Windlas Biotech Limited (WINDLAS.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Windlas Biotech Limited Q1 FY '26 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this call is now being recorded. Today on the call, we have Mr. Hitesh Windlas, Managing Director; Ms. Komal Gupta, CEO and CFO. I now hand the conference over to Mr. Hitesh Windlas. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us today for our financial results for the quarter ended 30th June 2025. We have uploaded the press release and investor presentation on our website as well as on the exchanges. I hope that everybody must have gotten an opportunity to go through it. Initially, I would like to discuss the outlook and way forward for Windlas Biotech, followed by financial highlights for Q1 '26 of the company, which will be shared by our CEO and CFO, Ms. Komal Gupta. This quarter reinforces our strong growth trajectory, marking the 10th successive quarter of record revenue performance. The company reported an earnings per share of INR 8.4 for Q1 FY '26, marking a 30% Y-o-Y increase. In line with its commitment to shareholder value creation, the Board paid a dividend of INR 12.2 crores, equivalent to INR 5.8 per share to its shareholders for FY '25 in August 2025. The Indian pharmaceutical market registered a Y-o-Y growth of 9% in Q1 FY '26 with a modest volume growth of 1%. We delivered 19.9% Y-o-Y revenue growth for the quarter, driven by steady contributions from all 3 business verticals. Our Generic Formulations CDMO vertical continues to deliver healthy performance, driven by customer additions, expansion in product portfolio and consistent delivery of quality manufacturing products. The Trade Generics and Institutional vertical sustained their growth momentum through deeper penetration across core and adjacent markets, supported by government health care schemes such as Ayushman Bharat and Janaushadhi. In exports, we are actively pursuing several strategic initiatives, aimed at meeting the increasing global demand for high-quality and affordable generic medicines. On the manufacturing front, we are strengthening our operational infrastructure through the upgrade of our recently acquired Plant 6, which remains on schedule for its planned capacity expansion. Additionally, our injectable facility is enhancing our ability to serve diverse customer needs and deliver a wider range of products efficiently. As we move ahead, our outlook on the broader Indian pharma sector remains optimistic. Our focus remains on driving long-term value for shareholders by boosting operational efficiencies, nurturing key talent and expanding our dosage form capabilities. I will now request Ms. Komal Gupta, our CEO and CFO, to discuss the financial performance highlights. Over to you, Komal.

Thank you, Ritesh. Good afternoon, everyone. On the back of performance momentum seen consecutively across last 10 quarters, we delivered another quarter of consistent performance with revenue of INR 210 crores, EBITDA INR 27 crores and PAT INR 18 crores. The company recorded 20% Y-o-Y growth in revenue, 27% in EBITDA and 31% in PAT. The company's gross margin expanded by 71 bps Y-o-Y to 38.3%, while EBITDA margin improved by 70 bps to 12.6%. Windlas Biotech is strategically focused on strengthening core capabilities and expanding into high potential geographies to meet evolving market needs. Through disciplined execution and operational efficiency, we are well positioned to drive sustainable growth, enhance competitiveness and create long-term value for our shareholders. Our Generic Formulations CDMO vertical achieved growth of 17.8% Y-o-Y, contributing INR 160 crores in revenue. Our continuous endeavor to ensure delivery excellence and stringent quality standards strengthen our positioning as a trusted CDMO partner in pharmaceutical industry. The Trade Generics and Institutional vertical grew by 25.2% Y-o-Y to INR 44 crores. This growth was driven by enhanced distribution reach, stronger market presence in previously underserved regions and increased product range. Exports vertical registered 45.4% Y-o-Y growth to INR 6 crores as we continue to deepen our presence in key regulated and semi-regulated markets. As we progress through FY '26, the company remains focused on driving process enhancements and strengthening internal efficiencies. We are currently witnessing encouraging trends across all business verticals, backed by a differentiated value proposition and strong customer engagement, the company is optimally structured to unlock its long-term goals in a sustainable and impactful manner. That's all from our side. We can now begin Q&A session. Thank you

[Operator Instructions] The first question is from the line of Dhwanil Desai from Turtle Capital.

