Ladies and gentlemen, good day, and welcome to Piramal Pharma Limited Q2 FY 2027 earnings conference call. 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gagan Borana, Associate Vice President, Investor Relations and Enterprise Risk Management. Thank you, and over to you, sir. Thank you, Sharia. Good morning, everyone. I welcome you all to our post-results earnings conference call to discuss our Q2 and H1 FY 2027 results. Our result material have been uploaded on our website, and you may like to download and refer them during our discussion. The discussion today may include some forward-looking statements, and these must be viewed in conjunction with the risks that our business faces. On the call today, we have with us our Chairperson, Ms. Nandini Piramal, CEO of Global Pharma, Mr. Peter DeYoung, and our CFO, Mr. Vivek Valsaraj. With that, I would like to hand it over to Ms. Nandini Piramal to share her initial thoughts. Good morning, everyone, and thank you for joining us on our post-results earnings call. We delivered a strong performance in Q2 and H1 FY 2027 with broad-based contributions from all three businesses with a significant improvement in profitability. In Q2, revenue grew by 28% year-on-year to INR 2,617 crores, while EBITDA increased 72% to INR 385 crores. For H1, revenue grew 23% to INR 4,887 crores, with EBITDA increasing 72% to INR 669 crores. In our CDMO business, performance was supported by demand across India and overseas sites, improved execution, and a sustained buildup in RFPs and orders. Our Complex Hospital Generics business continued to perform well, supported by growth in inhalation anesthesia in the ROW markets and the initial contribution from Kenalog. In Consumer Healthcare, Power Brands and e-commerce continue to perform well, supported by portfolio premiumization and expansion across channels. More importantly, the strong top-line growth translates into significant improvement in profitability. Better capacity utilization and operating leverage, supported by disciplined execution and a continued focus on productivity and cost management, enabled us to expand EBITDA margins by more than 350 basis points in both Q2 and H1 FY 2027. We achieved this performance while maintaining a rigorous focus on quality and regulatory compliance. On H1 FY 2027, we successfully completed 12 regulatory inspections and 110 customer audits. Since FY 2012, we have successfully cleared 427 regulatory inspections, including 51 U.S. FDA inspections, with no Official Action Indicated classifications across our U.S. FDA inspections. Moving on to business-specific highlights. Starting with our CDMO business, revenue grew 36% year-on-year to INR 1,424 crores in Q2 FY 2027. For H1, revenue increased 28% to INR 2,611 crores, reflecting robust growth across the network sites. Profitability in the CDMO business also improved meaningfully during the period, driven by robust revenue growth, better capacity utilization, and operating leverage, particularly across our India and North America sites, along with disciplined execution and cost management. We continue to see an increase in RFP activities and order flows across the network sites, helped by sustained recovery in biopharma funding and an enhanced commercial team. The sustained buildup in RFPs and orders provides greater visibility going forward. Supported by this order momentum and with H2 typically stronger than H1, we expect this growth momentum to continue throughout the year. During H1, we added 22 new customers and successfully cleared 110 customer audits. Further, during H1, we witnessed meaningful progress across multiple key metrics, which included over 50% year-on-year growth from ADC revenues, 39% year-on-year growth in revenues from on-patent commercial manufacturing, contribution from innovation-related work moving to 49% compared to 46% in H1 FY 2026, and an increase in phase III molecules from 25 as of March 2026 to 28 as of September 2026. We are also strengthening our differentiated capabilities across the CDMO network. We acquired a controlling stake in Yapan Bio to expand our biologics platform, while capacity and capability expansions at Riverview for high-potency API is completed and at Lexington for sterile fill-finish progressing as per plan. Contributions from differentiated revenues to our CDMO business increased to 43% compared to 40% at the end of the last financial year. Moving on to our Complex Hospital Generics business. Revenue grew 32% year-on-year to INR 849 crores in Q2 FY 2027. For H1, revenue increased 24% to INR 1,592 crores, reflecting good traction across the existing portfolio and initial contribution from Kenalog. In inhalation anesthesia, we maintained our leadership position in the U.S. sevoflurane market with a 48% value share. We also witnessed a healthy pickup in sevoflurane sales across the rest of world markets. In intrathecal therapy, we retained our number 1 position in the intrathecal baclofen market. In injectable pain management, we are ensuring availability of our products through focused supplier collaboration. Kenalog sales contributed to CHG revenues during the quarter. Kenalog is a good fit for our Complex Hospital Generics portfolio and will be an important growth catalyst by FY 2027. We are currently working towards transitioning the Kenalog manufacturing to a new CMO and are accordingly actively advancing the associated regulatory approvals. Looking ahead, continued expansion in market share in inhalation anesthesia segment in the rest of the world markets and contributions from Kenalog are expected to support the business throughout the second half. We continue to invest in building a portfolio of differentiated and specialty products through 505(b)(2) opportunities, complex generics, branded products in licensing and co-development. These investments are aimed at strengthening the long-term growth profile of the business. Moving on to Consumer Healthcare. Revenue