Ladies and gentlemen, welcome to the Q2 and H1 FY 2027 earnings conference call of Concord Biotech Limited, hosted by Choice Institutional Equities. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of the company's future performance and involve risks and uncertainties that are difficult to predict. 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 and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Maitri Sheth from Choice Institutional Equities. Thank you and over to you, ma'am.
Good afternoon, everyone. On behalf of Choice Institutional Equities, we welcome you all to Q2 and H1 FY 2027 earnings conference call of Concord Biotech Limited. Today on the call, we are joined by Mr. Ankur Vaid, Joint Managing Director and Chief Executive Officer, Mr. Raviraj Karia, Chief Financial Officer, and Mr. Prakash Sajnani, Assistant Vice President, Accounts, along with SGA, their investor relations advisor. We will begin the call with opening remarks from the management, followed by a question and answer session. Thank you and over to you, Mr. Vaid.
Thank you and a warm welcome to all on our Q2 and H1 FY 2027 earnings conference call. We are pleased to report a strong performance for the quarter ended 30th September 2026. Revenues for Q2 FY 2027 grew 25% year-on-year. For the first half of the year, the six months ended 30th September 2026, revenue grew 26% over the same period last year, so the momentum has held through both quarters. What is particularly encouraging is how broad this growth has been. It came from every product category and every geography. Immunosuppressants, anti-infectives, antifungal and oncology all grew. Anti-infective, antifungal and oncology grew faster in percentage terms on account of increased market penetration for the products commercialized in the last couple of years.
These newer segments are clearly gaining traction and we are optimistic of future. At the same time, we continue to win a larger share of our customers' spend in immunosuppressants. To provide further perspective, our immunosuppressants business delivered a high double-digit growth while anti-infectives and antifungal grew in line with the company average growth. Our oncology business nearly doubled compared to the corresponding period last year. Taken together, this shows a healthy, well-balanced portfolio, leaving us well-paced as we move into the second half of the year. Speaking of highlights for H1 FY 2027, we received ANDA approvals for tofacitinib and mycophenolate mofetil oral suspension which strengthen our formulation portfolio. We also filed a Drug Master File for fidaxomicin in the U.S., which adds to our API opportunities in that market. We successfully completed the US FDA inspection of our Unit II formulation facility at Valthera, Ahmedabad.
We also received ANVISA approval for our Unit III facility at Limbasi. Both outcomes reflected our continued focus on regulatory compliance and strengthen our position to serve customers in regulated markets. We have launched Inspira, our dermatology division. It takes us beyond our existing portfolio into science-led skin health solutions. The aim is to meet changing patient needs and build stronger relationships with dermatologists and other healthcare professionals. Lastly, board recommendation of 1:1 bonus issue has been approved by shareholders and will take effect in the coming weeks. The bonus issue reflects our confidence in delivering sustained growth and long-term value for all our stakeholders. Moving on to segmental performance. API revenue grew by 30% year-on-year during the quarter, while formulation revenue increased by 6%. The domestic formulation of the business delivered a strong growth of 29% in Q2.
The relatively modest growth in overall formulation revenue was primarily attributable to a shift in the procurement strategies across emerging markets, with certain customers increasingly opting to procure API instead of finished formulations, as well as the transition of business from Advergent to our wholly-owned subsidiary in the U.S., Stellon Biotech. On the growth front, we are actively engaging with several large domestic and global customers for our injectable business and we expect to finalize contracts in the near term. Securing these contracts would drive higher utilization of our injectable manufacturing facility, providing significant growth potential. The resulting faster ramp-up is expected to support revenue growth and improve margins over time. At Concord, we believe it is more appropriate to evaluate the overall business growth rather than view API and formulation revenues in isolation.
Our focus remains on expanding end customer sales and increasing our wallet share, irrespective of whether the business is rooted through API or formulations. While the revenues mix may vary depending on individual customers' procurement strategies, we continue to see an improvement in our share of their overall procurement. Domestic API revenue grew by 42% year-on-year in Q2 FY 2027, while export revenue increased by 8%. However, including deemed exports, the overall contribution from exports would be significantly higher. This is because several customers are increasingly shifting their procurement to Indian subsidiaries, from where the products are subsequently exported. These trends are largely driven by individual customer procurement strategies. Accordingly, we believe the more meaningful metric is the overall growth in our share of customers' total procurement, supported by deeper customer relationships and new customer additions across both domestic and international markets.
