Ajanta Pharma Limited (AJANTPHARM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ajanta Pharma Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you, and over to you, sir.

Thank you. Good evening, and welcome to all of you. With me, Mr. Rajesh Agrawal, Joint Managing Director; Mr. Arvind Agrawal, CFO; Mr. Rajeev Agrawal, AVP Finance and Investor Relations. I hope the results are already been reviewed. Now we will take you through the business-wise performance for Q3 and 9 months for the FY '25, along with the comparison of the previous year for the same period. So you would like to know that our performance of Q3 was satisfactory as a Branded Generic business quarterly growth of 10%. This was on the back of our strategic approach and focused execution along with the consistent efforts, which allowed us to turn around position as a leading player in the pharmaceutical industry. Our concentrated efforts on improvement in working capital cycle has resulted in generating free cash flow of INR 675 crores with 97% of PAT conversion in 9 months, which is indeed a remarkable achievement. We are confident of sustaining this momentum and driving continued growth in the coming quarters. Our excellence in terms of strategy and operational execution will enable us to deliver long-term value to our shareholders. Now moving on to the business details. During the quarter, the revenue from operations was INR 1,146 crores from current -- from our 3 verticals of Branded Generics, U.S. Generics and Institution business in Africa, a growth of 4%. During the quarter, 74% of the total quarter sales came from the Branded Generics, which is spread across India, Asia and Africa. The Branded Generics sales stood at INR 834 crores, posting 10% growth during the quarter. This business exhibits assurance, sustainability and potential for the long-term growth. Let me now take up the international business, and I will first start with the Branded Generics business in Asia and Africa, which contributed 44% in the total revenue. In Asia, our presence spans across Middle East, Southeast Asia and Central Asia, encompassing around 10 countries. In Q3, sales was INR 316 crores against INR 292 crores, a growth of 8%. And in 9 months, sales was INR 888 crores against INR 776 crores, a healthy growth of 14%. We launched 9 new products during the quarter, taking total tally to 22 new products launched in 9 months in the Asia region. Let's now move to Africa. Africa business is spread over 20 countries. In Q3, sale was INR 173 crores against INR 155 crores, a growth 12% and in 9 months, sales was INR 617 crores against INR 64 -- as against INR 472 crores, a healthy growth 31%. We launched 7 new products during the quarter, taking total tally to 10 new products launched in 9 months in Africa region. Let us now talk about other 2 verticals of international business. I'll move to U.S. Generics. U.S. Generics contributed 21% to the total revenue. In Q3, sales was at INR 263 crores against INR 252 crores posting a growth of 4%. And in 9 months, sale was at INR 723 crores against INR 703 crores, a growth of 3%. Our superior execution continues to keep us as a preferred partner of choice for the distributors. In 9 months, we filed 4 ANDAs, received 5 final approvals and launched 5 ANDAs. We now have 48 products available on the shelf and 21 ANDAs awaiting approval with U.S. FDA. I now move to Africa Institution Business. Contributed 3% of the total revenue, which comprises of ancillary products. In Q3, sales was INR 33 crores against INR 86 crores, posting degrowth of 61%. And in 9 months, sales was at INR 118 crores against INR 188 crores, a degrowth of 37% due to lower purchases by the global funds. As we report earlier, the business remains unpredictable due to the reliance from procurement agency, schedule and fund availability. Now I invite Mr. Rajesh Agrawal, our Joint Managing Director, who'll take you through India business. Thank you, and over to you.

Thank you. Good evening to all of you. I'm delighted to inform you that under strategic initiatives, we have forayed in 2 new therapies in IPM, namely gynecology and nephrology. The total IPM size for both these therapies is approximately INR 16,000 crores as per IQVIA MAT December 2024. We have added 200-plus MRs in these 2 new therapies, which are a part of total addition of MRs so far. We have launched about 12 new products in these 2 therapies in Q3 FY 2025. Coming to our performance. It was an excellent quarter on the back of increased volumes and new product launches. India business contributed 32% in total revenue. In Q3, sales was INR 345 crores as against INR 308 crores, a healthy growth of 12%. And in 9 months, there was INR 1,083 crores against INR 982 crores, a growth of 10%. India business improved revenue from Trade Generics, which contributed INR 43 crores against INR 38 crores in Q3 and INR 130 crores against INR 120 crores in 9 months in the same period of FY 2024. During the 9 months, we launched 26 new products out of which 8 were first time in the country.

