Akums Drugs and Pharmaceuticals Limited ($AKUMS)

Ladies and gentlemen, good day, and welcome to the Akums Drugs and Pharmaceuticals Q4 FY '26 Results Conference Call. [Operator Instructions] I now hand the conference over to Mr. Abdul [indiscernible] Thank you, and over to you.

Yes. Thank you, operator. Good afternoon, everyone. And on behalf of ICICI Securities, I welcome you all to the Q4 FY '26 Earnings Conference Call of Akums Drugs Pharmaceutical Limited. Today, on this call, we have with us the following members from the management team, Mr. Sandeep Jain and Managing Director; Mr. Sumeet Sood, CFO; Mr. Sahil Maheshwari General Manager Strategy; and Mr. Ankit Jain, Head of Investor Rivers. I now hand over the call to the management for their opening remarks, followed by which, we will open the line for Q&A. Thank you, and over to Ankit.

Thank you, Arun, for the introduction. Good afternoon, everyone, and welcome to Sahil Maheshwari Q4 and FY '26 earnings call. I am Ankit Jain, and I head Investor Relations at Akums Drugs and Pharmaceuticals Limited. I will commence with our standard disclaimer that any discussion on today's call might include certain forward-looking statements, which are predictions or projections of future events. Our business sites several risks and certain that could cause our actual results to differ materially from what is expressed or implied in such statements. As it comes, we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new transformation of future events or I hope you would have had an opportunity to review our investor presentation and financials that we posted on. I would now like to hand it over to our Managing Director, Mr. Sandeep Jain to discuss our performance. Thank you.

[indiscernible] everyone, and thank you for joining us today for our Q4 and full year FY '26 earning call. During Q4 FY '26, we maintained the business momentum on last quarter ended FY '26 on a strong lot despite a very challenging H1 FY '26. The operating environment through the first half was adverse recognized by fast erosion in API prices and prolonged phase of low volume growth in the domestic market. [indiscernible] managed to target the channel will face due to the depth of our client relationship and quality of our manufacturing sector and at the same time, continue to invest for the future and showed long-term sustainable growth. Coming to operating performance for the quarter, CDMO once again delivered a healthy top line growth led by double-digit volume expansion we believe this reflects the structural strength supported by growing customer preference for compliant manufacturers. Our international CDMO journey continues to get a following the addition of our plant 2 received in January, we have commenced those your filings and continue specific registrations across multiple European markets. In line with our stated plan to commence commercial supplies from plant Group in FY '28. Supplies to Europe, which began in the early part of this visit has continued to scale and along with the strong pipeline of 10-plus products for the European markets. On the Zambia partnership, the project remains on track with commercial supplies of approximately USD 25 million from our Indian facilities to Zambia expected to commence by the end of Q2 FY '27 sales along with the project planning and erection of the local manufacturing facility. While Akums Drugs, the domestic branded formulation business reported modest revenue growth during the year. Margins in the business expanded meaningfully renovating the efficiency focused strategy as we had at 2027. We expect this segment to grow at above IPM rates driven by new launches focused on brand building and continue and focus on fleet cost productivity. Our international branded formulation business had a tough year with muted growth due to market-specific disruption in our focus geographies. We expect this segment to return to growth as we are confident of the structural attractiveness of our chosen geographies. In the API business, pricing pressure in the cephalosporin assisted through most of the year resulting in continued losses. Our continued focus on cost optimization portfolio rationalization, field improvements and the gradual shift towards higher-margin [indiscernible] products and remitted markets are expected to contain losses for the coming year. The European audit of our API facility is restructured in the upcoming quarter in which would unlock remitted market opportunities at improving realization. So these [indiscernible] planned a corner this quarter going forward, we expect to stabilize to much smaller profit-oriented footprint going forward. On the operational and digital infrastructure front, our as for [indiscernible] initiated early risk in progressing as per plan and will over time drive material improvements in efficiency, automation and real-time analytics across functions. The [indiscernible] box implementation across our HR function is delivering 10 employee experience benefits. We continue to invest steadily in capacity expansion, R&D and modernization through the year which kept us broadly in line with our run rate, our newer facilities, including the dedicated injectable plant, the [indiscernible] and the new plant in one are all progressing through their respective ramp-up costs. With client audits and product approvals in advanced stages. As volumes well in over '27 and FY '28, these facilities will drive next leg of growth for the CDMO business. The Board has also recommended a final dividend for the year FY '26 [indiscernible] per equity share and a special dividend after these 2 share. To thank all the stakeholders for their continued trust and pushes through what was the transitional year, and we reiterate our commitment to creating sustainable long-term value for our shareholders. I shall now request our CFO, Mr. Sumeet Sood, to take you through the main financials for the quarter and the full year. Over to you, Mr. Sumeet.

