Ladies and gentlemen, good day and welcome to the Laurus Labs 3Q FY 2026 Earnings Conference Call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on the touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors Limited. Thank you, and over to you, Mr. Nitin.
Thank you so much. Good afternoon, everyone, and a very warm welcome to Laurus Labs Q3 FY 2026 earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Laurus Labs management, Dr. Satyanarayana Chava, Founder and CEO, Mr. V. V. Ravi Kumar, Executive Director, Mr. Krishna Chaitanya Chava, ED, Head CDMO, Mrs. Soumya Chava, ED, Generics and Commercial, and Mr. Vivek Kumar, AVP Investor Relations.
Before we proceed, I would like to remind you that some of the statements made during the call today could be forward-looking in nature, and a safe harbor statement to this effect has been included in the press release that has been shared on the company's website. I hand over the call now to Dr. Chava to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir.
Thank you, Nitin. Good afternoon, everyone. We continue to execute our strategy to advancement of important clinical and commercial programs with global partners, successful ramp-up of new launches, and strengthening our leadership in the ARV segment. Our large-scale development and manufacturing capabilities across small molecule as well as large molecule offering continue to gain traction with multiple partners. We are seeing a healthy level of interest across technologies and scale from our long-term existing partnerships. We are confident that we are investing in interesting technology platforms, many of those already underway. Successful execution on these projects will continue to transform our business portfolio and drive future growth. Some of the notable progress I wish to highlight: we made significant investments in CapEx so far in peptide development and manufacturing infrastructure to meet our current and future capacity requirements.
In addition, we operationalized our antibody-drug conjugate and gene therapy process development labs in Hyderabad this quarter, and the construction of GMP manufacturing facility is well on track. Last month, we also announced an increase in giant investments in KRKA, which is in line with our plan to support ongoing FDA facility construction in Hyderabad. Phase I is expected to be completed by mid-2027. Moving on to financial results, we delivered another quarter of strong operational and financial performance. Revenues for the third quarter stood at INR 1,778 crores. Gross margins have expanded further from the previous quarters and maintained around 60%. EBITDA margins expanded to a little over 27%. To achieve these numbers through strong performance across our generic business and also clinical and commercial supplies of CDMO programs to our partners.
Our product mix within business division and operating leverage have continued to do well in supporting our healthy margins overall. As we look forward, we remain well on track to deliver healthy operational growth for the entire financial year 2026. Now, I would like to request Mr. Nitin to share key updates on our CDMO business.
Thank you. Yeah. On the CDMO side, we continue to see strong interest in our integrated service offerings across various complex technology platforms. Our cumulative nine-month performance has been very healthy, clocking more than 50% growth. This has been supported by strong recurring business from our existing long-term customer relationships across various different scales. Now, in the small molecule space, our Q3 sales have been at INR 408 crore. I would say this performance is in line with our expectation due to phasing of deliveries in the coming quarters involving very long and complex synthetic processes. Pipeline momentum has remained very healthy with a well-balanced mix of big pharma clientele and also mid and small-sized biotechs. The majority of the pipeline programs under execution utilize several advanced technology platforms.
In line with that, we continue investment for large-scale capacity expansion in our WSAC sites and expanding our capabilities, including peptides, flow, high-energy chemistries, purifications, etc. Now, on the bio division side of things, Q3 sales have been reported at INR 43 crore. The performance has been a bit muted, but we are seeing better and longer visibility on demand projections and executing longer campaigns on the CDMO side. Additionally, our AOF business is clocking healthy operational progress with continuing customer interest for dedicated lines. Construction work for the commercial-scale fermentation facility at WSAC is progressing in line with the plan, and we expect a phase I capacity of a little over 400 kiloliters to be operational towards the end of 2026. Thank you, Krishna.
I would request Mrs. Soumya Chava to share key updates on our generic business.
Thank you. The revenues from the generic division have continued to perform well, reporting growth of 37% to INR 1,327 crores for quarter three. For the nine-month period, we achieved sales of INR 3,510 crores, reflecting growth of 26%. The growth has been supported by higher ARV volumes and, more specifically, by strong offtake in recently launched products in the developed markets. We continue to see stability from the established product portfolio and expect the benefits to continue, at least in the near term. The broad API market portfolio and production capacity in the ARV business continue to be fully optimized, ensuring that we are well-positioned to support additional orders as and when they arrive. This positions us well to meet customer requirements. The overall solid facility expansion is progressing well.
A significant part of the planned capacity became operational during the quarter and is currently undergoing ramp-up activities in line with the plan. Cumulatively, 92 DMFs have been filed to date. In developed markets, four formulation doses have been filed and five approvals received during the nine-month period. Overall, 91 products have been filed cumulatively to date. Thank you.
Thanks, Krishna and Soumya for the overview of generics and CDMO business. On the R&D front, overall R&D spending was at 4.1% of our sales for the nine months. The peptide research increased by 8% year-on-year, including our spend on the energy benefit space. This R&D spend is in line with our full-year target, and we continue to invest in portfolio focusing on product complexity, scale, and sustainable and new technology platforms.
