Gujarat Themis Biosyn Limited (506879) Earnings Call Transcript & Summary

Ladies and gentlemen, you have been connected to Gujarat Themis Biosyn Limited conference call. Ladies and gentlemen, good day, and welcome to Gujarat Themis Biosyn Limited Q1 FY '27 Earnings Conference Call hosted by 360 One Capital Market Private Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantee of future performance and [indiscernible]. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Rishikesh Patoli from 360 One Capital Markets Private Limited. Thank you, and over to you, sir.

Thank you, Pari. Good afternoon, everyone. On behalf of 360 One, I welcome you all to the Q1 FY '27 Earnings Conference Call of Gujarat Themis Biosyn. Hope everyone is in good health and doing well. On behalf of GTBL today, we have with us Dr. Sachin Patel, Managing Director; Mr. Krupesh Patel, Chief Financial Officer. I now hand over the call to Sachin for the management's opening remarks, post which we'll open the session for Q&A. Over to you, sir.

Thanks very much, Rishikesh. Good afternoon, everyone. On behalf of GTPL, I welcome all of you to our Q1 FY '27 earnings call to discuss our financial performance and business updates. As Rishikesh mentioned, on the call with me today is Krupesh, our CFO. It gives me great pleasure to address you all today as GTPL stands at an important transformational juncture in its growth journey. Over the last few years, we have consistently spoken about transforming GTPL into a larger, more diversified and innovation-driven pharmaceutical company. Today, we are beginning to see the strategy take tangible shape. While our quarterly financial performance remains important, what is more significant is the strategic platform we are building for the next decade of growth. Global pharmaceutical industry continues to evolve with increasing demand for complex APIs, specialty pharmaceutical ingredients and fermentation-based products. Customers are seeking partners that offer scientific expertise, process development, regulatory compliance and end-to-end manufacturing capabilities. We believe these structural trends create a compelling opportunity for GTPL, and our strategy is focused on building capabilities that allow us to participate in higher value opportunities across the pharmaceutical value chain. The strategic initiatives undertaken over the last 18 to 24 months are all connected by one common objective; transforming GTPL into an integrated fermentation led pharmaceutical platform. Our ongoing multiphase capital expenditure program and expanding our fermentation infrastructure strengthening our R&D capabilities and creating downstream API manufacturing capacity. These investments are intended to diversify our product portfolio, deepen technology capabilities and enable greater value addition. Historically, the company has developed deep expertise and fermentation-based intermediates. Going forward, we aim to progressively move downstream APIs and other high-value products, thereby capturing a larger share of the pharmaceutical value chain. Moreover, we have been strategizing to complement this organic growth with inorganic expansion opportunities. As you might be aware, we announced two major strides in that direction recently. We recently announced plans to acquire MicroBiopharm Japan, which specializes in precision fermentation and various other technologies and therapy areas. This acquisition provides access to advanced fermentation technologies, specialized scientific talent, proprietary know-how, more manufacturing muscle and an established R&D platform. The move at therapy areas across immunosuppressants, oncology and anti-infectors as well as technical capabilities such as peptides, plasmids, ADCs and [indiscernible] engineering. Overall, this would enhance our capabilities across fermentation science, process development and next-generation products and accelerates our aspiration of becoming a globally integrated fermentation-based CDMO player. Complementing our technology expansion is acquisition of selected global brands from Sanofi farms. As a part of this, we are acquiring 13 established brands in the anti-TB an anti-infective segments. This portfolio gives us access to 55 countries across Europe, Middle East and Africa markets. While MicroBiopharm strengthens our upstream scientific and manufacturing capabilities, the Sanofi portfolio expands our downstream commercial presence through established brands and international marketing access. It also creates opportunities for forward integration from intermediates to APIs and finished formulations. Together, these acquisitions substantially broaden our therapy areas such as oncology, immunosuppressants, et cetera, as well, give us a global geographical footprint. Viewed as a whole, these initiatives present a clear strategic road map. Expanded fermentation capacity supports manufacturing scale, investments in R&D strength and innovation, API expansion enables forward integration, microbiome enhances technology capabilities and the Sanofi portfolio broadens our commercial reach. Collectively, these initiatives position GTPL as an innovation-led pharmaceutical company with a growing CDM of capability, a wide therapy area and a strong foundation for sustainable long-term growth. Now I would like to hand it over to Krupesh to take you through the financial performance of the quarter. Over to you, Krupesh.

