Ladies and gentlemen, good day and welcome to the Aarti Drugs Limited Q1 FY 2026 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this call is being recorded. With this, I now hand the conference over to Mr. Adhish Patil, CFO and CFO from Aarti Drugs Limited. Thank you and over to you, sir. Thank you. Good morning, everyone, and thank you for joining us today for Aarti Drugs Limited Q1 FY 2026 earnings conference call. Joining me on the call today are Mr. Harshit Savl a, our Joint Managing Director; Mr. Harit Shah, Project Director; and SGA, our Investor Relations Advisor. I trust you have had the chance to go through our financial results and investor presentation for the quarter, which are available on the stock exchanges and our website. Let me begin with some of the key business updates on Aarti Drugs Limited, followed by the financial highlights. The quarter's weakness improved demand for active pharmaceutical ingredients, leading to a recovery and growth in volumes as compared to Q1 FY 2025. Our API business grew by 5% on a year-on-year basis. In Q1 FY 2026, the total revenue grew by 6% year-on-year to INR 591 crore, with gross profit margin improving by 130 basis points year-on-year to 36.8%. EBITDA has increased by 12% year-on-year to INR 74 crore, and EBITDA margins improving to 12.6%. Gross profit margin improvement is primarily attributed to the normalization of input costs. Looking forward, we anticipate further improvement in EBITDA margins, driven by multiple factors. These include an expected growth in global API demand and higher trend penetration in regulated markets, leading to uptick in selling prices as well as enhanced capacity utilization. On the capacity expansion side, our greenfield project at Sayakha has started pilot production. This plant has been set up mainly for backward integration into antidiabetic products and their interface and is expected to largely serve internal requirements. This backward integration is a key strategic step that should help improve profit margins over time and reduce the risk of input cost volatility. This project will support internal requirements for our antidiabetic products and choline chloride, contributing to backward integration, volume improvements, and supply chain reducing. Secondly, we continue to make progress on scaling up of our Tarapur greenfield site, where we launched salicylic acid production, entering a market historically dominated by imports. While the plant faced some initial startup issues, which is typical during the early stages of new products once you have developed technology, these have been effectively addressed and are being implemented at the plant level. The company is now focused on a calibrated ramp-up of operations. This is expected to begin contributing to the company's financials from the third quarter of FY 2026 onwards. Current output level still stands below 200 tons per month, and we expect to ramp up to 800 tons per month very soon and further expand installed capacity to approximately 1,600 metric tons per month. We view this ramp-up as strategically important, not just from a volume perspective but also in strengthening domestic sales demand. This strengthens our product mix and supports diversification into adjacent value chains. With the manufacturing capacity exceeding 1,450 tons per month, ADL is one of the leading metformin manufacturers in the world. We are aiming for higher utilization. In the future, we are planning for additional 350 tons per month of ground-free expansion. The launch of this team will further enhance and solidify the position of the company in the antidiabetic category. During Q1 FY 2026, the company incurred CapEx of roughly around INR 48.5 crore at the consolidated level, mainly towards capacity expansion, backward integration, safety, and finished formulation R&D. For FY 2026, we expect CapEx to be in the range of INR 150 crores-INR 200 crore. In the formulation business, we have grown by 14% year-on-year to INR 80 crore in Q1 FY 2026. 57% of the revenue contribution for formulation is from exports during the quarter. We have commenced commercial operations in Latin America and two African markets, along with undertaking new registrations in export markets and government tenders. Our formulation subsidiary has achieved a key milestone with USFDA approval for its oncology facility and U.K. MHRA approval for our oral solid dosage facility. In parallel, we are actively developing and registering new oncology products across global markets. These efforts are expected to drive meaningful growth in our regulated market trend starting FY 2027 onwards. A lot of new regulated customer audits have been triggered at the recently USFDA-approved Tarapur API facility. We also plan to expand this facility by putting more production blocks in the future. Additionally, we are rebuilding presence in the U.S. market. This has been a meaningful development for us as it enables our reentry into one of the most important regulated markets. While it may take some time to scale up, this opens up future growth opportunities for several of our API products. Recently, the U.S. government announced a cease-marriage on pharmaceutical products and API imports from countries like China, in a move to reduce reliance on Chinese supply chains. This policy shift is likely to disrupt global stock markets, but it also creates a significant opportunity for Indian API players. At Aarti Drugs Limited, with our recently USFDA-approved API facility and strong proven manufacturing capabilities, we are well-positioned to capitalize on this transition and cater to the evolving demand landscape in global markets. It is also