Ladies and gentlemen, good day and welcome to the Marksans Pharma Q2 FY 2026 earning conference call hosted by DAM Capital Advisors Limited. As a reminder, all the 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 your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agrawal. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and a very warm welcome to Marksans Pharma's Q2 FY 2026 post-result earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Marksans Pharma management, Mr. Mark Saldanha, Founder, Chairman, and Managing Director, and Mr. Jitendra Sharma, Chief Financial Officer. I will hand over the call to Mark to make the opening comments, and we'll open the floor for questions. Please go ahead, Mark.
Thank you, Nitin. Welcome, everyone, and thank you for joining us on our H1 and Q2 FY 2026 earning conference call. We sincerely appreciate your interest and continued support for the company. I'm pleased to share that Q2 FY 2026 has been a strong quarter for our company, reflecting a healthy recovery from a softer Q1. The revenue grew 16% sequentially, driven by improved demand across key markets and improved operational execution. In the U.S., we delivered a robust performance despite microheadwinds. Our strong order book moved into execution, and new launches in digestive health and pain management helped gain meaningful traction. It's encouraging to see that the tariff-related uncertainties have now stabilized, indicating that the business sentiment is returning to normalcy. Price erosion for RX products remains in low single digits, which gives us confidence in sustaining this momentum. The U.K. business delivered stable results and saw improvement in demand.
Even with the ongoing pricing pressure during the quarter, our U.K. subsidiary RangeChem received three new marketing authorizations from U.K. MHRA. These approvals will strengthen our product portfolio and support growth in the coming quarters. Our goal to double U.K. revenues over the next five to seven years remains firmly on track. On profitability, EBITDA and PAT grew 44% and 70% quarter-on-quarter, supported by operating leverage and improved cost efficiencies. We also received several important milestones during the quarter. Our Unit 2 facility in Verna, Goa, which was hosted while the Teva facility successfully completed a U.S. FDA inspection with zero Form 483 observation, reaffirming our strong compliance standards. Additionally, CARE Ratings upgraded our long-term credit rating to CARE AA- with a stable outlook, underscoring our sound financial position. As we enter the second half of 2026, we do so with strong momentum and renewed confidence.
With improved demand, a robust product pipeline, and a sharper operational discipline, we are well positioned to sustain growth through the remaining part of this year. We remain steadfast in our commitment to quality, innovation, and sustainable growth, building the company that we consistently create value for our shareholders. With this, I'd like to hand it over to Jitendra for a detailed update on the.
Thank you, sir. In Q2 of FY 2026, our operating revenue stood at INR 720.4 crore and increased by 12.2% year-on-year compared to INR 642 crore in the same quarter last year. Revenue from the U.S. and North America markets stood at INR 387 crore, an increase of 27% on a year-on-year basis, supported by new product launches across the digestive and pain management segments. U.K. and EU formulation recorded revenue of INR 245 crore. Australia and New Zealand markets recorded revenue of INR 61.3 crore. The rest of the world revenue stood at INR 26.5 crore. The gross profit for the quarter grew 7.4% year-on-year to INR 411.8 crore, with a gross margin of 57.2% compared to 59.7% last year, primarily reflecting product mix and pricing pressure in the U.K. We recorded EBITDA of INR 144.5 crore in Q2 FY 2026.
The EBITDA margin for the quarter stood at 20.1%, a decrease of 108 basis points year-on-year, and an increase of 391 basis points from the previous quarter. EBITDA margin improved sequentially due to operating leverage and improved cost efficiencies. Profit after tax was at INR 99.1 crore, an increase of 1.4% year-on-year. EPS for the quarter was INR 2.2. Moving to H1 of FY 2026 performance. In H1 of FY 2026, our operating revenue stood at INR 1,340.4 crore, an increase of 8.8% compared to INR 1,232.5 crore in the same period last year. The U.S. and North America market recorded revenue of INR 714.8 crore, up by 28.8% on a year-on-year basis, and contributing 53% of our total revenue. U.K. and EU market revenue stood at INR 449 crore, contributing 34% of the revenue. Australia and New Zealand revenue recorded INR 118 crore of sales. The rest of the world market recorded revenue of INR 58.2 crore.
