Granules India Limited (532482) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Granules India Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Prachi Ambre from MUFG Investor Relations team. Thank you, and over to you, ma'am.

Thank you, Anushka. On behalf of Granules India Limited, I extend a warm welcome to all the participants on Q4 and FY '25 financial results discussion call. Today on the call, we have Dr. Krishna Prasad Chigurupati, Chairman and Managing Director; Dr. KVS Ram Rao, Joint Managing Director and Chief Executive Officer; Ms. Priyanka Chigurupati, Executive Director; and Mr. Mukesh Surana, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, expectations and opinions as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, I would like to hand over the call to Dr. Krishna Prasad, sir, for his opening comments. Over to you, sir. Thank you.

Thank you, Prachi. Good evening, ladies and gentlemen, and thank you very much for joining us on the Q4 FY '25 earnings call. We appreciate your continued interest in Granules. We have uploaded a detailed presentation of our quarterly and full year performance on our website, and I trust you have had a chance to review it. I'll start with the update on the U.S. FDA remediation at our Gagillapur facility. Let me begin with the update on the FDA -- U.S. FDA inspection status at our Gagillapur finished dosage facility. As shared in our previous quarterly call, the facility underwent an FDA inspection in August '24, which concluded with 6 Form 483 observations and was classified as Official Action Initiated. On February 26, 2025, we received a warning letter from the FDA for the site. The warning letter does not affect supplies of approved commercial products. However, it may temporarily impact the FDA's review of pending product submissions from this facility until the matter is resolved. While manufacturing and distribution continues, the ongoing remediation measures have resulted in a slowdown of operations, which impacted our Q4 output and is expected to continue for another quarter or 2. Our remediation program initiated immediately post-inspection has been driven under the guidance of 3 globally recognized consulting firms with deep expertise in quality, compliance and regulatory affairs. These experts have been closely collaborating with our team, both on site and remote since September '24. As part of this initiative, we voluntarily paused operations in September to conduct a comprehensive risk assessment. Operations resumed only after confirming there was no product safety or contamination concerns and in concurrence with the U.S. FDA. We initiated extensive testing of both previously manufactured and ongoing batches for cross contamination. So far, over 1,200 post-inspection and pre-inspection batches have been tested. All are within acceptable limits. Additionally, more than 2,600 swabs and drill samples have been tested with no deviations observed. We developed and validated 89 test methods, specifically for contamination testing and analysis remains ongoing. We continue to generate and compile data to demonstrate the robustness and sustainability of our CAPAs in preparation for a future FDA meeting. Beyond compliance, we have implemented enterprise-wide quality culture initiatives, including corporate procedures for cleaning validation, visual checks, residual limits, change controls and competency building across teams. We remain fully engaged with the FDA, customers and other stakeholders throughout this process and are committed to embedding long-term improvement in our quality system. We are confident that the steps we are taking will lead to a satisfactory resolution within a reasonable time frame. Granules growth trajectory remains focused and diversified, underscoring that our strategy is not solely dependent on new product approvals from the Gagillapur site. Key drivers include new launches from our GPI facility in the U.S., growth from large volume products in the U.S. and Europe, capacity addition and commercialization of the greenfield formulation facility at Genome Valley, value chain advancement in Europe and our expanding oncology pipeline from Unit 5. Our near-term growth will be driven by new product launches from our GPI site for the U.S. market, especially the CNS and ADHD segment. During Q4, we received approval for lisdexamfetamine capsules following the early approval of the chewable tablet formulation in Q3. With this, we now have both dosage forms, capsules and chewables approved and commercially launched enhancing our presence in the CNS and the ADHD segment. Additionally, we launched multiple key products during the quarter, including paracetamol oxycodone, paracetamol hydrocodone combination and dofetilide capsules. These launches reflect our continued focus on expanding our complex generics portfolio and reinforcing our position in the U.S. prescription market. Our formulation facility at Genome Valley under Granules Life Sciences is progressing well. Phase I with a capacity of 2.5 billion doses has been commissioned and commercial dispatch of monograph products are ongoing. We are awaiting inspections by both European agency, as well as the U.S. FDA towards commercialization of prescription products from GLS. Inspections are expected in Q2 of FY '23. Phase II with an additional 7.5 billion dose capacity has been commissioned in the current quarter and validation activities for monograph products have also commenced. I'll now talk about Granules foray into peptides and the acquisition of Senn Chemicals. The global market for peptide-based anti-obesity and antidiabetic therapy has already crossed $50 billion in annual sales and is projected to reach $100 billion to $150 billion by 2030. Beyond metabolic disorders, we see exciting opportunities in oncology, cosmetics and theragnostics, where peptides are enabling next-generation targeted therapies. With the strategic acquisition of Senn Chemicals to assist with CDMO, Granules has entered the high-growth peptide therapeutic space. This marks our formal entry into complex peptides, including GLP-1 receptor agonist, one of the most transformative classes of therapies in the fight against diabetes and obesity. Founded in 1963 and headquartered in Dielsdorf, Switzerland, Senn Chemicals is a specialist CDMO with a strong multi-decade track record in developing complex liquid phase and solid phase peptide synthesis processes for peptide APIs and fragments, offering end-to-end customer manufacturing solutions across pharmaceutical, cosmetics, theragnostic and amino acid derivatives. We have completed the acquisition formalities in April and integration activities are in progress. We would provide more updates in the coming quarters. On the sustainability front, we made significant progress during the year. Granules received a core rating from EcoVadis, placing us in the top 5% of the pharmaceutical company globally in our very first corporate level assessment. We also improved our CDP climate rating to a B and secured SBTi validation of our climate goals. Additionally, we launched our supplier sustainability program to extend our impact across the value chain. To summarize, we remain firmly focused on strengthening the quality and compliance systems across the organization while staying on course with our clearly defined growth strategy. In the near-term, momentum will be driven by new product launches from our GPI facility and ramp up commercial operations at our Genome Valley formulation site. Looking ahead, we are strategically expanding into high-growth areas such as oncology and peptides, which will shape our medium- to long-term trajectory. Concurrently, we continue to invest in R&D to build a differentiated portfolio that underpins sustained value creation and global competitiveness. Dr. KVS Ram Rao will provide further insights on some of these initiatives. I now hand over the call to Dr. Ram Rao.