worth noting that regulated markets like Europe and the U.S. offer superior margins. With more of our products receiving EU certifications from larger plants, we are shifting high-value exports to lower-cost platforms, improving our margin capture. While volume growth has been steady, we expect meaningful pickup from H2 FY 2026 onwards as our newer assets stabilize. Volumes are picking up, and we also expect better realizations as global API demand begins to normalize. Over the medium term, we remain focused on our strategy of deepening backward integration and improving cost competitiveness. Finally, in addition to our sustainability, we have continued to make progress. One key development in FY 2025 was the commissioning process of the 24.4 MW solar project through our joint venture with Prozeal Green Power. This project is being developed to support part of our power requirements in Maharashtra and Gujarat. Once fully operational, we expect this investment to help lower long-term power costs and also strengthen our ESG profile by reducing our carbon footprint. This aligns with our broader effort to reduce dependence on conventional energy and move towards cleaner, more sustainable operations. To conclude, we remain focused on operational efficiency and disciplined cost control in what continues to be a dynamic business environment. Looking ahead, we expect further improvement in margins, supported by a normalization in API pricing, ramp-up of new commissioning capacity, better capacity utilization, and higher value export opportunities in regulated markets. The broader margin profile is also likely to benefit from greater internal sourcing and improved product mix. With that, I would now like to open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Dhawnil Desai from Turtle Capitals. Please go ahead. Hi, good morning, everyone. Am I audible? Yes, sir, you are audible. Okay. Hi, Adhish. Congratulations for a decent set of numbers. The very first question is that we have seen a very good improvement in our gross margin, both YoY and QoQ. The same gross margin delta is not getting reflected in EBITDA margin. To the extent, of course, we have improved 70 basis points, but some of that has been lost in the other expenses. How, when do we expect this gross margin delta to fully flow through to EBITDA? As you are saying, the backward integration and internal sourcing, plus maybe better realization, if that happens over, let's say, next three to six months, then how should we look at the gross margin going forward? Yes. So, Dhavlil, the gross margins have improved, no doubt, with further backward integration of our Saraikart Bidura plant. We certainly hope that they will improve a bit further. Having said that, after that improvement, obviously, the regulated market share will lead to higher selling prices. That will also lead to better gross margins. Having said that, with the current gross margins, what we achieved in this quarter, had there been better utilization of the capacity, then probably our EBITDA margins would have been better, coming almost about 14.5% even with these gross margins. This particular quarter, though the gross margins were good, because of the slightly lower utilization of the capacities, it did not flow into the EBITDA margins. There are obviously other factors, as you pointed out, which can lead to further improvement in the gross margin systems. Got it. Essentially, let's say from a QoQ perspective, next quarter onwards, do we see improving the capacity utilization, or shall we expect that from H2 onwards only? Yes. There are multiple factors from where the improvement in the financials will come from. One is definitely the higher utilization of the current API business itself. Another is by taking newer customer approvals for the existing APIs in the regulated markets. Third, we are experiencing now a lot of losses for the salicylic acid plant in the last quarter. That continues into this quarter as well. As I pointed out in the press release, our current capacity utilization still had been below 200 tons per month, and it will take somewhere around 500 tons- 600 tons per month at capacity and production for us to break even. Definitely, with the improvement in the utilization of the salicylic acid plant, in two quarters' time we see betterment in the capacity utilization. Plus, as new markets open up, the existing business will also have better capacity utilization in the coming years. Got it. Second question, you mentioned in your press releases that a lot of customer visits from regulated markets have happened and are happening. To also think that U.S. may take a little more time. If you can give some idea about where our current Europe business stands and how do you, how do we perceive that Europe business growing in FY 2026 and FY 2027, based on the US FDA approval that we have received for the plant? Yeah. Our Europe, definitely, our U.S. business is almost, as far as APIs are concerned. We just got the import alerts listed in December, and January got the official letter from USFDA as well. Three of our products are already being referred in the main ways. We are quite bullish about those three products to be launched very soon in the USFDA market. Having said that, the USFDA, U.S. market definitely takes more time. A lot of jurisdiction period is there. Probably, I can say safely after 9 to 12 months, we can start with the commercial supplies if everything goes smooth. As far as the Europe market is concerned, that will start much earlier than the U.S. market is possibly doing, because our plant was already EDQM compliant. Because of that import alert, a lot of customers feel