Ladies and gentlemen, good day and welcome to Sai Life Sciences Limited Q4 FY 2026 earnings conference 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 the conference call, please signal an operator by pressing star then zero on a touch-tone 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, Yusuf. Good evening to all the participants on this call, and good morning if you're logging in from the West. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements, namely known and unknown risks , uncertainties, and other factors. It must be viewed in connection 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, we have mailed the results and the presentation, and the same is available on the company's website. In case you've 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 and answer your questions today, we have the top management of Sai Life Sciences, represented by Krishna Kanumuri, Managing Director and Chief Executive Officer, and Sivaramakrishnan Chittor, Whole-Time Director and Chief Financial Officer. We will start the call with a brief overview of the quarter and this year, then past, which will be followed by Siva focusing on the financials. Then we'll go over Q&A session. With that said, I'll now hand over the call to Krishna Kanumuri. Over to you, Krishna.
Thank you, good evening, and thank you all for joining us today. We are pleased to report that Sai Life Sciences has delivered a strong performance in FY 2026, with overall revenue growth of 29%, EBITDA growth of 56%, and PAT growth of 109%. Both our CRO and CDMO segments registered healthy growth despite operating in an environment characterized by geopolitical uncertainty, supply chain disruptions, evolving regulatory expectations. This performance underscores the strength of our integrated CRO platform and our increasing relevance to global innovator companies. A key highlight of our growth continues to be increasing contribution from large pharma in FY 2026. The revenue contribution from our 19 pharma clients went up from 28% FY 2022 to 49% this FY 2026.
We are increasingly seeing a trend of large pharma moving to consolidate the full life cycle from early development to commercial manufacturing. Similar to trends witnessed in China, our CRDMO strategy remains firmly anchored on deepening engagement with large pharma clients. As you're aware, Sai Life Sciences today works with 19 of the top 25 global pharma companies. We believe that this foundation gives us a strong platform to build our growth on. We continue to build a strong pipeline of commercial molecules, with the tally standing at 34 commercial molecules, 11 in phase III pre-registration, but 155 in earlier stages of development. Importantly, we're also seeing strong traction on our dedicated development R&D team model with large pharma, an initiative we started scaling last year.
We believe this model will fundamentally shape how we partner with large pharma towards larger, more customized and longer duration programs. On the CRO side, our integrated discovery strategy continues to gain momentum, particularly with biotech customers. Our CRO revenue mix between pharma and biotech stands at 48%-52% versus 52%. We're also seeing increasing cross-selling opportunities with our CDMO large pharma customers, reinforcing the strength of our integrated model. A key differentiator for us is our focus on automation and scale in DMPK and biology, enabling us to handle large integrated programs for our clients. At the same time, we are investing in next-generation technologies, particularly in ADCs, where we are seeing significant interest and program inflow from large pharma. Let me touch upon a few broader industry trends shaping our strategy.
First, evolving regulatory landscape, particularly the FDA's push towards new approach methodologies, is expected to reshape discovery workflows over the next several years. While animal testing will continue to remain relevant for complex toxicology and global regulatory environments, we expect increasing demand for biology-heavy discovery services, including in-vitro biology, human cell-based assays, and organoids. We believe Sai is well-positioned to capitalize on this shift, and we continue to invest in these areas. Second, biotech funding has shown encouraging signs of recovery, with QTD year-to-date funding up 52% year-over-year, and April 2020 starting reaching $10.6 billion, up over 4% year-over-year. IPO activity has also strengthened significantly. While funding remains somewhat constrained to larger late-stage biotech companies, this trend still supports overall CRO/CDMO demand, particularly through increased outsourcing and program progression.
Third, we are closely monitoring the evolving global trade environment, including potential tariff-related developments. Increasingly, we are seeing large pharma increasingly structure deals in ways that mitigate tariff exposure. We also remain mindful of near-term challenges. Ongoing geopolitical tensions, including Middle East situation, are impacting input costs and disrupting logistics of supply chains. Despite this, our customer conversation and visibility give us confidence as we enter FY 2027. We continue to believe that our growth will be led by pharma, driven by increasing outsourcing intensity, movement of biotech assets into pharma pipelines, and strategic long-term partnerships. As we scale, a few priorities remain central to our approach. Science-led capacity expansion rather than POV reactor-led growth. Continued product and pipeline diversification, especially in CDMO, given the inherent variability in product life cycles. Careful management of customer concentration.
In FY 2026, top 10 customers contributed 54%, top 5 37%, and top 1 12% of revenues. Our top customer engagement spans multiple services, reducing concentration risk at any service level. Given the momentum we have seen through FY 2026 and the nature of customer discussions underway, we are entering an increasing investment cycle to support future growth opportunities. Our current estimate for investment in FY 2027 is in the range of INR 1,100 crores-1,300 crores. Importantly, these investments are being undertaken either with clear demand visibility or through active strategic conversation with the large pharma customers. Finally, on the digital AI transformation, we are investing CapEx capabilities that improve productivity, speed, and across organization. We believe this will be an important lever in enhancing competitiveness and narrowing productivity gaps across the industry.