grew 13% year-on-year to INR 359 crores for Q2 FY 2027. For H1 FY 2027, revenue increased 14% to INR 706 crores, led by continued traction in our Power Brands and e-commerce channel. Our Power Brands grew 21% during H1 and contributed to 53% of Consumer Healthcare sales. E-commerce delivered a 32% growth and accounted for 28% of sales, reflecting the increased importance of digital channels in our portfolio. We are sharpening our innovation strategy by prioritizing fewer, larger, and higher potential launches. Portfolio premiumization also remains a key focus with a richer mix of higher-margin products. During the period, we introduced the Vizible range under Lacto Calamine to address the growing demand for premium skincare products. We continue to support our brands through focused investments in media and trade promotion across digital and traditional channels. During H1, these investments represented approximately 11% of Consumer Healthcare sales. We are also strengthening our multi-channel distribution network with a presence across 180,000 chemists and cosmetic outlets, over 13,000 modern trade outlets, and more than 20 e-commerce platforms. Our focus remains increasing reach across smaller towns, modern trade, and non-chemist channels. The sales and distribution agreement with Bayer will expire naturally at the end of its term in December 2026. We are working jointly to ensure an orderly transition with minimal disruption. Given the low margin nature of the arrangement and the continued growth of our brands, we do not expect it to expire to have a material impact on our FY 2027 outlook. Going forward, the continued scaling of our Power Brands and e-commerce, together with portfolio premiumization and channel expansion, is expected to support growth and margin improvement. Overall, our first half performance and the progress across all three businesses has strengthened our confidence in the full-year trajectory. As has been the trend in prior years, we expect H2 to be stronger than H1. In CDMO, the sustained buildup in RFPs and orders provides greater visibility going forward. In Complex Hospital Generics, existing portfolio, continued expansion in ROW markets, and contribution from Kenalog are expected to support performance. In Consumer Healthcare, Power Brands, e-commerce, portfolio premiumization, and channel expansion remain key growth drivers. Given this broad-based performance and outlook for the second half, we are upgrading our FY 2027 annual guidance. We had earlier guided to early to mid-teens revenue growth with EBITDA to grow faster than revenue. We now expect an annual revenue growth of approximately 19%-20% with a meaningful higher growth and profitability. We remain focused on executing against the opportunities across our businesses, improving capacity utilization, and maintaining discipline around productivity, cost, investments, and quality. With this, I would like to open the floor 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 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sajal Kapoor from Antifragile Thinking Limited. Please go ahead. Yeah. Thank you for the opportunity, and better set of numbers team, so congratulations for that. Couple of questions. Peter, in Q1 earnings call last time around, you said Big Pharma isn't really showing a preference for nearshoring, and that the RFP pickup was kind of broad-based. Add to that, we know that select India-centric CDMOs are actually winning and growing U.S. customer relationships without a comparable Western manufacturing footprint. So what does the Western manufacturing footprint, whether it's U.K. or U.S., that many Indian companies haven't got, what it gives us today, and if we were to sort of redeploy all of that capital fresh without any baggage of hindsight. Will we be repeating the exact footprint that we have today, or we would rather do something different? Thank you. So I think, thank you for your question and your positive remarks about our near-term performance and outlook. I think perhaps the comment may have been miscommunicated, or it may have been misinterpreted. We were trying to say that we have a broad-based demand for our services across our network, and I was trying to give the fact that it was not a one-off in terms of one geography or one capability. So the intention behind the comment was to say that we are getting interest in the North America, and also our U.K. and also our India, and we're getting interest across our differentiated offerings in addition to ADC. So it was an attempt to say that it's not a single piston or engine firing, it's multiple pistons or engines, to use the analogy. So I think that's the first point. The second point I would say is that, the North America region in this period, so far this year, has been performing ahead of prior years and ahead of plan for us across all of the sites. So we're seeing an uptick in that demand. Again, I want to make the additional comment that it's not at the expense of the India region, where we also have strength, for example. So what we're trying to give is a concept of balanced growth. And we are seeing significant client interest in considering North America offerings, and that's showing up through a few dimensions. The first would be RFP inflow, which is up. The second would be order booking, which is up. And the third would be on our revenue realization from those orders, which is also up. And so we think that actually this is a period where the multi-geography strategy is being validated because we have the assets in place with the track record, so that when customers are considering, whether they be large or biotech onshore offerings, we can provide them a credible alternative. And so I think, in fact, I would say that the onshore offering is being validated by the current macroeconomic environment. And if we were to do it again, the only thing I would say our lesson is that, fewer larger