We lost the line for the management. Please be connected while we reconnect the management. Thank you. Participants, thank you for your patience in holding the line, we have the line for the management reconnected. Over to you, sir.

Okay. Thank you. So I will continue the statement again. We continue to outpace IPM by 300 basis points, with Ajanta growing at 11% surpassing IPM growth of 8% as per IQVIA MAT December 2024. This trend extends to most of the therapeutic segments we are in where our growth has consistently outpaced the segment growth. In the covered market, we tend to be fourth largest in IPM and amongst top 10 in all our therapeutic segments. As per IQVIA MAT in December 2024, our faster growth is contributed mainly by volume, which was approximately 3x more than the IPM volume growth. Cardiology contributed 38% followed by Ophthalmology, 30%, Dermatology, 23%, with remaining 9% coming from Pain and India branded sales. We have added 250-plus medical representatives in quarter 3, taking the total addition to approximately 450 in the first 9 months of FY 2025 and total tally to 3,450. These additions will help us drive India business in the coming 3 to 5 years. This addition is in line with our strategy of increased focus and expanding product market. I now invite Arvind Agrawal, CFO, to take you through the financial performance. Thank you, and over to you Arvind.

Thank you. Good evening, and warm welcome to the third earnings call of FY 2025. On this call, our discussion includes a certain forward-looking statements, which are projections or estimates about the future events. These estimates reflect management's current expectations about future performance of the company. These estimates involve number of risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Ajanta does not undertake any obligation to publicly update any forward-looking statements, whether because of new confirmation, future event or otherwise. We will look at the consolidated financials and provide year-on-year comparisons. The key financial highlights of quarter 3 and 9 months of the FY 2025 are as follows. Total revenue in Q3 stood at INR 1,146 crores against INR 1,105 crores, posting growth of 4%. In 9 months, the revenue was INR 3,478 crores against INR 3,155 crores, posting growth of 10%. The growth was lower than our expectations due to lower institutional procurement of antimalarial products. Our gross margin stood at 77% in 9 months, an improvement of 200 basis points from FY 2024. This was the result of higher contribution from Branded Generics business in overall revenue. We expect it to remain in the similar range with quarterly movement of 200 basis points due to change in product mix. Personnel costs in Q3 was at INR 265 crores, an increase of 15% on the back of increased the amount in India. For 9 months, it was at INR 810 crores, an increase of 21% due to a onetime charge of about INR 30 crores of -- for change in the [ city ] policy in Q1 and increased the amount in India. Increase in medical representatives in India, we see the cost side going up in coming quarters. R&D expenses was at 5% of total revenue. In Q3, expenses was at INR 53 crores against INR 52 crores in 9 months. It was -- I'm sorry, against INR 52 crores last year. In 9 months, it was INR 161 crores against INR 157 crores last year. We expect the expenses to be at 5% of revenue for the fiscal. Other expenses in Q3 stood at INR 302 crores against INR 266 crores. And in 9 months, it was at INR 918 crores against INR 792 crores previous year same period. It may be noted that the other expenses include ForEx loss notional towards the mark-to-market of hedges of INR 14 crores in 9 month FY 2025. As we've done in previous calls, the increase in expenses were in line with our guidance due to increased SG&A expenses. The expenses in Q4 are expected to be on the same level of Q3. We achieved EBITDA margin of 28% in both Q2 and 9 months. EBITDA stood at INR 321 crores against INR 314 crores, a growth of 2% in Q3. And INR 962 crores against INR 894 crores, a growth of 8% in 9 months for previous year. We expect the EBITDA to be around this range plus minus 1% for FY 2025. Other income was INR 30 crores in Q3 and INR 76 crores in 9 months of FY 2025. It includes ForEx gain of INR 18 crores and INR 26 crores respectively in Q3 and 9 months. Income tax stood at 24% during Q3 and 9 months and is expected to be on similar lines for FY 2025. In Q3, PAT was INR 233 crores against INR 210 crores, a growth of 11% and in 9 months, it was at INR 695 crores against INR 613 crores, a growth of 13%. PAT stood at 20% for both Q3 and 9 months of revenue from operations. We incurred CapEx of INR 180 crores in 9 months FY 2025. CapEx, including maintenance CapEx for the FY 2025 is estimated to be at about INR 225 crores. We have improved all the 3 funds of working capital in 9 months of the FY 2025 from FY 2024. Inventory stood at 71 days against 73 days. Trade receivables at 86 days against 109 days and payable at 66 days against 85 days. This is a result of our consistent effort in improving working capital cycle. In 9 months of FY 2025, we have generated a healthy cash flow from operations of INR 985 crores with cash conversion ratio 102% and free cash flow of INR 625 crores with 97% PAT conversion. ROCE and RONW continue to improve and be comparable to the best in the industry. ROCE stands at 35% and RONW at 26% at the end of December 2024. With these highlights, I open the floor for question and answer. Thank you.

