Ladies and gentlemen, you have been connected to the Alkem Laboratories Conference Call. Please stay connected. The Call will begin shortly. Ladies and gentlemen, good day and welcome to the Alkem Labs Q2 FY26 results, hosted by Motilal Oswal Financial Services Limited. As a reminder, all the participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the Conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Manudhane. Thank you, and over to you, sir.
Thanks, Anjali. Good evening and warm welcome for the second quarter FY26 earnings call of Alkem Laboratories. From the management side, we have Mr. Vikas Gupta, CEO, Mr. Nitin Agarwal, the CFO, and Ms. Purvi Shah, Head of Investor Relations. Over to you, Purvi.
Good evening, everyone. On behalf of Alkem, we welcome you all to today's quarter two FY2026 results call. Earlier today, we released the financial results, press release, and results presentation, all of which are available on our website and also have been filed with the stock exchanges. We hope you've had a chance to review them. Before we begin, please note that this call is being recorded, and the audio transcript will be made available on the exchanges and our website shortly after the call is concluded. Also, today's discussion may include certain forward-looking statements, and they should be viewed in the context of the risks and uncertainties associated with our business. With that, I now hand over the call to our CEO, Dr. Vikas Gupta, for his opening remarks. Over to you, sir.
Thank you so much, Purvi. Very good evening to everyone, and thank you for joining us for our Q2 FY26 Earnings Call. Q2 FY26 has been another strong quarter for us, marked by robust growth across India, the U.S., and key international markets. We also saw healthy traction in new product launches across our markets. The GST revision announced by the government during the quarter is a very positive step, and we adapted swiftly to ensure a seamless transition. Our improved gross margins and operating leverage have contributed to a stronger EBITDA profile. As we look ahead, we remain focused on accelerating growth and continue to strengthen our presence in the key markets. I will now present the key highlights of Q2 FY26 financial performance. The total revenue from operations touched an all-time high of INR 40,010 million, with a YoY growth of 17.2%.
India sales were INR 27,660 million, with a YoY growth of 12.4%. US sales were INR 7,649 million, with a YoY growth of 28%. Non-US sales were INR 4,241 million, with a YoY growth of 32.4%. EBITDA grew by 22.3% YoY to INR 9,208 million, resulting in an EBITDA margin of 23%. Net profit after minority interest was INR 7,651 million, with a YoY growth of 11.1%. R&D expenses were at INR 1,302 million, which is 3.3% of our total revenue. According to IQVIA SSA data for Q2 FY26, in the acute segment, in domestic market, Alkem became the number one company. We outperformed IPM in six therapies out of the total 11. Anti-infectives grew by 1.2x, GI 3.1x, VML 2.5x, Pain 2.3x, Respiratory 1.5x. Derma, again, substantially 3.1x of the market. In the anti-diabetes therapy, if we exclude the GLP-1 launches, we have grown 2x faster than the market.
Alkem also ranks number two in the IPM if I take the new product launches in the last 12 months. With a strong foundation firmly in place, we are poised to embrace the opportunities that lie ahead with confidence. I take this opportunity to thank all the teams at Alkem for making this happen, and I wholeheartedly believe in our strategy and remain inspired by the potential the future holds for us. Thank you so much. With that, we can now open the floor for any questions.
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 withdraw 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 comes from the line of Neha from Bank of Arora. Please go ahead.
Yeah, thanks for taking my question. So my first question is on the India business. We've shown a pretty strong growth in the first half. As we look into the second half and probably FY 2027, do we think Alkem can maintain this growth momentum that we have seen? I mean, what should be the assumption for industry growth and therefore Alkem's growth in the second half and fiscal 2027?
Neha, I have always maintained that we will continue to outperform the market at least by 100-150 basis points. This growth is backed by one, strong launches, plus our key brands doing pretty fast. I think this trend can continue even in H2. We gave an overall guidance of a double-digit kind of growth, assuming the market grows at around 8-8.5%, which looks like the plausible scenario. I do not foresee any reason for this growth to slow down even in H2. We should continue showing a similar trend in H2. Of course, Q4 may be slightly higher than Q3, but overall, on an H2 basis, we are confident of continuing this growth trend.