At the same time, adoption of AI within the CDMO sector must be carefully balanced customer confidentiality and data security considerations. Over the next 18-24 months, we expect AI and digital to become increasingly embedded not only in enabling functions, but also across the core scientific and development workflows. As we enter FY 2027, long-term opportunity for CDMO sector remains very robust, our integrated model with strong pharma relationships, technology investments position us well for sustained growth. We would like to reiterate our stated aspirations of maintaining revenue growth of 15%-20% while maintaining EBITDA margins in the 28%-30% range over a three-year period. Just a point, given some of our new capacities and investment progressively coming on stream during the year, we expect second half of FY 2027 to be stronger than the first half.
With that, I will now hand over to our CFO, Sivaramakrishnan Chittor , to talk through the financial performance.
Thank you, Krishna. Let me begin by reiterating that fiscal 2026 has been a year of strong financial performance and disciplined execution. We delivered a revenue growth of 29%, an EBITDA growth of 50%, and a PAT growth of over 100%. This growth was supported by balanced contribution from both the CRO and the CDMO businesses, alongside continued operational efficiencies. The CRO and the CDMO business for the year demonstrated a healthy growth rate, 24% for CRO and 33% for the CDMO business. Our revenue contribution from the top 19 out of the 25 global large pharma companies increased to 49% in FY 2026 as compared to 28% in FY 2022, demonstrating the steady deepening of our strategic relationships. Our revenue mix continued to evolve in line with strategy, with increasing contribution from pharma clients across both segments.
While the overall revenue growth in FY 2026 was 29% as compared to 16% in FY 2025, the year FY 2026 witnessed a relatively even distribution of revenues, with the split between H1 and H2 being 48% and 52% respectively, as compared to 40% and 60% in FY 2025. In addition, Q4 in FY 2025 was skewed at 34% of the total revenues as compared to 27% in FY 2026. As we've often stated, the CRDMO sector is inherently characterized by a degree of quarterly lumpiness, particularly as projects transition across different stages. While this will lead to periodic fluctuations in revenue and margin, as Krishna mentioned, the long-term opportunity for the CRDMO sector remains robust, and our integrated model with strong pharma relationships and technology investments position us well for sustained growth.
We remain confident in our ability to sustain our long-term revenue growth targets of 15%-20% and the EBITDA range of 28%-30%. As we enter FY 2027, a key focus area for us is to invest in proactive capacity creation aligned with customer demand. In FY 2026, we incurred a CapEx of INR 633 crores against a budgeted spend of INR 700 crores. For FY 2027, we expect CapEx in the range of INR 1,100 crores-INR 1,300 crores, split between CDMO at 65% and CRO at 35%. We expect to fund the CapEx through a mix of internal accruals and debt. Our CapEx allocation will be split across capacity expansion, capability, and technology. 75% of the CapEx will go towards capacity expansion and the balance towards capability in AI and technology.
At the same time, while we put these numbers of INR 1,100-1,300 crores, we will continue to calibrate the pace and the phasing of these investments in line with the evolving business environment and closely align the spend with our customers' strategic priorities and demand visibility. Importantly, our approach to CapEx remains science-led, as Krishna mentioned, rather than capacity-heavy, ensuring flexibility and higher long-term returns. During the year, we navigated external headwinds, including increases in input costs and higher logistics costs and shipment delays arising from evolving geopolitical environment, which is still continuing. At this point, we do expect some short-term impact on our cost structure. We have approached our customers for appropriate cost revisions in certain areas. However, we believe that the recovery of these increases may not always be contemporaneous with the incurrence of the costs.
We continue to manage these challenges through operational efficiencies, strategic sourcing initiatives, disciplined execution, and ongoing engagement with our customers. In closing, I want to reiterate that we remain committed to disciplined growth, prudent capital allocation, and margin resilience. Our balance sheet remains well-positioned to support the next phase of expansion, both in terms of debt and in terms of internal accruals that we are projecting. Near-term volatility can persist. Our medium to long-term outlook remains strong. With this, we'll be happy to take your questions.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. My first question will be on the CapEx announcement that you shared. We've seen a very sharp increase in CapEx, you know, from INR 200 crores or so that we did two years back to now taking it up to INR 1,300 crores. Could you talk a little bit about what is giving us the confidence for this level of jump in CapEx? Is there any one-off project that you're doing next year which is leading to this, or this sort of becomes our new level of CapEx? Could you share thoughts on these points?
Binay, if you look at what we had indicated as CapEx couple years back, it was based on what we thought the demand was. If you look at the last 18 months or so, we've been getting more involved with customers across the value chain. As we work with them closely, they're giving a better sense of what they would like us to look like and what volume they could potentially come in our direction on the discovery side. CDMO side, as we are getting into more integrated collaborations, really being development partners, we're having greater visibility in terms of pipelines rather than waiting for RFPs to come through.
I think given what customers are telling us, where we have to go in terms of technology, in terms of better visibility of what they have in the pipeline and what potentially can come our way, and what they want us to see in terms of other technologies coming in is building next-generation technologies for ADC development or changes in peptide development, in terms of high-throughput screening and biology to do more integrated programs. In terms of the level of data exchange they need between us and them, and also just the visibility in terms of not only what they are giving us for development and pipeline, we're seeing a lot more of the programs than we have in the past.
