Ladies and gentlemen, good day and welcome to the Akums Drugs and Pharmaceuticals Q3 FY 2025 Earnings Conference Call hosted by ICICI Securities 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 and then zero on your Touch-Tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abdul Qadir Puranwala from ICICI Securities. Thank you, and over to you, sir.
Thank you, Operator. Good afternoon, everyone. And on behalf of ICICI Securities, I welcome you all to the Q3 FY 2025 earnings conference call of Akums Drugs and Pharmaceuticals Limited. Today on this call, we have with us the following members from the management team: Mr. Sanjeev Jain, Managing Director; Mr. Sumeet Sood, Chief Financial Officer; Mr. Sahil Maheshwari, General Manager, Strategy; and Mr. Ankit Jain. I will now hand over the call to the management for their opening remarks, followed by which we'll open the line for Q&A. Thank you, and over to you, sir.
Thank you, Abdul, for the introduction. Good evening, everyone, and welcome to Akums Q3 earnings call. I'm Sahil. 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 the 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. Akums does not undertake any obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise. Now, let's begin. I hope you have gone through the investor presentation that we posted on our website and on the stock exchanges yesterday. I would like to now commence with our performance for the quarter.
We take pleasure in declaring the Q3 results of the company and thank all the shareholders and the stakeholders of the company for their continued support to the company. Q3 was an exciting quarter for the company. With our focus on establishing Akums' global CDMO footprint, we took a significant step by securing and signing a EUR 200 million contract. The contract involves manufacturing and supply of products to be sold in the European markets.
We believe this is the first of many such contracts and partnerships we will undertake to serve the European markets in the years ahead. On the domestic front, we continue to invest in our R&D. Total R&D investment for the nine months of this fiscal is INR 94 crore. We received DCGI approvals for seven products in Q3, taking our total tally for this fiscal to 25 of FY 2025 to 17 DCGI approvals.
Among this was the DCGI approval for Empagliflozin combination, a major anti-diabetic product sold globally. On the API front, we received DSIR accreditation for our Barwala R&D facility for APIs, reaffirming our strong R&D ethos. We continue to invest in APIs with significant market potential and process optimization of our existing basket. Our commitment to R&D would similarly stay in the future as well. Along with this in-house R&D, we also licensed key novel products from the global markets for the Indian markets.
These included our partnership with Triple Hair from Canada and Caregen from South Korea, which were in the dermatology and the metabolic segments. To further bolster our R&D capabilities, we will incur a CapEx of INR 32 crore over the next two quarters to improve and upgrade our R&D capabilities. This is largely for product development for regulated markets and product development for niche dosage forms.
We continue to expand and increase our manufacturing capabilities and capacities as well. We have also expanded recently capabilities for nasal sprays, eye drops, bilayer tablets, ampoules, and FFS small volume parenterals. Further, we plan to expand into large volume parenterals, dry powder injectables, and lyophilized vials soon. In the nine months of FY 2025, we have incurred a CAPEX of INR 191 crore, which is largely in the CDMO vertical.
Over the next two years, we will likely incur CAPEX to commission new plants and production lines between INR 175 to 200 crore annually. On the API front, we are rationalizing our portfolio to focus on high-margin products as well as reducing dependency on cephalosporin products and focusing on general APIs. We continue to do well in the branded, exports, and domestic formulation business. Moving now to the key developments and strategic initiatives we have taken during this quarter.
The first one, obviously, which we talked about, about the European contract. As we mentioned, we entered into a long-term CDMO contract with a leading pharma company globally for the manufacturing and supply of selected pharmaceutical formulations in the European market. This includes oral liquid formulations. The total agreement value is approximately EUR 200 million over the length of the contract. This includes an upfront payment of EUR 100 million with approvals and product dossiers and manufacturing site approvals expected by the end of 2026.
Hence, the commercial supply will commence from 2027 and will continue until 2032. Strategically, this allows us to expand further our footprint in regulated markets and replicate the domestic success we had had in CDMO in the global markets as well. Talking about Keyagent, we have entered into an exclusive master sales agreement with Keyagent, a leading South Korean nutraceutical company and a biotech firm.
