we'll update you as and when we have significant information on that.

Okay, thank you. One more question. It's related to Amplia therapeutics. I'm not sure if you're aware that they stopped this Amplicity project. Are we supplying any API to the project?

Any customer related topics, we don't necessarily want to comment from our end. So, sorry, I, unfortunately, because of confidentiality terms, we are not able to comment. Okay. Thank you.

Thank you, sir. All the best. Thank you.

The next question comes from the line of Veehan Bagri from Umayo Advisors. Please go ahead.

Yeah, thank you for your opportunity.

Veehan, I'm sorry to interrupt. You're not quite audible.

I know, what is it now? Better.

Yeah. So, I actually had a few questions. The first one being, what will be the capex and gross debt outlook for FY27 and 28? As we had indicated earlier, a thousand crore capex, and what can be the effective tax rate considered for the year?

Effective tax rate will be around 25%, 25 to 26% depends on the, standalone is definitely 25%. Then, CapEx guidance is around 3,000 crores in two years' time.

So, although we said 1,000 crore earlier, now depending on the prospects, what we need, capacity, and what projects in front of us, we are increasing our capex spend there, and we expect to spend around 3,000 crores in the next two years.

Okay. And regarding the gross debt outlook for the next two years? Gross?

The gross debt outlook.

I was asked, debt, maybe it may slightly go up in the current year, 527, but the debt by EBITDA should come, maybe maintain at the similar levels or maybe softening from the current level. Okay. Thank you so much, sir. Thank you.

The next question comes from the line of Vivek Agarwal from Citi Group. Please go ahead.

Thanks, sir, for the opportunity. One question on affordable medicine, which the generic businesses all put together. This year, you have done well with around 18% kind of growth. Just want to understand what's your outlook later for 27 and 28, what kind of the growth that you are looking at in this particular event? Thank you.

So, for the next year also, we have our order book pretty much in place. So, we will continue to reflect a strong growth in the next year as well.

So, grow in terms of, is it possible to say that it can grow in the double digit as well in the next year?

Vivek, you know we don't want to give any quantity to that.

But we will not be able to comment on the percentage over here.

Perfect, no problem at all. So in CDMO, the pipeline looks just shaping up well. So is it possible for you to just help us understand how the pipeline of products which are in the advanced stage of phase three, et cetera, so that is looking like at this point of time? And secondly, in FI 2017, are you expecting any new products that are getting commercialized by your partners? Thank you.

So, while we're not giving concrete numbers on different phase-wise split, we have several exciting programs that are late-phase programs. As I mentioned, given the clinical nature of these programs, it's difficult to predict when and how it will be, you know, commercialized. But within the visibility that we have, we expect some of the programs that we're working on to get commercialized. And some of the projections that we've had for volumes from our partners have been along those lines.

And just one last question on the CDM, right? Out of around the 1,900% of revenue. So, are you comfortable sharing the share of revenue that is coming from the projects which are still in development or the share of revenue that is coming from the products which are commercialized by our customers?

We are not disclosing. We wait on that.

No problem. Thank you. Thanks so much.

Thank you. The next question comes from the line of Forum Parekh from Bob Capital Markets. Please go ahead.

Thank you for the opportunity. Could you please disclose or highlight on the peptide capacity, the dedicated peptide capacity, and what would be the KPEGs allotted for the peptides?

Did we... We are building a large capacity for peptides, and we have several programs, as Krishna mentioned, but we don't want to comment on how many tanks capacity we are creating or how many projects we have right now. We don't want to comment at this juncture.

Okay, and would you be comfortable disclosing the KPEGs dedicated towards the peptide program?

I can only say it is a large capex. I don't want to give a specific number.

Okay. My second question is on the CDMO side. In the previous concourse, you had alluded that you envisaged CDMO contribution going towards 50% of the total sales. So, as per your internal assessment, and now that the CDMO pie is growing well, and we have strong order books, so how soon do you see, as per the internal assessment, 50% number being achievable?

See, we said two things. One is we'll go to 50%. We also said by 2030. Yeah.

Oh, okay. Okay.

And last question, if I may. Now that we have increased our KPEGs from 1,000 crores annually to 1,500 crores annually, so how do you see the return ratios shaping out? And do we still expect operational leverage with increase in KPEGs?

Most of the Capex what we are doing is growth Capex. See, we are not, at least now we have visibility, we are not putting Capex and hoping customer will come and give projects. We are not doing that. So mostly we have visibility which product, which customer, how much we are going to make in this new capacity which will come online.

Sure. And just last question. Can you please talk on the ARB to non-ARB split for FY27? Right now, it's 40%. So, do you still see non-ARB or ARB pie shrinking from this 40%? Or it would remain at 40% around?

Long-term-wise, we did 2,800 crores ARB. That will remain constant. It will be in that number, around that number. But percentages, it will go down.

Sure. Thank you. Thanks a lot.

Thank you. The next question comes from the line of Rahul Bhardwaj, an individual investor. Please go ahead.

Thank you so much for the opportunity. Dr. Satya, if we go back about five, six years, you know, the split of the revenue mix was more... And then, you know, over the last couple of years, we've increased our footprint on the CDMO business. Can you throw some colors on how do you foresee the mix will be if you look out next five to 10 years? That will be my first question. And my second question will be... At some point, you know, you may pass on the reins to someone else. Do you have a wish list where you would like to see Loras, you know, before you decide to hand over the reins to someone else? So that will be my two questions. Thank you again.

