Ladies and gentlemen, good day and welcome to Natco Pharma Limited Q4 FY 2025 earnings conference call hosted by B&K Securities. 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 your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Hrishikesh Patole from B&K Securities. Thank you, and over to you, Mr. Patole.
Good morning, everyone. On behalf of B&K Securities, I welcome you all to the Q4 and full year FY 2025 earnings conference call of Natco Pharma. Hope everyone is in good health and doing well. On behalf of Natco, today we have with us Mr. Rajeev Nannapaneni, Vice Chairman and Chief Executive Officer, Mr. Rajesh Chebiyam, Executive Vice President, Crop Health Sciences. I now hand over the call to Rajesh for the management's opening remarks, post which we'll open the session for Q&A. Over to you, sir.
Thank you, Hrishikesh. Good morning and welcome everyone to NATCO's conference call discussing our earnings results for the fourth quarter and the full year of FY 2025, which ended March 31st, 2025. During this call, we may be making some forward-looking statements or statements about future events, and anything said on this call which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I'd like to state that the material of the call is kept for participant questions in the property of NATCO and cannot be recorded or rebroadcast without NATCO's expert written permission. We'll begin with the results highlights and then follow with an interactive Q&A session. Hope all of you have received the financials and the statements that were sent out yesterday. These are also available on our website.
NATCO recorded a consolidated total revenue of INR 4,784 crore for the year ended on March 31, 2025, as against INR 4,126.9 crore for the last year, reflecting a growth of roughly 16%. Net profit for the period on a consolidated basis was INR 1,883.4 crore, as against INR 1,388.3 crore last year, showing a growth of 36% in its profit. The company has recorded its highest-ever consolidated revenue and profits during this financial year. This is the result of decades of diligence and focused strategy. For the fourth quarter, which ended on March 31, 2025, the company recorded a net revenue of INR 1,087.3 crore on a consolidated basis, as against INR 1,110.3 crore during Q4 of FY2024. Profit for the fourth quarter on a consolidated basis was INR 406 crore, as against INR 386.3 crore same period last year.
During the quarter, the company took an impairment charge of INR 500 million in the Crop Health Sciences business related to property, plant, and machinery, and a chargeback adjustment of roughly INR 250 million in its U.S. subsidiary, apart from incurring higher R&D expenses. As of today, the company has a strong cash position of over INR 35 billion, as it prepares for headwinds coming from its U.S. business during the financial year of 2026. The company estimates a possible dip in revenue by 20% and profits by 30% due to geopolitical uncertainties and pricing pressure in its core product portfolio in the U.S. and increased R&D expenses. Thank you all. Now we'll take questions.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone 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. As a reminder to all the participants, please restrict yourself to two questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Nirali Shah with Ashika Institutional Equities. Please go ahead.
Hi Rajesh. Congratulations on the set of numbers. I have three questions. I'll begin with the first one. Could you update us on the current state of the rescue plan litigation, and are there any upcoming milestones or any legal proceedings that we should be aware of in the near term?
Okay. On rescue plan, I think we believe, I think if all goes well, it should be reserved for order by the end of this month. There's only one last hearing left. I think it will get done today or maximum, I think hopefully we'll be able to close everything by the end of this month. We expect an order in maybe fourth holidays in June. I think it's daily hyper disclosed. I think July, I think July, August, I think we should expect some order on that. Right now, we have not launched the product. We're waiting for the clarity from the two judge bench, and then based on that, we'll strategize what to do.
If the order comes in our favor, within how many months do we look at the launch?
I think if the order is in our favor and everything is good, I would believe we can launch immediately.
Okay. My second one is on the clarity on the progress of NRG-2694. Any timelines or catalysts that we should be tracking?
At this time, I don't have any timelines, Nirali. I think we just kind of updated our NCE and Cell and Gene Therapy ideas. It's there in the public domain in the presentation. At this time, I think what we have done is we have taken a very late-stage cancer subset of head and neck cancer and who have failed the conventional therapy, which is Keytruda. Right now, the trial is ongoing. We're doing it both U.S. and India. I don't want to give any time bench at this time. I think maybe in about a year, year and a half, we'll have more clarity on this.
Okay. Yeah. It's still on the patient's recruitment terms, or is it done?
I think we need to get to a number where it is substantial. I think so far, I do not recollect the number, Nirali, so I do not want to say anything. We have done, I think, about a little more—I do not know how many patients we have done. I think about between 10-20 patients. I do not remember the number on top of my head, but I do not remember the protocol also, how many patients we have to do. I think once we get to about, I think, 60-70, I think we will have an idea of where we are. We hope that we will be able to recruit these patients in the next one, one and a half year, and then I think we will have clarity on how it works.
Okay. My last one is on the Trump tariff and the Trump campaign. Regarding the aggressive drug price cuts and the potential import tariffs, how do we see this evolving in terms of the impact that could be on our business?
I mean, obviously, a lot of our business is in the U.S., so obviously, there will be some impact. I mean, so far, I think we are okay. Let's wait. It is a very dynamic situation. I think let's see how things go, and then we can make an assessment of what will happen. It is too early to say.
The opening commentary you mentioned about FY 2026, do we look at it as a softer year for us because of the evolving scenario? I think in the opening commentary, you mentioned about.