We have been granted exclusive rights to sell certain Keyagent products in India, leveraging their proprietary peptide-based technologies. For Triple Hair, we have partnered with Triple Hair Canada for the exclusive licensing of a patented topical solution targeting alopecia for the Indian markets. The partnership expands our dermatology portfolio with innovative hair care science-backed solutions to the Indian market. The product is patented until 2035. Akums has also entered into collaboration with Jagdale Industries in India to expand the underserved segments of the aseptic carton technology for ready-to-drink products in India.
The partnership focuses on wellness drinks, sports nutrition, and therapy support products for critical care, diabetes, and weight management. Now, moving on to operating performance, the operating performance of the company was robust, with overall adjusted EBITDA growing by 12% year-on-year and adjusted PAT growing 15% year-on-year, driven by better profitability in our core CDMO segment.
The EBITDA improvement showed a continued improvement in the product mix. API EBITDA losses reduced significantly in Q3 compared to the last quarter, although prices of cephalosporin APIs still remained low. As I mentioned, the branded formulations continue to do well across exports and domestic segments. We have also been able to strategically reduce our losses in the trade-centric segment. We continue to take pride in stating that we are India's largest CDMO, India-focused CDMO, commanding over 30% market share. Our company serves over 1,500 customers, including both Indian companies as well as multinationals, with which we have long-standing relationships.
Today, over 26 of the top 30 pharmaceutical companies in India are our valued partners. Finally, before handing it over to the CFO, I would like to update that Mr. Nand Lal Kalra , who had been on our board since 2014, has retired. We are grateful to his contribution to the overall company over his span as a board of directors. Over to Mr. Sumeet.
Thank you, Sahil. I think Sahil mentioned that the quarter had been exciting on the various contracts and strategic partnerships we did. I'll take you through the overall financial performance of the company. If we look at the total income on a consolidated basis, we see that we are at INR 1,025 crore, 2% lower on quarter-on-quarter basis, which was INR 1,047 crore, and 6% lower on year-on-year basis.
It was INR 1,092 crore that time, likely on account of falling API prices. We've sort of held on to the EBITDA and seen a growth there of 1%. So in Q2, we were at INR 134.6 crore. EBITDA, we are at INR 136 crore EBITDA. And on a year-on-year basis, our EBITDA is 12% higher from our INR 121.2 crore. EBITDA growth is largely driven by the CDMO segment and the margins. Our PAT stood at INR 66 crore.
It was similar during the last quarter at 67 and it was, however, much higher than what we did in the Q3 last year, which stood at INR 57 crore. The cash flow for the group standalone surplus at around INR 340 crore, which is similar to the last quarter, but before the IPO, the company had a debt of INR 322 crore. Net cash flow from operations increased from INR 19 to 91 crore on quarter-on-quarter basis.
Further, our free cash flow increased from negative INR 73 crore in Q2 2025 to a positive INR 50 crore in Q3 2025. On a year-to-year basis, the cash flow from operations stood at INR 162 crore against INR 316 crore, while our free cash flow stood at negative INR 27 crore compared to a positive INR 90 crore on a year-to-date basis. Working capital saw a reduction of INR 40 crore on YTD basis.
It was 1,035 in December 2023, and our working capital is INR 995 crore in December 2024. If we were to spend a few minutes looking at how each of the segments has performed, we know over the past quarter that almost 78% revenue comes from the CDMO business and 18% from branded generics and 4% from our API segment. So if we were to look at the whole numbers, it is almost INR 787 crore, which would come from CDMO.
Branded generics would do INR 182 crore, and our API segment, which Sahil was mentioning, is at INR 48 crore. Our CDMO business continues to grow at 15% margins. So that's how the business has been. The CDMO business has increased EBITDA of 9% year-on-year, and this is largely because of better gross margins, which you would see. Our branded generic business EBITDA has been at 10.8%.
