Ladies and gentlemen, good day and welcome to the Q2 FY26 Earnings of Indoco Remedies Limited. As a reminder, all the participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Umesh Ladda. Thank you, and over to you, sir.
Good afternoon, everyone. I am Umesh Ladda from Nirmal Bang Institutional Equities. It gives me an immense pleasure to hold Q2 FY26 Indoco Remedies Limited conference. From the management, we have Ms. Aditi Panandikar, Managing Director, Mr. Sandeep P. Bambholkar, Joint Managing Director, and Mr. Pramod Ghorpade, CFO. Now, I pass it over to management for their opening remarks. Thank you.
Thank you, Umesh. Good afternoon, everyone. Thank you for all joining this call today. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements which are projections or estimates about our future events. These estimates reflect the management's current expectations of the future performance of the company. Please note that these estimates involve certain risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Indoco does not undertake any obligation to publicly update any forward-looking statement, whether as a result of new confirmation, future events, or otherwise. Thank you so much. Now, I will request our Managing Director, Ms. Aditi Panandikar, for her opening comments.
Good afternoon, everyone, and thank you for joining us today. I would like to give a brief summary of business highlights for the Q2 FY26. For our India business, the anti-infective and respiratory segments, which typically do well in the second quarter, have done very well for the company, and brands like ATM, Febrex Plus, Carval Plus have registered a good growth. This quarter, we launched six new products in the India market. VEPAZIL 250 and 500, which is a cefprozil, an anti-infective for upper respiratory tract infections. Caspell AA, a solid oral tablet, again to be used in COPD kind of conditions. Braceless, a toothpaste in the stomatological ethical segment of Warren, a paste to be used for people using braces and for removing plaque, even otherwise. And two other.
Nutrient and vitamin formulations, Multi-Fibro and Toco Fibro capsules, both again in the ethical dental segments where we are going after the submucosal fibrous segment for dental. As per IQVIA, the company is ranked 31st in the IPM for September 2025, with a market share of 0.56%. As per IQVIA, again, for prescription ranking, we are ranked 20th in IPM as per September 25 data. Coming to the other businesses, USFDA successfully completed an inspection of our API manufacturing facility at Patharganga with zero observations. Our API manufacturing plant at Patharganga also received a Certificate of Merit award from the National Safety Council of Maharashtra Chamber. For our finished formulations to US, Indoco Remedies Limited received the final ANDA approval from USFDA for Rivaroxaban tablets.
Our focus on manufacturing capability enhancement has started yielding results in terms of higher productivity and competitive cost advantages, coupled with our continuous R& D endeavors, both in domestic as well as international front. As most of you are aware, we've had a very difficult second half last year, largely on account of our inability to supply product because of planned and unplanned shutdown in many of our plants. I'm happy to share that Q2 FY2026 is the first quarter when we begin to show an upstick in performance, and most importantly, we are finally coming out of the lows of the earlier half year. I'm confident that with an increase in revenues going forward, with a continued control on cost and a focus on efficiency, which all of which are currently being practiced in the company.
We will soon go back to the days when we deliver a healthy and consistent financial performance going forward. Thank you all for joining us. I now hand over the call to Mr. Sandeep to take you through the financial performance of the quarter.
Thank you. Good afternoon, everyone. Thank you, Aditi. Let me first begin with the financial highlights. Standalone net revenues of the company for the second quarter, FY 2025-2026, are at INR 4,293 million, compared to INR 3,946 million for the same quarter last year, and INR 3,856 million for the immediately preceding quarter. That is Q1 FY 2026 at 8.8% growth and 11.3% growth, respectively. Consolidated net revenues of the company for the second quarter are at INR 4,718 million compared to INR 4,307 million for the same quarter last year and INR 4,309 million for the immediately preceding quarter, giving 9.6% and 9.5% growth, respectively. Standalone EBITDA to net sales for the quarter is 12.4% at INR 534 million, compared to 13.4% at INR 529 million same quarter last year. For the immediately preceding quarter, it was 3.8% at INR 148 million.
Consolidated EBITDA to net sales for the quarter is 9.1% at INR 431 million compared to 9.3% at INR 403 million. For the immediately preceding quarter, 4.1% at INR 175 million. Revenues from domestic formulation business for the quarter are at INR 2,261 million compared to INR 2,346 million. Major therapeutic segments like vitamins, anti-diabetics, anti-infectives, and respiratory performed well during the quarter as compared to the same quarter last year. On the international formulation business front, revenues from international formulations are at INR 1,533 million compared to INR 1,262 million. Revenues from reg markets for the quarter are at INR 915 million as against INR 866 million. Revenues from US business for the quarter are INR 336 million as against INR 247 million. From Europe, for the quarter, the revenues stand at INR 547 million as against INR 599 million. For South Africa, Australia, and New Zealand, they are at INR 33 million as against INR 20 million.
