Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Sajal Kapoor, an Individual Investor. Please go ahead.

Dr. Satya, do you believe that the whole can be greater than the sum of the parts in the context of the often CDMO services in biocatalysis , enzymes, cell and gene therapy and of course various chemistries across animal health, crop and human LifeSciences?

The sum of the parts is greater than the whole definitely. For some projects we started biocatalysis using third party supplied enzymes whereas our big pharma partner decided to use our expertise in R&D an d manufacturing of enzymes and provided the plasmids and we made the enzymes and currently using that for the batches being executed. This integrated approach is definitely going to offer significant advantage when compared to non-integrated players who are not capable in making enzymes themselves.

So, has there been any difference in the level of engagement with the innovators today versus let us say, 5 years back when we were onl y in the human pharma chemistries . Has the level of engagement shifted?

Absolutely, the depth and breadth of engagement has gone up. They can talk to one vendor who can offer all these. That is one and second, for them, there is no need to go to another CMO for a large-scale manufacturing. We can offer enzyme screening, we can offer, in fact most of the projects we are handling are very complex in nature, and it has at least one or more continuous flow chemistry techniques and also at least one or more biocatalysis in a 10 -12 step complex chemistry. So, these are becoming an integral part because the big pharma’s commitments towards ESG also pushing them to adopt new technologies , cleaner and greener technologies, pushing them to go to continuous flow as well as the biocatalytic approaches. So, we are becoming a very interesting partner to offer all these.

Secondly, In the context of the Biosecure Act, what I am trying to understand is if I look at the large three-four players in China, they have got significant exposure to US on the CDMO services and now because of this Biosecure Act Some of the Innovators desire to move away from overly dependent China. We have the capacity and the capability right, so are we efficient to take advantage of this shift and it is already happenin g in v arious discussion levels, can something materially change for India as a whole over the next 2-3 years, thats the expectation that we have and how do you see from your point of view?

This is very broad question , Sajal. This shift in big pharma to diversi fy their vendor base has sorted, I think all Indian CDMO companies are at the beginning of that shift, so few companies will definitely be benefited from this , but it will take its own time. I f the partner is an existing customer, then onboarding is easier. If they have to onboard a new vendor, it will take its own time, but the benefit of their diversification has started showing results. It is also very clear we got more RFPs in the last 12 months for late phase projects when compared to previous years. That is an indication that there is a diversification effort from big pharma, and it is clearly visible.

And finally, the debt side, we have got 3x net debt to EBITDA today, is it fair to assume that the debt has peaked and when EBITDA start mean reverting, we should be below 2x net debt-to- EBITDA or that is the kind of aspiration that we have.

Yes, Sajal, once the EBITDA improves, that is our aim. And if you look at even historically also at this kind of a range actually in the last 15 years , we have only for few years, and we are expecting to come down in the coming year.

Thank you. Next question is from the line of Jeevan Patwa from Sa hastrara Capital. Please go ahead.

Sir, two questions, one is the on the FDF side. So, we have launched one product in the US and there are two more products we are going to launch in US. I remember some 2 years back we used to say that we want to be global leader in 15 products, right, so are these three products are in that list of 15 products and we want to be the global leader?

Jeevan, that is right. So, these are the products which are generici zed with significant volume and also still growing. The new approv als came as part of our long-term strategy for global markets, not just for US. Couple of these products we are also planned to launch in Canada.

Because all three products are pretty big products, but when you say that we want to be global leader, are you actually expecting to have like 20% plus kind of market share in this product?

We don't want to get into market share by disrupting market by only price. So, if you look at our products where we have increased our market share it was done over a period of 12 to 18 months after approval. We don't want to get on day-one to secure the market share. That means we are cutting our own legs. So, we wait for the right opportunity to get market share.

And secondly, on the formulation last quarter which ended, we have actually got a client where we will be doing tertiary packaging on t he formulation, is that contract started or it hasn't yet started, or when it is going to start?

Expecting more in the packaging lines right now to cater to that contract and it is not a one-time contract. It is a multiproduct multiyear contract. So, we are investing in the packaging lines in the new formulation capacity building.

So, when can we expect it to start, sir?

So, post that contract will start fully?

