Ladies and gentlemen, good day. You all are connected to Q2 and H1 FY 2026, Caplin Point Laboratories conference call hosted by 360 ONE Capital. The conference will begin shortly. Please stay connected. I repeat, participants, you all are connected to Q2 and H1 FY 2026, Caplin Point Laboratories conference call. The conference will begin shortly. Please stay connected. Thank you. Ladies and gentlemen, good day and welcome to the Q2 and H1 FY 2026, Caplin Point Laboratories conference call hosted by 360 ONE Capital. As a reminder, all the participants will be in the 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 touchtone phone. I now hand the conference over to Julie Mehta from 360 ONE Capital. Thank you and over to you, ma'am. On behalf of 360 ONE Capital, we would like to welcome you all to the 2Q and 1H FY 2026 conference call of Caplin Point Laboratories Ltd. Today, we have with us senior management of the company, represented by Mr. C.C. Paarthipan, Chairman; Mr. Vivek Partheeban, Vice Chairman; Dr. Sridhar Ganesan, Managing Director; Mr. D. Muralidharan, Chief Financial Officer; and Mr. M. Sathya Narayanan, Deputy CFO. I would now like to hand the conference over to Caplin Point Management for the opening remarks, post which we will open the session for Q&A. Over to you, sir. Thank you, Julie, and thanks to 360 ONE Capital for hosting. Welcome, everybody. Thanks to all of you for taking time out and joining the Q2 H1 earnings call to discuss the results. Please note that a copy of all our disclosures are available on the investor section of our website, as well as on the stock exchanges. Also, do know that anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. The conference call is being recorded, and the transcript, along with the audio, will be made available on the company's website, as well as the exchanges. Please also note that the audio is copyright material of Caplin Point and cannot be copied, rebroadcasted, or attributed in press or media without specific written consent of the company. I'd just like to hand over the floor to our Chairman for his opening remarks. Thank you. Good afternoon and welcome all to our investor call. Let me start with what has been told by Harvard cognitive scientist and psychologist Dr. Pinker about private knowledge and common knowledge. He makes a crucial distinction between private knowledge, say, X, which resides only in an individual's mind, and common knowledge, where everyone knows X, and everyone knows that everyone knows X, and so on, ad infinitum. The private knowledge alone could create something unique and also the competitive advantage to any company. Now, the unique competitive and unique and competitive advantage of Caplin Point. Number one, higher revenues in smaller geographies of Latin America with personalized patient engagement. Number two, liquid assets exceeding the annual revenue that stands at INR 2,358 crore. Number three, scattering to the bottom of the pyramid. Of essential medicines cannot be replaced by new-age biosimilars too. Number four, we are not competing with the big pharma but creating a new ecosystem in the markets and manufacturing. First, market, the focus of the big pharma is always on institutional and brand marketing. Whereas we focus more on the private market, especially the last mile, which always serves to the poor and middle class in the rural markets. Currently, 50% of our products are outsourced both from China and India, and this asset-like model has created the hard assets in India. Then manufacturing. We found the rural women are more disciplined, hence we are empowering the women by increasing the women employees in our shop floor, which alone is not digitized in our factory currently. We also still retain the skilled and loyal men to continue in our journey with us. We are training the new grades, and they are quite good in enforcing integrity, quality, safety, with productivity in our facility. We are in the process of digitizing the shop floor like all other areas of our CSL. This will be a digital privilege to the underprivileged women. In the next two years, after we complete the fuel injectables, we'll be one among the four or five injectable exporters to U.S.A. with strong lines, both put together of CSL and COL. And we'll be mainly catering to the U.S. market. Number six, we are in the process of buying a land in Mexico where we are planning to start our factory. This is only to avail the benefits offered by the Mexican government recently. And the vice chairman will detail the number of new stations in the U.S., Mexico, and Chile from India and China. Number seven, we also have plans to start a liquid oil facility in Guatemala, which would increase our revenue and profits by selling a big range of liquid products in Central America. And exporting liquids from India or China does not have a competitive cost advantage. Number eight, we are also looking for a meaningful acquisition to increase the top line and bottom line of the company. And the vice chairman will detail an opportunity which came to our. Place in the recent past. However, we felt that particular opportunity is not a good fit for our business, hence we told them that we could look for something. Later. Number nine, we are also aware that one day artificial human intelligence and machine learning will rule the world. Robots will replace the routine to difficult-to-manufacture jobs. Keeping this in mind, we should also legally look for a country which supports robots for manufacturing of generics. However, we know that these robots will not have empathy or a feeling for the poor. Of course, we don't even know whether the future robots will have common sense and a gut feel. We at Caplin still feel. Scattering to the bottom of the pyramid is a compassionate journey which would continue forever. Finally, we also accept that no competitive advantage is an iron cloth, and it must be earned on a daily basis. Everything worthwhile is always uphill, and we should never give up to go up. Now, let me pass on this to. The vice chairman, Mr. Vivek, to give his presentation. Thank you. Thank you, Chairman. I'll touch upon the U.S. business a little bit before moving on to the rest of the world also. We are happy with another set of consistent numbers that we have done, both in Caplin Point and Caplin Steriles. And in Caplin Steriles, we've seen growth in both the B2B and the B2C businesses, which I'll touch upon in a minute. The growth is seen predominantly due to the new approvals that we've received over the last few months and also capturing a larger share of the existing market for the products that were already approved. In addition to our existing pipeline, we've been actively building up a pipeline of ANDAs that we are acquiring from outside, which helps fast-track our entry into. Some of these products. Because typically, when you acquire an approved ANDA, you can get to market within six to nine months compared to starting from scratch, which is around 18- 20 months. On a best-case scenario. We've already acquired around four ANDAs so far, and we're in the process of. Acquiring five more as we speak. This should happen in the coming few weeks. Once everything is completed, we should be touching around 45, 46. ANDAs, which we feel is a very decent number considering our first ANDA was approved only in 2018. To ensure that we're also utilizing our capacity effectively and. Also being true to our original DNA of being asset-light and focusing on outsourced manufacturing as well, we are also starting to outsource some products for CSL. We've already started with the first two products being outsourced from another highly quality-conscious company in South India. And we're in the process of discussing with them to move a few more products to them so that only the high-value and very tricky products or complex