It is at INR 19.8 crore, similar to Q2 levels of 10.3% and INR 18 crore. However, it is lower than the Q3 of last year, which was at 13.8% and INR 24 crore. API business, our losses reduced this quarter. EBITDA losses declined to almost INR 11 crore in Q3 compared to INR 14 crore in Q2 and INR 16 crore in Q3 last year. This was largely driven by rationalization of portfolio and focus on high-margin products. We continue to improve our margins and achieving break-even in this business. I think that's the overall gist on the financial side from the company. We are very happy to take questions from all of you. 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 the Touch-Tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. The first question is from the line of Gautam Gosar from Monarch AIF. Please go ahead.
Hi, sir. Thank you for the opportunity. My first question is on the formulation business. So, sir, can you highlight what was the revenue for the trade generics, specifically in the formulation segment in Q3 as well as in nine months? And you've indicated some provisions in the trade generic business. So if you could throw some light on that and quantify it as well?
So, you know, while we don't give a complete breakup of our marketing business, but the way we broadly look at is almost 65% of this business comes from our export business, from our branded business. One of those does 21% to 22%, and the remaining is trade generic. I think that's the limited information we can give you because beyond that, we don't give financials, but we are happy to, I mean, the business is trade generic business, as we mentioned. We have consolidated over a period of time, and it is doing well. So I think that would be where we would limit our answers, specifically for the subsegment of our segment, which we are not disclosing in our financials. I don't know if I missed out something. You can ask me, but have I answered your question?
[inaudible]
I'm sorry. Can you repeat, please?
You indicated some provisions in the trade generic business, right? So if you could highlight what is the provision about EBITDA write-off we have taken, or what is that exactly?
Oh, so the way, I don't know where the question is coming from, but the way the trade generic business provisioning works is there are dated value medicines that we have, right? The dated value medicines, if they are unsold, then those would be provisioned, right? That is in the normal course of business. And I think the larger provision we made was during COVID when some of the distributors and some of the medicines, which sort of expired because, fortunately, COVID blew over. So I think that was the two limited provisions that we do in this business, and that's what we have done also.
Sir, the reason for asking this question is that if the formulation share is increasing in the overall branded formulation business, then why are our margins stuck at around 10% only? They should have increased.
Yeah, so I think the way we look at this business is that the margins, if you look at the last period, our margins were around 10.3%, right, and we are at 10.8%, so I don't think that the margins are decreasing, but from a period last time, right, if you are trying to ask from there, there is a dip, but I think the margins are slowly recovering back to those levels.
So sir, can we expect some CDMO-level margins in the formulations business?
[inaudible] So let me help on the margins of the formulation business. So as I said, Akumentis as well as Unosource, they operate above the corporate average margins, right? Trade generics, where we are reducing our losses, so gradually you should see an uptake also. We'll also have to acknowledge that the Unosource margins also have R&D expense to it for various countries that we enter and file our dossiers and the regulatory approvals for. So this is also an investment we make to the future growth business. So having said that, slowly and gradually, yes, you are very right that these margins will move up to the corporate average margins.
Okay. And secondly, on capacity utilization, so what is our company-level capacity utilization right now?
So this is around 40-odd%.
Okay. And how is the injectable plants?
[inaudible] at 40-odd%, and we are slowly commissioning new injectable facility and other API facilities, yes.
Okay. So the utilization for the injectable facility would be currently?
So this has recently started, right? So we started our operations in the last week of August, the new injectable facility you are mentioning about. Then we recently, in January, also received the WHO GMP approval. So slowly and gradually, we'll now see client audits and subsequently orders from the clients. So as of today, this operates, so the utilization is insignificant, but I think this is a better question if we address six months down the line.
Sure. And for this business, the margins will have an uptake. So it is a higher-margin business. So if you could guide around how much margins can the business do with optimal utilization?
So injectables, and not just injectables. So we also do complex dosage forms within oral solids as well. So as I mentioned, bilayer tablets, it's something we have recently started. Then we also have other complex dosage forms within oral solids. We have some complex formulations in all the dosage forms, right? So that is there. Injectables, we have been doing since 2007 when our first plant was there. Subsequently, almost half of our facilities today are either completely sterile or have significant sterile blocks. So I don't think that you would see relatively a huge jump just because of this one injectable facility, while this will contribute significantly to our injectable portfolio. But I would still say that our overall EBITDA margins for the CDMO business should remain in the zip code we operate today.
