Ladies and gentlemen, good day and welcome to Shaily Engineering Plastics Limited Q2 and H1 FY 2025 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the belief, opinion, and expectation of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Sanghvi, Managing Director from Shaily Engineering Plastics Limited. Thank you, and over to you, sir.
Thank you very much. Good evening, a very warm welcome to all the participants to the post-results earnings call of Shaily Engineering Plastics. I have with me Sanjay Shah, Chief Strategy Officer, and SGA, our investor relations advisors. I hope you've had a look at our investor presentation that is uploaded on our website and the stock exchange. Let me start by giving some highlights on the operational performance. We delivered a robust top-line growth of 22% to INR 192 crores in Q2 FY 2025, have improved our gross margins and EBITDA margins, which stand at 46.3% and 21.5%, respectively. This is mainly due to increased sales from our Healthcare segment, which grew by 94% on a year-on-year basis. In the healthcare space, we've adopted a scalable approach that will enable us to increase our revenues at a faster pace over the next five years.
We had raised money, which we are using to scale the pharmaceuticals division. We anticipate that the medical device business will comprise 25% of our revenues over the next three years, enhancing organizational value. I'm happy to announce that we've doubled the size of our team in Shaily U.K. Looking ahead, our focus is expanding our horizons to include contract manufacturing for medical devices, products featuring our intellectual property, personalized packaging solutions. The dedicated efforts invested in advancing our injection system platforms are beginning to show favorable outcomes. We plan to increase our own IP contribution going forward. In the healthcare division, during the quarter gone by, we successfully participated in CPHI Europe, Parenteral Drug Association Fair in Phoenix in October, partnership opportunities on drug delivery in Boston at the moment.
In the Consumer segment, we have been awarded business for two new products from a marquee FMCG customer. Despite the ongoing geopolitical challenges, revenues from this segment grew by 10% year-on-year to INR 139 crores in Q2 FY 2025. In the Industrial segment, we received new business from a new marquee customer during the last quarter. Revenue grew by 30% year-on-year and stood at INR 16 crores for this segment. That is all from my side. I shall now hand over the call to Sanjay Shah to give you the operating and financial highlights. Thank you very much. Sanjay ?
Sorry, sir.
Yeah.
Am I audible to you?
Yes. Am I audible?
Yes, you can go ahead.
Yeah. Thank you, Amit, and good evening, everyone. I'm sorry for this technical issue and also for the delay on the call because of some technical issue with the operator. I shall share with you the highlights of our operational and financial performance of Q2 and H1 FY 2025, following which we shall be happy to respond to your queries. During the quarter, we processed 6,186 tons of polymers as against 5,673 tons in Q2 FY 2024. For the half year period, we processed 12,088 tons of polymers as against 11,495 tons in H1 FY 2024. Machine utilization rate was around 42% in Q2 FY 2025 and 41% in H1 FY 2025. We expect this to increase in the coming years. Exports during Q2 FY 2025 and H1 FY 2025 stood at 75% and 78%, respectively, of total income. I shall brief on consolidated result highlights.
Revenues stood at INR 192 crores during Q2 FY 2025 as compared to INR 157.6 crores during Q2 FY 2024, a growth of 22% year-on-year. EBITDA stood at INR 41.3 crores during Q2 FY 2025 as compared to INR 26.6 crores during Q2 FY 2024, a growth of 56% year-on-year. EBITDA margins stood at 21.5% for Q2 FY 2025, an increase of 460 basis points over Q2 last year. PAT stood at INR 21.9 crores during Q2 FY 2025 as compared to INR 10.8 crores during Q2 FY 2024, a growth of 103% year-on-year. PAT margins stood at 11.4%, an increase of 450 basis points over Q2 last year.
Cash PAT for Q2 FY 2025 was reported at INR 32.2 crores as compared to INR 18.9 crores during Q2 FY 2024, a growth of 70% year-on-year. H1 FY 2025 consolidated highlights. Revenues stood at INR 371.4 crores in H1 FY 2025 as compared to INR 314.9 crores during H1 FY 2024, growth of 18%. EBITDA stood at INR 77.4 crores in H1 FY 2025 as compared to INR 54.2 crores during H1 FY 2024, a growth of 43%. EBITDA margins stood at 20.9%, an increase of 370 basis points over H1 last year.
PAT stood at INR 39.3 crores in H1 FY 2025 as compared to INR 23.4 crores during H1 FY 2024, a growth of 68%. PAT margins stood at 10.6%, an increase of 320 basis points over H1 last year. Cash PAT for H1 FY 2025 was reported at INR 59.7 crores as compared to INR 49.7 crores during H1 FY 2024, a growth of 50% year-on-year.
