Concord Biotech Limited ($CONCORDBIO)

Ladies and gentlemen, good day, and welcome to Q4 and FY '26 Earnings Conference Call of Concord Biotech Limited, hosted by AMBIT Capital. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Vaid, Joint Managing Director and CEO for Concord Biotech Limited. Thank you, and over to you, sir.

Thank you, and a very warm welcome to all on our Q4 and FY '26 earnings conference call. I'm joined by Mr. Raviraj Kariaas, CFO; and SGA, our Investor Relations advisers. We have uploaded our results and investor presentation on stock exchanges and the company's website. And I hope everybody had an opportunity to go through the same. Let me start with a brief recap of FY '26, followed by way forward and financial performance, post which we will open the floor for Q&A. FY '26 was a challenging year for Concord, and we faced some industry headwinds, coupled with geopolitical headwinds and supply chain disruptions, just to highlight further. In FY '26, procurement activities by our customers, particularly for the U.S. slowed during the first half of the year, while prospective customers refrained from altering their existing supply chains amid uncertainties surrounding U.S. tariff measures and the broader complex geopolitical environment. However, conditions gradually improved in the second half, leading to increased procurement activity and renewed engagement with our new customer pipeline. With greater clarity emerging on the tariff situation, customers are now increasingly focused on derisking their supply chain and shifting business towards us. Supported by strong capabilities, capacities, global approval and customer references that [indiscernible] processes. During the year, we also faced challenges related to obtaining written confirmation approvals from [indiscernible], which restricted our supplies to the European region for nearly 3 months, representing approximately 1/3 of the financial year. While this did not result in permanent loss of revenue, the impacted supplies were deferred to subsequent periods. It is important to note, however, that this was not a case of pent-up demand where all deferred supplies could be immediately executed upon resumption. Instead, the recovery was gradual with supplies normalizing towards the end of the financial year. Another challenge was related to our supplies of Middle East region amid uncertainties arising from the ongoing war and broader geopolitical conditions. A major tender in the region remains in [ advance, ] which adversely impacted our revenues during the year. Nevertheless, we remain confident of resuming supplies under this tender once the same is open. In addition to the tender business being on hold, other API supplies to the region were also constrained due to prevailing uncertainty. As part of an interconnected global market, these developments had a direct impact on our revenues during the year. We are now witnessing improved visibility and gradual resumption of supplies to the Middle East in current financial year, particularly as these are chronic therapies where supply disruptions cannot persist for an extended period. During the second half of the year, customers adopted a differentiated procurement strategy, shifting from bulk purchases to a more staggered quarter-on-quarter procurement approach compared to previous year. As a result, revenues were distributed more evenly across periods rather than being concentrated within a particular quarter. This should, therefore, be viewed as a timing spillover into subsequent periods rather than a permanent loss of revenue. Lastly, in Q4, our U.S. Veterans Affair Business was impacted as the related tender had not been finalized during the year and continues to remain on hold, resulting in lower sales during the second half of the year. The factors mentioned above were largely beyond our control and were not related to lower demand loss of market share or pricing pressure. While we have encountered similar situations individually in the past, this year, multiple challenges coincided within the same period. Having said that, we believe these issues are temporary in nature rather than structural, and we remain optimistic about a normalized and a stronger performance in FY '27. Now speaking about our resilience and positive developments during FY '26. During the year, we strengthened our regulatory filings and have successfully completed U.S. FDA, EU-GMP, Russian GMP, NAFDAC and WHO-GMP inspections across multiple facilities, which reinforces our global compliance standards and support uninterrupted international suppliers. Our injectable facility has successfully commenced operations and completed its first year of manufacturing. With the WHO-GMP certification now in place, we are well positioned to enter the domestic market through our own brand and contract manufacturing opportunities as well as participate in government supply contracts. This has significantly enhanced the visibility and growth prospects of our injectable business for the current period. Speaking of our customer acquisition for API sales, CDMO and second source opportunities, we have commenced supplies of our APIs to 2 innovative companies. We have made steady progress with customer acquisitions in Nystatin, which was launched last year. We have also commercialized manufacturing of Fusidic acid, which is having limited competition, especially from the European region. We have increased the second source opportunities across multiple products, enabling us to grab a larger share of the business over time. And we are in active discussion with CDMO customers, which are in advanced stages as we speak. We have also invested in growth platforms like our entity into cell and gene therapy through investments in Cellimune Biotech. We have commenced commercialization of soft gel facility, creating additional avenues for revenue generation and incorporated and acquired licenses for Stellon Biotech, our U.S. subsidiary, which enables direct marketing, distribution and commercialization of Concord Biotech's products in the U.S. Considering all these factors together, along with the strong product capabilities, manufacturing capacities and product pipeline that Concord possesses, we believe the company is well positioned for a sustained growth trajectory with significant opportunities in the near future. With this, I would like to hand over the call to Mr. Raviraj Kariaas, our CFO, to take you through the financial and operational highlights for the quarter and financial year ended 31st March 2026. Thank you, and over to you, Raviraj.

