Windlas Biotech Limited (WINDLAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Windlas Biotech Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Jain from Stellar Investor Relations. Thank you, and over to you, sir.

Thank you, Alrik. Good morning, everyone, and thank you for joining us today. To discuss Q1 FY '27 business performance, we have with us senior management team of Windlas Biotech Limited, represented by Mr. Hitesh Windlass, Managing Director; and Ms. Komal Gupta, CEO and CFO. Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. The company undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Documents relating to the company's financial performance, including the investor presentation have been uploaded on the stock exchange and company's website. I now hand over the call to Mr. Hitesh. Thank you, and over to you, sir.

Thank you, Ankit, and good afternoon, everyone, and thank you for joining us today to discuss the financial results for the quarter ended 30th June 2026. We have uploaded the press release and investor presentation on our website as well as on the stock exchanges. I hope everyone must have gotten an opportunity to go through it. To begin, I would like to talk about the outlook and way forward for Windlas Biotech, followed by financial highlights for Q1 FY '27, which will be shared by our CEO and CFO, Ms. Komal Gupta. The Indian pharma market witnessed a volume growth of 3.4% in Q1 of FY '27, reflecting a steady yet measured industry environment. Against this backdrop, Windlas Biotech continued its growth trajectory, delivering its highest ever quarterly revenue of INR 248 crores, representing 18% Y-o-Y growth. This performance underscores the strength and resilience of our diversified business model, our operational excellence and the trust our customers place in us. We are on track for the commercialization of Plant 6 in H1 of FY '27, which will further strengthen our manufacturing capacity and enable us to support future growth opportunities. Our injectables and Plant 2 extension facilities continue to drive scalable growth, highlighting the effectiveness of our strategic investments. We remain focused on creating sustainable value through disciplined execution, talent development, client diversification, capability enhancement and expansion across dosage forms. I would like to thank our customers, partners and employees and shareholders for their continued trust and support. Over to you, Komal.

Thank you, Hitesh. Good morning, everyone. We have started FY '27 with a positive note by extending our record revenue streak to 14 consecutive quarters with 18% Y-o-Y growth to INR 248 crores revenue. Consistent with our focus on long-term shareholders value creation, in Q1 FY '27, the company also completed INR 47 crores buyback in which promoters did not participate and declaration of FY '26 dividend of INR 13 crores, INR 6.30 per equity share. Excluding the impact of ESOP expenses, which are noncash in nature, INR 7.2 crores, our EBITDA grew 26% Y-o-Y to INR 34 crores. PBT and PAT grew 27% and 37% Y-o-Y to INR 30 crore and INR 25 crore, respectively, reflecting our continued focus on improving operational leverage. If we take into account noncash ESOP expenditure, INR 7.2 crores, the company reported EBITDA INR 27 crores, PBT INR 23 crores and PAT INR 18 crores. For Q1 FY '27, earnings per share has improved to INR 8.6. Our Generic Formulations CDMO vertical delivered 29% Y-o-Y revenue growth to INR 207 crores, driven by customer expansion, deeper customer engagement and new product launches. The Trade Generics & Institutional vertical reported revenue of INR 30 crores, following discontinuation of codeine-based products. As we expand the portfolio with new launches and replacements, we expect to progressively bridge this gap. Our Exports vertical recorded 79% Y-o-Y growth to INR 11 crores. We remain focused on long-term company level performance rather than quarterly and vertical-wise fluctuations and are confident in the underlying growth opportunity in all 3 verticals. Looking ahead, our priorities remain focused on strengthening strategic partnerships, expanding our offering, achieving operational excellence, accelerating portfolio development and driving disciplined execution. Supported by a modernized manufacturing base, a talented workforce and clear strategic direction, we are all well positioned to capitalize on the opportunities across all 3 business verticals. Thank you for your continued trust and support in the company. We'll now open the floor for questions.

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

First of all, congratulations for a very strong execution once again despite challenges on the Trade Generic side. So my first question is we have done exceedingly well on the CDMO, CMO side. So if you can give some color, is it that because the overall volume growth in the market has come back and hence, it is kind of helping us. And generally, we have been in that 17%, 18%, 20% kind of a range. So is this still delta coming because of the injectable now also contributing to CDMO and hence, slightly more sustainable higher growth? If you can give some color on that.