Contribution from these two markets stood at 9% and 4% respectively. The gross profit was at INR 770 crore, up 8.1% year-on-year, with a gross margin of 57.4%, slightly lower by 35 basis points compared to last year. EBITDA for the period was at INR 244.6 crore. EBITDA margin stood at 18.2% compared to 21.4% in H1 of 2025. The decline is primarily due to an increase in employee expenses due to the headcount additions at the facility acquired in Goa. Profit after tax was at INR 157.3 crore. EPS for the first half was INR 3.5. In H1 2026, the cash generated from operation came in at INR 75.2 crore. The CapEx during the period was INR 73.2 crore. Our working capital cycle improved to 150 days as tariff-related disruptions eased and inventory normalizations began. We expect further improvement in the coming quarters.
We spent INR 26.2 crore in R&D in H1 of FY 2026, which amounted to 2% of the consolidated revenue. We continued to remain debt-free, and the cash balance stood at INR 666.5 crore as of 30th of September 2025. With this, I would like to open the floor for questions and answers. Thank you very much.
Thank you. We will now begin.
Hello.
Yes, sir.
You have to redial Mr. Mark Saldanha's number. I think his phone got disconnected.
Sir, he is online. I have connected him back. Mr. Mark, are you there? Mark, sir, are you there on the line? To review, re-record, or add to your message, press one. To mark your message urgent, press two. To mark your message private, press three. To send your message as. Ladies and gentlemen, please stay connected while we redial to management. Press three.
Disconnect.
Ladies and gentlemen, we have the management line reconnected. Mark, sir, Jitendra, sir, you can start the conference.
Yeah, sure. Let us start with the question and answers.
Yes, sir. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. 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 Ahmed from Unifi Capital. Please go ahead.
Yeah, thanks for the opportunity. I have a few questions. To start with, currently, how does the U.S. order book look like, and how has been the offtake in the new season? In a similar context, how do you see utilization trends for Unit 2 moving? A parallel question to this is, are the new product launches in the digestive and newer areas from the new site?
Yeah. Our order book right now stands at between $225 million- 230 million. That is quite strong. Our Unit 2 is progressing. We are trending very close to INR 500 crore in terms of revenue based on our last two months' statistics. The order book from Unit 2 will basically now take momentum now that everything, the US FDA, everything has been cleared. It will grow in 2026. We are expecting better growth in 2026 coming in. Basically, yeah, I mean, our product portfolio is strong. We are still very much in tune of hitting our objectives and commitment that we have given historically.
For the U.K. business, how do you see the market conditions currently? Has there been any change in the pricing environment, the volume offtake, and how are the new product launches picking up in the U.K.?
The U.K., obviously, we've had tremendous price erosion and pricing pressures in the U.K. With new product approvals coming into play, we are looking at a better tomorrow. We are very optimistic on our growth strategy of doubling our revenue in the next five to seven years. Our product pipeline is very strong and healthy, and we've done a lot of filings. We are expecting approvals. As you can see, every quarter, we are getting these approvals in place. These approvals are not so much top-line drivers, but they are more bottom-line drivers. With regards to season, obviously, this is the peak season in the Western markets in Europe as well as in the U.S. We do see this quarter and the following quarter being much better than the first quarter.
Sure. Lastly, on the Europe side, how are we making progress in terms of organic and inorganic initiatives to build out business in Europe? If you can give some comments on that.
Yeah. Europe, basically, we are looking at expanding our geographies, and we have been looking for M&As, but we have actually started our operations in Germany. We are focused on four countries in Europe, prime of Asia. In 2026, we would get our operations started either organically or inorganically in these four countries. Germany, we are going since we have not managed to close an acquisition. We have decided to enter the market through the organic route. Our present office setup is in progress. Our employees are being hired as we speak, and we are looking at FY 2026 starting operations in Germany.
Sure. I have a few more questions. I'll jump back into it. Thank you so much.
Okay.
Thank you. The next question comes from the line of Adityap al from MSA Capital Partners. Please go ahead.
Hi Samud. Thank you so much for giving me the opportunity and congratulations on great setup performance. Really wonderful that you have come back on a steady state again. The majority of my questions have been answered. Just wanted to do a bit deeper on Europe. How are we thinking in terms of if you can enlist those four countries? One, obviously, is Germany. Second is, when can we start seeing revenues coming from the European geography? Third is, the strategy remains the same where we will target the large customers and the business that we are doing with U.S. customers.
