Q1 26/27

Aug 10, 2026

Summary

Standalone Q1 FY27 revenue rose 42% YoY to ₹535 crore and PAT increased 49% to ₹71 crore. FY27 guidance includes 22%–25% standalone EBITDA margin and 40%–50% CDMO/CMO growth, weighted to H2.

Ladies and gentlemen, good day and welcome to the Aarti Pharmalabs Limited Q1 FY27 earnings conference call hosted by 360 ONE Capital Market Private Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Julie Mehta from 360 ONE Capital Market Private Limited. Thank you and over to you. Good afternoon, everyone. On behalf of 360 ONE Capital, we welcome you all to Q1 FY27 earnings conference call of Aarti Pharmalabs Limited. From the management side, we have with us Mr. Rajesh Gogri, Chairman, and Mr. Piyush Lakhani, Chief Financial Officer. I will now hand over the conference call to Rajesh, sir, for his opening remarks, post which we will open the session for Q&A. Thank you and over to you, sir. Yeah. Good evening, everyone, and welcome to Aarti Pharmalabs earnings call for the first quarter of the financial year 2027. I appreciate you taking the time to join us today as I walk you through our performance for Q1 FY27 and share key business developments. Let me start with the overview of our standalone financial Q1 FY27. The top line was INR 535 crores as compared to INR 375 crores a year back, showing an increase of 42% YOY. The EBITDA was INR 133 crores as compared to INR 95 crores in the corresponding period of the previous year. This is an increase of 40% YOY. The profit after tax for the Q1 FY27 was INR 71 crore as compared to INR 48 crores a year back, which was 49% increase YOY. Let me present a few business highlights. Aarti Pharmalabs operates across three key verticals, xanthine derivatives, API and intermediates, and CDMO/CMO services. The xanthine derivatives segment contributed to 51% of our turnover in this current quarter, and it recorded the highest ever quarterly sales of xanthine derivative. The volume split was 74% beverage customers and 26% other customers. In terms of geographical split, the sales skewed towards the export, which contributed to 79% and the local sales was 21%. The API and intermediate business stood at 30% of the turnover. The sub-segment-wise breakup was 58% regulated market, 14% rest of the world market and 28% non-regulated market. While we are working on the development of new molecules with the medium-term patent expiry, the pricing pressures in existing molecules remain. To mitigate these headwinds, we are starting a special project towards process intensification and cost reductions of existing products. The third segment, CDMO/CMO, has contributed to 7% of the revenue in this quarter. We are presently working with 22 customers and the number of active projects are now 57. Of which 37 projects are in the commercial stages while 20 are under different developmental stages, both at customer end and our end. Similar to previous years, the CDMO/CMO revenue is likely to be skewed towards the second half of this financial year. The remaining turnover of 6% is categorized as others, that includes trading sales, export incentives and other sales. Now, I will share the update on the CapEx. I am happy to share that Q1 FY27 marks the completion of couple of expansion projects. In Q1 FY27, we completed debottlenecking of the steroid block at Unit 4, Tarapur, which is our USFDA approved API production site. As a result, now we have additional 33% of our existing steroid capacity enhanced for this block. The additional capacity for xanthine derivatives, which started by the end of the current quarter, has also been commercialized and the trial production is ongoing for the final product. The incremental capacity will be ramped up through next few quarters, and we can reach 80% plus capacity utilization by FY28. Both phases of Atali Block 1 with 440 KL reactor capacity will become fully operational in Q2 FY27. Atali is majorly engaged in manufacturing of CDMO/CMO intermediate steps. Additionally, we have announced a CapEx of INR 149 crores towards Block 2 at Atali with 400 plus KL reactor capacity. Groundbreaking is expected in Q3 FY27 and the completion timeline is around 12-15 months. This block being dedicated towards a specific CDMO project is more cost-effective vis-à-vis multipurpose production block. This block marks another milestone towards our goal of INR 1,000 crore CDMO/CMO revenue. Conclusively, the business looks promising and offers substantial long-term value creation for all our stakeholders. Our strategic focus and operational excellence position us well to capitalize on emerging opportunities in the pharmaceutical sector and deliver sustained growth in the coming quarters. Now I request moderator to open the forum for Q&A session. 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 touch-tone 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 in the line of Dhruv from Vyomara Capital. Please go ahead. Hello, am I audible? Yes. Yes. Yeah. Congratulations on the good set of numbers, and thank you for the opportunity. My first question is on the Xanthine business. Could you please share the current domestic versus the export volume split in the business, and how is that trend going on, as you have increased the capacity? Where do we stand in terms of the global market share, if you can share? Yeah. Our current split in the current quarter is 79% export and 21% local revenue share. I think going forward also, as we ramp up our capacity utilization, the local market remains relatively smaller. Our share in export will continue to be higher. Yeah. In terms of utilization, I think we, as I mentioned, towards the end of next year, we will have more than 80% capacity utilization. Okay, sir. Also ask regarding the global market share, if you can share. We are aiming towards 20%-25% global market share with the enhanced capacity next 2 years' time. My second question is that within Xanthine, is the primary competition largely China-based, or it is fragmented globally? Roughly what share of the