Ladies and gentlemen, good day, and welcome to Q2 and FY 2027 earnings conference call of OneSource Specialty Pharma Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Singhal. Thank you, and over to you, sir.
Thank you, Danish. Thank you all for joining us today for the earnings conference call of OneSource Specialty Pharma Limited for the second quarter and half year ended September 30, 2026. We have with us Neeraj, CEO and MD, and Anurag, CFO of the company, who will walk you through the key business and financial highlights for the quarter and for the first half of the financial year. I trust you have the opportunity to review our results release and the investor presentation, both of which are available on the company's website as well as on the stock exchange website. The transcript for this call will be posted on the company's website within the next week. Please note that today's discussion may contain forward-looking statements, which should be viewed in the context of the risk inherent in our business.
Should you have any further questions after this call, our investor relations team will be happy to assist you. I now hand over the call to Neeraj for his opening remarks.
Thank you, Abhishek, and a very warm welcome to everyone joining this late evening for our Q2 results. Q2 was a strong quarter for us. In fact, it was our third consecutive quarter of sequential growth and in line with the trajectory which we had outlined in our previous calls. If you saw that revenue increased 37% year-on-year, 15% sequentially, and in the quarter, we actually delivered more than INR 5 billion revenue. In fact, more hearteningly, EBITDA grew 53% year-on-year, 32% sequentially, and the margin expanded more than 200 basis points quarter-on-quarter, reaching 32% for the quarter. The very fact that the pace of EBITDA growth was higher than the revenue growth, it really demonstrates the operating leverage, which is inherent in our business model.
And in fact, if you look at the first half, put together both the quarters, it has been a 47% year-on-year growth of EBITDA. The growth both in this quarter as well as for the first half is actually being driven by the additional DDC capacity, which has come online in the last quarter, which is quarter two and which helped us both commercial as well as MSA revenue coming in, thanks to that execution. Really staying with our DDC line expansion, many of you saw our second cartridge line is now running commercial batches even though the geopolitics actually impacted its start by almost six months. The fact is that today the line already since September, it is operational, and it has immediately doubled our total sterile production days.
The additional capacity, as we had said last time, the additional capacity really supports both the new launches which are coming in and provide us a significant ramp-up of the commercial volumes, which we are expecting during the second half. I'm also happy to share with you that even our third line has successfully completed its factory acceptance test in Germany and is now at our site as we speak, ready for qualification. This line also, the arrival was longer than anticipated obviously due to these extended transit times because of what is happening in the Gulf. As you also know that these are very bespoke lines, and I think I explained in my previous calls and interactions with many of you that these are lines built for much larger batch sizes, and therefore, they require quite rigorous qualification involving multiple European vendors.
Keeping that in mind, while we are making every effort for it to start in Q4, the commercialization might get pushed to the start of FY 2028. However, I just want to reiterate here that we will have all three lines fully operational and available for FY 2028. This is not just the filling capacity. I think that is what is important to highlight here and what really differentiates OneSource from every other CDMO is that every one of our lines are backed by full end-to-end capabilities, whether it is not only cartridge filling but assembly, labeling, packaging, and so on including cold chain, all under one roof. This differentiates us not only in India but even globally.
Our semaglutide footprint continued to grow during the quarter, and our partner, Hikma, launched the first generic semaglutide in Saudi Arabia, which really expands our presence in a very important market, which is off patent. Also more hearteningly, Dr. Reddy's API has commenced, I think, which they also spoke about in their earnings call. This would really help a relaunch in Canada, as well as launch across multiple other markets where they already have an approval. Apart from Dr. Reddy's, also the supply ramp-up from our other Canadian customers is also on track for the quarter three. Moving on to our second strong leg of our business, which is emerging very fast, which is biologics. It is increasingly becoming a very key growth pillar for us.
