Gland Pharma Limited ($GLAND)

Ladies and gentlemen, good day, and welcome to the Gland Pharma Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shriniwas Dange, Head of Investor Relations. Thank you, and over to you, sir.

Thank you, Parvas. Good evening, everyone. We welcome you to Grandpharma Earnings Conference Call for Q4 of FY '26. I'm Shriniwas Dange from the Investor Relations team at Gland Pharma. Today, we have Mr. Srinivas Sadu, Executive Chairman; Mr. Ravi Mitra, Chief Financial Officer from India Office; and Mr. Alain, CEO of Cenexi, who is connected from France. We will begin the call with the business highlights and operational highlights from Mr. Sadu. Followed by updates about Cenexi from Mr. Alain. This will be taken up by the group financials overview by Mr. Ravi. Before we proceed, I would like to remind everyone that some of the statements made today will be forward-looking and are based on management's current estimates. These statements should be considered in light of the risk associated with our business. This call is being recorded. The playback and script will be available on our website shortly. With that, I hand over the call to Mr. Sadu for his opening remarks. Over to you, sir.

Thank you, Shriniwas. Good evening, everyone, and a warm welcome to all to Gland Pharma's earnings call for the fourth quarter and full year ended FY '26. I will begin with the strategic and operational overview. Alain will then share an update on Cenexi, and Ravi will walk you through our financial performance. It has been a very strong quarter and a year for us in terms of revenues and profitability. This has been driven by robust growth in the CDMO segment alongside new product launches, improved Cenexi performance and healthy profitability across various business segments supported by ongoing cost efficiency initiatives. We remain confident in sustaining this momentum supported by a pipeline of complex product launches and the continued ramp-up of CDMO partnerships. Let me begin with an overview of our performance. For the fourth quarter FY '26, we reported revenues of INR 17,428 million, reflecting a growth of 22% year-on-year. Adjusted EBITDA for the quarter stood at [ INR 5,244 ]million with margins of 30% and adjusted profit after tax was INR 3,667 million with margins of 21%. The quarter saw a strong momentum driven by new product launches, including [indiscernible], higher volumes from recently secured tender wins, continued ramp-up in key products and improving capacity utilization along with steady contribution from Cenexi. For the full year FY '26, our revenue stood at INR 64,307 million, registering a growth of 14.5%. Adjusted EBITDA came in at INR 16,826 million, with margins up 26%, while adjusted PAT stood at INR 10,455 million, with margins of 16%. The CDMO business represented 46% of total revenues supported by healthy growth of 28%, driven by our continued strategic focus on investments. The consolidated performance reflects our ability to deliver high-margin CDMO projects, along with expansion of product portfolio, supported by strong operating leverage and cost optimization initiatives. Let me now walk you through the base business operational performance during this year. Starting with the United States, which continues to remain our largest market, we have seen strong new product and volume-led growth. Revenues for the quarter were INR 9,716 million, growing at 26% year-on-year. While for the full year, revenue stood at INR 33,181 million with a growth of 11%. This growth has been primarily driven by new product launches and increased volumes from existing and new GPO contracts. During the year, we launched 31 products in the U.S., including 5 products in quarter 4. Improved margins during the year reflect efficacy of operational efficiency improvements and operational leverage backed by volume base and new product base expansion. In Europe and other related markets is strong and accelerating momentum. Revenues for Q4 stood at INR [ 794 ] million, while full year revenues were INR 3,249 million, reflecting a growth of 11%. Growth has been supported by early benefits from our integrated business development model. The rest of the world markets revenues for the quarter stood at INR 1,468 million growing at 17% year-on-year, while full year revenues were INR 6,511 million, reflecting a growth of 7%. Growth has been supported by tech transparent CD business alone with steady performance in our own portfolio. In India, revenues for Q4 were INR 670 million and INR 2,600 million for the full year. Coming to the Cenexi business, it continues to deliver a steady performance with revenues of [ INR 45 million ] during the quarter. [indiscernible] year-on-year. Cenexi is now EBITDA positive, operationally stable and poised for growth. This performance reflects disciplined execution throughout the year driven by higher capacity utilization contract renegotiations to account for inflation, workforce rationalization, ramp-up of new products and deeper integration plan across business development, technology transfer and shared functions. Alain will provide further details of the same. We remain confident of its continued contribution to both revenue growth and margin expansion over the medium to long term, notwithstanding some inherent quarter-to-quarter variability. At an overall level, during FY '26. We have strengthened our market position, supported a broader geographic footprint, deeper customer engagement and increasing traction from our differentiated high-value product portfolio. Operationally, FY '26 has been characterized the strong volume growth and improved capacity utilization. Capacity utilization across key lines is now translating in improved operating leverage and profitability. We are putting new capacities on our site to cater the improved demand of our existing products and planned new launches. In line with our expectations, we have received approvals, particularly [indiscernible] in February and [indiscernible] in April. [indiscernible] been launched in the U.S. and European markets, and we're already seeing strong demand and ramp-up. Similarly, our [indiscernible] portfolio is expected to have a steady revenue contribution. These products are expected to be meaningful contributors to growth in FY '27 and beyond. Our CDMO business continues to show strong traction as emerging as a key pillar of our long-term strategy. During the year, we signed multiple new CDMO contracts and expanded our pipeline across oncology prices and complex injectable. One of these major CDMO projects announced earlier is progressing well and is expected to be commercialized in the history of FY '28 with an estimated annual revenue potential of INR 25 million to INR 30 million. In addition, few of the high-value complex [indiscernible] contracts are signed. These are expected to contribute meaningfully in the medium term. For the full year FY '26, CDMO business contributed 23% of base business revenues growing at 33%. We clearly see the driver of growth and margin expansion going forward. In the GLP-1 space, we have made significant progress with 8 contracts already signed, and the additional 67 are expected to resign soon. And current cards capacity now stands at 140 million units. Our approach remains disciplined and value-focused positioning gives us a strong mid- to long-term opportunity with meaningful upside. We continue to focus on capability building by exploring in-licensing opportunities in the areas of differentiated therapy areas or drug delayed systems like liposomes and biologics are biosimilars and capacity additions. On the cost front, our focus on yield improvement, alternate sourcing, energy optimization and process efficiencies continues to deliver results, contributed to approximately 1% to 2% margin improvement. At the same time, our investments in AI and automation across quality, R&D and vantaging will create structural efficiency advantages for the future. Our R&D efforts remain focused on building a differentiated pipeline. During FY '26, we spent IMR 2,230 million on R&D, representing on 5% of this business revenue. In the U.S., we filed 24 ANDAs, issued 28 approvals and launched 31 products. Our pipeline is increasingly focused on complex injectables and specialty platforms, which will drive long-term value. We are witnessing increased seat in existing products on the back of contract wins if compared to pricing which [indiscernible] is being achieved with our cost improvement programs with respect to the procurements and acquirements of scale. The [indiscernible] business demand, we are investing in the capacity expansion and CapEx outlay of INR 2,000 crores over the next 5 years. Looking ahead, we remain confident in our growth outlook supported by recent high-product purchase, product ramp-ups and CDMO execution. At the same time, we expect EBITDA margins to remain strong. To summarize, in FY '26, we have strengthened our operating foundation and built multiple growth engines. We remain highly confident in our strategy, execution and long-term growth trajectory. Thank you for their continued trust and support. Over to you, Alain.

