Vimta Labs Limited (VIMTALABS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vimta Labs Limited Q3 FY '26 Earnings Conference 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, Bhoomi. Good evening, everyone. On behalf of Systematix Institutional Equities, I welcome you to the Q3 FY '26 Earnings Call of Vimta Labs. We thank the Vimta Labs' management for giving us an opportunity to host the call. Today, 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. Thank you, and over to you.

Yes. Thank you, Vishal. Good evening, everyone, and a warm welcome to Q3 and 9 months 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. This 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; Mr. Siva Rama Krishna Kambhampati, CFO; myself; Ms. Sujani Vasireddi, Company Secretary. Now I request Ms. Harita Vasireddi, Managing Director of Vimta Labs Limited to provide you with the update for the quarter and 9 months ended 31st December 2025. Thank you, and over to you, ma'am.

Thank you, Siva. Good evening, everyone. I welcome you all to the Q3 and 9 months FY '26 earnings call today. I will start with the business updates, and then our CFO will take over to discuss the financial performance for the period ended 31st December 2025. I would like to report that Vimta Labs has recorded a quarterly sales revenue of INR 100.5 crores, showcasing sustained momentum with a growth of 10.2% on a year-on-year basis. This growth is a result of the pharmaceutical and food testing services contributing majorly. As innovation accelerates, quality norms become more stringent, the wellness sector continues to expand and the demand for uncompromising product quality and safety continues to surge. With a wide array and advanced testing capabilities and strong domain proficiency, Vimta is well equipped to seize new growth opportunities in all our services. Coming to discussing the services we provide in a little bit more detail. Our biggest contributor to the revenue that is the pharmaceutical testing and research services. They continue to do well. But I'd like to share that we saw some lag in booking clinical [Technical Difficulty] during the quarter, and we also faced certain unexpected operational challenges in the analytical services, which resulted in some revenues getting deferred to next quarters. On biologics contract research and development services, I would like to again inform that the equipment procurement and the facility setup is well on track, and we are confident of commercializing these services by quarter 1 of next fiscal. Our food testing division experienced good momentum during the quarter, and we will see improved traction in the coming quarter with certain tailwinds in place. In the Electricals & Electronics division, revenues have remained steady, and we continue to focus on increasing our penetration into the market. From an operational standpoint, the installation of second chamber in our life sciences facility for EMI/EMC testing is well on track. The current chamber is running at 24/7, 80%, 85% utilization. Anchored by a strong scientific operational base and encouraging market momentum, we are optimistic about driving continued growth across our service offerings. With this, I will now hand over the call back to Siva for a detailed discussion on the financials. Thank you.

Thank you, Ms. Harita. Good evening, everyone, and thank you for joining us for our Q3 and 9 months FY '26 earnings call today. I'll begin with an overview of our financial performance for the quarter and 9 months ended December 31, 2025. After that, we'll open the floor for questions. Before we move into the financials, I'd like to highlight that following the divestment of our Diagnostic and Pathological services business announced on August 30, 2024, the figures for the previous period have been regrouped to ensure a like-for-like comparison with the current quarter. I'll start with the financial highlights for the quarter. Total income for Q3 FY '26 stood at INR 1,005 million as compared to INR 911 million in Q3 2025, a 10.2% growth on a year-on-year basis. Quarter-on-quarter has seen a slight decline of 3.9% when compared to Q3 FY '25. EBITDA stood at INR 344 million in Q3 FY '26 as compared to INR 343 million in FY '25, up by almost 0.4% year-on-year. EBITDA margins for the quarter stood at 34.3% PAT in Q3 stood at INR 176 million as compared to INR 175 million in Q3 FY '25, a growth of 0.4% year-on-year. PAT margin for the quarter stood at 17.5%. Basic EPS in Q3 FY '26 was at INR 3.96. Coming to 9 months performance. Total income for 9 months FY '26 was at INR 3,043 million as compared to INR 2,521 million in previous year. So it has grown up by almost 20.7% year-on-year basis. EBITDA for 9 months was at INR 1,068 million as compared to INR 915 million in FY '25, up by almost 16.7% year-on-year. EBITDA margin stood at 35.1%. 9 months FY '26 PAT was at INR 564 million as compared to INR 484 million in FY '25 with a 16.4% year-on-year growth. PAT margin was at 18.5%. Basic EPS for 9 months was at 12.7%. I'd like you to note that pursuant to the implementation of the new labor laws from November 26, 2026, we have recognized an amount of INR 1.6 crores as past service costs. Considering the onetime nature of this impact, we had disclosed it under exceptional items in the P&L account. On the balance sheet side, we continue to have a net debt-free balance sheet. With that, we can now open the floor for Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of from [ Preet Jain from Niveshaay Investment Advisors ].

