Ladies and gentlemen, good day and welcome to the Sai Life Sciences Limited Q4 fiscal 2025 earnings call. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from EY. Thank you, and over to you, sir.
Thank you, Navya. Good evening to all the participants in this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that we've made the results, and the same are available on the company's website. In case you have not received the same, you can write to us, and we'll be happy to send the same over to you. To take us through the results of the Q4 and fiscal 2025 earnings call and one-pager summary, we have top management of Sai Life Sciences represented by Mr. Krishna Kanumuri, Managing Director and Chief Executive Officer, and Mr.
Sivarama Chittur, Director and Chief Financial Officer. We will start the call with a brief overview of the quarter gone past and then conduct the Q&A session. With that said, I'll now hand over the call to Krishna. Over to Krishna.
Thank you. You're welcome. Good evening, and thank you for joining us today. We are pleased to report robust performance for fiscal 2025, strong growth in Q4 driven by consistent execution and growing traction across our integrated service offering. Our CRDMO model continues to be a key differentiator, enabling us to provide seamless support from discovery to development and manufacturing. During the year, we made meaningful progress across multiple fronts. We expanded capacity at key facilities, onboarded high-quality scientific talent, and deepened our relationship with customers across the U.S., U.K., and E.U., and Japan, including 18 of the top 25 global pharmaceutical companies. The major highlight of the quarter was the launch of our dedicated peptide research center at our integrated R&D campus in Hyderabad. The facility is equipped with advanced automation robotics and high-throughput systems to support complex peptide synthesis and discovery.
As demand rises for peptide-based and other emerging modalities, this investment positions us well to cater to the next generation therapeutics. We are equally proud to have been certified as a Great Place to Work for 2025–26. This recognition reflects a strong culture, collaborative environment, and our continued focus on building an organization rooted in integrity and scientific excellence. Sustainability remains essential to our long-term vision. In line with this, we partner with DHL to implement their GoGreen Plus program for emission reduction and international shipping. We're also embedding sustainable practices and digital transformation across our operations to drive efficiency and reduce our environmental footprint.
Now, turning to our financial performance for fiscal 2025, we deliver strong growth supported by demand across both our CDMO and CRO segments. Revenue grew in double digits year over year, with the CDMO and CRO contributing 63% and 23% of the total revenues, 33% of revenues, 37% of revenues, respectively. EBITDA grew by 42%, with margin expansion of 458 bps. Our PAT saw a 105% increase over the previous year, driven by operating leverage and improved efficiencies. Looking at the broader industry, the global CRDMO sector continues to see strong momentum, increasing emphasis on supply chain resilience, cost pressures, and developed markets, and the rise of complex new modalities that are driving demand for integrated, high-quality outsourcing partners. India, with its scientific capabilities, cost advantage, and growing infrastructure, is well positioned to capture this opportunity.
This year, global policy changes and supply chain shifts have continued to reshape the pharmaceutical industry. As companies seek reliable cost-effective partners beyond traditional hubs, India is emerging as a strong alternative. With our scientific depth, integrated model, and global customer relationship, Sai Life Sciences is well positioned to support this transition. At Sai, we are confident in our ability to play a leading role in this shift. Our investment in talent, capacity, and technology are aligned with evolving customer needs and market dynamics. We remain focused on delivering high-quality, efficient, responsive solutions to our global clients. In conclusion, fiscal 2025 has been a year of progress, resilience, and preparation for the future. Over the next few years, we aim to drive sustainable growth by expanding capabilities, deepening customer partnerships, and strengthening execution across the value chain.
With that, I will now hand over the call to Shiva, our CFO, who will walk you through the financial performance.
Thanks, Krishna. Thank you, everyone, for joining us today. I'm pleased to share the financial highlights for fiscal 2025, which reflect a year of strong execution, operational discipline, and a continued focus on building a resilient and scalable business. We closed fiscal 2025 with a revenue from operations of around INR 1,595 crores. This reflects a 16% year-on-year growth as compared to INR 1,465 crores in fiscal 2024. This growth was driven by sustained momentum across both our businesses, the CDMO and the CRO segments, with strong contributions from ongoing projects and increased customer engagement. Our EBITDA for the year stood at INR 425 crores, a 42% increase from INR 300 crores in fiscal 2024. This translates to an EBITDA margin of 25%, up from 20% last year. The margin improvement was supported by better operating leverage, cost optimization, and increased capacity utilization.