Thank you, sir. Thank you, Sandeep. Good afternoon, everyone. I will take you through the financial highlights. Revenue for the fiscal year 2026 stood at INR 459 crores as compared to INR 4,170 crores in FY '25. An increase of 5.8%. Adjusted EBITDA stood at INR 522 crores. This is the highest that we've seen over the recent past as compared to INR 461 crores in the previous year, increasing by 13.3%. Adjusted EBITDA margin stood at 12% against 11.2% in FY '25. Pat stood at INR 256 crores as compared to INR 344 crores in FY '25. Last year, there was a significant benefit of deferred tax asset that was created due to the restructuring of the group, this was INR 106 crores. I think important would be to look at the PBT which probably would insulate the deferred tax asset. If we look at the PBT, we were at INR 382 crores in FY '26 compared to INR 341 crores in FY '25, an increase of 11.9%. If we look at the quarterly performance, revenue stood at INR 1,158 crores. This was 9.7% higher year-on-year and 0.1% lower quarter-on-quarter. Adjusted EBITDA stood at INR 152 crores. This is INR 61.6 crores higher year-on-year. Q4 '25 was INR 94 crores and 3.3% higher quarter-on-quarter, Q3 '26 was INR 147 crores, improved by -- driven by improved profitability in the CDMO segment and credit generics segment turning EBITDA positive. Adjusted EBITDA margins were 13.1% versus 8.9% in FY '25 at 12.7% in Q3 of FY '26. The reported PAT for the quarter was INR 81 crores compared to INR 150 crores for quarter 4 FY '25 and INR 60 crores for Q3 FY '23. As stated earlier, there was a significant deferred asset creation in Q4 last year. If we look at the PBT for the quarter, then the PBT is INR 11 crores in Q4 '26 compared to INR 75 crores in Q4 '25 if we go business, the 5 segments that we've given. If we look at the CDMO, the CDM of ecomet has been good. The revenue stood for the year at INR 345 crores compared to INR 3 crores to INR 208 crores in FY '25. An increase of 8.6%. EBITDA for the full year stood at INR 467 crores compared to INR 450 crores last year, an increase of 2.9%. Q4 revenue was at INR 52 crores, a growth of 13.4% year-on-year and 4% quarter-on-quarter. EBITDA stood at INR 137 crores, improving 54.9% year-on-year and 9.1% quarter-on-quarter. The segment sustained its strong growth momentum while always also benefiting from operating delivery driven by improved capacity utilization and ramp-up of newer facilities. Domestic branded formulations FY '26 revenue stood at INR 426 crores compared to INR 434 crores in FY '25, an increase of 2.9%. The full year was INR 90 crores compared to INR 77 crores last year, an increase of 17%. Q4 revenue stood at INR 102 crores, a decline of 1.5% year-on-year. And 11.1% quarter-on-quarter. EBITDA stood at INR 22 crores similar to Q4 last year and declining 13.2% quarter-on-quarter. International branded formulations. For FY '26, revenue stood at INR 143 crores, similar to last year, which was also INR 143 crores. EBITDA for the full year stood at INR 6 crores compared to INR 28 crores last year, an increase of 32.3%. For Q4 revenue was INR 36 crores, a decline of 9.7% year-on-year and 2.5% quarter-on-quarter. EBITDA stood at INR 10 crores, improving 14.7% year-on-year and declining 22.3% quarter-on-quarter. For the trade generic business, the revenue stood for FY '26 as INR 100 crores compared to INR 115 crores INR 115 crores FY '25, a decline of 13.2%. EBITDA for the full year stood negative of INR 10 crores compared to a negative INR 28 crores last year. For Q4, the revenue was INR 27 crores, a growth of 22.6% year-on-year and 10.2% quarter-on-quarter. EBITDA turned positive INR 1.4 crores from a negative INR 10 crores, Q4 '25 INR -3 crores Q3 FY '26. For the API business in the current year, the revenue stood at INR 184 crores compared to INR 219 crores in FY '20 by a decline of 13.9%. EBITDA for the full year stood negative INR 40 crores compared to negative INR 44 crores last year. For Q4, revenue stood at INR 41 crores, a decline of 18.8% year-on-year and 24.9% quarter-on-quarter. EBITDA stood at negative INR 12 crores compared to a negative at INR 6 crores, a negative INR 7 crores in Q3 FY '26. The company's operating cash flow stood healthy at INR 1,181 crores compared to INR 465 crores last year. This is majorly attributable to the European contract that was assigned to the company. The free cash flow for FY '26 stood at crores versus INR 201 crores for FY '25. We had a slight increase in the working capital days from INR 91 crores in days. This was largely due to the buildup of inventory, which was secured by advanced payment to riders, and we wanted to ensure the supply during the war time. The company continues to maintain a strong liquidity position. Cash and cash equivalents stood at INR 682 crores and a healthy balance sheet of the company we are well positioned to enter a new fiscal year with positively and confidence. I now request the moderator to open the forum for question and answers.

