ZIM Laboratories Limited ($541400)

Good afternoon, ladies and gentlemen. I'm Akash, moderator for the conference call. Welcome to ZIM Laboratories Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded. I would now like to hand over the floor to Ms. Deepika Sharma from Go India advisers. Thank you, and over to you mam.

Thank you, Akash. Good afternoon, everyone, and welcome to the Q4 and FY '26 Earnings Call of Laboratories Limited. We have on the call Dr. An Da, Chairman and Managing Director; Mr. Vinita Kumar, Director Finance; Mr. Shyam Mohan Patro, Chief Financial Officer; Mr. Chandkarend, Technical Director; and Mr. Zain Daud, Investor Relations. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that company faces. May I now request the management to take us through the financial and business outlook, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Deepika. Good afternoon, everyone. This is Anwar Daud speaking. A warm welcome to all participants joining us for ZIM Laboratories Limited earnings conference call for the fourth quarter and full year ended March 31, 2026. I hope you have had the opportunity to review our results and the accompanying presentation available on the stock exchanges. Before I discuss our operational and financial highlights, let me begin with an update on our EU GMP remediation and CAPA implementation, which continues to remain our highest strategic priority. I am pleased to report that we have substantially completed our CAPA implementation. The majority of CAPA responses have been submitted and outstanding regulatory queries have been addressed. We have done everything in our control to prepare comprehensively for the regulatory inspection and were ready from a compliance standpoint. I am also very pleased to share that our manufacturing facility located at B2122 MIDC area of Kalveshwar, District Nagpur has recently undergone a regulatory reinspection conducted by the German and Portuguese regulatory authorities team as part of the EU GMP compliance and remediation process inspection. The inspection was held from 4th May to 7th May 2026, and we have been given to understand that a positive outcome is expected on successful resolution of to the present inspection. We continue to be in active engagement with the regulatory authorities following the inspection. We will keep all stakeholders appropriately informed as developments unfold. What I want to emphasize today is that meaningful and substantial progress has been made, and we enter this next phase with confidence in the quality of our startup and the thoroughness of our preparation and the expected outcome of the inspection. In parallel, we have continued our proactive business continuity measures, including alternate certification and site transfer activities for select key products to ensure minimum disruption to customer commitment and to protect our regulatory footprint across markets. These steps reflect our commitment to maintaining strong relationship with our global customers through this transition period. So the operational highlights of Q4 and FY '26 are turning to our business performance. FY '23 has been a year of resilience and disciplined execution. Our full year revenue performance remained broadly in line with the previous year, and I would like to provide important context for this. The MENA region, a strategically important market for us, was significantly impacted by geopolitical disruption due to the ongoing conflict that began around February 2026. We estimate a revenue impact of approximately INR 20 crores that we could have otherwise achieved from this region. This was entirely an external and macroeconomic factor, and we expect this business to recover as geopolitical conditions stabilize. To ensure full transparency, we have introduced a dedicated regional revenue slide. in our presentation this quarter, which clearly illustrates the VA impact and the underlying health of our other geographies. Despite these headwinds, our core pharmaceutical business continued to demonstrate healthy sequential traction. We have grown quarter after quarter on a sequential basis, which is a strong reflection of the underlying strength of our base business and the quality of our execution. Our NIP and OTO business has shown better performance in Q4 compared to the preceding quarter and is on a sequentially improving trend. While year-on-year comparisons remain softer given the linkage of pipeline approvals to EU GMP reinstatement, the sequential recovery gives us confidence that this segment is gaining regaining momentum. On the organizational and capital allocation update, I would like to inform and our international business development function is now fully staffed and operational. Mr. Vikram Bend, our President, International business, has built out his team with dedicated regional heads covering key geographies. We believe this structure will meaningfully strengthen our emerging markets business in the coming years, and the early results are encouraging. We also made 3 additional senior leadership appointments during the year, Mr. Sridhar Reddy as Vice President, Quality Assurance; [ Mr.Deepak Deshpande] as Vice President, Human Resources; and Mr. Srinivas Choudhary as Vice President, Purchase, further strengthening our capabilities across compliance, quality, purchase and people functions. As we look into financial year '27, we are optimistic. Our CAPA is substantially complete, inspection is already done, and our organization has been strengthened. Our sequential business momentum is intact and our innovative NIP and OTL pipeline remains ready to scale. With the GSP inspection having been conducted and the restatement process is now underway as per our estimates, subject to stability in the geopolitical and macroeconomic environment, we believe ZIM is well positioned to deliver a stronger performance in FY '27. The building blocks are in place, and we remain focused on executing with discipline and purpose. I will now hand over to Mr. Shyam Patro, our CFO, to walk you through the financial highlights for Q4 and the full year FY '26. Over to you, Shyam.

