Phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Gupta. Thank you, and over to you, sir.
Thank you, Sadu. Good evening, everyone. We welcome you to Gland Pharma Earnings Conference Call for Q3 FY 2024. My name is Ankit, and I drive the investment M&A and corporate strategy for Gland. I have Mr. Srinivas Sadu, MD and CEO, and Mr. Ravi Mitra, CFO, to discuss business performance and financial highlights for the quarter. We will begin this call with the business highlights by Mr. Sadu, followed by a financial overview by Mr. Ravi. Before we proceed, please note the safe harbor statement that we have on the press release.
Some of the statements that we make today will be forward-looking and will be based on the current estimates that management has. These statements must be viewed in conjunction with the risks that are involved in our business. The call is being recorded, and the playback will be made available on our website shortly. We will also have the transcript in a week's time. I will now hand over the call to Mr. Sadu for his opening remarks. Thank you. Over to you, Mr. Sadu.
Thank you, Ankit. Good evening, everyone. Welcome to Gland's Q3 FY 2024 earnings call. I extend my well wishes for your family's health, happiness, and prosperity. May all of you witness a continued upturn in 2024, and we look forward to a prosperous year ahead. As in previous quarters, we intend to provide a comprehensive update on the standalone performance of Gland and the group's overall performance, including financial data from Cenexi, the CDMO we acquired in Europe. We have maintained our momentum with robust revenue growth in the third quarter. We reported revenues of INR 15,452 million for Q3 FY 2024, an increase of 13% quarter-on-quarter and 65% year-on-year compared to INR 13,734 million in Q2 FY 2024 and INR 9,383 million in Q3 FY 2023.
The quarter-over-quarter growth has been propelled by our consistent performance, increased volumes, shift in a stable pricing environment, and the introduction of new products. Furthermore, we recorded the complete quarter sales of Cenexi. The core markets generated 77% of revenue, a year-over-year increase from 71% in Q3 FY 2023. The company's largest market, the United States, witnessed a 12% quarter-over-quarter and 41% year-over-year growth. The company introduced or reintroduced nine molecules in these markets during the quarter. We witnessed robust volume momentum for key new products, including Levothyroxine, Ropivacaine, Ketamine, Octreotide, and Zinc Sulfate. The pricing for the products we shipped during the quarter remained relatively stable, and we saw increased demand for several of our previously launched products. The performance in the ex-US primary markets remained consistent.
Despite the longer approval process, we continue to identify products from our US basket that have the potential to enter these regions, specifically in Australia and Europe. The rest of the world markets contributed 18% of our revenue in Q3 FY 2024 compared to 21% in Q3 FY 2023. These markets reported a 7% quarter-on-quarter increase, largely attributable to Cenexi volumes. The Indian market contributed 5% for revenue in Q3 FY 2024 and experienced a 7% decrease compared to the corresponding period in the previous fiscal year. While building the other markets, we remain focused on strategically important products in India and will explore avenues for value creation. Our manufacturing sites remain operational with efficiencies, and we are committed to delivering high-quality products at scale with competitive costs and all-time compliance. We're conducting a facility upgrade activity in one of the lyophilization lines at our Dundigal flagship facility in Hyderabad.
Consequently, this lyophilization line will remain non-operational for two weeks in March. There will be temporary supply disruptions on this line. However, all the facilities, other lines, will remain operational. On the R&D front, total R&D expenses for Q3 FY 2024 were INR 530 million, or 5% of operating revenue. We filed eight, sorry, 10 ANDAs during the quarter and received approval for three ANDAs. As of December 31, 2023, Gland and its partners filed 346 ANDAs in the United States, of which 279 were approved and 67 pending approval. The company has 1,659 product registrations worldwide. Discussing consolidated profitability and EBITDA margin, we reported an absolute EBITDA of INR 3,557 million and a net profit of INR 1,019 million for Q3 FY 2024. This quarter, EBITDA margins remained similar at 23%, primarily impacted by negative EBITDA margins at Cenexi. For Q3 FY 2024, Cenexi reported a revenue of INR.
