Advanced Enzyme Technologies Limited (ADVENZYMES.NS) Q2 FY2026 Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Akash, moderator for the conference call. Welcome to the Advanced Enzyme Technologies Limited Q2 and H1 FY '26 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I would now like to hand over the floor to Mr. Ronak Saraf, Manager, Investor Relations. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Welcome to the Advanced Enzyme Technologies Q2 and Half Year FY '26 Earnings Conference Call. We hope you all have gone through our financials, press release and the presentation, which has been posted in the Investor Relations section of our website and on stock exchanges. We have with us Mr. Mukund Kabra, Whole-Time Director, and Mr. Beni Rauka, Group CFO. Today, the management will discuss the performance and the business highlights, update on strategies and respond to any questions that you may have. As is usual, for the ease of discussion, we will look at our consolidated financials. I would like to draw your attention to the fact that some of the information shared during the call, particularly regarding our plans, strategies and future outlook, may contain forward-looking statements. These statements involve inherent risks and uncertainties and are based on current expectations, forecasts and assumptions. Actual results may differ materially from those expressed or implied in these statements, influenced by a range of factors, including, but not limited to, economic conditions, changes in government policies, regulatory developments and other unforeseen circumstances. Participants are cautioned not to place undue reliance on these forward-looking statements as they are not guarantees of future performance and should not be viewed as a substitute for independent judgment. The company undertakes no obligation to update or revise any such statement, whether as a result of new information, future events or otherwise. So without any further ado, we shall commence this call. Over to you, Mukund sir.

Thank you, Ronak. Good evening, everyone. I really appreciate you all for taking out your valuable time, and I extend the heartiest welcome to everyone joining us today on the conference call for the quarter and half year ended 30th September 2025. I'm happy to announce that we have reported good numbers for the quarter 2 fiscal '26, continuing the growth trajectory. We have witnessed growth across all business segments of our presence. Our top line for the quarter stood at INR 1,845 million, reflecting a 26% year-on-year growth and marginally decreased by 1% compared to the previous quarter. EBITDA came in at INR 601 million, which is a 42% increase year-on-year and 6% higher quarter-on-quarter. Our EBITDA margin for the quarter stood at 33%. Moving to profitability. Our profit after tax reached INR 447 million, registering a 34% growth year-on-year and 11% increase quarter-on-quarter. The PAT margin stood at 24% for the quarter. Now I will take you through our segment-wise revenue performance for the second quarter of financial year '26 and compare it with -- compare it both year-on-year and sequentially with quarter 2 financial year '25 and quarter 1 financial year '26. Let's begin with Human Healthcare, our largest segment, revenues for quarter 2 financial year '26 stood at INR 1,212 million, making a 22% year-on-year growth and a marginal decline of 1% quarter-on-quarter. This growth was driven by higher sales in the Pharma/API and Nutritional business across both domestic and international markets. Human Healthcare remains the vital of our portfolio, contributing 66% of our total revenues. Next, we have Animal Healthcare. Revenues rose to INR 193 million, delivering a 6% increase year-on-year and a 26% decline quarter-on-quarter. Animal Healthcare accounts for 10% of our total revenues. Turning to Bio-Processing. This segment recorded strong growth of 52% during the quarter, reaching INR 255 million and an 8% sequential growth. This growth is primarily on account of robust performance of our Food business. The Food business grew by 77% on a year-on-year basis and 18% on a quarter-on-quarter basis. The Non-Food business underperformed during the quarter. It degrew by 4% on a year-on-year basis and 20% on a quarter-on-quarter basis. Lastly, the Specialized Manufacturing segment delivered a strong growth of 54% on a year-on-year basis and 30% on a sequential basis, reaching INR 185 million. This segment represents 10% of our overall revenue. We anticipate that our strong growth trajectory will continue across all business segments in the foreseeable future. With this, I will now hand over the call to Raukaji. He will walk you through the financials and key subsidiary numbers. Thank you.