sites in the U.S. would have been a hindsight strategy that we are now applying to all future M&A, where we're going to try and look carefully about any site addition that it needs to be above a minimum size. Because when you do acquire smaller sites, you have a certain runway to get to the minimum scale, and if there's a macro downturn in that period, you can end up with a protracted timeframe. Our big lesson would be not U.S., it would be fewer larger if we were to do it. I'm not saying we're committing to more M&A, I'm just saying that the lessons we've learned from that experience. No, that's encouraging to hear, Peter, and thank you for that clarification. Second question is, setting aside what's already been invested, if you were deciding today whether to own Morpeth, given the U.K. losses and US FDA September observations and of course, the exit costs there, I mean, pension liabilities and whatnot. Considering the cost of capital and return on capital from that perspective, what is the future for Morpeth, from here on? We see in this increasingly global-local, I'm trying to use the right phrase, environment where people do want global capabilities, but they also want local capabilities, and in particular, for a drug product facility to be near the end market, and the end market in this case being defined as U.K. and EU. You can provide supply chain solutions that sites in other continents cannot simply compete with. We see meaningful benefit to having a European drug product facility. While obviously we did have FDA observations, we've responded to the FDA in due course, and we expect a timely resolution of that through our monthly updates, as has happened with all of our prior audits across our different sites. We anticipate that being resolved in due course. For us, having a U.K. facility that can do that DP and in some cases DS capability in the region for the region is an important component. From a capital allocation perspective, we're investing primarily in maintenance and compliance CapEx at that site. We're not investing significantly in growth CapEx. In terms of the overall CapEx capital allocation perspective, most of the capital, other than maintenance and compliance, will be going into the growth areas that we described. While this site has potential to soak up demand for that region, in the region. Right. Peter, just to clarify, of course, there will be some remediation capital or work or effort resources, et cetera, that would be required to bring it up to the standard that US FDA demands. In addition to that remediation-related CapEx work, if any, there is no immediate need for any growth CapEx or fresh capital allocation for Morpeth site. Is that a fair assumption? We think that most of the remediation for the FDA is around people and processes. In fact, our prior CapExes had been around the infrastructure, and there will be continued site appropriate and size appropriate CapEx in maintenance. But at this time, based on what we know as of today, there is no large CapEx specifically related to the remediation. It is much around people and processes, which is something that we have capability in and teams that can support. We do not see any major CapEx trajectory change in light of the audit. Okay. Many thanks, Peter. Thank you so much. Thank you. That is all. Thank you. The next question from the line of Tushar Manudhane from Motilal Oswal Financial Services Limited. Please go ahead. Thanks for the opportunity. Sir, first on the ADC revenue, if you could share how much now it contributes and what capacity utilization you have reached for the facility. We give out the ADC figures on an annual basis, Tushar, and we will continue to maintain that. The capacity utilization is improving at the site, as we have called out before, that the capacity utilization for ADCs is improving because of an improved order book inflow at the site. In H1 roughly, the total of all ADC services that we have across all sites is about $40 million and it is growing meaningfully. Got it. Secondly, this increase in on-patent commercial manufacturing, which is almost 39%. So if you could share if it is to do with a certain customer or certain product which is driving it, what is the sustainability of this model? I think it is fairly broad based and it is across multiple products, so it is not just a single product. Just to build on that, I think we don't have, at the current moment, very high single customer concentration. I think we shared our numbers at the end of last fiscal, and we haven't seen any major change in that. We will update that from time to time, but if the concern is about customer concentration risk, we don't see that at this moment. Got it, sir. Lastly, in terms of net debt increasing over past six months, is it more to do with the currency impact or is there increase in this? There is the Lexington expansion, there's the Kenalog acquisition, and the currency impact. All of those things. Yapan. Yapan Bio. All right. Just to add to that, the net debt to EBITDA is at 3.4, so it is lower than the 3.7 that we had in March. Got it, sir. Thanks. Thank you. The next question is from the line of Shubh Mehta from ICICI Securities Limited. Please go ahead. Yeah, thank you for the opportunity. Sir, if you can dissect the growth in CDMO. The growth is from commercialization of phase III molecules or is it the addition of phase I, phase II or phase III molecules over there? If you can give some qualitative comments over there. If it is a mix, then can you quantify? I will give a first pass and then Vivek can add anything he wants to after that. You can kind of see the on-patent percentage innovation-related work growing from an increased share. What that means is that we have had a disproportionate amount of our growth coming from the innovation-related work, which is what we would broadly characterize as development services and on-patent commercial. We have obviously also shared