That'll give us better sense of what likely will translate probably 12, 15 months down the road to commercial manufacturing. It's just better visibility and better engagement with the customers across both diversity of areas we invest in. Like a new area was we were not very sure about what formulation would look like, but we're seeing a greater need for formulation development services early on. There's a lot more new things we're getting from customers as we engage more and more with them. What is extremely clear is companies want to develop strategic partners in India at this point, and they want to see who will be relevant in the next 5 years. They want to see partners who can understand, work with them, and build along with them, and that's how we're playing this game at this point.
We have a lot of conviction behind these investments.
Thanks for that. You know,
Sorry to interrupt, sir Binay. You are not audible.
Hi. Sorry for that. You know, one thing I noticed in your presentation, you've added one more large pharma customer, right? Earlier you were working with 18 out of 25, now it is 19. Did I hear you correctly in the opening remarks, you said that you are now have a dedicated research sort of a tie-up for large pharma?
Because earlier we had.
No, that's not what.
Okay.
No, no. That's not what we're talking about. What we're talking about what pharma has done. If you look at in the past, pharma never gave us late phase opportunities for outsourcing and process development. They generally used to give us lateral tech transfers. Over the last two years, several large pharma have started getting into FTE agreements for late stage and mid stage development. There's not a dedicated facility or anything of that kind. It's just that these are dedicated FTEs we are running for large pharma between our global sites, both in India and Manchester, which has greater visibility into doing development sub their mid -and late -stage assets. That's what we mean by that. As opposed to a dedicated center, they're dedicated FTE teams working on development. I hope that clarifies that.
Yeah. Yeah, no, that's very clear. Lastly, could you comment a little bit about where the capacity will go with CapEx? That's it from my side. Thanks.
Shiva. I'll let Shiva talk about the capacity, where it's going.
I think, Binay, the capacities that we are adding today, I think our current capacities will take us to around 1,150 KL capacity that we had mentioned as far as the Bidar capacity expansion is concerned. What we are doing, a lot of this is actually going towards, one, our investments in discovery. Second, there is investments in development phase that is kind of adding to our cost numbers. You know, if you remember last year, we had mentioned to you that we had started the plan for going from 700 KL to 1,150 KL, and we said that the FY 2026 CapEx will only take into account CapEx that will be incurred in that fiscal year while both the plants will not get completed. A majority of the CapEx will also fall in this year.
Capacity expansion, as I mentioned earlier, out of INR 1,100 crore-INR 1,300 crore CapEx direction that we have provided, 75% of that will actually go and satisfy capacity requirements. 25% will be for capabilities.
Thanks, team. Thanks.
Thank you. Next question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah, thank you for giving me the opportunity, and congrats to the management on good numbers. The first question I have, it's like, the CDMO segment has delivered more than 30% growth during FY 2026. What will be the outlook for 2027, 2028? While answering that, there are two data points from the PPT. One is we have added two large pharma customers on the commercial supply side, as well as our commercial products have gone up from 30 to 34 from the last quarter. How these two, three opportunities on the commercial side in terms of the scale as well as in what areas these commercial opportunities are? Thank you so much.
Thanks. Amey, I think on the CDMO side, I think what we had stated is that we stated that there are, I think even in the last conference call we had mentioned there are three new products that have actually gone commercial, and we've added 1 more product since then, which makes it 34. Some of them, you know, at least a couple of them will see production and commercial revenue starting this year. Other question, Amey, you asked about is how is the growth prospects.
You know, I think, you know, we believe that, you know, as we start the fiscal year, we believe based on the visibility, we believe the growth will be strong, and we are confident about a good financial year at this point in time.
Sure. The second question I have on the margin front, we have given the guidance that we will aim to maintain margins in 28%-30% range. There are two headwinds for the margins. One is the RM cost inflation, which could be there next year, as well as the CapEx, which is getting commercialized at the end of the year or the second half of the year. How should we look at the next year, particularly in terms of the margins? Thank you.
Our, our stated aspirational margin is to remain around the 28-30%. I'll tell you two reasons for it. One, with pharma generally there's an open book pricing. From what we've seen, and we've seen this across the Chinese companies as much operating at much larger scale, the margins tend to remain between the 25-30%, which is what we've seen. Our pricing with pharma indicates that 28-30% is what is much more comfortable from a pharma pricing perspective. The second thing I think, will there be an operating leverage as we scale up? Yes. There's also capacity coming in, and there's gonna be some amount of inefficiency as we scale up new capacity, which would then add cost into the equation.
That is also needs something that we need to take care of. That's why we're giving you an aspirational guidance of 28%-30%. I know we've hit 30% this year. We still wanna leave you with this guidance. This is consistent with what we've stated also including last quarter.
Sure. The last question, if I can squeeze in, on the CRO side, this is the second year, I believe, where we have delivered 20% plus growth. Over the years, the large pharma contribution or the big pharma contribution have consistently gone up. Is this contribution going up, is it incidental because the biotech funding has slowed down, or is it also strategic in nature? Should we expect this large, big pharma contracts to keep driving our CRO business going ahead? Thank you so much.
On that, I'll take this question. There are actually both at play, right? One is strategic. Large pharma is very clear that they want to build India footprint. This large pharma business did not exist in India 2 years ago. There were only two, three large pharma who were actively doing MedChem in India, I would say as close as three years back. Every large pharma is looking at coming to India through discovery. This will be a structural trend for the next few years in terms of as they pick partners. Biotech is just going through a little bit of slowdown as well on the new company formation, and we expect that to pick up in the next two years.