[Operator Instructions] We have the first question from the line of Sajal Kapoor from a[indiscernible]

Couple of questions. As your European and regulated market business ramps up, which specific internal capabilities currently least scalable? Is that a regulatory filing throughput or quality systems or debt transfer? Is it leadership bandwidth or manufacturing facility because the capability that is required to compete successfully in highly regulated markets, are somewhat different compared to Indian market, right? So that's one part of the question. And if you can also help in terms of what concrete investments are being made today to get to a level where we can pitch comes as a high-quality regulated market ready kind of facility.

This is Sahil. On the first question, obviously, direct market play requires stringent capabilities compared to the domestic capabilities. A few points why we are -- we think we are capable to serve those markets. One is we already serve large Indian customers and MNCs in denim markets who themselves have a strict sheet of how they operate, right? So we have been serving and at least for over 15 years now in India from the likes of all the large MMTs in India across their multiple products, be they a regular establishment or the new DCTs, Also, we received our first European GMP approval way back in '22, right? So the capabilities we have been strengthening our capabilities. And as you rightly mentioned, these are across R&D, quality, production, regulatory, everyone. So these capabilities since we already serve the larger ones in India. And we're also impose the capabilities, which we think we have. And as we go along, we'll further strengthen up those capabilities. The plant 3 also revenue plant, we also apart from European also received and these approvals this year, right? So this again is a testament our commitment towards regulated market. And we were also awarded the European CDMO contract, which was after a thorough review by the partner. So it's a learning journey. We are on the way. And rightly so, we'll have to trend the capabilities as we go along. Any on the investments required, so this will be tied down to what projects in the future we get, which capabilities with those forms we have to expand. But as we look today, we already have a European GMP-approved facility for injectables. You already have a European GMP facility for oral liquids and injectable facility, which is also in disapproved. Right. So for most of the important dose response would contribute to value and volume are already European GMP approved. And as we go along, we have planned for some additional plants to get European GMP approved over the next 18 months.

Sure. No, that's helpful, very helpful. And on the gross margin side, if you see ever since the IPO listing today, we are sitting at one of the highest or best ever gross margins this business has reported, which is a very positive indeed. Now there are 2 kind of loops that are playing out in parallel for us as a business. One is the negative loop of what's happening in the Middle East, which is something that's turned as everyone is facing crude-linked inflation in soles, et cetera. And we can only be backward integrated to a certain extent. We cannot start manufacturing KSMs and all the profits. So there will be some negative pressure coming from that side of the negative loop. In parallel, there is also a positive loop that will play out, which will be as we move from India into more complexity, more specialty regulated markets, we obviously expect to get a fair share of the pricing power that should help our gross margins move up. But these 2 groups are kind of contradicting each other. So what I'm trying to understand here is what is -- what in your view is the net effect of 1 negative loop, which is a cyclical look, hopefully, fingers growth, this situation will hopefully change at some point. And the other one is much more structural loop, which is a positive loop, higher complexity, better specialty products and higher demanding markets giving us pricing power. So what is the net effect on the gross margin in a nutshell?

So I quickly addressed. So as you rightly said, one is external, which is not really in our hands. But as a business model, it's a pass-through business model. So whatever is the cost of input material gets passed on as part of a CDMO contract and on top of it is our conversion and margins. So while the uncertainty in the glove environment creates a cyclical period of shortages price hike, but all of that gets passed through. Secondly, what is internal to us is how we can ramp up our unique differentiated dosage forms. Our product offerings are capabilities. This is which we are constantly focusing on. If you look at really the last 3 years, we have been investing over INR 100 crores in our R&D, which is a result of which we can, at a larger base as well, we can gradually move up our gross margins.

