Ladies and gentlemen, good day and welcome to the Akums Drugs and Pharmaceuticals Limited Q1 FY 2026 Earnings Conference Call hosted by Ambit Capital 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 the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Nair from Ambit Capital Private Limited. Thank you, and over to you, sir.
Thank you, Anushka. Good afternoon, everyone, and welcome to the Q1 FY 2026 Earnings Call for Akums Drugs and Pharmaceuticals . From the management, we have with us today: Mr. Sanjeev Jain, Managing Director, Mr. Sandeep Jain, Managing Director, Mr. Sumeet Sood, CFO , Mr. Sahil Maheshwari, Head of Strategy, and Mr. Ankit Jain, who handles Investor Relations. I now hand over the call to Ankit to take it forward. Over to you, Ankit.
Thank you, Prashant, for the introduction. Good afternoon, everyone. Welcome to Akums Q1 FY 2026 Earnings Call. I'm Ankit. Let me draw your attention to the fact that on this call, our discussion might include certain forward-looking statements, which are predictions or projections of future events. Our business faces several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied in such statements. At Akums , we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new confirmation, future events, or otherwise. Having said that, I hope you have all gone through our investor presentation and financial results that we posted on Friday. I would now like to hand it over to our Managing Director, Mr. Sandeep Jain, to discuss our calls. Thank you.
Thank you, Ankit , and welcome, everyone, to our Q1 FY 2026 Earnings Call. This date marks just over one year since we began our journey as a listed company. We continue to work towards strengthening the organization with a focus on long-term growth. I will commence with a brief review of the industry environment before sharing perspective on the business. The first quarter of FY 2026 continued to see traffic volume growth, with industry volume growth of below 0.5% and ICM growth being driven largely by price growth. The weakness seen in API pricing also continues. On average, the API prices have declined 10%- 12% in the last 12 months. However, Akums continues to forge ahead and maintain its leadership position in the domestic CDMO industry.
Despite the hindrances and long-term growth perspectives remaining intact in Q1, Akums reported growth in both revenues and profitability. R&D remains the backbone of the company. We achieved the milestone of cumulative 1,000 DCGI approvals for this group in Q1 FY 2026. During the quarter, we received 27 DCGI approvals. This is a significant improvement as compared to 31 approvals we received during the entire last year. DCGI approvals are new formulations launched in India, which help to improve our product mix and offer better margins. As the competition is limited, during the year, we received DCGI approvals for trelagliptin tablet, relugolix tablet, dapagliflozin+ linagliptin+ metformin tablets, naftifine cream, including others. We were also granted one patent this quarter for our niche formulation of tablets. In tablets of doxylamine and pyridoxine for management of nausea and vomiting during pregnancy.
Additionally, we filed 24 new patents this quarter in our CDMO business. We further commercialized triple-layer tablets for the first time this quarter in a novel formulation to improve patient compliance. We continue to take steps to become a global CDMO. We received approvals of our first European dossier approval for rivaroxaban, INR 15 billion+ market globally. We also filed our first dossier in Switzerland for dapagliflozin+ a combination. We received the ANVISA Brazil approval for our injectable plant three and GMP Russia for our hormone plant four. The progress of our European contract continues to be on track. This includes product development, scale-up, plant upgradation. The European GMP order for the plant is expected this quarter. We will begin commercial supplies from April 2027.
As informed during the last call, Akums has received EUR 100 million as part of the part consultation for the European contract this quarter. Consequently, our cash surplus stands at INR 1.518 million croress. The strong liquidity position provides a robust foundation for Akums to strategically scale up its business operations through both organic growth initiatives and inorganic opportunities. Our recent CapEx on newer facilities has started to ramp up. We are gaining traction on our dedicated Pan Am facility as well as our second dedicated injectable facility. Our Baddi facility will commence commercial supplies of liquid this quarter in H2. We will commercialize oncology products from this site, and in Q1 next year, we will start Zerodol block . We strengthened our leadership team this quarter with the addition of senior executives in IT and Finance.
We are also taking multiple digitalization initiatives across HR, R&D, quality, and other functions. Coming to the quarter, while CDMO volumes grew faster than the market, they were modest at 1%, driven by continued slowdown in the overall industry. Overall, CDMO revenues grew by 4% despite a 2.5% impact of lower API prices. The growth was led by better product mix and the amount of our strong R&D offerings. Operating margins remained healthy at 14.7%. We continue to aggressively work on turning around our API business. The API losses reduced by 50% compared to Q1 last year. We are on track to file three CEP dossiers over the next 12- 15 months. The CEP filing for cefuroxime axetil is on track. Validation has been completed for the CEP filing. cefuroxime axetil's validation has also been completed for Brazil filing.
