Dishman Carbogen Amcis Limited (DCAL.BO) Q2 FY2026 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Karthikayan, moderator for the conference call. Welcome to Dishman Carbogen Amcis Limited Q2 FY '26 Conference Call. We have with us today from the management, Mr. Harshil Dalal, Global Chief Financial Officer; Mr. Paolo Armanino, Chief Operating Officer; and Mr. Stephan Fritschi, Chief Executive Officer. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Stephan Fritschi. Thank you, and over to you, sir.

Hello, and welcome, everybody, to today's investor call to talk about the Q2 financial results. My name is Stephan Fritschi. I'm the CEO of Carbogen Amcis. And I also welcome from our side, Harshil Dalal, our Global Chief Finance Officer; and Paolo Armanino, COO of Dishman Carbogen Amcis in India. Before we go into the financial, I propose that I give you a brief update from a business perspective. And I would like to start with our French subsidiary. where we, as I said last time already, we got the GMP certificate, and this was really a kick in our business in the order income. We get more RFPs, requests for proposals from our customers. And the good thing is it's not only early phase, but also late phase, which is then really gives us a stable baseload on our business. The next subsidiary, Shanghai is, again, the drug manufacturing license we obtained. I communicated this last time as well. There, we are focusing on the Chinese domestic market. We increased the sales force. And from January onwards, we get additional salespeople to conquer and being active on the Chinese market to get more business from there. The Swiss operations, they operate smoothly as expected. And still with a strong emphasis on small molecules and specifically on high potent compounds. There, we see a huge interest for combination linker payloads, high potent and conjugation in relation to ADCs. And you have seen earlier this year, the communication about the collaboration with Japanese clients. There I can confirm that we are starting now the investment project on this activity, which means bigger quantities, bigger capacities in Switzerland, because the client would like to get material proceed and manufactured in Switzerland. So he is willing to invest in our infrastructure, which is a nice and beautiful collaboration with this long-standing customer. In terms of sales activities, we are proceeding, as we said earlier, we increased our sales force, not only in China, but also in the U.S. We get more salespeople there to penetrate also the American market, and be more present there and close the market. Last week, we had the CPhI in Frankfurt. That's the biggest event exhibition in the pharmaceutical outsourcing market. And what we have seen is really a pick up in interest from the market. Market is lively. Customers are coming, talk to us and are specifically interested in our collaboration. We enter more and more together with Dishman in India. So this is really a good PR, not only PR on table, but also in reality, we got multiple projects under discussion, quotation and we are close to finalize the negotiation to get more business also into Bavla. Specifically, I would like to emphasize the new collaboration we communicated a month ago with Celonic. Celonic is a small CDMO active in the antibody production development of antibodies. And we entered into a collaboration. There was a press release. You can read this in media. And with this collaboration, we closed the gap what we had so far, which is linker payload production, development production we can do and the communication with the antibody, we also can do and could do for a long time, but was missing development of antibodies. Now with this collaboration, we approach our customers to offer these services as well. This has been done, as I said before, by Celonic. And I call this as a win-win-win situation because Carbogen Amcis benefits and profits of this collaboration because we can get more clients, different clients, which come from Celonic. The same is the case for Celonic itself. They get our clients in collaboration. And last but not least, but most important is that the client gets the benefit of this new one-stop shop feature we can offer out of us. In terms of close collaboration with Dishman, I can confirm that the process is proceeding. We have last year and mentioned this already, the financial department unified under Harshil Dalal, the Indian and the Carbogen Amcis Group Finance is now under his leadership, which is very beneficial. Since 1st of September this year, we have one sales organization under the leadership of Francois Baduel. So he's taken care of all the sales activities. So we can assure that we have no duplication of sales efforts anymore. So we are more effective and productive. And since Monday this week, 3rd of November, we communicated the combination and, let's say, the merger on the IT organization. This is led by Sanjeev Jain. He is now leading the entire IT activities and information and communication technologies in Carbogen Amcis, but also Dishman Carbogen Amcis. So this is one further milestone in our process to get closer together. And one of the next steps what we are looking into is into procurement. I think that's for the time being, all what I would like to say as an introduction. And with this, I would like to hand over to Harshil Dalal.