with you the on-patent commercial separately, the ADC separately, and you can see that those are even growing faster. Obviously the differentiated services. We are trying to give you different lenses, but if you look at our LRP guidance, we said we are going to grow our on-patent innovation work faster, which this first half demonstrates. We said we were going to grow our differentiated services, including ADC faster, and we have shown that in this first half. That also, we are going to continue to invest in those late-stage clinical assets, and you will see that with our net increase in phase III programs. I think a lot of the, what I would call leading indicators of future financial performance and alignment of our CapEx to our revenue growth are showing up in this first half, and we are expecting this sort of trend to continue in terms of that disproportionate growth in these areas. Because essentially what we are trying to say is we put our CapEx into certain places, and that is where we think the opportunities are, and we think that those are then translating into the leading metrics of future performance. All right. Second, sir, on Kenalog, since we have integrated it in our CDMO portfolio, how is our current run rate over there? I believe we are contract manufacturing it from other player. Where does our CMO facility is and how does opportunity for Kenalog looks like? So with Kenalog, we've started to get some of the revenue post the acquisition. There was a period where there was no revenue, but now we are in the period of getting revenue. The revenue is coming from the current CMO. There was a CMO transition underway at the time of the transaction, and we've continued to make good progress with that new CMO, and we're expecting that to be the future supply for this product. In the interim period, while we do have revenue from the current CMO, it is tight, and we expect that supply to remain tight. Nevertheless, we are on the market and we are getting benefits and revenue from the acquisition. So validation from the new CMO is done or when it is expected? We haven't communicated specific timeframe with the new CMO, but they're proceeding through the normal steps you would expect in tech transfer which involve the whole range of, you have engineering batches, you have validation batches, then you wait for stability, then you do filing. So we're in that overall cycle, and so far the CMO has met all of their timelines as they've committed to the original owner and then later to us. All right. Last one, if I can just squeeze in, is for Vivek. During the quarter, we had stable GPMs. While I understand the growth for the CDMO was across India and North America sites both, can you throw some light that is it because of the balance growth from both the facilities or why is it the stable GPMs? My understanding should be that there should be some increase over there. How should I look over there? Shubh, as you rightly said, there is more a balance growth across facilities. It is a little bit more complex because it also depends upon what is the quantum of pass-through revenues that get built in during a particular period and what is the quantum of fixed cost overhead movement and inventory. All those factors do come into play. As we have historically said, typically 64%-65% is the kind of average gross margin, and that is what we will move towards even on a full year basis. All right. Yeah. Thank you so much. I will join back the queue. I have few more questions. Yeah. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Yeah, good morning. Thank you for taking my question. Just some qualitative color on the 22 new customers in H1, right? What are the typical profiles, biotech versus big pharma? If you could kind of give us some qualitative splits. What are they coming and asking us for in terms of, is it our differentiated offerings? Is it ADCs, innovation? Just some qualitative color and, are these first-time customers to us? I would presume so, new customers, but just want to understand what's helping us win these new customers. When we say new logo, it means that we haven't done business with that company before. Sure. Got it. This is the outcome of kind of a hunting strategy, and we're quite excited. I think we discussed our commercial transformation earlier and how it's got multiple components. By definition, if you want new logos, you will have a little bit more of a biotech-heavy angle to it. But there are also some nice big pharma components to this. But if you look at the sheer numbers, you would have a more biotech-heavy nature due to the simple nature of that's where more logos exist. But we are not only that, and we are seeing both aspects. In terms of the qualitative components, obviously, our phase III went up. That's a net basis, which means additions, subtractions, the outcome is up. That would imply that some of these are in that phase III category. I think the other one, we already covered some of the geographic and the differentiated capability mix. It is all linked into this. I would say the new logos are somewhat aligned with the overall other KPIs we shared. They are not in contrast with or in opposition to. Helpful, Peter. If I were to look at how our utilizations at our overseas plants versus India. India, I know has been pretty okay. I think earlier participant also asked about onshoring. Just want to understand, if you could share maybe quantitatively what our utilization levels are. Is some of these customers actually coming for the continent of U.S., for example? I am just trying to get that angle as well. I will just repeat, maybe try and use some different words. The same concept is that if you look at our North America region, we would say that the inflow is up, the order booking is up, the revenue is up. Our fixed costs are largely not up. The outcome is that the EBITDA contribution from the region is improved. I think that is, from a financial