global capacity would you attribute to Chinese producers? China is a major competitor for Xanthine. I think overall capacity of Xanthine chemistry in China is quite significant. Barring few producers in India and Europe, I think largely almost overall competition, 80%-90% share is in China only. Last question. What would you consider a normalized through the cycle EBITDA margin range for the Xanthine business at full utilization, and how much of that is structural versus dependent on Xanthine pricing? We are just not normally guiding on the EBITDA percentage because we have a raw material pass-through generally that happens, and you have seen in the current volatility with this crisis of Middle East increase the raw material prices which we have passed on to a customer. That skews the EBITDA percentage number. I wouldn't like to guide there. But in general, we are at a company level in the range of 20%-25% EBITDA. Okay, great. Thank you so much. That was all from my side, and all the best for the next quarter. Thank you. The next question is in the line of Raj Aggarwal from Nivishe Asset Management. Please go ahead. Hello, am I audible? Yes. Yes. Thank you so much for the opportunity. My question was on the Xanthine side. Xanthine was roughly 57% of the Q. I wanted to understand if you can share a split between what was the volume growth and realization growth. Over last year? Yeah, compared to last year. Yes, sir. I have to look at the numbers. Probably, I think 25%. I will have to look at the numbers, and we will get back to you. Yes, sir. But directionally, wanted to understand, assuming that Q1 numbers were- Yeah. 25% is the volume growth over last year's volume. The value number, actually we'll have to see the last year's percentage. Okay. Got it, sir. And sir, with the supply chains now easing, do we expect that the realization might decline in this current quarter Q2? Realization per kg will decline. But overall, with the additional capacity, our sales will grow. Got it, sir. Right. On last quarter, you had flagged that basically we have this large upcoming CapEx that is coming online. Xanthine just came online and now we have this Atali plant which is going to come online. So those pre-op expenses might hit in basically Q1 or Q2. Those expenses we have not booked yet, right? We will be booking them in the next quarter. Yeah. No, we will start booking the expenses. So for Atali, we have already started booking the expenses for phase 1 of the Atali block 1. Atali block 2 phase, which is smaller reactor block, part block will get completed in the current quarter. So whatever the phase, Atali block 1, all the expenses will start hitting the books in the second half of this year. Similarly, in Xanthine also, the new site that we started, the brownfield additional site that we started at 99, mechanical closure happened in end of June, and now we have started the trial production. So with that also, the expense will start hitting in the current quarter. Got it, sir. My last question on CDMO side, that you mentioned that we are putting up a dedicated block for a particular project. Do we have 2, 3 projects in our pipeline on which, in future, long-term, we can put up dedicated blocks? Since we just completed one large CapEx, can we expect that this Atali plant can contribute meaningfully from Q3 onwards? Yeah. Atali plant, as we have mentioned to you, we are trying to In Atali, our first block was multipurpose block. Now we are trying to put a dedicated asset which is tuned towards few projects which are repetitive in nature for every year. On the basis of the same, we would always like to keep our multipurpose block free for newer projects in the initial phase. As the projects mature and we have visibility of these projects, we will move these projects to dedicated blocks. So that is the theory that we are using. We are happy to say that we have identified the products and the projects which have those potential, and they are moving to the dedicated block once we have the dedicated block commissioned in next year. Got it. Q3 onwards, we can expect this Atali plant to basically contribute to top line? Yeah. I think Atali will initially, as we have done, partly top line and partly, it will contribute towards the early stages manufacturing also, for which the final stages customers would like to buy from the existing approved sites. Atali is already contributing from the current quarter meaningfully towards overall manufacturing capacity utilization. Got it. Those are my questions. Thank you so much. Thank you. Thank you. The next question is from the line of Yash from Unifi Capital Private Limited. Please go ahead. Hi. Congratulations on good set of numbers. Just tracing back to the Xanthine facility. What would be the cost impact from Q2 onwards? Can you please quantify it? Cost impact for the new production site? Yeah, Xanthine. Cost impact, basically, we will be ramping up that facility quickly to the newly installed 50% capacity, and I think that would easily be able to take care of the increased cost which will happen there. I do not see significant P&L hit on account of that brownfield expansion that we have done. Yeah. Regarding the Xanthine realization, as you said, basically, right now the prices have dropped, right? For Xanthine, from the peaks which we observed during the conflict, May, June. Yeah. The prices keep on changing basis the raw material movement. Currently, the prices have come to lower levels from the peak. Okay. Another question regarding the, it is related to your gross margin. Going forward, what will be the sustainable gross margin now? Because I think we had flagged that there would be an impact of input and logistics cost on your API and intermediate business, and which will not be able to easily pass over. Going forward, what will be the sustainable gross margins? EBITDA margin, we have mentioned 20%-25%. Gross margin should be around 50%, plus or minus a few percentage here and there. 