4,438 million, with a gross contribution of 75% and a negative EBITDA of INR 170 million. However, the business achieved EBITDA break-even on an adjusted basis, excluding some one-time expenses. An organizational restructuring exercise and changes to the pension provisions resulted in an effect of around EUR 2 million in the quarter ended December 2023. In addition, lower productivity led to reduced overhead absorption in inventory, resulting in lower EBITDA during the quarter. Our post-merger integration review is now mostly complete, and we identified areas where Cenexi would need investments, improvements, and leadership recruitment across critical functions. Regarding the company's business, we have reasonable confidence in Cenexi's current clientele and the partners' commitment for the long term. As for expansion, we have a solid order book of new programs that have been signed and are currently in various stages of tech transfer and approval.
With these programs, we anticipate a medium-term incremental increase of EUR 30-40 million on our existing annual revenue base. Despite our investment in capabilities to support this expansion, we continue to face issues with operational performance and the timely execution of our existing orders. These operational issues are causing delays in supplies and augmenting our backlog of orders. This issue has mostly affected our quarterly performance, leading us to rebalance our capacity and shift certain products to different lines, which will take time due to regulatory processes.
In addition, we'll invest in building new high-speed lines to replace the existing ones, automating processes to make them more efficient, and ensuring compliance. Cenexi plans to realize its acquisition thesis over the next 12-15 months. We're confident that we'll end the fiscal year 2024 on a positive note and continue to be excited about the opportunities ahead of us. I now hand over the call to our CFO, Mr. Ravi Mitra, who will share more insights about our financial performance for the quarter. Thank you very much. Over to you, Mr. Mitra.
Thank you, Mr. Sadu. Good evening, everyone. Thank you very much for attending our third quarter earnings call. Let me begin by sharing the financial performance of the third quarter and nine months of the financial year 2023/24. Revenue from operations increased by 65% to INR 15,452 million in Q3 FY 2024. The consolidation of the Cenexi business acquired during the current financial year contributed significantly to the year-over-year expansion of revenue, increasing our footprint in Europe. Revenue from operations for the nine months of FY 2024 stood at INR 41,273 million, a year-on-year increase of 45%. Our base business, which is ex-Cenexi, also grew 17% in this quarter over previous year and 9% over Q2 FY 2024, driven by our increased performance in the U.S. market. Other income for the third quarter of FY 2024 was INR.
374 million, which largely includes interest on fixed deposit and is lower than Q3 FY 2023, which was INR 615 million on account of lower interest income and forex gain. For nine months FY 2024, the other income was INR 1,281 million, of which interest on fixed deposit was INR 1,063 million, and foreign exchange gains on operations were INR 154 million. With the gross margin for Q3 FY 2024 was 61%, an improvement from 54% in Q3 FY 2023 due to Cenexi's high gross margin. On the positive side, our base business has also witnessed an improvement in the gross margin over the last year due to product mix. We have reported an EBITDA of INR 3,557 million in Q3 FY 2024 compared to INR 2,896 million, an increase of 23% compared to last financial year. The EBITDA margin of Q3 FY 2024 stood at 23% compared to 31% for the previous financial year.
For the base business, ex-Cenexi, we have reported the EBITDA margin for Q3 FY 2024 at 34%, up from 31% in the same period of the previous year. We, however, reported a negative INR 170 million of EBITDA at Cenexi, primarily due to certain one-time expenses. On our base business operation, we managed to rationalize the power cost and manpower expenses during this quarter as compared to the same period of previous year. The EBITDA for the nine months ended December 2023 was INR 9,744 million compared to INR 8,563 million for the same period last year, an increase of 14%. We have reported the EBITDA margin for nine months in FY 2024 at 24% for the group and 33% for the base business. During the quarter, we finalized the purchase price allocation exercise of Cenexi acquisition.
