Dishman Carbogen Amcis Limited (DCAL.BO) Q3 FY2026 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Karthikeyan, moderator for the conference call. Welcome to Dishman Carbogen Amcis Limited Q3 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, everybody. This is Stephan Fritschi speaking. I'm the CEO of Carbogen Amcis. I'm happy to also welcome Harshil Dalal, our Global Chief Finance Officer; and Paolo Armanino, our CEO at the Dishman facility here in Ahmedabad. Before we go and dive into the financial numbers, let's look at a brief update on Carbogen Amcis business-wise, starting with Saint-Beauzire, that's our French subsidiary dealing with drug product. The market shows increased interest in the product capabilities. We got more RFPs, more projects secured over the past quarter. And we also got interest in late-phase projects, Phase II and so on. In drug substance, we passed successfully a mock FDA audit at the Vionnaz site. This is of the 4 Swiss sites. That's a preparation inspection for a PAI inspection, which will be executed sooner or later by the FDA, which is a great success also for this [ legal ] site in Switzerland. And among normal APIs, also the ADC-related molecules with higher priority status are in our pipeline, specifically in oncology, which is great news as well. And we will report back as soon as we get more information from our customers that we can disclose those names. What we also have is this co-investment expansion project we talked recently together with a Japanese customer. The project is on track. We are now at the detailed engineering activities and planning so that we can start soon with the construction, which has -- the preliminary work has already started. But then, we go into the detailed construction, bigger capabilities in Switzerland in our Aarau and Neuland facilities. The last business unit we cover here is the specialty. There we see a strong VDA, vitamin D analogues, sales. This is the branch and part of the portfolio with high margin. So this is very satisfying, and we are happy about this. The cost reduction programs we have initiated, we continue, specifically on our cholesterol production that this is getting more profitable. Also, we opened new sources for our main product, our starting material in our Veenendaal facility, specifically on the wool grease. Coming to the sales activities. As you might remember, in the past, I always said be close to the market, be close to the customers. This is a slogan, which is still valid. And this, we support by adding more salespeople. We have hired additional salespeople in China and also in the U.S. So the focus is on attraction of new development projects. This means early phase, but also late-phase projects because these are feeding our -- eventually our commercial pipeline. Some different initiatives have been started also to tackle big pharmas, where we are historically also present, but we want to expand these activities as well because there is the majority of the promising blockbuster projects. What we have also started over the past months is an initiative on -- specifically on early projects. And there, we branded this initiative as SPRINT. The letters S-P-R-I-N-T stand for smart and efficient, proactive and agile, regulatory compliance, innovative science, no compromises on safety, and trusted partner. This activity brings us even closer and more attractive to our clients to be at the very beginning of the value chain on non-GMP and early phase activities. There, we have started this branding and initiative also by modifying our cost base and our working processes. So this is promising, and we get the first orders income these days and in the upcoming weeks. We also reported back the tight collaboration between Carbogen Amcis and Dishman [ in the call ]. This means that we widen our portfolio in the sense that we can offer big quantities also out of Switzerland that we are facing our customers in project management, in the sales activities so that we also can offer big volumes, quantities, namely that we do the development in Carbogen and the production -- the big production, big volumes in India with Dishman. So there are already multiple big-scale projects in collaboration, but also specifically with customers in discussion, and customers are reacting positively to this, and we are very confident that this will be a great success. The ADC expansion we talked recently is still under discussion and evaluation, and we are hoping to get some conclusion here very soon. So all in all, I perceive the position of Dishman Carbogen Amcis as very well. We conquer and add new business, and we are looking very confidently into the future and very optimistic and positively. With this, I would like to end here. I thank you for your interest in Dishman Carbogen Amcis, and I hand over to Harshil Dalal.

Thank you very much, Stephan, and a very good afternoon to everybody. Regarding the financial results of the quarter ending December 31, 2025, I'm sure you would have had a chance to go through it. I'll take you through the numbers for the quarter and for the 9 months ending December 31, 2025. For the quarter ending December 31, 2025, we did a revenue of about INR 720 crores as compared to INR 682 crores in the comparable quarter of last year, which is a growth of about 5.5%. We actually expected the revenue to be higher by about INR 20-odd crores in this particular quarter. However, there was a delay in the shipment of certain product, which has now gone out in January. And the delay was largely on account of delay in supply of a key intermediate, as well as because of the holiday season in Europe because of Christmas. However, not to be disappointed. We do expect that the revenues in the current quarter should be higher by that amount than as expected. The COGS for the quarter ending December 31, '25 stood at close to about 20% as compared to about 15% in the comparable quarter of last year. The increase in the COGS, specifically in this quarter, was largely on account of higher commercial supply as compared to what we had supplied in the first half of the year, where the revenue was predominantly coming from the development side. Having said that, in the current quarter, we also had a good amount of development revenue, largely coming from the non-late Phase III molecules, where obviously, from an EBITDA perspective, the margins are lower as compared to the Phase III work that we do. The employee expenses for the quarter stood at about INR 355 crores as compared to INR 332 crores in the comparable quarter of last year. The INR 355 crores includes certain provisions that were made on account of certain severance packages that were getting paid out to certain employees at the end of December, plus certain social insurance cost provision that was baked into in this particular quarter. The other expenses on account of the cost optimization efforts that we are undertaking across the group stood at about INR 109 crores as compared to INR 111 crores in the comparable quarter of last year. Overall, all of this translated into a reported EBITDA of about INR 113 crores, which is a margin of about 15.7% on the top line. The depreciation and amortization was more or less in line with what we reported in Q2 and Q1 of the current financial year at about INR 84 crores. The finance cost stood at about INR 45.7 crores. [Technical Difficulty]

Participants, kindly stay connected while connect the management back on the call.

