Ladies and gentlemen, good day and welcome to the Neuland Laboratories Limited Q4 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during 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. Ravi Udeshi from Ernst & Young. Thank you, and over to you, sir.
Thank you, Rutuja. Good evening, friends. We welcome you to the Q4 and FY 2026 earnings conference call of Neuland Laboratories Limited. To take us through the results and to answer your questions, we have with us the top management from Neuland Laboratories, represented by Mr. Saharsh Davuluri, CEO and Managing Director, Mr. Abhijit Majumdar, CFO, and Mr. Sajeev Emmanuel Medikonda, Head of Corporate Planning and Strategy. We will start the call with a brief overview of the financials by Mr. Abhijit Majumdar, and then Saharsh will give you the broad highlights of the business trends and what he's seeing in the market. Post that, we will open the call for the question and answer session. As usual, the standard safe harbor clause applies as we start the call. With that said, I now hand over the floor to Abhijit. Over to you, Abhijit, sir.
Thank you, Ravi. A very good evening and a warm welcome to everybody joining our call. I will take you through our financial performance for the quarter and the year, then share comments on cash flows, working capital, CapEx, and the actions we are taking to strengthen financial discipline through cost and process improvements. As we have highlighted in our previous call, given the nature of our business, quarterly performance can be uneven, and it is best to evaluate the business over longer periods. With that context, let me start with the numbers for quarter four. Total income was INR 788.7 crores, up 134.9% versus INR 335.8 crores in the same period last year. Commercial CMS projects drove the growth, with CMS contributing over two-thirds of revenue this quarter.
Gross margin was 62.1% versus 56.3% in Q4 FY 2025, driven largely by the business mix. We also managed higher freight costs towards the end of the quarter due to the conflict while ensuring continuity of supply to our customers. As always, gross margin includes manufacturing expenses and other costs directly attributable to the product. EBITDA stood at INR 319.4 crores and a margin of 40+%. This exceptional operating margin reflects the record high revenue this quarter. It is also partly because of the function of the uneven nature of our revenue flows and should not be seen as an indicator of our future performance. Profit after tax was INR 212.5 crores versus INR 27.7 crores in Q4 FY 2025.
Our EPS stands at INR 165.6 per share. For the full year of FY 2026, revenue was INR 2,053.1 crore versus INR 1,497.3 crore, a growth of 37+%. EBITDA was INR 603.4 crore versus INR 342.8 crore in FY 2025. With full year EBITDA margin at 29.4% compared to 22.9% last year. Profit after tax for the full year was INR 363.1 crore and EPS stands at INR 283.01 per share. Let me now move to cash flows and working capital, which are key focus areas for us.
For the financial year FY 2026, the free cash flow negative at INR 49.4 crore, driven primarily by higher working capital during the year, along with increased capital cash outflows. CapEx cash outflow for FY 2026 was INR 397.1 crore. Financing activity was INR 21 crore, including a net increase in long-term borrowings of INR 60.9 crore. Closing cash balance of FY 2026 was INR 75.4 crore as compared to INR 130.4 crore at the end of the year. Working capital days stood at 137 days in Q4 versus 107 days in Q4 of FY 2025, mainly driven by higher inventories and receivables, and we believe that they should normalize in FY 2027.
Net debt remains negative at negative INR 157 crores, supported by cash balances of INR 353 crores. Our long-term borrowings at the end of quarter four was INR 197 crores. Our approach to CapEx remains disciplined, phased, aligned with our strategic priorities, and executed with a clear focus on returns and long-term capability building. In terms of our priorities, our priority is to ensure that approved CapEx translates into clear execution milestones and business outcomes. Overall, we continue to maintain a strong financial position. The balance sheet remains resilient with comfortable liquidity, and we remain focused on preserving flexibility to support both growth investments and have operational resilience. At the same time, we are sharply focused on improving our cash conversion.
Working capital discipline remains a management priority, we continue to take actions to kind of work on our collections, inventory normalization and tighter controls so that our profitability translate into cash flows more consistently. Another related focus area is cost and process improvements, which we see as a structural enabler for sustainable profitability and stronger cash generation. Across the organization, we are progressing on initiatives to improve productivity, reduce variability, strengthen our operating controls and drive process standardization. This obviously includes tighter cost governance, procurement efficiency actions and operating discipline across functions aimed at protecting margins, improving our predictability and building a scalable operating model as the business grows.
Now, given the recent developments in the Middle East, we are closely tracking raw material coverage and price volatility and are taking actions to protect our continuity of supply and manage the cost pressures. As in the past, the presentation shared along with the press release contains additional details. With that, I would like to hand over the call to Saharsh for his remarks. Thank you.