[Operator Instructions] We have the next question to the line of [indiscernible] from InCred Asset Management.

So last 2 quarters, the volume variance has been north of 25%. So what is driving this? And what is your outlook on the same? And the price variance has been a negative 3.5% on an average in the last few quarters. But API prices rising 10% to 20% on an average will this reverse going forward? And if prices sustain, can we deliver a double-digit growth at the CDMO the Sure. So as you rightly pointed out, over the last 2 quarters in the H2, the volume growth has been significant. What we have seen, as we also discussed this is in Q3, this is primarily led from existing customers only, right?

So this is not new geographies or new customers. So what we are seeing is increased demand for existing brands from the existing customers only. So honestly, what is driving is still to be thought through and look at because overall IBM is still growing at a percent, but we think that -- this is a sustained growth because similar double-digit growth is also visible as we sit in May right. So that's on the volume growth. Pricing. Why is API prices over the last full financial year were a bit soft, right, the whole of the price is cash by over 20%, 25% as a basket, right? Due to the current ongoing global geopolitical situations, the API prices have slightly gone up, single high digits. They have gone up as a basket. Will they come down sharply so that is still to be seen, but still the prices remain lower than what they used to be in April of last year. So while the price has still gone up, they're still lower than the April prices, right? So the IP softening still continues, if you have to compare it 12 months prior to it right? So volume growth looks positive. I believe the API won't go down sooner from these levels. So that's how we see the CDMO outlook from here.

Next question was on the trade generic turning EBITDA positive. If you can share your outlook on how do you see the business for FY '27 and beyond. And a question on the tax rate expected for a [indiscernible]

Sur. E. I'll maybe address the business side on so maybe you can chime in for the tax. On the trade taking, as you rated, we turned EBITDA positive over the last couple of years have really cut the business short and now it's EBITDA positive. We are only doing the business in pockets where it makes sense for the business. This is expected to remain, as we mentioned in our opening statement is expected to remain at similar reverse of revenue. with similar levels of EBITDA. So this will not meaningfully contribute to the group's top line or profitability as we move along. On the API, this was a year of mix, honestly, the API prices continue to remain low, and hence, our cost COGS remain elevated, which resulted that our fixed overhead a variable expense of manufacturing could not be fully utilized and we could not be EBITDA positive. The prices have started to go up. We have also started to venture into exports or in March of this year. We also started our European inspections. Right. So all of those CPs have been filed in Brazil as well, right? So this year, we are hopeful we should do much better than what we delivered last year and similar to our trade generic turnaround in '26, we are hopeful we can do some significant turnaround in APIs this fiscal year. On the tax -- on the tax rate, if we were to look at some of the entities which are making losses, it does give an effective tax rate of 32-odd percent. But going forward, we think 29 on 1 and overall is something we can build into our business models, right? But right now, I'm [indiscernible]

Thank you. We have the next question line of Pravin Jarman from Avento.

Yes. Sir, my question is on the model side. So in CD, our Q4 FY '26, our margins have expanded to 14.4% even though we had a product mix base which was adverse product mix of our own 100 crores -- can you explain the model followed here a little bit. I understood it is a cost plus margins but whether it's a percentage margins or margin picks on an absolute basis. My question comes out on the case where even though the base portfolio carries lower absolute conversion margin compared to the nice. How could this adverse mix improve our EBITDA margins this quarter? What are we missing here, sir, on sequential basis?

Sure. So if you really compare it with last Q4, you will see an aberration. But you look at our stand-alone any other quarter, whether it is quarter 3 in general, every quarter, you will see these other regular margins. So Q4 of '25 was a year where we had a significant dip in EBITDA driven again by the product portfolio. and some year-end provisions as well, right? So this essentially in Q4, we had less of those low-margin product, and hence, this looks to be regular quarter review. So is it a percentage margin or on the model -- this model is a percent margins on the input cost. So the input cost then depending on the product type, the dose from the into the percent margin is applied on top of it.

Sir, my second question is on schedule [indiscernible] So now the deadline has passed, and we heard like inspections would have started by now. Have we seen any shipbuild improvement like we getting some volume growth or customers are [indiscernible] on this and will due to MSMEs schedule getting impact implemented?

So while this remains within the purview of the government, schedule and is being followed through, right? We'll have to look for how this gets rolled out and implemented, but obviously, even prior to [indiscernible], the customers we serve are largely cost quality-conscious customers.