Okay. That's it from my side. Thank you.
Thank you. Ladies and gentlemen, you are requested to please restrict your questions to two per participant. If you have any follow-up questions, you may rejoin the queue. The next question is from the line of Naman Bhansali from Nine Rivers Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. My question is on the CDMO side. So while we've seen some decline in revenue, and as you talk about API rates falling and impacting that, what would be the volume growth in the nine-month period that we've seen in the CDMO business?
I'll break it down. For the CDMO in the nine months, we had a volume decline of roughly 1%. If you look at this business, we had almost a 13% volume growth in the first quarter and an 11% volume decline. If you compare it to the previous quarter, we have grown volume by almost 0.6%. If I talk about complete 2024 to our 2023 levels, we have grown our volumes by 1.6%, where the industry was largely flat, right? Quarter two, which had a sizable volume decline, we have seen some growing shoots, and they have already turned positive in Q3 compared to Q2. Q4 also looks good.
Got it. Got it. Second question is, you provided the scale of the European business that you have signed. Can you provide us more insight into the addressable market or the potential benefits that we can get from the Triple Hair and the Caregen, as well as the ready-to-drink agreement that we have signed?
Sure. So these three are in licensing and not manufacturing. So these are not global CDMO, but these are manufacturing for the Indian markets, right? So obviously, the opportunity size is smaller compared to that one large contract we had. Having said that, Triple Hair, if I talk about, it is a patented product, a combination product, topical product for the hair loss segment.
This is a large segment driven by a few molecules, right? So this has a large target addressable population with a patented product, which we launched in 2027. We will make some inroads into the hair care segment. Similarly, Caregen, it has biotech peptide-based products for skincare as well as hair care and has a metabolic product as well, right? Similarly, Jagdale, it is a partnership for our ready-to-drink formulations for the sports and wellness nutrition as well as care.
So individually, as a basket, so the beauty about this business is none of the products or a segment of a product becomes large enough that we are concentrated in our offering. So this is similar to the R&D project that we do, that each of the products will have some size and scale. But if your question is hinting towards will it become sizable within the overall CDMO business, that will not be the case, unlike the global European CDMO contract which we signed.
Got it. Got it. Understood. And lastly, the Mumbai R&D project that we are taking up, so the rationale here would be more to be closer to our customers or gaining more customer traction sitting in Mumbai, or is it some other rationale that we are seeing here?
So we already had R&D in Mumbai. If you see, we have four R&Ds, a couple in Haridwar, one for API in Barwala, and one in Mumbai, which we already had, right? So what we are doing is we are expanding and upgrading the R&D for the new dosage forms as well as the additional markets we had. Also, the previous one which we had was on rent. Now we are moving to a property which we'll own. Good investment.
Got it. Got it. Thank you. That's it from my side.
Thank you. The next question is from the line of Shruti Jaiswal from Indira Securities Private Limited. Please go ahead.
Hi. Am I audible?
Yes, ma'am, you are.
Actually, sorry if I have missed out. I wanted to ask the capacity utilization for the current facility and the optimum levels. Hello?
Can you please repeat? I think if you are asking the capacity utilization?
Yes.
As I said, we largely operate on a 40% capacity utilization for our already commercially established facilities.
Okay, sir. And another question is, what would be the margin, operating margin, or any guidance for the upcoming period as you have CDMO contract and so many other deals like Triple Hair and Caregen, etc., partnership? So what margin can be expected in the upcoming period?
So both the European contract as well as Triple Hair will kickstart contribution to the P&L in 2027, the calendar year, right? And also, these are on the margins which we'll operate usually in CDMO. So I don't want to comment on the margin specifically. What we guide the market towards is the margins which we currently operate at.
Okay. Thank you so much.
Thank you.
The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello. Good evening, sir. Thank you so much for taking my question. Hope I'm audible. Hello.
