Ladies and gentlemen, good day and welcome to the Piramal Pharma Limited Q2 FY 2026 earnings call. As a reminder, all participant clients 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. Gagan Borana from Piramal Pharma Limited. Thank you, and over to you, sir.
Thank you, Swapnali. Good morning, everyone. I welcome you all to our post-results earnings conference call to discuss our Q2 FY 2026 results. Our results material has been uploaded on our website, and you may like to download and refer to them during our discussion. Today's discussion may include some forward-looking statements, and these must be viewed in conjunction with the risk that our business faces. On the call today, we have with us our Chairperson, Ms. Nandini Piramal, Mr. Peter DeYoung, CEO of Global Pharma, and our CFO, Mr. Vivek Valsaraj . With that, I would like to hand the call over to Ms. Nandini Piramal to share her thoughts.
Good day, everyone, and thank you for joining us today for our post-results earnings call. During the quarter and the first half of the financial year 2025-2026, we recorded revenues of INR 2,044 and INR 3,977, respectively. The YOY decline in the revenue was primarily on account of the inventory destocking by the customer in one large CDMO order for an unpaid commercial product. We continued our focus on cost optimization and operational excellence, which helped partly mitigate the impact of the revenue shortfall on the EBITDA. During H1 FY 2026, the EBITDA margin moderated to 11% and 10%, respectively, for the quarter and half-year ended FY 2026. In terms of net debt on the balance sheet, we currently have INR 3,971 of net debt, which is a reduction of INR 228 over March 2025. We maintain this at less than 3x EBITDA, largely supported by tight control over working capital and CapEx investments.
During the year, we successfully maintained a best-in-class quality and compliance track record of zero OAIs. We successfully closed 19 inspections, including one USFDA inspection at our Aurora facility in Canada, without any observations. On the sustainability front, we released our fourth annual sustainability report for fiscal year 2025 under the theme of Innovating Responsibly, Growing Sustainably, which has also been third-party-issued by BNB Business Assurance, India. The report outlines our measurable progress in the areas of environment, social, and corporate governance, thereby underscoring our purpose of doing well and doing good through sustainable operations. Moving on to business-specific highlights, starting with our CDMO business. Our CDMO business reported revenues of INR 1,044 and INR 2,041 during Q2 and H1 fiscal year 2026, respectively, impacted by the inventory destocking.
In terms of order flows, H1 FY 2026 was a mixed bag with a good year-on-year trend in new commercial orders, but slower than expected pickup in early-stage discovery and development orders due to inconsistent recovery in U.S. biopharma funding, alongside uncertainties of global trade policies, leading to an adverse impact on order inflows and customer decision-making. However, in the last two months of September and October, we have seen a significant uptick in biopharma funding. This, along with the increase in M&A activities, are indications of recovery. Sustenance of this momentum should provide impetus to early-stage RFPs and order inflows going forward. In recent times, we're also seeing increasing inflows of RPIs and RFPs, especially in onshore facilities and differentiated capabilities like ADCs, sterile fill finish, and unpatented commercial development and manufacturing. We are continuously engaging with customers to build a healthy order book for the future.
We're well prepared to capitalize on this emerging strong interest for our onshore facilities through our timely investments in capabilities and capacities across our North America and U.K. sites. We believe we're ahead of the curve with ready capacities available across our network for clients looking for immediate transfers. We're also further strengthening our position in North America by investing GBP 90 million across the Lexington and Riverview sites, part of our ADC seller rate program. Also, to adapt with market dynamics and better engage our customers, we made enhancements in our BD team, which we expect to yield positive results going forward. In terms of our existing development pipeline, we're making good progress. We recently made a joint investment at our Sellersville site with New Amsterdam Pharmaceuticals for commercial manufacturing capacity for fixed-dose formulation of obicetrapib and ezetimibe to meet commercial demand of the drug.
Our underworld site was instrumental in the development of the product, and now the product is advancing towards commercialization. We're establishing a dedicated manufacturing suite at the Sellersville site, as well as dual sourcing at the Pitampur site in India. Moving to our complex hospital generics. In inhalation anesthesia, we further consolidated our number one position in the mature U.S. sevoflurane market segment, with value market share increasing to 45% in March 2025 compared to 44% in March 2024. We're also working on obtaining regulatory approvals for sevoflurane in the ex-U.S. markets from our Dahej plant in India, which should help us with the pickup and the revenue roughly in H2. Sales of intrathecal therapy during the quarter were subdued due to temporary supply challenges, which we expect to normalize in H2 FY 2026. We continue to maintain our number one rank in intrathecal bupivacaine in the U.S. with 75.
