Indegene Ltd (INDGN) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Indegene Limited's Q2 FY '27 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. Abhishek Agarwal, Head - Investor Relations. Thank you, and over to you, sir.
Abhishek Agarwal (Indegene Ltd): Thank you, moderator.
Abhishek Agarwal (Indegene Ltd): Morning to all of you, and thank you for joining us today for Indegene's earnings conference call for the second quarter and half year ended financial year 2027. Today, we have with us Mr. Manish Gupta, Indegene's Chairman and CEO, and Mr. Suhas Prabhu, CFO, to share the highlights of the business and financials for the quarter. I hope you have gone through our results release and the investor presentation, which have been uploaded on the website, as well as the stock exchange website. The transcript of this call will be available in a week's time on the company's website. Please note that the today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the investor relations team. I now hand over the call to Manish to make his opening remarks.
Manish Gupta (Indegene Ltd): Thank you, Abhishek, and good morning, everyone. Let me start as I usually do with the industry. For the first time in several years, the major signals are pointing the same way at the same time. Capital is back, approvals are at a record pace, the pipeline is large and later stage, and AI has moved onto the operating agenda of almost every large biopharmaceutical company. When these turns turn together, the effect compounds. More funding means more trials, more trials mean more launches, and every launch needs content, evidence, and engagement. Let me take you through these four shifts and what each means for Indegene. The first one, capital and dealmaking are back. Through August, pharma and biotech funding rose about 85% year-on-year to over 69 billion. Biopharma M&A roughly doubled to around 194 billion, and licensing and partnership deal partnership deal value already exceeded all of 2020-2025. Every acquired or newly funded medicine needs a commercial and medical home, and increasingly, companies partner for it rather than build it. AI amplifies this, productivity gains are being redeployed into more content, more more personalization, and more channels. And the value accrues to those who own the domain, data, the workflows, and execution. That is the Indegene model. The second one, a record approval pace and faster reviews. The US regulator has approved 45 novel medicines so far this year, ahead of the pace of 2023, which was a record year. Priority vouchers are cutting review times for selected medicines from about a year to 1.5 to 2 months. Faster approvals mean regulatory, safety, medical, and launch work must be ready in parallel, which is exactly where our capabilities come together. The third one, a pipeline that is larger, later stage, and more complex. About 12,700 molecules are in development globally, more than two and a half times the level of 2015. Growth is stronger strongest rather in the later stages. Phase 2 is also up almost 18%, and medicines awaiting approval are about 30%, the highest on record. These are the launches of the next 2 to 5 years. The science is also much more complex: peptides, antibody-drug conjugate, mRNA, and cell and gene therapies are growing fastest, and each needs deeper scientific content, medical education, and safety communication. At the same time, more than $40 billion worth of revenue faces patent expiry over the next decade. For us, that translates into demand. In-market brands must work harder for longer. The next launches must land perfectly, and acquired assets must be integrated fast. The last trend is reallocation. Large pharma is restructuring, but this is not the industry spending less. R&D spending remains above historical levels. The industry is spending differently, redirecting savings through restructuring to later stage programs, acquisitions, AI, and commercialization, moving from fixed in-house cost to flexible partner models, and consolidating vendors. That favors a scaled, integrated partner. We recently in September had the the 2026 chapter of our Indegene Digital Summit, and in this, we heard the same from our customers in Philadelphia, with more than 120 senior pharma leaders and 40% higher pharma participation than last year. The question had moved from whether AI can work in pharma to how to scale it and with whom. Two themes stood out: Operating models matter more than tools. AI succeeds when workflows
Manish Gupta (Indegene Ltd): design first and business owns the outcome. The second one is the physician front door is changing. Doctors increasingly find information through AI tool- tools, so evidence quality and scientific credibility now drive influence. Now, closing the industry view, so if you bring all of this stuff together, capital is back, approvals are at record pace, the pipeline is deeper and more complex, and the larger companies are allocating, reallocating towards flexible partnerships. That means more medicines reaching market, more complexity per medicine, and a premium on partners who combine deep domain depth, technology and global scale. The industry is moving towards exactly the kind of work Indegene was built to do. With that, let me move to performance for us in this quarter. Q2 was another quarter of consistent progress. Revenues came