Thank you, Mr. Ankur, and good afternoon, everyone. Let me speak about the operational data points first. The API revenues for the quarter 4 financial year '26 stood at INR 264 crores, and INR 829 crores for financial year '26 with a degrowth of around 27% and 12%, respectively. Our formulation revenue witnessed a degrowth of around 8% and 13% for Q4 financial year '26 and financial year '26, respectively. Our split between API and formulation largely stood 80 to 20 ratio in our long-term stated rent. Our split between domestic and export sales stood at 52% to 48% for quarter 4 financial year '26 and 53% to 47% for financial year '26. Our export revenues witnessed a degrowth of around 9% for the financial year '26, and our domestic revenue witnessed a degrowth of around 15% for the financial year '26. Speaking of our financial performance, I would like to mention that, as mentioned in financial year '26 was a challenging period, our revenue has seen a degrowth. Revenue degrowth for quarter 4 financial year '26 stood at 24% and for the financial year, it stood at -- for the full financial year, it stood at 12%. Our profitability front, we have not seen that steep impact. Our reported EBITDA for the financial year stood at INR 367 crores with an EBITDA margin of around 35%. However, if we exclude the impact of expenses related to our new formulation facility and expenses pertaining to our U.S. subsidy, Stellon, our EBITDA would have been in the range of around 40.4% for the quarter 4 and 39% for the financial year '26. On account of the operating leverage with reduced sales, our profit after tax was down by 30% for the financial year '26, standing at INR 260 crores. Despite the degrowth on the back of culminating challenges witnessed during the year, our balance sheet stays healthy. We are a zero debt company with cash and cash equivalent of more than around INR 414 crores as on 31st March 2026. Our CapEx for the year stood at INR 65 crores, and our cash flow from operations stood at INR 267 crores with a CFO to EBITDA conversion of around 73%. With the manufacturing capacities across all 4 units supporting a peak revenue potential of approximately INR 3,000 crores, along with a strong cash surplus position and limited CapEx requirements, we are well positioned to capitalize on future growth opportunities and drive sustainable growth. With this, I would like to open the floor for questions and answers. Thank you, everyone.

[Operator Instructions] First question is from the line of [ Ankur Kumar ] from Alpha Capital.

Sir, as you said in the commentary as well as the return in the PPT that we expect strong outperformance in FY '27. So do we have visibility in first half to start this growth phase or like it will be delayed and we expect in second half?

So we have a very good amount of visibility in the first half. And based on that, we have been pretty confident that the coming financial year, we should expect the growth which should be better off than our historical growth, which has been there. So there is a fair amount of visibility in the first half.

And by historical also, can we expect like 18% to 20% tech growth or like more growth, please?

Yes. As I said that our historical growth has been around 18%. So we expect it to be slightly better off is how we are looking at the next -- this financial year.

And that should start from Q1, Q2 also?

That's correct.

That's nice to know, sir. And sir, on margin side, we said it was quite good in gross margin also, we improved and our -- excluding impact of this formulation as well as new subsidiary margins have improved. So are these businesses turning around? Or how should we look at our overall EBITDA margins for the next year, sir?