Sir, my question [indiscernible] to your point, like we said that there were some pricing difference caused by MSME people on -- due to the schedule and as now it has been implemented, like still are they doing this cost cutting to retain customers? Or with this getting implemented, we could expect those customers to come back to this?

I will like to skip this question because, honestly, we have no visibility on ground of how the government plans to roll this out.

Okay. Okay. Sir, can I add one more question on [indiscernible]? The new injectable facility, what would be the utilization and what will be the contribution from this specific growing. [Technical Difficulty]

Ladies and gentlemen, with management line has dropped [indiscernible] connected, while we join the management. Ladies and gentlemen, we have the management line reconnected. Sir, you may go ahead.

Okay. So my last question was on the injectable facility. So the new one, what was the utilization exit which we had? And what would be the contribution from the specific going [indiscernible]

For the new facility or overall injectable?

New facility, we are still ramping up the utilization is in early teens and we expect that this year, we will have a significant ramp-up in the injectable facility.

We have the next question from the line of Ankur Kumar from Alpha Capital.

Sir, I wanted to understand in terms of CDMO, what kind of overall revenue growth are we expecting this year? Because you said AP prices have improved, which will be a pass-through but they are still lower than last year. And volume growth, you said we were expecting double digits overall, what kind of revenue numbers and margins are we expecting?

So as I said, we have visibility for 45 to 60 days of our revenue right. So what we said is in Q1, Q2, as we can see, we can -- we expect a double-digit volume growth, right? So while H2 still have to be filled through the pricing, as I also mentioned in last are transiently high, whether they stay at the current levels go down, go further up, we still have to see as we go along. But this is what we can say for H1. And as we talk through in the next quarter, we can give more flavor on the Q2 and Q4. And any color on the margin side, sir, we have seen improvement in Q4. So what kind of numbers can we expect? Similar margin profile, what we currently have.

Got it, sir. And sir, on API side, you said you expect this year to be much better in terms of the reduction in losses. So can we expect it to EBITDA losses to reduce to trade generic levels? Or how should we think?

So we -- while the losses will be sizably reduced is what we expect. We'll have to wait for at least a couple of quarters to them through whether we can turn monthly EBITDA positive, not that the goal and aspiration. On a full year basis, we might still see some losses.

Got it, sir. And sir, on tax rate, you said 29%. So when do we expect to go to 25% type is a normal range?

See, I think the way we look at it is when some of our entities continue to make losses, right? If the API business was to turn around, right? And the trade generic business was to turn around, we would be coming at the tax rate that you think -- let's say, we have a INR 100 profit, and we were to pay a 25% tax over there. But that 25% if it's taken as a data to an 80 because of the losses, you'll see a higher percentage, right? So I think the way the taxes should come down is once most of our businesses come down at the normal rate. And while this number is looking also differential because of the deferred tax asset, I think to answer your question broadly, is the way I said that once most of the businesses are bad positive, we'll come at a normal rate.

Got it, sir. Sir, last question would be, we have good cash increase. We have good cash flow from operations also. So what is our plan? We gave only 18% dividend payout this year. So what is our plan on the cash usage?

So primarily, given if we are extensively our growth focus organization, the primary usage of the cash still remains in assessing organic or inorganic opportunities for growth. Dividend also was a way to reward the shareholders. So we expect that we'll soon utilize some parts of the cash for growth. We are already in process. of expanding our oral solid specifics since you have seen we have had almost 20% plus volume growth over 2 quarters. The quarter also looks good. And hence, we see that we now would need to ramp up our overall solid specialty as well. So we are in process of ramping up. So that's where some part of the CapEx of this year will go and also we are actively evaluating our objectives around niche businesses if we can acquire inorganic right? So this is where we expect the cash utilization to happen.

[indiscernible] Sorry. From Vijit Global. Please go ahead.

My question is related to the execution of deal, which we have done for land in. I wanted to know the purpose of the congregation and expansion plans for this line in future.

So if you really look at the history of [indiscernible] we have gradually expanded our operations there by acquiring nearby land sites and so on, right? This is how we have grown historically across [ Harita, ] right? So this is simply one of those activities, we will need for expansion of our capacities as well as building utility support and so on.

Understood. And my second question is related to the European contract of EUR 200 million how much of this is expected from the first year? Will it be a EUR 40 million commitment every year? Or there is some clause of initially the amount being lower and gradually the execution going up year-on-year?

So this is an established brand already marketed with predictable volumes being sold in the European market right? So this is not a new launch -- so how we look at it -- once we start the launch, whichever month or quarter, it is, once we start, we will have almost EUR 35 million on a MAT basis.