We are pleased to see our profitability profile moving closer to our long-term guidance of 28%-30% EBITDA margin. Profit after tax for fiscal 25 stood at INR 170 crores compared to INR 83 crores in fiscal 24. This makes a strong 105% year-on-year increase. This growth was supported by improved operational performance, stable finance costs, and disciplined cost management. From a balance sheet perspective, we completed the planned INR 720 crore debt repayment as part of the money raised through the IPO process. This significantly reduced our leverage. As a result, we expect to see lower interest costs for fiscal 26. On the return metric side, our ROCE increased to 12% as compared to 10% in the previous year. This has been supported by better asset productivity and earnings.
We've maintained financial discipline throughout the year, and this is seen in the working capital days that stood at 117, showing efficient cash and inventory management. We ended the year with a CapEx of INR 408 crores, in line with our investment plan to expand manufacturing capacity and strengthen our discovery capabilities. These investments are core to our strategy of supporting complex programs across late-phase commercial stages and to further scale our service offerings in the year ahead. As we look to fiscal 26, we remain confident in our financial foundation and growth trajectory. Our focus will remain on expanding capacity, optimizing margins, and improving cash flow generation. We are committed to the growth projections we have given in the earlier call, and we continue to build on the momentum for fiscal 25. Thank you. I would now like to open the floor for the Q&A session.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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. We take the first question from the line of Binay from Morgan Stanley. Please go ahead.
Hi team. Congratulations on a good set of numbers. I just wanted to focus on the quarter. So when we look at revenues, they're up around 31%, but the EBITDA growth on a YOY basis is lagging revenue growth. So could you talk a little bit about that, in particular this operating expense line item, which has seen almost a 70% jump on a YOY basis? So that's the first question.
Sure. Thanks, Binay. I think one of the things that we have mentioned in the prior calls and in our roadshows over the lead-up to the IPO is that this business needs to be looked at on a year-on-year basis, rather than on a quarter-on-quarter basis. On your specific question on the operating expenses or other expenses going up, there was a prudent provision that we had taken on bad debts and contract assets, and that's the reason for a one-time increase in costs and that kind of thing.
How much was this provision? Could you talk a little bit about what exactly is this provision?
So this is a question of at least talking to the partner or the customer, where we have not been able to realize what we needed to get from the customer. And while we are, at this point in time, working towards it, we thought it would be prudent for us to take the impact, given that it's slightly older. And we've taken a 100% provision against it, and that is the impact. The number is closer on INR 34 crores.
Okay. And that is all sitting in other expenses in this quarter?
Correct, and that's the reason why the other expenses line item is showing up high.
Thank you.
Technically, that's a 6% impact on the revenue for this year and a 2% impact on the entire fiscal 2025 revenue.
Right. And secondly, could you talk a little bit about next year? What is your current capacity utilization rate about CapEx next year? I recall there is one line capacity coming up in April. So if that already happened?
So just for capacity goals, we added manufacturing capacity in two phases. One part came online probably in the November timeframe. Another half is coming online in May. So that would increase the capacity by close to about 30% for the year. And capacity creations are fairly high, and we're seeing good visibility in the business. So I think there's been significant traction in the CDMO business, both from the R&D side and manufacturing side, as well as discovery. So we have significant CapEx plans, which Shiva can talk a little bit more, both in further expanding our manufacturing capacity from where we are now, also increasing our process development capacity and discovery capacity, and also some new modalities as well, which is a growing part of our business. But it seems to be pretty strong with the info.
All right. Great. Great. Thanks for that. And Shiva, could you comment on the CapEx number for next year?
Sure. I think to start with, I think question on capacity utilization. I think we had a great capacity utilization of 57% for the last financial year. I think just overall market, where it is, there seems to be a lot of growth momentum that we are seeing on both sides of the business. Remember, while there have been comments about slowing down on the biotech sector, but if you look at our CRO revenues, our CRO revenues have grown around 96% from the last financial year. If I look at the profile of where we are with respect to our CRO, we had kind of given you an indication during the IPO process that our pharma revenue has gone from a very minimal number to around 30%. That was what we said last year. Today, that number has increased significantly from close around 37-38%.