Okay. I'm sorry for that, but I don't know why I got disconnected. So I don't know where I stopped, but I explained the depreciation and amortization, which was at about INR 84 crores, more or less in line with the previous quarter. The finance cost stood at about INR 45.7 crores. In this finance cost of INR 45.7 crores, there was a onetime expense of about INR 11 crores that was booked in this quarter. This was on account of the new syndicated facilities that we entered into with the consortium banks in Switzerland, where there was a refinancing, as well as a provision for enhancement of the credit facility, and because of which we had booked that expenditure in this quarter. Overall, all of this translated into a profit before tax of negative INR 10 crores. [Technical Difficulty] stood at about INR 2.5 crores and the profit after tax stood at about negative INR 12.97 crores. For the 9 months ending December 31, '25, as far as the revenues are concerned, we reported a growth in revenue of about 4.3%. What we expect and we are very much on target to achieve that is that by the end of the financial year, this growth rate should be much higher than what it is reported for the first 9 months, more or less in line with what we had stated in the previous call. The cost stood at about INR 273 crores, which is close to about 13%, 13.5% of the revenue. The COGS this year is much lesser as compared to what it was in the previous year, largely on account of higher contribution of the development revenue, especially the late Phase III molecules. The employee expenses stood at about INR 1,040 crores as compared to INR 968 crores, which is an increase by about 7.5%. The other expenses stood at INR 363 crores as compared to INR 350 crores in the first 9 months of the last financial year, which is an increase by about 2.5%. Overall, for the first 9 months, we stand at an EBITDA of about INR 402.68 crores as compared to INR 316 crores as reported for the first 9 months of December 31, '24. This translates into an EBITDA margin of 19.4% for the current year as compared to 15.9% in the first 9 months of last year, which is a growth of about 27.3% as reported in the first 9 months of this year. The depreciation and amortization for the first 9 months stood at about INR 250 crores, which is an increase as compared to the last year, largely on account of the operationalization of the manufacturing lines at our French facility, and more or less, it will remain at the same run rate as we look into the future. The finance cost stood at about INR 113 crores as compared to INR 117 crores. We are seeing the borrowing cost for us going down, especially at the Swiss entity, where now the SARON, which is the Swiss equivalent to LIBOR, has gone down to 0%, and our effective interest cost is now between 3%, 3.5%. However, because of certain onetime finance cost expenditures that were booked, the finance cost looks higher. However, we should see that in the coming quarters, this finance cost should come down. All of this translated into a profit before tax of INR 58.76 crores and a profit after tax of INR 75.7 crores after accounting for the deferred tax asset, largely out of the French facility. So this is a significant improvement in the results for the first 9 months of the financial year as compared to the first 9 months of the previous financial year. Going into the segment-wise breakup of the revenues and the margins. The CDMO business keeps on doing well for us, both on the development, as well as on the commercial manufacturing side. As I mentioned earlier, this year, we are seeing a huge amount of revenue coming from development as compared to commercial, and we expect that it will be the same trend in the next financial year as well. For the quarter, we did a revenue of about INR 630 crores as compared to INR 590 crores in this segment as compared to the previous financial year's quarter, which represents a 6.7% growth. For the first 9 months, the revenue stood at about INR 1,750 crores as compared to INR 1,723 crores in the first 9 months of the previous financial year. We expect that this revenue should grow in the Q4 of the current financial year and would keep on showing a significant growth as we look into the future. The Marketable Molecules segment did a revenue of about INR 90 crores in the quarter as compared to INR 92 crores, so more or less flattish. For the first 9 months, this figure stood at INR 330 crores as compared to INR 271 crores, which represents a 21.5% increase, which is largely driven by our vitamin D analogs and cholesterol business. From a margin perspective, we did close to about 17% margin on the CDMO side of the business, which also includes our French facility, as compared to 22% in the previous financial year, where most of the revenues was driven by the late phase molecules. In the first 9 months of the year, we did an EBITDA of about 19.7% as compared to 17.2%, which is an increase of about 250 bps as compared to the first 9 months of the previous year. The Marketable Molecules segment did a 7.2% margin, largely because there was more of the cholesterol sales that happened in this quarter as compared to the previous quarter. However, if you see the first 9 months, the margin stood at about 17.5% as compared to 8.3%, representing a 920 bps increase in the margins on the Marketable Molecules side. So as you look into the future for this particular segment and more specifically cholesterol and vitamin D analogs, we would keep on seeing the margin improvements, where our target is to first get to the 20% margin and then take it up to 25%. So these were some of the financial highlights for the quarter and 9 months ending December 31, '25. With this, I would like to hand over the call to Paolo Armanino, our Chief Operating Officer, for the India operations, and then we can open the floor for Q&A.

Thank you, Harshil, and good afternoon to all the shareholders. So I will be brief to [ not spend time ] to investor [indiscernible]. In the last quarter, I would say, we continued our journey, which is currently based on strengthening the relationship with Carbogen Amcis and CRAMS business. [indiscernible] consolidating operation at both Bavla and Naroda locations. As already mentioned, from 1st of September -- or we already mentioned earlier, 1st of September, we are having a single point of contact for both Carbogen Amcis and Dishman Carbogen Amcis sales team. Mr. Francois Baduel, Chief Business Officer, is now leading the Dishman Group's sales teams across all the sites globally, India, China, Switzerland, France, U.K. and Netherlands. This, of course, is a great advantage for all of us. Since the inception, we already witnessed several progresses in the overall sales team operation. We also witnessed a significant improvement of the quarter of the [indiscernible] proposal received itself. We had several site visits, and even the due diligence with the Japanese partner was performed in November, and more are planned for the future quarters. The sales structure for both and DCAL and Carbogen has been rearranged, keeping into account also the operational teams in different countries. Dedicated technical groups with expertise in special tech were deployed to support and assess new proposal received by the sales group. Additionally, the organization keep investing in expanding the market intelligence department globally. We already witnessed as the market intelligence is substantially supporting the sales activity. And just recently, we have added an important market intelligence resource in India, which is reporting to the consolidated Dishman Group team in Switzerland. Needless to say that market intelligence enhanced significantly the job of the sales department. Market intelligence department, which is based out of Switzerland, is also reporting to our CBO, practically clubbing together market intelligence and sales groups. In [ this ], we are having once again here in India, our CEO and his key people to discuss the business strategy for the upcoming quarters. CRAMS proposal-wise, we keep receiving several important projects from Bavla, including the import unit and also including early phase projects. We are also very pleased to see an increase in the proposal for Naroda CRAMS, which we consider strategically very important for the overall business. And the last note is about our softgel formulation plant, which keep attracting the interest of very many different customers in India and abroad. We want to develop not only a generic business, but also use Dishman Carbogen Amcis as a CDO for the new CRAMS business. As Stefan mentioned earlier, we are very confident for the future of the company and of the overall Dishman Group. After that, I hand over the call back to the moderator.