Yeah. The market is slightly different in Europe, and within Europe, each country has a different market. We would have to tailor-make our strategies based on the market dynamics. Germany, obviously, as everyone is aware of, is a more tendering market. There are a couple of European countries which follow the German way of tendering. There are certain markets that are a little more branded and a little more diversified, like the U.K. We would be basically targeting four major countries and regions within Europe. From there, we will be adopting our strategy based on the market dynamics. We would always leverage our low-cost manufacturing base and our strengths in these countries. Our strategy will be in line with what we have historically done in the U.K. and in the U.S. We are not deviating from that strategy.
Like I said, we will be leveraging our facilities out of India, both our facilities out of India to service these markets. We do see, from a revenue standpoint of view, obviously, we are starting. For example, Germany, we are organically starting, and our operations would be full flow in the first quarter of 2026. You will see results probably in the second half of 2026 coming from the German market and from the European market.
Understood. Sir, what I understand is that our current capacities can take up to have a revenue capacity close to INR 4,000 crore. How are we thinking about adding new capacities? There is a land bank that we have with Teva as well where we can expand. Subsequently, we have with our other Goa plant as well. If you can just touch base upon that in terms of capacity expansion.
Yeah. So basically, our earlier plant, which is the L82 plant, we have a plot next door which we are looking at acquiring. This will give us, we are strategically planning to expand our present infrastructure and entablate our old plant to two and a half times and our soft gels to about three times from where we have. This project, we will undertake in 2026 from a CapEx point of view. We would have to spend a bit of CapEx to look at us to take us beyond INR 4,000 crore, like you rightly said. Based on our capacity that we are sitting on, I think INR 4,000 crore is very much achievable. Beyond INR 4,000 crore, we would need to invest into infrastructure again. Either we acquire a facility, which is easier said than done, or we construct one.
The cheapest way would be to basically expand on the land banks, like you rightly said, and come up with blocks with shared infrastructure. This obviously helps us in operating leverage also. More than anything, by just shifting capacity into these blocks, we can literally double, if not triple, our capacity from where we are. We are hoping somewhere in the end of 2026 to have a capacity of nearly 1.2-1.3 billion tablets coming out of our old plant. Right now, it is at between 700 million-800 million. We are looking at 1.3 billion tablets. We are looking at probably three times the capacity of our soft gel being enhanced out there.
Just last question before I go back in the queue. Just wanted to understand from you now the capacity that we have. When we are negotiating or when we are discussing with existing and new customers in the U.S., does this discussion come up that if they are a bit hesitant to give us a large order, even though they want to shift it to a low-cost manufacturer in India?
No. That question does not come because today we have ample capacity to see us through for at least a year to two years. Our Teva plant, I would say, is basically 30%, if not less, utilized. We have a huge scope of expanding our product portfolio. I do not think if there is an opportunity, they would consider us as prime manufacturers. They would look at us favorably. The last six months has been, as I have said in my previous earning call, the last six months, the uncertainty and revolving tariffs were the stumbling block. Now, with clarity emerging out of there, I think sentiments are returning back.
Perfect. Perfect. Wishing the team all the very best. Thank you so much.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Deepesh from Manya Finance. Please go ahead.
Yeah. Am I audible?
Yeah, you are.
Yes, sir.
Okay. Regarding the tariffs, what you mentioned, since there is a clarity on the U.S. tariff, has it helped with the reduction of competition and pressure in the U.K. market also?
It will take some time. See, clarity on U.S. tariff has come into play right now. The sentiments globally will improve in due course of time. It has unnerved the global sentiments by itself. A lot of companies like us looked at and are still focusing on different geographies for the reason of uncertainty in the U.S. Even today, in the first half of this call, we've been talking about other geographies like Europe and other markets. That drive from Indian companies to explore different geographies will remain there because of the economy and what the U.S. is witnessing today. One is obviously tariffs, which we talk about. The second is obviously inflation and more into recession type of things that most of the companies try to avoid. That said and done, U.S. is still a growth driver.
We still have done well in this year, and we'll continue to do well. We still have a very aggressive outlook. I know the last six months has been with a pinch of uncertainty, but now with clarity emerging, I think we will be back on track to hit our objectives. We are still targeting $300 million in a few years.