Thank you very much, Stephan. A very good afternoon to everybody. Regarding the financial performance for the quarter ended September 30, 2025, this was again a very strong quarter for us, both in terms of operating profit as well as the cash profit that was generated for the quarter. Overall, from a revenue perspective, the revenue stood at INR 652.6 crores as compared to INR 789 crores in Q2 of the last financial year. As you might remember, in Q2 of the last financial year, there was a huge deferment of orders from Q1 to Q2, and that was the reason in Q2 of last year, the revenues were exceptionally high as compared to the run rate for the full financial year. The cost for the quarter was substantially lower as compared to what our average cost percentage is. And the major reason for that is most of the revenue in this particular quarter was dominated by the development of the services that we provided to our customers. This also includes the supplies that we made for ADC to the large Japanese innovator as well. And the margins are substantially higher in the Phase III work that we do as well as the supplies to Japanese customers, and that has influenced the lower COGS for this particular quarter. The employee expenses more or less stood in line with what our run rate is about INR 333 crores. The other expenses stood at about INR 136.5 crores, which also includes certain provisions for onerous contracts that was made in Q2 of financial year '26. Overall, this translated into an EBITDA of about INR 149 crores for the quarter. which for the first half of the year stood at about INR 289.5 crores as compared to INR 176 crores in the comparable first half of the last financial year, representing a growth of about 64.4% at an EBITDA level. EBITDA margin as well for Q2 was quite impressive at about 22.8% and for the first half of the year stood at about 21.3% as compared to the first half of the last financial year where it was 13.4%. The depreciation and amortization was about INR 84 crores for the quarter. The finance cost at about INR 42 crores. The finance cost in effect has actually reduced as far as our Swiss borrowings are concerned. However, there is a translation impact on the finance cost because of which it looks higher than what the actual cash outflow is. The profit before tax stood at about INR 30.5 crores and the tax expense, there was a positive impact on the tax expense because of the provisions of the deferred tax assets at some of the locations, which are expected to turn profitable over the next 3 to 5 years. So overall, this led to a profit after tax of about INR 65 crores for the quarter as compared to INR 33 crores in the comparable quarter of the last financial year. And for the first half of the year, the profit after tax stood at about INR 88.6 crores as compared to negative INR 44 crores in the first half of the last financial year. So there is a substantial improvement that we are seeing every quarter over the last 5 quarters, and we would expect this trend to continue in the future as well. As far as the segment-wise breakup of the revenue is concerned, the CDMO piece of the revenue for the current quarter, the revenue stood at about INR 509 crores, which is a degrowth as compared to Q2 of the last financial year. But as we have been saying, it's difficult to compare for our industry and for our business this quarter versus the Q2 of the last financial year. And again, in Q2 of last year, there was a deferment of shipments from Q1 because of which the revenue was exceptionally high. For the first half of the year, more or less the revenue was similar to what we had done in H1 of last year. However, we do expect on the CDMO side of the business that the second half of the year would be much stronger as compared to the first half, where in the first half, most of the revenue was dominated by the development work that we had done. We would expect more of the commercial share of the revenue to come in the second half of the year. The Marketable Molecules segment grew significantly in Q2 of this year as well as in the first half of the year, and this was largely dominated by the cholesterol and the vitamin D analog business, which is very much on target or may even exceed the target for the full financial year. So we saw a growth of about 85% as compared to Q2 of the last financial year as far as the Marketable Molecules segment is concerned, where we closed the quarter with about INR 143 crores of revenue. For the first half, this figure corresponded to 33.7% growth with about INR 240 crores being contributed by the Marketable Molecules segment. As far as the breakup of the overall revenues are concerned in Q2, the CDMO part of the business has contributed about 78%, while about 22% was contributed by the Marketable Molecules segment, while in the first half, these figures corresponded to 82.4% and 17.6%, respectively. Regarding the breakup of the EBITDA margins according to the segment, we had a significant margin uptick as far as the CDMO part of the business is concerned in the current quarter, where it did about 25.3% EBITDA margin as compared to 19% in the comparable quarter of last year. And as I mentioned earlier, this was largely on account of the Phase III supplies and more specifically because of the supplies to the Japanese innovator. In H1 of the year, this margin stood at about 21.3% as compared to 14% in H1 of last financial year, representing a 726 bps increase as far as the margins are concerned. The Marketable Molecules segment did a margin of about 14% as compared to 15.7% in Q2 of last year. Having said that, the major contributor of the increase in the margins in the current quarter, which was the vitamin D analogs and cholesterol business, which did a margin of about 18%, though the revenue share of cholesterol as compared to vitamin D analogs was quite high. The Naroda business, the Quats business is where the margins were lower in the current quarter, and that's the reason you see 170 bps decline as compared to Q2 of the last year. Overall, for the first half, the margin stood at about 21.4% for the Marketable Molecules segment as compared to 9.3% in H1 of last year, representing 120% growth as far as the margins are concerned. Overall, this was a very good quarter and a good first half for the financial year, and we are very much on target to achieve the numbers that we had mentioned earlier for the full financial year as far as the operating profit is concerned. The net debt, excluding lease liabilities, also showed a decline as compared to June as well as March 31, '25. We are now the net debt stands at about CHF 141 million as compared to CHF 157 million as of March 31, '25. The capital expenditure that was done during Q2 was about $7.3 million as compared to the first half of the year, which was about $13 million. So more or less, as we have been saying, the CapEx for the full year should be close to about INR 200 crores to INR 210 crores. So we are very much on target as far as that particular CapEx is concerned. With this, I would like to ask the moderator to open the floor for Q&A.

[Operator Instructions] We have the first question from the line of [ Abhishek Jain ] from AlfAccurate. Mr. Abhishek, I'm sorry to interrupt again. There is electrical disturbance coming from the line.

Hello.

Yes, it's better now.

Yes. So my first question is on the geography mix. How was the geography mix in first half [indiscernible] in '26?

Sorry. We're not able to hear you, sir.

Hello? Are you able to hear me now?

Yes. This is better.

Yes, sir. My first question on the geography mix. How was the geography mix in first half FY '26?

Sorry, are you asking for the geography mix?

Yes.