Thank you, Chairman. Good evening, all of you. At Granules, developing a strong and a diverse product portfolio has always been a key priority, and it remains central to our strategic approach. Over the last financial year, Granules R&D spend was INR 238 crores versus the INR 199 crores in FY '24, representing a 20% increase in investment, which demonstrates our commitment towards R&D. We have been making steady progress in achieving our R&D goals with every passing quarter, we continue to expand and strengthen our product portfolio. We have a total of 127 dossiers filed across various regions. We have 85 ANDAs in the U.S., 16 pending for approval, 18 in Europe with 10 pending for approval and 24 in other regions, including Canada with 8 pending for approval. We have received 2 approvals, 1 in U.S. and 1 in Europe in the last quarter. We filed 3 U.S. ANDAs and 6 European dossiers in quarter 4, including a first-to-file product from the GPI facility. On the API front, we filed 18 DMFs, including U.S. DMFs, CEP, ASMFs, Korean and Brazilian DMF. There has been a significant progress in our ADHD portfolio. We have been developing a robust ADHD portfolio with about 10 products in the pipeline for development, which includes day 1 launches and day 181 launch opportunities, including some first-to-files. In February, we launched lisdexamfetamine caps and chewable tablets in the U.S. market. Furthermore, API validation and DMF filing is expected to be done in quarter 1 FY '26 for lisdexamfetamine, which leads to vertical integration and supply chain reliability for this product. Overall, Granules ADHD portfolio covers a significant portion of the U.S. ADHD market. We continue to expand our oncology portfolio with around 10 products currently under development. This includes NCE-1 day 1 launches, first-to-files and day 181 opportunities. We continue to make significant progress in our oncology portfolio. Last quarter, we submitted a promising high-growth oncology ANDA in the U.S. and the European geographies, marking the commencement of our oncology filings. FY '25 also saw entry of Granules into the peptide as a global CDMO business. Peptides has emerged as one of the most important and promising class of therapeutic agents. From treating metabolic disorders like obesity and diabetes with GLP-1 agonist to offering innovative targeted therapeutic cancer treatment, peptides holds the potential to significantly enhance treatment outcomes across a range of conditions. As a part of strategic objective to tap into this rapidly growing segment, Granules has acquired the Switzerland-based Senn Chemicals. This acquisition marks a pivotal moment for Granules. It will accelerate our transformation into a more diversified science and innovation-led organization with sophisticated product capabilities. With Senn Chemicals AG, we are not just bringing a European company to our fold. We are gaining immediate high-value access to the rapidly expanding peptide therapeutics market while also firmly establishing our footprint in the specialized CDMO sector. Senn Chemicals adds to Granules efficiency in complex high-growth areas like peptide development and manufacturing using technologies like liquid phase, solid phase peptide synthesis. It also brings in long-standing relationships with pharmaceutical, cosmetic and theragnostic clients worldwide. Looking ahead, we are confident the strategic synergies created by this acquisition will unlock significant value. Our focus going forward will be on seamlessly integrating their expertise while maintaining the operational excellence, accelerating joint development activities and maximizing the opportunities this new venture presents. This acquisition represents a tangible step in our journey to evolve our complex product portfolio, enhance our technical capabilities and solidify Granules' position as a leading global pharmaceutical player in high-value specialized segments. I'm pleased to share that we have remained steadfast in our commitment to executing our R&D strategies and developing robust portfolio and capabilities for the future. Thank you all. Now, I hand over to Mukesh Surana, CFO. Thank you.