Headwinds.
Yes.
Yeah. Headwinds. Yes. Yes. Yes. Yeah. What about it, Nirali? What about it?
Yeah. So.
What is your question?
We do see, I'm saying that because of the Trump issues and whatever is going on in the U.S. because of the policies, we do see that our portfolio will be hampered because of this. We do face the headwinds.
I think, see, we don't really know what's in store in the future. I think that's what I'm trying to tell. I don't know what's going to happen in the next few months. I think once we have clarity on what's going to happen and what their policies are going to be, then we can make an assessment of what the impact is going to be. As of now, I think we're just waiting for clarity on what's actually going to happen. It would be premature to say anything at this time. I would just reserve saying anything. I would just say that once we get clarity, then I think we can make an assessment of what's actually going to happen, what the impact is going to be. Yes? Is that fair?
Understood. Yeah. That's it. Thank you.
All right. Thank you. Let's give a chance to another person. Thank you. Next caller. Thank you.
Thank you. Next question comes from the line of Rashini Shetty with Dolat Capital. Please go ahead.
Yeah. Thanks for the opportunity, sir. So in the opening remarks, if I'm clear, you mentioned 20% dip in the sales and 30% dip in the profits for FY2026, right?
That's correct. Yes.
Yeah. Is this also because you're going to see any sort of erosion in your Revlimid product despite we will be taking the maximum market share, right, this year?
I think it factors everything in. I think we believe we should do well in the next couple of quarters. I feel June quarter and September quarter, we should do well. After that, it's very difficult to judge what's going to happen. I think we're being cautious. We gave the guidance upfront so that investors are aware of how we see the business. I think that's our assessment. Because, as I said, there are multiple things happening. Just among development, pricing scenario is very tough to judge. I mean, political scenario is very difficult to judge. We have also decided to spend a good amount of money on R&D. We have very good surplus, so we're using the surplus to sort of spend on our R&D budget.
I think because of these three factors, I think we have sort of made our best guess estimate of what we think the year is going to be. Yeah. I think that's fine.
Is it also supported by the fact that Revlimid might see a higher price erosion compared to this year?
I think so, ma'am. I think that's the, I think, see, at the end of the day, I'm making a guess. I mean, based on what's going to happen. Yes, I think we factored, best of my knowledge. I think we made an estimate of what we believe will happen. Yes. Yeah.
Okay. And so related to R&D, you said how much is the R&D in this year you have spent for the entire year, and how much are you expecting in FY 2026?
We spent INR 373 crore, which is 8.5% of our standalone revenue in R&D for the financial year ending March 2025. I would want to spend, I think, a similar amount of money this year as well. We have some very nice projects that we have lined up. I think the really good ones are always very expensive. I think that is what we are trying to do. I think we want to spend about in that range, up to INR 400 crore is what we target.
Okay. And one last question on the India business. This year, every quarter, we had done in the range of INR 95 crore-INR 100 crore. We are also planning to see some acquisitions with the cash flow. Till the time the acquisition does not happen, what kind of growth can we expect in FY2026? Will it be in the similar range of that 2%-3% growth, or should we expect a higher growth this year?
I think of the publicly announced pipeline, I think the base business should grow around 7%-10%. I think the two major launches that will drive the growth, I think one is Risdiplam, subject to the COVID decision, and of course, Semaglutide, which we're expecting maybe end of the year. These two are going to be very critical to the growth. If these two come through, I think you'll see much more than 8%-10% of the growth. You'll see much more. I think getting these two right would probably be very important for us to see very good growth.
I'm optimistic that both will work, subject to, obviously, in the rescue plan, the COVID decision, and Semaglutide once we have the market formation and get the approval. When we have clarity, I think both these products should be very interesting. I believe that domestic should do well. You'll see much better growth than what you're seeing now.
Okay. So thank you.
These two coming through. Okay.
Okay. Thank you so much.
Next caller, please. Yeah.
Thank you. Next question comes from the line of Kunal Randevia with Access Capital. Please go ahead.
Hi. Good morning. Rajesh, on Revlimid, I thought you would be booking some profit in FY 2026 also for the sales that Teva would have made last year. Since Teva's quota has gone up this year, I thought some of it would also be booked in FY2027. Does that still hold, or has the accounting changed?
I didn't understand your question, Kunal. I'll tell you what I understand from it. I think for the new quota that we got, we booked some amount in the March quarter, which is the January to March quarter in 2025. This quota, we will start selling, we're selling now, and we'll sell in the June quarter and the September quarter. I think December, I'm not able to predict what's going to happen, so that's why we're being cautious. The March for the 2026 year, it will be like it'll be a lot of competition, and there won't be any quantity restrictions. It will be very good.
I got that. Sorry. What I was asking is, see, typically, you manufacture and sell it to Teva, and Teva then sells it to the distributor. Once Teva gives you the profit, typically, there's a lag, recognize it may be a couple of quarters late. Whatever Teva, let's say, sells in September, I think you book it in December or March. That was my question.
I think what we had gave to Deva, we already gave. I think the quantity that we were supposed to give, we already shipped to Deva already. I think what we're only now we're booking now is only the profit share. We booked some amount last quarter, and we continue to book in the coming quarters as we go along.
