Dishman Carbogen Amcis Limited ($DCAL)

Good evening, ladies and gentlemen. I'm Madri, moderator for the conference call. Welcome to Dishman Carbogen Amcis Limited Q4 FY '26 Conference Call. We have with us today Mr. Stephan Fritschi, Chief Executive Officer, Carbogen Amcis; Mr. Harshil Dalal, Global Chief Financial Officer; Mr. Paolo Armanino, Chief Operating Officer. [Operator Instructions] Please note that this conference is recorded. I would now like to hand over the floor to Mr. Stephan Fritschi. Over to you, sir.

Welcome to everybody. This is Stephan Fritschi speaking. It's an honor to talk to you. And I also welcome Harshil Dalal, our Global Chief Financial Officer; and Paolo Armanino, our COO at Dishman India side. Before we go into the financial numbers, let me give you a brief overview about Carbogen Amcis, how we did at the moment in the past quarter and now. So starting with the drug product side in this year. The market shows some challenges, but still we could increase our quotation rate. We see an incline of requests. Some new projects could be acquired during the last quarter. And so we are quite optimistic to become successful in this site as well. There is specifically interesting late phase projects that we can produce commercial products in the foreseen future. At the same time, we control our cost, of course, we have initiated some cost control measures and so on. Drug substance, that's the biggest business unit in our company. It's likely in this area, we got more than 10 late-phase projects, including DPQ campaigns, which is very good for the future. We have, as usual, the normal API projects and products in our pipeline, but also related to ADC, there's a huge demand on ADC and related compounds like the linker payload, which is good and high-margin products. At the moment, we got more than 30 commercial products, which is our baseload in revenue generation. Core investments what we talked last time, the past 2 times is on track. We are optimistic and confident that we can finish the engineering activities in Switzerland according to plan. At the same time, the lean management is rigorously pushed forward to increase efficiency, productivity and reduce our cost base. The third business unit, Specialties, there we see a strong VDA, vitamin D and analog sales. These are the products with high margins. The demand has increased, which is also responsible and have got a big impact on the strong numbers there. We have optimized our supplier base, specifically on [indiscernible]. We have negotiated new contracts. We have more suppliers on board. We got better prices. So the cost base has been improved as well. Specifically on the sales activities, we have increased our sales force. We have increased on both sides on the [indiscernible] side, on the Dishman Carbogen site in India, we have increased the number of salespeople, which is the condition to attract more products and more customers to fill our pipeline. So we are well positioned for the future and get -- I'm absolutely optimistic and confident that we're on the right track and we get more products and business. Last time, I mentioned our Sprint activity. This is an initiative to attract early phase projects. This is very positive and successful. We got different new clients in our portfolio, big pharma, but also midsized and small pharma companies who are very strong. We show very strong interest in our new initiatives. This is important to get the early phase projects in for mid- and long-term future of the company. So this is a very good initiative, and we are very happy with the development of this. Another area where we make progress is the combination drug substance of product. We have started now to offer this entire package to the market so that the customer can come in the drug substance site and take the materials through to the drug product. So he has only one supplier to deal with, which is Carbogen Amcis. So the collaboration with Dishman in India and Carbogen Amcis in Europe is developing very nicely. We have multiple products and projects together. We have also now the first API where we transferred from Europe from our Carbogen Amcis sites to Dishman to be in a better position in terms of cost base and that we can get more and more attractive prices also in the market. So this project has been initiated, and I'm confident that this will be a great success also in the future. So all in all, together with Dishman Carbogen Amcis, our entire group is well positioned for the future. We are very optimistic that we are on the right track, and I think the financial numbers will confirm this. With this, I would like to hand over to Harshil Dalal to take us through the financial numbers.