Speaking about margins for the current year, we witnessed a gross margin contraction of approximately 400 basis points year-on-year, primarily driven by an increase in raw material prices, particularly the solvents, amidst ongoing geopolitical uncertainties and broader supply chain disruptions. We believe these pressures are temporary in nature and have impacted our quarterly performance. However, on a full -year basis, we expect to recover the margin impact through an improvement in revenue, coupled with effective cost optimization measures and optimum inventory management. Margins were also impacted by higher power and fuel cost. This was partly offset by the renewable energy sources in which we invested last year. As power and fuel costs stabilize, we expect to realize the full benefits of these renewable energy investments, providing further support to our overall margin profile. On the EBITDA front, our reported margins stood at 33.8% in Q2 FY 2027.
For H1 FY 2027, EBITDA margins remained fairly stable at 33.0% compared to 33.2% in H1 FY 2026, despite the contraction in gross margins. This demonstrates the inherent operating leverage and resilience of our business model. Excluding expenses associated with our new injectable facility in Stellon, where revenues are yet to ramp up, our H1 FY 2027 EBITDA margin would have been approximately 37.8%, closer to our historical margin levels. As these investments begin to contribute to revenue and the input cost environment normalizes, we expect our margins to progressively improve. Before I conclude, I would like to highlight the key strengths and growth opportunities that position Concord well for the future. Over the years, Concord has established itself as a leading research-driven biopharmaceutical company with deep expertise in fermentation technology.
Our extensive portfolio of fermentation-based APIs, supported by a robust pipeline, strong R&D capabilities, and established manufacturing capacities, provides us with a solid foundation to capitalize on growth opportunities ahead. In addition to strengthening our core API business, we are actively exploring CDMO opportunities in fermentation-based APIs. Our established technical capabilities, process expertise, and manufacturing infrastructure position us favorably to pursue these opportunities and create additional avenues for growth. We are also building a presence in the U.S. formulation market through Stellon, our front-end distribution platform. While the business is currently at a nascent stage, we believe it has significant potential to emerge as a meaningful contributor to our growth over the coming years. Looking ahead to FY 2027 and beyond, we remain confident in our ability to sustain our growth momentum, supported by strong business visibility from our pipeline and the execution of our long-term growth strategy.
Our niche capabilities in fermentation-based products and leadership position in key molecules continue to provide us with a distinct competitive advantage. While remaining mindful of external developments and evolving business environment, our priorities remain clear: deepening relationships with existing customers, expanding our market presence, capitalizing on emerging opportunities, and continuing to invest in our core capabilities. With these strategic priorities in place, we are confident of further strengthening Concord's market position and transitioning our capabilities and emerging opportunities into sustainable long-term business growth. With that, I would now like to hand over to Raviraj to take you through the financial performance. Thank you.
Thank you, sir, and good afternoon, everyone. Let me take you through the financial performance for the Q2 and H1 FY 2027. Revenue for Q2 FY 2027 stood at INR 309.1 crore compared to INR 247.1 crore in Q2 FY 2026, registering a year-on-year growth of 25%. For H1 FY 2027, revenue increased by 26% to INR 566.6 crore compared to INR 451.1 crore in the same period H1 FY 2026. API revenue for the quarter stood at INR 250.1 crore, registering a growth of 30% year-on-year, while formulation revenue stood at INR 58.9 crore, growing by 6%. As highlighted earlier, we believe Concord's performance is best evaluated on the basis of overall business growth rather than the quarterly revenue mix between APIs and formulation, as customer procurement strategies may influence the mix between these segments. Domestic revenue grew 42% by Q2 FY 2027 while the export revenue increased by 8%.