Thanks, Dhwanil. So CDMO, you have rightly pointed out, we have delivered a 29% kind of a number, which in a long period of time, this should be the highest one. However, I would like to emphasize that it is important for everyone to note that quarter while growth percentage is an area on which consistently we have been saying that it is important to look at quarterly growth numbers with caution, positive or negative because there are several factors that contribute to having a very high or very low growth number as far in any vertical for that matter. So it is important to look at our growth, which is consistently maintained at a company level instead of going vertical-wise. And of course, the few points that you mentioned have contributed like, injectables has started participating in the overall revenue of the company, but it's not particular to this quarter, right? Injectables has been now participating in the overall revenue of the company, which is not separately given. But -- so that none of the long-term factors we see have changed in any of the verticals, to be honest. So there is no specific reason that we have to offer which says that very high growth was because of it.

Okay. Got it. Second question is even looking beyond the quarterly dip on the Trade Generic side, last 2, 3 quarters, even if we remove the codeine-based revenue, whatever that INR 55-odd crores on a yearly basis from the base, we're still at that INR 30 crore, INR 35 crore kind of a run rate. So even if I remove that entire INR 13 crore, INR 14 crore quarterly number, we are still kind of not grown. And we have kind of been stagnant. I understand you guys have been talking about that it's a lumpy thing, all those kind of things. But now 3, 4 quarters of the same range, so how should we read this? And do you -- so once this kind of goes out of the base, maybe, let's say, Q4 next year, will we again go back to that 25%, 30% growth? How should we again look at that?

So Dhwanil, first is that, as you know, we do not give guidance. So I would not comment on what could be the growth going forward. But -- see, one thing I want to say is that growth is a function of sustained work on how we are -- what is our go-to-market strategy, what products we are offering in the TGx vertical, which geographies we are opening and finally, execution across all of these. So as you rightly summarized that although the loss of cough syrups is a sizable hole, we continue to believe that our sustained efforts in all of these areas are the only way to build long-term success. And that is what we are executing to.

Right. If you can highlight some of the things that you guys are doing, right, to kind of again bridge the gap, that would be really helpful.

So as I said, the fundamentals of the business do not change, right? We have to grow our product offerings in terms of the range of products we are bringing to our Trade Generics vertical. And still, I think we are much, much -- a lot of room to grow the number of SKUs that we can offer. The second is, as we have spoken about in the past, the geographical opening of other states and deepening of where we are present. And every time you add people, there will be a period of nucleation and then growth comes. So that second big part around geographic expansion is also something that we are aggressively working on. And finally, the third one is ensuring that the execution is happening in the right -- with the right hygiene and in the right timely manner. So fundamentally, these are the 3 things, and this is what we are working on.

The next question comes from the line of Sajal Kapoor with Antifragile Wealth.

Team, to be fair, the execution deserves acknowledgment. 14 consecutive quarters of record revenue is itself a clean execution. And I always say publicly, EBITDA alone is never the yardstick unless that EBITDA translates into solid cash flows. In Windlas, we have the cash flows and the balance sheet to show substance. What happens is in a bull market, the herd, the herd mentality often chases P&L reported earnings [Foreign Language]. So that is the P&L earnings and forget to ask where the cash went. Anyway, coming to my question, as Plant 6 comes on stream and capacity expands, what specific operating milestones should shareholders track over the next, say, 4 to 6 quarters to judge whether the incremental capacity is translating into higher utilization, stronger cash generation and sustainable returns on capital rather than simply higher revenue and EBITDA? That's the only question I have.