in at 11,223 million, up 39.5% year-on-year, and 5.6% sequentially. [cough] Sorry. That makes five consecutive quarters in which we have grown more than 5% quarter-on-quarter in INR terms. And what I find most encouraging is how evenly this growth is spread across our client base. Our top five accounts grew 9.2% sequentially in INR terms and our top 20 accounts grew about 6.7%. It is still early, but our largest client relationships are starting to move upwards. The work we have been building with these clients is now steadily showing up as revenue. Outside of top 20, growth continued as well. Our big- biggest relationships and our newer ones moved forward moved forward together this quarter, which is the balance we have been building towards. The numbers at each quarter at each rung of the of the client base tell the same story. We now serve 107 active clients, 31 more than a year ago. Clients contributing of a million dollar a year rose to 59, up from 54 last quarter. Clients above $10 million now number- are 30, one more than last quarter. Each of these relationships began sm- small and grew as clients trusted us with more of their work. Productivity is also rising alongside. Revenue per employee on a trailing 12-month basis is USD 79,600. This is up from around USD 69,000 a year ago. We are growing revenue faster than headcount because most of our delivery now runs on our GenAI-enabled platforms, and more of the work is priced on output and outcomes rather than on time spent. The two reinforce each other. As GenAI lifts productivity, output-based pricing lets more of the gain show up in revenue per employee. Now, we come to new new deal wins. New business. We had a good quarter in terms of deal wins. Nine deal wins with annual contract values of about $1 million, including three large deals, one in the $5 million-plus range and two in the $3-$5 million range. Let me start with enterprise commercial, which saw most of the action. In the largest new deal win of this quarter, we've won a mandate from our existing top five customer to migrate their content platform in new geographies outside the US. This is an expansion in scope of the mandate we won last quarter to migrate their content platform in the US. While the work comments in Q3, the rap- ramp-up will likely impact Q4 and beyond. The first in the $3-$5 million range is the one I mentioned in our last call. A top 20 pharma company had bought us in for a change management consulting engagement. Last quarter we described it then as a sub-million dollar start with the real room to grow. One quarter later, it has become a mandate to set up a global content factory across commercial and medical content for the company's international business. This is a path we want our engagements to follow: earn trust on a focused piece of work, then take on the operating model that comes after it. We are very excited about this opportunity. Finally, the large deal win is from a top 30 global pharma company to manage the global digital content where we are replacing a large incum- and incumbent. This is another deal which has tremendous potential to grow in the future. Coming to the deals in the $1-$3 million range, we continue to expand
Manish Gupta (Indegene Ltd): for Jenai enabled TEKtonic model with our largest customer with a deal win for the Canada market. Let me remark on TEKtonic for a moment over here. With our largest customer, the TEKtonic model was contracted starting with Germany at the end of last fiscal. Last quarter it extended to Spain, this quarter the client took it across the Atlantic to Canada. That is three markets in three successive quarters and the first one outside Europe. While TEKtonic wins continue to accumulate with the largest customer, the ramp-up in this case remains slow. However, we continue to invest resources and effort into driving change management and adoption within the customer's operations across all markets where we have won. Beyond TEKtonic, our push upstream in the content value chain delivered another success, this time through our GenAI-led Agentic AOR with a top-20 pharma company where an initial pilot, which we had spoken about earlier, turned into a full-scale engagement north of $1 million. What makes this deal instructive and interesting is how it began. The relationship started with our TEKtonic offering and evolved into Agentic agency of record. I highlight this because it shows our content engagements can now start anywhere in the value chain: strategy, studio, or production, and then move upstream or downstream. In fact, the lines are blurring to the point where Agentic AOR, TEKtonic and production work, we believe, in the future might not be no longer be distinct. We signed four more deals in the $1-3 million range split evenly between enterprise commercial and enterprise medical segments. Besides these new wins, we also had a successful extension of our ongoing deal. A fast-growing US base emerging pharma company had partnered with us in Q3 last fiscal to assist them with new product launches. We are signed, we have now signed multiple additional work orders aggregating 3 million plus to continue assisting them with the launch activities. Taken together, this quarter was a testament to Indegene's domain expertise, a validation of our nuanced solution approach to solving our customer needs across different areas, and