I think secular trend, you will probably see larger pharma coming in and filling the gap for the next couple of years. Biotech will come back in the next 24 months and give us secular growth. I think from that way, the industry is well positioned to kind of for the short and long term as where we are right now. We're also the early part of this pick, right? People are just coming chemistry, eventually the whole goal right now is to be fully integrated. I think the opportunity is significant for us because our integrated story is something we've invested in on the biology and DMPK front, which should probably give us an advantage in terms of being a preferred choice going forward.
Right now the orders are going up.
Sure. Thank you so much. I will join the call.
Thank you. Next question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Hi. Thank you for giving me this opportunity. Hi, team. In emerging modalities, many outsourcing relationships begin in discovery but don't necessarily translate into late-stage clinical or commercial manufacturing. I'm alluding to one of your other CRDMO competitors in India, Bangalore-based company. What precisely increases the probability that Sai retains a molecule across the life cycle, and where do you still see the highest leakage points today? That's my first question. Thank you.
I think there's a difference in how we have been built versus other companies. If you look at way we have been built, from day one, we've done this. We actually were a discovery company first, but then we took a gap in terms of discovery investment and went very heavy in terms of becoming a preferred commercial partner. As we become a preferred commercial partner, we also now, in the last few years, have become a preferred development partner. We right now are working with companies in all three areas, right? Discovery, development and commercial. What is happening, because we're integrated, there's a technology thing, right? Essentially what happens is when you're doing discovery, people are looking at newer technologies like ADCs. First generation ADCs will be very different from next generation ADCs.
Whatever we're doing in discovery, the development teams also are doing development to kind of reflect what their new generation ADCs look like and what the technologies are. Because we are partners there as well and we are commercial partners, it's much easier for them because we are qualified by all three departments to work with them. With other companies that have not made that transition, either they're very manufacturing heavy or discovery heavy, and they overlap a little bit on the discovery side, a little bit on the development side. We're the only company to really stitch all these together, and we're approved by all three of these areas. That's the strength why we believe that we can retain majority of the molecules.
That said, some molecules definitely leak out of us because either we don't have specific capacity, people want diversity, or they want to take the molecules in-house. The chances of us retaining are higher than most other players at this point. That's how I would frame it.
No, thank you. Thank you, Krishna. My second question is. That explains the whole scenario very well, so thank you for that. My second question is, historically, many CRDMOs scale revenue faster than organizational capability, which eventually creates execution fragility. In that context, as Sai increases integration across discovery, development and manufacturing, where do you believe complexity is kind of compounding faster internally or fastest internally? That is, complexity is compounding fastest internally. What are the leading indicators you monitor before those kind of stresses show up in numbers or financially? Thank you.
That's a very broad question. Again, unfortunately, right now, we are at a point right now that we are getting into a very interesting part, right? We're scaling capacity, we're scaling technology, and we're getting deeper relationships. I think what gives us the advantage to understand where the gaps are, because we are very deep in relationships and not doing one-offs, we get to have a much more visibility in terms of what we are doing from a performance standpoint.
I think the key if you ask me where the key gap will be down the road is really figuring out how AI plays a big role in terms of bridging the productivity gap vis-à-vis India and other geographies, so to speak, and getting the right talent pool who's next-generation ready in terms of working in the digital space. Because we believe AI is a great equalizer in terms of, one, is intellectual horsepower, in terms of, basically knowing what's going on everywhere, more rapid problem shooting. I think we are putting all the tools in place so we have a much better view of how to scale up, where the gaps are, and be proactive in terms of scaling up at this point.
The idea is there's no magic bullet here other than having your ears to the ground, talking to customers regularly. This is a 24/7 business. It's about every customer, every BAR, one day at a time. That's how we are able to scale up. That's really how it works. Shiva, you want to add something to this?
I think to add to what Krishna said, right? I think the one advantage the team sees, right? Working with these large pharma companies gives you. You know, because you work with them closely, they actually train you, they work with you, they kind of teach you their thought processes. Everything from setting up of a lab, setting up of experiments, how do you kind of train, what kind of things to look at, how do you kind of look at a problem, right? I think that kind of gives us that ability to understand things. What we are doing to reinforce and kind of strengthen this, we are just taking this as part of our learning.
We've created our own, what we call an internal Sai academy that then reinforces this thinking, not just to that team that is kind of involved with any particular program, to broad bases across the organization. This is now headed by a senior head of research from a large pharma who has now taken this full-time as an activity so that this can be a focus area for us. That's how we kind of make sure, you know, we keep at technology and science that keeps changing every day.
Just kind of adding to that, right? One thing we keep talking about is that we are building a technology-led growth. We really are focused on building the foundation, just not trying to over-index in one area, because we realize that if you over-index one area, then you're really not building the foundation. We are very, very clear that we want to get the foundation right here, and that's where we're spending most of our effort. Sorry, go ahead to your another question.
No, that's sensible, Krishna. Thank you for that. Just on that AI thing, I mean, is it homegrown capability or is it something off the shelf that, you know, even the competitor can buy off the shelf? I mean, how do we plan to differentiate AI so that it adds to the real advantage?