Thank you, CMD and JMD. Let me take you all through the top financial parameters now. Revenue. The fourth quarter revenue were INR 11,974 million as compared to INR 11,758 million in Q4 FY '24 with a growth of 2% and revenue grew by 5% as compared to Q3 FY '25. Sales growth is from increase in FD and API sales saw there was a continuous price erosion. The full year revenue were INR 44,816 million as compared to INR 45,064 million in FY '24. Formulation sales grew by 18% despite a voluntary pass of production in September '24 at Gagillapur facility in response to U.S. FDA observations and with remediation efforts, slowdown of production in H2. Further price erosion and demand issue in API and PFI has impacted the sales growth. The sales breakup as per business divisions, geographic regions are presented in our investor presentation, which is available on the website. Gross margin. Our gross margin as a percentage of sales for Q4 FY '25 was 63.4% as compared to 60.1% in Q4 FY '24. Gross margin as compared to Q4 FY '24 is up by 333 basis points achieved due to higher finished dosages sales with higher margin. Gross margin as a percentage of sales for Q4 FY '25 is up by 169 basis points from Q3 FY '25. Sustained higher finished dosages sales with higher margin has given this improvement. The full year gross margin as a percentage of sales for FY '25 is up by 635 basis points from FY '24. Margin improvement is due to strategical shift towards high-margin formulation products. EBITDA and EBITDA margin. EBITDA for the quarter was INR 2,524 million, that is 21.1% of sales as compared to INR 2,557 million, that is 21.7% of sales in Q4 FY '24, a decrease of 16 basis points from Q4 FY '24. Professional expenses have gone up on account of consultancy for remediation of U.S. FDA observation that has impacted the EBITDA margin. EBITDA as a percentage of sales for Q4 FY '25 is up by 83 basis points from Q3 FY '25. EBITDA margin is better despite continued professional expenses on account of consultancy for remediation of U.S. FDA observation and increase in R&D expenses. EBITDA for the year was INR 9,452 million as compared to INR 8,560 million in FY '24, a growth of 10% over the previous year. EBITDA improved with a better margin despite air freight and professional expenses incurred for remediation of U.S. FDA observation. R&D. Our R&D expenses for the quarter was INR 665 million as compared to INR 609 million in Q4 FY '24 and INR 568 million in Q3 FY '25. R&D expenses for the year was INR 2,377 million. We are going to continue to spend on R&D in the coming quarters as well. Net debt. Our net debt was INR 7,061 million as compared to INR 8,289 million in Q3 FY '25. Our net debt was INR 8,421 million at the end of March '24. Cash to cash cycle. Our cash to cash cycle was 202 days in the current quarter as compared to 213 days in Q3 FY '25 and 161 days at the beginning of the year. Cash flow from operations. Cash flow from operations for the quarter was INR 3,183 million as compared to INR 1,315 million in Q3 FY '25 and for the year was INR 8,666 million as compared to INR 4,394 million in FY '24. CapEx. CapEx spend during the quarter was INR 1,598 million and for the year was INR 5,700 million, primarily invested in Granules Life Sciences of INR 3,135 million in FY '25. ROCE. ROCE for Q4 FY '25 is 16.6% as compared to 16.4% in Q3 FY '25 and 16.5% in Q4 FY '24. With this, I open the floor for questions.