Thank you very much, Stephan, and a very good afternoon to all the investors and the stakeholders. It's a pleasure to talk to you about the financial numbers that we have achieved for the quarter ending 31st of March 2026. Starting with the revenue, it was one of the best quarters ever for us where we reported a revenue of INR 851 crores for the quarter, which represents close to 19% growth as compared to the comparable quarter of the last financial year where we did a revenue of about INR 716 crores. As far as the segment-wise breakup of this revenue is concerned, we saw a significant amount of growth on both the segments as we classify CDMO as well as marketable molecules, where on the CDMO side of the business, we saw a revenue growth of about 21% as compared to Q4 financial year '25, going up from INR 569 crores to INR 690.8 crores in the quarter ending 31st of March '26. As far as the marketable molecule segment concerned and more specifically within this particular segment, the vitamin D analog part of the business as Stephan has noted earlier has performed significantly well in the quarter ending 31st March '26 where overall for this segment, we saw a growth of 9.3% as compared to Q4 of financial year '25, INR 146.9 crores of revenue in that quarter going up to INR 160.5 crores in the quarter ending 31st of March '26. As far as further breakup of the P&L is concerned from a cost perspective, we were at about 15% in the quarter. This percentage is a bit higher than what the yearly average was, but this was mainly on account of higher amount of commercial supplies going out in this particular quarter as compared to more of the Phase III development work that was done in the first 9 months of the financial year. As far as the employee expenses are concerned, we see a significant increase in the employee expenses for the quarter ending 31st of March '26. There is a one-off in this particular line item mainly because of the switch of the pension plan for our employees at the Swiss entities where we moved from the earlier pension provider to a completely new pension provider, which basically allows for greater benefits for the employees when they retire as well as for the death and disablement of the employees. Because of which there was an additional provision based upon the actual valuation that was done that was booked as part of the employee expenses to the extent of about CHF 2.5 million. The other expenses stood at about INR 147 crores as compared to INR 92 crores in the comparable quarter of the last financial year. This deviation of about INR 15-odd crores is largely represented because of certain additional provision that we had to make in the quarter ending 31st of March '26 on account of the onerous contract. So as you know, what is fundamental to our business is continuously assessing what are the actual hours that are estimated for a particular project versus the budgeted hours, and wherever we see that could be a possibility of an overdone, we would immediately book a provision. Contrary to this, in Q4 of financial year '25, we did see a reversal of certain owners provision because of which we see a differentiation between the last year Q4 versus Q4 of '26 of INR 30 crores, which is solely attributable to this provision. Overall, from an EBITDA perspective, all of this translated into a healthy EBITDA for Q4 of FY26 of close to about INR 163 crores, representing 19.1% as the EBITDA margin for the quarter. The depreciation and amortization stood at about INR 88.79 crores for the quarter. The finance cost at about INR 43 crores and all of this translated into a profit before tax of about INR 46 crores. Tax expense was about INR 24 crores. It would not be prudent to see the tax expense as a percentage of the profit before tax because 50% is not the tax rate that we pay. But because of the losses in certain entities, the percentage looks higher than what our effective tax rates in each of the jurisdictions are. The profit after tax for the quarter stood at about INR 21.7 crores. Looking at the full financial year, while Q4 was extremely strong, we also saw a strong delivery of performance for the full financial year in line with what we had set out as expectations at the beginning of the year and subsequently in the Q2 and Q3 of the financial year. The income from operations stood at about INR 2,932 crores as compared to INR 2,711 crores in financial year '25, representing close to about 8% growth in revenue. The COGS stood at about INR 408 crores, roughly about 13% of the revenue. Employee expenses stood at about INR 1,447 crores. The other expenses were INR 510 crores. All of this resulted in an EBITDA of INR 565 crores, equating to a 19.3% for the full financial year '26 as compared to 17.3% in the previous financial year. So we have to [indiscernible] in the current financial year that concluded. The finance cost for the full financial year stood at about INR 174 crores as compared to INR 159 crores. That is also a ForEx impact which is included as part of this finance cost. All of this translated into a profit before tax of INR 104.9 crores for the full financial year as compared to INR 19.3 crores in the previous financial year. And the profit after tax stood at INR 97.4 crores as compared to INR 3.2 crores in the previous financial year. As far as the breakup of the revenues are concerned, roughly about 81% of the revenue was contributed by the CDMO segment for the quarter and it was 83% for the full financial year. The segment-wise breakup for the full financial year comprised of the CDMO part of the business growing by about 6.5%, accumulating to a revenue of INR 2,441 crores while the marketable molecule segment, the revenue increased by about 17%, going up to INR 490.65 crores as compared to INR 418.5 crores in the previous financial year. As far as the margins are concerned for the quarter, the CDMO segment reported a margin of 18.7% at an EBITDA level as compared to 23.9% in the comparable quarter of last financial year. And the major reason for this deviation is because Q4 of FY '25, we saw a lot of late Phase III molecules being delivered where we make our highest margins. The marketable molecule segment, as we had mentioned earlier, keeps on showing a remarkable performance as far as the margins are concerned because of the increase in the share of the VDA, that is vitamin D analogs as well as the cost measures that we undertook in terms of supplier diversification, we were able to increase the margins to 21.1% for the quarter and 18.8% for the full financial year of '26, representing a 940 bps increase in this margin. Regarding the CapEx that was done for the full financial year that stood at roughly about CHF 22.4 million. Our net debt, excluding the lease liabilities for the year ending 31st of March '26 stood at about CHF 146.8 million as compared to CHF 157.6 million at the end of the last financial year, representing a decrease of close to about CHF 11 million. Apart from this, I would like to highlight one of the points that was also approved as part of the Board meeting yesterday, obviously subject to the necessary regulatory and shareholders' approval, which was in regards to one of the promoter entities providing long-term external commercial borrowing to the parent entity with the objective that we are able to pay off the high-cost debt in India, which will have a significant positive impact on the interest cost for the group as a whole. And it will also provide flexibility in terms of the repayments because the terms are extremely favorable where we have a tenure -- proposed tenure of 10 years and the loan will be completely unsecured, which also allows us to free up the securities which are currently provided to the banks in India. Additionally, the funds can be utilized for the working capital requirement as well as the CapEx requirements in India and also at the subsidiary level as and when required, which takes away our dependence on external funding and also -- it also allows us to borrow at a cheaper cost. So this is something that has been approved by the Board yesterday. And we would look forward to receiving the shareholders approval so that the transaction can be executed and it should benefit the company at a stand-alone India level as well as at the group level quite significantly. With this, I would like to hand over the call for opening the floor for questions that we could provide the necessary answers too.

[Operator Instructions] First question comes from Harshit Khadka, Robo Capital.

Sir, if you look at the depreciation cost rate, it was around INR 79 crores a year back, which increased to INR 84 crores in Q3 FY '26, and is now at INR 89 crores, almost at INR 89 crores. Depreciation is increasing frequently every quarter. So just wanted to understand how should be moderate depreciation going forward. What would be the depreciation cost in FY '27 and FY '28.

Thank you for the question. So basically the depreciation more or less in terms of functional currency over the last one year has remained more or less constant quarter over quarter. There has not been a significant amount of CapEx that has been done. The last manufacturing line which went live was in France, which was in Q4 of financial year '25. So, there is an increase in the depreciation because of that. But apart from that, one of the other factors that influences the cost part and also the depreciation as part of it is the foreign currency fluctuation impact when all of the expenses are being converted or translated into INR, which also has an impact on this. But as far as the functional currency is concerned, we have not seen a significant increase in the depreciation.

