Dishman Carbogen Amcis Limited — Q3 FY25 earnings call

Call held 13 Feb 2025

Management summary

Dishman Carbogen Amcis reported a strong Q3 FY25, driven by significant EBITDA growth and improved operating margins. The company is progressing with its French drug product facility, expecting GMP certification soon, and is reinforcing synergies across its global operations. Despite some challenges like increased finance costs due to covenant breaches, management is optimistic about future growth and margin expansion, targeting 24-25% EBITDA margin by FY28.

Highlights

  • Revenue for Q3 FY25 stood at INR 682 crores.

  • EBITDA for Q3 FY25 was INR 140.6 crores, marking a 230% increase compared to Q3 FY24.

  • Operating margin for Q3 FY25 was 20.6%.

  • Net debt as of December 31, 2024, decreased by CHF 5 million to CHF 168 million.

  • The France subsidiary generated $3 million in revenue and incurred a $1.1 million loss in Q3 FY25, targeting break-even by the next financial year.

  • FY25 revenue guidance is set at over INR 2700 crores, with EBITDA expected to be INR 425-450 crores.

  • Long-term revenue growth is projected at a CAGR of approximately 10% over the next 3-5 years.

Key financials

  1. Revenue ₹682 Cr
  2. EBITDA ₹140.6 Cr +230%YoY
  3. Operating Margin 20.6%
  4. Profit Before Tax ₹27 Cr
  5. Finance Cost ₹48.78 Cr +47%YoY
  6. Tax Expense ₹22 Cr

What they filed

Q1 FY27: revenue down 4.2%, net profit down 352.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue789 682 716 708 653 −17%720 +6%851 +19%678 −4%
EBITDA147 140 153 141 149 +1%113 −19%163 +7%60 −57%
Net profit33 5 43 23 65 +97%-13 −360%22 −49%-58 −352%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueMargin
Carbogen Amcis CRAMS₹512 Cr23.7%
Cholesterol and Vitamin D Analogues₹50.65 Cr14.6%
India CRAMS₹77.7 Cr—
India Quats and Generic₹41.5 Cr7.3%
France Subsidiary₹3 Cr—

Capital allocation

high confidence
  • Capex $20 Mn
    The capital expenditure for the first 9 months stood at USD 20.8 million. So, we are very much on track as far as the budget is concerned for the capital expenditure for the end of the year.
  • Debt Net CHF 168 Mn
    • Rate reset Increased interest cost due to breach of financial covenants, expected to reduce from Q4 FY25.
    As far as the net debt is concerned, as of 31st of December, this stood at CHF 168 million, which is a decrease by about CHF 5 million as compared to September 30, 2024.

Guidance & targets

Revenue

  • FY25 Revenue Revenue · FY25 · High confidence INR 2700 crores+
    I think we should end the year with about INR2700 crore plus kind of revenue.

    — Harshil Dalal

  • Revenue Growth CAGR Revenue · next 3-5 years · High confidence 10%
    we expect that it would be safe to assume a CAGR of around 10% if you take a 3 to 5 year view.

    — Harshil Dalal

  • France Subsidiary Revenue Revenue · FY25 · High confidence $9 million
    So, what we expect is by the end of the year, we should be close to $9 million of revenue.

    — Harshil Dalal

  • France Subsidiary Revenue Revenue · Next Financial Year · High confidence $18 million
    And in the next year, what we expect is we should be closer to about 18 million, and that would mean that we would be breaking even in the next financial year.

    — Harshil Dalal

  • ADC Commercial Revenue Revenue · Future (post 2026-27) · Medium confidence $15-20 million
    I would say between 15 million and 20 million revenues for that particular product.

    — Pascal Villemagne

  • ADC Development Revenue Revenue · Current · Medium confidence $15-20 million
    the amount of development revenues that we are currently doing around ADC, it's about the same level, 15 million to 20 million

    — Pascal Villemagne

Profitability

  • FY25 EBITDA Profitability · FY25 · Medium confidence INR 425-450 crores

    Previously INR 500 crores → INR 425-450 crores

    What we mentioned was that the net 3 quarters should be extremely strong and we should be you know closer to about INR425 to INR450 crores. INR500 crores is something which obviously will not be possible in the current year.

    — Harshil Dalal

  • Next Year EBITDA Profitability · Next Year · High confidence INR 500 crores+
    That is something for the next year exceeding INR500 crores mark

    — Harshil Dalal

  • France Subsidiary Break-even Profitability · Next Financial Year · High confidence Break-even
    And in the next year, what we expect is we should be closer to about 18 million, and that would mean that we would be breaking even in the next financial year.

    — Harshil Dalal

Margin

  • Next Year EBITDA Margin Margin · Next Year · High confidence 20%
    For the next year or 20% kind of margin is something which needs to be sustainable.