50%, right? Yes, on new levels. Understood. Just last question on your steroid block, I think we had done a debottleneck again, so I think that increased by one-third. Yeah. When do you expect the capacity to be completely utilized? Is there any update on any specific orders which we have got for sterile injectables? No, this is not sterile injectable, this is steroidal side. Sorry. Steroidal. We have already enhanced the capacity. Because we had a one and a half month break in the current quarter, I think going forward, we are fully utilizing the additional capacity of 33%. Okay. That is it. I will join back in the queue. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is on the line of Ankit Gupta from Bamboo Capital. Please go ahead. Thanks for the opportunity, sir. Sir, in this quarter, one thing on the margins is very clear, that the impact of Xanthine was there significantly. The price increase that we have seen, the realization increase that we have seen in this quarter, that had resulted in gross margins touching almost 56% and our EBITDA touching 25.4%. This is something which is not sustainable in the coming quarters, given the realizations have already started dropping for Xanthine. Is that the right understanding? That will be mitigated by the increased quantities that we start producing. As earlier I mentioned that we were operating at around 6,000 metric ton level of xanthine production, and now with the increased capacity of 9,500 metric ton coming into operations, I think overall, we will see higher sales and absolute gross margin will get sustained. The gross margin should sustain is what you're saying? Absolute gross margin. Absolute. Okay, got it. Sir, on xanthine, have we seen some pricing pressure coming down from China with the government there reducing the rebates on exports, and we see that the chemical prices across the board have seen some increase from China prior to the war also. Has that been the case in xanthine, and how should that have a long-term impact on this business of ours? Currently the benzene prices are at elevated level and they have not come to the normal level of pre-war. They are still at elevated level. Though they are not at the peak, but they are still higher than what they were pre-war, because a lot of raw materials are still much higher than what they were in the pre-war situation. Sir, and on this China anti-involution policies, has there been some impact there on benzene also? Yeah. In benzene also they have removed the rebate and due to which structurally the prices of benzene have anyway increased overall because they are not able to get the rebate. That was one factor which has helped us improve the overall margin in the spot market. Okay. Sir, on the API segment, we have been in this INR 160 crore, INR 165 crore revenue range, and in your opening commentary also, you have mentioned that the pricing pressure continues. We had some good launches that we had planned for this financial year. Yeah. How should we look at this segment going ahead? Do you think we will be able to go back to at least that INR 200 crore kind of quarterly run rate that we had seen last year, in last to last year, in Q4 FY 2025? Should we be going back to those levels? When do you expect to come back to those levels, and how are the margins in the segment? Of course, you don't give the overall specific segment level, but any views on the margins in the segment since we've seen a sharp, we've seen the revenues also coming down here. Yeah. Basically, the overall API generic intermediate business, that has two parts, API and intermediate. There, as I mentioned that we had a shutdown in a block to do the debottlenecking, and that resulted in some reduction in the current quarter. That will get normalized, going forward. We are also looking at debottlenecking of our anti-cancer block and we expect newer launches happening in the next year from that block. Overall, another key segment in this is intermediate. That segment will also, a few products have been successfully commercialized and we have undertaken that process intensification exercise in this process. Those also will meaningfully add to the top line and the gross margin. Overall, we expect, going forward, this business to do well, reasonably well from the current level. Okay. Sir, just last question if I can squeeze in. On the CDMO side, sir, two parts of the question. One is, as CDMO revenues have always been H2 heavy and primarily in Q4, but sometimes last year it was also through. Should we continue to expect the same trajectory going ahead also, that this year also S2 will do the heavy lifting for the growth of 40%-50% which we're expecting in the segment? Secondly, Yeah. Sir, secondly, since FY 2025, we haven't seen significant increase in the number of molecules. Of course, there has been some improvement in the number of commercial molecules, but overall in terms of molecules and number of customers, there hasn't been any material increase that we have seen. If you can also talk about why that is there and what is our pipeline going ahead, RFP conversions and overall view on increase in the pipeline for the CDMO segment. Yeah. CDMO segment continues to be very important segment for us. That is why we have guided for a 40%-50% growth, and we are quite confident that we will achieve that growth in this current financial year. Overall, if you see, this is a current number that we published, that how many active customers are there and how many active projects are there. There we deduct the projects that have been dropped by our customers also, which have failed or which they do not continue the process. This quarter we have seen overall numbers to grow by 3 projects totally, and one additional customer has been added. But if you see last 3 years, the number of commercial projects have increased from 21 to 37 projects. That is the key. We have been able to get into the projects which have become commercial, and the company is quite convinced about the growth potential. That is why we are investing almost INR 