Yes.
Yeah, yeah. Hi, sir. So sir, I just wanted to know how do we look at API currently? Because I think even though absolute terms are EBITDA, losses have come down, but on a percentage terms, it increases, right, quarter on quarter. So just wanted to know what is happening currently? What do we look at, the turnaround coming in? Because I think it's a INR 10 crore loss on a INR 40 crore revenue, just eating up our good work in CDMO and formulations, right? So just wanted to know what do you see the business as currently going?
So for the entire group, as well, let me spend a couple of minutes on API, right? So as you rightly said, API, we have reduced our revenue to INR 40 crores, which was roughly in quarter two was INR 60 crores, and quarter three of last year was roughly INR 55 crores. The challenge is not driving sales. We'll have to understand that number one is the market, wherein the overall cephalosporin prices, which were almost 90% of our revenues, right, they dropped by 20% to 30%. With our COGS being over 80%, most of the cephalosporins which we marketed, we thought it's a wiser decision to reduce our sales in a way which will reduce our losses as well, right? So I just want to give you comfort that this is not a sales which is declining.
It is a conscious decision that we took in a way to reduce our losses. If you really look at it, we have been able to significantly reduce our losses from INR 17 crore in the last Q3 to just INR 11 crore in this quarter. Now, bringing down, then what will we do next? So there are two things in pipeline. One is we are also reducing our dependence from the Cepha-oriented APIs, right? So within Lalru, we had good commercial success in three APIs, right?
We are also bolstering our R&D efforts to move to more general APIs in a way that while Cepha in the near future and a couple of other two or three years down the line, will still contribute more than the general facility, but the share of general products will increase. In a way, this will limit our exposure to one segment of the API. So that is one. The second is we are also with our data bucket, which is the cephalosporin facility, we are also targeting exports. We have already kickstarted exports.
This is in high single-digit percentage. We are targeting that we expand our exports where the realizations are better. And also, we go into regulated markets. For this, we are already in works in our R&D, and slowly and steadily, we'll see commercial successes. So I think it's a transient phase wherein we have brought down our revenues but have dramatically increased our profitability. Over the next one, one and a half years, we are continuing our efforts on R&D and improving our product basket. We'll surely have good results in the years to come.
Okay. Okay, sir. So sir, just wanted to know, on an overall terms, what kind of revenue can we expect in FY 2025 and overall margin if you could guide for in FY 2026? Even a range would do, sir.
The way we've been guiding the markets on most of our calls is that if you look at how the business has performed over the last three quarters, right, and the margins if you look at. If you look at the three quarters, we are at almost INR 3,600 or 3,062 crore top line. We have almost an EBITDA margin of INR 401 crore. We sort of see that, as we had guided earlier, that for this period and the way we are guiding is that the business should see similar revenue and similar EBITDA. That's how we have been guiding. We said H1 would look similar to H2.
So largely, I think if we look at the organic part of the business and some of the new initiatives that Sahil spoke about, some of them were long-term, some of these sickle cell business which didn't sort of trigger for us, this could have been another segment of revenue which would have come in. The way we are guiding the markets is as is the business is pretty similar, and I think we should perform the way we have done it over the past three quarters.
Okay. Fair enough. So just on a last, again, so you were saying about just one more last question about API. So the turnaround, when do you see the business will be breakeven on a PBT level or an EBITDA level? So maybe it'll be a year or so, just range. What do you think, sir?
So while it's there, we are progressing well. I think this is in a zip code of one to two years when we'll in a way breakeven.
Okay. Okay. Fair enough. So yeah, that's it from my side. So thank you so much. All the best.
Thank you. Yeah. Sorry. Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. We have the next question from the line of Vivek Agarwal from Citi Group. Please go ahead.
Hi. Thanks, sir. Thanks for the opportunity. Sahil, you have highlighted that as far as the European contract is concerned, that this is one of the many contracts that you are going to sign, right? So just want to understand what gives you the confidence that you will get many more contracts of similar kinds? Are you in discussion with any players, any company in Europe, or it is, for example, that this particular contract has given you the confidence? Thank you.