Our ROCE and ROE stood at 22.1% and 17.1% respectively as on 30th September 2024. The growth in business has been achieved with disciplined use of capital. Our debt to equity stands at 0.45x and our long-term debt to equity stands at 0.11x as on 30th September 2024. Consolidated segmental revenue breakup for H1 FY 2025. In the Consumer segment, revenues stood at INR 271.3 crores in H1 FY 2025 as compared to INR 246.7 crores during H1 FY 2024, a growth of 10%. In the Pharma segment, revenues stood at INR 64.9 crores in H1 FY 2025 as compared to INR 42 crores during H1 FY 2024, a growth of 55%. In Industrial segment, revenues stood at INR 35.2 crores as compared to INR 26.1 crores during H1 FY 2024, growth of 35%. That is all from our side. We can open the floor for Q&A. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question- and- answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 is on the line of [Anant Jain], an individual investor. Please go ahead.
Congratulations on a good set of numbers, thanks for this opportunity. My first question is on the pens business. Looking at a new insulin pens order, can we expect our volumes in pens to be double yearly for the second half of this year? That's the first question. Second question is, for how many projects do we expect to supply commercial volumes in FY 2025 and FY 2026? Third question is on lira and Teri. When do we expect commercialization of these molecules, commission supply of pens to start for these molecules? Since Sema, rest of the world patent is expiring in January 2026, are we expecting a huge ramp-up in GLP-1 devices, like sales could go in tens of millions in FY 2026? That's what number that we keep hearing. We keep hearing much larger numbers than that.
How big can U.S., India, Brazil, China. If you have some rough estimates, if you have some inquiries for these markets, what kind of potential market share do we see here? We are the only ones with spring-based pens. These markets are price sensitive, so do we expect the devices to have a similar price for us, like when you supply to developed market versus rest of the world, do we expect similar realization for device? Any reasons for Teri launch? teriparatide, we were expecting the launch to happen maybe Q1, Q2, but it's gotten delayed. Where do you expect the launch to happen first, in EU or in U.S.? I have more questions, I think if you can respond to these, then I can give one or two more.
Sure. Excuse me. To your first question, we do expect pen volumes to double in the second half. Now, exactly double from which month is a little difficult to say because we're still undergoing installation of our new eight-cavity tooling. We're hoping to start production in December, which means that some part of this quarter and large part of the next quarter, we will see double the volumes on those pens. Teri launch is expected in Europe first. Yes, I realize that U.S. launch has been delayed. Unfortunately, it's not in our control, neither our customer's control. We know that Europe launch will be coming up shortly, as fast as quarter one calendar 2025.
That's kind of where we are on Teri. We are producing commercial batches for customer to launch. On liraglutide, its launch is expected towards the end of 2025, third calendar quarter three or quarter four of 2025. On Sema, we've been hearing everything from 5 million to as high as 200 million requirements from various customers. We actually don't know what is the right capacity to build. Right now we're looking at building 35 million pens a year capacity on semaglutide. Excuse me. With Canada, Brazil, and India and some ROW launches coming up in 2026, we're looking at roughly an order book of somewhere around 6 to 7 million semaglutide pens spreading between 2025 and 2026. Exact supply timelines are not known.
We have started supplying some small quantities for commercial batches, but the larger quantities will start towards the second half of 2025 and spill over into 2026.
Sounds good. Just one or two more questions. One is, do you think, looking at the entire market of both semaglutide and insulin, we are a little behind in terms of CapEx and because any kind of CapEx that we want to do would roughly take a year and a half, I would assume? That's the first question. The second question is, you mentioned consumer and new business under discussion. Can you give some idea about what this business is, what size this business can be? Do we plan to raise capital? Because I would assume that both are pens and if we want to grow consumers and if we see consumer as a significant opportunity, we would require funds.
On your first question, I think capacity in general in the device business globally is very constrained right now. The way I would look at it is that capacity build is happening always a little bit behind what the market needs, but at the same time, people are cautious of not having an overbuild of capacity because the way semaglutide is going, we don't know how commoditized it will become by the time it launches and becomes a little bit mature. Although we're slightly late on the capacity build, the opportunity is not lost because I think everybody has a lack of capacity right now. On the consumer, I'll let Sanjay answer that question.
On the consumer side, we are still exploring that opportunity and as we mentioned last time, as and when we have some definite reply, we will get back to you on a call about the same. Even on expansion, we are working out what our requirements would be and based on that, once we have exact details in terms of what funds are we looking at limiting, we will see how we would want to fund that. We do not have an idea of how we will look at funding our expansions as of now.
Okay. Thank you. Thanks for responding and all the best.
Thank you very much.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. The line for the current participant has dropped off. We'll move on to the next question. That is on the line of Aman Thadani from Solidarity Investment Managers. Please go ahead.
Hello. Sir, am I audible?
Yeah, Aman, you are audible.
Yeah. Thanks for the opportunity. Sir, my first question is, we recognize the significant opportunity that we have in GLP-1. Could you share your perspective on the potential risk both external as well as maybe internal execution-related that you sort of anticipate?