So this is a cycle that one goes through. And we have established the infrastructure last year, which was the injectables. And in this year, we have set up still on biotech. So whenever you're establishing your business units, it takes time to kind of build up and have positive contributions to the top line. So that's a cycle that we are going through. That being said, all the necessary steps have been taken, like we have mentioned in the past that the new injectable facility, we have taken the validation batches, WHO-GMP certification has happened. We have slowly started selling the products from our injectable facility and also as we speak, certain customer audits have also been lined up. And we've also gone through a couple of those. So we are going through that process. It's a little difficult for me to say that how the contribution is going to be from this injectable unit, but all the right steps have been taken in that direction. Also with respect to Stellon, we are expecting the supplies to happen in the first half of the year as well. Already orders are in place from our U.S. entity. So things are moving in the positive direction, but from a breakeven perspective, it's a little too early for me to say. But that being said, all the expenses that have been there for these 2 entities have been fully booked in the last financial year. So anything that would go going forward would be like a positive impacting only to the EBITDA.

Got it, sir. And sir, last question would be on the gross margin side. We have seen expansion both in full year as well as in Q4. So how should we look at gross margin for the coming years?

See, I mean, I would say gross margins to be kind of in a similar range because one sees that there has been some pressure on the supplies of the goods. And of course, I don't expect that to be there for the full year, and we are procuring a lot of raw materials as well. So there is some impact on some of the products, some of the raw materials. So I don't expect it to be significantly different, but my sense would be that for a full year basis, it should be pretty much in line with what our historical gross margins have been.

[Operator Instructions] The next question is from the line of [indiscernible] from Jefferies.

I wanted to know what was our sales exposure to the Middle East region in the past 2 years, let's say, in FY '26 and FY '25? And some details around the tender that you mentioned, what was the potential size of the tender, which country it was. So that's question number one. Question number two, it's on the injectable plant. So what was the loss due to injectable facility during the quarter and the year? And how is the progress in terms of filing from the facility for different markets? How many markets have we started to file? And any regulatory approvals or plant [indiscernible] that has been done till date?

Sure. So the tender impact, we had already captured that in quarter 3, and we had informed that the tender was to the tune of close to around INR 25 crores. And while we have exposures in the API, I think the challenge for these markets was to procure more towards the formulation than towards the API because of various reasons, that whether it was the currency for the currency allocations usually is a challenge in the Middle East countries or because API, they can still hold on to things as it has a shelf life. But formulations, it has to be consumed, and that was a challenge then. So major was a tender impact, which was INR 25 crores. API impact was there, again, in and around similar to what the tender value was, but it was not like fully impacted. I would say it was partially impacted. And going forward, as I said, that the tender clarity is not there yet, but there is supplies on the APIs that have slowly started to build up because, again, they can be in a position to kind of hold and make the formulations when required. And that is why we are seeing a gradual progress in the Middle East. And hopefully, once the situation improves, it would also have a positive impact from a formulation standpoint as we are seeing it from an API standpoint. With respect to the injectables, while I let Raviraj share his information on the profitability and loss. From a filing perspective, currently, the documentation process is going on. So our target market is the Southeast Asia and the Africa markets to begin with, and the documentation and the submissions are going to be initially targeted towards the emerging markets, which is the Southeast Asia and the Africa markets. I'll let Raviraj answer on the profitability on those.

Yes. So for injectable plants, we have previously also mentioned that the quarter-on-quarter expenses are around INR 10 crores, while the full year number would be around INR 38 crores, INR 39 crores.

Okay. Just a small bit again on the Middle East. What's the total current exposure towards the region, be it direct or indirect, ballpark?

So I would say it would be close to around INR 50 crores.

INR 50 crores at company level?

At company level.

Next question is from the line of [ Ankit Singh ] from Kotak Institutional Equities.

Sir, can you give a broad breakup of what has been the volume and pricing growth for us for FY '26 for the API business?

So as I said that prices have not -- there has been no price growth for us. So all the volumes, it has been primarily on the basis of volume.

So you would say that volumes declined for a full year basis in FY '26?

That's correct.

Got it, sir. And in terms of pricing, do you see heightened pricing pressure maybe compared to 1 or 2 years back? And what's your outlook on the pricing for the next year?

No. So as I said that some of the newer products that we have between launching like Nystatin, Fusidic acid and others, there you do not see a pricing pressure because we are entering it as a second source, and we have been gaining more market share as we speak. So there, it is all about volume growth, and it will not be right to say that there is any pricing impact that we are expecting because we are entering with an aggressive price there as a second source. But when it comes to slightly mature products, I would say not all markets, but there is always a little bit of price that to certain customers could be there, which gets compensated by the newer regions that one would enter into. So overall, I would say there is not a pricing pressure that one kind of gets a concern about. But as years progress, that's a part and parcel of the game. And that's where our R&D efforts begin where we continuously work on molecules where we do foresee any such impact in years to come. So to answer in short, we do not see any major impacts, but other than what is like a regular course of business kind of a thing.