In terms of where we had our revenues from. So as you know, in our business, the major geographies to which we sell, especially on the CDMO side of the business, it comprises mainly of U.S., Europe and Japan. So as far as the first half was concerned, roughly about 25% of the revenue came from U.S., about 55% from Europe and the rest from Asia, which is predominantly Japan.

Okay. Got it. And sir, in the CDMO business in -- if we compare quarter-on-quarter basis, there is a decrease in the revenue. But if I see the EBITDA margin that has gone up. So what is the reason? Is there any change in the mix?

No. So first of all, it would be difficult to see our business quarter-over-quarter because it all depends upon whether in a particular quarter, it is more of the development revenue or the commercial revenue, which is taking up a larger portion of the revenue. So like, for example, in this quarter, as I mentioned earlier, it was more of late Phase III molecules, including the molecules that we supply to the Japanese innovator, which was a significant portion of the overall revenue. So -- and that is -- and when we talk about development, late Phase III, that's where we make our highest margin and the material consumption is extremely low as compared to the commercial and that is also one of the reasons why we see a higher gross margin. Having said that, in the second half of the year, yes, while the development revenues will remain strong, but we will also see a larger portion of the commercial shipments, which would happen between Q3 and Q4 of the financial year. So from a first half perspective, if you see, there is a growth of about 3.5% as far as the revenues are concerned. Though the CDMO part of the business, the revenue as compared to first half of the last year is flat, but we will see most of the growth coming in the second half of the year as far as the CDMO segment is concerned. From an overall revenue perspective, I think, we should still see a high single-digit or maybe close to about low double-digit kind of growth as far as the revenues are concerned. But the most important part was to make sure that we are able to hit our targets or even better as far as our operating margins are concerned. And that is something that we have already demonstrated in the first half, and we should be able to demonstrate that in the second half of the year as well.

Got it. Sir, on overall guidance front in FY '26, so you had guided around INR 3,000 crores revenue and 20% to 22% EBITDA margin. So you still intact with this particular guidance for FY '26? And if you can throw some color on the FY '27 revenue growth and guidance for the different sector?

So as far as the full year is concerned, yes, we do expect close to about 8% to 10% kind of growth in the revenue. But as far as the operating margins are concerned or the EBITDA is concerned where we had guided close to about 18% to 20%, I think we should be able to get to the 20% mark. This is the result that we have achieved in the first half and what they're expecting in the second half of the year. And as far as FY '27 is concerned, we do expect that there should be a good ramp-up both in terms -- I mean, there should be a significant ramp-up in the margin, especially because we will see the French facility turning profitable in that particular year. We will also see a significant ramp-up in the order supplies going out of Bavla and the Swiss business will keep on growing in the manner it has been. So overall, all of this will result into a significant growth both in terms of revenues as well as in the operating margin, where we expect that the operating margin would be at a much, much faster pace as compared to the revenue.

Okay, sir. And my last question on the ROCE front. So what's your long-term plan for the ROCE? And how much ROCE we can be able to achieve in FY'26? And what specific operational or potential milestones which are required to cross the double-digit margin? And what is your internal time line to estimate?

So we have also given out the presentation as well that we have specifically talked about the ROCEs that we make on the CDMO part of the business, excluding the assets which are not currently getting utilized more specifically the French facility and the Bavla site in India. So as the ramp-up of the activities in both of these sites, which are going to be one of the key growth drivers as we move into the future, we would see the ROCE percentages increasing in the future quite significantly. So our internal target is to get to the 25% ROCE margin over the next 4 to 5 years. So that is something which we are very much on track to achieve because we are looking at an extremely strong pipeline for Bavla. This is all of the discussions, RFPs from contracts that we are winning for Bavla. For the French facility, now with the certification having been received, we are seeing a huge interest from the customers on the drug product side of our business. So all of this should culminate into a significant accretion in the EBITDA, as well as in the EBIT numbers going forward. So 25% is the benchmark that we have set for ourselves, and I think we are pretty much on target to achieve it.

We have the next question from the line of [ Kashyap Karthi ] from TableTree Capital.

Congratulations on a very good set of numbers for the first half. Sir, 2, 3 questions. The first question was around the French subsidiary. If you could just throw some light on it because in the annual report, we saw that it did a INR 145 crore loss, the French subsidiary. So at what -- currently, I mean, in FY '26, what revenue would we do? Or essentially, if you could tell me roughly at what revenue will be EBITDA breakeven and what revenue will be PAT breakeven? That would be very helpful around French subsidiary.

Sure. So as far as the French facility is concerned, as I just mentioned, we are seeing a huge amount of interest from the customers. And these are not just customers coming to the French facility for their orders, but these are also customers on the drug substance side of our business, which is the API CDMO part of the business, where we are now able to offer an end-to-end solution to the customer. So including the ADC part. So as Stephan also mentioned, we have entered into this collaboration with a Swiss company for the antibodies. So now we have an entire offering that we can give to the customer right from the antibodies, the conjugation, payload, linker as well as the form fill finish. And that is where we are seeing increasingly a huge amount of interest from the customers. And even during the CPhI, the interest was fantastic. So we have no doubts of ramping up the French facility quite significantly going forward. And as far as the breakeven point is concerned, so that's going to be about EUR 18 million where we would breakeven at an EBITDA level. So that is something we should be surpassing in the next financial year. In the current year, we expect that we would still have EBITDA losses coming from the French facility. But overall, at its peak, we do expect that we can generate a EUR 45-odd million of revenue with the 2 lines that are already in place, plus a provision for a third line, which we can set up in the future if we need to. So -- and right now, the orders that we are getting are mainly for the late phase projects, which could eventually go into commercialization. And now with this certification having received at the French facility, we will be able to support the customer even after the molecule moves from development stage to commercial. So that's how we are looking at the French facility.

