Sai Parenterals Ltd (SAIPARENT) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day and welcome to Sai Parenterals Limited Q2 FY27 earnings conference call, hosted by Emkay Global Financial Services Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 "*" then "0" on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Krishnakumar from Emkay Global Financial Services Limited. Thank you and over to you, sir.
Shashank Krishnakumar (Emkay Global Financial Services Limited): Hi, thank you. Good afternoon everyone and a very warm welcome to Sai Parenterals Limited Q2 FY27 earnings call hosted by Emkay Global. I would like to thank the management for giving us the opportunity to host this call. On the call today, we have the Sai Parenterals management team represented by Anil ji, the Chairman and Managing Director, and Mr. Mark, the Chief Executive Officer of Nomedd. I will now hand over the call to the management team for the opening remarks, and then we will open the floor for questions. Please go ahead, sir.
Anil (Sai Parenterals Ltd): Yeah. Thank you, Shashank. Good evening, everyone. Thank you for joining our earnings conference call to discuss the performance of Q2 and H1 FY27. I hope everyone had an opportunity to go through the financial results, press release, and investor presentation, which are uploaded on the stock exchanges as well as on our company's website. Our Chief Financial Officer, Mr. Anil Kumar is unable to join us today because of a personal health emergency. We wish him a speedy recovery. In his absence, I will also take you through our consolidated financial results after my opening remarks and Mark's update. As I mentioned last quarter, Nomed Pharmaceuticals has been consolidated from 12th November, 2025. So, our year-on-year comparisons are therefore not comparable. So, I will focus mainly on the sequential trend. Q2 FY27 is a quarter in which our transformation began to show in our profitability. Consolidated revenue from operations was 9% sequentially to 196 crores. H1 FY27 revenue was at 376 crores, around half of our FY27 revenue target of 750 crore. We have always guided
Anil (Sai Parenterals Ltd): 45-55 split between the two halves with the fourth quarter historically our strongest. So we're ahead of our plan. Gross margin rose from 40.9% in Q1 to 47.5% in Q2. Raw material costs actually fell by about 3% even as revenue grew by 9%. This was driven by tighter inventory management. Inventory was on the higher side last quarter. During Q2 we worked through a major higher-cost inventory, introduced strict first-in-first-out controls and implemented a new ERP system, which has brought inventory levels down materially. These controls remain in place, and so we seek to keep gross margin above 45% in the next all coming quarters. EBITDA grew 67% sequentially to 41 crores with EBITDA margin at 21.1% against 13.7% in Q1. Employee and other operating costs together rose by less than 6%, so most of the gross margin gain flowed through EBITDA. For the first half, EBITDA stood at 66 crores with a margin of 17.6%, already ahead of approximately 17% we guided for the year. Depreciation and amortization rose to 25 crores from 8 crores in Q1. This reflects the capitalization of new med assets and amortization of molecules acquired from Saptagiri Laboratories. Despite a more than threefold rise in the depreciation more than a threefold rise in the depreciation, profit before tax steady quarter-on-quarter, and profit after tax grew 33% to 10.5% 10.5 crores. For the first half, PAT stood at 18.4 crores. Then I come to IPO proceeds deployed and both acquisitions. Last quarter, I outlined a proposed variation in the use of the of our IPO proceeds. Shareholders have since approved it, and I'm pleased to report that the both transactions are now complete. We will be investing 98.8 crores of IPO proceeds, that is 83.83 crores in Sai Kriti Pharma, and already invested 15 crores in Pratyek Laboratories for each for a 60% stake. The balance of 3 crores from the amount originally earmarked for the research center has been allocated to general corporate purposes. The purposes for which we raised these funds has not changed: EU-GMP compliant injectable capacity for regulated markets and a dedicated research and development platform. Only the manner of execution has changed, and in both cases, we have acquired materially larger assets for the same outlay. So now I come to Sai Kriti Pharma, this new injectable facility on track for July 2027. At Sai Kriti site at Gummadidala, outside the Outer Ring Road, foundation works were underway and construction is accelerated. And as our equity comes in, it will progress much more faster. The layout design is complete, and purchase orders have been placed for all the four process lines: liquid and lyophilized injectables, GLP pre-filled syringe injectables, pre-filled and cartridge combi line for GLP products, dry powder in filling, and ampoule filling. Clean utilities and HVAC systems are in detailed engineering. We are targeting completion in July 2027. The facility is being built to EU-GMP and US FDA standards. It will take our injectable capacity to approximately 154.66 million units, about 47% more than the upgrades of units 1 and 2 with would have delivered. More importantly, it adds two new capabilities: lyophilization and GLP-1 manufacturing. Our existing domestic critical care franchise of around 52 crores will also be manufactured from this facility. Unit 1 and 2 at Jeedimetla will be discontinued once it is commissioned. We expect accreditation within about 12 months of completion with exports from FY28 and Europe from FY29. The total project cost is estimated at 215 crores. Our contribution of 83.83 crores is unchanged from the originally earmarked figure. The promoters of Sai Kriti fund the balance 40% of equity, and the remainder comes through project debt with a three-year