Got it, sir. And secondly, can you give details on the facility utilization across our facilities?

Yes. So the facility utilization for the Unit 1 was 77%. Unit 2 was 30% and Unit 3 is around 53%.

[Operator Instructions] Next question is from the line of Naman Bagrecha from IIFL Capital Services Limited.

Sir, any highlights in terms of the [indiscernible]?

Sir, your voice is very low. I request you to speak a little louder?

Is this better?

Yes. Please go ahead.

My question is on the U.S. return tender, let's say, orders. How long has this been an issue and important in the revenue exposure [indiscernible] for us?

So as I mentioned earlier, this was the challenge that we faced in quarter 3, and the exposure to that was to the tune of around INR 25 crores.

Any, let's say, any [indiscernible] guidance in terms of when you see this picking up probably in the next [indiscernible] it will be like [indiscernible]? Any color around that?

It all depends upon how [indiscernible] situation improves. But I think nobody has that clarity, not even us. But what we are seeing is that while the formulation has got impacted, there has been some improvement coming through the API because as I mentioned earlier that while formulation has a shelf life and the customers require allocation of plans to be supplied from a government tender standpoint, which is a challenge. So that's why some of these companies are also looking at routes to kind of hold the API so that at the right time, they can manufacture the batches whenever that allocation happens and supply. So we are seeing a little bit of shift from the formulations to the API. While that's not 100% that's happened a complete shift, but slowly and steadily, we are seeing that progression towards holding more of APIs and the formulations. Because as I mentioned in my remarks that being chronic therapies, it's beyond a certain time line, it's difficult for even countries to hold on to supply. So probably, they are using an alternate strategy to kind of keep inventory so that at the right time, they're able to supply this thing. So that's how we are seeing the market situation been developing.

So I just wanted to clarify. So this thing, I think API [indiscernible]. Okay, and sir, generally, this happens in, let's say, the sector has rolled out and the sector [indiscernible].

Sorry to interrupt. Naman, your voice is not clear. I request you to please use your handset. You are not audible.

So this INR 25 crores of impact that you highlighted in the formulation side, just wanted more color in terms of how and when this [indiscernible]. Is it like [indiscernible] and supplies happened in quarter 4 itself entirely? Or is it in a standard manner?

I mean, typically, supplies to these markets would happen through the government only. So whenever there is a need, whenever there is lesser inventory and government then decides to place tenders, that's how -- so it completely depends on utilization. There is no fixed time period on that it will happen within a particular quarter or a particular month. So in last year, we had seen supplies in quarter 3. And this year, if you see the entire situation changed, not only from a formulation standpoint but as I said, also through the API because also, the API got impacted because of the currency allocations and the funds allocated to the government for such supply. So to answer, there is no particular time period within which the tender gets floated, it is based on the consumption requirements.

Second question for Raviraj, sir. So there is INR 79.3 crores [indiscernible] in the [ balance sheet ] this quarter. Could you highlight what is it for? And I presume that [indiscernible].

Naman, your voice is not clear. Your voice is breaking.

Hello, can you hear me now?

Yes.

Yes. Sir, I was asking on the seat part, INR 79.3 crores is on the [ balance sheet. ] I presume that our CapEx is looking to be on to between INR 20, INR 30 crore per annum given last part of our CapEx cycle is done. I just wanted the clarification on the [indiscernible] number.

Yes, yes. So let me answer that. So as I mentioned earlier that we have also set up the soft gel facility within this year. So CapEx has also gone towards that in addition to the maintenance CapEx. And in addition, we have also, as I mentioned, that started work with one of the innovative companies. So there was some additional modifications that were required for us to initiate that project with the innovative company because it was a larger volume project, so it required a slightly larger modification to the plant. So those were some of the changes based on which the CapEx was slightly higher than the regular maintenance CapEx of INR 20 crores to INR 30 crores.

What would be the guidance for CapEx for FY '27?

Sorry?

What would be the CapEx guidance for FY '27?