Thank you very much, Mukund. Good evening, everyone. I hope you all are in good health and doing well. On the company's consolidated financial performance for the second quarter and year-to-date of fiscal year 2026, let me talk about year-on-year. Our revenue grew by 26% from INR 1,461 million to INR 1,845 million. Our EBITDA increased from INR 424 million to INR 601 million. Profit before tax increased by 41% from INR 422 million to INR 595 million. Profit after tax increased by 34% from INR 334 million to INR 447 million. On quarter-on-quarter basis, our revenue slightly decreased by 1% from INR 1,859 million to INR 1,845 million. EBITDA increased by 6% from INR 564 million to INR 601 million. Profit before tax increased by INR 46 million, 8% from INR 549 million to INR 595 million. Profit after tax increased by 11% from INR 404 million to INR 447 million. For 6 months performance for FY '26 as compared to FY '25 6 months, revenue increased by INR 698 million, about 23% of increase from INR 3,006 million to INR 3,704 million. EBITDA increased by INR 229 million from INR 936 million to INR 1,165 million, and it stood at 31% of our revenue as compared to 31% during 6 months of FY '25. Profit before tax increased by INR 236 million, 26% increase from INR 909 million to INR 1,144 million. Profit after tax increased by INR 168 million, 25% increase from INR 684 million to INR 852 million and profit after tax stood at 23% of our revenue. Now I would like to give you numbers of our subsidiary companies. Revenue of JC Biotech stood at INR 186 million, EBITDA of INR 37 million and PAT of INR 17 million for Q2 of FY '26 as compared to INR 158 million of revenue, INR 20 million of EBITDA and INR 5 million of PAT. For 6 months, the revenue of JC Biotech stood at INR 397 million as compared to INR 317 million, 25% increase and EBITDA of INR 70 million as compared to INR 44 million, 59% increase. PAT at INR 31 million as compared to INR 13 million. evoxx revenue stood at INR 74 million and EBITDA of INR 17 million PAT of INR 14 million in Q2 of FY '26 as compared to INR 49 million of revenue, INR 12 million negative EBITDA and INR 19 million of negative PAT during quarter 2 of FY '25. evoxx 6-month numbers stood at revenue INR 144 million as compared to INR 96 million and EBITDA of INR 31 million as compared to negative INR 19 million and PAT of INR 21 million as compared to INR 35 million negative during 6 months of last year. SciTech revenue stood at INR 185 million, EBITDA of INR 33 million and PAT of INR 15 million in Q2 of FY '26 as compared to INR 120 million of revenue, INR 14 million of EBITDA and INR 3 million of PAT. For 6 months, our revenue in SciTech was INR 330 million as compared to INR 232 million, 42% of increase and EBITDA of INR 38 million as compared to INR 36 million, PAT of INR 8 million as compared to INR 14 million. The top 10 customers contributed 27% in the total revenue in Q2 FY '26 as compared to 25% in Q2 of FY '25. For 6 months, top 10 customers, 23% as compared to 22% last year 6 months. B2C segment contributed USD 1.29 million as compared to USD 1.1 million during the same period during the previous year. Let me also give you the breakup of our Human Nutrition business. So our Q2 numbers for India sales is about INR 570 million as compared to INR 659 million during Q1 and Q2 of last year, INR 419 million. International sales during quarter 2 is INR 642 million as compared to INR 562 million in Q1 and INR 573 million in Q2 of last year. Domestic numbers from Human Nutrition is about INR 570 million as compared to INR 642 million -- I'm sorry, domestic is INR 570 million, international sales was INR 642 million during quarter 2 of FY '26. In Q1, it was INR 659 million from the domestic market and international market was INR 552 million. In Q2 of FY '25, domestic was INR 419 million, international sales was INR 573 million. Our R&D spending during Q2 is INR 78 million. Revenue expenditures and CapEx of 1 -- total is INR 80 million as compared to INR 85 million in Q2 of last year. On a consolidated basis, R&D spend is about 5%, INR 84 million during Q2 and 6% in Q2 of FY '25. This is without considering intercompany elimination. On a consolidated basis, R&D spend is about 3% during Q2 and 5% in Q2 of FY '25. That was from my side. Now we shall open the floor for question-and-answer session.

[Operator Instructions] The first question comes from Rachna K from SCIL Ventures.

Congrats on a good set of numbers. I have a couple of questions. My first question would be, could you provide color on how could we achieve year-on-year good growth rates across our geographies like India, Europe and Asia? And what caused a slight decline in U.S.A.? If you could please provide color on drivers of growth for this quarter across each geography individually? This is my first question.

We will give you some numbers. Okay. What is the next question?

Similarly, for our product categories, Animal Healthcare, Human Healthcare, Food Processing and Specialized Manufacturing and -- what were the growth drivers? If you could give some color on each category separately? And what caused a decline of industrial processing revenues to remain flat? And do we see the growth trajectory sustaining over the long term? These would be my questions.

Rachanaji, I would say this way, like when we talk about India, Europe, all the different segments, numbers can be given by Rauka. But in general, it's the marketing effort we are putting up from last so many days into the different areas, different geographies, Asia as well as in Europe. And all of this, like it's a long-term like effort. You cannot just go and say that in our [ business ] in one day, like growth will come and can go. So I would put it this way, it's like into all the different segments, which we are working. In Europe, we were working into the baking areas. In the [ U.S., ] we were working into those different food areas. In India as well, we were working on different food areas. In other markets, Asian markets, we were working into the different pharma areas. And all of those give you some effect. At the same time, we did have some back footing because of the tariff issues, which is there. And what we anticipated a little more growth went because of tariff issues, which are still there. And we anticipate that may continue. We don't know when it will be because the uncertainty is there. And probably that is the one area which has caused a little bit loss in U.S. as of now. And also in some of the areas where the indirect market is there. So we are waiting for the -- we are waiting how these tariff issues pan out to make further strategies, what we should do, what we shouldn't do. But what I would like to say that it's like long-term efforts, which are turning into some sort of growth.