Thank you, Mr. Sadu, and good evening, everyone. This has been another good quarter at Cenexi. We are happy to report that we delivered on our guidance for the last quarter of our financial year 2025, '26. Cenexi recorded EUR 45 million in revenue this quarter, a 4% increase over the same period last year, with a major revenue improvement in [indiscernible] compared to the previous year. After a profitable Q3 FY '26 quarter, we are pleased to inform you that we delivered an EBITDA of EUR 1 million in Q4 FY '26, in line with our guidance. This underscores that our turnover strategy continues to gain momentum quarter after quarter. During full year FY '26, revenue stands at EUR 182 million reflecting an 11% growth year-over-year, and EBITDA improved by EUR 16 million. I will now provide key site level updates. In Fontenay May, the production ramp-up on our new and profiling line, which was installed last year, is progressing as expected. We are also actively preparing the replacement this summer of another old ample line with a new high-capacity line that will add additional 30 million ample capacity by 2027. The activity in our [indiscernible] site continues to grow significantly, supported by the ramp-up in production of 2 successful products launched in 2025. A an inactivated vaccine and a sterile of timing gel. In only, one of our existing customers asked to relaunch the development of a solid product that could become a game changer for the site. Finally, in Braine-l'Alleud, we continue to see strong momentum in our injectable pipeline, supported by sustained customer interest and a healthy flow of request cation providing good visibility for future growth. We won a large contract with a leading European laboratory to manufacture a hormonal drug filled in prefilled syringes. We remain confident in our outlook for next financial year, supported by an improvement of our operational performance and an increase of output in front a strong ramp-up of production with recently launched products Herouville and the continued favorable outlook in Osny and Braine-l'Alleud. The ongoing investment in capacity increase and the fast-growing business pipeline, reinforce our confidence that we will achieve our midterm objective of mid-teens EBITDA. Thank you for your attention. I now invite Ravi to take you through our financial performance in more detail. Ravi, over to you.