Yes.

And on the CDMO side, so last few years, we have been adding multiple capabilities on the CDMO side, but we haven't yet heard about any new contracts that we have signed, so after that agrochemical contract, I think we haven't yet announced anything on that. Is there anything in the pipeline in the very advanced stage where we expect to have some long-term contract?

Currently, we don't have any agreements in negotiations for long-term talks, but several projects are moving into later clinical phases, for example, currently we are validating two APIs, which will go into NDA soon. So, the scale at which we are operating moved to offering APIs, not just intermediates, that’s a significant step. If you look at, one previous investor was asking question on the diversification, see most of these big pharma source APIs from elsewhere, so when they want to have new vendor, they want to have a vendor who ca n offer APIs, not just starting materials or intermediates, so that is the advantage we are having right now. But you know these batches, Filings, Approvals is a long-term process, but the prospects looks very interesting.

And sir, on the Bio side, so if I heard right, you said tha t we are starting work on Vizag and Mysore both the sites, earlier we were working only on one side, Mysore side?

You are absolutely right. As Ravi mentioned in his commentary, we have opportunities to produce pharmaceutical grade intermediates and products.

Is it fermentation API that we are talking?

Intermediates and APIs, both. So, why we changed, We augmented our strategy to non-pharma products at Laurus Bio and pharmaceutical related fermentation products in Laurus. That is the change in strategy what we had in the recent past.

So, Mysore will be mostly the food protein side and Vizag will be mostly toward pharma side?

Yes, Jeevan, correct.

And in that I have just read one project report which was submitted to the government on the food protein side , Laurus p roject report which mentions about 10 different food proteins with total capacity of 1350 ton , so is it like the long -term plan of the Company of getting into 10 different food proteins of 1350 tons of capacity?

Those are the pipeline products. So, those are all contract manufacturing. The Laurus Bio except the cell culture ingredients, none of these food proteins are marketed to customers, it is B2B.

When it is a food, 50 tons is not big. It is small.

Thank you. Next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.

I wanted to get the mix for ARV versus non-ARV for Q4 and ARV FDF versus non-ARV FDF?

In the APIs in the Q4 out of Rs. 745 crores, Rs. 408 crores came from ARVs and Rs. 337 crores came from non -ARVs. So, you are also seeing that gradual increase in the share of non -ARV APIs and also gradual share increase in the ARV formulations as well.

And what would be the number for the end? I was asking what would be the entire number for the total ARV share for Q4 including FDF and ARV?

Rs. 709 crores.

About 50% of our sale came from ARV in the Q4, both APIs and formulations put together.

Thank you. Next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Sir, my question is on, you made a few references to late-stage contracts on CDMO, so are you referring to molecules, which are already commercial, and you would be coming up a s second or third source for the innovator that is the kind of contract you are talking about over here?

What I mentioned, two products under validation, those are yet to be launched, they are filing NDAs soon.

But besides that, are you also pursuing opportunities where the molecules are already commercialized and where the innovator opts for the second supply source?

For some intermediates, yes, but those are at the very early stages of progress, I put it that way.

Sir, if I would then probably just summarize some of the things that you just said, give us some timeline for when would the meaningful impact of the animal health business contract will start to be visible and when the crop protection contract becomes to start visible?

We can't give you more specific details, but we expect these products and the RFPs what we're receiving will add lot of value for all the stakeholders.

Thank you. Next question is from the line of Bino K from Elara Capital. Please go ahead.

I think we shifted to the new regime for the L aurus Labs. So, we expect to be around the 25% plus will be the tax rate , but for our subsidiaries we haven't migrated to the new regime. So, maybe we expect in the similar range what we have this year.

And what is the CAPEX plan for next year?

CAPEX, I think will be in the similar range of the current year.

And where would that go to?

That goes to the Bio and the CDMO.

The consolidated receivables number debtor days are higher this year, why is it and is it going to be still like that?

No, because of the quarter revenue is higher, the receivables also higher by end of the financial year, but it is based on the quarter revenue, the receivable number will change.

And finally, could you just help me understand the thought process behind this investment in ImmunoAct, specifically what kind of financial analysis did you do, what kind of opportunity that product has and so what sort of order are you looking from it?