Percent value market share. In the injectable pain segment, our efforts to resolve supply constraints have started to yield results. We're also seeing improved supplies, helping us to capitalize on the healthy demand in the market. We're also investing in 505(b)(2)s, complex generics, differentiated generics, and branded products through licensing deals or co-development deals to enable long-term growth. Moving to our consumer healthcare business. Our PCH business continued to deliver sustained growth of 15% during the quarter and first half of the financial year, driven by the robust growth of about 20% in our power brands. Growth was primarily anchored by Little's, Lactocalmine, CAR, and iRange. We continue to make calibrated investments in media and trade promotions to grow our power brands into established and profitable brands in the market. Our spends in media and promotion in H1 FY 2026 was around 12%, similar to last year.
E-commerce, growing over 40%, now contributes to about 24% to PCH sales, with quick commerce accounting for over 40% of the e-commerce channel. During the quarter, through collaboration with different stakeholders, we smoothly transitioned to the changed GST rates with no business impact. In terms of new product introduction, we launched 26 new products and SKUs during H1 FY 2026. Given the slower-than-expected growth in the CDMO and CHG business during the first half of 2026, we moderate our full-year guidance to remain flat. Accordingly, we expect our EBITDA margin to moderate to low teens for the year. However, as has been the trend in prior years, we expect H2 to deliver meaningfully better revenue and EBITDA performance. The recent positive trends should also help us deliver better performance in 2027. These include a strong uptick in customer interest for onshore offerings and differentiated capabilities in our CDMO business.
We expect to benefit from this given our timely proactive investments in our overseas sites. We're also seeing early signs of improvement in biopharma funding, which should help order inflows for early-stage discovery and development projects. Also, enhancements in BD team to adapt to market dynamics and better engage with our customers should yield positive results going forward. In the CHG business, we expect the growth to pick up on higher inhalation anesthesia sales in the ex-U.S. markets, along with improved supplies for our intrathecal and injectable pain products. Portfolio expansion through in-licensing and co-development groups will also be important drivers of growth. Lastly, we expect our consumer business to continue its growth momentum driven by power brands and e-commerce sales. With this, I would like to open the floor for the Q&A.
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 to ask a question. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avneesh Barman from Vickaya. Please go ahead.
Hi, good morning. Thanks for taking my question. Can you get some color on the base CDMO growth? I mean, in the first quarter, there was a disclosure that the base CDMO growth grew by mid-teens. Can you give us similar color for this quarter?
I don't think we're giving that disclosure on a go-forward basis. I think we overall are seeing growth in the base business, but we aren't quantifying with and without specific customers because we think that that will probably add more confusion than clarity in the long term if we set up a trend of every quarter giving itemized customer-wise revenue. Overall, we are seeing growth in the business, absent of the stocking, but we're trying to move away from line-by-line customer disclosures in each quarter.
Understood. Is there any color on this large PO, which is going to be absent in FY 2026? When does it come back? I mean, does it necessarily come back in FY 2027 or the second half of FY 2027? Is there any color on that?
It's kind of a follow-on, a similar answer to the prior question stated differently. What we would say is that with that customer, we have not had any further clarity as to when they will resume reordering. That's anticipated. We will give our forward guidance for the next fiscal year a little bit later in the year as we did in other years. You can obviously look that that customer did publish their quarterly results a couple of days ago, and you can see the underlying growth of that product is in kind of the, depending on how you look, between high teens and low 20s. You can look at the primary source yourself and determine their overall underlying growth. That should be a factor in their reordering pattern.
Okay. My second question is. On the U.S. administration and the intent. Do you think whatever has been happening by the Trump administration. In your view, what are the chances of. Moving API manufacturing either from India or China in terms of API or, let's say, from Ireland in terms of formulation? How do you see that moving back to the U.S.? Is that feasible, probable? I mean, whatever you can tell about it.
I would break this into some parts. I think the first part is that we see a general desire to de-risk from China. Not all people are moving in that direction. Some are doing what you would call budgetary quotes for board management. Others are making decisions. It is not necessarily driven by explicit government guidance. It is more been driven by a general desire to have independent supply chains for those who feel that is important. That could manifest through decisions to look at India as a source if it is a higher volume situation, or it could be looking onto the Western markets if it is maybe a different level of volume required.
If we were recently at CPHI and we saw a significant uptick in what we would call onshore drug product interest from a wide range of stakeholders, and it does seem the drug product is getting a little bit of a pivot towards, let's say, the U.S. from a market perspective, and that's probably driven by a variety of factors, including the administration. That being said, in terms of specifically, let's say, a recovery of the biosecure in some new form, or specifically a fear over tariffs, I'm not sure that it's an explicit link. Instead, I would say that there's a general bias towards one, moving out of China for some of our potential and current customers, and two, for a more onshore, particularly for drug product, but also to some extent drug substance for, again, some of our customers.
There is a practical reality of the amount of available capacity and the cost of that capacity that means that it will be percentage shifts, not wholesale shifts, because there is simply just not enough capacity in the U.S. to absorb the full amount. It is going to be marginal shifts of X% or Y%.
Understood. This was helpful, Peter. Thank you so much. I'll get back.