Sir, am I audible?

Yes, go ahead.

Sir, a couple of questions from my side. First being, regarding our growth outlook, could you provide color on expected revenue trajectory for next 12 to 24 months? Specifically, how should we think about the ramp-up time lines for your current available capacity? And at what stage do you anticipate reaching peak utilization levels?

The markets are very favorable in this industry, whether you take food testing or within the pharma industry, be it preclinical research or clinical research, even the market for electronics testing. So the environment is very conducive for companies to do well in this sort of a growing market. Coming to Vimta, I think we have a good track record of 40 years, be it science or systems or our business fundamentals, they're all pretty strong. So growth, we are very confident when it comes to the near term and even the long term. As such, we don't give any forward-looking statements with respect to numbers. So I will refrain from doing that. I can just share my confidence on what we think would be a good growth future for the company.

In past communication, company set a revenue target of INR 500 crores for current fiscal. So given the numbers of 9 quarters are out, is that still -- is that expectation still intact? Do you expect that quarter 4 will be a back-end surge to bridge the remaining gap to that target?

Yes. Typically, H2 tends to be better than H1. Like I was mentioning in my opening remarks, there were a couple of events that happened that coincided for us. And therefore, you see that slight dip in quarter-on-quarter revenue. So we expect Q4 to be much better. That's been the trend. And so far, nothing says that we will not have a better Q4. Now are we going to come to the run rate of INR 125 crores, which is basically what I have been trying to share. Maybe not, we may not touch that number, but I feel we'll not be disappointed with where we land at by the end of the year.

Okay. One more question from my side. On the strategic shift towards CDMO and CRDMO, can you give an update when these projects are coming into pipeline? And when can we expect the revenues in Q1 FY '27, you told. So how much contribution can they provide to the top line?

Next fiscal will be the maiden year for the biologics contract research and development services. So maiden year, I don't think we should be really looking at how big the numbers will be. It's more about going out there and picking up some clients who can trust us with their projects and delivering them well so that we build confidence and good reputation with our first few projects. I think that's more important. We will be ready to commercialize by Q1. And hopefully, we will have a project also, but I won't be able to say that now.

Okay. Okay.

[Operator Instructions] Our next question comes from the line of [ Disha from Sapphire Capital ].

Hello? Hello? Am I audible?

Yes, you're audible. Please go ahead.

Yes. Okay, yes. So you mentioned in your commentary that there were some operational challenges we faced. So could you just elaborate a bit on what went wrong?

Nothing went wrong. We are doing a lot of restructuring within our facilities to accommodate for expansion of our analytical facilities. So there, I think there is some dependency on external sources to help us do those modifications. So there, we experienced some unexpected delays. And this has impacted the productivities of certain teams.

Okay. And I think you mentioned that there was some spillover of revenue into Q3 -- Q4. So what would be the quantum of that, if you could just help.

That is too nitty-gritty, and let's not get into that. I can just say that a couple of things happened together, and therefore, you see that slight dip in revenues quarter-on-quarter.

Okay. But then I think from Q4 onwards, we'll be back on our trajectory. Is that a fair assumption?

Yes.

Okay. All right. Okay. That's it from my side.

Our next question comes from the line of [ Santosh Keshari from SKK HUS ].

Am I audible?

Yes, you're audible.

