Innova Captab Limited (INNOVACAP) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Innova Captab Limited Q1 FY '27 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. 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 date of this call. These statements are not guarantees of any future performance and involve risks and uncertainties that are difficult to predict. Today, from the management side, we have with us Mr. Vinay Lohariwala, Managing Director; Mr. Lokesh Bhasin, Chief Financial Officer and SGA, Investor Relations Adviser. I now hand over to Mr. Vinay Lohariwala, Managing Director of Innova Captab Limited. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us today. It is my pleasure to welcome you all to Innova Captab Q1 F '27 Earnings Conference Call. We have started financial year '27 on a strong note, delivering strong year-on-year growth of 34% and 33% in revenue and EBITDA, respectively, for the quarter. The performance is broadly in line with growth trajectory we have outlined in the year and provides further confidence in our ability to deliver on our guidance of 20% revenue growth and profitability outpaced revenue for FY '27. This performance reflects the continued strength of our diversified business model, disciplined execution, sustained customer traction across the CDMO and branded generics business. Growth during the quarter was supported by steady order flows and expanding product portfolio and deeper engagement with both existing and new customers. Our continued focus on operational excellence, manufacturing efficiency and stringent quality standard has enabled us to strengthen our competitive position and effectively address the evolving requirement of our customers across domestic and international markets. Coming to our CDMO business. The CDMO business reported revenue of INR 328 crores during Q1 FY '27, reflecting a year-on-year growth of 32%. We continue to witness healthy demand across our customer base and our focus remains on strengthening relationship with our existing customers, increasing our share of business with them and simultaneously adding new customers across therapeutic category and dosage form. Over the years, we have built a broad and diversified product portfolio supported by strong formulation development capabilities. We continue to invest in product development and complex dosage capabilities, which will enable us to address a wider range of customer requirement and further strengthening our position as a trusted CDMO partner. Our manufacturing capabilities remain a key competitive strength. With technology advance, facilities, increasing automation, robust quality systems and a scalable manufacturing platform, we are well positioned to support the growing requirement of our customers while maintaining consistency, efficiency and compliance. Coming to our branded generic business. The branded generic business continued to maintain healthy momentum with revenue of INR 142 crores growth of 39%-year basis. Our strategy remains focused on strengthening our presence in existing market and gradually expand into newer domestic and international geographies. We continue to broaden our product offering and deepen market penetration supported by our integrated manufacturing and product development capabilities. Over the medium and long term, we believe the branded generic business provides us the significant opportunity to further diversify our revenue base and strengthen our presence across the key markets. Our long-term focus remains firmly aligned with building Innova Captab into a future-ready, scalable pharmaceutical organization, while maintaining a strong focus on disciplined capital allocation and sustainable value creation. Our strategic priorities remains clear: improving capability utilization across our manufacturing facility, expanding our capabilities in complex dosage form, strengthening our R&D platform, deepening customer relationship and expanding our branded generic presence across key markets. At the same time, we remain committed to deploying capital in a disciplined and prudent manner with investment being prioritized towards opportunities that offer optimum return, strengthen our capabilities and competitiveness, support our long-term growth objectives. We remain confident about the opportunity ahead and are committed to creating sustainable long-term value for all our stakeholders. With this, I would like to hand over the call to our CFO, Mr. Lokesh Bhasin, to take you through the financial performance for Q1 FY '27. Thank you.

Thank you, sir, and good morning, everyone. I will now walk you through the financial highlights for Q1 FY '27. Q1 FY '27 highlights. Our Q1 performance reaffirms the growth trajectory, and we remain confident of delivering on our stated growth objectives. With healthy demand across our businesses and continued execution focus, we believe the momentum is sustainably in the future also. Consolidated revenue for the quarter stood at INR 470.9 crores, registering a strong 34% year-on-year growth, supported by strong demand across both our business areas. Exports contributed 32% of our revenue during this quarter, reflecting the continued progress we are making in expanding our presence across international markets. Our CDMO business reported revenue of INR 328.7 crores, growing by 32% year-on-year. The growth was driven by an expanding product portfolio, addition of new customers and deeper engagement with existing customers, resulting in higher wallet share. Our Branded Generic business recorded revenue of INR 142.2 crores, representing a growth of 39% year-on-year, supported by continued traction across our key markets. On the profitability side, EBITDA for the quarter stood at INR 75.1 crores, a growth of 33% year-on-year with a margin of 16%. Profit after tax for the quarter came in at INR 44.1 crores, reflecting a growth of 42% year-on-year. With this, I would like to conclude our opening remarks and open the floor for question and answers. Thank you.

