Blue Jet Healthcare Limited (BLUEJET) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Blue Jet Healthcare Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. For cautionary remarks, I now hand the conference over to Mr. Advait Bhadekar from Ernst & Young. Thank you, and over to you, sir.

Thank you, Bhoomi. Good evening, and a warm welcome, everyone, to Q3 and 9M FY '26 Earnings Call of Blue Jet Healthcare Limited. Please note, the investor presentation and the financial results are available on the company website and the stock exchanges. Also, anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. The conference call is being recorded, and the transcript along with the audio of the same will be made available on the website of the company as well as on the exchanges. Please also note that the audio of the conference call is the copyright material of Blue Jet Healthcare Limited and cannot be copied, rebroadcasted or attributed in press or media without the specific and written consent of the company. From the management, we have with us today, Mr. Shiven Arora, Managing Director; Mr. VK Singh, Chief Operating Officer; Mr. Ganesh Karuppannan, Chief Financial Officer; and Mr. Sanjay Sinha, Deputy Chief Financial Officer. Now I request Mr. Shiven Arora, Managing Director of Blue Jet Healthcare Limited, to provide you with the update for the quarter and 9 months ended 31st December 2025. Thank you, and over to you, sir.

Thank you, Advait. Good evening, everyone, and thank you for joining us today. Let me begin with a few business and strategic updates before we hand over the discussion to our COO. Vizag Greenfield project, we are pleased to announce that the groundbreaking ceremony for our Vizag project is scheduled for this month. This greenfield site represents a pivotal growth platform for Blue Jet Healthcare. In Phase 1, we will be setting up a dedicated capacity for API and intermediates focused on new products aligned with customer requirements. This project was approved by our Board with a total investment plan of INR 1,000 crores over the next 3 to 4 years. The initial capacities under development are aligned with customer demand and long-term business visibility. We believe the scale, infrastructure and the geographic advantage of Vizag will strengthen positioning as a reliable global partner in complex chemistries. Hyderabad R&D expansion. We have successfully secured lease space for R&D activities in Hyderabad. Development work is expected to commence from Q3 FY '27, further strengthening our innovation pipeline and technical capabilities. Artificial Sweetener pipeline. As a part of our focus on specialty ingredients, we are initiating a few exhibit batches of the new Artificial Sweetener in FY '27. This will complement our existing high-intensity sweetener portfolio and address a growing segment of global demand. In terms of CapEx update of Unit III, our expansion project is nearing completion. The block is designed for key intermediates in Contrast Media. The facility incorporates robust safety, environmental and automation systems and is expected to be ready for qualification in Q1 '27. It will play a key role in debottlenecking our supply chain and supporting the future growth. On this note, I would pass it on to my colleague, Mr. VK.

Thank you, Shiven, and good evening, everyone. Let me take this opportunity to expand on our operational progress, CapEx execution and CDMO pipeline momentum. At our Mahad Unit III site, the core block for backward integration into Contrast Media Intermediates is nearing completion. This facility has been designed for one key site chain in our Contrast Media portfolio, a step that not only improves cost competitiveness, but also provides strategic independence from raw material volatility. We have embedded a very high level of automation into this facility alongside strong safety and environmental design. The site is on track for validations in quarter 1 of FY '27, and we have incurred a cumulative CapEx of approximately INR 146 crores to date. This plant exemplifies our approach to securing supply chains and defending leadership in complex high-barrier segments like alternated Contrast Media. On the R&D and CDMO platform expansion that Shiven touched very briefly. Over the last 18 months, we have doubled our R&D infrastructure and talent pool. As a part of our next phase, we are investing about INR 40 crores to build a new R&D center at Hyderabad focused on emerging technologies, including intermediates for GLP-1s and some other chronic therapies, peptide chemistry, biocatalystis and a faster turnaround of CDMO tailored late-phase RFPs. This expansion is designed to support our growing CDMO pipeline, particularly high conviction Phase III and commercial stage opportunities. Currently, we are tracking around 20 active RFPs. Of these, 6 are high conviction Phase III programs, including a couple of GLP-1 candidates and Contrast Media in CE. Two are commercial products that may evolve into strategic lateral entries with dedicated capacity planning. We are also ramping up customer engagement, including onboarding a senior resource in Europe. On sustainability and operational excellence, we continue to embed sustainability into our operations. 70% of our power consumption is now met through wind and solar. Our teams strive for [indiscernible] efficiency in synthetic chemistry and sustainable process design. We have been recently recognized by the CII and have been awarded the National Award for Excellence in Energy Management. On the operations side, we have built a dedicated process excellence department supported by strong additions in engineering, quality and supply chain. As a company, we believe in building scale, and you see the same happening at Vizag, Mahad and our R&D platforms. We remain sharply focused on reliability, responsiveness and readiness to support our customers across the life cycle from clinical intermediates to long-term commercial supplies. With this brief, I hand it over to Ganesh for the financial review.

