Marksans Pharma Limited (NSE: MARKSANS) Q4 2025 Earnings Call dated May. 20, 2025
Corporate Participants:
Unidentified Speaker
Dr Bino Pathiparampil — Head of Research
Mark Saldanha — Chairman & Managing Director
Jitendra Sharma — Group Chief Financial Officer
Analysts:
Unidentified Participant
Ahmed Madha — Analyst
Gautam Gosar — Analyst
Mythili Balakrishnan — Analyst
Nitin Agarwal — Analyst
Viraj Mahadevia — Analyst
Bharat Shah — Analyst
Dhvij Patel — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the conference call to Discuss Markson’s Pharma Q4FY25 earnings con call hosted by Elara Securities India Private Limited. 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 this conference call, please signal an operator by pressing 0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Dr. Bino Pathi Parampal from Elara securities India Private Limited. Thank you.
And over to you sir.
Dr Bino Pathiparampil — Head of Research
Hi. Thank you Navya. Very good evening to all of you. This is Dr. Bino Pathiparambal welcoming all of you on behalf of Alara securities to the Mark Sense Pharma quarter four and full year FY25 earnings conference call. We have today with us Mark Saldana, Founder, Chairman and Managing Director and Mr. Jeetendra Sharma, Chief Financial Officer of Marksens Pharma. Before I hand over the call to the management, please note that certain statements made by the management may be forward looking in today’s call. These reflect management’s best judgment and analysis. The actual results may differ materially from current expectations based on a number of factors that affect the business.
We will begin the call with opening comments from the management and we will have a question and answer session following that. I hand over the call to Mark over to you sir.
Mark Saldanha — Chairman & Managing Director
Thank you Binu. Welcome everyone and thank you for joining us for our Q4FY25 earning conference call. We sincerely appreciate your interest and continued support for the company. I’m pleased to report yet another year of robust performance achieving an all time high in both revenue and profit. Our operating revenue and PAT increased by approximately 21% year on year. We witnessed a positive growth momentum across all our regions with the US market being a significant growth driver experiencing a 35% increase in revenue year on year. Our OTC segment reached a record high revenue and crossed a 2,000 crore mark or testament to our focus and execution in expanding our OTC product pipeline.
During the year. Favorable market conditions and growth driven by market share gains and new product launches in the US fueled our success. However, the fourth quarter witnessed a slower cough and cold season for the RX products. Price erosion was stable in Q4. Our UK and Australia and rest of the world markets achieved their highest quarter. Revenue of the year. The freight cost in the quarter was stable. We witnessed high freight cost in the first two quarters. However, cost stabilized in the latter. Half of the year our strategic initiatives are shaping up with continued focus on achieving a product pipeline and during the year we managed to commercialize 58 SKUs and have about 79 more products in the pipeline. In the UK region we received approval for around 12 products and we have already filed 18 additional products out there. Our capacity expansion initiatives is advancing and we have anticipated the operating leverage benefits to materialize in the next financial year.
Looking forward, we are optimistic about the outlook. Our track record of consistent growth serves as a solid foundation and we are confident that our strategic initiatives will continue to drive momentum as a part of a commitment and enhancing shareholder value. I’m pleased to announce that the Board has recommended a dividend of Indian Rupees per equity share representing 80% of the face value per share. With this, I would like to turn it over to Jitendra for an update on the financials.
Jitendra Sharma — Group Chief Financial Officer
Thank you sir. In quarter four of FY25 our operating revenue stood at rupees 708.5 crores, an increase of 26.5% year on year compared to rupees 560 crore in the same quarter last year. Revenue from the US and North America markets stood at rupees 328.6 crores, an increase of 34.1% on year on year basis driven by new product launches and increased market share. UK and EU formulation business grew by 17.7% year on year to Rs. 274.1 crores. Australia and New Zealand market recorded revenue of rupees 76.5 crores up by 20.9% year on year. The rest of the world recorded revenue of rupees 29.3 crore in Q4 of FY25, an increase of 55% year on year.
Gross profit was at rupees 383.2 crore up 32.1% year on year. Gross margin expanded by 228 basis points from 51.8% to 54.1% in Q4 of FY25. This was driven by better product mix and low raw material prices. We recorded EBITDA of rupees 125.8 crore in Q4 of FY25, an increase of 14.7% year on year. The EBITDA margin for the quarter stood at 17.8%, a decrease of 183 basis points from last year’s same quarter. The decline in margin is due to an increase in employee expenses and an increase in R and D expenses in Q4 of FY24.