General CapEx is around to the tune of INR 20 crores, INR 30 crores. And as of now, there is no particular requirements per se, but in the future, if there is any newer projects, which does require, I think we have sufficient cash on hand and a zero debt status. So to optimally utilize for that growth, I do not see that as a challenge.

Okay. One more question and then I'll jump back to the queue. Sir, you have highlighted that there will be savings from the [indiscernible]. Has that savings started or what will be the potential revenues going ahead?

Yes. So those savings have started and we expect around 1% to 1.5% positive impact on the EBITDA.

Considering the newer, let's say, power and fuel costs or this is the [ older networks? ]

Yes. I mean if you consider it, this situation to be there for full year, then it might be a little lesser. But assuming that it should be in that range of 1%, 1.5%.

[Operator Instructions] The next question is from the line of Sumit Gupta from Antique Stockbroking.

Am I audible?

Yes.

So sir, first on the CapEx part like you highlighted that general CapEx would be INR 20 crores, INR 30 crores. So do you expect any growth CapEx also? Or should we go with this,[indiscernible] for the next 2 years?

Difficult to say for the 2 years. But yes, for this year, I do not see any challenge, any further additions, at least in the first half of the year. And as I mentioned to Naman earlier that if in the second half, there does come any requirement because of any new projects coming in, which requires additional CapEx, it should be okay with us as there is no -- I mean, to kind of optimally utilize it for the growth. But just to add, and maybe I missed on one point there. We are also setting up an additional facility of a smaller size for the topical range. And that could be something that one would see in this financial year.

Understood, sir. Sir, second question on the API side. So what was the contribution from the base portfolio and the new launches? Can you highlight [indiscernible] between the API segment?

So much of the growth that we are seeing or we are going to be seeing in this year would also be coming from the anti-infective and the oncology segment is how we see. While in terms of the value-wise growth, there will be value growth across all the segments. But I think there will be a faster growth is what we see in the anti-infective and the onco segment.

Like what kind of growth? And usually, will it be coming from new launches? Or -- and how is the base portfolio like over the next 2 to 3 years?

I mean, there is no base for us because every year, we've been launching 1 or 2 products. So it's difficult to quantify what is base for us. But as I said, that the growth that we are seeing would be from, say, products like Nystatin, which is there. We're also seeing -- we are just initiating supplies also on Fusidic acid. So while the quantum of Fusidic acid supply may not be as big as the same was the case for Nystatin last year where only smaller quantities were supplied and larger quantities we are seeing in this year. So that's how we see for the newer products, but are already commercialized products. Within that, products in the onco segment and in anti-infective segments are going to see a relatively higher growth than the immuno-suppressant growth.

Understood. And sir, with respect to CDMO, how much of the contribution from this segment in 4Q and FY?

So CDMO still -- so we do not classify contract manufacturing at CDMO, just to be clear there. So that -- so contract manufacturing of Concord IT products are still considered under our own business only and not under CDMO. So we classify CDMO only where the IP belongs to the third parties like the innovators. So this year, I would say that we will be in the single digits, maybe between 1% to 4%. But we are expecting a couple of CDMO opportunities to click. And at least for one we are right now at advanced stages of discussion. If that happens, those numbers could change to a certain extent.

So like should we consider this in 2 formulations? Or can you split that into API and formulations?

API, it would be primarily in API.

API, okay. So in that sense, do you expect the mix to be almost at 80, 20? [indiscernible] also. API to formulations?

I mean, yes, I mean overall, API to formulations, as you saw last year and last to last year and also last year, we were in and around that 80-20. So plus, minus 6% here and there is what we expect also in this year.

Okay. So just final question. So in that sense, let's say, you got a good -- let's say your mix [ change ] improves. So like can we expect improvement in gross margin or should it sustain at these levels?

No. So the gross margins, I would say, would be in and around a similar thing as I mentioned that we would be in and around 80%, 20% mark.

Next question is from the line of [indiscernible].

I hope I'm audible.

Yes.

Yes. So sir, you have in the past quarter indicated that the injectables and your U.S. business, the CDMO business book together have caused the INR 75 crores sort of additional OpEx, which was not absorbed. And I think you also, in your remarks in the start of the call indicated that adjusted for these margins would have been north of 40%. So given that now you are confident of growth coming back, is it reasonable to assume that there will be operating leverage on these 2 facilities, which will lead to operating margin improvements?