During the quarter, we marked our entry in the Nigerian market and cephalosporin APIs. With cephalosporin API, our domestic branded formulations, despite the weaker growth in the quarter, are expected to continue the healthy growth trend backed by an attractive portfolio focused on chronic treatments across gynecology and cardiodiabetes. We continue to invest in enhancing field force productivity and expand reach to specialists in keeping with our growth aspirations. In the international branded formulations business, we continue to build capabilities across our focus market. We received 20 new dossier approvals this quarter. This is a focus segment for this group. The consolidation in the trade generics segment continues as we are doing protracted efforts to bring down the losses. Let me turn attention to our performance now. We saw overall incoming growth at 2.5% during the quarter, year-on-year.
Revenue growth in CDMO came in at 4% year-on-year, resulting in revenue of INR 813 crores. Domestic branded formulations have shown 3.4% year-on-year growth to INR 107 crores. International branded formulations showed 3.8% year-on-year growth to INR 23 crores. Total EBIT improved 19% year-on-year, while operating EBIT improved 4% driven by better gross margins. Looking ahead, we remain focused on strengthening our CDMO leadership, scaling high-value capabilities, and driving operational excellence backed by a strong pipeline and prudent capital allocation. We are well positioned to deliver sustainable and profitable growth in the year ahead. With that, I would like to hand over to our CFO, Mr. Sumeet Sood, for the discussion on financials.
Thank you, Sandeep Jain, for the detailed explanation on the business. Now, good afternoon, ladies and gentlemen. I'll take you through the financial performance of the company and the highlights for 30th June.
Our total income stood at INR 1,051 crores, an increase of 2.4% year-on-year, and a decrease of 2.1% quarter-on-quarter. During the quarter, we recognized our presence in the API and trade generic segment, leading to a reduction in revenue in these segments. The reported EBITDA for the quarter was INR 156 crores, an increase of 19% year-on-year and 40% quarter-on-quarter. Margins stood at 14.8%, expanding 208 basis points from a year-on-year basis and 443 basis points on a quarter-on-quarter basis. If we look at the EBITDA without the other income, which is on account of interest income that the company had on the amount Sandeep Jain just mentioned, which was our net surplus, the EBITDA stood at INR 129 crores, an increase of 4% and a 37% growth, which is on a quarter-on-quarter basis. The adjusted EBITDA margins were at 12.6% overall.
The adjusted PAT stood at INR 65 crores, an increase of 13% year-on-year, and an increase of 48% quarter-on-quarter. I will now take you to the segment-wise financial performance. If you remember, we've broken this up into five segments, and that is where the CDMO, the branded formulation, exports, trade generic, and API. The CDMO revenue stood at INR 813 crores, an increase of 4% year-on-year and a decrease of 3% quarter-on-quarter. Revenue remains modest due to continued decline in API prices. EBITDA for the quarter for the CDMO business was INR 119 crores, a decrease of 1.4% year-on-year and an increase of 35% quarter-on-quarter. The company was able to maintain the EBITDA margins of 40.7%, driven by improved product mix. Domestic branded formulations, if we look at the details, revenue stood at INR 107 crores, an increase of 3.4% year-on-year and 3.7% quarter-on-quarter.
EBITDA for the quarter was INR 16 crores, an increase of 18% year-on-year and a decrease of 29% quarter-on-quarter. Overall, EBITDA margin for the year is expected to remain similar to last year at around 18%. International branded formulations, the revenue stood at INR 35 crores, an increase of 2.4% year-on-year and a decrease of 12% quarter-on-quarter. Despite the weaker growth, we continue to expect high-beam growth in this segment for the full year. EBITDA for the quarter stood at INR 8 crores, an increase of 8% year-on-year and a decrease of 8% quarter-on-quarter. EBITDA margins remain healthy at 23%. The revenue for the API business stood at INR 45 crores, a decrease of 35% year-on-year and 10% quarter-on-quarter. As mentioned in the previous quarter, we are keeping our focus on only the few molecules with higher gross margins.