Thank you. The next question is from the line of Meghna Agarwal from Mount Intra Finance. Please go ahead. Please go ahead.
Hi, good morning. Thank you for the opportunity. I just wanted to know the capacity expansion that is happening in the U.S., which we are expecting to be completed by 2027. When can we expect the meaningful revenue contribution from these facilities?
For the CDMO, we have the Michigan facility, which is a high-quality facility. We have the Summit facility. Sorry. If you can help, just some echo.
Can you mute yourself? You could mute yourself.
All right. The point is we have three material facilities in the U.S.: the Riverview facility, which is high-potent API, the Sellersville facility, which is solid oral dose and liquid cream ointment, and then we have the Lexington facility. The substantial expansion is primarily centered around the Lexington facility, and we have a modest expansion that is underway at the Riverview facility, particularly for linker payload for ADCs. In terms of revenue growth potential, should the onshore push become more dramatic, we have immediate capacity available at all three sites, and our message to potential and current customers is that should they want to place something for tech transfer, we could do it tomorrow. We do not need to wait for the expansions to complete for the revenue to go up.
What we do need is for customers to make the decision to do onshore production and have the money available and the intent to move the programs. Our message, and we were just at CPHI, which is a large trade fair, as I'm sure you know, and that was the general message we shared with our customers and our potential customers, and overall, the market was receptive to the onshore offering. In terms of the Lexington facility, we have the same capabilities available at smaller scale already. Our explanation to customers is you can start the tech transfer now, and then whenever the expansion is ready, we could qualify the additional line. There is no need to wait. That is the message we share.
Okay. Thank you. Thank you so much for the answer. Also, I just wanted to know what is the addressable market size that we are targeting for this?
The CDMO market. We are in.
Ms. Meghna, I have a request. So sorry to interrupt in between. Ms. Meghna, I would request you to please be on mute while the management answers your queries.
I think it's important to note that for any of the areas we serve, we are in the low single-digit market share of this overall CDMO market. It's a very large market. You don't need a large number of wins to get a material revenue growth. India headquartered CDMOs are still a very modest share of the global market, and we believe that it's also a highly fragmented market, and there's a significant opportunity to growth. By no means is headroom or available market size the issue. The issue is our availability of clients to place work in the time frame we want and our win rates.
Okay. And just one more last question. How are the power brands like Little's, iRange, Lactocalmine performing? Do we have anything that is overperforming or any of the products that are not performing well, anything of that sort?
I think the power brands are actually at 20%, and that is at a higher growth rate than the rest of the portfolio, where the average is 15%. I would say each of them are doing well. We expect them to continue growing forward.
Okay. Thank you. Thank you so much. That's all from my side. Thank you.
Thank you. The next question is from the line of Vinod Jain from WF Advisors. Please go ahead.
Good morning. My first question is whether the FY 2013 guidance in terms of revenue and profitability is still standing in view of the muted Q1 and Q2 results?
I think we'll give more specific guidance later on in the year, but I think we're still holding to the FY 2013 numbers.
The guidance stands?
At the moment, yes.
Okay. The second question is, even if it is a repetition, whether the loss of demand from the concerned CDMO customer is temporary or is it long-term?
We are continuing our relationship with the CDMO customer across many other sites and products, and I think we expect this to be temporary.
The underlying product is growing. We believe we are their primary supplier for their largest market, and we believe it's a temporary situation.
Okay. Thank you.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Good morning. Thank you for taking my question. Just on the first half numbers and looking at fiscal 2026 guidance, I'm not asking fiscal 2027, any change to revise it? We have a -5% decline in revenue. I know we have a second half, which is better. What are some of the things that give you comfort in the second half if you were to retain your guidance that you shared at the quarter four? I just want to understand that piece, please.
Shyam, we are moderating our guidance for revenue to be flat for the year and for the EBITDA margins to moderate to low teens. As you are aware, historically, our H2 has always been higher than H1, and we expect this year to be no different. You will see H2 to be better than H1 for the larger part of the business. Both CDMO and complex hospital generics will have a better H2 versus H1. Based on that, and considering how H1 has been, we have moderated the guidance accordingly.
Got it. When I look at the individual pieces in that, have you also done, I think we gave some qualitative guidance on how some of these pieces are going to be, like CDMO versus CHG versus ICH. Is there some qualitative color on how it is going to work even for the three segments below that?
We've given guidance at the overall level in terms of how the overall company revenues would pan out, and that's what we have kind of moderated now.
Got it. Thank you. Just the second question, I was just looking at your standalone and consolidated financials. First half versus first half. I know two H could be different, and comparing two H is different. I am comparing one H versus one H, and we have seen losses in the international subsidiaries. I am just doing very simplistic console minus standalone and arriving at either revenue or PAT. It has widened in terms of the net profit margins as losses have increased, I am saying. I just want to understand what is driving that. When do we start seeing some of these divergence actually narrow and we start moving closer towards break-evens on the international facilities? Thank you.