He is there on the line but not speaking.

Can you tell him just in case he is unmute.

Ganesh sir, please unmute your line and go ahead.

I'll request Sanjay to take it forward.

Good evening, everyone. So I'll take you first on a year-on-year performance. So revenue from operations has increased. Revenue was at INR 3,184 million last year. And this year, it was INR 1,924 million. And it is revenue from decreased by 40% and EBITDA decreased by 62% and PAT decreased by 39%. Coming to Q-on-Q performance. The revenue from operations has increased by 16%, EBITDA decreased by 15% and PAT decreased by 23%. The increase in revenue is mainly towards increase in Contrast Media and where the dispatches were much more higher last quarter and got recognized this year. Offtake of our flagship product was very stable, and we continue to do to the major supplier. Gross margin for Q3 was at 52%, slightly lower than our normal trend, mainly due to change in product mix and onetime write-off of inventory. EBITDA stands at 24% for the quarter, lower mainly due to operating leverage of lower sales volume, onetime impact of Labour code Implementation and, of course, engagement of certain foreign consultants. So I'm taking okay. Ganesh?

Yes, Okay.

So 9 months to 9 months year-on-year, the revenue from operations increased by 3% and EBITDA decreased by 6% and PAT decreased by 6%. The increase in revenue from operations was due to increase in sale of PI this year. Gross margin was at 53% compared to 55% last year. This is mainly due to product mix. Company reported a robust other income in 9 months period with INR 45 million revenue.

On this note, we can open the floor for Q&A.

[Operator Instructions] Our first question comes from the line of Amlan Das from JPMorgan.

First question is regarding the destocking impact that you have highlighted in your opening remarks. So my question is when do you see this destocking impact going away? And how do you see this year ending, especially on the fourth quarter? So do you expect growth to recover on your FY '25 base in the next year? Or how should we think about the quarters ahead regarding this?

Thank you for the question. See, yes, there is clearly some channel inventory for which there is some destocking happening. And but at the same time, there is a supply chain realignment that is also happening. And the reason for some subdued orders can be contributed to both of these. Now I would -- we -- our assessment is that it might take a couple of quarters for this to get completely realigned. But if you would see that over the past 9 months also, we have done significant volumes as far as our API, PI vertical is concerned. To further corroborate the potential and the optimism that we have for this molecule, you need to understand how the end molecule is faring. Quarter-on-quarter, it is still showing a good medium -- month-on-month, I would say, it's still showing good mid-second-digit growth, mid-level 2-digit growth. And new markets are also opening up, like a very big market that's Japan is opening up. And there are a lot of markets in the emerging geographies that are opening up. And the launch in Canada still is going to awaiting traction. So we foresee that -- I mean, we are still very bullish on this product. We don't see any concern or issue.

My next question is regarding the Contrast Media segment. So I just wanted to understand over the, say, past couple of years, how many launches have you done in this segment? And how has it contributed to your revenue so far? And which -- and any product that you'd like to call out, which has been a meaningful contributor to you? And how is your market share in this product fared so far?