Thank you, Abhijit, good evening to everyone on the call. The numbers are out there, Abhijit has taken you through them in detail. What I would like to do is spend a few minutes on talking about what's not explicitly in these numbers but is very important for all of our investors to understand. While we have not given formal guidance in the past, as we do not intend to do so going forward, we did indicate earlier that FY 2026 would be a year of strong growth when viewed against FY 2024, especially since FY 2025 represented a period of slight de-growth. With the strong performance delivered in Q4, I'm glad to note that this outlook was accurate. We have achieved the kind of performance that we anticipated at the beginning of the year.
In fact, slightly better than expected, aided by the favorable exchange rates. As we look at Q4 and FY 2026 through this more favorable lens, it's also important to recognize the inherent lumpiness of our business. The same lumpiness that resulted in a record-breaking Q4, if you recall, also made the previous quarter, which is Q3, a relatively muted quarter. It's worth stating the obvious. The lumpiness does not recognize financial year boundaries, right? It doesn't recognize or it doesn't care about March 31st. Even sometimes a full year may not turn out to be exactly as expected, although in this case we did have a strong year as expected.
This does not distract. Whatever happens, even at a year level, I would like to point out is that it should not detract from the long-term growth, prosperity and resilience of the business. In the short to medium term, our business visibility continues to be anchored by commercial and near commercial molecules. This gives us a strong degree of confidence over the next few years. Alongside this, while our DDS business was softer in FY 2026, we see good growth potential ahead and have deployed substantial resources across development, customer engagement and capability building to support the growth in the short, medium and long term. Our focus on execution discipline, customer satisfaction and protection of business fundamentals is central to ensuring that this phase of growth is delivered with minimal disruption, despite the inherent variability in quarterly performance.
Beyond this, long-term growth requires an enterprising vision, a decisive strategy and careful capital allocation. Much of the work we are doing today is foundational in nature, strengthening capabilities, scale and technical depth, so that we are well-positioned to attract the right opportunities over time. The outlook for the coming years remains promising. Over the next 2-3 years, we have visible growth driven by our existing pipeline. At the same time, we are laying the groundwork for growth beyond this horizon. A key element of this is our investment in large-scale peptide commercial facilities. This will help us move into a more differentiated space, focused not only on peptide fragments but also on peptide APIs, thereby expanding both the scope and quality of the opportunities we can pursue. Alongside manufacturing, R&D remains a critical pillar of our long-term strategy.
The new R&D center will be an important step up in our ability to support complex programs across development stages. It will strengthen our scientific depth, enhance cross-functional collaboration and improve our ability to scale customer programs from early development through commercialization. The investment is not just about capacity addition, it is about building the kind of technical and problem-solving capability that will allow us to engage earlier and more meaningfully with our customers and support larger, more complex programs. On the business development front, our efforts over the last year have been focused on improving both the quality and maturity of opportunities entering our pipeline. We continue to see encouraging traction across customer segments, including increasing customer engagement on larger and more complex programs.
While conversion timelines in our industry remain long and non-linear, the nature of discussions we are having today aligns well with the capabilities we are consciously building across R&D, manufacturing, and project execution. The objective is clear: to prioritize opportunities that offer sustainable, high-quality growth, even if that means being selective and patient in the near term. As we experienced in FY 2026, growth over the next 2-3 years is also expected to remain lumpy. Not every quarter will necessarily show progression. However, if performance is assessed over a longer horizon, say 10-12 quarters, a clear trend line should emerge consistent with the growth outlook that we have always outlined. On the margins and returns, FY 2026 benefited from favorable exchange rate movements. While our ROC remains healthy, it is expected to moderate as we enter longer capital deployment cycles.
We are comfortable with this as long as these investments strengthen our long-term growth engine and competitive positioning. Today, the focus, and in some respects, the key constraint of the business is twofold. First, building an execution engine that can continue to perform reliably at scale. Second, ensuring that we bring the right kind of projects that support high-quality, sustainable growth. Over the last year, in addition to strengthening our key account management structure, we have also put in place dedicated resources to support larger projects across key operating functions. This enhances our ability to serve existing large customers effectively while also building capability in anticipation of similar projects in the future, including deeper engagement with big pharma. Before I close, it is important to briefly acknowledge the risks and uncertainties inherent in our business.