Profit after tax was at rupees 90.7 crores compared to rupees 77.6 crore in Q4 of FY24, an increase of 16.9% year on year. EPS for the quarter was rupees 2. Now talking about FY25 financial performance in FY25 our operating revenue stood at Rs. 2,623 crores, an increase of 20.5% compared to Rs. 21. 77 crore in the same period last year. The US and North America market recorded revenue of rupees 12. 37 crores up by 34.7% a year on year basis and contributing 47% to our total revenue. UK and EU market grew by 9.2% year on year to Rs.
10. 30 crores contributing 39.3% to the revenue. Australia and New Zealand market recorded revenue of 253crores, an increase of 15.5% on year on year basis. The rest of world market recorded revenue of rupees 104 crores. Contribution from these two markets stood at 9.6 and 4% respectively. The gross profit was at Rs. 14. 79 crore up 29.8% year on year. Gross margin increased by 407 basis points to 56.4% in FY25. EBITDA for the period was at rupees 529 crore an increase of 15.3% year on year. EBITDA margin stood at 20.2% compared to 21.1% in FY24. The decline is primarily due to an increase in employee expenses due to the headcount additions at the acquired facility in Goa, an increase in freight cost in the initial quarters of the year and also due to increase in the R and D expenses.
Profit after tax was at Rs. 383 crores compared to 315 crore in FY24, a growth of 21.5%. EPS for FY25 was rupees 8.4 compared to rupees 6.9 in FY24 in FY25. Cash generated from operation came in at rupees 207 crores. The capex during the period was rupees 173 crores which is in line with our plan to scale up the acquired facility in Goa. We spent Rs. 57.9 crore in R&D in FY25 which amounts to 2.2% of the consolidated revenue, we continue to remain debt free and the cash balance stood at Rupees 704 crore as of 31st March of 2025.
Additionally, India ratings and Research has upgraded the company’s long term debt to IND AA from IND A with a stable outlook and affirmed short term debt at Ind A1 enhancing our financial credibility. With this I would like to open the floor for question and answers. Thank you very much.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press 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. We take the first question from the line of Ahmed Madha from Unifi Capital. Please go ahead.
Ahmed Madha
Thanks for the opportunity. Sir, my first question is on the Tewa facility. In the last call you had mentioned that utilization was up 20%. It will be helpful if you can explain what is the current utilization or the other utilization for Q4 and how do you see that trending in FY26? A parallel question to that is there has been hiring for that facility in last few quarters. Do you see the peak hiring is behind us or even in the next year? Employee cost should inch up further on quarterly basis.
Mark Saldanha
Yeah. With regards to the hiring, obviously we need to hire staff for the growth as and when the facility has to produce more. But that said and done, we are very close to the peak in terms of hiring. There may be a marginal hiring capacity requirements but that will be extremely small compared to the quantum of hiring that we’ve done in the last quarter. By itself with this hiring, we do believe our scale up would basically meet with at least 50 to 60% of our capacity growth that we have targeted historically. Today in. Not in the last quarter, not in the fourth quarter, but in the first quarter.
We are trending. We are trending around at 400 crores which is pretty much half of what we had spoken of. 800 coming out of that plant.
Ahmed Madha
Got it. And with this trend and other facilities at higher utilization in the next two years, is it fair to assume we reach close to 3,500 crore top line? Going by your commentary before, yeah.
Mark Saldanha
We still believe we are on par of hitting those objectives. Yes.
Ahmed Madha
Got it. And in Q4 we had a very high R and D cost. Obviously it’s a part of the business. But could you give some some guidance? What was the nature of the same was it because of the increased filings and how do you see the R and D cost normalizing on a full year basis in future? Either in percentage of revenue or absolute terms whichever way the company looks at it.
Mark Saldanha
I think from an R and D point of view taking the whole year spending makes more sense than a quarter wise spending because it just depends on when the filings happen, when the product biocoolants cost comes into play and everything of that stuff. So it’s difficult to equate quarter justification of balance. But the whole year I think we will be range bound at what you are seeing. You know I think Jeepinder will throw some bit more color on that R and D spend.