I think few years back we decided this, still we have that strategy of investing up to 10% of our profits into disruptive technologies either in-house or external . When we are explaining the strategy, one of the big fund actually they have connected this ImmunoAct team. Then we had a lot of disc ussions around the world and with the few experts and few oncologists on this treatment and we found it very interesting and that is how we made our first investment of Rs. 40 crores. It is a high-risk investment made a few years back when it has not even completed a phase one clinical trial. So, once phase one clinical trial is completed and then phase before completing the phase two clinical trial, again we got an opportunity to invest further , but of course the valuation has been much higher than the first investment because they were about to complete phase 2. So, now they got phase two approval and then they already launched in the market. They already serviced including the clinical trial they have completed the 100 patients treatment. We are very happy that we could be able to contribute through our money , this treatment has come to India and then recently you must have noticed in IIT Mumbai, President of India has dedicated this product to the Indian people. So, there are very interesting things going on. They are setting up a large manufacturing facility in the Navi Mumbai, they got a land parcel, and they are building on their own. They are also tying up with some other countries and this is also encouraging, and they are also trying to g et in another treatment. They have to conduct a trial. So, this looks interesting today, but we don't have any plans to f urther increase our stake and they don't require any more money.

Bino, if you look at the kind of investments, wha t we are doing , for the investments what we made in ImmunoAct. So, far, we are only recognizing our share of losses in our balance sheet and also invested almost Rs. 120 crores. But the opportunity is very big and like that, we have also invested in R&D as well as in the manufacturing assets at IIT Kanpur. These initiatives are putting very interesting for the long term, but short term, these are very painful investments because we are investing in CAPEX, OPEX both. All these are going through the balance sheet, but one has to realize, your Company is putting money in the right places for long-term and sustainable growth.

Thank you. Next question is from the line of Bharath from Bosch. Please go ahead.

We have increased our API capacity by more than 50% recently, but if you see this other API segment, last year we have done around Rs. 800 Cr and this year we have done around 600Cr . So, it has declined by around 22%, how do you feel on this like capacity going up 50% and revenue declining by 22%?

The capacity going up is the reactor volume and most of the reactor volume, what were increased is utilizing for the manufacture of clinical phase programs for big pharma. So, the capacity increase is not primarily meant for generic APIs, it is majority meant for clinical programs for phase two, phase three and validation batches.

So, do you see any pricing pressure in other API because there is a decline of 25% in other API year-over-year?

Actually, if you look at the quantum of revenue coming from other APIs is only a quarter of our revenues. That is not the big chunk of our APIs. 50% of the API sales come from ARV s and then contract manufacturing a nd Onco is another 25 %-30% actually, maybe around 25% is contributed to other APIs. So, the growth in other APIs is not going to impact the entire API segment.

And if you compare Q3 and Q4, there is no much significant product changes, in fact, if you see the Onco API contribution has increased from 7% to 10%, but there is a decline of 450 basis points in the gross margin, may I know the reason for this?

That was primarily driven by the product mix in Q4. If you look at, there is little growth in our CDMO revenues from Q3 to Q4, but there is significant growth in our ARVs, both APIs and formulation Q4. So, this is the primary reason for that.

I think if you look at quarter 3, Bio and Synthesis together 22%, from there now in Quarter 4 it is 18%. So, both Synthesis and Bio are the high gross margin areas, 4% decline in share. Second, finished goods and in process inventory has also come down. So, part of the overheads will be added to the inventory valuation. So, that is also another reason. These are the two reasons, but in the coming years, we are not saying that this will be at the same level, but it can improve once the CDMO revenue share is being increased in overall.

R3 plant in Mysore is 2-million-liter capacity, right? And the new plant which we are going to build in Vizag is also 2-million-liter capacity, right?

Actually, the fermentation plant we are planning at Vizag will be currently is 500,000 liters only.

So, this is on top of R3 in Mysore, right?

Yes.

And my last question is that I understand that management is very bullish in CDMO segment, but if you see the trend of our CDMO revenue for last 3 years in FY22, we have done around Rs. 900 crores and FY24 we have done again Rs. 900 crores, so in the last 3 years it is almost flat with no growth, how do you see it? It is like can you expect good growth in coming years?