The risk is, as I answered the previous caller's question, is that capacity buildup. First, the demand is constantly changing and what we've seen in GLP-1 is that the demand is constantly growing. Our customers are also not able to fully anticipate what a realistic forecast looks like. From whatever information we've gathered from our existing and new customers, we're looking at building up capacities to manufacture 34-35 million pens a year for semaglutide. This capacity will go on stream in the first half of 2026, not FY calendar 2026. We've started the capacity buildup on semaglutide. We have existing capacity which we can cater up to 10 million a year. We're building new capacities to add another 25 million.
The internal risk and the external risk, although we go through about maybe close to 100 different audits a year, we still haven't been audited by the U.S. FDA. As and when that happens, that will happen at some point. There is certainly a risk. It shouldn't be a major risk, but there is certainly a risk, because we are MDSAP certified with the U.S. FDA scope. We believe that we're confident risk is minimized, but there's always a certain risk of some minor findings. The second is how quickly can you scale up? I think operationally speaking, given that Shaily has a larger business, we do have enough operational capabilities that are fungible, in terms of human resources across the various businesses that we have.
Operationally speaking, it's always easier to potentially hire and train on the consumer side of the business than on the pharmaceutical side of the business, which means that those with experience on the consumer side can be taken on board the pharmaceutical side to help with the operational scale-up. To mitigate the U.S. FDA risk is that we've already started the project of automating our entire QMS documentation, which is a project that has started earlier this year and will go on for 24 months. We should be fully online, fully digital in terms of all our documentation.
Very well.
Aman?
Yes, sir.
Yes.
Sir, my second question is, sir, over the next decade, healthcare division would sort of become a substantial part of our business, and it's sort of very distinct from the other segments of the company. What sort of initiatives are we taking to recruit more talent in Shaily India? Maybe probably from the healthcare background to help us expand this segment of the company.
Recently we recruited a very large tooling team. The heart of the business is making sure that the tools we manufacture or outsource are done rightly. A lot of focus has been on recruiting the right tooling team. I think we recruited upwards of 17 engineers on the tooling side in the last four months itself. And we continue to grow that team. Both manufacturing tools internally as well as having the right competency to run several projects at the same time is what we're doing in India at the moment. India very much focused on manufacturing and tooling in terms of recruitment right now. Of course, we're also looking for senior management on the operations side.
Okay. Sir, my third question is, we sort of don't disclose the specific pricing details for our pens. Maybe could you provide some insight into the pricing distinction between a like-to-like pen for, let's say, Shaily Engineering and Becton Dickinson, so that we sort of understand that is there any advantage for a player to manufacture in India?
Aman, I'll let Amit answer part of the question. Pricing, I don't think we will want to disclose anything in terms of how we are pricing it to whatever competitors are. I don't think that's a question we would want to answer on the call.
Aman, the right way to look at it is what market you're supplying to. Insulin is price sensitive. There's an X price for pen being sold on the insulin business. Of course, they're also a different SKU altogether. Semaglutide is going to be at a different price point. We also have the advantage that we're the only spring-driven pen out there. I would say against potentially a BD or another competitor, we would be priced either on par or potentially at a premium.
Even for a like-to-like pen, with having manufacturing facilities in India, then too, would it be at a premium to BD?
Well, see, it's not a like-to-like pen. BD does not have a spring-driven tech at the moment. For GLP-1s, particularly for semaglutide, we've got a device which functions just as well as the innovator device, which gives us the ability to market it at a slight premium.
Got it.
Second is also the money spent. It is not just the manufacturing margin. The money spent on developing the IP technology platform all has to be considered as part of pricing.
Sir, the last question is on the industrial business. Sir, we received order in that business. Sir, can you provide some color, like what product is it and what would be the size of that order?
That is a new customer we have added on the automotive space. It is a start, which we are trying to do with this customer. As we move forward, we will look at building a relationship with this customer.
Sir, the total orders that we received in Q2 FY 2025, what would be the size of both these orders from the consumer as well as from the industrial division?
We're not disclosing the numbers here. What we're trying to disclose here is, we're basically adding businesses across different businesses.
Understood, sir. Those are my questions, sir. Thank you so much. I'll get back in the queue.
Thank you very much. Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is on the line of Rupesh Tatiya from Intelsense Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. My first question, sir, is on this spring-based device.
Sorry, sir. Rupesh, sir, your audio is not clear. Can you use the handset mode while speaking?
Sorry, I'm already on handset. Is it audible now?
Yes.
It is better.
Yeah. It's better, right, sir?
Yeah.
Yeah. Okay. Sir, my first question is this spring-based device you have talked about. We've recently seen announcements from generic players, three, four of them, that they are settled with the innovator for semaglutide. Novo Nordisk, the settlement is with Novo Nordisk. My question is our device a part of any of these settlements?
I will not be able to answer that, Rupesh .
Okay. Sir, in one of them at least I know that it's not a spring-based device where the settlement has happened. How does that impact your competitive positioning? Do you still hold the view that we will still be able to get 60%-70% of the generic market share?
You know that view is based on the number of generics we've actually signed on, so it's not really anything else. What's also happening is, the number of players getting into semaglutide are also increasing on a daily basis. You have almost an equal opportunity. If we look at the volumes, U.S. is going to contribute 30%-40% of the global volumes going forward. Basically, the ROW markets are simply not supplied at the moment by the innovators because of capacity constraints. You have an equal opportunity on the ROW markets as well. We're seeing a lot of scale being built for the ROW markets.