Our industry continues to be exposed to factors such as demand variability, customer ordering patterns, regulatory timelines, geopolitical developments, and supply chain volatility. Given the nature of our business, revenue realization can be uneven, and the timing of project progression, particularly for complex and long-cycle programs, can vary. Additionally, as we embark on larger and longer duration capital deployment cycles, execution discipline becomes even more critical. Delays in customer programs, changes in development priorities, or shifts in market dynamics can influence both short-term performance and capital productivity. That said, our focus remains on building resilience through diversification of the pipeline, strengthening operational execution, prudent capital allocation, and maintaining a strong balance sheet. While these factors may create variability in the near term, we believe that they do not alter the fundamental long-term opportunity of the business.
To conclude, while individual quarters will continue to reflect variability, we remain confident in the direction of the business, the quality of our pipeline, and the foundations we are putting in place for long-term value creation. Thank you for your continued trust and support. We'll now be happy to take your questions.
Thank you very much. First question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thank you for giving me opportunity, congrats to the management and the team for the great set of numbers. First question, obvious question I have on the performance of our CDMO business for the quarter. I agree with you that there would have been a benefit of currency depreciation, it would be to the extent of 10%-12%, right? Still our growth looks phenomenal over year-over-year basis. What is driving this? Is it the existing commercial projects, or have you added any new product in the commercial side? Was there any bunch of orders from the last quarter which could have also helped during the quarter? Yeah.
Yeah. Thanks for the question, Amey. I think it's yes, I think currency definitely helps, especially because we had a strong Q4 and a lot of shipments happened, you know, as the, you know, the rupee depreciated. I think we did see a chunk coming in. Yes, I think it doesn't really take away from the inherent growth we've seen in the business. I think the contribution has come from the products we've been looking at in our pipeline, Amey, I think we had 1 new commercialization this year, but we've also had ramp-up of volumes of previously commercialized products. Those have largely driven the growth. We continue to have newer molecules enter our pipeline.
We're probably looking at 1 commercialization in FY 2027, and maybe, you know, 1 or 2 more later. These don't really come in at a quantum that really changes the trajectory of the growth. I think, you know, it's really the existing pipeline and the recently commercial molecules and the volume growth in those which have driven this growth. There's some volatility. That volatility is, you know, just based on shipments, you know. It could get evened out a little bit, but, you know, it's nothing out of the ordinary.
Sure. To summarize, basically it is driven by the existing products with the help of 1 commercial launch, which you had also indicated in Q3.
That's right.
Sure. The second question I have is on the peptide side, the contract which we had signed and we had also given the notification. Products look to be in the early commercial stages. What value add are we doing here as a CDMO first? If the product move to the late commercials going ahead, they will continue to work along with us, how this contract is structured? Yeah.
Yeah, Amey Chalke, I think, you know, the contract you're referring to was an announcement made in partnership with our client. To be fully transparent with you, it's a very early-stage program, and I would not really associate any near or midterm revenue coming out of those projects because we do have, you know, close to 8 to 10 peptide programs in our development pipeline. Some are advanced, some are early stage. I would categorize the one you're referring to in the early stage. You know, these are being developed for various therapeutic indications. It will take at least a few years for a program like the one you are mentioning to give us commercial benefit.
The programs that Neuland would expect to be commercialized in our peptide facility are programs that are not perhaps information on them are not available in the public domain. I just wanted to clarify that.
Sure. Additionally, when we are looking to grow our peptide business, what is our key selling point to clients? Since we have added like the client LIR Life Sciences. Will that help us to add more clients going ahead to work on the similar platform? Is it the platform which we choose which can broaden our clientele in the similar category? How does that the thought process behind the peptide business growth going ahead?
Yeah. I think the pitch we make to peptide clients is that we've invested close to 16, 18 years in the peptide space, and we've kind of worked our way organically by making fragments, building blocks, amino, unnatural amino acid-based fragments, and then slowly moved up the value chain, making even peptide APIs. Our biggest strength is the fact that we have done a lot of process development for peptides in-house in Neuland. We've always had peptide R&D in Neuland for several years, focused on process chemistry, not medicinal chemistry. This is a skill set that is very important when it comes to engaging with clinical-stage peptides, especially APIs. We were able to successfully showcase those capabilities.
Once we showcase those capabilities, and now we have also started investing in creating manufacturing infrastructure, it's becoming easy for our clients to partner with Neuland. That's kind of what's, you know, giving us traction in the peptide space.
Sorry to interrupt. May we request Mr. Chalke to please rejoin the queue. Thank you. Ladies and gentlemen, we will request you to please limit your question to two per participant. The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah. Thanks for the opportunity. Hi, team. It's always good to see the convex side of volatility and lumpiness. Excellent show. I've got two questions. First is, Neuland has built strong capabilities in complex chemistry and peptides, but the industry's value creation is, in my view, increasingly shifting towards hybrid modalities like ADCs and fermentation-enabled manufacturing. What do you see as Neuland's biggest capability gap in sort of participating meaningfully in that kind of an ecosystem, and how are you addressing all of it today? That's my first question. Thank you.
