Thank you very much. Ladies and gentlemen, we will now begin with the question and answer session. We take the first question from the line of Sajal Kapoor, an individual investor. Please go ahead.

In one of the slides, I mean, there was no slide number, so I can't refer to the slide number because there wasn't any, but in one of those slides, it was mentioned that out of the 28 customer audits conducted in Q1, how many were CDMO client audits out of these 28 that happened in Q1? What are these customers looking for? I mean, what draws them to Laurus when there are so many other CDMO companies in India? Thank you.

Thanks, Sajal for asking that question. I would say at least half of the audits are done by CDMO customers. Some of them are periodic audits because they have to do audits in a stipulated timeframe and some of them from new customers which we are onboarding.

And is the intensity increasing? So, what was the number, let's say, 2 years ago versus today? I mean, do you see an increase in customer visits, customer audits, above and beyond the R FQ? So, I know you mentioned RFQs are coming. But are customers actually traveling to India and physically seeing the facilities and the infrastructure?

I think there is a significant increase in visits followed by the quality audits followed by safety audits and then they roll out the RFQs. So, to get an RFQ we have to go through a long process. See no big pharma, no NCE customers would like to give an R FQ and project without their commercial team visiting, without their quality team visiting, without their EHS team visiting. They can give pre-clinical projects, but when we are talking about late stage clinical programs, I think their audits are sometimes multiple days, sometimes involving multiple facilities also.

Understood. And on the Lauras Bio slide, it's mentioned that initiated dis cussions with several strategic customers for longer term CDMO collaboration. And question really is why are customers interested in Laurus Bio given that R2 is fully booked and new capacity will only come online when R3 goes commercial. So, when there is no capacity available, h ow can we engage in discussions 3 years in advance because R3 going commercial, I think, is give or take three years away, right?

It's 24 months away. We are also building fermentation capacity at Vizag also, which will come a little earlier to R3. And the long -term customers who are willing to sign long -term contracts are visiting right now because they are running their projects currently at R2. It's not that we are bringing a new customer for R3. Actua lly, the customers who are using R2 for pilot scale of their programs are talking to us for the large-scale manufacturing in R3.

Right, you mentioned Vizag fermentation, but that's the GMP fermentation and that's under Laurus Generics, if I am not mistaken. That's not under Laurus Bio, correct?

No, it is not Laurus Bio. So, there are two programs initiated when compared to the last 2 quarters and right now. Because of the higher demand of GMP intermediate manufacturing in our generic products and also some enzymes which needs GMP manufacturing will be anything related to GMP manufacturing and which involves organic solvents usage after fermentation, those will be done at Vizag and the fermentation which doesn't involve any GMP steps, doesn't involve any use of organic solvents will be done at R3. I think that is a very easy answ er why we are keeping R3 under B io umbrella and another facility under Laurus umbrella. So, we want to segregate GMP manufacturing and non-GMP manufacturing.

And lastly, very quickly, on the OPEX side, during the AGM that was conducted a few weeks back, you mentioned that today 80% of the scientists are on the CDMO side as compared to only 20% few years ago. If I look at our scientific count, so 2019 we had about 200 scientists in the synthesis division or the CDMO division versus today we have no less than 800 give or take. And so that's a four-fold jump in 5 years. And now we have got this new Genome Valley Center coming up, which will add to our OPEX fixed cost further. So, it's kind of nearly five-fold jump in our scientists on the CDMO side, which is giving a significant high OPEX fixed cost, right? You mentioned H2 is when we see the benefits emerging. How confident are we that we are not misallocating capital or we are overestimating the demand coming on these CDMO services? I mean, is the customer giving us enough assurance that gives us the confidence to increase 5-fold increase in the scientists on the CDMO side?

