Ladies and gentlemen, good day and welcome to Q1 FY 2027 earnings conference call of Aarti Drugs Limited. 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 the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Before we begin, a brief disclaimer. This conference call contains forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Adhish Patil, COO and CFO from Aarti Drugs Limited. Thank you, and over to you, Mr. Patil. Good morning, everyone, and thank you for joining us today for Aarti Drugs Q1 FY 2027 earnings discussion. Joining me today are Mr. Harshit Savla, Joint Managing Director. Good morning. Mr. Harit Shah, Whole-time Director. Mr. Vishwa Savla, Managing Director of Pinnacle Life Science Private Limited, along with our- Good morning investor relations advisors, SGA. We hope you have had the opportunity to go through our financial results and investor presentation for the quarter ending June 30th, 2026, which have been uploaded with the stock exchanges and are also available on our website. Before discussing our quarterly performance, let me begin by providing some perspective on the operating environment during the quarter. The first quarter of FY 2027 continued to be influenced by a dynamic global landscape. Geopolitical developments, particularly the ongoing conflict in West Asia, remained an important factor affecting international trade, logistics, and supply chains. The industry also continued to witness elevated freight costs on certain routes, longer procurement cycles in a few regions, and increased volatility in raw material pricing. At the same time, these developments created a favorable pricing environment across several API products. As availability tightened in certain markets and customers prioritized supply reliability, API prices witnessed an upward movement across the industry. This translated into significantly better realizations for us during the quarter. While such disruptions can often create uncertainty, they also reinforce the importance of being a dependable and integrated manufacturing partner. Customers today are increasingly looking beyond just pricing. They are placing greater emphasis on supply security, manufacturing consistency, and long-term partnerships. These are areas where Aarti Drugs has built strong capabilities over several years, and we believe this positions us well to capitalize on evolving market opportunities. What is particularly encouraging is that despite this challenging external environment, our operations remained completely stable throughout the quarter. We did not experience any production disruptions, material shortages, or supply-related interruptions. All our manufacturing facilities continued to operate efficiently, enabling us to meet customer commitments across both domestic and international markets without any significant delays. This operational resilience is a direct outcome of the investments we have made over the years in strengthening our manufacturing footprint, expanding our backward integration capabilities, and maintaining disciplined inventory and procurement practices. Moving to our business performance, I am pleased to share that we delivered a strong start to the financial year. Our performance during the quarter was driven by a healthy combination of improved API realizations and volume growth across key products. Demand remained healthy across API and Spec Chem portfolio, supported by strong consumption across key therapeutic categories and continued traction in both domestic and international markets. Our export business continued to perform well as customers increasingly sought reliable and compliant suppliers capable of ensuring uninterrupted deliveries. We also witnessed steady demand across our domestic formulation business. Equally important, our focus on cost optimization and manufacturing efficiencies continued to yield positive results, and we witnessed improvement in EBITDA margins in Q1 FY 2027. This margin expansion came despite continued pressure from higher raw material prices and elevated freight costs, highlighting the resilience of our operating models. Our regulatory track record also continues to strengthen our competitive position. Our manufacturing facilities continue to hold approvals from leading global regulatory authorities, including the U.S. FDA and U.K. regulatory agencies. These approvals not only validate our quality systems and manufacturing standards, but also enable us to strengthen our presence in regulated markets over the long term. Another area where we continue to make steady progress is our manufacturing expansion strategy. During Q1 FY 2027, our Sayakha facility continued its planned ramp-up and operated at nearly 65% utilization. This facility remains as an important strategic investment for us. Beyond adding manufacturing capacity, Sayakha strengthens our backward integration capabilities, enhances supply chain reliability, and provides us with greater control over key intermediates, especially for the antidiabetic segment. Once resolved and as utilization levels continue to improve, we expect the facility to contribute further towards operational efficiency and long-term