[Operator Instructions] The first question comes from the line of Aanchal Maheshwari from Naredi Investment.

I just had 2 questions. So can you -- is it possible to give the breakup for our branded business between domestic and international branded?

So at an overall level, while breakup -- further breakup in business area-wise, we normally do not track. But at an overall business -- overall consolidated revenue basis, our domestic business is around 70% and export business is around 30%.

Okay, sir. And what is our current capacity utilization for our newly commissioned Jammu facility?

So Jammu plant has just started ramping up. So if I see this quarter at an annualized basis, we are looking at a capacity utilization of around 25% to 30% on an annualized basis based on the performance of this particular quarter.

And sir, what are the asset turns that we expect from this particular plant?

So at an optimum level, we expect that the asset turn from this plant would be north of 3x.

[Operator Instructions] The next question comes from the line of Juhi Kumari from Narnolia Financial Services.

Congratulations to the team for the good set of numbers. I had a couple of questions. My first question is regarding the net working capital, management was like aiming for the historical levels following the Jammu ramp-up. So what is the net working capital...

Sorry to interrupt, ma'am. May I request you to please use the handset as your voice is not clear.

Yes. I was asking about what was the net working capital cycle as of June 30, 2026? And also are the inventory holding days and trade receivable normalizing back towards the historical levels following the Jammu ramp-up?

So see, as far as our Jammu ramp-up is concerned, the initial working capital has already been built up and factored in our initial ramping days previous year itself. And as of now, we are maintaining our expected cash conversion cycle of 90 days plus/minus 10 days for our entire group level.

Okay. Okay. And one more question, like how many new products or formulations were commercialized in first quarter? And what is the planned R&D spend percentage for sales at the remainder of the FY '27?

So our overall R&D spends range between around 0.7% to 1% of our total revenue in general. And at the same time, see, there is a continuous flow of new product development and R&D keep on working on new products with a very firm time lines to be commercialized in short term, midterm and long term. So it's a normal course of business in which new products depending upon customer and market demands are introduced by R&D through proper study and research.

The next question comes from the line of Deepak Ajmera from IGE India.

Yes, am I audible?

Yes.

So what is our revenue from the Jammu facility in absolute terms, if you can mention in this quarter, specifically?

So this quarter, we have achieved a revenue of around INR 107 crores from Jammu.

Got it. And what was the revenue last quarter?

Around INR 90 crores.

So even the ramp-up at Jammu is a bit slow?

No, sir. So Jammu ramp-up is pacing up the way we expected. So we should also consider that normally quarter -- if there is a seasonal impact of the entire year. And from -- see, from quarter 2 onwards, the normal healthy season starts picking up. So in coming quarters, we are expecting the Jammu plant should also ramp up as we speak.

[Operator Instructions] The next question comes from the line of Pavithra Jaivant from PrimeInvestor.

Congratulations on the numbers. I just wanted to know how should we look at possible conflict of interest between your CDMO business and your Branded Generics business? Is that something we should think about?

So you are talking about the contribution of these 2 business area in our overall revenue growth?

No, sir. I'm just talking about a conflict of interest. Like, for example, if you have the same products that you're making for your CDMO clients as well as under your own Branded Generics business, would that be considered a conflict of interest? How would that work?

See, while we are having 2 front-end business areas, CDMO as well as Branded Generic business. So from a plant perspective, from a manufacturing capability business, our Branded Generic business is just considered as a normal CDMO customer by our plant. So from that particular viewpoint, there is no, I would say, additional treatment or special treatment for our Branded Generic business. So from a manufacturing capability business, they are just producing for both business areas. And at the same time, it's a competitive industry and whatever product that has been transferred from manufacturing capability from manufacturing plants to our Branded Generic business are transferred on an arm length basis. And in an open market, it is an open competition. And at the same time, it's a normal industry practice, accepted practice to have that CDMO business is having also a Branded Generic business. So normally, it doesn't -- there is no conflict of interest per se, having both CDMO as well as Branded Generic business.

The next question comes from the line of Vedant Nilekar from ICICI Securities.

Am I audible?

Yes, please.

Congratulations to the management for a great set of numbers. I just have one question on the gross margin front. So we have seen a Y-o-Y dip in the margins. Could you please throw some light on it? And how do we see the trend for the full year?

See, the movement in gross margin is a combination of our overall business mix. So it is just a 1%, 1.5% down from year-on-year, so which is in the normal course of business and mainly due to the contribution of our different business mix in overall city.

Right. So on an overall year basis, we should not expect a major deviation?

Yes, it should -- so as of now, we have posted a gross margin of around 35.5%. So our overall at a full year level, they should maintain between this range, plus/minus 2%.