This is a very great question, Sajalji. So, as you mentioned, a lot of resources are being allocated currently for the late-stage projects for big pharma. So, if you are putting resources on a phase one molecule with 30 steps, and it w ill take 100 scientists, the outcome may be questionable. But currently, we are taking very minimum early stage projects so that we don't put resources on a project with uncertainty associated with that. So, most of the resources are happening in projects with big pharma, with oncology, some of the projects in oncology, some of the projects in rare diseases, with high dosages. Our expanded R&D capabilities will augment our ability to take early clinical projects as we mentioned in our investor presentation. We don’t want to neglect increasing the funnel by taking more early stage projects.

But, Sajalji, actually we have not increased 5x resources. So, the resources I think if I am not wrong, may be 25% to 30%, but what Dr. Sat ya said is, re allocating from generic to API. Additional OPEX because of the new R&D, yes it will be done but your productivity also will improve.

Thank you. We'll take the next question from the line of Mr. Tushar from Motilal Oswal Financial Services. Please go ahead, sir.

Sir firstly, how much will be ARV sales for the quarter?

APIs around Rs. 400 crores and including formulations was Rs. 552 crores.

Overall Rs. 552 crores?

Yes.

So, basically trying to understand the jump in the gross margin when the custom synthesis sales has been lower and even the formulation sales has been lower on an overall basis. If you could explain the sharp jump in the gross margin and sustainable gross margin?

Sure. See the gross margin improvement is based on one is the product mix. We have a significant increase in our oncology sales and also the gross margin in AP Is also increased because of the favorable pricing mechanism from AR V API RMs and also the process improvements done in some of the key large volume APIs. These three factors led to the improvement in the gross margins.

Oncology proportion has been largely stable as a percentage of sales may be in fourth quarter or even in earlier quarters as well?

Yes, this significant impact came from raw material cost, reduction in the overall large volume APIs supported by the process improvements what we have done in the previous quarters also came in the Q1.

Got it. So, secondly on the long term CMO agreements which we signed in FDF, so two questions, how much CAPEX will be required while this would be funded by the customer and this is for a patented product or a generic product?

This additional CMO contract we are signing is to give additional manufacturing lines in our oral solid dosage form facility in unit two for our partner. So, currently we do about 2 billion tablets contract manufacturing there. And our partner is asking for additional capacity. So, we are adding several lines. And eventually we will give additional three billion tablet capacity over a period of time. And most of the CAPEX will be funded in the sense they will give advance and we will install the capacity.

But would this be for again the generic product or for a patented product?

Mostly this CMO contract is generic formulations.

We expect about Rs. 200 crores investment into Vizag and we expect it will be ready by mid of 2026.

Thank you. We move on to the next question from the line of Krish Mehta from Enam Holdings. Please go ahead.

I just wanted to ask on the leverage ratio in terms of the net debt to EBITDA being elevated at 3.3x. So, as our capacity utilization increases gradually, how do you see this settling?

: I think the net debt by EBITDA is because of the lower EBITDA. I think as we indicated like for a full year basis actually we will be definitely improving. As we indicated before, we are targeting to make it less than 2.5 by end of March 25.

Okay, that's helpful and I wanted to ask second question on the mix in terms of the ARV and non-ARV. So, given that in Q4 and Q3 of last year, we were around 50% and it gradually come off a bit. How do you see this mix if we look at say from a 1 to 3 year basis going forward?

I think as we mentioned in previous calls, the overall AR V franchisee will remain give or take Rs. 100 crores, around Rs. 2400 crores - Rs. 2,500 crores. That's the range we expect, despite of how much e ffort we put. Because we don't want to invest more in ARVs and as most of the investment going in other areas. So, even in Q1, you might have seen our ARV contributed Rs. 550 crores out of Rs. 1200 crores. So, Rs. 650 crores came from other businesses. As we grow in other businesses, especially what we are saying, our Animal Health facility is going on stream, our Crops and Ingredients facility going on stream next year. Most of the clinical programs late stage, we deliver second half of this year, and the commercials kick in next financial year. So, gradually, we expect the revenue contribution coming from ARV, AP Is, and formulations. The quantum will remain the same, but the percentage will significantly come down over a period of time. We don't want to comment the percentage, then you can gauge what is the topline. So, we want to leave that space open.