I think it's a question of getting the framework ready for using AI and there are a lot of tools coming in. One is obviously what user tools available. You have to understand, we're gonna be restricted in terms of what we can use of customer data. How much internal data we can use is going to evolve. Right now, we have different external sources. It's not a question of just integrating AI, it's a question of what is the long-term strategy of how you integrate across the board. It has to be a fundamental shift. It cannot be I'm buying a single tool. This is what's gonna work. It's not a single tool, it's a complete way of operation has to change.
Right now we don't know how it's gonna evolve in terms of internal tools, what customers want from an IP standpoint. It's early days, the idea is to make ourselves digital ready to be able to plug and play different tools as they come in. Our core processes themselves should be data rich to give us the opportunity to evolve with as the tools evolves.
Thank you. Next question is from the line of Girish Bakhru from OrbiMed. Please go ahead.
Thanks for taking my question. Just on Sajal's question on the, actually on the new modalities, Krishna, possible to give a ballpark figure you're targeting for revenue contribution from new modalities by, say, FY 2025, given they are items of 10%?
Right now we're not in the position to give that information yet at this point. We're not that far along to be able to give a prediction of what that will be. Generally what happens if you really look at the trend of CROs, just to be put in perspective, right? We tend to basically follow whichever way the pharma companies are going. If you look at where pharma is going today, it's 50% pure small molecule. The next 30% will be peptides, oligonucleotides and ADCs. That's what they consider biologics. 80% is going to be covered there.
Over probably a five to seven year from now, you'll see a similar mix, purely from a, not the Sai perspective, but anybody who plays in these areas, you tend to follow the customers from that standpoint, if you look at the way the market is. That might flip, right? In two years, people might say, "No, peptides are useless. We'll go someplace else." It's very hard for us to forecast what it looks like because we're almost like we are following the customer, and that can switch any time. The important part of being a CRO in our opinion is to be a fast follower, be close enough to be able to change the trend, but not be on the bleeding edge where you're left with a dead investment.
That's kind of how we look at it.
Understood. Of course, you've highlighted four of these key ones. Just one key question there. I mean, there are a lot of low-hanging fruits, but where do you think you will potentially take a high market share? Is it more peptides or, I mean, you're doing right now fragments, you're limiting yourself to peptides and oligos. ADC side also, you've said that you're evaluating clinical conjugation. Which area do you think will be a possibly a big focus area of these four, and probably easy to do also?
Very hard to say at this point. I'd love to come and give you that guidance. I can't really give you the exact sequence how that's gonna go, right? It's hard. Right now, honestly, we can't predict that at this point.
Is there an area where you see customers are asking you?
What's that?
No, I'm saying there is a lot of.
Sorry about that.
pipeline, clinical molecules, you never really know which ones will go ahead, which ones will come none. There's gonna be other things that will kind of influence the number and the revenue. That's why it's a little difficult to kind of give you a specific growth rate or a number at the end of a particular period.
Understood. Understood. Just last one, I mean, and this is probably more like a industry-wide question. We've seen so many companies talking about these new areas, but very few investments going into biologic manufacturing. Do you have any plans for that in future?
Look, we evaluate all options and when we're ready to take a position, we'll kind of communicate it. Obviously, we're evaluating every market at this point. Obviously, we're looking at all options and even if you look at biologics, you decide where to play. Again, we are all constantly talking to customers to see where the demand is, where the gap is. As our strategy evolves, we'll definitely inform you guys how we look at it.
Understood. Thank you so much.
Thank you. Next question is from the line of Siddharth Gandhi from PwC. Please go ahead.
Hi. Thanks for the opportunity. Just wanted a couple of quick clarifications. One, you know, the new technology, revenue salience went down from 7% to 4%, which means that in absolute terms also there is likely to have been sort of a decline on a year-on-year basis. Was that, you know, if you could explain, you know, what caused that? Was there a one-off earlier or was there any particular project that did not go through from 1 stage to the other? If you could give us some color on that. The second one was you mentioned about some of the CapEx being on AI. If you could tell us what's the nature of that AI CapEx that you're putting up, that would be helpful.
Sure. I think on the first question, I think we mentioned this even last time when we put up this number. A lot of the work on the new modalities are not commercial from our perspective. They are in clinical pipelines. When you work on clinical pipeline, you're gonna have a campaign, and then you're waiting for another campaign. There will always be that swing, and this is the primary reason why CDMO businesses have revenue swings. It is primarily that, and it's not about one-off this time or one-off last year. The second question on AI, I think Krishna addressed this, but I'll kind of give you a thought, the thought process that we have with respect to AI. Right?
The way we are thinking about AI, right, we need to look at our productivity, efficiency and kind of, you know, scientific output that can be improved by using AI as technology that can aid and enable a scientist to do things faster. That's the whole purpose of this AI definition. There are a few tools that are available from the market, but we're also building things within our overall system. We are defining an AI canvas as we speak. This is kind of to make sure that the teams can get as much assistance, automation, analytics all pulled in one direction, in one set of information that the chemist or team leaders or the leadership team can actually use at any point in time to kind of, look, analyze, and kind of present data.