Right. Okay. Okay. So if my understanding is correct, you have already supplied for this year.
Correct.
Okay. Perfect.
Or already supplied.
Okay. Okay. That makes sense. Thank you. Yeah. Just a couple of more questions.
Thank you.
For Semaglutide, sorry, Rajesh.
For Semaglutide, yes. Yeah. Go ahead.
Yeah. So Semaglutide, will you be needing some investments to promote it in India and Salesforce, or will you be partnering with a larger player?
We are thinking of both the models, Kunal. I think we're looking at both P2B model and also our own Salesforce. We have built the Salesforce to cover this segment. For the last three, four years, we have actually able to build a Salesforce to cover the doctors that are required for this product. We have the setup, but obviously, we're looking at both dual revenue. We look at both P2B and our own brand as well.
Sure. Sure. Just one more. I was a bit surprised with the impairment in this property, plant, equipment for the agrochem business. Are you kind of scaling back your plans for this business?
No, Kunal. It's just an accounting entry. It's a non-cash entry. Essentially, what it is, is the business has not done well in the last two, three years. We've not made money. I think with our consulting, with our auditing firm, I think they assessed that we need to take impairment of this. This can be reversed. Let's say, for example, in 2026, the business starts making money, which we hope to, then some of the impairment can be reversed. This has taken a conservative position, and we've been, I think, it's judicious to do it. That's why we've done.
Got it. Got it. Thanks. Okay. Next caller, please.
Thank you. Next question comes from the line of Nathan Agarwal with DAM Capital. Please go ahead.
Hi. Thanks for taking the question, Rajeev. Rajeev, on R&D, how many products have you filed this year, and how many were meaningful in your assessment in FY 2025? How are you looking at 2026, 2027, if you can?
Give me a moment. Total filings, I think, in what is it called? Let me see. In the U.S., we had about five filings in the U.S. And meaningful ones means a lot of them are shared exclusively. I think there's nothing special that I can come to my mind other than the ones that we've already announced. That was your question, right? How many we have filed and next year, how many we intend to file? About seven to eight is what we're targeting. The interesting ones that we got this, yeah. Go ahead. Go ahead.
I was exactly the same point. Interesting ones that you've got this year, and how many do you probably see coming through over the next couple of years from a filing perspective?
I think the interesting one that we got this year was probably, I think, was one of the spins of Semaglutide where we're so left here. We filed something in April 2024. That was probably the most exciting one that we filed. We filed Risdiplam that's also shared FY. We are one of the two. I think these are the two big ones that we filed in the last financial year. The interesting ones, I mean, we spoke about this many times. I mean, Semaglutide probably is probably the biggest one that we have, where we have some strength we have so left here. That's probably the biggest one that we have. I think, subject to the legal clarity and approval, Olaparib would be very interesting. Then we have medium-sized. We have head dash in it, cap magnet in it.
That's also an interesting that we filed. We have shared FCF on Yondelis, and then cartilage in it. We have Ibrutinib in it, subject to the legal outcome. We have like seven or eight things. I think it plays out over the next 10 years. Maybe we do not have anything in the next one or two in the near term, but I think if you take an 8-10 year view, we have these. We updated our investors on some of our NCE and Cell and Gene Therapy investments. I think the most excited one, I mean, some of them are smaller ones and some are bigger ones. The big ones that I look at is probably the NRG-2694, which is a late-stage head and neck cancer where we're doing a phase two.
We have very interesting phase two data. We can probably even get it approved with a limited number of patients. That is one possible excitement. Another one is one of our Cell and Gene investments. We made an investment of $8 million in eGenesis. They were the first one in the world to do a xenotransplant where they transplanted a genetically modified pig kidney into a human. There is one particular patient who is actively on the kidney. I think it has been about four months, and it is still doing well. These are probably the most exciting ones in our NCE, Cell and Gene, and then probably the Paracord as well. The idea here, Nathan, is that you build a pipeline of about 15 of them. I think even if we get six or seven of them right, I think you are home.
I think that's the idea. Okay?
Right. And just last one on Revlimid. Have you been surprised by some of your earlier expectations versus the way the market is really playing, expected to play out in 2026? Are you seeing it playing out in 2026?
Honestly, Nathan, I am not surprised. I think I've always been very conservative. I always believe that you'll see erosion as time goes by. I'm not actually surprised. I'm actually just fitting in pretty much what our expectation was.
Thank you so much.
Okay. Thank you. Thank you. Next caller, please.
Thank you. Next question comes from the line of Rohit with Emkay PMS. Please go ahead.
Yeah. Good morning, Rajeev. Thank you. And congratulations on all the hard work that the team has done. Rajeev, most of the questions have been answered. Just two or three of them as a follow-up. One is on this agro business. This was a foray that we had started three years back, and I think it's below expectations. What is the thought process now? How do you see it over the next two-three years? If you can maybe share your strategy and thought process there. That was one. Second was, I mean, given the cash that we have and we've talked about acquisitions, anything that, I mean, any update or anything that you'd like to share on that in terms of any thoughts that have evolved over time?
Okay. Sure. Sorry. Let me just answer those two questions just once. Let me just answer these two, then we can— all right. The first question that you had was on the— just refresh me again. Agro business.
Agro.