products are being manufactured in-house until our complete capacity expansion and COL2, or phase III, as we call it internally, is completed. Our large offering and variety of sterile products from CSL is getting even larger and even more diverse as we start doing more exhibit batches of products like prefilled syringes at this plant. We have around 11 products that are at advanced stages of development, and we plan to file. Almost all of these 11 by the next financial year. Some of these are additional to the existing approved ANDAs, so these would be what we call as post-approval supplement, where we get the approval within six months rather than the traditional timeline of 10- 15 months. We're also adding cartridges from the same line, which includes the GLP-1 products. In fact, in four countries in. Latin America, we've already filed the dose here, and we should be in the first wave of generics when the patent expires. We're also working on another very niche technology at CSL, which is BFS, or blow-fill- seal technology, where we are working on a pipeline of products that includes unit dose octal mix and inhalation products. When it comes to CSU, which is our own label in the U.S., Caplin Steriles US, we are very happy with the progress so far. We targeted breaking even within the second year of operation. But I'm glad to inform that not only have we broken even within the first quarter, we actually have become profitable in that entity, and the numbers are very similar to the parent companies, which, as you all know, is fairly robust as well. We have launched 24 products within the first 12 months, and we are targeting another 15 products in the next financial year. And going forward, we expect our own label to occupy a significant share of Caplin Steriles' sales in the coming years. We are also looking to license more products from other partners, other licensing companies, both in India, China, etc., for our front end as we get more comfortable with how the whole sales network happens over there. In addition to U.S., we are making good progress in our next very high. Focus market of Mexico. We have already filed 35+ products. We have 20 approvals along with our partners. And we are also working on a larger pipeline of 80- 90 products that we are confident will be filed within the next 12 months. Most of these are internal products, and the rest of it is all from our partners in China, which are basically. ANDA products or EUMA products, where we expect the approval to come through quite quickly. Another high-focus area for us is Chile, where we already hold around 125 product licenses. We have recently started our. Warehousing for private market sales and local tender sales over there. This is picking up pace as we speak. And just like Chairman said, we are also aligning with the global push for. Onshore manufacturing. On this account, we are also. Not against the concept of an inorganic acquisition. In fact, we are now more and more getting comfortable with that idea. And along this line, there was an opportunity that had come up in the U.S. for something that. Was sizable. But. As Chairman was saying, we were able to engage with. A private equity company that was able to actually make those numbers work, which were actually quite significant for a company our size. So it goes to show that as long as we continue to do things the right way with a very sharp focus on cash flow, bottom line, and top line, our valuation will put us in a good position as and when we do something. Inorganic. It is very important that it fits in with our line of growth and fits in with the overall. Models and ethics that the company always stands by. When it comes to CapEx, our Vizag facility is cleared. We've received the CTO, which is a consent to operate. We are working on the first few scale-up of. APIs as we speak. And our oncology API facility is also coming up at a good speed, and we expect this to be completed by next year. Finally, there is nothing specific to be reported on the tariff position. It's status quo. We are still exempted from. Tariffs, and we are in the same boat as everybody else on that. So. Happy to. Take any calls later. I'll request our CFOs to throw a little bit of light on the numbers before we open up the floor for questions. Thank you. Thank you, Mr. Vivek. Good evening, everyone. I was taking time off to attend our investor call. Let me briefly take you through the Caplin Point performance for the second quarter and the first half year of FY 2026. Overall, results are gratifying, and the company has grown in almost all financial. Parameters. Operating revenue grew by 11% year-on-year. Growth continues to be broad-based across geographies. Total income grew by 12% year-on-year. H1 revenue of INR 1,098 crores exceeded full-year revenue of FY 2021 just INR 1,088 crores. The growth in other income of INR 14.18 crores has primarily come from deployment of incremental cash. As we have in the past explained, our target is to accrue at least INR 300 crores-INR 3 50 crores year-on-year, and that has put us in good state. And the INR 14.18 crores, the exchange rate has also helped us to have a 2 point Increase in exchange gain is the next of INR 2.3 crores compared to the last H1. While the revenue grew by 11%, Q1 year grew by 8.2%. That means our operational efficiency has improved, and this has directly fallen into the contribution margin. Employee expenses also grew just by 7% year-on-year, with productivity going up. OpEx also grew by 2%. That means we are constantly monitoring the. Spending. We are discrete in our spending. This has resulted in only 8.2% increase in. This is not linear. Resulting in increased contribution and profitability. The. OpEx as a percentage of total revenue is currently 24.8%. As against 25.6% last year. Above factors have resulted in a growth of 18.2% in EBITDA margin, way above the revenue growth of 11%, 12%. So capitalization of INR 48 crores. Accounted for additional INR 2 crores of depreciation. PBT grew by 19.4% year-on-year from INR 322.8 cro res to INR 385.5 crores. Stands at 34.1% as against 32.9% previous year. That of INR 311 crores is higher than the PAT of INR 388 crores achieved in full year of FY 2022. All above positive factors have resulted in growth of 21.6% in PAT. PAT stands at 28.3% as against 26.1% what we achieved in the corresponding period. It may be pertinent to note that we have been promising about 25% as our target PAT. So we are way ahead of that. Coming to the balance sheet, the company's net worth crosses INR 3,000 crores mark. We stand at INR 3,159 crores. Our chairman has already talked about the liquid assets, which stand at INR 2,358 crores. Cash and cash equivalent stand at INR 1,334 crores as against INR 1,180 crores as of March 25. We have incurred cash expense of INR 94 crores on capital-related items. Though capitalization during the H1 was INR 48 crores, rest are in WAP. We have a WAP of about INR 170,000 crores, which is primarily an account of Caplin One Labs injection project, which is almost in the final stages, which is about INR 90 crores. And probably by end of December, we'll go on steam. Others. Are relating to Caplin One Labs expansion, which Mr. Vivek explained, like API oncology and phase III or COL2. So these are the other projects that are. Going on. Inventory close to customer and transit accounts of 61% of our total inventory. And receivables stands at 117 days as against 118 days as of March. As you may recall, we have been saying that we'll contain that below 120 days. We are working on that. Coming to cash flow, CFO stands at INR 250 crores as against INR 188 crores in the past year corresponding period. And pre-cash flow after CapEx stands at INR 160 crores against INR 109 crores in the corresponding period. Compared to peers, we are happy to announce that we are way ahead of our comparable peers in terms of healthy margin and strong returns backed by cost discipline and efficient business model. Just to summarize, the Caplin Point stands on a foundation of unique business model, which our chairman explained. Operational excellence, which is evidenced by increase in contribution margin. Financial prudence, evidenced by our containing of costs and discrete spending. And sustainable growth, which is evident by decent growth in both revenue and then out of missing the target growth in PAT. So. Thank you for your continued trust and support in the company. And we'll be glad to take any questions or to Mr. Vivek. Thank you, sir. We can open up the floor for questions now, please. Sure, sir. 