As discussed earlier, changes in the customer procurement patterns can influence the reported revenue mix between domestic and export markets. Gross margin for Q2 FY 2027 stood at 76.2%, contracting by approximately 400 basis points on year-on-year basis, primarily due to higher raw material prices and changes in the product mix. For H1 FY 2027, gross margin stood at 77.4% compared to 79.1% in H1 FY 2026. On a half-yearly basis, margins have remained relatively stable despite the input cost pressure experienced during the quarter. EBITDA for Q2 FY 2027 stood at INR 104.4 crores, registering a year-on-year growth of around 18%. For H1 FY 2027, EBITDA increased by 25% to INR 187 crores. EBITDA margin stood at 33.8% for Q2 FY 2027 and 33% for H1 FY 2027.
Excluding the expenses associated with our new injectable facility and Stellon, where the revenues are yet to scale up, EBITDA margin would have been 37.1% for Q2 FY 2027 and 37.8% for H1 FY 2027 for the first half. This reflects the underlying profitability of our established business, excluding investments in the growth initiatives. When I talk about the PAT for Q2 FY 2027, it stood at INR 69.6 crore, registering a year-on-year growth of 10.3%. For H1 FY 2027, PAT increased by 19% to INR 127.3 crore. PAT margin for Q2 and H1 FY 2027 stood at 22.5%. However, if we look at the PAT excluding the share of profits from our JV, PAT at INR 126.6 crore compared to INR 103.2 crore with a growth of 23% year-on-year.
Lastly, Concord continues to maintain a zero debt balance sheet with cash and cash equivalents of around INR 445 crore as of September 30, 2026, reflecting our continued focus on financial discipline and balance sheet strength. With this, I would like to conclude my remarks on the financial performance and open the floor for questions and answers. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Yash Tanna from ithought PMS. Please go ahead.
Hi, good afternoon. Am I audible?
Yes.
Hi, sir. My first question is, the API revenue is bouncing back well. If you can highlight a few key products, geographies where you're seeing this traction, and also have there been any new customer wins which is leading to this growth? Also, from a medium term perspective, let's say two to three years, how do you see the growth of this business and what could be the key drivers for the same?
In terms of products, as I mentioned, the immunosuppressant continues to grow where we are able to bring in new customers on board. This is across geographies, particularly in the U.S. and in Latin America. However, the growth over the last six months has been significantly in the anti-infectives, anti-fungal, and the oncology. Last year, around a year and a half back, we had commercialized nystatin. As I mentioned earlier also, we continue to gain traction there. That's been doing very well for us. We also have several U.S. customers who have qualified Concord as their source. We have provided them validation quantities. Commercial supplies are yet to begin. Once they are becoming commercial, we would see, again, a significant jump coming in nystatin as well, which is an anti-infective segment.
When it comes to antibacterial, we have seen more traction coming in products like mupirocin calcium. We are just in the process of launching fusidic acid as well, where we've just supplied some quantity. That's a product that in the next coming few months to quarter, we would be commercializing in emerging markets and then extending it to global markets. For fidaxomicin, we have launched. We just filed a U.S. DMF, so we are seeing good traction there as well. These are some of the products in the anti-infective and antibacterial segment. When it comes to oncology, products like romidepsin has picked up well because of some of the customers launching the products in the U.S. market, and products like everolimus continue to see traction.
This is in addition to our core business of immunosuppressants, where in addition to products like tacrolimus, mycophenolate mofetil, mycophenolate sodium, and cyclosporine, we are also seeing good growth coming in from other products like sirolimus and temsirolimus. I would say it is a holistic growth across all products and all segments. In terms of geographies, key markets would continue to be the U.S., Latin America, and Japan. We have added quite a few customers as new product additions are happening, particularly in the anti-infectives and antifungal segments. With the new launch in oncology products, there have been several new customers that have been added in the last six months. As we continue to build on some of the new products that we expect to launch in the coming quarters, they are also mostly in the anti-infectives and antifungal segment.
We would see significant customer additions also happening going forward. In terms of the growth over the next two to three years, I would say that there is no company like Concord which has such a vast portfolio of fermentation-based APIs, and we continue to build on that portfolio. We already have around 30-plus products. We have another 10 to 15 in the pipeline, and significant capacities have been built to cater to the requirements for these products once they become commercial. We see a lot of potential in these products, and I think they are going to be the growth driver when it comes to the API business, in addition to, of course, the other business segments, which are the formulation and the CDMO.