Congrats for a very good set of numbers. My first question is how is the ramp-up on the injectable side? And also, if you can help us with the utilization and how do we see the ramp-up going ahead? And a question tied to this is that our gross margin has expanded significantly. So, when do we see the full benefit of cost absorption of the new plant as the scale-up happens on the injectable side?

So as Mr. Dhwanil has discussed consistently in our past conversations also, we want to emphasize that our business is more amenable to be evaluated on a longer-term basis rather than quarter-by-quarter and also as a whole rather than part by part. Thus, we continue to reinforce this message by bringing to your attention at the company level performance as opposed to dosage form-wise performance. So, our action plans are in place, and we are progressing on the various dosage forms, including injectables. With regards to your question on the margin expansion, Komal, if you want to add?

Yes. So, in terms of margin expansion, as we have mentioned in the past, we see that we expect the margin expansion to happen. Exactly when the correct operational efficiency balance along with the revenue and capacity expansion hits is difficult to mention the timeline, but we see margins growing as you have been seeing consistently.

No, I appreciate the point of not disclosing utilization. But I think last 2 quarters, you were talking about increased cost depreciation because of the injectable plant. So, I think it would be really good to know that how that cost absorption is happening along with the scale up, even if you don't want to talk about specifics because we were talking about those factors in the last quarter, right?

So, last quarter, we gave injectables revenue detail. We did not give any other detail, and that was in line with what we have been saying for earlier all 3 quarters. Last year was our first year of injectables facility commercialization. And that's why we promised 31st March, post 31st March call, we promised all the investors that we would give injectables revenue detail at the end of the year, and we delivered, which was not a very encouraging number. But we don't intend to, in addition to giving the vertical-wise details, which we continue to give right from beginning. We don't want to add up another thing. Last quarter, that was the reason why we discussed. Depreciation, of course, depreciation increase was coming in from 2 factors for first 3 quarters, which was injectables depreciation. We never give injectables depreciation as a separate number, but we maintained that most of the increase is because of injectables. In plant 4, there was also additional depreciation coming in from plant 2 extension capitalization. This year also, the reduction, if you see, is coming in from mainly the injectables and also some portion of plant extension. That much we can mention, and we can continue to mention, but we don't intend to continue to give the exact ramp of for every dosage form, which we do not do earlier also. We don't give tablet capsule, liquid, sachet, such details in past, we have never given.

Okay. Appreciate that. Second question is on the, I think in the commentary; we talked about the export market and some steps that we are talking, taking. So, if you can dwell more on that. So, I think export numbers have been growing, but still, I think still relatively smaller compared to the scale in the other 2 segments. So, if you can talk on that and how do we see the journey from here?

Sure. While this quarter also, if you see, our growth has been good, but of course, it is a small base. And we really have to unlock more markets and unlock more product in our RoW segment. So, the rest of the Asia, the CIS, the Africa, these are the markets that, or the geographies that we are active in. And we have been adding more and more dossiers, so getting registrations done as well as getting renewals of our existing products done in these markets. Some new markets also have been, we have been trying to open. So, the registrations are expected. Most of the regulatory authorities don't really give timeline commitments here. So, we have been waiting for some of them. In the past, we had also talked about in-licensing of certain MAs for Europe. And those are also in the process of transfers where the regulatory authorities, the filings have been done, and we are now in the wait mode to get the transfer approvals. So, there's a lot of work going on in the background. And we expect, we are optimistic, and we are expecting that as each of these various filings unlock or approvals come through, we will be able to commercialize and expand our vertical over there.

The next question is from the line of Sudarshan Padmanabhan from ASK MDPMS

Congrats On good set of numbers. Sir, my question is just taking forward from the previous participant, not necessarily dwelling on numbers, but if we are looking at utilization of the injectable plant, probably where do we, how have we seen the ramp-up in that plant? And just taking forward your comments in terms of one is, of course, new client addition is very good for us. But how has the wallet share improved in the last 2 to 3 quarters, if you can qualitatively give some color on that?

