Akums Drugs — Q4 FY26 earnings call

So, as you rightly said, one is external, which is not really in our hands. But as a business model, it's a passthrough business model. So whatever is the cost of input material gets passed on as part of our CDMO contracts. And on top of it is our conversion and margins. ... Secondly, what is internal to us is how we can ramp up our unique differentiated dosage forms, our product offerings, our capabilities. This is which we are constantly focusing on. If you look at really last three years, we have been investing over INR100 crores in our R&D, which is a result of which we can at a larger base as well, we can gradually move up our gross margins.

Clarifies the company's ability to pass on input costs in CDMO and its strategy to improve gross margins through internal capabilities and R&D.

Asked by Sajal Kapoor

So, as you rightly pointed out, over the last two quarters in the H2, the volume growth has been significant. What we have seen, as we also discussed this in Q3, this is primarily led from existing customers only. So, this is not new geographies or new customers. ... Pricing-wise, API prices over the last full financial year were a bit soft. The whole of the year, the API prices crashed by about 20%, 25% as a basket.? Due to the current ongoing global geopolitical situation, the API prices have slightly gone up, single high-digits, they have gone up as a basket. Will they come down sharply soon? That is still to be seen. But still, the prices remain lower than what they used to be in April of last year.

Explains that CDMO volume growth is driven by existing customers and provides a nuanced view on API price trends, noting recent increases but still below previous highs.

Asked by Aditya Sarin

So, while this remains within the purview of the government, Schedule M and is being followed through. We'll have to look for how this gets rolled out and implemented. But obviously, even prior to Schedule M, the customers we serve are largely cost quality conscious customers. ... New facility, we are still ramping up. The utilization is in early teens. And we expect that this year, we will have a significant ramp-up in the injectable facility.

Management was cautious on commenting on Schedule M's market impact but provided an update on the new injectables facility's low current utilization and expected ramp-up.

Asked by Praveen Jayaraman

So primarily, given – we are extensively a growth-focused organization, the primary usage of the cash still remains in assessing organic or inorganic opportunities for growth. ... We are already in process of expanding our oral solid facility ... And also, we are actively evaluating our objectives around niche businesses that we can acquire inorganically, right? So this is where we expect the cash utilization to happen.

Outlines the company's capital allocation strategy, prioritizing growth through organic expansion and potential inorganic acquisitions in niche areas.

Asked by Ankur Kumar

So this is for two years, $25 million each FY27, FY28. ... Broadly, this is how it is, EUR35 million for the next six years till 2032. ... So the initial two years will cease. These supplies from the Indian facilities will cease after FY28. And once in FY29 or FY30, we have the plant cleared for commercial production, we will start ramping up that facility from and supply to Zambian government, local Zambian private market or neighboring nations from that facility.

Provides specific financial values, durations, and operational timelines for two key international CDMO contracts, including the transition to local manufacturing in Zambia.

Asked by Rohit Bahirwani

So while we are finalizing the contract, so this is an established product, established molecule over the last few decades now. So, we have already taken into our costing the inflationary patterns of that API and the input materials. At the current API prices, we are fairly confident this remains our comfort zone of the margins we are thinking through. And you are right, this is a fixed price contract till 2032. ... It should be similar or high teens.

Clarifies that the fixed-price European contract has factored in API inflation, and management is confident of maintaining 'similar or high teens' margins, providing visibility on profitability.

Asked by Richa

So, these require sizable investment in time, dossier clearances and so on. So, require two, three years until we ramp them up. ... So obviously, we all recognize and acknowledge GLP is a large and a massive opportunity. As of now, we are still evaluating when to enter, at which states to enter, given if you also have read some news last week when we have been witnessing in the industry itself, the pricing still remains very volatile and going down south. So, since we first have to think through who will our API partners be, who what is the right stage of investment into any dosage form that required. So we'll enter the GLP market. We'll inform in our subsequent calls what is our strategy going forward.

Highlights the long-term nature and investment required for new overseas CDMO clients and indicates a cautious, strategic approach to entering the GLP market due to pricing volatility.

Asked by Abdul Puranwala

So if I talk about inorganic growth per se, so we there are some dosage forms we still don't have. For example, Metered Dose Inhalers, we don't have. For example, we still don't have oncology injectables. And a few other dosage forms in small molecules. ... At times, it does not match up to our expected valuations or it does not match up to the plant standards or the product standards we wish for. ... Similarly, for example, in the Akumentis space as well, we can have options of brand or a portfolio acquisitions, as well. But the current valuations in the market for branded player are significantly higher than what we currently trade at, right.

Provides insight into the company's disciplined approach to M&A, explaining that certain inorganic growth opportunities were not pursued due to valuation mismatches or misalignment with plant/product standards.

Asked by Sajal Kapoor