Thank you, Alain. Good evening, everyone, and thank you for joining us today as we review our financial performance for the fourth quarter and full year FY '26. I am pleased to share that we have reported highest ever quarterly revenues and EBITDA during fourth quarter of FY '26. FY '26 has been a strong and rewarding year for us marked by healthy revenue growth improved profitability and valid progress across all key business segments with significant 28% growth in CDMO business. Currently, CDMO business constitutes 46% of the total revenues. The fourth quarter performance also was [indiscernible] with encouraging revenue growth and improved profitability with new product contribution. Let me begin with the performance of the fourth quarter. For Q4 FY '26, our consolidated revenue stood at INR 17,428 million reflecting a healthy growth of 22% year-on-year. This growth was driven by new product contribution, strong volume expansion and continued traction in our older key products. The base business delivered a robust performance, while Cenexi continued its momentum with positive EBITDA contribution during the quarter. Overall, gross margins for the quarter stood at 66%, an improvement of 30 bps over previous year, reflecting the benefits of improved product mix and operational efficiencies. Excluding Cenexi base business gross margins were at 62%, which improved 90 bps over previous year, reflecting our continued focus on cost optimization and margin improvement plans. Moving to the full year performance. I am pleased to highlight that FY '26 has delivered strong results across all key parameters. Consolidated revenue for the full year stood at INR 64,307 million, reflecting a growth of 14.5% year-on-year. The base business delivered consistent growth supported by new product launches, increased volumes and improved market share, while Cenexi contributed meaningfully with a strong recovery and growth in revenues. Overall, gross margins for FY '26 stood at 65%, reflecting an improvement over last year of [ 250 ] bps, driven by favorable product mix, operational efficiencies and higher contribution from value-added segments. Excluding Cenexi, base business gross margin were 61%, which improved by 60 bps over previous year. Aligned with our strategy of building a strong pipeline of complex and differentiated products. R&D expenses for Q4 stood at INR 506 million, representing approximately 4% of those business sales. While for the full year, R&D expense were INR 2,250 million or about 5% of this business revenue. Our continued investment in R&D reflects our tend to strengthening capabilities in complex injectables, peptides and specialty delivery platforms, and we are seeing good progress across our development pipeline. Coming to profitability during Q4 FY '26, adjusted for ESOP related noncash expense of INR 114 million, adjusted EBITDA stood at INR 5,244 million, with margins of 3%, a remarkable improvement of 500 bps over previous year. Main growth was supported by operating leverage with 2 additional lines getting commercialized and cost efficiencies. For the full year FY '26, adjusted EBITDA, excluding ESOP-related expense and other one-off items stood at INR 16,826 million with a margin of 26%, an improvement of 360 bps over previous year. This was mainly imported by Cenexi turnaround, operating leverage and cost efficiencies. For the base business, excluding Cenexi, adjusted EBITDA margin remained strong at 41% for the quarter and 38% for the full year '26, highlighting the inherent strength of our core operations. We are also pleased with the progress which has significantly improved its EBITDA performance and return to profitability for the 3 quarters during the year, marking an improvement milestone in its standalone journey. Other income, comprising primarily foreign exchange gains and interest income stood at INR 1,115 million for Q4 and INR 3,160 million for FY '26. Adjusted net profit for Q4 stood at [ INR 2,067 ] million, translating to adjusted PAT margin of 21% versus 13% in previous year. For the full year, adjusted net profit stood at INR 10,455 million, with margins of [ 16% ] versus 12% in previous year, reflecting a strong improvement over the previous year. On taxation, the effective tax rate for the quarter stood at 28% and the full year stood at approximately 29%. As of March 31, 2026, total cash and cash equivalent at the group level stood at INR 33,591 million. External debt at Cenexi level stood at INR 2,434 million. And overall, our balance sheet continues to remain strong and well capitalized. Cash flow from operations remained healthy at INR 4,035 million for Q4 and INR 10,340 million for FY '26 compared to INR 9,157 million in FY '25, reflecting improved operating performance and better working capital management. Our cash [indiscernible] for FY '26 averaged 164 days, showing improvement compared to previous year driven by better inventory management and receivable control. Total CapEx during FY '26 to INR 4,928 million, primarily directed towards the capacity and capability expansion in India, ongoing investments at Cenexi and selective projects aligned with our CDMO and complex product strategy. These investments are in line with our long-term strategy and building high-value capabilities and supporting future growth opportunities. The year has seen strong revenue growth improvement in margin profile and robust cash generation, along with a significant improvement in Cenexi performance. There is an increasing integration of Cenexi with Gland Pharma core operation, particularly in business development, customer engagement and tender participation. We are now seeing meaningful cross-selling benefits with joint capabilities enabling us to win larger multi-geography contracts and attracting global customers. Cenexi and Gland will increasingly be operating as one unifying platform in future. With that, I would now request the moderator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Consider of numbers for the quarter, if you could share the milestones on the revenue share for the quarter?