The additional impact on depreciation and amortization on account of fair valuation of net assets for purchase price allocation amounted to INR 294 million and INR 377 million for the quarter and nine months ended December 31st, 2023, respectively. On a go-forward basis, Cenexi would report a depreciation and amortization of approximately INR 90-INR 140 million per quarter on account of purchase price allocation. Our net profit for the third quarter decreased by 17%, stood at INR 1,919 million compared to Q3 FY 2023, and decreased by 1% to the previous quarter of the current financial year due to the reasons mentioned earlier. During the quarter, we recorded a PAT margin of 12%. During the nine months of the current financial year, our PAT was INR 5,800 million at a 14% margin. The total R&D expenses for the third quarter were INR 530 million compared to Rs.
512 million for the same period of the previous financial year and stood at 5% of the revenue from operations on an ex-Cenexi basis. The total R&D expense for the nine months were INR 1,337 million, which is 4% of our revenue. On a standalone basis, our effective tax rate was 25.5% in the third quarter and 25.8% for the nine months of the current financial year. As of December 31st, 2023, on a group level, we had a total of INR 24,795 million in cash and equivalents, an increase of INR 2,168 million over the previous quarter of September 30th, 2023. Due to loans on Cenexi's books to the tune of INR 4,058 million as of December 31st, our net cash position was INR 20,704 million. Cash flow from operations during the nine months was INR 6,228 million. Working capital was reduced and stood at INR.
22,805 million as of December 31st, 2023, as compared to INR 24,010 million as of March 31st, 2023, due to decrease in inventory levels. The average cash conversion cycle improved and stood at 182 days for the nine months ending December 2023, as compared to 240 days of the same period last financial year. CapEx spend during the quarter is INR 810 million. At Cenexi, the plan of new high-speed and pure line and new equipments for enhancing our capacity and operational efficiencies is progressing well. With this, I would request that the moderator open the lines for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove 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 is from the line of Shyamakant Giri from Goldman Sachs. Please go ahead.
Yeah, good evening, and thank you for taking my question. Just the first one is on the U.S. market and the sustainability of the revenue run rate, right? So we have done about $8.2 billion for the quarter. So just want to understand what's driving that. I think your commentary talks about stable pricing environment. So is it largely driven by volumes, and are we, are we in a position to sustain this quarterly run rate?
Yeah, the market looks actually positive. The growth came from volumes by 8%, and another 3% came from the new launches. But also, Enoxaparin came back, and we are seeing an uptick of volumes. We are looking at a forecast of $19 million. I think last call, we said about $16-$17 million. I think we are seeing a higher demand from that market. But like I said, you know, we are a little aggressive on the pricing. Also, the material price has gone down, so we have revised the pricing and to go after the business. And also, there are several molecules where you might have seen oncology products got launched, which are higher value. So the momentum looks positive in terms of the U.S. business.
Mr. Sadu, are you any kind of guidance for how we should look at Q4 at this point of time, or do you think we can sustain this for over INR 8 billion odd number?
The growth, steady growth will, you know, at least in the near term, we are seeing steady growth will continue.
Mr. Sadu, you broke down the 14% COQ growth for the quarter as 8 of volume and 3 of new products, right? So that still leaves another 3 percentage points, which would be the Enoxaparin. Is that how you're breaking it down?
That's, you know, we also have the other income, right, milestone and the profit share portion of it.
If you could quantify that, please. Sorry, yeah.
I think the rest, the 3% comes from those two components. I don't have a breakdown of these two, but that comes from that.
Okay, understood. Just the second question is on Cenexi, and I'll pause after that. Is on, you know, we have looked at this asset for close to, you know, at least coming to a, a year now, and, you know, there is some restructuring that we have done. You're talking about additional investments. When we made this acquisition last year, it was a 10% EBITDA margin business. This quarter, even if I add back the EUR 2 million, that's an EBITDA breakeven. So what's the long-term outlook here? You know, you made changes to, the purchase price as well. So if you can, from a consideration perspective, obviously. But just want to understand the long-term outlook for Cenexi. Do we have the ability to take it back up to historical margins, or something has changed there cyclically? Thank you.