That's correct. So as I mentioned earlier that the full cost has been factored into the last year. So there would be operating leverage kicking in. But as I also mentioned that typically, it does take a little bit longer time for it to kind of have a full breakeven because the supplies to sell on are going to happen in the first half of the year. And also injectables is slowly and steadily picking up pace. So full breakeven, I would say, will take time. I would say probably in the next financial year is what I would look at. But it would -- the operating leverage will start kicking in from this year, and it should have a positive impact compared to what we saw in last year.

So between the savings on energy cost from your renewable energy, and also reduced losses in these 2 operations, the energy saving itself, you indicated could be 100 to 150 basis points of margin improvement, and plus further benefit from [indiscernible] or reducing the losses in these 2 new ventures. Would that mean that scope for operating margins to improve could be 200 basis points or more?

Possibly, yes, because as I said, 1% to 1.5% should be from the power and around 0.5, 50 bps from the rest of the business, it is -- one can look at that, yes.

But what were your losses between these 2 businesses for financial year '26? And to what degree do you think those losses can be reduced in FY '27?

So Raviraj had already mentioned earlier on the loss -- on the expenses that were there for both the 2 businesses, which was [ INR 38.10 ] crores. How much of that will get compensated, will get taken care for the full year, a little early for me to say.

Okay. And just one clarification, did the CFO also mentioned that the current capacity is adequate to take the company's turnover to INR 3,000 crores?

That's correct.

Okay. In which case from here on, any CapEx is essentially for debottlenecking and maintenance?

That's correct. Under unless it is for a new project with a customer that may require growth to happen.

And from a working capital standpoint, do you see things remaining stable or improving or deteriorating going ahead?

It should remain stable because much of it is the need of the industry, which is in fermentation, you may require certain longer. So I expect it to be in line with what you see.

Okay. Sir, one more broad-based question. I think you have always alluded to your historical growth rates of high teens and indicated that you could possibly be in a position to maintain or even perform a number beyond that. Is it possible to elaborate on what pedestals that aspiration is sort of dedicated? What additional revenue streams and margin will bring about that? I mean to whatever degree, it's possible for you to share?

So maybe it will be a little difficult to cover much of that in a shorter time on the call. But I think from a capacity standpoint, we have the necessary capacities in place, also the growth levers because we have recently commissioned the -- a couple of years back, the Unit 3. Unit 2 also has -- we have added capacities, both from oral solid as well as from the soft gel. The new injectable facility, which is not currently contributing has been also commenced operations. Other growth levers like the CMDO and Stellon for the U.S. business has been established. So there are multiple growth levers which are there, and the capacities and capabilities are also there to address these needs. So basis on that is where we get the confidence to kind of have the capability to have INR 3,000 crores from the assets that we have created. So these assets -- so there is an asset block, which can meet those sales. And there are products both in the API and the formulation as well as in the CDMO opportunities there to kind of meet those long-term growth that we look at.

And when do you see you being able to optimally utilize your current capacities?

So Unit 1 is already at optimal capacities. Unit 3 is slowly and steadily also progressing. We are close to around 50% utilization. Unit 4, as I mentioned that by next year, you should see breakeven coming in. And soft gel also is adding. So we are at the right part to kind of walk towards optimal utilization.

Let me put it this way. I mean, when do you see the next tranche of large capacity creation requirement coming up, 3 years out, 2 years out or 4, 5 years out?

So I don't see any larger capacity happening this year until unless there is any requirement because...

Not this year. My question is given the kind of run rate of revenue increase that you can foreseeably see, do you believe that 3 years out, you will require your next tranche of substantial CapEx? Or do you think that's 5 years out that you will require a substantial capacity addition taking place because you indicated that there's room to scale up your turnover?

Anything above, I mean INR 50 crores to INR 100 crores probably in 2 to 3 years would be a good estimation. But beyond INR 100 crores, I think it will be probably 4 to 5 years down the line. Currently, there is not a significant CapEx addition on the overall asset [indiscernible] that we would have. So yes, I don't see that as a material change in the next 4 to 5 years.

Next question is from the line of Agraj Shah from Tata AIA Life Insurance.