You explained in your opening commentary that 50% tax rate is not the normalized tax rate and is elevated mainly due to losses in subsidiary. So like how should we model the consolidated tax rate going forward for FY '27 and '28?

So I think you can keep on -- yeah there are two parts. So you know certain subsidiaries like for example our France subsidiaries as well as the Shangai subsidiary you know where there are losses right now, and we are also nonperforming currently. So because of that the tax rate is getting higher. But as the performance keeps on increasing, as we keep on generating more and more profits at this particular entity [indiscernible] the effective tax rate as a percentage of the profit before tax should keep on coming down. So I would say it would gradually keep on coming down. So for FY '27, it could be close to about 40% for the full financial year. The year after, it could be close to about 30%. Because if you see right now, the most profit generating units that we have majorly Swiss entity as well as the Dutch entity, the taxes that we pay at the Swiss entity are close to about 15%, at the Dutch entity, it is close to about 25%. And then we have accumulated losses at the India level because of the depreciation of the goodwill and in France as well because of the last 2 years where there were losses. So we would be able to utilize these losses against the future profits as well. So I would say in about 3 years' time, we should be closer to about 20% -- anywhere between 15% to 20% as the effective tax rate on the profit before tax.

Right, understood. And some time back, we had said that there would be INR 10 crores of reduction in our interest cost on a quarterly basis, and you know, the interest expense would eventually stabilize around 30 crores per quarter, but the interest cost has not reduced as expected. So if you could give some color on that and help us understand the outlook for debt levels and also interest cost for the next 2 years.

So basically the interest cost right now that you see an absolute basis at the Swiss entity level the cost has come down, but again, you know there is an impact on account of the foreign exchange fluctuation [indiscernible] finance cost. From an actual cash outflow, if you look in the functional currencies of the subsidiaries the cost has actually gone lower. Having said that with the fundraising plan which has been approved by the board, and if that goes through, we should be able to reduce the cost significantly because the high cost debt that we have in India is something that we would want to pay off from the loan that we are able to raise at much lower cost. So there would be an interest differential of close to about 7% on the Rupee borrowing that we are talking about.

So sir, is it safe to say that the interest will eventually come down to around INR 30 crores to INR 35 crores per quarter?

It could go even lower than that, but on a conservative basis, 30 to 35 crores should definitely be doable.

Sir, but that would be from which quarter exactly? In FY '27 only right?

This would be in the current financial year.

By any quarter if you could specify?

Conservatively, we can say from Q2 of the financial year. Q2 or Q3.

The next question comes from Yash Tanna from ithoughtPMS.

Congratulations on decent set of numbers. My first question was on the India business and the scale up there. Last quarter, you mentioned that we have close to INR 1,100 crores or INR 1,200 crores worth of RFPs and we expect to at least convert at least 35% of the orders. And you mentioned that maybe in the next 6 months, you get some [indiscernible] companies. So just wanted an update on that on the RFP and how also the new pipeline or new RFPs are looking like for the coming year since you had a plan to scale India up to INR 500 crores in the next 12 to 18 months and also an updated guidance on that timeline and targets.

Sure. There have been significant developments like [indiscernible] start with one of the largest molecules that we were producing -- or we are producing out of the Swiss entity, which is for a big pharma. The customer has agreed for tech transfer to happen to India. So that is something -- which was a great achievement, and because of this transfer, even after giving discounts to the customer, we should be able to increase the overall margins on this particular product. That is one of the significant developments. The other RFPs as well these are progressing quite well. We have physical inspection from one of the large innovators that should be happening in the current month or in the next month. So that could translate into additional orders coming in for the active pharmaceutical [indiscernible] for the product that we are currently manufacturing, the key starting material. So in terms of the timing, yes, we are getting more and more RFPs as well. Those are getting added, and the ones which were already in pipeline, we are already seeing positive effects of the same. As far as those translating into the revenue numbers and profitability, that would be happening in the later part of this year or in the next financial year. So that is how we are looking at it.

Got it. So that's clear. It will be more backend, right? But can you quantify like you mentioned this Swiss tech transfer, so the [indiscernible] tech transfer and the innovator molecule that you mentioned where you are in talks with the innovator. Can you quantify what sort of values or contract values this would be, and in that sense what would be the revenue realization, let's say in the FY '28 from these already sort of not confirmed, but close to confirmed contracts.

So basically for these molecules that I mentioned about you know for the tech transfer. The annual revenue that we currently do is close to about CHF 20 million to CHF 25 million per annum. If other projects [indiscernible] if everything goes well it could be achieved another CHF 20 to CHF 25 million of opportunity for the India business. So these two are the ones which look to be going quite well, but obviously it's a matter of time like when the tech transfer everything happens and when we start seeing it in the numbers.

Got it sir. This 20 million to 25 million is dollars right? Just to clarify.

This would be in Swiss Francs.

My second question so we mentioned on this -- this s on ADC supplies of the linker that we're doing. So last quarter we had mentioned that last year we did CHF 32 million and for '27 and '28 we had given an indicated number of CHF 30 million, CHF 40 million respectively. So just wanted to know if these are contracted volumes and the innovator will pick up this much value of products from us, and also just wanted to understand EBITDA margin profile on such kind of supplies right because they're quite complex. Is it fair to assume that this would -- the margins will be close to more than double the margin that we are doing on the [indiscernible].