You know, this is the thesis is still holds good. It's just the timing. If you see, one is, of course, the one-off expenses we incur in the quarter, which will make it breakeven. And, we also have a lower productivity. That's where we're talking about operational efficiency would increase. Lower productivity impacted the end of the quarter inventory. It's a 75% margin asset. Any inventory lowering of inventory actually is impacting big time. So the downside is impacted around INR 3 million, because of the lower inventory compared to the previous quarter inventory.
Yeah. Sorry, what was your question on the purchase price?
No, no. I said, we have made an adjustment. We have got the right numbers, right? I believe so far, we have made an estimate. This is the right number for, because the DNA has changed, right? So I just want to understand from a long-term outlook, where are the margins likely to settle for Cenexi?
So, one is, of course, the current business. You know, at least we're looking at 10%, like I said last time. You know, we're still looking at 10% in the midterm. And then, we have projects which are getting tech transferred that will add revenue of EUR 30-40 million. Most of it should, you know, trickle down to the EBITDA level, because we see a breakeven point for this asset around EUR 190-200 million. Anything above that should, you know, positively impact the profitability.
Got it. Thank you, and all the best, yeah.
Thank you.
Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. So again, on the Cenexi piece, if you look at the revenue rate, we're obviously tracking much better than what we've.
Sorry, Mr. Sadu, Ms. Manpuria, your line was cracking in between. So could you please repeat the question once again?
Is it better?
Yeah.
Okay. Sorry about that. So I said on Cenexi, you know, if I were to look at the revenue run rate, obviously, it's doing much better than, you know, even part of the quarter that was there. Gross margins also aren't that different. I, I didn't quite understand the lower productivity comment because their revenue does not seem to be showing lower productivity or lower volumes. So, you know, even adjusted for one-off, why did we just breakeven? I would have assumed that, you know, we would have gone back to the usual margins, here. So what I, I didn't quite understand your comment.
Okay. So the top-line number, yes, you're right, because improved in this quarter. But the production has not to the tune of what we had expected. So while there was inventory which was sold out, and so this was sufficient to our expectation, production was lower, which has led to lower absorption of overhead in inventory. And there was something, you know, one-offs too, like related to employee and management restructuring, which has impacted one time.
Okay.
So that is the reason why this is a bit of INR 170 million negative this quarter.
Sadu, so you also mentioned something about, you know, operational issues and executing order leading to, you know, delay in sort of realizing revenue. So does this mean the $30 million-$50 million incremental revenue that you talked about could come in much later? I mean, when should we start assuming this, you know, incremental revenue flowing through? And what did you mean by operational issues? Is this the same thing that you're talking about, that there was lower production?
Yeah. So the INR 30 million-INR 40 million, you know, you see only in the FY 2025, sorry, FY 2026 next year. What I'm saying, the operational efficiency is the current, you know, one of the facilities are, I would say, you know, capacity-wise, it's chockablock. And, we're not able to deliver because of the poor OTIF. You know, the lines are old, and we want to change those lines. Unless we substitute with a fast line, it's very difficult to get to those numbers what we talked about. And for that, we need to sometime, you know, one maybe next few months, we take a call of taking a shutdown and then implementing this because long-term, this is what we want to do. That's why we said it's a near-term pain. But the business is very strong.
You know, the order book is very strong, and the transfer projects what we're handling are very strong. So it's just the timing and, how to streamline the operations is a challenge in the near term, because any movement of products from one line to another requires some regulatory approvals. And, you know, that's what we're doing now. You know, we're moving some products from one side to other, one line to another. And, you know, getting approval to commercialize those will take some time. So, you know, there's a near-term pain in that regard.
Okay, got it. My second question is, you know, on the ROW business in the standalone piece, that seems to be coming off quarter after quarter, you know, you know, is there some slowdown that we're seeing in particular market, or is it inability to gain, volume? What's going on in the ROW, and when should we start seeing that market go back into growth mode?
There are some positives, actually, from—you will see from the April quarter—we did one, again, the tender in Saudi for 15 products. The estimated sales for that is around $50-$55 million per year, per annum. The previous year, Saudi, we were clocking around $25 million, 25-odd million dollar sales. So that is almost 15 products we won tender for. So that's a good uptick. Then, in South Africa, we got approvals for four products and launching three products.