Got it, sir. Very helpful. Sir, given you mentioned about 8% to 10% revenue growth, and I'm just focusing on revenue growth, we'll end up somewhere around INR 2,500 crores revenue. Do you think next year, is there a possibility given the pipeline that you have, given the ADC molecule is having multiple other indications and everything else. So do you think a INR 3,000 crore revenue is possible in FY'27?

So you're talking about the CDMO part specifically?

No, no, no. The -- yes, CDMO, sir, CDMO.

Yes. So that's very much what we have as a target in our minds. That is something that we would want to achieve in FY '27. So yes, that's exactly what we have as a plan.

Got it, sir. Last question from my side. Sir, our Naroda facility has been reviewed and we've not received any observations. Have we kind of received a formal approval from FDA or we're still awaiting it?

No, we have already received the formal approval. The EIR has already been received.

We have next question from the line of Smit Shah from JHP Securities.

Yes. Firstly, congratulations on a good set of numbers. My question would be that at peak utilization, how much revenues can we make from the French facility? And how much EBITDA margins can the French facility make at peak utilizations?

That would be with all the lines running at full steam, that would be close to about INR 45 million of revenue. And that revenue can be an EBITDA margin of about 35%.

Okay. And by when do we expect it to like -- just a rough number would help like ramp it up to full capacity utilization in the next 2 years or maybe 3 years?

So it would take close to about 4 years' time to get to that level.

Okay. Okay. Got it. And also in Bavla, we have a total of 18 units, out of which right now, we only have 9 units operational and which we first aim to get to full utilizations. And then you had mentioned that we will have to do some refurbishments to operationalize the next 9 units. So how much would this cost be just an approx. number would be helpful.

So what the idea for Bavla is that we try to utilize the existing units which are running to the maximum extent possible before we start refurbishing the units. The only exception to that would be the hypo facility in Bavla, where we are looking at 1 or 2 projects which could come into that particular unit, which is a specific unit for highly potent compounds, where we might have to ramp up the refurbishment much ahead of otherwise we would need to. So if there is a specific order for a specific unit, which has a specific capabilities, we would have to incur that expenditure quite quickly. But apart from that, I think the annual spend should not be more than roughly about INR 50 crores to INR 60 crores. This is all including the maintenance CapEx as well that need to be incurred.

Okay. Got it. And just one last question from my side. So on an annualized basis, if we have -- like we have interest cost, which has jumped gone from INR 120 crores to INR 160 crores to INR 170 crores, whereas debt levels from FY '24 to current date has not increased in tandem. So I assume that the INR 40 crores, INR 50 crore increase is on the back of COVID and defaults. So when do we expect to get back to INR 120 crores finance cost, assuming that we don't pay out any debt?

No, so the interest cost had increased last year. Again, this year, because we have already seen the interest cost going down. But then there is also an FX impact when we do the translation of those interest costs from Swiss francs to INR. So what we are already seeing at the Swiss entity, where on a net basis, the borrowings will be close to about 100 million. So what we are already seeing is that those interest costs have already come down and those will further go down as we move into the following quarters. So that is where the interest cost reduction is. The part where the interest cost is high is the debt that is sitting in India. And that is something that we would want to reduce as quickly as possible. And whether we do it in the same manner as we have been doing right now or that we could have that as one of the objects for which we could do a fund raise. So that is something that we would want to retire as quickly as possible in order to make sure that the interest cost burden goes down. The other part to it is that if you see the last 2, 3 years, since all of our loans are variable in nature, the [ Zeron ] or the SOFR had actually gone higher because of the increased rates globally because of the inflation. Now what we have seen is that even Zeron has now come down to 0%. So whatever now we pay to the banks is only the spread because the Swiss equivalent LIBOR has now gone to 0. So now effectively, the interest costs have been reducing for us and that should get reflected in the numbers as well as of any INR depreciation against the Swiss franc or U.S. dollar.

[Operator Instructions] We have the next question from Vignesh Iyer from Sequent Investments.

So my first question is regarding the Bavla site. Earlier in the quarter 4 our call, if I remember Mr. Harshil had mentioned about the major upgradation in our Bavla site and a revenue potential of INR 800 crores with all the plants and units running. So wanted to understand what is the run rate right now, I mean, in this quarter? And also wanted to know how close are we to hitting the INR 100 crores run rate per quarter that we had earlier targeted?