We're also, with respect to the partnerships that we have with other large pharma, we are also trying to integrate with their systems and their needs in terms of what data that we will transmit and send out. That's the broad concept of AI.
Sure. Sir, you also mentioned about some AI CapEx. Is there any particular CapEx there or did I mishear that?
Yeah. Anything that we are building or your tools that we are buying will be CapEx, and that's the AI CapEx that I'm talking about.
Got it. That will be software and stuff. Got it.
Yes.
All right. Thank you. Thanks so much.
Thank you. Before we move to the next question, ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the question queue, please restrict yourself to two questions only. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Sanjay Kumar Elangovan from ithought PMS. Please go ahead.
Hi. First question on the CapEx. I think INR 1,300 is earmarked, but next year's cash flows could be anywhere around INR 600 crore-INR 700 crore. What, what will be the debt that we are planning? Does this CapEx only include the land 50 KL capacity or we'll also start work on the greenfield? I think we have mentioned that we have acquired a land for a new greenfield site.
Sorry, your line is not very clear. Can you repeat your question, please?
The INR 1,300 crores that we have earmarked for CapEx.
Our cash flows will be somewhere around INR 600 crore-INR 700 crore. We'll have to take debt, right? How much debt are we planning to take to fund the CapEx? Does this INR 1,300 crore CapEx, is it only for the 1,150 KL brownfield expansion or is it also for the greenfield that we'll be starting in the new land that we have acquired?
The INR 1,100 crore-INR 1,300 crore CapEx, I'm not gonna give you the debt versus the cash flow number because that then means, you know, I'm trying to give you a projection. Without going, you know, based on where we see this number ending for FY 2027, our debt-to-EBITDA ratio will be fairly healthy. That's really what I believe. If I look at the CapEx spend itself, it will be for capacity also, including the 1,150 KL that we've talked about. As we mentioned, 225 KL of that 450 KL CapEx will only get done at the second half of this year. The other CapEx is going to be much longer duration.
Most of the CapEx for the plant would actually happen in this year as opposed to last year. We're also adding capacity on the product development side, adding capacity in terms of fume cupboards, and analytical and chemistry equipment. We are also increasing our discovery capability and biology capability, both in terms of fume cupboards and equipment. This will all be there. There will be slightly a smaller CapEx on the new site. That new site will probably start towards late this fiscal year and early next year, is how I see that CapEx starting to grow.
Okay. Okay. Second question. We've added four commercial molecules this quarter and 5 in the phase III pre-registration phase. Can you highlight some of the high potential ones and the corresponding therapy areas? Do any of them involve new modalities?
Not gonna You know, I think the therapy areas are broad, so there are multiple things. There are this When I say high potential, at least in my belief, there are at least three molecules that would show a good progress in this current financial year. We have started manufacturing and delivering or starting to deliver revenue in FY 2027 on at least three of the molecules that we have currently added into that pipeline. Of the four molecules, I will say three will have a pretty decent revenue growth and trajectory. The fourth one, in our opinion, will be a smaller one, but it was a fairly important capability to acquire, hence we've done this.
Okay, just a follow-up then. I think Krishna Kanumuri had indicated in a media interview that you might even look at acquiring new modalities or acquiring small pharma companies for the tech and for the new modalities. Anything that you're looking at?
We are open to options all the time. We evaluate deals as and when they get presented, from, you know, from the bankers. At this time, we don't have an announcement to make, but as I said earlier, we continue to evaluate multiple deals all the time.
Got it. Thank you.
Thank you. Next question is from the line of Vinay Rai from KamayaKya Wealth Management. Please go ahead.
Hi. Congratulations, sir, on great set of numbers. Just one clarity on the CapEx side. You said 25% of CapEx is in capability. Is it predominantly for our new modalities, and which is the key area that we are going to focus on?
It's not necessarily new modalities. This could be newer technique even for small molecules. For example, high-throughput experimentation is fairly new in terms of how things work or a complete automation on a DMPK biology, which kind of end-to-end kind of gives you a different ability to kind of do precision biology and handling molecules at scale or volumes at scale. Those are the things. It is capabilities in both sides, both small molecule and, you know, some, you know, new modalities.
This could also include the CapEx for ADCs and peptides.
If you go back to our conference calls in the last year, I think we had stated that we are adding development capability on the peptide side. We probably will also at pilot scale, you know, this is coming up this year. We started the CapEx last year, so peptides is definitely included. In the CapEx that we are talking about this year, we are adding some capability on the ADC side, but that's more discovery side. You know, we have some products and we are working on the ADC on the development side. We will come back to you know, as soon as we are able to make a public announcement on that.
Okay. Just a last question. Even in the CRO business, we are seeing that, pharma is constantly at a higher share of revenue compared to biotech companies. Do you see this increasing in the coming years, and how has been the pipeline or how has been the development from the biotech companies?
Can you repeat your question? Sorry, we're not able to understand, sir.
I'll take the question. We already answered the early part of the call, right? It's just where the market dynamics are right now. I think biotech will always be a significant part of discovery. I think long term, I think the 50-50 ratio will hold. Short term, there might be an imbalance in terms of pharma, you know, maybe in the next couple of years. Long term, biotech still is the development engine for large pharma. We do expect that balance to maintain at 50-50 on the 50-50-ish long term on the pharma versus biotech. It's just as a short term, you will see pharma probably drive the growth. Longer term, biotech will come back. Overall, the pie should get larger in the next couple of years.