Sure, sir. Thanks. That is very helpful. Could we assume like a mid-teen sort of a growth number for this business over the next few years?
I would say that one should expect slightly higher in terms of the API business. Historically, we have grown at around 18% to 19%, and I think it would be safe to kind of build on assuming our historical growth numbers. Of course, beyond that, there are contributors like the injectables, like the CDMO, and the finished formulations that we have been investing in, which would also drive the growth beyond the historical growth of 18% to 19% that we have given in the past.
Got it, sir. My second question was related to the formulation business, sir. We did close to INR 200 crore revenue in FY 2024, and we are almost at a similar run rate now in FY 2027. I also wanted to understand what is the capacity utilization for the oral solid unit, which is I think Unit II, and the injectables unit, which is the new unit. How are we planning to ramp both these units up? Because the sales number has not moved. You also mentioned about tofacitinib and MMF approvals. You also spoke about a few injectable contracts in your opening remarks where you were talking to a few customers on the injectables front. A few timelines around those and how formulations will ramp up will be very helpful.
Yeah. For the capacity, I would say that the Unit II was 21% was the capacity utilization for Unit II, and around 5% is for the injectable Unit IV.
When it comes to how are we seeing the ramp-up, again, we continue to add products. Over the years, as I mentioned, we have seen good traction even in the domestic market, which has been growing over and above the growth of the company, I would say. This quarter also, the domestic formulation business grew by 29%. There is again, with our own manufacturing coming in the injectable business, we expect that our domestic formulation business will grow above our company average growth. Many of those products are in-house manufacturing. Of course, this would also lead to ramping up the capacity utilization.
In addition to that, with Stellon coming in and with new ANDA approvals coming in, we expect that facility utilization would also increase. For tofacitinib, we have already supplied our products to Stellon, and mycophenolate mofetil oral suspension is something that we expect that in the coming quarter, I mean, in next quarter, we would be supplying the products to Stellon. Stellon continues to make inroads for all the products that it has as approved and commercial, and the new launches, the team is working to kind of gain market share when it comes to the oral solid doses in the U.S. Coming to the injectables, many of the customers have taken the first step, which is in terms of auditing our facilities. In the last couple of months, we've had several inspections or audits by our potential customers, and we continue to engage with them.
Things are progressing quite well on that front, and we are quite optimistic that in, as we've mentioned in the past as well, that in H2 we should see some of these contracts materializing.
Got it. That's very helpful. I have more questions. I'll join back.
Thank you.
Thank you. We have the next question from the line of Debanjan Bhakta from USGI. Please go ahead.
Yeah, thank you for the opportunity. What will be the effective tax rate for the rest of FY 2027 and FY 2028?
The tax rate would be in the range of 24%-25%.
It doesn't show any elevation like it showed for the last two quarters.
Sorry?
It doesn't show any elevation like it showed for the last two quarters.
No.
Okay. Thank you.
Thank you. We have the next question from the line of Abhishek Kamdar from Value Plus Advisors. Please go ahead.
Yeah. Hi. Thanks for the opportunity. We just wanted to understand, in terms of pricing, I think in quarter one, we had mentioned that we gained some market share as we were able to offer competitive pricing to our customers, given our capacities. How has pricing worked out in this quarter, in Q2? Around that, we also spoke about raw material cost increases. Have we been able to pass on any of these to our customers?
When we say that we have been able to gain customers on account of better pricing, that pricing basically is to the customer. Because what I mean to say is that, Concord, because of the economies of scale, because of the expertise that we have in fermentation, and the kind of productivity that we have on the products, we are able to offer a significant price discount compared to their current suppliers. While maintaining the profitability, which is in line with our API business. It is like a win-win situation. We have been able to gain customers by reducing their procurement cost, but at the same time, it has been in line. We haven't seen any pricing pressure when it comes to Concord, but yes, we have been able to gain customers because of the price reduction compared to their current existing suppliers.