Let me share a brief one on the quality side. In the nine months, the company underwent close to 110 quality audits by multiple drug regulatory agencies and several customers. The company has successfully passed audit inspections without any critical findings. On the ESG front, one of the leading agencies, S&P Global, has published its 2024 ESG score, in which Laurus reported an impressive 10 percentage point increase in the score, achieving 81 out of 100 points.
This reflects our continued commitment to sustainable development and exceptional performance in ESG practices as we move along. Now, I request Mr. Ravi Kumar to share overall financial highlights.
Yeah, thank you, Dr. Satya, and very warm welcome to everyone for this quarter three and nine-month FY 2026 earnings call. Total income from operations for the nine months came at around INR 5,001 crores. We just crossed INR 5,000 crores in nine months' time, registered a growth of 30%. We have continued to deliver strong growth mainly due to sustained ARV business momentum, strong CDMO, and growth in other generic business. For the quarter three, total income from operations was at INR 1,778 crores, with a 26% growth.
Gross margin maintained healthy way for nine months at 60.1%, and for quarter three, it is at 60.9%, mainly due to better product and division mix and continued process improvement efforts. EBITDA for nine months stands at INR 1,303 crores, with a margin of 26.1%. It is well within our early-year guided range.
For quarter three, EBITDA reported at INR 485 crores, with a margin of 27%, due to strong operational leverage. Profit after tax at nine months: INR 610 crores. It's a growth of 388%, and for quarter three, INR 252 crores. ROCE has improved to 18.5%. If you look at the last three quarters, it is progressively improving. On the CapEx front, we invested about INR 246 crores for the quarter, and cumulatively for nine months, it is INR 735 crores.
Our net debt stood at INR 2,092 crores, which is a similar range of quarter-ended September, and debt to EBITDA has further decreased to around 1.2. On the capital allocation front, our strategy remains unchanged, and we will continue to prioritize investments into high-value business segments to drive near and long-term growth and return for our shareholder over a period of time.
To conclude, as we will finish the year, we are confident in delivering growth and ongoing focus on execution. We remain well-positioned to drive long-term growth. You can refer to our IR presentation for more details. With this, I would request the moderator to open the lines for a few minutes. 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 the touch-tone telephone. 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 comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity and congrats on a good set of numbers. Just first, to start with, a question in terms of, could you break down ARV sales into formulations and API.
Hello. Yeah, I'm just answering. In the nine months, API is INR 86 crores. The formulation is INR 865 crores ARV. In the API, it is INR 1,259 crores.
Sorry, how much? How much is the API?
Tushar, these numbers can be. It is there in the IR, or I, Vivek, can give it to you, Tushar. You can ask any qualitative question.
The total ARV revenues were INR 744 crores for the quarter three.
Got it. So secondly, on the CapEx side, this nine month CapEx is largely more than what we would have done in FY 2025. And then we have certain contracts made on the peptide side or now in ADC. So firstly, how much one can think about investment into peptides as an asset over, let's say, the next 12-24 months? And ADCs as well, if you could. And then thirdly, on the overall CapEx for 2027.
The ADC is still at the nascent stage right now. We have allocated $25 million to the GMP facility, which is under construction right now. We don't expect any meaningful revenues coming from ADCs in the next two years. When it comes to CDMO investment in peptide commercial manufacturing facilities, we expect qualification during this calendar year. We will give you more details as and when we are in a position to give feedback to you.
For overall CapEx?
Overall CapEx this year will be about INR 1,000 crores in FY 2026. FY 2026, based on the current estimate, we do feel it will be over INR 1,000 crores next year also.
This will be largely done with keeping net debt at similar number?
Maybe debt may be increased slightly if it's needed, but your debt by EBITDA will be in a better way.
Got it. And just one last from my side, if you could at least just share in terms of pecking order the gross margin for different segments like API, synthesis, FBF?
I'm not giving that segment-wise gross margin details, but it is everybody's guess. Yeah.
Qualitatively, while not a specific number, but directionally if you have to think about, is FBF, synthesis at a similar gross margin, API at a lower gross margin? Is that the way to think about?
Tushar, the order remains same. CDMO, formulation, API. This is an order.
API on the lower side, formulation on the higher side, and CDMO is on the top.
Because sequentially, we see quarter-to-quarter, there has been improvement in gross margin, while the share of formulation has increased considerably in this quarter compared to the previous quarter, which is why I was trying to understand. In fact, synthesis share has reduced, and even API share has increased, which is why I was just trying to understand if there was anything to look into as far as gross margin for the quarter is concerned.
I think the order remains same, Tushar.
I think, you see, there is a product mix within the same segment, some products where higher margins were there. So there is, see, if you look at last quarter, also we had the similar gross margin. This quarter also, gross margin. And we expect to maintain gross margins of 60%, around 60%, for the coming quarter and also next financial year.
Okay, sir. That's it from my side. Thank you and all the best.
Thank you. Next question is from the line of Rehan Saiyyed from Trinetra Asset Management. Please go ahead.