During the quarter, we had multiple new project wins, which is both from new customers who we onboarded as well as existing customers. We have onboarded two projects for end-to-end development to commercialization projects from a U.S. biotech. We secured additional new program for one of the top global animal health companies and our existing customer. This, as you know, comes back-to-back from the previous quarter where we had EU customer wins. These wins, whether the U.S. or Europe, these really reflect the really integrated offering which we have, which we call from gene to device, in biologics, which again, very few CDMOs offer. The fact that India's growing position as a trusted hub of global biologics, biosimilar development as well as manufacturing. The same is reflected in our biologics RFP funnel, which is at highest ever with multiple projects in advanced stages.
All this is really going to be driving the growth beyond FY 2028 for us. As far as our base business, especially the injectables, we discussed last quarter, we are adding new capabilities including pre-filled syringes and new lyophilization capacity. The planned shutdown of the site is in fact currently underway. It started at the back end of Q2, but the new capacity will be available from next quarter onwards. Both at the same time, both our injectable and softgel business grew last quarter with multiple launches actually happening in several markets during the quarter. Another thing which we're always proud of, our compliance track record, where during the quarter, we successfully completed multiple regulatory and customer audits. Also as the new capacity comes online, maintaining the track record is really what the whole team is focused on.
Just to conclude, with the line 2 already commercial, line 3 progressing, new launches coming through and more coming in the next coming quarters, a very strong biologics funnel, and momentum across the business, we are really set for our next phase of growth. We expect second half to be stronger than the first. Basis that, we are also reaffirming our FY 2028 outlook, which we have given of $400 million revenue and then $160 million EBITDA. Also, really important as we build the capabilities, capacities, and the customer relationships, this, we believe, will really sustain the growth beyond the current year and beyond our guidance period. Finally, I really want to thank our teams for their commitment and our customers for the trust they continue to place in us.
I really want to thank everyone here, and would be happy to take questions along with Anurag, our CFO.
Danish, we are good to go. Can you please take the Q&A?
Sure. Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Rupesh Tatiya with Long Equity Partners. Please go ahead.
Yeah. Hi, sir. Am I audible?
Yes, Rupesh, go ahead.
Yeah. Congratulations, Neeraj, on fantastic set of results. First question is on capacity across all our businesses. Softgel, what is the capacity utilization? Steriscience, I think we had a planned shutdown, so if you can quantify what kind of revenue loss we saw in Q2, and is that capacity going to be available in Q3 or it is going to take a bit of time? On DDC, is the new line 500 L batch size line, or are we still on the 200 L batch size? When do we expect this capacity to reach optimum utilization, line 2 DDC? First question is on capacities across all our DDCs.
Yeah, Rupesh, thanks for asking. I think as we have been maintaining, I will start because I spoke about the DDC capacity, I will answer that in that order. The new line, which is there, we mentioned it last time also, is actually going to be increasing the output simply because it can work with much larger batch sizes. This is the line which will run 500 L batches for us. This is what, when we say doubling our sterile capacity days, that is what it is really doing. It is already the 500 L batch size, which will happen on this line.
In fact, all the new lines which are getting added are able to handle significantly larger batch sizes, and that's why I mentioned with the increase, because these are fairly bespoke lines, the qualification period takes much longer, and that's what you saw with the second line, which is coming. It will all be 500 L and even larger. In fact, these lines can handle even larger batches. As far as injectables, as I mentioned, the site where we took a shutdown, in fact, the shutdown started only at the back end of the quarter ending September. The shutdown will last this current quarter. Then starting January, the lines will be available. These will significantly increase our lyophilization capacity and capability, which there is a big gap in supply and demand as far as lyophilization capacity and globally.
In fact, most of the shortages, if you see in Europe or in U.S., if you see FDA's shortage list, 70%-75% is contributed by injectables, and lyophilization is a big contributor to that. We are looking at really improving those supplies for these markets. Finally, on softgel, I think the traction continues. We have had multiple launches which happened. The capacity utilization continues to increase. But you also remember, we have said that in our current site, there is no possibility for us to expand further. That's the reason we are going in for a greenfield site as far as softgels are concerned, which would not only add significant new capacity, but also provide us opportunity to get into completely new area of containment, and high potent softgels, which is again, a significant demand coming in from customers. Hope it answers. Thank you.