Jitendra Sharma
So last year like you know we have spent 2.21% of our revenue on R D expenses and in the Q4 like you know so if I compare with the Q3rd spend with Q4 so in Q3 our R D spend was 11.71 crore and in Q4 it increased to 23.5. So there was an increase of almost 12 crore in the Q4 and we have done lot of filings both in US and in UK during the Q4. Moving on we do expect the R and D expenditure to remain between say 1.9 to 2% on a year on year basis.
Ahmed Madha
Got it. Just one more question before I join back in the queue. How do you see the impact of US tariffs on your business? Obviously everything is premature in nature but some insights from your side qualitatively and your view will be very helpful. And also in that context, in anticipation of tariffs or otherwise, are we seeing any pre buying in quarter one?
Mark Saldanha
No, not exactly. There’s no pre buying in quarter one. The US tariff is a universal question. Honestly I don’t think anyone is anyone has the right answer for that. Are optimistic that India’s proposal of trade, you know, the trade balance or the 00 tariff recommendations would fly. And even if there is a nominal, even if there is a tariff implemented it could probably be very nominal in nature. Our Indian delegates are there in the US as we speak. But again that’s said and done. It’s anyone’s guess as to what all the tariffs will outplay. My personal view is I don’t see a major impact on the tariffs because US is taking more of a softening stand over time.
Not taking a hard stand on how they started the tariff play. But then again that’s only my opinion. I do believe that if the tariffs are disproportionate in any Nature, it will be passed down to customers and clients and accordingly it will be then passed down to the consumer or customers. So I think that clarity has come from all the retailers that tariffs, if the tariffs continue, then price increase would be, would be unavoidable. Basically. So basically the retailers have already spoken out and said that the prices would go up for consumers.
Ahmed Madha
Sure sir, this was helpful. I’ll join back in the queue. Thank you so much.
operator
Thank you. Next question is from the line of Gautam Gosar from Monarch aif. Please go ahead.
Gautam Gosar
Hi sir, thank you for the opportunity. Also my question is on the TIVA facility. Sir, basically I wanted to know how much volume did you do from the TIVA facility last quarter in Q4.
Mark Saldanha
So the last quarter Q4 we didn’t do the volumes as expected. You know, we were somewhere around 200 odd million tablets, 200 million units being generated. But this year we are, this first few months we are trending around 350 million tablets. So our objective is to hit to cross the 450, 500, come to close to 500 million in the first half and then look at 800, 600 and 700 million thereafter.
Gautam Gosar
Okay, got it. So we have a capacity of around 8 billion units in the facility. So can you highlight the peak utilization levels where we can reach and how much time will you take to ramp up this further?
Mark Saldanha
So we do expect to hit 50% of those volumes hopefully within the next six months. Ramping up to hit 8 billion units would probably be towards the latter half of the year or maybe early next year. But we do plan to come very, at least utilize 50% of those volumes within the next six months.
Gautam Gosar
Okay, what is the capacity utilization for the XIVA business?
Mark Saldanha
I didn’t get, could you repeat that question again?
Gautam Gosar
What is the capacity utilization for the combined business?
Mark Saldanha
The other facilities are running at around 65%.
Gautam Gosar
Okay, just to follow up sir, I think with the existing capacity ramping up further on the facility as well, we will be majorly exhausted in the next two years on the current capacity. So do we have any plans to further add any capacity by debotting or any plans there? If you could highlight on that.
Mark Saldanha
Yes, I mean it’s a good question. Looking at our growth plans, we would have to obviously add facilities maybe after two years, but definitely we are always on the lookout because you know, in pharma you got to invest today to see returns after two years. Right. So technically we are always on the lookout for facilities expansion. I mean any new facility that comes our way we will definitely try to explore those possibilities today. We don’t have anything on hand or we don’t have anything concrete to discuss on that, but we would have to explore new capacities maybe two years down the line.
Gautam Gosar
Okay, got it. So we don’t have any expansion plans in our existing capacity.