Typically in Contrast Media, there were 2 needle movers for us. One is an advanced intermediate for the existing product that we make, which is currently under validation, wherein we have the capacity ready for the next 5 years. And the second molecule is an NC intermediate, which has done well for us in the past 12 months. As you recall, in December '24, we had commenced a new line for this [ NC ] intermediate. So I think keeping these 2 together, we have capacities on stream. One is getting validated, one is already scaled up. And the growth outlook in these 2 molecules is extremely encouraging. So these are the 2 major launches. And the third one, which is more of a backward integration play, and we spoke about a line, which is under validation in Unit III. This also could be a significant strategic needle mover for us, both on the bottom line and also on the top line.

So -- and how is the market share fared in this product? So can we assume this market shares to be sustainable? Or have they gone down recently in your key products? So how should we think about it?

These are very sticky relations. And in most of these cases, these are backed by multiyear supply agreements. So we feel that depending on the order flow, it's just about execution. And in terms of the development of these molecules, we've done considerable work. So we're very confident about the qualities and the order flow to go through very soon.

Just if I could squeeze in one more. So in the -- I just wanted to understand in your PI, API pipeline, how do you think about it in the, say, next couple of years? So how many molecules do you have in, say, the late stage or Phase III assets in your PI, API pipeline right now?

So the late-stage assets are about 6. And I think they'll start kicking in about 2 years from now.

[Operator Instructions] Our next question is from the line of Sanjesh Jain from ICICI Securities.

I got a few of them. First, on the margin. In the presentation, you mentioned that the product mix and the inventory write-off has hurt the gross profit margin. I think with increasing contribution from Contrast Media, the mix has only improved. And can you give us more color on the inventory write-down, what and which product and how much did it hurt? Because the gross profit volatility has really been all over the places and need to have a little report that, that would be really helpful. That's number one. Number two, you did mention on the realignment of the supply chain for the Bempedoic Acid. Where are we in that realignment because one of our peer in India has also add up a lot of capacity. So in this realignment, how do we look our contract? We were at 120 metric ton earlier. Will it positively benefit us? Will it negatively benefit us? And this destocking phenomenon, when should it get over and we should start looking at volumes coming back? So these are initial 2 questions.

So let's take the question on the gross margin. If you see gross margin on a YTD basis is around 53% compared to 55% last financial year, last. So it's only a difference of 2%, out of which 1% impact is roughly on some certain inventory write-offs, which are all stock, which was sitting in our inventory. So it was a 1% impact is there. And balance 1% is basically a swing off because of product mix.

No, I thought product mix has improved, that 1% should have been positive. So what we are talking is much bigger impact there?

Just to give you some more idea in Contrast Media, we have 2 approved vendors, right? And in the past quarter, we had sort of increased the offtake from the European supplier. And that could have had a marginal impact on the main product of contrast media. But at the end of the day, both contrast media and the pharma intermediate vertical is highly profitable with gross margins over 50% and in some cases, about 55%. And on the stocking, destocking, I can't give specific guidance, but I think with the molecule gaining new entries in new markets and the growth outlook definitely is very encouraging. The capacities are on long standby, and we are already discussing encouraging volumes with our target customers for FY '27 and beyond.

Should we expect growth in the volumes in the -- yes, please go ahead.

Ganesh here. Sorry, there was some issue. Moderator [indiscernible] phone. Maybe I'll just explain a little bit more on the gross margin. I remember last quarter, we actually talked about change in finished goods and [ WLP ], where goods in transit was pretty higher. I was actually talking about overheads getting inventorized. So to that extent, your gross margin in that particular quarter went up to 65% because we had a very huge goods in transit, which didn't reach the customer destination as of the end of the quarter. Now that whatever overhead which gets inventorized actually gets released into this quarter when you actually book the revenue. That's how the accounting works. So to that extent, you would actually see a slightly dip in the gross margin. The way Sanjay put it, if you look at cumulatively for 9 quarters, whatever number we were actually like committing, we are in that similar range, 52%, 53% of gross margin. And if you look at products like Saccharin, there is a little bit of price erosion. So that would have actually contributed marginally to reduction in the gross margin.