Right. So Mr. Iyer, so basically, the Bavla side, yes, as I mentioned earlier, we have signed certain new contracts and we are in the process of signing some as well. We have already scheduled certain visits for some of the potential Japanese customers. Recently, we signed a contract for an Italian customer. So we are seeing an increasing interest for the Bavla side. As far as the recognition of the revenue is concerned, what we are seeing is that most of the revenue recognition should start from the next financial year. So this year, more or less Bavla would be doing a revenue which was equal to what it did last year. So say, close to about INR 250-odd crores. We will start seeing the ramp-up happening from the next financial year as we start servicing the orders that are in the pipeline. So progressively, what we will see in the next financial year is that quarter-over-quarter, there should be an increase in the revenues coming out of the Bavla site. And in order to touch the INR 800 crores, the target is that we should be able to touch that over the next 3 years. And that is something which looks very much possible with the kind of RFQs which have been given out because of the closer integration between India and Switzerland. So as Stephan also mentioned about the steps that have already been taken in order to make sure that this integration works, and one of the key aspects was to have a unified business development organization, and that is something which is already in force now. And even during the CPhI, we saw a huge amount of interest from the customers where they hear about the integrated story between Switzerland and India. So we have no doubts in terms of ramping up the revenue coming out of the Bavla side. And with all of the upgradations that have been done over the last 3, 4 years when we were under the EDQM cloud that is actually now resulting into positive effect as we are seeing now increasing customer interest for the Bavla side. So to answer your question, I would say if you take a 3-year view, starting from the next financial year, we should be pretty much targeting the kind of revenue that you mentioned.

Right, sir. So my second question would be to understand our order book as in the development pipeline and commercial order book for Carbogen Amcis on September 30, '25?

The development pipeline right now stands at roughly about CHF 150 million. And as far as commercial is concerned, that would be close to about CHF 100 million. So that's the pipeline with which we are working right now as far as Carbogen Amcis is concerned.

[Operator Instructions] Next question coming from the line of [ Maitri Shah from Sapphire Capital ].

Yes. Just a clarification on a few things. So we mentioned that we'll be growing by 8% to 10%. That is the growth you're expecting in CDMO. Is that correct? FY '26?

Yes. So the 8% to 10% will be the total growth that we expect for the entire business as far as the revenue is concerned.

Okay. And we are also expecting INR 3,000 crores revenue from CDMO in FY '27?

Yes, that's the target. This would also include the French facility, the India, Bavla site as well as Switzerland, Manchester and Shanghai, yes.

Yes. And on the MM side, what sort of targets do you have for next year? And how many of the 12 late-phase molecules are we expecting to commercialize next year?

Well, that is something that we would not know. That depends upon how aggressively the customer is pursuing it as well as it depends upon the regulatory agencies. But what we can say is that the pipeline looks extremely strong, especially the late Phase III, which is predominated by oncology segment, including ADC molecules as well. And as and when these molecules move from development to the commercial stage, we do see a significant incremental revenue that could be coming our way. But how many of them will go commercial, what timeline that is something which could be anybody's guess right now.

Got it. Also some -- I'm new to the business, so my question might be a little on the easier side. But the one thing you mentioned was that we had a significant supply to the Japanese innovator in the CDMO, which led to 25% margin. Do we have more such contracts in pipeline going forward that can lead to a higher margin on the CDMO side?

Yes. So for us, the late phase development work that we do, we typically make our highest margins in that particular phase, followed by commercial and then the early phase development work. So as I mentioned, we have a strong market of molecules in late Phase III, not just the molecule that we have for the Japanese customer. And out of these projects, 3 are under validation. So we do expect that the margins from these projects to continue in the manner that they are. It's just that in a particular quarter, what dominates the revenue, as I mentioned earlier, and that's reason we see close to about 25% kind of margin. Having said that, if you take the last year, we had a huge amount of commercial supplies that happened, especially from the Swiss entity. And that was also one of the reasons why we saw a significant uptake in the revenues. This year, what we are seeing is that the development side of the revenue will be a predominant portion of the overall revenue. So it all depends upon the customer strategy as well because this is all B2B. So sometimes the customers they want to stock up larger quantities for the launches that they are going to make because of which in the next year or in the first half of a particular year, they might not want those quantities and it would come subsequently. But the underlying point is that we have a good visibility. The basket of the products is extremely strong, and we have no doubts in terms of the growth for this particular business.

And the French facility, the breakeven you mentioned was EUR 80 million the EBITDA level. Is that correct?

You're talking about the French facility?

Yes. The French facility, was it EUR 8 million or EUR 80 million?

EUR 18 million would be the breakeven point at an EBITDA level. million.

1-8 or 8-0?

No, 1-8, EUR 18 million.

EUR 18 million. And I think it can do a EUR 45 million at a 35% margin, correct?

Correct. That's correct.

Okay. And this ADC part, if you could explain in a bit more detail, what sort of end-to-end solutions are we going to provide and how it's going to help our business out?

You mean the ADC part, what we do and how it helps the business?

Yes, sure. Yes.

Okay. Maybe I can answer and just ask that if it's not clear. So what we do, well, we are very strong. We are very well known for the high-potent activities. And this validation campaign, Harshil mentioned before, they are predominantly in the arena of the high-potent activities and the high-potent species are normally going into the ADC final product. To create an ADC antibody drug conjugate, you need the payload, which is the high potent compound, a linker, which is often a peptide, and we connect those 2 and then we conjugate with the antibody. And this is what we can do out of Switzerland. And we would be now a, with the collaboration with Celonic is that we get the antibody as well. And furthermore, together with the French subsidiary, we can ship the final product, the ADC product to the French subsidiary for dosing and dispensing the virus and glyphosation. So this is in a nutshell what we are doing to provide our products to the pharmaceutical market in ADCs. I don't know. Did I answer your question?