Okay. Okay. So initially, it will be EUR 35 million and thereafter broadly, this is how it is EUR 35 million for the next 6 years until 2032.

We are the next line of [indiscernible]

I had just one question on international branded business side. The revenues have seen a sharp decline, but the margins have improved to 28%. Is there a reason for that?

So certainly, so what we are focusing on is a more -- we are investing into marketing while the business is small, which honestly was not one of the best years for the export business and we are hopeful this business will be shaved well this year. Margin expansion has come from 2 reasons. One is we are focusing on marketing of brands rather than just pure B2B play is more B2B2C wherein we are doing our marketing. So 7, 8 countries, we have our own sales force, extensive force. We have over 10 countries where we have our country managers, right? So that's there also we got some benefits of the U.S. sense got some benefits for the ForEx gain.

Right.

And that resulted -- which resulted in the gross margins to be up by over 5%, 4%.

Right, right. And just one more thing, sir. The domestic business does not seem to be doing well. How do we ensure that the divested business deliver that par with ICM over the next few years?

So this year, if you really seen through, we hardly took a price hike, right? So what we thought through, but more cautious approach on price growth while the focus was on volume growth, right? So in the future, what we think through is this year, we expect we should grow in line where the volume price growth and the NI growth will all play a part, and we expect to be double-digit top line growth in the domestic formulation business.

We have our next question from the line of Avnish Tiwari from [ Bogari. ]

Can you just repeat that they are in the cryo business, you get a markup on bit of material. So when the API prices are going down, what does in to your absolute amount of profits you make of percentage margins you report and relatively when [indiscernible] price is going up, then we sent a reverse debt phenomena.

Yes, you answered it correctly, these are percent margins. And hence, if the input materials go down, the absolute margins also go down. As profits go down.

And the second question I have is the trade generic side. You are a manufacturer of each drug then why are you not making money? What's wrong with this industry structure that you should be the lowest cost producer of these drugs and directly selling to pharmacies is -- so what is it that this segment have an issue in the industry sector is driving the phenomena?

So this is honestly a question of how and where we deploy our capital. Trade Generics historically has been an area where you have elongated working capital cycles across inventory and receivables. Right? And hence, we thought through at 1 point in time, 4, 5 years back, '22, we did almost INR 400-plus crores in our trade generics business, right? We skill down simply because it had elongated working capital cycles and the margin profile was not what we expected these 2 return. And hence, it's a conscious call of capital reallocation.

We have our next question from the line of Dia from Sapphire Capital

Yes, please, we can hear you. So what was the FY '26 and how much are we going to in C.

So FY '26, we did a CapEx of INR 222 crores. And this year, we are targeting to keep our CapEx INR 200 crores to INR 300 crores. That's the target for our CapEx. All right.

So any top line target for the whole year FY '27?

So we do not want to answer this question. We don't want to state future numbers.

We have the next [indiscernible] from Vergara.

I have a couple of questions. When we had a phase of API declines in the last year, it was kind of led by [indiscernible] And now will you please correct that understanding if it's strong. And now when you say that sequentially, there has been a little bit of bounce back, is it fair to assume that the bounce back is also led by price -- so that -- so in the IB business for the CDMO business, the CD business you're talking about.

Yes. But I want a view on the PPA APS. So the -- if you see and analyze the data, not just see up, most of the APIs over the last year have gone down. As simple as paracetamol went down, oil went down, anti-infectives window. All of those vendors likely the ones which suffered a significant decline in prices are the ones which picked up in this April post quarter. So those numbers still have to come out because these are the numbers we are talking about till March and likely we'll have received the order in February, right? So till the time the impact on API prices was not seen. Talking about Q1, across most of the APIs, whether it has shipper and nonsecure, chronic APIs and so on. whether imported domestically growth, we have seen that the API prices the basket has started to go up.

And just to clarify, I think this question was asked earlier, when the API prices are going up, then your absolute gross profit growth is higher than the volume growth. Is that a fair understanding? Since the margins are linked to a percent rightly so, right?

So effectively operates at a non-formula linked fixed expenses, right, the labor, the unit manpower and so on. So one -- since the percent is on the gross input cost, as and when it fluctuates, it fluctuates my absolute margins. Okay.

The last question was on the volume growth. Of course, I mean, last couple of quarters have been such a strong volume growth for all like a very large player like yourself. And you mentioned that it's coming from existing customers. It means that you are gaining wallet share from your existing customers. So I just wanted a little more color on how is that happening? I mean, are you gaining from let's say, a little bit of the unorganized or less organized sector? Or are you gaining from other competitors which are only compliant with Tribune and persons why is that happening?