Thank you, Sachin. Good afternoon, everyone. Revenue from operations for Q1 FY '27 stood at INR 43.8 crores compared with INR 35.9 crores in the corresponding quarter last year and increase of 22.1% year-on-year. Fees growth came in from a robust increase in sales volumes, which reflects a healthy demand outlook for our products. EBITDA for the quarter grew by 49.4% year-on-year to INR 20.8 crores with an EBITDA margin of 47.5%, up by 867 basis points. Profit after tax stood at INR 11.1 crores compared with INR 9.1 crores in Q1 FY '26, reflecting a growth of 22.1% year-on-year. Our balance sheet remains healthy and provides the flexibility to continue investing in our long-term growth initiatives. With that, we can now open the floor for questions.

[Operator Instructions] The first question is from the line of Harsh Kapadia, an Individual Investor.

It has been almost three years since we last had a con-call. So first of all, my question is that what was the reason behind the almost three years of silence?

Is that the first question or the only question?

No, no. It is the first question, sir.

Okay. I think -- I think you're right. We have been silence for the past three years. I think we have been in a mode whereby our business has been pretty I would say, flat, but at the same time, we've been sold out on capacity, and we have been in a working phase whereby we've been investing in CapEx and building the infrastructure that that we have. And admittedly, we have been late by almost about a year in terms of the projects that have been implemented, but now it's all ready to go.

So my first question is regarding the INR 3,000 crore mega acquisition that we are doing. So we are raising around INR 1,000 crores for QIP and taking a debt of around INR 2,000 crores. Now if you take the modest cost of capital around 10%, then it will create around INR 200 crores of interest burden every year. So if this new business brings around INR 1,000 crores to INR 1,200 crores of revenue in the initial year, then a huge chunk of profit will go direly go as the interest payment. So sir, how does this actually make financial sense for us in the near term? And when do you realistically expect these acquisitions to start adding actual net profit to our company's bottom line after the paying the interest?

A couple of couple of points. Although we have signed both the acquisitions at one time, one of them gets over -- gets closed right now. The second one is still probably about 6 months or 9 months, if not longer away because the long stop date over there is June next year. The reason for that essentially been that there are significant regulatory approvals that have to be obtained from over 50 countries. So it is expected to take time, which is usually does. And with regards to the interest cost, while the interest percentages are significantly higher in India. In the 2 geographies that we are looking at, the interest cost is significantly lower than the 10% that you have mentioned. So we don't see interest outflow to the tune of the number that we mentioned. And the way we see it from the very beginning, this business is actually cash flow positive.

Okay. Sir, my next question is regarding the API block. So back in November 2023 con call, you guided that we would start seeing additional revenue from the API block in FY '25. Now we are already in the FY '27, but our quarterly revenue is still stuck around INR 20 crore run rate. Could you please explain what led to such a long delay of two years when we finally see the actually actual revenue or in the P&L?

Essentially, our API block although we were planning to start with immediately, it took a lot of time because we did not have enough capacity in the fermentation block. So that is something which has just begun now. And unless we had more intermediate, we had no opportunity to produce API because whatever we were producing was already on tracked in terms of sales. So we could not gets into the API path by cannibalizing or by reducing the supplies that we had to the current customers, which have been long-term partners of us for a long time.

So sir, now we are having the additional fermentation capacity that is which we are going to use to [indiscernible] the API, right?

That's right. That's right.

Sir, my last question is regarding the merger, the merger that we have planned with the [ finest Medici ]. So we noted the announcement happened in around November 2024. But after 6 months, the decision was made to withdraw the scheme. But could you please explain the insight into the strategic thinking behind pursuing the merger initially? And what factors led you decide to call it off?

So our initial path was to essentially make this fully integrated pharmaceutical company with API fermentation and brands in the domestic market. That's very -- at a similar point of time at GTBL, we appointed an external firm to give us a strategic option in terms of what could we do in GTBL. And this is where the whole concept of a fermentation-based CDMO became more clearer to us, and we felt that if you would be doing anything else you will be diluting what GTBL is doing. And hence, from a perspective of GTBL we decided that we want to grow this particular business as a fermentation-based CDMO and not get into other businesses, which were predominantly domestic in nature.

