Sanjivani Paranteral Limited (531569) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sanjivani Parenteral Limited Q2 FY '26 Earnings Conference Call. From the Sanjivani Management, we have with us Mr. Ashwani Khemka, Chairman and Managing Director; Mr. Srivardhan Khemka, Executive Director; and Mr. Pritesh Jain, Chief Financial Officer. We will begin with management's commentary, after which we will open the floor for questions. [Operator Instructions] Please note that this conference is being the content. I now hand the conference over to Mr. Srivardhan Khemka. Thank you, and over to you, Mr. Khemka.

Thank you. Good morning, ladies and gentlemen. A very warm welcome to all of you to the Q2 FY '26 Post Results Earnings Conference Call of Sanjivani Paranteral Limited. Before I dig in, we mention the standard disclaimer presentation that we have uploaded on the stock exchange, including interaction in this call contain or may contain certain forward-looking statements concerning our business prospects and profitability, which are subject to uncertainties and actual results could differ from those in forward-looking statements. Let me start with a brief overview of the company. Sanjivani is a WHO-GMP certified pharmaceutical company with over 2.5 decades of experience specializing in manufacturing of injectable oral solids. The company has established itself as a leader in the industry. Company's primary focus lies in life-saving drugs, and we export our products to over 25 countries. We are headquartered in Mumbai with a WHO-GMP certified manufacturing facility in Navi Mumbai and Dehradun. We cater to major therapeutic areas, including central nervous system, cardiovascular, antibiotic, gastroenterology, antidiabetic, anti-allergic supported by a strong R&D. We categorize our business into 3 verticals: base business, which is Sanjivani Paranteral Limited. This is the ongoing business, which focuses on formulation sales and export markets. And in the Indian market, we are primarily a CDMO player, though we have nominal presence in the domestic formulation as well. Second vertical is SPL Infusion. This venture is manufacturing of IV products, and here, we hold 60% equity. And the third is Alevia Healthcare, which is Nutraceutical venture in Europe, where we hold 45% equity. This will aid us in the consolidated bottom line. Let me begin with the macro backdrop, which played an important role in shaping Q2 performance. Macro factor-related uncertainties were much lower during Q2 FY '26. On freight cost front, the volatility is the new normal, though the intensity has reduced. On pharmaceutical sector front, as per [indiscernible] Latest report, demand outlook for generic and branded generic is likely to remain strong across geographies. Major drivers include loss of exclusivity, high substitution rates in mature markets, health care cost containment policies worldwide. Emerging markets are expected to deliver the highest incremental growth supported by rising per capita income, sustained economic expansion, expanding insurance coverage, broader health care access and rapid growth in chronic disease prevalence. Structural factors such as aging population, increased diagnostic rates and accelerating urbanization further reinforce medium-term demand momentum for affordable generics. Overall, we expect generic -- branded generics to remain a critical and growing component of global medicine consumption, underpinned by affordability pressure in developed markets and sustained access-led volume expansion in emerging markets. Companies are increasingly focusing on their core strength and choosing well-defined niches rather than trying to compete across every segment. As a result, the competitive landscape is becoming more rational, creating a favorable environment for companies like ours. With peers prioritizing narrower strategic areas, the market now offers clearer space and opportunity for all players. In Latin American market, we have observed quality-related concerns arising from manufacturers, which has led to heightened scrutiny of supplies in the market. While this environment ultimately benefits quality-driven companies like us, it may temporarily delay new product approvals and increase compliance-related requirements, thereby moderating near-term growth. That said, we remain highly optimistic about the long-term prospect of the Latin American market, given our strong technical expertise, proven quality track record, we believe these developments will strengthen our positioning and support sustainable growth over time. On the company performance, Q2 FY '26 growth was impacted largely by external disruptions across key export markets. In Nepal, prolonged local unrest prevented execution of export orders worth nearly INR 1 crore. In LatAm, product issues raised against unrelated Indian exporters led to tighter FDA scrutiny for all suppliers, slowing clearances and dispatches. A few MENA markets also faced delays in obtaining required product approvals, shifting shipments to the next quarter. We remain fairly optimistic about outlook of FY '26 for the base business. on SPL Infusion Limited -- Private Limited venture, all the regulatory approvals are in place. We have started the commercial batches, and we should start booking revenue in Q3 FY '26. That is the quarter ending December. On the Prague joint venture, the operations are steadily picking up pace. The interest shown by prospective customers is quite encouraging. We are further participating in trade shows to improve the momentum for revenue. So broadly, FY '26 should end with all 3 business verticals contributing respectively in numbers. With this, I will hand over to our CFO, Mr. Pritesh Jain, for commentary on financials.