reluctant buying from that plant for the Europe market as well. Our Europe market has also opened up. If you see our investor presentation, we have mentioned that in FY 2024, our Europe was around 14%, and FY 2025 was our update around 12%. That can significantly go up, so you can safely assume that after 9 to 12 months, the registered sales from our Tarapur API facility, which has been recently approved by USFDA, should commence commercial sale. Okay. This 12%, you know, let's say over the next two years, can it go to 20%+? Is that how we should look? We'll try to because it can go to 20% because there are multiple things which we are trying to set. First of all, what we are doing is that all our CEPs, you know, the European approach, we are trying to move to our existing plants, the bigger plants, not the multi-purpose but the dedicated plants. From there, if we start supplying to the European market, we will be able to supply at a very, very cheap rate. That rate will be better than the other markets, but as compared to the same products, it is being sold at a very expensive rate as of today in the same market. We can supply at a much lower rate from that. Definitely 15%- 20% is possible. Also, our E22 facility, the USFDA facility, we have adjoining land caution where we are putting up more blocks. That will take time, at least around 12 to 24 months for blocks to make commission. The approval process can be a bit faster for products because we will start to apply for the products from the existing products envelope. That can become more effective in the product approval process and the commercial operation from the newer blocks. Last question, at the start of the year, we were expecting 15% kind of a volume growth and negative price variance, let's say around 5%, so at least double-digit growth in revenue. First, are we on track for that? If I understand correctly, that negative price variance will be in H1, and in H2, probably if the prices remain the same, there will be no negative price variance. H2 onwards, maybe top line growth will be upward of 15%. Is that how we should look at it? Yeah, it is fairly possible what you said that the H2 growth can go in double digits. For the first quarter, that is June 2025, on year-on-year basis, we had a volume uptick of around 9%. The negative price variation was roughly around 4.5%. That is why we assumed that, you know, 4%- 5% or 4%- 6% of growth in the standalone and consolidated company. Got it. Got it. Thank you. Any more questions? I'll come back. Thank you. The next question comes from the line of Rehan Saiyyed from Trinetra Asset Managers. Please go ahead. Hello. Am I audible? Yes, sir, you are audible. Thank you, sir. I have a super power solutions. Sorry for the terrible number. I'm playing with the wrong places. Sir, I have a couple of questions regarding this. First of all, sir, from your current pipeline of API and formulation products, how many do you plan to commercialize in FY 2023? Are they going to be high margin or which logistics proposed to be commercialized are in this? I could not understand your question. Can you just ask for this? Yeah, sure. From your current pipeline of API and formulation products, how many do you plan to commercialize in FY 2026? Are there any high margin or which logistics proposed regarding an upcoming quarter or maybe in a year? Okay. You are asking about newer product launches in the coming few quarters? Yeah, sure. Yeah, yeah. Okay. The main product R&D, we are doing what we are doing for formulation business in regulated markets for oncology as well as for other solid dosages. The regular dosages have been developed and registered, I would say. Whereas the oncology, those dosages will take a little bit of time. What we expect is that by December of next year, that is, December of 2026, by that time, most of the R&D would be done for at least 18 oncology products, and we'll be filing the dosages for approvals. From there, it might take around six, seven months for the approvals. Then the commercial sales of the oncology products will start. As far as the APIs are concerned, it's an ongoing process because the APIs go with manufacturer roughly around 45 molecules, 50 molecules in a year. Our stocks can be almost contribute to around%, 92% of the total sales. There are all the trail molecules which are already there, you know. What we expect is slowly, slowly, the demand of those trail molecules will increase. Similarly, we propose to do a few of the other products as we are seeing the product market. One such product which can grow and we might need to grow production capacity is a fluconazole antifungal product. Already in the leading antifungal product, we have the largest market share and production capacity in the entire globe. It's also ongoing process as far as it goes. The formulation lines are still going. Yes, yes, sir. I just have one more comment. I want to just clarify a bit about the Sayakha facility and see how it is covered or at least either almost solicited R&D. The Sayakha facility has started a span production. When do you expect full commercialization? From which quarter would you receive Sayakha 's impact on R&D and margins in this quarter and maybe in two years? Okay. The Sayakha facility is mainly used for backward integration for capsule conversion purpose. Along with that, there will be some, you can say, side chain products which will be produced simultaneously, which may have to sell out chains. We have started the trial production now. It's a very high-temperature, high-pressure kind of a reaction. It's very common for that kind of a plant whenever you start the operation for the first time