No, that's very helpful, Ganesh. I think that's clear. On the realignment on the bempedoic value chain, can you help us understand what exactly is happening? And how is it going to benefit us?

Sanjesh, I think it's a little premature on our part to comment on it. But all that I can say is that it will work in our favor. And it is not that supplies from Blue Jet are not going and somebody else is supplying or the end molecule is not doing well. So it's neither the case. So I think it's just about some realignment and channel destocking, yes. And you must also understand that these are advanced intermediates. So any change will require some -- will have a regulatory pathway. So -- and we were the primary suppliers in the past, and we believe that we will continue to be the primary suppliers.

That's clear. On the growth in FY '27, FY '26 has been quite subdued on the growth side. What gives us the confidence that FY '27 should be better than FY '26 in terms of revenue growth and on the operating leverage helping to regain the margins?

I'll answer this question by giving you some perspective about the capacity utilizations. And the 2 major lines that we had created, one for the cardiovascular molecule and the other one was for the NC intermediate on Contrast Media. Both of them would be positively contributing for FY '27 -- which is backed by some customer orders. And you've seen in the past year, we've been able to scale up this -- both the molecules well. So there's one thing that you add capacities, but at the same time, successfully scaling up with the right efficiencies, I think there's a proven track record. The third incremental aspect would be the backward integration play for the Contrast Media Intermediates in Unit III. While the top line growth will happen after certain customer audits, validations. But as soon as the line is commenced, we ourselves are a customer for this critical raw material. And we will gradually -- this will gradually impact the bottom line in the next coming years and some marginal top line growth. So these 3 molecules we discussed. And the fourth one is the [ alternated ] contrast media, which the validation took longer than expected, but the forecasts are very encouraging, and this keeps us very positive in terms of the FY '27 outlook.

And from the API, PI basket, we are not looking at any new product to come in FY '27?

We are, we are. But I think we will be giving a positive update in the next quarter for that. There is something very encouraging cooking, but I think we would be in a position to share that in the next quarter.

Our next question comes from the line of Shyam Sampat from MSA Capital Partners.

I just wanted to understand, firstly, on the Vizag land that you mentioned that we've taken possession. Keeping that in mind, what will our CapEx deployment schedule look like for the next FY '27, given the current volatility that we have with pharma intermediates? How will you be facing this CapEx?

So I think as per the Board approval, we've committed a CapEx of INR 1,000 crores over the next 3 to 4 years. And specific targets for FY '27, we'll give you in the next quarter. But having said that, the CapEx that we are doing in Vizag is for specific projects which have customer demand. This is not capacity creation in anticipation of a particular order. These are products candidates that have been discussed for many years with our end customers. And this has no correlation to the specific product in pharma intermediate we spoke about.

All right. Understood. Sir, the next question that I have is regarding Contrast Media. In the presentation, you mentioned that the top 4 players hold 75% of the share. So will our strategy be looking like gaining more wallet share now? With those players?

Yes, yes. Those 3, 4 needle movers that we spoke about in terms of the portfolio will definitely contribute to the increase in the wallet share because, again, our target is to be a small partner to these large innovators and be a part of their growth story.

All right, sir. Understood. Sir, and regarding -- again, in the presentation on Page 6, we had a line mentioning that EBITDA was impacted by engagement of a foreign consultant. I just wanted to understand the nature of this engagement. Is it one-off or recurring?

This would be a recurring expense. This would be a recurring expense, and it's more strategic in nature, and we can...

These are all European-based consultant who will be helping the company in strategizing, transforming. So they will add a lot of value.

Okay, sir. My last question that I have is regarding EBITDA margins. We've been seeing negative operating leverage. So just wanted to understand what kind of revenue threshold do we think we should expect to get back to the 30-plus margin mark?

No, that's a combination of product gross margin. And we cannot be -- unfortunately, we cannot guide on those numbers.

[Operator Instructions] Our next question is from the line of Nikhil Upadhyay from SIMPL.

