Ladies and gentlemen, good day, and welcome to Vimta Labs Limited quarter one investors conference call, hosted by Systematix Institutional Equities. As a reminder, all participant line 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. Vishal Manchanda from Systematix Institutional Equities. Thank you, and over to you, sir.
Thank you, Sejal. Good afternoon, everyone. On behalf of Systematix Institutional Equities, I welcome you to the Q1 FY 2025 earnings call of Vimta Labs. We thank the Vimta Labs management for giving us an opportunity to host the call. Today, we have with us the senior management of the company, represented by Ms. Harita Vasireddi, Managing Director, Mr. Satya Sreenivas Neerukonda, Executive Director, Mr. Narahari Naidu, Chief Financial Officer, and Ms. Sujani Vasireddi, Company Secretary. I'll now hand over the call to the company management for opening remarks. Over to you, sir.
Thank you, Vishal. Good afternoon, everyone. Thank you for joining Vimta's Q1 FY 2025 earnings call today. As the new financial year has begun promisingly, let me take you through how the industry dynamics were briefly over the quarter, and then I will shed some light on our business. The quarter began with the global economy showing signs of stabilization, but at a relatively weaker pace. A sustained recovery will depend on factors such as the pace of inflation reduction, the evolution of geopolitical tensions, and the effectiveness of policy responses. Within the industries we operate in, that is the CRO industry and the TIC industry, there are growing opportunities for testing and contract research across many of the industries, and more and more companies do rely on external organizations, such as ours, to outsource services that require special technologies and knowledge.
Over the quarter, the business overall remained kind of stable, and despite the capacity constraints that we have been experiencing for over a year now, the company grew 3% on a sequential quarter basis, resulting in a total income of INR 824 million. This is a result of hard work and dedication of the team at Vimta. The growth was mainly led by the pharmaceutical services. During the quarter, we had a successful U.S. FDA remote audit with no observations. This was related to the clinical research studies. We recently received grants in aid of INR 40.9 million from the Ministry of Food Processing Industries for the upgradation of our food testing laboratories at our life sciences facility in Hyderabad. This will assist us to invest in latest technologies, thereby giving a push to the food division and all our overall business.
As you all may know, in line with our plans of doubling our capacity, we will be inaugurating our new buildings at Life Sciences Facility, Hyderabad, very soon. Our double capacities at Genome Valley, Hyderabad campus, will be instrumental for our growth over the next five years. The expansion project will add close to 200,000 sq ft of additional space for labs and support functions. The company restrategized its services portfolio, providing greater impetus for driving growth in food, pharma, and electronics testing, while optimizing our other industry services based on their returns. The long-term partnerships initiated last year with globally leading pharmaceutical companies are progressing well. On food and electrical and electronics testing for the quarter, the business remains stable, but we are seeing improvement in the overall business dynamics.
Here, I would like to mention that, we have planned a CapEx of INR 70-INR 100 crore for the financial year 2025, out of which a portion will be utilized in setting up one more EMI/EMC testing chamber in our new facility. The transfer of testing equipments to the new facility has started in June, and this will happen in a phased manner, and the facility will be commercial in Q2 FY 2025. We have maintained our margins and will strive to continue the same going forward. We remain focused on growing drivers, growth drivers, and are confident that they will continue to propel the company in maintaining its leadership in our industry. With this, I now invite our CFO, Mr. Narahari Naidu, to discuss the financial highlights for the quarter. Over to you, Narahari.
Thank you, Ms. Haritha. Good afternoon, and a very warm welcome, and thank you for joining us on our Q1 FY 2025 earnings call. Our investor presentation and the financial results are available on the company website and on the stock exchanges. Please note that anything said on this call which affects our outlook for the future or which could be constituted as a forward-looking statement, must be reviewed in conjunction with the risks which the company faces. Now, I would like to walk you through the consolidated financial performance for the quarter ended 30 June 2024, after which we can open the floor for questions and answers. I'll start with the consolidated financial highlights for the quarter.