Mark Saldanha
In the existing facility. It is nominal CAPEX now? Yes, from, yes, from 450, 500 million to, you know, from 5 billion to 8 billion. We may need to expand a bit just to line balance everything, but I do believe so CAPEX will continue nominal CAPEX will continue for the next couple of years for us to debottleneck whatever we believe is needed to achieve optimum capacity in the plant. So that is very, very, that is very normal. It will be nominal in nature compared to the size of revenue being generated. So I think one should expect that there will be some capex, but not to the tune of what we have done in the last financial year.
Gautam Gosar
Got it, sir. So my last question is on our working capital gains, they’ve gone up significantly, which is leading to the low operating cash generation for us. So if you can allude some reasons for the claim and what can be the sustainable working capital raise for us?
Mark Saldanha
I’m sorry, I’m not audible. I just could not get, I could not get that question. Could you repeat that?
Gautam Gosar
Am I audible now?
Mark Saldanha
Yeah, yeah.
Gautam Gosar
So my question is on working capital. So the working capital days have gone up for us, which is leading to the low operating cash generation. So if you could allude some reasons for the same, what can be the sustainable working capital days for us?
Jitendra Sharma
Okay, so. Hi, Jitendra here. So see our current working capital cycle is of 127 days. So there is a slight increase as compared to last year and our inventory levels have gone up. So right now we are like, you know, in the process of building up inventory because a lot of new launches have taken place during last year, specifically in us. And we need to ensure that we, you know, we should have at least like, you know, three to four months of inventory at any given point of time. So we are building it up right now in terms of the cycle, optimum cycle.
Definitely our revenues are increasing. So in absolute terms, we will see increase in inventory and receivable levels in absolute terms. But in terms of number of days, I think it should be very much, you know, at the level which, at which we are at present.
Gautam Gosar
So it will continue to remain around 125 days old.
Jitendra Sharma
It will definitely be in this range. Definitely. Yes.
Gautam Gosar
Thank you.
Jitendra Sharma
So if you if you see our overall like, you know, levels, like, you know, our receivable levels are just under 75 days inventory, that by nature of business is service oriented. So definitely we don’t see inventory levels coming down. So broadly though we are trying to optimize. But it will remain under within These range of 125 to 135 days.
Gautam Gosar
Okay, got it. Thank you. And all the best.
Jitendra Sharma
Thanks.
operator
Thank you. We take the next question from the line of duty. Pathi Parampal from Elara Capital, please go ahead.
Dr Bino Pathiparampil
Hi, good evening again, Mark. We had this target of 3000 crore revenue in FY26. Are we on track for that?
Mark Saldanha
Yeah, very much, Binu, because we have done 2600. So we are very optimistic that we are very much on track for 3000 crores.
Dr Bino Pathiparampil
Right. And that will entail about 17% growth in FY26. It’s still early, but if I just ahead into 27, 28 etc. Do you think the 17% sort of growth rate is sustainable or do you think the size becoming bigger could gradually bring down the growth rates?
Mark Saldanha
No, I think that is very doable. We would like to improve over the 17% obviously, and we are optimistic that the market dynamics will stabilize. The geopolitical issues will probably settle down. But I think on a conservative basis, 17% is definitely the overrun.
Dr Bino Pathiparampil
Got it. And just pushing you a bit on the tariff front. Worst case, if some tariff indeed come to apply, say 10% or 15%, whatever it is, how would you be positioned competitively against your key competitor, which I guess is Perigo? I mean, will Perrego have a lot of US based plans and will they be much better positioned in such a scenario?
Mark Saldanha
So obviously, you know, tariffs being tariffs coming into effect is going to affect U.S. production also because, you know, U.S. is very dependent on all raw material imports. There are no raw material manufacturers within the US So technically all raw materials coming into the US will the tariffs will have an impact on that cost will go up even whether you produce it in US or any part of the world. With regards to if it is a nominal tariff, I think it is the impact is less. If it is an abnormal tariff, then one that will be passed on to the consumers and into the retailers and the retailers will pass it onwards.
I don’t believe it will go down that road. I’m quite optimistic that tariffs will be very nominal or not exist moving forward. It’s losing a bit of steel because of various. So I do believe that eventually if tariffs are disproportionately high, then it will be passed on. That said and done. U.S. manufacturing is also not going to the cost of U.S. manufacturing. U.S. manufacturing manufacturers are not insulated or isolated with tariffs their cost will go up because raw material costs cost will go up. So overall the difference may not be all that great that one would think that, oh well, if you are a US manufacturer, your cost will be very low.