[Operator Instructions] The first question is from Tushar Manudhane from Motilal Oswal Financial Services.

Sir, I request to start off with therapies in the India market. So what in this quarter reflects the additional expenses related to the therapies or these are expected to further increase in the coming quarters? That's my question.

So as far as people cost is concerned, about 200 people which have been added in these 2 therapies is already included, and this will continue in the other quarters also -- coming quarters also.

And the marketing expenses?

Marketing expenses are yet to take off, I think it will slowly go up in the coming quarters.

So essentially, like continuing these factors, maybe I have missed the EBITDA margin guidance for FY '25/'26?

Relative to what we have given last year, at the beginning of the year, we have maintained 28% plus minus 1%. So I think we are -- we feel that things should -- it should go in that direction for the year.

And just secondly, we listed to ANDA and we filed 4 ANDA in this financial year. So the target of 8 for 2 years for the [ mature ] or...

Yes. It will be [ mature ]. There are a lot of ANDAs which are skewed towards the quarter end. So we are expecting to file 4 more NDAs in the last quarter.

Will the lending be higher, say, at least some accounting on R&D costs and so that you have from a Q4 perspective that cost in terms of the impact on the margin?

No. Actually, R&D cost is already incurred because it's just waiting for the stability data to come out and things like that. So that is already baked in into the current quarter and the last quarter. So we don't see any significant expense increase in the next quarter also. That will be a marginal increase, but not a significant increase in expenses considering R&D domestic launches, what we have done for, in addition, all the people, all those things. Maybe we can see a slightly more impact in the next year. But we'll talk about the next year when we finish the year.

Got you. And just lastly, if I may, like considering many therapies available, what sort of factors went in to drive to a conclusion of selecting nephrology and gynaecology as the next sort of growth in your -- additional growth for the India markets?

Nephrology is a natural extension of what we have been doing already for so many years. We have been covering nephrologists by way of marketing and selling our largest brand [ therapeutic ] , which is the second largest brand in that particular therapeutic segment. So nephrologists made logical sense for us to expand our footprint and product portfolio, have a dedicated team and taskforce. It is also a small kind of set of customers that we need to cover. So that took the way that we have really built our business. Gynecology, I see this market is still large. It is INR 11,000 crore-plus market and I feel that we have required a product portfolio and the skill set to make our presence in this segment. It's a large segment, and we would like to be prominently present over the coming 3 to 5 years.

[Operator Instructions] The next question is from Amlan Das from Nomura India.

Sir, I just wanted to ask what is your outlook for the Africa antimalarial business? Is it going to remain low? Or do you have any outlook regarding this?