Revenue from operations for Q1 FY 2025 to date INR 818 million, as compared to INR 835 million in Q1 FY 2024. Our EBITDA stood at INR 252.1 million in Q1 FY 2025, as compared to INR 252.4 million in Q1 FY 2024. EBITDA margins for the quarter stood at 30.6%, which is up by fifty basis points on a year-over-year basis. Our margins could sustain despite a marginal dip in revenue with better operating efficiencies during the quarter. Profit before tax in Q1 FY 2025 stood at INR 1.3 million, as compared to INR 1.2 million in Q1 FY 2024, up 0.7% year-over-year. Tax margin for the quarter improved by forty basis points to 14.9% on a year-over-year basis.
On the balance sheet side, cash and cash equivalents, including other bank deposits, stood at INR 324 million, with a total borrowing of INR 120 million. I would like to highlight that we have paid back INR 62 million, which resulted in debt to equity ratio of 0.04x. CapEx for the quarter stood at INR 164 million. Coming to update on CapEx, as mentioned, by Ms. Harita, by Q2 of this financial year, the new life sciences plant facility will be commercial, along with the certifications and validations received. With that, we can now open the floor for Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Yeah, am I audible?
Yes, sir. Can you please, speak near to... Can you come near to the mic and speak, please?
Sure, I'll do that. Thanks for the opportunity. So my first question was on, you know, the revenue growth. If you look at the past eight quarters, you know, we have been stuck in the range of around, you know, INR 75 crore-INR 80 crore for, from, let's say, June 2022. You know, almost in eight quarters where, you know, we haven't grown our top line on a quarterly basis from that range. So, you know, is it primarily because of the capacity constraints on the pharma side, or, you know, like, or is there any other reason that, you know, the business itself is facing challenges on the pharma side?
I do understand that, you know, some of the other segments like diagnostics might have seen the growth or the food testing laboratory wouldn't have done that well. But, you know, what is happening on the pharma side also, that, you know, we haven't seen a growth in our top line for almost two years now.
Thank you for that question, Mr. Ankit Gupta. You're right, the revenue growth has been kind of flat during the last several quarters. You're also right about the reason. The primary reason is our capacity constraints. We have been juggling with that for almost 18 months now, but for COVID, maybe we would have had this new facility that is currently under shifting. We would have probably had it with us maybe a year and a half or two years ago. So that is the prime reason. The other reason also, as you mentioned, is the, let's call it restrategizing or refocusing that we have done during especially the last few quarters. We are primarily pushing only our pharma, food, and electronics. There is a defocus on the other services of the organization.
Okay. So with the new additional capacity coming in from, you know, quarter two of this financial year, do you think, you know, we will be able to go to, let's say, you know, INR 95 crore-INR 100 crore kind of quarterly revenue by end of this financial year, let's say by Q4?
Yes, I'm definitely hoping those are the numbers that we can reach. We hope to have a step up in Q2. Now, during Q2 also, we will be shifting all our equipments. We are actually creating more space in our legacy building by sending some services out into the new building. So we will have to reconstruct some of the quadrants of our legacy building. So it's not that magically a lot of space will be available, but there will be some additional space available for some of our services. But that, I think, should allow us to take a step up in Q2, and definitely by, you know, Q4, we should see those bigger numbers.
Okay. So we remain confident of achieving the, you know, INR 500 crore top line by, like, 2025 looks difficult, but at least in 2026 . So that will be a substantial jump from, you know, let's say around INR 300 crore and INR 320 crore kind of revenue run rate that we are doing currently on an annual basis to almost INR 500 crore by FY 2026?
... Yes, it's a big jump. We are aware of the very large strides that we have to make quarter on quarter, in the next, two years. And, we are working very hard towards that goal.
Okay. My third question was on the electrical and electronic testing. You know, in your opening comments, you made a comment about expanding capacity on that side. So earlier, when we used to talk, actually, you used to say that, you know, at current capacity, we can reach around INR 25 crore-INR 30 crore kind of mandate from the existing facility. So have we reached that number? And how is, how do you see the growth for this segment over the next year or so?
The capacities in electronics testing, but especially EMI/EMC testing, is in couple of dimensions. One is the chamber capacity, where we actually do the EMI/EMC testing, so we are just going to add another chamber. But the investment that we have done in terms of the testing tools, testing equipment, that will suffice for the INR 25 crore-INR 30 crore that we originally talked about. So it's a chamber we are adding. It's like a room, another room, a very expensive room, but we need one more room because the current EMI/EMC chamber is occupied at 80% or sometimes even more every day.