I think this is something that we continue to do, not only for the new products, but also for the existing products where we hold a significant market share. Because some of the competitors that we see, they are significantly priced higher compared to Concord. That gives us an opportunity to gain more market share given our strength, as I mentioned earlier. When it comes to raw material pricing, it is quite challenging, I would say, to pass on some of the cost that we have incurred to the customers. I think we would rather try to address these issues through R&D and through productivity improvements rather than passing these because these are, again, more of a short-term issue. They are not a longer-term issue that we need to think about passing these raw material cost increase to our customers.
Had it been a more of a long-term issue, we would have still thought about seeing that what could be the best way out. But this is more of a shorter term issue, which I feel that we don't need to reach out to customers to engage in those discussions, is what we would be looking at. But as I mentioned again, that there has been no pricing pressure. It's been more of the benefit that we offer to our customers.
Hello?
Any further questions? As there are no further question, move on to the next speaker. We have the next question from the line of Chirag Khinote. Please go ahead.
Yeah. Thank you for the opportunity. I wanted to talk about the new API that we are manufacturing for the dermatology as a target industry. Could you provide some more clarity on this Inspira? Is it like a skin infection or autoimmune skin condition like psoriasis or something else? Will it be fair to assume that the TAM for Inspira would be about INR 5,000 crore plus and not like the MMF that we have for U.S., which is about INR 300 crore, if I'm not wrong.
Yeah. You're right there that, for the Inspira division, if you see the TAM, the India-based market itself is for the Concord range of products, is close to around INR 5,000 crore. Here again, we are the only company in India which is fully integrated, right from API to finished. So definitely there are advantages in is what we see on the dermatology. Within the dermatology, the key segments that we would be working is towards eczema, where we have products like tacrolimus, pimecrolimus, anti-infectives, antifungal, where we continue to see products like fusidic acid, nystatin, mupirocin calcium and also certain acne products. So these are more products where there is some value that we are able to create for our stakeholders as well as for our patients.
What would be your strategy to increase the size, like reaching from the initial INR 100 crore -INR 500 crore sort of revenue? What kind of target is there in the mind of the management for this particular segment?
So typically to kind of make inroads into. Currently, we have launched in certain markets, and I think we are also working towards expanding into different regions within India as well. This has just been couple of months that we have launched the Inspira division. But the intent is that once, by the coming years, we should be able to make quite significant inroads. Of course, going to the levels of close to INR 400 crore or INR 500 crore, I would say it would take at least four to five years to kind of start building, having a significant market share in these products. But being a fully integrated and having full control on the quality aspects and on the input cost, we are fairly confident of having a significant market share on this. That's the reason why the division has been launched with that perspective.
We have the next question from the line of Stuti Bagadia. Please go ahead.
Hello. Thank you for taking my question. Am I audible?
Yes.
Yes, we can hear you.
Yes. I wanted to ask, on terms of the EBITDA margin, what do you see as the driver that could lead to a margin expansion? Also, if you could give some guidance on a sustainable EBITDA margin in the medium term.
If you see EBITDA margin, we have taken, as I mentioned during the speech as well, that we've taken steps to kind of see that how we kind of continue to build on our EBITDA margins. One of the steps which was taken was investing into the renewables energy. That has a positive impact on the EBITDA margins. Of course, times like these, because of the global uncertainty and the increase in the cost, some of those benefits have kind of compensated the increase in the cost. But once I think these issues are resolved, we should see positive contributions coming from the kind of investment that we've done in the past when it comes to power and fuel costs. Similarly, we've mentioned that Concord continues to invest in growth. Be it the Stellon business or the injectables, which are growth drivers for the future.
As we see ramping up happening in these two business units, we should reach closer to our historical EBITDA margins. In our presentation also, we have mentioned that, without these, the EBITDA margin looks closer to around 38%. As ramp up happens also in our other businesses like at Unit III Limbasi, we would see more margin expansion happening there as well. Our sense is that over the next few years, we should be in the range of 38%-40%, which has been our historical EBITDA margins once these business units start to contribute in the overall business.
That is helpful. Thank you. One more question that I had from my end. What is the CapEx that we are guiding for the next year and for the remaining of FY 2027?
Stuti, we have been guiding that around INR 20 crore-INR 30 crore worth of maintenance CapEx that we incur every year. For this year and the next year, we expect around INR 50 crore-INR 60 crore each every year we CapEx, which is in the tune of INR 100 crore-INR 120 crore.