My question was on this API, PI product. See, last quarter when we had the discussion during the same call, you had mentioned that we are bound by the order and we see visibility on the amount of offtake. I understand generator is renegotiating the orders and all. But when the renegotiation happens or a new supplier comes in how does the business like breakup happen between the 2 suppliers? Because as you said, we are -- they would be part of the filing of the innovator and all. So is it like do you see a risk that from what we have done historically, there could be some substantial drop? Or is it like a minimum commitment that this will be maintained and incremental will go like just some sense because we don't know how these things happen. So just some sense how the contracts get renegotiated.

So I think very, very fair point. And I think I would want to give more clarity on this aspect because it's a considerable part of the overall revenues at this point in time. See, any new supplier entering has a regulatory pathway. That's number one. Number two, we've spoken about the L molecule growing and entering new markets. So this is -- if you read about the molecule, the indicators are very positive. And if at all, there was -- there had to be a need to be caution at this point in time from an FY '27 perspective, it would be our duty to highlight it. But we don't see those indicators at this point in time. So we are still positive around this molecule, and we just have to be a bit patient around it.

I appreciate that. But what I'm trying to understand is that if you look at '27, FY '27, the volume or the amount of business which the innovator would be taking from you, are these firm orders which are signed? Or is it like it will be more closer to starting like financial year '27 would be signed? Just a sense on -- are these signed orders that we'll be getting just to get some confidence that is all.

No, no. So there are binding forecasts and there are confirmed purchase orders. But at this point in time, it's very difficult to give specifics around that. And hence, there is no need to be worried about the outlook for '27.

And secondly, we understand if you look at the incremental pipeline from here, there are 2 Contrast Media products and one more API, PI product, which you mentioned. By the time '27 and we get into '28, would you see that the business would diversify to a lot -- the business would become more diversified versus what we have today? Or would you say this concentration to few molecules will still remain very high?

A bit of both, a bit of both because the new launches that we spoke about in Contrast Media, I think they are large molecules at the end of the day. So when we set up capacities, we look at an incremental growth year-on-year for the next 5 years, wherein we are ready for that requirement. And with the new launches in pharma intermediates, yes, there would be some lumpiness because that's the nature of CDMO. So you should have a 2-, 3-year outlook. But yes, the idea and the endeavor is to definitely add more molecules. And that is one of the reasons the Vizag CapEx has been announced, and we are looking at it very positively.

But if you would see the numbers 2 years back and now you would see that both product and client concentrations have significantly improved. So I would imagine that we are on the right track, and it should stay the same. I mean, it should improve further.

Our next question comes from the line of [ Abneesh Berman ] from [indiscernible].

I had a question on this new PCSK9 inhibitor. I don't know whether this was answered or not, but my question is about this NewAmsterdam product called obicetrapib. And how do you think it will -- when it gets launched with the 2 years, how does it compete with Bempedoic Acid given the fact that the results in the trials have been pretty encouraging for this newer product?

I mean -- so of course, the molecule is very potent, and it has strong USPs around it. It is very difficult to make such predictions as to how it will fare because what matters is the Phase IV data. Phase IV means that post-launch marketing surveillance data, that's also very critical. There is a pathway for getting to the prescriptions on the physician table. By that, I mean that you need endorsement from certain cardiologists and you need Phase IV and you need outcome trials. So while even if this is a great opportunity, it will take a while for it to gain traction. And regardless of that, I think it's a new molecule, so you have to wait and watch just in case there are any adverse reactions or whatever. So I think as far as our opportunity is concerned, we are in a very, very safe zone. That's what we believe, and that's what the indications that we have. Beyond this, I don't think I'm capable to comment.

Okay, that helps. Just one question regarding the Contrast Media. I mean, I know that second quarter was marked by some transit issues. But if you look at the 9-month revenue and compare it, the growth is flat. So when do we expect like a material double-digit growth here, if that is possible?

In terms of providing an outlook would be difficult. But I think when I was trying to say that there are -- we will scale up around 3 molecules and molecules are of large volume, high-value products. So...