Thank you, Dr. Daud. Good afternoon, everyone. Let me provide a summary of our financial performance for Q4 and the full year ended 31st March 2026. The earnings presentation is available on the exchange, and I would request investors to refer to it alongside these remarks. Let me go through the quarter 4 FY '26 financial summary. For the quarter, the company delivered a steady performance with continued sequential improvement across key operating metrics. Total operating income for quarter 4 FY '26 stood at approximately INR 1,053 million, supported by strong traction in our core pharmaceutical export business. EBITDA for the quarter stood at approximately INR 134 million, translating into a margin of approximately 12.7%. Margins continue to reflect the impact of elevated operating expenses and ongoing investments in regulatory and compliance initiatives, partially offset by improved product mix and operating leverages. Profit after tax for the quarter stood at INR 37 million, reflecting a sequential improvement compared to the previous quarters. Exports continued to be the dominant revenue driver, contributing approximately 82% of the total operating income during the quarter. Revenue for our NIP and OTA platform stood at INR 234 million, representing 22% of the operating income. Sequentially, this segment performed better in Q4. If I come to financial year '25, '26 full year, the summary is under. -- like for full financial FY '26, our performance reflects a year of managed resilience against the backdrop of regulatory transition and external macroeconomic disruptions. Full year total operating income stood at approximately INR 3,744 million, broadly in line with FY '25. The flat revenue performance is primarily attributed to the estimated INR 20 crores to INR 25 crores impact of minor disruptions and continued effect of UGM-related constraint on our regulated market pipeline. Full year EBITDA stood at approximately INR 414 million. Margins were impacted by higher operating expenses driven by investments in regulatory compliance quality infrastructure and organizational capacity building. Full year PAT stood at INR 58 billion. Profitability remained impacted due to elevated costs and higher finance charges, consistent with our stated investment priorities for FY '26. We continue to invest our innovative pipeline, INR 311 million was allocated to BE study and registration, advancing our NIP and OPM platform in preparation for the post EU GMP growth phase. Our balance sheet reflects the capital allocation decision for the of the year. The preferential issue proceeds are being deployed towards capacity expansion and CA infrastructure as planned, we remain focused on improved financial efficiency and managing leverage as revenues scale up in FY '26. To summarize, Q1 and FY '26 as a whole reflect an organization that has navigated a challenging regulatory and geopolitical environment with a disciplined maintained sequential business momentum, completed its, strengthened its leadership and invested purposely in the future growth platform. We are committed to completing the UGP journey, scaling our internal business and delivering a long-term potential of ZIM Laboratories. We enter FY '27 with a clear strategy and strength team and a strong result to deliver. With that, we would like to open the floor for questions.

[Operator Instructions] . The first question comes from the line of Mr. Darshil from Pintos Capital.

Sir, first question is with regards to NIP plus OTP OTF revenue, it fell from INR 62 crores to INR 48 crores now due to this EU GMP audit. So which are the products that are most impacted in this? And what happens after this excess restore?

Yes. So I think the Finance Director has the numbers.

Yes. So what we are looking at that the NIP product basically, which is going to be for the regulated market that will be starting. We are -- as we have mentioned earlier, agreements are in place. We are awaiting the EU GMP certification, which we expect somewhere in second quarter. And post that, the NIP products, which will be giving -- expecting some revenue in the fourth quarter. By that time, the regulatory agreements and MA will be complete.

Okay. So what is this addressable revenue opportunity in this?

Yes. So that as of today, we cannot give you exact guidance because it all depends on the timing of receiving the MA and the customer launching the that.

Okay. Understood. And the second question is with regards to -- sir, we have received MA for dabigatran capsules in 2026 May. So what is the market opportunity over there? And if you can share who is the partner and when this commercialization begins?

Yes. So Darshil, the market is strong, about $400 million in Europe alone. Italy itself is a $60 million market for us. And we are looking at commercializing this as soon as the EU GMP is back on track. We have some contracts already signed, and there are interested people who are now more keen to sign agreements as we have the MA. So we are looking at a market size of about $400 million for the entire European Union, $400 million.

Understood. Sir, final question is with regards to our cellular. One more question is with regards to our R&D. One is that almost 8.3% of the revenues were there for R&D. So what is the kind of budget that we see for FY '27? And another question would be with regards to Sildalafil OTF Riri commercial supplies. So is it generating revenue? I just wanted to understand -- it's 2 parts.

So I think when it comes to -- first, I'll answer the second question. See, Sildenafil right now, the supplies have stopped because obviously, we are in the remediation process. Once we get back our GMP, we will restart the supply of sildenafil. So that was going to Europe, and that is the reason we stopped right now. In terms of R&D, we'll be in a similar percentage because we have our next pipeline of products ready, which we want to develop as soon as we can. And you are looking at a similar percentage next year as well.