Yes, I would like to give you the numbers. So total revenue, 50% has come from India on a 6-month basis YTD FY '26, 30% has come from Americas, where we see a decline of 4% in our numbers as compared to last year 6 months. Europe is about 6% of our revenue. And we have seen 51% of growth in this particular -- from this geography. Asia is about 12% of our revenue coming from there in the 6 months of current year. And we have seen [indiscernible] growth in this particular geography. Rest of the world which constitute of our growth -- our revenue and 30% increase in 6 months. Do you need absolute number or you will get some idea on this?

I'll get some idea. And on product categories, if you could give some color.

I mean product categories in what sense you are saying, anti-inflammatory is our last product.

Yes, the drivers of growth because the growth rates this quarter are very good. So just wanted an idea on those aspects.

It's all the different areas and different products, everything is like showing growth. If you really look at it, our anti-inflammatory product growth is also there. Our baking enzymes growths are also there. Animal feed enzymes also there. So all of them are like growing at this point of time. There are a lot of like research which is happening. Those are also like supporting into some of the areas, and those are also going to support in the future. So that's all what I can say as of now, Rachanaji.

Okay. And one more question. How will we offset the impact of tariffs? You said you have some strategies in place. So if you could provide some color on that as well.

Rachanaji, I don't want to reveal those strategies. We will wait and see how the things pan out, and then we will take appropriate call at a given time, how do we need to do. We are still working on different areas. If this persists, then what we need to do.

And how do you think the growth in H2 FY '26 will pan out? If you could provide some color on that as well.

There are a lot of uncertainties are there. What I would say is that we will still stick with the numbers and the initial guidance what we have given that we will have this year like a mid-double-digit growth. And I would like to continue with that as of now, and we'll see how the things pan out in the given time because I see a lot of uncertainties around the world. So I don't want to comment too many things as of now.

The next question comes from Mr. Umang Shah from Banyan Tree Advisors.

Congratulations on good set of numbers. Sir, I had 2 questions. First was the Specialized Manufacturing business, right, last 2 years, the bottom line is around INR 4 crores or so in that subsidiary. At what scale do you think the margins will scale up? And what is the current -- I mean where do you think the margins will land at for next 2 years?

I mean, see margin in that particular business is really low. And currently, like a lot of expansion is happening. So I think the depreciation expenses has gone up and capacity utilization has also gone up. But yet, the margin is low in that particular segment. And particularly, when you have like -- the geography-wise, if you look at the numbers, then I think the domestic market is a little bit more competitive in the sense in getting the kind of margins. So I think we will go with the same kind of margin that is what we had in the last year. In this particular company, I think maybe about 8% to 10% of the kind of the margins we are going to have.

Okay. Okay. Sure, sir. Very helpful, sir. Sir, and how is the competitive intensity for serratiopeptidase in India?

Competition is always there, Umangji, and it will continue.

Right, sir. Right, right. No, because last year, the competition had significantly increased after many years. So do we continue with that intense competition or now you see that the rates are still firming up?

No, I would say that rates are more or less stable, and competition is going to be there, and you need to deal with the competition with whatever the tools which you have.

Right, sir. And sir, in the last call, you had helpfully mentioned the total impact on our profits for the full year if the U.S. tariffs go to 50%. Now they are at 50%. So do we work with those numbers? And right now, what are the conversations like with our customers? Are they taking some impact of the tariffs?

As like -- last time also like, I think like we mentioned that at the worst case like, we will have a 2% impact on the EBITDA if we absorb everything going forward as well. The way we will work it out is like some of them probably like we will absorb, some of them we will try to pass it on. It depends on the customer. It depends on the strategies. It also depends on the volume of the customer, size of the customers and what different actions what we need to take. But still, it's absorbable if the volume goes up. So we are open on that as of now, and we'll see how it works out.

The next question comes from Mr. Raman K.V. from Sequent Investments.

I'm fairly new to the company. If you don't mind, can you please explain me the business vertical? And my second question is, what are the key growth drivers for your double-digit growth for the year, as in are you planning to launch more product? Or are you planning to scale the existing products?