EBITDA for the quarter stood at -INR 6 crores compared to INR 12 crores, which was in the last quarter. We continue to work on cost optimization. Trade generics revenue stood at INR 23 crores, a decrease of 21% year-on-year and an increase of 4% quarter-on-quarter. As mentioned earlier, our focus is on recognizing the underperforming units while retaining the profit-making ones. EBITDA for the quarter stood at -INR 5 crores as we continue to take certain provisions in this segment. Our current exposure on inventory and receivables is at INR 54 crores and our working capital investment is INR 18 crores. Our balance sheet is very healthy, as you would have all seen. We have a cash surplus of, as Sandeep Jain mentioned, INR 1,518 crores.
We had a positive free cash flow of INR 935 crores, which was partly on account of the money we received from the EU contract. Overall, the business continues to remain strong, supported by a solid CDMO segment, a promising pipeline, and, as I mentioned, the healthy financial position. From our side, we can conclude the financial highlights for the quarter. We would request to open the forum for question and answer session by the moderator. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets by asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of [Rehan Sayers from Three Nebra Asset Managers]. Please proceed.
Good afternoon to the team, and thank you for meeting with our council. Sir, I have just two clarifications on the question of mine. First, on the EU-related approval side, am I on the right?
Not clear. Your voice is not very clear.
Now, sir, am I audible here?
Yes, we would request you to speak slightly slowly so we can get you.
Sure. Sorry. You have mentioned receiving the first European dossier approval for EUX7 and filing a capital approval in combination with Niger and Switzerland. Could you share the expected revenue potential from this launch over the next three years? How does commercializing pipeline look beyond April 2024?
Sure.
Go ahead, [Prashant].
Right. Should I go question by question, or do you wish to shoot up the second one as well?
As I wish. Can I add my second question also?
Yeah.
My second question is on the R&D side. On the R&D, Akums has a diversified portfolio of long-review dosage forms. Which tool works or through which tool works really technologically expect to see the stronger customer adoption in the next 12 years or by?
Sure. So. On the European dossiers, as we have a strong pipeline of over 4,000 molecules, formulations in India, we have started building a pipeline for the European market. As we speak today, we have over 15 products which are in various phases of pipelines. The first one, which was of rivaroxaban, has got approval. Hopefully, this calendar itself, we should be able to commence the commercial supplies of that order as well. As you know, we don't still have a field force in Europe. This is still based upon large companies or large distributors or players who participate in regional or national tenders to get us the order. I cannot really put down a number of what will be the overall size, but rivaroxaban, which is Xarelto, is a large molecule globally. We expect it to continue.
Dapagliflozin, again, serves a large market in the diabetes segment, and its combination along with metformin is something we will file, we have filed, and we'll get approval soon. Similarly, we have multiple products in tablets, hormones, liquids, which are under various phases of development and will get filed subsequently. As you would understand from our initiatives, Europe, across our own brands and across CDMO, is a key focus for the group over the next five years. Apart from just Europe, we have also received the ANVISA approval for Brazil, as well as GMP approval from Russia. These are the additional geographies we are targeting.
Right.
On the R&D technologies, which you say, this is on the molecule and not necessarily on the technology. While we have technologies, which are almost 20, 25 technologies, which we have in-house, which help us to get the product faster to the market, these are our platform technologies and help us build dosage forms. For example, this year, we commercialized the triple-layer tablets. As you would remember from our annual presentation of FY 2025, we really portrayed that our niche formulation, the share of our niche formulation is growing compared to the simple dosage forms. The whole idea of getting technologies and R&D is how can we increase the share into the niche dosage forms, which helps us attract customers, retain customers, and deliver a better margin profile.
Right. Okay, thank you for your clarification and good luck for your.
Thank you.
Thank you. Before we proceed with the next question, a reminder to the participants, in order to ask a question, please press star and one on your touchtone telephone. We take the next question from the line of Vivek Agarwal from Citi group. Please proceed.
Yeah, thanks for the question. First question is related to CDMO business, right? The growth was, again, muted around 4% or 5% kind of thing. How to look at full-year growth in this particular segment and what are the trends or the KPI pricing is concerned on the overall industry volumes are concerned? Actually, if you can highlight. Thank you.
Sure. Vivek, hi. Two things, I think. One is you're talking on the pricing of the API. API pricing continues to remain soft, right? What we did was we looked at our large buying APIs, the top 200 odd APIs, and forward really is the trend. What we saw was a double-digit decline in the last 12 months only. On top of it, add the decline which happened a year before, right? That continues to remain soft. On the full-year guidance for this CDMO business, I will still have nine months to work hard on this. I think what the guidance which we initially gave was a mid to high single-digit growth in the top line in the CDMO business, right? What we observed in Q1 was a 2.5% decline in our API pricing led to growth, right?