margin improvement. Alongside Sayakha, we are also continuing to invest in expanding our formulation business. Our brownfield expansion at the Baddi facility in the adjacent land parcel is progressing as planned. Once completed, this project is expected to nearly double our overall solid dosage manufacturing capacity. This expansion is aligned with our long-term strategy of strengthening our formulations business, increasing manufacturing flexibility, and creating additional capacity to support future growth opportunities across both regulated domestic and export markets. Overall, our capital expenditure philosophy remains disciplined and growth-oriented. Every investment that we undertake is guided by clear focus of enhancing competitiveness, improving operational efficiency, supporting backward integration, and creating long-term shareholder value. We remain confident that these investments will provide a strong foundation for sustainable growth for the coming years. Coming to the consolidated financial highlights. Q1 FY 2027 revenue stood at INR 703.6 crores compared to INR 590.8 crores in Q1 FY 2026, reflecting a growth of 19% year-on-year. EBITDA stood at INR 96.9 crores versus INR 74.7 crores in Q1 FY 2026, a growth of 30% year-on-year. EBITDA margin stood at 13.8%, an expansion of 120 basis points year-on-year. PBT stood at INR 69.2 crores as against INR 51.1 crores, a growth of 35% year-on-year. PBT margin stood at 9.9% and expansion of 120 basis points year-on-year. Tax stood at INR 50.1 crores as compared to INR 54 crores in Q1 FY 2026. Q1 FY 2026 tax includes a principal tax refund of INR 15 crores. Excluding this, the growth impact would be 29% year-on-year. With respect to the standalone business highlights in Q1 FY 2027, revenue stood at INR 627.6 crores versus INR 521.3 crores in Q1 FY 2026, a growth of 20% year-on-year. Standalone business contributed around 89% to the consolidated revenue. 68% of the standalone revenue came from the domestic market and 32% from the exports market. Domestic revenue grew 25% year-on-year, and export revenue grew 12% year-on-year. Within the API business, the antibiotic therapeutic category contributed 35%, antiprotozoan around 18.5%, anti-inflammatory 11.9%, anti-diabetic 18.2%, antifungal 10.2%, and the rest contributed around 6.1% to the total API sales. Coming to formulation segment highlights. Re venue from formulation stood at INR 81.6 crore compared to INR 75.8 crore in Q1 FY 2026, up 8% year-on-year. Exports contributed around 74% to this revenue. With that, I did now like to open the floor for questions. Thank you. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on a touch-tone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Avaneesh Burman from BlackRock Funds. Please go ahead. Mr. Burman, please go ahead. Can you hear me? Yes. Hello? Hello, can you hear me? Yes, we can hear you. Yes, go ahead. Yeah. Adhish, I just wanted to understand how the realizations of metformin have moved, if you can just indicate something and how on a quarter-on-quarter on a YoY basis they have moved. Yeah. Harit, would you like to answer this question? Thanks. Yeah. What do you mean, sir? Demand or the price for it? No, pricing movement of metformin. Yeah, pricing movement. It has gone up by around 15%-20%, compared to before the war. 20% approximately. Yeah. Avaneesh, year-over-year, the growth has been quite stark in metformin. Quite high. The major hike came during the start of the war around March and April. Even now, as Harit pointed out, it is still higher than before, but it is slightly lower than what the price was in the month of March and April. Okay. Understood. Adhish, if you can just help understand, you're backward integrating in the product, and it'll always give you some leverage as compared to the competition. How do you plan to use this in your, let's say, ambition to take market share? Because as I understand, it's a fairly mature molecule. The global growth rate for this product would not be very high. You have aspirations to grow much faster than the industry growth. Once the backward integration is streamlined, what are the plans? Yeah. As of now, our metformin capacity already is around 1,400 tons per month. We are already utilizing it anywhere between mid-eighties, we can say. We are expecting that the demand for our metformin will grow quite significantly in coming future due to more and more approvals which we are getting. Okay. No, what I was trying to understand was that. Already we have EDQM approval for the product, in future we are planning for U.S. FDA as well for the metformin. Our current plan is to scale up metformin from 1,400 tons per month to roughly up to 2,200 tons per month, out of which around 500, 550 tons per month would be a U.S. FDA capacity and rest of the capacity would be for the other market, a non-U.S. FDA market. Going forward, we will require lot of support from our backward integration, which we have already done in Sayakha. That is why we feel that the Sayakha facility will continue to be a very important area where we want to streamline our production as soon as possible and support the growth of metformin. Metformin