No, that’s not the case because your cost will go up because of the raw material. And that I think reality is seeping in into the US market by itself. Well, tariff is never good news, but it is, it is what it is. It’s the nature of the beast today and we just have to tame it or cross handle it when it comes our way.
Dr Bino Pathiparampil
Got it. So this year we have seen a compression in EBITDA margin because of all the extra costs related to your new facility etc. So as operating leverage sets in, do you see a decent improvement in EBITDA margin next year?
Mark Saldanha
So there are two things Sabino. One is if you are comparing our last quarter, our last quarter has always been low historically if you go through the last couple of years because.
Dr Bino Pathiparampil
We can talk from the full year perspective from 24 financial year, 21% it has come down to about 20%.
Mark Saldanha
Yeah, so the, yeah, so that is very nominal. I think we will, we will basically we will be at par or we will be able to maintain the EBITDA, if not improve the ebitda. So we are quite optimistic and bullish on those grounds on the EBITDA front of it, the last quarter, obviously our last quarter is not the right way to evaluate anything because last quarter the product mix changes by itself. You know, we come off the cold season and we go into the pain season. There is a bit of a product mix change also which has an impact on the gross contribution by itself.
And yes there is the timing in terms of the timing may not be right because we added more people to enhance more capacity and volumes from, from our new plants. So. But I do believe we will maintain our ebitda, our historical EBITDA that we have done, but improve on that.
Dr Bino Pathiparampil
Got it. And finally one last to Jitentra. Could you put a number to the capex expected in FY26 all inclusive, maintenance, debottlenecking, etc all put together.
Jitendra Sharma
So last year of course we did capex of 173 crores and I think this year also the, the capex we will continue to incur, it will be lower than last year. But I think we should be somewhere between say 8 to 10 million dollar overall.
Dr Bino Pathiparampil
Got it. Thank you. I’ll turn back to you.
Jitendra Sharma
Thanks.
operator
Thank you. We take the next question from the line of Dhwij Patel from Fintrest capital. Please go ahead.
Dhvij Patel
Hello. Am I audible sir?
Mark Saldanha
Yes you are.
Dhvij Patel
Yes sir. Good evening sir. My first question would be on the Teva facility. Just wanted to understand what kind of revenues have we you know seen from Teva facility in this financial year. I guess we have just seen for six months if I’m not wrong.
Mark Saldanha
Yeah, so this, this year, I mean like I mentioned we, we are trending at. Right now we are trending at 40, 40 odd crores, about 35 to 40 odd crores. So we are looking at somewhere around between 400 odd crores. 400 to 5, between 400 to 500 odd crores. This is the trend as on today.
Dhvij Patel
400 to 500 crores is what we are seeing for this financial year.
Mark Saldanha
Yeah, for this financial year based on the current trend obviously it will improve. But, but this if you look at let’s say April and May, like May for example we are, we are trending at between 400 to 500 crores.
Dhvij Patel
Got it sir. As far as I remember when we had a conversation this facility was somewhere going to generate around thousand odd crores of revenues for us once you know it reaches a peak capacity. So is it, is this plan delayed because we were anticipating around 500 crores for this financial year. The last one, the, which has just gone by.
Mark Saldanha
Yeah, the last one that approvals, site variations, everything took a bit longer than expected. Not so much as the capex. The Capex obviously we’ve invested Capex as you can see we’ve invested 175 odd crores of Capex. So from a capacity standpoint we are good to hit those objectives of 500 odd crores and we are trending towards like I mentioned between 400 to 500 crores. So I do believe we will be hitting on a trend basis minimum that objective will be achieved. Then when we talk of doubling it that’s where some more Capex and debottlenecking will go on.
So hopefully in the latter part of the year we will be moving probably more towards 600, 700 odd crores in terms of the trending part of it, not the actual revenue but the trend lending part of it. Now it is a process by itself. It cannot be short and overnighted achieve those objectives because it is all about plant approvals, it’s all about product approvals. There are some things which are not within our control. Although Capex is within our control but approvals and product switches are not within our control. So those things, you may have a quarter delay here and there but we are pretty much on target where spending is concerned, where objectives are achieved.
I do believe this plant will hit thousand crores eventually.