[Operator Instructions] We have the first question from the line of Smit Shah from JHP Securities.

Can you shed some light on one new molecule which we have commercialized this quarter, like in terms of the molecule size, if any, and from which facility are we supplying this?

Yes. So this is for leukemia. We will not be able to mention the name of the customer at this point. And right now... I mean, it was developed at the Swiss site, and it would be supplied from the Swiss site right now. The market opportunity could be quite significant. It could be possibly a blockbuster drug.

Okay. Okay. But do we have any plans to get the commercial batch to the Bavla site?

Well, we would have to discuss with the customers -- with the customer, based upon the projections what they are giving year-over-year. And then, at appropriate time, we can think about tech transfer or something like that, depending upon the volumes.

Okay. Okay. Got it. And can you tell us what would be the revenues in 9 months FY '26 from the Bavla site? And after the current quarter results, do we still stick to our revenue guidance of INR 250 crores to INR 290 crores for FY '26 from the Bavla site?

Yes. So for the first 9 months, the total revenue was about INR 150-odd crores, and we do expect that there should be higher revenues coming in Q4 as compared to Q3. But yes, I mean, the bigger growth would largely be seen in financial year '27. But yes, it should be closer to about INR 250 crores by the end of the financial year.

Okay. Got it. And can you also shed some light on the integration that you've been talking about between Carbogen entity and Dishman entity, which is the Indian facility? More in terms of the numbers, like how many clients have already visited the facility? How many molecules do we expect to commercialize in FY '27, which will lead to the ramp-up? And how much of these molecules will be an NCE? And -- yes.

Sure. Paolo, do you want to take that?

We are seeing -- we had several [indiscernible] in the last 6 months. We are working very closely with the Carbogen salespeople. So we just started now a Phase 2 . So, as I mentioned also, we started working in the early phases, not only in commercial. So I would say in the last month, we had 4, 5 clients are coming. And we are seeing already other clients coming in the next quarters. So it's just a trend which keeps growing.

Okay. Okay. Got it. And one last question after which I'll get back in the queue. What are the EBITDA margins for development activities like Phase II and Phase III and that of commercial molecules? Just a broad range would also help.

Well, a broad range would be -- in Phase III is where we make our highest margins. So we are talking about upwards of 30%. The early phase would be close to 12% to 15%. And commercial, it's done in Switzerland, would be close to about 25%. Obviously, in India is where we are now focusing on doing more of the commercial work. And in India, if you talk about the commercial work, that would be close to about 35% to 40% at a minimum.

Next question comes from the line of Yash Tanna from ithoughtpms.

So I have 2 questions, I think. So the first one is on India. I think you submitted -- we've been saying that you have submitted significant amount of RFPs to ramp up the India operations. So looking at the current pipeline and the RFPs submitted, what is the visibility that you have at least for the next 1 year and also maybe the next 1, 2 years? Also, let's say, if you submit RFPs of 100, what is the conversion typically for you? And also, if you can share the amount of RFPs submitted already?

Sure. So right now, banking upon the strong relationship that Carbogen Amcis has with many of the customers, we have given out a lot of RFPs from the India sites. And in terms of value, this would be close to about INR 1,200 crores worth of RFPs that have been given out. We expect that at least 30%, 35% of this should get converted into orders, and that gives us the confidence. And this is an ongoing thing. So there are more and more RFPs that are going out to the customers. So we do expect a significant ramp-up as far as the India assets are concerned because now that the capacity is already created, it is all about filling up these capacities with this new RFP. So these are the ones which we have given out based upon the relationship that Carbogen Amcis carries with the customers, plus certain new customers as well. And then, we already have the base load in India, which we expect should also continue. So overall, our first target is to get to INR 500 crores of revenue, which should happen in the next 12 to 18 months is what our expectation is. And then, the next target is to get to INR 800 crores of revenue coming out of India sites. So, that we have a clear path as far as the next 3 to 5 years are concerned, where we want to take the India business to.

Got it. Got it. And this 30% to 35%, just a follow-up, has to be supplied in the next 12 to 18 months is what you said, the incremental RFPs?

Well, these are RFPs. Some of them have already gotten converted into orders. Some of them are in the process of. So once they get converted into orders, you have to give more or less 4 to 5 months for the entire manufacturing process and then they get supplied. So yes, I mean, overall, what we expect at what point these RFPs -- some of these RFPs will get converted into orders, we would not have a control on that because much of it is also dependent on the customer. But we should get a fair amount of visibility, I would say, in the next 6 months' time.

All right, sir. Got it. My second question was related to a molecule that we supply. So one of -- like the partner of the molecule that we supply to has received additional indication approvals for first-line metastatic breast cancer and also a Breakthrough Therapy designation for post-neoadjuvant therapy for breast cancer. So if you can explain each of these indications separately and the impact on our commercial volumes that we will have in the next few years? Because in our understanding, these additional indications expand the patient pool significantly.