We are very confident in what we are seeing in the market. Our current biotech customers that we are working seem to be well funded. That said, the funding situation is a little bit of a wait-and-watch at this time. However, based on the visibility that we are seeing, we are broadly looking at a CapEx of close to INR 700 crores for the next year. The way we are looking at this is we're probably looking at close to around INR 550 crore or so as basically we are currently looking to do. This CapEx will be necessary for us to deliver our fiscal 2027 numbers based on where we see visibility.
In addition, we are working on investment of around INR 50-60 crores on the new modality cycle, followed by there are also other CapEx that we are the balance is actually based on business visibility that we are currently advertising, which would then increase our CapEx to INR 700 crores. That's how we are looking at CapEx for fiscal 2026.
Right. No, no. That's an ambitious plan. Any views on funding of this CapEx?
It will be both internal accruals and debt, in addition to the money that we still have from the IPO process.
Great, team. I'll come back in the queue. Thanks.
Thank you. Participants who wish to ask questions may please press star and one at this time. We take the next question from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.
Hi. Good afternoon, everyone. So you have grown very well in the CRO segment over the past two quarters, and you did mention about a higher share, 30% increasing to 37% from the big pharma clients. Firstly, what is driving this higher engagement? And secondly, I mean, when you talk about your biotech customers being well funded, I mean, clearly things have slowed down further over the last few months after seeing a recovery in CY24. So how should we look at growth in the CRO segment going forward?
If you look at just taking a step back, the CRO segment has been slowing down significantly in the last couple of years itself. So I think what you will see in the next couple of years, at least both on the discovery and overall push to India diversification, I think pharma will be the lead indicator as we go forward. Biotech, again, there'll be the better-funded biotechs who will basically work both India and China. What we are saying is that while the sector itself is slow, this is just I'm talking sector specific, not Sai specific as well. You will see a lot of the business coming to India driven by pharma looking to invest long-term in diversification. These are not short-term contracts where they're coming in and giving huge volume day one, but they're really building up this capacity over the next four, five years.
You will see pharma continue to build relationships in India, which will go over a period of time. The better funded biotechs right now, which will do work both India and China, but you won't have these huge spikes in revenue which came in the past in 2021, 2022 with all the funded biotechs. So I think you will see a period of leveling off next two years. So that said, wait and watch. We have to see how the biotech environment shakes up, see if there's any upside to it. But our thesis, and most thesis is based on pharma continuing to expand the portfolio and the better funded biotechs still managing global footprint. That's how we're looking at it at this point.
But the environment is still pretty tough and very hard to read right now because they're just reacting to the Trump news, and it's all relatively new. So I think everybody's just taking stock of the situation right now.
Understood. Apart from these tailwinds for India as a whole, as a sector, I mean, would you like to call out anything specific for us? I mean, for instance, say the Boston Center really contributing more meaningfully, or has it contributed more meaningfully in fiscal 2025 versus FY24? Or any other such qualitative insights would really be helpful.
No, if you look at the qualitative insight, we are the only one who's been growing discovery for the last, let's say in two segments, right? We're the only company so far which is really growing discovery for the last three years irrespective of the market is. So that trend continues. And that is a combination of everything, right? The Boston side, the Indian side, the combination of overall integration package. And the fact of the matter is on the CDMO side, we are one of the strongest R&D bases. So if you see our contribution, it's coming not only from just commercial molecules, it also comes from the development pipeline. So we are meaningfully engaged with customers end to end, right from discovery to development. I don't think anybody has this footprint at this point.
So I think our business model is uniquely different enough and we're deep enough across the value chain, which is really creating this upside potential for us. And also, it helps us better balance upside and downside of the business, right? Because this business is actually a fluctuating business. But because we're well diversified between discovery, development, and commercial, we're well hedged at that point to balance out the growth.
Understood. The second question is on CDMO. If you look at our growth in CDMO or CMC in fiscal 2025, while we saw very strong performance in FY24 in terms of growth, fiscal 2025 growth was, I mean, relatively more modest. So in terms of the commercial visibility we have going into FY26 and maybe beyond, how are you thinking about the opportunity specifically for the company?
Yeah. So, I can, Alankar, going back to what we had spoken during the roadshows, I think what we had specifically stated was the timeline on certain molecules that kind of scaled up for the first time, and then the follow-on purchase order will result in lower growth than previous years. This is the commentary that we had provided last time. However, where we are seeing today, fiscal 2026, we see a strong growth momentum. We see much better visibility and stronger pipeline.