Yeah. Hi, hi, Sajal. It's always nice to hear from you. I don't know if I would completely subscribe to the hypothesis. You know, I think that I would agree with the basic concept that, you know, more value is in complex chemistry, complex modalities, but I would, you know, probably put peptides into that category as well. I think today, if you see the explosion happening in the GLP-1 and the peptide arena. They, you know, I think some of these peptides, especially the innovative volumes are going into multi-metric tons. The commercial value for a CDMO business is running into INR billions per molecule. I would argue that the peptide CDMO opportunity is as or more attractive than maybe some of these oligo ADC kind of opportunities.
Even if you take, you know, just based on my limited understanding of the oligo business, you know, the oligo CDMO business is not as big as the peptide CDMO business. That's because, you know, oligos have not reached the kind of scale. ADCs is again slightly different because there's a mAb component, there's a biologics component over there. I think, you know, yes, it is definitely a future modality from a CDMO perspective. I think the way Neuland is approaching it is that we are a small company. You know, I think we are barely scratching the surface when it comes to this business. I think we have a long runway of growth in front of us.
I think if we continue to sharpen our skills in the small molecule, complex small molecule place, we, you know, strategically get into the peptides and start making complex peptides in a meaningful way. Then we slowly start looking for other adjacencies. For example, a peptide capability can help you make linkers for ADCs. You're slowly getting into the ADC space through the peptide capability. Maybe, you know, future through some, you know, strategic acquisitions, et cetera, you could, you know, climb yourself into these new modalities. I would see, you know, a decade of growth, you know, by being invested in these current skill sets, including peptides. I would not say we should be limited to this area.
That's where I would agree with you that, you know, you should keep, you know, going into these adjacencies. I definitely see peptides as more compelling today compared to, let's say, you know, an oligos or even some of these RNAi-based therapies. ADCs, yes, I agree, but ADCs is a different ballgame. I think that's something maybe a future adjacency that we would pursue.
No, that's very thoughtful as always, Saharsh. Thank you for that. Second, a lot of newer enzymatic and bio-enabled manufacturing routes, they kind of look attractive at lab scale. Commercial manufacturing is ultimately constrained by yield consistency, you know, purification economics, contamination controls, and of course, the regulatory aspects are always there. Which of these do you believe is the biggest real bottleneck today? Where does advanced synthetic chemistry is still kind of retains a more durable economic advantage over, you know, these emerging biotech led manufacturing routes?
Yeah. I think very, again, thoughtful question, Sajal Kapoor. I'll just give you the businessman's perspective. You know, I'm not a scientist or a chemical engineer. You know, I think your encapsulation of the challenge is very accurate. I think synthetic chemistry based techniques gives far higher scale and are more reliable over long term. You know, the biological processes are, you know, always challenging. You know, just if you look at peptides, for example, the, you know, 10, 15 years ago, you know, the largest volume peptide would be, say, leuprolide, you know, maybe 100 kilos per year. Today, some of the GLP-1s are made at a metric ton scale. The reason why the industry is able to make metric tons of peptides is because of the advancements in synthetic chemistry.
Our ability to maybe, you know, avoid, bypass these cumbersome downstream techniques and come up with modern techniques which avoid stuff like lyophilization, et cetera. The reason that has happened is because academia and industry has invested a lot in chemical engineering techniques that avoid the use of these biological processes and have broadened synthetic processes. I think we as a CDMO cannot obviously make those kind of investments in fundamental research, our R&D groups would follow those developments very closely. Therefore, as new techniques become available, our goal would be to partner with, you know, these kind of, you know, knowledge-driven organizations and try to make them scalable. Short answer is yes. I think synthetic chemistry-based techniques in peptides, maybe even in oligos, would be the area we would like to focus on.
I think, you know, there's a lot of growth opportunities over there.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah, good evening. Thank you for taking my question. Just two quick ones. First one is on the recent development, 1st of May, when, one of your big customers of benfotiamine acid, Esterion, has been taken over or at least there's been a bid from Arkema. Just not getting into that transaction, but more from a longevity of this business, does it give you. Is there any change in course you think, or, you know, the dedicated CapEx you put, some time back? What are some of the messaging you are actually picking up from this transaction? One of the key concerns from an investor perspective is what happens to benfotiamine acid, post patent expiry sometime later this decade, right? Just want your thoughts on how this product is evolving.
