Innova Captab Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

Innova Captab reported healthy growth in Q3 FY25, driven by strong performance across its CDMO and international generic businesses, despite a slight decline in Sharon's revenue due to deferred orders. The company achieved significant profitability improvements, with PAT growing over 36% YoY. A major highlight was the commencement of commercial production at the new Jammu facility, which is expected to be a key growth driver, contributing substantial incremental revenue and margin benefits in the coming years.

Highlights

  • Q3 FY25 consolidated revenue stood at ₹316.5 crores, registering a year-on-year growth of almost 5%.

  • EBITDA margin improved by 60 basis points to 16.1% in Q3 FY25.

  • Profit After Tax (PAT) for Q3 FY25 witnessed a 36.3% year-on-year improvement, reaching ₹34.2 crores.

  • PAT margins improved to 10.8% in Q3 FY25 versus 8.3% in Q3 FY24.

  • Nine months FY25 overall revenue stood at ₹928.9 crores with a year-on-year growth of 13.5%.

  • CDMO business contributed 54% (₹172.2 crores) to the overall topline in Q3 FY25.

  • International business registered an impressive 17% year-on-year growth, reaching ₹41.2 crores in Q3 FY25.

  • Jammu facility commenced commercial production on January 14, 2025, with an expected incremental revenue of ₹400-500 crores next year (FY26).

Key financials

2 periods

Headline

  • Revenue
    ₹316.5 Cr
    YoY +4.6%
  • EBITDA Margin
    16.1%
  • PAT
    ₹34.2 Cr
    YoY +36.3%
  • PAT Margin
    10.8%

9M

  • FY25 Revenue
    ₹928.9 Cr
    YoY +13.5%

What they filed

Q1 FY27: revenue up 33.8%, net profit up 41.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue318 316 315 352 380 +19%450 +42%448 +42%471 +34%
EBITDA50 47 48 52 52 +4%69 +47%65 +35%73 +40%
Net profit35 34 30 31 30 −14%42 +24%38 +27%44 +42%
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

Share of Revenue
CDMO (9M FY25) ₹505.1 Cr 40.6%
CDMO (Q3 FY25) ₹172.2 Cr 13.8%
Domestic Generics (9M FY25) ₹169 Cr 13.6%
Sharon (9M FY25) ₹141.9 Cr 11.4%
International Branded Generics (9M FY25) ₹113 Cr 9.1%
Domestic Generic (Q3 FY25) ₹58.6 Cr 4.7%
Sharon (Q3 FY25) ₹44.5 Cr 3.6%
International Generic (Q3 FY25) ₹41.2 Cr 3.3%

Guidance & targets

Capacity

  • Jammu facility incremental revenue Capacity · next year (FY26) · High confidence ₹400-500 crores
    And as we already communicated that we will be able to see revenue of say ₹400 crores to ₹500 crores next year.

    — Vinay Lohariwala

  • Jammu facility total incremental revenue (including transferred business) Capacity · next year (FY26) · High confidence ₹450-550 crores
    Slightly higher, it will be like ₹50 crores, ₹60 crores business will be transferred. You can say like the balance would be like ₹450 crores to ₹550 crores.

    — Vinay Lohariwala

  • Jammu facility revenue Capacity · Q4 FY25 · Medium confidence ₹20-40 crores
    So, Raghav, we are still working with on the order book with the BD team, but at a high level, we estimate that Quarter 4 Jammu revenue should be in the range of 20 crores to 40 crores.

    — Lokesh Bhasin

  • Jammu facility peak utilization Capacity · Not specified · High confidence 70-75%
    Yes, because throughout the year there may be some months where we get the utilization as 85%, 90%, or there may be some few months where the utilization will be like 50%, 55%. So that's why we factor in that all seasonality to our number, then the peak utilization we estimate at 70%, 75%.

    — Vinay Lohariwala

  • Jammu facility peak revenue (at 70-75% utilization) Capacity · in two or three years' time · High confidence ₹1,500-1,600 crores
    So our estimate is that the peak utilization is like a 2,000 crores somewhere. So, 70% is like ₹1,500 crores, ₹1,600 crores. And in two or three years' time that starts with the ₹400 crores, ₹500 crores, we can reach to the ₹1,000 crores mark in the Jammu facility.

    — Vinay Lohariwala

  • Jammu facility peak revenue (at full capacity) Capacity · Not specified · Medium confidence ₹2,000 crores
    So our estimate is that the peak utilization is like a 2,000 crores somewhere.

    — Vinay Lohariwala

Growth

  • Sharon business growth Growth · coming years · Medium confidence early teens
    So, Sharon business is growing at a decent pace, and we had been working on multiple fronts at R&D, RA, international BD team, and we expected it to grow in early teens in the coming years.

    — Lokesh Bhasin

  • CDMO business growth (overall perspective) Growth · coming period · Medium confidence early teens
    And if I talk about a very ballpark figure, it should be in the early teens itself.

    — Lokesh Bhasin

Margin

  • Sharon margin profile Margin · as of now · High confidence stable
    Margin profile would remain stable at where it is as of now.

    — Lokesh Bhasin

  • Overall EBITDA margins (from Jammu benefits) Margin · coming years · Medium confidence 100-200 bps improvement
    So, there may be improvement of say 100 basis point or 200 basis points, it will be difficult for us to comment now.

    — Vinay Lohariwala

Capex

  • Jammu plant annual depreciation Capex · per annum · High confidence ₹20-25 crores
    So, yes, we are still working on the final depreciation workings, but we estimate that our annual depreciation from Jammu plant should be in the range of 20 crores to 25 crores per annum.