Yeah, good evening to the team, and congratulations for a good set of numbers, and thank you for giving me the opportunity. So, sir, I have a couple of questions. First, on the CDMO side, CDMO grew 88% in H1 FY 2026-based management and repeatedly warned that this business is lumpy. So your consolidated quarter three revenue grew only 7.5% sequentially over quarter two. So my question here is, your CDMO growth in H1 was phenomenal due to late space, MCU deliveries.
However, looking at the sequential revenue growth in quarter three, so it seems the lumpiness might be entering at a plateau. Is the revenue we see in quarter three the new sustainable quarterly base for CDMO, or did this quarter include a significant portion of registration batches or large quantities that might not repeat in quarter four or quarter of FY 2027? This is my first question.
See, CDMO revenues, if you look at the overall year, nine months, we have grown significantly. We are also confident that the growth will continue like this. Although the Q3 was a little softer because of timing of deliveries to our partners. We expect the—if you look at Q4 FY 2025 versus Q4 FY 2026, we expect to grow.
Okay.
We request you to take annual revenue then a quarter-on-quarter for the CDMO.
Okay. Fair enough. Fair enough. And sir, my second question is around the OpEx burn on specialized modalities. So with the impressive PAD growth this quarter, the burn from specialized modalities like CGT and ADC is less visible. So however, as an analyst, I want to understand the core efficiency. Could you quantify the specific quarterly EBITDA drive from these non-revenue-generating activities? And furthermore, since you now recruited new leadership for ADCs, so is the INR 250 crore budget still sufficient, or should we expect an upward revision in OpEx as you move towards bioconjugation and fill-finish capabilities?
That's a Laurus philosophy we were informed about a lot of our investment companies.
None of them are not clearly audited.
None of these pre-operative expenditures or any of our new initiatives is capitalized. So every new modality expenditure is expensed. So in the ADC space, we are investing significantly both in OpEx and CapEx, but that is going through the balance sheet. We are not capitalizing it.
Okay.
Coming to your question of the team, actually, we have a separate team identified, a guy who is relocated from U.S. to India to take care of the ADC and then Noorjeen Dhilpe.
Okay. Okay. And my last question is on the ROC and ROE guidance that you have given in the last quarter. But management has highlighted that the company's current size can absorb the INR 1,000 crore annual CapEx better than in the past. So however, with the groundbreaking of $5.6 billion by Vizag Complex and the current turnovers of 0.9, so aren't we risking another multi-year period of operating de-leverage? Specifically, if your Bengal Bio capacity is sold out until end 2026, and new Vizag capacities are also a year away, so from this specific division, will it be incremental turnover came to bridge the gap to your 1.1 asset turnover and 25% ROC target in the next 12 months?
I think in case of bio, our revenues will stagnate until we operationalize our new capacity, which will be by the end of this calendar year. We are not committing that we will achieve a ROC of 25% in the next 12 months, but we are confident that the ROC percentage will go up from the current 18%.
Sir, you have said 18%, right?
Right now, it's 18%.
Right now, it's 18.5% ROC. We expect to go up, but we are not committing it will go to 25 with a time-bound program. Yeah.
Okay. So we are not putting any numbers here?
Yes.
Okay. Okay. Fair enough. Thank you. That's it from my side.
Thank you. The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah. Hi. Thank you for taking my question, and good afternoon, team. It's heartening to see a very strong jump in the operating cash flow. I'm looking at the nine-month number. It's about 600% increase. But there is an interesting trend here, Raviji, if you can elaborate and help us better understand this wider picture. So if I look at the 10-year data, so I'm looking at 2016 to 2025 cumulative, we clocked an EBITDA of INR 8,500 crores. And against that EBITDA of INR 8,500 crores, we did an operating cash flow of about INR 5,400 crores. So that's about 63% conversion. Whereas in the nine months, the conversion is 113%. So 63% going to 70%, 75%, even 80% is understandable. There is a definite change in the net working capital strategy.
As far as I can understand, if you could just help us double-click and understand a more longer-term and more sustainable conversion of EBITDA into operating cash flow. Thank you.
Sajal, thanks for your very interesting question. So this kind of help happened because of some of the customer advances which helped this year. But of course, if you look at the absolute number of the NWCs close to the similar number for the March and December, but the revenue has increased. That's really helped. But you are right, from 63% to 80%, 90%, but beyond that, actually, some part is helped through customer advances. Thank you for your in detail understanding.
Sure, Raviji. Just to harp on that one, so given that the business characteristic is definitely changing in the favor of CDMO, and these customer advances will be an ongoing thing, we cannot compare quarter-over-quarter for advances because in one year, the advance may be higher than the other year. But on a broader five-year basis for the going forward five years, I think the conversion should be a lot better than what we have delivered in the last 10 years. Is that a fair assumption?
Yeah, that's a fair assumption.
Okay. Thank you. Thank you. My second question is for you, Dr. Satya. Where not to go or what not to do is also equally important because businesses have got finite cash flows and capabilities. So in that context, what is that one area where Laurus has chosen not to grow despite opportunity looking very interesting in the near term?