to observe some leakages in pipelines or some equipment. You have to plug those leakages and refurb the facility. We have been doing this since a couple of months. Now, we thought we are pretty confident, but within a week's time, we will come to know whether any more leakages are being observed or not. If they're not observed, then we will be putting that facility to use in this September quarter itself. If not, if you find some problems, then probably it might go to Q3. Very high chances that facility might be put to use in Q3 itself. Okay. I just wanted to clarify my question. You are targeting for quarter two, and if everything goes wrong, it's clearly going to quarter three, right? Am I right? Correct. Correct. Correct. Okay. The last one is on the cookie cutter. It's going to have diets of INR 150 crore-INR 200 crore this year. How much of this will directly contribute to growth? Is there a minimum quarter you are expecting to be the target when approvals are? What is this big stuff? Yeah, sir, I'm going to put it like this. You guys are saying INR 150 crore-INR 200 crore for CapEx this year. How much of this will directly contribute to growth if you can overcome? What ROCE can you expect to be by targets when approvals occur? Okay. I understand. Roughly 50% of this probably will be investing in the new products, R&D in the formulation business, mainly towards oncology and a bit towards non-oncology as well, but targeting the regulated markets, roughly 50% of it. The rest would be done in the parent company for ground-free expansion of a lot of products. We have certain products in mind, like some antifungal products, then cardiovascular products. We are also putting up new blocks for our USFDA facility. Even our antidiabetic therapy we are trying to expand. There are a lot of ground-filled expansions involved. You can say that, other than, you can say, 10%, let's say 10%-1 5%, rest all 80%, 85% would be focused for growth and not for maintenance, in this. Okay. Definitely, your voice is not coming. Sorry. Now can you hear me? Can you hear me? Yes, sir, you are audible. Yes, sir. Yes, I'm audible. Yeah. Definitely, as you said, we are doing a lot as far as safety is concerned. Since the last one and a half years, we have spent almost around INR 10 crores- INR 15 crores for better equipment, for better GMP equipment, and separate equipment so that the accident or small mishaps or what happens at plant level, we are trying to reduce that by having better equipment, better maintenance, and also optimizing most of the things better and doing a lot of things on the safety part. That has also been one of the key focus areas as far as capital. Thank you. Participants, you may press star and one to ask a question. The next question comes from the line of A.M. Lodha from Sanmati Consultants. Please go ahead. Hello. Am I audible, sir? Yes, sir, you are audible. Sir, I would feel highly obliged if you manage and give some guidance about volume in FY 2026 and FY 2027 and value-wise growth in FY 2026 and FY 2027. Okay. When we started the year, we had a certain volume growth in mind for FY 2026 and FY 2027. We had, you know, roughly a CAGR growth of 15%, roughly 15% year-on-year growth for these coming two years. It might so happen that you can hit 10% here and 20% in next year. That we cannot predict much. Roughly 15% CAGR growth in volume we are targeting for FY 2027. For this year, the first half, year-on-year, there can be a negative price variation of around -4% to - 6% for the first half only. From the second half onwards, the negative price variation will go away. Whatever growth in volume is there, that will contribute to value as well. Okay. What about in FY 2027? How much value growth we can expect? 15%. Yeah, it depends on the prevailing prices. Yeah. Yeah. Based on the prevailing prices, we expect 15%, 15% on each year. 15%, 15% on each year value growth. Okay, sir. What is the net debt? My second question is, what is the net debt of the company as of date? Yeah. On a consolidated table, it is slightly below, somewhere near about INR 597 crore, of which around 56% is a long-term debt and 44% is a personal debt. Can you expect some reduction in the loan? Almost the CapEx, the big CapEx is over? Yes, actually, what you're saying is correct that in spite of being a heavy CapEx and having two big shareholder payouts in the last two financial years, almost to the tune of roughly around INR 80 crore-INR 85 crore each year, so combined, it would be somewhere in the range of INR 170 crore or something. Plus the CapEx, we are done. Still, we are able to manage the debt at this INR 597 crore level. We do see that if we don't, you know, take a new CapEx or new capacity expansion, this debt level can further come down drastically. Okay, thank you very much, sir, and thanks a lot. I have done it. Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Majid Ahamed from Pinpoint X Capital. Please go ahead. Am I audible, sir? Hello? Yes, sir. Yes, sir. Yes, sir. Thank you, sir, for the opportunity. Sir, if you can understand, like where the presentation one mentioned, INR 1,200 crores of revenue is again a hump in the upcoming Q3. If I take INR 1,200 crores of top line, like it could be starting from H2, but even if I take those numbers, then it is around, from the current level of revenue, it is around 45%- 50% growth on the current level of revenue. I just want to clearly understand, like as we are saying 15% volume growth and not much pricing growth in place, and we are saying INR 300 crores of capital consumption. I just want to understand the impact on this number scale. Yeah. The thing is, for the full, whatever capacities we are putting in right now, for the full benefit to translate into financials, it might take around three years. It might flow into FY 2028 for the, you know, for optimum utilization of all these clinical CapEx work we are doing right now. The revenue will start coming more in an upward phase manner, this INR 1,200 crore. It will come up in a phased manner. You're very much correct. Okay. Moving forward, like as you are also the reinvesting of operating cash flow going forward, and you also mentioned a billion payout, how are you then going to manage your debt assets going forward? Yes. Can you manage it with your little zip? Yeah. As I was just talking with the previous caller, in spite of being, you know, around INR 170 crore of shareholder payout, either in the form of buyback or delivery, and carrying a CapEx of roughly around INR 150 crore-INR 200 crore each year, we were still able to keep our debt at INR 597 crore, which roughly translates to around 0.42 or 0.43 debt-to-equity ratio. In the last two to three years, our debt-to-equity ratio has been, you know, systematically coming down in spite of heavy CapEx as well as, you know, giving out shareholder payouts. The company's policy of 25% shareholder payout, we can easily maintain that policy and still keep our debt levels very much in control. That won't be an issue. Will the debt level of debt-to-equity of 0.4- 0.5 be maintained for this whole year? We, as a management, feel that around 0.4- 0.7 is a fair enough number to keep debt-to-equity levels because it also helps in achieving higher ROE because of the debt leverage. That would be a good number to keep. Having said that, if we don't do shareholder payout for any reason, if we don't do it, then our debt-to-equity ratio will fall down significantly. Got it. My third question is regarding, especially you have your earlier intakes, Q1 FY 2025 to FY 2026, the API contribution has went down from 80% to 77.6%. Going forward, what would be the overall revenue contribution between API, formulation, and other? What's the direction that you've seen? Thank you, sir. A couple of percentage here and there is what we have been seeing in our recent last few quarters. The main reason for that is a slight volatility in the demand or tenders of formulation business. Sometimes, in the sale of formulation business is there, then suddenly the API component looks higher. Having said that, I will just give a fair enough range. As of today, our business is roughly around 70%- 80% of APIs, roughly around 8% of Spec Chem and intermediaries and the rest, 12%- 14% is formulation. That is a rough plate what we have as of now. Given our expansion plan, we are expanding our formulation business. In three years' horizon, we do feel that formulation business will almost double from here. It might reach to around INR 550 crores-INR 600 crores where oncology also commercializes. Along with that, the resting main greenfield CapEx, what we have put in the standalone company, the salicylic acid probably would go in intermediate and intermediate space, salicylic acid. Though it has a final application in dermatology as well, we might classify most of the sales as a part of intermediates because it goes in the manufacturing of salicylics, which has a lot of application in perfumes and flavor industry. The sulfur property which has come up will help in backward integration for our antidiabetic portfolio, as well as some specialty chemical products which will come out from there, which will be selling outside. Our Spec Chem and intermediaries percentage might go up from that 8% to, let's say, 15% in three to four years' horizon. API might be around 75% or something like that, 70, 75%. Spec Chem and intermediates might grow a little faster, and the formulation will also grow to the same extent. Another question is, how does it going forward, like if we have to make sure that the margins, because you're saying you're going for, with your Sayakha plant coming in, as a backward integration, what type of growth margin expansion that you're looking at? Any numbers? It is very difficult to predict for the next two years, but what we see is that if you look at the current pricing levels of those intermediates, then definitely, a percent or two, I would say, plus the regulated market sales, both put together, can definitely help us to improve the gross contribution margin by around a couple of percent. The higher regulated market sales plus the backward integration of Sayakha. If I can assure a growth margin expansion of 200bps-250 bps plus if you can do cost rationalization of the fixed cost, can it move towards a 15%, 16% risk? Yeah, yeah. It is fairly achievable if everything goes right. Okay. Okay. Thank you so much. All the very good. Thank you, Majid. Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Raman K.V. from Sequent Investment. Please go ahead. Hello, sir. Can you hear me? Yes, sir. You are audible. Please go ahead. Sir, what is the current time of salicylic acid in India? The market for this year? Total addressable market. Yes. Salicylic acid roughly has almost 20,000 kilo-ton per annum kind of a market in India. What are the different producers? There are three main producers in China from where the salicylic acid is being imported. The Indian capacities are very limited as far as salicylic acid is concerned. The market potential, which I told you, is purely imports, which is happening from China. We are competing with China. What will be the cost of production for them in this particular intermediate in China versus our cost of production? Yeah. So, you know, salicylic acid, when we started the commissioning of the plant and