That will add about a few million dollars. So there are some positives coming off. And also, other thing is the debate what we had for Saudi ended in the last quarter. So the tapering of sales happened. The current quarter also, there's limited sales in Saudi, but the next bid open, which we have won, the supply will start from March, April. So again, the business will go back narrowed up if once we start supplying to that. So it's mostly the timing perspective, I would say.
Understood. And one last question. The Lyo line shutdown, what could have what kind of revenue impact can we see from the two-week shutdown that you're talking about?
25, it will not be substantial because it's happening in March, and it's only two weeks of LYO. So it should be substantial, but just as, you know, because we've been asked last time that we should inform, so regulators have informed that.
Good. Okay, got it, sir. Thank you so much.
Thank you.
Thank you. A reminder to all the participants, if you wish to ask questions, you may press star and one on your touch-tone phone. The next question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thank you so much for giving me an opportunity. So I have a couple of questions. First is, see, we are a CRAMS company, so that we have been saying that we will, as a source of the products, we typically supply to multiple clients. But I have not seen a client addition happening in some of our key products. So if you can highlight on the same, are there any major client additions on the top 10 products which could either have already taken place over the last one and a half years, and how it will pan out over the next one year?
There are only certain limited clients who will like these products, right? And, you know, we are supplying products to most of the top injectable front-end companies. This part of the business where, you know, some of the clients, they don't meet the market share requirements, it gets transferred to another customer if they're really in need of it, because most of them may already have this product. So it's an ongoing process. We did onboard a couple of new customers as well. But again, there are only so many front-end customers who can enlist these products.
Sure. So there is another question related to this. There are a lot of shortages. If you see the USFDA shortage list, there are at least two, three products, oncology products, we are already there in those products, like Cisplatin or the couple of platins which are there. And there are two large products from our top 10 list, like Heparin and Ketorolac. So, have we already benefited from these products? Is it there in the numbers, US numbers, or you expect going ahead, there could be a volume ramp-up which would happen in these products? Or is there a chance of client addition in these kind of products where there is a shortage, where we have the capacity but the another competitor may not be having it?
So, I mean, to be product-specific, like Ketorolac, you know, it's always been under shortage. So we've been having larger market share for these products for a long time. For Cisplatin and Carboplatin, we launched two quarters ago. And we have for Carbo, at least we have 55% of market share, and so we have a consistent supply for that. So on an annual basis, I think the sales have, I would say, started from last two quarters, so it will be increased on the, if you look at, an annual basis. But it's we already start supplying, and I think most of the shortages are going on at least for these products once we started once we have started supplying two quarters ago.
You see any benefits coming in because of shortages in the coming year, or you think it is already in the numbers?
Well, it's always there, right? I mean, it's last 10, 15 years, if you see, always there's some products which are always coming out, coming in the shortage list, because of regulatory issues. So that's part of the injectable business, and that's why so much importance in quality of sites is important, and we pay so much attention to it.
Sure. The last question on the Cenexi, we acquired this asset also through the kind of technical capability it had. So is there a synergy we can generate for the U.S. business, from this unit?
Yeah, there's several, especially the oncology treatment units, what they have. They're already working on some other products of R&D to trying to collaborate with that asset, where we didn't have earlier. So yes, we are working with them, but, you know, we have other issues to resolve first before putting more burden on that asset. So that streamlining's happening. In parallel, some development has started working with the clients as well in terms of business. The clientele of Cenexi are in discussion with us to take more products from us for other markets as well.
Sure. Thank you so much.
Yes.
Thank you. The next question is from the line of Chintan Sheth from GIRIC Capital. Please go ahead.
Thank you for the opportunity. Hope I'm audible. Couple of questions again on Cenexi. If you elaborated that inventory-related, you know, issue resulted into you know losses over there apart from the one-off part. But if you look at the gross margin profile, sequentially, it has just contracted only 200 basis points from 77%-75%. Does that actually translate into such large underabsorption of profits or underabsorption of cost?
