Good afternoon, everyone, and Welcome to our Quarter two FY 2027 results call. I trust you had the opportunity to review the investor presentation. Before we begin the question and answer session, I would like to take you through some key highlights. At a consolidated level, we delivered a year-on-year growth of 12.6% in quarter two of FY 2027 and 12.8% in the first half of the year. Our DBF business, Domestic Branded Formulation business, grew by 14.1% in Q2 and 14.2% year-on-year in H1 FY 2027. Adjusted for the Zorvia business, the Branded Formulation business growth stood at 16.5% and 14.9% for the quarterly period. SUNDAE continued to maintain its leadership position as the number one brand in prescriptions and in units. On the profitability, consolidated EBITDA grew by 7.3% year-on-year in Q2 FY 2027 and 7.2% in H1.
While profit after tax have grown by 39.2% in Q2 and 27.3% year to date. Further details are all available in the investor presentation. We can now open the floor for questions.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Participants who wish to ask questions may do so by clicking the raise hand icon at the bottom of your screen and wait for your turn to speak. When prompted, you can accept the prompt on your screen, unmute your audio, and ask for your questions. We will wait for a moment while the question queue assembles. Participants who wish to ask questions may do so by clicking the raise hand icon at the bottom of your screen and wait for your turn to speak. The first participant is Niharika Agarwal. Please unmute your line and please go ahead with your question, ma'am. Niharika, ma'am, please unmute your line and ask your questions.
Can you hear me?
Yes, we can hear, ma'am.
Okay. Gross margins have improved approximately 134 basis points on QoQ level, right? But on EBITDA margins, we are still seeing some pressure. I wanted to understand when gross margin gains will translate into EBITDA expansion?
Yeah. Look, we are ahead of our guidance. We guided that in H2, the EBITDA margins will be around 35%, which have moved to 36% thanks to the earlier improvement of gross margins also. As stated earlier, H2 will see an improvement in both gross margin and EBITDA forward.
Okay. Thank you. In terms of Zorvia deal, after we account for lost product sales and the 7% royalty, approximately how much would be the net incremental EBITDA benefit that we see from out-licensing?
Yeah. So at an EBITDA level, this business which we outsourced was not EBITDA positive for us. It was hardly there. All this 7% royalty should add up to that.
Okay. Thank you. My last question was on the Bhopal facility. Could you help quantify the expected cost savings and the timeline for the 100 basis points gross margin benefit?
Yeah, 100 basis points of gross margin benefit should accrue in the next two quarters. When we are able to shift the entire business, which is by somewhere in the Q2 next year, then we would see more like a 1.5%-2% reduction in gross margins.
Okay. What proportion of the relevant insulin and injectable volumes have already shifted?
Very small. Negligible, but it will ramp up very quickly now.
Okay. What incremental depreciation and fixed cost should be factored in during the transition?
Yeah.
Niharika, the current depreciation, we expect around INR 200 crores-INR 300 crores more to be capitalized. That is around 15% of that. INR 30 crores more on an annual basis is what should be added to the depreciation.
Okay. Thank you for the opportunity. That is all for me.
Thank you, ma'am. I request all the participants who have raised their hands introduce themselves with their name and be followed by the company name they are representing. The next question comes from the line of Mr. Rahul Agarwal. Please introduce yourself and the company you are representing, sir. Request you to ask the questions.
Thank you. This is Rahul from EverFlow Partners. Amit, my first question is on the Bhopal site. Earlier when we had increase the CapEx there and expanded potential capacity there, you had indicated that there could be potential beyond just fulfilling our internal requirements, be it partnerships or scale up there. Is there any progress on that? What sort of scale do you expect in the medium term from that side?
Yeah, Rahul, there is a progress on that side, but nothing concrete as of now to tell you. But the kind of facility which we have built up is quite a bit in demand. We have conducted a couple of audits there, so I think the results of the audit will also come in the next couple of months. So we are still in discussing nothing, which I can tell you at this point of time, from other than our own insulin manufacturing point of view.