The next question comes from the line of Mr. Deepesh Sancheti from Manya Finance.

You mentioned the May 4 to 7 EU GMP inspection by German and Portuguese authorities is complete and you're in active engagement with regulators. Can you share the current status? Have you received any preliminary observations or any draft inspection report? And what is the expected time line for reinstatement?

Yes. So the draft inspection report is expected in the next coming days. All our statements are related to the meeting in the end of the audit. I have already said that we expect a positive outcome based on the audit that has been conducted, which the findings were informally shared with us in the wrap-up meeting. So based on that, the moment the report comes in, we will understand more clearly what are the requirements of the CAPA. We have -- we feel very confident that with the kind of work that has been done by our team and our entire technical team led by our technical director that we will be able to engage with the authorities and find an appropriate acceptable CAA in a very short time after receiving the report and it will be an acceptable CAPA. So we are confident that we will be able to navigate our journey back to being EU GMP accredited in the coming days.

Right. The original EU GMP audit in July 2025 was unsuccessful. So what are the root causes of the -- the previous EU GMP was unsuccessful in July 2025. What was the root cause deficiency? And how confident are you that the CAPA submitted addresses all of them? And what is the scope of reinspection identical to the original?

Yes. So I didn't catch your name...

Deepesh Sancheti.

The causes as identified by the audit team are in public domain. I mean they are available on the website. And there were data integrity issues identified by them. Certainly, had a different view on our conclusions are also part of the submission we have made to the authorities. Some things are certainly not right. Our overdependence on manual documentation and other issues were there, certainly. This year, we work to address all those. A lot of digitalization and automation has been done in the company to actually reduce any suspicion of data integrity. -- as was previously noted. And quality assurance controls and systems have been tightened. A lot of competent members have been added to the team. This whole process was oversighted by one consultant who are working -- the consultancy which was working with us over the 6 to 9 months. Also, it was oversighted by European consultant who are also giving us good inputs and training to our team. So I think it's a good lesson for any company to learn. And we have done our bit. And we are very well positioned to see that these kind of even suspicions don't arise in the future.

Right. So you've engaged into an alternative CMO partner for product as a business continuity measure. How much revenue is currently routed through this alternate site? And what are the margin differentials versus in-house manufacturing?

Yes. So at this moment, the partner has been selected and I will ask Dr. Mende to actually give you further details, which are interesting because at this moment, it's an investment site issue for us. On to see that something like this does not disrupt our customer requirement and therefore, their confidence in the future. This is a strategic call. After this EU inspection outcome, in order to have a continuity of our business for the key product, we have shortly some partner. And as you are aware that there is a process of filing and getting the variation approved. Now we have completed our this thing process. And now we are going to apply very soon for the variations of the manufacturing site. That will be the additional site to us. So that will be a complementary to our main site, and we will work with them revenue allocation as on date has not been finalized. But as and when we get approval for this additional site, we will have a figure and all these things.

Okay. So if you can tell me the margin differential also...

It is not -- it will be very marginal. I mean it will not significant difference that we are giving into that. It is -- as per the international rules and regulations, we are paying them for toll charges. That's all. It is our own product. We are only paying the toll manufacturing charges, not something product or licensing arrangement or this thing. So those costs would not be -- they will be marginally over and above the cost we incur at our own site. So there's more significant than the margin, which is material.

Right. So in the event of EU GMP reinstatement, I mean, it extends till H2 of FY '27, what is the contingency plan to protect both revenues and the customer relationships in this regulated market? Yes. In the event if this reinstatement extends to, let's say, H2 of FY '27. So how will you protect your revenues and customer relations?

Well, the impact of these kind of variations doesn't -- doesn't start accruing so fast. But however, a strategic call has been taken in the future, there is a protection to the customers against disruption of supply. But addressing your -- more directly the question that you have is how it will play out as far as our regulated business is there, that answer has already been given by the Finance Director that the business will start showing some impact on our revenue in the Q4. In general, we have MAs from other regulated markets such as Australia, as you know. So once we've also been inspected by PGA Australia during this period. So we are expecting a positive outcome for that as well.

The next question comes from the line of Mr. Rupesh Tatia from Long Equity Partners.

I am relatively new to the company. So I have some very basic questions. So please pardon me. Sir, first question is we have this 12 plus 5, 17 products in NIP plus OTF basket. Let's say, if I take a 24-month view, is it fair to assume that all the products will be commercialized in, say, next 24 months? Is that a fair?

Yes, that's a fair view.

Okay. Okay. And between these 17 products, conservatively on average, I'll say I can say INR 10 crores revenue per product in regulated markets.

I think that's a very averaged out assumption. Each of the product has different potentials and different kind of market sizes. So to put a number to one product is difficult. And right now, we would not want to give out a general number for each of the products, but the upside is good. So let's just wait and watch.