Okay. Just one more question, if I could squeeze in. In terms of the contracts that you mentioned about for the injectables facility that are ongoing, how big of an opportunity are these, and if you could give any qualitative color on them?
We have been discussing with quite a few customers, and these are again, larger customers. The discussion is across multiple products, where Concord is also backwardly integrated on those APIs as well. The opportunities are quite sizable. I would say that the TAM for the injectable products that we do is close to around INR 5,000 crore, of which we have kind of built in around INR 300 crore top line over the next three to four years from the domestic/export markets, which I feel that if these customers are on board, that is something which is quite achievable in the timeframe that we have given.
Thank you, sir. Thank you. Those were my questions.
Thank you. We have the next question on the line of Sidharth Negandhi from CWC. Please go ahead.
Hi. Thanks for the opportunity. Just wanted to clarify on how much is the CDMO revenue and what's the status in terms of future CDMO contracts. Last quarter, you had mentioned about $2 million in revenue. Was that the lifetime revenue, or was that the revenue in the last quarter? And what's the revenue in quarter two on CDMO? Second, just continuing from the previous participant's question, how do we see the gross margin trajectory in context of formulations being heavier on growth going forward, considering injectables, considering Dicodex. In that context, would you believe that we can also see this as the lower point on gross margin?
Let me first answer on the gross margin part. If you see that for the quarter two and also for the full year, the API -to -formulation has been pretty much in the same lines of 78% to 22%. I think for the six months, it's around 80/20. It has been pretty much in line with what we have, which is the 80/20 split. Even the facilities that have been designed, both at the API and the formulation, the capacities have been designed such that we would be in the range of the 80/20 split between APIs and formulation.
That being said, it is not something that we kind of monitor and say that, okay, it has to be in this ratio because we are driven by how we can capitalize and how we can work towards maximizing our market share at the API level, be it through API or formulation. But historically, we have been in the range of 80/20 split. So we expect gross margins to be pretty much in line with what we have seen historically. I think as everybody would agree with us that in the last six, eight months, because of the rising fuel prices, because of all the other things, the operating costs, not only for Concord, but for I think many of the companies have increased.
That is something that I would say impacted us, but not that much because, being in fermentation, only a certain portion of our raw materials gets consumed, which are impacted by the increase in the power and because of the oil such as the solvents and oil. Most of the other products which are agro-based products, there we do not see these kind of significant impacts that are there. So in somewhat we have been impacted, but not as much as, I would say, companies which are focused on using a lot of solvents and oil. So we expect that as things would improve, we should get back on the gross margins in terms of what we have seen historically. When it comes to CDMO business, the $2 million that we mentioned was more so from an annual perspective, because currently we have one project where we are commercial.
Of course, we do not classify contract manufacturing for third parties as CDMO. We only classify CDMO where the IPR is with the third party primarily being the innovators here. We have undertaken smaller projects as well, which are more in the development stages rather than on the commercial front. So they may not have an impact on the top line. But there are quite a few projects that we are working when it comes to R&D development activities. I would say that they may not be a true reflection of the kind of work that we are doing, but from a revenue perspective, I would say we have one commercial project and we are exploring to work with a couple more on those front.
Okay.
Yeah. Sir , just to follow up on that, you had alluded to the mix being a challenge on the gross margin. Could you clarify on what that meant, what part of the mix was unfavorable on gross margins? The $2 million that you are talking about, is that the FY 2027 annual revenue guidance on CDMO?
Again, when we say the gross margins. Sorry, I did not get your first point on the mix.
Sure. In the presentation mentions that gross margin has been impacted by an adverse mix. Could you help me understand what the mix-
Yeah.
Which part? Because you are saying the API formulations are more or less, I mean, there is a 2%- 3% change. Is that the mix that you are referring to? Because that logically would have actually improved gross margins. What is the product mix that meant against gross margins? If you could help us understand that.
Sure.
And the $2 million, is that the FY 2027 guidance or how should one think of that?