$300 million order book?
Yeah. Order book, yeah.
Order book. Okay. If you can give a guidance.
In a couple of years. Not right now. Not this year.
As in by FY 2028?
Yeah. We are hoping. Yeah.
Yeah. Can you give a guidance for, I mean, you mentioned that you're planning to get to around INR 3,000 crore of revenues by next year. Can you give a longer-term guidance of what are your longer-term targets?
See, obviously, if you ask, I mean, we have a business module that will take us to INR 5,000 crore, but it's not going to happen in the next two to three years. It will need a longer duration, maybe five to seven years, looking at that horizon.
Okay. So by FY 2030, we should expect around INR 5,000 crore of revenues?
Yeah. That's too safe. Yeah.
Okay. Now, my question was around for the rest of the world business, especially in the MENA countries. Having a lower base also, but we have not really grown over there. Is there a particular reason that, I mean, our focus is not right now on these countries and more on U.K. and more on U.S.? I mean, it is a very small base.
Yeah. It is a small base. Looking at the opportunities and our drive right from inception, it has been more into the Western markets. Obviously, we do see an easier penetration, and we see our strengths. Our infrastructure is more positioned to service these markets. Resources, infrastructure, product pipelines are more focused into these huge markets that we are catering to. If you ask me, while you are right, MENA has been a small base. It will keep growing for us. We will continue to have our nominal growth. It will still be a relatively small percentage looking at the other market potentials and where we are in those markets and what we can do to take a leap in those markets.
I mean, yeah, I do see other markets going at a faster pace, including the U.S., Europe being a fantastic market for us to look at growth. Let's not forget the U.K. also. We have our strategy to double our revenue from where we are. That's easier said than done. A lot of product approvals are needed, and business has to take shape to take us to another level. That's what we are working hard for.
Because you mentioned in your previous answer that you're looking at other markets also apart from US and UK. Will these MENA countries be our focus, or will Australia and New Zealand be more focal points?
See, Australia and New Zealand are all smaller markets. MENA will be our focus to grow if you're looking at that region from that angle. If you look at the whole geography, I think our growth will come from our core markets that we are strong in. Besides the core markets, we are looking at the growth to come from Europe, which is still a virgin territory for us. We do see these being, we are launching also Canada by 2026. It is a smaller market, but I think we will be targeting such markets also, smaller markets. I do see Europe being, besides the countries that we are strong in today, I do see Europe taking shape in the next two to three years as a very prominent contributor to the revenue.
Specifically Germany?
Germany and the rest of Europe. Obviously, Germany is the largest market in Europe. Yes, Germany, followed by four countries that we are focusing on.
Great. Great. Thank you so much, Mark. All the very best.
Thank you.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Prolen Nandu from Edelweiss Public Alternatives. Please go ahead.
Yeah. Hi, team. Thank you for taking my question. Mark, I want you to elaborate a little bit on this tariff uncertainty that you highlighted, right? While we understand that maybe customers as well as companies like us are slightly not sure as to how should we go about. When you talk to customers, what are they saying in terms of if in case the worst-case scenario were to play out, how do they engage with you? Are there any alternative modes of mechanism which you guys are working on?
When you say worst-case scenario, this is regarding what context?
No. You're talking about that tariff uncertainty is still there in the market, right, in a way. I just wanted to understand, just add a little bit more granularity on the same, right, in a way where we have to cater to an end market, right, in a way. Where is that uncertainty? Which aspect of the business is that uncertainty there right now?
I must emphasize that clarity has emerged. The uncertainty has diluted to a great level because the current administration has made it clear that pharma tariffs are not going to come, tariffs are not going to be put on pharma or on pharmaceutical products. Even whatever investigation they are doing on that sector, they are not going to pursue it with regards to any pharmaceutical tariffs. I think the generic outline and the tariffs on the generic part of it, on the pharmaceutical part of it, that clarity has now come in the last one month, one and a half months. I think people are now just beginning to realize that the risk is not there like what they assumed it was. I mean, in the last three months, things took a bad turn where India was hit with tariffs of 50%.