Ramanji, the business segments, which we have, and we have mentioned on the -- our presentation on the website as well, but I will just for you [ referral ] I will give you like in short. So we do have our Nutraceutical business where like all the Pharma and Nutra business is a part of it. Second one is like Bio-Processing business where Food and Non-Food business is a part of it. And the third one is the Animal Feed business. And I would like to say that like the growth is always with the existing products as well as the new products. We are more like a R&D-driven company. We heavily work on the R&Ds, and the new products and new launches are always into the pipelines. But all the products doesn't scale up that fast or that quickly. It always takes -- there is always some time lag in our area. But -- and we intend to increase our R&D intensity as well going forward. We are coming up with the new R&D center as well, where we would like to increase our R&D capacities multifold than what we have at present. So the simple answer is it's a combination of both existing products as well as the new products, what we are going to launch. Some of them not maybe like an individual form, maybe in the blends and formulation form.

Understood, sir. Sir, while looking at the historical figures, I have noticed that our historical margin before COVID, it was around 44% to 46%. Can we assume this 30% to 32% kind of margin is the new normal? Or can we go back to the 44% margin?

What -- in the last few calls also, we were saying that at this point of time, our view is this is going to be the new normal for us. If it improves, it is good, but we will go with these numbers as of now.

Okay, sir. And sir, my last question, it's more of a doubt. If you can give ballpark figures, which is your -- which is a better margin business amongst all the verticals?

It's -- we don't really track with the different products, different margins, different areas to that level. But I would say that all of the segments are more or less equal. But whenever there is a sale from our U.S. subsidiary, it adds up to the margins.

The next question comes from Mr. Lakshminarayanan from Tunga Investments.

I want to understand our largest product sales, what has been the sales for the last 6 months versus the previous year 6 months?

Yes, Lakshminarayananji, INR 829 million as compared to INR 555 million.

Okay. And if you look at it, what is our India market? This is entirely domestic, I believe, right? Now in this, what is the total market size for this product?

It's difficult, Lakshminarayananji. But I would say that we command maximum percentage of it.

Okay. I mean when you say is it another 35% or 20% more would be that? I mean I just want to understand what is the broad number, what is the range it should be?

See, the application can be different. It can be like into the other areas as well, like you can extend the applications, right? So it's very difficult to put it into the actual number, but if -- so that's a challenge Lakshminarayananji, to tell you exact number.

Got it. Got it. Now how many players are there right now? Because if the market itself is around INR 200 crores or so, I mean, then it's a different thing as well as when the market is large. So -- because it needs a minimum order -- minimum size for somebody to set up this particular product, correct? Now in your view, what is the minimum revenue somebody has to generate to actually enter into this particular business?

I would put it this way, like individual single product, probably it's very difficult to sustain...

Or survive. Yes.

Or survive. You need to have different batteries of the products, you need to have different products. You need to take the capacity utilization very differently. It's -- because just giving one product doesn't work out.

Got it, sir. And we talked about the American business, and there has been tariff impact. Now is it that the entire product that are being shipped to the U.S. suffers from this tariff? Can you just tell me what is the percentage? Because there is -- if you add value, then the tariff becomes different, right? So what is the weighted average thing for this? And then how do you -- what kind of mitigation you can actually do? However, you talked about some of the things like 2% is an impact. I just want to understand how much is -- how much would get suffered with this tariff? And then what is the weighted average? And then what are your mitigation, sir?

If I go with the last year's number at the worst scenario probably like we will have an impact of INR 7 crores, INR 8 crores.

Okay. In the EBITDA?

Yes. I mean like total whatever we can call, PAT or gross numbers or whatever...

[ PAT was ] INR 7 crores, INR 8 crores and INR 10 crores to INR 12 crores of EBITDA.

Sorry, sir, I didn't get a clear...

INR 10 crores to INR 11 crores is impact on EBITDA and INR 7 crores to INR 8 crores on PAT on overall basis.

And how do you intend to mitigate it? Is there a way which you can mitigate by changing the source of origination or keeping the pace at which the value is being added? Is there something which you can mitigate?

Yes. I think that's what we are working...

We will explore all of those areas.

Sir, and if you look at India, non-pharma business, right? So can you just give me a split of India non-pharma and how it has actually grown?

So when we talk about India, non-pharma is basically textile and leather, and we mentioned many times that, that is not our focus area, Lakshminarayananji, but we intend to be there and see how is the market moving. Maybe like in the future, we would like to come out with the products into those areas.

Yes, because I thought there is a sizable amount of Animal Feed business, which is...

Animal Feed doesn't come under the non-food areas. The non-food areas basically comprises of like textile and leather.

I talked about -- I was looking for non-pharma, sir, sorry, I think I wanted to know the non-pharma part of India. What is the revenue that is actually -- for the last 6 months and how it has grown, excluding pharma domestic sales?

So Raukaji can give you the numbers of the Food business, how it has grown. And basically, the other one is the Animal Feed overall numbers. We don't have numbers like separately geography-wise or others, right? So you can give the 6-month comparison, Raukaji.

