Vimta Labs Limited ($524394)

Ladies and gentlemen, good day, and welcome to Vimta Labs Limited Q4 FY '26 Earnings Call, hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Manchanda from Systematix Institutional Equities. Thank you. And over to you, sir.

Thank you, Nitesh. Good evening, everyone. On behalf of Systematix Institutional Equities, I welcome you to the Q4 FY '26 Earnings Call of Vimta Labs. We thank the Vimta management for giving us an opportunity to host the call. We have with us the senior management of the company represented by Ms. Harita Vasireddi, Managing Director; Mr. Satya Sreenivas Neerukonda, Executive Director; Mr. Siva Rama Krishna, Chief Financial Officer; and Ms. Sujani Vasireddi, Company Secretary. I now hand over the call to the company management for opening remarks.

Thank you, Vishal. Good afternoon, and a warm welcome, everyone, to our Q4 and FY '26 earnings call of Vimta Labs Limited. Please note that the investor presentation and the financial results are available on the company website and the stock exchanges. Also, anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. The conference call is being recorded. And the transcript, along with the audio of the same will be made available on the website of the company as well as on the stock exchanges. Please also note that the audio of the conference call is the copyright material of Vimta Labs Limited and cannot be copied, rebroadcasted or attributed in the press or media without specific and written consent of the company. From the management, we have with us Ms. Harita Vasireddi, Managing Director; Mr. Satya Sreenivas Neerukonda, Executive Director; myself, Siva Rama Krishna Kambhampati, CFO; and Ms. Sujani Vasireddi, Company Secretary. Now, I request our Managing Director, Ms. Harita Vasireddi, to provide you with the updates for the quarter and year ended 31 March, '26. Thank you. And over to you, ma'am.

Thank you, Siva. Good evening, everyone. Thank you for joining us on this call today. FY '26 has been a year of strong execution, resilience and strategic progress for Vimta Labs. As we reflect on the year, I'm pleased to say that we have continued to build on our core strengths while laying the foundation for the next phase of growth. Throughout FY '26, Vimta has delivered consistent growth across its core service lines supported by robust demand, disciplined execution and unwavering focus on quality. Pharmaceutical research and testing services remained our largest contributor, driven by good demand from both domestic and international customers. Food testing also demonstrated good momentum, while our electronics and electrical testing and environmental testing continued to scale in line with expectations. The broader environment continues to be favorable, driven by tightening quality norms, increasing regulatory scrutiny, innovation in pharmaceuticals and allied industries and an expanding wellness ecosystem as such in the life sciences. These trends reinforce the relevance of our services and strengthen our confidence in the long-term outlook of the industry. Part of Vimta's defining strengths is its commitment to quality and compliance. During the year, we successfully underwent multiple regulatory and customer audits, reinforcing the trust that global customers place in our systems, science and people. These outcomes are a testament to the strength of our processes and the dedication of our team. FY '26 also marked a strategic milestone with our entry into biologics contract research and development services. The first year, which is this year, FY '27, will be about execution, learning and building credibility. Our focus is on delivering well for customers, earning their trust and establishing Vimta as a reliable partner in this complex and evolving space. We believe the long-term potential is significant, but we will approach this opportunity with characteristic discipline and patience. Vimta continues to maintain very healthy EBITDA margins, clocking about 35.8% in '25 -- in FY '26, which we believe are among the best in the industry even by global standards. While there may be natural fluctuations due to capacity ramp-ups, maintenance costs, people investments and of course, now the geopolitical issues, our focus remains on sustaining margins in a stable and competitive range over the medium term. Our progress in FY '26 would not have been possible without the dedication and expertise of our people. While talent availability and attrition remain industry-wide challenges, we have successfully retained critical scientific and leadership talent, which remains central to sustaining quality, innovation and growth. As we look ahead, we remain confident. The opportunities across pharmaceuticals, food testing, electronics are real and growing. At the same time, we remain mindful of the global uncertainties, cost pressures and competitive intensity. I would like to thank our teams, our customers, our partners and all our shareholders for their continued trust and support. We remain committed to building long-term value through quality, consistency and thoughtful growth. Thank you for being with us, and we look forward to continuing this journey together.