Yes. As you have seen in the current quarter, we saw significant debt. And for the whole year also, the degrowth [ conservatively ] of 40%. So for the whole year, that's what we're looking at around 40% degrowth from the last year. Going forward a bit uncertain because of the announcement made by the Trump administration of not in favor of funding the U.S. aid and some more things. But then there was a rollback and some clarification given by the after 24 hours or 2 days that they want to continue with some critical medicines and like [ steering ] medicines. So I think that's still an evolving landscape that determines purely on how much money the former -- government agency for this procurement agency. So -- but yes, I think it's -- it is -- current year, we've seen a degrowth of 42%. But I think in overall scheme, it's become a very small component of our business. It is now 3%, maybe next year, the way our other businesses will grow the Branded Generics business in India, emerging markets and U.S., this will even become a much smaller part.

Sir,one more question regarding India business. Have you procured any sales for the new drugs that you have added in this quarter? There is a 12% growth? What is the contribution of this nature of this?

In the current quarter?

Yes, current quarter.

No, it is insignificant. We have just onboarded the new team. They would take quite a few months to be productive. This is insignificant compared to total domestic business.

So what is the CPTM right now?

CPTM is about INR 3.9 lakhs at a company blended average business, including all the therapies, including on the MRs that we have present. But I'm not adding the MRs that we have added in the last 6 months essentially because that will take -- we will take at least another year to be projected. So this INR 3.9 lakhs is at a rate of 3,000-plus MRs.

[Operator Instructions] Next question is from Vishal from Systematix.

With respect to U.S...

Vishal, your voice is very low. Could you please use the handset, we can't hear you very clearly.

Yes. Is this better?

Yes. much better.

Sir, with respect to the U.S. Generic business, can you guide for the next year in terms of how many launches we can expect and any color on the type of these launches with respect to the market size that they address and whether they are early to the market in terms of immediately post patent expiry or limited competition?

I think -- I don't think I'll be able to give you that in-depth granular details to you. But we are, as I told you, we've launched a new product during the year, and there are more launches which run in next year in the mid quarter and next year. So in the beginning of the year, we had guided mid-single-digit growth for the U.S. market. We are pretty much trending towards that for the whole year. Nine months also is pricing like that for the whole year. So that's pretty much on what we had given the guidance and what we have made a project internally. Next year, we feel we should post a higher growth, much higher growth. It will be double-digit growth but I will give you the growth in the next call on what we are going to look for the U.S. once all our budgets and targets are finalized. But definitely I think decent number of new product launches, which will happen in next year also.

So would you be able to share any limited competition launch that you expect? Complex product launch?

Unfortunately, sir, I don't have those kind of granular details. There will be a few products which are limited competition, that much I can tell you. there will be at least 2 possibilities of which could be limited competition. Two products we are definitely looking at on the horizon and which will have limited competition.

And with respect to these branded markets, Asia and Africa. Can you explain the reason for these markets to be volatile over quarters, like we can see sharp growth in some quarters by way it becomes subdued like this quarter was a subdued quarter for the Asia and Africa market.

So essentially, what happens here is actually our self sales, which is a secondary sales, which happens in the market, that is at a steady state but because it is -- we are shipping to India to our distributors and then there are air freight factors, and there are transit time factors, which are all there. So that is the reason we see this kind of peaks and valleys, the lumpy sales at times going down. I think quarter-to-quarter variation is not the right way to look at the export sales. I think the 9 months or 12 months horizon is the right way to look at that growth. And at the beginning of the year, we had guided for the Branded Generics business to be in the mid-teens. And as you will see, if you remove the quarter-to-quarter, if you see the 9 months or what we are forecasting for the whole year, it remains pretty much in the outlook for guidance which we have given of hitting that mid-teen Branded Generics growth. So I would tell you, don't read too much into the quarter-to-quarter I think look at the horizon. If you look at Asia, the 9 months growth is 14%. So which is what normalized because second quarter, we saw 28% growth, quarter 3, 5% growth and Q1 was 8%, 9% growth. So on the whole 9 month basis, we got normalized to 40% average blended growth.

And just one more on the new division launch in nephrology and gynae, so whether these 12 products that you launched, any color in terms of whether these are kind of new launches in a large market and you would be a new brand in those categories and multiple established brands there already or you are doing a different strategy here? Or you are getting into very fast-growing categories within the space?