Very thought-provoking question you asked, Sajal. See, right now, we decide not to enter into large-scale mAb manufacturing. We don't want to do that. That area, we decide not to get in. The other area we decide not to enter right now is also sterile manufacturing. These two areas we decide not to enter. Although opportunity looks good, but we also need to understand our management bandwidth to handle many things. So we know right now we are busy with what we are handling. We have visibility about our growth plans in the next two, three, four, five years. So we are cautious in the areas where we wanted to enter and deploy our resources, both material and money. Yeah.
That's understandable, Laurus Satya, because if you look at India, I've seen many large sterile and mAb monoclonal antibody players. One of the leaders in that space are struggling when it comes to their balance sheet and the ROCE profile. So completely understand that strategy, and thank you for clarifying. Thank you. That's all from my side. Thank you.
Thank you. The next question is from the line of Mehul Panjwani from 40 Cents. Please go ahead.
Hello, sir. Thank you so much for the opportunity and congratulations on a great set of numbers. Sir, if you can elaborate a little bit on that, that is my first question. On the joint venture with KRKA, can you please elaborate what are we doing? Because I am not tracking. I'm recently tracking this company.
The joint venture with KRKA is to manufacture formulations for the European market where APIs will be supplied by us. In the phase I, we are creating 3 billion solid oral capacity and 100 million solid oral capacity for potent molecules. In the phase II, we will create another 5 billion tablet capacity in the solid oral space. Phase I, we expect to complete by mid-2027. This unit will primarily do formulations packaging for various European markets and also some markets in Asia Pacific as well.
Right, sir. Thank you, sir. And the second question is on cell and gene update, gene therapy. If you can highlight or elaborate what kind of revenues will kick in and what are we trying to achieve for a layman who understands a little bit about pharma, it will be helpful. Thank you.
In the cell therapy, our associate company, ImmunoAct, is already having commercial revenues. When it comes to gene therapy, we are at very initial stage of investments in antibody drug conjugation gene therapy. Our process development labs were operationalized, and the GMP facilities will come in the next 12 months. We don't expect any revenues from ADCs and gene therapy, at least in the next 24 months.
Right, sir. And what about the joint venture with KRKA?
We will have revenues in the next financial, not in this financial year. Yeah.
Okay. Thank you so much, sir. Thank you. All the best.
Thank you.
Thank you. Ladies and gentlemen, we request you to please use handsets while asking a question. The next question is from the line of Chirag Shah from White Pine Investment Management. Please go ahead. Mr. Chirag, please go ahead with your question. Your line is unmuted.
Hello. Am I audible?
Yes, you are. Please go ahead.
Yeah. So first question is both for CDMO as well as for API and FDF business. Q1, Q1, YOY, if you can just highlight, is there anything with respect to volume and pricing, especially in API and FDF? Have we benefited on pricing in API and FDF?
In the API, FDF, we predominantly benefited from the volume gain.
Okay. Okay. So pricing has not really changed much, correct?
Pricing hasn't played a significant role in this. The volume gain was significant.
Was the main reason. Okay. Sir, second follow-up, just a clarification also on the CDMO side. If you look at sequentially, CDMO revenue would be up, is down by 13%, YOY up by 1%. Now, in the last two calls, we have been indicating supplies to late-stage development as well as commercials. So despite that, we are seeing a flattening out of revenue. So is there any callout you would like to make on that side? The ideal is commercials are playing out, then the ramp-up should be slightly higher before we start flattening out and the new molecule pipeline starts replacing or compensating for that.
Yeah. Even while the late-stage supplies and also commercial supplies are ongoing, even in such situations, some of these supplies are once or twice per year in some cases. So there's not necessarily a supply going out every month. It comes down to their internal manufacturing capacity and demand requirements. So even in the case of it going commercial, we'll continue to expect lumpiness in some of the programs. I won't say that's the case for all, but some of the programs, you will continue to see that lumpiness on a quarter-to-quarter basis.
On the annual basis, you have to look at on the annual basis, number one. And number two, on the annual basis, we are still committing to our earlier projection for the CDMO for the full year.
That's correct.
Yeah. Yeah. And sir, I was more keen on 27 because some new molecule supply has to start for us to compensate for this lumpiness, correct? Else we will see a kind of a flattening out or maybe 5%-10% kind of a growth in CDMO business. So if you can just talk a bit about that, how to look at 27 in CDMO revenue growth?
While we are not giving any concrete numbers for 2027, we still expect a healthy growth over whatever we expect to report in 2026.
So if you look at FY 2026, in the nine months, our growth is close to 50%. And we expect Q4, as I mentioned just now with another question, about Q4 FY 2027, we indicated that our Q4 FY 2026 will be better than Q4 FY 2026. So we have visibility now how FY 2027 looks like, but we are not giving any quantitative guidance. It's qualitative.
It's more about qualitative. It's more about, are there any large molecules coming up for supplies for you in 27 based on the pipeline that you have created over the last two, three years? Is that the way to think that will drive the growth?