Given the fact that we have multiple sites outside of India, it's actually a mixed result. Yes, some of the sites get to break-even. Some of the sites actually are seeing a year that is better than what it was in the prior year. Typically, overseas sites tend to have a bigger H2 than H1, even as compared to India. India is relatively more stable, but overseas has a bigger H2. This picture of divergence that you're seeing between standalone and consolidated results, this will narrow out as the year progresses, especially in quarter four. Yes, we do expect the performance of overseas facilities to pick up. If the question is over the longer term, then yes, as you are aware, our overall capacity utilization at some of our overseas sites is still sub-optimal. They are not yet broken even.
As the capacity utilization increases in the years ahead, which is where we have done our investments and expanded capacities, we do expect the EBITDA margins to move upwards for the overseas facilities.
Helpful. Lastly, just going back to the large PO order, Peter, you did mention. It's probably a temporary phenomenon. I know you don't like talking about individual customer and what the contracts are, but what are some of the, how do we get reassured that we have all what it takes from getting that order at the future point of time? If you could help us kind of reassure that piece, because that seems to be the big delta in how numbers are panning out versus what you're likely to see growth coming back, let's assume fiscal 2026. Any qualitative color you can share will be very helpful. Thank you.
I think with that customer, we would be showing a screen on their internal supply chain dashboard across all parameters based on our current performance and our recent performance, because we do have other ongoing work with them. We would anticipate that there's no reason why they wouldn't continue to order from us when the stock is depleted. I think just to refresh, because some of us have some time has passed, the customer had built up stocks expecting, particularly in the U.S. market, a significant growth, which is the market in which we are supplying for them. That was based maybe on their M&A case, and it did not play out the way they wanted. I think in a prior call, we discussed that there was some third-party validation of this in a Wall Street Journal article about how that particular product played out for them.
I think we shared that on a prior call. Overall, obviously, it's still growing, but it didn't grow the way they wanted. As a result, they had more stock than they needed. We needed to let that stock deplete. When that depletes, they can reorder for that market from us. Overall, we have no yellow or red flags on our performance with them, and we believe we are qualified for that primary market, and the underlying product is growing. They just have to burn through the inventory.
Got it. Yeah. Thank you. Thank you, Peter. All the best.
Thank you. The next question is from the line of Madhav from Fidelity. Please go ahead.
Hi, good morning. Thank you so much for your time. Just wanted to get an update if you can share any color on our 30+ phase three opportunities in the pipeline. How many short-term goals we could probably have in the next 12-18 months? Any color there would be helpful. Thank you.
We're trying a new trick because a lot of our customers don't let us talk about them. Every once in a while, we're lucky and we're able to convince a customer to talk publicly. I think the two we can talk about that we put in the public domain because our customers have been happy to share that would be the New Amsterdam opportunity, which we did, I guess, kind of a semi-dedicated or dedicated suite for them in Sellersville. We're actually very excited about that program and partnering with them and their trust in us for that. I think, as Nandini described, we did the development work for that set of combinations in Omnibot and PBDS.
We're dual source out of Sellersville and Pitampur, which I think, again, shows the value of the global network because we're doing the same SKUs out of two sites to give a balance of proximity and value. You can obviously pull down analyst reports from that particular customer, and you can see how third-party analysts see that future. We're just really humbled that they trusted us with that. I think there's another one that's more modest in size, but it's the George Health, which I think we also shared. It's a combination drug that, again, is using our network where we developed it, and we are manufacturing it. Again, it's showing the multi-site benefit, and that's helping people with their hypertension and control. It's got a really good value for health systems because of the combination and the adherence benefit for patients.
We're really excited about that. I think those two we can talk about. What I would say is that we're very excited about our phase three pipeline. These are much chunkier and more meaningful than maybe some of our average ticket sizes in the past. We think that these are going to be big drivers of our growth. Now, we can't guarantee all of the successes, but a bunch of them are reading out in the—a fair number of them are reading out in the time horizon you described. I think also worth noting is that a lot of them are in what we call the differentiated areas, including some in the ADC category. We think this is part of why we're remaining confident.
Back to the original question asked by another person on the call of our 30 guidance, we think that these phase threes are a meaningful contributor to why we still think that the growth is going to be good in the medium to long term.
Got it. That's super helpful. Also, on the opportunities for the onshoring opportunities in the U.S., when you say tech transfer, just maybe basic question, but I would assume these are for products which are already commercialized, and the customer is looking to add another site in the U.S. It should be a non-commercial, on-patent opportunity. Is that how we should think about it?
It's the whole spectrum. I would say that. There will be people who will be in the clinic who maybe, let's say, at that phase three point, and they've been using an offshore provider, and they now have got to that point where they have some compelling data, and their board is saying, "In light of the current geopolitical context, do you really want to continue with your primary supplier being in China or some other location?" We're seeing requests for people to, let's say, add us as a source to their existing source or, in some cases, pivot. I think the second one would be we would see some kind of on-market commercial, on-patent projects that would be looking at extra sources. Interestingly enough, we're also seeing some generic players looking at their drug product choices as well, particularly for Sellersville as an option.