Yeah, I think my view would still probably hold that based on customers that we've signed on and those we're working with, at a global level, we should have a very significant market share, a dominating market share on the semaglutide business for generics.
Okay. Sir, the other question is Canada patent expires by January 2026 for semaglutide. I'm a little confused on the timelines you said. The semaglutide supply will start in calendar 2025 or it will start in calendar 2026?
It will start in calendar 2025 and spill over into 2026.
That 6 million-7 million number you said we can hit, that is calendar 2025?
Like I said, it will start in calendar 2025 and we will not supply the entire 6 million-7 million in calendar 2025. There will be a volume that spills over into 2026.
Okay. Two questions on this non-U.S. market supply. Is entire supply going to be spring-based device or will it be some other platforms as well? What would be the pricing differential between, let's say, other regulated markets versus, let's say, some ROW emerging markets? If you can give some view on that.
Our pricing is very much based on volume. Regardless of the market you're operating in, our pricing is more or less the same. It's staggered pricing. You've got volume slabs. Between the spring tech and the non-spring tech, the pricing differential would be, I think, 7%-10%, depending on market. Yeah, that's about it.
There will be some non-spring tech-based semaglutide supply.
Yes, we have non-spring based semaglutide supply also.
Okay. Sir, my final question is, you have said healthcare will be 25% of our business in two, three years. Can you maybe give a similar view for consumer electronics business?
We're still working on the consumer electronics business.
A broad range will do, sir. A broad range will do. We shouldn't even consider it. Maybe it'll be a decent part of our business. Some qualitative comment around that.
It can be, but the journey is very early right now, so we're very much in the nascent stages of that journey. It can be, but given that consumer electronics is a fast-moving industry, we can see there's a potential to scale up faster if we have success in whatever we're trying to do right now.
That clarity you would be able to give in another maybe two, three quarters?
I cannot give you a comment, unfortunately. As and when it happens, we will provide that clarity.
Okay. Thank you, sir, for answering my questions.
Yeah.
Thank you. The next question is on the line of Sanjay Kumar from ithought PMS . Please go ahead.
Hi, sir. Thank you for the opportunity. First question on healthcare. Is there a revised target for the number of pens for FY 2025 and 2026? If you could give the updated guidance for the number of pens.
No, Sanjay, there isn't a revised target. I think the target we gave at the beginning of the year for this year is what we're sticking with.
18.
I think we need to be cognizant of when we fully rely on our customers getting approval for our business. Until we have confirmation that approval has come in and we will start supplies, there's no revision in targets at the moment.
Got it. Okay. Second question, how many unique OEMs do we have for Ozempic and Wegovy? If possible, also for tirzepatide. Are we talking to customers who have filed with someone else but are looking to switch for various reasons? Have any clients switched from us to some other competitor for any of the GLP-1s?
Okay. We have probably, I'd say somewhere around 14 or 15 active semaglutide projects, some completed, some ongoing. That would include both Ozempic and Wegovy.
Okay.
We have—
By projects, you mean the different variants within dosage, variants within Ozempic and Wegovy.
By projects, I mean unique customers.
Okay. Got it.
You know—
Tirzepatide?
—this is also a business where there's a lot of front-end partnerships happening, right? You're not going to see semaglutide. Everybody's not going to jump in and compete on semaglutide. There's going to be a lot of partnerships. You'd have a combination of two or three pharma companies partnering together on a particular project. Someone who takes care of manufacturing, someone who front-ends the business development side of it and the sales side of it, someone potentially being an API supplier. There's a lot of partnerships happening on semaglutide, particularly.
On tirzepatide?
I think 2036 is the earliest launch possible, maybe beyond 2036. We're right now only working with those partners who are interested in the NCE-1 filing.
If you could give a number.
We've said that, I think, from a timing perspective, the most we can do is five. We've signed on more than 50% of that number. We've got room for one or two customers at the moment for tirzepatide. Only keeping in mind the NCE-1 filing deadline. Anyone who'd like to do tirzepatide beyond NCE-1, we will have plenty of capacity.
Okay. Third question, just an extension to one of the previous participants. On this non-spring-based device, is human factor study not such a big deal for pharma companies that they're choosing to not use spring-based pens? How do I look at the market based on this new assessment?
Human factors have to be overcome. A comparative human factors study is needed for a non-spring-based pen.
Can that disrupt, let's say, will other OEM or pharma companies also follow suit and go for a non-spring-based pen? Is that a risk from that perspective is the question.
There will always be several who opt for a non-spring-based pen and several who opt for a spring-based pen. Everybody has a different strategy. From the perspective of user experience, certainly, a spring-based pen has a better experience for the user. I don't think it's all about pricing. Number of components essentially on either pen don't really change much. You've got springs, which obviously will add to the cost, and then the rest of it is really around the money spent on developing the technology. I think you'll have a combination of everything, people who opt for a spring-based pen and those who don't.