First of all, thank you, Sajalji, for your recognition. We really appreciate that feedback. And to your question around what are some of the operational milestones for Plant 6. See, for Plant 6, we are estimating H1. We have already done the mechanical completion. We've updated that. And as all the validations and customer audits are ongoing, we expect that at end of H1, we will be in play with that capacity fully coming online. Now in terms of this plant 6 is an expansion of our core. Injectables was an expansion of our periphery because we entered a new dosage form. And therefore, that required some learning side from us also and customer also testing us and also a more complex dosage form. In case of Plant 6, which is an expansion to our core, we expect that similar things will follow, just like in the Plant 2 expansion we had, where customers -- we are extending our existing portfolio. We are not necessarily waiting for any new product development. And these portfolios will be offered from Plant 6. There will be plant level approvals by customers. And then we expect that as we bring in new customers also, we will get to leverage Plant 6 in a more meaningful way because as customers see that we do have available capacity, they also get encouraged to work with a partner who can be more supportive of their growth in terms of both the breadth as well as the volume per product. So see, fundamentally, the signal of our success will still come in revenue, will still come in our cash flow generation, as you mentioned. Because really, honestly, that, as you said, is the crux of how the business should be looked at.

The next question comes from the line of Kumar Saurabh with Scientific Investing.

Congratulations on great set of numbers and all the right steps, whether it is ESOP for the longer-term vision or investor-friendly buybacks. I have 2 questions. First question is on the IPM data. I'm assuming because we work in this sector to a certain extent, we will not be independent of the industry growth and there'll be a dependence. Last quarter, IPM growth data has been very healthy. We -- for last 2 years, we were growing somewhere around 7% to 9% and now we have gone into 10% to almost 12%, 14%. And 3 years back, this IPM data peaked somewhere around same 12%, 14%. So I'm not asking for any future projection or forecast. But given you have been in the industry for so many years, what is your reading of IPM data? Do you feel these are the things sustainable or is cyclic? What leads to a higher IPM growth? And what is the sustainable number looking at history we should believe? And do we have any correlation of our growth with that or our aspirational growth is independent of IPM data? That is my question.

So Kumarji, see, what I can say is that if you look at -- as you very well summarized also that maybe 2, 3 years ago, IPM used to be around a healthy growth percent. What for us at Windlas, we actually look at volume growth more closely, because the price growth is something where as a CDMO, we don't necessarily participate. The benefit of that goes to our customers. And if you see the volume growth in the last 2, 3 years has been very mild, sometimes even going negative. There were a lot of explanations that were out there in various industry publications and talk that this is probably related to maybe incomplete data capture, some of the trade generics not being captured fully in the market or it could also have been related to other factors. What we did in our -- at Windlas was to just focus on execution. How can we bring business timely, how can we execute, how can we supply. And as I had mentioned earlier also that it requires a full team-based effort to do that. All our almost top 50 to 60 people are measured on revenue growth, whether there were a lot of queries earlier also with API pricing going up or down, how does that impact things. For us, we said that, okay, whatever is an externality, we can't change that. But we can focus on what's in our hand. And so that's what we have been doing. With regards to whether this IPM growth in volume, which is close to almost last quarter of 3.4%, that is definitely a healthy sign. I think that I would love to see this continue going forward so that it is not actually a blip because our customers benefit as they get volume growth, as they penetrate deeper, as their brands become bigger, we have an automatic benefit that comes to us. And of course, we have to add more brands and grow. So I don't want to say that the tide has turned and pretend to know more than what anybody in the industry can say. But I think this is a welcome sign, and I want to -- we are honestly watching these growth numbers and definitely want to leverage them to the best of our ability.

Great, sir. Sir, my second question is our current utilization is around 65% and Unit 6 is coming. And we don't have any immediate new CapEx plan. So what is the peak capacity utilization we can achieve? And coming to export growth, I think last 2 years, we have been doing very well, and we have been more focused in terms of rolling out BD team. So do you see this kind of extraordinary growth of export continuing with our initiative? This is the only question I have.

About Exports, as we have always maintained that it is a higher gestation period conversion business. And that's why it takes time for several business ideas that we are working on to convert into revenue. So everyone has been patiently waiting to see that growth come in, which has come in. But again, the additional factors that we continue to work on. In terms of our efforts, there is consistency that has been mentioned. The results are very difficult to say that what kind of growth numbers should be achieved. Anyway, you are aware, we don't give away the guidance as such. But we stay focused. We have always consistent -- we have maintained consistently that we remain really positive in terms of the growth opportunity available for our Exports vertical, and we continue to do so.