So starting with the first part, yes the molecule has been performing quite well and it has been getting more and more approvals as well. And we supply the linker as well as the payload. So yes, I mean we have the purchase orders in hand for the next years and that is the reason we are quite confident about this particular project plus the customer has been co-investing along with us. The first co-investment has already been completed. The second one is in progress. So we are quite hopeful on that particular molecule. As far as the margins are concerned, the assumption that you mentioned is quite true, and it could be even higher than that. So it's quite a profitable product for us. And the partnership has been going quite well. Maybe Stephan, if you want to add something to that?

Harshil, you summarized the situation quite nicely. The partnership is very tight. We host them on our side regularly. We go there to see them and to discuss the progress of the project. And what we see on the customer side, they have secured some successes by their clinical trials by having more indication. So we are all in all, very confident and optimistic that what the customer tells us and told us in the past that this will be the future and reality that we can produce according to the plan.

And just follow on that. So the supply -- since you have the purchase order, will this be in any particular quarter or will it be throughout the year? And if it is a particular quarter, if you can mention which quarter the supplies will come...

I think that would be very difficult to say like exactly what quarter, we have the planning for it, customers might want something pre-order quantities as well, so it all depends and that is also one of the reasons why we say that it is very difficult to look at us on a quarter-over-quarter basis, like in the last quarter you know that EBITDA was not that high. We had explained that there was the deferment of certain orders which were went to Q4. So it all depends upon when exactly the customer needs those quantities. I mean whether it falls in those three months or maybe in the fourth month that's very difficult to gauge right now.

Got it, sir. And one last question, if I may. So on the ADC front, right? Now this is one molecule and one contract as you said, extremely profitable. Can you highlight if you are working on such similar innovator molecule contracts [indiscernible] similar contract from the Swiss entity, which could be in the pipeline and maybe could get commercial maybe in the next 1 or 2 years? And any color around that?

I mean we would not be able to name anything specifically, but these are general statement, we can say that we are working on many wonderful candidates and some of them could be if not equal to at least a great portion of the business as and when it move into Phase III or move from Phase III into commercial. So what we are confident of is because of the technical capabilities that we have developed in-house and be partners to some of the large innovators as well as the biotech companies as well as entering into this partnership with Celonic on the lab, that's helping us to gain traction in terms of more and more of these projects. Plus we also, as Stephan has mentioned earlier and also in the last quarter call, we also started this initiative called the Sprint initiative, which is to capture more and more projects for the early phase because the success to our business is that the more number of projects that we start at the early phase, those could be potential candidates for late phase and then turn them into commercial projects. So that is something that we are quite focused on. And yes, some of the molecules look really promising. But Stephan, if you want to add something to this?

Yes. As I said, Harshil, we have good customer -- good customer base, big pharma, midsize and small. We have some multiple late-phase projects where we're also ready for FDA inspection. We're just waiting for FDA popping up, which is always a good sign. And the collaboration with Celonic is a milestone because there, we have the possibility to have a combined offering starting from the linker [indiscernible] synthesis to the conjugation with the Celonic antibody and then also to the drug [indiscernible] formulation in. So this is very promising, and there's a lot of attraction in the market.

The next question comes from Disha [indiscernible] from Sapphire Capital.

Sir, my first question was on our overall revenue growth. How do you see the growth for FY '27, given the ramp-up of our subsidiaries, how do you see the overall growth?

The overall growth looks quite promising. I mean right now because of the geopolitical situation, there are certain uncertainties as well, but we do see that overall from a business perspective things should look up, but we are continuously assessing the market situation as well and remain cautious as far as the guidance for the year is concerned. So if you take a three-year view, we are pretty confident of the of the growth that we have set out, the path that we have set out in terms of the revenues, the profitability and the growth plans remain very much intact.

Okay. And so in terms of for margin -- so this quarter we saw dip in the CDM margins because of the [indiscernible] redevelopment. How do you see these margins for FY '27 and also the increase in the marketable molecule segment the margin increase was very good. So how do you see this sustaining and is there scope for further improvement?

So as far as the margins are concerned, we do expect that both the segments will keep on improving as far as the margins are concerned. Our target remains the same, which is to get to the 25% mark in the year after [indiscernible] FY '28. So that target still remains. And the contribution would be both our contract development and manufacturing business as well as more specifically our vitamin D analog business where apart from the increase in the revenue, we are also concentrated on how we can optimize the cost structure, both from a raw material perspective as well as the other indirect expenses. And all of this put together, we should be pretty confident of achieving this kind of number. [indiscernible] we can get more and more business into the [indiscernible] trying to provide drug substance and drug product as a single offering to our customers. And that should help us in more traction as far as that particular business is concerned. For India, the capacity is already there, the regulatory hurdles are behind us. So we don't see any reason why the India business should not keep on growing in the future. So combined all of this, we are pretty confident of achieving our midterm and long-term growth plans.

Sir, you mentioned 25% sort of EBITDA for FY '28, right?

Yes.

So FY '27 could be somewhere around 22% to 23%, will that be a fair assumption.

Yes, that's the target. So as I said, let's wait for a quarter or so and then we can be more confident of giving the guidance on the numbers.

Sure. And just on the overall mix, sir, for CDMO and marketable molecules, where we see this -- what will be the target mix that we are targeting both of these segments, say, in the next 2, 3 years?

Sorry, the target what?

The revenue mix from the CDMO...

Yes. So the CDMO business will keep on growing. And as far as the mix is concerned, I would say it would be somewhere like 85-15. So, 85 % being the CDMO part of the business and 15% being the marketable molecules I mean most of it is dominated by the vitamin D analogs and cholesterol.

The next question comes from Prit Nagarseth from Wealth Finvisor.

My question is regarding the -- you mentioned that the debt on the India side, which could get replaced with the ECB. Could you please quantify how much is the India debt and at what percentage it is right now?