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 their touchstone phone. 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. We will wait for a moment while the question queue assembles. The first question comes from the line of Garvit Goyal from Nvest Analytics Advisory. Please go ahead. Hello. Am I audible? Yes, sir, you are. Good evening, sir, and congrats for good execution. Sir, my question is on the capital allocation side. So we are having free reserves of more than INR 1,300 crores, while our average annual CapEx in the last three years has been around INR 200 crores. And it seems like for the next few years, we will be in a similar range. So at the same time, the ROC that we are doing is well above 25%. But a larger part of the cash is lying in the save instruments, maybe earning 8%- 9%, right? So even the PAT CAGR in the recent year that appears to have outpaced the sales growth, largely due to this treasury income. So. From a shareholder perspective, wouldn't it make sense to preserve what's required for the CapEx or the inorganic opportunity that you are talking about and distribute the excess cash through dividend or buyback instead of letting such a large amount earning some optimal returns? So that's my first question, sir. Okay. We still feel that going for a meaningful acquisition at a later date, which would actually do more benefits to our investors. The reason being, although our top line is not growing very fast, I hope you would agree with me about the cash flow and the profits, which are now very, very comfortable. And if you compare with any of our peers, we are definitely cut above the rest. We know, actually, if you look at most of the big companies, they have become big not only by organic growth but also by inorganic growth, which means the most important one, I feel, actually, is looking for some meaningful opportunities in the form of acquisition. That's why we need to keep some cash, actually, in reserve. Is it okay? And can you share. If you are speaking about we are very much open to the inorganic acquisition. So you must be currently having something in inventory. So can you share some insights on that, whether we are evaluating some inorganic acquisition right now, or what is the status? Somebody who met us actually recently, as it has been told by me and the vice chairman. They were ready to actually fund us, provided that they wanted us to dilute our stake, which we were ready because that particular opportunity was very attractive in terms of, actually. In fact, at the face of it. For the investment to be in the region of $300 million from their side, we have to reduce our stake, actually, by 20% on that thing. And the company, which they told us, also is doing around $200 million. But the issue is that's not a meaningful fit. They are not complementing, actually, something in the form of what we are not doing. And this is not going to be a good fit. And they were also. They accepted because of the fact that they were doing well and the sales was decreasing and also the profits. So why I'm telling this one? Only to say that there are people who are approaching us. One such, actually, one such PE fund, which is one of the top 10 in this world. And they came to us. They told us this opportunity. The others, of course, we didn't give much importance because they were asking for. Other priority, which is not the best priority for us. So definitely, there is an opportunity for an acquisition. It has to be again and again, I'm telling, it should be meaningful. Yeah. Just to add to chairman's point, a couple of other things also. So we get these opportunities almost on a weekly basis. And we have to evaluate what really fits in with our line of growth, which is specifically towards the larger markets of LATAM, also in the U.S., and two, the distribution model that we have been successful in the past with. Number two is whatever acquisition we do, we need to make sure that the rest of the world markets, which we are very, very strong in, also are benefited by. So it should not be very specific to one particular region itself, which was the case with the one that was on hand. On paper, it was excellent numbers. In fact. The size of the acquisition was a significant one, and we were open to it. But. Once you started peeling away the layers and understanding the next five years, it just didn't seem like what. We expected it to be. So. Just to strengthen the point that we are very much. For it if it makes sense to us. And were they asking for the equity deal instead of cash acquisition? No, no. We don't want to go into too many details of it because it's not happening also, right? What we are trying to say is, see, we have, as a family, we own around 71%. Now, for this deal to have happened, this was. Several hundred millions, right? So we were even open to the concept of. Liquidating some of our things just to make sure that we take a much larger. Company on. But again. It just didn't fit in with our line of growth. And just to show you that we are not being too conservative or anything like that. And we're also preserving some of that cash because if we go for an acquisition like that, there needs to be a larger check size as well, which we are not shy of writing. That's what we are trying to say. To add it in one line, probably when they invest actually $300 million that kind of money, the overall, actually, equity will expand so that. Some percentage, which is said, it will be reduced to the promoters. That's exactly what I was trying to convey. Understood. And just one last thing on U.S.A. operations. We saw YoY decline in the PBT there, despite a top-line growth of 25%. So is there any specific reason for that, sir? I would request Sathya or CFO to answer this because we have not really seen a decline, at least, yeah. Yeah. Hi. Thanks for the question. This is Sathya Narayanan here. So if you look at the CSL plus CSU consolidated, what we have been tracking now. Q2. PBT is around INR 20.2 crores as compared to. Last year, INR 17.13 crores. So it has actually increased. So it's not only that. I think CSU is. Sorry, just to interject. So CSU, if you look at it, it's literally nine months old, right? So I think it's far too early to consider anything or compare anything on a quarter-to-quarter basis, please. Got it. Got it. Got it. Maybe I have some doubt, but I will take that offline. Okay. This work. Thank you very much, sir, and all the best for the future. Thank you. Thank you very much. Thank you very much. Thank you. The next question comes from the line of Adityapal from MSA Capital Partners. Please go ahead. Hi. Am I audible? Yes, please. Yeah. Thank you so much for the opportunity. First of all, I want to congratulate. Mr. Vivek and also would like to extend my congratulations to. Mr. Ashok for becoming Vice Chairpersons in the company. Thank you. Thank you. Going to the question part. So. My main doubts were mainly around Caplin One Labs. So now that our injectable facility is also online in oncology, how should one read the asset turns and. Increase in revenue, say, over the next two years from that facility? And also, when