We're seeing actually across three distinct phases some of those choices, and we're bidding on those each individually. It's not monolithic. It's a little bit more broad-based.
Okay. These phase three tech transfer opportunities are already commercial. This is above and beyond the 30-plus pipeline which we already have, right? That could add to the funnel rather than already being part of it?
Correct. What we're describing as RFPs would be for work we don't yet have.
Correct.
That therefore would be additive to what we've disclosed. It's already in our customer pipeline.
Understood. Just one more, if I could ask, the New Amsterdam opportunity, given that it's already in the public domain. Any timeline you can share? Could this be an FY 2027 opportunity for us as well if sort of the customer's commercialization pipeline goals as per plan?
I would encourage you to look at analyst reports for that company. There are many excellent analysts covering them, and you can look at that in excruciating detail or at high level to your discretion.
Okay. Perfect. Got it. Thank you.
Thank you. The next question is from the line of Bharat Gupta from Fair Value Capital. Please go ahead.
Hi. Thanks for the opportunity. Just one question with respect to the entry of a new Chinese player in the isoflurane market. Can you provide some colors like how it can impact our market share? What is the total addressable market size for this kind of a molecule?
There are no patents on the production technologies for isoflurane. We expect that there will continue to be new players entering and maybe even existing players working with new distributors or new companies that process downward steps. You will continue to see moving pieces in that market. Based on whatever math we have done, we think we have a world competitive cost position. Also, distribution does matter. We generally see the isoflurane market as stable, not particularly growing or shrinking. We think that we have a meaningful, strong position in it from a market share perspective. While there could be some minor perturbations with entries and movements, I think what we found with the Chinese, particularly in the larger Western markets, is that they find it harder to succeed than maybe some of the rest of world markets.
Overall, we're not anticipating any major shifts there, but we continue to watch, obviously, day to day.
Sure. That's really helpful. That's it from my side.
Thank you. The next question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thank you for taking my question. I have a first question on on-patent product sales. Is it possible for us to give on-patent product sales for the first half of this year?
I think that will be hard. We generally update it once a year. We will do that with our annual disclosures.
Sure. Second question I have on the ADCs. What amount of investment so far has gone into the ADCs assets? Is it possible to estimate some number around that?
Let's come back to you on that. I want to say it's north of $100 million because some of the investments are comingled or multipurpose. The example would be the GBP 90 million into the Lexington and Riverview. While the Riverview portion is dedicated specifically for linker payload, the investment in the Lexington expansion is multipurpose. It could be ADC, it could be not ADC. If you could maybe talk with our IR later, we can figure out how we answer that because the answer is I could give you different numbers depending on what story you want because of the multipurpose assets.
Sure. You have said that some of the assets already have been suboptimally utilized. Is it possible to quantify the number, particularly for Lexington and Riverview, in terms of capacity utilization?
Lexington, per se, as you are aware, that we wanted to create commercial-scale capacities, which is why we have announced an investment of about $19 million. That investment is currently underway. Lexington, in a way, was largely development-scale capacities, and the commercial-scale capacities are currently being put into place. As far as Riverview is concerned, we had done expansion a couple of years ago. Currently, we do have some capacity available to be able to meet the interim requirements. We have also done a small investment recently or commenced it to be able to handle payload linkers at the site.
One clarification to augment what Vivek shared is that the Lexington site does currently provide commercial supplies, but that size we can support is more modest. The whole benefit of the expansion is that it can handle much larger batches and double the volume of the filling capacity, but orders of magnitude more LIO capacity.
Sure. Sure. Got it. Thank you. That's super helpful. Thank you so much.
Thank you. The next question is from the line of Kunal Randeria from Axis Capital. Please go ahead.
Hello. Good morning. Sir, what would be the growth outlook for iteration in NST area? Because in sevoflurane US, you've seen now we'll be hitting a ceiling at close to mid-40% market share. So while I do understand you've spoken of non-US markets, what would be a realistic growth outlook for the next three to four years?
I think you've rightly noted that in the U.S., we're already on all the major GPO awards. Many of them are dual source. They're unlikely to go to single source. It's going to be hand-to-hand combat in the U.S. market. You can see that in that combat, we are showing market share growth. We think we're well positioned. That being said, it would be modest in the U.S. The primary growth opportunity remains in the ex-U.S. markets where we think we still have significant opportunity. If you look at our overall global positioning, we're still number four in the market. Therefore, there's room for us to move to number three or number two, and that's through market share gains. Now, that's where the Dahej expansion plays in and the hedge expansion plays into the cards because they give us.