Yeah, Shyam, thanks for the question. Shyam, I think just given that, you know, these CDMO molecules are, you know, under confidentiality clauses, we will not be able to comment or acknowledge what molecules we make for whom and what the underlying transaction that you're referring to. I think general comment I can give you, which might be helpful, is that, see, generally for all our CDMO businesses, you know, M&A of sponsor companies is a very natural part of the business. I think a lot of biotechs get acquired. Some of the biotechs we've contracted with have gotten acquired by big pharma. One, supply agreements usually have inherited clauses, change of ownership does not necessarily, you know, annul or create any kind of a disruption to the supply agreement.
Second of all, usually for these kind of CDMO relationships, customers are looking for securities of supply and making sure that the patients are getting the medicine. What we have seen from all our conversations with our CDMO customers is that typically no one wants to disrupt supply chain. People are looking for continuity. I think any kind of disruption might happen if there is a clear performance problem or some kind of a strategic change. Usually when these kind of M&A transactions happen, we don't see any immediate risks.
Even if we were to see anything, then, you know, we would obviously not be able to comment on specific CDMO molecules, but we will obviously, as a responsible company, temper our outlook and modify our outlook and indicate, if we see some short-term challenges. For that, I would ask you to just revert back to the opening comments I made, where I made comments about short-term, medium-term growth and our visibility of business from these commercial molecules.
Helpful. Thank you. Thank you, sir. Just second question, just on outlook only. Should we rely on some of your past guidance on quantitative elements of the growth and margins? You know, we have talked about 18%-20% CAGR over time. I'm not pinning it down to a year. Also margins, is it better to look at H2 margins rather than Q4 margins as a place to start? You know, if we were to look at fiscal 2027 or 2028, whichever you want to talk about, how should we look at, say, growth and margins, please?
Okay. My CFO started laughing at your second question, but I won't let him answer. I think the 18%-20% is a fair assumption, you know, not necessarily linearly. I think margins, you know, I think it's definitely You know, we've always been a little bit conservative in terms of how we've looked at our margins. That's because how we fundamentally budget our numbers, you know, whether it's exchange rates, raw material pricing, volumes. We tend to be slightly on the conservative side and therefore, you know, the margins play out better than expected. I don't know off the top of my head what the H2 versus H1 is, so I don't wanna comment on it. I think, you know, you can see a trend line, Shyam.
I would, you know, I can't give you a better prediction than that. I would say, you know, nothing's changed fundamentally. I think just things are looking slightly better than what we typically paint the picture to be.
Thank you. The next question is from the line of Shrikanta Kolkar from Nuvama. Please go ahead.
Hi. Thank you for the opportunity, congratulations on a very good FY 2026 performance. Would it be possible for the management to provide the sorry, capacity utilization across the three units at the moment?
Yeah. The current capacity utilization of 2 of the 3 units are close to, between 85%-90%, and the last unit is around 65%.
Okay. In the initial comments, you talked about the longer capital deployment cycle now. Can you elaborate a little more on this? What are we thinking in terms of CapEx and utilization of the cash that we have generated in FY 2026?
I think maybe I'll just give a answer and then maybe I'll request Abhijit to add if there's anything after that. I think what we were alluding to is that as, you know, the facilities are getting utilized and we are seeing the business grow in scale, we are also, you know, looking at long-term growth slightly differently. I think our planning and I think the way we are thinking about capital allocation has become a little bit more long-term from being tactical. You know, I think just to illustrate this point, I think two, three years ago, we built a production block for a CDMO molecule. We built that block because we had a long-term contract that was secure.
Therefore, for us it was a very comfortable investment. I think for us, our thinking also has fundamentally started to change, because now when you are at a INR 2,000 crore revenue and you're going to grow, you know, eventually you'll be adding, you know, hundreds of crores every year, maybe INR 500 crore, maybe even in the future, INR 1,000 crore a year. This requires a different level of preparedness in terms of creating a base, creating production blocks, and being ready to engage, especially with newer clients like big pharma clients. I think that's the game that needs to be played, and that requires a different mindset of capital allocation, which is what was being referred to in the opening remarks.
Thank you. The next question is from the line of Vivek Rakholia from Ficom Family Office. Please go ahead.
Very good evening. Am I audible?
Yes, you are. Please go ahead.
Thanks a lot for the opportunity and congratulations on a great set of numbers. I just, I wanted to have an understanding of, any potential or any what are the reasons for the leadership transition with Saharsh taking over as CEO and MD from Sucheth, who become a Vice Chairman.