Sure. The mix that we mentioned was a product mix at the API level. As I said, not all products are at exactly the same margins as one would see. There are some products where there could be slight change in the margin profile if there is one product being sold over and above the other. But they are more or less in the same bracket, but not the same. There is some impact which does come through the change in the product mix at the API level. But the significant contributor to this has been primarily the raw material pricing with a smaller impact coming in from the change in the product mix, which has been sold in that particular time period, is what we meant by that.
When it comes to the CDMO, again, on specific CDMOs, we are not giving any guidances, as you would say. But the opportunity that we see currently in discussion with our customer has been around the $2 million mark. Whereas we still continue to build on that opportunity because as for them, the opportunity size is quite big there. But they've been building on the platform in the U.S. because it is a new product that they've launched almost a year and a half back now. So they continue to build and make inroads because being an NCE product, which is there. As for them, the opportunity could be much larger, but we are their exclusive manufacturer for them. So any opportunity or any volume that will come would come exclusively to Concord there.
Got it. This is helpful. Last question again on the gross margin bit. Sorry to harp on this. There would have also been a benefit from in-housing the injectables formulations, right? Is that material in this quarter, and if so, save for that what would have been the further dent on account of the two other factors on the gross margins?
It hasn't played out yet because as Raviraj mentioned, that the capacity utilization for unit four has been around 5% only. While it will play out significantly once the volumes start to pick up. But being in currently at utilizations of 5%, it has not kind of reflected. As a matter of fact, at times it can play slightly on the other side because it's slightly opposite because all the API that we do transfer to the formulations is basically at the market price. So at times it can kind of show you a different picture when you just start looking only at gross margins.
That is why we say that you should look at how our EBITDA margins are moving rather than looking at the gross margins because the gross margin also has a component in terms of the API being transferred to the formulation units at market prices rather than at COGS.
That is a volume-weighted price, sorry, volume price, and therefore at lower utilization, they would actually end up paying more prices.
Correct. So that is why we say that as formulation business at times grows, you could see some impact on that happening on the gross margin side and hence you should look at from a totality perspective rather than looking it from say line item because it has that impact.
Got it. Thanks. I will get back in the queue.
Thank you.
Thank you. We have the next question from the line of Alankar from Kotak Institutional Equities. Please go ahead.
Hi. Thank you for the opportunity. Ankur, first half growth top line is about 26%, and you had spoken about the 18% plus growth in FY 2027. Would you like to revisit the guidance?
We have mentioned that the growth in FY 2027 would be slightly better than our historical numbers. And yes, I think, H1 has been 26%. We have a fair amount of visibility also on our quarter three numbers. And I would say that we would continue to kind of consider the growth for this financial year slightly better than our historical growth of 18%.
Got it. Ankur, just a follow-up there. If I look at specifically for this quarter and the two-year and three-year overall sales figures are relatively quite low. So two-year sales have been flat. three-year overall growth is around 5.5%- 6%. The question is, once the base normalizes in FY 2028, should we expect you to continue to report that 18%- 20% plus growth that Concord used to report till FY 2025?
If you take out the last year's de-growth, Alankar, that was there, I would say that over the three-year period, five-year period, and the 25-year period, we have grown at 18%- 19%. I think we've discussed during our various concalls as well on what were the challenges that we saw in what we experienced in the last year. During the last year also, we had mentioned that the impact which was there in the last year was more from a global phenomena effect and nothing structural in nature. I think, the kind of growth that we have seen in quarter two and the kind of visibility that we have for quarter three, it kind of also shows that the last year was more from a global impact rather than something structural in nature.
If you take out the last year, I think, as I mentioned that, any time point, we would have grown at least by 18%- 19%. This year also, we are saying that we should be growing slightly better off than the 18%- 19% because some of the challenges which were there led to somewhat of the kind of work that we did in the last year, which did not fructify in the last year because of the risk aversion of our customers is getting fructified in this financial year. That's why I say that we should do slightly better than our historical growth that we've seen. For the next two to three years, as I mentioned earlier, we have the right product mix, we have the ample capacities in place. We have a very strong pipeline of products which nobody in India is developing.
I think our competition coming from Europe or Southeast Asia, we see a good position that we will be able to take significant market share on those products. So I think we are quite well-positioned to kind of gain more market share on those products, which would lead to the kind of growth that we have spoken about.