And ma'am, on the utilization, where will we hit the peak?

In terms of utilization, we have mentioned earlier that with Plant 6 we can deliver INR 1,100 crore kind of a number in terms of revenue. However, we have always in past seen that the initial estimate that we give in terms of revenue that can be delivered with our plants can be grown to a large extent, 10% to 15% more with various efficiency initiatives that we consistently take internally. We keep figuring out the most suitable way to do manufacturing packing. And accordingly, we keep making incremental changes. Some of it also goes into the maintenance CapEx every year that gets done INR 12 crore to INR 15 crore every year. So we are very positive that this number can grow to a large extent further in terms of capacity utilization. As such, we have said that 60% to 65% is the highest peak utilization level for our kind of business, which can, of course, be stretched to 70% or so. But as we increase the operational capacity, this number does not really remain that important. That's why we are mentioning that the number, INR 1,100 crore is an easy go. And beyond that, there is surely a great deal of possibility to further increasing.

The next question comes from the line of Avnish Burman with Vaikarya Investment Managers.

Congrats on a good set of operational performance. Komal, if we look at the Trade Generics business and if we remove the codeine from the base, do you think that the ex-codeine business has grown Y-o-Y this quarter?

TGx so -- because TGx is a TGx plus institutional vertical, and institutional revenue, as we have earlier also mentioned is very lumpy in nature. So quarterly revenue to say in terms of Y-o-Y, if there is growth is very difficult to mention although -- so to take near to actually give response to that, I would say that with codeine taken, there has been some impact to our TGx and institutional vertical in terms of the momentum that we have been maintaining. We would like to acknowledge that. And having said that, we would like to emphasize that we remain extremely positive in terms of the long-term growth potential that is available in our TGx and Institutional vertical, which continues to be supported by favorable macroeconomic factors, increasing demand for affordable health care and our internal AAA strategy. So we continue to work in that. We continue to work on geographic expansion, portfolio expansion, institutional account addition and also alignment of our internal sales force. All those factors we are continuously working on. The momentum has taken a hit, but that, I would say, is a temporary hit for a few quarters instead of a long-term listing. We are very confident of bringing back the momentum, bringing back good revenue numbers in this vertical.

Okay. And if you look at the employee cost on an ex-ESOP basis, they seem to have grown by 17% Y-o-Y. So just wanted some color. Are you adding manpower? Or is it just increment largely contributed by increment, if you could just give some -- throw some light?

So there are several factors that going to personnel cost increment is obviously one of the factors. There is another factor of contractual manpower that increases the variable manpower with increase in production. That is second. And third is also there has been further increase the minimum wage by Uttarakhand government. So that increase has also become part of it. In fact, Uttarakhand government gave retrospective effect increase, and that amount is also part of this personal expense that we see. But there is nothing extraordinary. And we think that with these kind of numbers, we have still been able to maintain the kind of production that we have, and that's why able to maintain the EBITDA numbers.

And how much is this minimum wage? And by when was it implemented by the government?

It was done around period when...

When these are -- maybe about 2 to 3 months back, the notification had come. They -- so -- I mean I don't remember off the top of my head, Avnishji, but we -- what Komal is also pointing out that we -- the growth in our case is mostly volume driven, right? So if we have to produce more -- a lot more units, a lot more batches and cater to a lot more customers, that results in additional manpower also, so.

Okay. And the Plant 6, I mean, when it gets commercialized, what is the increase in quarterly depreciation run rate that we are expecting to see?

Quarterly depreciation, we have yet to do the thorough calculation, but should be around 30 million, plus/minus, I don't know, 10%, 15%, but around 30 million per quarter should be the number initially, initial 1 year and then it goes down as you have seen the quarter depreciation reduction. Yes.

Yes. Just last one with your permission. In this quarter, was there any increase in working capital because I see the interest cost increased a little bit, and it has been on an up trend. So is it because of the geopolitical or I mean, crude prices going up and down that you had to extend the working capital? Is that what happened?