For the quarter, the profit share is 9%, milestone is 6%.

So excluding that or like existing for the same, the EBITDA margin is still quite healthy for the quarter and in terms of the absolute EBITDA as well. So just to understand how sustainable is this as far as base business inventory is concerned?

Yes. As we said, I think we could launch the major CDMO products and also the 2 large products, [indiscernible] launched in March. So that is the ninth year that product I imagine and also the several CDMO projects that got launched in this quarter. And this is the annual year and these are long-term contracts. So these are -- this will be sustainable in terms of long term.

Okay. And sir, secondly, on this, if you could quantify like the 8 contracts value-wise, how much of this would be like the GLP 8 contracts, if you mentioned that already signed? And how much of the capacity of this 140 million units will get utilized for these contracts?

As we said, they're not actually to any numbers for GLP. Even the guidance we've given is excluding GLP because it all depends on this partner getting approvals in different markets and volumes. So we're not giving any numbers out yet. We're just seeing how many contracts and the events also very difficult to assume right now. So the forecasting of the guidance we give is extruding GLP. So anything which happens and GLP on upside.

Got it. And while not getting into details with respect to GLP, but any approvals, so to say, you're expecting FY '27?

Yes, at least our partners are expecting opposes through partners. Yes.

And sir, just secondly, with respect to Cenexi, is it now safe to assume that at least will be EBITDA metric for 2027 and with sort of EUR 45 million revenue?

So for FY '27, our target is to reach at least mid-single digit -- high single-digit EBITDA. By the end of this year, you should get there. That [indiscernible] yes.

And this should be driven by the scale up in revenue in that scale revenue despite that...

Yes. So the focus is more on efficiencies and putting up lines which are invested into. So the focus is more on that and revenues with these new product launches, the high-value products will replace low early products. So the revenue increase may not be that great, probably but mostly on the profitability, the improvement in what you are seeing is more on the efficiency.

Got it. And sir, just lastly, on the hedging policy, if you could sort of refresh follow the blend on both base business as well as next year.

So we have naturally hedged policy. So most of our parameter which we import is open and as well as the revenue in. In Cenexi, it's mostly euro revenue and [indiscernible]. So there's no need to hedge there.

The next question comes from the line of Neha Manpuria from Bank of America.

My first question is on the next piece. Sir, on your comment that the revenue increase should not be that much. I mean given the investments that we have made with the addition of [indiscernible] and the contract lines that we're talking, we did see EUR 50 million in the last quarter. Should the next year not be above $200 million -- EUR 200 million of revenue in FY '27?

So we met tax about close to EUR 200 million in FY '27. But the majority of the growth matter next year when we put out this additional line in August of this year that will add capacities that will commercialize next year. That will ramp up a bit. But FY '27, EUR 200 million is the target we are looking at, yes.

Understood. Okay. So the capacity addition that we're doing, the NPL loans that we're adding will contribute in this year. But even the line that we have added last year, one of the lines?

Yes. So last year, line which we added in ample in [indiscernible] is ramping up now. So that is adding the right? The new additional line, which will be put up in August of this year post getting it qualified, the ramp-up will happen next year.

Understood. Okay. And for the base business, what is the growth momentum we should assume there? Is the mid-teens -- mid-to high teens given the CDM contract win and the new product launches. Would that be a fair assumption? How should we think about Cenexi growth?

As a consol, we are looking at around 13%, 12% to 13% growth. So it's a mix of both Cenexi and base business. This is excluding the GLP, whatever we get used on that.

Understood, sir. And on the CDMO business that you've mentioned, I think I missed the review, but did you say it was 46% of the revenue and grew 23%?

The base business is [indiscernible] is 100% CDMO. So as a group, it's 46%. But the base is increase is about 28%. Yes.

Okay. And the contract, the high-value contracts that you're talking about, I think one of them that should start -- I mean all of the contracts put together, what would be the pipeline that we have, which gives you this medium-term. If you could give any color there on the premium of the revenue?