While that growth is still achievable, I would rather say from mid to high, we would target a mid growth as of now, mid single-digit growth as of now.
Understood. Thank you. We have also seen a marginal dip as far as the margins are concerned, right? 15.5% to around 14.7%. What has led to this?
I think this is quarterly, I think, a blip. As we also mentioned earlier, this business is really looked at at an annual level. A 14%- 15% margin is what we usually deliver in this business. That should be the zip code in which we operate.
Just one more question. As far as the volumes are concerned, next year, we will see in India a launch of semaglutide by multiple players. How are you placed in this particular segment? Are you expecting any kind of volume pickup next year on account of the product launch, etc.? You can throw some light on it.
Sure. One is on semaglutide. Semaglutide really is a value, not a volume-driven prototype. Can semaglutide really pull up the volumes in the market? No, right? The volume will still be driven by mass therapies. On our play in this segment, that is not really the core segment we are focusing on.
Thank you. Thank you, guys. Thanks so much.
Thank you. The next question is from the line of Madhav from Fidelity. Please proceed.
Hi. Good morning. I'm Madhav. My first question was on the CDMO business margins. Given that API prices, you know, have been coming down, that obviously impacts the top line growth for us, which you're saying could be mixing a little bit this year. If API prices are lower, shouldn't the percent margins for us start moving higher just mathematically? Is that the right way to think about the margin profile and, yeah, how that could be?
Sure, Madhav. The margins that we get in this business are a cost plus on a percent basis, right? For example, if on a certain dosage form I make a 15% margin, that 15% stays, right? If the API prices move from 100% to, let's say, 90% today, my 15% would remain, right? That's not how the maths work at the factory, right? We have fixed expenses across power, fuel, manpower, and so on, right? The constant effort is how do we increase our product mix wherein instead of a 15%, can I have a product which commands 18% of margins, right? That way my net margin improves. Secondly, around the cost reduction and the optimization initiatives, which are an ongoing process across the group, how do we sustain our margins.
Sure. Sorry, your guidance for FY 2026 to how much?
As I said earlier, replying to Vivek, given the API prices, what we saw in Q1 declined by almost 2.5%, and it still looks very soft as we speak in August. They still continue to slide, right? We are targeting growth. Obviously, growth should come, but it should be in single digits only.
Okay. Got it. The second question was on the export business. In the presentation, when you have given international branded formulations of INR 35 crores, that's basically the export CDMO business or the export CDMO business was captured in the CDMO segment itself? Where does that revenue get captured today?
Exports for CDMO is anything we do in India or exports. The international branded is what we classify as a segment. Branded is our brands.
Correct. Okay, what we're doing as a CDMO in Europe today, that's part of the CDMO segment?
Correct. We still have to recognize the revenue in that. We still, as I said, have to recognize we recently received the first approval of rivaroxaban. We still have to recognize revenues in it.
Okay. Got it. Could you give some more sense around the business potential in Europe? Basically, could you explain a little bit about the business model as well? Like are we sort of going into the large Indian generic companies who have presence in these countries and we sell via their front end, or you know how does it work? What's our competitive advantage in this market? Do we have a lower cost structure versus many large Indian generic companies operating in Europe today? Do we have a lower cost structure or what's our sort of strength there?
What we have identified are three levers wherein we can play in the European market, right? First is I still don't have a field on ground, and my core strength as a group always has remained manufacturing, right? Our first lever is it is CDMO, what we'll do as a group largely in the European market. That is one business model. The second is focusing on products and molecules where there is limited competitive intensity, right? As we said, we have received for rivaroxaban, right, dapagliflozin, which is a large untapped molecule. We have few products in pipeline across the hormonal range as well, for which the EU GMP is expected over the next six, nine months, right? Playing in markets where the competitive intensity is low, that is our second theory behind it. Third is tapping clients not just in India, but outside as well, right?
One easy breakthrough out could be we tap Indian customers, right? With the quality of products, the history of manufacturing services, and we serve MNCs as well in India. To your question, we are not just very go getting on the Indian players as well. We have our teams which regularly visit the European markets, and we are open to any sort of collaboration, whether with Indian or a European or an American player in Europe.
Yeah, do we have a stronger cost structure in the supply because as the molecules you're mentioning, like dapagliflozin, etc., they're very large molecules. I'm sure many generic companies would be targeting as opportunities in Europe.