Okay. So, but we haven't reached that scale, INR 25 crore-INR 30 crore as of now?
No.
Okay. Okay. So with this capacity addition, so will there be any, improvement that we can see in, you know, like, our target numbers for the electrical and electronic testing, or it will remain around INR 30 crore only?
This chamber, you know, we are. The plans are moving forward. You know, by the time we order it and it's installed, I think it will be Q4, you know, late Q4 even. So the additional capacity will be available to us, very likely in the next year itself. Meanwhile, now we are trying to enhance the scope of services by adding a few other equipment, so we can address more products in the market.
Okay. Okay, okay. Thank you, Anisha. All the best.
Thank you.
Thank you. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Good afternoon, madam. Am I audible?
Yes, sir, you're audible.
Okay. Ma'am, my first question is, you know, on food segment, you know, if you can give some color. I think you mentioned that, you know, it was stable, so I assume that, you know, it was flattish kind of a number. So between non-JNPT and, JNPT, you know, how is the growth panning out? And also, you mentioned that, you know, you see some uptick, in the overall environment for that segment, for growth, if I understood correctly. So some color on that would be helpful.
Compared to last year, the food segment, I think, is faring much better. Last year, we were impacted by the export-import scenario of the country. So compared to that, you know, there are no headwinds to food industry as of now. In fact, there is a lot of trust from the government. Government is planning to increase its surveillance, and therefore, even private testing labs will get some share of that, you know, additional work that government will do in terms of taking care of food safety and quality. So in that aspect, we are, I think, in a very stable mode with respect to food industry.
For us, usually Q4, and the last quarter is the highest quarter of the year, and then it sorts of, sort of comes down and then starts picking up, depending on how well we are able to drive our sales strategies. But in that aspect, compared to Q4, Q1, the sample volumes will be slightly lower, and this is very typical. This is a very typical trend, and, that's the reason I made that statement, that it's quite stable.
Okay. And how is ramp up at JNPT, you know, happening? Is it kind of coming in line with our as your expectation? There was some hiccup there. So have you overcome that? And, you know, some color on, you know, how do you see JNPT through this year?
We did see an exceptional month during last quarter, but that's all it was, an exceptional month where the sample flow was high. So we continue to pursue our dialogue with the government partners to see if they can, you know, help us with more volume. So that is going on. Nothing significant has transpired so far.
Okay. Got it. Second question, ma'am. You mentioned that, you know, we are defocusing, except for the three segments. So I think diagnostic and environmental are the two areas where probably the defocus could be happening. So does it mean that, you know, those revenues will kind of go off the books in terms of, you know, you'll slowly scale it down, and then that revenue, you know, there will be de-growth in revenue from those segments? Is that how you're looking at it, or you are thinking in terms of more capital allocation and resources, your focus will change?
Now, both, environmental testing services and diagnostics are not capital intensive. Yes, they are manpower intensive. When we say we are defocusing, I think, you may be aware that we have rolled back couple of, regional labs that we set up. Now, we rolled back our plan to be a B2C service provider, so our, original strategy of being a B2B player in diagnostic, that continues, and that is being grown organically now. Coming to environmental testing, we have been very critically reviewing the sub-segments in that, sub-services in that. There are some services that were not really adding value to our bottom line, so those we have deliberately cut off.
So some revenue dip has occurred, and now we are trying to pull up the other revenues from other services in the same environmental testing. So we are optimizing there. Our focus is very intensely on the margins, because last 18 months or so, we couldn't do much around capacity. So we have done a lot of work around rationalizing the services. Now, which ones we will push, which ones we will not. So that kind of analysis, in-depth work, has gone into our service portfolio. And therefore, you see those stable margins in spite of, you know, a flat top line. Because typically, when the top line is flat, your margins shrink. But we have made sure that the margins didn't get affected, only because we were operationally very focused on improving our productivities as well as the efficiencies.
Okay. Got it. And now, very helpful. And last question, before I come back to you. Is that you mentioned about this, you know, INR 70 crore-INR 100 crore CapEx. So does it include the CapEx, which is, remaining for the pharma segment? And if you can give some idea about how this CapEx will be divided between food, in electronics and, pharma.