So I'm just giving you number for Food segment. So for 6 months, it is about INR 380 million as compared to INR 312 million. And other than that, the Animal Health -- Animal Feed business, that is what we call it, it's INR 453 million as compared to INR 353 million in last year 6 months, then...

This is India?

No, it's not India. It's all like India plus [ international sales figures. I think ] total number I'm giving you.

Okay. Okay. Sir, and moving on to Europe, which has also grown for us. Can you just give me a split of what is growing in the Europe? Is it the...

No, I would put it like -- Lakshminarayananji, we shouldn't go on a quarter-on-quarter or half yearly basis. Overall yearly basis, it has more relevance. I would say that the focus area is still like the same, what we have into the food areas and particularly into some of the nutraceutical areas, which is still there into the Europe. We are registering like our few products in the EFSA, and we are waiting for the novel food approval. If that works out, then probably like the Europe business can grow much faster. Similarly, we are waiting for some of the approvals for the -- some of the pharma areas into the Asian areas, if those happens, probably like that should like really increase the growth into those areas as well, particularly. It's a long time-consuming process. The process we started 1.5 years back and still we are waiting. Maybe like 6 to 8 months down the line, we expect that, that should materialize.

Sir, one just last question. The American business has shown a little slower growth. So is it completely related to tariffs or it is something outside the tariff issue that is actually leading to this?

We don't know at this point of time, Lakshminarayananji, but what we can say that into the last -- particularly last 2, 3 months, there is a lot of slowness what we can -- what we have observed. The number of inquiries, which used to be, let's say, about 100 in a month dropped down to 4, 5, 6 new inquiries. So that just shows that there is a lot of slowness, which is happening into the market. Now is it because of the tariff or some others or because of the price rise, what is happening into the U.S., we still need to wait and watch. But what I would like to say that there is some slowness, which we can see. And we believe that it has to do more with the tariff and other cost increase, what is happening in the U.S.

The next question comes from Mr. Nitish Rege from ChrysCapital.

Just a question on the guidance, which you said you want to maintain at the mid-teens level. So you expect 2H our revenue growth rate to decline? We've done 23% Y-o-Y in the first half. So if you want to do mid-teens, we expect 2H to be a slower growth for us?

I think that's what we have been telling because of a lot of uncertainties around the world, we feel like we need to have the same guidance for the time being.

Got it. And just if you could share some color on margins. Do you expect it to be at this 32.5% EBITDA margin levels going ahead?

I'm sorry I didn't get you...

Margin maintain [Foreign Language].

The margin, I think we have already mentioned, except like the impact of the tariff. Otherwise, I think we will continue to have the margin of PAT about 21% to 22%, EBITDA of 30% to 32%. That's what we are still managing...

I would say that still like -- we will not go with the quarter-on-quarter. I would still like to see more certainties as to -- I mean, like some more clear picture how the whole situations pan out. As of now, what we are trying, we are getting some results. We expect some more results. Some of the results didn't come up because of like tariff issues and other issues. So we'll wait and see, wait and watch how the things pan out.

Got it. And sir, we've got close to INR 600 crores of cash on our balance sheet right now. Is there any M&A we are targeting or any such acquisitions where you have in mind you're assessing right now?

The acquisitions and other things are always there in the mind. We always work. We are working on a few of them, but it always depends on the cost and what we are getting out of it. So we don't know whether it will happen or it will not happen as of now.

But like are we looking for targets which are in the human nutrition or in the industrial bio-processing, anything we are favoring?

I mean that's an ongoing process.

And it's more of like forward integration, we are looking at, say, Animal Feed business, of course. In Human Nutrition, like we are looking more at probiotics. That's the area of our interest.

Okay. And just lastly from my side, what traction are we seeing on the biocatalyst side?

We do have a lot of good traction, which is coming up. We do see that there are a lot of products which are under the pipeline, and probably they should also add up to the growth going next year, maybe some -- maybe the last quarters. We will see, wait and watch how the things pan out.

Any number -- could you quantify the number?

I won't be able to. Raukaji, can give the numbers, but the market work which is going on, that's all what I can say as of now. But Raukaji can give you the number.

So I think biocatalysts total for 6 months stood about, I think, INR 128 million as compared to INR 104 million last year.

The next question comes from Mr. Rajas Joshi from ChrysCapital.

Sir, I just wanted to get a sense on the growth that we reported both for the earlier quarter and this quarter. How sustainable is this growth? And are there any one-offs per se, so to speak, in the numbers for H1, both with regards to revenue and/or margin?

I would say that there is no one-off, but there is not every quarter we get the same -- I would say the same orders. Some quarters may be here and there -- a few here and there. But I would say this is a little bit long-term growth rather than like we just go with a quarter-on-quarter basis. So it's difficult. There is no one-off customers, but we still need to wait for the -- how this tariff comes up because there are a lot of times like the indirect sales are also there, which also goes to the U.S. So we need to wait and watch how the things pan out.