Thank you Srivardhan. Good morning, ladies and gentlemen. A very warm welcome to you all. Let me share the update on the financial performance of the company for Q2 FY '26. The company reported a revenue of INR 15.5 crores and a decline of 14.5% year-on-year basis. The decline was on account of largely by external disruptions across the key export markets. In LatAm product issues raised against unrelated Indian export has led to a tighter FDA scrutiny for all suppliers, slowing the clearances and the dispatches. The EBITDA was at INR 2.4 crores, a decline of 25.6% year-on-year. The EBITDA margin was at 15.5% versus 17.9% in Q2 FY '25. The year-on-year contraction in EBITDA margin was due to lower margins during the quarter. Profit after tax was at INR 1.6 crores for quarter versus INR 2.3 crores, a year-on-year decline of 28.5%. This is broadly reflecting the EBITDA decline. Let me provide the segment-wise performance for Q2 FY '26. Injectable revenues grew 2.4% year-on-year to INR 9.3 crores. Oral revenues declined by 35.4% to INR 4.9 crores. Nutraceutical revenue stood at INR 1.2 crores in Q2 FY '26. On market-wise performance, exports constituted 81.6% of the total revenue. The core markets of CIS, Middle East and Africa, Latin America accounted for 81.6% to INR 12.6 crores. During the H1, we did a CapEx of INR 1.04 crores. the net debt position as of September was at INR 6.7 crores. With this, we can now open the floor for the question and answers. Thank you.

[Operator Instructions] The first question comes from the line of [indiscernible] Tandon with Ananta Capital.

A couple of questions, sir. I think the first question will be, sir, will you be able to quantify the loss in revenue this quarter because of these externalities in absolute numbers?

Yes. See, it's difficult to quantify the numbers exactly. But the 2 markets that regarding Nepal, I mentioned that orders worth INR 1 crores were held back due to the local unrest. And in South America, we have actually held back some shipments because there were some scrutinies on the distributors who are present in those markets. So in case we shipped out and they were facing any regulatory issue in those markets, they would have not been able to clear our product from the customs, and this would have become a bigger issue in terms of inventory. So we have decided to scale back on that front.

Okay. So going ahead for this year, next year, we can understand one quarter here and there, business can go a little slow. But any guidance or any bookings from Q2 you are expecting in Q3 and Q4 going ahead? Can you give some guidance on this year? How is this year looking like ultimately?

Yes. This first half was 2, 3 issues were there, which S. Var told you already. Going forward to the guidelines for Q3 and Q4, which is on the track, and we are going to achieve what we are going to do. As you have seen in most of the pharma companies across India, many companies has to held back the shipments due to regulatory tightness in various countries as well as in Indian continent. And this was the major issue where the stocks were hold. And you can be seen our inventory levels are around INR 6 crore plus, which we could not export because of this reason. Generally, when you export the consignment to those countries, they're not clear to neither the country take the responsibility and bringing back is just a waste of the stock and it goes in the brain. So we hold the stock here very clearly. And our order books are good, and we are doing good in the next 2 quarters. And moreover, I would like to add one more thing that antibiotics, which were a major contribution to most of the companies and our company also, it is contributing around 10% to 12%. Those markets are deepening because of the resistance level in the world population. So our focus and our product portfolio covers this entire gamut, and we will be seeing our targets achieved by the FY '26.

Okay. Sir, any specific growth guidance, 20%, 15%, if you can achieve or you would refrain from doing that as of now?

No, no, we will be doing -- we have told you 10% we will be there because this quarter, we took a little dip here. And going forward, if you see the sales growth, and it will be 10% from the last year's, minimum.

Okay. And sir, what about the Puna venture, that will also add to our revenue? Sir, when are we -- when will commercial bookings start, sir?

No commercial production has already started. The business will start from this weekend, and we have a very good healthy order book in place. [indiscernible] Q3 will have less volume and Q4 will have a substantially good volume.

Okay. Sir, this plant can contribute what kind of revenue if we have a full year of operation?

The full year operation, we can INR 90 crores to INR 110 crores, we can do.

Okay, sir. And the margin profile will be similar, sir, for this plant also?

Yes, yes, similar. A little better also.

Okay. And sir, do we -- when do we expect to hit optimal capacity utilization in this plant, sir? Will it take a couple of years? Or when can we hit INR 100 crores, sir?

[indiscernible] in the second quarter of FY '27.

Okay. Understood. So Q2 FY '27, we are looking like a INR 20 crores to INR 25 crores revenue -- quarterly revenue from this plant?