Yes, that answers my question.

The next question comes from [ Srihari C from PCS Securities ].

Yes. So my major part of my question is around the CHF 50 million that the partner would be spending, Japanese partner. So if you could please let us know what are the areas in which this is planned to be deployed? And secondly, what is the kind of asset turn you expect from it? I mean, if you can -- I think on 25 million CHF, what is the kind of asset turn you are in FY '25? And going down the line, at optimal level, what is the kind of asset turn you would expect? And secondly, on the fundraising plan, whether you have started any road shows for that?

Sure. So the first part of the question, as you understood, this was related to the co-investment agreement that we have entered into with the Japanese customer. So the first co-investment agreement was entered into in 2021, where we were supposed to do the extension in Bubendorf, which is the largest site ex of India that we have. And that extension got completed. The validation also got completed, and now we are already producing the quantities for the customer. So that is something which has already happened. It was a total investment of about CHF 25 million, of which the customer contributed CHF 15 million and we contributed CHF 10 million. So we expect an asset turn of at least 1x on this particular extension. The second co-investment agreement got entered into June of this year, and it is expected to go live by January 27, where, as Stephan mentioned, we have already started the investment for the customer. And this is again a CHF 25 million of investment. But this time, we don't contribute anything. The entire contribution comes from the customer. So once it goes live, again, at its peak, we would expect close to 1x as done. Having said that, we also manufacture the ADC at our other locations as well. So the second extension or the second expansion is happening at Neuland and Aarau, which are the other 2 sites in Switzerland apart from Gondorf and Vienna. So this extension is now happening at the other 2 sites. It is also our Shanghai site, the Manchester site, which also support the final payload and the linker that we supply to the customer. So basically, this molecule touches various sites across the group in order to deliver the final payload and linker to the customer. So -- and right now, as we speak, we have a good visibility in terms of the orders over the next 3 years or so. And we do expect that there will be a significant ramp-up year-over-year for this particular molecule. Having said that, while this is right now, it has become one of the largest molecules for us, we have several of the molecules in the pipeline as well as some of the molecules which have recently gone commercial where we would again see a good amount of ramp up. So that's on the co-investment part. On the fundraising part, yes, I mean, we did meet certain investors as part of our road show and that is where we have pitched the business to potential investors.

Any kind of quantum that you're looking at, fundraise?

Well, overall, we have taken an approval up to INR 1,000 crores of fundraise. So yes, the quantum would be within this overall range. Not that we might raise the entire INR 1,000 crores, but it might be a subset of this.

I mean, INR 1,000 crores is a bit high considering your ex in the audit cap. So would it be something around INR 500 crores or is it INR 1,000 crores?

Yes. I mean it should be -- well, the purpose is going to be to retire the debt in India. So that is roughly about INR 700-odd crores. So we would look at somewhere like INR 500 crores to INR 700 crores.

Yes. So on this CHF 25 million outlay that has already been incurred, what is the kind of revenue generated in FY '25?

Sorry, can you please repeat the question? I couldn't hear that.

Yes, the CHF 25 million which your Japanese partner helped 2021 outlay, what was the kind of revenue generated on that in FY '25?

Yes. So in FY '25, we did a revenue of close to about CHF 23 million. And in the current year, it should be close to about CHF 30 million. Sorry, just to add this CHF 23 million is not just from that extension, but it is an overall revenue that we have done for the customer.

[Operator Instructions] The next question from the line of [ Venkata Padavala ], an individual investor.

Venkata here. So I wanted to understand the Germany ADC molecule that you mentioned in the annual report that you people are doing end-to-end development. So I wanted to understand what is the current state of molecule and what kind of molecule we are working for a German customer?

So maybe I can answer this question roughly that's collaboration, we've started, let's say, 12 years ago, a very small scale and we work essentially from Manchester, Shanghai, Neuland, what Harshil mentioned before, one of the Swiss sites in Bubendorf, where we produce the high potent part. And then we conjugate with an antibody we purchase from outside. And this material to conjugate goes then to Saint-Beauzire to France for the drug product formulation. It's a peptide derivative and indication is oncology, breast cancer and things like this.

Is it something in preclinical stage or I mean, the start?

No, it's late Phase I, early Phase II.

Early Phase II. Okay. So the second question is something related to the current GLP or aging molecules. So I mean, are you doing anything on the GLP or aging molecules currently?

On the GLP -- yes, I'm back. Can you hear me?

Yes, yes. On GLP as well as the aging molecule. I can hear you.

Yes. We are not directly involved in the GLP development production. But of course, we are interested in this field in this arena because the capacities in the world market is not big enough. So we think there's a chance that especially Bavla can enter into this collaboration at some point. But at the moment, we are not active here.

[Operator Instructions] We have the next question from the line of [ Amit Pagija from Petzialla ].

My question is, can you brief us about what is the current working capital cycle and where do you see it stabilizing?