Got it. When you say audits, you mean for EU or other regulatory certifications?
Yeah, regulatory. Yes.
Got it. On the GLP-1 side, Amit, how is the ramp up coming along? What sort of scale do you think does the generic market reach on a run rate basis by the end of the year, and where are we today, and how do you expect Eris's position in that?
Rahul, we are quite excited with the GLP opportunity. We still remain very positive on the outcome. As of now, we maintain number one in units and number one in prescription because we have a vial component also, therefore, we are number two as in value. But the market is ramping up well, and I feel that the market might double up in the next year from where we started from. Looks like now we are talking about what? INR 40 crores-INR 45 crores a month. That's the number. I think that next year we should be doing around INR 80 crores-INR 90 crores a month.
Got it. This is for the next full year, you are saying?
Yes.
Got it. One last question, Amit, on the Swiss Parenterals side. How is the progress on the regulatory issue remediation there? By when do you expect that to progress, and is the original target of CDMO scale-up to potentially a thousand crore level over three, four years still intact, or is that something that you would have to review once the regulatory process gets over and you review the contracts with the partners?
Yeah. Rahul, we are in touch with everybody. As of now, we have already stated in the slide that nothing has moved out. The progress is on. As far as the remediation, we will be taking a close down in the month of November to get everything done, and we expect by the end of the year, sometimes in the end of the year, we would be able to invite the auditors once again. So, the remediation work is online. We have spoken to all our CDMO partners. Anyway, we had only one active sale during the current year. Rest of them were anyways in the next year, and their development work is going on regularly as we speak. So till this point of time, this is the status.
Got it. Thank you. Thank you so much.
Thank you.
Thank you so much, sir. I would request all the participants to introduce themselves first, along with the company they represent, and then go forward with the questions. The next participant is Mr. Harith Ahamed. Please go ahead, sir.
Hi. Thanks for the opportunity. The first question is on the plant shutdown that you talked about at our Swiss facility. How should we think about the financial impact for the December quarter?
Yeah, Harith, as of now, we see that there is an opportunity for us to be 5% plus minus of the last year numbers. I am talking about the top line.
Okay.
The way we have planned out at this point of time, it is 5% here and there. Chirag, that is the-
Yeah.
Yeah. That's how we are looking at it. The good thing is we were expecting a little more. The business has been a little robust than we would have imagined, so we've got the numbers right. This is our outlook.
At margins similar to Q2 levels?
Sorry, say that again.
Sorry.
At EBITDA margins, similar to Q2 levels, or will there be a drop?
Yes.
Okay. Amit, your comment on the performance of our semaglutide brand. Good to hear the traction there. If you could give a bit of color on what the numbers look like in 2Q. You had provided that for 1Q. Some color on the breakup between the vial presentation and the pen device.
Okay. Harith, the breakup I don't have, but I think our representative numbers for the quarter would be around INR 16 crores to INR 18 crores. We will be close to that number for a quarter, INR 16 crores to INR 18 crores coming from GLP. It is ramping up well. Harith, we are also coming up with a very large study, one of its kind, where we are basically being able to demonstrate that it is the visceral fat which creates all the problem regarding the risk of CAD, CKD. It is a very large and very appreciable study. We hope that it will be published in the next two months.
Okay. Just wanted to confirm. Did you mention a INR 45 crore run rate that we are tracking now or-
No, I said for the market. I said for the market without the oral. The market value overall was tracking INR 45 crores, INR 50 crores.
Okay. Got it. And then your comment that we are approaching the end of our CapEx cycle. Will you be able to share the CapEx expectation for FY 2027 and how we should think about FY 2028?
Sorry, FY 2027, another INR 50-80 crores this year left.
Yeah.
How much?
INR 100 crores.
Around INR 100 crores? Still left INR 100 crores? Okay. Around INR 100 crores left in the second half, and then we should move down significantly.
Okay. Understood. Thanks for taking my questions. I will get back in the queue.