Hope that answers your question.
Thank you. Next question is from the line of Viraj Shah from PGIM. Please go ahead.
Oh, hi. Thank you for the opportunity. I just have one question. In your presentation, you have mentioned 15%-20% revenue CAGR on a, you know, current revenue run rate of INR 2,200 crores with expected CapEx of INR 1,100 crores. Fair to assume the asset turn would remain in the similar historical range as it was?
I will see a little bit of a dip before it kind of comes back because we are into, we are doubling down on our CapEx. That's really what we have stated. What we had committed, and we continue to commit this, is our asset turn on a net basis, you know, installed capacity will be 1.2-1.4, but that's medium-term commitment. We will see some fluctuations, but we continue to remain committed to our, you know, the steady state 1.2-1.4.
I think the important aspect to understand is that no matter what CapEx you put in, it's gonna take a two, three-year cycle to get back to that scale. It's not like you put it's gonna be day one that revenue. I think as much as we expect that as a long-term trend to maintain whatever you're forecasting, but obviously there'll be a two, three-year ramp-up period to get there for any CapEx you put in.
Understood. Okay. That's it from my side. Thank you.
Thank you. Next question is from the line of Akshay Kaila from AK Investments. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, my first question is, generally the Q4 should be the strongest for our kind of business, right? In this quarter, we have seen year-on-year growth of only, let's say about 4%. Can you put some light on that? I will ask my follow-up question.
I think, Akshay, I think I answered that question in my opening remarks. What I was mentioning to you was if you look at our FY 2025, and this has been the general trending even for Sai, we had a 40% in the first six months and a 60% revenue split in the second six months in FY 2025, while in FY 2026, even though we delivered close to a 30% growth, our revenues actually fell almost even. We were like 48, 52. It's not about as we've always told you know, this business cannot be, you know, ascertained on a quarter-to-quarter basis. Kind of difficult to say when the PO becomes due and when the PO gets delivered, because this is not a business that you produce in anticipation.
You produce only based on what the customer wants. It just depends on how the PO is.
Okay, sir. My second question is, despite the heavy CapEx of anticipation of around INR 1,100 crore-INR 1,300 crore, are we confident of maintaining 28%-30% margin this year, this financial year and going forward?
Akshay, what we've said this last year and continuing to say it this year. 28%-30% is our steady state aspiration. That's really what we committed. We actually committed we'll get there in two to three years timeframe, and we've gotten to 30% last year, based on how we look at EBITDA. I believe that we will continue to aim for that same number.
Thank you. Next question is from the line of Avikshit Vijay from Global Consilient Research . Please go ahead.
Hi. Thank you for the opportunity. I had a couple of questions. First one is, we had set aside a amount of INR 1,100-INR 1,300 crore as CapEx. When do we expect it to come live?
A typical plant takes somewhere around 18 months or so to complete construction. Depending on what project. For example, we started the 700-1,150 KL capacity expansion sometime during the middle of last year. We are expecting 225 KLs to come this year and 225 KL next year. Similarly, we had put up a capacity to double our process R&D capacity last year. Anything will take around 12-15 months timeframe in terms of capacity. And CapEx will be incurred in parts in one year and maybe the remainder will come in the 2nd year. These are all brownfield expansions within sites that are already developed. If it's greenfield site, it's probably gonna take you 24-30 months.
Okay. Yeah. That answers my question. The second one is there a possibility that we could name some of our molecules and the end clientele?
We will not be able to do that due to confidentiality restrictions.
Not even the clients, if possible?
no.
Client is definitely not possible.
Okay. Yeah. Thank you so much.
Okay. Thank you.
Thank you. Next question is from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.
Hi. Thank you for the opportunity. First question, apart from the four commercial molecules that you added in FY 2026, you also now have 11 phase III or pre-registration molecules. This number, as of 3rd quarter FY 2026, was around six. Assuming there have not been any drop-offs or further additions, seems like you have added about five incremental opportunities in phase III or pre-registration. Can you elaborate on which modalities would these be in? Any, any technologies that you would like to call out?
Most of these, Alankar, we've identified one that is already there on the new modality, which we said is currently undergoing validation. There is probably one more on new modality, but the rest of them are all small molecules. Some of it is coming from, I think, what Krishna was talking about, right? This whole integrated CDMO play that pharma wants to consolidate as they kind of look at long-term outsourcing partners in India. Customers who are probably not doing a lot of late phase in India are looking to do some of those, which is also a result of some of these additions.
Got it. Out of these 11 molecules, sir, do you expect any to commercialize in FY 2028?
Alankar, right now it's too difficult. Some of them have just moved. very, very difficult for us to predict. As soon as we hear something, we'll definitely come back and provide that information.
Fair enough, sir. The second question is, what is your view on the impact of AI on drug discovery? You spoke about the investments, you spoke about the opportunities, but specifically on drug discovery, do you see that as a threat or an opportunity?
Yeah.
So-
We see it as opportunity. I don't see a threat. Shiva, go ahead if you.
No, no. Why don't you finish, and then I.