till we reached the end stage and started actually selling the product in the market, let's say, till that time, the margins were very high. As soon as we started manufacturing the product, basically, the Chinese competition had reacted and tried to create an entry barrier by dumping the salicylic acid into India and reducing the prices significantly, as compared to the change we have seen in the last four to five years. That makes a very special case. Even how you say that, if you reach at around 800 tons per month kind of a capacity, we can still break even with the current pricing. The pricing equivalent to the dumping of salicylic acid by Chinese manufacturers into India. Even at that level, we can break even at around 800 tons, 900 tons per month. Now, the thing is, because they have released the prices sharply after an Indian manufacturer has come into existence, it makes a very good case for anti-dumping duty. We are approaching government for that. We are making a case. We'll be filing it soon, once we compile the entire data. We also introduced salicylic acid into BIS, that is the Bureau of Indian Standards, in last year. That also is a part of creating a little bit of that barrier for the Chinese producers to sell that product into India. It's a very tough job to compete with China, no doubt about that. For most of the product market which we have in API space, our main competition is only from China. We are pretty much habituated to the Chinese competition. It will be like any other product for us. One last question on this particular part. What is the current price of salicylic acid, and what will be the price if the ADD is imposed? The ADD, we won't be able to tell you right now because that depends on the decision of the government. The selling price, current selling price is roughly in the range of INR 119- INR 120 per kg for salicylic acid after selling the patient. INR 190-INR 1 20? No, no. INR 1 19,INR 119-INR 120. Just prior to Chinese layer dumping, what was the price? It was roughly in the range of INR 150 per kg, INR 130, INR 150. Okay, thank you, sir. Thank you. The next question comes from the line of Dhruv Archrekar from Tiger Asset Private Limited. Please go ahead. Hello, sir. Good morning. Sir, am I audible? Yes, sir. You're audible. Yes. Thank you. My question is, as the U.S. has imposed the high tariffs on the Chinese APIs, how does Aarti expect to capture opportunities in the U.S. as well as in the other markets, and resulting demand upticks and the contract bill? This tariff, basically, would matter in relative terms. What I mean is, mainly there are, let's say, two major APIs in the world, China and India. If the Chinese tariffs are higher than Indian tariffs, that will definitely help us in getting better margins and keeping our costs low, definitely. Having said that, as far as the U.S. market is concerned, cost of production is not that big of an issue for us because we are competing with China even in the unregulated markets in the ROW markets. This tariff will help us to commission just like the way China Plus One strategy played in during the COVID period. It will help us, no doubt about that. Fortunately, this has come right when we got the USFDA payback. The customers might also feel that the customers who are solely dependent on China will feel the need to approve more Indian producers. That will definitely help us in getting more approvals, no doubt about that. Okay. Okay, sir. My next last question is regarding the CapEx. As you mentioned that there is a CapEx of INR 440 crore for FY 2025, there is a simple way to go. How is the CapEx? Sir, your audio is breaking. Hello? Hello? Hello? Yes. Yes. Marjula, yes. Yes. You are recording. My last question is regarding the CapEx. As the current CapEx is around INR 40 crore and the FY 2026 guidance of around INR 150 crore is, how is the CapEx? I think I was not able to hear her sentence clearly. Hello? Yeah, my question is, sir. Sorry to interrupt. Your audio is not clear. The voice is breaking. Is it breaking now? Am I audible now? Yes, sir. My question is, this CapEx is being financed from, and what is the expected return for the profile? If I get your question correctly, I think if you're asking about how are we going to finance the CapEx? Yes, yes, yes. Typically, what we do, whenever there is ground-filled expansion, we do it from the internal accruals itself. Only for the big greenfield projects or the newer big projects, the relatively big projects, we take a term loan financing from banks because our cost of debt for the long term would be roughly in the range of 8.3%- 8.5%. Now it will come down drastically because of the reduction in the interest cost. Okay. Okay, sir. Thank you. Thank you. Thank you. The next question comes from the line of Rashmi Shetty from Dollar Capital. Please go ahead. Hello. Am I audible? Yes, ma'am. Yeah. Thanks for the opportunity. Just two clarity. One, is on CapEx. You know, from last two quarters, we are doing the CapEx of around 20%. In FY 2026/2027, will it stay in the range of 24%- 25%, or will it be in the range of 20%- 21% given the differed tax rate? Next financial year, that is FY 2027 onwards, it will be like 25% only. This time, we have been getting a lot of income tax refunds in this financial year, and even in last year also. Whatever refunds we are getting, we are adjusting in the tax provision directly. That is the reason why the tax provision might look a bit lower in this year and last year. What will be your guidance for FY 2026? 