Sure. So first, I'll talk about the infrastructure. I think we are already in pipeline for a few more facilities will be European GMP, right? So one is we'll have the scale and the infrastructure along with product development capabilities that is out there. So we are ready for opportunity that knocks our door. Second is we already have started our presence within the European market, the business development team, right? So while this is a large contract, we already are seeing some discussions around the contract.
It's not this big, but this is a phase where you'll understand that this is proving yourself right for the first two products and then getting deeper within. This is the same that happens within the domestic CDMO as well, right? So this gives us confidence that over the next two, three years, we'll also have a good business coming from the European CDMO. And Europe is just one of the markets. I think the focus is regulated ex U.S. as of now.
Understood. Sahil, just one more thing on this contract, right? So starting, you are expecting the revenues to kickstart in CY 2027. So is it going to be spread across the next five, seven years, or it is some kind of back-ended or front-ended kind of revenue realization that is going to be?
Right. So just to clarify, this will start in calendar 2027, so likely Q4 of 2027 or quarter one of the next fiscal, and this will be evenly spread across the year.
Understood. And one clarification here that you mentioned that the margins in this particular business will operate in line with the CDMOs, right? So is it your CDMO business that you are talking about or the overall global CDMO industry that is operating in the European market?
This is our CDMO business.
Okay. Thanks. And just actually one more question, if I can squeeze in. As far as the volume growth is concerned, right, if you look at the next couple of years down the line, right, so what kind of growth you are expecting, is it going to be in line with the overall IPM, or is it going to be higher than the IPM, or what kind of, for example, the tech delta that you can have, and what is going to drive that? Thank you.
Sure. So I'll maybe answer it historically, and then because future is something in volumes, I think we both can sit and have a long debate, but still we'll be debating and discussing. If we talk, if we leave this FY 2025, if we have to see ourselves as a five-year historic period, largely we grew in 6% to 8% of volume on an average, right? So this was always two, two and a half times higher than the market. If you also look at 2024, where we grew 1.6%, then last year was largely flat, right? So we sit in the market, right? So obviously, our volume growth is definitely tied down to the market.
But what we have always delivered is we have delivered good growth over what the market growth is. Having said that, the volume should come back. I think this is a transient period. The volume should come back. We are seeing good green shoots in Q4 as well. Q1 also looks good. As you understand, this business, we already have 60 days of orders in hand, and hence we can deliver them. So Q4, sitting outside of Q4 today, Q4 looks good. And similarly, we should have continued good success in the next fiscal as well.
Understood. So barring the blip in this particular year, right, you don't see as far as the story changing as far as your ability to get the kind of market share in India, especially in the CDMO industry?
No, absolutely. Absolutely right. And if you really recollect what I said, the new dosage forms that we are adding, whether it is small volume parenterals, large volume parenterals, bilayer tablets, right, dry injectables. The whole focus, if you really carefully think through, is to drive value products rather than volume-based products, right? So while volume growth is there and we are still in the market where it is dominated by solids, our continued focus is how we can improve the overall product mix.
Thanks. That's from my side.
Thank you. The next question is from the line of Prashant Nair from Ambit. Please go ahead.
Yeah. Hi. Thanks. So just a couple of questions. Sahil, I don't know if you mentioned this before because I got disconnected a couple of times. What was the volume growth in CDMO this quarter?
Volume growth in CDMO for quarter three was 0.6% compared to quarter two of FY 2025.
All right. Thanks. The second question is on the API business. Now, when you say that you have rationalized your portfolio, so can you give us some sense of scale? So for example, if your sales was 100 earlier, how much would the balance portfolio which you have left with you, how much would that I mean, just to get a sense of how much you have cut out, that will help us also take a call on how you will grow.
So Prashant, honestly, I also don't have an answer to this as of now. But if you really look at our Q2 to Q3, we have dropped by almost INR 19 odd crore in our revenue. This is largely on account of few cephalosporin APIs which we used to do sales, but they were simply too competitive for us to be in the market, right? Q2 to Q3, if I talk about for the products which are of higher margins, they still continue to remain that kind of sales. But the drop in the sales was largely on account of the ones which we discontinued.