Got it. Okay. Fourth, on insulin, what is our own IP capacity? I believe the client who's given us the 10 million order is planning for much bigger production capacities, and it's almost to the tune of 4x, 5x. We will need more capacity for own IP insulin also, right? Are we not expecting any further orders from them?
No, we are expecting further orders, and we are also building more capacity on insulin pen.
If you could give the current own IP insulin capacity and what's the CapEx expansion that's planned?
Yeah. Once our eight-cavity tools go on stream, we have a capacity of 11 to 12 million pens a year.
Expansion will be?
I think any expansion we do, that was our first automated line at 40 parts per minute. All our lines are essentially going to be 80 parts per minute line, so roughly about 24 million- 25 million per line, per capacity increase.
Perfect. Finally, just a follow-up, sir. Sir, are we talking to people who are looking to switch? Also on similar lines, have any clients switched from our GLP-1 platform to a competitor?
Any client who switched from our GLP-1 to competitor? I don't know. There are people who are running multiple programs and multiple partnerships, everybody is going to slightly de-risk because we don't know who's going to succeed. Yeah, I think we do have partners who are running multiple programs.
Okay.
One which would include our device, one which would include someone else's device, someone else's manufacturing capacities, and someone else's, potentially even APIs. There's a lot going on, Sanjay, that there's a lot of uncertainty, but a lot of optimism on some of these times. Let's leave it at that.
Okay. Can I squeeze in one more? Do we expect a patent challenge for Ozempic?
Well, given the recent settlement, I would anticipate by the time everybody gets to market, yes, there will be patent challenges. I don't think the innovator is just going to allow everybody to walk in.
Got it
Most of these products are going to be kind of litigated products, there isn't a whole lot anyone else can do about it.
Perfect. Okay. Thank you, sir. I'll come back if need be.
Thanks.
Okay.
Thank you. The next question is from the line of Mohit Surana from Monarch Networth Capital Limited. Please go ahead.
Hello, sir. Thank you for the opportunity. A couple of questions. One, can you give some insights on the Shaily U.K. business? How do we record revenue over there? Is it on a project basis? We do not pay any taxes on that business as well. Is it that because we have some tax loss carryforwards? How long can we continue to pay no taxes on it? Second, if you can give some insights on the, you mentioned the risk about the U.S. FDA approval for your platform pen. I think it's related to the insulin. I'm not sure. If you can give some insights on how significant it can be and what measures needs to be taken so that we are on the approval side.
To answer your second question first. We don't file a product. We provide our dossier. We only file device components. There is a device master file that either we file or we give the dossier to our customers as part of their ANDA filings. All of these products are combination products, so they're filed by our customers. The risk of approval is entirely on them. From our side, we just need to make sure that our dossiers are as comprehensive as possible and that there are no manufacturing issue. There's essentially no QMS issues. Whatever we have defined as our quality management system is exactly what we should be following in the plant. From that perspective, like I said, we go through maybe 150 audits a year by customers, by third-party external auditors, by MDSAP auditors, ISO-13485 .
We're relatively confident that we will not have any significant challenges at a future date when there is a potential audit. That confidence also comes from our customers auditing us and letting us know that, "Look, yeah, your systems are in line with the requirements.
Understood.
Taking the first part of the question. When we record revenue at Shaily U.K., we have agreed milestones with the customers, and as and when those milestones are completed, that's when revenue is recognized. Currently, we have patent box and R&D benefits which are available in Shaily U.K. That's because of the development which we have been doing and the patent which we have been developing there. That basically helps us to get to zero tax.
Right. Just to understand the kind of R&D business that we get on a milestone payment basis, it's like developing a product as per the requirement of the client, and then based on the milestone, we record the revenue. Just wanted to understand how come we are not paying any taxes on it. Is it the regulations that if we are spending on R&D, then we don't have to pay taxes?
There's patent box and R&D benefits that you get in the U.K. I also don't think that it'll always be the case because under patent box you have a favorable tax regime. You don't have a zero tax. That's just what has happened in the first three years of the business. We will, of course, be paying taxes
Understood. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Thanks for the opportunity. I hope I'm audible. Amit, in the first line of the call, you indicated the need to adopt a scalable approach that will help us increase our revenues. You used the words scalable approach, and you also indicated that we will look to increase contract manufacturing capacities. Can you please provide some more context to the words scalable approach and increased contract manufacturing capacities?
When we talk about a scalable approach is that, in manufacturing, you want to stop experimenting when it comes to manufacturing. Now that we have our first capacity built up on the insulin pen, we figured out what is the right size of capacity per product. What is the optimal size of capacity? You get too large a tooling cavitation, it becomes very complex to manage, because you're dealing with very small tolerances. Basically, 16- cavity tools and 80 parts per minute line are essentially what we're talking about, is what we feel is the right combination of the highest output with potentially as low a complexity as possible. Every time we scale, it'll be multiples of this number.