Things were very, I mean, I can't stress more, were very uncertain in the last six months because while tariffs started in April, things took from a bad to worse turn where India was concerned. Now, things are shaping better for India because we have talks of being reduced and probably a trade deal happening. Nevertheless, while the rest of the industries would probably have a far more impact on the tariffs, the pharmaceutical, we have relatively escaped the brunt of the tariffs. Uncertainty whether the pharma would come into the tariffs because there was a lot of talk two months back, I think that has been put to rest. Clarity has emerged that the pharma will not come into the tariffs.
If you ask me, if you had asked me a month and a half back, two months back, my answer would have been I would probably be answering you differently. Today, I have the confidence to say that that has been put to rest. When clients do approach us, some of them are very well educated with what is going on. Some are not updated with that fact. We do emphasize on that fact. We are seeing a better traction than what we were seeing maybe a month back. That said, there are a few clients which are apprehensive that whether the administration will change their mind tomorrow, which is always the case. It's been happening all the time. I don't see tariffs coming into play now. I think the worst is behind us where that is concerned.
Okay. Thank you so much, Mark, for that. Second question would be just on your working capital, right? While we had some inventory issues and U.K.-related issues in Q1, even in Q2, our working capital days are close to 150, which is higher than our average of, let's say, 125-130 days. Do we expect that? I mean, nothing has changed fundamentally in the business, which will entail a higher working capital, right? We should get back to 125-130 days?
Yeah. We should. It will take some time. See, we consciously built up because of this uncertainty of tariffs, right? We consciously took a call of being very heavy on our inventory, on our stock holding so that in case things go south, we at least have enough inventory to sustain till we take proactive actions to meet the new world or the new requirement, you can say. We did increase a lot of our inventories, and that is where the working capital did increase to a great extent. It will take time. It may take a few months to come down to that level because we were sitting on nearly five to six months of stock. I think we should see better days, but it is not going to happen in a month's time or two months.
Let's say, for example, Q1, FY 2027 onwards, the normal run rate should resume, right? Is that a fair assumption?
Yeah, I think so. Definitely. Now, it has started coming down already. If you see the levels from Q1 to Q2, already the trend has started showing. I think in the next two to three quarters, it should come back to 120-130 days.
Okay. Thank you so much, team. That's it from my side. All the very best.
Thank you.
Thank you.
Thank you. The next question comes from the line of Nitin Agrawal from DAM Capital Advisors.. Please go ahead.
Thanks for the question, Mark. On the U.K. business, now, I think we've seen Q1 and the recovery in Q2 gone by. I mean, what are your thoughts, really, speaking on what happened in Q1? Do you clearly think now this was a sort of one-off which happened, and then we should be in Q2 the more normalized base for us to think about U.K. as we go forward?
Yeah, Nitin, a fair question. Q1 was a one-off, you can put it that way. Q2, we are back on schedule, like you said. Q3 will be better than Q2. I can tell you that for certain. Again, Q4 will be more seasonality where you can't compare it compared to Q3. We are back on track. Moving forward with all these new approvals coming in place, our foundation is getting only stronger. It is not getting weaker. We are going to make progress. This is just a gestation time when we consolidate, we stabilize, and then we move onwards. Q1 has been historically, for various reasons, difficult to pinpoint, but for various reasons, starting from season to global uncertainties to geopolitical issues, Q1 was a challenge.
Like you see, Q2 is better, and I do believe Q3 will be better than Q2 for the U.K. Thereon, I think we will see a better 2026 than 2025 for the U.K. A great trajectory. We are still very confident on the U.K. market, and we are still very bullish in our growth pattern. It may take a few quarters or a year longer than such, but we are still pretty much out there.
Secondly, Mark, on U.K. itself, when you talk about some of the relatively higher-value products driving growth in the U.K. going forward, when do you see some of such launches starting to have a more meaningful impact on U.K. business and the overall profitability for the business for us? Are you looking at the second half of 2026?
This is calendar 2026.
Financial year, you could say.
In Q3 and Q4, you're starting to see the newer approvals beginning to make an impact?
Yeah. Yeah. So you're looking at Q3 of 2026.
Okay. What is the nature of?
Q1, again, Q1 is again going to be a bad quarter. I mean, a bad season, right? It is difficult to say that Q1 is going to because that is April, May, June, which is literally probably the worst month in the pharma industry.
Okay. When you say that you're going to be doing more valuable products, high-margin products in the U.K., what is the nature of these products in general, as a qualitative?