Yeah. Thanks, thanks for the question. Yes, I think the role change between Sucheth and me, effective April first, was part of a pre-planned transition. Basically, the background is that as the business is growing, both Sucheth and I as full-time directors, promoters were focusing on essentially similar parts of the business. Both of us were looking at the day-to-day business. What the board felt as the business is ramping up, it would be more effective for the organization if one of us was to focus more on the day-to-day business, and, you know, how the business is operating, you know, on an ongoing basis.
The other promoter focuses more in terms of the long-term and areas that are important to the business, especially as we grow in size. That's how the roles have evolved. I think for me personally, just given my role in the, you know, the building of the CDMO business. I mean, just to give you the background, I've been, you know, with Neuland for close to 19 years now. My role in the company was essentially to build the CDMO business. As the CDMO business has been ramping up, we also felt as a board that, you know, it would be logical for me to drive the day-to-day business since I understand the business from an end-to-end perspective.
It would be more meaningful for Suchet to take on a slightly long-term role. You know, he's been responsible for, you know, operating the Neuland Foundation, which is a new initiative that the organization is taking. I think as a organization that's manufacturing-oriented, we are also looking at enterprise risk, sustainability, and these are all areas that were in the past not really covered between both of us. It's more of a role clarity and a role separation. Suchet also continues to be equally involved in the business.
Thanks a lot for the answer. My next question was. You have answered this partially, but I'll still continue.
I'm sorry to interrupt, Mr. Vivek. We are unable to hear you clearly. Can you please speak louder?
Is it better?
Yes, much better. Please go ahead.
Thank you. Thanks a lot for that answer, Saurabh. The next question is that as per the S&P Global data from March, the global PE VC biotech funding has declined sharply since 2021. I understand that you answered partially, but how is this trend impacting your business, the RFQs and client inquiries, and how do you plan to navigate this trend?
Vivek, if I were to understand your question correctly, you're talking about how the funding environment is affecting our business, right? I think as we have said in the past, I think a lot of our business and our growth is driven more by molecules which are in the close to commercial and in the clinical stages. A lot of the funding has affected more the discovery and the early stages. We haven't seen that affect our business as much. It is at the same time, it affects the pipeline funnel over a period of time. The focus for us continues to be molecules where the IND is being filed. That is, where they're entering phase I onwards. I think there we continue to have good visibility.
Irrespective of the funding environment, molecules with good data continue to do well. I think our focus, the BD team's focus is such molecules. I think we have been fortunate that even our customers, some of the molecules have done well in terms of their data. We don't see this impacting us in the short to medium term. Thanks.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, we would request you to please limit a question to one per participant. The next question is from the line of Ritika from ValueQuest. Please go ahead.
Yes, sir. Thank you for taking my question. First question is on peptide facility. We had earlier talked about this getting operational in July. Are we on track for this? By when do we expect commercial quantities to start? Do we already have firm contracts for this facility?
Yes, thanks, Ritika. The Yeah, the facility will be ready by July as per schedule. There has been no change in the date for that. We have projects that will ramp up in this facility, and we have visibility for these projects. I would probably not go as far as to say that we have firm contracts because, you know, these are early-stage projects and yes, they are
Near commercial, you know, I think we will probably focus first on, you know, completing validations, qualifications, and go through that process, which is pre-commercialization, then maybe we will in the same time get into contracts and stuff. Yeah, I think we're very excited. I think we have project visibility and, you know, there is enough pipeline to feed into this facility.
Thank you. The next question is from the line of Chirag Shah from Whitepine Investment Management. Please go ahead.
Yeah. Thanks for the opportunity. I've joined a bit late, so apologies if I'm repeating the question. See, for the first question is with respect to the quarterly results or H1 results, however you wish us to look at. Bringing in the context of past, there is volatility in the business. Any comments, is that the nature of volatility changing and it would be much less volatile? How much of the Q4 results is kind of one-off, lumpy, et cetera, et cetera? That's first question that I have.
Yeah, thanks for the question. I think, you know, volatility and how long it will last, is difficult for us to say because, you know, we are seeing a very dynamic, you know, growth in the business. You know, some of the newer molecules are also fairly high value. Typically, volatility is brought about by newer molecules. The older molecules tend to be less volatile. When the newer molecules are also, you know, significant in terms of value contribution, this volatility will continue. I don't even necessarily see it as a negative thing. I think as long as we have investor alignment that this volatility is part of our business, I think it's something that we should be okay with.
I would not see us going to a, you know, 25% times 4 kind of a situation anytime in the near future. Because the moment these newer molecules stabilize, then there's a possibility that some new molecules will come and they will bring in the volatility. Sometimes these newer projects are also very high-value projects. It's not like, you know, the base has become big, so the volatility is reducing. We are also finding it very challenging to kind of, you know, demystify the volatility. That's the reality of our business, and I would go back to the comment I made saying that look at a, you know, a multi-quarter trend and then, you know, make your deduction in terms of the growth rate and the margin. I think that will give you a better comfort for your modeling and visualization.