Yes, yes. Shiven, you talked about this one, the NCE product. Can you also talk a little bit about the [indiscernible] [ ABA HCL ] product? I mean, what could be the realizations here? And what are the target volumes here and time lines? I mean, when can we see commercial launch for this product?

So in FY '27, you will see the commercial launch and the ramp-up will happen from Q1 itself is our understanding. And value per kg, it would be higher than our premium molecule because it's a forward integration play.

Okay. And what kind of volumes can we get from here, let's say, in the second year and FY '28.

That is difficult to comment right now.

Our next question comes from the line of Sujit Lodha from ICICI Lombard.

Sir, just one thing on the pharma while all the other questions have been answered. Sir, on numbers, while I understand that the contracts are fluid and you don't have quarterly numbers and it's very difficult to guide on that. But just a small number here that last quarter same year, we did a Pharma Intermediates revenue of about INR 146-odd crores, which is roughly about INR 40-odd crores in this quarter, right? Sir, what is the quarterly number one should look at for FY '27? Or what is the annual number one should look at? Is INR 145 crores a right number? Or is that exaggerated INR 40 crores a very underestimated number? Should it be somewhere in between? What is the right number one should look at in terms of normalcy of the supply chain and inventory if that happens?

See, one is that we normally don't like to give a guidance like this. The second is that it all depends as to how the orders they pan out. I think just wait for a quarter and then the run rate that you will see from that run rate, you can extrapolate.

Okay. Okay. Okay. So a quarter is what you are saying more will take for the things to normalize is what your understanding?

I think that's a fair assessment to make.

Our next question comes from the line of Ankush Mahajan from Sanctum Wealth.

I just try to understand, sir, that if the end product is giving a growth of mid-double-digit growth, that is showing strong prescription on their side also. New markets are also growing -- expected to grow in Japan. So just trying to understand the nature of this supply chain, how this stocking and destocking happening actually, sir, would you throw some more light actually? Because products is doing very well. Growth is there. Then they stock it at the earlier level, can we say before 2, 3 quarters, they stock the raw material earlier 2, 3 quarters before the launch and something like that?

See, we supply the advanced intermediate and this gets converted to the API and which gets converted to the formulation. So from the point of supply to the point of purchase, there is about 9 to 10 months. And when the is new, then you -- yes.

So these will lag of 3 quarters?

Yes. It's so difficult to give some sort of a number. I mean, if you are trying to create a model. But then broadly is, yes, that's the type of guidance that you can work with.

But still, there is a constant -- they are -- whatever the numbers they are releasing that growth is there.

Yes, yes. Growth is there, and that's why we have been saying that there is channel inventory and there's some destocking happening, and you will see the numbers revive very soon. Just be a bit patient.

I think from a stocking scenario to limited product, I think we are at the end of the transition.

From the last 2 quarters, we can say that there is destocking. So maybe one more.

Not from the last 2 quarters, but yes, last quarter, we did. But maybe we could take it offline if you have more concerns and queries on this. We can explain more about the end molecule, and there are some reports available online about the end molecule in terms of how it's entering new markets, and that could be a good indicator for absorption.

Our next question comes from the line of Shashank Krishnakumar from Emkay Global Financial Services.

So my first one was on the 6 late-stage assets. I think last call, we did indicate that we have seen some RFPs for 1 Phase III and 2 commercialized products. So anything incremental in terms of updates that you might have to share, whether we can see some of these getting converted into orders, say, sometime next year, FY '28, -- anything that you would -- any update there?

Just wait for some more time. I think we are moving very fast and in the right direction. We -- last time we spoke about 2 lateral entries. Very advanced conversations are on, on both of them. And to some extent, the capacities that are envisaged at Vizag will be also catering to these opportunities. So just give us a little more time, and we'll make some announcements soon. But all that I can say is that they are moving in the right direction, both the opportunities that we spoke about.

Got it, sir. That's helpful. And the second one on the new sweetener that we are looking to commercialize. Now can we sort of expect it to start contributing meaningfully from FY '27? Or will this largely be contingent on the Vizag capacity coming in and then we'll probably start seeing this contributing to the sweetener revenue? How should we think about it?