You're talking about the nature of the products?
I mean, what makes them high-margin products? I mean, are there limited competition products, different presentations in oils?
Yeah. They are limited. It is a mix of everything. Not only limited, the very niche molecules are very limited competition, and they are more formulation-driven complexities that are there in those molecules, which will probably give us that edge. Those molecule sizes, the market sizes are very small and niche, like I mentioned. Like I said, there are no players. Either there are no players or there is only one player that we have to take on. It does give us that leverage to say that, okay, while the top line may not have a substantial difference, the bottom line will be seen. When you go and put we are working on over 200 molecules, right?
When you start looking at a lot of product approvals coming into this, and every product contributing a small portion, it becomes a large portion eventually once these products unfold, once these revenues start unfolding of new molecules. An individual product may not be a big market size in terms of the top line, but if you talk of collectively 50-60 to 70-80 products, then that makes a lot of difference.
Got it. If I can squeeze in last one, on the U.S., now, the growth in the U.S. largely will be driven by what, your current set of approvals, or it's going to be more driven by newer launches or newer approvals for the U.S.?
Both. Within both. We are still filing products. We are getting approvals. The Teva approval, USAP approval is really strengthening our foundation where now we have two plants to service from a de-risk point of view. That is perfectly situated where we can make, where we can produce products in either of our plants. It does put us in a stronger position and probably will put a lot of our investors into, have a better confidence that now all eggs are not in one basket. Yes, we are expecting approvals from the new plants also to come in in 2026. Technically, yeah, it is a basket of newer products and obviously newer accounts coming into it.
We haven't been in a lot of new accounts, but like I said, last six months has been with a lot of uncertainties, which people who are waiting and watching how things are unfolding. Now, I think a bit of clarity has emerged. People are much more proactively discussing now.
Thank you so much.
Thank you.
Thank you. The next question comes from the line of Sudarshan from ASK Wealth Advisors. Please go ahead.
Yeah. Thank you for taking my questions and congrats on good set of numbers. Am I audible?
Yes, you are.
Yeah. My question is, as strategy, today when we are seeing U.S. markets and what other things going around, and you talked about diversification in terms of geography, I see that we have also taken a 100% stake to increase exposure to Dubai. Given that we have cash on books and we are moving up the value chain in terms of product launches, your take on newer markets with existing products and getting new products into newer markets, how are we looking at it organically and also utilizing the cash on books too? Hasn't market presence in both these categories?
When you talk of new geographies, whether we like it or not, pharmaceutical is all about investing first and seeing returns after a couple of years. All these new markets, whether you look at organically or inorganically, inorganically, obviously, you pay a higher valuation in what you acquire. Organically is also not very cheap. When you talk of cash on books, in crores, it looks very big, but when you convert them into euros or in pounds or in dollars, they are not all that big when you talk of getting into a new continent or a new geography by itself. We are looking at expanding our geographies into Canada, into Europe, into four different countries in Europe. There will be a lot of investment from our side, both organically, and we are keeping a corpus that we are looking at as we talk.
Also, we are looking at smaller M&As across Europe to be concluded in 2026. We are aggressively pursuing that. We do see that resources going for both organic as well as inorganic. Let's not forget that once we see a trending towards INR 4,000 crore, we cannot sit and wait for us to hit INR 4,000 crore. Maybe once we cross INR 3,000 crore, we will probably have to start looking at infrastructure in terms of manufacturing capabilities to take us to the next level, maybe INR 5,000-odd crore, right? We have to plan at least one to two years in advance. That's what I mentioned. Pharmaceuticals is such an industry where you invest today to see returns probably after two to three years.
Sure. Two things on the cost. If I look at the cost, I think the other cost, we have done fairly very good job in terms of curtailing the cost. If I am looking at almost five to six quarters, irrespective of the top line, we are able to manage the cost at around between that INR 155 crore-INR 160 crore. One is, of course, I understand as Teva facility keeps ramping up, you get operating leverage, and therefore that kicks in. Even as an absolute cost, can you talk a little bit more about what initiatives you have taken which is yielding to the additional margins apart from the Teva operating leverage? The second is, if I take a little bit longer-term vision as you move towards the INR 5,000 crore, today we are between 19%-20% margin.