You mentioned 100-150 basis points outperformance?
Of the IPM, at least.
Okay. Okay. My second question is on—oh, sorry, sir. On FY2027, is it fair to assume that we can maintain this outperformance given the launch and the brand momentum that you're seeing? Would that be a fair assumption as well?
Yes, sure. India is our core market. In India, we have really done a lot of strategic initiatives in the last couple of years, and our growth is really giving us, and we will continue to do whatever is necessary in terms of growing the domestic business with a similar trend. I have always maintained that in India, we would always outperform the market by 100 to 150 basis points. Now, we do not know how the market behaves next year.
Yeah, I mean, we are very confident of our growth as far as the domestic market is concerned.
Understood. My second question, sir, on margins. I think we're guided to flat margins given how the first half has been. Do you think there's an upside risk to that guidance, or you still see—I see that there has been an increase in other expenses. So the new business investment that you had planned, that is yet to come, and you still maintain the guidance? Any update on the investments in the new businesses as well as the guidance?
Yeah. The new investments that we had spoken about so far have not been fully operationalized. In H1, we have hardly seen any expense on that front. In H2, we expect our US CDMO plant is operational now. We will start getting the OpEx of that plant from Q3 onwards. In Q3 and Q4, H2 put together, we expect at least INR 50 crore-INR 60 crore as an operational expenditure for H2 per quarter, sorry. At least INR 100 crore of operational expenditure might start hitting us in H2. The overall guidance, I would say top line, we are confident that we should be surpassing whatever we had discussed. Even from the EBITDA guidance perspective, I see somewhere between 19.5%-20% should be our EBITDA for the full year. That is how vis-à-vis the earlier guidance of keeping it at 19.5%.
We are hopeful that we should be looking at that because there is another expense which is going to hit us. Not expense, actually, it's an impact. Because of GST, we have an impact of in H2, INR 50-60 crore for the benefit that we used to get from the Sikkim facility. Perhaps that will be another impact that will be there for us. Put together, I think our H2 expenses will be higher. Still, I would say we are hopeful of crossing our earlier guidance in spite of these additional expenses coming in H2. From 19.5%-20% is what we see our EBITDA numbers. Yeah.
Sorry, sir, one clarification. The INR 50-60 crore impact from Sikkim facility, this will be on the gross margin line, the benefit that we were getting?
This is accounted under other operating income. It will be part of the revenue.
Okay. Thank you so much.
Yeah.
Understood.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Damayanti from HSBC. Please go ahead.
Hi. Thank you for the opportunity. First, can you update us on the sales which came from MedTech and Adroit business in Q2? Then what kind of spend are currently ongoing for these new businesses?
MedTech, we have just started. I think we recorded we have done almost 900 knee replacements. Though in terms of the revenue, it will be hardly INR 2.5 crore. In Adroit, I think we are maintaining our run rate of around INR 15 crore for the quarter. That is on Adroit.
In terms of spend, what kind of spend are ongoing for these two segments?
For the quarter, MedTech OpEx was around INR 8-9 crore. There is an EBITDA loss of around INR 5.5 crore in MedTech. Adroit is at a break-even. The branded business was already operating, so.
Adroit is at break-even. Is it cost-break-even?
Yeah. So it's part of our domestic business. We cannot.
We have never looked at this separate-wise, this thing. It'll now be merged with our domestic business. So we'll run it as a part of the business.
Sure. That's helpful. If you can update us on progress in the Indian business as well. You mentioned you had started operations in Q2. What kind of ramp-up timeline are you looking for this business to achieve cost break-even? I understand you earlier mentioned this facility will incur a cost of around INR 50 crore per quarter, right?
Yes. For Indian US operations, the current average is around INR 15-20 crore per quarter of revenue. We expect this to continue till year-end. We expect to close between INR 70-80 crore of revenue from Indian CDMO US business. The OpEx expense will be around INR 50 crore per quarter going forward because we just started this facility in the month of September. Going forward, Q3 and Q4, we expect OpEx to be around INR 50 crore and revenue to be around INR 20 crore per quarter because we have just started the plant.