is already growing globally, and it's a huge market, and there is lot of potential for us to get more market share as well. By when are you expecting to supply to U.S. market, as in when could we expect the approval to come? The U.S. DMF we have already filed so that is not a challenge. The thing is the facility because we are constructing a fresh roughly around 500-plus tons per month capacity in the same land parcel, in the same location. It will take roughly around 10-12 months for that capacity to come up and immediately as it comes up, we will file for the U.S. FDA inspection with the help of some customers. Basically you can't supply the API till the facility gets approval. The API supplies also at the earliest can happen only after 12 months. Correct. It will take at least 12 months. Currently, we do have European approval for the same facility. How much are you supplying to European market? Actually, it is not much. Even the European market is untapped, though we are trying with the smaller players right now. The key challenge what we faced so far is that many of the European clients of metformin are also operating in the U.S. market, so they need a supplier with both European as well as U.S. FDA approval. That is the main reason why we are going in for U.S. FDA approval because that will open up not only the U.S. market but also the huge European markets for us as well. Okay. Understood. Thank you so much. Adhish, congratulations for the role elevation also. Many congratulations. Thank you. Thanks. I'll get back. Thank you. Next question comes from the line of Parth Sodha with Trinetra Asset Management. Please go ahead. Am I audible? Hello? Yeah. Yes, you are. Please go ahead. Yes. First of all, thank you for the opportunity. I wanted to know, do you believe the API industry has entered a sustained recovery phase or is it still too early to call? The thing is the broad scenario, we just thought a month back that everything streamlined and everything will come back to normal. Again things are quite volatile as of now to say anything. The thing is the antibiotic, certain therapeutic categories, certain products, the demand of those products behave as this when the prices are lower. For us, frankly speaking, even if prices are lower, but if they are stable then we can definitely make handsome margins. Competing with China was never an issue for our product line, at least. Obviously, you always face pressure here and there little bit from certain players for certain products at a given point of time because of inventories as well. They also act up sometimes. Overall what we feel is the API business, the kind of product profile we are operating in, the business is quite stable. Stable in the sense we are not that worried about Chinese competition at least. Okay. Got it. My second question is with the INR 600 crore CapEx now completed, what is the expected asset turnover and, let's say, revenue contribution over next two to three years? The asset turn from the phase 1 greenfield facilities is roughly around one and a half times. About Sayakha, around 50% of the capacities are being captively utilized for capital consumption for our anti-diabetic portfolio. That will add to the gross margins more than the revenue itself. Having said that, the phase 2 brownfield CapEx, which will come in both these sites, Sayakha as well as G61 in Tarapur, their asset turn would be much higher, around three, four times, because most of the common facilities, like ETPs and etcetera, all those things are already set up and running. All that OpEx and CapEx has already been done. The newer phase 2 CapEx will give higher returns, but the one which we just did, that will get us around 1.5x. Okay. Got it. Thank you so much for the opportunity. Thank you. Next question comes from the line of Rashmi Shetty with Dolat Capital. Please go ahead. Yeah, thanks for the opportunity. Adhish, you mentioned that metformin, you're constructing new lines at the Sayakha plant, right? For 500-550 tons in the U.S. No. The metformin expansion is being done in the same Sarigam facility. Okay. Where we already have around 1,400 tons per month. That we'll be scaling up to around 1,700 tons per month, and additional 500 tons per month, we'll be putting up a U.S. FDA block in the same location. The same location. Okay. What is the update on E-22 plant currently, which is already U.S. FDA approved? How many products are we supplying currently and to which markets? Yes. Currently, in our current U.S. FDA plant, we have two main production lines and one small product line, means the high-value products. Currently, we have around sedative, antibiotic, anti-inflammatory products which are already doing very well, and we feel that within a year's time, our capacity will fall short because these products are quite big in terms of tonnage. We are also planning a fresh, you can say, quasi greenfield project of U.S. FDA in the adjacent plot itself, so it will have same API number. That will give us capacity enhancement. It will roughly, slightly more than double our existing capacities. We will be putting up three more production lines to the tune of, let's