So the current CapEx budget, which is about INR 70 crore-INR 100 crore, is for the, you know, operating CapEx, which doesn't include the Project Sahasra. So Project Sahasra, we already had incurred about INR 50 crore in the last year. And, we may incur about INR 10 crore-INR 15 crore or close to INR 20 crore during the current year. So that's budgeted separately. The INR 70 crore-INR 100 crore is, to equip us with the instruments, you know, to get the, revenues as well as replacement of, our obsolete, equipment.
So, how much of that would be allocated to the pharma, food, and the GMI?
So majority goes into pharma and food. Probably, 20% or 10, 10-15% goes into food, but for that, majority goes into pharma.
Okay. Got it. Thank you. I'll come back to you.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Nitya Shah from KamayaKya Wealth Management. Please go ahead.
Yeah, hi. Am I audible?
Yes, sir, you're audible.
Yeah. I wanted to ask, now that the CapEx will be operational, what is the level of utilization you are seeing for FY 2025?
See, what we have done is invested money on infrastructure. Now, infrastructure is not something that you keep on building. You do this once in a few years. So the utilization rate will depend on the rate at which the company is able to add more business.
So around about, say, you have spent close to around, say, INR 80 crore-INR 100 crore on this CapEx. So, you also guided for, you know, crossing INR 500 crore in sales, by FY 2026. So I just want to understand how would the ramp-up be. Are you seeing that, considering the amount of space available, will you be able to touch, say, 40%-50% utilization in the first year?
40%-50% utilization in the first year may not happen. My guess would be around 20%-30%.
Fair enough. And, secondly, I wanted to ask was regarding, the JNPT lab. What is the peak potential of revenue from the JNPT lab?
I won't be able to comment on the revenues there. We are bound by confidentiality agreements with our government partner.
Okay, okay. And thirdly, I wanted to ask is that the events which will be beginning now, a few ago you had mentioned about preclinical trials, if I'm not wrong, that now you would be able to start catering towards that. So preclinical trials and electronics testing, how do you see the ramp-up going forward?
Electronics testing, I think India is in a very good position. We are seeing a lot of push on Make in India, the variety of products that are coming for testing and now the industries are growing. The labs that are providing these services are also quite proliferated in South and North India during the last one to two years. So I feel the industry is very vibrant, and it's going to be one of the major industries for India. And therefore, us being at in that space, you know, will definitely be beneficial to our business. Coming to clinical trials, I think I mentioned this in my previous call also. We are conducting our maiden trial, and this is going well.
Okay, fair enough. And electronics, currently, say, in this current quarter of INR 82 crore revenue, what was the percentage allocation towards electronics?
... We don't disclose that kind of bifurcation. Now, what I've always shared, I can share again. Food and pharma put together is about 85%. The rest-
Right.
-is in the remaining 50%, 15%.
Understood. Going forward, I also wanted to ask you was, just one second. Excuse me. Actually, I'll get back in the queue, ma'am. I just wanted to check one data point. I'll check and get back.
Sure, sure.
Yeah.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Chirag Jain from Yogya Capital. Please go ahead.
Hi. Thanks for the opportunity. Most of the questions have been answered. Just a quick clarification on the Hyderabad facility that we have nearly operational now almost. So we have— Do we have the U.S. FDA inspection completed or for that, or it is pending?
It's in the same life sciences premises, so it has the same establishment number or identity. We will not need any additional inspections from any regulatory authorities. All the existing licenses, approvals, accreditations will continue.
Okay. Okay. Thank you. I'll get back in the queue.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Viraj Mehta from Enigma Investments. Please go ahead.
Yeah. Hi, madam. Madam, if I look at last four years of our CapEx, we have spent more than INR 200 crore of CapEx, including obviously the, the new food laboratory that we started with Garmec. But we are again talking about INR 75 crore -INR 100 crore of CapEx. If I look at the overall CapEx, it will close within INR 275 crore-INR 300 crore, whereas we have not got anything close to, a decent number in terms of revenue to compensate us for that kind of CapEx. What kind of KRAs you and the team think about when you keep doing such CapEx without any revenue increase, that even we have guided in the past and we have not achieved?