Understood, Ankur. Just one follow-up there. When you talk about new products, would it be fair to say that the contribution of new products, say, if I take a three, four-year view, will be higher than what we have seen in the last two, three years?
New products have to be classified into two categories. One is that the new product that we have launched in the last three to four years, and then the products that we have just commercialized within that year. Of course, products like nystatin, if you see, or products like fusidic acid, they have been growing quite significantly. As we would gain approvals in some of the regulated markets as their file would get approved by the FDA, we should see significant surge in volume pickup for those products as well. It is a life cycle that it would go through, but Concord has a strong positioning on these products and can significantly gain market share on a very shorter period of time because of the strength that we have, whether it is capacity, expertise in fermentation and all. These products will grow faster than the rest of the business.
But having a smaller base, it will take time for them to kind of reach to the levels of, say, certain mature products.
Understood. The second question is, you mentioned about growth over the last six, eight months being driven more by anti-infective, antifungal, and oncology.
Again, if I look at the next few years, do you expect to gain further share in some of the key immunosuppressant products as well? What would be the key driving factors out there?
Immunosuppressants continues. If you see for these six months also, the growth in the immunosuppressant business has been in line with the company growth rate and the historical growth rate that has been there. Immunosuppressant in these six months has also grown significantly. That has been a function of us gaining market share, us gaining wallet share with our customers. Certain markets like Latin America is opening up for us because of the ANVISA inspections that have happened. All the inspections, they do play out, maybe they play out four or five months down the line after the inspection takes place. These are steps that we are taking to kind of see that how we can grow business in those regions. That would lead to second-source conversions going through.
There are, again, a lot of discussions at quite advanced stages that are happening with our customers on some of the immunosuppressant products also, given that we have a leadership position on many of those APIs. I would say immunosuppressants will continue to grow, and for that, the growth not only comes from the market growth, which is around 10%, but also from us gaining the second source, which actually is a much bigger contributor to the growth of the immunosuppressant business.
Got it. With your permission, couple of final questions. Firstly, on margins. You had spoken about reverting to the 40% reported margins in FY 2028. Historically, Concord has generally been above 40% margins. If you look at the gap right now, it is pretty wide. When should we expect the reported margins moving meaningfully towards the 40% bank? Specifically, if you can help us assess the profitability of Stellon, that would be helpful. Thank you.
Stellon currently, we have supplied them the material. Currently, I would say that we should start seeing meaningful contributions coming from Stellon in the second half of the year. Because the first half of the year has been more about providing them the quantities and them trying to get traction with the customers because it is not that we have our front end, and we have the formulations getting ready, and the customer is ready to qualify Concord. While all the things have been done, I think even the materials have been supplied, the finished products have been supplied to the U.S. We have started seeing traction coming now in the U.S. for our products, and H2 is where we see that things will start building up in terms of the revenues from Stellon.
Till that, I think we have given our cost structures in terms of what is the expense that we incur from Stellon and the injectables. Once Stellon kind of starts ramping up its sale, we should see positive contributions coming up, which will then help us move slightly from the 33%-34% slightly towards our numbers. We are putting all our efforts on the injectable front as well. We spoke about the contracts. Our own division, which is the Inca division, continues to kind of engage with the doctors that now we are a fully integrated company. I would say efforts are being put to kind of see that how fast the ramp-up can happen on both of these two units. Once that does take place, we should be moving from the 33%-34% to 38%-39%.
That is one of the reasons why we report so that you people can understand the gap which is there and then what are the efforts that are being taken to kind of move from our current levels to those levels.
Fair enough. Final question, can you help me with the utilization rates for all the facilities?
Alankar, the utilization for Unit I stood at 75% and unit III at 55%. I mentioned earlier, Unit II is 21% and Unit IV is 5%.
Got it, sir. That is it from my side. Thank you and all the best.
Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.
Thank you everyone for joining our Q2 and H1 FY 2027 earnings call. We hope we have been able to address all your queries. For any further information, please feel free to get in touch with us or with SGA, our investor relation advisors. Thank you once again. Have a good evening.
Thank you. On behalf of Concord Biotech and Choice Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.