Yeah. So just one clarification and second question I will ask. So what is the capacity utilization in softgel? I mean, is it 60%, 30%, or is it optimum? I mean, if you can quantify. This new line, because it is a capacity 500 L, which is 2.5x the existing line, so it will take two, three quarters to go to optimum utilization, or it will go to optimum utilization really fast? Those are the clarifications. Then the second question is, $400 million revenue for FY 2028, so Q4 exit run rate will be, let us say, $90 million, 38% or 36% margin. Will we be within striking distance of that as a Q4 exit run rate? Generally, we give this exit run rate across our company. That is the second question.
Yeah. Okay. So, as far as on the cartridge line, it's a fairly quick ramp-up, because we have significant demand, as you're aware, both from existing customers, existing market, and the markets which are opening. So that, the ramp-up to optimum capacity is fairly quick as far as the cartridge line is concerned. For softgel, it's because there is a key requirement from customers who are moving from other The CDMO part, who are moving from other manufacturing sites to us. So it takes a finite time. So it's ramping up. We started adding capacity last year, and we increased almost 3x that capacity. Now, a significant part of it is already covered, and we already have a visibility of, as I said, visibility of 80%+, from a capacity utilization point of view.
That's why, because we can't increase the capacity at this site, we are going in for a new greenfield. As far as the question on the FY 2028, as I said, we've reiterated our guidance for the full year, and we will have our lines, all three lines available for FY 2028. It is just the fact that because it is a bespoke line, the qualification takes longer, so whether it will be available for full quarter four or a part or not, that's something which I mentioned earlier. So, to answer your question, FY 2028, line is available, and that's why we are reiterating our guidance.
Okay. Thank you. Just one quickly. In biosimilar, will we be part of KEYTRUDA across all our partnerships? Because I think Formycon is almost like a first-to-file, is my understanding. Just if you can answer that question, and then I will get back. Thank you.
I do understand. Formycon is a key customer. I will not be able to talk on specific issues. Having said that, I can tell you that with all our customers, we have some of the largest products in the biosimilar space.
Okay. Thank you.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Abdulkader Puranwala with ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, my first question is with regards to the supplies for Dr. Reddy's. Any indication you can provide as to how the ramp-up is happening in terms of the revised APIs, what you would have got? How are you looking forward for the next six months in terms of the capacity reservation for this client?
Yeah, Abdul, thank you for your question. I think it is very much in line with what commentary they already made on their earnings call. The supply of API, as I mentioned already, has already commenced. Within this current ongoing quarter, we expect supplies to start first, obviously, to the Canadian market, and then also multiple other markets where they already have approvals in emerging markets, India, and multiple markets. In fact, there are markets where the approvals are going to be coming in over the next two quarters. We see that the numbers which they have given in their earnings commentary, we don't see any reasons to not follow exactly those, what they have said.
Got it. Very helpful. Sir, I am referring to your presentation, slide nine, where you talk about six new order wins, which includes two biologic products. Sir, you would help us understand what are those balance four about, whether it's in the DDC segment or apart from it also you're pursuing something?
When we talk about multiple wins, these are across. The wins are in biologics, there are wins in DDC, and there are wins in base business. That's how we actually operate and see. It's across. As I mentioned earlier, the momentum is across our businesses. The wins are both from a new launches perspective as well as existing.
Sure. My next question is to Anurag, sir. Sir, if I go through your cash flow statement, the trade receivables for the first half of fiscal 2027 has gone up a bit. Anything to read about, or it's just about the shipments which would have happened towards the later part of the quarter?
Thank you, Abdul. I want to actually give you the big macro picture. If you really look at the developments over the last couple of quarters in terms of the overall shipping lines and the lead times in terms of supply, getting the access to-
Containers.