That is what I meant when we talk about scalable approach, is that we basically want to get out of experimenting in manufacturing operations, keep it as streamlined, as stable as possible, making sure that you have the right quality of product being manufactured every time. What was the second question?
You said we would look to increase our contract manufacturing capacities.
Maybe as part of our first earnings call, we talked about the fact that we're developing capabilities to potentially work with more innovators. We've been working with Sanofi for a very long time, we're developing capabilities to work with more innovators. As part of that, one is that building technology that is more suited, that we think are the future of drug delivery, so to speak, where sustainability is a big topic. We're working towards developing those products and also putting in the capacities in place to demonstrate that we can manufacture at scale for large innovative companies.
Sure. Just a few more. Given the outlook is so good, are our clients asking us for committed capacity?
Sorry to interrupt. Sir, your audio is not clear, Mr. Shah.
Am I audible now?
Sir, you're sounding very soft.
Is it audible now?
Sir, slightly better. Please proceed.
Yes. Amit, my question is, are any of our clients asking us for committed capacity?
Ritesh, there's a lot of background noise on your line, unfortunately.
I'll just try once. Otherwise, I'll jump back to you. My question is, are any of our clients asking for committed capacity from us?
Yes. We have some clients who ask for committed capacity. If there is an ask for a committed capacity, it has to be contractually binding on both parties.
Right. Are we facing that constraint or that particular variable, which is probably a amendment scenario?
Yeah, I think in some cases we're having very good discussions and potentially leading to those contracts. The market is volatile. People will struggle to make a sure shot commitment to buying an X volume. I think that sure shot commitment of buying an X volume comes essentially when you get closer to launch. Now that we know that 2026 will be launched in some markets, we're getting those commitments on volumes. What is the anticipated volume? A lot of our design development and exhibit batch contracts are being translated into supply agreements.
Sure. With the attention to there, are clients open to invest in insulin concept-
Sorry to interrupt, Mr. Shah. Sir, your audio is not clear.
I'll jump back to you. Thank you.
Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Yeah. Thanks for the opportunity and congratulations for great set of numbers. My first question was on our own IP pens on the insulin side. As you said, we are doubling the capacity to 25 million pens. When is this capacity expected to come on stream, and how fast can we utilize this capacity given a lot of innovators are moving away from insulin and the demand for the insulin pens also is very high?
Commercially manufactured product from this new capacity is I'd say 16 months away. 14- 16 months away, when we can start supply from the new capacities.
Got you. It will be most likely to contribute to our revenues in a big way from FY 2027 onwards.
Yes.
Sure. In our last participant's question, you were also saying that we're also looking at building capacities and working with innovators like Sanofi for more insulin opportunities, pens in that direction. Will that be a contract manufacturing opportunity, or we'll also be developing our own IP pens for them?
It will be a combination. Some will be contract manufacturing opportunities. Some might be a play on one of our platforms. Typically, when you work with an innovator on a novel molecule or potentially large molecule, the relationship tends to be more exclusive, unfortunately. I think the opportunity really is to work with one of them and see potentially very significant volumes on a product.
Sir, for our contract manufacturing that we do for insulin, how much is the capacity currently, and are we also looking to expand that as we are doing for our own IP pens and insulin syringe?
Sorry. We're expanding capacities on, I think, all of our platforms. We'll need capacity on our auto-injector, two-step auto-injector, which is Toby. We'll need capacity on Neo, which is the spring-driven pen. We're increasing capacity on, what do you call it? Protean, which is our insulin pen. At least these three are going through capacity expansion. And then on products like teriparatide, we're not necessarily going through a capacity expansion, but we will have a requirement for a new set of tools, purely because the old set was always meant for clinical batches, and now commercial batches will come from essentially a higher capacity, too.
Sure. Sir, we are seeing a lot of device manufacturers and even CDMO players who work on drug and device opportunities. We have seen that for the incremental opportunities, they want their clients to participate in the CapEx as well. Ypsomed has talked about expanding capacities where innovators will also be participating in funding the capacity expansion. Any thoughts that we are having with some of our customers, where they also put in money or we are able to get some that ensures locking from the customers also about some capacity or assured volume of capacity for further expansions?
Yes. Either customer participates on the investment or guarantees a certain volume.
See, when we build large capacities, we build it. To a certain extent, you can do it based on a forecast, when you start looking at investing millions dollars into capacity enhancement, Sorry. We look for commitments to customers either in the form of joint investment or participating in the investment or in the form of a capacity commitment take or pay, for next volume, for next number of years.
Sure. Okay. One last question on our normal consumer business. How is that doing, and how do you expect growth for this segment for the next year or two, both on plastic side as well as carbon steel side? Can you talk about that?
We have participated in quite a large RFQ on the consumer business. We are anticipating that we will have decent growth over the next, I think, starting to commercialize some of these products in the next 8- 10 months. We are expecting good growth in the upcoming years for the consumer business, both carbon steel and plastic.
In the last three years, the client also has been facing some challenges on the growth front. Is it that their business is expected to revise, or we are garnering more market share from our competitors in India as well as abroad?