Yes. So the India debt is roughly about INR 800-odd crores. And I would say, the average interest cost would be close to about 10.5% to 11%...

Okay. So you are saying this gets replaced with a 4% loan. So the spread is 7%. But if you were to say the currency depreciation, say, assuming Indian rupee depreciates 4% to 5% every year, wouldn't that effectively take it to about 9% level?

No, because if you see from India, 90% of our revenue also comes in foreign currency. So we have equivalent amount of foreign currency that would be coming in, which kind of negates any adverse foreign exchange fluctuation risk. But the debt in foreign currency would act as a natural hedge against the revenues in the same currency. And again, the tenure of the loan is also kept quite long so that if you see the revenue over the next 10 years, I mean, the revenue in foreign currency is going to be much higher than the foreign currency debt that we will be availing.

Okay. So, what you're saying in other words, is that the first priority whenever this gets sanctioned is to repay the INR 800 crores. And you see this concluding by end of quarter 1, somewhere quarter 2. And hence, you're saying that from quarter 2 or quarter 3 onwards, the interest cost for the quarter would go to around the INR 25 crores, INR 40 crore mark, instead of the current loan.

That's correct. Yes. So the idea is to basically at least from a net debt perspective because certain loans might have certain lock-ins or certain prepayment penalties, et cetera. But at least from a net debt perspective, we would want to have it meet zero as far as the India entity is concerned, so that we can keep on paying that off as quickly as possible, which should have a significant positive impact on the finance cost at a consolidated level.

Regarding the overall debt, do we see it increasing this year over and above what we close to this year?

We don't expect any increase, because as we have been saying, there are no major CapEx plans apart from the co-investment that we are doing with the Japanese innovator, where 100% of the CapEx financing is being done by the partner. So apart from that, the maintenance CapEx is something that we will have to keep on incurring across the group. There would be investments that we are making into digital transformation, which includes the SAP implementation across the group. Putting the group on the same platform as far as possible regarding all the systems, processes, including the lab management software, and also trying to make advancements using artificial intelligence wherever possible in order to make the processes more efficient. These are going to be the areas that we would keep on concentrating on. But otherwise, in terms of the hard-core assets, I think we already have that capacity. It is all about utilizing that capacity in the best manner possible.

Can I safely assume that given that there is a CHF 20 million, CHF 25 million tech transfer to India plus an additional ADC business worth CHF 10 million for this year, that's CHF 30 million itself and whatever additional business comes our way, we should at least see a INR 400 crores to INR 500 crores top line jump from the current financial year's closure. Is that a fair assumption on my end?

I would say that, because these things are fluid, so we don't know how much of it would come in the current year, how much goes into the next year. But from an overall perspective, we would want to wait for a quarter or so and then take the guidance so that we are extremely sure about what we could aim to achieve by the end of the financial year.

The next question comes from Ankit Gupta from Bamboo Capital.

Congratulations for a good bounce back in the quarter. Sir, the first question is on the stand-alone business. So with these 2 new contracts being discussed and hopefully, we should get them, how should we look at the trajectory for our stand-alone business for this financial year and next financial year? I think most of these contracts will get commercialized in FY '28 only. So how does FY '27 look for in the stand-alone business? And how is FY '28 looking like currently with the current set of business in hand and RFQs in the pipeline?

Yeah, for the current financial year, we definitely expect an increase in the revenue, which would also translate into increase profitability for the India business. That is for sure as compared to FY26. And as far as the trajectory is concerned, because of the senior organization that we have now formed, as far as the business development and the sales activities are concerned between Carbogen Amcis and India, the Swiss entity, and India. That is helping us to now pitch to the customers. And that is something that what we are aggressively doing as a single offering between the high-tech development services out of Switzerland and the large manufacturing setup out of India. Which means, we are already seeing positive effects of the same, and it should start translating into orders and hence the numbers in the coming years. How much of it happens in the current financial year versus the next year is something that we would need to see. But overall, from India perspective, we do expect an increase as compared to the last year, both in terms of revenue and profitability. And if you take a 3 to 5 years view, India is definitely, one of the -- I would say, the growth in India is going to be one of the key strategies for us in order to increase the revenue at a group level, as well as improve the profitability significantly. Because historically, India had been doing close to about 35-40% operating margin for us. And that is kind of level that we would want to get back as quickly as possible.

With the current order set in hand, could we at least get back to FY' 25 levels of INR 400 crore? Or that looks difficult? FY' 28 with these new orders and RFQs in hand, we should be looking at INR 500 crore-plus kind of top line. Will that be a right assumption to make?

FY '28, yes, that's the target we have in mind. For the current year, it could be a bit lower than one the number that you mentioned. But we are we are still two months into the year, so it will be too early to say that.

And on the ADC bussiness, apart from the one large molecule that we are doing with the Japanese innovator, we were also in discussion with the same client for the other molecules which were in Phase 3. And other customers also for which some of the molecules were in Phase 2 and Phase 3. So, any update on the same? And how are we seeing the progress on that front?

I think the progress, in general, for all the Phase 3 molecules has been quite good. Just talking about the Japanese innovator, they also received approval for their molecule as a first-line treatment, which is quite significant. And the kind of projections and estimates, the orders that we have received, it looks, I would say, if not beyond expectations, that is in line with what we were expecting. So that's moving quite well. Even though other molecules, are progressing quite well. We are getting more and more traction because of the other initiatives that we have taken at the Swiss entity, in as I mentioned earlier, in terms of getting new molecules. Overall, from the technical capabilities that we have, we are not seeing significant dropout of the molecules. But again, it depends upon, I mean in the past, we have seen molecules even in late Phase 3 dropping out. But as of now, things do look promising.