Anil (Sai Parenterals Ltd): remains a 7 years repayment schedule. Now, I will come to Sai Prateek Laboratories, the group R&D consolidated division. We completed the acquisition of 60% stake in Prateek Laboratories on 5th October 2026, sorry, on 15th September 2026 and has been remained renamed as a Sai Prateek Laboratories. It is now our dedicated R&D subsidiary and all group R&D has been consolidated there. The residual 40% may be acquired through a rights of right of first refusal at the same valuation. Sai Prateek brings 65 personnel including 28 research scientists with 3 years of operating history in lyophilized, liposomal and nano-based complex injectables and in an oncology portfolio. Its portfolio spans 174 molecules and 285 SKUs across critical care and oncology. It will develop further products for Sai Parenterals, for NOMAD, and for Sai Kriti. The biggest advantage of this acquisition is technology transfer. Sai Prateek has already delivered a complex critical care injectable portfolio, which will be transferred to Sai Kriti's new facility for our own manufacturing. That means we do not lose time developing products after the Sai Kriti's facility is built. Pre-acquisition molecules remain with Sai Prateek's existing shareholders, but the group may use them for its own manufacturing and Sai Kriti is entitled to transfer them to the upcoming site. Until now, Sai Prateek has been developed only for its own use and had no revenue stream. From next quarter, we are beginning to sign R&D and CRO development contracts with external clients, with revenue generation projected from FY '28. Our in-house dossier records supports this R&D platform. We have developed 98 dossiers in-house on Sai's stand-alone, 45 products are commercialized, and further 76 are under development, targeted for FY '28. Besides them, we sit on 599 approved registrations and more than 451 TGA dossiers acquired with NOMAD. Now, I'm coming to Unit 3 expansion. The expansion at Unit 3 Bhongir is almost completed. The new block will start commencing from December 2026. Production capacity will rise from 85.5 million to 155 million units a month, an increase of 81% from this, after completing this new block. The expansion adds a head, high-capacity ointment manufacturing, a dedicated high-speed capsule filling line, and a high-speed liquid oral manufacturing and filling lines. Output Output will ramp up from Q4 FY '27, and most of the additional volume will serve Australia and New Zealand. In the fourth quarter, while the Adelaide facility prepares to start the production, we will also supply bulk tablets from India to support it. Australia accounted for 76% of the export revenue this quarter against 83% in Q1. The Q1 share was higher because Sai stepped in with additional volumes for NOMAD when third-party contracted manufacturers fell short. We plan our export capacity broadly 70-30 between Australia and other markets, and this quarter returned to that pattern. In the Philippines, we added 11 molecules and 22 SKUs during this quarter, led by cardiovascular therapies including Telmisartan, Amlodipine, Sacubitril, Valsartan and Rosuvastatin. The Philippines rose to 16% of export revenue from 12% in Q1 FY '27. At today's Board meeting, the Board approved acquisition of balance 25% share stake in SP Analyticals Private Limited. On completion, SP Analyticals will be will become a wholly-owned subsidiary. Now, coming to outlook. The first half has run ahead of plan and the second half is season seasonally our stronger period. Three developments will shape next in the next two quarters: One, the expanded Unit 3 capacity ramps up from Q4 FY '27, with most of the increment directed to Australia, New Zealand. Two, the Adelaide facility begins operations in the in the Q4 of FY '27, with commercially supplied expected in Q1 of
Anil (Sai Parenterals Ltd): FY28. It will progressively move Neupharm's outsourced volumes in-house and convert a distribution margin into a manufacturing margin. And three, Sai Protech begins taking external development contracts, building a new revenue stream for FY28. We are well placed for FY27. FY27 remains a year of building and FY28 is when the results of that building should start to show in our performance. With that, I'll hand over to Mr. Mark Silbone, Chief Executive Officer of Neupharm Pharmaceuticals, for an update on the Australian platform. Thank you. Mark, over to you, Mark.