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

Sir, with respect to the Senn Chemicals, what further investment is...

Sorry to interrupt Mr. Tushar. I would like to request you to please come closer to your device while asking a question.

Is this better?

Yes.

Yes, it's better, Tushar.

Sir, just wanted to know in terms of the Senn Chemicals, what further investment would be required for next 2 years to further sort of either integrate with Granules and further scale up the capability or capacity?

Tushar, we are analyzing the whole situation. We have to -- there's going to be a lot of CapEx that has to come up in Switzerland. And also, we are putting up a peptide R&D facility in Hyderabad and which will be followed by a peptide manufacturing also. Some of the developments will happen in Switzerland and commercialization of large volume product will happen here. We are analyzing what we have to do and maybe the next quarter, we'll have a clear idea on this. But definitely, there's going to be CapEx on peptides.

Currently, sir, any like sales or profits from this entity, if you could share that number?

It's sort of breakeven or the slight loss as of today. Yes. And we think in the next 1 or 2 quarters or 3 quarters, it will continue to be around that level. But going forward, with the new strategy, it should improve.

Got it. And just secondly, as far as Gagillapur facility is concerned, you said the production disrupt [indiscernible] if you could share FY '26 revenue, EBITDA guidance?

We cannot give you any guidance on this. But definitely, all I can say it's going to be better than the last year. And I also want to make it clear that the slowdown on operations in Gagillapur will continue for a quarter or 2. Despite that, we think that we will do better than last quarter -- last year.

Got it. And just lastly, this professional and consultancy fees, which you would have used paid for Gagillapur in FY '25, if you could quantify that?

So I'll just quantify not only professional expenses, all kind of expenses, including air freight and the U.S. FDA consultancy expenses, all have been close to INR 60 crores for FY '25.

And this will not recur in FY '26 or there will be some more spend in FY '26?

It will continue for Q1 and Q2, but slowly declining. But definitely till Q2, we see that it should be continuing. We have taken up a complete remediation plan, not a band aid exercise. So we have a lot of consultants working on the site. So we think that this will continue for some time. Just a clarification, Tushar, the air freight may not be as high as what we have incurred in Q3, particularly in FY '25. There we are seeing an improvement with a better planning.

The next question is from the line of Rashmi Shetty from Dolat Capital Market Private Limited.

Just on the Senn Chemicals, you said that you will also be exploring the GLP-1 opportunity. So which part of the value chain you would be targeting only intermediates or the entire formulation part? And you will be targeting generic companies, I mean, in the CDMO space or you will be targeting -- you will be supplying to the innovators?

On the CDMO, it will be some of the innovators we are targeting already. And on the GLP-1 question, basically, let me explain a little bit in detail for everybody's benefit. Our relationship with Senn Chemicals started with us wanting them to develop GLP-1 products for us. We gave them a contract manufacturing opportunity. And when we saw that they had some very good capabilities, we thought we should get hold of that company so that we can also have a kick start with technologies readymade. And we are working on APIs for GLP-1s, and we expect to plan to do formulations and formulations we will be developing in India and getting it contract manufactured for the time being.

And it will be for various markets like -- because India and the other emerging markets are already opening up from March '25 end?

India markets also, but we'll be a little late for India market starting now because our API will be available after a while. But definitely, for the U.S. market, U.S. is the biggest target we have. We have to wait for a while. But the other GLPs going forward, we have a lot of time, and we will be targeting all markets at one time.

Okay. And you mentioned that EBITDA or the PAT currently is at the breakeven level or slightly loss. But what is the current sales from Senn Chemicals? And what kind of products are being manufactured over here?

So currently, they are doing roughly CHF 20 million per year and with a breakeven EBITDA. And they are largely into CDMO related to peptides, pharma, cosmetics and theragnostics. And they also have amino acid derivatives, largely peptides CDMO.

Okay. Sir, with the CapEx plan forward for Senn Chemicals and plus we also have an ongoing CapEx for Granules. So put together, what will be the CapEx guidance for FY '26 and FY '27?

So currently, we have done estimate for FY '26. FY '27, we are still working on. So FY '26 overall CapEx estimate is about INR 600 crores. This includes further CapEx, which we have to incur for Granules Life Sciences and also oncology and peptide investment.

This includes the Senn Chemicals CapEx also that will be additional in case if you plan it?

Yes, this includes that as well.