149 crore additionally over and above INR 450 crore expansion that we did in Atali, to ensure availability of capacity for these 37 projects that are with company. We are quite confident of this INR 1,000 crore target that we have set for us. Since you did not answer on this, CDMO revenues will continue to remain H2 heavy and- Yeah. That I mentioned in my speech that for the current year, this will be H2 heavy, second half. Yeah. Sure, sir. Thank you. Welcome back. Thank you. The next question is on the line of Shub Mehta from ICICI Securities. Please go ahead. Hello. Yeah. Yes. First is, just a clarification on the revenue breakup which you have provided. I wanted to understand, the breakup is on the standalone or console numbers because 6% Standalone. Then sir, can you give us the 6% of the contribution of other segment breakup, trading business, regarding what is it exactly? No. That is all the scrap sales and some other sales. Okay. Because we do group buying for the company, like solvents and stuff like that. Not much revenue or gross margin accretive. All right, sir. Second one, sir. Ganesh Polychem side. How are margins over there right now? PAT margin side. Yeah. Ganesh Polychem overall margins for the consolidation, we have added at INR 7 crores PAT number after rationalizing INR 2.5 crores of the dividend income that we got from the company. Overall Yeah. Just a follow-up over there, sir. How is business performing over there at that side? Yeah. We've had a strong quarter there, and we had good growth. We are quite happy that the business in this current fiscal looks strong. Yeah. All right, sir. I'll join back in the queue. Great. Thank you. The next question is on the line of Umang Gadha from Avanda Investment Management. Please go ahead. Hi, Amand. Yeah. Yeah. Thank you for the opportunity, and congrats on great set of numbers. I had one question on the margin side of things. Given that you mentioned that xanthine prices on the spot market have come down, you also have some pre-op expenses on your Atali side of things. On the EBITDA level, where do we see the margins headed for the full financial year 2027? Is it more towards 25% and maybe above, or it is more towards 22% kind of range? Yeah. It will depend upon how fast and how easily we are able to operationalize the expanded capacities that we are planning to add during the year. But we are still guiding for EBITDA margin of anywhere between 22% and 25% for the full year on a standalone basis. Okay. The reason to ask is that, you do not foresee an impact because of this war-related prices and higher raw material prices impact on the business, right? No. I don't. Largely, if you see this year, we have given a guidance of almost 40%-50% on the CDMO. That revenue will also be significant and almost become 20% of overall revenue of the company, and which is where we have higher gross margins. They will try to average out the overall EBITDA number. Understood. Last question on the API side of things. Yeah. In this business, we had a very great year in FY 2025, and 2026 was a very relatively less good year. Do we expect to cross the levels of FY 2025 revenue levels of INR 780 crores kind of thing, or we are just going to maintain some 30-odd percent growth on our FY 2026 level revenue? Yeah, I think the revenue internal target is to meet that number. But I think looking at overall environment and the launches and stuff like that, I think we'll be not able to cross it, but nearly there. We should be nearly there. Understood, sir. That is all my questions. Thank you, and all the best. Thank you. Thank you. Ladies and gentlemen, I request you to limit your questions to two per participant. The next question is on the line of Rahul Jain from Credence Wealth. Please go ahead. Thanks for the opportunity. Sir, congratulations on a great set of numbers. Sir, just to understand on xanthine, typically this quarter we have reported INR 305 crores of revenues, and given our capacity ramped up to expanded capacity, which will further ramp up in terms of the utilization. This year, and of course, you mentioned that there is a slight decline in the prices, but at the same time the prices are above the pre-war levels. How should we look at the sales for Xanthine this year? Can we look at the INR 300 and say maybe some decline in the prices being mitigated by your increasing production? Can we expect this year to be somewhere around INR 1,100 crores plus or minus INR 50 crores of sales from Xanthine? I think we have to wait and see how the crisis normalizes. I think that will have a bearing on overall pricing. I think it will be a range between INR 900 to INR 1,100 crore. In that range, I think anywhere it can land, INR 900 to INR 1,000. Can you specify what kind of price increase have already happened in the industry as such? Maybe you may refrain from saying for us, but overall, what is the prices increase which the industry has? The price increase is coupled with the raw material cost increase also. Overall margins per se will have a marginal impact. I think overall, if you see, we have also done the mix change. We are selling more towards the cola customers than the regular customers, because as our new facility is upending, we have a higher commitment to give more volumes to these customers. As the new capacity comes, it will be more on the spot pricing. That is how the mix has evolved in the current quarter. Okay. And sir, with regards to the block, which you are talking about CDMO, we are planning to do a CapEx. With that CapEx and the CapEx which got completed in the phase 1 as well as getting completed in this current year. Those capacities are built to reach our stated goal of around INR 1,000 crores of revenues. Yeah Potentially by FY 2029. We have to see when we reach it, but 2029 or 2030. But in terms of the current new block that we propose to put and the existing current block and of course, the manufacturing that we will have at Vapi, I think sufficient capacity will be there to meet that aspiration