Mark Silbone (Neupharm Pharmaceuticals): Thank you, Anil, and good afternoon, everyone. I'd like to cover off three things in our conversation today. One is our contracted book, our portfolio, and our new product development, incorporating the discussion around the progress from the Adelaide manufacturing facility. Last quarter, I spoke about a seven-and-a-half-year exclusive OTC supply contract with the EBOS Group, covering across TerryWhite and Pharmacy Choice brands, renewed on the 1st of July 2026. This contract was valued at 202 million AUD. And on the 25th of August this year, we renewed a second OTC medicine supply contract with Wesfarmers, covering across the brands of Priceline and Pharmacy Hero, which is another, which is another one of Australia's leading pharmacy chains. This contract has been renewed for a further 3 years and is valued at 30 million AUD, or approximately 204 crore. Both renewals carry an expanded product portfolio and a higher agreement of value than the one that they replaced. Together, these two renewals take our contracted Australia OTC supply business over this period of time to 232 million or approximately 1,560 crore. These are renewals earned through years of consistency and delivering in one of the most tightly regulated markets in the world. Both agreements are built to grow, with new products and line extensions added over their terms. We would also We would also hold the exclusive long-term supply agreements as we also hold 451 TGA-approved dossiers. Our Our agreements commit us to introducing new products each year. Growing forward development now happens within the Sai Group rather than with us using third parties. Coming to the Adelaide facility, to date, we have invested 46 million AUD of the 53 million planned for Adelaide. The program has been supported by the $20 million grant from the Australian Federal Government under the Modern Manufacturing Initiative. And we expect the facility to be commissioned in January of 2027, slightly behind where we previously advised. And this delay has been caused by logistics disruptions due to the Iranian conflict. The TGA license inspection is anticipated in second quarter 2027, with the commercial supply expected to commence thereafter upon the granting of the license. As Mr. Anil indicated, Sai will be supporting the supply of tablets from India and the initial packing operations once onshore manufacturing is underway. These things will change directly for us. One, packing that is outsourced today moves in-house, enhancing our current distribution margin so it resembles more of a manufacturing margin on the same contracted revenue. Second, we will bring the inventory down from 9 to 10 months closer towards 5 to 6 months, freeing warehouse space and working capital. And third, supply chain to our pharmacy partners improves and becomes more reliable, at which point our recent shipping disruptions have have inhibited supply issues. I'll now hand over to Mr. Anil, the Chairman and Managing Director, for further comment.
Anil (Sai Parenterals Ltd): Thank you, Mark. I'll now take you through our consolidated results compared with Q1 FY27. First, I would like to bring out to your notice that from this quarter, we present other income below EBITDA. Prior periods have been restated on the same basis. On this basis, Q1 FY27 EBITDA is 24.7 crores at a margin of 13.7%, instead of 27.3 crores at 14.9% as reported last quarter. The difference is entirely other income and
Anil (Sai Parenterals Ltd): and PAT remains unchanged. As mentioned earlier, I'll focus on the sequential comparison with Q1 FY '27. Revenue from operations rose 9% to 196.1 crore from 179.9 crores in Q1 FY '27. Raw material costs fell to 103 crore from 106.2 crore sequentially, so gross profit rose 26.4% to 93.1 crores and gross margin improved from 40.9% to 47.5%. Employee and other expenses together rose by 2.8 crores. EBITDA therefore rose 67.4% on QoQ basis to 41.4 crores, and EBITDA margin improved from 13.7% to 21.1%. Depreciation and amortization rose to 25.1 crore from 8.1 crore for the four reasons I described earlier. Finance cost eased to 9 crore from 9.4 crore. As a result, profit before tax was 9.9 crores, in line with 9.8 crores in Q1. We recorded a tax credit of 0.6 crore this quarter as compared to the tax charge of 1.9 crore in Q1. Profit after tax therefore rose to 37.7% to 10.5 crores from 7.9 crores with a PAT margin of 5.4 crores, 5.4%. Sorry. Coming to H1 FY '27 consolidated performance. For the first half, revenue from operations was 376 crores, above 50% of our full-year target of 750 crore. Gross profit was 166.7 crore at a margin of 44.3%, and EBITDA came in at 66.1 crore with a margin of 17.6%. After depreciation and amortization of 33.2 crore and finance cost of 18.3 crore, profit before tax was 19.7 crore, profit after tax was 18.4 crores. Coming to revenue mix, CDMO contributed about 73% of Q2 revenue and branded generics about 27%. For the first half, the split was 75-25. Exports made up about 73% of Q2 revenue. Within exports, Australia contributed 76%, the Philippines contributed 16%, South Africa 4%, and other markets at 3%. Private-label customers accounted for 80% of the revenue and institutional customers for 20%. So, coming to the balance sheet. At 30th Sep-- at 30th September 2026, total borrowings stood at 357 crore against about 320 crore at March 2026, and cash, cash equivalents were 129 crore. We have spent about 70 crores on projects in H1 '27, mainly on Adelaide facility and unit three. FY '26 will be our peak debt years as we complete our CapEx program, and we expect debt to come down from FY '28 and FY '29 as these assets start earning. Five cities project debt will be raised and sit at the subsidiary level and will be drawn at the as the construction progresses. To sum up, the first half is ahead of our plan, margins have improved, and projects are moving from construction to operation. We are all well placed for the second half of the year. With that, I request the moderator to open the floor for questions. Thank you.
Moderator: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Hit from Axis Capital Limited. Please go ahead.
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