The containers and everything, there is multiple impacts that we are seeing as a result of all this geopolitical development. People that I talk to, people that I meet up, at least as a CFO community, I see everybody is experiencing about 2 percentage points-3 percentage points impact on the P&L. When I look back in terms of comparing it to our results, I see that since most of our raw material is actually passed through, we don't have any significant impact, at least as far as the P&L is concerned. We've got implication on fuel, freight cost, shipping lines availability, but at least, we've seen significant control as far as the P&L is concerned. But we do see some implication of these delays in terms of the overall cycle times when it comes to our working capital.
The delayed deliveries to the customer does impact at least 45-60 days in terms of the overall cycle time. I do believe that it is not structural, it is temporary, and it is only a timing impact. Hopefully, within a quarter or two, we should start seeing this getting normalized. Of course, there is implication as a result of the significant higher volumes in the last couple of quarters, which also shows up into the overall receivables. But clearly, there is no quality issue on the receivables.
Understood, sir. Very clear. Thank you.
Thank you. Our next question comes from the line of Girish Bakhru with OrbiMed. Please go ahead.
Yeah. Thanks for taking my question and congrats on great numbers. Neeraj, sir, can you comment on how many sterile days line 2 was available in Q2? And how much did it run?
I think I had mentioned that September was the month when we started the line getting active. But the fact remains that, as I said, on an annualized basis, it doubles our sterile days. And that is, I think, the key metric you should be looking at. And thanks to this line, the ramp-up of not only the commercial sales, which we are going to do for Canada and other markets, but also gives us the ability to do MSAs, both for existing customers which have been pending as well as add new customers which also, as you know, we have not been able to do for last one year, thanks to the capacity constraint which we had.
Now with this, immediately we have got multiple options and multiple opportunities available to onboard customers and meet the demand of existing customers, especially when now Dr. Reddy's coming back on track.
Understood. In past you have commented on, of course, numbers from line 1, something around 60,000 pens per day. If I were to compare the batch size related factor, one should assume that this 60,000 will basically grow by 2.5x, right? By line 2.
It's like to like. I think if you look at the yields and so on, it's basically roughly 50,000 to 55,000 on the first line, and if it goes to 500, it comes to about anywhere between 120,000 to 130,000. Because yield varies from product to product, from customer to customer. But yeah, more or less, that's the math.
Understood. Of course, not really wanting the pricing number, but when we, let's say, look into FY 2028, can you give some broad comment on blended realization, which we can see? Will it stay largely same or reduce while your volumes will increase with the new line and more markets in the emerging markets, including Brazil, Turkey, all opening up? How should we look at the realization?
I think our realizations are, there is not a major shift we are seeing in realization. As we've always said that our pricing to the customers has always been volume-based and not market-based, whether it's emerging markets or Canada or anywhere else. We don't see that changing. We have also said that the very fact that when there is an increase in batch sizes in a sterile business the cost of manufacturing per unit comes down, and we are happy to share the savings there with our customers. So it's a fairly win-win. The customers who are efficient enough and able to allow us to go to larger batch sizes, that efficiency benefit they get because we also get, and we share that efficiency with them.
Got it. Just last one, if I can squeeze. I know FY 2028 is still forming up, but how much DDC can we forecast in FY 2028 guidance of $400 million sales? Ballpark, is it 50% or much higher?
I can only tell you that the very fact that I mentioned that our three lines, we are eagerly awaiting the third one to add, and so are our customers. So DDC will be a strong contributor to our FY 2028. Like it will be a contributor to our second half, it will remain a very strong contributor to our FY 2028 numbers.
All right. Thank you so much.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Chirag Shah with White Pine Investment Management Private Limited. Please go ahead.
Yeah. Thank you for the opportunity, and congrats for good set of results. Neeraj, my first question is more on the batch sizes that you indicated. If I have to break between line 1 and line 2. Line 1 is, we can assume that optimal batch sizes, right? Six days a week, et cetera. Line 2, where we would be and how should we think about the flow through to EBITDA level because of that?
Chirag, thank you for your question. Although your voice wasn't very clear. What I understood from you, that the earlier line, the first line, had a max batch size what we could do in that line was 200 L and that was what all our customers had moved to. Remember, we started on the same line at 30 L and ramped up to 200 L. On the new line, that's how bases the demand. Currently, the capability of the line is to go up to 750 L. But the customers right now are ramping up to 500 L. I think that's what the case is.