The next question is from the line of Alan Tagawa from Adhant Ventures.

I had a question with regard to your group company, Themis Medicare and you post the merger, the acquisition that you have, the Sanofi brands and NBJ. What are the benefits that can actually move towards formulation for Themis? Do you see that happening over the next 1 to 2 years, where I think a formulation which is currently outsourced will eventually move towards Themis?

I think a couple of things. I'll divide the discussion of the response between Themis and GTBL because we are really on the GTBL earnings call. So from a GTBL perspective, the Sanofi business, which is there, will be contracted to -- a certain part of it will be contracted to CMOs, which may or may not be Themis. But as plans stand right now, it will not be Themis because there are projects which are going on in Themis already or some other category of products. So we don't envisage that. But yes, we most certainly will be moving production from Sanofi to other sites, but on a CMO basis. This may or may not be inside India.

Next question is from the line of Mirali Shah from Aspen Western Managers.

I have three questions. So first is on the MDJ, we have a lot of capabilities that we are bringing in from the MDJ portfolio, like the appreciation, fermentation, ADCs and [indiscernible]. Just wanted to know which of these platforms are already commercialized or commercially validated today and which are essentially like a 5-year option? And what the revenue is currently being generated from each of them?

So at MDJ apart from ADC, which is a relatively new technology that they have developed and patented. All the other areas are already commercialized, which means we have experience of at least one project that they have put into development and also commercialized, which means they have the respective GMP acquisitions to, which would be required. In terms of revenues, which are coming in from each of the verticals that we are not in a position to [indiscernible] at the same stage.

Okay. So ADC is something that will be coming up now, right?

ADC is something which will be -- so they have the technology, but there is no project which is still bagged from a CDMO perspective. But it's innovative technology, which only time will say how much interest it gains from the prospective customers, plus all the other technologies, meaning peptides, plasmids, onco, precision fermentation, immunosuppressants, anti-infectives these are all commercialized -- at least one product from each of them is commercialized.

Understood. My second question is on the -- so we are seeing a global product market shift from Rifaximin towards Rifapentine. What is the downside to our existing Rifamycin as economics and how much of that risk is offset by the Gujarat Themis moving downstream into Rifapentine APIs?

We actually like from a Rifa-S manufacturing perspective, we like the fact that the market is moving towards the Rifapentine, although not as rapidly as we would like because the requirement of Rifa-S to manufacture 1 kilo Rifapentine is more than what you required to manufacture Rifamycin. And from our perspective, it doesn't matter either way because we are ready with [indiscernible].

Understood. And lastly, on the formulation capacity, if you can help bridge the utilization, the additional 540 kl capacity that we have come up with more color on the customer qualifications and how much of it is currently unallocated?

So we have -- as you mentioned, we practically doubled the capacity. All of the expansion is going only for Rifamycin because there is some expansion, which is also gone for R&D and CGM pilot facilities, but practically double the capacity. And we -- those manufacturing site starts full scene by the end of this month. So we have to be easily commercialize everything that we produce.

So what will be our utilization level from that incremental plan?

So from a fermentation perspective, it's 0 or 100. So basically, we will be running capacity at full scale. So the expanded capacity will be fully operational and running and producing by the end of this month. In terms of customers in terms of customers, et cetera. Obviously, our target is everyone who is using the intermediate in and outside the country.

The next question is from the line of Saloni Arya from Molecule Venture.

I just have one question on the Micro Biopharm Japan. We have made aware this deal is expected to be closed by August end. So has the funding been secured to close to the deal?

Yes, pretty much. Pretty much. So -- and I think there would be some last minute approvals required. But yes, otherwise, it is in place.

Okay. So if the funding is secured from what this extra INR 450 crore debt flexibility option plus INR 1,000 crore guarantee that we have recently taken from the group companies. What's the purpose for that, sir?

We have -- we are preparing for multiple avenues in terms of funding. So we have one avenue close that we would like to work with the optimal mix of debt and equity. So we are keeping everything ready by the end of this particular month when we had the closing to figure out or rather to ensure that we have the best mix that is required to close this particular transaction. And hence, there are multiple approaches, which are being explored and being exercised also. At the right time, we will take a call what works best for us.