Right. And when you say you discontinue, I mean, would you retain the infrastructure, the product capabilities, and come back into the market if pricing improves, or?
Yeah, certainly. Certainly. So when I say discontinue, it is discontinued at the current price levels. As I said, cephalosporins are almost down 25% to 30%, right, while the KSM prices have not moved down that much. So whenever the prices normalize, we already have done investments in R&D and process optimization of the products. We already have the infrastructure, the reactor, and the blocks in place. So whenever it is commercially viable, it is just a matter of KSM procurement and supply.
Okay. And one last question. Maybe not exact numbers, but can you give us some flavor of, say, the mix of customers on the CDMO side? Say how much would be going to the prescription market, which is, say, captured by IQVIA or AIOCD AWACS, and how much would be to trade generics or any other segments?
Unfortunately, Prashant, we do not calculate customers that way or revenue that way.
All right. Yeah. Thanks. That's it from me.
I don't have a sense of it. Yeah.
No worries. Thank you.
Thank you. Participants, to ask a question, you may please press star and one. We have the next question from the line of Palak Shah from Entrust Family Office. Please go ahead.
Yes. Hi, sir. Thank you so much for taking my question. So just a couple of them. So mostly on the API side, you mentioned that you have discontinued a few of the products. Are they actually below or negative GC? And is that the reason why you are discontinuing the products?
Yes. So GC, and on top of it, if you add just the direct manufacturing expenses of manpower and utility, the amount would be higher than the current selling prices.
Okay. Okay. So given that we are actually underutilizing the capacity even before the discontinuation of the product, where would our capacity utilization stand now? And just to go in short, back to 65%, which makes us breakeven on this capacity, what's the delta that we need to generate in terms of the number of products or absolute revenue?
Sure. So just on the capacity utilization, as I mentioned, this was directly variable cost associated with that production. So capacity underutilization does not impact the business of this product. And on the API side, we are largely at a 30-odd% utilization, right? And that's broadly about it as of today.
Okay. So is the max, right, that we need to reach at least 60% to 65% to breakeven on the operational cost, I mean, EBITDA level?
Yes, so not that high, but yes. As we scale up our capacity utilizations, we will, in a way, absorb the fixed expenses.
Got it. Got it. So secondly, on the branded generics side, last quarter, we mentioned we used to have a one quarter, INR 1 crore per month loss in the business of trade generics. Adjusting for that, our margin should be around 12% to 12.5% during this period. Can you give us just some broadly, given that we're doing R&D in the global side on the Unosource side and the Akumentis side, we've got such a large cost of R&D, fixed cost, what will be the percentage difference in margins there? And when you talk about going to company-level margin, which is close to 14% odd, how fast a delta can occur as the cost absorption of Unosource's R&D happens for us?
The trade generics business that we had mentioned is where we had consolidated, right? While I was mentioning to an earlier participant that we don't give a breakup of it, but largely the EBITDA margins for Unosource's and Akumentis remain in 18% to 20% bracket, right? That's as Sahil was mentioning, higher than our overall CDMO business, which is close to 15.4%. I think the trade generics business, which you mentioned, is the one which is still at a negative EBITDA.
Yes, sir. But even if I adjust that INR 1 crore loss per month, you are at 13% margins. So if your Unosource's and Akumentis are about 18% to 20% margin, then what is leading to this almost a 6% to 7% gap in the margin delta, adjusted margins?
No, so I think the way you're looking at the trade generics losses, it is slightly higher. It is slightly higher. It's around INR 2 crore per month.
Okay. Okay.
Okay. Then your math should tally. I think we can get the exact figure, but then your math should tally.
Got it. Got it. I just got the point, sir. I may take it offline with you. Just one last question on the CDMO. Yeah. Please. Sure. Sure. So just last year, the CDMO business, you reported a nine-month volume growth of 1%, but the revenue growth declined of 7%. So the effective 8% pricing impact that you have seen. Again, in the previous calls, you have mentioned that you usually run two to three months ahead of the industry because you supply to the industry, and then the IPM shows the growth.