Obviously, this is all backed by a strong cost advantage that we drive.
Okay. This last question, if I can, on generic semaglutide, which obviously could be more of an injectable kind of place. Are you saying that when generic versions of this product get launched next year, are we planning to be in this product at all, or we will not focus on this product? Just wanted to understand how we position ourselves. Thank you.
Right. No, this is not a core segment for us.
Even on the.
Right. The reason also I'll say because this is a question which comes again and again. I think there are two reasons for it. One is that most of the Indian combination players are doing it in-house only, right? The total addressable market for a CDMO gets squeezed down. That is one which limits my business case to set up a cartridge facility basis, right? We'll see how this market moves and grows. If necessary, we'll probably do one or two years down the line and then decide how do we capture this market. As of today, this is not the priority one molecule for us.
Okay. If I can just one more follow-up here, in the domestic CDMO business which we have of INR 3,200 crores last year, how much of this was anti-diabetes therapy for us, you know, where we do the SGLT2s, DPP-4s kind of therapies?
Honestly, in our SFT, we've tagged brands and not human molecules, right? It has to be tagged to therapy. While we don't do it, what we did during our IPO times, I can probably share that this completely reflects the IPM only. Whether it is anti-infective, gynae, cardiodiabetes, it is largely within the - 10% of a therapy which is there.
Okay, thank you.
Thank you. Before we proceed with the next question, a reminder to the participants: in order to ask a question, please press star and one. The next question is from the line of [Avinish Verman from Vaihkaria]. Please proceed.
Yeah, hi. Thanks for taking my question. One is on the European filing. Sahil, if you can just explain how the MRP process works, the mutual recognition process, how does that work in that geography?
Sorry, can you please repeat? I did not fully understand your question.
There is an MRP process, mutual recognition process, where if you get approval from one member state, then you can use that to apply to various other member states.
Yes, that is there. Once you get it, it is dependent on country to country. Some countries, you have to have a local QP release, right? That is where you need a local pharmacist to do it. Other countries accept it, right? It gets extremely swift and easy once you get approval from any of the countries which accept the EU GMP and the dossiers, including the non-EU states like Switzerland. Once we receive approval, everything falls in track. For some countries, it is EUR 5,000, EUR 10,000, and so on. We just have to file the registration fees, and it continues to that geography as well.
Is there a timeline that the regulatory authorities say that within these many days, I mean, they are liable to receive approval?
Honestly, I don't know this. Maybe we can take a look at my record and get back to you.
No worries. No worries. Second question is that when you are filing in Europe, I just wanted to understand what model you're calling. I mean, are you like filing your own dossiers and then partnering with a distributor, or you're partnering with a front-end pharma company? Between these two models, what is the basic difference?
Sure. If you remember, two board meetings back, we got approval to set up a subsidiary in Europe, right? We are already in the U.K. market, which is post-Brexit, out of the European Union and in Europe. We will follow two models. One is where we do a co-development with the client, right? Wherein the dossier will be owned by the clients in certain geographies, and in the rest of the geographies, we will have that dossier. For some dossiers, the MA will be exclusively held by us. The current one which we received is with the partner model. Gradually, as we proceed and we have a larger portfolio, the MAs in Europe will be held by us. We already have a company, Akums Healthcare UK, registered, wherein we will leverage to register the MAs and then tap the local large companies, distributors, tenders to scale up the product.
Okay. In the cases where the MA will be held by you, how will you market the product? Will you give it to the distributor, or how do you plan to basically sell the product?
There can be no one answer to this, honestly. Depending on the country, depending on the product type, depending on how much is the private level of take, maybe at the booths or other pharmacy stores, this might differ. The bottom line remains that we will have to maximize the uptake from that product.
Okay, thank you. I'm done, sir.
We take the next question from the line of Harsh Bhatia from Bandhan AMC. Please proceed.
Yeah. Thank you. What do you mean?
Yes.
Yeah. This one, on the European market, just one clarification. I understand that there will be a co-development module which you just mentioned, as well as of three molecules going forward, which will be on those years, which will be on their own name. How would the pricing be decided? Because from what I could understand from your commentary was that these will be tender-based contracts, which is why you're not giving out a guidance. That's okay. The pricing part can be linked to how the tenders pan out to that extent, or it will broadly be a cost-plus model that we follow in the India market? Plus, how would the margins for the European markets kind of look?