Dhvij Patel
Got your point. And just the question that I actually asked was, you know how much revenue have we seen for this financial year? FY24. FY25 from the Teva facility.
Jitendra Sharma
We did, you know, around, around 300, 325 crore.
Dhvij Patel
Okay, got you. And the final question would be on the new products which will lead to higher margin products. Can you please elaborate? What are we doing there now? What is the update on that?
Mark Saldanha
So we are launching, we are launching products literally every quarter and every, every quarter we are launching products. So we do believe we will see at least 50 odd prices products in different segments, in different therapeutic segments. Whether it might be cold, whether it might be digestive, whether it might be pain and some in prescription also. So we do believe we’ll be launching very close to about 70 odd products between now and let’s say September.
Dhvij Patel
Got it, got it. So your growth and you know the slide of you know, FY25 and beyond looks a bit conservative. I feel we can change that someday in near future.
Mark Saldanha
Yeah, it is what it is. We would like to give a number that we believe is very much doable. Even taking into consideration the geopolitical situations that exist all over surrounding us. We are still bullish and optimistic in expecting that we will hit our objectives.
Dhvij Patel
Absolutely sir. That’s it from my side and all the best. And thank you so much for taking my call. Thank you.
Mark Saldanha
Thank you.
operator
Thank you. Next question is from the line of Maithili Balakrishnan from Alchemy Capital Management Private Limited. Please go ahead.
Mythili Balakrishnan
Hi, I just wanted to understand a little bit about any feedback that you. Are seen in the US you mentioned. That there is nothing much per se but what about the previous quarter? Is some part of this growth because of customers talking?
Mark Saldanha
Sorry, I didn’t get your question. Could you repeat it? This. It’s not very audible.
Mythili Balakrishnan
Sure. I wanted to understand you know somewhat about this pre buy from the U.S. you mentioned that you know there is nothing much which has happened in April but could you sort of indicate whether anything was happening during this particular March quarter? Are you seeing customers wanting to stock up ahead of the tariffs?
Mark Saldanha
I don’t think that is a scenario. Not in pharmaceutical. There was. See when there’s uncertainty People will wait, wait and watch. Right. I don’t think you could stock up B. Beyond a certain level. Most of these retailers don’t keep a lot of inventory by itself. So they don’t have the. They are not equipped to stock up or hold inventory because they handle probably 10,000, 20,000 different items. So technically. So there has been no stock up in April. In March there has been some slowdown because of pricing situations and whether prices will affect, will change in the distribution channel.
So if nothing else, it has, you know, I mean there were talks of recessions and recession and everything. So a lot of uncertainty was revolving around the US market. You know, whether it is the bond yields, whether it’s a recession, whether it’s. And it all started off with tariffs. So it is all very, it was all very new in March. It started in Feb, but it was already new in Feb and March. Literally nobody knew what was going on. So everyone was waiting for a better tomorrow or a better outcome. And uncertainty is never good for business.
So I think now in April, April you saw things being paused. You saw positive things coming out and some damage control being done by the administration. And then you obviously saw bilateral government discussions happening. Indian government is really working hard towards achieving trade neutral proposal. So technically I’m optimistic that they will succeed. So we are hoping obviously for things to stabilize and only improve. Moving on.
Mythili Balakrishnan
Got it. But was April more normal or was April also a bit.
Mark Saldanha
I think April was also a bit more like March per se. But things are getting better. The fag end of April you could see things getting better because you know, the pause came, the tariff pause came into effect in April and then.
Mythili Balakrishnan
And also to understand on the tariff side, right. These are largely fixed price contracts where the contracts have been done for a period of three, four years. So just wanted to get a sense from you of, you know, how will the tariffs sort of get passed on to the customer and you know, will we be expected to bear a part of it or you know, do you think we can. You know, sometimes there is no alternate. Right. But to raise the price. But just wanted to get your sense on that.
Mark Saldanha
So eventually obviously our outlook because tariff is more like a force measure, right? It is not within your control, it is a government doing so. The contracts do not cover anything of those natures and I think the retailers do anticipate that if tariffs do come into play. So today there is no tariff and as a matter of fact, India has got a great advantage compared to the rest of the world, including for products being manufactured in US Today India enjoys the benefit of being more competitive because US manufacturers are still having the brunt of bearing raw material tariffs which are coming out from China, which most of the raw materials do come out of China.