So FY '27, it's almost, I would say, 40 million, 40 million, 50 million will come from CDMO. So the additional growth coming from the CDMO contracts in FY '27 will be between 40 million to 50 million. Larger contact -- yes, sorry?

This is in the base business?

Yes, base business, correct.

Next question comes from the line of [ Sasha Gol ] from Infinity Capital.

Congratulations on a good set of numbers. I got 2 questions. [Technical Difficulty].

Sorry, can you repeat that?

Yes. So my question is what sort of growth do you expect for the overall business in the coming years and over the next 3 years?

The next 4 years, we're looking at a CAGR of 15% on the -- as a consol basis.

Okay. And my next question is on Cenexi, what sort of steady-state margin profile can we achieve?

So the margins... So we are looking at a meeting EBITDA level in the midterm.

The next question comes from the line of [ Dewang Shah ] from A&T Financials.

Sir, the first question is from the sales side. We did the acquisition a few years. And also like -- like first now on the last question, you spoke about that in next you can achieve the net number, right? Was it a good purchase or it's like -- like I'm not understanding what was the concern behind it? Like what was the rationale? Because it's -- we have purchased 2, 3 years late [indiscernible]. In next year, we see EBITDA levels like what was the rationale view on that?

You mean the rational behind purchasing Cenexi? That's the question?

Yes.

So one is, of course, we are not still exporting to synergies as a strategic initiative, we need to enter CDMO business in Europe. That's one. Second, the client tail of Cenexi is completely independent of what we have. So we are not completely expected that. So we are working on that. We have already signed 5 to 6 products with the same plan at what Cenexi has. So all of those don't reflect in Cenexi's business, but that adds to at a group level. So one is that. Second, our own products, now we have actually taken MAS in Europe. So Cenexi [indiscernible] is releasing entity there. So more products of plan can get into European market as well. From technology front, they have technologies which we don't have again, like 6 months, we don't have. So we're doing a development program where we can develop and then get manufactured Cenexi because there's a substantial business out there for that. There are not many sites available for it. So there are multiple reasons why we acquired is not just the business what they have. So as we speak, we have already started developing some [indiscernible] products. Now we're looking at [ competition ] you can do in India. Signing contracts with customers for Cenexi for all products and auto products getting launched in. So there are 7 reasons why we did this acquisition.

Okay. And sir, the main address was like currently, the Cenexi is operating at maximum level? Or it's like the capacity utilization is 50% or [ 80% ]? Can you just give me a brief like what's the cause to the utilization over there?

At Cenexi?

Yes.

So Cenexi [indiscernible] operating at full level. The continent is at almost 100%. That's how we kept -- we'll add a line and one more line we're adding, we paying that so that we can increase the capacity. So there is a demand -- higher demand than what we're able to supply today. Only again, a solid oral, it's almost 100%. I would say 90% occupancy. The other 2 sites, we have capacity where the tech [indiscernible] programs have happened and some products are getting launched. Those are probably 50%, 60% capacity, 2 sites.

Okay. And sir, what's the future plan on the group base on the Gland Pharma group base, what are your future plans to maintain this EBITDA level of 25% loss? And like we are just spending 4% to 5% on the R&D. So is there any plan to increase or ramp up that part of the double digit or something?

So we have -- there are several programs that we're doing. One is, of course, internal R&D where we spend 4% to 5%. You also do co-dev projects, 15 projects we are working with development partners those don't reflect in this spend what we do. We're also doing an investment in program in China in the liposomal side. So those also do not reflect this. So this is an internal R&D spend what we're showing reflected, but there's also spend, which is done on different aspects. The other is, of course, more focus on high-tech CDMO. So the investments are going into a fine macroscale manufacturing technology, nanotechnology. Those are high-value CDMOs where the margins are very high. So on one side, the volumes are helping us in terms of the products, high-volume products, which is helping with an operating leverage. So keeping the cost down per unit cost down. On the other side, we're also entering contracts with us high-value CDMO contracts. So long run, I think can be sustainable in terms of margins.

[Operator Instructions] The next question comes from the line of Rahul Jeewani from IIFL Capital.

Sir, this overall consol top line guidance of 12% to 13%, which you provided for FY '25, right? I'm assuming that is an INR terms. But on the currency as well, both on USD, INR and EUR, we would see almost a 5%, 6% kind of a benefit in FY '27. So do you think that your guidance of 12% to 13% is a bit conservative because then, essentially, what we are implying is that the constant currency growth would only be again high single digits?