So I mean this is INR 10 crore widely understated, widely overstated? I mean...

It is more complex than just -- I can't answer that in 2 words. But if you go through our presentations previously and the earnings call, you'll get a better idea of this.

I see. I see. Okay. And when the 17 products get commercial in next 24 months, what should be market split between, let's say, regulated markets like EU, U.K., Australia and then the other sort of pharma emerging and ROW? Is 50-50 a good assumption or it will be more skewed?

I think 50-50 would be the split between innovative products and our generic business. Innovative products are also being commercialized in ROW markets. So out of that, I think 30% should be regulated, 20% should come from the ROW markets.

Okay. Okay. So 50% will be innovative. Out of that 50- 30% will be regulated, 20% will be ROW and pharma emerging.

Approximately, this is what we are projecting right now.

Okay. Okay. And sir, currently, I mean, we are in an investing phase in the business, business is a bit subscale, but our gross margins are very healthy at 56%, but that doesn't waterfall to EBITDA margin. So in next 24 to 36 wins, it's fair to assume that we can reach, let's say, 20% margin if everything works out, if the ramp-up works out, regulatory issues get sorted out, product scale up. Is 20% a good number from a modeling perspective?

Yes, we are assuming and we are projecting upper teens as our EBITDA margins once everything kind of starts going on in the regulated markets. So that's a fair assumption.

Okay. Okay. And now when I look at the 2 slides, there are 5 products which are regulatory approved between NIF and OTF, but they have not started commercial supplies. So when can we see some reasonable commercial supplies for these 5 products?

So like we said, our projection is Q4 of this year because we'll get our UGMP back in the next 2 or 3 months. And after that, we'll process the orders and we can ship out from January.

Okay. Okay. That's clear. So I have 2 more questions. So one question, sir, is, for our company of our size, the R&D we are doing is outstanding. I mean it's really commendable, and I must congratulate you to stick with this because these pharma R&D cycles are a bit long. But now the company is going to change, right? You're going to go from an R&D organization to an operational execution organization. So can I assume that you have done your planning well and we -- if the opportunity presents, we will execute properly with cost discipline, with on-time supplies, with good quality. Can I assume that the organization is ready from that perspective?

Yes. The organization is ready from that perspective, but we are still an R&D company. We will continue the hard work that we have been doing in R&D and the credit goes to a technical director who has developed these kind of products. We do have a pipeline of some 6 core products that we have, which are going to be equally innovative. So the R&D spend is going to be there. But as a percentage, it may be similar and in absolute value, it may reduce. Operationally, like we've told you, we have done quite a lot of hiring on senior levels. We've brought in 3 VPs and a President of International business to ensure that execution is done properly. So we are confident that now we are in that execution phase and that disciplined execution should happen in the coming 24 months.

Okay. Okay. That's clear. The final question is the nutraceutical business degrew year-on-year. It went from, I think, INR 95 crores to INR 75 crores. So what happened there? And how do you see this business panning out over the next 24 months?

So see, this is basically our legacy Nutra business, which we do in the Middle East. And a lot of the issue has been because of the geopolitical crisis going on right now. We look at a steady growth in this business over the coming 24 months. And if the issue that is going on in the Middle East gets resolved quicker, then we should be able to get back our business as well.

Okay. Okay. But steady state is what, 10% type of growth.

Yes, 10% to 15% will grow. That's a fair assumption. We'll definitely try our best to grow that more, but we have projected about 10% to 15% growth happening every year.

Okay. Okay. And just final one more, sir, for the 17 products, is there like some technology or some facility CapEx? What kind of CapEx would be needed when all these 17 products go commercial? Do we have all the facilities already? Or do we need to invest some more?

No, we don't need to invest some more. We have already invested in a quite heavy CapEx cycle, and that is almost near completion. Only the last stages are left. So we don't anticipate any more CapEx for these 17 products to get commercialized.

And these NIP products?

Rupesh, sorry to interrupt you. I request you to... [Operator Instructions]. The next question comes from the line of [indiscernible] from Altis Financial Partners.

Okay. So my question is INR 35 crores was raised via preferential allotment to Florent Tine LLP at INR 73.46 per share. Can you provide a deployment update, how much has been utilized for which purposes and what is the time line for the remainder?

So we have posted this on the exchanges exactly how this money is going to be divided. It's for 3 main projects. It is for a dedicated enzyme NIP suite for expanding our nutraceutical plant and for SAFA. If you go on the exchange, you'll get a detailed note on where the money has been deployed.

Okay. And my second question is, the Advisory Board was constituted in March 2026. What is their specific role purely advisory or do they influence business decisions?