across different segments and spectrum of customers. Continued win with our GenAI-enabled offerings, TEKtonic, agency of record, Agentic agency of record confirms that our strategy to move upstream has found recognition in the market. It also puts us on a path of broad balanced growth: more clients, larger clients, rising productivity. Let me now move to BioPharm acquisition and the reason I do it, it's we, on October 1st BioPharm completed first year as part of Indegene and it was of course a reasonable sized acquisition from our perspective. When we announced this acquisition, we had provided two strategic reasons: that together we would become a powerful player in data-driven omnichannel and brand activation. We also said the combination would unlock real revenue and cost synergies across a shared client base. 1 year in, we are making progress on both. We had planned to transition Finance, HR, and IT and Legal, close out the seller's transition services by the end of March. We finished that by the end of February, with no disruption to client engagements and strong retention. When we did the deal, I said this was a team that would be very difficult to hire in the United States. The team is with us and now fully part of Indegene. On cost cost synergies, we have realized around 1.5 million in annual savings and we have reinvested these savings in growth, most visibly by expanding BioPharm's go-to-market team from 3 to 9 people. Now to growth. A year ago many of you had asked why BioPharm's revenue broadly flat for a few years would change. Our answer was that business had been run primarily for margins with very little support
Manish Gupta (Indegene Ltd): both have come about. Just a caveat, we have already provided for this entire amount in our balance sheet. The biggest story is what BioPharm has done for the rest of Indegene. We are including BioPharm's capability in existing and new enterprise omnichannel engagements. Its data and targeting capabilities are now giving us an edge in some of our largest pursuits which sit in our pipeline right now. Data and AI is a dimension in which long-term value can be created. Tandem brought us over 20 years of proprietary data on how physicians respond to promotions, spanning more than 300 300 million exposure events and 15 million engagements. It expanded our physician profiles from 1.8 million to over 3.6 million, with much deeper coverage in oncology, rare diseases, and ophthalmology. We have combined Tandem and envisaRx in our audience intelligence platform, part of the Indegene data universe that forms the data foundation of our AI stack beneath Cortex. It is already at work beyond omnichannel in agentic QR, an AI-led agency model. It powered research using synthetic key opinion leaders, completing in days what a traditional agency takes months to do. A year ago, we described this combination as more data, more engagement, more brand impact. 1 year in, we're seeing all three. BioPharm is no longer an acquisition we talk about. It is a capability embedded in how we win. And we believe its biggest contribution to Indegene is still ahead of us. With that, let me request Suhas to take you through the financials in detail. Over to you, Suhas.
Suhas Prabhu (Indegene Ltd): Thank you, Manish. And a very good morning to all participants on the call today. Let me start with revenue. Revenue for the second quarter was ₹11,223 million or $117.5 million. In dollar terms, that is a strong growth of 27.5% year-on-year and 4.4% sequentially. EBITDA came in at ₹1,873 million, up 32% year-on-year at a margin of 16.7%. I want to put that figure in context more because the more important story is what the quarter absorbed. The second quarter is when our annual wage increase take effect and this year the wage hike impacted margins by about 150 basis points. Improved productivity and favorable exchange rates have largely offset this impact. In July, we told you this quarter 2 would break from the usual pattern and it has. Beyond EBITDA, other expenses were as anticipated and largely in line with the past quarter. However, interest income was down 44% sequentially from ₹237 million to ₹134 million. While the invested funds largely remained constant quarter-on-quarter, the mark down in our mutual fund portfolio NAVs due to the increase in interest rates towards the end of the quarter compressed the near-term yields. The quarter-on-quarter impact of lower yields impacted PBT by about 90 basis points and PAT by about 70 basis points. Coming back, the annual wage hike is already in the base. Impact of productivity workforce transformation initiatives combined with operating leverage is anticipated to have a favorable impact on EBITDA in the coming two quarters. Looking ahead, we also expect some of this quarter's pressures below the EBITDA line to ease. Amortization charge will reduce in quarter 3 and beyond. We anticipate yields to increase with the higher interest rates prevailing combined with a conscious shift in the investment portfolio towards a higher allocation to held-to-maturity instruments which reduce volatility. Taken together, this should impact PBT positively aggregating up to 90 to 95 basis points. This would help our PAT margin expand faster than our EBITDA margin in the coming quarters. Profit before tax was ₹1,000