Got it, sir. And one final question before I come back. How should we assess the impact of the two macro events for the industry? One is tariffs, and the other is the recent MFN order?
I think it's too early to tell. I don't think anybody yet is making any decisions on what is transparent because it's very fluid, and nobody will know for any length of time exactly where this is going to settle, so I think nobody is making any short-term or short-any decisions yet in terms of how they want to pROCEed, and any impact will be very long-term, but won't be short-term in nature.
Understood, sir. Thank you.
Thank you. Participants who wish to ask questions, may please press star and one at this time. I repeat, to ask a question, please press star and one now. We take the next question from the line of Geetha Parekh, an individual investor. Please go ahead.
Wanted to understand the split of discovery business between chemistry and biology, and what is the outlook for biology? Are you seeing any pricing margins there? This is the first question. Second is, how has the pricing moved for FTEs given the China plus one pressure?
To answer that question, I think the way we look at it, biology and DMPK together, we consider their biology services. So our split is 60% discovery chemistry, 40% is what we call biology services, which includes both DMPK and biology. And so far, we have not had any pricing pressure. We have held our pricing, and we're getting our business as usual from a pricing standpoint. We have not seen any pricing pressure yet.
Okay. Thank you.
Thank you. We take the next question from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hi. Good afternoon, all. I was just trying to figure out your 1Q fiscal 2025 numbers from the three quarters that you have reported. Mathematically, I'm getting an EBITDA margin of only 9% for the first quarter of the year versus 25%-27% in the next three quarters. So is that correct, or is there some error somewhere there?
No, it is correct. I think this is primarily some bit of seasonality on the CDMO side, which impacts a lot of the costs are fixed in nature, which then impacts our overall margin. And if you look at our first half versus the second half, there is definitely a scale improvement with respect to EBITDA as deliveries kind of ramp up in Q3 and Q4. And you are correct about what you saw.
Okay. So should we expect a similar seasonality? I mean, to some extent, it is a lumpy business that I understand, but this kind of volatility should be expected in Q1 of most years, or is it going to be more or less even?
Generally, the first half, without going into a specific for the next quarter or the second quarter, specifically, I would say that our first half will be lower than the second half. As business kind of grows in terms of larger commercial volume products, we expect that will get smoothened out much better than what it was in the past. But we will continue to see some amount of swings between H1 and H2.
Understood. So the full year growth of 15% that you have done and the full year EBITDA margin of 24%, that I can take as more or less a guiding sort of number going forward. Is that correct?
Our long-term guidance that we've provided, and we continue to reiterate, is that we expect to get to a better margin of 28%-30% in the next couple of years. We expect to, over a 3-5-year period, and we are reiterating the fact that this business has a certain amount of lumpiness where you will see higher growth in a year and probably a lower growth in the following year. We are saying on a 3-5-year period, our average growth CAGR on revenue will be between 15%-20%.
Got it. Thank you very much.
Thank you. We take the next question from the line of Madhav from Fidelity. Please go ahead.
Hi. Good evening. Thank you so much for your time today. Just want to understand the CapEx. I think we have steadily increased the CapEx guidance, which is quite positive, but could we revert some of the CapEx momentum for the business? I guess you understand that we need to front-end in this industry, the CapEx, to win more business in the future, but if you could just throw some more light, that will be very helpful.
Just to give a little honest, I think as we're going into the year, as we are looking at maybe CapEx forecast last year, now we've seen more visibility in terms of several modules scaling up and needing more demand. So this is really driven by what we're seeing in terms of pipeline demand from our modules scaling up and going commercial. Plus, a big difference for us is we've seen a huge demand in terms of our process development work, where we've done multiple leads across the development, where we're seeing a significant increase in our R&D resources for the pipeline we have accommodated, which also will directly play to manufacturing. So I think a lot of this CapEx increase is based on increased visibility we've had in the last six months, more than it helps.
That's quite positive. And what would be the status of the INR 700 crores into our sort of research business and the manufacturing both?
I'll have to give you I don't have the split as such right away, Madhav, but broadly, I would say 60%-65% would be on the manufacturing side, and 35% will be on the R&D side. That said, most of the CapEx that we would spend this year, other than equipment that Krishna alluded to with respect to the increase in R&D, will all be for CapEx that we would need in fiscal 2027 because most of the infrastructure that we will start building this year will start resulting in a plant or an R&D center in fiscal 2027 post-construction of the buildings.