Thank you, Ms. Harita. Good evening, everyone once again, and thank you for joining our Q4 and FY '26 earnings call. I'll begin with an overview of our financial performance for the quarter and the year ended 31 March, '26. After that, we'll open the floor for any questions. Before we move into the financials, I'd like to highlight that the following -- the divestment of our Diagnostic and Pathological services business in '24. The figures for the previous period have been regrouped to ensure a like-to-like comparison with the current quarter. I will start on the financial highlights for the quarter. Total income for Q4 FY '26 stood at INR 1,120 million as compared to INR 961 million in Q4 FY '25, up by almost 16.6% year-on-year, with a quarter-on-quarter increase of 11.5% as compared to Q4 FY '25. The staggering growth was on account of our food and pharma division performing exceptionally well. EBITDA stood at INR 421 million in Q4 FY '26 as compared to INR 347 million in Q4 FY '25, up by almost 21.5% year-on-year. EBITDA margins for the quarter stood at 37.6%. Profit after tax in Q4 FY '26 stood at INR 211 million as compared to INR 183 million in FY '25, a growth of 15.2% year-on-year. PAT margin for the quarter stood at 18.9%. Basic EPS was at INR 4.7. Coming to yearly performance. Total income for FY '26 was at INR 4,163 million as compared to INR 3,482 million in FY '25, up by 19.5% year-on-year. EBITDA for FY '26 was INR 1,489 million as compared to INR 1,262 million in FY '25, a growth of 18% year-on-year. EBITDA margin for the year is at 35.8%. PAT was at INR 775 million as compared to INR 668 million in FY '25, increased by 16.1% year-on-year. PAT margin was at 18.6%. Basic EPS for the full year was at INR 17.4 per share. On the balance sheet side, we continue to have a net debt-free balance sheet with the cash and cash equivalents, including bank balances close to INR 650 million. With that, we can now open the floor for any question and answers. Thank you.

[Operator Instructions] We have first question from the line of [ Shreya Chatterjee ] from [ Ageless Capital ].

Congratulations on the results. My question would be that on your 4 verticals, would it be possible to give out the margin profile of each of the verticals? And going into the future, what would be the highest driver of the -- like which vertical will grow the highest? And if you could also give some update on your biologic vertical?

We don't differentiate the margins between our service lines. It's all treated as one service. So, that information is not available. And going forward, 90% of our revenues are driven by research and testing services for pharmaceuticals and food. So, this will continue. Both these service lines will continue to drive the growth of the organization. And third question?

On the biologics?

Biologics, yes, vertical. So, we have put in place the processes, systems, equipment people to start working on contract research services for biologics and peptides development. So the machinery and people, infrastructure, systems, everything is ready.

So, when do you see this biologics to be a significant contributor to your revenue profile?

Maybe not in its maiden year. Too soon to comment on that. But this year, what we hope to do is build traction in the market, onboard at least a few good clients and deliver well.

And if I may ask like, if it's possible to disclose how much of your service profile or the contract profiles are FTE versus FFS for these 4 verticals?

FTEs are only in the pharma service line. Food and other businesses don't really have FTEs. And even on the pharma side, it's limited to analytical services as of now. So it's not a major percentage.

So, FFS would be the major percentage?

Yes.

[Operator Instructions] The next question is from the line of [ Yogesh Patil ], Individual Investor.

I just want to know what are the growth drivers, which you see panning out in the next 1 or 2 years? And how does the business visibility going forward in terms of maybe -- I'm not asking for a very bigger hypothetical. But in, let's say, on quarter-on-quarter basis or month-on-month basis, how do you see that your long-term strategy is aligned with the revenues? And do you think -- in current environment, it does have any kind of impact on current environment in terms of revenue booking or maybe deferment of client due to this U.S. trade or maybe supply chain issue arises due to Iran-U.S. war? Is there any impact of any global environment, point number one. Second, growth drivers in near term. And how do you see the visibility in near term in terms of when you talk to your clients or maybe new prospective clients?