Yes. So, Sudarshan Ji, basically, the CDMO space is not very well documented. So even for us, we don't, while we get, we can track how each customer is increasing in contribution to us or in magnitude in terms of how much business we are able to attract. But wallet share is very difficult for us to know because there is no real set of published data and also customers also don't like to disclose what percentage or what is the total outsourcing they are doing. So hard to answer that question. On our side, the way we look at it is more in terms of the client concentration being an important factor. So, since we are a B2B business, our internal metrics have been around ensuring that we don't have overdependence on any one customer. So, we have been over the last 4, 5 years, consistently improving in reducing the contribution of our top most client. And this year also, this quarter also, we are staying in line. All our growth is coming from distributed set of clients. It is not a significant or chunky growth from one business or one customer or one product. And so that way, we are maintaining the health and the focus of broad-based business development in this vertical. In your third question was around the utilization level. So, on the utilization levels, we are in, not much is changing because of 1 quarter. It's very small period for us to say. So, if you look at our last year's numbers, then we are within a range of similar utilization.

Sure, sir. The reason why I was asking more on the wallet share and the interest from customers is the Schedule M, which is intending to be more implemented aggressively this time. So just wanted your sense more qualitatively from your interaction with the clients that is the ecosystem gearing up towards this schedule and implementation, focus on more quality? I'm trying to understand the polarization from unorganized inefficient players to organized is it starting to move.

Sure. I think you hit on a very important point, Sudharshan ji, that even when we first got listed, this was one of our important thesis that given the very highly fragmented nature of the contract manufacturer industry, very large number of people present and the increasing quality pressures, we definitely expected that it should lead to more benefit towards the organized players. Now if you look at Schedule M, there have been a lot of changes done in terms of quality expectations. They are on the infrastructure side, which needs capital. They are on the day-to-day reporting and defect monitoring and reduction side, which requires competent manpower and systems. And they are on the soft aspects of actually doing, sorry, the actual tests being, the quality tests also being enhanced. So Indian Pharmacopoeia has also been revised. So more tests are required to be done. Dissolution test has entered in almost all domestic supplies. So all of this means that there is more cost, there is more oversight and there is a focus on more careful execution. And this is where the investments that we have been doing, Windlas, many years, whether it was our electronic systems, moving our QA and QC to electronic systems or whether it is our infrastructural investments, the new facilities or even the upgrades to the older facilities. And even on the manpower side, where we have very strong performance-linked compensation, both in terms of variable pay as well as in terms of equity-linked compensation. So this is, these are very important things that we have been laying the foundation, and we hope that as this structural change of new Schedule M and continues to implement and the government becomes more and more stricter over a few, further years, organized companies and people who have this forward thinking should benefit. And so that's how our thesis has been, and we continue to believe in that strongly.

Sure, sir. Sir, one final question before I join back the queue is today, when I look at the raw material prices, whether it is chemicals or APIs, lion's share of the prices have actually come down. And broadly, if you look at the CDMO business, it's a cost-plus business model. So just wanted your thoughts whether is this something that you would be looking at? Or is it something that doesn't really matter in the overall scheme of things that something goes plus and something goes minus, but business goes on?

We can give you the reference of last 10 quarters. There have been quarters when API prices went down a lot. And there have been quarters when API prices grew. Net-net, in the longer scheme of things, as you rightly mentioned, we don't see a solid impact as such because you end up reaching where you want to reach by doing more volume when API prices are a little bit low. But that ultimately gets also, when you see API prices rising, really your growth percentages don't go haywire. So net-net, in the long term, you end up being positive, good. So we continue to have that optimistic sense. That doesn't change because of API prices going down.

And also one more thing is that like our, all our facilities are general category products. So we are not in antibiotics. And a lot of the fluctuation that you see or hear about API prices because antibiotics are very high value high volume and high value. So therefore, those companies which are having those dosage forms will have a greater impact because we are mostly general. So the impact tends to be not so severe that we pointed out.

The next question is from the line of Vilina Jain from Perpetuity Ventures.

Can you highlight the progress which is there on Plant 6 and the commercialization of the same?