Thank you. The next question is from the line of C.A. Shilpa Saboo, an Individual Investor. Please go ahead.
Hello. Congratulations, sir, on the good set of numbers. My question is for the CFO, Mr. Abhijit. Sir, in Q-three con call, an individual investor has asked a question about inventory manipulation, but in the transcript, some words are changed, which has changed the essence of the question, whereas the audio on your website is crystal clear. SEBI guidelines also don't allow these changes, so this looks like actual manipulation somewhere. Can you please justify this?
I'll have to check back on what you have mentioned, and then revert back to you, Shilpa. I don't have the facts and figures right in front of me to react to your question.
Which quarter is she referring to?
Q-three.
Q3 FY 2026 at 24 minutes, 26 seconds.
Yeah, we'll check and get back to you.
Thank you. The next question is from the line of Mehul Panchwani from Forty Cent. Please go ahead.
Hello, sir. Congratulations on a great set of numbers. Sir, you were explaining to one of the participants, Mr. Sajal Kapoor, about that, you know, we don't see that ADCs are. I mean, peptides are less complicated than ADCs. You know, how does a. You know, I understand that peptides are mainly using GLP-1, but what is the. What leads to the complexity actually? If you can, you know, help me, for a person, a layman like me.
Yeah, sure. I mean, just full disclosure, I'm an electrical engineer, so I might find it a little difficult to explain it too technically.
Sure. Sure, sir.
I just want to clarify that I To Sajal's question, I did not say that peptides are more complicated than ADCs. ADCs are a biologic molecule which is tethered to a small molecule using a peptide linker. Even a rudimentary textbook definition will tell us that ADCs are more complicated. What I was telling Sajal is that peptides are very lucrative as a business, and when compared to the oligonucleotide business, I believe the CDMO business value of peptides is higher than the oligo business. When it comes to ADCs, the molecules are far more complicated, and therefore I would be very clear to reiterate that ADCs are more complicated than peptides.
However, I'll still respond that peptides are long-chain molecules and are made of a series of amino acids. They tend to be very delicate. If they're not synthesized in the appropriate way, they tend to fold and they tend to form a lot of impurities. The synthesis of peptides is considered to be far more complex and challenging than synthesis of traditional small molecules. When you look at the business from the prism of small molecules, peptides are far more complex and therefore they're far more value creating if you're able to make them. Because of the explosion of these GLP-1s for metabolic diseases and other indications, there are a lot of molecules out there that are peptides, and there is a need for CDMO services for these peptides, especially on the NC side.
That's the area we want to target because we believe that as a small company, we have a lot of opportunity in that area, which is the point that was being made earlier to Sajal Kapoor.
Thank you. The next question is from the line of Bharat Shah from BCS Capital Ideas Limited. Please go ahead.
Yeah. Hi. Over many quarters and years actually, you've been very fair and consistent in guiding about the character of the business and inherent up and down character of the business so that quarterly kind of precision that unfortunately investors are looking for all the time is something which is not inherent in the business. You've been very, very fair and consistent in guiding the kind of rough gravy train that Neuland business is. You made a comment that compared to FY 2024, FY 2026 has finally registered a meaningful growth if we regard this FY 2025 as a blip. When after all the ups and downs over this 2-year period, the growth is about roughly 10% compounded over this 2-year period when we measure it from 2024 to 2026.
For all the so much volatility, relative underlying velocity of output finally is somewhat underwhelming, or am I being unfair in saying this?
Yeah, thanks for the question, Bharat. I think, you know, the Whether it's underwhelming or overwhelming, I think those are, you know, individual deductions and, you know, I think certainly not our place to comment on it. I believe that the kind of growth we've demonstrated and the growth we aspire to is, you know, I think that's what we are talking about. I think, you know, the 18%-20% CAGR that we talked about is potential that we see. I think the kind of growth we have seen in FY 2026, you know, where we ended at INR 2,000 crores.
I think, you know, we, you know, we talked about it on the base of FY 2024, which was I think at about INR 1,500.
Yeah.
-plus INR crores. Yes, I think when you pick a period of time or a frame of reference, I think the numbers will, you know, kind of not be as promising or as, you know, attractive as the management may portray it. Nonetheless, I think, you know, we look at a longer horizon, and in fact, when I even talk to investors about 18%-20% CAGR, I'll just talk about it over a 5-year period, and I always talk about it as aspirational. I would, you know, just, you know, ask you to look at those comments in that context. I would not probably get into, you know, a debate in terms of whether this is, you know, attractive or not.