As I said, this will be across private market as well as tender markets. Some countries like Germany have a strong tender system of procurement. You have clinical commissioning groups in the U.K., which procure regionally for counties. Then you have the rest of the markets wherein you have a large private market, right? This will be a mix of whether it is which channel it really goes through. The margins, obviously, will be better than the domestic CDMO margins that we currently generate. Yeah, that's broadly around it. As we, this has to really show up as we build. If I now talk maybe three to five years down the line, what we target is to have at least 10 dose years in the European market, which we own and are sizable in nature.
Depending on whether it's a target market or tender market, your pricing strategy or cost-plus model will keep on changing. That would be the share of our ship.
In Europe, what we have realized honestly is cost-plus is a limited part of the model. Largely, it is a fixed pricing, whether it's a private market or a tender market, right? That's how the margins move. If you really track other players as well, introduction of a new player or API pricing usually does not impact the output prices, but usually impacts the margins of the formulators, right? That is largely how the model moves in the European market.
Okay. Just one last clarification thing. Bigger contracts that we had, which will start, I think, from July 28 or July 27, rather, that is also on a fixed cost model?
Correct. That's a fixed cost CDMO model where the market authorization is completely belonging to that client. We don't own that dossier as well. That is not the model we were talking about earlier where we file it. That is a filing that will be done at the client for their established plan, which is currently being done. We are just an exclusive manufacturing partner out of India for that molecule. That will begin from March 27.
Yeah, thank you.
Thank you. We take the next question from the line of Vivek Agarwal from Citi group. Please proceed.
Thank you for the opportunity again. In the domestic business, how to look out for the full-year growth given that we have seen a subdued growth in this particular quarter? Any particular reason why your growth is at 3%, 4% in this particular quarter? Thank you.
You mean domestic CDMO, right?
Yeah, domestic branded formulations.
Domestic branded formulations. Okay.
Yes.
Domestic branded formulations should track the IPM growth, Vivek. This was one quarter. I think the margins were better compared to last Q1. It was just a one-off quarter. We see the growth coming back in Q2 and the rest of the year. We should be tracking the IPM.
What has impacted in this quarter?
I think it's a usual reorganization. You have certain periods. I think not necessarily I can pin down to one reason, honestly, Vivek. It is growing, but that should come. If you also look at the price growth that we took was roughly 1%, 1.5% itself, which was way larger than the rest of the market, which takes up 5%. Everything is in place. I think for the rest of the year, we should perform well. No significant concerns or deviations from the guidance earlier on this business.
Given the small waste, as well as I think the business makes a large in favor of certain chronic treatments, right? Don't you think that this business should grow ahead of the industry, ahead of the IPM at least?
That's the endeavor, Vivek, but we could not do it in this quarter. For the rest of the quarters, we'll have to certainly perform better than the market and hence track the IPM, right? The endeavor is for the rest of three quarters, we grow faster than the IPM so that at least we are in line with the IPM as we throw a failure.
Thanks. Just lastly, on API and trade generics, right? How long do you see the business can just turn a bit positive?
Sure. I take trade generics first because that is the consolidation year for that business, right? Over the last two thirds, we have experimented a few things, but we still believe this is a business which has a peak a bit of potential, which is lower than the CDMO business. The global initiatives we are taking, as well as the working capital which is required to run this business, is large. It is largely a non-differentiated business where price plays a major role in the uptake, right? Considering all these factors, we believe that this is not the right segment for us to stay invested in. Hence, trade generics, gradually, we are bringing it down. We might retain one or two business units within this, but those should be profitable and no more bleeding, right? That is on trade generics this year.
API business, as we mentioned, we have some global aspirations. We are filing the European CEPs. We are also doing work in Africa and LatAm, right? Domestic cephalosporin prices continue to be a concern. This is driven by extensive price or margin erosion, which players are resorting to in order to gain in a market which has seen no volumes, right? We also did the assessment of how our yields conversion norms are there, and we are pretty much in line with the market, right? Two things which will drive this business are, one, global expansion, and secondly, how the API prices gradually move up. That should be a positive point for this business. As of now, we are still aggressive and invested in this business as we speak in FY 2026.
Yeah, thanks. That's from my side.
Thank you. Ladies and gentlemen, in order to ask a question, please press star and one on your touchstone telephone. A reminder again to the participants, in order to ask a question, you may press star and one. We take the next question from the line of Madhav from Fidelity. Please proceed.