Understood. And on the GLS Phase II, that is 7.5 billion dosage, the entire CapEx is over or that extra amount is going to come in FY '26 also?

It will come in FY '26 also.

Okay. So the plant is not ready for 7.5 million dosage -- billion dosage, sorry?

We do have some CapEx creditors. And also, we are incurring additional CapEx expansion in terms of packing facility and some [indiscernible]. All of that will be spent in FY '26.

But commercialization has already started in the new Phase II, Rashmi.

Okay. But the capacity -- total installed capacity currently is not 7.5 billion. I mean, it is ongoing, right?

No, no, no. We have already 2.5 billion in Phase I. And this will be...

Yes, that is first phase. That is your first phase.

That's right. 7.5 billion is -- I think you can say 7.5 billion capacity by next month onwards.

Sorry, 7...

7.5 billion from next month. But it will take us time to get into full utilization because we first need to get approval from the FDA and the European authorities, which we expect to have in Q2. Once we get these approvals, we'll start full production. And then I think by possibly this year, we may do about 40%, 50% capacity utilization and close to 90% by next fiscal year.

Got it. So 7.5 billion dosage will get over by -- we can expect by Q2 of FY '26. The CapEx will get over?

No, no, no, no. It will be '27.

2027, okay.

Close to 100%, 90% or so.

Got it. Got it. And just on the gross margin. So we had a strong formulation sales during the year, and that is why with the help of good business mix, our gross margin was 61.5% during the year. But what are we expecting for the API and PFI segment from the last 2 consecutive years? Due to the external factors, we have seen a decline. But whether any small growth or anything we can expect in these 2 segments? And if the sales increase of these 2 segments, FY '26, the gross margin would decline or it would be at the similar level?

Rashmi, first of all, all the APIs and PFIs we make are slowly getting consumed in-house. So it's a vertical integration that's giving us the benefit, except paracetamol API where we have a large capacity, other APIs are all being used in-house. So paracetamol, we had quite a substantial API sales, which has been impacted by extra capacity created in the [ works ]. And so, instead of trying to push more API into the market at negligible margins, we are concentrating on converting most of it into PFIs and FDs. So we will see the FD share at this level or possibly increase a little bit more. Definitely, I can tell you, API percentage will not increase.

API percentage will not increase. So year-on-year, we will see a small decline or maybe flattish?

Yes, because all that is the capacity is going into consumption.

Getting converted to the FDs. Got it. Got it. So then this kind of gross margin is sustainable?

We hope to, and we are confident as of today definitely.

Okay. Okay. Got it, sir. And one last question. Just on the Europe business, we have seen for quarter 4 and for the full year decline, whereas even in the rest of the world, we have seen a decline. Your other markets like India and U.S. has done well. So is it mainly because of the paracetamol and the API segment impact, which is actually reflecting in the geographies like Europe and all?

Yes, you're perfectly right. Europe was mostly driven by paracetamol API with some of the big brands. And there was a slowdown there. It's slowly picking up, but I don't think it will go back to where it was. The price erosion continues to stay. I don't think we'll get back to the old levels, which actually was helped during COVID. And except for very valued customers, we do not plan to sell paracetamol. So -- and European sales will be mostly driven by formulations, where we had a lot of filings, there was a little delay in launching those products. And once these products are launched, European sales will increase. But as a percentage, it may remain the same.

The next question is from the line of Tarang Agrawal from Old Bridge.

Congrats for a reasonable set of numbers given the background of Gagillapur. So 3 questions, sir. Firstly, on Senn Chemicals acquisition. So what are the medium-term milestones and...

Tarang, you're breaking up, Tarang. I can't hear you properly.

Am I audible?

There's a little break, but let's try again.

Okay. So what are the -- this is basically with respect to the Senn Chem acquisition. What are the medium-term milestones and, say, slightly longer-term milestones that you are looking at? And a subsequent question, given the strategic nature of this acquisition, how should we calibrate the eventual success or failure of this acquisition?

On the Senn acquisition, the medium-term, I think we will be focusing on, a, improving the CDMO segment. So as already mentioned in the speeches, that there are 4 areas where there is already enough customer base. And also, there is a lot of potential, and we will be exploiting this potential on both the science technology, as well as the infrastructure to enable Senn to be competitive, diversified and lead to a kind of a good CDMO play in the medium- to long-term. That is 1 segment. Second segment, the GLP-1s, as already mentioned by Chairman, we actually started our journey with them on GLP-1s, and we have gone quite a bit of business development of the products. So this will become an important journey in terms of looking at GLP-1s and therefore, using this knowledge, experience and technology to look into various fragments of GLP-1, both for CDMO business and also for the Granules consumption. I think that will be the long-term approach to Senn.