This INR 20 crore revenue is only from the CDMO plant in the US, or this is also including the supplies from Pune plant?
No. This is only from US CDMO. Yeah.
Okay. How much is the contribution from Pune plant right now?
Pune, around INR 20-28 crore for the quarter. INR 25-30 crore for the quarter.
Is this plant cost-neutral now, or are you incurring loss there as well?
Domestic is already break-even or, in fact, EBITDA positive. In terms of if you look at overall Pune operations, in H1, we are around INR 180-185 crore of revenue, including the US business which we do from Pune. For quarter two, it was around INR 120 crore from Pune operations, including the business done in US from Pune.
Okay. That's helpful. Yeah.
The CDMO business from the US plant.
Yeah. Understood. Okay. Just a question on R&D, my final question. So R&D in one H is much lesser, right? So earlier you said 4.5-5%. Will you reach there, or there is some recall?
We will. Most of our filings are in Q4. I think it is more of a phasing thing. We expect the R&D to be within 4-5%. I think we should get there. That has been our trend over the years. We will catch up. That expense will catch up in H2.
Okay. That's helpful. Thank you. I'll get back in the queue.
Sure. Sure. Thank you.
Thank you. Ladies and gentlemen, a reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Bansi Desai from JPMorgan. Please go ahead.
Yeah. Hi. Thanks. My first question is on penicillin G. We hear that the government is reportedly considering imposing MIP, minimum import price, on penicillin G. We would love to hear your thoughts, any impact that it could have on us. Could this reverse any benefits that we would have seen?
This is speculative, Bansi, at this point in time. Any hypothesis that I build on any speculation will not hold true. We are waiting for some notification to come. As of now, we are sufficiently covered in terms of our inventories. I mean, depending on the MIP, whatever price the government will fix, only then will we be able to see whether it is going to be a cost increase or a cost decrease. That call we can take only when the government fixes the MIP. Otherwise, it is speculative. I will not be able to comment on it.
Appreciate, sir. Second is, X of R&D, if we look at the other expenses, they have sharply increased sequentially by almost INR 2.00 billion. What has driven that?
You're talking about other expenses?
Other expenses.
Mainly on account of our marketing expenses. Generally, in quarter two, the marketing expenses are highest if you compare to other quarters. Also, there is a slight increase in R&D expenses quarter.
Lastly, sir, just on the non-US growth that has been phenomenal this quarter, 30% plus, should we expect this momentum to continue?
There are certain markets that have done really well for us as far as the non-US growth is concerned. I have always said that our non-US expectation also will be a high-teens kind of growth. I foresee for the annual—I mean, for this financial year, we should be very much there. At this point in time, maybe because of certain opportunities that we were able to get in markets like Germany and Australia, we have got a very good first half. We are expecting that, looking at even the second half projections, we should be easily upwards or close to around high-teens or 20% kind of growth from the non-US markets going forward.
Got it. Thank you, sir.
Thank you. The next question comes from the line of Bharat from Aquirius Securities Private Limited. Please go ahead.
Yes. Hi, sir. Congrats on the setup conversation. I just wanted to understand on the other expense part. We have seen a sharp increase sequentially. On Year-on-Year basis, there is a healthy growth in other expenses. While you mentioned that US-related expenses will be kicking in from current fourth quarter, why are we seeing these expenses sequentially as well as Year-on-Year in second quarter?
One reason, as I said, is the marketing expense. Generally, our quarter two marketing expenses are higher as compared to other quarters. If you compare with last year, also we have now two new subsidiaries, Bombay Auto and Adroit, which is currently in this quarter, it was part of the consolidated results. That has also resulted in higher other expenses.
Right. We had mentioned that in the second half, we will be doing almost INR 20 crore per quarter from the U.S. engine plant. What sort of run rate or annual target will you have for the next six weeks for U.S.
Bharat, we've always maintained an asset turnover of around one from the U.S. plant. I think it will take us 12-18 months to fully get there. I think this is just first quarter of when we are operationalizing it. We will try and get to that number maybe at an annual run rate of INR 300 crore.