Yes, one more follow-up. The EU CDMO contract starts on April 2027. It's basically FY 2028. How much could be the annual revenue run rate from this contract for us? Do we expect it to sort of ramp up fully in the first year, or could it take a few years before it fully ramps up?
Sure, Madhav. This is an established product, so there should be no ramp-up phase. We should do at least INR 300 crores annually from this contract, and yes, April 27 is when we start commercial supplies.
Okay. Got it. Got it. Understood. The margins for this contract are similar to our existing CDMO business margins, or is it better than what we do, 14%, 15%?
Similar margins.
Similar margins. Okay. The other European business, which we are targeting, where we've got one approval recently and filing some more, how big can this opportunity be for us in the next, let's say, two or three years' time? I'm assuming it's close to sort of zero right now. Is it ramping up? Any aspirations in terms of revenue next two or three years?
I should say five years because European GMP approvals, those are filings, scaling up to other countries takes time. Let's take a five-year horizon. From exports, how much should we do? If I could break it down, INR 300 crores we'll get from this contract. There are a couple of other, not of this value, but there are a couple of other contracts that we are working towards. Those should give me some value. There is already INR 150 crores run rate of other exports business that I do in other geographies. Over the five years' time, we should target maybe $100 million in exports.
Okay. $100 million exports of CDMO, basically, right?
I'd say exports because international branded is also supplied 100% from this group. Entirety of formulation exports from the group.
Okay. That's already at, let's say, $15 million, $20 million of this, right? Like $15 million. The source, right? The formulation exports would be.
We currently are at $15 million. If over five years, we should scale up to $100 million.
Okay. Okay. Understood. Given we have balance sheet cash set out from the advance we've received and in the PPP within pensions, there's organic opportunity which we can pursue. What could be the framework? I mean, what kind of acquisitions we can look at? Like what fits the M&A framework for the company? Thank you.
Sure. We drill down on multiple things. I think what finally we have selected are two things which we will deploy our cash in organically. One is if we can acquire a dosage form capability we currently don't have. There are still a few dosage forms which we don't have capabilities on and we are targeting them. Secondly, if it could give me access to other markets, right? I have strong R&D, quality manufacturing, and things. If I get any base wherein I can quickly come launch new products and expand to global markets, that is another thing which we are looking at in the inorganic side of it. We are open whether we do it within India or maybe outside India.
Got it. Okay, thank you.
Thank you. Ladies and gentlemen, a reminder to the participants, in order to ask a question, you may press star and one on your touchstone telephone. We take the next question from the line of Pranav Chawla from Ambit Capital Private Limited. Please proceed.
Good afternoon, everyone. Sir, I had one question. On the GMP you highlighted, you may not be part of it. We are not even targeting Simponish.
For what?
I believe for GMPs. Simponish opportunity in India. You recently.
Yeah, I said the Simponish is something we are not targeting.
Right. So that includes Simponish as well.
That includes Simponish as well, right? We have the required R&D in place. We are on it. How big we'll do, which all dosage forms we'll do, we're still not aggressive on that molecule given, as I said, most of the players are doing it in-house. Subsequently, with so many players entering the market, the prices might drop substantially compared to the innovator price.
Okay. Sir, also, can you share an update on our JAMO expansion?
Sure. As I said in earlier calls, we have to start the plans by March of 2027, right? We are tracking the timeline given our current CapEx is already ongoing in Bhatti plants as well as the utilization scope of ramp-up already exists in our Haridwar facility, right? Towards the end of this year, we'll start CapEx, and over the next 12, 13 months, we'll do the CapEx. Subsequently, March 2027, we should be ready to go live from that facility.
Sure. One last question from my end. In the API business, if I see the numbers closely, we have been able to maintain our gross margins, EBITDA margins over there. How do we use this? EBITDA margins in this business were almost 20% in the first quarter of last year, and now we are almost stabilizing the early teens numbers,
Right. So we did almost INR 44 crores, INR 45 crores of EBITDA loss in that business last year, if I remember it correctly, right? What we initially indicated was we'll do an improvement of INR 20 crores odd in EBITDA this year. That was the target, right? While it could have variability quarter on quarter, I think we would still track this number, and we are targeting that we should do as per the guidance in this business.
Okay, thank you so much. I'll take back on the views.
Thank you. Before we proceed with the next question, ladies and gentlemen, in order to ask a question, please press star and one on your touchstone telephone. The next question is from the line of Dr. Neha Kharodia from Abakkus. Please proceed.
Yeah. Hi, good afternoon, everyone, and thanks for the opportunity.