Sure. Plant 6, we had acquired sort of a facility, and we are now in the refurbishment phase. We expect that it will be about at least maybe 2 to 3 more quarters before we do the mechanical refurbishment and then we will enter the validation period. But given our understanding, we are completely on track. So, there is no slippage there, but we are expecting also how to bring it sooner so that we can cater to the business requirement. And in terms of CapEx, maybe Komal, you can also share the budget and those aspects.

Yes. CapEx plan that we mentioned earlier is on track. So, INR 40 crores to INR 50 crores CapEx is what is planned for this plan.

Okay. So, we can expect the commercialization then only in FY '27, assuming 2, 3 more quarters of refurbishment and validation?

It is possible that phase-wise, there might be areas of the facility, we might be able to bring up sooner. But yes, I mean, we have not, we want, obviously, to be able to do it like that and bring some benefit in this year. But yes; facility in terms of the, all the areas and all the sections will mostly come up in next year. But we will, we should have some portion of the facility being able to be able to cater to our requirements here also.

Okay. And on a fully commercialized optimized capacity, what is the asset turns which we'll be expecting from here?

So other than injectables, with our existing plant and plant 6 capitalized, we should be able to deliver INR 1,000 crores revenue. There might be some upside coming in later on the basis of our past experience. where some efficiency improvement we are able to bring in at a later stage on the basis of process improvement and optimizations that are possible in the plant. That should be a later thing though. To start with, as soon as plant 6 is capitalized, we should be able to easily deliver INR 1,000 crores aside of injectables.

Okay. And given that we are optimistic on the injectables progress, do we have any plans on the Phase II expansion currently?

No. Currently, we are, we will trigger that expansion, we want to be very careful in terms of the new areas that we are opening. So Plant 6 is the most important CapEx that we are doing. We need to successfully finish this by this time. And then as soon as the orders require us to do expansion on plant 5 injectable capacity, we'll do that. That is a much smaller time frame thing because from the facility-wise capabilities, the utilities and all that area is already built in. We just could add the machinery and qualify it.

So that wouldn't take more than a quarter or 2, right?

Yes. Depending on what machinery we go for, yes.

Okay. Understood. And lastly, on the Trade Generics business. So although on a Y-o-Y basis, we see a growth of growth of 25% for the business. On a Q-o-Q basis, it's been a bit lower. So on an annual basis, can we still see like a INR 200 crores to INR 225 crore run rate for this business?

So, Vilina, as you know, we are not giving a guidance. But what I want to say is that even if you look at the past few quarters, there has been a variation in TDX revenue. In some quarters, we are able to ship and meet the deadline for some of the tenders. And in some quarters, there is a seasonal effect in our geographies. So, and still, I would think that the base is still not so big that we can go quarter-by-quarter kind of a trending. We still are just beginning to build this business. And so, my sense is that we look at it annually, and we are definitely committed to growing and building this vertical in a very strong vertical for Windlas.

The next question is from the line of Abneesh Berman from Valtaria.

Komal, is it possible to split the 18% growth rate in CDMO into volume and pricing?

Yes, it's mostly volume-driven growth, if you ask me. There will be a very small portion, which is driven by, because of prices, its mostly volume driven.

Okay. And as you mentioned, the bulk of API price decreases we've seen in antibiotic side, which you don't deal with. In your portfolio, the API prices have not moved too much this quarter. Is that a right assumption to make?

They have.

They have, Abneesh. What, see, in our portfolio, we are dealing with almost close to 400 different APIs, right? So what, and all the prices are also dependent on what is the volume that one is buying at and also what is the supplier base that one has got in a certain API, so that's why it's very, very complicated, and we don't want to say that, okay, that there is a trend of, which is impacting growth in terms of…

If everyone is wanting to give us the credit, we did work more to deliver this kind of growth. We agree.

Yes, yes. I mean I know it's complicated. But I mean, if you have to put it in simple terms, even if there is like a little bit of API price decline on a blended basis, that means your volumes would have grown even more than 18%, right? That's what you're indicating.

That's correct.

That's correct. Yes, Abneesh.

Okay. Great. The second question, I don't know whether Komal, you mentioned in your opening remarks or not, but I just wanted to know the reason for the depreciation decrease this quarter sequentially. And is this the current run rate before the depreciation for plant 6 comes in, whenever it comes...