    — Lokesh Bhasin

Risks & concerns

  • API price erosion impacting CDMO business

    medium

    API pricing is stable Q-o-Q but slightly lower YoY, impacting CDMO revenue growth, though volume growth is offsetting.

    Management acknowledged

  • Initial operating costs of the new Jammu facility impacting Q4 FY25 margins

    medium

    The Jammu facility commercialized in January 2025, and initial fixed/semi-variable costs will come in Q4, potentially impacting margins, but management is working to mitigate this by maximizing sales.

    Analyst acknowledged

  • Challenges for smaller pharma units to comply with Schedule M regulations

    low

    Analyst questioned the practicality and cost for smaller units to meet new manufacturing standards, but management stated it's difficult for them to comment on this specific aspect, while confirming their own facilities are compliant.

    Analyst not addressed

Areas of evasion (2)

  • Specific split of local vs non-local headcount at Jammu facility
  • Ability of smaller units to transition to Schedule M compliance

Q&A highlights

3 direct
Sharon revenue deferrals and gross margin impact Direct
So, there are slightly reduction of Sharon revenue in quarter three, which was mainly due to certain orders spilling over to Quarter 4. It was to the tune of around 4 crores to ₹5 crores.

Clarified the reason and quantified the impact of Sharon's Q3 revenue decline, indicating a temporary deferral rather than a fundamental issue.

Asked by Sudarshan Padmanabhan

Jammu facility ramp-up, utilization, and long-term margin profile Direct
And as we already communicated that we will be able to see revenue of say ₹400 crores to ₹500 crores next year... So, in the long run we are very much positive that we are going to get a slightly more benefit out of it, as Jammu is ramping up and other business is also contributing to this. So yes, it is going to be slightly higher.

Provided detailed forward-looking guidance on the new Jammu facility's revenue contribution, utilization targets, and its positive impact on overall company margins, which is a key growth driver.

Asked by Sudarshan Padmanabhan, Amey Chalke, Karan Shah, Neha Kharodia

CDMO business growth and API pricing trends Direct
So, Amey, pricing of the API if you see, is more or less in a stable region. But if we compare, say, year-on-year basis, so slightly we can say it is on a lower side... And if I talk about a very ballpark figure, it should be in the early teens itself. So yes, after considering the pricing impact, it is showing a year-on-year increase of around 7% to 8% at a standalone revenue level. But volumes had been better on that part also.

Addressed concerns about CDMO growth slowdown, explaining the impact of API pricing and highlighting that strong volume growth is helping to mitigate these pressures.

Asked by Amey Chalke, Abdulkader Puranwala, Rohan Vora

2 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Highlights

Innova Captab reported a consolidated revenue of ₹316.5 crores for Q3 FY25, marking a year-on-year growth of nearly 5%. The company demonstrated strong profitability, with its EBITDA margin expanding by 60 basis points to 16.1%. Profit After Tax (PAT) saw a significant 36.3% year-on-year increase, reaching ₹34.2 crores, and PAT margins improved to 10.8% from 8.3% in the prior year's quarter, primarily driven by enhanced EBITDA margins and reduced interest costs.

Nine Months FY25 Consolidated Performance and Segmental Mix

For the nine months ended December 31, 2024, Innova Captab achieved an overall revenue of ₹928.9 crores, reflecting a robust 13.5% year-on-year growth. The business mix for this period was dominated by CDMO, contributing 55% (₹505.1 crores), followed by domestic generics at 18% (₹169 crores), international branded generics at 12% (₹113 crores), and Sharon Bio-Medicines at 15% (₹141.9 crores).

Segmental Business Growth and Sharon's Deferred Orders

The CDMO business maintained its growth trajectory, contributing ₹172.2 crores (54% of topline) in Q3 FY25. The international business segment showed strong momentum, growing by an impressive 17% year-on-year to ₹41.2 crores in Q3. Sharon Bio-Medicines, however, experienced a 6.5% year-on-year decline in Q3 revenue to ₹44.5 crores, attributed to certain international orders worth approximately ₹4-5 crores being deferred to Q4 FY25.

Jammu Facility Commencement and Future Revenue Potential

A significant milestone was achieved with the commercial production commencement at the Kathua, Jammu facility on January 14, 2025. This new facility is projected to generate substantial incremental revenue of ₹400-500 crores in FY26, with an estimated ₹20-40 crores expected in Q4 FY25. Management anticipates peak utilization at 70-75%, which could translate to ₹1,500-1,600 crores in revenue within two to three years, with the absolute peak capacity estimated at ₹2,000 crores.

Margin Expansion and Cost Management Strategies

The company expects overall EBITDA margins to improve by 100-200 basis points in the coming years, driven by the benefits accrued from the new Jammu facility, including GST incentives and capital interest subvention. While initial operating costs for the Jammu plant are expected in Q4 FY25, management is focused on mitigating any margin headwinds by maximizing sales. The annual depreciation from the Jammu plant is estimated to be in the range of ₹20-25 crores.

API Pricing Trends and CDMO Growth Outlook

API pricing remained stable quarter-on-quarter but was slightly lower on a year-on-year basis, impacting the CDMO business. Despite this, the company reported better volumes, leading to an underlying year-on-year increase of around 7-8% at a standalone revenue level for CDMO. Management expects overall CDMO growth to be in the early teens in the coming period, driven by its robust manufacturing capabilities and product portfolio expansion.

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