    — Harshil Dalal

  • FY27 EBITDA Margin Margin · FY27 · Medium confidence 22%
    I think it would still be at about 22

    — Harshil Dalal

  • FY28 EBITDA Margin Margin · FY28 · Medium confidence 24-25%
    and then it will go to say 24, 25. By FY28? Correct.

    — Harshil Dalal

Debt

  • Net Leverage Ratio Debt · next 3 years · High confidence <2 (1.5 to 2)
    So as far as net debt is concerned, what our target is that in the next 3 years, we should be reducing our net leverage to less than 2, somewhere between 1.5 to 2.

    — Harshil Dalal

Capex

  • Annual Capex Capex · per year · High confidence $20-25 million
    the capex per year should be somewhere between $20 million to $25 million or somewhere around that.

    — Harshil Dalal

Finance Cost

  • Interest Cost Reduction Finance Cost · from Q4 · High confidence INR 10 crores
    I think it should reduce by about INR10 crores.

    — Harshil Dalal

  • Interest Cost Level Finance Cost · in couple of quarters · High confidence INR 30 crores

    From INR 48.78 crores today

    Okay, so the range which is now 48-50 crores it will come down to 30 crores in couple of quarters, right? Yes, absolutely.

    — Deepak Poddar

Product Pipeline

  • ADC Commercial Production Product Pipeline · 2026-2027 · High confidence Resume
    the business is going to resume by commercial production in the year '26, '27.

    — Pascal Villemagne

Tax

  • FY25 Tax Expense Tax · FY25 · High confidence INR 40 crores
    In absolute terms, I think for the year it should be somewhere around INR40 crores of tax.

    — Harshil Dalal

  • Next Year Tax Rate Tax · Next Year · Medium confidence Much better percentage
    So next year, as I mentioned, as the French entity moves closer towards breakeven and with Netherlands also performing better than this year we would see that the tax rate as a percentage of the PBT should be much better.

    — Harshil Dalal

What to watch in Q4 FY25

France Subsidiary Break-even

Next Financial Year
Current Loss of $1.1 million in Q3 FY25
Target Break-even

Why it matters

Achievement of break-even for the new French facility is a key milestone for profitability and return on investment.

And in the next year, what we expect is we should be closer to about 18 million, and that would mean that we would be breaking even in the next financial year.

Risks & concerns

  • Competition in Vitamin D analogues

    medium

    The Netherlands business faced difficult competition, especially around the vitamin D analogues family of products.

    Management acknowledged

  • Breach of Financial Covenants

    medium

    Breach of financial covenants with banking syndicate led to a step-up in interest costs, though performance improvement is expected to mitigate this.

    Management acknowledged

  • Foreign Exchange Fluctuation

    low

    Foreign exchange fluctuation, particularly the Indian rupee depreciating against the Swiss franc, impacted employee expenses.

    Management acknowledged

  • Delay in French Facility Operations

    low

    Technical issues and equipment corrections caused a delay in the start of operations for the French entity, impacting Q4 FY24 financials.

    Management acknowledged

  • Capacity Bottlenecks

    low

    Global capacity bottlenecks, especially across Europe, limited the ability to cope with higher demand and pursue aggressive growth.

    Management acknowledged

  • Attrition Rate in Phase III to Commercial

    low

    Only about 10% of Phase III projects typically go commercial, implying a need for a robust development pipeline.

    Management acknowledged

Q&A highlights

6 direct
Inconsistency in Profit Before Tax (PBT) Direct
What we focus on is the operating profit. And as I already mentioned in my presentation, the finance cost in this particular quarter has increased significantly as compared to the previous quarter. So that was the major reason why the profit before tax was lower in this quarter as compared to the previous one.

Clarified that the lower PBT was due to higher finance costs, not operational issues, and that operating profit is the key focus.

Asked by Priyanka Patel

Resolution of loan covenant breach Direct
And basis that there was an agreement that was signed with the bank wherein they agreed -- they agreed to base the breach of the covenant and that is something which has been agreed to. However, till the time we comply with the original net leverage and the economic equity ratio as has been agreed with the bank, there was a step-up in the interest cost

Provided an update on the resolution of the covenant breach, explaining the temporary increase in interest costs and the path to compliance.

Asked by Priyanka Patel

Commercial vs. Development Revenue Split and CRAMS Growth Partial
First of all, how you from where you take your double-digit growth for commercial products, it goes along with the life cycle of those products, which I remember the audience that are not belonging to us. The IP is belonging to our customer. We are acting as a contract manufacturing organization here. So, we are not the promoter of the product sales on the market.

Addressed the CRAMS growth trajectory, explaining that as a service provider, growth is tied to customer product cycles and customers often split volumes, limiting Dishman's direct growth correlation.

Asked by Sajal Kapoor

Growth Technologies beyond ADCs (Peptides, GLP-1) Partial
So, we have questions around those kind of things, technology that are surrounding those concepts, but GLP-1 itself and the peptide production is not our core business. This is for sure. And if we have to go there, that would request a significant amount of capex to invest as well as another knowledge that is not core of our business right now.