Understood, sir. And has the strategy in any sense changed, especially, I mean, with regards to, let's say, sales and marketing or business development, any other kind of change in strategy that you've done over the past 1 year or that you would like to highlight specifically?

No, no comment.

I don't want to comment on that, Rajasji.

Okay. Okay. Understood, sir. And secondly, on the gross margin, right? So I mean, Q4 was kind of the bottom. And then last Q1 also, we were about, I think, 73-odd percent. And this quarter now we've given about 76-odd percent in terms of gross margins. So -- and if I look at the sales in the U.S., which is rightly -- as you had rightly said, a higher-margin market for us. Quarter-on-quarter basis, sales are down for this high-margin market. Then what is really driving this gross margin expansion per se on a quarter-on-quarter basis?

So overall operational efficiency is driving, operational efficiencies as well as like your -- some of the research is there and some of the like product mix, which varies with quarter-to-quarter.

On mix, could you highlight what exactly is higher margin and what is lower margin, which would help us understand going ahead as well, how we should think of gross margin?

I think for you, it will be difficult to arrive at such things, frankly speaking, because it's a complex model where we have animal nutrition, human nutrition, biocatalysts, probiotics. So I mean, it's very difficult to drive in that sense, those numbers.

So even qualitatively, not from a number perspective, you could -- I mean, let's say, animal nutrition is higher margin or some other product is low margin, anything of that sort?

No, I don't think we will be able to give you that kind of guidance.

The next question comes from [ Zaki Nasser ] from Nasser Investments.

Sir, congratulations on a very strong set of numbers. Sir, you've given a guidance of a mid-teens growth, which I think is on the cards. But sir, how do you foresee the company 3 years from now? How do you want Advanced Enzyme to shape out as a company in the global scenario, sir? Because it's a complex company with the products itself are pretty complex. And also, I would like you to throw some light on your sector of industrial and bio-processing. What do you foresee that because that has had a good growth this quarter, sir?

So if you ask me like we always wanted to maintain the growth trajectory of like mid-teen over a longer period on an average, if I would like to say. So that's always the goal. In terms of bio-processing and all of these different areas, we are coming out with different new geographies. We are adding up new products what we are working on. Some of them are in the R&D, some of them are into the final stages. Some of them, we already added and marketed into the market, right? So to support that, you need to add more like geographies, just not like dependent on the baking. So we are working into the different areas, into the food categories as well. And we are coming out with the new products, new R&Ds. And that is how like we are working on the bio-processing, and that is how like we need to grow in each and every areas.

Sir, would you have a broad idea of what your share in the world market would be or how large would Advanced Enzymes reach as a world player, sir? Would you have 10% to 15% market share or more, sir, in this area?

I would say that we are very small. Even though we will be among the top 5 or top 10 players, there are very few companies in the world. If you just go and compare like the revenues of the biggest like Novozymes or Novonesis right now, we are very, very small. So we won't be commenting like even like 5% of the share in the world market, probably like...

Less than 2%.

Less than 2%, somewhere around that, that is what our share is as of now.

So there is a huge headroom, sir, if things -- if you have a good couple of years?

Yes, but that has to be supported with a lot of R&Ds. And this is a complex business like as we're always saying, right? So that needs a lot of research, and that is what like our focus is going forward as well.

The next question comes from Shreyans Gathani from SG Securities.

So I had a couple of questions. So the first one was that we've seen like a big pickup in high-protein foods in India, especially like high-protein yogurts and milk. So are we providing any kind of enzymes towards those specifically like lactase or in that particular area? And what kind of growth are you looking at?

We are working into those areas. As of now, we do have certain products under the trial. Even though like our Indian market share is smaller into those areas. In India, there are like a little different challenges, but we are overcoming on those. And you need to have a lot of different product batteries. Like when we talk about lactase, there are a couple of types of lactase, particularly into the -- this area, probably, you need a neutral lactase. We do have a very good acid lactase. Neutral lactase is also like under the R&D. There are a lot of different aspartic enzymes, proteases and all of those are also into the customer testing phases and all of that. So yes, in giving the short answers, we are working into those areas. As of now, we don't have too much of the sale in Indian market, particularly of those, but those are the products under the -- different stage of developments.

Okay. So we are in testing phase. We developed the product is what I can understand?

Sorry?

Is it under like customer testing or what phase are we at?

There are a lot of different products, right? So some of them are at the customer testing. Some of them are like in our lab testing. Some of them are under the development stage as well.

Okay. Okay. And second question was on the B2C India business. So how do you see that shaping up? Any kind of traction that we are seeing? And what's the strategy over there?