The majority of FI27 revenues in our CDMO division will be commercial supplies. I think that much I can make a statement. Yeah. Majority commercial supplies.
Okay. And sir, one last this, because this is more with the gross margin improvement that we have seen. Has currency played any role in your gross margin improvement? Because sequentially, we would have benefited reasonably on the USD-INR movement and USD-EUR movement also for that matter.
Significant. Answer is yes, but not very significant.
Could it contribute 20, 30 basis points or even 40, 50 basis points of gross margin improvement sequentially given the adverse? This is in context of adverse mix in the broader segment. CDMO share is down, APS share is significantly up. That's why I was asking.
We will definitely get a benefit because we are a net exporter. But I'm saying that it is not a very significant impact or positive impact.
Okay. Thank you and all the best.
Thank you. The next question is from the line of Jeevan from Sahasrar Capital. Please go ahead.
It's very heartening to hear the guidance of 60% gross margin going forward. I think it's very, very positive. Coming to the CDMO side, sir, I just want to understand your FY 2027, so one is the animal health. So I don't think animal health has still scaled up in '25 much. So animal health, how do you see the scale-up in FY 2027? Agrochemical also, I don't think FY 2026 we have done much of a delivery there. So how do you see agrochemical growing in FY 2027? And apart from that, is there any large contract that we are talking or are in the pipeline with the big pharma? If you can speak on that.
Yes. On the animal health, there's ongoing commercial supplies for a few compounds, continue to do validations and filings for our partners in other programs. So there is some meaningful revenue for this year as well, and we expect to continue that or, in fact, grow on that. In the crop science space, we've commercialized one particular supplies for our partner, and we expect that to continue shipments in the coming years as well. But we look forward to adding more partners in the crop science space, but meaningful revenues for the crop science probably will start maybe two years or one to two years down the road.
Okay. And.
Yeah.
Yeah. Good.
Yeah. On the second question on the large commercial contracts, I mean, unfortunately, I can't necessarily comment on that, but we continue to have good discussions with several partners in several phases of the programs.
Yeah. So are you basically seeing any cases where the innovator or large pharma is looking to move late-stage molecules from other clients to us?
The opportunities exist, but unfortunately, without divulging confidential information, I can't really fully comment on that. So yes.
Okay. No problem. No problem. Thanks a lot. And next question is about ImmunoAct. So I think we have done recently tie-up with Cipla for South Africa region. So any comment on that? How do you see that market or how do you see that opportunity?
That opportunity will be meaningful only a year from now because of the regulatory approval needed in South Africa. So clinical trials will start soon in South Africa, for ImmunoAct. So it will be FY 2028, you will see that. But there are some milestones ImmunoAct already received from Cipla.
Okay. Great, sir. Great. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Bharat Siriparupu from Quest for Value Capital. Please go ahead.
Yeah. Congrats for boosted numbers. Dr. Chava, regarding this new greenfield CapEx of 500 acres in Achutapuram, may I know when can we expect this new greenfield CapEx start coming online? Can we expect first phase of it to come somewhere in FY 2028?
We are expecting land allotment, and handover will happen in the Q4 this year, financial year. CapEx will start from maybe second quarter of FY 2027, and we expect qualification and validations only two years from now, not before.
Okay. Good. And my second question is to Krishna Chaitanya Chava. So currently, if you see there is a significant wave of demand coming to India on small molecule side from Innovators. So basically, what I understand is that the Innovators are chasing for capacity. Yeah. So with this background, how is Laurus prepared to handle this surge of demand? Are the current capacities sufficient to satisfy the CDMO demand? And are we considering scenarios like freeing up generic capacities and allocating them to CDMO?
I think one of the strategies that we've adopted is investing ahead of time. That was the case over the last couple of years where we continued to do significant amount of CapEx. That was in line with what we were expecting from capacity requirements and customer additions. Therefore, that has positioned us strongly to meet some of these new opportunities that are coming about. That's also in line with our current guidance on CapEx for this year and the next year. This is to create capacities for our partners and opportunities that we are seeing.
Basically, we didn't lose any business because of not having capacity basically till now?
That's a fair statement to make, yes.
Okay. Yeah. Thank you.
Thank you very much.
And my last question is to Soumya Garu. So if on generic, so recently, 3 billion tablet capacity has come online in year two for KRKA. So may I know from when do we expect to generate revenue from this new capacity?
We've already started using the additional capacity, and we will see a little bit of increase or jump from next calendar year, from next financial year, next quarter Q1.
Okay. Yeah. Thank you. Thank you very much. Yeah. That's it from my side. Yeah.
Thank you, Bharat.
Thank you. The next question is from the line of Vivek Agarwal from Citigroup. Please go ahead.
Yeah. Thanks for the opportunity. So first question is related to peptides. So you are making ongoing investments. So just want to understand how much or what kind of investments you are making here, let's say, over the next couple of years, and when you see the revenues starting from this particular segment. Thank you.