I think it becomes a combination of all of the above.
Sure. Any update on the carbon steel facility? Like how are we doing in terms of capacity utilization and any updates on how we are seeing margins and so on.
Compared to last year, our utilization levels are better. We expect the utilization levels to be better in H2 as compared to H1, and we should probably end the year where we will be a bit positive. We should be a bit positive.
Okay. For the entire year, we'll be able to break even?
That's our expectation right now.
Got it. Okay. Thank you and wish you all the best. Yeah.
Thank you very much.
Yeah.
Thank you. The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.
Yeah. Good evening, sir. Congrats on good performance. I have couple of questions. First, on the healthcare side. I believe in the initial part of the call you talked about you are expecting only one commercial launch this year. And you indicated lira, that project which you were expecting is happening in FY 2026. For FY 2026, is it safe to assume that the number of commercial launches for us can be maybe a dozen or so, given there are number of projects in Teri and Lira also, and maybe few Sema. What is your expectation of those number of commercial launches in FY 2026 for us?
We expect, FY 2026 runs up to March 2026, right?
Yes.
Between FY 2026 and FY 2027, we expect Teri, Lira, and Sema to be launched in multiple markets across the world.
Sure.
All of these programs would have multiple customers. I won't comment on potentially how many we are expecting to get approval, but all three of these products will be launched in FY 2026 and 2027.
Sure. For Lira, some of the projects will happen in FY 2027 also. I thought most of them will be launched by FY 2026 itself. I'm saying March 2026.
The launch. Yeah. No, I see. There isn't an IP challenge to launch the product. Right now it's just about who's getting approval faster or which one of our customers gets approval for it first.
My next question is on tirze, which we talked about. We have maybe three odd customers, and maybe one or two, we will try more. The batches, the exhibit batches, have they started or when are they expected to start?
Q4 of current financial year is when we'll start supplying exhibit batches.
Is it safe to assume that the first scaling up of Shaily U.K. in terms of this will come? Maybe in Q3, Shaily U.K.'s tirze, any projects will start coming.
Yes, I guess that's safe to assume. See, all these products are we only invoice based on milestones achieved.
Okay.
You will see the fee spread between Q3, Q4, and Q1 of next year for tirzepatide.
Okay. Generally on Shaily U.K. side, H1 was quite good for us, but normally H2 is much better. Do we expect the same trend, maybe like a very good growth in H2 Shaily U.K. compared to H1?
I think H2 will be comparable to H1 in Shaily U.K. Plus or minus some, but essentially it'll be very comparable.
Not a ramp-up like in the number of pen we are saying.
No
it wouldn't be a ramp-up.
No, because we don't sell any pens in the U.K. It's purely creating intellectual property and then managing end-to-end projects and design and development work for particular customers on various molecules. Shaily U.K. will have very similar revenue as the first half of this year. Could be a little bit higher or a little bit lower, but essentially, it'll be more or less the same.
Sure, sir. You talked about good hiring in, like you've doubled the number of people in the U.K. When do we expect—
Yeah.
—let's say some new kind of project or maybe innovative project or contract manufacturing, not related to GLP necessarily.
Yeah.
But when do we see some concrete project orders or some projects?
We've seen some themes on drug delivery or evolving themes. We've got maybe our own take on what is the future of GLP-1 drug delivery. We're looking at developing two types of new platforms. One is based on our fixed-dose pen, which is the Axiom, but being able to deliver a much larger volume. Axiom currently delivers 80 uL. For GLP-1s, you typically need something to deliver 500 uL-750 uL. We're working on a product on a platform that delivers the large volume needed for GLP-1s. The user experience, instead of dialing, it becomes simply a pull and push to deliver. We're also looking at potential unique opportunities on auto-injectors, high viscosity drug delivery. With the increased size of team, we'll be looking at a couple of new platforms and products in the upcoming years.
Hopefully either next CPHI or just shortly after, we should be able to showcase some of our new developments.
Sure. That is good to know. On the capacity, sir, we've talked about we are trying to expand insulin, maybe around 25 million it will be after expansion, Sema 35 million, I'm assuming the rest of them will be another 10 million, 20 million. Is it safe to assume we are talking about almost doubling our capacity from 35 million- 40 million to maybe 70 million- 90 million over the next two years?
Yeah. Insulin, we have 11 million right now. We're adding 24 million. Insulin will become 30 million- 35 million capacity. Sema will be 35 million. Everything else together would be at least another 25 million- 30 million.
All this expansion can happen in our current facility or do we require a new place because this is like 100 million numbers?
Let's see. 30 million and 30 million. 25 million and 25 million can happen in our current facility, which means up to another 50 million pens, we should be able to manage in our current facility. It will require, of course, machines and assembly lines and tooling and all of that, but the size of the facility should be able to manage another 45 million- 50 million pens, we will require a new facility.
Okay. That makes sense. Just a couple of more on this and then other part. On lanreotide, we heard that one of the generic players has launched the product. How many customers do we have for this product? Do you think this can be a contributor this year to our revenue or sales or only next year?