Agro business, obviously, it's not done well. It has not met our expectations, but it is what it is. I think this year, I think we feel we are going to hit that critical mark where we'll start breaking even. I think our expectation is that we need to hit about—we're doing about INR 60 crore net revenue last year. I think we need to hit about INR 160-170 crore, at least, to have that a bit of positive. I think that's the idea. I think hopefully we'll hit that number this year. Hopefully, if we go beyond that, then we'll actually be profitable. I think 2026 is the year that it's going to—2025, 2026 is the year where it's going to turn around. The other question was on the cash, right? I mean, as we announced, we had about INR 3,000 crore of cash.
Now, I think we received further receivables. I think we are probably sitting now at INR 3,500. It's a good place to be, honestly. I wouldn't complain. How do we use the cash? We're looking at acquisitions. We're looking at a lot of active acquisitions. I think I'm positive that we're able to close something in this financial year. I think that's the idea. I think that's all I can say at this time.
Right. And.
Next? Yeah. I'm sorry. Next question. Yeah. Sorry. Go ahead.
One follow-up again on agro. While you said that this may be the year where we will turn around, but slightly longer term in terms of the strategy here, I remember you wanted this business to get to about INR 3,400 crore or around that number in your scaling this business up. I mean, from here on, of course, it did not pan out, and that's fine. From here on, are you sort of still positive on this overall opportunity, anything on that? One more question on I think you have given out this NCE and your sort of the NCE and all the other moonshots that you have, investments that you have done. Should we look at it as your conviction in them has become better and you are closer to some kind of an outcome, and that's why you are sharing now?
Because in the past, I mean, people have asked me, you've sort of really not talked a lot on them, and I'm sort of hearing you for the first time speaking a bit more. Is it sort of should we take it as your conviction in them has improved as you get more information or as you get more closer to sort of outcome? These were some of the questions I have. Yeah. Thanks.
What question was on the NC? The other question was on what they call the agro success. Okay. See, let me tell you. I mean, we make certain judgments as a business. Some businesses turn around in two years. Some businesses take five years. Some businesses take eight years. It is a cycle that you just have to live with based on how you sort of execute. Sometimes you get them right. Sometimes you do not get them right. I think agro is something that is probably taking longer, but it is what it is. I mean, as I said, you just have to deal with it. My personal sense is that it will get better. I think the first point I always look for in a business is that it has to start breaking even.
Once it starts breaking even, it doesn't cause a strain on the balance sheet. You need that one idea which can always suddenly start turning profits, right? Because to build a successful business, you need to have the core portfolio which kind of pays bills, and then you'll have what you call one idea that will just take that business to the next level. I think hopefully we'll reach that stage in agro shortly by hitting that number. INR 150 crore-INR 160 crore is what we probably need to hit. I'm starting small. Let's hit that number. I think then we're not losing money, and then we can target the next number. It's a two to three-year journey, I suspect, to get to that level. Regarding my NCE and the Cell and Gene Therapy, yes, I think so.
I generally don't like to talk about when they're early stage. I think in the past, a lot of people have asked me, and I said, "No, it's too early stage. We'll talk about it later." Now, I think I feel more confident that these things are coming to a stage where we can probably hit something. That's why I'm talking about it. I think, yes, specifically, yes. Especially those two assets that I mentioned a few minutes ago, both the—I am very excited about both these assets right now. Again, as I said, there's no guarantee that everything will work out. I think, as I said, the idea in this business is that you build about 10-15 ideas, and then even if you get half of them through, then you're home.
I think we're also sort of—you have to reimagine your business every few years, right? I mean, a pure generic play is going to be very competitive. Your moonshot ideas cannot stick only to generics, right? You need to also look at NCEs. I think doing an NCE program in our balance sheet also becomes very—it's very stressful as well. What we have done is we adopted a strategy of what they call. We've done some smaller investments, a larger one, but obviously, 2694 and the xenotransplant one are probably the bigger ones. If something good happens there, then obviously we all will have a good upside. That's the expectation. Yeah? Okay. Yeah. Thank you.
Thanks.
Thank you. Next question comes from the line of Benoor Pattiparambil with Elara Capital. Please go ahead.
Hi. Good morning. Rajeev, first of all, when you say profit decline of 30%, are you talking about a decline of 30% or at that level?
High.
At level 30.
Okay. Second, you have done a—you have scaled up your R&D investment because you had a lot of money coming from Revlimid, etc. So going into FY 2027, although it is a bit early, is there any kind of an indicative margin range that you can give at the EBITDA level?
At this time, no. It's hard to predict anything right now because there are so many moving parts. The moving parts would be that some of our Paracords, if some of them come through, there could be some upside there. The Semaglutide upside is probably not factored in in the 2027 numbers. I think it's very dynamic. I think once we're coming closer to the—as the year progresses, I think we'll have more clarity of how 2027 is going to look. I think we can give some guidance. At this time, I would dissuade from doing that. I think it's too early.
Okay. And this Risdiplam, if you get a favorable judgment, would you expect other Indian players to join, come into the market as well immediately?
We'll see some competition, but I have—everything goes well and we launch, then we'll have much more advantage. That is always good. In this business, being first mover is everything. Theoretically, yes. If we get a favorable order, other companies can also come theoretically. Yes, that is possible. We have the first mover advantage. Yeah.