So this is broad-based. I think there's some volume share gain from their announced production. There is some volume gain share from what they used to manufacture it from other CDMOs, right? So while we have not done that analysis of what person comes here, but this will also meaningfully change every month on month on quarter-to-quarter. But what we are seeing is either new brands from in-house or other CDMOs or existing brands, which have sold more which we already had are sold more into the channel and hence, we get a better order book for it. So all of it is contributing. So since, as you rightly said, on a large base, such large volume growth. So most of the parameters will have to play out for this sustained.

The next is line of Saket Kapur from Copen Company.

[Foreign Language] Yes, Sir, I'm new to this company in the sector, so pardon me for my question, sir, if we take our mix of revenues and as alluded by you, that we had pressure on the API segment and there getting negated with the current year. So if you could just give us some more understanding with the type of commissioning of orders, especially for the [indiscernible] mission, which you mentioned, how should the current year probably sitting off in terms of the different verticals. I get to this summary of the same.

So do we have talked about extensively, right? At least for the H1, we see strong volume growth and the API prices, I think, should remain at current levels. So that's how we look at the CDMO segment. The domestic marketing, we talked about, we should be targeting an IPM level low single digit -- high single digit, low double-digit kind of growth. In the domestic acumen is for exports as well, while the last year was flat this year, we expect to do a double-digit growth in that segment as well and the margin should sustain the margin profile should sustain on the generics, we have already done positive, as we said this will not meaningfully contribute to our top line and bottom line going forward and should not drain our P&L going ahead. On the API segment, while we had a minus INR 40 crores last consistently for the last 3 years, every year on our P&L. This year, we expect the losses to come down sharply. We expect that by the full year would still remain negative. This will be sizably lower and would have a significantly lower drag on our P&L. So this is how the 5 business verticals will shape up. Apart from this, as you rightly said, 1 more element is on a Zambia will flow in into our CDMO revenues. So this will be, as we said, a $25 million, which at today's rate will be INR 230-odd crores. Addition to our top line, which we expect to deliver in Q2, Q3 sequentially as we roll out the orders and get confirmed purchase orders. And this will be slightly at margins similar to CDMO business, right? So this is how the overall year is some what we are thinking through the European CDMO contract will kick in from the next.

And sir, then with the Jambi order, is it a multiyear contract that we will be executing or a onetime exercise?

So this is for 2 years, $25 million each FY '27, FY '28. In panel, we have to commission the facility, whether it takes 2 years, 2.5 years, this is our internal target, right? So FY '29 is somewhere we believe. Calendar year '29, we will start the revenues from the Zambian facility, which will gradually scale up in which we have a 51% equity share.

Okay. So this is different than the other which we are executing of $25 million for the current year. I could not get it.

So the initial 2 years will see the supplies from the Indian facilities will see after FY '28. And once in FY '29 or FY '30, we have the plant cleared for commercial production. -- we will start ramping up the facility from -- and supply to Zambian government, local [indiscernible] private market on from that facility. [indiscernible] today is largely a $200 million pharma market, and we expect to gain a sizable share within that market where the government itself procured over 80% of the products, which are largely imported.

Okay, sir. And what is the total investment that we have indicated in the facility in the Janani?

Across building across products that transfer facilities, machine land, everything, the tangible intangibles. This is a $45 million which will be bond 51% by us.

We have the next line of [indiscernible]

Yes. Sir, my question is on the European contract for which we have already received in advance -- from what I understand, it's not based on cost plus basis, but it's a lament. So could you just give some insight on how the margins could play out in case there's an inflation of the environment in the raw material side.

So right, [indiscernible]. So this is -- while we are finalizing the contract, this is an established product established molecule over the last few decades now. So we have already taken into our constant inflationary patterns of that API and the input material. So at the current API prices, we are fairly confident this remains our comfort zone of the margins we are thinking through. And you're right, this is a fixed price contract on the factory.

So at current prices, the margins that you expect are more or less in line with the current CDMO? Or is it expected to be higher?

It should be similar or high teens. So this is what we expect.

And sir, apart from this European project, what kind of international mix do you expect within the CDMO is, let's say, 2 to 3 years from now? So similar efforts are being driven across oral solid injectables across niche products like hormones and ending sectors, right?