with the current block. With the current block also, currently we have only approved 400 KL, but we have capacity to increase that by another 200 KL, and that will depend on the new project getting matured. So we are going to keep that readiness on the civil construction part of the project, and that also has been sanctioned by the board. However, the equipment 405 KL only we are putting up, but the additional 200 KL equipment can be put up at very short notice. Okay. My understanding was the one dedicated block which you already announced now. There was one more dedicated block which you were planning, probably waiting for some approval. That is what we have announced. That is what we announced last quarter. I did mention about, we are thinking about this, and that got approved by the board. Yeah. So we have few good CDMO projects which are very promising future growth. No, I think I am talking about two dedicated blocks separately. We are putting up one, right? Yes. But we already have another 400 KL multipurpose capacity also available. Okay. The current block that we are putting up, we have currently approved for 405 KL, but we can still go up additional 200 KL. Existing 450 KL plus the 600 KL additional we can go up to. Which will be very large capacity. Okay. No, it is a double block. Rather than dividing into a smaller block, we are putting up a bigger block. Okay. Yeah. Sure. Thank you. Thank you. Ladies and gentlemen, I request you to limit your questions to two per participant. The next question is on the line of Sajal Kapoor from Antifragile Thinking. Please go ahead. Yeah, thank you for taking my questions. I have got two questions. One is, beyond the revenue growth, how has the complexity and value of the CDMO segment changed over the years? How is that progression reflected in the gross margins of CDMO segment? Yeah, good question. I think, since we started the CDMO journey five and a half years ago, a meaningful CDMO journey, I think we have grown almost 10x in that period. Initially we started with ISO product supply, regulatory starting material supply, KSM supply, and then we have moved to GMP supply. We have always been restricting ourselves to smaller molecules. Now we have also bagged certain projects where we are supplying API for initial tox batches and also for the initial clinical batches. In terms of chemistry skill sets, as I mentioned last time also, we have approved R&D lab, which can equipments in our research and development center where we can look at peptides and oligonucleotides. That is adding additional capabilities in near future to what company can do. Apart from that, we are also doing more and more green chemistry, flow chemistry and stuff like that. Overall, where we were, I think, five and a half years ago and where we are today is completely different. We are much more mature company, and we are operating all the manufacturing sites which are all approved by the large innovators. Two sites are USFDA approved for intermediate manufacturing as well. I think overall, we are able to build a good name in the CDMO market, where people have started recognizing what Aarti is capable of doing. With the recent hiring of CSO and then the team, a new R&D team also has helped us in overall pushing that agenda. That's very interesting. Thank you for that. Secondly, some of the larger Indian CDMOs report about 85% gross margins in the development segment. When the molecule goes commercial, they report 70%-75% gross margins in commercial manufacturing, depending upon how many steps, what complexity, et cetera. Question is, as Aarti CDMO business scales from 7% of revenue today towards more like INR 1,000 crores whenever we get there and beyond, how should we think about the structural opportunity for consolidated gross margins? We have got three segments. Xanthine is probably the lowest gross margins, then we have got APIs, and then finally the CDMO segment, which to my mind is the higher gross margin. Yeah. Overall, I think 85% and 75% margins, of course, those who are doing very early stage work, but there the gross margins are high, but it's more research work. We have to put up lot of R&D efforts. We specialize on the manufacturing side. If you see the way in which we have been able to increase our commercial portfolio, it's quite rapid. You don't see many company doing 37 commercial projects within such a short span. That's where, since we get into the projects during phase II, phase III changeover, and then the commercialization of the products, if they happen, we straight away have the commercial sales. This, our manufacturing specialization, helps the innovator to bring down the cost from the early stage suppliers that they have for the clinical batches. That is where our specialization is. We don't expect to be 70%, 75% gross margin currently unless we move up in the peptide segment and oligonucleotide segment, where it is very complex and more research-driven going forward. In small molecules, I think we are reasonably at 60%, 65% gross margin. On the commercial side, 60%. Whereas on the early side, we also have little bit higher margins in some projects, but we do limited stuff there overall. No, that's very helpful. I think even with 60%, 65% gross margins on optimal utilization, the EBITDA margins can be easily north of 30%. Again, it depends on the utilization level and how fixed costs are covered. I think 60%, 65% on a sustainable basis is a very healthy gross margin. Yeah. But one thing, overall, we have three business segments, and in combine we are pushing all the businesses to grow significantly. As I mentioned earlier that we want all the business to grow beyond INR 1,000 crores. Looking at that, I think xanthine, as I mentioned, will reach that number sooner. CDMO/CMO has few years, and also I think API also will take couple of years to reach there. So with all the three segments reaching that, I think we expect CDMO/CMO segment to go beyond 25%-30% overall percentage of the company sales going forward. Very