Absolutely. And based upon the projections that we have seen not just from the analysts, but also as quoted by the management of the customer, the volumes seem to keep on increasing. And that was also one of the reasons why we entered into a second round of co-investment earlier this year with the customer. So yes, we do expect a significant ramp-up as far as the linker, payload supplies from our sites are concerned. And the payload would keep on changing depending upon the end product. But as far as linker is concerned, it remains the same. So this is something that we will keep on supplying to the customer into the future as well. And we do expect that the volume should ramp up over the next 3 to 5 years' time. But Stephan, maybe if you want to add something?

Yes, absolutely. I'm fully agreeing with you, Harshil. The current capacity we have is based on the first forecast the client came to us with. And as soon as the customer realized that he got more indications, which were successfully tackled, he also came to us and asked for bigger capacities. And as we were at that time, [ currently ] limited in capacity, we agreed to joint investment. And now, we got the second round. Again, I can repeat that we are on track, and this should be finished in about 1.5 years.

Got it. Got it. That's helpful. And sir, if you can share a few numbers around this molecule or this therapy indication as in how much revenue are we currently doing and what is the expectation in the next, let's say, 3 to 4 years?

Well, for the last financial year, we supplied roughly about CHF 22 million worth of material to the customer. This year, we expect it could be about CHF 30 million. And for the next year, it could be closer to about CHF 40 million, and then it would just keep on increasing. But just to take a fair estimate, you can assume close to about 1 to 1.1x as the revenue that can be generated on the second round of co-investment, which will be -- which is for CHF 25 million. So, that should contribute close to about CHF 30 million of incremental revenue.

Got it. Got it. And this CHF 30 million or 40 million that you're saying, that wouldn't actually include the newer capacity because that is anyway coming after 1.5 years. Am I right?

Absolutely. That's correct.

[Operator Instructions] Next question comes from the line of Ankit Gupta from Bamboo Capital.

On the India business side, Paolo, you or Harshil, if you can talk about -- we had submitted some of the RFPs for which we were expecting approvals from the customer, and these were expected to be pretty big, given our Indian operations. And we were expecting the customer to come back with the order in Jan of this year. So any updates on that? And I'm talking about, like, the customer -- the Japanese customer -- the Swiss customer for whom we supplied for Japanese and the Chinese market. And we were in discussion with some intermediate, which was expected to be pretty big.

Right. So for one Japanese customer, not the same one that the Swiss entity is supplying to -- well, it is also supplying another intermediate to that particular Japanese customer. For India, we already have the KSM that we are already supplying to that Japanese customer. What we have given out a quote for is the final API as well for which -- and it is not just for the Japanese market, but we have also given that out for the Chinese customer as well. And we expect -- so the preliminary feedback was that they were okay with the price that we have given, but the final confirmation that we should receive should be most likely in April or in May. So, that is the sense that we have received from the customer.

Sure. And on the Indian operations side, we -- this year has been pretty challenging for us in terms of revenue and the margins because of the operating leverage have also declined significantly. Given -- like, although you have spoken about the ramp-up which will happen next year, and so how -- like, all this INR 1,300 crore RFP that we have submitted and that we have bid for the Indian operations for some of the big molecules, if you can talk about the timelines when we expect the customers to get back to us? If you can elaborate on that and how will that impact our numbers for FY '27 for the stand-alone business?

Right. So in terms of the timelines, what I can say is that, as I mentioned earlier, we will have to give it roughly about 6 months in order to get a commitment from the customer. Having said that, even within the 6 months, there would be -- I mean, we are expecting some of the RFPs to get converted into orders. But within a period of 6 months, we should get a very good visibility on conversion of many of these RFPs into orders, part of which will be supplied in the next financial year and then going into the future because in our business, these are mostly like long-term contracts that we enter into with the customer. So it is just this initial, I would say, peaking phase where we have to put in the extra efforts because once we have the customer on board, more or less, we remain their partners throughout the life cycle of the molecule.

In that case, if you're expecting majority of the RFPs to get finalized in the coming 6 months, then you will also do trials and validation batches from our existing facilities. So the significant delta for this RFP should only come in FY '28 and not FY '27. Is that correct understanding?

Yes. So there would be a part impact that should come in FY '27, but the major part of it should be in FY '28. So that's the reason what we are saying is that the first target is to get to the INR 500 crore mark, which should happen most likely by the end of the next financial year or it might spill over a little bit in the year after that. But the year after that, it should be much higher than the INR 500 crores of revenue target because many of these RFPs would have gotten converted into orders.

I can add one thing also. Yes, certain amount of RFP we are discussing in this moment with the customer are for commercial production direct. So there are several RFPs which are going from early phases and validation, but there are also a certain amount of RFPs which can go directly to commercial phase. So this could contribute already significantly in the current financial year. So we are discussing also RFPs which require commercial directly [indiscernible].

And on the ADC front, if you can talk about -- there are other drugs of our major customers there, which are in Phase III. So any visibility on that front? And any commercial orders or visibility that the client has given to us for the supplies?

Well, for the Japanese customers that we currently have on the ADC side, yes, I mean, there are other indications. Somebody also asked earlier because some of the indications have received first-line treatment approval. Yesterday, it was announced that the molecule has received priority approval for another indication. So...

No, I'm talking about the other molecules. For these existing molecules...

Other than this?

Other than that, there are some...

Other than this, yes, we are working on other ADC molecules as well, including one in Phase III, and then there are other molecules in the earlier phases as well. So all of them are progressing right now quite well. At what point even the Phase III molecule goes commercial, that is not yet known, but we expect maybe in the next 12 months -- 12 to 18 months, it should get commercial, so -- which would again be what we are expecting or what the customer is expecting would be a blockbuster drug.