So we expect that over the next 2, 3 years, we will have 8 to 10 global customers for whom we will serve with a larger small that has still to be played out. But we expect within CDMO, we should have 8 to 10 customers, which could be Indian players or European global players as well for whom we'll do CDMO services.

We have the next question in line of Abdul. Please go ahead.

Yes. I hope I'm audible. So first question, just a follow-up on the previous participants. So about in the CDMO relation would take the overseas customers. I mean say you can talk about what stage we are into in terms of discussion and what kind of an investment we will have to bring or take that relationship ahead with those customers?

So as well, these are long-term contracts, right, and require sizable time investment as well.

So as I heard you reassure talking future CDMO export customers, right?

Yes, yes.

So these are -- these require sizable investment in time, those clearances and so on, right?

So require 2, 3 years till we ramp them up. So in terms of manufacturing capabilities, we are largely too. So we are only taking out those facilities, which we have already constructed. So we are not thinking to a new pet new doses form and then take it up to the global level. So already have a new injectable [indiscernible] already have a hormone facility in continuation with the existing approvals. Right. So that is there. So our path remains similar, an Indian manufacturer with capabilities across our regulatory quality a track record of serving MNCs for over a decade now with cost ponchos, quality conscious manufacturing, right? So the fit remains similar, and this is how we proceed. It could be across tech transfer from their existing manufacturing site or a completely new development, which in most of the cases, we are helping our partners in our R&D centers only.

Got it. And one more -- so on the GMP front, we have seen a good amount of traction getting developed towards the generic pharma companies. So are we also supplying TLP drugs either in an injectable or an solid dosage form to customers?

So obviously, we all recognize and acknowledge is a large and a massive opportunity. As of now, we are still evaluating when to enter stage to enter given if you also have read some news last week when we have been witnessing in the industry itself, the pricing still remains very volatile and going down south, right? So since we first have to think through who will our EPA partners be who what is the right stage of investment into any dosage from if required. So we'll enter the GLP market. We'll inform in our subsequent calls, what is our strategy going forward.

We have the next in the line of Siji Kapur from IT [indiscernible]

So just a quick one, really. Given the net cash on the balance sheet we have the sustainable operating cash flow, there must have been many options on the table in terms of should we do X or why in terms of both domestic and international expansion. Can you just help me out with 1 or 2 areas which the being evaluated and decided not to pursue despite a strong cash position?

So if I talk about inorganic growth for sales. So we -- there are some dosage comps we still don't have. For example, meter in alerts we don't have. For example, we still don't have oncology injectables, right? And a few other dosage pumps in small molecules. Within the large spaces, we are still not present into the Latin molecules, right? So these are a few opportunities be evaluated and obviously, we have to be cognizant of also the investment and the return expectation. Right? So at times, it does not lag up to our expected valuations or it does not matter to the plant standards or the product standards we wish for. And then hence, these are the areas where some of the conversations strong. Also on organic front, we were also contemplating a long back on the expansion of our oral product, which I recently mentioned, we are kicking off now. So these are the decisions that you take as the business and the volumes progresses which are the areas where we can invest. Similarly, for example, in the cumene space as well, we can have options of brand or portfolio acquisitions as well but the current valuations in the market for branded player significantly higher than what we currently trade at, right. So all of those decisions come into play, and we and team have been consciously evaluating a lot of opportunities. And hopefully, we should deploy some capital in the near future.

Thank you. We have the next question from the line of Nitesh from Price Capital.

Just with respect to our international CDMO contracts, when I'm looking at FY '28. So we will have around EUR 70 million of revenue, right, from something and the EU contract, which is around INR 60 crores of top line. So is this the right way to say that export CDMO will be around 15-plus percent of 15-plus percent share in CDMO revenues in FY '28.

Simply on the XL looks a good number. Yes, so this is how we think through that next year, we should -- once we start right as I said -- on a MAT basis, the European contract will give us EUR 35 million. And the Zambia months are FI driven, right? So we'll have FY $25 million this time in '28 and in each.

So just a follow-up. These contracts are effectively have -- assuming we'll have better margin just because of favorable FX movement. So do we see our CDMO margin, which has been in the 13% to 14% level improved to a 15%, 16% level?

We can include that the base margins for the business once both of these contracts are in full swing will improve.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Ankit Jain for any closing comments.

Thank you, everyone, for attending the Q4 and FY '26 earning call for Akums. If you have any remaining questions, you can reach out to the Investor Relations team. Thank you, and have a good day.

On be of Akums Drugs Pharmaceuticals, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.