First thing is our CapEx spending is of two kinds. One is on infrastructure that we don't do regularly. The last investment we have done for our life sciences was in 2004, 2004 to 2006, when we built the life sciences campus. That costed us at that time also about INR 100 crore. And now is the second time we are, you know, actually adding capacity in the same campus after almost 20 years. So you cannot club this investment with our regular CapEx investment. And this industry, you may be aware, is quite technology intensive. And companies come to us because one of the main reasons is because of the technologies that we have, and the rate at which technologies get obsoleted also depends on the regulations.
The regulations also have been fast moving in, especially on the pharma industry, and sometimes even on the food side. So every time, typically what we in-invest is the depreciation value, and that's why you see those numbers repeating year after year. But in between, unless we add more infrastructure, the business will not grow. So that's the reason you will see those numbers. And every time we have put in, you know, a big amount of CapEx, I think we have shown an inflection of sales.
So, ma'am, is it then safe to assume that if you do this INR 7,500 crore of CapEx that you are saying, inflection of sales, like, anyways, we are talking about INR 500 crore by 2026 now, that you are saying that it looks difficult. But post that CapEx, what's the number we are looking at? Because there has to be some kind of game plan that you and the management are working with, right?
INR 500 crore is definitely possible through the investment infrastructure that we have now built. So I'm thinking we can do even more than INR 500 crore , but this is a business where you will have to keep on expanding. One is, you know, expanding in terms of infrastructure within a location, but also you will have to go and add more locations. Otherwise, geographic penetration also will not come that easily. And this is all to be considered as a build phase. Hmm?
Sure, ma'am. Thank you so much, and best of luck.
Thank you.
Thank you. The next question is from the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead.
Hi. Thanks for the opportunity. Just wanted a clarification-
Sorry to interrupt you, sir. May I request you to please come near to the mic and speak?
Is it better now?
Yes, sir. Please go ahead.
Okay. My question was that, I wasn't very clear as to when this new facility will start commercial production. Is it, sometime Q2 next year, or is it, Q2 of this year? That was the first question.
Q2 this year. Now, this quarter that we are in.
Okay. So when you're talking about, let's say 20%-30% in the first year utilization, that is for primarily this financial year, and then from next financial year, we can expect a full ramp up. Is that a fair assumption?
There will be a ramp up. I wouldn't call it a full ramp up.
... Okay, so next year, let's say, will it be 60, 70, 80% kind of ranges, or will it be still lower?
Very difficult for me to say at this point of time. Depends on, you know, which services are scaled up. Very difficult at this point of time.
Sure. Okay. And because you are doing the shifting of the equipment, is there any revenue loss at the current facility? Because those equipments are obviously in transit, and they are out of circulation. So just curious, have you lost any revenue because of this, shifting of equipment in Q1?
We are trying to do it efficiently. Obviously, there will be some impact, but teams are working very hard to, you know, bring down the impact.
Okay. Just last question on this, INR 275 crore of CapEx, how much has gone into this facility which you, you were talking about, you'll do once in 20 years? And how much is, you know, the CapEx for growth? Of course, the facility expansion is also for growth, but I'm just curious, you know, this is sort of once in 20 years, and everything else is, let's say, for a lesser time frame.
So that's Rajesh. So if you have to break down the entire INR 275 crore crore, so INR 120 crore has already been incurred in the past three, four years. And INR 70 crore will go into the infrastructure addition, which we talked about, the capacity enhancement. And the other INR 70 crore-INR 100 crore of budget, which we have given for the current year. So the INR 70 crore is to, you know, cater to our operations, which again, has to be divided into two buckets. One is for U.S. services, which we are planning to cater to. Second is, you know, obviously, we will have to replace our instruments, because the nature of the instrument is as such that, you know, every seven to eight years, this may become obsolete.
Right. So let me ask my question differently. So if INR 70 crore has gone in infrastructure, so let's say you are left with INR 200 crore, right? And out of that INR 200 crore, what is sort of the maintenance CapEx versus the growth CapEx?
Currently, I don't have that number, but we can definitely connect offline to discuss that.
Sure. Okay. All right. Thank you, and all the best.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next follow-up question is from the line of Nitya Shah from KamayaKya Wealth Management. Please go ahead.
So, ma'am, so yes, I wanted to ask regarding that, you know, 30% of the company is owned by players in the industry. So in the past you have mentioned that they are silent investors. To understand, is there any other kind of angle in any way, like, what is their intention of, you know, owning such a big part of the company? If you put some color on that.