Revenues from emerging markets for the quarter are at INR 618 million against INR 396 million. Revenues for the API business for the quarter are INR 431 million against INR 301 million. Revenues from NSIFR CRO and Indoco Analytical Solutions are at INR 68 million against INR 37 million. That is all about the business highlights for the second quarter, and I now request all of you to put forth your questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Umesh Ladda from Nirmal Bang Institutional Equities. Please go ahead.
Hi, good afternoon, ma'am. First question. On our international business, the international revenues have gone up, but that was from the emerging market primarily. On the Europe side of things, what kind of ramp-up do we expect now, given the MMP is completed, and subsequently, what impact can that have on the margins?
Yeah, hi. Thank you for the question and for reading it right. Yes, the MMP is completed now. However, as I said in the earlier call, we have gone in Q2, we have been in a phase where, although our plants are ready, several of our customers were doing the sort of giving us approval for the tech transfer, etc., and all the formalities that are required to be registered with the requisite authorities to allow us to move products to the sites where they will be taken in larger batch sizes, etc. Therefore, going forward, I'm very confident from Q3, since we have now got approvals from the largest buyer of product to U.K. and Europe. I'm confident going forward now, we shall soon start seeing the upside coming to Europe business. The upside will be seen in two ways.
Yes, revenues will go up because we can now supply more, and efficiency on these revenues is also expected to go up. I expect that at least from here on, we should be able to show a Double-Digit Growth in Europe-U.K. business, and on the margin front, we would like to wait and surprise you.
Secondly, on our other expenses again, while we were expecting them to go down quarter on quarter, even on a consolidated basis and on a standalone basis, they have increased. What levels do we see these expenses going forward, and what measures are we taking to control?
Yeah. So the recurring kind of other expenses, in fact, are being very well brought under control, such as lab expenses, your spares, and all the other plant-related efficiency-related. Those are coming under control. In other expenses for us, we continue to have the remediation costs, which are related to the USFDA remediation at plant two, and these specifically are likely to go on for another two quarters. Also, our sales promotion expenses have gone up requisite to the. Since typically, for the first half of the year, we do not hold anything here. Generally, if we see that the India business is not giving us, for example, the kind of returns that we need, then accordingly, from Q3 onwards, you see them slowing down. We do not, for the first half, for most of the campaigns, most of the CMEs, most of the.
Other expenses related to product samples, etc., that is all on track, and therefore, that has not come down yet. For international, like I told you, the legal profession, that is one area where we have expenses. Traveling also, because a lot of our international business has. Some of these, but largely, it is a remediation cost on USFDA, which is at this stage a little higher. Also, at a consolidated level for Warren Remedies, which is our OTC business, we are not slowing down in any way. We spend on the advertising and digital. Advertising, etc. While in Q1 this year, we had seen a small dip because the advertising strategy was underway. On other expenses, while we feel confident to hold at INR 150-INR 160 levels.
On a consolidated basis, that is going to be our attempt, but they are likely to stay a little bit elevated.
Okay, so earlier, we were talking about 140 because at a consolidated level. So now.
140 was at standalone.
Okay. Next, okay, on the cash flow, I see a sale of fixed assets of INR 45 crore in H1. Can you provide more details about this?
Yeah, on the cash flow front, this INR 45 crore is equipment from the Wadu plant, which we have resorted to sale and lease-back transaction. That's what you're seeing there.
That was INR 25 crore as per the exchange disclosure, right?
No, no, no. In two lots, it was done, totaling to very close to INR 50 crore.
Okay. But this is a sale and lease-back transaction?
Yes, yes.
Okay. Lastly, on the USFDA side, any update from there? Also, what has been the progress on the two restarted lines?
Yeah, so I'll come to the lines first. On the two restarted lines, we have finished media fills of most of the volumes, and some amount of manufacturing has started, but it is quite minimalistic yet. On the audit from our side, letters have gone to USFDA reminding that we are ready. Just this morning, we have got a receipt from USFDA saying that they acknowledge that we are ready, which is the first positive communication we have got from their side, that they acknowledge that we are ready. We will now look forward to them coming down soon.
Okay. Yeah. All the best.
Thank you.
Thank you. The next question comes from the line of Madhav from Shastra Capital. Please go ahead.
Yes. Good evening, madam.
Good evening.
Yes, yes.
Yeah, madam. No, no. I want to touch upon on the regulatory supplies for U.S. and India. Since actually, we got what we heard the previous call is that we heard from the FDA from the first two lines commence in the month of June. So we are in the month of October, right? In the still three, four months, still now we are hearing that we are in the still at the starting stage. Is there any reason for taking more time, madam?