I think we'll give more details at an appropriate time, Vivek, on this. But I can give you a glimpse. We are creating capacity for fully integrated programs, protected amino acids, unnatural amino acids, fragments, final peptides, and purification isolation. So the capacity being created is fully integrated. Yeah. We'll give you more details at an appropriate time.
Yeah. So just try to understand more. So is it like that you already have some contracts or talks with some of the big pharma, or is it like you are creating the capacity first, and then, for example, you are expecting some kind of business from this facility?
I think I can't give you more details on this.
And no problem at all. And in CDMO, actually, just building on the comments that you made during the call. So in 4Q, you are expecting growth YOY. So just want to understand, is the growth expected to come from a supply of a new commercial molecule, or is it kind of a late-stage molecule? If you can provide some more color.
Most of the revenue in Q4 is going to come from commercial supplies of molecules what we supplied earlier.
Okay. Understood. And just last question on CDMO. So in calendar year 2026, right, so how many commercial molecules, the new commercial molecules you are going to supply?
In the last 18 months, I can give you because we did add a review internally. We supplied three commercial NCs in the last 18 months.
Okay. Just lastly on the generics, right? In CDMO, you commented about that Q2 growth, YOY growth in the fourth quarter. How to think the performance of generic business in 4Q? In this quarter, actually, there is a significant step up. I just want to understand what is the sustainability of the step up in 3Q, and how to look this particular segment in FY 2027? Thank you.
In the generic space, lion's share of revenues are coming from ARVs, both APIs and formulations. That business is pretty stable. Actually, we are able to increase our market share in both API and formulations in that. Our North American formulation and European CMO sales are also going up. I think we believe those numbers what we did in Q3 are sustainable. Yeah.
Understood, sir. Thank you. That's from my side.
Thank you. The next question is from the line of Ramesh, a CA. Please go ahead.
This is to Mr. Ravi Kumar. Just I want to understand why there was a, I mean, marginal growth in CDMO business quarter on quarter as compared to our generic business. You are telling for nine months, of course, I understand, but for this particular quarter, why growth was not visible?
Can you just repeat your question?
Why CDMO revenues are not growing?
If your question is why CDMO revenues are not growing, it is as we indicated, you can't compare on a quarter-on-quarter for a CDMO revenue. You have to see on a year basis. So the year as for nine months, as Dr. Satya said, we already achieved a 50% growth. For a year also, we are expecting to have a higher growth, and then you don't compare on quarter-on-quarter. I hope your question is that.
The margins are sustainable, sir, even for the next quarter?
Yes.
Thank you. Thank you. This is from me.
Thank you. The next question is from the line of Manav Mehta from Vriddhi. Please go ahead.
Hi, sir. Good evening. So my question is on the MOU where we are signing with LCS South Korea, where we've announced entry into OLED materials, OLED materials. So my question is, how does Laurus enter into this structure apart from pharmaceutical?
So similar to our strategy across different areas, right? For example, human health, animal health, and crop science, OLED represents another potential opportunity where we could be a potential player in the OLED materials, which are, again, small molecules or chemically synthesized compounds, right? For that, that's an MOU that we had agreed upon with LCS. And we don't necessarily expect to see any meaningful revenues this year or the next, but that gives us an opportunity to potentially play in this very lucrative market.
Understood, sir. Thank you.
Thank you. The next question is from the line of Vishal Dhaga, an individual investor. Please go ahead.
Hi. My question was similar to what was the previous person asked. Just to add on to the question, what will be the total time of the market in the OLED segment, maybe 2027, 2028?
Yeah. It's still an emerging development given that the partner program that we're working on is also a developmental program. So I can't necessarily comment on the market size itself because that's an emerging space that's currently under development.
Understood. Okay. Thank you.
Thank you. The next question is from the line of Aseem, an individual investor. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Many congratulations for the fabulous results for quarter three. So one of my questions on the business is already answered. Thank you for that. I have one question on the financials for quarter four. If you look at the last year, quarter four, we have other income of around INR 40-50 crores, which has led to higher profitability. So my question is, what is a one-off, or we can expect a similar level of other income in this quarter as well?
We are not expecting another income in the quarter four.
Okay. So that was a one-off for last year?
Yes.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Abhijit K, an individual investor. Please go ahead.
Hello. Can you hear me?
Yes.
Yeah. I'd like to understand. I have two questions with regards to the one question with regards to the asset turnover. May I know what is the asset turnover currently?
0.91, actually.
Okay. 0.91. And I look at the generic business and the FDF. Mr. Chava had mentioned that you have entered into some new products, and the volume growth was there significantly, right? How sustainable is this? Because we've seen that the APA and the FDF sector has been fluctuating over the last 24 months, actually 24-36 months, if you see. But now this has been a significant ramp-up in the FDF and APA, both sectors. Is this something that we can expect the company to continue to grow on? Because you also have new capacity just online, as I mentioned earlier also.
The growth in generic API business could be very sustainable. When it comes to growth in our other FDF business, it will also eventually be sustainable despite up and down three quarters because our increased capacity for our CMO business in Europe with a European customer will yield revenues starting from this quarter and fully operational by next quarter. We expect those numbers are also sustainable in the long run. May not be in Q4 this year and Q1 next year, but eventually, we expect to do well there as well.