Suhas Prabhu (Indegene Ltd): 4 million, with the effective tax rate steady at 23.8%, profit after tax came in at rupees 1,123 million, up 10%, also up 10% from a year ago. Coming to the business mix, the business mix was steady with Enterprise Commercial contributing about 71% of our revenue and Enterprise Medical 25%, followed by Others at 4%. By geography, North America continued to be the highest contributor, accounting for 74%, followed by Europe at 23% and the rest of the world 3%. Our largest customer today represents 7.8% of revenue and our top 10 together make up 49%. Let me delve a little deeper in two of our larger relationships, since you'll see the movement in the aggregate numbers. Revenue from our largest customer slightly eased this quarter as the tectonic engagements that we signed with them are ramping up more gradually, though the scope we contracted keeps expanding. The contracted business as Manish described keeps growing, and as execution catches up, we expect revenue from this client to return to an upward path. Separately, one customer moved from the $25 million plus cohort to slightly below. This customer had moved into the $25 million plus cohort two quarters ago and the drop in is a small variation in the quarter-on-quarter volumes. We believe this is a temporary drop given that the largest win this quarter, the $5 million plus win that Manish mentioned, is with this customer. And as the deal ramps up, we expect the customer to get back into the $25 million plus cohort in the coming two or three quarters. Despite these two movements, our top 20 accounts grew 6.7% sequentially in INR terms and shows strong growth in our top 20 accounts beyond the two that I already spoke about. Coming to the DSOs, the DSOs net of unearned and unbilled revenue was slightly higher at 69 days, up 2 days, and cash and investments stood strong at Rs 13,896 million. With that, let me close with the margin part. Our outlook remains unchanged. We continue on the path to quarterly EBITDA margins of 19% plus by the fourth quarter of this year. Three things give us confidence: first, this year's wage cycle is now fully in the base; second, the outcome-linked omnichannel contract with one of our large customers has progressed positively in the first two quarters; third, we have deal wins during the quarter as well as a healthy pipeline going into H2. As they scale, the go-to-market and delivery investments that we highlighted in the past and we made ahead of time begin to pay off, and as all of these play out, margin growth in H2 is likely to outpace the revenue growth as we exit quarter 4. With that, let me pass it back to Manish for the outlook. Over to you, Manish.
Manish Gupta (Indegene Ltd): Thank you, Suhas. Before we open the lines for questions, let me close with where we believe we are headed. While we do not provide formal guidance, I want to restate two goals we had set for ourselves and discussed with you all.
Manish Gupta (Indegene Ltd): Our focus for the rest of the year is clear. Working on these two objectives, both are underway, and they keep us firmly on track for our FY '27 goals while building a strong foundation for FY '28. Looking further ahead, our enterprise commercial business entering is entering an important new phase. 5 years ago, we set out to move upstream in the commercialization value chain by fundamentally changing how pharma approaches content from strategy and creation to production and deployment. We have since build the pieces required to make that vision real. Tectonic and Agentic, KOR and OmniChannel have expanded our presence upstream and downstream, supported by capabilities, actually, supported by technology build organically, lot of capabilities that were built organically and through our acquisitions such as CultHealth, MJL and Cake, and very recently Biofarm. We're bringing together envisaging tandem into a strong audience intelligence ability and integrating that data with industry-specific platforms, contextualized workflows, and AI embedded throughout the through throughout the way we work. It has taken time to build this model because we are we're defining a market, not simply entering one. But now we believe we are now we believe we are at its important inflection point. Clients can can increasingly enter our ecosystem anywhere, from strategy to creative to production, and expand and expand across the value chain. Over time, we believe the distinctions between Agentic, KOR, Tectonic and production will matter less. The destination is one integrated AI-led content model spanning the entire commercialization value chain. That is where we intend to keep investing. And we see this as an important growth opportunity for the next few years. To sum it up, where we stand, exactly a year ago on this call on the same call, we told you we're making deliberate, ahead of the curve investments. Last quarter, we told you we're generally confident how they would pay off. Today, that confidence is turning into evidence. A stronger industry, demand is moving from testing to scale, a broader and deeper client, an acquisition that is delivering, a sec second half, the growth and margins come together. The building blocks are in place. The momentum is real, and we believe the best is still ahead of us. With that, let me hand over to the moderator to open the line for questions. Thank you so much.
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