Clarified the company's strategic focus, indicating that while they are exploring bioconjugations, peptides and GLP-1 are not core due to high investment requirements.

Asked by Sajal Kapoor

Debt Level Outlook for next 2 years Direct
So as far as net debt is concerned, what our target is that in the next 3 years, we should be reducing our net leverage to less than 2, somewhere between 1.5 to 2. So that is what our goal is. ... if I have to give a figure just on the net debt, I would say that it should be somewhere around 120-odd million.

Provided clear targets for net leverage and absolute net debt reduction over the medium term.

Asked by Amit

Sustainability of EBITDA Margin Direct
Considering all of this for the full year we should be at about 17% to 18%. For the next year or 20% kind of margin is something which needs to be sustainable. If you see historically at a consolidated level, we had done or we had been doing around 25%, 26% margin, and as the India performance keeps on improving what we expect is that is the target that we need to achieve in the next 2 to 3 years' time and then go beyond that at a group level.

Outlined a clear roadmap for EBITDA margin expansion, from 17-18% in FY25 to 24-25% by FY28, linked to India's performance.

Asked by Deepak Poddar

Tax Rate Outlook Direct
But 80% is not the tax rate that we pay but it's just that because of the losses which eat into the profits that are made by say Carbogen Amcis again, the tax rate as a percentage of the PBT looks extremely high. In absolute terms, I think for the year it should be somewhere around INR40 crores of tax. ... So next year, as I mentioned, as the French entity moves closer towards breakeven and with Netherlands also performing better than this year we would see that the tax rate as a percentage of the PBT should be much better.

Explained the unusually high Q3 tax rate due to subsidiary losses and provided a more normalized full-year tax estimate and an outlook for improvement.

Asked by Deepak Poddar

France Subsidiary Performance and Break-even Direct
As far as the French performance is concerned, the revenue was about $3 million in the quarter. And the loss was $1.1 million in the quarter. So, what we expect is by the end of the year, we should be close to $9 million of revenue. And in the next year, what we expect is we should be closer to about 18 million, and that would mean that we would be breaking even in the next financial year.

Provided specific financial figures for the new French facility and a clear timeline for achieving break-even, which is a key milestone.

Asked by Satish Bhatt

2 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Highlights

Dishman Carbogen Amcis delivered a robust Q3 FY25, reporting INR 682 crores in revenue. The company's EBITDA surged by 230% YoY to INR 140.6 crores, with an operating margin of 20.6%. For the nine months ended December 31, 2024, revenue reached INR 1,995 crores, a modest increase from INR 1,961 crores in the prior year, while 9M EBITDA grew by 37.2% to INR 318.5 crores.

Segmental Performance and Strategic Focus

The Carbogen Amcis CRAMS segment achieved a 23.7% margin in Q3 FY25. India CRAMS demonstrated strong growth, with Q3 revenue up 28.5% YoY to INR 77.7 crores and 9M revenue up 61% YoY to INR 209 crores. The Netherlands business, focused on cholesterol and vitamin D analogues, faced competition but is seeing improved order flow. Management highlighted a strategic focus on early-phase projects for Carbogen Amcis to drive future growth.

Operational Milestones and Leadership Transition

The new drug product facility in France successfully completed its audit and is awaiting official GMP certification, a significant milestone. Similarly, the Chinese affiliate has been audited for local certification to pursue business in the Chinese pharmaceutical market. Pascal Villemagne announced his departure as CEO of Carbogen Amcis, effective March 31, 2025, and will be succeeded by Dr. Stephan Fritschi, a long-standing company veteran.

Debt Management and Finance Cost Outlook

Net debt reduced by CHF 5 million to CHF 168 million as of December 31, 2024. The company previously breached financial covenants, leading to a temporary increase in finance costs, which stood at INR 48.78 crores in Q3 FY25. However, with improved performance, management expects interest costs to reduce by approximately INR 10 crores from Q4 FY25, targeting around INR 30 crores within a couple of quarters. The long-term goal is to reduce net leverage to between 1.5 and 2 within three years.

Future Growth and Margin Expansion Targets

Management provided an optimistic outlook, guiding for FY25 revenue to exceed INR 2700 crores and EBITDA to be in the range of INR 425-450 crores. For the next financial year, EBITDA is projected to surpass INR 500 crores with a 20% margin. The company aims for a long-term revenue CAGR of approximately 10% over the next 3-5 years, with EBITDA margins potentially reaching 22% by FY27 and 24-25% by FY28, driven by improved India performance.

ADC and Bioconjugation Strategy

Dishman Carbogen Amcis is actively involved in bioconjugation projects beyond ADCs, with current development revenues for ADCs being in the range of $15-20 million. Commercial production for ADCs is anticipated to resume in 2026-2027, potentially generating $15-20 million in revenue. However, the company is not currently pursuing peptide or GLP-1 production due to the significant capital expenditure and specialized knowledge required, which are not core to its current business model.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Healthcare earnings calls