Okay. And one last question with regards to the peptides sector that is happening. We understand that you are working with an American biotech company, and we want to understand the timelines of these projects. Is it 24 months, 36 months, or 48 months, or is it really, really unpredictable? We have seen some data that there are some trials going on in the U.S. without disclosing the company, of course. But if you can understand timelines because you've invested billions of dollars in your company, and you are looking at the future of the sector, which is obviously it is ADC and peptides, which is like a revolutionary thing in pharma. So we wanted to understand what is the timeline, if you have any visibility or anything like that.
I think you have to bear with us for some more time. We will give you the details at an appropriate time. Yeah. But as you mentioned, we are investing a significant amount in peptides as well as also a significant amount in ADCs. Yeah.
So in that part, can we conclude that you are trying to move from being an API or CDMO sector to a biotech company, a company that is like the longer-term vision for the organization?
No. See, our investments in biotech, for example, cell therapy, gene therapy, ADCs are most emerging fields globally. And we wanted to invest ahead of the curve and wet our hands to capture opportunities. In the case of peptides and all, we are well established. We have investment. We have programs running right now. So the answer to your question is we are more focused on small volume CDMO than large volume CDMO right now, large volume CDMO. Yeah.
Okay. All right. Thank you. Thank you.
Thank you. The next question is from the line of Anjan Banerjee, an individual investor. Please go ahead.
Hello. Am I audible?
Yes.
Yes, sir.
I have a question for Dr. Chava, and thank you for the opportunity. Sir, I have a question on the CDMO space. Like we have been seeing many of the Indian pharma players, they have been expanding their capacity towards this CDMO segment. As per understanding, how big and long is this opportunity? Given that Laurus has invested so much in the last couple of years towards expanding the capability and capacity, what is the competitive advantage that Laurus Labs has as compared to its peers? That's one of my questions.
I don't say we have advantage. We were well prepared to take the opportunity. I'll put it that way. So people look at us if there is a complex chemistry, if there is a scale involved, if it is a flow chemistry, if it is biocatalysis, if it is high-energy chemistry, and involves scale, and we are the perfect partners. So we have invested in these modalities and created capacities.
Okay. So sir, as per you, whatever these competitors that you talked about, so is it a fair assumption that developing these capabilities is a very long-term process, and any pharma company just cannot hire scientists and just foray into these because they are very skillful operations? So is it fair that developing these and getting the customer approval is a very big thing because the capability matters a lot as compared to the capacity? So is it a fair assumption?
Yeah. I think initially, we are creating capabilities and then investing in capacities. So what I mentioned, Laurus currently uses enzymes at the commercial scale. Laurus uses flow chemistry at commercial scale. So we are going in phase I. First, we create capabilities and then create capacities. And we believe projects will come.
Sir, my second question is for the CDMO space only that you have constantly guided that we intend to reach that 50% of our share which will be driven from the CDMO segment overall. So is it the ceiling, or once we reach this 50%, it will look beyond the breaching rates? That 50% ceiling also. That's the second question.
I think our first goal is to reach 50%. Yeah, for a long term. We are not going to be there in the medium term. It is a long-term goal for us to get there.
Okay. Thank you very much and all the best.
Thank you.
Thank you. The next question is from the line of Kodandapani, an individual investor. Please go ahead.
Good evening. Thank you very much for being here. Good result for this quarter. So I want to ask you, what is the exchange benefit for this quarter because of the huge reduction in the dollar?
Yes, but not very significant.
Okay. Okay. Thank you. Most of the things already clarified. Very thanks. Thank you.
Yeah. Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Hi there. Thanks for taking my question. Sir, on the ARVs, you've been earlier mentioning that the business will sort of stabilize around INR 2,400-INR 2,500 crore. We seem to be running significantly ahead of the run rate in the current year. So has something changed in the ARV space per se which has enabled us to improve our scale in this business? And is it sustainable?
See, earlier, we guided INR 2,500 ± 200 crore. But you're right. Current run rate is a little beyond that. The main contributor for that is we have expanded our API capacities to meet our customer demand. That's driving our positive growth there. Now, if I have to restate that, currently, we are at INR 2,600 ± 200 crore. I'll put it that way. But fundamentally, it hasn't changed much.
And sir, given there were some changes in the market landscape, has the profitability of the business also improved versus the dip it had a couple of years back? Is it a much better business profitability-wise than it was maybe a couple of years back?
It's profitable if we sweat assets more. That's what we're doing right now. Yeah.
But you don't see any major change in the competitive intensity in the business in that quarter?
No. We're not seeing any. But Nitin, actually, what happened, actually, we suffered for a few quarters because of the steep price reduction, but that we could be able to recover those things because of some process improvements, raw material prices, and productivity improvements. Yes, we have been indicating for the last six quarters that we have been working on ARVs that have been resulted in this quarter. Actually, it's sustainable. Yeah. API sales.
Sir, secondly, on the non-ARV formulation business, what are the growth drivers for this business when you look at next 12-18 months?