If you look at the in vestments, what we made in the Animal Health plant, we will see segment revenues in FY25. Our Crop Science plant you see investments may be next year, not even this year and many projects are moving from phase one, phase two to phase three and commercial. So, I would say this is a transitionary period for the investments what you have done to see significant contributions coming from those initiatives.

Thank you. Next question is from the line of Rahul, an Individual Investor. Please go ahead.

Dr. Satya, in terms of specific priorities, beyond the next couple of quarters, can you share your vision for the Company’s long-term growth trajectory, so that will be my first question?

If you look at the transformation and tr ansition the Company underwent in the last 6 -7 years, from a pure play API to integrated formulations, then we started investing in Bio, then we started investing into Animal Health, started investing into Crop Science Chemicals and also Cell and Gene Therapy assets being created. So, all these will put the Company into a very integrated CDMO player offering broad segments and each of these segments has their own gestation, for example, selling enzymes is easier, crop science is easier, animal health may have to go through a lot of regulatory pathway, and the human health has to go through even more stringent and long regulatory pathway. But all these we have invested very early into this vendor diversification by the major pharmaceutical compani es. So, we believe we have created technology platforms and also have created capacity to capture that opportunity and we are saying this for the last three quarters, but numbers haven't improved significantly as one of the investors asked FY20 to FY2 4 revenues were same , it is true , but the clinical development timeline is 7-8 years, if it is very short, it is 5-6 years and we have projects in different phases of their life cycle and when we are investing in these initiatives, either we have partner who is willing to work with us or we have a contract with the partner who is already working with us or we have conviction that people will come to us, use our capabilities. I think all these will definitely demonstrate and then you ask the question and leave one or two quarters, but at some point if then these numbers will come and all of us who have confidence in the Company will definitely benefit from this.

As a follow up question, since CDMO is a growth part of the business , 5 years out from now, around what percentage do you think CDMO space will be contributing to the overall revenue mix for Laurus

CDMO business used to contribute 20% of revenues in FY20 -FY21. FY23 was a big jump because of the COVID-related supplies, but again FY24 is similar to 20% if you add CDMO and the BIO. We expect in the next couple of years this should grow to again one-third. That is our belief.

And any Indian pharma peers that you think are doing great work in th e CDMO space that we can pick up best practices from or you look up to?

I think I don't want to comment on your question.

Thank you. Next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

So, firstly, on this $40 million fermentation CAPEX, so is this considering the contract already in hand or you are building the facility and then subsequently we will look for the contract?

It is mix of both. We also have certain intermediates plants, and some partners want to use our expertise in fermentation. So, it is a combination of internal as well as we make products for our partners.

And sir, out of this total Rs. 700 crore CAPEX which we have envisaged for FY25, how much would be funded from internal accruals, or will there be further increase in debt?

I think Tushar, we are not trying to increase too much debt. Depreciation itself is almost like Rs. 350-Rs. 380 crores. So, I think we will try to manage without increasing substantial debt, Tushar.

And the CAPEX which we have invested to debt, let us say is a Rs. 2,600 crore, or in particular for the CDMO projects, so effectively the pickup in timeline because as we have indicated in the presentation as well that there has been some delay in the pickup of the Animal Health Facility, which has been actually o perational from November 23. So, effectively, when do we see the meaningful scale up from the investments which you have done on the CDMO facility, is it like second-half of FY25 or is it getting pushed to FY26?

I mean, in this year FY25, we will deliver launch quantities for the Animal Health NCE program from that site. And we will be completing validations for around 4 products in this financial year, commercial validations. So, we started, or we are going to start commercial supplies from the Animal Health facility this year whereas Crop Science Facility will be ready by end of this year, but commercial supplies will come only next year. In the CGT space , we are building vector capacity and then gene therapy products capacity at Kanpur. Maybe we will ha ve revenues only in the next financial year. I hope I answered your question.

And similarly, also if you could throw light on the API side industry, because at least in FY23 also at the industry level API has witnessed significant erosion in price hikes, while at least FY23 companies were able to offset that with higher volume throughput, but broadly these APIs are like legacy or old APIs, so the demand would be in the range of say 5 % to 7%. So, will we be able to offset further price erosion in FY25 also or will we see the pricing again impacting the profitability for FY25?