I don't have any specific information that would be useful. They have been with us for a long time. I think it's a good investment, therefore they are there.
Okay, fair enough. So there is no angle of any, collaboration or synergy of that sort?
No, they are actually competitors.
Okay. Okay, fair enough. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Faisal Hawa from H.G. Hawa & Co. Please go ahead.
So, ma'am, what is our R&D spend on a yearly basis, and do you want to increase the spend by any significant measure?
Company does not have any R&D of its own. We do contract research for our customers.
But we do not want to go into any kind of, you know, things which will make, you know, our customers' task easier or, you know, process-oriented patterns or anything?
So those things are done. Like, for example, if there are some test methods which have a certain runtime on the equipment, we are always trying to make the methods more efficient. So we invest in, you know, developing new methods, more efficient methods. So that kind of R&D we do, but it's not the R&D that people understand. We are not into any development or discovery of products, so we don't do that kind of R&D.
Ma'am, have you done any kind of hiring at the top executive levels to you know facilitate this expansion that we are doing, and particularly on the marketing front? Second is that, you know, what is the concentration of our top five customers to our total revenue?
Top five, I don't have the number. Top 10 would be around 35%-40%.
Okay. That's good enough. Okay, and any hiring that we have done, which are very significant hiring, you know, which are people who are industry-relevant people?
They have been typically replacements, no additional hiring.
Okay. Thanks a lot, ma'am. I appreciate it.
Thank you. The next question is from the line of Raj from Arjav Partners. Please go ahead.
Hello, am I audible?
Yes, sir, you're audible.
I wanted to know how much of peak sales we can do post this expansion?
How much of peak sale we can do post the expansion into the new facility?
Into the new, new and old combined, and for the new also.
Like I said-
25%.
25% is the expectation that we have in terms of capacity utilization. That's a good question. The whole facility could probably deliver around INR 600 crore-INR 700 crore.
Okay. This includes new as well as the older equipments, both combined?
Mm-hmm. Yeah. New, older, yes.
All right. In last two, three years, you incurred a CapEx of INR 275 crore. Out of that, INR 120 crore has already been incurred, right? INR 70 crore is for the additional infrastructure.
It's not only for infrastructure, it is for adding equipment also.
Infrastructure and for adding equipment, and now then another INR 85 crore, it is for what?
So I'll clarify that, Raj. So, you know, we haven't incurred INR 270 crore till now. So the earlier question was, you know, we had already incurred about INR 120 crore towards equipment, and INR 70 crore is what we may incur towards the infrastructure addition. INR 70 crore -INR 100 crore is what we have given the budget for the current year. So that's where, you know, the other gentleman has summed up the three things and said, has mentioned INR 275 crore as the total investment.
All right. Including this. Okay. Okay, yeah. And I wanted to know, can you provide segment-wise CapEx? Like if you go to electronic test, testing, and if you go for food test, and then-
Sorry, we don't have that information, Raj. We don't disclose such kind of information.
All right, yeah. And, going ahead, where do we exactly see growth coming from? Is it from food? Is it from electronics? Is it from pharma?
All three.
All three. Yeah. Thank you.
Thank you. The next question is from the line of Nagaraj Chandrashekar from HDFC Family Office. Please go ahead.
Hi. Just want to understand the size of the outsourced analytical services market in India, and who our large PLK would be.
I won't be offhand able to recall that information, but, there is, the latest annual report that is on our website. We, we have some interesting numbers there. All I remember is that the Indian industry is growing at a faster pace than the global industry, and the Indian industry is growing at, the early double digits. So it's a very good growth rate, I think. I mean, especially all the fields that we are operating in, both domestically and globally.
Yeah, and these global pharma companies that you have started working with or in talks with for the past year or so, I see that roughly one-third of our revenue is already coming from overseas clients. What is the scope of work exactly with these customers, and how does it differ from the scope of work you do for Indian drug companies? And exactly, and are there any new scope of work that you're doing with these global pharma companies with the new facility that you're setting up?
Hello. So the scope of the work for domestic companies and global companies, more or less is the same scope. The only difference we, in the work we get from overseas is overseas companies do a lot of discovery research. There's not much of discovery research which happens in India. India is more of a generic market. So from outside markets, we are able to serve both the generic companies for their requirements and also the discovery science. So that is the major difference in, these two markets.