I will be able to answer the first question, easily. The first question is, see, our ARV, as you mentioned, our absolute quantum-wise ARV revenues are very, I would say, around 2,500 plus arm is 2.0. Now, I would say 2,500 plus arm is 3.0, because we did 2,800 goes this one after 2,600. By FF30, we expect the ARB... CDMO revenue in general will be 50% of our overall sales, and the ARV percentage will come down significantly. While the ARV sales remain constant, but percentage contribution will come down significantly. And the second question is, see, right now, see, Laris is engaged in... Lot of modalities. In small molecule, our focus is large volume generic API's integrated CMO opportunities, and doing CDMO for clinical programs in human health and animal health, and also working with discovery-based companies in crop science, not generic crop science molecules. That's the focus. When it comes to biology, as I mentioned to Mr. Hajil Kapoor's question also, so we have investments made in cell culture, precision fermentation, enzymes, biocatalysis, cell therapy, gene therapy, ADCs and all. So our investments are in multiple lines, and that's where my focus is currently, and the rest of the businesses are handled by Krishna, Swamy, and other team members. So my focus is going on new modalities right now.

Thank you so much, and I wish you very good luck for the future. Thank you again. Bye.

Thank you. The next question comes from the line of Bharat Siripurapu from Quest for Value Capital. Please go ahead.

Yeah, thanks for the follow-up. Dr. Chava, regarding this new greenfield capex of 500 acres in Ashtapuram, may I know when can we expect this new greenfield capex coming online? The first phase?

Will we be able to give you more color on that maybe in the next quarter, perhaps? Okay, yeah, thank you.

Thank you. The next question comes from the line of Sajal Kapoor from Anti-Fragile Thinking. Please go ahead.

Yeah, thanks for the follow-up. Dr. Satya, many CDMOs do well at micro or pilot scale, but fail to manufacture a multi-turn batch with consistency. So the key word here is consistency. In that context, For the recent CDMO programs that successfully moved from lab or pilot to commercial scale, what percentage met target yield and quality spec in the first three commercial batches? And how predictable is the scale-up process we have today, you know, going from few kilos to 500 kilos and more, depending on the molecule, of course?

While LARAS is investing in large capacities well in advance of commercial launches, nowadays Big Pharma wants the... They don't want to have any uncertainties of scale up or moving from one plant to another plant for lack of capacities. So all the commercializations, what we have done in the last two years, were scaled up. Validation is done at the same scale. Validation is done in the same line of equipments. So, there are no surprises. So, when we did validation, we do the same train, equipment train for commercialization, same bath size, same facility and all. So, we have, fortunately, we haven't had any challenges so far.

Perfect, perfect. Thank you so much for that clarification.

Thank you. Thank you. The next question comes from the line of Yash Lahoti, an individual investor. Please go ahead.

Hello. Good evening, everyone. My question is, the revenues from Norden collaboration, when will they start kicking in?

Yeah, this is again related to the OLED opportunity that I talked about in the Q&A session. So, we'll be able to concretely comment on this in a couple of quarters, but at this moment in time, it's difficult to, you know, put a finger on the actual numbers.

Okay. All right. Thank you.

Thank you. The next question comes from the line of Venkat, an individual investor. Please go ahead.

Hi, sir. Thank you for the opportunity. I have one question. I don't have complete understanding on the pharma part of it. My question was, AI, with AI, it is disrupting multiple industries. I want to understand in the discovery phase or Do you see any challenges in how discovery is getting involved with, how is discovery fair is getting impacted because of AI? Do you see any challenges in that front?

So at a high level, a lot of us within the CDMO space, we are not involved in the discovery side of things for any partners. But in speaking from a general standpoint, there's certainly a lot of AI being leveraged in the discovery space. So what of that is some of the discovery molecules, the pipeline generation is significantly faster. But also, interestingly, given that these molecules are designed by AI, they tend to be also more complex in terms of structures or the synthesis itself, right? So, yes, there's certainly AI being leveraged globally, but given that we are not in the discovery space, that's not something that we typically look at.

Thank you. And also, do you see any disruptions in the day-to-day standard operating process in general? Do you see any other companies leveraging it differently or something? I want to understand the application in the industry. It may not be limited to LORIS as a general standard process itself.

I mean, we... There are several, you know, at least what we are aware of, there are several companies that are leveraging it, you know, from especially in the discovery space, in designing molecules and predicting some of their profiles. Yeah, there's certainly quite a lot of interesting publications that are also being put out there. Yeah, there's certainly being leveraged extensively across the industry.

Yeah, I think as you are mostly in the manufacturing part of it, we don't see a risk. Can I put, can I rephrase it this way or?

Yes, yes, that's correct to say our, you know, risk from AI or, you know, impact of it is minimal, if any.

Yeah, got it. Thank you. Thank you. The next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Yeah, thanks for the opportunity again. Sir, on the mom ARV formulation side, there has been decent growth for full year 26 compared to 25. So, what kind of outlook can we expect for the coming year, either on the new launches or on the scale of the existing applications? How can we have the foundation for it?

For the non-ARV formulations, we expect to see growth from existing products. We will be utilizing the capacities to ramp up our formulation units.

But it was a sizable jump, say, in FY26 compared to FY25, so that momentum will sustain in FY27 as well?

There is a momentum definitely compared to FY26 to FY27 as well.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you, all the stakeholders, and for your insightful questions, and good evening, everyone. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of Loris Labs, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.