Understood. And just one more question from my side. Now that we step up on CapEx, do we still sort of think we can? I know you've reiterated the margin guidance of 28%-30%, but is it kind of factored into our guidance? Because I assume that if you step up on CapEx, you would have some fixed costs that should come in. But does that subsume in the guidance itself the some initial fixed costs from the CapEx?
We continue to maintain the guidance of our ability to hit 28%-30%. We're not changing the guidance. That's what we're targeting for still.
In the next couple of years, you said, right?
A couple of years, exactly.
Okay. Perfect. Great. Thank you. Thank you.
Thank you. Participants who wish to ask questions, may please press star and one at this time. We take the next question from the line of Dhaval Shah from Jefferies. Please go ahead.
Hi team. Thank you for taking my question. My first question is, what is our current FTE strength, and how do you see it moving in FY26? Secondly, how do you see our CDMO molecule pipeline shaping up in next year? Any commercial molecules that you expect in FY26, any meaningful phase three addition in next 12-18 months, which is giving us a lot of visibility and confidence? And lastly, on the CapEx side, what is our maintenance CapEx out of this INR 700 crores CapEx that we are going to do?
Sure. So let me take the CDMO question first. I think with respect to new molecules going commercial, there was data not within the control of the CDMOs like us. We've seen two large volume products that received phase three, a good phase three readout, as announced by these pharmaceutical companies. The timing of when it will add to our commercial pipeline is something that we don't know at this time, but these are data that we have seen in the public space. I think with respect to commercial products, I think a lot of the growth that we have seen this year, commercial product volume has increased, and that is driven by certain products scaling up. And we are seeing visibility with respect to some of these products scaling up better again in the next year. So that is what is giving us the confidence.
The second reason for the confidence of the CDMO business is primarily what Krishna mentioned earlier. The FTE deals that we are working on today are leading into scale-up opportunities that then kind of result in manufacturing revenues in addition to the R&D revenues that they get. So these two factors combined is what is making the pipeline look very strong.
What's our FTE strength right now? Do you see it meaningfully changing during the course of the year?
I think we expect our FTE business to kind of change. An average FTE from last year to this year, we expect at least 12%-15% growth from last year to fiscal 2025 to 2026.
Understood. And what was the growth in fiscal 2025 in the FTE strength?
We grew by close to 27%.
Got it. Lastly, what is our maintenance CapEx?
Roughly around INR 70 crores or so.
Okay. Got it. Thank you.
Thank you. We take the next question from the line of Deepak from Carnelian Capital. Please go ahead.
Yes. Thanks for taking my question. So the first question is on the gross block and the CapEx part. So when I see the gross block is around 1,680 crores of gross block, and our sale is also very similar. So 1x asset turnover, which we have. And I see that there is almost more than 30% comes from the CRO, where generally asset turnovers are better. And when I compare with the other CDMO companies, so their also asset turnover is 1.5-2x. So any reason why our asset turnover is not similar to the other companies in the same space?
I think what you have to factor in is the facilities that we are bringing in today are fairly new, so we are in an investment phase. There are organizations, and if you look at the overall CDMO globally, asset turnover is in parallel with a lot of the players that are expanding on a constant basis. We see ourselves reasonably comparable to the rest of the market. I believe even with the addition, I think we had given a guide in the next three, four years of a 1.2-1.4 net fixed asset. That's what we had actually committed, and I believe we will get to 1.2-1.4 based on where we see our long-term fiscal plan.
Thanks. And second, how much is the rental part in the P&L in this FY2025?
I don't have that number in front of me. We can provide that data separately.
Okay. And third, if you can provide the outlook for FY26, have we given any guidance for FY26? Because I couldn't see in the press release, and PPT has not. I don't think it has been released.
We are not giving guidance for Fiscal 2026. We continue to reiterate what we mentioned in the last conference call. Our revenue growth cadence for the three- to five-year period will be 15%-20%, and the longer-term aspects will be around the 28%-30%. If you look at what we said, we were at 20% in Fiscal 2024, and we said we'll reach 28%-30% in three years' time, three- to four-years' time frame. We are currently at 25% in Fiscal 2025.
So this 25 will go to around 28%-30% in the next two more years?
Yes.
Okay. Thank you very much, and all the very best.
Thank you.