The growth drivers for our industry, which we call contract research and testing have more or less been same during the last decade. The only thing is outsourcing, whether it is for testing or research, whether it is pharmaceuticals, nutraceuticals, medical devices or even for that matter, electronics or food, the outsourcing is growing. So, all these industries on their own globally are growing at the rate of anywhere between 7% to even 11%, 12%. So, that itself provides an opportunity for all the players within the industry. Further to that, we have been dominantly playing with just a few markets. So, our business development efforts are to go out overseas and gain more market share. So other than that, there's nothing that is significantly or drastically shifting in terms of growth drivers within these industries. Coming to business visibility, what we see for our food, pharma and electronics and electronics testing is that it's good visibility. These are going to be industries that will flourish in the future as well because some of them are essential. And we see that more and more R&D spending is happening. The pipelines, especially for pharmaceutical are shifting more towards large molecules. So the innovation aspect is, I think, on the upward trend because the shift is from small molecules to large molecules. And we also see a lot of smaller companies coming into the space of R&D, wherein even the large companies are collaborating with the smaller companies to strengthen their R&D pipelines. So all in all, I think for pharma, food and electronics, good visibility. Coming to electronics, I think India's Aatmanirbhar initiative and the focus on indigenizing a lot of defense tools and vehicles, whatever is high. And that calls for a lot of testing and Hyderabad is a hub for defense OEMs. So, I think we are in a good space for now. But even putting aside defense, overall, the electronic industry, what we hear, what we see also happening on the ground level is that there is a lot more activity in terms of investments that is happening. The manufacturers who were also predominantly playing only in the domestic market look now towards overseas markets to sell their products. So, all this is a healthy environment for testing labs as a third party to verify safety, compliance and quality of the products. Coming to what our long-term strategies are, they are perfectly, I think, aligned to how these industries are growing and the macro trends within the industry. Impact of war is there on us. The cost of some input materials, consumables has gone up slightly. There is a slightly longer lead time for us in the supply chains. So, there is some impact directly on us as a result of this war. Now, what will the future impact be is a wait and watch. We'll have to see how things pan out for everybody. And coming to last year, yes, I think the pharmaceutical industry was under strain because of the tariffs imposed by U.S. I think these have now been reversed. So, whatever small lull that we had observed last year, we are hoping that will quickly be reversed at least on the tariff side of things.

At least from an environment point of view, it means global environment or the industry prospects outlook, FY '27 would be better than '26, do you think, based on your client interaction or experience because more and more defense electronics and plus your pharmaceutical launches? I think -- I don't know which segment is going to benefit us. But based on your interaction with clients because see, all these are also very, very high-growth areas in terms of client interest and visibility even from government point of view. And you are in right spot -- sweet spot, sorry, in terms of launching new products, CDMO and electronics and plus food is again a growing industry. So, I'm just trying to understand, is there any -- in terms of client deferment of new product, or is there any competition? Or do you see in terms of structural growth, let's say maybe FY '27 to FY '30 based on your clients' interaction? It means first is your client and second is sector. And third is competition in terms of margins. How do you see going forward here?

In a flourishing industry, in a growing industry, competition is always going to be there and competition only intensifies because it's a very good environment. Now coming to -- in near term, you're talking 2027 to 2030. If we talk subtracting the situation, geopolitical situation and also putting aside the sudden surprise tariffs that these days countries are imposing on each other, now if you remove those factors, I think things should be good, better than what we have seen now. Things should only become better. But given the uncertainties, I can only comment when those things happen because it's anybody's guess.

I completely agree. But your company is very difficult to track because in other sectors, you can track export data or maybe certain IPM growth and all. In our kind of business, very difficult to get any -- basically growth drivers or maybe because all these business or in B2B is not in public domain actually. We can't -- nobody can track that. In terms of that, if you give some visibility, let's say can -- our company can grow, let's say, 20% to 25% kind of CAGR of 3 to 4 years and maintaining the profit, that is possible or it is a very optimistic scenario?

No, it's a stretch number, but definitely doable. And that's what we target each year.

Okay. Okay. And in terms of, let's say, expertise any clients we are dealing, so that client is coming to us or he also -- it means if he is launching new product, he also -- what I'm trying to understand is client is the price sensitive or what?

For some services, which are very routine, low technology, low science, those kind of services, price competition will always be there. But then there are some specialty services where the scientific input is very critical. So there, I think Vimta has an edge. So it's a mix basically, especially on the pharma side. Food tends to be more and more leveled ground for everybody, but companies that move fast whenever there's a regulation change, there is some advantage that can be taken out of that. And Vimta has been quite good at that so far.

Okay. So it means from here, we are maintaining gross margin and the incremental profit could be driven by only revenue growth, right?

Yes. Margins, I think we are already doing well at EBITDA level, I would say. So, you can expect a correction of 1%, 2%, depending on how things are panning out right now because if the input cost goes up, there could be some impact for us there. And also manpower is something that continuously keeps on increasing, but we try to offset with the top line growth. So, we can expect some correction, but more or less, I think it will be maintained.

Okay. But it would be manageable or maybe it can be nullified due to revenue growth also?

Yes, yes.

[Operator Instructions] We have next question from the line of Mr. Vishal Manchanda from Systematix Institutional Equities.

In one of your slides on the presentation that you have published, it says the pharma analytical testing industry is about $9.7 billion. So, could you kind of give us a sense like considering this industry size, we are pretty very -- we are small. Despite being small, we are meaningfully large in the Indian context. So, just wanted to understand why is that so despite the industry being large, the Indian market seems to be much smaller? So where are the gaps? Like where does -- is testing not happening enough in India? What could be that reason?