The very fact that there is very strong demand which is there both from existing customers, existing markets, as well as new markets which are going to be getting approvals, customers are going to be getting approvals, and the new customers which are coming on board. So there is, as I said, robust demand, and that's the reason we have said that we are also very excited with the fact that the third line is already at our site. It's exciting development for us. The fact that I already mentioned, we have a very strong OpEx leverage in our business because the incremental cost is very limited compared to the incremental revenue. You already see the EBITDA margins improving for us quarter on quarter, again, thanks to the OpEx leverage. That's the reason of us giving the guidance what we have given.
Okay. Let me rephrase. I think you missed out my question. What I was trying to understand is, in terms of efficiency level, in terms of number of batches that we run per week, and obviously the size of the batch, line 1 is at optimal level, right? So efficiency gains coming from line 1 is limited operating leverage gains. Where are we in line 2? You indicated that customers have gone up to 500, but not all customers would have been, right? So the current results that we have, what element of excessive costs are still lying, and how should we think about it as we increase the revenue size from line 2?
So in terms of efficiency, yes, you are right that the line 1 is running at optimal efficiency. Line 2 has given us the opportunity to do MSAs. Obviously the utilization in an MSA is different from utilization in commercial, and it's going to be a ramp up, remember. As we start, the market volumes are ramping up, and accordingly, our line will also be ramping up. Because there is a mix of MSA and CSA, a typical steady state picture is that in any line, it should be 75/25, 75% commercial, 25% MSAs. That is how we expect steady state for the second line also to be.
Okay. Second, housekeeping questions for this. One, what is this consumables that we see as a line item in raw material? Because it varies a lot. Is it linked to any specific business or what exactly what we classify as consumables? Second, employee cost, there has been steady increase since last five, six quarters now. Are we still in hiring phase? How long we need to hire? When that will stabilize for us?
Yeah. Chirag, hi. Chirag, thank you for those questions. Chirag, consumables is a variable. It will depend upon the activity level. Every time we take a fresh batch, every time we take an engineering batch, every time there is a significant ramp up in volumes around any of those things, it will vary in those particular quarters. Those are clearly a function of the level of manufacturing activity. As we had said in the past, we are in line with our guidance in terms of ramping up our overall capability within the organization and building up the employee base in our unit two, which is our flagship site, which is ramping up capacity 2x-3x within this year. It clearly was a function of what we want it to be. We are on track with that.
Clearly, there is nothing that surprises us in terms of the employee cost increase. The way you should look at our business is these are elements of fixed cost that we will have to enable the manufacturing lines with, because these are specialized capabilities. These are capabilities that require high level of quality observations. For building all of that, it's a conscious focused effort towards building that capability and which we are working towards.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Harshal Patil with ASK Wealth Advisors. Please go ahead.
Thank you, Anurag, and congratulations for a good set of numbers. Sir, just one question to start with. The ETR, that's the expected tax rate, I believe you have got a lot of deferred tax also into it. So just wanted to know, how should we look at this expected tax rate for 2027, 2028 going ahead, and how long would the deferred tax benefit be available to us?
Sorry, I missed the name who asked the question. Very quickly, this is Anurag. At this moment, we anticipate that you should assume the current level of ETRs will continue through till FY 2028, at least till the third quarter of FY 2028.
Okay. So till the third quarter of FY 2028, sir, we should be assuming the current rate of taxation. Is it that you said?
That's right.
Right.
These are some of our brought forward losses, which we continue to utilize as we continue to generate more profits, and these will continue to remain at least for a significant part of FY 2028.
Got it, sir. Just another second question on basically the capacities. I believe we have discussed it, but just one point to understand with respect to the new lines as well as the existing. In general, sir, if I have to, as I understand it, this looks to be more as a strong demand and a supply-constrained space. But when it comes to commissioning of new lines, ideally, what kind of a time frame does it take to scale up, let's say, from a 10%, 15% of a utilization to maybe 70%, 80% of a utilization level?