You're absolutely right. These are high-growth subtherapeutic segment, which we have identified as our go-to-market strategy. And so deliveries are already there in our favor and none of them are first-to-markets at this point, but we are confident of being able to differentiate given our ability to engage the customer on the scientific activities and also through unique customer engagement activities that we do and that we have done in other specialties. We are quite confident the team that we have is a highly experienced team in these respective therapy, which gives us a head start. So this is how we will differentiate and make a presence.

The next question is from Nitin Gosar from BOI Mutual Fund.

Wanted to understand 2 aspects. Now keeping in mind that the Branded Generics forms a very dominant share of our revenue and the outlook in Branded Generics is somewhere around 10%, 12%, 20% kind of growth. And the U.S. becomes the only key moving part to driving the additional growth, how should we look at this company now from next 2 to 3 years' perspective in our agenda where we are having a lot of resources to be deployed but growth rate is slightly, you can say, close to GDP or slightly dynamic? How should one look at the organization from next 3-year perspective?

I think we are pretty much outpacing the market. Our growth has been, I think, 20% or 30% higher than the market growth. We feel comfortable the way we have positioned ourselves in the Branded Generics business. I think, cumulative, see us I think low teens to mid-teens kind of growth in Branded Generics is quite liberal, whereas the markets are going at 8%, 9%, 10%. So even if you're able to do it, let's say, 12% to 15% growth on a 3-year horizon, we would be almost beating the market by 50%. And on a base which we are. In most of the markets, our growth are in the top 5 growth percentage in the market. So I don't know. I think you should reevaluate our figures in the past going forward. U.S. we had already added in the beginning of the year. This is a year where we don't have that many launches a lot of launches are few towards the second half, but it is going to be a mid-single-digit growth but we are looking to post higher growth in the next year. But U.S., depends on like that. The year we have higher launches, the growth becomes higher the next year we may not have that launches but at over 3-year period, I think we should be able to post mid-teen growth also, I think, on a capital basis or probably even higher than that.

Point taken. It was only that the kind of cash flow we are generating. How should one see that getting redeployed or it will be a company which should continue to have a higher dividend payout? Or there are enough kind of revenues to redeploy the capital?

So we keep continuously looking at acquisition assets, but we are not forcing ourselves. We are not resizing our to make acquisitions just because we have a large cash flow, which is coming through. We have assured whatever transaction deals are happening in the market, they come out well. We make clearly, very judicious evaluation. They have to fit our therapeutic segments of our presence in the market. So multiple pieces are there. We can't force some tie-in acquisition. As in when it happens it have, but we are actually on the lookout. In that time, we will give back to our money payouts, payout implementation.

And in the opening remarks, there was a mention of high cash flow generation, but vis-a-vis that if I were to see the 9-month interest [ outgo ] is around INR 15 crore versus last year 9 months around INR 6 crores. Why should be that be, sir?

That is only the because we have done some discounting of our receivables. So that is why that amount is being shown there. And this is, again, to make our working area more efficient. So that is something which in the past has been incurred for that group. And one thing is that it is neutral because as I say that interest cost, definitely, I earn the interest also, and it is always almost better than what I really say discounting charges.

Okay. And should now, should the company become the norm for this? Like...

Yes. I think we will keep on doing this as long as it something which is doing us a positive sense for diverting capital efficiency building.

Next question is from Tushar Manudhane from Motilal Oswal Financial Services.

Sir, like the way we have added new therapy in India. Any plans to walk on that part as far as Asia and Africa market?

Yes, yes. We are to get into 2 new therapeutic segments in the international market. In the Q1 of next year, we will be launching a [ C&S ] line in our Asia market, and we're pursuing the gynecology expansion also in the international market. So next year, we will have 2 therapeutic segments added in the international market as well.

And secondly on gross margins, where we continue this trend in couple of quarters. So is it to do because of the relatively lower proportion of U.S. business of some moderation in U.S. business and that is what is driving the gross margin? Or this is a kind of gross margin, which we should sort of assume in FY '26 time line?

You are right, Tushar. I think it is more to do with the business peaks. More the Branded Generics business naturally the gross margin side are going to be higher. As the proportion of the U.S. go up, as we may will come down. But that is something to very clearly the proportion of the business mix, which is going to be there in the future.