I wouldn't say that testing is not happening in India because regulators such as U.S. FDA, EMA level the ground for everybody. And India remains on the generic side, one of the largest players in these markets. But having said that, R&D side of things, I think, is on a much lower scale in India compared to these developed markets. So, maybe that's one of the main reasons. And for my understanding, these are just -- the numbers that I know is that by 2030, the Indian analytical testing market will be around approximately $300 million. So it's really, really small compared to the global market. And the main reason why we will not be able to tap into all that big size global market is because this tends to be something that is outsourced to local players because it's not worth shipping a sample overseas for a simple analysis or a short-term analysis. Only where the project is of higher value would the customer also benefit in going to a country like India, which gives the advantage of both time, price. So, I think these are the factors.

So in that -- would -- if NCE R&D picks up in India, that would be a trigger for the industry to become larger.

On the analytical side -- yes?

So when I say NCE, I mean, new chemical entity R&D.

Yes. Possible. More R&D definitely is more work on all sides of testing and research, right, not only for analytical, but also for preclinical, clinical research everywhere.

And like -- in your existing revenue would large part of -- in your existing pharma analytic revenue, would large part of that be driven by ANDA filings in the U.S., generic filings in the U.S.? Or there is something else beyond the ANDA filings that you support?

Analytical testing, I think, by and large, remains on the ANDA side. I would ask Sreenivas to supplement if there is anything else here.

Yes. Mostly on the ANDA side and on for their product release. Sorry?

You said product release.

Either general product release, which is already what you call, approved in the market. And if they are filing ANDAs then to support their ANDA filings. It includes both approved products, ANDA new products, 505(b)(2)s NDAs. There could be some part of NDA analysis, which is also done. Majority is towards the generic 505(b)(2) NDA and ANDA.

Okay. And one on the biosimilar business -- biologics business that you started, would you only do contract research and manufacturing there? Or would you also do some off-the-shelf products, which you can offload to some companies willing to do biosimilars in the like -- biosimilars in the U.S.? Like you'd kind of do the initial development on biosimilar and keep it ready and maybe someone wants to kind of leverage that. Is that also a strategy?

To start with, it is mostly contract research. That's what we are going to start. We are looking to develop products for our sponsors, our clients, maybe at a later stage, but initially, that's the plan.

Okay. And have we signed clients yet on the biosimilars side?

We have good inquiries, and we will be closing them soon. We have a good traction from Europe, from India, a couple of them from U.S. as well. So, we are just finalizing the product and the modality.

[Operator Instructions] The next question is from the line of [ Rohan Shah ] from [ RS Investment ].

I want to understand what has led to the growth this quarter? I think we have achieved the highest ever revenue. And do you think we'll be able to keep up with this momentum, maybe INR 120 crores, INR 130 crores every quarter in the revenues?

Yes. That's the intent to keep moving at this momentum. And the prime drivers for Q4's good revenues are preclinical and also food has done well, food testing because Q4 tends to be a good quarter for food testing. So, these were the main reasons why we could push -- we could have done better because in some areas, we did not see the kind of growth that we were expecting. But definitely, the intent and effort will be towards maintaining this momentum.

Okay, ma'am. That's helpful. Ma'am, one more question. On the environmental testing front, how is the performance? And I understand we are only providing post-project monitoring. So, just wanted to get some color on that.

It's a very tiny part of our -- of work that we do at Vimta. We have moved away from EIA, which is environmental impact assessment and now sticking only to PPM, which is post-project monitoring. And in this transition where we were moving away from EIA, getting into PPM, what we could do is just keep the revenues there. Maybe next year, these years, we will try to push up the revenue. But as such, this is not a high focus area for the company because the growth opportunities are not that high in this segment.

Got it, ma'am. Got it. Ma'am, how has food been this quarter and has the war impacted in any way?

There was an impact, especially the last fortnight of March because we serve exporters, and we also support import testing at the NFL in Navi Mumbai. So, there was an impact in the last fortnight.

[Operator Instructions] The next question is from the line of [ Anjali Singh ] from [ Bansal Family Office ].

Sir, my first question is on the export side. Could you please quantify what is the percentage of export revenue?

In Q4, it has been around 38%.

Okay. And one more question. Now, that we have a new facility up and running, so what are the overall utilization levels?

Utilization will slowly pick up because you don't build a facility wherein you are going to occupy it immediately. That's not how you plan facility. So, utilization will pick up this year, a little more next year, more the following year. So, that's how it is done infrastructure-wise.