And the strategic importance, Tarang, is that, we will have access to good capabilities rather than starting from scratch. So it's just going to be a technology transfer from there to India for increased volumes of GLP-1s to start with. And then there are various other factors we want to concentrate on as we go by.

Got it. Got it. Sir, second, I mean, your R&D clip has been quite significant, especially in the last 5 years. How are you measuring the productivity of your R&D spend? I mean, if you could help us with some anecdotes, it will be quite helpful.

So R&D spend productivity is seen through, one, the number of quality filings that we are doing both in U.S. and Europe in ADHD and oncology segments. I think that is the first measurement that we see. The second measurement is on the value of the filings. So the NCE-1, the first-to-files are the differentiated filings. So I think we have been very consistently maintaining that our portfolio is going to be focused on ADHD and oncology segments and the measurement of filings. And you already see that we have lisdexamfetamine chewables and oral tablets approval as a beginning of our journey into the ADHD segment. So we are very clear on the number of filings globally and also in specific geographies as 1 big productivity measure. And I think we are pretty satisfied with the kind of progress we are making on our R&D spend and its productivity.

Tarang, we also have a benchmark for return on investment of 1 particular ANDA, how many times of that in what period. And these are different numbers for regular products, P3 products and for going forward with first-to-files and all it's going to be another aspect. So we are fairly happy with the progress and the returns we are getting.

Sure. Just last question, sir, with whatever uncertainty that's been sort of been created over the last 2, 3 months with the impending tariffs, given your significant exposure to the U.S., how are people looking into it? I mean, are you positioned or how -- I mean, what are the conversations that are happening internally to address the eventuality, if at all it would come to it?

Yes. More than internally, I think external communication is important. We are talking to all our customers in the U.S. about the possible impact. And we have been mentioning that if the duty tariffs come in, we will have to increase prices. There's no way we can absorb this. And we don't see too much resistance as of today. But let's see when it actually happens, what the impact will be. And my feeling is, this is going to impact everybody, just not us, and it's a level playing field, and there may not be too much of an effect because everybody is going to get hit with this tariff. And there's so much anybody can absorb on margins, especially products [ generalized ] long ago.

Got it. And last, I mean, Mukesh, on CapEx, what's the CapEx number for FY '26?

INR 600 crores, Tarang is what we guided.

Okay. And Senn Chemicals is on top of that. So about INR 1,000 crores, INR 1,100 crores of outlay, correct?

Sorry?

Senn Chemicals.

Yes, you are right. Senn Chemicals investment is on top of that. That is equity plus debt put together INR 450 crores as -- when we did the acquisition.

The next question is from the line of [ Sahil from M&S Associates ].

Sir, I have a couple of questions. Firstly, regarding the new formulation facility at Genome Valley, which commenced commercial dispatches. Sir, could you discuss the impact of it? Could you discuss its impact on the overall capacity and revenue?

Only Phase I has been commercialized, Sahil. And Phase II is under commercialization right now, which should happen within a quarter or 2. So there has been, like we said, a slowdown in Gagillapur till the FDA remediation is completed, there will be a slowdown because of various activities that are being undertaken there. So all that from this quarter to some extent and Q2 in a better way will be made up by GLS and also from our U.S. sites with new product launches. So going forward, Genome Valley site is going to play a very important role in our revenue because even when Gagillapur returns to full normalcy, the demand for our products we foresee will be increasing, and we definitely see that this site will contribute quite a bit.

Understood, sir. Sir, secondly, how is the company addressing the decline in European sales? And what are the plans to regain market share in that region, if you can shed some light on that?

Yes. I just mentioned a little while ago that Europe was mainly dominated by paracetamol API sales and now API sales demand has come down, and we are moving the APIs more into PFIs and formulations that has been happening in U.S. and other places. And this will -- paracetamol sale API will improve a little bit, but we do not see it going back to the old time. And we will make up for European [ sales where ] formulations where the margins also will be high. And we had a delay in launches of some products, and we expect that to be back on track and sales will definitely improve. But as a percentage, I said a little while ago, will not be -- U.S. will continue to be the biggest growth driver.