Further capacity at a lower unit cost and a lower variable cost per unit. Our whole plan is to register a number of markets with these new sources of DigWall. That is taking some time. Also, just to be clear, we are trying not to go too aggressive on price too early to make sure that we can be disciplined in how we approach the market. We had hoped for and anticipated maybe more growth in the first half here, but we are trying to be responsible market participants. Therefore, we are being careful in how we approach it. We have significant headroom available. Our cost position is globally competitive, but we are trying to make sure we protect the product margin as we go down these steps.
We do see that as being a meaningful growth contributor for us in the medium term.
Sure. Sure. And second, just on this New Amsterdam product. So is this supply just for the U.S. market or it's a global supply agreement? Because New Amsterdam has outlicensed the European rights to Underplayer. So who calls the shots here? Is it New Amsterdam or the marketing partner?
Our relationship is with that client. They have their own agreements with other partners, which are their decision and their purview, but our supply at the moment is to them, and then they can pass that onwards however they feel appropriate.
I mean, sorry, I meant. Would you be supplying just for the U.S. market or even for the European market? Because that's going to get approval, I think, in the next few years.
We're qualified to supply those markets, and we don't believe they have other CDMOs qualified for those markets. It's our expectation, but not our right to supply all of the markets. Ultimately, they'll have to have their individual discussions with their individual marketing partners. We're ready and qualified and able to.
Got it. Thank you.
Thank you. The next question is from the line of Abdulkader Puranwala from ICC Securities. Please go ahead.
Yeah. Hi. Thank you for the opportunity. Just taking the question from the previous participant about your collaboration with New Amsterdam. Could you highlight what is the kind of investment you are doing here? In terms of the commerciality of this project, by when should we see that getting reflected in your numbers?
We have to be a little bit modest in how we describe this because while we are able to describe that we're working with them, the alignment was that it's a modest investment in the plant that they supported. We've been asked not to disclose the specifics, but it's modest, and it's largely equipping the facility, the rooms in the facility to handle the particular APIs mentioned because they have specific handling requirements. That's what was put in for that at the Sellersville plant. We think that's going to be part of why they picked us. In terms of the timing, I think I answered that earlier to another person asking, is I would encourage you to look at the analyst reports for that company.
If you were to anticipate the revenue for us, it would be in line with whatever the analysts think that the approval would be. I would encourage you to look at primary sources. It's going to be better for you.
Sure. Sure. And secondly, on the FI 30 guidance you guys have maintained. On the top line front, do we still kind of hold to the previously shared revenue contribution across your three segments and on the EBITDA margin as well?
I think for FY 2030, yes, we are continuing to hold to that guidance.
Sure. And last one from my end. The FY 2026 loading EBITDA margin guidance, which has been revised, does that also include other income in your assumptions?
Yes.
Yes.
That's right.
Okay, sir. Thank you. I'll get back to you.
Thank you. The next question is from the line of Sucrit Patil from Eyesight Finet rade Private Limited. Please go ahead.
Good morning, Sukrit team. My question is, as more global players enter the CDMO space, what is Piramal Pharma doing to build a strong edge, not just through capacity or client wins, but something deeper than that. Like a way of working or thinking that grows over time and makes the company hard to replace? Yeah. Thank you.
I think we obviously were just at CPHI, and we were able to see how our positioning would match up against our competition. I'd say there's a couple of elements. First of all, there's what I would call table stakes. You have to have the right approach to EHS and quality. We think that we're very good in those two areas. Our quality track record gives customers a lot of comfort that we won't have any supply interruptions due to quality issues. That's the first point. The second one is we've been putting disproportionate investment into technologies that not everyone can offer. I'll give an example, but I won't give all the details. One example is ADCs. Everyone says they want ADCs, but we've been doing it for 20 years.
We can show a track record over multiple decades that gives clients comfort that it's not just a, "We put money in and we have a shiny kit." It's that we actually know how to work it, and we have had people working on these things for literally 20 years, and we know how to do it. Trust that if you give a project, it'll go well is an important area. I think the next third point is really important. We've looked at our competition, and our competition typically has certain geographic centers. For example, you have a North America-centric competitor or a European-centric competitor or a Chinese-centric competitor or an Indian-centric competitor. We are seeing a lot of concerns from geopolitical issues.
We see our customers are sitting on the same side of the table with us, working out what we can do in India, what we can do in the onshore location, and in what combination. There are very few competitors who can do this. An example is actually the New Amsterdam project we just described, where they had a huge volume of complicated formulation work to be done that simply could not be done in our U.S. facilities at the speed and the quality they wanted. We did that in India. We did the initial tech transfer in Pittsburgh, and then we now have done it in Sellersville. You cannot combine these assets with too many of our competition. We do have similar stories in API and some covering API and drug products. I think that is a bit of our secret weapon, is the combination of.