I think between FY '27 and '28, there are certain milestones that we are working towards. I think in terms of the target capacity that we are targeting is about 10% or $1 billion. So for a large molecule, there has to be some work in piloting in terms of proving ourselves to the target customers. So I think in terms of the development, we are very confident. In terms of the pilot quantities in FY '27, this will give us some very valid indicators in terms of continuous engineering. In the backward integration in Mahad is a very continuous plan. That's why the CapEx is optimized, and that would be the endeavor for this large sweetener as well.

[Operator Instructions] Our next question comes from the line of [ Vinay Shah ] from the [ Corporate Daily. ].

I hope I'm audible. Management has attributed that the recent revenue decline is due to the customer destocking. However, during the high-growth period of H2 FY '25 to Q1 FY '26, we observed a nearly 100% spike in trade receivables, rising from INR 137 crores to INR 350 crores. Could you please explain this period of significant credit-led sales and why it was immediately followed by 2 consecutive quarters of a sharp revenue slump?

I didn't get your question. Can you repeat that, please?

We observed 3 good quarters, H2 FY '25 and Q1 FY '26, 3 good quarters with a spike of 100% trade receivables from INR 177 crores to INR 350 crores. And after that, OFS happens, and there are 2 slump quarters back-to-back wherein customer destocking is happening. And so the previous 3 quarters, sales were led by credit. So can you please explain this?

See, this is normal when a new product is getting launched. I mean, if you track any new launches, then filling up the channel is very critical because getting the product to the patient and ensuring that any prescription that is written gets filled up. So this is something which is very normal in the pharmaceutical world. So I mean, usually, that's how it happens. So I don't see any -- I actually, I'm not able to get your concerns. So...

See, I think if you see in the numbers also, my friend, I think in 2024, the PAT was about INR 160 crores, around INR 160 crores. In '25, it became INR 300 crores. So after listing, we've been able to double the profits. So the endeavor of us is to definitely grow the company. And going forward also, the target launches that we are looking at, I think the outlook should remain positive.

Can we expect the next quarter to be better. Normalized?

Again, as we said, we don't really give a guidance. But like we already mentioned, it may take a quarter or 2 for this particular opportunity to get back to normal, in fact, be better than the past.

[Operator Instructions] Our next question comes from the line of Alankar Garude from Kotak Institutional Equities.

Sir, if we adjust for the INR 50 crores, INR 60 crores of goods in transit, which you had called out in the second quarter, the contrast media sales have actually declined on a sequential basis. I mean we also would have had the ramp-up of the Gadolinium -based NCE and possibly some validation supplies of the iodinated product. So in this context, just trying to reconcile the low contrast media sales. Was there any pricing pressure or any specific volume impact which you would like to call out?

There are no -- first of all, there are no volume or pricing pressure as such. And as you rightly said, there was a huge, what we call, sales cutoff last year, so this last quarter. And -- but it was followed by -- I mean, the cutoff essentially means dispatches have happened. So those dispatches now got recognized. We spoke about it last quarter also. So there is...

Alankar, just to clarify, the closing cutoff for this quarter is also similar to the opening cutoff. So you didn't see the impact, but actually our dispatches -- if you actually see from a production, we have a pretty strong production of Contrast Media this quarter. And the cutoff for December is also similar to the opening cutoff. So that is a pretty positive news as far as Contrast Media is concerned, and we should be recognizing that in Q4.

Okay. If I understood this correctly, sir, the goods in transit were higher in the second quarter. Was that the issue in the third quarter as well and you expect it to be better in the fourth quarter?

It is a similar number. So maybe if I go back to Q2, the opening of the quarter, we didn't have too much of goods in transit. It was actually more in the closing. So that's why you had a significant impact in Q2. But in Q3, both opening and closing are more or less similar. So the business is as usual. There is a very steady state of dispatches. So like it is not that there is a one-off in Q2, which is not there in Q3. I think that assessment is not correct. You would actually see whatever cutoff we have in Q3 getting recognized in Q4.