The next question comes from the line of Ankit Shah from Canara Robeco AMC.

Congrats on a great quarter. My first question is related to your growth. So we managed a 34% Y-o-Y growth. Can you break it up between volume and realization? And also excluding Jammu, what was the volume growth? If you could give some sense?

Ankit ji, while your voice was not that audible, you were just asking that 34% of revenue growth, breakup between existing and Jammu? Am I right?

Yes. And also volume growth as well.

Okay. Okay. Yes. Yes. So volume growth at overall level on a revenue basis, if I break this growth into 2 parts, volume is around 22% growth year-on-year at an overall manufacturing capability level. And the rest of the growth has been fueled up by a favorable change in product/sales mix and favorable pricing.

Right, sir. And of this 22%, I mean, excluding Jammu just from Baddi, how much would have been the volume growth?

Yes. I think it should be in the range of 12% to 14%.

Got it, sir. And secondly, you gave a sense on the revenues from Jammu, but now how would the profitability look? I mean, are we now positive EBITDA margin on that?

Yes. So we are pleased to inform that this quarter, we have posted a positive EBITDA for Jammu to the tune of INR 1 crores to INR 1.5 crores.

Okay. Got it. Thirdly, there is a rise in other expenses on a Y-o-Y and Q-on-Q basis. So any cost particularly risen, especially in light of global supply chain disruption. So anything you would like to call out?

So Ankit ji, if you see from a percentage basis, my other expenses have slightly reduced on a year-on-year basis. But yes, overall cost has increased, which is commensurate with the increase in my operations also. And yes, as far as that conflict is concerned, there was slightly increase in logistics costs, which has been duly factored in our overall EBITDA period of time and in overall revenue scenario also. It was not that material.

Okay. Got it. And so in the light of the strong performance in this quarter, do you still maintain the guidance of like 20% plus growth? Or is there a room to upgrade that for this year?

So Ankit ji, whenever we say growth for [ projected ] it is always on a volume basis. So as of now, we are maintaining that we are growing north of 20% on volume. And we would like to maintain that -- we are very much confident that we should be growing on a 20% plus volume growth in the coming period also.

Okay. But the business mix tailwinds, that should continue for the coming quarters as well? Or was there anything one-off in this quarter?

So see, from an overall business perspective, while our front-ending team keeps working on bringing value to the table and doing value addition to overall kitty. But since there are other macro political and geopolitical reasons, which keep on changing. So we will evolve as and when these things unfold.

And lastly, can you give any updates on the Baddi CapEx and also CapEx guidance for this year and next?

So as far as our general CapEx is concerned, it will go in normal course of business for both maintenance as well as our certain growth CapEx to help augment our overall capabilities in our existing manufacturing plants. And in addition to this, as we submitted also regarding that Baddi new plot that we bought last year. So the plan as of now is on the same line, and we are working -- still working to firm it up. So as and when we will firm it up, we will come to the market with more concrete plan.

The next question comes from the line of Pritesh Chheda from Lucky Investment.

Sir, just on the margin bridge. So Jammu margin is about 1% to 1.5%, which means non-Jammu margin is plus 20%. Now we always, in our growth phase, would have a situation where there will be a new plant which will come up. So let's say, in this space, where do we see the overall margin heading before the new plant comes in?

So Pritesh ji, if you see the Jammu expansion is like -- is a large expansion when you see the existing base. When we done the INR 500 crores CapEx that time, let's say, the ex Jammu CapEx is also like INR 500 crores. So it's 100% [ FAR ] extension to the existing one. So the future expansion could not be in that territory that in a single sort, the INR 1,000 crores is not invested. So it could be like in tranches of like INR 200 crores, INR 250 crores. So drag on the existing margin could not be that much. I think you understand what I'm trying to say?

Yes. Yes.

Jammu is a big project for the company on the base of the INR 500 crore expansion, was INR 500 crores. Now let's say, if we are doing a INR 250 crore expansion, then the operational expenses or the depreciation will not be that material for the overall consol balance sheet. So the question number two, that once the Jammu start giving a good EBITDA margin, then the overall margin that is at a level of 15% to 16% should expand.

Your ex Jammu margin is 20% today.

Yes.

So should the overall company level margin should move eventually towards 18% to 20% number?

So for margin guidance, we always maintain that 15% to 16%, plus/minus 2%, right? So that's because of the growth engine as well as the other things, right? So once the Jammu margin is maturing and the new factor in CapEx, it can have the 1% or 2% drag, right? So assuming 20% is very high expectation, I think 17%, 18% is the fair number.