Given that, even in this quarter, we are effectively sort of flat on the volume. But if you talk to industry peers, they're still talking about a volume growth in Q4 for them. I'm saying your customers are still talking about a volume growth in Q4. Well, it's a subdued quarter for them, but still on a YY basis, they're still expecting a growth. How do we marry the two? Because in our IPO roadshows, we have mentioned that you want to grow ahead. Our aspiration is always to grow ahead of the industry in volume terms, not only absolute revenue terms.
Right. So if you really look at so volume growth, as you mentioned, so quarterly, looking at quarterly volume growth, I think is not the right reflection for the kind of business, right? Because while these are two different businesses, marketing is secondary to the patient, right? And hence, that's where the uptake is for us. It is batch manufacturing and shipping at their warehouses, right? So a 12-month period is a better way to look at these businesses. And as I said, 12 months, we have done a 1.6% volume growth. The industry numbers are out there with whichever database you wish to consider, but these are largely flat, right? While we acknowledge that the volume growth was subdued this time, but barring a few quarters, we have been fairly doing well in terms of volume as well.
So, what will get us our volume back to like 4% to 5%? Because our aspiration to grow ahead of IPM, which is 12% at least average, we take a 9% to 10%, and you want to go to 12% to 13%. The pricing still swings, comes back to normalization. That's 8% delta. Would you expect the volumes to grow at 4% to 5% for you, plus achieving that 12% to 13% approximate revenue growth in CDMO?
So 4% to 5%, certainly. So what are we doing? I think essentially everything we do, right, from R&D to establishing manufacturing capabilities to the client engagement we have, right? Everything we do is to sustain the business and drive volumes, right? Ultimately, this is based on three things: how quickly we can supply, the quality we can supply, and the pricing which is there, right? So everything we continuously work on. And the ultimate aim is how much market share we can command.
Got it. Got it. All right. Thank you so much for the shout-out. I'll come back for that margin question on the trade generics side. Thank you so much for taking the time.
Thank you. Ladies and gentlemen, you may press star and one if you wish to ask questions. The next question is from the line of Abdul Qadir Puranwala from ICICI Securities. Please go ahead.
Yeah. Hi. So this first question on the CDMO business, when Sahil mentioned that there are certain new contracts which are to be executed for the next six months, could you provide us some flavor as to how that translates in the CDMO growth for you, maybe in terms of volumes for the next two quarters at least?
Sorry, Abdul. So which contracts on the next six months? So the contracts which we talked in our call earlier were largely commercializing in 2027.
No, I was talking with reference to the order book for the CDMO business.
Okay.
So if that gets executed as what you would have planned, then at least for the next six months, what would be your volume growth?
So as I said, we have visibility for Q4, right? Sitting in early February, 60 days is what we are. So I can only talk about Q4 and not the next fiscal, right? The volume growth looks decent as of now. I'll not be able to give a number to it because ultimately, this is on production and final delivery, right? But the pressures on volumes which we had mid-year this fiscal, these look to be a story of past as of now.
Okay. Okay. And my second question is with regards to the European contract. So in the PPT, you mentioned that EUR 100 million or something, there would be an upfront consideration. So has it already been received, or is this kind of a milestone income which will come in due course of your contract period?
The money has been transferred from overseas, and we have still to receive it in our account, right? So it's the nostro account of the bank, right? So once we receive it, it'll be an advance received against that contract.
Okay. Okay. And a final one on the API business, on the losses. So I understand you're trying to curb the losses. Then any color by when we can break even in this particular segment, maybe in a year's time or two years' time? I know some color if you could provide what we have from.
Yeah. So we just talked about the outlook. So I think we still need at least a year where we are targeting. So one, one and a half, two years at max. This is something which we are looking at this business.
Perfect. Thank you so much.
Thank you. Participants, to ask a question, you may press star and one. Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
thanks a lot, everyone, for this engaging discussion. We continue to work on our strengths and looking forward to catching up with you all in the next quarter. Thank you.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.