Clearly, incrementally, we are looking at higher-value products and operating leverage coming in. How do we see the margin trajectory as we touch that INR 3,000-INR 5,000 crore?
I think the operating leverage will get better only when we go up. At the same time, you're right. The operating cost does go up when you talk of newer markets, when you talk of newer infrastructure. It does temporarily go up till the leverage starts kicking in. It is like it is ever, it does not stop unless you believe that, "Oh, we have now conquered the world and we are now going to grow from an infrastructure point of view or geography point of view." Now we just consolidate and grow on sales. As long as the company is aiming to have a robust growth plan in place of doubling or working towards doubling the revenue, you will always see that while operating leverage kicks in, the cost also will go up.
Then again, once we stabilize that country, operating leverage will kick in in that country. In terms of when we talk of Germany, we are starting an organic operation out there. We will have to invest into people, into filings, into infrastructure. Obviously, you'll probably see returns coming in when revenue starts coming in. On one side, you'll have the Teva plant, like you said, operating leverage kicking in. On the other side, you'll have the cost going up because we are expanding new territories, budget markets. It would have obviously made a lot of sense if you acquired a company and you have already the operating leverage there and you can just grow from there. When you talk of organic growth plans, definitely initial investments are a little higher, especially where cost is concerned.
When you talk of new infrastructure starting from ground zero, then operating leverage takes a bit longer because initial years is all about construction, cost, people being deployed, production yet has to start or commercialize, our tools yet have to come. We do have that chicken-and-egg situation. That said and done, I do believe that our margins will be sustainable and will grow slightly with obviously our revenue growing up and operating leverage. It's not going to double because if that's what you're aiming for. We will see an upward trend with the revenue increasing.
Sure, sure. Thanks a lot. I'll join that.
Thank you.
Thank you. The next question comes from the line of Nirali Shah from Ashika Stock Service Limited. Please go ahead.
Thank you for the opportunity. I just wanted to know on the capacity. You indicated that the old plant is currently at around 700 million tablets, and we are expecting it to move to around 1.2 billion-1.3 billion. Then there is a plan to scale this to three times of the current level. Based on this, can you quantify the CapEx that will be required for us to get to 3x of the tablet capacity and the phasing of this CapEx over FY 2027, FY 2028?
Let me clarify that. Our present capacity of our old plant is at 700 million-800 million tablets a month. That is our present capacity. We are not utilizing that capacity today. We have not hit that volume. When I was talking of a new plot and I was talking of expansion out there, it will also free a bit more space for us to expand our tablets. We do see once we put in that CapEx, our capacity going up from 700 million-800 million to 1.3 billion tablets. That will be a substantial growth in our capacity from a tablet point of view. Our soft gel will double, if not triple, our capacity by doing this within the same CapEx because it will again free space. That will again give us a substantial drive.
We are going to put in the CapEx somewhere in 2026. We are budgeting about INR 100 crore-odd onto that CapEx. We will basically move forward once all the trade deals of India and everything is put in place. We are very clear that our sales trends are moving towards optimizing our present infrastructure. Once we see that happening, probably a year before that, we will start investing into CapEx to make sure that we can take the next leap. As of today, we do have capacity in our Teva plant. We are utilizing only about 30% of our capacity. We do have some capacity, not a great capacity, but we do have some capacity in our old plant. If we have to grow from INR 4,000 crore to INR 5,000 crore, then we will need this new infrastructure in place.
When we see ourselves trending towards INR 4,000 crore, then we will say that it's time to invest to take us to INR 5,000 crore. We will not need any new approvals per se because it's in the same plant. Yeah, the infrastructure time taken will probably be six to eight months once we do decide to go down that road.
Got it. That would be when you are inching upwards of INR 4,000 crore, above INR 4,000 crore.
When we are trending towards that. I'm saying, yeah, when we are trending or very close to trending towards that.
Got it. Got it. The second one is on the EBITDA margin. We have bounced back to 20% in this quarter. You have indicated Q3 will be on a similar line as Q2. On a full year, say FY 2026, can we expect margins to settle at around 19-20% then?
Yeah. It's very reasonable and fair to assume that. It may be slightly better, but it's fair to assume that, yes.
North of 20%.
Pardon?
North of 20%.
North, yeah. North of 20%. I mean, from a safe point of view, 19%-20% is very reasonable.