If you look at the sales to US, Canada, for the quarter FY2026, they are at INR 33 crore, INR 34 crore, and that is an improvement over the INR 28 crore last time. Out of the four lines in Goa, which are in the sterile plant, only two have been allowed to function. Typically, the way US works is you are not allowed to take any product from line one and two and transfer it to these lines. Only the product mix, which was running on these two lines, one of which is injectable and the other is ophthalmic, we are allowed to make. Much of the time, as I told you, has gone into media fill, getting the partner sort of up and about and allowing us to supply. Our largest line was line one, which is still not approved.
It is a bit slow, I agree, but we expect after the audit to be able to supply from the whole plant. Does that answer your question?
Yeah. Thank you, madam. That answers my question. One more thing. What would be the revenues? Let us say it will take another one or two quarters for the remaining two lines to get approved from the FDA. From the first two lines, can we expect at least INR 30 crore to INR 40 crore revenue coming out of this NSDA?
Incrementally, you mean?
Yeah, madam. From now onwards, incrementally. You're right. You're right.
Yeah. It is a bit dicey to say from now onwards because we will have an audit, and after that, we will have a report. Sadly, that is going to go away into now, even if it happens by December, it will go into the next quarter, quarter four. In a clean quarter after USFDA audit, with everything going fine, we can definitely expect INR 30 crores incremental. Till then, we hope we will be able to sell more of our solid orals so that we can get some more revenues for U.S.
Thank you, madam. That answers my question. One more thing on the same, are we working on any additional lines, any new lines other than the four one-cut approved, madam?
What we are doing at this stage is we are trying to de-risk from our side by getting our larger products approved and approved in other facilities outside of our own from other CMOs. We feel that is a better strategy at this stage than us further investing on U.S.
Because in the annual report, when I was going through this year, there was an INR 200 crore CapEx on unit two. That is the reason I'm asking you this question, madam.
Yeah, it was planned, and we have made initiation. Looking at how slow USFDA is to coming and with all this that is going on, either that CapEx which is planned, we are looking to sort of offset it by, rather than depending on CMOs, rather than investing it upfront.
Okay. Do you have two choices? Whether to do it in-house or we do it outside? Decision is not taken.
Correct.
Yeah. On the same, on the annual report, this was also given that there are three new diabetic products are given for the US market to be commercialized in the financial year. Can you kindly throw some light on that, madam?
Diabetic product, can you repeat? I'm sorry.
Yeah. It was given in the annual report that three new diabetic products are given for enhancing for commercial agency for US market. That was given in the annual report, madam.
For US market from Baddi? I'll just look at it. I'll have somebody open the page. If you can come back in queue, I will try to reply exactly to what you are asking. Okay?
Yeah.
Yeah. Meanwhile, I think you can. I have a few more queries when you are allowed to do that. Shall I continue, madam?
Yeah.
Yeah, of course.
Yeah. Thank you. On the Clarity point, madam, we have signed an agreement with them for the 15 products. Can you throw some light on the 15 products? What is the status of these? How many got actually filed with the U.K.? What is this kind of agreement with them? Can we allow to do the same molecule for other partners as well or exclusively for them? What is the expected visibility of the business? Some information is required, madam.
We have just started with Clarity. Actually, we have launched the products under Indoco U.K. and Clarity is our distributor. About four to five products have just been introduced in the market. Still, we have a long way to go.
Six months, can we take two quarters? We can take as to get some kind of revenues coming into it?
Yeah. By March, we'll be able to give you some update.
Yeah.
And out of this Clarity Pharma, how many of the products are from oral and how many from the sterile?
No, they are all oral. We do not have any sterile with Clarity. Sterile business is largely only for US.
Okay. Okay. Understood, madam. What I was given in the annual report was also, three products are being launched for the Europe market in September 2025. Three are from Clarity Pharma. Is there an additional product, madam?
Can you repeat? Your voice is a little bit, I'm not getting. The last part, can you just repeat your question?
Yeah. So in the annual report, it is also given that for Europe, three products are launched in the month of September 2025 for U.K. market. And addable, madam?
Yeah. I'm just trying to look into the annual report exactly to what has been said so we can respond accordingly. FPP has licensed in.
Yeah, madam. They are in.
Okay. I'll just explain to you about your first question on U.S. and the diabetic portfolio. FPP, the company we acquired in 2023, used to be in the business of trading. They had licensed in. We have licensed in a couple of products from some people to continue that business. This is a business where a third party makes the product, and FPP is a trading partner to sell in U.S. Okay?
These products will now be logged in with the USFDA, and we'll take at least two years to get them approved.
That is about that. Let me check about your Europe thingy and come back to you. Okay? Thank you.
Yeah. Thank you, madam.
Thank you. The next question comes from the line of Madhur Rathi from Countercyclical Investments. Please go ahead.
Thank you for the opportunity. Ma'am, I wanted to understand what would be the margin profile of our domestic formulation business?