metric perspective, the more important component, which is getting that fixed cost coverage and then getting that EBITDA margin improving. Obviously the first half is a lower revenue half than the second half, generally. We would not really look at or normally communicate utilization site or region or even partial year-wise. I think it shows up in the financials in that, again, we have discussed this on many calls and you have been on many of them. Sure. There's a certain fixed cost element to this business at both the site level and the business level. When we can grow, it has disproportionate benefit on margin, which is why when we always discuss with you all our LRP ambitions are reasonable is that the top line doesn't always proportionally increase the cost, and that's why we get these swings up when we get the revenue growth. Got it. My last just housekeeping question. Any word on the large PO order we had from last year? Is there any update or we are still waiting to hear back? We're no longer really talking about individual customers. I think that one became an outcome of certain analysts covering EXIM exports at certain frequencies. Sure. I think our customers really don't want us to talk about these elements. All I'd say is that you can see our growth numbers would suggest that the business is healthy. The customer concentration numbers would suggest that we aren't highly concentrated, and we're continuing to win new business. I think that's the way we'd like to frame the discussion going forward. Got it. Thank you, Peter. All the best. Thank you. The next question is from the line of Parikshit Gupta from Fair Value Capital Limited. Please go ahead. Thank you very much for the opportunity and many congratulations on a great set of results. My first question on the CDMO segment, while it is very appreciated that the ADC segment grew by over 50%, I just wanted to understand, in our $2 billion top-line aspiration, in which I guess the CDMO share is expected to be around 60% of the revenue, how much of revenue contribution have we anticipated from the ADCs business specifically? It's a fair question. We haven't broken it out separately. However, I would give a qualitative guidance that we would expect our ADC share to be growing disproportionately better than the overall revenue guidance, along with our differentiated services, of which it is a part. We have invested in this capability across four sites. We have available capacity. If we were to need to, we would enhance that capacity. We see ADCs as one of the sunrise sectors, or bioconjugation is another phrase to use around it. We would expect it to grow higher than, and probably meaningfully higher than, our overall growth rate. I understand. Now, in terms of the on-patent manufacturing, the 39% growth is appreciated. I just wanted to understand if you could share what is the contribution from the GLP-1 injections. While I know that the market leaders' patent expiry extends well into the mid or the late 2030s with demand still strong, however, if there are alternatives developed or possible reduction in demand given certain side effects, have we anticipated any risks from that? I think we are not really participating in the GLP-1 kind of opportunity. I think our focus is on more niche peptides, and also contract manufacturing for other people in terms of peptides. So I would say, I think we are not suited for the GLP-1 opportunity. To further clarify, the on-patent commercial manufacturing numbers are as described, so a generic product offering, even if for third parties, would not be in this metric. I understand. Thank you for the clarification. Now in terms of the Complex Hospital Generics business, what has been the growth rate ex of Kenalog for this quarter? We haven't broken it out separately. I would mention that we've had a few prior earning calls where there were questions about our ROW-based business growth, and we are quite pleased with the first half performance in that area. I think the message you could take away is that the Kenalog obviously provided relevant growth in the period, but we also had good performance with the base business and especially in an area of prior discussion of ex-U.S., if you will, inhaled anesthesia. Yes, I was just about to ask on that part. In the previous con call, we discussed about the sevoflurane growth was a mix from existing and new markets, but I was really hoping to understand how the ROW contract wins were progressing so far. We had a couple of nice wins in the period, which contributed to the, what we call base business growth. That's been a nice addition and that's been substantial in terms of the driver of incremental growth year on year for the, what we call base business. I understand. Just my final question on the Consumer Healthcare business, please. I understand that many products in the portfolio have been through acquisitions that Piramal Pharma made and hence enjoy the sole discretion on the product strategy. However, I still want to understand how much of the portfolio ex of Bayer products is outside of discretion of Piramal Pharma. I just want to understand what happened with Bayer. Is there some part of the revenue also of the similar risk, please? No, I think now with the exit of Bayer, everything is owned and managed by Piramal Pharma. We can do whatever we like with those brands in terms of extensions, in terms of distribution, selling price, et cetera. So it is all our products now. These are very helpful. Thank you very much for your answers, and good luck for the current quarter. Thank you. The next question is from the line of Abdulkader Puranwala from ICICI Securities Limited. Please go ahead. Yeah. Hi. Thank you for the opportunity, and thanks for making these disclosures on a first half basis. My first question is with regards to the ADC revenue and the uptake what we have seen. So if you could highlight how much of this growth is being driven