So we can't assume what the currency rate would be set taking in a constant currency whenever we're giving the guidance. So this is based on constant currency growth. So if any fluctuation in currency happens and that will be an upside.

Okay. So 12%, 13% is on constant currency?

Correct. Correct.

Sure, sir. And well, let's say, while you said that Cenexi might see a growth acceleration from FY '28 or the base business, what is driving, let's say, growth in FY '27?

So like I said, products are launched in the last quarter, and that's why the numbers look good. That is annualized, and we ate won a GPO contract for that and the BMI multivitamin we're launching in this quarter. So this just the 3 or 4 products are actually contributing to about 40 million. And then we have our own new launches, helping us give another INR 200 crores. So together, about INR 650 crores is from the base business and about INR 150 crores will come from the Cenexi business. [indiscernible] products, excluding the ForEx and the GLP-1 and we are also seeing a lot of shortages. We are hearing from U.S. now. that could be also be an upside. But we think that with the current order book and forecast at hand, 12% to 13% is the guidance you want to [ get ].

And last question from my side. So obviously, over the past couple of quarters, we were banking on [indiscernible] and the multivitamin portfolio to get launched, which is helping us to drive growth now. So for FY '27, are we looking at, let's say, any critical product opportunities to come in, which you can fall out?

No. So there are already products which are approved, which we have tentative approval and the pin is expiring later this year. So the product or approved just a launch is there, and there are other CDMO contracts which will start producing it. These are all accrued products. So the guidance for this say, 12%, 13% is without any risk, I would say, because all the -- almost all the products we have approval that took one small product.

The next question comes from the line of Ashish from BMO Capital.

So on GLP-1, are we looking to register the product ourselves in any of these markets? Or we will prematurely relying on manufacturing partners, will be manufacturing partners or companies registering the product?

Yes. So we are not developing these products. We are only CDMO for GLP-1. So we're really producing all eradicate and that appetite or 3 GLP-1 versions will be manufacturing, but mostly -- but everything for other customers.

Got it. My second question is consistent, you have GLP-1 in the customers approved and the pipeline, what market have a partner received approvals in and what sort of capacity utilization do we expect over the next 1, 2 years?

So I can't give more details because if I tell whether the customer got approved then it's very obvious. So we want to -- we don't want to get that out. Volumes also it's too early to tell. Like I said, guidance person want to see how the market forms and when these customers get approvals and how many units they then sell. So it's too early to give a guidance on that.

Okay. But any specific markets which that got an approved you is that all?

Probably you'll hear once they've answer, don't want to let out [indiscernible].

The next question comes from the line of Abdulkader Puranwala from ICICI Securities.

Sir, first question, just a follow-up on the previous participant on GLP-1. So first of all, any reason why we are not including this in our guidance for '27. And secondly, if you could just broadly help us underpin this EUR 14 million capacity what we have now say, over the next 2 to 3 years, how should we kind of build up a ramp-up into this capacity?

No, it's very difficult to give a guidance because one is, of course, we are not selling to rightly our customers. Second, the timing of launches will vary from customer to customer, market to market. And most of the volumes, as you know, comes from U.S. where the patent is close to 2030. So the ramp-up will happen mostly on -- during that time. So I think next year, I would say, a lot of exhibit batches filings and some approvals will come later part of this year, maybe third quarter. So it's very difficult to assume numbers without actually having to know when the approvals have come in which market.

Understood, sir. Sir, and next one, just a clarification on the opening amount from the reserve when you talked about opportunities of crossing coming within the parent growth. So how exactly should we look at it from a growth perspective? Is it something that you have already worked upon? And now FY '27 in guidance kind of equity covers it or for the FY '28 and beyond, how should the ramp up in these products should pan out?

I mean there's an integration piece, you're saying?

No, I'm talking with the parent with on cross-selling opportunities there.

No, that's not with [indiscernible] with Cenexi, but that's not guided in FY '27, whatever we are doing with [indiscernible], whom we are signing products with them. That is not the -- you'll see that from FY '28. There are 3 MAs which are also signed up. We might see some launches happening in third quarter, but mostly from FY '28.

Okay. Okay. Understood. And sir, last one is a bookkeeping question from my end. I mean the PR of close to 30% for the year. What should we kind of bullet in for the next 2 years?

M&A EBITDA margin?

No, sir, I'm talking about the tax rate. Yes.

Tax rate will improve because Cenexi profitability as it improves, there will be the blended tax rate will be better, it will come down.

Next question comes from the line of [ Smith Gala ] from RSP Ventures.