Okay. Sorry to persist on this, sir. Just trying to understand the numbers. If you look at INR 81 crores of Contrast Media sales in the second quarter, you had said about INR 51 crores of goods in transit, and we have reported INR 124 crores in this quarter. So I mean, if I add that, say, INR 51 crores to INR 81 crores, the number is actually higher than the INR 124 crores that we have reported. And I mean, we are expecting at least some ramp-up after the commercialization of the gadolinium-based NCE and possibly some validation supplies of the iodinated product as well. So just trying to reconcile these numbers, sir.

See, as far as the gadolinium category, the sale is constant there is -- it is almost reaching some sort of a steady state, although the product is not comparable to the iodinated product. When you look at the key product, our production and dispatches were higher in Q3 actually. The amount we recognized is even considering the opening cutoff is a bit on the lower side actually because we still have the goods in transit as for December end, it is actually slightly more than what we have as opening. So this is the point I can explain offline in terms of this reconciliation.

Okay. Got it. Okay. So basically, you're saying the gadolinium-based NCE was flat sequentially. And you mentioned about flattening out. I mean, are we expecting any growth here in FY '27 or...

I would say it is a steady state. It's a steady state. And whatever purchase order we have received, the numbers are reasonably stable and sustainable. I think instead of a quarterly, maybe you will have to look at from a yearly perspective. From a yearly perspective, these numbers would be more sustainable.

I think just to give you another additional data point on this NCE molecule, I think I was just reading some reports, it's growing by high teens. So that's definitely encouraging from the future capacity utilization standpoint.

Okay. So eventually, there could be some growth. Okay. Fair enough. The other question was, VK., you said Blue Jet will continue to be the primary supplier for the PI, API molecule. What is giving us that confidence? You mentioned about being in discussions and there being some binding forecast, some purchase orders. But this point about being the primary supplier, especially given the realignment in the supply chain, which you alluded to earlier, just trying to understand this and if you could provide us some comfort as to what is giving us that confidence.

One is the sheer momentum. Two is the quality. I cannot elaborate more.

Momentum of what, sir?

We have been supplying -- we have supplied large quantities in the past. I mean you can see the data. And so that's the momentum that I'm talking about. And two, I think our quality is extremely consistent because we are getting it from a very high-tech automated and dedicated facility.

Next, we have a follow-up question from Shashank Krishnakumar from Emkay Global Financial Services.

Just wanted to check. So from a normalized gross margin standpoint, should we take this quarter's figures as the normalized margin? Or is it likely to be closer to the 9-month figures? How should we think about it?

It should be between 50% to 55%, depending on the product mix.

Okay. Got it. And just a last one on the Vizag facility. What is the incremental P&L impact that we should try and build in, say, for FY '27? Because obviously, this will get fully commercialized after a point, but what is the incremental P&L hit in the near term, which we should sort of expect?

Most of the Vizag expenses will be capitalized, and we need to just see the portion of expenses that cannot be capitalized because it's going to be a greenfield and I don't expect any significant P&L impact.

Our next question comes from the line of [ Andy ] from [indiscernible] Ventures.

Sir, just one question. So given the recent moderation in operating cash flow and the announced INR 100 crores CapEx program, could you elaborate on how management is thinking about funding this investment? Is it like specifically how do you expect to balance the internal accrual versus existing cash and investments and let's say, potential for external finance, et cetera debt equity? If yes, then what could be the guardrails around leverage or dilution as you execute on this CapEx?

Good question. Ganesh, can you take it up, please?

Right now, we have INR 410 crore cash as of December, okay? We will continue to use internal accrual for the initial phase of CapEx, okay? We have both opportunities open. We could actually tap the debt market or we could also like use the capital market. Anyhow, we have a certain headroom to be offloaded to meet the minimum promoter stake of 75%. So we have all options. And as we get into long-term contracts with the customer, we are also evaluating co-investment options. So for us, being a debt-free company, we have all options available.

Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.

We thank you, all the participants, and we will meet you in the next quarter. Thank you.

Thank you. On behalf of Blue Jet Healthcare Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.