So we are like main B2B company, and that is where like we are like separating that arm from Advanced Enzymes to the new company what we just recently formed. So we will be transferring that business. As of now, like we do have a good growth on a smaller number. This year, probably like we'll be hitting somewhere around INR 1 crores to INR 1.5 crores, which is lower than what we budgeted initially, but we'll see. And there is a young dynamic team, which is working behind it, and it's a different company. That's what we are trying to aim at to develop it further.

Got it. Got it. And lastly, is there any update on how we are going with the R&D center and what plans of hiring and all, people in that?

So R&D center is at different stages. And I would put it this way, probably like by the end of the March, it should have some kind of -- some kind of shape should come up. And probably, we are targeting to capitalize some of the assets during that time. But...

Partially it becomes...

It will partially become active by the March.

By the end of this year -- fiscal year, sorry.

By March. Okay, okay.

Yes, yes. By March.

Okay. Okay. Got it. And last is the European subsidiary, we had an order, like any kind of similar orders we are looking at? We did see like a revenue jump there. So if you could give some color on how that is doing and yes, just some update on it.

Yes. So European subsidiary is more like R&D, but we are working on some of the similar contracts out there. Some of them are on the advanced stages. Some of -- and we see a good growth if those materializes, maybe in the next 2 years -- 1 years down the line and 2 years down the line. But we will wait and see how the things work out because some of them are under still like the development stages for them.

The next question comes from Mr. Aditya Khandelwal from SiMPL.

Sir, this question has been asked before, but I'll also try my luck. So see, the growth which we have witnessed in the first half, more than 20%. So if you could just provide some flavor what is leading to such high growth? So is it that we have won new customers or some of our products have clicked, which is leading to this high growth? Or is it just purely a base effect playing out? So if you could just spend some time and help us understand what is leading to this high growth.

So we are getting good growth in all 4 segments. In Human Nutrition, we are getting a good growth of about 21%. This is our largest business. And here, we have different products and different product mix. So many of like products are getting good orders. And because of that, I think the growth is good in this particular segment. In Animal Health segment, again, we are getting 28% of growth. So that is coming from India as well as from the international market. And this is because mainly, we have done a lot of work in the last 3, 4 years. So I think we are getting now a lot of orders from our customers. And Bio-Processing Food is another area where we see a good growth of 22%. So all these segments are doing well in these 2 quarters, and there are several things because the efforts have gone in the past. And now you are getting those kind of numbers from different customers. So it's not only one particular thing which we can say, okay, it's only because of A, B, C, D reason. There are several things which has gone back into getting this kind of support and numbers. We'll look at the alternate manufacturing business, I mean, where we have effervescent based technology, and we could see 42% of growth in this particular business as well, which is run by our subsidiary company. So all put together is given a kind of growth of 23%.

We'll take up the next question from Mr. Abhishek Kohli, an individual investor.

Yes. My question 1 is, I see high inventory in your balance sheet. Is it to -- is it like preparing for -- is it like in preparation for U.S. tariffs that you are maintaining this high inventory? That's my question 1.

Abhishekji, in our business, like the inventory is always high. Like if you look into the historically as well, you will see that the inventory is always high because we have multiple different products, different locations. The product cycle is bigger. Let's say, if you want to make one product today, you will at least need 1 month's time. That too depends on like whether the capacity is available because when there are multiple products, there are different batch campaigning as well happens. At the same time, we have different plant locations in India as well as out of India. So that makes it always our -- and the delivery time has to be as short as possible. So we historically as well had the same inventory levels.

Okay. So as of now, there is a business between India and U.S. like as in you are able to do that despite these tariffs?

We anticipated that, and we did some movement into the first quarter to the U.S., some of them, like which can take care of another 1 quarter or so, 1.5 quarters.

Okay. Yes, that was actually my question because I see INR 173 crores inventory, which looks big compared to your past. So I was asking like were you preparing for that in the form of finished goods?

A little bit built up. Yes.

A little bit built up. Yes.

Yes. Question 2. I think 2 quarters back, I remember you mentioned about a pharma intermediate that was in pilot stage. Any update on the commercial orders for that pharma intermediate?

We had a few, but there are a few challenges as well, which we are working. We are working on a few of the intermediates as of now. We'll see how it pan out. And probably like after 1 or 2 quarters, maybe like we'll be able to more highlight on that.

Okay. And my question 3. This is my final question. I remember like our CEO mentioning that there was a reduction in the number of inquiries. Despite that, we are -- like you are guiding for mid-teens growth. Like my question -- my main question is, will this reduction in inquiries be affecting the H2 or next fiscal year '27?

See, this is already like affected like if you really look at it, our U.S. sales is down by 7%, 8%, whatever that number is. So it's already affecting us to some level because we see like some of the slowness. If we really go back. And when we were like calculating, it was like we were anticipating some 9%, 10% of growth in the U.S. business this year, but this has already affected us.

Okay. And the U.S. -- this tariff-related slowdown, is it like affecting only your U.S. business? Or is it affecting like the global supply chain as well? Is that what you're feeling as of now?