Congratulations on a good set of numbers. My first question is also, you also [indiscernible] your opening remarks what caused us to give such wonderful growth in Q4, especially in the base business? And what kind of margins are sustainable as the base business is concerned, we have delivered around 40%, 41% margins? So for the full year, not even with '27, '28, what the kind of margin base business are sustainable?

So if you see last few quarters, base business EBITDA margin is around 35%, 36%, and we've been guiding like that. So we still guide for the year as a base business around 25%, 30% to 35%. And as a console basis, around 25.6% EBITDA. Now the like probably for a few quarters, we've been saying the initiatives we took to increase the [indiscernible] of business so that -- those contracts which are signed up and got commercialized last quarter and it will continue to commercialize moving forward. On the initiative side, again, 2 more lines got operational this quarter. One more then we'll get operational next quarter. So we're also getting an operational leverage from capacity because there is a demand in terms of products. So we've been seeing which products actually to sell. So there is an increased demand. Again, we did tell that we signed. We got several GPO contracts end of last year, which started where we just started selling from beginning of this year. So that also added to volume growth and added lines and volume growth, that also has been operational leverage. So that's where the margins are high. It's a combination of new GLP-1 contracts which we have won because of the better cost structure we have and then an operation leverage and also the [indiscernible].

That was helpful. The next question is, I know that we don't have much impact to the Middle East, it's around 2% to 3% of our total sales. But any impact do we see on the Middle East part of our business, as you may have mentioned, Saudi Arabia in some of our growth guidance. And any development on the new CEO appointment?

So if you look at the Saudi, it did impact, if you see last quarter, there's a dip in RW business, major dip is coming from that area because we didn't ship anything to that space. So probably, hopefully, next quarter also, if it cools down, that might shipments might start and RW might come on track. So that's an impact for sure from a business perspective. From CEO perspective, yes, we are looking at candidates who have stronger CDMO background and also [indiscernible] as well. That's an active question.

The next question comes from the line of Saion Mukherjee from Nomura.

Mr. Sadu, if you can talk about your investments and any update on the biologics biosimilar space that you had mentioned a few quarters back?

Investments generally or on the adjustment of bio. So on the investment side, I'll first touch upon the general side. We did -- we do have now facing some constraints on certain product ophthalmics. We are tight on it. So we have taken a good approval to put up ophthalmic line with the capability of suspensions. Also, they are getting the growing in technology, so that will be next year. So but the investment will start now. So then the -- of course, some CDMO contracts needed dedicated equipment and lines. So there's investment going in that. So around INR 2,000 crores, we are investing in the next 3 years in addition to about INR 300 crores this year.

FY '27, we expect about INR 500 crores.

Of the INR 500 crores investment in FY '27. Yes. And on the bio side, still, we are not invested much, still it's low run. So in the guidance, you give also the numbers, I would say, is lower, not that much. But we are looking at small-scale projects just to understand the space and know how, but not much investment doing in the best space yet.

Right. I think the second question I had was on medium-term growth in investing INR 2,000 crores. I think you mentioned over the next 4, 5 years, you expect like mid-teen growth on a consol basis. And there are various growth drivers that you have talked about. Is it possible for you to sort of indicate the key drivers of what you think will be the #1, 2 or 3 drivers that would sort of help deliver 15% kind of midterm top line growth?

I think our CDMO pipeline is very strong. I would say the [indiscernible] portfolio is strong again. So several products in that they're under patent, which goes our pack. So that is one big growth driver. One is the complex injectables, suspension products. And there are sterile API-based complex in [indiscernible], did mention last year on the CMS project where we signed with European entity. So that will commercialize from end of this year, third or third quarter of this year. So that is a big revenue driver for us. along with some end device projects what we signed up with multinational on the CDMO side. That's a good driver. So there's several pipeline projects with [indiscernible]. I would say many are approved products, some are changed from a while to device projects, which have taken up. And [indiscernible] at you back. I think these are the major growth drivers.

I mean, is it like over the next few years, your growth rate would be largely steady at like mid-teen or you see one deployer where there could be a step-up like FY '28, '29 or is it more...

FY '29 will be one big step up, a couple of complex products, which are big ones, will be launch for the second and third quarter 79%. That could be one big step up. But I think the steady state this year, if it is -- we are saying [ 13% ] at the constant currency and then FY '28 could be 15%, and then later, it could be 90%, 50% of the most. So the step up in FY '29 where more complex products will hit the market. But otherwise, it won't CDMO and other products, which we some of settlement dates in FY '28, those also gets launched in FY '28.