We expect to sustain those because of additional capacities coming up for our CMO partner in Europe and also volume gain in the U.S. and also some new launches in North America, both the U.S. and Canada.
Okay. And sir, this will, because this quarter was probably the first decent quarter of ramp-up which happened. We had a pretty meaningful ramp-up, actually, this quarter. So is this like a run rate from year on, or there will be lumpiness in this business as we go along?
I think we expect a little lumpiness, but it is not significant. Yeah.
Sir, lastly, on the CDMO business versus the kind of conversations we were having with investors or rather with our partners a couple of years back to the kind of conversations we're beginning to have now, what has been the change? I mean, if you can qualitatively indicate the change in the quality of discussions we are having, scale and scope of discussions we are having with various partners on CDMO?
I'm sorry. What answer? Any change in?
That's, I mean, it's a long answer. But okay, to just summarize it, I think the tone of the conversations continues to remain the same in terms of what kind of capacities, capabilities, and credentials that the company has. I think that's what primarily attracts customers. With that being said, I think the global landscape has been a tailwind for potential conversations with customers. But the fundamentals need to be sound, and that will only drive the business, is our understanding at least.
Okay. Thank you so much.
Thank you. The next question is from the line of Abhijit K, an individual investor. Please go ahead. Abhijit, please go ahead with your question. Your line is unmuted.
Yeah. I had a clarification with regards to the CDMO business. You mentioned animal health and crop sciences. Animal health will continue in FY 2027, and crop sciences, one product has been commercialized, and meaningful supply will happen in one to two years. I remember in the previous phone calls, you had mentioned about human health CDMO contract also. Is that still on track, or is there approval spending and etc.?
In the human health space, there are several different programs that we currently work in with several partners. As Dr. K mentioned, there are several commercial supplies ongoing in the human health space.
Okay. But percentage-wise, can you give a breakup? Is it possible to say what are you looking more at? Is it crop science, is it animal health, or is the future going to be human health? Because that's where I think a lot of companies are talking about it. So just a picture, if not to be too specific, but just a rough.
Our largest share of CDMO is in the human health space by far, and that will continue to be the case. After that, we have a sizable portion coming in from animal health. And the third one, which is again currently very small, is in the crop science space. And this ranking of human health, animal health, and crop science will be similar if I project a couple of years down the road as well.
Okay. The crop science is the one? Is it a patented product or no? I'm asking this question because next year and in the next two years, a lot of products are going off-patent. I just wanted to understand if it will affect you or not.
Yeah. The commercial one is technically a patented product. Some of the other opportunities that we're working on are also on the patented ones that we're looking at.
Sure. Thank you. Thank you.
Thank you. The next question is from the line of Dheeraj Kumar Reddy from EquaSquare. Please go ahead.
Thanks. Thanks for giving me this opportunity. I just have a couple of questions. The first question being, many CDMO players are talking about peptides as an opportunity today. I mean, even Neuland or First Pharma etc., right? They say that this is a $10 billion opportunity. Dr. Chava, I just wanted to understand what out of this $10 billion opportunity, how much will probably come to India, or is it only Indian opportunity? And relevant players will get what kind of market share out of this overall? I mean, you can just give me in a three- to five-year time frame maybe. Yeah.
It's a very difficult question to answer. See, we don't have visibility on who is investing, what capacity, what products we have. They have. But whoever gets the GLP opportunity, people are investing in amino acids, protective amino acids, fragments, and some of them investing in small volume, some of them investing large volume. Opportunity is going to be meaningful for a good number of players. And I will not be in a position to comment any further on this.
Got it. And my second question, Dr. Chava, is basically, so if you're saying that ARV will be more or less in the range of INR 2,500 crore-INR 3,000 crore, what is the expected growth in the API segment going forward, API and the formulations? How will they grow in the next two to three years?
We grow in the next year, but significant growth will come in FY 2028 because we're adding capacities where we are getting some generic APIs and formulations. So growth will be significant FY 2028, but there will be some growth in FY 2027 as well. The generic APIs will have their TS space.
Understood. Okay. Got it. Got it. Thanks, Dr. Chava. I think that's all from me.
Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Mr. Bansal from NBG Investments. Please go ahead.
Yeah. You said while answering one of the questions from the participant that your asset turnover is 0.9. So what is the maximum achievable capacity sorry, fixed asset turnover ratio?
If you look at one of our slides in the investor presentation, our five-year average asset turn was 1.1. Our first target is to reach 1.1. Maybe 0.9 to 1.1, we will reach. But our peak asset turn was 1.4. We are not anticipating 1.4 at this moment, but we are targeting 1.1 over a period of time.
Okay. That means you are almost at the full capacity utilization.
But 0.9-1.1, actually, there is a we can see it.
Correct. Correct. Okay. Okay. Thank you very much.
Okay.
Thank you.
Thank you. Ladies and gentlemen, as this was the last question for today, I now hand the conference over to management for closing comments.
Thank you, everyone, for asking very insightful questions. Thank you.
Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.