The domestic formulation business is one of the better margin businesses for the company, naturally, because we are creating brands. As such, we do not give out segmental profitability. It is a good business. It is a rock-solid business for the company. That is it.
Is it higher than 20% on an EBITDA level or even higher than 20-25%?
Yeah. I think your numbers are quite ballpark.
Okay. At what rate do we see this business growing, either by new product additions or just taking market shares from different players over the next two to three years?
Even now, if you have checked, then on a consolidated basis, we have grown by 11% in India, which is way above the IPM and the covered market growth of around 8%, 7% to8%. This is despite we have a heavy seasonal portfolio. And Cyclopharm, one of our main brands, although on a MAC basis, it is growing at 12%. The prescriptions are growing by 12%, and the product is also growing. This year, because the rains have come early and they refused to go away, I mean, probably this is the longest monsoon we have had in the last decade. It is doing a bit of a flip flop for some of our acute products. Cyclopharm, which is typically an antispasmodic, which.
Sells a lot when there is food-related diarrhea, which happens when there are hot, moist summers, which did not happen this year, as well as Cytal, which is like a urinary alkalizer, which also sells very well when the heat is excessive and there is no moisture. Both these products stay impacted. Despite headwinds for Cyclopharm and Cytal, because of very good performance by OxyPod, which is an antibiotic, Febrex Plus, which is anti-cold, Carval Plus, which is also anti-cold, and some of our ATM, which is an antibiotic, the company has managed to show a decent performance. I'm confident that we will be able to show a higher single-digit growth in India business in the quarters to come as well.
Got it. Ma'am, can you please mention about the new product addition strategy or how are we making our portfolio more resilient towards these cyclical ups and downs?
Yeah. Yes, we have launched two antibiotics this quarter also. If you look at overall our new launches, then we have products across almost all segments because we have five or six divisions, and each division takes new launches. We have new launches in urology. We have done an extension of the Cytal portfolio to make it a little unseasonal. Cytal primary brand is highly dependent on heat and summer season, but Cytal UTI, which is for urinary tract infection, and the new launch Cytal- PM6 solution in urology, it is a potassium salt of the same sodium citrate, so it is unseasonal. Dropizine cough syrup in spray, which we launched, it is again for cough and for when there was prolonged COVID, so it is not necessarily related to the season. Another GI product we have launched is DrotiTech, which is another antispasmodic.
This is to expand our antispasmodic portfolio. We have launched a new MacuChek in ophthalmology, which is a multivitamin product for ophthalmology for age-related degenerative ophthalmic illness. We have another product in stomatological, which we have launched, is Rilsoft mouthwash and gargle. This is a very good product and has done quite well after launch also because given the kind of respiratory ailments we are seeing now post-COVID, where there is a whole lot of throat pain and dry cough and mucus, and people are looking at beyond antibiotics and beyond cough syrups for treatment. In addition to that, we have done a brand extension of our old brand Weapon by launching Weapon CV, which is with clavulanic acid, cefuroxime. Another product, Vopanja, which we have launched, is a voriconazole, which is your PPI, sorry. Then we have Tuspel AA, which I talked of, and.
We are doing launches across a variety of segments. Most of these fall in the subchronic kind of product therapy area.
Got it. Thank you so much and all the best.
Thank you. The next question comes from the line of Sajal Kapoor from Anti-Fragile Thinking. Please go ahead.
Yeah. Thanks for the opportunity. Aditi ma'am. FPP Holding and Warren Remedies have a negative net worth of INR 35 crore and INR 51 crore, respectively. Put together, both have reported a combined loss of INR 23 crore in this quarter. Now, management opines that the recoverable amounts of investments in these loss-making subsidiaries exceed their carrying values, and therefore, we are not taking any impairment hit. What are the key assumptions in cash flow forecasts and business plans underpinning this assessment that there is no need to take any impairment hit?
Yeah. I'll let my CFO answer that technically to you.
Yeah. Sure. Mr. Sajan, thanks for this question. This gives us the opportunity to explain to you about these two subsidiaries. One is about the FPP. A couple of years back, we got this subsidiary in the U.S.. The advantage is they have licenses to operate in all states in the US. We started shipping certain goods. Now, with our sterile plant under regulatory constraint, we could not supply as many products as we wanted to. Our plan is to, once we resume production and once we are out of this regulatory challenge, we will supply those, and they will act as a front end for us where that is a bigger plan for FPP. We are very confident that we should turn around this very quickly. If you see the overall expenses for the FPP, those are really controlled very well.