Over next 18 months.
Yeah. Over the next 12 to 18 months. That is how we'll fully reach there. I think maybe after a quarter or two, we should be able to give you a better picture on that front. We are very hopeful of getting there.
Right. Any comments on GLP-1, how we are positioned for GLP-1 for India as well as for other markets in case we are?
I think our India application, our CT for diabetes indication is already completed. We presented to the subject expert committee, and we have got approval. That is public information. We are waiting for the MA to be formal MA to be received. Our results were presented to the subject expert committee. We are very hopeful that very shortly we will get the approval for GLP-1. We should be on track and amongst the first players to be out there in India when the patent expires. With regards to other markets, we are working on launch in other markets as well. Still, the patent goes at different times in different markets. I think the other markets we will be able to introduce only a couple of years from now. That is the time.
Even our US filing will happen, maybe it takes two years to get the approval. I think it is a part of our plan as far as other markets are also concerned.
Right. How are you seeing the market for us next year from a GLP-1 perspective? Can we be a meaningful player there?
We will be a meaningful player over there. That is what we expect whenever we launch a product. I am sure everybody would be thinking it is a pretty large opportunity, and I am sure there is room for a meaningful presence for more than one player in that market.
Charlie, thanks a lot. I will be back next week.
Thank you, Bharat.
Thank you. Ladies and gentlemen, a reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Harshit Dutt from Diamond Asia Capital. Please go ahead.
Thank you. Congratulations to the management team for the good set of numbers. A couple of questions from my side, Gupta sir. First thing, as you highlighted, the domestic growth trend will continue. In FY 2027, also, we are confident on the domestic growth part. In FY 2027-2028, also, our medical devices business revenue will start, so the run rate will improve. The engine will start to close the INR 300 crore annual run rate. How should we see the margins from the medium perspective from FY 2027 onwards?
See, I've always maintained that Year-on-Year, we should look at at least a 1% improvement in our overall margins. I think we are pretty much on track for that. Even if you look at this year, I think that is how it has played out. If I remove the investments behind growth that we have had to do. I will maintain the similar trend, and we are very hopeful that that's how it should continue.
Okay. So in this year, despite having investments, we are expecting around 50 basis points margin expansion and from FY27 onwards, 1 percentage point margin expansion. This is a fair understanding.
I spoke about 19.5%-20% now. Let the year close down, and we will know. Of course, over and above that, from subsequent years, we should look at at least a 1% improvement in our overall margins.
Okay. Another question, sir. How are we seeing the season in 3Q? Seeing the IPM data of October month, it seems that the season is still continuing. Any comments on that would be very useful, sir.
Season as in for the.
The anti-infective season generally, which we witness in 2Q. Is it still continuing in 3Q as well?
See, I mean, seasonality is part and parcel of our business. I mean, we have not seen any, I do not see any major reason as to why this growth trend will continue. I have no, I mean, speculation here whether the season will continue or not. We will get to see. I mean, that is something nobody can predict. I can tell you our business is going as per our expectation and going pretty strong. That is something that I can just assure you.
Yeah. Super. Thank you, sir. Thanks.
Thank you. The next question comes from the line of Madhav from FIL. Please go ahead.
This is the XUS export business. Could you give us a sense around the constant currency growth versus how much was from the constant currency growth in the XUS markets for this quarter?
Constant currency growth in the US market, you're saying? Or see, overall, I think we have had a currency gain of close to 4.5%.
4.5%.
In the range of 4-4.5%.
Okay. So basically, 32% reported. We should assume 28% was constant currency growth, then?
Yeah. You can assume that. Yeah.
Okay. Got it. Okay. Understood. Then just one more clarification on the margin guidance. Like you said, 100 basis points expansion SI27 onwards. That includes the impact of some of the investments which you're making in the Medtech and the CDMO business, or that's except for that?
Yeah. Correct. So whatever investments we have planned as of now, it includes that. As the business progresses and if we come across, say, some opportunities where we feel that we should not shy away from making those investments, it's only in that case that we will come back to you. Whatever investments we have planned for now and made for now, that is how I think it will play out.