Thank you.
Thank you, sir. The next question comes from Mr. Kunal Randeria. I would request Mr. Kunal to introduce himself and also introduce the company he represents. Please go ahead, sir.
Yeah. Hi, good afternoon, and thanks for the opportunity. Sir, first question on the insulin business. Amit, sir, you mentioned in the past that there is a good scope for you to ramp up on the government side of business. So just wondering whether that opportunity still stands. Where are you in terms of monetizing it?
Yeah, Kunal. We stand by what we said, and the expansion of the insulin portfolio as well as the capacity in Bhopal both will enhance the supply side of the business. Nothing changes on the stand. We still remain positive about that.
You mean to say that demand is intact? Once the supplies ramp up, that is when you should start seeing some revenue traction. Which should be what? Late 2028, early 2029 then?
No. Look, Kunal, our production from If you see the slide, we have put a pack shot, which has been manufactured from our Bhopal facility. Our Bhopal has already started manufacturing, which means the controls are in our hand as of now. This should ramp up, say, from the first quarter of next year. The ramp-up should start from the first quarter of next year.
Got it. Sir, you also have a slide where you showed that you have kind of done better in OAD this time around. You have been struggling in OAD for a while now. Is this what your primary sales also reflect? Should we expect to grow at least in line with the market going forward?
Kunal, look, while we were struggling, 50% of our struggle was because of the discontinuation of a large brand last year. What happens by July, August, it tapered off. When it tapered off, we were like 4% - 5% was contributed only by that brand. Otherwise, there was always a basic amount of growth. What happens when it got tapered off and then we had a couple of new launches, which are actually doing quite good. Contrary to what we had been telling you in the past, I remember last time I told we would be 70% of the growth. Maybe we could be ahead of the market in the coming quarters.
That point is behind us, and our new product, which have come from our own R&D, it just took six to eight months more than we were expecting, but the ramp-up is quite good.
Got it, sir. That's useful. Just one more if I can.
Please.
Mr. Sameer, sir. Can you share what your net debt number is today and your expectations? Because the cash generation has been pretty strong. Just want to understand your net debt number today, and how do you see it at the end of FY 2027 and 2028?
Yeah. Net debt as of today is around INR 2,150. INR 2140 to be precise, currently, as of September 30.
Yeah.
Right.
We are aiming for around INR 150 crores to INR 200 crores of a pay down this year. We are trying for INR 150 crores to INR 200 crores pay down this year.
Right. The next year should be what, INR 400 crores, INR 500 crores more?
Should be. Because once the CapEx cycle spools down, I think that's a fair number to think about.
Got it. Thank you and all the best.
Thank you, sir. Participants who wish to ask questions may do so by clicking the raise hand icon at the bottom of your screen and wait for your turn to speak. I would request all the participants to self-introduce themselves and introduce the company they represent before they ask the questions. The next question comes from the line of Mr. Manish Reddy. Please go ahead and introduce yourself, sir.
Hello. Thank you for this opportunity. My first question is regarding the Bhopal facility. What is the expected full year EBITDA benefit once the Bhopal manufacturing shift is completed? When should the earnings be visible? The second question is related to the CapEx cycle. Most of the CapEx cycle is expected to wind down by the end of FY 2027. Eris BioNxt, Swiss, Levim expected to contribute more from next year. What kind of earnings growth are we expecting for the FY 2028? Will it be a meaningful acceleration considering the FY 2027? What are the key assumptions behind the acceleration? Thank you.
Yeah. You are right. All this investment which was going from the last couple of years should kind of set out in the next year. Bhopal is a clear-cut case where the earnings will look up, and once we shift all our products there, and by the time we do it, we will have a gross margin benefit, which will then precipitate into an EBITDA margin benefit. That is what I told you earlier, that we expect 1.5 to 200 basis point of gross margin coming down, which will then be reflecting in the EBITDA also. Simultaneously, there will be tax gains also because, as of now, we pay around 37% tax on outsourcing, and Bhopal is a 115BAB, so we will come down to 15% of net tax. That is Bhopal. Levim will largely contribute into getting newer products.