So these are very seasoned people who have a lot of experience like you have seen in the presentation. Each of them has about 40-plus years of experience. So they are in a pure advisory role. They are not involved in day-to-day execution. They are advising the Board and the Chairman, MD and the senior people of the company to take the right decisions.

Okay. What milestones have they been assigned for financial year '27?

That is a bit strategic and that is our internal strategy, which we are not ready to reveal right now. As time goes by, we keep on letting you know what happens. But you can see from their backgrounds where their expertise is and you'll understand what kind of role they are playing.

The next question comes from the line of Shreya Chatterjee from Aegis Capital.

I wanted to just understand that when you are expecting a positive outcome from EU GMP, when do you expect everything to be cleared? -- like if you could give the exact time line if everything gets cleared? And then what would be the NIP plus OTF revenue that you are expecting as a percentage of your total revenue in FY '27 and FY '28? Also, if you could just give a brief on what exact data quality remediation measures that you have filed in your final CAPA, that would be helpful.

Okay. So the first question is, see, this is a process. They've inspected us. Now they're going to give us an inspection report. After the inspection report, if they ask for a CAPA, we have to submit that CAPA, and we expect this process to be complete within the next 2 months. So that's the rough time line. Your second question regarding the percentage of NIP and OTF, like I said, our aim is to reach to 50% of the business being coming from these innovative products in developed and ROW pharmerging markets. So that is what we are aiming at. In FY '27, it's a bit difficult to know right now because as we told you, the first commercialization in developed markets is going to happen in Q4. So if that goes well, then we are looking at a higher percentage than the current year definitely. And your third question in terms of TA, we have put a lot of measures like in Elog, we have done -- I will ask our Technical Director to answer this a bit more in detail what we have done to improve this.

Going back to our last inspection, the main issue was the manual document in order to give more confidence to the auditors and depend on the actual electronic data, we are already invested in the different system. That includes the environmental monitoring system from the German company. Then we have invested in the e-log book that is eliminating the manual entries and manual log book. So this has given a lot of confidence to the auditors in our 4 to 7 May inspection. That's the main thing on this.

Got it. And I wanted to understand a bit about the new antoagant -- just one last question, one last question. This was my second question. So on the anticoagulant product that you are launching, who is going to -- who is going to be a marketing partner and in which countries are you going to launch?

So, the part for Italy, and we -- let me give this to our Technical Director, again, he'll be the better person to answer this.

See, we are in the process of finalizing our customers and all these things. This is a very unique product, and we received the approval in Italy via a DCB procedure. So very soon, we will let you know about our partners and all this thing in the Europe.

Got it. And any CapEx plan, CapEx plan for the next year? What's the rough amount?

Required for this product to be commercialized. We've already done that. already done the CapEx for you.

So only maintenance CapEx...

Yes.

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

Sir, on the 2 blockbuster products that we were expecting to launch, we are yet to receive the regulatory approval of the urology as well as on the desal part, one for which we are also building a block. So what is the current status of those products? And when do you expect to launch them? And when do you expect to receive approval? And when is the expected launch date for the same? And have we also transferred this product to the contract manufacturing sites in case the approval for site gets...

So one of these products, which is the urology product, we have transferred to an alternate site to secure our business. But the enzyme product is a very, very high-end technology involved in producing that. For that, we have created our own block. As per the commercialization that's going to happen, like we told you for the gastrointestinal enzyme product, we expect commercialization may happen in Q4, if everything goes well. And we should get the urology product approval also this year. So we will keep stakeholders updated once we get that.

Sure, sure. And on the follow-up on the same, like for these 2 products, how do you scale up -- how do you see the scale up happening in FY '28...

In FY '28, we have already signed agreements for these products. So if everything goes well, FY '28 should be the full year we will be able to enjoy commercialization from this in regulated markets. So there's not -- no number I would like to give right now, but FY '28 should be a good year for both products.

And just a follow-up on this. Can these products become a huge, let's say, as we were -- at least on the gastro but the enzyme product, can it become -- can it scale up to a big number, let's say, INR 50 crores, INR 100 crores plus in FY '23?

That is the plan because that's a very unique product and very few companies have it. So that is our plan that we will be able to scale up to those numbers.

Okay. And the EU GMP inspection also happened for this new block as well, right? Like so we will get the approval for the entire plant if we...

No, -- we are in the process to do that for the new block. The EU GMP has happened for the old block for which we had been audited in last June.

The next question comes from the line of Mr. Rohit Balakrishnan from ithought PMS.

On getting this CAA and I mean moving forward on this whole EU GMP issue. All the best for what lies ahead. So sir, my question was on NIP. So if I were to look at your NIP over the last maybe 8 quarters, I mean, barring for Q1, Q2, we've been around that INR 16 crores, INR 17 crores kind of number. The Q1, Q2 numbers were low, like INR 5 crores, INR 8 crores. But apart from that, we've been doing around that INR 17 crores, INR 18 crores kind of number. So is that a run rate that you would feel that given what we have today, this is like a sustainable run rate? And as newer products come in, as newer approvals come in and as newer markets come in, especially regulators, this number should inch up from here. But -- is this the run rate that assuming nothing comes right now, this is a sustainable run rate? Is that something that you would agree or...