And sir, lastly, as far as Asia market we have been consistently growing at 14% to 15% year-on-year over the past few years, FY '25 also 9 months, we are almost at 15% growth. Maybe in terms of market share, if you could just highlight what is the market share we have and what is the visibility for sustained healthy growth in this market for next couple of [ businesses ].

No, definitely, we command a decent market share in various countries where we have a significant presence. Our market share is in the range of 2% to 5% despite we're not being in multiple therapeutic segments. So a number of markets, number of molecules, we are leaders, a number of therapies like nephrology, diabetes, opthal and derma, our rankings are pretty high. So I think we feel very comfortable, as I always say, I think our existing brands, they have expected to grow. We are adding more brands and more people. So combination of that, we feel comfortable to keep growing in double digits. There could be a variation quarter-to-quarter or year-over-year. But I think annualized 3 years right, we feel very comfortable being able to post the low-teens committing growth in the Branded Generics space. We have a very strong product pipeline and just would like to add a lot of products are under registration. And we feel that we have a continuous pipeline for us to keep launching and there are a lot of products on under R&D which is the 5% spend which you see a lot of products are getting developed, which will be filed in this country. So you can just continue to see that I think around the 2.5% to 3% of our growth even in the emerging market is coming from the new products. So that will continue to happen for the next 2, 3, 4 years, whatever the near-term horizon, which we can speak.

The next question is from Rashmi Shetty from Dolat Capital.

Just on the U.S. business, again, we have seen both Y-o-Y and quarter-on-quarter growth. And I get that flu season was also weak. So what has really contributed to growth? Is it that the new launches have added or is the price duration has come off, if you can explain that? And whether new product launches, which you had done in second half would actually lead to a better quarter-on-quarter growth in quarter 4 in U.S. business, if you can guide that also?

Yes, you're right. There has been a number of launches which has happened. So we got the market business for those products. We also increased the market share in our existing products. So that also got added. The flu season was pushed out a little. So we are seeing the flu season taking off now actually in the -- relative to last week. So I think we feel that probably the next quarter is where the flu season effect will come in our next quarter. So if you see last 2 quarters, we were around INR 230 crores odd for the quarter. And this quarter, we did INR 260 crores. So we added INR 30 crores I think we should be able to improve on this figure also quarter-over-quarter for the next quarter based on the launches market share, which we have got and the flu season kicking in. If all goes well, I think we should be able to post the number higher than the INR 250 crores also for the next quarter.

Understood. And the number of launches we have done in 9 months is 5. Are any more expected in quarter 4?

Quarter 4, I think maybe not, I think, no. No more launches in the quarter, yes.

And in FY '26, how many launches are we planning? Will it be 6 to 8 launches like we do every year or it will be higher than that?

No. I think we are looking at 6 to 8 launches for the next year.

And just on the EBITDA margin, generally, quarter 4 is a weak quarter where all the major cost comes in. And you mentioned that you'll be able to maintain this kind of EBITDA margin. So just want to reconfirm that despite quarter 4 being weak, we would be able to maintain it? Or there is more to it?

No, I think we should be able to maintain it. As I mentioned, plus minus 1% is there, but to we should be able to maintain it.

Okay. And this is because our branded market, U.S. market where we'll be doing business even in the higher cost will get absorbed?

Absolutely. You're right.

And my last question is related to tax rate. You mentioned for FY '25, it would be 24%. What it would be in FY '26 and FY '27? Should we be modeling similar tax rate or it would be higher?

'26, it will be almost same. '27 may be higher because some of the assumptions will go away, so '27 maybe is higher.

So '27, it would be in what range?

Maybe 25%.

We'll have to work out that actually. That's not we can share this in the next month. Right now, we don't have that figure off already.

Next question is from Foram Parekh from Bank of Baroda Capital Markets.

So my first question is, since we are talking about entering newer therapies in Asia and Africa market, so do we want to increase our guidance -- growth guidance in next 2 to 3 years? Similarly, even for the Indian market, since now we are entering newer therapies, so should we still look at 12% to 15% growth? Or can we look at higher growth because of the newer therapy?