Yeah. Just to clarify, the increase in OpEx, do you expect that's part of the guidance already, right? Like the 100 basis points expansion?
Yes.
Got it. Okay. Perfect. Thank you.
Thank you. Ladies and gentlemen, a reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Karthik from Bajaj Allianz. Please go ahead.
Thank you for the opportunity to ask. My question is about the four launches that we have done in the last quarter in the U.S. If you can elaborate what kind of launches are these and what is the market size or how much is the competition in these four launches?
I think the most meaningful launch in the US has been Sacubitril/Valsartan that we have done in Q2. That has really done well for us. That has contributed to the growth in the US market that we have seen this year. Of course, it is a highly competitive market. Let's see how it goes in the subsequent quarters. I think that should help us to grow the US business this year to the tune of at least maybe a double digit from an earlier expectation of close to 5% growth, that mid-single digit kind of growth that we were expecting from the US. We are hopeful that we should be closing the year close to a double digit kind of growth. I think that is the most meaningful launch that I'll talk about.
Balance launches are there, but not so at this stage, not so significant that I need to call out the numbers.
Thank you. My second question is about the GST. Did you experience any impact from the GST either in the top line or the bottom line? How much?
See, GST has been a very welcome move by Government, and we clearly believe and appreciate and are very thankful that government has taken that move. I think it's a positive move because the medicines become more affordable. It makes it accessible for a more number of patients. As a company, we are always supportive of such changes. Yes, there were some transient industry-wide disruption that happened with regards to supply chain and with regards to certain costs. One is a one-time impact that we have had because of our arrangement with the trade that we had to do, which is to the tune of around INR 10 crore-INR 12 crore within that range. The second is the benefit that we used to get from Sikkim. I think that's a substantial impact which is going to hit us from now on.
I think that impact in H2 alone is close to around INR 50 crore-INR 60 crore. That is the other impact that we have. We still believe it's a positive move, and we're really appreciative of that.
Thank you very much. Congratulations on the good set of numbers.
Thanks, Harshit.
Thank you. The next question comes from the line of Seon Mukherjee from Nomura Securities. Please go ahead.
Yes. Thanks for taking my question. Sir, I just had one clarification on the US CDMO revenues. So you're saying currently you are not booking any revenues, and from next quarter, it would be like INR 20 crore a quarter. Is that what it is, or you're already booking INR 20 crore?
We have already in this one, Seon, we have already booked around INR 40-45 crore of revenue from CDMO business in the US. Going forward to next two quarters, again, we see around INR 20 crore per quarter of revenue. As we shared in call just a few minutes back, the overall opportunity for us is around INR 300 crore from the current production capacity which we have built, which we estimate to achieve in next 12 to 18 months.
Sir, but the operating cost of INR 50 crore, nothing of that is coming. Revenues are booked, but costs are not there in the quarter. Like INR 50 crore per quarter that you are mentioning, that will come?
We just started operations in September. There was some pre-work which was done for which the revenue was realized. I think the OpEx cost was mostly capitalized till September. From next quarter or from this quarter itself, October to December quarter, there will be an OpEx cost of around INR 50 crore per quarter from US.
Right. And, sir, if when you reach that, let's say, 12-18 months, INR 300 crore turnover, then what's the next step? Are we going to make additional investments? If you can just take us to a slightly medium-term prospect of the CDMO plant in the US.
We see a good opportunity in that business. At this stage, because we've just made the plant operational, first, we would like to maximize the output of this plant. Say, three to six months down the line, if we see an opportunity and if that warrants us to make and scale up that business and make further investments, we won't shy away. We'll take that call at that stage. At this stage, we are looking at, because in the medium term, we are pretty hopeful that that could be a meaningful business for us, the way the opportunity looks like. Of course, we will wait for this plant, as it has just got operational. We will see how it's going and how the order book is looking like. If there is a need to expand, then we will expand.
Is it possible to share how many projects you are working on? I mean, currently?
We don't give the project-level details, Seon.
Okay. Sir, no problem. Thank you.
Thank you.
Thank you. The next question comes from the line of Neha Manpurai from Bank of America. Please go ahead.