Right. Right. One last question on Semaglutide. Have you sorted out all your device, etc., and would your fill and finish be internal? Have you figured all those things out?
I think so. I think we're getting there. Our clinical trial has already started in India. We are hoping that we'll be able to complete everything on time and that we'll be able to be there when the market formation happens early next year. I think that's our expectation. I think we're in good shape. As of now, I think everything looks good.
You are planning?
Let me come closer to the launch. Yeah.
Okay. You are planning your own capacity?
We're planning our own capacity, you said? No. We are using a CMO for the cartridge. We're with OneSource on this.
Okay. Okay. API will be yours.
All right. Thank you. Next caller, please.
Thank you.
Thank you. Next question comes from the line of Phishit Chaveri with PI Square Investments. Please go ahead.
Good morning, sir. First question on the CapEx plan. Do we have any significant CapEx plan for next year, 2026?
We have general CapEx. I mean, there's always something going on. Every year, we spend about INR 300 crore-INR 350 crore. I mean, we have a CapEx plan of about INR 500 crore-INR 600 crore, but I think per year, I think it looks like we're going to spend about INR 300 crore. I think it takes about one and a half, two years to build these projects. INR 300 crore-INR 350 crore seems, I think, a reasonable amount of CapEx that we'll do per year.
Okay. Understood. Sir, on the guidance which is there, I think that first half of FY 2026 will still have some good growth in terms of June and September. Are you seeing the H2 to be really bad that the entire year will take a hit, or the H1 and H2 both will take a significant hit as compared to the FY 2025?
I mean, I will not use the language that you would use, but I would say that the first half will be good. The second half will not be as strong as the first half. The second half will be weaker than the first half. I think the first half should be strong, and the second half will not be as strong as the first half. Yes. You will definitely see a difference. Yes. Yeah. Because there are so many moving factors. That is why I think we have been conservative in our guidance here. You are right. Principally, you are right. I think the first half should look good, and the second half is, as you would say, not as—I would say not as strong. Yes. That is correct.
Okay. Understood. Sir, just the last question. Given the guidance, we have already discounted the higher tariffs from the U.S. government, or we have not discounted it? If we have already discounted it, any relief there would drive up the guidance significantly?
As I said, when we make an estimation, we consider multiple factors and multiple assumptions. If I could change my assumptions, I'll come and tell you based on how the policies change. We have assumed the political risk and the change in the portfolio and the R&D expenditure. I think we've factored certain things in. Again, there are too many moving parts, my friend. You can't say this event happened. That's the reason why did this go up or come down. I don't want to get into it because what we can do as a company is only make an estimate. I think that's what we're trying to do based on the situation. I think it sounds reasonable. I think generally, our estimates are—I don't generally, we've been very reasonable in our estimates. I think one or two times, we are also surprised.
For the most part, I think we get most of the times, we get our estimates right. I think, yeah. I mean, again, there are always some things that I can't control which could change things. As of today, yeah, I think that's what it feels like.
Got it. Any inorganic deal on the table right now or no?
Yes. We are pursuing a couple of deals. Again, we've been saying that. Hopefully, we'll be able to close something this financial year.
Okay. Thank you and all the best, sir.
Thank you. Next caller.
Thank you. Next question comes from the line of Abdul Kader Puranwala with ICICI Securities. Please go ahead.
Hi sir. Thank you for the opportunity. Firstly, on the R&D budget of INR 400 crore that we have unlocked for this year, I don't know what % of this would be spent on the NCE projects and in Agrikin. If you could help us cover that, please.
Of the 400, how much are you going to spend on NC and how much are you going to—the NC will probably see about, I think, INR 25-30 crore. INR 30 crore, I would estimate in that amount. I mean, making an estimate, Abdullah, do not hold me to it. But yeah, if I were to make an educated guess sitting here, yeah, I think about that, an estimate will be on 10 big.
Sure. Understood.
I think we deliberately didn't want to do too many NCE programs because it becomes too much strain on the balance sheet. A lot of the other programs, we have done only equity investments because we wanted to balance trying to get the right amount of R&D at the same time, don't want to tie up too much of the surplus and expensing too much R&D. Again, that's the balance we're trying to strike.
Sure. Understood. Sir, next one, we have capital allocation from year on. R&D, you have guided CapEx, you said another INR 300 crore-INR 350 crore. With the, say, INR 700 crore-INR 750 crore spending every year, for any inorganic goods to pursue ahead, would you even want to raise your balance sheet to some debt on the balance sheet if the need may be?
Right now, we don't need that, no, Bill. I think right now, we're very comfortable. I think when it comes to crossing, we'll see. I think as of now, I don't want to comment. As of now, we're comfortable. Yeah.
Okay, sir. Thank you.
Okay. Thank you. Next caller, please.
Thank you. Next question comes from the line of Chet Ndoshi with Tulsi Capital. Please go ahead.
Good morning, Rajeev, and thanks for giving the opportunity. What I have been observing is you are very conservative in giving the forecasting about the overall business, and you always exceed. Whatever you say, you exceed in the end of the year. That is my observation. Anyway, congratulations. Even 30% drop on current profit, that is close to financial year 2024, that much profit will do. Do not you think you need to be a little bit liberal on distribution of the profits to the shareholders? Second question is, what is the type of acquisition you are looking forward to and which you intend to close in this financial year?