you're answering, if you can also touch upon what are the. How are we in terms of the regulatory timelines getting this facility audited? Okay. Now that, as I told you before, our growth, actually, which has come only from the smaller geographies. Now that we are moving to larger geographies, whether it is South America or North America. So it may take a little time, actually, to complete the registration. And some of the products which are in the form of OSD, whether it is oncology or general products, we have to go for, actually, biostudies also. So it takes time to complete the registration. But the biggest advantage is the markets are big. Although we have not been concentrating much on, actually, the institutional business, the opportunities have come to us for the institutional business also in the recent past in the smaller geographies too. And we have found it's very lucrative. The same thing will happen in the larger geographies too, the reason being. The larger geographies are dominated by the big players. First, with multinational, next with, actually, Indian top companies. And our size is a mid-size. So we are not trying to compete, actually, with somebody of our, actually, size. We are trying to go with, actually, the big-size company, which means their overheads will be high. They'll always go to the higher price in the tender, even if it is a private market. That means the opportunity for us for growth is multi-fold. It's a question of time before we really make it. In every market, what is important for generic? Generic, actually, is nothing but a commodity business. Only thing, we should not be the commoditized character in the sense we should not have a model which should be commoditized. If your model is actually that you cater to a particular segment with variety and, actually, novelty and. Quality, generics at affordable cost, you still have a say with the middle of the pyramid and the bottom of the pyramid. So we are very sure that we will continue to grow. But it's a question of time little here and there. That's it. No, I completely understand, and I also understand the broader business. My question was more to do with the oncology facility because if I see. The oncology facility has come online, we are already doing. The OSD. Doses, and now we've. Injectables have also come online. We are targeting both the existing markets as well as regulated markets. We have a very good gross block over there, close to around. INR 96 crores with. I have to give you the answer. Is it okay? I'm sorry to interject. Is it okay to give the answer now? Yeah, yeah. Just either you or CFO Sir can answer that. I don't mind. I'm partly even talking to you. Sorry. Hello? Yeah. I can tell. And of course, Chairman also will add to it. Yes, sir. Thank you so much. As I told you before, the business that we do today is more like a vertically integrated business, something similar to the big buys. The only difference is the volume of their business is high. But the model, especially in some countries, is very unique. In some countries, of course, you have to follow them also. But while following them in the tender, we have an added advantage. Advantage is our price will be our price may be slightly lesser than. The big boys, but it will be much more. Effective and much more profitable for us. So we will not only concentrate on the smaller geographies to start with. We'll go for the bigger geographies also in future, whether it is oncology product or general product or injectable products or products. And everywhere the products are sold. In some areas, it's more of a private market. In some areas, in the private market, it's something you have to go for leading change. In some areas, you'll have to go with the small change. In some areas, the tender, if you keep the goods next to the customer, right from the government to the private customers will come to you. That's exactly the model we have been doing for the last 20 years. In the last 20 years, unlike other companies of our size, we are in a position to have a cash flow on the liquid assets. It's mainly because of this model. So markets doesn't change. But the model, when there is a change in the model, the model attracts the customer to come to your place. So whether it is an oncology product or actually other product. The only difference, suppose if the product cannot be sold through pharmacies, then you have to sell through clinics. Then what is needed is you'll have to go, actually, you'll have to appoint somebody who will go and tell the doctors, "Here is a company which has got a warehouse in so-and-so place, and we have got all these products in our warehouse room." The doctor himself will say, "Either I will place the order online or you come next visit, I'll buy it from you." This is the model which is happening everywhere for generics. Is it okay? Understood. Yeah, yeah. Understood. Understood. Yes, please. Can I continue? Can I ask the next question? Yeah, yeah. Please, please. Go ahead, please. Yeah. Sir, so also, I just wanted to understand now. With regards to our. API facility accreditation as well as oncology facility that has. Injectable phase that has been completed. So just wanted to understand the. Accreditation. Now, where are we in terms of, obviously. The semi-reg markets would the healthcare authorities would have accredited. But what about, say, EU GMP or U.S. FDA? Yeah. I think what we are going ahead what we are going ahead with at the beginning is we are first going to go for our INVIMA inspection, which is what we have done in our polygenic facility also. So this will happen, hopefully, early next year. In fact, we have an INVIMA inspection happening once again for our injectable section in polygenic for general category products because many of these semi-regulated markets, they. Sell the ampules sell a lot more than the vials, which is what we do in. Caplin Steriles. Having said that, we are also going to be applying in fact, we've already applied for. The audit of our oncology facility as well. They've not yet given us a date, but we expect that to be sometime next year, post which, of course, we're not sitting idle, right? So once the facility has come on stream, we are doing exhibit batches for products that we have developed. And once the INVIMA approval comes through, we will be. Filing all those products. So from a pure timeline standpoint for the existing markets, we are already doing business. For the larger ones such as Mexico, Colombia, Chile, and all of that, this would probably start by Q4 of next year. Understood. Understood. Just one last question before I come back to the queue. So now that. We are filing. The. Product registration, either be it ANDA or be it with CPs or be it with other geographies. And we are attaching our own API to that, especially in the general section because our oncology API is yet to come online. So how should one read that in terms of our gross margins? Because we are already posting really strong gross margins, at least for the last four quarters. So how should one read that? I would probably put it in a slightly different manner. So of course, definitely gross margins, I think, over a mid to long term will be enhanced because we have our own API. But more importantly, what happens is because. We are into injectables and ophthalmics, the amount of API that goes into a product is very less. Okay. So we don't really occupy a large percentage of anyone's value chain because it's not like OSD where you have 500 mg in a tablet or 700 mg in a tablet. In most injections, it's like 10 mg, 20 mg, and so on. So many times what happens is the API vendors, they prefer to supply their product. They give preference to the larger buyers, which are the OSD players. So for us, making sure that we have API available at all times is going to be very, very important. Number