2026? Yeah, okay. Yeah, FY 2026, how much should we assume and how much should we model in? Okay. I don't have the exact numbers as of now, but probably, we might get around INR 30 crore of tax rebate. That's what provision we might be less for the interview. Okay. So roughly, it would come in the range of 20%- 21%. Yeah, yeah, please. I haven't done the calculation yet. Okay. It would be pretty lower in case if it is INR 30 crore, right? In case if the refund is coming in that range. Mm-hmm. Anyways, I'll take that offline. On the EBITDA margin front, you mentioned that 15%- 16% EBITDA margin is achievable. That 15%- 16%, are you guiding this all starting from FY 2026 only, or do you believe that this will happen only in FY 2027? For the entire year, it should happen only in FY 2027. This year, probably now going into the last quarter of this financial year, we might try to achieve that. The main annual numbers, if you look at them, probably I would suggest FY 2027 would be the right year. Okay. FY 2027, basically, 15% value growth was what we are expecting. EBITDA margin of around 15%- 16% is something which is achievable with whatever factors which you, which will be driving the growth and margin which you have already mentioned. Yes. Okay. Thank you. That's it from my side. Thank you. Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Maitri Shah from Sapphire Capital. Please go ahead. Yeah. Hello, am I audible? Yes, ma'am. You're audible. Yeah, a few questions. The value stays the same for the first half, so I think 4%- 5%. What sort of increase are we expecting in the second half and first by 2027? Yeah. For the first half of this FY 2026, we are having, we might be having a negative price variation of roughly around 5%. What we see is that the current value-based growth of 5%- 6% is what we will have in the first half. We will try to increase it to around 10% or more in the second half of FY 2026. Having said that, I would just like to point out one thing that the support of FY 2025, that is the March 2025 quarter, our, says the demand and the volumes were quite high. That will be one of the challenges. Otherwise, 10% volume-based growth is, fairly, you know, we can easily try to target that. We can even try for 15%, chances-taking, in the second half of FY 2025. This is the value first, not the volumes of, right? Yeah. Second half value and volume would be more or less similar, both agree. Okay. Value, volume, and FY 2027, the same range because we're also entering the regulated market now? Correct. Correct. Correct. Again, 10%- 15% on value and 10%- o 15% on volume. Is that correct? Yes, yes. For the EBITDA, we're targeting 15%? EBITDA, yeah. We're targeting 15% with, you know, optimum utilization of all these greenfield CapEx work we are putting in. Will the salicylic acid sales be only domestic, or are we targeting any international sales as well? Definitely, we are rarely finding the pockets in the global market where we try to, you know, target them because we do have a very good distribution network across the globe here. We're exporting to more than 100 countries, as far as we're hearing information is taken with this company. Wherever pockets we find across the globe, we will try to target that as well, no doubt about that. Having said that, the main market of salicylic acid is here in India, so it will be more geared towards domestic sales. Okay. The formulation business, you said you're targeting INR 550 crores-INR 600 crore through oncology. Will that happen post two years or within the next three years? Yeah. It will take three years. It will be very minimum, takes three years. Within INR 550 crore-INR 600 crore as of now, I'm saying means in three years' time is because of both oncology as well as the registrations, the other OSD registration code we are doing across the globe. As you say, we got a U.K. MHRA approval for our regular OSD facility in Baddi. We already have peak approval for the same. As you state today, we are also having ongoing audit for another regulated market. If that goes well, then we will be on the right path to manufacture more and more regulated formulation products in our own facility and export it to the regulated market. INR 550 crore-INR 600 crore by FY 2028, I would say, because the oncology piece will play. I was saying, I was telling that by December 2026, probably most of the work in R&D will be done for ASIN products. Then, we'll be hiring those, and then we can assume six to nine months for proof and show within the regulatory authorities. Then, we'll be able to start the commercial sale. Meanwhile, we do have a USFDA-approved oncology plant. If there are some other formulation companies in India or abroad who want to get tool manufacturing done in a USFDA-approved facility for oncology, which are very few across the globe, if we get those opportunities, we will do that to increase the utilization of the plant. Are any of those in pipeline, or it's just an opportunity? We are talking with few. I cannot give an estimate on that, but we are talking with few. Okay. Any idea on the tariff difference that will help in the China and India from the U.S.? Yeah. The only concern for us would be if the Indian tariffs should not be more than Chinese tariffs, which seems very high. It seems unlikely. We are not worried that much because if you speak about the API market in the U.S., cost is not that much of a big factor. It is mainly, you know, you should be able to get the tariffs done in the U.S. market. It's more about marketing than the cost because we are not worried about the cost as far as whatever products we are manufacturing in the USFDA part. Okay, thank you very much. All the best. Thank you. Thank you. The next question comes from the line of Nit Mehta from Prasoon Exponentials. Please go ahead. Ladies