As I mentioned that, we are the first company to get a semaglutide recombinant approved for clinical trials, and we have a lot more products coming out from Levim. Each of these products are meaningful from a value consideration once they are launched. Levim's contribution will not be seen in value term, but will be more seen from a product term, which will then precipitate into value. The third major investment had gone in the large block, which we have built in Swiss, which will also be a good revenue churner for us in the next year. We expect March, April, the PV batches to happen. We had been a little short on supplies capacity. Once that comes up, it will be advantage in the Swiss business.
You are right, there are two direct components, and then there is one indirect component which should add to growth and margins.
Thank you. Any number are we looking for the FY 2028?
Numbers you can calculate now. If the gross margin comes down by 150 basis point and it gets precipitated into EBITDA-
Yeah
Then it is all about putting these two things together.
Okay. Yeah. Thank you.
Thank you, sir. The next participant is Mr. Nilay Parekh. I would request Mr. Nilay to introduce self and also introduce the company he represents.
Perpetuity Ventures. I have multiple questions in line. My first question is basically on the FY 2027 guidance for the Swiss Parenterals. Can you throw some light for the same?
Yeah. We just mentioned, we will be +/- 5% of what we achieved last year.
Okay. In terms of this EBITDA margin, can you say some-
EBITDA will be in the range of 25%.
25%.
There will be improvement in EBITDA. Top line will be in a 5% range.
Okay. Sure, sir. My second question is, could you please elaborate on the strategic rationale behind out-licensing this injectable as well as this acute portfolio to Zorvia Healthcare?
Yeah. If you are following us from some time last year, we did make a mention that we have INR 100 crore portfolio, which does not suit us, our specialty, and all of them has been acquired. We got a very good vehicle where we think that this business can actually grow, and it still remains with us. Number two was it was never EBITDA positive for us, and it was a drag on our gross margins also. After removing Zorvia, I think from 87%, we move up couple of basis points in chronic therapy. We might come close to 90% in chronic, subchronic, which in our view is very strategic. These are two, three reasons where we tried and do this.
My last question is regarding this INR 30 crore-INR 35 crore of this exceptional, this loss that we have received this quarter. Could you provide some more details on the products that were related to that?
Yeah.
This receivable write-off. Yes.
Why not? Of course. Guys, again, I am sorry, if you would have been following us, there was a category in our portfolio which is called at-risk. What at-risk means, we challenge the patent for some good reasons. There was a group of around four products, if I can remember correctly. These four products created a very good sales for us. You understand almost 20% of that, finally, we were not able to sell, and that is which has been kind of taken back.
Okay, sure. Sure, sir. Okay.
Thank you.
That is it from my side. All the best for the quarter ahead. Thank you.
Thank you.
Thank you, sir. The next participant is Mr. Foram Parekh. I would request Mr. Foram to introduce self and also introduce the company he represents from.
Hello. Thank you for the opportunity. My name is Foram Parekh, I am from BOB Capital. So, my first question is on OAD growth, which is 12%. So, if you can give us the breakup, how much is coming from price growth and how much is coming from volume?
We do not have the breakup available with us, but you can conveniently consider that it is as per the industry. There is nothing which I need to tell you, which is out of the order. So it is as normal as it is in the IPM. It is an IPM reflection.
Okay. I see that our domestic growth ex of Zydus has been 16.5%. Now with OADs performing above the IPM level and expected to stay there, and we have demerged, I think, the dermatology and all these brands. Can we expect domestic region to grow around the current levels of 16.5%, 17%, as IPM is also growing?
Yeah. We have given a guidance of 300 basis points ahead of the market, and I think we will stick to that.
Okay. Just a broader question. How do you look at the domestic IPM growth shaping out next year? This year it has performed very well, and one of the reasons is because of new launches, because of Sema generics. Now with Sema generics being in the base next year, how do you see IPM growth sustaining?