Thank you. The next question is from the line of Jeevan Patwa from Sahasrar Capital. Please go ahead sir.

Yes, so first question is on the one of the slide where we mentioned that we have done some Rs. 2600 crore CAPEX. So, out of the 2600 crore CAPEX, how much is currently being utilized? How much is not being utilized?

Mr. Jeevan Patwa, what is happening in the current capacity utilization which we have built for CDMO projects, We are not utilizing full capacity. Suppose we are doing 20 chemical steps in a project, we cannot do all 20 steps at a time because the project is not commercial. We do step 1, step 2, step 3, step 4. So, the facility where we do this complex chemistry, maybe if you see the reactor operation, it could be between 10 %-20% no more. But the facility looks like fully occupied, but the actual utilization will be very, very marginal. So, going back to your question this Rs. 2,600 crores investment, about three-fourths of that is done for CDMO.

Got it, sir. And second part is, so we are actually seeing last two years that FY25 is the year one should be watching out for. But the 1st Quarter actually doesn't look like the quarter. So, even last quarter we said that all bad quarters are behind right. But Q1 is again, I don't think it's a good quarter again. So, any color on this, are we still thinking that FY25 will be the big year or you think 26 will be the big year now?

Jeevanji, we said our H2 will be better actually. We have indicated H1 will not be that great and H2 will be definitely better. That's what we indicated. And frankly speaking, this Quarter 1 is in line with our internal guidance. So, we are in line with the thing and FY 25 definitely will be a good year. But we indicated FY 26 will be much better year because some of the assets which we invested like Animal Health etc. will start yielding results.

And we have done a lot of work on the CDMO side. So, we talked about a lot of processes that we have developed, biocatalysis, continuous flow chemistry, and all that. And we are talking to a lot of big clients since last few quarters. So, any color on any large contracts or anything which is under negotiation in the last stages or final stages, do you see any? So, how do you see that?

What we can say, we have utilized our biocatalysis expertise, and we are making enzymes and using in the late stage chemical programs. That is one good thing. And second, when we are saying continuous flow chemistry, we have delivered registration batches for an API. I would say we have completed registration batches in API , deliveries will happen this quarter using continuous flow chemistry. So, we are demonstrating our capabilities which are going into the registration files of our partner products, large scale biocatalysis, large scale continuous chromatography, large scale continuous manufacturing. These are going into our partner products. And we are also adding continuous manufacturing in hydrogenation also. We are expanding our capabilities. These will go into the files once they get approval and then th e commercials will kick in.

Thank you. The next question is from the line of Bharat, some Quest for Value. Please go ahead, sir.

In annual report, I see that there are 17 PARA IV and 11 FTF opportunities. When can we expect revenue from these PARA IV and FTF?

The major will come in FY29, not before.

And this question is more on the macro level. I want to know your opinion on this BIOSECURE Act in US. Do you see supply chains shifting away from China for the innovative CDMO? And may know which country will benefit most from this shift and do you see any s upply chains shifting to India?

I think because of the BIOSECURE Act, people will diversify their supplier base, that's for sure. And India is likely to get benefited from this. And it's not going to be a knee jerk reaction. Nobody is going to shift in 2 months. So, they will take their own time. They visit, they audit, and they give a small project, and then increase the collaboratio n over a period of time. I think in the long run it will benefit, but in the short run, it is not going to happen in two quarters. It will take its own time. But in the long run, it is a definite step, good step towards the CDMO opportunities for Indian companies.

Thank you. And sir, you guided that the ARVs in total would be around Rs. 2500 crores and for FY25 also the guided margin was around 20% EBITDA. Are you still confident of achieving these two guidance?

Yes, broadly yes.

And regarding the new CAPEX in FDF that is funded by customer, I just want some clarity on this one. So, are you going to expand Unit-2 from 10 to 15 billion or is it 10 billion itself, so you are giving some expansion to this new customer?