Size of the acquisitions, I don't want to comment. It's very premature. I don't want to answer that question. Regarding distribution of the money, as of now, I'm saving all the money for the acquisition. We believe that we'll be able to close something. That's the reason why we have not given an aggressive dividend. I think you're right. Regarding the guidances, I think it's always people are harsh when we say something higher and then we deliver, then market is harsh. It's better to say something less than deliver more. I think that's what I've learned.
No, but.
Sorry. I think it's safer this way.
One of your ideas, please, you surprise if you can surpass your current year profits also. One of the ideas goes on floor, then it is a big boost to Natco. That is for sure.
Yeah. Thank you, sir. Thank you so much. The next caller, please.
Thank you. Next question comes from the line of Srihari with PCS Securities. Please go ahead.
Yeah. I'm auditing.
Yeah. Please go ahead.
Yeah. Thank you. Two questions. Firstly, if you could please talk about the non-US formulation exports market. Secondly, if I look at the cost-based fix of R&D, you have spent close to INR 1,200 crore in FY 2025. What is the kind of scale down you have considered in for FY 2026? Thank you.
I didn't catch your question. Can you rephrase both your questions? I didn't catch both of them. I'm sorry. I didn't understand both your questions. Can you say that again one more time, please?
Yeah. Formulation exports ex of US and the cost-based ex of R&D. How much scale down you're looking at?
Scale down because of what?
You would obviously have some pressure at the EBITDA level. So you might have planned some kind of cost reduction?
I'll give you a general answer. I'm trying to understand what your question is. The R&D spend is driven by, obviously, the bidder that we have. I think we have a pretty good plan this year. Last year, we spent a good amount of money. Next year, even 2026, March also, we should be able to do well. Regarding the R&D exposure in 2027, I think we'll make that assessment based on what surplus we see that year. I think we'll make that judgment. Maybe we can give you some light on that end of the year. The R&D exposure is obviously linked with the above bidder that you're making. Based on how much money you believe you're going to make, then you have to make a plan. Okay. Fine. I'm not making so much surplus, then I'll scale it down.
If I believe there is a reasonable amount of surplus, then I will continue to spend this much. We will make that judgment closer to the time. As of now, it is hard to comment. Okay? What was the other question you said? I did not catch it.
No. I was talking about expenditure ex of R&D. That was, I think, around close to INR 1,200 crore for FY 2026. Are you looking at a reduction there?
Reduction in what? The exports to U.S., you're saying, or?
No, no, no. The expenditure ex of R&D.
Expenditure. Do I see any reduction in the expenditure ex of R&D? Is that what you're saying? Okay.
Exactly. Yeah.
I think we have, I mean, we'll see. I mean, we always want to challenge ourselves on whether we can reduce our cost beyond that. I think we have done a lot of cost cutting. We have done a VRS program about two years ago. I think cost, we're looking at it all the time. Yes. It's an ongoing process all the time. I mean, there's no, I mean, I think it's something that everybody does it.
Yeah. The first question was exports of formulation ex of U.S.
Ex of U.S. Premium only. Let me see. I would say about INR 800- INR 900 crore minus U.S.
Is that the estimate for FY 2026 or 2025 number?
Yeah. I don't have the split, my friend. I'm making an estimate because I don't have the split literally the way you want it. I've not come prepared to answer that. I'll be better prepared next time. Yeah, I don't have the number, but roughly about that is what I see.
Oh, okay. Thank you.
Thank you.
Thank you.
Okay. Thank you. Okay.
Thank you. Next question comes from the line of Gargantha Raja, ASK Investment Managers. Please go ahead.
Yeah. Good morning. I hope I'm audible. Hello.
Yeah. Go ahead. Please go ahead.
Yeah. Sir? Does your guidance bake in the launch of Risdiplam and Semaglutide next year?
No.
Okay. Fine. In India, you're pointing to a substantial improvement in sales next year. Can you elaborate? I mean, is it basis launches other than SEMA?
These two are the big ones, my friend. These are the two big ideas. If they work, then that will drive the growth. Otherwise, see, you need to understand. I mean, I think generally, the business is very competitive. I mean, you look at our peers. Everybody's well financially strong. The opportunity only happens when you do that special product. To do something that everybody's doing, it's very difficult to get growth. You only get that, I mean, whatever, 7%, 8%, 10% growth. If you want something dramatic to happen, you need that special product. I think that's why I keep talking about these special products because this is what drives the growth. I believe that if you want to get above-market growth, you need to get these two right, I think.
In my view, at least off of my mind right now, these two are the big ones you have to get right.
Right. For the non-U.S. markets, Canada also, would you be there in the first wave for Semaglutide rollout launch? Generally, I mean, on that basis, INR 800- INR 900 crore, how do you see growth happening next year?
I think we are not going to be in the first wave. I think we're working on it, but we're not in the first wave in Canada. I think that's my understanding. We are tied up with Mylan on this part. We assist with this part. We're not doing it directly, but.
Okay. Otherwise, is the growth going to be healthy in the non-US export markets for you on the current base?
I would believe so. I think we're doing very well in the MENA region. I think we're doing very well in Canada and Brazil. We have very good launches. I think so, yeah, we should do well.