Yeah. So what happens is that, you know, because it's a high-margin product, and largely the overhead, which is expenses and salary and power, etc., is loaded. So that is coming in the SG&A line item below gross margin but not loaded on inventory. So that is what has happened.
Okay. Under?
It should have been higher in line with what the sales have happened, and which will, next few quarters, it will come back. Then with the higher production, you have more overhead expenses, which is, you know, transferred from expense to inventory.
Okay. But the production loss of this quarter will also have some impact or element of, you know, reduced revenue in upcoming quarter in 4Q? That will be the right assessment? The pain will continue for another quarter, in soon?
Yeah. It all depends on how, you know, how soon can we make it more efficient to produce more, and,
But it won't happen in a quarter, right?
Correct, correct. So the pain will continue, but, you know, how much we can reduce, that's what I would say. At least the one-off items will be gone, and maybe if we can increase certain inventory levels, then at least we will get into a positive at the topic.
Okay, got it. And in the India business, obviously, the revenue generated, the US, you know, revenue is coming back pretty, pretty decently. And that is also helping us to improve our margin profile. You mentioned on the comment that the growth will sustain, given the current outlook or what we are seeing right now. Does it also have an element, you know, to further improve our gross margin profile in that, given the scale is coming back and we will have some operating leverage, which we were deleverage, which we faced in the past year, will start to recoup again, once the scale scale-up happens, you know, quicker than the previous quarter?
Correct. So once the volume start increasing, you know, that's what we're seeing from last few quarters. So we started selling more units, and absorption is more. So your margin is improving. So, you know, the idea is, one is of how to reduce costs. How to improve, improve profitability by making more volumes. You know, that's been the, that's where we are putting more efforts on. With Cenexi, you know, the issue of revenue is not there. Now, the whole focus is on how to reduce costs and be more competitive and also increase the margins.
And lastly, on the CapEx outlook for this year and next, especially for the Cenexi part, would be helpful.
Okay. So Cenexi, we are currently framing the CapEx plan for this year and next year. And overall, the allocation would be around EUR 30 million both for changing the equipment as well as increasing the capacity level. For Gland Pharma, the usual the programs which we are running for increasing capacity, like Suite nine and for Combi line and Pashamylaram, we are increasing backline. So all put together, we expect to spend about EUR 300 in the next financial year.
Okay. I'll jump back in. Thank you for the response.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Ankush from Axis Securities. Please go ahead.
Sir, thanks for offering me the opportunity, sir. Sir, my question is regarding the key products like Ketorolac, Ketorolac and Enoxaparin. We are seeing the continuous fall in the prices, and so what is the impact that we can see on the margin side due to the key products? Because excluding Cenexi, the margins are quite good in this quarter for the business.
So both the products, not just the pricing, actually, the material, the cost, the raw material costs gone down substantially. That's got translated into end-market pricing. So that pricing got adjusted. So from a margin perspective, the only impact is just that from top line, it has come down in terms of that. So that's not an issue. There's no issue with that. And Ketorolac, it's been a consistent product with the same similar pricing for a long time for us.
Okay. Sir, the second one is related to the Cenexi. So in the first quarter, we have a 10% of the margins. Any outlooks for the sustainable margin for the Cenexi?
As we mentioned that the near term would be some challenges in terms of EBITDA margin, and we expect to break even in next 12-15 months. After that, we will go back.
Okay. This is the last one is related to the India business. India business is sustained. I mean, it's a stable business now. So the kind of growth we can look in the India business?
Sorry. Could you repeat that?
Sir, Indian business is almost stable if you see on Q1, Q basis. So the kind of growth we can look in the India business in upcoming quarters?
So India, honestly, we are in the hospital space, and most of the products, what they have, will undertake the PO. So it's not been a big focus market for us, unlike branded products, right? So, you know, we are selling which are, I would say less competitive, but most of the injectables in India are under DPCO . So the focus is less, and the percentage of revenue when you compare to the total turnover for us is smaller.
Thank you, sir. That's from my side.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
I'll just try to answer the question. So, two questions. One is, A, in the past, you used to talk about our, our plans to get into the biosimilar biologics manufacturing. Any updates on how you're thinking about the space now after the vaccine, you know, actually didn't take off?