Got it. Thank you.
Thank you.
Thank you. The next question comes from the line of Sriram, an individual investor. Please go ahead.
Thank you for the opportunity. What is the size of the U.S. private label OTC market, and what is our current market share?
The size will be a couple of billion dollars because you have the largest player, which is Perrigo, which is probably doing around $1.8 billion-$2 billion in the private label. Then you have PLV, which is doing about $700 million, LNK doing about $400 million. We are ranked amongst the top four players in the US market, but we are still far away from the leader. The size will be, I mean, is way above a couple of billion dollars.
Okay. So considering the large opportunity size in the U.S., I mean, and with the way our U.S. business is growing, is it reasonable to assume that the US could account for, let's say, 75% of our total business in the next four to five years?
Difficult because we are growing rapidly in other markets, and we are focusing on other geographies. It is not that you can displace anyone overnight. It is a process by itself. It is not that you can, I mean, these are players, these are manufacturers and companies that have been there even before I created this company. They have been there for the last 40-50 years. It is difficult to, in private label, they are the, what do you call, the black shoes or the Noah test type of thing, right? They are pioneers in this industry. It is difficult to displace them fully, but taking market share, definitely. From a growth driver point of view, I do see U.S. being one of our largest growth drivers.
That said and done, our focus is there on other geographies, and other geographies will also contribute gradually, maybe at a slow pace, but it will contribute decently to our overall number.
The rate of growth, which is historical growth rate for us, is about 20%+ . Can we expect that to continue over the next four or five years? In four years, can you double the U.S. business revenue?
If you ask me my frank opinion, I would love to say yes. Geopolitical issues are the ones that make me pause a bit. Otherwise, if you had asked me a year back, I would have said yes. Today, I would say, INR 300 crore is more realistic. Yeah, I mean, our aim is to go beyond that.
Okay. Okay. Lastly, could you broadly explain the cost difference between us and competitors like Perrigo?
Obviously, we do not get into those details, but we are basically, we have a huge product portfolio. They have a huge product portfolio. We are a reliable partner for most of the retailers to partner with. Perrigo has its own strengths. We have different strengths. We do leverage low-cost manufacturing based out of India. Perrigo is predominantly a U.S. manufacturer. They do play on that made in U.S.A. part of it. Besides that, I think both have different strengths. What goes in Perrigo's advantage is their 50 years of existence in the U.S. and being pioneers in this industry.
Could you just put some broad number to that difference? Let's say the average cost difference would be, let's say, 20% or 15%.
No, I can't put those numbers out there.
Okay. Okay. Thank you so much, sir. All the best.
Thank you.
Thank you. The next question comes from the line of Prolen Nandu from Edelweiss Public Alternatives. Please go ahead.
Yeah. Hi, team. Thank you again for giving me the opportunity. See, my question is, sometime during last quarter or after the last quarter, we had a thought that maybe the delivery mechanism in the U.S. needs to be changed. Our capacity, we need to expand. We need to think about nearshoring. All those discussions are no more on the table as we stand today. Obviously, things can change, right? As we stand today, it's fairly certain that we won't be expanding our capacity in the U.S. or thinking about adding new facilities in the U,S. or anything on nearshoring. Is that assumption correct?
Nandu, you're right. It's correct. In the last six months, this uncertainty has made us pause our outlook and whether we should invest in India or in the U.S.- based on what the pivot will outplay. Now, with a bit of clarity coming into play, we are back to our original plan of investing more into infrastructure where we are strong and where we have the bandwidth of and capabilities of leveraging low-cost manufacturing base. We are back on that platform. We had paused all our plans because we did not know whether we should invest in India or in the U.S. infrastructure point of view, all depending on the outcome of the tariffs. Nevertheless, that's off the table. You're right. We are back to what we originally had planned.
Great, Mark. Thank you so much and all the very best.
Thank you.
Thank you. That was the last question for today's conference. I would now like to hand the conference over to management for closing comments.
I would like to thank each and every one of you all. I know it's late evening, and thank you for the interest and support to the company. I wish you have a great evening and be safe. Thank you very much.
Thank you.
Thank you so much. The pending questions would be taken offline. This brings the conference call to an end on behalf of DAM Capital Advisors. We thank you for joining us, and you may now disconnect your lines. Thank you.