Yeah, look, we are also happy to see the growth being what it is. While Sema has participated in growth, it is not as big as it could turn the whole lever. There is a lot of growth coming in different specialties, cardiology being one other than diabetes. So, it is a pleasant thing for us also. As of now, we predict that the growth next year would also be in the range of 11%-12%. This is a little bit of a new thing, so we need time to kind of wrap our head around. As of today, looking at how the numbers have behaved, it seems the IPM would be around 11%, 12% next year also.
Sure. That is helpful. My second question is on tax rate, if you can give us some guidance on how the tax rate would be for FY 2027 and next year as well.
Yes. Foram, the effective tax rate that we see for the current year should be in the range of 20%-21%. Similar, I think we will continue next year also.
Sure. That is helpful. Thank you.
Thank you.
Thank you, sir. Participants, if you wish to ask a question, you may do so by clicking the raise hand button at the bottom of your screen and wait for your turn to speak. The next question comes from Mr. Keerthan Donga. I would request Mr. Keerthan Donga to introduce himself and the company he represents.
Hello. Thank you for the opportunity. I am Keerthan from Leo Capital. My question was on insulins. We have a bunch of product launches lined up, in segments which we have not been able to serve historically. How large is the market opportunity for us in those segments?
We alluded to this in last quarter. If I remember correctly, it has around INR 2,500 crores of analog markets, which have been growing very healthy. Almost in double digits. So that is the whole piece which we want to represent in the coming years. And now, diabetes contribute to 38% of our overall revenue, which is quite significant. And two of the brands in INR 200 crore plus are also coming from the same franchise. So we feel that diabetes is our moat. And with the kind of new product filing which we are doing, we feel this will be a significant growth driver for the future.
Okay. Thank you.
Thank you, sir. Dear participants, if you wish to ask a question, you may do so by clicking the raise hand icon at the bottom of your screen and wait for your turn to speak. The next participant is Mohammed Patel. I would request Mr. Mohammed Patel to introduce himself and the company he represents from.
Yeah. Hi, can you hear me?
Yes, sir.
This is Mohammed Patel from Edelweiss Public Alternatives. I have a couple of questions. The first one is, what led to the sequential improvement in gross margin in EBITDA?
Gross margin, basically product mix. EBITDA also is a result of a better product mix. Bhopal has started contributing in one of the SKU. This could be one reason. But largely it is product mix based, and EBITDA also followed. The EBITDA growth was little lower because we had little higher other expenses this quarter.
Yeah. The next question was regarding other expenses. Can you explain why it was 27% higher?
Yeah. This is the season for us. There is a lot of new launches coming in, and a lot of money is going on the development also of new products as well as filing and regulatory. It is a combination of both.
Okay. My next question is, in the slide you have mentioned gross margin levers, 100 basis points from Zorvia, 100 basis points from Bhopal. I just wanted to understand the timeline of when this will happen.
No, both of them are short-term in the H2. Chirag ji, right?
Correct. Okay. On the Zorvia deal, when is it going to start reflecting in the numbers?
Number means?
In the quarterly numbers.
Reflecting. Next quarter.
From next quarter, it should start, Mohammed.
My last question. Are we on track for the product launches that we had targeted for FY 2027?
Yeah. Largely, we are on track, Mohammed. We got pushed and pushed on this axle and on, which we think is a very good product. Finally, we got the permission last week, so we are launching in the next three days.
Okay, and that should drive the cardiac growth?
Yes. That should drive the cardiac. You are absolutely right.
Okay. What about FY 2028? How many product launches are we planning?
I can tell you what is coming from the regulatory pathway. The other products, we haven't bundled them together. So we are expecting one, two, three analogs to be launched in the next year, all coming from our own stable.
Okay. How should we look at Swiss for next year?
We are looking at positively. We do not expect any major turnaround till Q1 next year. Post Q1, depending upon how the GMP things happen and how the new block gets into function, things should start looking up quite a bit.
Okay. Thank you so much. All the best.