ADC, how much would be the contribution in FY' 26? How do you see that growing in FY' 27 and FY' 28 especially with the new CapEx coming online in FY28?

So FY'26, that would be close to about all molecules put together on the ADC side would be close to about 25%.

Okay, 25% of the Swiss entity or consolidated?

All of the CDMO part of the business.

Sure. Okay.

And, yes, I mean, this share could keep on increasing in the future. Now, with the joint offering that we are giving along with Celonic as the partner for supplying the MAbs.

Got it. Sure. And on the French subsidiary, if you can share the numbers, what were the revenues and losses for FY26? And what is the outlook for FY'27 and FY'28?

Yes, so the French facility did a revenue of close to about EUR 8 million. And we had a loss of close to about EUR 9 million for that particular entity. What we expect is that in the current year, it should get up to close to about EUR 11 million to EUR 12 million of revenue. And the losses should come down to close to about EUR 6 million.

And these are at EBITDA level, right?

These are at the EBITDA level.

Okay, so the breakeven is expected in FY' 28, or it'll go to FY' 29 at the EBITDA level?

I think, in FY' 28, is when we aim that it should turn profitable, especially now that we have about a year back we already received the ANSM approval, that is where we are trying to get more and more projects for Phase 3. We could potentially turn and we are also aiming for projects for commercial supplies as well. We have aggressively bid for these projects, so we just need one or two of these projects to kind of fructify basis, which we expect that the profitability as well as the revenue should increase significantly.

And last question on the interest cost do we plan to hedge the Swiss currency loan that we plan to take in the Indian parent? Or it will continue to remain in Swiss franc only? And how do you see the interest cost for FY '28 let's refinance happens in Q2, Q3? So FY '28, how should we look at our interest cost?

We don't plan to hedge because as I mentioned we have Swiss franc revenues as well coming from India, which kind of acts as a natural hedge against the debt that we will be taking in Swiss franc in order to pay off the rupee debt as well as part of the debt could be utilized for future working capital and CapEx requirements, which had come up. So, overall what we expect is that because of the refinancing activity the debt cost for us should go down significantly. I would say we would see a net interest cost of not more than INR 70-odd crores for the full financial year. So that is what we are expecting.

For FY26, our interest cost at a console level would be around that? That is what you're saying.

At a console level, it would be close to not more than INR 100 crores.

The next question comes from Viraj Mehta from Enigma.

Congratulations. Only question is on India utilization. Obviously, our utilization is very low today and pretty hopeful of ramp-up there. In terms of when you say CHF 25 million tech transfer for a large product from a Swiss entity to Indian arm will happen, will there be price reduction? So like for Indian entity, what will that mean in terms of revenue?

Well, it would not be -- well, the revenue we would have to see at that particular point in time. But just taking the current run rate, even after providing the discount to the customer and close to about 30-odd percent, still the overall margin at a group level is increasing by close to about 20% to 25%. So in terms of revenue, it could be close to about CHF 15 million to CHF 20 million, but in terms of profit, it will be much higher than what we're making currently because of the clear cost difference that we see between the Swiss cost base and the India cost base.

Right. And this project you mentioned will start by Q3 of this year?

No, right now, the tech transfer has started. So it will take a few years before the entire project can move over here. Maybe as an interim, what could happen is that at least part of the project could be moved, which could be manufacturing additional intermediates than what we are already doing. So, it could be a phase-wise approach rather than everything in one go.

Right. So, but if that is the case, then how are we seeing INR 500 crores for '28, right? Because we are at INR 220 crores. And if this does not come, that what gives you or inspires that confidence in you, especially given our history of at least last 18 months, to go to INR 500 crores in India?

Yes, this is not the only project that we are banking on. There are several projects in the pipeline plus certain orders already received new orders which have already been received. So in the current year itself, we will see at least 25-odd percent of growth in the revenue. In the next year is where we would see many of the contracts that will be signed in the current year, or the orders that would be received it would get translated into revenue numbers. So, getting to INR 500 crores is not unrealistic, whether this tech transfer happens or does not happen because we have multiple projects in the pipeline. And as I mentioned, for certain projects, the contracts are already signed, for certain projects the orders are already received. For the new contract that we have already received, we are already providing now the validation batches, and the higher quantities would come in the current financial year, by the end of the current financial year or beginning of the next financial year.

Sure. So I understand there is a lot of visibility when you talk about FY '28. And my last question, Harshil, is on the CHF. Now because CHF has depreciated against Indian rupee by almost 6%, 7% over the last 6 months, I'm talking about the Swiss entity right now. I understand we have losses at some other, but our largest profitable Swiss entity. Is it fair to assume that whatever EBITDA that we make in the Swiss entity and by the same logic PBT and PAT even if we assume very little growth of 5%, 7% growth that happens there, we will see a substantial increase in the numbers in INR, at least at the P&L level? And entire gains or translation of the currency would at least flow into our P&L in the INR level over next one year?

I mean, at an EBITDA level, even if, say, for example, there is a 5% movement in the foreign currency, like Swiss franc, the cost base is also quite high. So, from an EBITDA perspective, if you're making, say, for example, a 20% EBITDA margin, the impact could be for that 5% on that 20%, which is the only impact that we would see. Because most of the cost base is in Swiss francs, while in the revenue, we have dollars Swiss francs, in Euros as well as GBP.

Right. I understand. But I'm saying if you were making just 100 Swiss francs as EBITDA a year back, and your projection is 105 Swiss francs this year, the same translated into INR would be 110 rupees rather than just that gain should directly show.