by our partnership with Ajinomoto and what is the actual growth in the base business of, say, the $26 million what you had last year? We do not obviously disclose individual collaboration-related revenues. I would say that the collaboration that we had marketed would be a modest contributor to our overall revenues. It is more marketed towards potential customers than to investors, but we cannot segment our communication strategy and the intention of both us and our partner with that communication is to say their technology works in our manufacturing and development and vice versa, and to give customer or potential customer confidence. From an investor perspective, this is based off of the bread and butter bioconjugation, linker payload, the mAb, and then finally the fill finish, of which that would be a modest contributor. Sure. Got it. My second question is with regards to the Bayer distribution agreement, which expires in December. From the manufacturing side, how are we looking at it? While we have called out for a 5% contribution from that to the overall top line, are we also looking to divest any manufacturing assets which would be associated with this venture what we had? I think the Bayer manufacturing agreement, I think still continues, and I think we see them as good partners going forward. Okay. Understood. Thank you, and I will get back in the queue. Thank you. The next question is from the line of Alankar Garude from Kotak Institutional Equities Limited. Please go ahead. Hi. Good morning, everyone. Peter, can you talk a bit about the nature of your recent conversations with CDMO clients? Clearly, you are seeing an improvement in the client engagement levels. Just wanted to understand how the discussions have evolved over the past few quarters. I think we discussed this maybe in some prior calls and maybe we were able to try and signal to you all that it was going in a positive direction, but I will just maybe repeat some of the themes. The first is, obviously it helps if clients have money, and if you look from October of last year to today, there has been a meaningful improvement in funding available for our current and potential clients, and that shows up in their floating of RFPs. The second thing is that then the RFP inflow numbers are significantly up, and especially so maybe not last calendar year-on-year, but much more starting this calendar year, January, they have been up meaningfully, and so that is showing up to be in overall inquiries for potential business. Then that has then translated into decisions. We started to see that uptick of decisions, I would say Q4 last year and then through this year. I think what is notable is historically, H1 has been soft in terms of order booking, given the normal seasonal patterns, but maybe due to our actions and also the external environment, we have seen more order booking in H1 than we have historically in the past. Maybe some other indicators, if we look at major conferences or engagements we have with our customer advisory board, I would say the discussions have more of an action-oriented feel. There is a more general volume of interaction. I do not think that is unique to us from the industry perspective. I think overall, if you look at, let's say, the Endpoints survey that just got released, the sector sentiment is significantly improved versus one or two quarters ago. We're doing our best to take advantage of the external environment. I'll wrap it up with just two other comments. As mentioned in prior calls, we did a pretty substantial transformation of our go-to-market organization, which is still underway, but we're starting to see some benefits of that new approach. Along with that approach, we increased the total number of people out in the market interacting with customers. To be candid, the transformation will show benefits in this time period, but the new additions of staff, they would probably only really start to bear fruit or show results in coming quarters. Given the time from when you bring someone on board to when they can meet a customer, to the whole RFP cycle. Overall, the transformation on our go-to-market and then our increased feet on the street, if you will. That's helpful, Peter. Just a follow-up there. How big a factor do you think has been the funding environment in driving this uptick? I mean, the question is, if you assume a scenario where the funding environment slows a bit versus the current levels, does it have a meaningful impact on your CDMO outlook? I think if you were to look at a 10-year horizon and you were to look at CDMO as a sector, the CDMO sector does well when funding is available and when US FDA is approving drugs and when M&A takeouts occur, because that all allows recycling of money. One of the elements of our strategy with the commercial transformation was to significantly enhance our approach to key accounts and large pharma, and we have started to see some nice early results from that strategy. The benefit, if we can continue to show progress in that strategy, is that large pharma R&D and development spending is more resilient than biotech, and we've been historically more prone to volatility there. We are expecting one of the benefits of our commercial transformation should be a better weighting towards large pharma, which will take some time to achieve, but it will not change the overall sector linkage to volatile funding. Biotech funding is a cyclical situation, and it is linked to CDMO performance. I am giving you a bit of a roundabout answer to saying it is true to everyone. We have historically been more exposed. Our commercial strategy is aimed at making us less exposed, but the cycle remains. Got it. That is helpful. The second question is, you had a target to improve margin substantially to double digits in the OTC segment by FY 2030, and you had spoken about operating leverage, lower marketing spends. Just wanted to understand qualitatively, where are