and gentlemen, we'll take this as the last question for today. The next question comes from the line of Dhuanil Desai from Turtle Capital. Hello. Yeah. Yeah. Hi, Adhish. Just one question. If we go back in time, even pre-COVID, with, let's say, 35% or even less gross margin, we were doing 15%-16% EBITDA margin. Currently, we stand at close to 37% gross margin with room for improvement. Below gross margin, as I understand, currently, the EBITDA margins are lower because of the lower capacity utilization. As we achieve optimal capacity utilization, even if you expect EBITDA margin north of 16%, we're only going by historical numbers. Is there any cost which has significantly increased below gross margin, which would keep margins in check to 15%-16%? If you can help us understand those dynamics, what was in the past, what's happening in the future? Yes. If we look at the standard and profitability for the March 2025 quarter, as you said, you are right that even with the gross contribution of around 35.2%, we were able to do an EBITDA of 14.5%. Already, we are almost 1% better. That 14.5% margin should be around 15.5%. With a better gross margin, why not 15.5% or 13.5%? The thing is, you're correct. In the best possible quarter where the utilizers are very high, everything is good, probably I'd be able to hit those margins, because even our power expenses, which would be roughly around 3%. With the solar power coming in, our manufacturing expenses will go down a little bit. Our manufacturing expenses, as you see, if you look at all the past five quarters, they don't go up much anyway, even if the sales go up. Definitely, an incremental profitability of 25% is there. What I mean is, after INR 5 00 crore or INR 600 crores, if I do INR 600 crores of more sales, probably it adds around INR 25 crores to my bottom line, in the PBT cost. That much leverage is possible. When the Tyson plant is coming, definitely, the expenses will go up because right now we are not expensing it out, because it is in CWIP. The good part is that the Talisman CapEx plant, where it hasn't come into sales much, but the entire cost is being expensed out as of today. In fact, for the last five quarters, we have completely expensed out the cost as far as Talisman CapEx plant is concerned. Once that goes in profit, definitely, it will help in the EBITDA margin by almost around 1% at the company level. Got it. What you're saying is that there is a potential, but you are currently guiding for 15%-16%, right? Yes, yes. Correct. Okay. One more question on salicylic acid. You mentioned that if 800 tons with the lower prices that China is pumping out, you will do break even. I'm sure that all endeavors are to, again, at least work to that company-level EBITDA margins. Is it fair to assume that without anti-dumping duty, it's difficult to get to that 14%, 15% EBITDA margin in salicylic acid? Yeah. One thing is that as of now, we already factor into our financials whatever EBITDA margin is showing right now is with the loss of salicylic acid. That is one thing. Secondly, yes, our standalone business for the salicylic acid project, the thing is right now, we are talking about 800 tons, but the final aim is going to 1,600 tons per month. When we reach those levels, 1,500 tons, 1,600 tons per month, definitely, we feel that the margins will look much better. Typically, what we have seen is that when we start manufacturing a product day in and day out in a dedicated facility, we get a lot of new things to reduce the cost. Right now, what is happening because of the equipment, we were not able to run the production smoothly in a continuous form. That is the reason why we are not able to bring in the cost reduction agencies in salicylic acid as of now. We are confident that once we reach that 1,500 tons, 1,600 tons per month kind of level, then the company-level margin should come in. Having said that, what we feel is that as of now, China, even from January to July, in this period also, they have further reduced the salicylic acid price by around 6%, 7%. That is only to discourage the Indian manufacturer from producing. Fortunately, as we aggregate the standalone companies in manufacturing only salicylic acid, it's probably a problematic situation for us. We have such a big product basket that the other products can easily absorb the loss of salicylic acid as of now. As soon as we break even, we will be in much better condition at the company level. From that point onwards, when you go to 1,500 tons, 1,600 tons per month, we will be even better. There is always a scope of salicylic acid derivatives manufacturing because in India, most of the companies are manufacturing the derivatives of salicylic acid and exporting it to the world. Export, that has a lot of export potential. That is always there. As of now, we are not focusing on that because, first of all, we will try to focus on selling salicylic acid to those Indian customers. If that doesn't work well, then we have an option to go for the derivatives. Got it. Got it. Very helpful, Adhish. Thank you and all the rest. Thank you. Thank you. Ladies and gentlemen, due to time constraints, we'll take this as the last question for today. I would now like to hand the comments over to the management for closing comments. Thank you, everyone, for joining us today on this earnings call. We hope we have been able to answer most of your questions. We appreciate your interest in Aarti Drugs Limited. If you have any further queries, please contact SGA, our investor relations advisor. Thank you. On behalf of Aarti Drugs Limited, that concludes this consent. Thank you for joining us, and you may now disconnect your line.