say around 10 per month, each line, which will be a multipurpose line and from which we can cater to more products. As of now, we have around four, five products which are active from the current U.S. FDA plant. Not all of them are going to U.S. market. Some of them are also going to the European market. Majorly, all these four to five products currently we're supplying to the EU markets only, right? Correct. Yes. The U.S. market still hasn't started yet, the business development has already started the sample approval. We have already sent samples also to the customers. Okay. As soon as they get the approval for vendor addition, then we can start the supplies. Okay. At your Sayakha plant, these Specialty Chemical products in your greenfield plant, Specialty Chemical products are also manufactured, right? In Sayakha, yes. Your growth for the Specialty Chemical was around 149%. The sales were around INR 82 crores. Is it because of this new plant which has come up and we have supplied newer products? Basically, how should we look at it for the full year? Is it going to contribute significantly this year? This first quarter's performance will definitely repeat for the next three quarters. In fact, we will be trying to improve it further. The answer to your question was, yes, it is because of that Sayakha facility which we have just put up. How many tons per month we have reached for this Spec Chem business in Sayakha plant? Sayakha, for the methylamine plant, we have already reached around 65% utilization. There are a few other products where the utilization is lower. There we are trying to improve. methylamine's the main gases, that we already reach around 64%, 65% in the quarter of June. That comes to how many tons per month? I will tell you. It is roughly around 60 tons per day. Okay. For the entire quarter, it was somewhere around 3,500 tons for entire quarter, June quarter. Okay. For this year, basically this will be the new quarterly run rate for the Specialty Chemicals if you want to model in. Correct. Okay. Related to your Tarapur facility, where are we currently for the salicylic acid supply? Yeah. The improvement is still awaited in that facility. Last quarter, in fact, we kept the production of salicylic acid very low. In fact, the entire quarter we produced only 67 tons of salicylic acid. One of the main reasons was we were waiting for that equipment, which came, and it is installed now. The main purpose was to further reduce the raw material costing and also improve the effluent quality from the salicylic acid. We just commissioned the plant for manufacturing derivative of salicylic acid, that is methyl salicylate and few other salicylates can also be manufactured because it is a multipurpose plant. That capacity is roughly around 354 tons per month. The trial batches have started. We got around 5, 10 tons of trial production, we'll be ramping it up soon. What we'll be trying to do is that produce the salicylic acid and then convert it into the derivatives and then sell it to the market because that will reduce our losses. Unfortunately, what has happened to the anti-dumping duty part, it got delayed a little bit. Though the case was okay, the government asked that the injury period should be one year more. We'll have to wait most probably one more year for anti-dumping duty to come up. We are pretty much sure that it will come for salicylic acid. Till that point of time, I think it will be better for us that we manufacture the derivative of salicylic acid and then sell it to the market because then at least we will try to achieve breakeven for that location. Okay. Generally, margins are higher in derivatives of salicylic acid compared to the main product? Yeah. What happened was, before we started the production, salicylic acid itself had very high margins and derivatives also had a decent margin. The thing is, for derivatives, we have to venture it into four or five products, whereas salicylic acid you can just get all that margin in one product itself. That was the initial plan, that to manufacture salicylic acid and supply that to the Indian consumers. After we launched the capacity, Chinese players, they drastically dropped the pricing of salicylic acid, mainly to drive the competition out. That is the main purpose. Because of that, salicylates became more attractive than the salicylic acid itself because of that price drop. Initially it was not like that, but as of now it is like salicylates are more profitable than salicylic acid. Okay. My last question is on volume growth and price growth for this quarter, also if you can give a outlook on that for the remaining three quarters. Yeah. Most of the volume growth has come from this segment. Overall company level, we still achieved around 3.5% aggregate volume growth on both domestic and local markets. Majority of the growth came from the price growth in the June quarter. The main reason for this is because there were certain price hikes because of the raw material prices went up due to that U.S.