Thank you.
Thank you, sir. Participants who wish to ask questions may do so by clicking the raise hand icon at the bottom of your screen and wait for your turn to speak. The next question comes from Mr. Yasser Lakdawala. I would request Mr. Yasser Lakdawala to introduce himself and the company he represents.
Hi, this is Yasser Lakdawala from M3 Investments. Amitji, what is your midterm guidance on field force additions? I think we have got oncology, nephrology, neuroscience, small portfolios there.
Correct.
Thought process on scaling those up and what kind of field force addition would you be looking at over the next two to three years? Any thoughts on that would be great.
Boss, we have never been a huge fan of adding a lot of people, and the specialties which you are mentioning are less people driven, more product driven. The point is that can we enrich oncology? While we talk about the Bhopal facility from a biotech point of view, but we also have a mAb unit there, and we will start some tech transfer in the month of December. Once those tech transfer happens, and we go through the regulatory framework, by second half of next year, we will have couple of mAbs coming out of our own stable.
But these will only be formulations.
Sure.
So we are trying to strengthen the portfolio in these segments rather than increase the people as of now.
And would you say that from a three to four year perspective, looking at 2030, are you happy with the current portfolio mix that we have, or would you still see room to add any therapy area you feel that you probably want to get in? It is a high growth area, or it feels you get some good products that you could probably in-license. Are you happy with this current mix at the moment?
Yeah. So actually, we have tried hard to reach this mix, actually. If you look at our mix today, it is 37% diabetes, 15% cardio, right, a similar number in derma and a similar number in VMN.
This makes core 5 therapies quite concentrated, and these are the therapies which have a lot of tailwind also.
Sure.
These also happen to be the therapy where we have invested in getting differentiated and new products. From a therapy point of view, in fact, this is what we wanted to look like. We are quite okay with the therapy. For in-licensing and something, look, we will be playing in these therapies. If we get something which is exciting, then we might go for it. But anything new which we want to do from a therapy point of view, the answer today as of now is no.
Sure. Going forward, can we expect from a capital allocation standpoint, the majority of our cash flow would be reducing our debt and maybe in case we do get some strategic opportunity, we have that room available. But broadly, you would say we will be paring down debt over the next two to three years, at least? three to four years.
Boss, we have been always like this. Look, we have spent a lot of money. We know that. We had two choices, either to get the debt down or to build capabilities.
We believe building capabilities is far-reaching than paying down the debt. Eventually, all our acquisition turns out to be very well. Today at a company level, if we are delivering 36%, then you understand almost all business we acquired. Some of them were languishing at 8%, 10% EBITDA.
They have all come to this level, company level. Other than this, paying down debt is the only priority.
Absolutely. Thanks a lot, and wish you all the best. Happy Diwali to all your team. Thank you.
Oh, thank you so much. Same to you.
Thank you.
Thank you, sir. The participants who wish to ask questions may do so by clicking the Raise Hand icon at the bottom of your screen and wait for your turn to speak. There are no more questions, I believe, and we now hand over the call to Mr. Chirag Mehta for the closing comments.
Sure. Thank you all for your participation today. Before we conclude, let me just briefly recap the key highlights. As we mentioned, our insulin and biologics business has reached an important milestone with the approval to commence clinical trial in the recombinant semaglutide. Our analog portfolio is also progressing well into a regulatory phase. International business remains steady, and our EU GMP CAPA plan is on track. Our long-term outlook for the business remains unchanged and stable.
For H1 FY 2027, consolidated revenues, as mentioned before, has grown by 12.8%. Consolidated debtor days have improved by 10 days, from 80 days to 70 days, and our CapEx stood at INR 220 crores. EPS for the period was INR 23.58. Thank you once again for your time and continued interest in Eris Lifesciences. We are planning to hold an Investor Day on 19th November and look forward to seeing you all there.
Thank you so much.
Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of Eris Lifesciences Limited, that concludes this conference. Thank you for joining us and you may exit the meeting.