We plan to expand. The current 10 billion is not enough for our products and the partner products. So, partners need certain type of equipment, certain type of technologies. So, we are buying partner specific equipment and installing. That is an expansion. So, in 18 months our capacity at Unit-2 is going to be 13 billion tablets, not 10.

Okay, so 3 billion for this new customer and 3 billion for the joint venture with KRKA and then the rest would be used for ARVs and our general things, right?

Yes.

Thank you. We take the next question from the line of Rishabh Gang from Sancheti Family Office, please go ahead.

My question is that in the annual report mentions that there will be pricing headwinds in some API portfolio, so need some light on the reasons for this and how long will this come? First question. Second, how much impact on margins this will cause? And how much of this pricin g impact company expects to be moderated by cost improvement measures and increase in CDMO and Biotech business?

As you have seen, our quality of business is very good as we demonstrated gross margins around 50% consistently. Despite price of APIs going down, we were able to maintain that gross margin because if you look at our last few quarters, the growth in CDMO revenue is not big, but we were able to maintain the margins at healthy 50% or above . That was primarily because of our sourcing benefits coming from the softer RM prices and higher process improvement benefits coming from our R&D efforts. These two are the main reasons we were able to offset the price headwinds in the APIs.

I am sorry we are not giving guidance but we are saying as we mentioned we are confident that the performance will certainly improve from H2 and we are very confident on delivering some interesting and large CDMO opportunities.

Any outlook on agro side?

Agro, no revenues will come this year. So, facility will be commissioned only by end of this financial year.

Thank you. The next question is from the line of Mr. Smith from RDA. Please go ahead.

As I can see, we received a patent for (Inaudible). Are we pursuing opportunity in AP I market or formulation market?

We have several patents, but that doesn't mean all patents will pur sue for commercial opportunity.

What is the addressable market and something like that?

No, we cannot give product specific guidances.

Thank you, sir. We take the next question from the line of Madhav from Fidelity. Please go ahead.

When you speak about the CDMO or the NCE commercial CDMO launches in quarter 4 of second half of this year, does that mean that the product sort of moves through the R&D pipeline for the customer via Laurus, and now it's kind of commercializing for the customer with the new launch? Is that how we should look at that opportunity?

No, we are not delivering commercial quantities. We are delivering projects for their registration purposes.

So, this is basically after Phase-3 but before...

After Phase-3.

So, if this basically, the regi stration batch succeeds, then FY 26 we see commercial volumes coming in for that particular product. Is that how we should look at it?

Hopefully. We also expect the same. So, the chances of success of these programs generally very high because these are in the registration pages. So, we expect for complex molecules, their supply chain also needs a lot of lo nger lead times. So, hopefully, once we deliver these registration batches, we expect some commercial quantities in the next financial year.

We take the next question from the line of Harshal Patil from Mirae Asset Capital Market. Please go ahead, sir.

Sir, just had one clarification. For the PPTs, if I have to refer to the API PPT slide, there's a comment which says that overall sequential decline due to timing of shipments particularly. So, is there any problem that we faced, any logistical issue that we faced? And do you see this more as a transient thing or what?

We can't give you a specific reason for that.

But is it at least transient in nature? So, we can expect the normalcy to be retained?

Yes.

That was fair, sir. And secondly, with respect to the CDMO thing, definitely you clarified on the NCE scheduled deliveries, but with respect to the existing supplies, sir, if you could just talk a bit about the traction and what kind of improvement we could expect for FY25?

I think our base of commercial deliveries is give or take Rs. 200 crores per quarter. That doesn't include any additional opportunities what we are delivering or what we are committed to deliver and where we have orders on hand. So, once we deliver new opportunities, the value will go beyond our regular supplies.

And lastly, if I can just squeeze one probably on the margins, where we are seeing that the API prices are getting a bit more softer. So, believe that our margin trajectory, as you've guided, would be maintained despite of that?