Sure. Just last question from my side. On the French subsidiary side, if you can tell us how much has been the revenue for the quarter, for the 9 months, and how have been the losses here? And how do you expect the performance to improve going forward? And there were some challenges on the raw material side from the customers' end. So have they been sorted out and your view -- your outlook for next year on this?

Sure. So on the French subsidiary, as Stephan mentioned in his opening remarks, we are seeing a lot of interest for that particular site, a lot of orders that have already been booked, and there are several in the pipeline. So what we are expecting is that in the next financial year, we should be breaking even in that particular facility with both the manufacturing lines. So that's the visibility that we have right now. For the current financial year, in the first 9 months, we did a revenue of about EUR 7 million, and we should end the year with close to about EUR 9.5 million to EUR 10 million of revenue, which is a bit lower than what we were expecting, but the single most reason for this is because of the delay in supplies of certain drug substance that was supposed to come from the supplier then, which is now going to come only at the end of Q4 of the current financial year. So all of that revenue should come in the next financial year. But overall, from a business perspective, after receipt of the ANSM approval, we are seeing a huge amount of inquiries, a lot of inquiries getting converted into orders. Earlier, the customers who had apprehension coming to this particular site, we are seeing a lot of activity happening over there. Stephan, do you want to add something more?

Yes. Thank you. What I would like also to mention is this synergy effect what we have between drug substance and drug product. So this package what we can offer is attractive to clients. And due to this presence of both portfolio of product elements, drug substance and drug product, we got an increased number of customers being interested in the combination of both. And since we have the collaboration agreement with the other Swiss company, Celonic, which is working on antibodies, we have even a third dimension. And this is an increased interest on the market that we can offer the whole portfolio from antibodies to the drug linker, payload and conjugation, and then the drug product formulation. Then we have significant projects in the quotation phase, of course, again, I cannot disclose. But once this has been finished the negotiation successfully, hopefully, then we can disclose also this and tell a bit more details.

So what revenues do you expect for FY '27 from the French subsidiary?

So, that should be closer to about EUR 18 million.

Okay. And that should help us at least breaking even at the EBITDA level?

Yes, absolutely.

The next question comes from the line of [ Venkata Padavala ].

One is, what is the size of order pipeline that we have with the Japanese customer from the -- over next 2 years? And considering that they have multiple indications and multiple ADC molecules and as Dishman is going to be a primary supplier for this payload and linker, how you are going to plan to secure this supply pipeline?

Yes. So we -- as I mentioned earlier, we have a fair visibility on the revenues coming from this particular customer over the next -- at least for the next 3 years. And that is the reason why we are doing the co-investment along with the customer. And that should allow us to ramp up the revenue significantly once the supplies from the second co-investments also start. So yes, I mean, we would be the primary suppliers of the payload and the linker to the customer. The customer -- I mean, we don't do the conjugation right now because the customer does it by itself is what our understanding is. But yes, I mean, we haven't seen any negative news from the customer. Everything looks very much on track, including the establishment of the new site. In terms -- sorry, your second question in terms of securing the supply chain at our end, so what...

Sorry. So being that we are going to supply more than 5 to 7 ADC molecules, so how you are going to secure our supply pipeline?

Well, our supply pipeline, so we also manufacture the key starting materials, as well as the intermediates for this final API or the linker and the payload that we supply to the customer, except for one intermediate, which is currently sourced from another company. Apart from that, if you see right now, this particular molecule is manufactured in Shanghai as far as the KSM is concerned, KSM/intermediate, also in Manchester, in Neuland, in Aarau, as well as in Bubendorf. So there are multiple sites across the group that are involved in manufacturing this payload and linker for the customer. And again, the quantities are not huge. Here, we are talking about small quantities but high value.

Next question comes from the line of Gunit Singh from Counter Cyclical Investments PMS.

My first question would be regarding our current capacity and the utilization. So what is our capacity utilization on a consolidated level? And what is the maximum revenue potential from current capacity?

Sure. So the capacity utilization varies across all of our sites. So for example, the Swiss site is operating at roughly about 75% capacity. The French site has just started operations last year. So that's at roughly about 20%. The Netherlands facility is at about 60%, Manchester at about 75%, Shanghai at about 50%. Apart from that, India, which is at about 20% to 25%. So this is more or less the utilization across all of our sites. So, as far as the commercial manufacturing work is concerned, we do not have any capacity constraints right now, so to say, because we try to utilize the India sites as much as possible. As far as the development work is concerned, we are trying to aim for more and more of the early phase development work. And those are the efforts that Stephan also mentioned in his opening remarks in order to get more of the early phase development work. And we keep on ramping up the operations out of the French facility. So that's the strategy. Plus in China, we have now received the local FDA certification basis, which we have also hired a new salesperson in China in order to target the pharmaceutical market in China so that the Shanghai facility can then start manufacturing and selling into the Chinese market. So, that will help us to ramp up the utilization out of the China site as well.

Got it, sir. So basically, in FY 2019, we were doing about INR 210 crores of PAT and about INR 2,000 crores of revenues when our block of plant and building was about INR 2,000 crores. And now, it has almost doubled over the previous 6 years, but our revenues have not even increased at the rate of inflation. And we -- our PAT, we haven't been able to achieve the margins and the PAT we did in FY '19. So I would like to understand the asset turn for the additional, say, INR 2,000 crores over the previous 6 years have been even less than 0.3. So I mean, was it misallocation of funds? Or is it so such that we added capacity, but there is no demand in the market or we are facing some problems in ramping up our facilities? So what is the main reason or what is your take on this? And yes, I'll ask...