you in this journey? I think, as we said, we are single digit profitable at the moment. We are continuing to focus on profitable growth, which is between premiumization, price, and volume to look at how do we improve margins. Nandini, can we say that you are on track to get to that double-digit number? Yeah, we will be close to it. Got it. That is it from my side. Thank you. Thank you. The next question is from the line of Gaurav Bama from JM Financial Limited. Please go ahead. Hi. My question has been answered already. Thank you for the opportunity. Thank you. Thank you. The next question is from the line of Sudarshan Padmanabhan from Ashika Investment Managers. Please go ahead. Yeah. Thank you for taking my question and congrats on a great set of numbers. My question is related- Sorry, can you speak a bit louder? We cannot hear you clearly. Yeah. Am I audible now? Are you able to hear me? Much better. Thank you. Yes. Yeah. So my question is, we have seen the on-patent commercial manufacturing pie improving and overall the innovation-related work improving as a percentage of the business. Given that we are seeing a fair amount of interest from clients and also the fact that the phase III molecules are also increasing. From a directional perspective, where do we see both the innovation and the on-patent commercial manufacturing as a pie to increase, say, in the next 2-3 years as we achieve our directional target in 2030? I think we expect them to grow faster than the rest of the business. In the next couple of years, they should easily take over about over 50% of the business. Okay. Incrementally, when we are talking about addition of new customers, how many customers would primarily be into the value chain of on-patented and say, innovation-related work? It is more are in that category than not, because if you think about it, the generic industry is consolidating to some degree, and we would probably already be working with many of them. If you want to get new logo, it is largely innovation-oriented. Not fully, but largely. Sure. We should be able to see consistent increase in the pie probably, as some of these clients start getting converted into business. Yes, that is the expectation. Sure. Yeah. Apart from ADC where we have seen a significant growth, we do have a fair amount of offerings in other complexities like peptide. You mentioned that we are largely not in GLP, sterile injectables and various other things including hormonal. In the overall pie, how do we see this composition of, if I put it as, complex products where the capabilities is being built as compared to the utilization of capabilities that we have built currently, how do we see this pie improving, say, in the next 2 to 3 years? We would expect to see growth in peptides if that's the question. From a relative capital allocation, we have put more money more recently into the U.S., specifically in the area of the fill finish, we've also put in money into the high potent API, we put money into the bioconjugation areas. So those did receive some amount of CapEx, we've been more modest in our investment in the peptides. But nonetheless, we have put some money into that area, we are expecting to see nice growth there, it remains to be an attractive area. I just add one further clarification that while we do certain peptide-related activities in our Turbhe facility near Mumbai, we also can do some more earlier stage peptide activities in our traditional small molecule facilities at Digwal and Ennore, we are seeing orders in that area as well, because they can work in traditional reactors. So we're going to be just participating in peptides both at different stages in the value chain and not only at our Turbhe facility. One final question before I join the queue is, with the distribution agreement with Bayer coming to a close by the end of the year, while you had highlighted about the revenue impact, largely this business, I would assume, would have lower margins primarily because this is largely distribution, right? So as far as the margins and profitability is concerned, the impact should be much lesser, probably it would be better from a margin perspective given that when the business goes up, the absolute margin should actually look much better. Would that be right? Yes. Okay. Sure. Thanks a lot, Angela. That's okay. Thank you. The next question is from the line of Dhawal Khut from Jefferies. Please go ahead. Hi. Thank you for taking my question. Can you inform us about what is the current business mix at Lexington? Is it more clinical or commercial, small molecule versus biologics and ADC? Secondly, at Lexington, what is the quantum of capacity expansion in terms of the number of units that we have, that we are currently undertaking, and the key inflection timeline we should watch out for? Again, we don't give all of those details. I would say, broadly speaking, it does have commercial, but the commercial is more modest, and predominantly, from a mix perspective, it's a much heavier mix towards development. Part of the reason why we went under the expansion is that we could attract tech transfers at the commercial level, but also certain development customers that would not want to have to leave if they were to graduate to commercial. We would anticipate one of the benefits of the expansion is that we could get more larger late-phase clinical and also commercial and shift the mix to be more commercial, which we think will be beneficial from a margin profile as well. From the scale perspective, Vivek, we will get back with the exact percentage increase, but it's a massive increase in overall capacity for both vials, but also, even more importantly, lyophilization capability and capacity. In terms of timing, it's the end of calendar year next year, we would be going live. We're expecting three separate go-lives. We have to be in the business of marketing as well. The first go-live already happened. It's our