Yes, both are correct. So, depreciation reduction remains the same reason that was the reason of increase last year. So injectables capitalization that had happened because we do use WDV method. In initial years, we end up having more depreciation impact. And as the years pass by, the overall depreciation tends to get lower. That is what is exactly happening in our case, and that's why depreciation reduction. And you are right, this is without the depreciation impact of Plant 6. So, whenever we capitalize Plant 6, there will be some depreciation impact coming in.

So yes, yes. I mean, before that impact, this is the run rate for the existing business as of now?

Yes. This can be considered as a base run rate for this year.

And I think Hitesh mentioned that some phase-wise commercialization for Plant 6 will happen in the back end of FY '26. So that is when the extra depreciation starts kicking in, I'm guessing.

Yes, it should. So towards the, so whenever the capitalization happens, accordingly for that portion of the year, depreciation impact should come in. You're right.

The next question is from the line of Ankit Gupta from Bamboo Capital.

Congratulations for a good set of numbers. So just wanted to check with you last quarter, we had INR 6 crores of revenues from the Injectable segment. I know you are not disclosing the numbers, but are we growing on a Q-o-Q basis on this number or it has remained a steady range on that?

Because we have given last quarter the revenue, Q4, if I mention that, that would kind of be giving the numbers, which I would want to avoid maybe, so that is the only reason we don't want to do it, although we want to emphasize that we continue to make progress on the action plan for improving capacity utilization for this facility.

Improvement okay. So they're improving capacity utilization is improving quarter-on-quarter is what you are saying?

So yes, Ankit, the issue is that we want whatever the Injectable progress that we are making, we are definitely trying to accelerate and the actions required to do that, which is the more companies auditing the dossiers, more companies auditing the plant, approving, giving us the POs, all of that is in progress, right? So it is something that dosage form wise, we don't want to begin the tradition of giving numbers because any is all our business, this facility is also supporting CDMO. It is also supporting our Trade Generics. Eventually, for exports also, it will go. So that's why we are not providing the dosage form wise revenue breakup or cost breakups and things like that.

So, any thoughts on we can double our capacity in Injectable by putting up another floor. So, have we reached the stage that we would be taking a call on expansion on the injectable part or it's too early still?

We would do that when we are very close to the peak utilization of the facility, right? We are not definitely there yet.

At least FY '27, you will not take a call on that. And most probably you will take a call in FY '27 is what we can think of?

No, we don't know. Honestly, at this point, we don't know. It can happen sooner, or it can happen later, which depends on when we see peak utilization limits reaching, as I mentioned, which is close to INR 100 crores of revenue from this. So, when we see that kind of a run rate hitting, then we would, even when we see like a couple of months later, that is where we are going to reach then we would start off for the capacity expansion. And as earlier by Hitesh, that is not a very long process. It should be maybe 2 quarters is the kind of time line it should take for us to do that.

Sure. My last question, second question was on the cash utilization. So, it's been a very long time since we have been accumulating cash and have a very large kitty with us. So, any thoughts on how we think about utilizing it or distributing it to shareholders? Any progress on that front? Or have we taken any call on it yet?

Yes. So, since we got listed, we have maintained compliance with our dividend policy, which is distributing close to 20% of the profit, which we have done consistently. And we hope to continue to do that in future as well us saying that. Second thing is for M&A transactions also, we have been exploring, but we don't want to rush it. We did not come across something solid. So, we are not even in the final stages of some opportunity. But we stay open to sharing the wealth with all the stakeholders that is on card. And if we come across some opportunity, we would go for that. If at all, we are able to completely stabilize Injectables business as well. And Plant 6 is also up and running. By that time, if we don't see any inorganic opportunity really clicking in, we would go for CapEx on our own for some other dosage form. That's the plan.

The next question is from the line of Nirali Shah from Ashika Stock Service Limited.

Just from the previous participant's question, I wanted to have a clarity what could be the peak utilization for our, all the facilities on a blended basis? I mean, currently, we are in mid-60s range.