That's correct. Yes.

Next question comes from Subrata Sarkar from Mount Intra Finance Private Limited.

Sir, first one, question on the balance sheet side. So sir, my point is like we don't have any CapEx as such in near term, apart from the Japanese contributor. And like we have actually experiencing almost 40% depreciation in INR vis-a-vis Swiss franc. So in this scenario, sir, why would we like rather -- and we are generating almost INR 500 crores of cash flow from operations. So in this context, rather than, sir, converting the existing loans to -- like foreign currency denomination basically, how could you justify these, sir? And that too, sir, we are taking this loan from a Promoter NPT. So what is the significance of that? I know -- so if you go by our blended cost, it is now around 6.7%. So it will get reduced to 4% which means, on a yearly basis, say, INR 50 crores, INR 60 crores. But on the contrary, like we have a [ gone ] rate of around INR 2,500 crores. And if we are opening up incremental risk of currency depreciation to a great extent. And given that we are already leverage and our -- and the gross debt is actually higher than our gross revenue. So how would you reconcile that?

So as far as the currency fluctuation is concerned, we have the revenues, which are also denominated in foreign currency. So this liability would act as a hedge against the foreign currency revenue that we are going to get. So overall, if you see over a period of -- if you take 10 years, which in turn, the tenure of the loan, basically, over a period of 10 years, the total revenue that could be generated out of the India entity itself, even at the current run rate on INR 500-odd crores, it is almost about INR 5,000 crores in foreign currency. Against that, the debt that we are seeing is close to about INR 800-odd crores. So effectively, there is a natural hedge, which is double label. As far as the debt as compared to the revenue is concerned, so from that perspective, this would be actually an effective interest cost for us, where there is a significant reduction that we are seeing as far as the cash outflow is concerned, also as far as the interest cost is concerned. So this will also have a positive impact on the overall P&L and the profit before tax and after tax. So that is going to help us immensely as far as the cash flow of the group is concerned. And it will also act as the mechanism well for any -- because India is coming out and there would be a requirement of additional working capital as well as we move into the future as well as there could be CapEx requirements in the future, not that something has been planned right now. So in case that is also required, this is the cheaper source of finance by which we can basically have all of those expensive mat. So that is the rationale behind getting this financing plus all of our securities, which have been given right now plus the repayments, et cetera, that are happening on a yearly basis. So that also gives us the flexibility, plus there is also a clause where the interest can also be capitalized. So at least for the first 2 years, it is going to be paid only in kind. So it will be capitalized as part of the overall facility, which should be amortized, not even amortized, there would be a bullet payment at the end of 10 years. So there is a lot of flexibility that is provided in this proposal and that makes it extremely beneficial, not just for the India entity but for the group as a whole.

Yes. But sir, to be very frank, if you see that I have raised this question previously also. Like in last 6, 7 years, our debt has gone up by 3x from INR 1,000 crores to now almost INR 2,500, almost INR 3,000 crores a year ago. So I know we have -- in between, we have gone through a lot of difficulty, and that's one of the reasons I understand that. But if you see like our -- like our cumulative revenue growth is in single digit or, let's say, high double digits, whereas like if you count that the only last year, Swiss franc has gone up point-to-point almost 20%. So in these circumstances and to be very honest, we are saying everything is notional, but whenever we have to repay it back. So in that point of time, like we have to actually, in terms of rupee, we have to pay back much higher. In this context, I would just -- I would rather...

So what I would say is that if my revenue was in rupees and if my subsidiaries were also not generating any revenue in Swiss franc and also at the India standalone level, then I'm with you. But here, I have a lot of Swiss franc receivables, a lot of Swiss franc inflows that are coming in, which will be utilized to service the interest and the principal payment. So from that perspective, I'm not running of foreign exchange risk on account of the ForEx fluctuation. That is what I was trying to say.

No, I understand your point. But sir, later in the last year example, sir, Swiss franc have gone down by -- like it has depreciated by 20% given that if you put the same logic, our revenue growth should be more than 20% because only currency fluctuation has given us -- should give us a 20% growth in terms of revenue which is not -- which is not the case. So in this case, sir, like on the opening and as of now, we are -- if you take a base label Indian pharma company, vis-a-vis like our debt level is much, much higher. My only point into context is that -- now we are -- from a -- I want to at least draw your attention, if you take -- so we are now positioning ourselves the way like now we have come out with PPP where we are trying to present ourselves, which we were there, but now we are projecting ourselves as a CDMO player. So if you compare Indian CDMO vis-a-vis, we are trading at advantage of evaluation in terms of revenue to EV or revenue to market.

To your point [indiscernible] worth of the company -- I don't know to which companies you are comparing because in our journey starts with the development of active molecule and Swiss franc [indiscernible] one of the most [ convey ]. So yes. I mean, we agree. I mean, that the value does not reflect the true value...

Sir, I said, my only -- my point to draw your attention is that despite we have expedited of the ADC kind of thing, which is quite advanced in terms of technology, one of the most complicated. One of the reasons, and probably the most important reason for us, is not getting that kind of evaluation is our date level because vis-a-vis if you compare other CDMO in terms of leverage, they are much less leverage. So my point -- my only request kindly think of this, sir, is any way we can read rather than keep on increasing our debt there and getting more leverage, sir. If we improve our capital...

We are not getting good leverage. That is what I would like to correct here. We are not getting good leveraged. That is what I was trying to say. The leverage would actually go down as you have already seen in financial year '26 that the leverage went down by about CHF 11 million. Similarly, we will see the leverage going down as we move into the future. What will happen is that it will result into additional cash flow for the company because there will be a significant saving as far as the interest cost is concerned, and that will help us to take other initiatives as well. We would be part of the growth of the business and for accreting the value to the investors.