Still, we are actively pursuing that. It's not that it's out of the window. I mean, we signed one plasma project, and it's actively we are started looking for revenue. We are estimating about INR 14-15 crores per year with this project for five-year contract. But there are also other bio-biologics companies we're visiting. But as you know, the funding for a lot of small bios has slowed down. So because of that, it kind of slowed down, but we're still pursuing that space as well.
Okay. And secondly, you know, when you look at your business except Cenexi, you know, there is obviously US has been, has come back pretty strongly over the last couple of quarters. Other segments seem to have their own sort of struggles for now. When you sir look at, take a 3-5-year view of your business, so what is the, you know, it's the steady rate at which this business can really grow at? Is it more like a mid-teens growth business, a late-teens growth business when things stabilize, or what kind of growth characteristic would you sort of be comfortable looking at, for a 3-5-year view of our ex-Cenexi business?
The good thing is a lot of complex product filings are happening, and, by the way, we have already filed 7. We have 2 approvals. We're going to file 4 more this year. So that, that those product launches will happen. And, we are, we are also seeing, increase in the CDMO space where a lot of companies are transferring products to us. So you can see the CDMO, the CDMO revenue is also going up. So there's a shift in that.
So overall basis, you know, and also you have to consider the base at which we are operating now. So, of course, as a company, you know, on a consolidated basis, we have to see. But at least ex-Cenexi basis, probably mid-teens could be a target internally, but, you know, we have to see, you know, where they're going slow on how we are devalued, because there are several options we are looking at. But that's, that's what we're looking at at least in the next 2-3 years.
Sir, was it the period when you talk of mid-teens target for, you know, for the business? This would be what, again, driven by the U.S. or, or RoW, or what is what is going to be equally or are you seeing any particular geography as being the primary driver for this growth?
See, there's a lot of opportunity in RAW also, like you said, so that growth will come from there. U.S. complex, again, these are there. We have entered contracts with Carthage's 10 products, so that will add some revenues. And also, we are looking at contract manufacturing from some of the big pharma as well. So it's a combination of these few, few things.
Okay. Thank you so much.
Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah. Thanks for taking my question. Just a clarification on the Cenexi margins. Did I hear correctly that Cenexi would continue to be loss-making for the next year also for fiscal 2025, and the margin guidance that we had is only for FY 2026?
Not at EBITDA level. I think, Ravi was mentioning at the PAT level because of the depreciation amortization. At EBITDA level, we'll be positive.
Okay. Okay. So the 10% guidance that you gave for EBITDA, you know, is that number reasonable? I mean, is that margin reasonable to assume, in FY 2025?
Yeah. I think FY 2025, that's reasonable. Yes.
Got it. Okay. And, Ravi, on the depreciation and amortization, in your opening remarks, you gave a number of INR 90-140 million. Seems like a very wide range. So this is the number that you would see in Cenexi for, you know, for Cenexi as an incremental DA? I mean, what's the DA in the base that I should look at, you know, for the consolidated business?
Yeah. So, if you see, Q2.
Yeah.
Consolidated distribution was about, you know, INR 80 crore. Okay. Now, going forward, there would be around INR 10 crore addition to that, so INR 90 crore. In this quarter, it is higher because we have made a catch-up depreciation here because PPA was finalized this quarter. But the going-forward basis, there would be around INR 90 crore on a consolidated basis.
Okay. So INR 90 crore is the number I should look at. Got it. Understood. That's clear. Thank you so much.
Thank you. The next question is from the line of Chintan Sheth from GIRIC Capital. Please go ahead.
Question got answered. Thank you.
Thank you. A reminder to all the participants, if you wish to ask questions, you may press star and one now. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Ankit Gupta for closing comments.
Thank you, everyone, for joining us today. We appreciate your participation. If there are some questions which are still unanswered, you can reach out to us anytime, and we'll be happy to address the same. Looking forward to connecting with you, the next quarter and also in case there are more questions. Thank you.
Thank you. On behalf of Gland Pharma Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.