Yeah. Thanks for taking my question. Sir, on the U.S. business, I see that we have tentative approval for Tolvaptan. Is that not a near-term launch for us, or is this launch slated for fiscal 2027?
No, sir, in Tolvaptan, you're talking about the G.I.N.A.C. approval, right?
Yeah. Yeah.
That is slated for FY27. We'll be launching at that time because current player, I mean, we have an ongoing litigation with the innovator. We will take that call. At this stage, it's a little far away.
Understood. And for Mirabegron, it would be based on the litigation outcome for the existing generic players in the US? So that would still be an.
As I said earlier, I think we have a settlement agreement with the innovator. We will launch only after the patent expires. That's how we will.
Okay. Okay. Thank you so much.
Thank you. The next question comes from the line of Ankit Pandya from Baroda BNP Paribas. Please go ahead.
Yeah. Hi. Thank you for the opportunity. Just two questions. Firstly, on the gross margin, in Q1 also, with the strong domestic business growth, we have seen 65% gross margin, 65.3% gross margin. In the current quarter, with India business and along with all the geographies, we have been seeing double-digit growth. Gross margins are still at 65%. Is there anything to read between that? Anything missing out?
The gross margin is a factor of two, three things. One is your API prices. Definitely, we saw a decline in API prices in quarter two as compared to quarter one or as compared to the corresponding quarter of last year. Our international business growth was higher than domestic in quarter two. Whenever international business will grow at a higher rate than domestic, there will be impact on gross margin because our gross margin for domestic business is better than international. That was one of the reasons that you do not see a great improvement in gross margin quarter on quarter.
Okay. So I think 63.5-64% gross margin is something that we can look forward for the second half and for the full year.
Yeah. Sixty-four to sixty-five, you can. Yeah.
Okay. Sir, just lastly on your US business. Given that you also highlighted that Sacubitril/Valsartan is a very competitive space, how has been the pricing erosion in that? What can we expect for the next quarter in that product?
See, price erosion in a new launch in the U.S. is a market phenomenon, right? This is only the first quarter of players entering. If the question is whether price erosion will happen, price erosion will happen. When it starts tracking, whether it is three months from now, six months from now, we will wait and see. I'm sure in any new launches, when more and more players come in that market, the price erosion starts happening in the U.S. market. There is one level of price erosion that has already happened, and we will see how the market evolves. I think we will be fairly competitive in that segment.
Thank you, sir. That's it from my side.
Thank you. The next question comes from the line of Rashm i Shetty from Dhaulat Capital. Please go ahead.
Yeah. Thanks for the opportunity. This is Rashmi Shetty. Just again on the US part, when you say that this quarter will be benefited from Valsartan, Sacubitril, and CDMO, if I remove that part, quarter on quarter, is the base stable, or have we seen some erosion on a quarter on quarter basis?
See, if we remove the new launches, the general trend has been very flattish for the U.S. business. We have volume growth, but there is price erosion that happens, which is the nature of that market. The growth is largely driven by the new launches.
Okay. How many launches have we done in first half?
I think we've done four launches. The meaningful one is Valsartan.
Correct. How many are we planning for second half?
I think at this stage, we will have at least three or four more.
Three and four. Okay. So when you say that for this full year, we will be doing double-digit growth, would it be like high-key growth or lower double-digit growth in the US market?
I think close to a low double-digit kind of growth. So somewhere between 10-11% is what I expect. We should be close.
Assuming that the erosion will hit in Saki Betel was.
In the subsequent quarters when the price erosion happens in these new launches. That is how we are looking at it.
Okay. One more question on other intangible effects. When I just compare, seen in your balance sheet from 31 March 2025 to the current second half, it has gone up significantly up. If you can specify the reason for that?
We acquired two companies in April 2025. One was Bombay Auto, and the other was Adroit. Other intangible assets also include the trademark and the technical know-how which we got from these companies when we acquired them. We have capitalized the trademark and technical know-how from these two companies. That is the reason the other intangible assets have gone up. Also, there is some impact on the depreciation and amortization amount.
Okay. Some impact is also there in the goodwill, right?
Yes. Yes.
