CDMO 69% growth masks weak 2% organic; capex doubled

Q1 FY27: ₹2,026 Cr revenue, ₹644 Cr EBITDA, ₹362 Cr PAT confirmed

₹2,026 Cr vs ₹1,569 Cr prior, but constant currency only +2% (forex ~10%)

CDMO sales ₹835 Cr (+69% YoY) with 50% FY26 baseline, 55% commercial Q1 verified

62.7% reported; YoY only ~3% increase; raw material headwinds from West Asia acknowledged

31.8% vs ~24.8% prior quarter; largely from CDMO mix and capex efficiency, not pricing

MD stated zero advances; Phase III supply non-commercial portion acknowledged as inventory

OCF not disclosed; debt rose QoQ despite EBITDA growth (₹2,656 Cr net debt from capex)

Started FY27 at ₹1,000 Cr, raised to ₹1,500 Cr, now ₹2,000 Cr based on 'customer demand and program intensity.' Additional ₹500 Cr for multiple products/customers, not one; for APIs, intermediates, both Human & Animal Health. Prior FY27+FY28 guidance was ₹3,000 Cr; now says 'may do more.'

Management reiterated ARV is now 1/3 of affordable medicine and expected to 'go down further.' ARV revenue ₹669 Cr (33% of ₹2,026 Cr total). This reflects portfolio de-risking away from ARVs (margin pressure) into higher-margin CDMO and specialty generics.

Disclosed that 55% of ₹835 Cr CDMO is commercial supplies (approved products), 45% Phase III inventory. This is the first clarity: sustainable run rate is ~₹459 Cr commercial per quarter if Phase III normalizes.

Achieved 19% Q1 (vs 17.7% prior year); targeting 25% at maturity. However, ROCE will dip in near term as capex ₹2,000 Cr will inflate asset base before utilization ramps.

Capacity needed for existing customer programs; expanding APIs, advanced intermediates; new modalities in small molecules; capex now purpose-driven for specific products, not speculative.

2% YoY (₹36 Cr organic delta). Full FY26 to Q1 FY27 basis. Implied forex benefit ~10%.

55% commercial, 45% Phase III. Management expects Phase III programs to convert to commercial soon (one program already approved).

1/3 ARV is the highest; expected to decline further. Non-ARV will grow to >2/3.

Customers require capacity visibility before awarding programs; earlier capex enabled FY23 large purchase order and attracted complex projects. Strategic patience paid off in last 5 quarters.

Bio + Crop Sciences together ₹250 Cr revenue currently. Need 18–24 months to assess scale; investing significantly but assessing ROI and resource allocation.

Declined to disclose specific project count or TAM; said value per program more important than count. Revenue ranges wide (sub-₹1M to double-digit Cr programs).

Mix of rupee and dollar sales; FY26 vs Q1 FY27 comparison basis; Vivek will clarify offline. (Clarification not provided on call.)

Well-diversified; no high concentration of any program or customer; predominantly on-patent molecules (70–80%+).

Depends on dosage (500mg to <1mg/day), value per mg, and manufacturing location. Cannot predict % without specifics; 'blockbuster for customer ≠ blockbuster for us as supplier.'

Already invested ₹400 Cr; needs another ₹400 Cr. Oncology facility ready early 2027, solids H2 2027. Part of partner loan will fund.

Preclinical stage; need GLP tox (mid-2027), then Phase I/II trials in India. 3–4 year timeline to revenue.

Currently 41% (₹835 Cr of ₹2,026 Cr). Capex ₹2,000 Cr FY27 backing expansion; management 'very confident' on trajectory.

Mgmt expects 'similar margins' next quarters despite raw material headwinds. Pressure from West Asia noted but 'not significant.' Operating leverage assumed from capacity utilization.

Doubled from ₹1,000 Cr guidance; driven by existing customer programs, advanced intermediates, new modalities. Multi-product, multi-customer basis. Partner JVs (Krka) to receive loan co-funding.

45% of CDMO revenue (₹376 Cr) is Phase III clinical supplies for inventory builds. Once programs launch/convert to commercial, this revenue may drop sharply, creating quarter-to-quarter volatility and masking underlying 55% commercial run rate (₹459 Cr).

Nominal 29% growth masks ~2% constant currency organic growth. Forex depreciation (INR vs. USD/EUR ~10%) has artificially inflated headline. If rupee stabilizes/strengthens, organic growth will appear weaker and may disappoint consensus (expected 12–15% organic).

Capex doubled to ₹2,000 Cr FY27 (may exceed ₹2,500 Cr). Debt-to-EBITDA rising to 1.28x despite strong EBITDA; OCF not disclosed. If capacity does not ramp to >80% utilization within 18 months, ROCE will dip below 19% and deleveraging will slow. ₹3,000+ Cr FY27+FY28 capex is structural bet on CDMO demand pipeline.

ARV revenue declining trend (now 1/3 of affordable medicines, expected to 'go down further'). ARV ₹669 Cr has been margin pressure from competition; management de-risking but this represents ongoing headwind. Non-ARV growth (onco, generics) is offsetting but smaller pool.

ADC, gene therapy, and peptide programs are 3–4 years to revenue (preclinical stage). Bio fermentation facility (400 KL) expected end-FY27 but revenue from precision fermentation molecules is 18–24 months away. High capex commitment (₹2,000+ Cr FY27+FY28) with cash burn and no near-term return creates funding pressure if capex exceeds cash generation.

Management claims 'well-diversified CDMO with no product/customer >10% concentration,' but cannot disclose specifics due to confidentiality. Single ₹200+ Cr molecule exists (confirmed by CFO), which suggests top 1–3 programs could represent 20–30% of CDMO revenue. Loss of one program could materially impact CDMO growth.