Yes. So there are like 3 or 4 factors. So first of all, the right way to look at our assets would be after taking out the multiyear depreciation of the rupee against the foreign currency because that -- all of our assets get restated at the closing exchange rate, which actually grows up the overall fixed asset base. So right now, there is almost an effect of almost INR 1,000 crores plus sitting as part of the gross block just on account of the foreign exchange fluctuation. That's number one. Number two is that there is a huge amount of goodwill, which is also sitting in the balance sheet, which is a completely noncash item, which needs to be discounted in order to look at the fixed assets [ subjectively ]. Thirdly, the investments which have -- okay. I'm just mentioning all the factors as far as the overall block is concerned. Thirdly, if you see the capacity additions which have been done, one is the French facility where the total investment was close to about EUR 50 million, so give or take, about INR 500 crores, and second was in India, which was close to about INR 300-odd crores. So this INR 800 crores of addition which was done, we're yet to realize the potential out of these investments which have been done because the French site commenced operations last year. We expect it to ramp up and get to the breakeven level in the next financial year. Number one, the India side obviously had issues because of the EDQM observations that came in March of 2020 because of which the performance was subdued over the last 4 to 5 years. And now, we are seeing a good amount of visibility as far as the ramp-up of the India operations are concerned. So, as we keep on increasing the utilization at both these locations, that will have a significant positive impact, not just on the revenue, but also on the margin front. And that is the reason our target is to get as quickly as possible to the 25%, 26% consolidated margin that we were doing prior to March of 2020. So that's the first target to be achieved over the next 2 years, and then get to the 30% EBITDA margin mark by the end of 2030. So, that is how the ramp-up in the revenues and the margins would happen.

Got it, sir. So in terms of the ramp-up, I mean, for FY '27, do you have any visibility of ramping up? So our consolidated utilization is around 60% or 50%. So I mean, what are the internal targets in terms of visibility for FY '27 and for FY '28 in terms of ramping up consolidated utilization?

Sure. So if you take a 2 to 3-year view, we would want the utilizations to increase significantly, especially out of the French facility and the India site. So India should be able to easily make it 2.5x of what it is doing today as far as the production utilization -- production capacity utilization is concerned. And as far as the French facility is concerned, it should be a similar kind of number that we would be targeting in the next 3 years' time. The Shanghai facility, we have just started the activities of targeting the pharmaceutical market in China. So that plus the incremental orders coming from the Swiss entity for some of the customers who want to have a preference for China to get their intermediates manufactured, we do expect that the utilization should go up from the current 50% to around 75%. The Swiss entity, what we are trying to do is to focus on getting more and more projects for development. So the target is that in the next 5 years, we should be able to double the development revenue from what it is right now. And that is the reason we are taking extra efforts in getting the customers right at the initial phase of development. And then, we are also targeting customers to -- for the molecules, which are already in Phase III, to be added as a second supplier. So there are various efforts that are being taken in order to make sure that we are able to increase the development revenue out of the Swiss entity and increase the commercial revenue out of the India site.

The next question comes from [ Harshit R from Newgen Advisors ].

Yes, sir, in the previous con call, we have -- you have guided approximately 20% EBITDA for FY '26 and strong late phase ADC contribution. In Q3, margins dropped to 15% and the company reported a loss. Can you clearly quantify how much of this margin miss was due to mix timing versus any structural cost increase? And also, does the 20% guidance still stand for FY '26?

Sure. Yes, so the target for the full year still stands. So we could be ending the year with anywhere between 19.5% to 20%. So if you take the first 9 months, we are already at about 19.4%. So we don't deviate from what we have set out at the beginning of the year. Obviously, quarter-over-quarter, in our business, it is very difficult to maintain a linearity in the margins all throughout each of the quarters because as we saw in the first half of the year, there was a strong portion of the development revenue, more specifically the late phase molecule because of which the cost was extremely low, because of which the EBITDA margins were at about 21-odd percent. But in the second half of the year, we do have a high amount of commercial supplies that would go out where the margins are a bit lower than the Phase III molecules. But overall, for the full year, as we had also said in the previous calls, the composition of development is going to be higher than commercial, and that is one of the key reasons why from the last year's 17.3%, we should be ending the year with closer to 20% margin. And I think we stick to that even today as we see the full financial year of '26.

Okay. And sir, one more question. This was on the business side, sir. Over the past 8 to 10 years, the company has invested heavily in R&D talent-specific capabilities and the plants and all, yet the asset utilization and ROCE remains weak, while -- when we compare peers like Laurus and Neuland. So at that point, they were very small than us, but they have compounded faster. From the -- from your perspective, what has structurally prevented us from converting these capabilities into scale and returns? And what is fundamentally different now that gives you confidence that this might change?

Absolutely. So basically, if you see the -- I mean, there were several factors similar to what I had explained earlier -- but one of the key factors was that over the last 4, 5 years, the India site was not performing because if you see financial year 2020, India was doing a revenue of close to about INR 550 crores with a margin of close to about 40% at an EBITDA level. Now, when that revenue came down, that had an impact on the revenue, but more so on the operating margin that we were targeting to achieve in 2024, 2025. So, that had an impact. Now that we have integrated the organization, we are looking at ramping up the revenues out of the India site. All of the regulatory hurdles are behind us, not just from the EDQM, but we also had successful FDA inspection, even from the Japanese PMDA. All of the regulatory issues are now behind us. So now, what the focus of the business is to get more and more orders in order to fill up the India site because this is a site which is going to give us the highest margins as far as the entire group is concerned. Plus the site has been upgraded significantly in order to make sure that we are ready to handle this kind of orders, the new orders that come in, not just for the short term or the medium term, but also for the long term. So, that is the reason why we decided that if we have to make investments, let's do it for one so that we don't have to worry about these regulatory issues for the next 10, 15, 20 years. So, that is -- that was the philosophy. So that's number one. Number two, if you look at it, at the Swiss entity, we always had a constraint on the capacity in terms of manufacturing. So historically, we have always been targeting the small molecules, the niche molecules. And that is also one of the reasons why oncology and technologies like ADC, highly potent compounds, those have become a significant portion of our revenue, which in a way is a good thing because our people, they are extremely talented, the scientists that we have, and that is the reason we have been able to crack this kind of complex technologies, which people are talking about today, which we had mastered 15 years back. So that's a great advantage to have. But on the flip side, the higher volume business is something that we had to let go because on one side, we had the regulatory issues in India. The integration between India and Switzerland had not actually played out in the manner that was expected by the previous management, which is now actually playing out that we have a singular business development organization, a lot of synergies that we see on the operational side, and that gives us the confidence that now are the years where we should be able to reap the benefits of this closer integration. So I think with these 2 things coming into play and actually playing out for us over the next year, we should see a significant amount of ramp-up both in terms of revenues, as well as margins. And now, we also have this additional capability of doing the form fill-finish for our customers where we complete the entire loop of services that we can offer to our customers, right from development of API, to manufacturing of the final product that injectables is the delivery form, which puts us in a very unique position as compared to many of our other peers.