By the end of it, we were able to maintain similar working capital levels. But during the period, yes, there have been some factors in terms of increase in -- because of geopolitical factors, some increase in inventory was there. And accordingly, some increase in receivable days was also there. But net-net, we were by the end of the -- like, by now, we have been able to bring in back to the similar level as long as overall operating working capital is considered.

The next question comes from the line of Ishit Desai with [ Fods ] Family Office.

Congrats on a very good set of numbers. My first question, sir, is on the Trade Generic side. You, couple of previous participants, kind of answered that. But one thing I wanted to understand on codeine-based products specifically. So we are trying to expand the portfolio with new launches and geographical expansion as well. But anything specific in terms of like-to-like replacement to a cough syrup product wherein we have already built a distribution chain? And if we are working around that, what kind of initiatives now again, we need to do it at company level, distributor level, customer level in terms of time line, if you were to kind of replace it with the cough syrup product itself. So if you could help us understand on that side?

Yes. So Ishit, one thing that we should think about when we think about codeine and cough syrups is that India's 2 largest brands in the entire pharma market. I will not name them, but those brands are also basically not on the market now. So this change in cough syrups consumption usage, government's own stance on that. Certainly, it would be reasonable to think that at a overall market level, some other cough syrups would have replaced the ones that have been discontinued. And of course, in our side also, we were also having several other cough syrups in our product range. And we have brought more focus on to them. And we have ensured that across our verticals, even in CDMO, where some of our customers also ended up dropping codeine. So even they required more cough syrups. So from a cough syrups perspective, I would say that it's very hard to say, okay, can we replace 1:1 -- 1 cough syrup with another cough syrup. But for us, our approach has been more than that. We also looked at our liquid line was a multiproduct line. And why not offer more liquid products to our customers, and our own vertical. So we offered and launched more products in liquid to leverage this. We also launched more pack sizes variants in liquids. So a whole range of strategies was thought about, and those are the ones that we have enacted upon. And -- but fundamentally, as I mentioned earlier, in Trade Generics, the idea is that you are working on a product range of 150, 200 and looking to expand it much larger. And nobody in the market is working on a product strategy as such because you are on a portfolio and it is a basket approach. So we are also in the same boat, and that's how we are working.

Sure, sir. Understood. That's helpful. And my second question is on the injectable side, sir. Since last 3, 4 quarters, there have been numbers coming in injectables and also we kind of caught up on a slightly slower start that we have already built an infrastructure for 2 lines, I think, when we initiated, I remember you mentioned that. So where are we on that? I mean, are we at an advanced stage of now at least in terms of thinking of a new line? And if at all, given that the basic infrastructure is already in place, how much -- what kind of time line are we looking at to add any capacity in injectables?

So in terms of capacity, I can tell you that when we take a decision to enhance capacity, it will be around 6 to 8 months kind of a process to add the machinery, qualify it and bring it online. So because we already finished all the supportive facilities work in terms of getting the area ready, in terms of laying out the water system extensions, in terms of getting the AHUs all installed. So all that is there. Of course, we are also looking at is it just a straight capacity expansion? Or can we look at some more variants in that. And those discussions are also on the way. But certainly, when we do it, we will come back and inform you. As of now, we are not commenting on that.

Sure, sir. I mean, more to understand, I mean, injectables now is back on track, right? I mean given the way it kind of ramped up a little slower than our expectation, now I think we are on track in terms of customer feedback and inquiries and offtake, we are reasonably on track, fair to assume that?

Yes, that is correct.

The next question comes from the line of Pawan Kumar with RatnaTraya Capital.

Sir, can you give us a broad understanding of volume versus price growth in CDMO this quarter? I'm just -- it might not be an accurate number, but...

We cannot hear any question.

Can you give us a broad breakup? Can you hear me now?

Yes, Pawan go ahead with your question please.

Are we audible?

Yes, sir, you are audible, but the line for the participant has dropped. I'll move to the next one that would be Vansh Gupta from Prescient Capital.

I wanted to understand has there been any change in API prices quarter-on-quarter on our revenue, any noticeable impact?

Sir, ma'am, did you get the question?