Yes. This is a sustainable run rate, and this is going to increase further because we -- like we told you, we've now hired a President for International business, who is looking after ROW and farmerging markets. Yes, the registrations are coming in from a lot of other reasons as well apart from regulated markets. So we expect this run rate to go up from here. But we will at least maintain this run rate. This will be the minimum what we are going to maintain going forward in the ROW and farmmerging markets. You know once regulated comes, this is going to change entirely. But for the farming and regulated market -- farming and ROW markets, this is the run rate that we'll minimum maintain.

Right. And sir, for the -- that's very heartening. And for the enzyme product, I think the CapEx was also for -- I mean, the recent QIP was also for that. So have we done whatever work was remaining because I'm seeing still some amount of money in capital work in progress. So from our side, are we ready? I mean -- and when do you expect...

So see, this product can be manufactured in the current facility also, and we are planning to manufacture in the new facility also. So the new facility is looking at the scope of this product and the amount of sales we are looking at, we had created this new block to cater to the capacity that's going to be needed. But we are ready in our existing plant. Once we get EU-GMP, we'll be able to manufacture this product here.

Okay. Understood. And from a base business point of view, so of course, this quarter, we saw some headwinds from Middle East. How do you see the base business now? I mean, given that the situation is still hazy, so how do you see this for the full year? Any view?

This year, we have tried -- since the President has come on board, we have tried to kind of hedge this as much as possible and try to grow our business in other regions also. In FY '27, even though these headwinds might continue, we expect that we'll be able to make up for this business from other regions and hopefully not be dependent entirely on the Middle East situation to resolve.

Got it. And last question on the finance cost. So I mean -- and just generally the debt level. So I think should we take this like as a peak debt and like from here on, using the cash flows, we should significantly reduce the debt?

Yes, this is the borrowing we have not any plans to increase the borrowings any further. And because also we have the issue money, which will be utilized for the CapEx. So this year, perhaps the borrowing will remain constant. And similarly, the finance cost will also...

The next question comes from the line of Anil Desai from Turtle Capital.

So the question is, sir, I think in the earlier calls, we had talked about our NIC plus OTF at a peak potential can go to INR 250 crores, INR 300-odd crores. And you mentioned in the earlier answer that all the 17 products will commercialize in the next 24 months. So is there a fair number to look at, say, let's say, once the commercialization happens and then scale up. So in next 3 years, reaching to that number, is that a fair assumption from our side?

So yes, see, there's a fair assumption that we are going to -- once these get commercialized, the revenue is going to increase significantly. So it's a fair assumption. And after these 17 products are commercialized, we will have a pipeline also of some other products, which we will look to continue and get licensing fees from. So this is going to be a cycle that's going to continue.

No, that I got, sir. I would just want to confirm that INR 250 crores, INR 300 crores over next 3 years. That's the confirmation that I wanted.

See, it's difficult to give an exact number. We would want to avoid that. That would be a very future-looking statement.

Got it. Got it. So I mean, if you are completely off, you can guide. If not, then maybe I don't want exact numbers. But if you are completely off, you can probably say no, just way too much or anything of that sort.

It could be this. It could be a lot higher, a lot lower. That's why I said it's a very future-looking statement. So I think we would want to avoid giving guidance on that.

Got it. And sir, second question on pancreatin. So I think that product used to be in shortage in Europe a while ago. And then this reinspection and everything probably will push the launch by a few quarters. So do we -- I mean, what is the current situation on that? And do we expect that to kind of the shortage to continue in the time frame which we will be able to commercialize this product, if you can advise on that?

See, as far as we know and what we've heard from our customers, the shortage is going to continue. We can at least look to commercialize this in Q4. Until then the shortage is going to continue. Beyond that, it's very difficult for anybody to comment whether the shortage will continue. But we are looking to capitalize it as soon as possible. We are ready. We just need our GMP, and we'll be ready to commercialize this.

The next question comes from the line of Mr. [indiscernible], an individual investor.

Sir, generally, what we have seen that whenever EU GMP or U.S. FDA audits are completed, the notifications which are given by the company to the exchanges is with regard to whether it's the audit has been completed as clear or minor observations has been made or major or critical because all these things are being discussed at the time of exit meeting. But the clarification what company has submitted to the exchanges are very ambiguous. We are not able to infer whether it has been cleared or there are minor, major or critical observations. So just wanted to understand and have more clarity from your side.