Thank you. We take the next question from the line of Alethea from Athena Investments. Please go ahead.
Hey, guys. Thanks for the opportunity. Am I audible?
Yes.
Yes. So in the CRO side.
I'm not so much in your voice, ma'am. Could you just take care of that? There's a lot of background noise.
Is this okay now?
Yeah.
Yeah. So I have seen in the CRO segment, there's a five-year agreement with the Schrödinger. So what's the how much does the deal contribute to overall CRO revenue? And when do you think that this deal is going to expire for this CRO segment?
We generally don't comment on specific customers or specific customer revenue, but we had announced at that point in time that there is a five-year deal, and it is a five-year deal. So without going into much detail, that's really where I would leave it.
Okay. Sure. And the other thing is I would like to know the revenue split in the case of geographical regions, like how much we are getting from the U.S. and U.K. or something like that?
We don't provide that information, given that information is not meaningful from a CDMO CRO perspective, because you could ship compounds at different locations depending on where that compound needs to go as opposed to where the company is located, and hence we don't provide our tracker information.
Okay. Sure. And the other thing is if I look at the manufacturing facilities, this Unit 3 and Unit 4 are the major facilities for you. And what's the revenue contribution from each site it would be like? And if you are I mean, I have seen that in capacity expansion, you're going to open one more unit, right? So what's the difference in between them?
So, we don't have products that work in both units simultaneously or serially during a chemical transformation process. We don't track revenue contribution by units. We look at it from a business perspective, and we've actually provided the data between the CDMO and the CRO segment. I think some of the expansion that we are talking will happen both at Bidar, and we're also working on an alternate site just for supply security. These are two locations. We would not expand our unit 3 capacity.
Okay, so is that new facility very similar to the Peptide Research Center?
Yes and no. In terms of they are a small molecule facility. There would be changes in terms of what you actually put in there without getting into technicalities, but they are broadly small molecule facilities for manufacturing intermediates and APIs. That way they are similar, yes.
Okay.
Thank you. We take the next question from the line of Arjav. We take the next question from the line of Raj from Arjav Partners. Please go ahead.
Hello. Am I audible?
Yes, you are.
Sir, how much is the CDMO pipeline?
Sorry, can you repeat the question?
CDMO pipeline. So we don't.
Can you tell me the pipeline?
We don't give any pipeline guidance. I think all that we are saying is that we would have a longer-term growth catered. We don't provide specific pipeline guidance with respect to any of the business. All right. Sir, can you provide the breakup of the CapEx? I just skipped a point in your earlier comment.
I think what we said is that an overall INR 700-plus crores of CapEx, broadly split around INR 550 crores or so of CapEx based on current visibility that we already have. And these are CapEx. Majority of them are for CapEx for fiscal 2027 delivery. We are investing between INR 50 and 70 crores of CapEx on new modalities, which is peptides, ADCs, and oligos. And then there will be some follow-on CapEx based on visibility that we are currently advertising, but we would trigger those CapEx based on visibility during the year.
All right. And sir, I also skipped a point on the provision which you made in Q4, around INR 34 crores. What exactly was that provision about?
As we've mentioned, this provision was against a delayed billing to our customer, and as a matter of prudence, we have taken provision in the books while we continue to work on recovery.
All right. Yeah. Okay. Thank you.
Thank you. We take the next question from the line of Nishant Gupta from Minerva Capital Research Solutions. Please go ahead.
Hi. So thank you for the opportunity. Sir, I am very new to your company. Sir, I just wanted to get a bit broader view. You are saying that the target for a longer-term top-line growth is around 15%-20%, right? The company is very expensive if I put that comment in an investor point of view. So could you explain how will the growth happen in the longer term? Or are you being very conservative when you're giving a 15%-20% kind of a growth versus how much is the return on equity which the company can deliver? So I'm just trying to put the pieces together. Is there any particular molecule which is bringing some kind of substantial growth eventually? So I just wanted to understand this.
I think, just to be honest, this industry just to be very clear, overall, if you just look at the industry as a whole, this itself is a cyclical industry. There are so many variables, right? Variable one is clinical success of molecules. It's basically timing of commercial launch, successful or failure of commercial launch. So essentially, we're an industry which is basically cyclical and doesn't have a straight-line growth projection. Look historically, the upside, if you look at the last 10 years, the industry has grown. So we never give you guidance by year or quarter because we just don't control it. And obviously, we are investing based on the pipeline visibility. But obviously, guys, we are giving guidance at 15%-20% over a three-year period or a five-year period. That's how we look at it. But we make investments as we see opportunities arise.