Next question comes from the line of [indiscernible].

Sir, right now, given we have branches at China, India and Europe, what is the difference you see between manufacturing in India and China? Do you see any structural difference of manufacturing we do here and there?

Maybe Paolo or Stephan, from a manufacturing perspective, if you want to answer.

Maybe I can...

In simple words, what is the difference in manufacturing ecosystem of India and China?

Maybe I can start and Paolo can jump in then. I wouldn't differentiate. I would not say what is the difference in manufacturing, but what is the market expectation. This is more relevant. From production capabilities, we are quite similar. Of course, Shanghai is much smaller than India. They have bigger capacities, bigger size, bigger -- more people and so on and so forth. But the important thing is what our customer is expecting. And there is a diverse expectation. One part of the customer, they say, we want to go to Asia. It doesn't matter if it's China or India. Some people say everything but China, and some people say everything but India. So this is where our strength is that we can offer whatever the customer expects. From a quality perspective or from a scientific approach, we are the same. It's not a difference. But maybe, Paolo, you can share your feeling from your perspective.

Yes. I agree with you that there are many customers. I would say, in the last period, we see completely a trend that the customers tend to get out from China, honestly, because of this geopolitical situation. So we see definitely customers that are very, very keen to shift their manufacturing from China to India. India, from my perspective, is a kind of ideal scenario worldwide because especially in our case, we are having a large capacity and great talent. There is great thing, which in my opinion, India is much, much better than China, which is the language because to write in English and to communicate in English is definitely a big advantage with respect to China. Now, of course, as Stephan said, there are also customers which want to go to China. But geopolitical-wise, today, we see customers very keen to come to India rather than [ stay with ] China.

Currently, what is the preference of large pharma companies? Where do they want their materials to be sourced from, India or China? On a market level, generally, what are companies preferring right now?

Well, as I said, we see everything, also from big pharmas -- I mean big pharmas, they have a worldwide footprint, but they are concerned about this BIOSECURE Act. Although Carbogen Amcis and Dishman Carbogen Amcis are not falling under the BIOSECURE Act, there are still some concerns. And that's why big pharmas have a trend to leave China and place more work in India. But again, it's not one unique voice. It's a diverse thing because big pharmas, they have also their subsidiaries in China. So they're also in a political environment where they need to be cautious as well.

So do you see Dishman benefiting from the recent 2 FTAs that India had, one with Europe and one with U.S.A.?

Sorry, were you asking about the trade deals?

Recently, India -- as you've seen, India has signed FTAs with Europe and soon with U.S.A. also. Do you see India benefiting -- do you see Dishman benefiting in any manner? Means, can we bring back production to India?

Well, yes. I mean, right now, we don't see any -- even before these deals, we were not seeing any impact -- any major impact of the tariffs because most of our shipments -- even though the customers are based in the U.S., most of the shipments were happening to the European region. So from that perspective, we don't see any positive or any negative impact because of this trade deal. But yes, I mean, the idea is very clear is to get more and more production into India and also try to fill up the Shanghai site as quickly as possible.

[ Maybe I might add ]. On the pharmaceutical arena and part, I agree there is not much impact because they're exempted from the tariffs, specifically in the U.S. On the fine chemical part, personally, I see a big chance because they are falling under the tariff regimes. But if we have now a free trade agreement between Europe and India, there is absolutely the chance that we can produce more in India and export it to Europe because then the tariffs are significantly reduced on the fine chemicals -- not pharmaceuticals, fine chemicals.

Next question comes from the line of [indiscernible] .

Today, I have a question [indiscernible]. We're a mature company and still we go from red to green [ quarter-by-quarter ]. [indiscernible] part of the business? Or there is a period where you can see the consistent profitability? [indiscernible] Are we still like in a growth phase or we are in an investment phase or we are a mature pharma company? I'm just finding a little bit difficult to understand.

Sorry, you were not that audible, but I'll just try to rephrase your question, and you can correct me if that's like same thing. But your question was because -- I mean, why do we have these fluctuations in the margin as far as the quarterly results are concerned?

Yes. More, it was like for a mature company, shouldn't we be consistently profitable? If not, like what are the triggers which will make us consistently profitable? That's the main [ idea ].

Well, I would say the nature of our business is such that it is very difficult to have linearity in the margins every quarter because it all depends upon weather -- I mean, what is the composition of revenue that is driving the margins in that particular quarter. So the right way to look at our business would be more on a yearly basis, if not on a 2-yearly basis. But at least on a yearly basis, we would have a visibility on what the revenue numbers could look like and what the margin could look like for the full financial year. Quarterly, it might just depend upon what work has been done in that particular quarter, whether it is more of the late phase development versus early phase versus commercial on the CDMO side and on the Marketable Molecules, whether it's more of the vitamin D analogs or cholesterol because this is a completely B2B business. So much of this is dependent upon also when the customers want the material to be supplied like we had in this last quarter, where they wanted it in January versus in December because of the holidays. So there are these factors which might influence the quarterly margins or the revenue. But from a full year perspective, I think more or less, we should be in line with what we stated at the beginning of the year.