What stage exactly of the clinical trial process would you be serving this next stage of the research function? Exactly at what stage will you be involved for a new molecule research?
In a new molecule research, we associate with companies much, much ahead before it even reaches the clinical stage. We are there with them right from the concept stage to the preclinical studies. We do a lot of animal studies for them, the analytical, development validation. And, on the clinical phase, we are with them on the trial, phase one, phase two, phase three trial. We are able to support them in phase, phase.
Okay. And are you directly getting involved in the clinical trial stages? Are you entering that field as well? And what would be the-
Sorry. Yeah, sorry, sir. Please repeat.
How exactly would that work for you?
We also work with companies directly at the clinical stage, and that's a very strong vertical we have at Vimta. Till I think couple of years back, we were majorly supporting the generic industry, but from the last two years, we have now started also supporting the trials, clinical trials in patient population.
Thank you.
Thank you. The next question is from the line of Ankeet Pandya from InCred Asset Management. Please go ahead.
Yeah, hi. Good afternoon. So, I just have the two questions. So firstly, like, you know, we are investing in new chamber for the electronic business. So just wanted to understand, like, you know, when, if there's a way to, like, you know, guide, by when will be the next investment, investment, required to add an additional chamber for electronic? Because that is important for the growth. So if there's a way to, like, you know, by when can we reach peak revenue or, what kind of an asset turn can we expect, from this?
... So sir, as Haritha mentioned, we have already doubled our capacity in the last two years when we began. We have added a chamber. We've already ordered a chamber. That chamber is going to get commissioned around October. So having that chamber, it doubles our capacity. Our next expansion, if you are asking about the next, the third chamber, so maybe that will be towards the end of next financial year. So before, if it, we have opportunity.
Okay. So basically, roughly, we can, one can assume that, one and a half year takes to achieve full peak capacity utilization, and post that, you's will build a new chamber, if that is the right way to look into it?
I mean, there is no set formula by which you can say. If the demand picks up, the industrial growth picks up. If you look at this first quarter has been a little slow due to the election time and all, the manufacturing industry was slow. If the manufacturing picks up the pace again, so the addition of this new column could be much, much earlier on.
Just to add to that, the next chamber, I don't think we will add in Hyderabad. We would want to look at a different city.
Okay. Any like particular city that you have been looking at or, something, we have been evaluating?
There are multiple options. Too early to decide on that. As of now, the good options are Pune, Bangalore.
Okay, fair enough. Just a last question. So, sequentially, we see, we have seen a 3% top line growth. But on the gross margin front, it is slightly come down by around 60-70 basis points to 77.1%. So, like, you know, given that we have one more, you know, facility coming up in the second quarter, so how should we look at on the gross margin front going forward or on sustainable basis?
We will, we will be pushing the top line, and my expectation is to maintain the margin. Now, I was, you know, making a comment earlier. In a flat kind of situation, it's very uncommon that the margins are retained. They are typically pushed down because we are a very human resource intensive industry, and the cost of human resource keeps on only going north, you know, year after year. And also, we consume a lot of material. We have multiple facilities. So every cost, input cost, only keeps growing year after year. Now, despite that, you know, our margins have been doing pretty well, which means that, you know, we have been taking care and focusing on profit-making services, pushing more profit-making services with the capacities that we had.
Mm-hmm. So, oh, okay, so, the point is then, like, you know, we have in the second quarter, we have another, life science facility coming up. So again, the input cost will be there. But like you said, the initially, the capacity utilization will be at around, 25%-30%. So, will, will there be some constraint, like be minor constraint on the gross margin front or, even the 77%, that, one can, like, you know, see that on sustainable level, we will be able to maintain it?
So on the gross margin front, we don't see any significant impact because majority of the investment is into building, so this has a higher life for depreciation. So, especially at gross margin level, we don't see that, you know, it's going to have any impact. We can expect our existing margins to continue going forward as well.
Okay, fair enough. Yeah, that's it from my side. Thank you.
Thank you. The next question is from the line of Chand Pal Singh, who is an individual investor. Please go ahead.
Hello. Am I audible?
Yes, sir, you're audible. Yes, sir.