helpful. Thank you so much. Thank you. Thank you. The next question is from the line of Dinal Mehta from AMC. Please go ahead. Sir, on the CDMO side, given our aggressive growth ambitions and CapEx, could you elaborate on the talent acquisition strategy driving this expansion, specifically on what addition have you made across your R&D scientific leadership team and global sales and business development team over last few years? What is the pedigree or domain expertise these hires bring in for Aarti Pharmalabs? Yeah. As I mentioned earlier during this current year, we have built a CXO model on the tech side. We have a Chief Scientific Officer, we have a CTO, we have a COO who operate our manufacturing assets for API and the intermediates as well as the CDMO/CMO segments and the R&D segment. We have right people hired, and of course, below which also we have built a team. We have a dedicated R&D team which has expertise in small molecules. Now we have also hired a few people on the oligonucleotides and peptides, and also we have a very good team on the scale-up side and the process intensification. These three are very important in terms of R&D. We run three R&D centers. We have an innovation center in Nerul, which is largely for the innovators, where we have more than 100 scientists sitting there. We have an API R&D center in Dombivli which we operate, and then we have a scale-up and the process intensification R&D center in Vapi. All these three R&D centers combined, we have more than 250 scientists working in our organization. We have quite a healthy pool of scientists and a very good team. In terms of BD team also, we are trying to enhance our BD team. We have a geographically distributed BD for CDMO/CMO, and we have people assigned towards different regions. We have a European lead, and we have a U.S. lead, U.S. and Japan lead. They work cohesively, and we also have a project management team which supports them so that they only engage mostly in the BD work. I think we have a good structure that is working well for us. What role did the scientists have 2 years back and now as the CDMO has scaled up? Yeah. The entire lab of CDMO we started 3 years back, and we have set up this entire 100 chemists only for the innovative work that we continue to do at our Nerul lab. Yeah. Understood. Thanks. Thank you. Thank you. The next question is on the line of Shubham Agarwal from Burman Capital. Please go ahead. Yes, thank you for the opportunity. Sir, my first question is on the prices trend of xanthine. Sir, there have been three different effects that are playing out. One is that Chinese rebates have been eliminated going forward from April 2023. Second is what we also understand is that, and that is based on the info provided by one of your Chinese players through their RHP, that there have been production quota cuts in China in the domestic market. And the third is that there has been a rise in the cost of the raw materials that you are consuming. Sir, let's say, pre-involution duty, your prices were X. Can you just help us understand where they are as of now, and how many of these factors in your assessment will be temporary in nature versus structural in nature? Yeah, I think the anti-involution duty currently looks like a permanent structural change, at least for the near term. For the next few years, I don't see that changing significantly. In terms of raw material increases, that is temporary, and that is basically tied up with the West Asia crisis. Whereas the quota tightening up of Chinese manufacturers that has been done by the government is to ensure a cap on the competition, because all the companies were bleeding in China, so they wanted to prevent it. I think that is structurally improving the overall xanthine business margins overall for us. I think with the capacity that we have now, we will have the second-largest capacity in the world of xanthine. I think for each and every consumer, we expect to have a volume share in their overall requirement, being the very large Indian source that we are. With that, the growth that we have predicted, currently we are operating close to 6,000 tons, and we are anticipated to go to 9,500 tons in a couple of years. Sir, let's say, if the prices have increased by any amount here, would you characterize 50% of it as structural in nature and 50% temporary, or would it be even higher temporary increase? Just in your assessment. I think it's very difficult to put that number, but I think we can go by 50/50. Understood. Sir, I just heard that you were saying that we are expecting INR 900-INR 1,000 crores of revenue in xanthine. What I understand is INR 305 crore in this quarter. So remaining INR 700 crores in the next three quarters. All in all, would you expect a step decline in xanthine revenues in the next couple of quarters, just because prices temporarily will revert? Or would you expect to maintain this quarter year and it going live? I think this quarter was exceptional in terms of the top line and overall, in response to the West Asia crisis, the prices of raw material had almost practically increased by 50%-100%. I think in the end of June and July, they have come to a little bit of reasonable level from 100% down to 25%-50% level. So there is already a change, and this will reflect on overall pricing because largely we have priced passthrough deals for the large customers. For the spot market also, it reflects overall pricing to come down. So with that coming in, I think the top line is anyone's guess where we will land. So we are just giving a broad range. Understood. Just one last question on CDMO. We have put up a INR 150 crore dedicated CapEx for some of our molecules. I just wanted to understand this dedicated CDMO block. Is it referenced by a customer booking your capacity in advance for one of the molecules they might be in commercializing stages, or is it more to do with your own visibility of a basis, few of your molecules? Is it for one customer, one molecule basis for near term, or is it fungible