And that's what we're guiding you to at this point. It's not anything different from what we are seeing. And it's hard for us to forecast. If I make an investment today, it doesn't mean that revenue is going to come tomorrow. A product might come in 18 months. So it's very hard for me to give you those indications at all. So I think what you're asking for is not possible to give you in this industry. And so that's a hypothesis you'll have to make yourself based on the trends you see in the industry.
Got it, sir. And any view on return on equity? What is that number that can probably look like in the years to come? On a more longer-term perspective, obviously, there are a lot of variables which will influence it, but if there is a number that we can get.
We generally track ROCE and then provide guidance through ROCE. We've done even in the last call. We have committed to a mid- to high-teens ROCE. We committed that during the IPO process, and we've also committed that during our last call. We continue to maintain faith we will be able to get to the same mid- to high-teens ROCE.
Got it, sir. So thank you and all the best.
Thanks, Madhav.
Thank you. We take the next question from the line of Madhav from Fidelity. Please go ahead.
Hi, good evening. Thank you so much for the follow-up. I just had one more question. I think if you look at the global CRDMO landscape today, obviously, there are people saying that demand is a bit softer, funding has not recovered as was expected. But it's quite supportive to see your commentary that we're stepping up CapEx and seeing good client flow. Could you sort of put the two together in terms of a weaker global environment? We continue to grow at a good pace. So is it more the supply chain shift which is kind of helping us, or what's kind of helping us sort of maintain our steady growth momentum?
As of right now, it's mostly supply chain shift, right? I think that's what you have to attribute it to more than anything else. It's not like the sector is growing any more different than usual, but I think the supply chain shift is a major factor benefiting us. And the fact that we had a relationship with most of these customers the last 20 years, and those are panning out for us at this point.
Have you seen active projects already shifting from some of the larger CRDMO players in China and coming to Sai and to India? Have you seen that kind of project shift happen? Yeah.
That's been going on for the last five years plus ever since COVID hit. So that's business as usual nowadays.
Right. Right. Okay. Got it. Understood. Thank you.
Thank you.
Thank you. We take the next question from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.
Given we are one of the few integrated players based out of India and pretty big, how would you assess, how would you compare the supply chain diversification trends across CRO and CDMO? How would you differentiate between the two?
I don't think, see. I think it's a question of timing and space. I think everybody wants to diversify CRDMO, CDMO. The trends change by time, right? If I take a step back and just look at that diversification, the first diversification started in early 2021 post-COVID. You saw basically commercial molecules or later phase molecules shift to India. Then you saw the diversification in terms of R&D pipeline shift in India on the CDMO sector. And then we've seen a significant shift in the discovery business also starting to shift to India from large pharma primarily. In between, there was a lot of shift to biotech, which slowed down a little bit. But essentially, you are seeing shift across the board.
Every company we are talking to now is taking a much more global view of saying, "How do we integrate our discovery operations to our manufacturing and development operations?" So I think the trend is all these are moving. They're moving at different paces, but the end goal is companies want to, as much as possible, with as few companies as possible. And that's not only talking about discovery, development, commercial, but what other modalities we can do with people. Can we do ADCs? Can we do oligonucleotides? So I think people are looking to concentrate their footprints more and more with fewer companies who can integrate better with their supply chains, essentially. So I think this trend will continue, and the integrated players will definitely benefit more than most in the long run.
Got it. Would you say, sir, this was possibly one of the reasons behind investing in the Peptide Research Center as well? Discussions with client, incoming interest, and possibly, I mean, some benefit coming in from the diversification trends as well?
I think, look, I think we've been talking to our customers actively in terms of what are the areas of interest. And they've given us three, four areas of what is their key focus. They say 50% of the molecules are traditional small molecules. And the three main areas they're focusing on right now internally are all their ADCs or I'm just going to say ADCs. It's all the conjugation products. It could be a peptide conjugated product, or it could be ADC conjugated product, or an oligonucleotide conjugated product. Oligonucleotides and peptides, these account for about 80%-90% of the pipeline today. And most customers are working with us actively as well to kind of build our capabilities into helping them support in those areas, essentially.