We have only six people operating there in the U.S.. We do not have much overheads as such, except rent and salaries for the six people. The second subsidiary, which you talked about, WRPL, the Warren Remedies, in Warren Remedies, there are two parts of business. One is the OTC business, which launched last year. And second one is API intermediates and API finished goods. So out of these two, OTC we launched, we have a manufacturing setup under this particular entity, which is commissioned and started delivering. In all, right from commissioning, we could manufacture close to about 9.2 million tubes till date from that particular plant, which is a highly automated plant, which is supporting for our OTC venture. That is one. Second piece, which is about API, where intermediate plant is started and started supplying to our Patharganga plant.
The API finished goods will be closed very soon. If you see the API uptick, the current growth in our API, which is almost about 40%, you can see quarter on quarter, as well as even year on year basis. Some portion is contributed by this particular subsidiary called Warren. Once we finish this API manufacturing facility and go for approval, then we'll start. The product, which will give us a better margin from this particular plant. We have very specific assumptions, very specific strategic plan for this particular entity. We are very confident that we will very soon come into positive margins from this particular entity.
Sure. Sure. Thank you for that. While we are on this balance sheet, if I can just quickly check what the thought process is currently on the rising debt profile on the balance sheet. Because if I look at our business over the last 10 years, roughly speaking, over the last 10 years, our sales have barely doubled, but our interest payment has gone up tenfold. We used to be running at INR 10-11 crore of annual interest cost. Today, we are approaching INR 100 crore, around quarterly 2024, 2025, right? I mean, this is clearly not sustainable. What is, I mean, operating cash flow? Yes, we got to do innovation, we got to do R&D, we got to do plant upgradation, remediation challenges. I mean, our operating cash flows are limited, right? What is the view on the balance sheet debt levels?
How soon can we get to a more manageable level, which to me is something like on a sustainable operating cash flow, we should not be carrying more than two times net debt.
Yeah. Mr. Sajan, if you remember our past calls, the last about two years, we have invested heavily, particularly on the master manufacturing plant. That is one. Secondly, on remediation for Goa 2. In addition to this, major CapEx is invested in this Warren subsidiary, where we have now two separate units, which are commissioned in Wadu, Sambhajinagar in Maharashtra. These are major CapEx, which we carried during the last two years. Now, there is no any further specific CapEx, which is required for at least the next few years, because we have now a good amount of capacity, which is available to utilize. We have done a lot of projects on increasing the efficiency, particularly in Baddi 1, Baddi 2, and Goa 1, our plant. That should give us decent margins that will increase our overall CapEx, overall cash flow.
Secondly, we have reduced our R&D spend. We have been very clear in terms of controlling the R&D spend as such, because we have multiple products, which are either approved or in the process of approval, which should give us a good amount of overall product portfolio going forward for the next two to three years. We expect to reduce a little bit of R&D spend. No CapEx as such, except running CapEx. As regards to expansion in our margin, that will increase our overall cash inflow. You can see that in quarter two also. Q2 , we have generated cash from operating activities. That is almost equal to what we generated during the last one year. You can see that. We anticipate to start repaying. This year itself, we repaid certain loans in the first half.
Our commitment to repay in the next half, that is the second half of this particular year, is close to about INR 520 million. A year after that, close to about INR 1,400 million. We are definitely confident in terms of generating that much cash flow, including supporting for the finance. Ma'am.
Yeah. I just wanted to add something. For this decade of investment, I agree with you. We also have moved models for our regulated markets and moved from being a pure contract manufacturer to sort of front-ending in both the geographies, whether it is U.K. or Europe. In fact, even in Germany with our own MAs, etc. This has been a transition because we did realize that with the kind of infrastructure investment required to succeed in these markets, if we remained only a sort of a benign player with having no say in exactly when our products would get launched, with an inability to therefore convert opportunities into gains, we really suffered because otherwise we had a great ophthalmology portfolio, which should have today been of a very different size.
That has meant that our milestone collections from the likes of Teva are very minimal now, almost nothing. Instead, we have paid them back whatever we had collected to own all these assets. It simply means that going forward, much of the investments that were to be done towards the US as a business, towards Europe as a business, are done and over with. From here on, we have to only manufacture and convert it into sales and get the opportunity. We are instead investing towards the OTC business, which we see has a great promise in India. It is required for how the market conditions for the Indian business are ripe for this kind of change in, not exactly change, but a kind of a lateral increment for where we are. Beyond doing pure ethical, we are also going to OTC.
You will see the organization shape a little differently going forward. I give you confidence that the kind of CapEx we have done or the kind of R&D budgets you have seen historically when we worked with large players, those are not going to happen in the years to come. Our pipeline is not going to dry because we have, over the last five years, invested in products which will be commercialized from 2028 onwards. We have enough product to support us for growth. I hope that answers your question.