two, which ensures continuity of supply, right? And number two, the compliance factor is also in our hands. In the past, we've been burnt a little bit by. Some API player that goes into. Warning letter or things like that, by which case our approval also doesn't come through. So these are all things that can be avoided in addition to the cost. Cost is something I feel you will look at it. From From more of a mid to long-term perspective. No, makes a lot of sense. Makes a lot of sense. And this also clarifies the way Caplin is looking at things. And we're really hoping for the company and wishing you and the team all the very best. Thank you so much. Thank you so much. Thank you. The next question is from the line of Karan from Anubhuti Advisors. Please go ahead. Hello. Yes, sir. You're audible. Yes. Sir, my question is regarding the hedging policy of the company. As we are well geographically diversified, so how do we manage this currency risk? Yes. See, the currency risk, actually, in places where we have our warehouses, is managed this way. See, currency risk, actually, in a country which cannot be managed by us because you know very well, this is something in the form of an international issue. But when you have and you keep your goods in the warehouse, even if the receivables, actually, it takes a beating because of currency risk, you have an advantage of actually increasing the price of the goods that are in the warehouse and sell it, actually, to offset the loss which has happened because of the currency risk. Okay. So do we enter into any derivatives contract or so? No, we don't. We We don't. Of course, we don't because we have been, actually, currency risk is universal, which you know very well. And then because of the currency risk, we never lost anything in a big way. Yeah. In addition to that, two more points also is please remember that almost 35% of our products goes out of China, which can technically be called as like an import, right? Yeah. So we sort of have a natural hedge a little bit. So we've not gone for any hedging. Couple of the countries where we operate in, the local currency itself is the U.S. dollar. So that also helps out. Yeah. Okay. So for FY 2025, if we I'm just looking at our annual report. So in the annual report, we have with foreign exchange only INR 720 crores. And foreign exchange used is INR 25 crores. Export is INR 720 crores and import is INR 25 crores. So it shows that we are facing some currencies because. No, I could not understand. Can you please repeat? Yeah. Can I get you? Yes. Yeah. Yeah. Sorry. Can I answer? Please. Go ahead. Yes. Maybe I was the one who should say. I understood your question. I understood your question. What is reported in the annual report is pertaining to the standalone market. Okay. Standalone, Caplin of the standalone, the exchange, the exposure, and the import. Currency outflow and the inflow does not. Belong to the group as a whole. What our chairman Vivek was explaining was the group as a whole, right? So the capital standalone market here doesn't depend much on imports. So naturally, the 25% is absorbed by cash outflows, right? So the INR 720 crores. Yes. As a person that on a consult basis, it acts as an agile hedge. It will match this imports and export number. Okay. That's somewhat of the. That's somewhat of the. Yeah. I would like to add one more thing. Our business model is such, actually, that we don't import APIs except in actually CSL. Most of our business that happens from China is exporting formulation directly to. Latin America through our subsidiary. I don't know whether that helps, actually, to understand your issue. Okay. No, no. Because from last, I guess from 12 quarters, I have seen the numbers. We have this INR 47 crores of translation gain. So that's the reason I have this question. And. That is pertaining to the foreign exchange translation of the subsidiaries across the globe. Whatever is happening in India is taken to the P&L. Whatever is happening in terms of revaluation of the receivables, revaluation of liabilities and other things, the net of that goes into the because we can't consider that as an income. It goes through the OCI route. So that's just revaluation. OCI. Yes. It's OCIF. So the INR 311 crores, what we talked about back does not include that figure, right? This is a notional thing which is valued on 31st of every quarter or 30th of every quarter, and then reversed on the 1st of next quarter. And what happens next quarter is the next quarter's thing. So this is not flowing into the so as we said, as Chairman also said, we have not lost INR 1 on account of currency risk. Rather, we have been gaining substantially over the period. So that's what it is. Okay. Understood. Okay. Yeah. Thank you. Thank you very much. Thank you. Thank you. The next question is from the line of Harsh, an individual investor. Please go ahead. Hello. Am I audible? Yes, sir, you are. Yes, please. Yes. Okay. So So first of all, congratulations on another good quarter. So I am sort of new to the company and. The sector. And I was just going through our company, and I noticed, I mean, what exactly is our edge in terms of because we enjoy very high market margins compared to our competitors. Is it just because we are forward integrated or we are asset-light? What essentially gives us that edge? Or is it maybe our product portfolio such that we have higher pricing power, etc.? I would like to actually tell you something here. As I started in the course of my actually speech. See, generic business is generalized. It is not customized only to us. What is customized is the business model. We went to places like Central America, that is Latin America, 20, 21 years ago. And we made it a point to go to countries where there were not many Indians and Chinese present. It was one of the reasons, actually. We entered, and we increased the number of registrations very fast. Today, we have 500- 600 products, actually, in most of the geographies where we are present today in the smaller markets. And over a period of time, if you can give good quality product at affordable price, people will buy the product. You also know not that, actually, we also will go to doctors every time. If you want some products to be bought, but you can also buy it from the pharmacy also. Even diabetic people, if everything is controlled with the diabetic medicine, will not go to your doctor. You'll buy the same medicine by going to the pharmacy. This is something in the same case everywhere in the world. So the people who bought our medicines continue to go to the pharmacy and buy. And doctors who are also happy with our medicines, although it's generic, they started prescribing, actually, generics in some parts of, actually, this part of the world. So there is nothing extraordinary technology. The one which we have to say is very important. We were early to the market. We went for an end-to-end model. Like today, we have liquid oral suspension, tablet, capsule, ointments, powders, injectables. Everything, actually, not only in India, but we also source from China. Because we can't compete with Chinese in some areas such as North Korea and Venezuela. We identified these companies, we sourced it from there, tested it on our quality control laboratory in China, and exported to Latin America. There are various factors that have really contributed to what we have today. If you look at, actually, companies, most of the companies which are doing well, you will not be able to find one company which has made money in a non-regulated market in generics. That's because no company has to take a risk, actually, physical risk to go to these types of smaller geographies. If you sell your product in a smaller geography, you'll become very visible in that market. And the guy actually who has been doing well, the local, he will lose business. He will try to