Firstly, I would like to understand that given that most of the challenges that we faced this year are on the export side, still more exports actually there did relatively better than the domestic. We saw exports [indiscernible] only 9%, positive domestic [indiscernible], 15%. So can you just explain that? Is it indirect [indiscernible] customers or what exactly is in this?

I mean for the U.S. market, most of our sales is typically indirect because many of the Indian manufacturers are supplying to the U.S. market. So as I mentioned, in an interconnected world even supplies to India goes to the U.S. And also, as a matter of fact, the formulations that I mentioned was supplies to the domestic market and our counterparts in India then supplied it to the India. So the Middle East suppliers was actually domestic, got captured in the domestic formulations rather than in exports. And that's why in the overall equation, the domestic gets impacted more than the export.

Okay. And just on the formulation side. So given that the base is relatively low, but still we are seeing a decline. So will you [indiscernible] that? Or is it just that these indirect sales are getting -- are impacting us as we would have been on a growth trajectory? The company, yes, but the formulation business was relatively young with newer capacity.

So all our businesses, as I say, because we have domestic formulations, contract manufacturing in India for other companies. U.S. business and international business. So apart from the international business, which got impacted because of certain geopolitical reasons, all the other regions domestic as well as U.S. business has actually grown. So the impact was primarily on account of the formulations on account of these geopolitical issues that we spoke earlier during the call.

Okay. And just on the working capital side, [indiscernible] all the inventory days have gone up [indiscernible] days last year. So on an absolute number, it was [ INR 240 crores ] last year, has gone to [ INR 326 crores. ] So are these finished good inventories or let's say, there was some shipment [indiscernible].

So it's a mix of two things. One is that as mentioned during the call earlier that certain of our customers made it more staggered procurement approach than the bulk approach. So there was inventory build up, which we were expecting to kind of ship as in quarter 4, which has been now staggered over subsequent quarters. So there is some sales happening in quarter 1, quarter 2 and so forth. So that inventory is sitting in our books as well. And some delays because of which customers delayed because of all that was happening in the last couple of weeks of March. So there is some impact of that. And the other is, of course, that when we are manufacturing, the utilization numbers have gone slightly higher. And in fermentation, as I mentioned, the time cycles are larger, which is the need of the industry. So some contribution is also from that. So we expect this to slightly moderate as well in the coming quarters as staggered supplies to these customers would start happening.

Just a clarification on your insurance commentary to the fourth [indiscernible] you want the growth starting to be closer to 20% plus in the first half. So is it that in the second half, so if you look at the first half of this year, we had regrown by [indiscernible] on the full year, also, we have grown by 12%. So would it be that, let's say, the growth will be first half as well the full year next year would broadly be along the similar rate or it would be more first half?

So what I mentioned earlier was that for the full year, we expect our growth to be in line with our historical, slightly better than our historical. And the first half, we have a good visibility towards achieving the full year that we spoke about.

Next question is from the line of [ Stuti Bagadia ] from [ Choice Institutional Equities. ]

I'm sorry if I missed this, I just wanted to know what is the EBITDA margin guidance for FY '27?

So we have not given any guidance on the EBITDA. But what we have mentioned is that there are certain positive impacts that are there. One is that the power cost where we expect 1% to 1.5% positive impact. And also that certain of our businesses like the Stellon Biotech as well as the injectables, the expenses have been fully built up in last year. So we expect some operating leverage for that to kind of kick in. But there is no specific guidance that we have given for the next year.

Okay. And my second question is on the inventory days. So like you mentioned that they have increased significantly. Do we expect normalization in FY '27?

Yes. I mean it should be in the normal course of business, which should be there. So a slight increase as which was seen has been on account of what we just spoke earlier. But other than that, it has been pretty much in line with what our historical inventory days have been. So that slight increase was on factors, which we spoke about, which, as I mentioned, should get addressed in the first half of the year.

Next question is from the line of [indiscernible] from Jefferies.

I wanted to know the energy exposure. What's the very broad level exposure towards LPG versus non-LPG? And if the situation were to normalize, will that benefit also be meaningful for us? That's one. And second, at the IPO, we had a very large top 5 molecules. So how is the contribution of those top 5 products for us right now?