Yes. It helps, Aditi ma'am. Strategy-wise, I think it makes sense to own our future, own our IP in our hands, and then commercialize them, taking the majority or all of the gains. We have taken certain risks, filing the debt on the balance sheet. Now, our aspiration at one point in time, a couple of years back, was to get to this target of INR 5,000 crore of top line, give or take. How realistically? Yeah. What is your kind of, given what has happened and the remediation of Goa plant to line one and so on, what is your realistic expectation over the next three years? Let's not talk about next year because we'll still be probably in a ramp-up mode after the USFDA approval, hopefully, fingers crossed. What is your three-year target from here? Fiscal 2027, 2028, and 2029? Ballpark.
Yeah, thank you for that question. Thank you for understanding the hell we have gone through. The loss of opportunity has really hurt us tremendously. We realized that, as you correctly said, we must own the chain through and through. Yes, because of all that we have gone through in the last couple of years, the INR 5,000 crore in 2027, which was our immediate agenda, looks a little bit distant at this stage. I feel that we will have to take a delay of probably 18 months to realize that beyond 2027. That is only for the top line, though. The margin improvement, you will see substantial. I'll give you a little flavor of what's going on. Like I said.
For Europe, which is our largest volume business outside of India, because of the MMP investments, we will see much better EBITDA returns in the quarters to come. In emerging markets where we are focusing with on-ground people and where we participate only with the branded business and where we are now giving more focus, you will see much better growth. These markets give EBITDAs close to India business kind of. In India, where we are not growing or increasing the number of people on the ground, rather focusing on getting more from the metros where sales are coming more incrementally and doing much better with our new launches, I expect the Indian business to give us better return. The only one business where I will have to support for the next three or four years with expenditure for creating brands will be the OTC.
I feel confident that, going forward, you asked me a picture of three years. Today, last year, we did INR 1,500 crore with a degrowth. From here in three years, I feel confident to be in the region of around INR 3,500 crore.
Sure. That's helpful, Aditi ma'am. Thank you so much for all the detailed responses. Thank you.
Thank you.
Thank you. The next question comes from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good afternoon, everyone. Ma'am, my first question is on the US side, and I think two, three subparts to that. One, for the US business, you talked about filing from alternate sources from the CMO model. One, let's say, if we are not able to clear the FDA inspection, there are some challenges on that side. Do we have existing product already filed from CMO so that we can start supply to US market for the existing products? On the front-end side, is FPP ready to kind of do the marketing part as and when the CMO alternate side gets approval?
Yeah. I'll answer the second part first. For FPP, it really doesn't matter where we give the product from. They are a sales and distribution company kind of, although they are our front-end. They take orders for the product, irrespective of where it is made. It has to be against our ANDA, of course. Coming back to, yeah, I mean, it should not happen. Supposing we have challenges with the FDA, both in terms of the time of the audit or the outcome. Yes, the products that are currently approved and in the market. We have been proactively working on this now for an entire year. Some products we will be immediately able to put into the market. Others, which are under approval from USFDA, however, or where we are making changes because the new sites have kind of an equipment.
Which is different, which requires a change in process, we may have to wait a little bit for the regulator to approve it. It will be a mixed bag, but we will definitely, even then, we will be doing better than we did in H2 when we were at absolute close. Our solid oral supplies are going very well. Glimepiride and antidiabetic, which we are supplying to US, is doing very well. We are vertically integrated on this product. Another product, allopurinol, which we are vertically integrated on, is also doing decently all right in U.S.. I feel that the solid oral portfolio will continue to give us a good top line from US and growth because in the second half of last year, our US supplies of solid oral had also got impacted. From a growth perspective, we will do well.
From an opportunity perspective on ophthalmics, if the USFDA does not clear our site, yes, we will not be able to deliver like we expected, but it will not come to an absolute zero.
Okay. Okay. Got it. Second question on Europe. I think you talked about Double-Digit Growth from the current run rate of INR 55 crore on this quarter. Going back a couple of years, we were kind of INR 300 crore plus on the Europe side of it. On a run rate basis, by Q4, should we be able to reach that number? What are your thoughts on reaching that milestone of INR 300 crore on the Europe side?
Yeah. Actually, by next year itself, we should be able to do it. This year, in the first half, we have done 55. From Europe alone.
118 this year.
118, sorry. This is Q2. I'm sorry.
Q2.
Yeah. First half, we've done 118 already. We are in that run rate of 230-250 already. This is simply because first quarter this year, our manufacturing challenges continue. It will be a full year with one quarter not giving optimally. Next year itself, I think we should be able to do the number that you have talked of, 100%, if not more.
Okay. Okay. Second question on the console numbers. I think at subsidiary level, there is significant increase in loss on a sequential basis. I assume that will be largely from the OTC side, right? Because FPP operations are almost stagnant.
Yeah. Yeah. I think Pramod explained it earlier. You heard. It is largely from the OTC business because we have restarted our promotions.
Okay. So how should we look at this number? Is this the run rate now? Going forward, at least for this H2? I think we talked about a couple of years before we break even on the OTC side. So any.