Okay. Okay. One last question, ma'am. So, you have mentioned that new biologics contract research will commence from FY '27, that is next quarter means. So, how are we placed at the moment and how are the efforts being put to bring in new projects for the company?

Some projects are under discussion. Like I was mentioning in my opening remarks, the people, systems, infrastructure, equipment, it's all ready and we are discussing some projects, and we hope something will materialize soon.

[Operator Instructions] Next question from the line of Umesh Matkar from Sushil Financial Services.

Ma'am, I would like to know about the subsidiary that has been approved in the U.S. So in which segment are we looking into? And also what sort of investments are we going to incur for the U.S. subsidiary?

The purpose of undertaking this is to be closer to our customers because we have a sizable population there and also to give them greater confidence. We are on their soil. So it gives greater confidence for them. So for as of now, that is the intent that we have. If something develops in the future beyond this, I will certainly come back to all of you.

Okay. And does it give advantage to us in case of tariffs if we set up a subsidiary in U.S.

No, not much. So, there's hardly any impact of tariffs on the services that we provide. As MD has just mentioned, the main purpose of opening the subsidiary there is to be closer to the customers.

Right. And my last question is -- and my last question is with the new capacity that has come up, so what sort of revenue can we look into, say, once it fully gets utilized?

The idea is to -- when we took up this project of expansion, the idea was to have a facility that can take care of our growth, at least for the next 4, 5 years. So, I think we are good so far. We have moved into these facilities, and we see growth happening as you have seen for the last financial year. And the idea is to keep on continuing this momentum.

[Operator Instructions] We have next question from the line of Advait Bhadekar from EY. As there is no response, we take the next question. We have next question from the line of Mr. Rohan Shah from RS Investment.

Ma'am, how are the electronics and electrical testing scaling and what is their medium-term potential?

Last year for us has not been very exciting in this segment. We were hoping that we would pick up some more momentum here but we had leadership challenges, which are fixed now. Leadership challenges on both the technical and operational -- sorry, operational and BD side. So, this is fixed now. But despite those challenges, I think the team has progressed. It is very encouraging for us. We have retained most of our customers and the word of mouth is strong for us in this region. So now since that factor is addressed, we hope to see some strong movement coming here.

Got it, ma'am. That's helpful. Ma'am, also with a net debt-free balance sheet and INR 650-plus million cash, how does management plan to deploy capital going forward?

Very good question. As of now, there are no firmed up thoughts on what we will do with this money. But it's good to always have cash on hand, especially in these uncertain times. So for now, I have no specific information to share.

Okay, ma'am. I understand that. Ma'am, one more question, if I may squeeze in. Are there any plans for acquisition, capacity expansions or investing in any new service lines?

Like I said, nothing concrete as of now. But if something materializes, I'll definitely come back to you.

All right, ma'am. All right. Ma'am, how should investors think about margins in the biologics business compared to the core testing business?

Honestly, we think the margin should be around this region. Our expectation is that it might be a percent or a few percent here and there. The reason why we say this is because the early projects may come more from domestic clients. And also the other aspect is the cost of input material is quite high here. But once we develop some traction here and we have a track record of successful products or processes that we have developed under our belt, we can go overseas. And I think when we go overseas, the margins can be good.

[Operator Instructions] We have next question from the line of [ Amitabh Modi ], Individual Investor.

Ma'am, our original plan was to clock INR 500 crores revenue annualized. So, where do we stand? Is it possible to achieve it in FY '27? And secondly, how confident we are to maintain our EBIT margin over 35%?

Yes, we have had a very good CAGR during the last 5 to 7 years. We want to maintain that CAGR. And if you extrapolate that, then yes, the numbers that you are talking about is what we are also targeting. Our goal was to hit 500 by last year. But because of divestment of Diagnostics, we said we will try and get to those run rates by Q4. But again, Q4, some headwinds in terms of external factors. I think we put a very strong effort, and we would have really gone close to that number. But some things did not happen for us, which we were expecting. But going forward, we are hopeful, very, very hopeful. But there are uncertainties in the environment now, as you all know.

One more question, ma'am. Is there any plan to raise money to ramp up the CapEx plan like you have cash of INR 65 million (sic) [ INR 650 million ] on hand? But is there any plan near term by way of rights issue or some other way?

As of now, we don't need anything from that kind of a method. If there is, then we will definitely share that news.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to management for closing comments.

Thank you to all the participants who took the time to join the call. I also wish to thank Systematix, especially Vishal for being here and facilitating this call. Good day to all of you.

On behalf of Systematix Institutional Equities and Vimta Labs Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.