I think, as I explained, these lines are not your typical lines. These are bespoke lines which have been made to be able to deliver the kind of batch size output which customers really require basis the robust demand which we have. I think what you need to understand, that's why because bespoke lines, having multiple vendors, the whole qualification process takes time, especially the new line which has come in, which has got a German isolator, a German filling line. Because of that bespoke nature, the whole qualification time from the installation of the line to the start of commercial batches, it takes significant amount of time. But at the same time, the ramp-up, the good thing is once these lines start, the utilization is fairly quick.
In fact, the current line, second line which we have started, we are very quickly looking at a very significant utilization. Remember, as a sterile process, which we have said, the overall utilization I am talking about is same in the range of 225-230 sterile days in a year. Because of all the work which it takes, media fills and the various quality reviews which happen, that is why we have got 225 days. We expect that the current line to be doing those 225 days fairly rapidly, considering the demand which we have, fairly rapidly.
Right. Okay. Probably with the line 3 that is slated to be on in probably Q4 or early days of FY 2028, I believe towards the first half of 2028, we should be expecting the same ramp-up pattern for that as well, which is 225-230 sterile days in a year.
That's correct.
Correct. Sir, just last two bookkeeping questions, if I may squeeze in. I just also wanted to know for this Q2 results, do we have any impact of currency fluctuations on the margins or something like that?
There is a marginal impact of currency fluctuation. It is reported in the financials called out separately. You will be able to see that in the publicly available financials that are there. It is about 300.
Okay, sir. So that was it from my side. If there is anything, I will get into the follow-up.
Thank you.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question, press star and one. Next question comes from the line of Mohammed Patel with Edelweiss Public Alternatives. Please go ahead.
Can you hear me?
Yes, we can.
Yes, please go ahead.
I have a question which is twofold. One is, how is semaglutide doing in the markets in which our customers have got approval? How are our customers doing currently?
Yeah. Mohammed, I think as you have seen, this was a product which was always constrained by supply rather than the demand. Whether it is the markets which are the largest in the world, like U.S. and Europe, or these other markets which are now available off patent, whether it is Canada, Brazil, India, and many others. I think the demand stays robust. The very clear visibility which we have on numbers from India, if you see how Sema from February, which was before the patent expiry of anywhere between 20,000-25,000 units a month, is now looking at more than 200,000 units a month as of September. This is when typically India takes, for a chronic therapy like this, it takes three years to stabilize. There is still a very strong growth path available there.
As we see in markets like Canada, which is obviously the largest market outside of U.S., we have seen already the market growing from 8 million units to 12 million units and currently post genericization, today it is more or less, we are talking about 16 million, 17 million units, and continues to grow. Again, because the generics have just launched in. Unfortunately, Dr. Reddy's had to come out of the market, and now it will be back. Once all the players, the product is sufficiently available, we will see that market to continue to grow. We have said earlier, and there is enough market analysis available that markets like Canada, markets like Brazil should be anywhere between 4x-6x of what they are today. There is a very, very strong tailwinds behind this.
The fact that we have all the major customers in these markets, Canada, all four approvals with us. Brazil, many customers waiting in the wings for approval. India, multiple approvals. I think all this, the market movement is supporting the robust demand which we are seeing.
Is it safe to say that FY 2028 customer projections are strong at the moment?
Yes. That's the reason, the fact of our commitment of CapEx is based upon both what we see our customers giving robust demand, as well as what we are seeing overall market demand going up.
I have one last question. How should we think of OneSource growth beyond FY 2028?
Yeah. I think I mentioned. The fact is that all our businesses, we have long legs beyond FY 2028. I'll start with drug-device combination. As more markets open up, you'll see FY 2028, FY 2029, Europe starting to open. FY 2030-2031, the big market, U.S. will open, Western Europe, U.S. So there is the DDC itself having very, very long legs. In emerging markets you'll see growth already quite significant. That's the reason that our capacity expansion had been kept in line with the fact that these products have got a number of markets opening up, large markets opening up. When it comes to our second pillar, which is biologics, the guidance period which we have given, all the revenue in the guidance period is coming from what we call MSA, which is a pre-approval R&D revenue.