Country-based assets all in a non-China frame. The last bit is we are obsessed with delighting our customers. It's something that's very important to us. We want them to be emotionally attached to us as a choice, not just satisfied with our OTIF. We are relentless in our understanding of how customers feel about us based on how we deliver, such that they can want to promote us and be referrals and give us their next project or refer a friend to use us. That's the last bit. I think we have a unique customer listening process that really does make a difference. Those are the points I would highlight that we think position us well to grow above market, notwithstanding the current quarter's performance.
Thanks. My final question is about margins and cost planning. Forward-looking question. As CDMO volumes and compliance costs keep on shifting, how are you planning to protect the margins? Are there any smart internal methods that you are putting into place that may help you keep the delivery quality high, but without hurting your profits?
I'd make two points. I think the single largest driver of our margin expansion, as we've probably shared on other calls, is the operating leverage of individual sites. We've shown how when the revenues at a site go up, the EBITDA margins go up. When the revenue at a site goes down, the EBITDA margins go down because of our multi-site network approach. Our growth is a very large contributor at the site level to our aggregate profitability, and it's one of our primary areas of focus. The second point about growing smartly, we believe technology and different areas of automation and even, in some cases, AI are going to play an important role in improving our productivity and our reliance on labor and changing how that equation works and even our use of materials and yield.
We have a lot of focus on use of technology and investment in that technology to allow us to not have to grow our personnel or our material cost in line with our revenue over the period to address some of the inflation or other compliance costs.
Thank you for the guidance, and I wish the entire team best of luck for Q3.
Thank you.
Thank you. The next question is from the line of Devansha from Dd Enterprises. Please go ahead.
Yeah. Hi. Good morning. I'm audible.
Yes, you are.
Yeah. The first question is, for the forward, we are continuously not getting the EBITDA levels what we are expecting from last, if I'm not wrong, from the last three financial years. Is there any plan to get it on the track?
At a high level, last year, we believe we met our guidance as to what we said we would do, which was an improvement over the prior year. That year was in line with our expectations and our communications and a positive movement. This year, we did have an event, which was driven largely by a single customer destocking, which we described when we set out our guidance for this year. Also, we have had the additional subsequent events, which we are working to address. We do not think it changes our long-term guidance, as Nandini mentioned, for FY 2030, but we do accept that we have had to restate our guidance for this year. We do think the underlying factors for our performance in the medium and long term remain intact.
Yeah. The main question is, is there anything? Like last quarter, we have seen that our biggest customer got a destocking of the inventory or something. Is there anything, like we cannot rely on something like this? Or it's a nature of the business only that this can be done? Sorry, this can be happening for the quarters also? Any plan to hedge all things? Sorry. Yeah.
I think the plan is to actually get individual scale at each of the individual sites so that if there is an issue going forward, with a large customer destocking, you have enough other business to make up and see if you can keep the operating levers the same. I think that's the plan.
That's fine. Thank you for my—that's all from me.
Thank you. The next question is from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.
Hi. Good morning, everyone. The first question, apart from the slower funding environment and the possibly slower pickup in sevoflurane in ROW markets, are there any other reasons driving the cut in FY 2026 top line guidance?
I think these would be the two main reasons. I think the other one would be our supply constraints for some of our other critical care products. While they are beginning to resolve, I think we're still facing some short supplies.
From CDMOs.
From our partner CDMOs there.
Got it. Peter, on this sevoflurane issue, you spoke about not being too aggressive on pricing in the first half. Which are the key markets, maybe a few markets you could highlight you are referring to within ROW?
I would just look at the large ROW markets that you would all associate as being large pharma markets. We're playing across the field, and we're just trying to be careful about the steps we take and the order we take them.
Got it. The second question is from a timing standpoint across tech transfer as well as the pipeline opportunities in CDMO. Which are the ones that are likely to manifest earlier? Would it be tech transfer or the pipeline ones? I know this is not an easy question to answer, more of crystal ball gazing, but any sense on that would be helpful.
This is general principle, not specific answer. The Holy Grail from a sales team perspective is always the tech transfer. They are probably fewer and less frequent because that means something has to have gone wrong at the current CDMO or some major change at the client set because why tech transfer is the Holy Grail is that you can go directly from the plant to the plant. Most development work requires lab work first and then later plant work, and you did not have to wait for the clinical trials to season. One would. We find tech transfers if we do planning or prospecting the area that we want to go for, but they are kind of harder to predict, harder to secure, and less frequent, but obviously desirable from a timing perspective.
That being said, a more assured path for growth is the winning standard development orders that require lab work and then scale up and then clinical results to manifest and so forth. That is the follow-the-molecule strategy that has been present for a long time. That is what you can rely on and therefore the foundation of any strategy.
That's helpful. The final question, were sales of the major product which is currently witnessing destocking spread out largely evenly in FY 2025?
Yes. That was part of the benefit we got last year.
Got it. That's it from my side. Thank you.
Thank you. The next question is from the line of Yashthina from MIPL Family Office. Please go ahead.