Sure. Our working capital cycle is roughly around 80 days. And the way to calculate our working capital cycle is to take the inventory as well as the receivables and subtract the creditors, but of course, also subtract the prepayments that we receive from our customers. So overall -- and that is also something that we have given in our presentation, which is uploaded on the stock exchange, not the recent one, but the one before, where it has remained in the range of about 75 to 80 days. And I would say more or less it would be around that range going forward. The largest blockage of our working capital is in the inventory, mainly because our customers, they would mandate us to keep a certain level of stock of APIs either in a semifinished nature or in finished nature, where they do not end up in a situation just because of the shortage of the API, the final product gets impacted, especially when they are launching the molecule in new markets. So that is where the largest blockage happens. But yes, overall, it remains around 75 to 80 days.

Sir, second question is coming to the debt, actually I missed that part, like what is the current total debt that we have? And what is the cost of debt we are spending on?

The total debt, so in INR terms would be close to about INR 2,200-odd crores. And out of this gross debt roughly about, I would say, close to INR 1,450 crores to INR 1,500 crores will be sitting at the Swiss entity, where the average cost of borrowing is roughly around 3%, 3% to 3.5% now. The remaining part of the borrowing is sitting at the India level where the average cost of borrowing will be about 10% to 10.5%.

So what is the company's policy connected to this? Like any plant to optimize the cost of borrowing or reduce the debt-to-EBITDA ratio?

Yes. So that is exactly -- so apart from this, we obviously have cash of roughly about INR 600-odd crores. But having said that, the idea is to try and pay down the India debt as quickly as possible because that will be built into a better conversion from the EBIT level to the PBT and the PAT level as far as the P&L is concerned. But more importantly, also from a cash perspective, with that kind of interest saving, we can deploy that cash into the working capital that would be required in India in order to fund the increased dollars that we are already seeing coming at the dollar side. So that is something that we would want to do and that is something that we are on.

The next question comes from the line of [ Sharmistha Danah ] from [ I Wealth Fund ].

So my question is that what are the -- hello.

Yes, we can hear you.

Yes. So sir, my question is currently, which are the big molecules? And are you the only supplier to them? And also if any patents are going off in the next few years? If you can give us some detail.

Sorry, what did you ask if you are the sole supplier?

So in CDMO sector or the marketed molecule sector, currently, which are the major revenue driving molecules? And are you the only supplier and if any patents are going off in the next few years?

Well, as far as the molecules are concerned, we are fairly diversified. I mean, obviously over a period of time, antibody drug conjugation is one of the key technologies that we have mastered. We have been one of the earliest movers in this. And that is the reason why we are increasingly seeing a lot of ADC interest from our customers. So we have one molecule that we supply the payload and the linker to the customer, which has become the largest molecule for us. But apart from that, it is highly diversified. As far as the supplies are concerned in some of the molecules, so today, we have about 28 molecules which are already in the commercial stage, where in certain cases, we are the sole supplier and in certain cases, we are the primary supplier, if not the sole supplier. But for us being a CDMO, a true CDMO player, the journey always begins with the development of the new chemical entities, working through the entire life cycle of development and then if the molecule moves from development to commercial, supporting the customer on the commercial side. So it is not that we try to target the customers to add us as a second supplier or in Phase III, which might now change with the India facility having now received all of the clearances and all of the integration that we talked about that we would start targeting molecules in Phase III as well or to add us as a second supplier, where many of the companies are also looking at adding a second supplier in addition to the supplies that they might be getting, for example, from a Chinese supplier. So those are the kind of opportunities where the addition of India to the overall basked with a singular business development team that definitely helps us.

The next question comes from the line of [ Ramanuj Chandak ], an individual investor.

Yes. So can I thank you for bringing this option of pre-registration. This time it was much better compared to earlier. Sir, I see in your annual…

Mr. Chandak, you'll have to repeat it. Can't hear you.

Sir, if you're now on our annual report in Page 39, we are seeing Dishman Carbogen is going completely towards cloud migration of ERP. It means we are going for SAP as our accounting software, right?

That's correct.

Is that done completely?

Well, India has already been successfully operating on SAP since last 16 years now. We already have SAP in Netherlands, and we also upgraded to S/4HANA. The idea is to now also put the entire Carbogen Amcis group on SAP that the first phase should go live in the next 4 to 6 months. That would be the Swiss entity. So right now, we are in the process of implementing S/4HANA in Switzerland, and then we would replicate that in Manchester, Shanghai and finally, France. So that's the road map that we have set out. So the idea is very clear, we put the whole group on the same ERP platform and then we can reap the benefits of centralization of many of the processes, which will further help us in bringing in operating leverage for the group as a whole. And it is not just this system, but we are also looking at common systems in terms of the lab management software as well as the other functions as well. So that's a global integration, digital transformation exercise that we are undertaking across the group.

So will this be more transparent than what current process we are using?

So right now, we are on Microsoft Axapta as far as the Swiss entity is concerned, and that's the same in Shanghai as well as in Manchester, while the French entity is on Microsoft 365.

Perfect. So how much is this total cost for us migrating to this?

Well, the total estimate cost would be close to -- I mean, everything put together would be close to about, I would say, CHF 15 million.

15 million rupees or dollars?

No, no, CHF 15 million.

Swiss francs.

Yes. Swiss francs, roughly about INR 150 crores everything put together.