Don't expect the pricing will be impacted further. And we will give you more details in the coming quarter’s conference calls. We are identifying some areas where we could really add value by making fully integrated products. We will give you more light in the coming quarters, what are the areas we are focusing in the API space.

Thank you. Next question is from the line of Madhav from Fidelity. Please go ahead.

I just had one question on the IIT Kanpur link project which you spoke about, the re you said some revenue to start in FY26, could you give some more detail in terms of how much CAPEX are we doing here? And I mean typically who are the clients for these kind of projects? How many products do we have? It is like a slightly new thing. I don't think you mentioned about revenue starting from this part of the business earlier.

We expect some revenues will come next year for vector manufacturing. CAPEX and OPEX in the next 3 years could be potentially closer to Rs. 300 crores, next 3 years,

So, Rs. 300 crores is the CAPEX for the next 3 years ?

CAPEX and OPEX, I am not saying only CAPEX, it is both.

When you say OPEX, it is like R&D spends that is what the area of funding?

R&D spend will be in the range of 5% only.

For the Company as a whole?

Overall Company.

You are saying Rs. 300 crore CAPEX and OPEX is seeing happen is linked to a clinical trial. It will come in if the project moves ahead successfully in the next few sort of steps.

Yes.

Thank you. Next question is from the line of. Aniket Singh from Kotak Institutional Equities. Please go ahead.

This is Alankar here from Kotak. Sir, just one clarification on gross margin , sir you made that point on lower contribution from Synthesis and Bio, but just trying to understand whether higher CMO contribution in the API segment has also led to lower gross margins in this quarter?

The CMO segment in APIs is better than the general APIs, but less than the CDMO. So, you are right. That is also a part contributor.

Sir, then essentially from an overall EBITDA margin standpoint, would it be fair to say that our EBITDA margins can improve meaningfully and go beyond 20% once again only once this synthesis and bio contribution increases fairly significantly? Of course, I mean we need to adjust for slightly higher CMO contribution in this quarter , but more from a directional standpoint to go beyond 20%, we need a CDMO synthesis plus bio to increase meaningfully?

Yes.

And maybe one final question, sir, regarding your discussions with CDMO clients, are these more with existing clients or has the engagement with potential new clients inc reased significantly over the past year or so?

We have added two new clients and increased our product basket with the existing clients.

And when you say added t wo clients, does it mean on the engagement side there could potentially be more clients, so with more new clients, we are discussing the CDMO contracts?

At the very early stage, nothing meaningful will come in the 12 months from the new clients. By the time we sign Contract, six months will be over.

Thank you. Next question is from the line of Foram Parekh from Sharekhan. Please go ahead.

Sir, I think you said that in CDMO sales, sales from crop protection and CGT sales would not be a part of sales for the next 1-2 years. Even animal health sales would be after FY27, so with the same amount of CDMO sales, can we assume that EBITDA margin for the next 1-2 years would be in the same range or there is a potential to increase the EBITDA margin. So, how should we look at it?

What I mentioned Crop Sciences and CGT, no revenues will come from FY25 while the Animal Health revenues will come in F Y25 itself, but the peak revenues i n Animal Health will be in FY27.

So, with this, do we at least see 300 plus increase in EBITDA margin and?

I think we don't want to give specific number; we hope the EBITDA margins will improve because see we are not taking any new initiatives. People are there at all these new factories. So, any sales coming from extra sales coming from should add into the EBITDA margins.

And sir, my second question is on the ROCE, we are at the bottom of the ROCE levels right now. So, from here on, what is our plan? Do we have any target ROCE in mind for the next couple of years?

We can't tell for the ROCE for the couple of years, but broadly we always used to aim for 20 % to 25%. But I think because we made a lot of investments once we started yielding out of this investment, we can be better ROCE.

Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Dr. Satya for closing comments.

Thank you for participating in our Q4 FY24 and FY24 results call and we appreciate outside in view of the organization and asking very relevant questions. Thank you everyone. Have a good evening.

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