Ma'am, any incremental from the incremental samples, samples from the JNPT side?
No, they are kind of stable. There was a high volume experienced in the month of May, but otherwise it has been back to earlier revenues.
Okay. Yeah. Not any growth, that's it?
No.
Okay. Last year, I, I was able to vote for the AGM, because you put that on the NSDL site. This year I missed it, so I request you to always put the voting procedure through the NSDL.
I will convey it. I'll convey it, yeah.
Okay, ma'am. Ma'am, regarding the electronic testing side, earlier you projected that, projected the revenues of INR 30 crore-INR 35 crore with the chamber that you're already using. So, has the revenue solidified?
No, no. The plan was always to add a second chamber, and we are in the process of adding a second chamber.
Okay. The revenue projection will remain the same?
Yeah. For this capacity, the revenue projection will remain the same, unless, of course, something in the market significantly changes with respect to competition, prices, and stuff like that.
Okay. Thank you, ma'am. Thank you. Ma'am, our new facility is capable of handling NCEs?
Yes.
Okay. Thank you, ma'am. Thank you. That's all from my side.
... Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Anupam Agarwal from Lucky Investments. Please go ahead.
Yeah, thank you for the opportunity. I just have one. If you can break up your revenue into public and government business, that will be helpful.
I don't have that kind of a breakup.
Okay. Any ballpark figure as to what percentage comes from either of them?
No, we don't look at it in that angle at all. At least I've never looked at it in that angle at all. But we do work with a lot of government agencies for our food testing and also environmental testing.
Okay. So when we say that 40% of business comes from top 10 clients, any government clients from them?
Yes.
Okay.
One of them is, yeah.
Okay, thank you. That's it from my side. Thank you.
Thank you. A reminder to all the participants, that you may press star and one to ask a question. The next question is from the line of Vishal Manchanda from Systematix Institutional Equities. Please go ahead.
Thanks for the opportunity. So I have a question on the clinical trial that you are doing. Wanted to understand whether this is a single-site clinical trial, or this is going to be conducted at multiple sites and at third-party sites?
Vishal, this would be multi-site trial at the third party, mainly the hospital setups spread across the country.
You've already started enrolling patients for the trial or, that's yet to start?
We are on that stage where we have identified the sites, and we are also at the advanced stage of discussions with enrollment.
How many patients will you be enrolling?
Don't have that number, but, usually these trials, the sizes range anywhere from 200 to 300, or depends on the product. This particular trial, I'm not sure. I, I can let you know.
Okay. And this will be an 18-month long trial?
Yeah, that's the typical life cycle of the trial.
Okay. And so would you have enrolled? So you would need internal resources to conduct the clinical trial. Is the recruitment done at your end, your end?
Yes. Our site, we have the team to manage clinical trials. It's a separate team. And then, externally, we also have CROs on board, who will be doing the site monitoring. So that team is there.
Okay. And when do you expect that kind of the patient to start, basically the trials to start dosing to patients?
It should start this quarter.
This quarter. Revenue should accrue post that. Is that the right way to think about it?
So, Vishal, revenue is recognized based on the milestones of performance, based on, you know, performance completion method. So irrespective of, you know, the contract, invoicing, so we recognize based on the activity completion. So probably some of it would have been recognized in Q1, some of it may get recognized in Q2, and so on and so forth.
And just one more, this trial would more or less be at the same margins as the company margins? Or do you expect this to be accretive or dilutive to the company margin?
That is very difficult to, you know, understand at that level, because a lot of resources are common, so we will not be able to understand the margin for any project, because we don't see project-wide margins.
Okay.
It would be more or less in line with our existing margins.
Okay. So going forward, you don't expect your company margins to be diluted at least, or meaningfully diluted, from where it is today?
We are not expecting any dilution, rather we are putting efforts to improve the margins. So of course, the efforts are already seen, factored in the current result as well. So, we have initially mentioned that 20%-30% is something which we are looking at, and we will try to improve on that number as well.
Got it. Got it. Thank you. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants, that you may press star and one to ask the question. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
I want to thank all the participants in this call, and also, Systematix and Vishal, and the conductor of the call. Thank you all, and wish you a good remaining day. Bye-bye.
Okay.
Thank you. On behalf of Systematix Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.