between at least one to two projects, basis different durations of time? Yeah, I think this block is going to be used as a dedicated block for manufacturing of a few projects. I think three to four projects will be done in this block for multiple customers. A little bit of flexibility we will have in between because of skewed nature when they would like to take certain quantities and when they may not like to take. But I think we have quite a good visibility of what kind of requirement combined can go with those projects that we have, and current capacity that we have would be multipurpose and inefficient and insufficient to meet that number. Not inefficient, but basically over, because for each and every reactor, we have multiple sets of flexibility that we create, which need not be there for this dedicated block. So rather than creating additional multipurpose, we decided to create a block which encompasses these changes due to dedicated nature that we are only going to do few stages in those dedicated reactors. So which makes the CapEx a little bit more efficient, and the process also optimizes a bit because we take care of the need of the process and tweak the machinery accordingly. Okay. So that's the advantage that we have. But sir, we would have visibility on projects which in itself can become INR 200 crores, INR 250 crores per month. We do have some sort of those projects in pipeline. I would not like to comment on number, but we have visibility of course. Understood, sir. Thank you so much for answering my questions. I am good, sir. Okay. Thank you. The next question is from the line of Abhishek from Padmaja Investments. Please go ahead. Am I audible, sir? Yeah. Yes sir, you are audible. Please go ahead. Regarding this new CapEx study, new capacity that got commissioned, when do we get that facility audited by USFDA or EU GMP? Is it necessary or not? Yeah, I think, see, the Atali facility that we have started, there is no mandatory requirement of USFDA to get it audited. It has been already audited by our innovator customers, and they have approved the site for manufacturing. Whereas in case of the Anten facility, is largely for the food requirement that we have enhanced the current capacity that we had at the Brownfield site, and that also doesn't require USFDA approval. Overall, both the sites that have become operational in last 6, 8 months don't require USFDA approvals as such. Okay. Another question is that on this xanthine side, will you be allocating more capital going forward also to that division? Since it is a commodity and you are trying to focus more on the CDMO part. I am trying to understand the capital allocation as in your strategy. Yeah, I think with the current expansion that we have done, we will be the second-highest manufacturer of xanthine in the world, and I think we feel that this will be good enough for us to have this capacity for next few years before we put additional capital in that. However, we will not rule out cost-saving projects and stuff like that which have lower payback period. Okay. Last question, sir. This will be last question. I remember your last presentation where you mentioned that 7% of the R&D expense as a share of API intermediates and CDMO revenue is the expectation. In that, majority of it, is it allocated towards CDMO or towards the API intermediate one? I think it is split between both. Yeah, between both. The number looks high, so I am also trying to understand if it is towards paying old APIs and it is API- I think more towards CDMO. Okay. Going forward also, we can expect the same range? Yeah. Will it be towards lesser than 5% out of that? Yeah. More than 50% of that will be for CDMO. Okay. Thank you. Thanks a lot. Thank you. Ladies and gentlemen, I request you to limit your questions to one per participant. The next question is from the line of Pritesh Tedha from Lucky. Please go ahead. My question is with respect to CDMO. This 149 crore of dedicated project with 400 KL and another 200 KL possible expansion. Can you tell us the ramp-up plan, at least for this dedicated project? My guess is here you will have some visibility on the commercials of that volume. Overall, my guess is you guys have invested now about INR 600 crore as CapEx. Right, 450 and this 150. This INR 600 crore of CapEx translates into what kind of asset turnover? Yeah. I think asset turnover will be in excess of one. I think around one. In terms of overall capacity utilization, meaningful capacity utilization, because this plant that we are dedicated, facilities that we are putting up will start in next financial year, end of next financial year, second half of next financial year. I think it will get reasonably occupied in a one and a half years' time post that. We expect this to meaningfully help us reach our target of INR 1,000 crore. Yeah. In terms of top line. That one-time asset term is on the whole INR 650 crore, you are saying? Correspondingly, you have INR 1,000 crore ambition. Yeah. Then we need to put in some more capacity. No, we already have our Vapi site also, which has a 600 KL capacity, out of which partly is dedicated towards CDMO. Currently 450 KL is there, another 400 KL, and I think the current block we have kept another 200 KL flexibility. Which will also require additional money. But rather than building two blocks, we have decided to go ahead with one block where we can eventually ramp it up to 600 KL. But currently we have a visibility of 400 KL, but I think civil we are going to keep ready so that within six to nine months, we can ramp up additional 200 KL also. Mr. Pritesh, I would request you to rejoin the queue for a follow-up question. Ladies and gentlemen, I request you to limit your questions to one per participant. The next question is from the line of Julie Mehta from 360 ONE Capital Market Private Limited. Please go ahead. Yeah. Thank you. So sir, I had one question relating to Xanthine and CDMO. Basically, given that Xanthine contributed to around 57% of revenue, while CDMO has fallen to