Lanreotide, I guess it's a niche product. I wouldn't say we have too many customers on lanreotide. We will look at generating part of the revenue for lanreotide in the current financial year, then a more significant number in the next financial year.
Sure.
We will start supply for clinical batches in the current financial year.
Okay. Makes sense. We have two, three customers or much more here?
No, just about two, three. Yeah.
In the presentation you talked about we have participated in a lot of conferences this year, like PDA and PODD. How was the response? Did we get any major breakthrough in some of the big 20, 30 pharma companies or anything which you want to highlight?
CPHI was very good for us. I will be very honest, we did not have time to breathe at CPHI. The discussion was largely around, at CPHI especially, on the capacity buildup. I think several of the investors have asked today. A lot of the discussions with customers was on capacity buildup, and how does that partnership evolve into a commercial partnership which is kind of beneficial for both, at the same time guarantees the customer an X capacity, but also protects us from overbuilding or investing upfront without a commitment. Largely, the discussion was very much GLP-1 and capacity buildup. We have seen a lot of interest in our wearable on-body injector, Mira. We are looking at developing Mira further now based on the inputs that we have received from potential customers. PDA, which is very much a kind of a learning experience, I would say.
It is a conference, but you learn about emerging trends, you learn more about emerging standards and regulation and how do you get combination products out, what is the best possible way to get a combination product through the regulatory authority. We participated in PDA and that is where we kind of enforced the thoughts we had around what are the next generational products that we should be developing. The auto-injector, high viscosity auto-injector, fixed dose, larger volume delivery are all in line with the themes that we have seen this year on drug delivery. PODD is still happening. I am in Boston at the moment. Today is the last day. Yeah, it is a much smaller conference, but certainly some good conversations. PDA and PODD are actually where you get to meet large innovator companies. They do not typically show up at CPHI.
Meeting the likes of larger companies like Eli Lilly or Novo Nordisk or Pfizer, you would see them at these conferences more. I would say that we have had some good conversations, but how quickly will they translate to business is unknown. I would say 24 months at a minimum.
Sure, sir. Final two questions. On the applicator project, has it started? If you can talk about, is it for which molecule and any other similar projects you can get from other of our customers.
The applicator. I also don't know which applicator, Aman, you're referring to.
There was supposed to be a project started in Q2, I think. Sanjay maybe can talk about it.
Oh, I think this is Astra deal applicator . Yes, we have started manufacturing and supplying.
Okay. Any other projects of this size which you can get from customers?
No, not at the moment. I think there's enough on our plate. We need to focus on capacity build-up and supplies right now. We are focusing on next generation of drug delivery, but we certainly need to focus more on the capacity build-up and supplies.
Next. Final question on the overall company's utilization level. It has, good to know it has started inching up at 40%, 45% for this quarter. Say Q4 exit for FY 2025 and exit for FY 2026, so can we expect maybe 55%, 60% exit run rate for this year and maybe 70%, 80% exit run rate in terms of utilization? I'm talking about exit run rate, not for this full year.
Sanjay?
I think so but a lot of...
Yes, Aman. Yeah.
Sure. Okay. Thank you. These are my questions.
Thank you. The next question is on the line of Anant Shenoy from AS Capital. Please go ahead.
Good afternoon. Am I audible?
Yes, sir. Please proceed.
My question is on Shaily U.K. In the past you have mentioned about drug delivery devices like soft mist inhalers and on-body injectors, and now you are talking about newer projects like high viscosity auto-injectors and all. Given these exciting things happening there, what is the revenue visibility do you see for FY 2026 in Shaily U.K.?
Anant, we develop a lot of these platforms based on where we see drug delivery going. They are not necessarily custom developed for a particular customer. We will develop a platform and essentially, generally we know what is the demand out there for a particular type of technology. Revenue in Shaily U.K. has, first half of this year, has scaled up quite nicely compared to last year. We anticipate similar run rate for the second half and probably a similar number for the next financial year as well. I am not looking at exponential growth in Shaily U.K., but you would have decent growth, probably 10%-12%, 15% growth in Shaily U.K.
Okay, got it. My second question is on the overall, like you have mentioned about all this capacity announcement for insulin going to 35 million, semaglutide going to 35 million. What is the overall spend that we are doing in this one?
The overall spend?
Yes.
Some of the spend we've already done.
The overall spend, it's a little difficult to give you an exact number right now, but all these capacities, we're not going to spend everything on day one. Spread over the next 36 months, we would be looking at spending probably INR 150 crores-INR 200 crores on the capacity build-up.
Okay. Thanks a lot for answering the question.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for any closing comments.
Thank you. Thank you everyone for participating. I hope we've been able to answer your questions adequately. For any further information that you need, I request you to get in touch with SGA , our Investor Relations advisors. Thank you once again and have a great evening.
Thank you everybody. Happy Diwali and Happy New Year.
Happy Diwali. Yes. Thank you.
Thank you.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Shaily Engineering Plastics Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.