micro expansion, which went live, I believe, earlier this month around CPHI. This is the lab that is used for the legacy facility, but also the new facility block. The second go-live will be most likely early next year, which will be an improvement in background grade that would reduce any ambiguity around Annex 1 compliance. That would be the second go-live for the legacy facility. The third go-live would be the full expansion, and that would be at the end of the calendar year. We're particularly excited to mention that we already have the anchor customers for first, second and third customer that would be using the expansion signed up for their specific batches. Now anyone else who were to agree to the expansion would not have to worry about am I first, second or third. For these customers, do we have any data readouts that will be important to watch out for, which will determine the quantum of business that we can get from these customers? That's the nature of the business. The site has a wide range of development clients at different clinical stages, and every one of them is going through their own clinical journey, and they each have their own binary events for their upcoming clinical readouts. That's the name of the game in this business, and all I can say is it's a part of what we have to live with, and it's also the opportunity, because when they get the good news it means that the growth goes up. I'd say that yes, but that's true of all of our sites serving innovation customers, and most of what we do in North America would be in that bucket. Thank you. Just one last question, if I can squeeze in. For Sellersville, very high level, when do you think we can break even at EBITDA level? We already have informed about one contract. Is it more like 18 months sort of a timeline wherein we can break even, or is it much more long-term and tougher task to turn around that site? It is more like a three, four, five-year journey from here on. From an EBITDA perspective, I think I alluded to it in the earlier remarks. Obviously, we only produce our subsidiary accounts at certain intervals. From an EBITDA perspective, we are seeing nice translation of the improved revenue in this current year itself across our four North American sites. If this trend continues, we would expect our dialogue to change around some of our North American sites. Okay. Thank you. Thank you. The next question is from the line of Vinod Jain from WF Advisors Limited. Please go ahead. Yeah. Congratulations on the improved working and return to profitability. Sir, the higher tax incidence of the company remains a quagmire to understand. While in the past you have explained this higher taxation as profits from tax-paying jurisdictions, and that the benefit of carry forward losses, though not high in the current year, would accrue in the future. If that is the case, I would like to know in which year or years the benefit of the substantial carry forward losses is likely to accrue in time. Mr. Vinod, as you rightly mentioned that tax outflows currently are in tax-paying jurisdictions. We do have almost 580 million of carry-forward tax losses that are overseas entities. Utilization of this will be very specific to each and every site, depending upon how the turnaround at the site happens. As Peter mentioned, each of our North American sites is currently seeing good improvement in the profitability. As per our long-range plans, we were expecting that we should be able to start utilizing this over the next 2 to 3-year period. But it is very entity-specific and will depend upon which of the entities start turning positive. As you can imagine that from an accounting standpoint, the moment they turn positive, we should be in a position to recognize the deferred tax asset in the books. That is how it will work. One by one, as each entity starts moving towards profitability, we will start accounting for that. Sir, the tax incidence is so high that almost the entire profit for the quarter is wiped out. Is there a possibility of taking an active step in managing the tax liability in terms of sharing the business between various facilities you have, so that the facilities become more tax efficient? Mr. Vinod, from a transfer pricing perspective, we obviously do what is best possible within the realms of what the law permits. If you have looked at the standalone accounts, you must have noticed that 70% of the tax is actually paid in India, where the profitability Correct coefficient is relatively higher. Yes. And trust me that whatever is best possible within the realms of what the tax laws permit, we optimize on all of that. Okay, one last question. The deferred tax asset net of INR 494 crores in the balance sheet, is it indicative of the future tax benefits entirely? As I said, we have carry forward losses of about INR 580 million. Yes. Which means the potential deferred tax asset that we could create is about INR 120 million. Okay. All right. Thank you. Thank you. The next question is from the line of Vibhisha, an individual investor. Please go ahead. Ms. Sha, kindly unmute your line. Hello, am I audible? Yes, you are audible. Yes, sir. Just wanted to understand what led to the margin ramp up and are these kind of margins sustainable the next year? Yes, the margins are sustainable. As we mentioned, the fixed costs have been largely controlled. If the revenues go up, a lot of that extra goes down to EBITDA. Okay. Do we see further margin increment from here onwards? I think we will see some if revenues continue at the pace that they are meant to. Okay. Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Gagan Borana for closing comments. Thank you very much. We hope that we were able to answer most of your questions. In case you have any follow-up questions or any clarification, please feel free to reach out to me, and I will be happy to respond. Thank you, and have a good day. Thank you. On behalf of Piramal Pharma Limited.