I think at least gross margin front, all of you might have noticed, last seve ral quarters we were able to maintain around 50% gross margin. So, I think that we are very confident to maintain at that level. So, if you look at in the presentation, Q2 F Y23 to Q1 F Y25, that means almost 8 quarters. Eight quarters were able to maintain around 50% gross margin.

Thank you. We take the next question from the line of Nitin Agarwal from DAM Capital. Please go ahead.

So, on your CAPEX plans, given where your various expansion plans are, what kind of CAPEX do you envisage for the next 2 years?

This year and next year, probably anywhere between Rs. 1800 to Rs. 2000 crores, maybe around that.

And Ravi, how would you break that up into broad segments if you can?

Is this customer specific requirement where in presentation you mentioned that CMO contract should start from FY27. How should we think about the potential size or scale of the business?

We know the volumes, we know the products, we know the price. So, there are no surprises on either side. So, we are putting the capacity because we know how much we are going to make on that. So, yes, it is a very stable business. We are building that with generic customers, we know the markets, we know what percentage of market share he is enjoying. So, I think that is going to be a very stable business for us.

So, on this account, now since you are putting up additional capacity in formulations, this quarter for example, over the last few quarters we have had extreme volatility in our ARV supplies to LMIC markets. So, the capacity that we have for finished formulations, are they fungible across ARVs and non-ARVs or we have to use certain amount of capacity only for ARVs only?

Formulation capacity is very fungible. So, we can use it for ARV, non -ARV, diabetes, cardiovascular. There are no challenges. Only the size of the batc h determines which line we use.

Is there any reason why, what portion of the capacity currently is utilized fo r ARVs or the formulation size?

ARV, we are making about $100 million sales on average. So, why we will allocate capacity of ARV to something else. How much percentage of capacity we are using for ARV , formulation wise maybe 25% capacity is used for ARVs.

25% of that?

Yes.

Okay. And then lastly on the CDM O business, you obviously are into multiple negotiations. What is the nature of most of the business that comes in? It will be for early stage projects or do you have also opportunity for certain large supply starting because it's probably taking on some of the more commercialized products. So, do we have like the commercial supplies coming through immediately or you'll have contracts where you build up the relationships and then supplies happen over a period of time?

Most of the supplies what we mentioned will happen in H2 of this financial year are for registration or Phase-3 projects. So, the certainty of those moving into the commercial is very high and we expect some commercial orders will come next financial year.

Thank you. We'll take the next question from the line of Madhav from Fidelity. Please go ahead, sir.

I was just asking that the one molecule which you spoke about, really supplying the registration batch. So, if I understood that from the presentation, currently we are supplying 10 commercialized products in the CDMO division. So, this one if it succeeds, it will be the 11th product for us, which is commercialized. Is that how we should understand t he business currently?

No. When we said 10 products commercial, those are already in our base sales. And what we mentioned the new projects, those are over and above what we are supplying commercially.

Sir, basically commercial doesn't mean that it's a commercialized molecule for the customer. That's not what you are indicating?

No. 10 products what we said commercial, those are products commercial ized at our customer side also.

Exactly, that's what I am saying. And just the other question was, in the CDMO business, currently how many of the supplies that we are expected to do over a certain time are for like these registrations, which is very close to commercialization like 2-3, if you could give some sense there, and how many are in late stages basically?

Typically, when people file NDA, they expect to launch in 12 months. If there are no red flags raised by the FDA or agencies, they will launch in 12 months.

And for particular project, is Laurus the sole supplier

We are not talking of one project, we are talking multiple projects. And nowadays with the global supply chain challenges, nobody is going to use only one supplier for any project. I want to be very clear there.

Thank you. Ladies and gentlemen, we take that as the last question for the day. I would now like to hand the conference over to the management for closing comments.

Thank you for joining our conference call for Q1 F Y25 and also asking very pertinent and interesting questions. Thank you.

Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.