Some part.
Yes.
Okay. Thank you. Thank you so much. That's it from my side.
Thank you.
Thank you. The next question comes from the line of Abdul Qadri from ICICI Securities. Please go ahead.
Yes, hi Sir. This is Abdul from ICICI Securities. Sir, just one question on the Overhead. How should we see the ramp-up RTR in the new CDMO plant? I understand you've been guiding about INR 50 crore of operating overheads. By when is the plant expected to break even?
Twelve to eighteen months. It has just started operational in this quarter. Within twelve to eighteen months, we should be reaching the breakeven.
Okay. Sir, what would be the timeline the same for your MedTech ventures?
See, MedTech, operationally, if you look at, we will break even from the current operations. We would like to also invest and go for other markets through this product. There will be some expenses on product filings and also on getting other countries' approval for the factory. I think FY2028 is when we will break even. The amount will be not very significant from MedTech in terms of OpEx losses.
Got it. Sir, one final one, if I may. On the M&A front, in terms of our key priority markets, I mean, in India, are we continuously now still looking for acquiring some brands on the domestic formulation side, or is MedTech something where the focus is now shifting across to?
Sir, it's not like that. I think India is our core market, and I've always said that we are continuously on the lookout. Now we have good cash on our balance sheet as well. Whenever there is a right opportunity at the right value where we feel that we can create more value, we'll go for it. That's our take.
Got it. Thank you, and wish you all the best.
Thank you.
Thank you. The next question comes from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Thanks for the opportunity. Sir, just on the engine side, to be taken as a gross margin, engine US or maybe engine combined US as well as Pune side?
See, CDMO business, if I say, so CDMO business is generally a higher margin than our overall corporate margin. That is how I can say. It is a high-gross margin business, generally. I do not think margins are a consideration in that business. That is why we are very confident about that opportunity. I think the right way to look at it is the EBITDA margin because you do not incur much of material cost when you do CDMO, so. Yeah. And it is.
Because these are more because of the CDMO work at the product development level, or this would be more like a commercial level?
No, for development, yeah. For US, as of now, we are for product development.
When we are thinking of reaching the INR 300 crore sales as well, that is largely to be coming from development work.
Yeah. It is all development work. This is not a commercial-scale manufacturing.
Understood, sir. Just one clarification, this GST impact of INR 50 crore-INR 60 crore you were highlighting, is that per quarter or for the second half?
No, that is points two. At the quarter level, it is around INR 25-30 crore.
Got it. And lastly, how much to take ETR or effective tax rate for FY 2027/2028?
FY27 will be 35-38%, you can say, because we'll be coming out of MAT after March 2026.
Anything which is probably not any losses which will not be considered, and which is why this 35-38%?
There is always some amount of expenses which get disallowed under income tax. That is why the rate is more than 35%. Yes, we have more than INR 1,500 crore of MAT credit on our balances. For the next, say, one or two years, we will not have any cash outflow. It will be under MAT only, the cash outflow. Yeah, the ETR will increase significantly as compared to what we have to.
Just lastly, so additional OpEx with respect to CDMO plan, INR 50 crore-INR 60 crore per quarter in terms of expenses. GST impact for the second half completely. On the MedTech side, additional OpEx?
MedTech, see, current OpEx is in the range of INR 10-12 crores only. Going forward, I do not see any major significant increase. Maybe in the range of this, it may increase further by INR 7-8 crores max. Just to give you in terms of guidance, I think there is a lot of query related to the other expense. Other expense, there is a significant increase from quarter one to quarter two. The other expense will be for quarter three and quarter four, it will be in the range of, say, INR 900, INR 900-905 crores. Everything including engine and MedTech or other expenses will be around INR 900 crores for quarter three and quarter four.
Got it, sir. Thank you. That's it from my side.
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you all for joining today's call and for your questions. If you still have any follow-up queries and need any clarification, please feel free to reach out to us directly. Thank you.
Thank you. Thank you, everyone.
This brings the conference call to an end. On behalf of Motilal Oswal and Alkem Laboratories, we thank you for joining us, and you may now disconnect your lines. Thank you.