give you all kinds of trouble. So this trouble has been actually handled by the family, the promoter of the company. It is called this struggle and the blessings that we see in the form of profits and cash flow. So essentially, we. Yes. Sorry. Sorry. Sorry. Please. Go ahead. But now, as we enter into more competitive markets with Chinese and Indian players, now our. Plan is essentially to have a backward integration in order to retain margins. Is my understanding sort of correct? Yes. Yes. In some markets, the backward integration may work. As Vice Chairman said, it all depends upon the product. If the constant of actually raw material is much lower in the form of grams, grams or kilos, there's no point in manufacturing that product as a backward integrator. But if someone actually if you look at some of the products which are tablets or capsules, it sells in huge volumes, then of course you have to manufacture in tons and tons. But here in most of our products and injectables, you have to manufacture in only tons and tons, not in tons and tons. So it all depends at the end of the day. I don't think basically integrated model helps. Volumes differ based on the products that we promote. Understood. Thank you. Thank you. Thank you Thank you very much. Thank you. Thank you. The next question is from the line of Shrinjana Mittal from MS Capital. Please go ahead. Hi. Thank you for the opportunity. I have two questions. One is I understand that the tariff situation is in the flux right now and it's not very clear. But just wanted to get your understanding of what is the current situation as per your needs, and especially given that we are trying to set up front-end. Yeah. So if you can just throw some light on that. That would be useful. So as I. So as I mentioned, status quo remains on the tariff situation. The generic products are not tariffed. And in whatever the information that we've received over the last seven or eight months with this new administration, nowhere it was mentioned that generics will be subject to tariffs. So. Status quo remains. And even if something like that happens, we're in the same boat as everybody else, right? So I don't think we would be at an unfair advantage compared to anybody else. So that. I I think there is nothing to really report on over there. Understood. Understood. Second is just a bookkeeping number. Sathya, if you can help us with the Caplin Steriles EBITDA number for this quarter, that would be great. Sathya, can you take this please? Sure. Thank you. See the EBITDA for Q2 current year is. INR 37.2 crores. Understood. Understood. Thank you. Thanks. This is very useful. Thank you. Thank you. Thank you very much. Thank you. The next question is from the line of Deekshant Boolc handani from DB Wealth. Please go ahead. Hello. So congratulations. Satya Deekshant? Yeah. Hi. Am I audible? Yes. Please. Yes. Congratulations on the good numbers, sir. So first question is. You were traveling to China as you spoke in the last quarter. And. We already have a plan in place to. Do our backward integration better and set up a better distribution channel so that we can expand our market. And you have said that we can expect the 20%, 25% growth in the next, let's say, two years. What about further than that? What is it that we are looking at? Because. We are a visionary company. And what is it that you're looking at after that? Okay. I would like to convey something here very important. See, we started with actually markets, marketing and markets. That's what has brought us to where we are today. And then as we told, actually, as both of us told in course of our conversation, the asset-light model has created actually the assets that you see, which are in the form of completion. Some are actually work in progress. So it takes time for us to complete the projects. And then when it comes to U.S. FDA and other regulated markets. It's not that easy for us to actually delegate and get it done. It's possible, but again, we don't want to take a chance because we have to stay here and then also travel. So. There is a huge opportunity in the markets. There is also opportunity by staying actually in a facility which gives us good returns in the sense we never expected that we would do actually front-end in the U.S. so faster. And now that, as the Vice Chairman said, as Vice Chairman said, we are in the process of acquiring brands, acquiring ANDAs. No, sorry. Acquiring ANDAs. The more and more ANDAs when it comes to us, by the time in one year or one and a half year, we will complete the next phase of. This one, injectables. Currently, we have six lines. We are going for one more line in the phase I and phase II here. Our phase III is going to be the COL. That is, again, injectable for the U.S. market. We will have five lines there. Once you have five lines, as I told you in the course of my speech, we will be one among the four or five actually top injectable exporting company in India, which means we should do well. What I have seen in China, they're extraordinary in innovation, but coming to injectables, probably they must have felt why export injectables and lead a very tough life and make less money. Probably that's the way of this look. After the erosion of prices, they are focusing more on actually innovative products in the form of. Biosimilars and some of the products like. Semaglutide, all that kind of these things. So now what we are doing is when the semaglutide kind of prepares. If you see India, you don't see many API peptide companies in India. Whereas when we went to China, there was a time we paid $500 per gram for semaglutide. The same company, one of the biggest in the country, has come down to 150. I've seen actually a seller for $50 with the same quality, which means we will look at it, which one is going to be good to us, we will buy from there. Which one, of course, we are not in a position to innovate, we will associate with actually with. What you call startup or the mid-size company. In India, biosimilars are only in the hands of few companies who are at the top, maybe 7- 10 companies. In China, the government supports the startup and mid-size companies. There are plenty of companies, maybe 500, 500, 600 companies. The only issue, we have to stay there for a month or so to understand. Because these things, we need to understand, actually go for a deep, actually pattern to understand the deep patterns of what is happening in China. Then we'll have to create a pattern of our own business, which will actually take us to the next target. There is an opportunity in China, in the U.S., in Latin America, in every market there is an opportunity. How are we going to position ourself, what kind of products? We need to understand the why first and then how later. Okay. So just to dig a bit deeper, sir. One, it's amazing and inspiring what you're doing at the age of 70, sir. So congratulations. Thank you. My you. My goodness. Thank you. It's really inspiring. But. Thank you so much. Just talking about peptides, sir, so what is the larger idea, that we continue our trading business from China, or do you think that there is a possibility for us to integrate and create our own peptides? Because, I mean. It's really looking at U.S. markets and even European markets, the adaptability of peptides after the whole GLP-1 thing, it seems like it's inevitable now that that will be the next frontier of growth for a lot of pharma companies. Now, we have probably the contacts in China to trade it pretty well. And as you said, that $50 per gram is what you see in the sometime, I don't know the time, but are you thinking to manufacture it and be a manufacturer in India, US, or. Just Just trade it for now? No. Currently, what we are planning is we are planning to go for a formulation of actually peptide. But again, as you rightly said. We are not 100% sure that we will make huge money on those. Those days are gone now. Maybe one or two, it happens. It all depends upon the technology with luck. Those days, Japanese are skilled at bringing nature with technology together. Instead of man versus nature, rather a union of two. So that luck and technology is a union of two. Sometimes it brings you actually profitability. Sometimes if you don't have that luck, somebody else actually has already gone. And if the number of players are more, automatically the price erosion comes in. That's why there's nothing which we will say in the form of, "This technology will make it big. I hope you've agreed with me." We all talk of AI. And how far, actually, we are still in the artificial general intelligence. We are not reached to the level of artificial human intelligence. Got it. Is that human intelligence going to replace the common sense and the hunch of a person who comes with an idea? That idea gets executed into business. You have to wait for 10 years, I think, or at least 10 years. So there are many things in the form of opportunity and challenge. And it's not that we know the answer to everything. We cross the bridge when we reach that. Many times it happens like that. But we will make it because as long as you don't borrow money and you don't go by borrowed wisdom, when your hunch works and you also see the patterns, the bright patterns and dark patterns, and as I told you before, the deep patterns, if you are in a position to understand the deep patterns, it helps the bright patterns that happen in our life. That's how I look at it. Sir, last question. Yes, please. First, very insightful. But last question. So. Now you're saying that the 20%, 25% growth, do you think it's going to happen in FY 2028 H1 or H2? That means it can be expected in, let's say, 18 months down the line? No, it is 24 months after, but it will definitely happen. The reason one. I don't want to repeat again and again. You know also we have enough cash, which means enough cash and the equity of the promoters also is something not in the form of 15% and 16%, 70%. And I never expected somebody would come to my door and tell me, "I can invest $300 million." Our ticket price is minimum $300 million. And have you found something in the U.S.? Is it a good attractive opportunity for you? They asked us. What we found is not an attractive opportunity. The idea of telling this one, if we continue to do well the way we are doing, and we are sure of actually doing well the reason being we are going for hard assets, we are also going for asset-light models. We are also having actually primitive products which cannot be replaced by biosimilars. The reason is, do you think for pain and headache and all other things which. Is Is helpful in the form of all these penicillins and cephalosporins will be replaced by the latest products? The latest products are going to help only to the rich and the otherwise, the government has to buy actually. I'm talking of biologicals actually. The government has to buy and subsidize to the poor. So if someone can cater to actually the bottom of the from and that middle of the from, they'll continue to do well. The only thing which can actually create issues, as I told you before, if the robots come and that robot replaced actually human being, and if I'm not in a position to use the robot and manufacture my products, especially the. Cheaper generators, I will not be comfortable. That's why much in advance we are going for actually facilities in the overseas, be it actually in Mexico, be it in Guatemala. Maybe we may go for one facility in the U.S. also because the world is moving towards protectionism. We will do it also. We have enough resources. We also found opportunities coming our way because there are not many peers. It's not that in all humility I'm telling, there are not many peers of our size who have the fundamentals that we have today. And who have the exposure in Latin America and North America? Who have the exposure of actually having the office and doing business from China for the last 20 years? So we are very sure two years, maybe 18 months, I don't know, but definitely after two years, we will do well. We will always focus on the bottom line because top line is sanity, bottom line is sorry, top line is sanity, bottom line is sanity. Sanity. Cash in the bank, okay. Correct. Correct. Sir, last question. Yes, please. Do you think that. You have been saying that margins will improve now, but do you think that in 24 months we can expect. Going close to those 40s valor number on our operating margin, or is it going to be 100 basis point, 200 basis point improvement? Part B of this question is, what about our cash conversion cycle? Because now that we are creating the whole supply chain, do you think that the cash conversion cycle will be the same? Will it improve or will it deteriorate? And if you could put some numbers there as well. The next two years, as I told you. It, of course, we may not have extraordinary growth. The growth will be there the way it is. Sometimes it may mute. Quarter to quarter, we cannot give you a guarantee to live very honestly. But after two years, the fundamentals which you have seen in this company will be much better also. The reason being, we are not actually focusing on the smaller geographies. We are going to focus on the bigger geography. And when we go for some of the unique products from China, which we already started, we will take it to our existing geographies, although it's a smaller market. They also will absorb these types of products, and the profitability will be higher actually in the smaller geography also for our specialized products. So you think 40% operating margin is possible in two years? After two years, yes. It's definitely possible if the markets are not commoditized totally. Because that's one thing. And then if the rulers doesn't come with some policy like what has happened today to some other industry. That's the reason today, probably. Individual excellence has to. Outplace, outscore actually the politics. So what is that you are trying to do? How are you going to position yourself if one country is not going to help you? Maybe if you have some issue for six months or one year, you'll have to bounce back in other countries. That's the kind of business which you are doing now. So I'm sure even that one country, some countries, there is an issue. They are not going to actually do something to us because we may be the last man in terms of getting into that country, but we'll be the last one to get affected and the least one to get affected, or the least one to get affected. This I am very confident. It's a question of that. Yeah. And on the cash conversion cycles, because that is one of the concerns that I'm seeing. I'm going to be very honest with you. I need to finance there. I will leave it to actually CFO. What exactly you are trying to convey, you will know CFO or deputy CFO. Yes, please. Are you with me, Mr. Murali? Yeah. Yes, sir. Yes, sir. Yes, sir. I was waiting for you to. What exactly he's trying to convey, please tell me. Because I'm not a financial jargon, I don't understand. He is good in finance. No, no, sir. No, sir. So nothing but common sense, sir. Actually, as you have been saying, that our thing is about 120 days is our. Receivables. The geographies we are going to go are not going to be any different. Because. The largest market, we also intend. Now I can answer to his questions. How I answered his question. Yes, sir. Yes, sir. Our focus all these years, as I told you, 75%, 70%, 75% private market, which we control. Because what we can do is, if I don't get money from my customer, I can stop the supply so that you will come to me. Because you cannot find an alternative where you will get actually 150- 200 products. But I cannot control the government. What I can control is my