For India, it would be too early to factor in growth rates or increase the growth rate expectations because of the 2 new therapies as you would already know, it would take quite some time for us to really penetrate. There are already strong incumbent players in both the therapies that we entered. So no, I don't think that will have any significant impact on the growth rate because the growth rates are factored upon on a large base. These businesses would be very small for the next 12 to 16, 18 months. So for domestic, we would not like to revise the guidance. It's same for the international market, our entry is with the [ EMF ] segment has very different handful of people, it should be 30 people. So in the overall cumulative figures, which we already have a base, it's a small percentage. Gynaecology division we have guided within the third quarter. So next year, I think the few therapies will not add up so much in the growth of the whole year of the numbers. But yes, they will be bigger over the years. So going forward, I think they should become the sizable business.

Yes, my second question is now on a similar line. So because we are talking about these businesses becoming bigger eventually. So can we expect a 30% kind of EBITDA margin and above because of these new therapies coming out maybe from '27 and beyond?

Normally, we don't give so far out guidance as we will year-to-year guidance. So I think probably it will be that we have this chat, the conversation in the next con call when we have all our figures, budgets, everything goes on. My logic, if you want to go, yes, when the growth will happen, the extent not to go that far that high. So there's also a possibility for expansion. But I can't tell you what it will be and what impact it will have. I think let's take this composition in the next quarter.

Yes, but are you looking at this 30% kind of psychological marker of 20% and above kind of guidance since we added 27%, 28% hovering around this level since quite some time.

I don't think I'll be able to give you any more insights other than what I shared with you. So my answer is pretty much the same. Our endeavor will be to expand the margin. It is a possibility of a possibility. What will be the number, I think I'll tell you probably in the next con call.

And my last question, if I may. I see SG&A costs, extra R&D contribution as quite low, which has increased the EBITDA margin to 28%. So going forward, I mean the detail you are telling were the marketing expenses, good shipping. So any outlook or guidance on what the SG&A contribution we are looking at?

I think this year contribution remains almost the same. As we said, the sales will grow, that contribution also will grow. Maybe a little higher proportion in the initial period, but afterwards, it will stabilize.

The next question is from [ Rahul Arora ], an individual investor.

So my question related to biosimilar [ first time ]. Are we going to go into the biosimilar in kind market in future?

No, I think right now we have no such plans actively in future for the bit size.

[Operator Instructions] The next question is from Harsh Bhatia from Bandhan Mutual Fund.

Just as a follow-up of the previous participant, I understand that we are not actually into that part of the business, which is [Foreign Language] or whatsoever. But if you could ask just some of your thoughts on the market dynamics. Obviously, there is under the 12 months that are supposed to go when the international markets and even India goes off second starting for certain molecules but just your thought process in terms of how the groundwork is shaping up. What is the feedback from the community as such? Anything can be helpful.

[ From your side ], undoubtedly is expected to be a blockbuster drug even in India when it comes off patent. Of course, there are several companies that are working upon it. As we shared in our previous question, it's too early to comment really 12, 16 months out from today. So it's like a moving target. I would not like to comment anything on that at this point. But yes, it's just going to be a very lucrative market that is going to unfold in India for sure.

But we feel that as it stands, again whatever from your end could be helpful, but you feel that having a backward integration at the API level, the contribution from these companies and maybe not from new companies, but you feel that, that could sort of give an advantage given the fact that it is going to be a highly competitive market to that extent? The other point of course is that the API is a difficult nut to crack especially now.

Look, it's a complicated product. It's not a small molecule. And therefore, it's going to be limited play. So if you are asking from Ajanta standpoint, we don't have those capabilities. Very few companies in the country have those capabilities to be able to manufacture the [ Zenotiltude ].

[Operator Instructions] And that was the last question. As there are no further questions, I would now like to hand the conference back to Mr. Yogesh Agrawal for closing comments.

Thank you, everyone, for joining this call. In case there are any further questions that remain unanswered today please reach out to our Investor Relation team. Thank you.

Thank you, everyone, for attending this call.

Thank you very much. On behalf of Ajanta Pharma, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.