-Iran war. Because of such sharp increase in the prices, typically what happens is formulation purchasers, they refrain from buying too much. They keep the stock to minimum because the prices are very high. That definitely impacts the quantity of, you can say, demand. The quantity sales goes down in such scenario. Still we were able to achieve 3.5% growth, but mainly it was driven by the price. As of now, the pricing has eased out as compared to the month of March and April. It came down slowly from April, May and now. Still the prices are high because still the war restarted and we are not sure how long it will now get stretched. On YoY basis, what was the pricing growth in absolute terms? In YoY basis, at the aggregate level, we saw somewhere around 16, 17% aggregate growth. Okay. You feel that this will not be sustainable, right? Structurally there is not easing in the pricing pressure. Right now, again, the pressure is still there, but as the war, everything eases out, then when the raw material prices goes down, then probably the selling prices will come down. Okay. What is the outlook for the remaining three quarters in terms of volume growth and price growth? I mean, how do you see any guess estimate? Actually speaking, we are hoping that the volume growth should be much better than June quarter. June quarter, there was sudden hike in the prices. As I said, the demand got affected because of that. When the prices stays high for a longer period of time, then the demand should come back. Once the inventory levels at the further end of the value chain goes down, the demand should come back. Export demand won't get impacted much. It is generally the domestic demand, what we have observed in past as in three, four years back, that in the very high prices scenario, certain categories of products, like mostly antibiotics and some antidiarrheals, they face demand pressure. Okay, got it. Thank you and congratulations on your new role. Thank you. Thank you. Next question comes on the line of Dhwanil Desai with Turtle Capital. A reminder to all the participants that you must press star and one to ask a question. Mr. Desai, please go ahead. Yeah. Good morning, Adhish. Am I audible? Yes. Yeah. Adhish, the first question is, you talked about the volatility on the pricing side of it, the realization part of it. I think even when this price increase was not there, our eventual goal was to reach to 14%-15% EBITDA margin in due course. If once the realization comes down, let the volatility settles down and the realization and RM both comes down, do you think we are on par to reach 15% margin maybe by end of this year, or is that a longer journey? Yeah. This quarter also, we took some write-offs of aging CWIP, but that way, we had crossed around 14% EBITDA margin in Q1 as well, at consolidated level. 14% is quite doable. We are almost there. Once the utilization of the two main greenfield projects, what we have put up, once that improves, then definitely 15% should be very easy. Once the salicylic acid plant comes on track, then that drag will reduce on the overall P&L. Above 14%, we are almost there already. Right. The realization may not stay at the same level, right? It will come down. Right. That means that the 14% that we see today in Q1 eventually may ease out as the prices come down. Is that a fair way to think? In short term, yes. What will happen, ideally the volume growth should pick up once the pricing rate goes down, because our March quarter volumes were much higher than our June quarter. Overall, we are almost there. I would still say we are almost there. In the quarter of December and March, the main thing was our Sayakha plant was also not operational fully. The utilization was much lower, 30% and 40% respectively. This is the first quarter that utilization went above 60%. That is also one of the reasons why the EBITDA margins have gone up a little. Okay. Got it. Second question, Adhish, is that we have done a very large CapEx in last two years across various products. Based on that, our aspiration of double digit volume growth or maybe 15% volume growth, should that be the base? Because 7%-8% volume growth anyway we were clocking even without CapEx, right? All these new products and new CapEx coming into play, are we aiming for 15% kind of a volume growth or you think it will be more closer to high single digit, low double digits kind of a number? Yes. The thing is, for next two years we are very well poised for that 10%-15% kind of volume growth. Because right now, even if I consider salicylic acid capacity as just 600 tons per month, we are sitting roughly at around 70% utilization, mainly on the account of that project. There is lot of scope for existing products as well as this a bit in the Sayakha facility and a lot in salicylic facility. Capacities are there. Achieving 10%-15% volume growth in next two years should not be a problem. Only challenge would be how fast we streamline the salicylic acid and the derivative part. Okay. If the salicylic acid part, let's say if we assume that until the anti-dumping duty comes into play, next worst case, maybe even the derivative part doesn't pick up, then without that, is it possible to get to that 10%-12% volume growth? Yes. Still 10% should be doable. Okay. Got it. If you can help us understand the