Right. The final one, sir. Last quarter, you indicated it would make a lot of sense for you to get a manufacturing or a distribution base in the U.S. given the current circumstances. Would the acquisition that you're considering be in that direction?
Yes. That's one of the acquisitions we're looking at. Yes.
Okay. Thanks. I'll get back in the queue. Thanks for taking the questions.
That's right. Thank you so much. Next caller, please.
Thank you. Next question comes from the line of Rahul and Induja Ndosi. Please go ahead.
Hello. Hi. Can you hear me?
Yeah. Go ahead, Rahul.
Yes, sir. I just wanted to know a couple of questions. Have you informed the US FDA that Kotul plant is ready for its green section? It's a warning letter, or how does it happen? Have we sorted out all the?
We're getting constant updates on. Yeah. I think we constantly give updates on the things that we're doing. So our remedial action is going on, and our updates are given. We hope to inform them, I think, sometime this year. I think we've not informed them. The question is, did you inform FDA for the green section? No, not yet.
In a sense, yeah. I just wanted to know whether it is over. The remedial is still ongoing.
It's still ongoing. We continue to supply from the site. It's not that there is a restriction on supply from the site, but we're not getting new approvals from the site. I think that's what's happening at this time.
Yes, sir.
Sir, there was a 2009 article on your company. It said a lot of things about the history and all of that. It also said something like our company holds close to 400 acres of land. I'm just saying because last year, we sold a little bit of it, including where the plants are there. Sir, is this like an untapped gold mine still we have, or we have sold most of it, or what is the status there, sir?
It's still there, my friend. It's still there. I think. To monetize an asset like that, usually what happens is it is, I mean, something you could always monetize. I think when we get the right party, like Microsoft in that particular example, we sold it to Microsoft for a data center. It was a good rate, and we got it. You need to do some amount of work, and you need to do the basic infrastructure. Usually, when you have a large parcel like that, you always have these mitigations on some portion because you know in India, land titles are always very tricky. If you're able to, I mean, I'm not saying that there's mitigation for all the pieces, but there's always some pieces here and there, a few acres here and there, there's always some privileged mitigation.
It can be monetized over a period of, let's say, if you take a four- to five-year view, yes, yeah, we can definitely monetize it. It's valuable property. It's one hour from the city of Hyderabad, so near a metro. Always it's valuable. Yeah, I think, yeah, hopefully, we'll be able to bring some value there as well. Yeah.
I was just going through the segment reporting. In the Crop Health Sciences division, actually, year on year, our top line has reduced. The sales have reduced, and obviously, the losses have also increased. I think we have set the segment loss of around INR 150 crore this year. Your optimism in the coming years is based on what, sir? Because historically, we have reduced numbers. What is the idea of this?
I'll tell you. Okay. The loss also represents the impairment that we have taken. Okay? Let's start with that. The second is, see, what has happened was when we stocked the product two years ago, and then basically what happened is a lot of the stock came back and returned. The sale reduction is because of the returns of the previous year. It's a new business. I know. I mean, it's not a good place to be, but because it's a new business, it took us a while to sort of figure out how the distribution works, how do you manage the controls, how do you make sure that the stock is liquidated. I think it's getting better. I mean, as I said, because of the returns and all, we had to take a loss and the reduction in sale.
When somebody comes back, comes back as returned, then you have to reduce the sales. I think it's looking better. I think if you look at the cash flow, even if the sales were INR 60 crore, we actually had a cash flow of almost INR 85-90 crore. Cash flow, in my world, is a true indicator of whether you're selling the product. I think we're getting there. I think 150 is the number that we need to be there. I believe that we'll be able to get there this year. See, I tell you, my friend, generally, when you start a new business, it is not a fairy tale, right? You come in, and then you start making money on day one.
Especially when you're doing a business that you're not having a setup, what do you call it, before, a green field, it's always going to be a challenge. To build a business, in my experience, it has always been it takes about four to five years. Sometimes you get lucky, and things turn around in a year or two. Unfortunately, I agree with coming in that medium where there is a four- to five-year time. I think we're getting there. It's not as bad as it looks. It should get there.
We are not calling it quits out here. No, sir. I mean, we are going to become stronger because this is something we were all hoping would be a thing. I want.
No, thing is, in a business, you're going to get it's going to take some time, and this is one of those businesses that's taking time. We believe that sometimes, see, what happens is, obviously, nobody likes losing money, but what happens is sometimes businesses do take four or five years to build, and it is one of those. I believe that we're at the end of the tunnel, and I think it should be able to break even this year. Yeah.
Thank you. So one last question, sir. I have a question, please.
I had the good fortune of hearing a 2020 MoneyLife interview, your comments, and your outlook and all this just to say all these ideas. Sir, you have a disdain for the mutual fund industry, sir, and we need more institutional investments. Do we as a corporate strategy have any? I mean, it's not working out. We just go up and down. It's too volatile for our market cap. I mean, do you think? Because you actually have other companies in the market cap, and they're doing 10%.
I have a disdain for everyone, honestly.
It was right there, sir.