I think most customers are helping us and guiding us in terms of where we need to go in terms of being future-proof for them as their pipelines move, essentially. That's why we are following our customers. In this way, we're not following the molecule. We're following our customer, if I would put it that way.
Got it, sir. This is very helpful. The other question was, how many of the 90-plus CMC programs are in phase two and phase three?
Alankar, I don't have a split right now, but we can provide this separately.
Okay, sir. And one final one. Can you quantify the revenue contribution from the two overseas centers in fiscal 2025?
Roughly around $40-$50 million on fiscal 2025.
Profitable in fiscal 2025?
Yes. Net EBIT profitable from a fiscal 2025 perspective , which is what we had kind of stated when we began the year.
Got it, sir. This is very helpful. Thank you and all the best.
Thank you very much.
Thanks.
Thank you. We take the next question from the line of Dhaval Shah from Jefferies. Please go ahead.
Hi, sir. When you say you are expanding capabilities on peptide and other new areas like ADC, oligo, does it mean more synthesis capacity, or is it more lab capacity, more discovery work, and addition of scientific staff? So what are you exactly doing when you are saying you are adding capabilities?
It's going to be a gradual process, right? I think at the end of the day, I don't think you're coming directly commercial. I think you're adding both discovery capabilities and development capabilities and clinical supply capabilities. You would probably follow the path of it because at the end of the day, all these technologies are very complex, and companies are doing more and more complex technologies. So I think you will see people and lab capacity coming on board along with early phase assets for supplying phase one, phase two materials. And as these progress, obviously, when we build our capabilities, then we progress with the molecules. But most of these assets are going to be focused much more on the oligonucleotide. Obviously, with commercial, we're much further along than other areas.
But most of the other areas are more focused on most of the clinical pipeline because the majority of the pharma assets actually are clinically in these areas. Very few are on the commercial side. Most of these are modalities pharma has just come back to in the last few years. So most of the assets are early phase. And that's exactly what we're building with the board right now.
Did I hear you correctly just now? You said you have commercial asset on the oligonucleotide?
On the amide chemistry, yes. Amide is due to commercial.
And in your earlier comments, you said there is significant demand for process chemistry. So can you expect significant expansion on overseas site, especially Manchester, because I think that's where you do these kinds of work?
No. Actually, most of our people are pushing a combination of Hyderabad and this together. Manchester is running at a reasonably high capacity, and so that is growing, but we're also adding significant Indian capacity also. I don't see us adding Manchester dramatically, but Manchester, we're adding more people as much as we can accommodate, and we obviously will increase the significant capacity in India. But it's really the question of how do we combine these two together, which is giving us a key differentiation more than anything else. With the best practices across both sides, it gives us a much stronger R&D platform than what others can provide at this point.
Got it. Lastly, going ahead, we can expect significant improvement even on overseas profitability. And the gap will continue to decrease between company level or India ops and overseas ops. Can that be?
We've always maintained that our overseas ops as a percentage are going to continue to decline because we're not adding those capacities. So I'm not coming and saying because overseas is going to be more or less a fixed cost or fixed revenue, not significantly increasing. But the proportion of the overall contribution will continue to drop. So I think in terms of value to the company, overall, they'll increase. But in terms of impact on the cost, they'll be more minimal as we move forward.
Okay. Thank you.
Thank you. We take the last question from the line of Geetha Parekh, an individual investor. Please go ahead.
Thank you for the opportunity. I wanted to ask that in the CDMO business, what are the OTIF on time in full? Do you capture that? And what are those ratios looking like?
We capture, and we work with our customers on a day-to-day basis on this metric, but we don't generally disclose this metric outside, but suffice to say, we run a very high customer satisfaction across our customer segment.
Got it. And can you tell the percentage of large pharma in the business, discovery versus development?
I think we mentioned that we are around 37% pharma versus biotech on the CRO side. On the CDMO side, we are probably close to around 70% large pharma as opposed to 30% biotech.
Thank you very much, sir.
Thank you. I would now like to hand the conference over to the management for closing comments.
Again, just thank you everyone for taking the time to attend this call. We continue to be excited about the path forward, and I think the trends continue to be positive for the entire sector in general. I'm just not talking about us in particular. I think India, as a general rule, will do well. I don't think anything systematically has changed in the industry, and I think we execute well. I think the opportunity is too great. Thank you, everyone.
Thank you.
On behalf of Sai Life Sciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.