The next question comes from Amit Mehendale from Robo Capital.

Most of my questions have been answered. I have just 1 quick question on the revenue. So is it safe to say that our revenue growth for the next couple of years, would be more or less in line with what we have done like 10%, 12% going forward at consolidated basis.

So basically, the idea is that if you take a next 2- to 3-year view, the CAGR of the revenue should be much higher than what we have achieved in the last financial year. So overall, from a revenue perspective, we do expect close to about 15% as the CAGR over the next 3 years.

Right, sir. And my last question is on the French entity. I think it seems that the breakeven is delayed by about 2, 3 quarters or 2 quarters. Any color on what happened? And how do we see going forward?

So here for the French entity, as I mentioned, we have given the proposals for certain make phase as well as commercial projects. And what we are also doing is to offer drug substance, which is our API business, along with the top product as a single offering, where we are already now seeing positive effects. And basically, it does take time is what we realized from the time we obtained the ANSM certification to actually getting the customer in and converting into revenue. So that is where the time was consumed, but we are pretty confident as far as the business model is concerned, and the fundamentals of that particular business is concerned. And because of this single offering of drug substance and drug product, we do expect that a lot of projects should flow to the truck product part of the business.

The next question comes from [ Rama Nochanda ], an Individual Investor.

So my doubt [indiscernible] goodwill on 31st March 2025, our goodwill was INR 4,053.56 crores. But we see an 7th of March '26, it has increased to INR 4,798 crores. How did this increase?

So this increase is largely on account of the foreign exchange fluctuations that we have seen in the last 1 year. So these assets get restated at the closing exchange rate. But otherwise, there is no additions, so to say, as far as goodwill is concerned, it's purely on account of the FX fluctuation.

Okay. Sir, majority of the goodwill we are holding is in [indiscernible] it is quoted in -- it's not quoted in Indian rupee.

So basically, this is the -- so this goodwill has 2 parts. One is the goodwill on the stand-alone India balance sheet which is on account of the internal restructuring the module that we had done in 2017. So that is, I think, roughly about INR 550-odd crores. And the rest of the goodwill is on account of Google on consolidation. So because the India entity has investments in its wholly owned subsidiaries in Switzerland, Netherlands, et cetera. All of these investments would revalue to the fair value in 2017. So the difference between the fair value and the book value is what is sitting as part of this goodwill on consolidation.

[Operator Instructions]. Next question comes from Mr. Vikram Mehta, an individual investor.

On the pricing of borrowings and the balance sheet, you, see we have increased borrowing, long-term borrowings from INR 1,150 crores to INR 1,340 crores. The cash on hand has gone up from INR 340 crores to INR 790 crores. The point being there, if we don't have any major CapEx planned, why have we increased debt into [ active ] cash on the balance sheet rather than vice versa?

Because the new facilities that were provided as part of the syndicated rent facility that Swiss entity where we had to draw down the facilities and since we have U.S. dollars in hand, those are basically capital deposits on which we receive a positive interest because the cost for the Swiss franc borrowing for us is less than 4%. So that is where we are able to get a positive interest on the borrowings.

So you've actually saying here, we have an earning interest in value currency and paying lesser in other...

Yes, because -- and the investment is also in foreign currency only, but because otherwise, if we don't draw down, then there is a commitment fee that will be charged by the bank. So instead of paying the commitment fee, it is in our interest to get a positive interest on the cash that is drawn down.

So when do we reverse [indiscernible] this is a very skewed outlook on the balance sheet, right, to an observer, which was also the point which another investor was making earlier. So maybe you could give some explanatory note with the notes to your accounts to this. So like in light, it looks like a very heavy debt equity ratio which clearly is not the case. So again, when do we see this reversing in the sense that when do we using the cash in bank balance to pay down and reduce the overall debt number at a consol level?

So from a -- so I think the right way to look at it would be from a net debt perspective, having the cash on the balance sheet actually provides us the interest income as well. So the right way to even look at our P&L would be the finance cost, net of the interest income because on the cash, which is sitting, we are also earning in interest income. So effectively, our cost gets reduced on account of the investments because of the borrowers.

Fair enough.

The net debt would be the right way to look at the balance sheet rather than just the cross debt.

Fair enough. So could you give us some guidance on what is the target net debt reduction year-on-year for the next 2, 3 -- 2 to 3 years?

So that would be at least to the tune of about CHF 10 million to CHF 15 million roughly about INR 150-odd crores a year is what the target is.

I think if you're generating a cash flow of INR 500 crores plus a year. Your minimal CapEx, why are we only targeting reducing the debt by INR 150 crores and not -- I mean and why not something closer to INR 250 crores, INR 300 crores?

So this is the minimum target. I mean, it could be even higher than that. But yes, as you correctly mentioned, from the cash flow that we are generating x of the CapEx that we need to do every year. Whatever is the additional cash and maybe a small amount for the working capital as well, the rest all cash is something that will go towards the net debt reduction.

Thank you, sir. That would be the last question for the day. Now I hand over the floor to Mr. Stephan Fritschi for closing comments.

Yes. Thank you very much. Thank you for the interesting and informative questions. We are convinced we could answer to your satisfaction. Also thank you for your general interest in digital coverage at Ansys. We are looking forward to a bright and good future at our portfolio company because we are very well positioned in the market, and we are optimistic that we can reach our goals. With this, I would like to say thank you, and say goodbye until the next time. Thank you.

Thank you.

Thank you. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you and have a pleasant evening.