Yes. So see, we deliberately did not give any observations because this closing meeting is usually an informal meeting. It's not a formal mined meeting that can be taken on record. We will get the report from them in a month. Once the report comes, then we'll be able to share with you because we'll have something in writing. Till then, we cannot comment because a lot of the time, many of these observations are clubbed together or they are removed from what they tell us in the closing meeting. So till we get something on paper, we want to avoid giving stakeholders any information about that. What we were sure of was we told you that the inspection happened, the closing meeting was positive. Now let's wait for the inspection report to go ahead and see what happens.

So at least can we get an assurance that there would not be any critical observations, which would lead to again, kind of.

I feel so because first of all, the inspection continued for the complete duration. The suggestion, the findings all pointed towards very positive improvement as noted by the auditors during the inspection as compared to the last visit. And in general, as we have already explained that the audit was positive, the findings were very positive. There were observation for sure. As the auditors have not explained in detail what they are finding are actually going to be by clubbing together some observations or by removing some observations or classifying some of these observations and observations and recommendations. So we recorded -- this audit, we -- it's our duty to reflect and transfer to all stakeholders what the meeting consisted of, the proceedings of the meeting. I think we have been very -- we have been able to convey them very truthfully and to kind of be the spokesman of the auditor and then to find that what they said and when they went back and they sat what -- how they would classify on these observations because they did not classify them during the war erupting in spite of the positivity, we are also unable to kind of give warrants to what in terms of major, minor critical. I'm sure there is more critical because the audit went positive. So that's our assumption that there is no critical.

That's only the suggestion from my side, sir. I mean the company has been maintaining the highest standards of transparency, and we had been with the company for the last 8, 9 months during this tough period also, and we would like to continue. But only thing what stakeholders and shareholders request is the utmost transparency, which the company has been maintaining.

The next question comes from the line of Jira from Fortuna.

Sir, I am on this CASA remediation slide where you've reported that there is gist of projects in alternate markets and launch of CA product in alternate markets. Sir, specifically in Q4 and Q1, sir, which are the alternate markets that you have staged? If you can give a little more specific detail on this?

See we are looking at all of the ROW and -- sorry, ROW and emerging markets, which are there. CIS, Latin America, Middle East, Australia also, we can launch at because the alternate site is PG approved. So these are the markets we are looking at. Other than that, I think we've also mentioned that we are going to launch -- we are going to go with alternate sites I think you must have also read that alternate sites are being done for products to be able to supply to alternate market. So there are these couple of -- one alternate site where a couple of products have been transferred, and we are looking to supply from there.

Okay. Sir, the Australia market, I think this approval came some time back. So has some revenue started flowing in from there?

No, revenue hasn't started flowing in from there because the -- after we got the MA, the EU GMP inspection, the last year's inspection happened and we were under remediation. Our Australian approval was based on our EU GMP certificate. So once that was -- that went in noncompliance, we are not able to supply. Once we get EUGMP back, we are positive we'll be able to supply again. Yes. So I think Dr. Raul was mentioning that our TG audit also took place. So separately, we are going to be positive -- we are positive on the fact that we'll get TG accreditation as well. we'll be able to start our supplying from our own site...

In addition to having an site where we can contract manufacture if we ever have capacity constraints or to supply from our side.

Okay. Okay. Sir, there's one on the -- when you report the NI OTF percentage sales, there is another head on licensing fees that you provide, which I think in Q4 is substantially lower. And I think in Q3, it was also not there. So is that also something that we will start seeing flowing in once the EU GMP certification is in place?

Yes, you're correct. This is going to start flowing in once the UGMP certification is in process because there are milestones to these, which are basically linked to having the UGMP like the submission of the dossier, the marketing authorization being received. And all this had stopped because we didn't have EU. Now that we will get the EU back, we'll get those milestones back and this should also start flowing in.

[Operator Instructions]. The next question comes from the line of Mr. Rohit Suresh from Samatva Investments.

I had a couple of questions. One, the first question is, why has the domestic revenues decreased year-on-year? And how do you see the revenues going forward? And second, a bookkeeping was what has been the one-off in the other income in Q4? Yes. So first question, I'll answer the second question, I'll defer to the Finance Director. See, the domestic business has decreased because there were some institutional business tenders, which we did not get. As you know, this tender is a 1-0 situation and sometimes you don't get the tender even if you quote the best price. But alternatively, what we are doing is now we are marketing our NIP and OTF also in India. So we are trying to build up a private business as well that will help. And going forward, we don't see that this decrease should continue. We see that this will stabilize and be on rather an increasing path. And for your second question, I'm discussing the Finance Director.

Income other income one-off... Yes. So the other income includes 2 parts. One is the revenue income and incentive and ForEx gain.

Understood. Sir, just on the institutional part, how total domestic revenues?