Makes sense, sir. Sir, regarding the stand-alone we have done, this fermentation block as well as the NPA bock, I just wanted to take an update from -- since last [indiscernible] were expecting the commercialization to happen from this month onwards. So has it started yet? And what is the update on the scene? When can we expect numbers coming in from the fan NPV?

We should start seeing the output from the expanded capacity to a certain extent from this quarter and then finally, from -- in the second half of the year.

So both the API and the fermentation block will be up and running?

That's right.

The next question is from the line of [indiscernible] from MMM Capital.

Sir, my question with regards to the some of the acquisitions, which is more on asset-light model as we are not acquiring any of their assessment -- since there are no factors being acquired this [indiscernible] molecule will manufacture that [indiscernible] Will it be manufactured directly by us or you will be doing with some other parties?

Sorry, the line was not very clear. Was the question, Sanofi products will be manufactured directly by us or by someone else? Was that the question?

After the post closing.

After post closing, there is a [indiscernible] service agreement between us and Sanofi for 3 years, whereby on a step-by-step manner, all the transfer will take place. Will start with country-by-country transfer of the marketing authorizations from their NIM to our NIM, which will finally culminate into all the manufacturing moving into power control. not the sites, not the people, but just the manufacturing. So essentially, we will be using PMOs, some of them which already are Sanofi's using and some of them, we will create at the 3 years' time.

This would be completely manufactured by us, that's the plan, right?

We hope much earlier. We hope much earlier, but Yes, 3 years is the maximum time that will take. So all the tech answers, et cetera, would be complete in the first year itself.

Okay. Sir, my question is regards to the fund raising as -- how much you are raising debt? Is it on INR 4,000 crores or [ INR 1,500 crores ]?

So we are keeping ourselves ready to do the transaction completely or significantly by debt and also planning on equity. So as I mentioned that to the previous person who is asking the question, we'll do the right mix as time goes -- as the time comes by.

But we haven't decided any absolute amount in terms of debt is on what like amount, we have kept an option open?

Right now, I think what we have decided is that we are raising equity to up INR 1,000 crores. That is what we are looking at right now. Today, it is up to INR 1,000 crores. And then you will figure out exactly whether we raise INR 1,000 crores? Or how do we go about the sorry, what do we do with regards to the debt part, we are keeping everything ready for us.

Okay. And just [indiscernible] proprietary technology like [indiscernible] how post can absorb it and commercialize it in within [indiscernible]

Sorry, what was the question about enzymes and how we can commercialize it in GTBL?

Yes.

I think we have some clear ideas on this, and we will do a fair amount of work within the first year. So I think it's not -- if won't take too much time for us to bring in some quick wins in terms of synergy between the two companies.

Great. That answers my question. Sir, my only request is, can we have this con-call going on on a quarterly basis, if not quarterly on a tenant basis, regularly rather than just one-off?

Yes, most certainly.

The next question is from the line of Vignesh Iyer from Segment Investors.

Two questions from my end. First question is on the promoter income brands. Could you guide me if I'm not wrong in the month of July, around 2% of the income [indiscernible] got released. So what is the action plan from here on one part of that? How would we see the income then going down?

Sorry, I'm not so aware about this particular detail. The 2%?

I'm in the pledge of the shares that has happened -- with the -- I guess, it is around -- as of June, it was 8.5% and certain 1.5%, 2% got released in July. So I wanted to know what is the action plan on this part to reduce the promoter pledge?

I think within a year, the year to 15 months will be going down significantly.

Okay. Okay. And I wanted to understand on our base business, what kind of CapEx can we expect in this year in FY '27?

So most of our CapEx is now completed. I think probably to do some last -- sorry, that to do last -- the last mile thing we may have a little bit less about INR 10 crores to INR 15 cores, but otherwise, most of the CapEx is already done by the company.

Right. And some amount of maintenance CapEx would also be there, right, in this year?

Yes. Some other some that would be there for sure. But typically, CapEx has been a few crores, not much.

Okay. So around INR 20-odd crores, can we expect, I mean, on the base business for 3 years including everything?