Understood, sir. And just last question, if I can, on the cost side because the Middle East. Have we seen any pressure in terms of raw material availability or price or power cost in Europe? Any sort of an impact on account of the Middle East conflict? And also in your comments, you also mentioned about cost optimization. I mean, is there scope for additional cost optimization within your existing setup and if you can quantify that?

Yes. So to give you an ongoing exercise for us in terms of cost optimization. From the cost perspective, Europe, I think [indiscernible] our costs. And in India, we more and more we are looking at solar. We have already acquired a solar plant. So that should help us in reducing some of our power costs. And also it's a constant optimizing in terms of several products where the boxes are lower, we are increasing or bad sizes because of the contracts we won. So I think it's an ongoing exercise. In terms of Middle East, yes, it's not the question of availability, but I think it's more to do with -- we hear there is a short delay in solvent supplies, but as plans are not a major API producer. So there's not much impact on solvent side. But from [indiscernible] here, there is a request from the suppliers to increase the 5% to 6%. So we are studying the impact on the nonrun, it's too early to tell, but probably there could be an impact of 1%, 2% overall. On the logistics side, as you know, a model, we share the costs with our partner. So it will be minimal cost. But again, we have to see the total impact, but probably 1% to 2% of the revenue could impact.

Yes. next question comes from the line of Shyam Srinivasan from Goldman Sachs.

Just the first one on the corporate capacity now at [indiscernible]. Sir, I know you're not telling which are the contract geographies. But any sense of the -- I don't know whether all GLP-1, but aggregate, roughly how much of the [ 150 million ] could be GLP-1 has been contracted?

All are GLP-1 only is just a different molecule in GLP-1.

Sir, how much has been contracted? Not capacity.

So can you repeat, Shyam? I didn't get your last statement.

No, [indiscernible] asking of the 140 million of capacity, how much have been contracted now? Aggregate number. I'm not looking at which contract, but aggregate how much has been contracted at least in the next 12 months.

So Sam, it is not possible for us to give you how much of the capacity has been contracted because it is basis the projections that are provided by the partner, and it changes from time to time. It won't be possible for us to quantify how much of it has been contracted so far.

Understood. But the expectation is that in the next 12 months as we come to fusion and maybe there's a press release from some of the partners, if you come to life in the public domain. Is that true, sir?

Yes. once they get approval, then we will make an announcement comfortable.

Understood. Understood. Second question is on constant currency growth for the quarter, Q4, the growth is 23%, but what is constant currency growth? And maybe if you can also tell us the U.S. revenue growth?

We can come back to you on that. It's very difficult to tell because we have multiple because it's also volatile during that quarter because many invoices made at different point of time. And we also have U.S. -- some U.S. sales happening in rupees, especially with the local customers. But we'll come back to you, Shriniwas will come back to you separately.

And sir, last question is on balancing. So was there a cement we launched in sad? Was there a channel push or an inventory push given that which could have increased Q4 numbers and maybe it normalizes over time? Would that be a development?

Not really. In fact, after we launched the customer has won the [indiscernible] contract as well. So the numbers are actually up from the first quarter, the next 4 quarters, if you analyze that, the annualized numbers will be higher than what we sold in that quarter.

The next question comes from the line of Ashish from [indiscernible] Capital.

So I mean, I previously asked regarding the GLP-1 ramp-up and you told that it might be delayed. And I was wondering what is the rationale behind adding the next 100 million capacity? Was the previous 40 million fully utilized?

No. So when everybody launches in 2030, so we'll be -- we should be ready with that. So what we have also done is we have signed the insulin contract for this line, which will help us fill the capacity for some time till the full ramp-up happens. So the line what we have is a combo line, which can fill vials and cartridges. So we do -- we will sell insulin parties and while for at least next few years, still a full ramp-up happens for the GLP-1. But as you know, we can't produce to everybody so just have 40 million when it commercializes. So it's more to do with commercial launch when it happens in 2030, we should have enough capacity. But the filing will happen from that plan. So that's the reason.

So the insulin rides are occupying the total 140?

Well, in [indiscernible] cartridges might occupy 30 million to 40 million in the next couple of years, it will ramp up, but at least that will cover till 2030, majority of costs.

Ladies and gentlemen, we will take this as a last question for today. I now hand the conference over to the management for closing comments.

Thank you, everyone, for joining us today. We appreciate your participation in the question-and-answer session during the call. If you have any follow-up questions, please feel free to reach out to us. We look forward to connecting with you again next quarter. Thank you.

Thank you. On behalf of Gland Pharma Limited, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines.