Ladies and gentlemen, good day and welcome to the Laurus Labs 2Q FY 2026 earnings conference call hosted by DAM Capital. As a reminder, all participant lines 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors Limited. Thank you and over to you, sir. Hi, thank you. Hi, good afternoon everyone, and a very warm welcome to Laurus Labs Q2 FY 2026 earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Laurus Labs Management, Dr. Satyanarayana Chava, Founder and CEO, Mr. V. V. Ravi Kumar, Executive Director, Mr. Krishna Chaitanya Chava, E D, Head CDMO, Mrs. Soumya Chava, ED, Generics and Commercial, and Mr. Vivek Kumar, AVP, Investor Relations. Before we proceed, I would like to remind you that some of the statements made during the call today could be forward-looking in nature, and a safe harbor statement to this effect has been included in the press release that has been shared on the company's website. I now hand over the call to Dr. Chava to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir. Thank you, Nitin, for the introduction. Good afternoon to all of our stakeholders. We continue to make encouraging progress in delivering important clinical and commercial programs for our customers and also strengthening our pipeline through collaborations with several big partners. Our growth is increasingly benefiting from our leadership position in antiretroviral ARVs as well as CDMO expansion. At the same time, we're investing in enabling capabilities and capacities to meet growing customer demand. I have increasing confidence that our R&D-driven commercial strategy will continue to generate long-term value for all our stakeholders. Moving to some notable updates, early this quarter, we received allotment of 532 acres from the Government of Andhra Pradesh in Vizag, and our focus is to create a world-class pharmaceutical manufacturing complex where we propose to invest around $600 million over eight years. As you're aware, over the past few years, Laurus Labs has built significant capacities to service diverse pipeline opportunities. This new land will materially support further strengthening our global position and offering across manufacturing scale and new technologies. Additionally, during the quarter, we invested in an ADC technology platform company with payload and site-specific linker technologies that will enhance Laurus integrated ADC services. Also, most of the capacity announced in specialized modalities, including gene therapy, ADC, and fermentation, is broadly on track in line with our customer needs. Moving to our financial results, our Q2 performance was in line with our expectations with revenues of INR 653 crore, reflecting robust demand for our ARVs and CDMO revenue growth. Gross margins expanded further from the previous quarters and maintained well above 15% range, and EBITDA margins were expanded by 11 percentage points to 26%, moving better operating leverage and product as well as segment mix. As we look forward, we remain confident in our outlook for the improved growth for the rest of the year. I would request Mr. Krishna Chaitanya to share key updates on our CDMO business. Yeah, thank you, Dr. Satya. From a CDMO perspective, the division continues to see strong demand momentum in our CDMO service offerings, recording a Q2 sales of INR 471 crore. For the H1, the division recorded a sale of INR 964 crore with a healthy growth of about 88%. This growth was mainly driven by several mid-to-late phase program deliveries as well as commercial deliveries, and also increased sales from our new manufacturing assets that have come online. The pipeline momentum and RFP flow has remained strong with a well-balanced mix of big pharma clients and small to mid-sized biotechs. In specific, we are adding multiple clinical programs off late that involve quite a lot of complex chemistries and advanced modalities. In line with that, we continue to invest on expanding our commercial capacities at our [Vizag] site and also expanding some of our capabilities for some of these advanced modalities and therapies, which we will disclose as they mature. Thank you. In large molecule CDMO, Laurus Bio, we reported a healthy recovery in Q2 with sales of INR 47 crore. I would like to emphasize that the majority of sales seen in Q2 are accruing from customer base with long-term potential and improvement in commercial product sales. We are seeing increased customer interest for dedicated fermentation lines. Construction work for the commercial scale fermentation facility in [Vizag] is progressing as planned, and we expect phase one capacity of about 400 kL to be handy by end of 2026. I will request Ms. Soumya Chava to share key updates on our generic business. Hi, good evening. The revenues for the generic division continue to do well and reported a growth of 28% to INR 1,135 crore, which was mainly supported by the volume growth in ARV and also the formulation supplies. For the first half, we've achieved INR 2,183 crore sales with a growth of about 20%. The generics continue to benefit from our recently launched products and also stability from the rest of the product line. We expect that these benefits will continue in the future quarters as well. At the beginning of the year, we stated that our focus would be to address API rebalancing capacities, and now we are glad to report that we've completed the activity and we've achieved the capacity de-bottlenecking within the key API businesses, especially the ARVs. We are also happy to report that we're meeting our delivery commitments to the customers. To further add, the CMO activity levels are also going up, and we see good visibility on improving utilization levels for the rest of the year. On the filing side, we currently cumulatively have 91 DMFs till date, and for our finished dosage forms we filed three dossiers and received four approvals in the first half of the year. With this, cumulatively, we have about 90 products filed till date. Thank you. Thanks, Krishna and Soumya, for the overview of generics and CDMO business. From R&D front, we spent 4.3% of our sales, including a spend on cell and gene therapy. The spend is in line with our two-year target, and we continued to invest in portfolio, focusing on complexity and scale, while also pushing forward with the adoption of sustainable technology platforms. Let me share a brief on our quality side. In the first half of this year, the company underwent close to 65 quality audits by multiple customers and several regulatory agencies. The company has successfully passed these audit inspections without any critical findings. Now, I request Mr. Ravi Kumar to share overall financial highlights. Thank you, Dr. Satya, and a very warm welcome to everyone on our second quarter and H1 earnings call. Total income from operations for H1 at INR 3,223 crore registered a growth of 33%. We have continued to deliver strong growth, mainly due to ARV business, sustained CDMO momentum, and growth in other generic business. For Q2, total income from operations was INR 1,653 crore, with a 35% growth. Gross margin in the range of 60% for Q2 and H1, mainly due to better product mix and the division mix apart from process improvement efforts. EBITDA for H1 stands at INR 818 crore, with an EBITDA margin of 24%, whereas for quarter two, INR 429 crore with a margin of 26%. Profit after tax at INR 358 crore, and for quarter two at INR 195 crore. Gross was 16.3%, improved from 9.7% in the last previous year, and has been progressively improving. However, it is compressed due to continued CapEx investment towards growth projects. On the CapEx front, we invested INR 224 crore for the quarter and INR 489 crore for H1 FY 2025. Our net debt stood at INR 2,100 crore, and debt/EBITDA is around 1.3x versus 1.8x in the previous quarter. On the capital allocation front, our strategy remains unchanged, and we will continue to prioritize investment into high-value business segments to drive near and long-term growth and return our shareholders over time. You can refer to our IR presentation for more details. With this, I would request the moderator to open the lines for Q&A. Thank you. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. Firstly, on the gross margin front, where the proportion of synthesis business has reduced quarter over quarter, while API and the FDF, which is largely ARV, has increased. Despite that, we are seeing reasonably good improvement in the gross margins. If you could just elaborate on that aspect first. If we look at our first quarter FY 2026, we reported gross margins of 59.4%. This quarter, we are reporting 59.9%, almost 60%. The CDMO revenues were almost similar, both small molecule and large molecule put together. Some growth came in ARV, APS, and formulations. We have delivered more commercial molecules in CDMO during the current quarter, so margin profile was better. Gross margins improved because of that. Understood. Sir, on the ARV side, just if you could give the breakdown of ARV API and ARV formulation sales for the quarter. We have done INR 733 crore ARV, both API and formulations put together in this quarter. When you compare the last quarter, we have done about INR 647 crore ARV sales, both API and FDF put together. About INR 90 crore more sales we have done in this quarter. Sorry, a breakdown into API and formulation, ARV, API, and formulation. Tushar, the API was INR 395 crore, Tushar. Okay. Okay, you can balance it out for formulation. Sure. Sir, just on the ARV part, like for the first half, we are almost INR 1,380 crore. At the start of the year, the commentary was that ARV business would be largely stable for FY 2026 at least. In FY 2025, we had done INR 2,300 crore ARV sales, and we have already done INR 1,400 crore. Does it mean that we'll see some decline in ARV sales as of the remaining two quarters of FY 2026, or we have got enough orders to sustain the first half performance of FY 2026 in the ARV segment? Still, I will maintain my commentary. Our ARV sales will be around INR 2,500 crore, give or take a couple of hundred crore. You can't have a dark on INR 2,500 crore every year. As I mentioned, INR 2,500 crore plus RM is INR 200 crore. The values differ based on the tender results, awards, and then our supplies. I still continue to maintain the same statement, INR 2,500 crore plus RM is a couple of hundred crore. Could you just broadly help us understand the working capital cycle for synthesis business and FDF business, if there is any key difference? Typically, the working capital cycle for formulation and synthesis business is longer. In CDMO, we are handling very long complex syntheses. Because of that, the working capital cycles are higher, but margins are higher, so that will not have any impact on the working capital margins. Formulations will have a long working capital cycle. It depends on the product also. Broadly, current portfolio, what would be the working capital cycle for synthesis business and for FDF business separately? Just a ballpark number. It is very difficult, Tushar. Okay. We can take it offline, Tushar. You can't give the details. Sure. All right. That is fine. Thank you. Thank you. Thank you. Our next question comes from the line of Bharat from Quest for Value. Please go ahead. Yeah. Firstly, I would like to congratulate Dr. Satya and V. V. Ravi Kumar for delivering a good set of numbers. I would also like to especially congratulate Krishna Chaitanya and Soumya Chava for delivering CDMO and generic numbers consistently from the past few quarters. My first question is to Dr. Chava. If you look at our history, we generally put huge CapEx, and we go through short-term pain due to operating leverage for some period. Once capacities are fully utilized, operating leverage will play out. For example, in the last cycle, we put huge CapEx in 2019 for FDF. Once it is fully utilized, we reached peak margin, EBITDA margin of around 33%. If you see the current cycle, we have invested a lot of CapEx in the last four years, and finally, it looks like the capacities are being utilized and operating leverage is now playing out. If you compare last cycle with the current cycle, the last cycle was mainly due to the growth was mainly due to generic FDF. This time, the growth is coming due to high margin and more sustainable CDMO. My question is, do you think in this current cycle, once the capacities are fully utilized, the EBITDA margins can easily surpass the previous last cycle peak of 30% because of better product mix and better gross margins? I would say it will improve. I will not give a number. As we change our product mix more towards small and large market CDMO, EBITDA percent will improve. Also, operating leverage will kick in as we utilize our assets better. That's what happened in Q1, and that's what happened more in Q2. We continue to see that trend. I will not comment to what extent it will grow, but the indications are that we will continue to do better in EBITDA margins. Okay. That's helpful. My second question is to Krishna Chaitanya. Are you seeing a trend of supply chains shifting towards India due to this BIOSECURE Act and also due to the supply chain diversification efforts from innovators? Did you see any significant increase in RFPs due to this? How is Laurus prepared to capture this wave of opportunity that is coming to India? Certainly, there's some discussions around that and the discussion or talk around that. Getting immediately translated or attributing the flow of RFPs to any of these world events is very difficult to link both of these together. I think at the end of the day, successfully getting an RFP and delivering on it comes down to the capabilities rather than compulsion for somebody to diversify the supply chain. There's certainly discussion around that, but not immediately can fully draw a correlation between the two, at least from our perspective here. Okay. Yes. Thank you. My last question is to Dr. Chava. Can you please give an update on the bio-artery plant at Mysore? I don't see that in the presentation. We are constructing on a fast-track basis a large fermentation capacity at Vizag instead of investing that in Mysore. The reason is we have better infrastructure right now. It is an industrial complex. Whereas Mysore, the waste treatment facilities are not ready. We decided to invest in Vizag ahead of Mysore. It's close to our existing unit, Bharat. Okay. Thanks, Ravi. Thanks. That's it from my side. Thank you. Thank you. Our next question comes from the line of Jeevan Patwa from Sahasrar Capital. Please go ahead. Yeah. Firstly, congratulations, sir, for a very good set of numbers. Happy Diwali to you, Ravi, and all your team. My question, obviously, since last mini quad, I still keep asking the same question. It was more on the formulation side. CDMO, obviously, I'm very happy with the performance. I am remaining very bullish and optimistic. On the formulation side, I just wanted to understand the thought process that we had since many quarters and years. We want to be the global leader in 15 or more than 15 type of products or molecules. Are we still of the same opinion and the thought process, or do we want to move towards more CMO, like contract manufacturing kind of thing on the formulation side? Both are happening. We are investing more in CMO for generic formulations with our European partner going well. We are also doing select products, global launches, and our approach of doing few products and gaining leadership position globally is on track. We are not deviating from that principle. Are you seeing results from that strategy? Yes, yeah, yes. Okay. Perfect. I think that's it, sir. Thanks a lot. Thank you. Thank you. Our next question comes from the line of Bino Pathip arampil from Elara Capital. Please go ahead. Hi. Good afternoon and congratulations on a great set of numbers. Just a couple of housekeeping questions from my side. One, what is the total CapEx for the current year that you are estimating? It's closer to INR 1,000 crore. We invested about INR 480 crore in the H1, and we expect to invest a similar amount in the H2 as well. Understood. The receivable days and inventory days seem to have come down for the mid-year balance sheet compared to the March balance sheet and even compared to the earlier balance sheets. Has anything changed there materially? No, I think additional sales have resulted in the reduction in inventory bin. Okay. Is that a level we should look forward to, or is it temporary, and for the year-end should we go back to the levels of previous year-end? Yeah, I think it goes with the sales. Okay. What is the full-year consolidated tax rate that we are looking at? I think similar. Right now, we have a 28%. At Laurus Labs, we have converted into a new regime, but there is another subsidiaries are going at a different. That is the reason it is coming around 28%. I think it will be in the similar range. Understood. Thank you. Thank you very much. Thank you. Our next question comes from the line of Sajal from Antifragile Thinking. Please go ahead. Yeah, thanks for taking my questions. At the same time, last year, the CapEx run rate was 11% of sales, which was very healthy, of course. Today, our sales have increased. They are significantly better YoY. The percentage CapEx is not just 11%. It's 15% now. Both the sales and the CapEx have increased YoY. The question is, what's driving this level of conviction? What kind of interactions or the feedback are we getting from big pharma and other innovators, please? We are investing into new modalities, which are taking more CapEx. We're also investing in fermentation, and we are also building some initial blocks in our animal health. The building qualification validation is also taking a very long time. It is not that we can right now, if we start the construction of a manufacturing block, by the time we build, qualify, and do validation, it is anywhere taking between 18- 24 months. Because of that cycle, we are investing more. We don't expect that the investment around INR 1,000 crore will come down in the future years also. Probably may go up. Yeah. That's helpful, Dr. Satya. My second question is, while our small molecule CDMO pipeline is well positioned to take us to the next level over the medium term, we will eventually need to demonstrate leadership in biologics and precision fermentation as well. How do you see the competitive intensity in both human and non-human bio, non-food proteins, and polymers evolving? Where do you think we have the sort of opportunity to differentiate ourselves given the current industry dynamics in these segments? Our current capacity in Bangalore is already sold out. For us to grow, we need capacity. That is the reason we're doing, on a fast-track basis, additional capacity of 400 kL in Vizag. Especially in bio, we know what to make, how much to make. We are not at a stage where we're putting capacity and don't know what to do. In bio, at least, we need capacity. We continue to invest in bio more and more in the next two, three years. That's for sure, Dr. Saty a. My question was, I mean, between these segments, whether it's ADC or gene viral vector, or whether it's non-food proteins and polymers, I mean, which area is looking more exciting to you as on today? Of course, this may change next year. Okay. No, I didn't get your initial question very well. Now I can answer. In the next three to five years, we are not expecting any revenues coming from cell and gene therapy, except our investment in ImmunoACT. That's one statement I can make. The CDMO of large molecule, especially fermentation, is very as attractive as small molecule CDMO. That's helpful, Dr. Satya. Wish you all the very best. Thank you. Thank you. Thank you. Our next question comes from the line of Venkat, who's an investor. Please go ahead. Venkat, your line is unmuted. Please proceed with your question. Venkat, if you have muted the line from your side, please unmute the line from your end and please proceed with your question. I think we can go to the next question. Unless there is no response from the line of current participants, we'll move on to the next question. The next question comes from the line of Rahul Bhardwaj, who's again an investor. Please go ahead. Thank you for the opportunity and wishing everyone a happy Diwali. I would like to get a sense of how do you see the fragmentation between the generic and the CDMO to evolve over the next two to three years? I think roughly as of now, CDMO contributes around 30%. How high or low do you think CDMO will be contributing over the next two to three years, Dr. Satya? Currently, both small and large molecule contributes about 30%. We expect it will grow. Both small and large molecule CDMO prospects are looking very bright. Yeah. Okay. Would it be possible to give like some idea of how much growth do you expect? Like could it be 10%, 20% every year, or even since? We're not giving quantitative. Rahul, your voice is cracking. We are not giving quantitative numbers of growth. See, currently, we have 200,000 L fermentation capacity in Bangalore. We're adding 400,000 L in Vizag, and that's in phase one. We'll add another 500,000 L- 600,000 L in phase two. We keep on adding large capacity for our freshened fermentation. Small molecule, we continue to invest enough requirements. It is difficult to say we have a visibility, but we don't want to confuse everyone by giving our visibility as a guidance. We can say the growth looks interesting. That is the reason we are investing enough capacity. Makes sense. Thank you so much. That's it from my side. Thank you. Our next question comes from the line of Chandra Moliar from TechFund Capital. Please go ahead. Thank you for the opportunity and season's greetings to every one of you. I'm glad about the performance of Laurus Labs this quarter. What is concerning me as an investor is I make a comparison with other players. Like last quarter also, I had a question about, let's say, the growth of DV's performance. It's my capital investment between the CDMO players in the industry. I find relatively Laurus is not getting the return on investment quickly as others are. Why is there a delay in getting the orders from the innovators, or are we not investing in the capacities where the demand is growing incrementally? I would like some amount of clarity on this. The modalities of CMO offerings have changed significantly, which demands a very early and large amount of CapEx required. That's the one factor contributing. Investments are being done well in advance, whereas revenues are coming later. Another big change is you get a phase three molecule, you do validation, and create a large capacity and wait for NDA submission and approval and all. From late stage supplies to commercial supplies, there is a gap of almost 18- 24 months. During that period, your utilization will be very, very low. If you look at our traction in CDMO, it is not 10-year old. We have a significant traction happened in the last three, four years. We are catching up with our investments and the projects, commercial sales, and all. This will continue for a few more years, and then we'll be back on track with our return on capital to a good level. Okay. Thank you, Dr. Chava. That's all from my end. Thank you. Ladies and gentlemen, in order to ensure that we are able to address questions from all the participants in the conference, please limit yourselves to two questions per participant. If you have any follow-up questions, you can rejoin the queue. Our next question comes from the line of Viraj Shah from PGIM. Please go ahead. Hi. Thanks for the opportunity. I have just one question on CapEx. In the last quarter, you have guided a CapEx of INR 5,000 crore for five years. If I see your presentation, it's $600 million, which comes to around INR 5,000 crore again, but it's for eight years. Are we reducing or extending the tenure of CapEx in this? If you could help me out with those numbers. That's $600 million CapEx in the new 530-acre complex. That has nothing to do with the CapEx in the existing land bank. The total CapEx remains the same. That is INR 5,000 crore at least for the next five years. It remains constant, right? Yes, you are right. Okay. Thank you. That's it from my side. Thank you. Thank you. Our next question comes from the line of Marta from Fidelity. Please go ahead. Hi. Good evening. Thank you so much for your time. I just want to clarify on the API formulations business. If I look at one edge last year, if I have my numbers right, we had done about INR 350-INR 400 crore of revenue. This is about INR 600+ crore in the first half this year. I think sir maintained that we will be in the same band of INR 2,500 crore ± INR 200 crore. Is this jump up more in terms of the shipment timelines, or have we been doing more tenders outside of what we usually used to do? What's happening here? The number is quite strong first half to first half. I just wanted to check what's happening there. I would say two reasons contributing to that increase. Shift in supplies is one reason. The second reason, there is a slight increase in demand. Okay, the shift in supplies means the timing of the shipment. Timing of the shipments. There is a slight increase in the overall demand also. Okay. Is this in our existing markets itself, like which we were servicing earlier, where there's been an increase in demand, or have we been doing some newer markets? Anything increasing demand for our existing customers are important. Exactly, more demand came from API rather than formulations. Okay. Because the ARV formulation seems like there's been a big jump, which is why I wanted to check. The API still seems quite stable year over year, in line with your guidance. Dr. Satya indicated already INR 2,500 ± INR 100- INR 200 crores. That was indicated. We still are in that statement. There's no change there. Probably, as we are indicating, the API and formulation may be interchangeable for a few quarters. Sure. Got it. Okay. I think the second question was on the newer modalities which we're investing in, like ADCs, for example. Could you just give some qualitative sense in terms of what kind of pipeline are we doing? Is it more early-stage work, or do we have getting some late-stage projects here? Just any qualitative sense will be helpful. Could you give a little bit more detail about this investment that we've done in a platform for ADCs? Some more detail there as well, please. Thank you. In the ADCs, as a company, we already make payloads and linkers and supply for multiple programs to one big pharma. Because of that, we wanted to have capabilities to do bioconjugation, purification, and filling finish. To gain that, we decided to invest in a company who is developing novel ADCs. That partner will give us conjugation, purification, and filling finish technology, and we will make their clinical programs. I think that much I can share right now. Yeah. They have multiple programs. They're about to file IND for one of the molecules. Once they file IND, they will do tech transfer, and we will manufacture here. Our investment is only $2 million. We only invested $2 million, sir. Okay. In this company. Got it. Understood. I think the IND, which they filed for the one molecule, like for this one, we plan to do payload and linker, or we plan to do like the integrated ADC. If you could share some kind of. Integrated ADC. Integrated ADC. Got it. Got it. Great. Great. Thank you. Thank you. Thank you. Our next question comes from the line of Manoj Bahety from Carnelian. Please go ahead. Hi. Good evening, Dr. Chava. Good evening, Ravi. First of all, congratulations on a good set of numbers. A couple of questions. I just need some clarification on CapEx. Earlier, INR 5,000 crore CapEx was on our existing land bank. Now, with this 532 acres of land, which we got and where we have put a $600 million investment over the next eight years, is it over and above our existing plan, or does it mean total we should consider INR 5,200 crores or INR 5,500 crores over eight years? I think over eight years, you can consider maybe INR 8,000 crore. Over eight years, it will be INR 8,000 crore, right? Yeah. Around. Eight years is too difficult to predict. If the opportunity comes, we are prepared to invest more. We are not limited to this number. Current guesstimate is we need about $600 million in the new 530 acres. Current projects demand about INR 1,000 crore per year investment. If there is a massive project coming, we need more investment. We're happy to invest. This is our understanding as of today. Yeah. Okay. Got it. Right now, our CDMO run rate is almost INR 500 crore per quarter. I just wanted to get some color on what kind of capacity we have, current capacity can take us up to what level of CDMO sales, some perspective on that. Also, on this additional investment, can we consider at least 60%- 70% of this incremental investment will be towards CDMO? I would say majority, I will leave at that stage. Our capacities initially once we created a fundable between generics and CDMO. Right now, we are allocating certain capacities, but we are starting building dedicated capacities for CDMO and the capacity utilization of our CDMO assets. I think what we have to do is, we have indicated before, and even in the investor presentation, our fixed assets turnover ratio is around 0.9 today. Our average, what we have achieved before, is 1.1. I think that is the point to fixed assets you need to bank on, on the growth, what we can achieve in the coming years. Ravi, at this run rate of growth, will you be soon outgrowing your capacity? Whether your growth will be constrained by your capacity, that is one perspective I wanted to understand from you. Yeah. No. We are adding capacities to meet our expected customer demands. We are conscious of that. Yeah. Okay. Great. Thanks. Thanks for taking my question and wish you luck. Thank you. Thank you. Our next question comes from the line of Praful Kumar from Dymon Asia. Please go ahead. Praful, sir, your line is unmuted. Please proceed with your question. Sorry, is it audible? Yes, sir, you're audible now. Please go ahead. Yeah. Sir, many congratulations for your super delivery, consistent delivery for the last many quarters now. We recently saw some clear observations from U.S. FDA and the subject line. Does that add to more tailwinds for us on the ARV side, which is already delivering strong numbers? Can you repeat the question? There was a lot of US FDA observations on petroplants when I said compared to on the ARV side. Have you seen any incremental requests or inquiries on the ARV business in terms of products? This is very recent. We haven't seen any disruptions as yet. Okay. Is there any, one last question on margins, which has been already very strong. Is there a scope of an operating leverage fixed in margins to, you know, incrementally get better in the next 12- 25 months for us? Yeah, obviously yes. Okay. Thank you, sir. Thank you. Thank you. Thank you. Our next question comes from the line of Anubhav Sahu from MCPro Research. Please go ahead. Hello. Yeah, thanks for this, sir. A couple of questions. First, on the CDMO business for animal health and crop protection markets. Doctor, I want to understand, how is the commercial ramp-up of the facilities dedicated to this? In Q2, is there any material contribution from this to end markets? If you could also provide some understanding of what would be the capacity utilization of these facilities. First of all, I would like to answer the animal health and crop science. Yeah. Firstly, on the crop science side of things, there was not any significant material contribution from the crop science side of things. Of course, it needs some amount of time to go through the whole qualification filing activities for our partners, which we expect to ramp up in the coming quarters. Nonetheless, there was no significant contribution from the crop science side of the part. From an animal health side of things, one particular asset that we currently manage, we've started doing the commercial supplies itself. The dedicated animal health site is still undergoing validations and filings. As and when the filings are successfully approved for our partner, we expect to start the supplies. Predominantly, validations are going on with one commercial asset that's being supplied already. Okay. So largely for these two segments, the validation and qualification stage is what we are in. The CMO opportunity, if I recollect, for the animal health, that's already done with, right? It's not, there's no contribution for that in this Q2, or is there? It is there. From the animal health side of things, it is there. However, crop science is mostly involved, and there's almost nothing there. Okay. Understood. Thanks. My second question is on the positioning or, let's say, are we positioning for GLP-1 drugs opportunity in any way in the value chain? I know we have interest in peptides, but particularly GLP-1 drugs value chain, are we participating or do we plan to participate? It's very early to comment on that, but as you mentioned, we have capabilities in that area. Yeah. Okay. Understood. Thank you. Thanks a lot. Thank you. Our next question comes from the line of Ramesh Jain, an investor. Please go ahead. First of all, congratulations, Dr. Chava, for the excellent set of numbers. My question is regarding CapEx, sir, how we are planning to finance? Either it will be by way of debt or by way of internal accruals. My second question is regarding gross margin and the operating margin. Are these margins sustainably going into the future? We try to host internally, and then if needed, debt. That's how we are going. We are not thinking on any dilution on the CapEx funding side. The gross margin, Dr. Satya last time indicated 55%- 60% gross margin. I think we are. If you look at six, seven quarters earlier, we used to say gross margins will be around 50%. Then, as and when the business mix is changed, we said it will go around 55%. Now we are saying it is closer to 60%. I think that's a good sign. As the business matures, our clinical programs move into commercial programs. We strengthen our leadership position in ARV and oncology. Things are looking better. Yeah. Right, sir. Thank you very much, sir. Thank you. Thank you. Our next question comes from the line of Varun Chaudhary from ICICI Bank. Please go ahead. Yeah. Hi. Thank you for the opportunity. My compliments on a great set of numbers, sir. My question is, before I ask the question, I would like to get back into the past first. The thing is that two or three years back, that asset turn for the company was pretty high. It was close to around 1.5x, and it went right down to around 0.7x. Today, it is around 0.9x. I'm just wanting to understand if you could give me some color on how the future on the asset turn looks like. Our average asset turn was 1.1x for five years. That's what we are guiding. 1.4x was the peak asset turn in one year. Our aim is to reach 1.1x. That's how we are progressing from 0.7x to 0.9x. We already progressed. We are expecting to progress from 0.9x to 1.1x over a period of time. Still, we are in a growth phase. We continue to invest aggressively in CapEx, and we need extra two more years where our return ratios will improve closer to 25%. Right. Thank you. That was question number one. The question number two was around the manpower and attrition, not related to the presentation, but otherwise important for any business. The leverage on capital, human capital, there is a lot of competitive intensity, what I'm given to understand around pharma, surgical companies, particularly based down south. How are you looking at the attrition and the well-being of employees at your organization? Our attrition is in a lower range of pains, and we have a lot of novel things we have adopted over a period of time, of inducting post-graduation in the fourth semester, etc., that we are managing it. We are also planning to have a skill development center to help other people, other industries, and also pharma in Vizag. That will improve. You are right, the skill is a challenge. Recruitment is a challenge. We never faced a challenge. We are getting people. Okay. Thank you. One point I would like to add is that in the last five consecutive years, we are recognized as a great place to work. That's also. Six years. Six years in a row. Thank you. Great place to work consecutively. That shows we are a good employer. Right. Thank you. Thank you. Our next follow-up question comes from the line of Bharat from Quest for Value. Please go ahead. Thanks for the opportunity again. My question is to Dr. Saty a. So, sir, whenever we put huge greenfield CapEx, especially, yeah, we went through significant operating deleverage. For example, EBITDA margins fell to 14% around two years back. Of course, the gross margins were good, but the EBITDA margins fell to 14%. At that time, we were a small company doing huge CapEx. Hence, EBITDA margins were volatile and were significantly hit. Now we are transforming significantly into larger and more resilient companies. Also, the product mix is tilting more towards high-margin CDMO. My question is, do you think, once this future greenfield CapEx of INR 500-INR 1,000 crores comes online, maybe in FY 2028 or 2029, will it again cause huge operating leverage and hit EBITDA margins like in the past and make EBITDA margins more volatile like in the past? Do you think we will become a significantly bigger and more resilient company? Then this greenfield CapEx of INR 1,000 crores per year should be easily absorbed by our numbers and should not impact EBITDA margins like in the past. I got you. I think Bharat, in the earlier cases, it is not the greenfield which has lowered the EBITDA. Actually, it is a new business area where and whenever we selected as greenfield, that causes the EBITDA lower. For example, when we started a formulation, we were able to hit EBITDA for at least three years because it is a new area. One is investing in OpEx as well as some kind of a development expenditure. I think as your question has an answer, I think you will also have the size also can absorb this kind of a INR 1,000 crore, which will be maybe 10%- 15% of our overall asset investment, which can absorb. It will not have a significant impact. Okay. Yeah, thanks. Thanks, sir. It helps us. Thank you. Our next question comes from the line of Vishal Daga, an investor. Please go ahead. Hi. Am I audible? Yes, sir. You're audible. Please go ahead. Hey. Congratulations on a great set of numbers. I have a couple of questions. One, we recently got to know that there was a breakthrough in the HIV drug with a $40 jab that can come for the developing nations. Does that impact Laurus in any way? It is going to get, I think, rolled out in 2027. If it does, is there any way we are going to mitigate the impact? The drug is for prevention, not for the treatment. We don't expect any materialistic impact in the near to medium term because of the PrEP market. Got it. Got it, sir. Just one more question. On the Laurus Bio, we saw a good uptick this quarter. What would be a steady state run rate that you know you're targeting from a capacity expansion perspective for, say, 2027 or 2028? New capacity will come online by the end of 2026. That means next five, six quarters, we don't see significant ramp-up. Marginal growth will be there, but no significant ramp-up in revenues will come until the end of 2026. Got it, sir. Thank you so much, sir. Congrats once again. That's all from us. Thank you. Thank you. Our next question comes from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Sir, just a couple more. How much investment are we doing in this facility for gene and ADC facility? It is expected to be completed by CY 2026. We are investing both OpEx and CapEx for the next three years, about INR 250 crore. Next three years, yeah. Principally, this would be like once we build the facility, we'll then sort of try to get the contract from the prospective customers. Yes. Yes. Yes. Got it. Just one annual health. One thing I would like to add to, sir, here, all the expenditure on cell and gene therapy, on preoperative expenses, and R&D, everything is expense. We are not capitalizing single rupee out of it. Sure. How much of that would be for first half 2026? As I mentioned, next three years will be about INR 250 crore of CapEx and OpEx. On the animal health, the earlier commentary was that the site is undergoing validation for one commercial asset. If this converts to a commercial success, then how much of the capacity will get utilized for this asset? Sorry if I was not clear enough, Mr. Tushar, in the previous comment. There are multiple product validations that are ongoing in the animal health site, with one of them being commercially supplied as we speak. There are multiple different projects or Active Pharmaceutical Ingredients that are being validated as we speak. Understood, sir. Thank you. When this validation-related business would also be coming at this point of time within the animal health segment? That's correct. As soon as the validations are complete, we'll be able to invoice, of course, the material and the service related to that. A significant amount of the revenues would actually come when the commercial supplies would start. There'll be certainly some addition from the suppliers of the validation quantities itself. Got it. Just to extend on this, while you might not indicate current quantum of business from the animal health segment, considering the timeline for this validation, when do we see meaningful pickup in the animal health segment broadly at the portfolio level? We expect animal revenues to contribute meaningfully and continue to grow over the next fiscal year and going forward. Understood. Thank you. Thank you for the information. Thank you. Our next question comes from the line of Gaurav T. from Antique. Please go ahead. Hi. Good evening and festive greetings to the team. Just a couple of questions. Firstly, on the CDMO, Doctor, you mentioned that this quarter we saw a higher contribution from commercial supplies. Do we expect this mix of commercial to clinical supplies to stay at Q2 levels for the rest of the year as well? Do we expect clinical supplies to go up again in Q3 or Q4? We're not giving a specific indication on what those numbers would look like. At an overall year level, we expect to post a growth over the last year, certainly. As you are aware, CDMO business tends to be lumpy in terms of how the revenues come through. Nonetheless, we're seeing a good healthy growth, you know, when you look at the year in totality. Your observation is right. There will be more commercial late stage and commercial supplies that will continue. We are not giving a proportion of sales, but it will continue to be like that. Sure, sir. Thank you for that direction. A couple of financial bookkeeping questions. We have seen higher other income this quarter. Would that be largely driven by forex income this quarter? Yeah. Yes. Okay. You know we saw a lower, significant debt repayment in one edge of this year, and the financial costs were also lower in Q2. Given our operational cash flows were significantly higher and should be higher in H2 as well, can we expect more debt repayments in the second half of this year as well? No, we are not expecting that. We are not expecting that. Interest cost reduction also helped through an interest rate come down. Okay. That's helpful. Got it. Thank you, sir, and all the best for the rest. Thank you. Thank you. We have the last question coming from the line of Malhar Sangri from Bodhi Capital. Please go ahead. Hello. Hi, sir. Can you hear me? Yeah, a lot of disturbance. Is it better now? Yeah, go ahead. Congratulations. Firstly, on a great set of results. I wanted to know your views on the MSN policy, which means that the kinds of drugs wanting to come down in the U.S., and what kind of effect will that have on the outsourcing by the global pharma companies? No, no impact. There'll not be a positive or negative impact at all to the companies itself? I'm not talking about us specifically. What will the outsourcing impact be in general? It is difficult to predict. We can say our revenues are not impacted by that. Okay. Okay. One more question. I'm sorry if I missed this, but this new acquisition which you've done called Aarvik Therapeutics, what part of ADC manufacturing do they have expertise in? They have expertise in both conjugation, payload, linker, conjugation, purification, and then fill finish. They don't make mAbs. They outsource mAb manufacturing. Right. Right. Perfect. That's great. Thank you so much, sir. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, I now turn the conference over to the management for closing comments. Thank you all these stakeholders for interesting questions. They were keen interest on Laurus Labs. Thank you. Thank you. Thank you. On behalf of DAM Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.