Post that is the time, FY 2029 onwards, is when the commercial revenue starts. In fact, those commercial revenues are of a very different order of magnitude than comparable small molecules. So, very strong growth coming from biologics. Also the base business. All the capacity which we are adding in our injectable business which will be getting filled as over the next two to three-year period. I mentioned softgel, where a completely new line coming up, and a new modality of high potent softgels coming up. I think that you will see all those contributing to the growth beyond FY 2028.
High double-digit is something that we expect?
As we progress, we will give you an outlook during FY 2028 of what is going to be beyond that.
Thank you. All the best.
Thank you.
Thank you. Our next question comes from the line of Abdulkader Puranwala with ICICI Securities. Please go ahead.
Yeah. Thank you for the follow-up. First one, I know Brazil, so I understand few generics have got an approval. But sir, any color what we are getting from our customers as to when they're likely to launch this product there?
Yeah. It is a very interesting market, Abdul, simply because it's, again, very high incidence of diabetes, obesity, a very, very strong focus on body positive and aesthetics and so on. So it's a very, very interesting market. Right now, while there are a couple of approvals, there is only one generic, which is the local Brazilian company which has actually launched the product. Many of our customers are waiting in the wings to get the approval, and I think some of them have already announced publicly that over the next quarter or two, the approvals will come. We are ready. We are ready to support their demand, and you will soon see approvals coming in.
Understood. Lastly, one bookkeeping question for the current quarter that is Q2 FY 2027, if you could share what was the MSA to CSA ratio for the DDC business.
It has started because the availability of the line, as I said, was from September onwards. Since then we were able to do MSAs. Because the new line had a very limited period, it will not give you the correct picture. But as I said, in a steady state we should be at 75/25 between commercial and MSA revenues.
Got it. Thank you.
Thank you. Our next question comes from the line of Sanjay with Ampersand. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. In addition to this EBITDA margin guidance, can you give something about your return on capital employed and deleveraging plans?
Hey, Sanjay.
Yes.
Sanjay, hi. We clearly have a clear line of sight in terms of moving forward with our cash generation engine. We are currently in a significant investment cycle, and as we've said in the past, we will continuously move towards generating free cash going forward. At this moment, we will continue to remain between one and a half times EBITDA margin in terms of our debt levels. We do anticipate that by end of FY 2028, we should be in high twenties in terms of our ROC returns. That is what we anticipate at this moment. We are clearly moving forward towards that goal.
Okay.
Thank you. Our next question comes from the line of Gaurav Bama with JM Financial. Please go ahead.
Sir, my question has been answered. Thank you for the opportunity, and congratulations on the good set of numbers.
Thank you.
Thank you. Next question comes from the line of Prabhat Agrawal with Finnestres. Please go ahead.
Thank you, sir. Just wanted to ask one question. You mentioned 12 launches this season. How many are GLP-1 DDC versus sterile injectables?
Prabhat, I think as I mentioned, a very significant launch which we did was in Saudi Arabia by our customer, Hikma, of semaglutide, which is very key. Across the portfolio, the launches have happened in soft gelatin, in injectables, in our markets like in U.S., in Europe, in some of the emerging markets. It is a very large list, and obviously we can't talk about individual customers, only the ones which are in public domain or which are okay for us to be announcing. I can tell you that this is across modalities, across markets, and across customers.
Okay. Thank you, sir. Sir, one more thing I wanted to ask. Why FY 2028 EBITDA is expected $160 million? Is this adjusted or reported?
No, it is. All our EBITDA numbers are reported numbers.
Okay. Thank you, sir. Congratulations for the good set of numbers. Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
Thank you everyone for this late evening, and really appreciate all the questions, and thank you for participating. Have a nice evening.
Thank you so much, sir. Ladies and gentlemen, on behalf of OneSource Specialty Pharma Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.