mix, how it has progressed over time between, let's say, regulated and unregulated market. I think Europe was quite small for us, U.S. was a nonexistent, which are generally better realization markets. How it has progressed for us and how do you see that going forward now that the U.S. FDA thing, at least for one plant, is in place? Yes. Yes, that is one of the key focus area for us going forward, how to increase our regulated market sales. Definitely getting U.S. FDA approval for API facility after a long wait of 10 years. Now that that scope has opened up for us, not only for U.S., but for Europe market as well. Plus we got around CEPs for European markets for nine products. As I was speaking before that, we have already filed for some of them to be shifted to a bigger WHO kind of a GMP plant, which will be transforming to the EDQM approved plant. Our cost structure will go down, the pricing will go up. There will be expansion in the margin. Plus we will get more volumes also because of the European markets. Plus, other than that, we have also got good approval. All regulatory approvals for our formulation business as well. We got U.S. FDA approval for the oncology. We also got European approval for the oral solid dosage. There also we are filing a lot for regulated markets. Already formulation has demonstrated that we are doing more than 70% of our formulation business in exports market now. We are tapping the regulated markets in that division as well. Both in formulation as well as in APIs, we are targeting regulated markets. Having said that, I would say that still the current sale doesn't reflect that profitability which will come through regulated market. It is still in the business development phase. Some success we got, but then as the pie becomes meaningful, then it is meaningfully reflecting the overall EBITDA margins of the company. Got it. Thank you. That's it. Hello. Thank you. Next question comes from the line of Sajal Kapoor with Antifragile Thinking. Please go ahead. Mr. Kapoor, please go ahead. Yeah, thank you for the opportunity. Yeah, hi. Yeah. How much. Yeah, hi. I can hear you. The question is, how much of Sayakha's benefit is visible in revenue today, and how much is invisible because it replaces intermediates that were previously procured externally? Yeah. I would say the last quarter still, around 60%-70% we must have procured from outside last quarter, in the June quarter. Already that percentage has gone down drastically in this quarter. Increasingly in September quarter and then by December quarter, I think hopefully around 80%-90% of the captive consumption will happen through Sayakha plant. Though we will always need to keep around 10% external supplies for diversification case. Yeah, in September quarter and December quarter, the captive consumption will go up drastically as compared to June quarter. Adhish, the question really is the captive consumption should improve our gross margins, right? Because it's a- Yes ...backward integration. It gives us not only more control of the value chain, but it also makes, in the eyes of the customer, it makes us as a source more secure because we are not reliant on external. Yes, 10% is fine for the sake of diversification. What's your take on the gross margins as utilization improves beyond 65%, where we are today to, let's say, reaching closer to 90%? We are hoping that it should add another 1% or so in the gross contribution at the peak level. Right. That gross contribution coupled with better utilization of the network should naturally improve the EBITDA margins. I think the other participant's question was also along the same lines, exploring how soon or when we can get back to 15%. Those two things put together, improving gross margins and improving utilization should result in a much better EBITDA margins. I mean, it could even be 200 basis point improvement, no? Yeah, in the current condition, yes. What happened in June quarter was because of that ammonia shortages and the derivative compound shortages, the prices had gone up quite drastically for this chain of products. Once it settles down, we need to see whether 200 basis points will come or not. Sure. That's all. Thank you so much. Thank you. Okay. Thank you. Thank you. Ladies and gentlemen, as there are no further questions, we have come to the end of question- and- answer session. I would now like to hand the conference over to the management for closing comments. Our diversified presence across APIs, formulations and specialty chemicals, together with our longstanding customer relationships and broad product portfolio, along with our ongoing investments in capacity expansion and operational excellence, we believe we are well-positioned to capture these opportunities and sustain our growth momentum in the years ahead. Thank you once again for your continued support and confidence in Aarti Drugs. For any further questions, please reach out to SGA., our investor relations advisor. Thank you so much and have a nice day. Thank you for attending Aarti Drugs Limited conference call. Thank you for your participation. You may now disconnect. The conference has now concluded. Thank you.