actually price at which I sell at a higher actually. Profit, with a higher profit. But. What they do is, sometimes the government may delay the payment. But they won't deny. We never had that kind of a loss in the past. Yet, they don't deny in the process. It may go to 120 days or whatever it is, maybe a little more or less, all these things, which is very difficult to say because the priorities are too many now. And we are trying to focus on something which is very, very important in the form of increasing the sale, increasing the cash flow, increasing the profits. In the process, once or twice, it can happen. So that's why I said the next two years is not going to be the bedrock of our future business. This is actually the bedrock actually is in the form of work in progress. So trying to supplement. When it starts rectifying. You will see something different. Yes, please. It's one path because. Yes, please. I just want to add to that. While our forward integration has given us graph margins higher and then the value addition and then what is going into our PBT and then the sales. So the moment you say you are forward integrated, our inventory takes 90 days before it can be sold. Yes, sir. So I spend out from here today, day zero, it takes about 60,000. Can you tell him some of the factors which are important? Because of actually the turbulence that is happening. Next to Yemen and other turbulence in the form of tariff turbulence, that containers movement has got affected and it takes more time to reach the destinations. So if I get the government order, sometimes they say, "We'll have to supply within four to eight days." If it is delayed, then the payment also gets delayed. Yeah. So there are some challenges which we cannot avoid because of the geopolitical and geoeconomical scenarios. So in a nutshell, it would be fair to assume that maybe it would remain the same or maybe a little bit. A 10% deterioration in our overall cash conversion cycle can happen if we are trying to get for higher sales and margins right now. But nothing too crazy. It may go a little, yeah, nothing to it may go a little up or less, higher low. But that's not going to result in actually inventory loss or loss of actually. Not receivable. Of course. Yeah. Those are correct. Those things are not going to happen. Because we don't do that kind of a business. Of course. No, sir. I was just trying to. Understand. No, I understand. I fully understand. I understand. I fully understand. Your questions are what actually I asked. No issues. Yeah. Well, thank you so much, sir. Yeah. One more thing is that we are not on any borrowing. Yeah. Right? So Right? So rarely, longer the cycle, the interest costs would eat into your profit. Correct. Correct. Correct. Actually, we are on our own cash accruals and we are managing both CapEx and OpEx for our own cash accruals. And we don't depend on any borrowing. We hope to be so for the near future as well. So the slightly longer working capital cycle should not really impact the company's performance. What we should be looking at is higher turnover and higher margins. Instead of looking at inventory there, here. Yeah. So the net return on equity and return on capital employed would be the same because the margins and volumes will take care of it. Yes. That is arithmetic, but this is what grows. Yeah. Got it. Please continue. There is no bug in the operating system. Thank you. Yeah. No. But please continue to inspire us like this. And congratulations to our company. Thank you so much. Thank you. Thank you. Thank you so much. Thank you. Thank you. Thank you. The last question comes from the line of Adityap al from MSA Capital Partners. So please go ahead. Hi. Thank you so much for taking up the follow-up. So just missed asking last time when I was speaking is that. When we're talking about acquisition, first of all, a very good thing in terms of. Utilization of the free cash. Just wanted to understand your thought process. What is the kind of capability. Or product or geography that you are looking to acquire the asset for? Yeah. You see, as the Vice Chairman said, it has to be in the form of actually something. Chain of distribution. Why a chain of distribution? When you have your warehouse, say, assume that in Mexico. People will think of establishing a factory. I even also told you that we are going to for a factory. We will not invest in the factory in a big way. You are thinking of a factory which is not going to be highly capital intensive to be very cost-effective. But 50, 60 products without even actually doing bioequivalence and bioavailability will get it registered. And then, in fact. Another son of mine who also has become a Vice Chairman recently is staying there. He has been working in the market. So why I said this thing, why actually even Vivek said it's good to go for a distribution. Only a distribution company will be in a position to tell us where all they are marketing their products. So that. This company will give us actually the exposure without even going to the market and understanding the market mechanics in one year or one and a half years. So first is that one. Second, if some company in actually China or somewhere, we may not invest big because China is for the Chinese. At the end of the day. If Chinese is interested in taking care of that factory and they will allow us actually to do the marketing, we have to look at the kind of investment. We will not go for something big. We'll go for a. Startup or a mid-size which can also give us the biological product which the big companies are manufacturing today. At the end of the day, it's not the size of the company, it's the quality of the product. And the amount of products which we are capable of selling and if he's in a position to supply that one, that's the kind of actually acquisition which is interested. The third one, you are also aware, some of the companies which manufacture controlled drugs or drugs which are actually to be manufactured in the U.S. to supply to the U.S. citizens, that kind of acquisition. So anything which is meaningful, it is not the place. It is actually the quality of that organization which will be. A good fit for our company is a right actually acquisition actually for us. Understood. Understood. So. Thank you. I think largely. The bigger piece of acquisition will be the continued vertical integration strategy. And then. The smaller P&V. Could be a product or capability. It can be a part of actually vertical integration. It can be a part of actually in the form of product ANDA. Maybe some brands in countries like Latin America, Mexico, and all, if you find some brand which is very good and there is no deterioration in growth, if it is an incremental growth in the form of a brand, OTC also can be a good asset because that will give us when we buy a product in OTC, it's equal to generate. And we will come to know where all people buy. If someone has bought that particular product, that gives an opportunity for me to actually knock the door of that particular. Retail shop which has been buying that product. So this will be like a breadwinner. The other products will piggyback on the product to the market. Understood. Understood. Got it. Got it. Makes a lot of sense. Thank you. Thank you Thank you so much. Thank you. Thank you so much. Thank you. Thank you. Thank you. Thank you. you. Thank you. Thank you very much. As there are no further questions, I now hand the conference over to the management of Caplin Point Laboratories for closing comments. Over to you, sir. Thank you. Thank you. Thanks to 360 ONE Capital and Julie and myself for hosting. And thanks to all the participants and the wonderful questions. We'll continue to be in touch. Thank you so much. Thank you, sir. Thank you, everyone. On behalf of 360 ONE Capital, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.