Yes. So my question is about CapEx and the return on capital employed. So what we can see is that the CapEx is on an increasing trend from 2, 3 years back from INR 50 crores now to over the past 2, 3 years, it is more than INR 70 crores. And then the ROCE is something like getting not very regular at above 30%. So what could be the reason behind it? Are we seeing some concern in the market landscape? Or there is some work in progress and we can see the ROCE going up beyond 20% in the next few quarters?

So I think first on the CapEx spend, typically, in our industry, we invest what comes out of our depreciation amount of the previous year. That is a minimum must because you don't want to be technologically obsolete and you also need capacities to expand or grow your revenues because things like equipment, you add on-the-go, you don't buy and keep those capacities idle unless you are developing a new service. So that's typically the CapEx spend, and we have been very much on target with that. The last couple of years, if you have been following the company, you may know that we have done a lot of capacity -- infrastructure capacity expansion. And also recently, we announced a foray into biologics, formulation or process development services. So that involved additional CapEx. So that's the reason you are seeing those additional numbers. Coming to ROCE, I think we have some of the best in this TIC/CRO industry. I don't see a problem there.

Okay. So are we saying that we can get back 20% kind of ROCE in the next few quarters? Or it would be remaining under 20%?

ROCE that you are seeing in the presentation is for the period of 9 months, okay? So that is compared for the full year in the previous period. Having said that, this as MD has just mentioned, with the addition of biologics division, where we are spending and the revenues are yet to come up. So there is a slight dip in the ROCE in current financial year. It will come back to regular levels.

Okay.

[Operator Instructions] Our next question comes from the line of [ Diksha from SP ].

I have 2 questions, ma'am. One, we had discussed in the past about the U.S. exposure, where I believe you had mentioned that it was about 35% and exports and then 60% of that, which effectively translates into 20% of the top line to U.S. So is that proportion remains the same, if I look at the top line contribution? And my second question...

Yes, I think that has actually -- the export percentage has actually slightly gone up in Q3. So exports, we are more or less doing good. In Q3, we have [Technical Difficulty] export revenue.

I'm sorry, can you repeat? I could not get it.

Almost 39% of our income is from exports, which is actually better than the first half of the year.

Okay. And out of 39%, what would be U.S. export, ma'am?

About maybe 60% is from U.S. We have...

So that proportion, you mean?

Yes, yes. Yes.

Sure. And second question, ma'am, on this top line guidance, I did not follow. Are we sort of still more or less aligned with that INR 500 crore top line for the next year or that may be sort of revised?

No, no. Next year, we're definitely aligned.

So next year annual target still remains INR 500 crores?

Yes. Like I said, I don't give out forward-looking statements with respect to numbers. But since this 2025-'26 was a goal we took almost 5, 6 years ago when we even had diagnostics. So that's when we said we'll share this vision with the market because it's always good to share long-term plans so that you know -- you understand what we are working towards. Otherwise, it's -- we don't normally issue forward-looking guidances on numbers.

Okay. Okay. And any plans on inorganic ma'am because there are a lot of opportunities in the market for this new line of business typically where it is a lot of unorganized players are there who are trying to sort of get exit. Are we looking at that inorganic mode of growth? Or we are strictly no, no?

In principle, we do believe that the future would have some sort of inorganic component with regards to our growth. But is there anything on the cards right away, I would say no.

Okay. Okay. That's helpful, ma'am.

Welcome.

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

Sorry, I was on mute. Ma'am, in your opening comments, you hinted that there was still some positive traction on the food front that you are witnessing, and we'll probably see good numbers from next quarter. Can you share some color on are there any positive regulatory developments there?

No, food tends to be seasonal business and Q4 is typically the quarter which does the highest numbers in the whole year. So that's why I mentioned tailwinds because in Q4, you generally see that seasonal benefit.

Right, right. While -- but there are no major -- there are no important regulatory changes happening in this space that can help a lot...

Quite a few are happening. They are continuously happening. So a lot of effort is being put to continuously expand our scope under the NABL certification also. So that is actually a good thing for the laboratory, and these are continuously happening. We can't say there is any major one, but small, small ones, they are the ones that add more and more testing revenue for the laboratories.

Okay. And second one, on the clinical trial research space, have we been able to kind of get more clinical trial research projects?