So on the LPG, I'm not sure, I can reconnect with you separately. We won't have the comparative there. But overall, if you see around 20% of the cost, in and around 20% is power and fuel, which I would say around 50% of that close to around 10% is LPG -- is LPG based, LPG or furnace oil-based because at multiple plants, we have either LPG or furnace oil. So there is definitely an impact on the higher side, which is there. And that is eating away, of course, into the benefits that we see from the power and fuel, and that's why we've given a range of around 1% to 1.5%. So while we are seeing positive side on the power, the fuel is something that is on the higher side. And I think if that improves, then we should get closer to the 1.5% EBITDA mark is what we see. But from the top 5 molecules, I would say that, yes, of course, last year would not be a right year to kind of look into what the top 5 molecules has contributed. But going forward, as I mentioned, that we are seeing more growth coming in from the oncology and the anti-infective segment.

Okay. And lastly, is the supply chain stable, like there's no availability challenge in terms of whatever fuel requirements, be it LPG or furnace oil based?

Yes, in the first few weeks, of course, it was challenging because as you will know that many of the places, the government had restricted the use of fuel to the industry or there were higher charges to be paid for the higher usage of fuel. And of course, in fermentation, you cannot stop the industry. So we were forced to go with the higher utilization at a higher price -- utilization at a higher price. But yes, I think that shortage is now no more there. It's only with respect to the price, which is there. But yes, the initial few weeks in April, there was an industry challenge.

Next question is from the line of [ Sajal Kapoor ] from [indiscernible].

I have three questions. First is, if FY '26 was primarily a timing issue, which you have explained, right, rather than a demand issue, where should investors expect to see the release of that timing effect first? Will it be inventory or receivables or operating cash flow or revenue growth?

So as I mentioned that inventory, because we spoke earlier during the call that the slightly higher elevated inventory levels should get kind of used during the first half of the year. And what I've mentioned earlier that there is a fair amount of visibility on the first half of the year as well is how I would look at which kind of translates into the revenue that will get positively looked at.

No, that's helpful, Ankur. I mean you mentioned that some of the tenders that couldn't land in FY '26 are still work in progress, hopefully. So in that context, what percentage of current inventory is already linked to identified customer demand or customer forecast or commercial shipments that will start getting released from Q1 of this fiscal?

So that impact is only in the Middle East. All the other markets, I think, as I said, that our new customer acquisitions, which are there are new projects that we are looking at, the material that we have in hand is mostly being targeted towards -- being targeted and subject towards those. When it comes to Middle East, we are not manufacturing formulations and sitting on the formulation process. So the inventory that we have is not with respect to the formulation inventory because therefore, shelf life starts kicking in. So the inventory that we have is primarily, I would say, more towards the API. And there it has been more about the staggered approach, which is there. So for Middle East, I think supplies will be through the API to the extent it is possible to address those opportunities. But when it comes to formulations, neither are we holding the inventory. And whenever there is visibility and there, we have fixed orders coming from there, only then those production would happen. So that's how we are looking at the inventory positioning.

So that's helpful. So based on what you just told me, if I understood it correctly, there is absolutely very low probability of risk of we, taking any sort of write-off because of any inventory getting obsolete, et cetera.

That's correct. From a formulation standpoint, yes.

Okay. And lastly, compared with FY '24, '25 kind of time period, do you expect Concord's steady-state working capital intensity to be structurally higher, structurally lower or kind of broadly will remain unchanged over the next 3 years? And the reason I'm saying 3 years is because that factors in some of the recently commissioned capacities to be kind of optimally operational?

I would expect to be in line with our historical numbers. because majority of the business is API. And there, the working capital cycles are usually higher because of the nature of the business. So I expect to be relatively in line with our historical numbers.

Sure. That's helpful. And could I just appreciate that the quality of communication on the earnings call have been top notch throughout. And yes, we have seen a bit of a difficult period in FY '26, but nevertheless, we have just communicated what was actually correct rather than just making it up, and very, very helpful communication. Thank you.

Ladies and gentlemen, due to time constraint, this was the last question for the day. I now hand the conference over to the management for the closing comments.

So thank you, everyone, for joining on our Q4 and FY '26 earnings call. We hope we have been able to address all your queries. For any further information, please get in touch with us or SGA, our Investor Relations advisers. Thank you once again. Have a good evening.

Thank you, everyone.

Thank you. On behalf of AMBIT Capital, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.