Yes.

Okay. So next year, sir, then what we are saying is that maybe INR 70 crores can be contribution from this plant alone in the full year FY '27, sir?

Yes, yes.

If you start from Q2, let's say, [indiscernible]. So maybe INR 70 crores, INR 80 crores and can come from this plant itself, sir next year?

Yes.

Okay. And sir, are you seeing initial order books? And how does the business work? Where are we selling? What is the order book, et cetera? Can you throw some light on this plant, sir?

See, this is a strategic location in Maharashtra and in Maharashtra [indiscernible] plants are currently working. And we have order books are from the semi government and government institution directly because we are a part of PSU with Hindustan Antibiotics Limited. Some orders are with the Hindustan Antibiotics Limited and certain are in the open market and few are export to 3, 4 country -- geographies where we are present for last more than 10 to 15 years.

Okay. And sir, will you be able to quantify the order book currently that you are having for this plant?

Quantify -- I cannot comment right now on this, and we will be disclosing that.

Okay. And sir, next year, base business can grow 15%, 20%. So this year, it is impacted, so you are planning to grow around maybe 6%, 7% and then some revenue from the Pune plant. But next year, sir, the base business itself can grow 15%, 20% in your view?

Yes, yes, yes.

Okay. So, we are looking like INR 150-odd crores revenue next year, sir?

Exactly. Correct.

Okay. And so the Pune margin -- Pune plant margin can be a little higher, sir, in terms of EBITDA?

Yes. It may improve. We are on that path.

Okay. So should we just conclude that this quarter and this H1 was a little aberration in our growth objectives and probably going ahead, sir, with this new plant being operational and recovery in the base business, we'll be back on our growth?

Yes.

Next question comes from the line of Santosh, from Financial Finesse.

I have a question regarding the Prague venture. Is there any revenue that we started booking from the Prague venture? So what -- how much we would have booked last quarter?

Yes. So in Alevia Healthcare, we have already started booking revenues. Small orders have been executed and some more are in process. So as we had informed earlier, the method of processing orders through that plant is a little longer in terms of time consuming. Since the product actually goes from India, then it gets packed there and then it gets sold further. So there is a lot of order which is in process right now, which is expected to be completed by the month of Feb. So -- but when we report the full year numbers, we should have the numbers reflecting in our books as well.

That sounds good. And in the past, we talked about PPP model, similar to the SPL model, we were having a few discussions in having a PPP model with other government organizations. Is there any progress on that? Or it'll still take some time?

Yes. This new PPP model is -- we are front runner in many of the government organizations and many ventures in India, and that's on the line. And very soon, we may tie up with 1 or 2 like similar venture, which will be disclosed to the stakeholders [indiscernible]

Next question comes from the line of Niraj, an Individual Investor.

Just Ashwani, in one of your previous comments, you mentioned that some points around antibiotic resistance and how it is impacting your business. Can you elaborate a bit more on that, please?

Yes. And you must have seeing the growth of the antibiotic market overall in India, if you are getting the IMS data. Last 3, 4 years after the COVID pandemic and the infections -- the antibiotic growth is down by 8% to 10% in most of the cases, barring 1 or 2, like antibacterial and antimicrolites. [indiscernible] World over also, it is going down. You must be seeing [indiscernible] , Carbapenems and antibacterial are still there, small, but microlites and everything are getting down.

And what's the reason for this? And how do you see this -- like by when do you expect this to recover maybe?

No, our contribution to the antibiotic segment is hardly 7% to 8% only. So it doesn't much bother and affect to our company. But the companies who are having more than 30%, 35% dependence on antibiotic will have effect on.

Understood. Understood. And sir, on our HAL joint venture, if I understood correctly, maybe from December quarter, its contribution will start coming in. So during the initial quarter, do you expect some kind of a negative impact on the bottom line because the capacity might not be fully utilized or we expect from the December quarter itself to start contributing in a positive way on the bottom line?

No. See, if you see the quarter-wise, December quarter won't affect it may be flat also, maybe some gain. because the product mix which we are going to manufacturing and marketing are having a positive substance on the products. So those numbers will be healthy. So you will have a good and Q4 will be much, much better.

Next question comes from the line of Rohit Jain, an individual investor.

Sir, you mentioned that certain shipments were held from your side in Q2. So is that demand deferred to Q3 in particular, I'm saying about, say, October and November until now? And are we seeing order inflows up till now?

See, you want to know the reason why it is or -- What do you want to know?

No, no. So what you held back, have you already shipped or are we shipping them till now, that is at least still the date?