Yeah. We are. Yes, we are. Yeah. See, I tell you something. See, what happens is our business has volatility. I think I'll be very honest with you. What happens is, I mean, there are some mutual funds who are with us, and I think they understand our volatility, and they're willing to be with us and willing to ride the volatility. If you look at our return on capital, the profits that we generate, they're as good as any of the top 10 Indian companies, right? The issue is, a lot of the times, again, it's not a criticism, but it is. I mean, we need to accept. People do not want volatility in their NAV. I think what they want is something that delivers 10%-15% compounded growth consistently without too many volatile elements coming in.
Those assets have higher value than assets like ours who deliver great profits but have a little element of volatility. I think people who understand are there because as investors, people who do not understand that are not there. They also have their own, what do you call it, limited interest. You cannot change what you are doing, right? I mean, it is what it is, and you just have to communicate what you are doing, and people will come along. I mean, that is how you have to look.
This new investment that we're looking for will be a state-style investment, right? It won't be a moonshot, and it'll be like buying a business or something, which is to existing business, right? It's a brownfield investment you're looking for.
No, I think what we're trying when you do an acquisition, if you're buying a front end or you're trying to buy a new market, it'll be a brownfield, yes. Moonshots make money, my friend. Don't discount moonshots. All our brownfield shots, a lot of our moonshots have been successful, so.
I have one last question, sir. How are we going to monetize Tevogen Bio, sir? Because that is not a company that we own. Is it like when it gets listed, we get money? What is it for us?
It's very early stage, my friend. It's a very early stage company. I don't want to, it's too early to talk about it. They have a very interesting CAR-T pipeline, and CAR-T is something that we don't have a skill set in Maxport, so I'm very invested with them. They'll all come to fruition. You just have to be patient, and then you'll get the opportunity if they do well. Any business idea will always take you five to seven years. Otherwise, it doesn't happen. That's how it works. Okay. Let's give a chance to someone else, please.
One last question.
One last question. Thank you.
Thank you. Next question comes from the line of Nithin Agarwal with JM Capital. Please go ahead.
Hi. Thanks. Sorry. Can I take a quick question again? Two things. One is on the NCE molecule, how should we think about the milestones and the next steps on this product?
Before they announced it two weeks time. I think the way I'm looking at it, Nithin, is that yeah, yeah. I think the way we're looking at it is what we have done is we have taken a very end-stage disease where there was no therapy available. All the first line, second line is completed, and there's no other treatment options that are left. We're doing that subset of patients. I don't think we're doing a trial on something like this is you don't have to do many patients. If you're able to demonstrate efficacy and we are doing a single-arm study. We're not doing a comparison study either because we're using a subset for which there are no therapies available. If we're able to show a response, you'll get an approval.
If you have very good phase two data with a reasonable number, you can get an approval. I think as long as we're able to recruit those patients and we're able to do it, I think we're home. We're targeting something niche. I mean, again, the disease is obviously a niche disease, and it's not going to cater to a very large number of patients, but it'll be a very critical item that you need in the event that the first line, second line is not working. I think it's a good one to do and relatively easier to do, and I think hopefully it'll work. I think that's it. Yeah.
How much time do you think you'd be required to complete your recruitment given the challenges which are there in such hiring recruitment?
I think the difficulty that we're facing on this trial is the fact that we're unable to get Keytruda failure patients. The reason is Keytruda fail nobody uses Keytruda in India. There's a limited number of patients who use Keytruda because Keytruda itself is so expensive, right? I think that's a challenge that we're facing in recruiting patients. Typically, generally, people who are already on Keytruda failure are already very ill. It's very difficult to recruit patients. I think we are taking up a challenge. Hopefully, I think we'll have some clarity in the next one month and a half year where we're going. We've already done some patients. So far it looks good. I think, as I said, it's a single-arm study. It's not a comparison study, so it's relatively easier to do. The problem we're facing is the recruitment.
I think if we're able to get around that, we have done some amendments to the protocol, so hopefully we'll have some clarity, and then we'll be able to recruit. If we're able to recruit, then I think, yeah, I think it could be interesting. Give us a bit of time though, Nithin. I think I can't answer that whether we'll have some clarity maybe in the next 12-18 months. You can always ask me for an update every quarter, but as of now, I think let's give ourselves about 12-18 months to get more clarity. Okay.
That's helpful. Thanks a lot for that. Secondly, on the non-U.S. businesses, INR 800- INR 900 crore is, I think, a meaningful step up from the numbers we discussed last, I remember. Which are the major geographies that are taking up this business, and what are the drivers for these businesses as we go forward? Any specific products?
I think it's an overall portfolio. I think Brazil and Canada are the biggest ones that we are driving this business, and to an extent, now, MENA is also driving this business. These are three geographies that we're doing very well. In terms of products, it's mostly our cancer portfolio. I think Brazil and MENA have done extremely well. It's mostly from our cancer portfolio. Not a product specific. It's like a basket of products that we have, which has made a difference.
Going forward, any specific launches that will drive the portfolio, or this is going to be this?
I think at this time, we are just saying it's the cancer portfolio. We're not giving any guidance on specific products at this time. Yeah. Okay, Nithin. Thank you so much. I think we'll see. Thank you. I thank you, everyone. Thanks for the time that you guys have taken to interact with us. We appreciate the time that you've spent with us. Thank you so much.
Thank you. Thank you all.
Thank you. On behalf of Natco Pharma Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Thank you.