Hi. Thank you for taking my question. I just broadly wanted to understand what kind of traction we've been seeing in the European markets for NeoAntiCon and, going forward, what kind of growth can we expect from this product?
We're still early in the launch phases for that, and it's probably too early to break out some specific guidance, but we would anticipate it to be, I'd say, modest in revenue contribution. We realize that we may have overplayed our communication of it in some earlier meetings because we wanted to give it as an example of the types of products we want to add. From an overall salience and materiality standpoint, it's always going to be modest and has been modest, and we would expect it to grow, but it's never going to be as big as our other current large products. We wanted to talk about it because it's an example of a product where there's limited competition and significant value over the standard API option that's not targeted at the pediatric or neonatal use. Short answer is it's still exciting.
We're still finding growth in it. We're still early in the launch, but it won't be a material growth driver.
Got it. Secondly, on the complex hospital generics space expanding into the rest of the world's market, you mentioned that you were trying not to be too aggressive with pricing on that front, but wanted to understand if you're going to be maintaining similar margin profiles to the product in the U.S. or what kind of margin profile can we expect from the rest of the world's market going forward?
We do not see yet reason to believe that the margins will be lower. What we did see is that the input prices, even for our heavily vertically integrated supply chain, have come down for us. We were hoping initially that we could maintain some amount of the pricing and get a benefit. What obviously is other people are buying those same starting inputs that we are. That may have flowed through the price into the market faster than we would have wanted. At the current stage, we do not yet see a reason why we should anticipate different margins than we have been projecting or enjoying. It is just that we were trying to be a little bit smart about how we approach the pricing in each of those different market entry events.
Overall, we are seeing probably better than anticipated RM purchase prices, and even some of our internal plants have performed a bit better than we thought when we designed them for both the hedge and take-all. We think we have headroom here to not have to choose so far at the moment.
Got it. My last question is more of a bookkeeping question. Our effective tax rate has been a bit volatile in the preceding years. Could you maybe provide some color as to what it could be going forward in the next two to three years?
Yash, I don't know if you've been hearing our calls before, but for us, the effective tax rate in each jurisdiction is what is actually applicable in the jurisdictions in which we operate. The reason why you see the volatility is because of the mix. The higher the quantum of profitability from sites where we are currently paying taxes, the higher the ETR goes up. We do expect this year it to moderate, but it will completely depend upon the kind of mix of profitability between sites where we pay taxes versus the sites where we currently don't pay taxes or we have carry-forward losses. That's the reason it's slightly difficult for us to give guidance on a very specific ETR rate.
We do expect that as our profitability of our overseas sites goes up, the ETR will start coming down, and it should normalize to about 24%-25% at the right scale of utilization.
All right. Got it. That's it from my end and all the best. Thank you.
Thank you. The next question is from the line of Bhavani Kulkarni, an individual investor. Please go ahead.
Yeah. Hi. I was just wondering, we have seen that there is a debt reduction of INR 2.28 billion from the last year to this H1 FY 2026. How are you doing that? Because we are seeing there is a negative bottom line, but we are paying off the debt. What's the plan there?
Mr. Bhavani, there are multiple initiatives currently to ensure that we are operating our overall net working capital in a robust manner. Whether it is increasing efficiency of collections, reducing the quantum of inventories that we are carrying, or seeking early refunds of the GST because we are largely an export business, getting the GST credits faster is how we are ensuring it.
There is a whole set of initiatives to kind of ensure that the cash collection cycle is faster and we are able to maintain the debt at a certain level.
Okay. The follow-up question is, can we see some more debt reduction in the coming quarters?
Given the fact that we have guided for a certain level of CapEx, which we will incur, as you are aware, we have incurred about $49 million of CapEx, and we do expect us to spend about $100-$120 million kind of CapEx, we will see a modest increase in debt in the subsequent quarters for the year.
Okay. Thank you.
Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited. Please go ahead.
Hi. Thanks for the opportunity. Ma'am, I have one question on the CDMO side that because of this volatility in supply, and you say that once we have a more product pipeline, then our EBITDA will be a stable EBITDA that one can look for. So can you guide us? I mean, when do we really see a good kind of product portfolio and sustainable supply that can, I mean, give some comfort on EBITDA? When it will be a one-year, two-year timeline that we expect?
I think we can talk more about guidance for specific years later on. I think we're still holding for the FY 2030. Both revenue and EBITDA, and I think there you will see we will have doubled revenue. So we'll be a $2 billion company by then with a 25% EBITDA margin, which I think is a sustainable one. I think we will continue. It's not a hockey stick, and we continue to work on track for that.
Thank you and all the best.
Thank you.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Gagan Borana for closing comments.
Thank you very much. We hope that we were able to answer most of your questions. In case you have any follow-up questions, please feel free to reach out to me. Thank you and have a good day.
Thank you. On behalf of Piramal Pharma Limited, that concludes this conference. Thank you for joining us today, and you may now disconnect your lines.