I think that's for you to decide. I think the business that we have built, I think is very attractive, and I think the base we have today in terms of the pipeline and the potential we have is fairly strong. I think it is an attractive business. I really don't want to, you know, either agree or challenge the hypothesis that you made.
Thank you. The next question is from the line of Harshad Dhodt from Diamond Asia Capital. Please go ahead.
Hi. Hi, Saharsh. Congratulations on a strong set of numbers. Two questions from my side. The Neuland is the oldest player in the peptide chemistry working on this thing from last 18 years. When you see from a longer term perspective, let's say five years, five years down the line, and the kind of pipeline that you are having, the kind of CapEx that you are conducting, from an investor perspective, from five years or more than that, is it fair to assume that the capability that we are creating, the capacity that we are creating has enough visibility to create one more Neuland in terms of numbers?
Did you understand? Sorry, I, could you just quickly repeat the question? I couldn't clearly understand.
Sure, sure. Sure, sure, I will. Am I audible properly?
Yeah, you was. If you could just speak a little loudly and a little slowly, and you can keep the question short.
Yeah, sure. Sure, sure. Saharsh Davuluri, we are in the peptide capacity peptide capability from last 16, 18 years. We are working on that. We have developed several molecules from basic to complex range. Now we are putting the capacity also. From an investor's point of view, seeing the company from 5 years and more than 5 years down the line, this category itself has.
Has the potential to create 1 more Neuland in terms of numbers. I don't want to know the name of the specific molecule, specific capability. Just what the company is building and how should investor look at it from a 5-year perspective. Is it fair to assume that this category in itself has a potential to create 1 more Neuland in terms of numbers?
Yeah, see, I think if you look at the market potential, you know, I think we've also had outside consulting firms evaluate this space before we committed to our peptide investment. We were told that it's a $5-6 billion, just the CDMO space, you know, $5-6 billion market opportunity. It has a very healthy CAGR as a industry because there's a lot of GLP-1s coming in. It's not just about the weight loss drugs that have been commercialized, but it's also about the next gens, not just from the large companies, but other companies as well. There is a plethora of development candidates which are peptides, and that creates a very attractive value proposition. I think the short answer is that it has the potential to create another Neuland for sure.
It may take a few years, it may take more than a few years. I think that really depends on the nature of the opportunity. I think from Neuland point of view, I think we are looking at this business as a current capability plus peptides. We're not really looking at leaving our, you know, small molecule capabilities. We are looking at adding that on. We think there's a lot of magic that can happen between small molecules and peptides. There's a lot of also work you can do on the small molecule side which feed into the peptide business. I think aggregately it will be a very exciting business model. How big this business can be, I think really depends on how the opportunities play out.
Our goal is simply to just be, you know, kind of, one of the on the forefront, at least from, you know, our part of the world and, make investments, be ready and create the opportunities. We really have to see how it plays out. You know, this is kind of like the CDMO story we were talking about five, seven years back when the CMS business was like, you know, 10%, 15% of our total revenues. We knew that it has potential, but we were not quite sure how it would scale up. I think we're in a similar kind of a situation with peptides where we believe it will grow, but obviously we also don't wanna get ahead of ourselves by, you know, making it sound concrete.
Thank you. The next question is from the line of Raghunath, an individual investor. Please go ahead.
Yeah. Good evening, sir. Sir, how we are using the AI for our operation for manufacturing processes? Are we gaining some advantage because of using the AI?
Raghunath, thanks for your question. I think at this stage, in terms of manufacturing, we are still exploring. I think there are certain areas in, say R&D and certain other operations where we have done a few pilots. I think that is where we are at this point of time.
I think, you know, there are three basic layers of AI, and I think the base layer, which is, you know, trying to, you know, get repeat tasks, or tasks which are, you know, kind of redundant, if you can get AI to use them. I think R&D is definitely one area, as Sajeev's talked. In manufacturing, I think the only area that we are exploring is if we can get AI to scan a lot of manufacturing data, and be able to point to where, you know, the root cause of, you know, investigations are. I think that's an area that's being explored. But, you know, I think it's still very early days for us, but we're very committed towards, you know, bringing in AI applications meaningfully into the business.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Good evening, everyone. Thank you once again for your interest in Neuland and for your questions, which helped us to also answer as well as think a little bit more about the business. Even as we probably haven't been able to answer all the questions in the queue because of the paucity of time, please do reach out to Ravi or Sribai in case you have further questions. With that said, good evening, everyone.
Thank you. Ladies and gentlemen, on behalf of Neuland Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.