around 7%. We observed that margins have remained stable year-on-year. Should we expect that margin expansion to improve as CDMO revenue recovers? Or does that mean that profitability profile of Xanthine has improved enough to offset the lower CDMO contribution? I think overall, if you see all the manufacturing companies, their profitability in the current quarter looks a little bit higher because of the impact of raw materials which have been procured at a lower number and sales that we have been able to push up. So that has resulted in little bit of higher margin for the current quarter, but that will get normalized for the Xanthine range of products going forward. I think, in terms of CDMO also, as it moves towards the second half, I think there we will see a ramp-up of margin in CDMO because we expect almost significant sales happening there. I think overall, this year we will see more stable quarters rather than more up and down happening. Okay. Yeah. Okay. Regarding the CDMO decline, was it basically because of project timing or lumpy commercial shipments or maybe there were changes in customer demand. How do we look at it, sir? If you could throw some light on it. No. CDMO, we have guided. We hold on our guidance of 40%-50% growth over last year. Last quarter also, we had quite significant sales of CDMO. In the current year also, due to the accounting standard, we had some postponement of sales also because of the non-billings and stuff like that, which could have resulted in sales in this year. Looking at overall, I think we are not concerned about lower sales in this quarter, but I think over the next three quarters, we will build it up, and we will get that growth number. Okay, sir. Sir, just one last question. In terms of API, where are we seeing the strongest traction fitting in? In which areas, like oncology, steroids, respiratory or hyper products. How do we look at that? See, the company is uniquely positioned, and it has the capability of doing anti-cancer projects. It has the capability of doing steroids, and also we do more lifestyle drug projects. Whereas we anticipate more launches in anti-cancer happening in the coming years, where the growth can come. That is why we have taken an expansion of our block 3, which is our anti-cancer block, and almost the capacity will be ramped up significantly there. Whereas in case of the lifestyle products also, we are adding few more products there, which are anti-diabetics nature and which have commercialized and going forward, they will ramp up. But of course, as you know, due to the long and strong pressure on the pricing and as I mentioned in my speech, that we are targeting process intensification and operation intensification and cost optimization exercise going forward. That will result in positive margin and our ability to sell those products more. All this will result in positively, I think in next six months' time and we will be able to grow this business also going forward. Okay, sir. What kind of margins do we look for API business on a blended basis? Just approximate range would also work. Gross margin level, we are at around 45%-50% gross margin. Okay, got it. Thank you so much. Yes. Thank you. Ladies and gentlemen, I request you to limit your questions to one per participant. The next question is on the line of Abhi Singh from Schroders Capital. Please go ahead. Hello. Yes, sir, you are audible. Please go ahead. I think that's No, I think it was from the management side. Management side, yeah. We can take next question. I think probably we can take that last question. If we have one question, that we can take. The next question is from the line of Ashish from Leo Capital. I request you to limit your question to one per participant. On the API business, what is the share of our top 5 or top 10 molecules to overall sales? Would we be supplying it to domestic, international market? What sort of global market share do we have in these molecules? I think the top 10 products would be close to 60%-70% of our sales. Okay. What would the share of API, and this is in domestic or international, sir? International and domestic both. Okay. What sort of market share would we have in these top 10 molecules? Top 10 products will be between 10%-50%. 15%, sir? Fifty. Okay. Okay, sir. Thank you. Thank you. The next question is on the line of Manan Desai from Kotak Capital. I request you to limit your question to one. Please go ahead. Hi. Good afternoon, sir. My question is on the API side. I think you mentioned about some kind of a closure because of the debottlenecking of six weeks, I think. So now currently we are at INR 160 odd crore this quarter for API revenue. Do you think that we should be able to do INR 180 plus with the debottlenecking behind us? And with the capacity now with debottlenecking on the steroid side, and I think you are also thinking about debottlenecking on the anti-cancer side. So with that in place, do we have enough capacity to go to INR 1,000 crore on API or we need more CapEx for that? No, I think we won't need any more CapEx for that. I think we will be good for INR 1,000 crore plus with the current debottlenecking exercise that we have done for steroid and ongoing exercise for anti-cancer products that we have. Then we have the block 5, which we have also additional line that has come up there. So with all these three initiatives, I think we are good for now for the requirement of for achieving INR 1,000 crore plus going forward. And sir that question on debottlenecking, that if it was not there, would I have crossed INR 175 crore? Yeah, we should be in that range of INR 170 crore to INR 190 crore, anything in that range going forward. Perfect. Thank you. Thank you. Due to time constraints, we take that as the last question. I now hand the conference over to the management for closing comments. Yeah, I would like to thank all the participants for taking the time. Good evening. Thank you. On behalf of 360 ONE Capital Market Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.