Next question comes from the line of Yash Tanna.

So my question is again on the ADC drug that we supply. So it's -- the molecule is a blockbuster product with significant sales -- end sales. But our revenue contribution is very miniscule, if we compare it to the overall scheme of things. Even with the growing number that we alluded to, my previous question, the share seems to be significantly lower. So just trying to understand why our share of value is so limited despite the scale of the molecule? Is it just because we don't do our antibody and that is one of the biggest parts in the value chain? And a related question to that is, with our partnership with Celonic for antibodies, can we compete in this space? And can we manufacture the complete ADC in-house? And -- because what we understand is that the innovators typically like to keep bioconjugation in-house. So just some thoughts on that.

Sure. So on the first question, so if you see, last year, the customer did close to about, I think, about [ 4 billion ] of revenue from this particular molecule. And right now, there are 2 approved suppliers. One is ourselves and second is a Swiss-based CDMO company. [indiscernible] suppliers of -- correct. So we being the primary supplier -- I mean, if you talk about the ADC, that would be close to about, say, maybe 1.5% at max of the final product price that the customer is realizing. So of the [ 4 billion ], if you take 1.5%, that's roughly about [ 60 million ]. And then, if you take out the antibody component, which could be close to about [ 20 million, 25 million ], then we are left with roughly about [ 35-odd million ]. And of that, roughly about 60% is what is supplied by us and 40% by the other CDMO company. Plus we also supply for the other indications, which are in the pipeline. And that's how the entire revenue of [ 30 million ] is more or less made up of. So I would say as the revenues of the end customer keeps on growing, this would be more or less the share that can be computed as far as our contribution to the overall revenue is concerned because the kind of -- so the ADC as such is not more than 1.5% at max of the final product type.

So the linker that you're talking about is not more than 1.5% of the end sales?

The linker and the payload.

Linker and the payload.

The linker, payload, yes, put together.

Got it. Got it, sir. That's helpful.

And sorry, what was your second question?

So it was related to the tie-up with Celonic. We did the -- so now -- yes.

Yes, so [indiscernible] offer like the end-to-end...

Shall I repeat the question?

No, I got your question. So with this partnership with Celonic, we are able to offer the end-to-end solution to the customer, including the antibodies, the conjugation, the payload and the linker. So, that is the benefit of having this partnership with Celonic, where even the customers who would be approaching Celonic, they could be potential customers for us as the suppliers of the linker, payload and the conjugation. So, that is where we are seeing increasing amount of inquiries. We have also given out RFPs to certain customers with this entire proposition. And we see significant benefits because now we are able to do the end-to-end for the customer, including the form fill-finish out of the French facility if the customer desires that. But maybe, Stephan, if you want to add something on this partnership?

No. Exactly that's the reason why we entered into this partnership. So it's twofold. A, we can offer this end-to-end solution, where it's a simplified process for the customer. But also secondly, on the sales and marketing front, there are customers dealing only with Celonic in that specific case, and we get into the picture. So there are new customers for us because so far, the customer was kind of lost. And now, with us in the picture, he can come to us with the linker, payload and the conjugation request. And of course, on the other side, for Celonic, it's beneficial because we have some customers who have no contact with antibody development. So that's the reason why we say it's a win-win-win situation.

Have we already seen some interest from maybe small biotech customers or Celonic customers for this end-to-end capability?

Yes. This is what I mentioned before or meant when I said there is an increased interest. They're mainly small biotechs which develop their own antibody with the support of Celonic. But at the same time, they need somebody to produce the linker, payload. And this we are this company.

Got it, sir. That's very interesting. My final question is relating to the debt side. So what is the current debt on books? And how are we thinking on the debt front, let's say, for the next 1 to 2 years? Are we looking to pare it down? And if you can give some numbers around it?

Sure. So basically, our net debt -- or a large portion of our debt is denominated in Swiss franc, and that would be the right way to look at our debt number. So we are at close to about CHF 150-odd million of net debt. What we plan to do over the next years would be to pay down the debt as far as the India side is concerned because that is the debt which is coming at a higher cost as compared to the debt which we have at the Swiss entity. So the cost differential is huge, almost about 7% between the India debt and the Swiss debt. So ideally speaking, we would want to utilize the cheaper debt in Switzerland to pay off the debt in India. But technically, that is not possible. So we are looking at, apart from the operational cash flows, the free cash flows that we generate to pay down the rupee debt in India. So that's the prime target of the free cash flow.

Sorry, sir, just to clarify, how much is the India debt? And by how much are we planning to pare it down?

So India debt is today roughly about INR 750 crores. So ideally speaking, we would want to make the India debt 0.

In the next 2 years' time frame?

I would say with the cash flow generation, we should be able to do it over the next 3 years' time.

Got it. And are we looking to raise any other source of funds for this? Or will this primarily be from internal accruals?

I think the internal accruals will be the primary thing. Apart from that, we might do a fund raise, but obviously, at the right valuation and taking into account the other factors as well. But right now, we are just considering the operational cash flow.

Due to time constraints, that was the last question for the day. Now, I hand over the floor to Mr. Stephan Fritschi for his closing comments.

Yes. Thank you very much. Thank you to everybody for your interest in Dishman Carbogen Amcis. As we could see from the discussion, the business is quite lively and very diverse. And we are very well positioned to serve the market, and we are optimistic and positive to tackle this and to bring great results in the future as well. So thank you again, and have a nice day.

Thank you, sir.

Thank you.

Thank you.

Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] Conference Call Service. You may disconnect your lines now. Thank you, and have a pleasant evening.