I would request Ms. Neha to please come closer to your device while speaking.
Am I audible now?
Yes.
Hello? Yeah. Yeah. Good afternoon. My questions are basically around two parts of our business, CDMO and the domestic branded formulations, which is 90% of our overall business. For CDMO, just wanted to understand for the domestic piece, is this understanding correct that one has to look at the growth in the volume for IPM, and the other thing can be the API pricing scenario for us in that business?
Correct. We do not get any benefits of the MRP, right? That is something which a marketing company governs. For us, two important things are the volume growth in the overall sector as well as how the API prices move, because since it's a cost plus, it's a major component of my cost.
Understood. When we say that we can go in with two high single-digit growth in this segment, what is the assumption that we are taking for the volume growth as well as the API? Are we expecting any improvement in the API pricing scenario?
As of today, as I see, we have three levers, right? One is how my overall product mix improves, how my pricing of my product improves, and how the volume improves. Pricing is dependent on the API prices, the input material, right? We saw a -2.5% decline. That is on a decline. The volumes, which we grew by 1%, we expect some uptake in the rest of the three quarters. That should drive a few percentage points up. Product mix is something we are constantly working. If you really look at 50 quarters, that has given us an upside of 2%- 3%. It should continue, and the product mix should contribute to the rest of the single-digit growth we are communicating.
Understood. 2%- 3% kind of volume growth and 2%- 3% kind of benefit from the pricing. Is that understanding correct?
From the product, the pricing should remain flat.
Gotcha. Okay. Understood. Regarding the second part of the domestic branded formulations business, as the earlier participant had also asked, this business is quite small for us as of now. On the low base, why was our growth only, let's say, 3%? I just wanted to understand, can it not be also pricing-led, and are we focusing on any particular segment for the growth? Secondly, on the margin part, if I look at the margin, if the margins are similar to the CDMO business, intuitively, one feels that probably in the domestic branded formulations business, one can have a better margin in this business. How should one look at the margin for this particular segment going forward on a steady state future?
Sure. You asked on margins and growth. Margins, if you really look at the quarter one last year, they were tracking around 12%- 13%, which have improved to 14% +. As we move ahead in this business, the sales and the margin profiles increase because a lot of fixed cost gets leveraged, right? Q2 and Q3 perform well, right? As we speak, because there's a CFO who was also mentioning about in his opening remarks that they should remain at an 18% odd EBITDA margins. This is certainly better than the CDMO domestic margins that we currently generate. On the growth, as I said to the earlier participant, this was one of quarters wherein we did not take price hikes, as well as the primary was lower, but we should catch up over the next nine months in this business.
Understood. In the next nine months, we are expecting to be able to take some price hikes. Is that understanding correct?
That will get to be seen, honestly, how do we take price hikes because that will be our SKU to SKU driven. As we move closer to H2, we should be able to better understand how the growth dynamics work in that business.
Understood. The current environment, how is it looking? Do we feel that that can be possible, or it looks difficult and it will be more of, again, volume and new launches driven?
Price growth, honestly, is in our hands only, which is as per the government norms of how do we grow. The DPCO portfolio for us is extremely limited. We largely have a non-DPCO price-controlled chronic-oriented portfolio, right? As we scale up, almost half of the sales that we generate is from non-metros, which we also reflected in our Q4 presentation last year, right? A lot of things on doctor perception, prescription uptake, your target pool, your current pricing in the market, all those things play in before we really make a decision to hike the prices, right? That's the reason we still have to see how do we do in Q2 before we take a conscious call on it.
Understood. Just to understand it further, there is a likelihood that our margins, if the growth does not turn, can remain in the range of about 15%-16%. It can be slightly lower than what we have guided. If we are able to take the price hikes, then we can maybe deliver at the level that we are expecting already.
Price hikes are a positive for this business. The business should continue at an 18% EBITDA margin.
Understood. Okay, thanks so much.
Thank you. The next question is from the line of Jay Modi from EIML. Please proceed.
Yeah.
Sorry to interrupt, Jay. Your audio is not clear. Can you please fix that? Jay is out of the queue. I'll add him back to the queue. Just give me a moment, sir. He has been disconnected. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Ankit Jain for closing power. Over to you, sir.
Thank you, everyone, for attending the Q1 earnings call for Akums . If you have any remaining questions, you can reach out to the Investor Relations team. Thank you and have a good day.
Thank you. Thank you very much.
Thank you. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you for joining.