The next question is from the line of [ Varun Mishra from SK Investments ].

Sir, I had a couple of questions. So I wanted to know like for North America, like we have been accounting almost 79% of our total revenues as for Q4 in FY '25. So, sir, like what are our strategies in place to diversify our geographical revenue mix?

Yes, we do have a strategy. Priyanka, would you like to take that?

Sure. I'll take that question. So we've been working on the North America strategy for almost 10, 12 years now in terms of filings, et cetera. So that market has been and will continue to be our biggest growth driver. But if you look at the number of filings that we're doing in other regions, this year, we've done about 11 filings for Europe, and we continue to increase that momentum. In addition to that, we are training up the strategies for the rest of the world for finished dosages and plan on increasing our existing current API and PFI business as well. So going forward, you'll see an absolute increase in numbers coming from ROW markets as well. But again, I just want to reiterate that the U.S. -- just the size of the market is so big that even for us, that will continue to be a focus.

So my second question was around the -- what is your outlook on the API and the PFI segments? Could you like give the current contributions to the revenue? How are they contributing it? Could you throw some light on that?

Yes. Currently, it is less than 25%. And this is how the trend also we see going forward, as Chairman clarified in the earlier conversation. So we are producing API more for in-house consumption. So we are focusing more on formulation. So this trend of around close to 25% of API, PFI will be in that range.

All right, sir. My last question is, sir, can you please provide an update on the CapEx spend on the GLS and the CZRO projects in FY '25? How do we see these projects like contributing on the top line in the coming years?

So in terms of CapEx investment, I had clarified in my speech. We have spent about INR 313 crores in FY '25. And we have further left investments left amount to be spent in FY '26 also in annualized spend. And in CZRO, we are going slow. We have not incurred much in FY '25. Largely whatever we have incurred is on the land, which was incurred a year before and some pilot facility, which we have incurred over the last 2 years. CZRO, we are cautious and going slow at the right appropriate time, we'll do. In terms of priority, the GLS expansion is our priority and also the new oncology and peptide facilities are our priority. In terms of near-term revenue, we don't expect much from CZRO immediately in near-term and also similarly from peptides in the near-term in terms of revenue other than the acquired revenue percent. In terms of Granules Life Sciences, our Chairman has clarified that this year, it would be about 40% of capacity utilization. Next year, it will be closer to 90-plus percent.

[Operator Instructions] The next question is from the line of from [ M.R. Doshi ], an individual investor.

I hope you can hear me.

Yes, Mr. Doshi.

Yes. Sir, I just wanted to have some color on the oncology portfolio that we have. You just mentioned that we filed 1 U.S. ANDA. I wanted to understand what are the total number of molecules that we have here in the pipeline? And where are we in the development or regulatory time line along with any market sizes for the same, if you can share?

On the oncology pipeline, as I mentioned in my speech that we have already filed 1 molecule in the U.S. and European segment. And we have a good double-digit pipeline of oncology products, which will be, as I told before, that which will be NCE-1 segment. Some of them are first to launch. Some of them are Para IV 181 and most of these products are for global development. And as mentioned by Priyanka, that we are building our Europe and ROW business and oncology will become a significant element of this building of the business in terms of PFI [ stroke ], the formulation business. So overall, this is the portfolio, and we expect this portfolio to start yielding us revenues from FY '28 onwards.

Okay. Okay. All right. Got it, sir. So this was the first filing. And do we expect to see filing every quarter or every 6 months from now on?

I think every quarter, we make progress in terms of filing. But you know R&D, and therefore, I would not like to say a quarter or this one, but we have a fairly good idea about the time line of filing in U.S. and in other geographies.

All right. Got it. And just an extension to that one. We would be here looking at making the API in-house with full integration and then going on to the formulation? Or how are we thinking about it?

As Granules strategy, and as you heard our Chairman just a few minutes ago, I think most of it will be vertically integrated. So entire differentiation in the API comes completely from a vertical integration. And that is one of the reasons and also one of the strategies for selecting our portfolio.

Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you very much, ladies and gentlemen. It's been an interesting discussion. And I look forward to meeting you all once again in the next earnings call with possibly better results. And until then, have a great day and a great time ahead.

On behalf of Granules India Limited Q4 FY '25 earnings conference call, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.