I think it's an opportunity. I think end of the day, the synthesis part does not change, and the AI moieties are much more complex to make than regular synthesis. You might make fewer molecules, but the resources needed to make the molecule are more than the past. Plus AI itself helps us be more efficient in terms of route design and better options. I think net-net, I think my view of AI is going to be either you probably won't drop the R&D dollars, you probably will be doing more with less, more targets. I think everybody we've talked to so far has indicated that the design part is what is going to be affected the most, not the synthesis part. Synthesis part is going to be an important aspect of it.
I think AI for us is a net positive because the complexity of the molecules are higher, and we don't see R&D dollars dropping in terms of what they want to do on the AI front.
Fair enough, Krishna. Thank you, and all the best.
Thank you.
Thank you. Next question is from the line of Bharat C. Shah from BCS Capital Ideas Limited. Please go ahead.
This has come right at the very end. I have another call to catch up in two minutes, so I'll be just brief. I was intrigued by Krishna's statement about AI in terms of aiding the digital capability. I thought in specifically for pharma, AI probably would be a very potent research resource. I'm from a non-science background, but whatever I understand, pharma drug discovery is much more of serendipity, some hard work and some amount of luck trying out zillions of molecules. AI, along with quantum computing, can tremendously accelerate that process and make the drug discovery process smoother and much, much faster and far more efficient.
I was bit intrigued by AI merely as a digital capability rather than the fundamental core capability of the CDMO or CRO, AMO organization.
So-
I think, Go ahead, Shiva.
No, I think the way we look at There are two things, right? From our perspective, what we presented to you is what we can do without impacting confidentiality and IP of our customers, right? That is what we can do within AI. If you look at AI on the drug discovery side, right, I think if you really look at AI today is being great at generating molecules, right? It gives you novel binding targets and things like that. That's the, probably the least expensive part of drug discovery, right? There is, you know, if you really look at programs actually succeed or fail, and the bottleneck is actually when they move from pre-clinical to clinical. There are many things that today, these programs, success of a program actually hinge on judgment calls, right?
AI will get you efficiency, gains in enrollment, and all of that stuff. There are so many things that the model today is not yet trained. I'm not saying five years, 10 years down the road how they will behave, today it is attacking the, probably the lower cost piece of the AI and the lower complexity part of AI, right? There is definitely software is giving you know, great output, workflow optimization, et cetera. I think the whole development side or synthesizing a molecule that is kind of super complex because AI has created things without a constraint is creating more work on that side. That's really what we're talking about.
Yeah. I just wanna add a little bit to that, right. I think we're not saying digitalization, but if Okay, AI, you're talking about quantum computing just in terms of discovering what molecule to develop, right. Now you're synthesizing a molecule, scaling up the molecule. AI will help you design the molecule. Synthesis route itself is better. It'll give you a better translation from lab to plant. There's a lot more AI which goes beyond digital. AI is inbuilt into everything. You have become AI native company. What I say digital is, getting to be enabled to handle AI is as Unless you get the platform right, you won't able to apply tools across the board. AI is just not related to just discovery of new molecules.
It's a question of increasing efficiency of scaling up every molecule as they go commercial and reducing the timeline. I hope that is clear. We're not talking digitalization here. We already are a company, a digital company, the ahead of the curve. We're talking about how to take that data and increase your accuracy and speed in terms of scaling it up, and what's the correlation between lab data to plant data and so forth. I hope that gives you a little more clarity as we're talking about this.
Thank you. Next question is from the line of Gaurav Bawa from JM Financial. Please go ahead.
Hello. Am I audible?
Your voice is very low.
Yes.
Please use your handset.
Yeah, this is better. Is it better now?
Yes, please proceed.
Hello. Is it better now?
Yes, please go ahead with your question.
Yeah. Sir, thank you for the opportunity first. I would like to begin with congratulating the company on the good set of annual numbers. I had a question regarding the CRO business. It's a more of a bookkeeping kind of question. I just wanted to understand how many scientists do we have in the discovery of the CRO business, and what was the similar number in FY 2025?
We don't provide discovery CMC sciences. We have sciences across discovery and CMC. I think, you know, we provided this number as part of our annual disclosure. You will see that number.
Understood. On the second question, I think you did answer it a bit earlier, but nonetheless, I'll confirm again. The INR 1,100- INR 1,300 crore CapEx outlay, a large part of it is going towards the 1,150 KL expansion plan, right? The 75% of the This FY 2027 guidance.
It is going for capacity, but it's not necessarily the INR 700-INR 1,150 only, right? There are also CapEx that for discovery, for R&D capability, fume cupboards, all of that stuff included.
Understood. Yeah, that's it from my side. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments.
I thank you for, you know, for the call. I, as we mentioned, we believe, as we enter fiscal 2027, we believe that the trend in terms of outsourcing with respect to the CRDMO will remains very robust, and we believe we are positioned well to kind of capitalize on this growth. Krishna, you wanna add something for closing comments?
No. I think, it's very exciting time, I think, for, I think, India in general and for Sai as well. I think, it's a multi-year trend. Nothing has changed dramatically. I think, it will I think, India is definitely become a very strategic player in terms of the global supply chain over the next five years. I think the trend is good, we're well set to benefit from this opportunity at this point.
Thank you, sir. On behalf of Sai Life Sciences Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your line.