On FTP, I'm far more confident we'll be able to recover losses more quickly. In a couple of quarters, FTP should be able to break even. WRPL is really a function of how fast we can grow the sales in OTC, because there will be a period of investment. We should look at another two quarters where these two subsidiaries will continue to bleed a bit.
Okay. By any chance, ma'am, can you give a number of sales number at which we would break even rather than a timeline? Is that possible?
As Pramod explained earlier, the WRPL, or Warren Remedies Private Limited, is a consolidation of two strategies for the company. One is to manufacture and sell cosmetic toothpaste and other oral products. The second is to support Indoco Remedies' API strategy. At this stage, I see that the OTC side of business will break even much faster, despite the investment we do, simply because the API manufacturing, which is currently only making key starting materials, the finished product construction is underway. That will get completed, after which we will file with USFDA, after which the site will be triggered, and then we'll be able to sell finished API from that site. There will be a lag on the API side for breaking even.
We keep our fingers crossed for the OTC side doing so well in sales that it should help the whole entirety break even faster.
Okay. Two questions on the number side. Pramodji, sir, the other operating income has gone up significantly. Can you help us understand what that number contains?
Yeah. There are two components. One is foreign exchange gain, looking at dollar, euro, and GBP rate. You can understand there is a good amount of gain. The second is the exports incentives, which we realized during this time. Since exports are increased as compared to previous couple of quarters, there is incentive in that particular number.
Okay. Got it. On the R&D side, ma'am, you and Pramod sir both mentioned that going forward, R&D cost probably will kind of come down a bit. Any sense on the number that you can give?
We have been hovering at around 5% of our sales. As the sales pick up, I think we should, going forward, we can bring it easily down to 4% in the very first year. This is not because our focus on R&D is going away. We are just being a little bit more mindful on the kind of efficiency R&D can give us. We are looking at working more on products where we are vertically integrated on API so that we do not spend too much on the material that goes into taking these batches. We are being mindful of how many projects we take up parallelly. We are being mindful of how many parafor-like opportunities we do not wish to go into, where we are ready with product way before we can. For example.
I can say that openly now because we just got a tentative approval on the Canagliflozin. Although it is not part of Q2, it has come after Q2. Pramod or the secretarial department may not like it, but yeah, we got it in this month, a few days ago. You can imagine this product was filed four years ago. That means we have carried for four years the investment of research on a product like that, which we will be only able to sell in 2028. Six years of. We are not doing stuff like that because the US market is becoming very unpredictable. I do not know over six years how the scenarios for a generic will change. We are doing more of parapheries, more of volume builders, more of products where we are vertically integrated, more of sterile products where.
Manufacturing and supply continues to remain an advantage. We have just backed from CPHI, and we have seen that despite whatever has happened with plant 2, both our customers as well as the market is hungry for sterile product. We will stay focused on the kind of research, picking and choosing the research opportunity.
Got it, ma'am. Very helpful, and wish you all the best.
Thank you.
Thank you. The next question comes from the line of NYSERC, Credent Asset Management. Please go ahead.
Thank you for the opportunity. Ma'am, just on Warren Remedies on the OTC portfolio, can you just maybe share what is the gross margin profile of this portfolio? How much you are spending on A&P?
We are not doing that. I'll tell you very honestly. You know logically that products that are taken OTC have to start with very good GCs. Otherwise, it's impossible to even survive or stand because these products in the initial years, when you take them from X to C, need a whole lot of support with advertising budgets, etc. You don't have to be concerned about that. The products as such are really profitable, even at GC level, at EBITDA level. The kind of support they need initially for the company to register and for us to make that shift from beyond selling at chemists to selling at grocers, selling through modern trade, and to reach the consumer, the initial years are going to be a bit draining on the margin.
Okay. Ma'am, tell me that because since Warren Remedies has two businesses, OTC and API, in terms of OTC contribution, would be how much in this quarter? If you are growing, at what rate?
From a headline perspective, OTC would be 99% to 98% of the revenue. No, I'm sorry. This year we did a little better on API because API currently makes KSMs, which get transferred to our Patharganga site. If somebody can upload that quickly. I think around INR 40 crore came from API in the Warren Remedies top line this quarter. Let me just quickly check it.
Yeah. One minute. Maybe on the OTC side, your portfolio will be restricted to oral care, or maybe you would look to expand other categories? If yes, when?
No. Right now, we are remaining in OTC, frank OTC, restricted to oral care. I do not think you guys want me to put more money behind advertising. Let me stick to one area and perform. Just to tell you why this was necessary, I have said it in earlier calls, and you must know it, that on the ethical side of sensitivity, the market only expanded in the last four years from INR 500 crore to INR 700 crore. On the other side, which is beyond X, there has been an expansion, which is like doubling up of market size. We had to go after this opportunity. That is what OTC gives you. It may not give you the same margin profile as ethical, but it will give you a huge opportunity of creating brand. It is very much required for us to do that.