Sir, I'm sorry to interrupt you. I would request you to join back the queue for question -- the next question comes from the line of Mr. Madhur Rathi from Counter Cyclical Investments.

If I were to look at FY '27 on an overall basis, considering the alternate sites that we have schedule for production, our domestic business, our business, sir, what kind of growth should we expect? And what kind of margins should we expect with this CAA remediation cost going down? So conservatively, what kind of revenue growth and margins can we expect for this year?

For the coming year, we have already explained you that the future guidance we are -- as of now, we are not giving. The guidance will be around same till in the H1, a little bit increase will be there. But after getting new GMP, definitely the guidance will be increased, will be reported to you in the disclosing post that. Number two, the margins, definitely, there will be an improve because the diversified other market sales opportunities, which revenue will come from, it will be more on the mid-teens side. And this is what we are projecting for the next year until the CAA and the Q4 comes.

Right. Sir, but if I consider our revenue, CAPA shouldn't matter, right? Because CAPA is going to -- whatever revenue that will come from the EU GMP approval, our side will start in Q4. So that is not -- as of now, sir, that shouldn't be considered. So currently, as of now, where we are standing, where do we see our -- the base business growing as well as the NIP plus OTF business growing conservatively for this year?

Yes. So that -- what you said is right, the base business and the NI business and as of the percentage will be definitely growing in the current year. And post remediation and getting EU, it will be in the fourth quarter, it will increase. We'll give you the guidance for H1 somewhere in the next quarter.

The next question comes from the line of Mr. Ashwin Reddy from Samatva Investments.

So first question is on the NIP plus ODF. Now we were counting on the growth in the rest of the world market, right? I mean, without even considering the EU growth. Now there has been a slowdown there as well. So what's been the reason for the slowdown in the NIE plus ODF in the nonregulated markets?

So this has been a gestation period. FY '26, basically, we have filed a lot of dossiers in all countries. And usually, these dossiers take about 1 year to 18 months to come through. So FY '27 will be the year where a lot of these dossiers are going to come through, and we'll get revenue from other markets also. So the formulation business will grow for NIP and OTF from other markets.

But then just to extend -- so you're saying that the growth from the NIP and ODF or growth in FY '27 will not be much, then considering even if we don't get the EU GMP or if it is delayed, that should not affect the growth, right? I mean, shouldn't we grow from where we are today in FY '27?

We are projecting a growth in NIP and OTF this year. Even despite the EU GMP, we are projecting a growth because we expect a lot of filings to come through.

Got it. And my second question is on -- if you go back in time in the last 4, 5 years, whatever work we've done on the OTF, I wanted to know what has been the traction there? I mean is it resulting in meaningful growth in terms of the oral in the Vistleim segment? Because when I see the filings and even in the approvals, what we've been getting, the number looks good, but what has that translated to revenue growth -- revenues in the last 3, 4, 5 years?

So it's grown steadily, but now we are at an inflection point when it comes to OTF. You must have read about the Middle East partnership that we did. So with OTF, we are seeing that people are interested in this kind of new technology and a lot of local manufacturing is being promoted. So with this, we expect this year a lot of revenue to come through for OTF because a lot of partners have put in stake into this technology and are marketing on their own. So this was what was needed, somebody to champion this product. And now that this is happening, we expect that this year should be meaningful growth in the OTF segment.

And when you say meaningful, what numbers we're looking at for the OTF segment for this year? I mean some quantum would be helpful for us to track better. In FY '27, what number would be a good number for you?

Yes, we are still in the first quarter. I think by H1, we'll be able to give you a better picture.

We have a follow-up question from Mr. Rupesh Tatia from Long Equity Partners.

These 12 products, NIP products, everything is oral? Or are there some injectables in there?

No, this company let me just defer this question to the technical Director...

Actually most of our products are in the oral solid. We are not in the injectable segment at present.

Okay. And the second site, when can we expect EU GMP approval? And what kind of dependence do we have on that site for next, let's say, 24 to 36 months?

So like we answered, this is next 2 to 3 months, we are going to see EU GMP come in. In terms of dependence, there's quite a lot of dependence because all of the regulated market revenue is going to come from EU and EU being one of the bigger markets, we need the EU GMP. So there is a dependence there.

No, I was asking about the other side. So you said this is the...

There will be growth without the U.S. as well. But if you see in terms of regulated markets purely, then we need to add the...

In the interest of time, that will be the last question for the day. Now I hand over the floor to the management for the closing comments.

Thank you very much for this opportunity to present our earnings call. And thank you for all the support in the last few months. It's been a good period for us to learn and absorb for the future. We hope to continue this transparency and this relationship with all our stakeholders in the future as well. Thank you once again, and a good day to all.

Thank you so much, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] conference call services. You may now disconnect your lines now. Thank you, and have a pleasant day.