It's mainly U.S.A.

It's mainly the U.S. business and some of the indirect U.S. business.

Okay. The reason I'm asking is like your businesses are more countercyclical business, say, like precision proof business, because food and pharma, these products. Textiles, anyway...

No, I would put it this way. Like our enzymes goes into the pharma intermediates as well, but also like most of the enzymes categorized in the U.S. as a nutraceutical. So when it goes to the nutraceutical, let's say, if I'm selling some enzymes to the tablet manufacturing company, and they are exporting to the U.S., that is not happening because of the 50% tariff, which is there on to their final products as well. So that's how like indirectly also like it affects. And it did affected us into the last 1 or 2 quarters. So...

Okay. Then a really fantastic job actually what you guys did despite all these headwinds, a 20% growth rate. I think without that, it would have been like more than -- I think close to 30%, right, by what you're saying. Great job.

We have a follow-up question from Mr. Lakshminarayanan from Tunga Investments.

Sir, just wanted to understand whether people who are taking material from us in U.S., have they found alternate supply sources or -- that is number one. And second, with respect to the growth in Asia, the growth has been stupendous. Can you just help me understand what are the levers of growth in Asia and this U.S. question, please?

I would put it this way, Lakshminarayananji, I don't see there is an alternate supply or this. We haven't raised the prices or anything as of now to a level which it should be, right? And we are not like -- we might take some hits as well, like as we are seeing, and we will wait and watch how the things pan out. What -- one thing what we can look at it as of now is like everywhere there is going to be a price increase in the U.S., which will happen by the next year. This is what our anticipation is. As of now, we'll wait and see how things pan out in the U.S. What was your second question? Was Asia. So...

Yes, Asia. What lead to the growth in Asia, which segment?

Nothing happens in 1 day, Lakshminarayananji. You need to do like a lot of registrations and other things, and it's the efforts of last 1, 2 years, what you put in, this starts getting materialized, right? So nothing is in a 1-day process or this process. We were like working on it. We got some success. We are still working on some of the geographies, and we will wait for those geographies to materialize.

Is it Animal Feed or is it Human Nutrition? What actually drove the growth in Asia, sir?

It's all the segment, I would say. Except food, I would put it more into the Animal Feed and into the Human Nutrition business.

Other than U.S., Asia business has grown up.

Next, we have a follow-up question from Mr. Umang Shah from Banyan Tree Advisors.

Sir, some time back, Raukaji had mentioned on one of the calls that our market share in U.S. is 15%. Just wanted to confirm the number. Is the understanding correct?

15% of like I think we must have mentioned about the Nutraceutical and that too, I think, double, right?

Yes, in Nutraceutical market in U.S., that is the right understanding, right?

Yes. Right.

And in that -- with that 15%, what would be the rank? Would we be first, second, third, fourth?

I think there are 3, 4 players. Yes.

Okay. 3, 4 players ahead of us or 3, 4 players in the market?

No. No, they are ahead of us.

Major, I would say that 3 players. So you will be one of them. There will be some small players, but mainly [ 3, 4 ] players.

Sure, sir. Sir, and the second question was this Food business revenue that you've got in this quarter, is it sustainable? Or is it based on a contract or onetime? Because previously also, we have seen some volatility in this segment.

I would not say that it's a onetime business. I would say that like some of the -- I would still go with not a quarter-on-quarter. Some quarters, probably you will have a lower, but I would say that this is a more sustainable business.

Right, sir. Got it, sir. And just last one thing. R&D expenses, is it simply a function of higher sales due to its share decline? Or have they also ramped down?

Yes, yes. Right. I think in absolute number, we have about, I think, INR 19 crores or so this year 6 months and last year also a similar number. Here, we are spending a lot of money, which we have not capitalized. So we are not taking those numbers into account when we are talking about our total R&D spend.

Sure, sir. Sure, sir. And sir, once the R&D center comes on stream next year, how much R&D are we budgeting from the P&L?

So I think this will increase substantially in the sense like supposing we are spending, say, about INR 25 crores. So roughly for the next year, it is going to go about INR 10 crores to INR 12 crores higher than whatever we have spent -- we are going to spend in FY '26. And gradually, it will ramp up. Gradually, it will ramp.

Due to time constraints, that will be the last question for the day. Now I hand over the floor to Mr. Ronak Saraf for closing comments.

Thank you, everyone, for taking your valuable time for attending our earnings conference call. We will keep you all posted for any further updates. I request you all to kindly send in your questions that may remain unanswered. And audio recording and the transcript of this call will be uploaded on our website and on stock exchanges in due course. Looking forward to host you all in the next quarter. Till then, stay healthy, stay safe.

Thank you.

Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call services. You may disconnect your lines now. Thank you and have a pleasant day.