Okay. Sir, my second question is regarding...

Has already been inquired. So what is the question?

Yes. My second question is actually regarding our total manufacturing output. Sir, on basis of total quantity of APIs or all the pharma that we manufacture, what percentage comes from India, what percentage comes from Switzerland and what comes from China? Can you give that in detail on quantity basis?

In quantity basis would be difficult to quantify because as you know, the Swiss entity, the maximum we can produce for a particular customer or a particular molecule specifically would be not more than 1.6 tonnes to 2 tonnes of a particular molecule, while the India entity has multi-ton capacity production capacity. So in terms of our total capacity, that is something that we have disclosed in one of the earlier presentations. And right now, as you know, Bavla is actually now ramping up the production in India. So the production is not at a huge scale, but that is the idea as we move into the future. And that is where the Swiss entity will also benefit because we can target molecules like one of the speakers asked regarding GLP. So if it is the Swiss entity, we can never target GLP molecules because it just does not have the capacity. But now with the integration with India, we can utilize the Bavla site more efficiently, and we can look at such opportunities as well as we move into the future.

Okay. In future, suppose you were to expand your manufacturing capacity, in which country would it be?

Well, if it is related to some specific technology, like, for example, ADC, that is something that we would want to keep in Switzerland. So if we have to say, increase the conjugation capacity, which we may have to based on interest that we are getting. So that is something that we would want to keep in Switzerland because the quantities required are not going to be large. As far as the larger volume business is concerned, I would say, the capacity is now already created in India. So we don't need to actually invest heavily into creating larger volume capacity. It is all about utilizing the capacity that is available to us, especially out of Bavla in a more efficient manner. So that is exactly what we've been targeting. And as we mentioned earlier, there will be certain amount of refurbishment expenditure that would need to be incurred. It's not going to be a huge significant expenditure.

Sir, in future...

[Operator Instructions] The next question from [ Satya ], an individual investor.

I have one question. This is -- two questions. This is regarding the COGS has reduced drastically. What is the reason? And will it have an effect? Does it have to be compensated for further quarters, upcoming quarters?

Well, yes, so as I already explained earlier, the COGS is lower mainly on account of a significantly high contribution from the Phase III molecules in terms of the revenue. And that is where obviously, the material cost is quite low. So that is the main reason why in this quarter, the COGS were extremely low. For the full year, I think we should be -- as the commercial supplies also increased and we also have early phase work as well, we do expect that the COGS would be a bit lower than what we had last year. But otherwise, yes, for the full year, it will be higher than what we've seen in Q2 of this year.

Okay. So sir, one more thing. The initial question, I missed this. When you were talking about this new Swiss collaboration. So did we ink any pact with them? And then are we expecting any revenue somewhere in the upcoming quarter? Or how do you see? What is the status of it? Where are we?

I'm sorry, but can you please speak up a little bit because it is difficult to hear the question.

Yes. No, this is regarding the Swiss collaboration. I have missed the initial expression on this. What I'm asking is did we ink any pact on this? And are we expecting any revenue in the upcoming quarters? Or where are we standing on this?

So you're talking about the -- and you can correct me, but you're talking about the collaboration that we entered into with Celonic, Swiss company on the ADC side. Is that the question?

Yes, yes. Same thing. In Page #4, we have announced it…

So the question is that whether we would see a ramp-up in the revenues because of this collaboration in the future.

Yes. Any additional revenue that we are expecting from this? And what is the quantum and when, time and the quantity is what it is?

Well, there is no specific number in revenue increase, but of course, we expect increase in revenue and also in profit, of course. The question is when. We are -- we have communicated with collaborations in September, and it takes some time. We have handful customers now under discussion. And it takes normally negotiations between 3 and 6 months to talk about the clear understanding of the project and talk about the size of the activities and so on and the contractual details. So it's not that I can promise a pick up tomorrow, on increased revenue and so on, but it takes over the next weeks and months, some time to get the clients on board.

Okay. So regarding the Bavla site, what is the utilization of the Bavla site, last year versus this year? And what is expected for the next financial year?

Well, right now, the utilization is quite low, roughly about 20% to 25%. And we do expect that in the next year, the ramp-up should be quite significant on the back of the RFQs, which have been given out. The close collaboration between Switzerland and India is definitely helping us in getting more and more customers. And as I mentioned earlier, there should be a significant ramp-up if you take a 3-year view starting from the next year, we do expect that the revenue should grow exponentially from here on.

From here on means, by FY '26, we are expecting or '27, we can expect?

From FY '27, we will see a good amount of ramp-ups which should be visible in the numbers as well.

Due to the time constraints, that was the last question for the day. I now hand over the floor to the management for closing comments.

Okay. Thank you very much. Thank you to everybody. We hope to have answered your questions. And of course, if there are some questions left, you can approach us outside of this call. We thank you for your interest in Dishman Carbogen Amcis, and we are looking forward to the future to expand our services and capabilities as an entire collaboration between the entities, what we described between Carbogen Amcis and Dishman Carbogen Amcis in India to increase our portfolio and the offering from our company. And with this, I would like to say goodbye and wish you all the best. Have a good day. Thank you.

Thank you.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation. You may disconnect your lines now. Thank you, and have a pleasant day.