Coming back to this quarter, I think of the INR 34 crore revenue, we have almost INR 29 crore coming from OTC sales.
Okay. Many of us are not.
I'm sorry. Yeah, go ahead.
Yeah. Sorry. Go ahead.
No, for the first half of the INR 71 crore, INR 61 million has come from OTC sales. It is very much an OTC company. API is only a support system for the parent Indoco because we saw our API division being able to sell high volumes going forward and needed an expansion of the key starting material manufacturing areas. As such, today we depend on the Patalganga site. It will become our second site for regulated API. Yeah. Go ahead. You were asking questions.
Yeah. Overall, Warren Remedies, you think that maybe you said next two quarters will still be loss-making, but FY 2027, you think you can break even at that level in Warren Remedies?
Yes. At EBITDA levels, we should. Not sure about that. Okay.
Okay. Ma'am, I thought earlier you said maybe it will be you actually break even in 2027. So has there been some kind of delay that you now assume?
Sorry?
Maybe I thought earlier you said it will break even in FY 2027, maybe a few quarters ago. Has there been some kind of delay that you are assuming now?
We were talking of EBITDA breaking even earlier and improvement in drain. Yes, I mean, you're asking me questions, so I tell you the numbers. I'm trying to be safe because I've been told I should not put my foot in the mouth. Let's wait a little bit. 2027 is a little far away. Let's clear these two quarters, which are going to be challenging. Maybe next year itself, we can surprise you a bit.
Okay. Since you've done a very large CapEx last few years and CapEx requirement is minimum, let's say next two, three years, what could be the CapEx roughly if you can just indicate?
We would do more of maintenance CapEx in the region of around INR 50 to INR 70 crore max, max INR 50 crore because we have several sites. So that is the highest you can.
Let's say maybe next three years, we can assume about INR 150 crore kind of CapEx?
Yeah. Yeah. Less than that.
Okay. Thank you very much and all the best.
Thank you.
Thank you. The next question comes from the line of Madhav from Shastra Capital. Please go ahead.
Yeah, ma'am. Thanks for the opportunity once again. Again, on the Europe side, ma'am, since now our unit two also got approval for the EU GMP. What is our plan for the Europe market for the sterile products, ma'am?
We have approval from Europe because we had filed some very promising products. I'll be very honest, the kind of opportunity the sterile products have in the U.S., currently, we are not seeing that too much in Europe. Europe, unless we work with a very large partner who already has a market share and become their contract manufacturer, something like that, which defeats the purpose, it would be a backup strategy for U.S. challenges, I would say.
Okay. Any reason, ma'am, for the if you compare the quarter one and Q2 for Europe? Q1 , I think they have made close to INR 60- INR 64 crore in the current financial year. And the Q2, we made INR 54-INR 55 crore. Is there any reason for the reduction in Europe, ma'am?
Yeah. So we had some challenges with one of our products on the distribution side and, but more importantly, if you look at U.S. in the same period, it has increased. Like I said earlier, some of our customers, they had not entirely shifted to the new sites for Europe, but our commitments to US customers from the sterile sites were already there. Some of the volume from plant one in Goa has been committed to US to supply, say, glimepiride, which is increasing leaps and bounds. We have had Europe to queue in at Baddi 3, so that some supplies got delayed. It will get evened out going forward. From a trajectory perspective, if you've seen, it is going in the right direction.
Okay. Thank you. Last query again on the Clarity Pharma, ma'am. Out of the 15 products of the Clarity Pharma, so all 15 products are new products? No existing product is available for the Clarity Pharma for distribution, ma'am?
No, they are not because most of the existing products are already tied up with other customers for whom we manufacture them. Our model before Clarity clearly was we were contract manufacturers for license holders. Everything else in Clarity is new. It will be built from scratch.
Okay. Are we allowed to do same product manufacturing for other companies as well? It's an exclusive working with Clarity?
No, it is not exclusive working. But typically, it is a good relationship thing that we work together to build the products for the market. So we do not expect to do the same product with others that we are doing with Clarity. And the product mix that we do as part of contract manufacturing with our existing partners, that we do not intend to take to Clarity.
Okay. Thank you very much, ma'am. Thank you very much.
Thank you very much. As there are no further questions, I would like to hand the conference over to management for closing comments.
Yes. Thank you very much. Thank you, everybody, for your active participation. Pointed questions, and good discussion. As I said earlier, look forward to presenting better and more consistent financial results in the quarters to come. Thank you. Thank you very much.
This brings the conference call to an end. On behalf of Indoco Remedies Limited, we thank you for all joining us. You may now disconnect your lines. Thank you.
Thank you.