But if it is a fact that tariffs, tariffs do not, I mean India, while it is beneficial, if tomorrow tariffs do come into play, it will be passed on. If it is extremely negligible and insignificant, we may not bother, you know, burdening anything. Probably try to get the cost of goods down to nullify it. But most likely if it is percent or anything above 10%, we will definitely work on passing it down and we’ll still be competitive compared to the to domestic manufacturing in the US because they will also have the brunt of raw material tariffs.
Mythili Balakrishnan
Got it. But this would be a force majeure event in any case.
Mark Saldanha
Yeah, this is a force majeure. The retailers have already made public, I mean other consumables which are not exempted are undergoing tariffs are being implemented and retailers have already made public statements stating that prices are going to go up because you know, the inventory is being depleted, the non tariff stock inventory is being depleted and the new stock will come with tariffs. And for that it is not possible for the retailer to absorb anything. So they are going to pass it down to the consumer.
Mythili Balakrishnan
Got it. Questions on the U.S. growth, when we look at it, it is much higher than what the US market seems to be growing at. We have grown like 34% on a year, on year basis. So just wanted to get a sense of how are we sort of getting this share. Are there any specific new retailers we have added or just if you could sort of explain it a little bit. And also this growth that we have seen in terms of the rest of the world, is there any particular geography that is driving?
Mark Saldanha
So with regards to us, obviously for size of the US market, the base is extremely small. So you know, when you grow, the percentage looks big because the base is small and the market size is huge. So literally the percentage gives you a different picture altogether. But we are taking market share both from product as well as from new retail outlets that we are getting into. So and it is a mixed basket of everything, existing products, new products as well as new clients. But again, our base is extremely small. So we are optimistic of that growth and continued growth for the next couple of years.
Where US is concerned, the rest of the world obviously their market sizes are smaller, UK market size is extremely small. But we are doing fantastically well. We have a very aggressive growth plan for UK market also. So we do plan to grow and those numbers will start unfolding in a couple of years. But you will see amazing growth coming from our UK subsidy to for newer markets, obviously we are targeting the European market, which for us is still a new market basically. And we would, we are focusing more on those markets now than ever before.
So we are hoping that we can get in there. And last but not the least, hopefully someday we will get into the Indian market also.
Mythili Balakrishnan
That’s all from my side. Thank you and all the best.
operator
Thank you. Next question is from the line of Nitin Agarwal from Dam Capital. Please go ahead.
Nitin Agarwal
Hi Mark, thanks for taking the question mark. On the US business, you know what kind of based upon the current order book, what kind of revenue scale up visibility you have for the next couple of years.
Mark Saldanha
So our order book stands at somewhere around 220 odd million and it is growing, Nitin. But obviously tariff has been a bit of a damper. Right. Because people are waiting and watching before they actually. So I think like I mentioned earlier, uncertainty is never great for the growth part of it. But we are optimistic that we would basically look at a $300 million order book status within the next two years. So when you say $300 million order.
Nitin Agarwal
Book, what does it translate into a typically analyzed revenue by when you start realizing those kind of. For example, when you say you have a 220 million dollar order book right now, what does that really mean from our revenue booking perspective?
Mark Saldanha
So I mean obviously that’s a good question because an order book, when you, when you get a contract, it takes about six to eight months to start executing that contract because of the artwork process and everything of that stuff. Right. So technically substantial amount of this 200, I mean nearly around, I would say 20, 20 to. Sorry, 30 to. Am I on 30 to 35 million will basically be. We will start shipments only in the month of September. So and then balance 20 will probably happen in the month of February, March. Yeah. So technically it takes about good six to eight months to start commercializing and shipments of these orders and then you are not going to see from day one 30 million being done.
Right. It’s a trending pattern.
Nitin Agarwal
Right. But in a typical situation, you know, if you were to just look at for example this 220 million dollar revenue, by what time would you be translated to say analyze revenues for you?
Mark Saldanha
If you look at today order book status, 220 million will do next year in F26. Yeah, but if my order book goes higher then we’ll obviously be much better positioned to cross that then whatever order, whatever contracts I get towards the latter half of the year will go probably will that commercialization will probably because all these contracts these days retailers are always one year, they always talk of the next year. They don’t no longer talk of this year. You know, so if I’m getting contracts of this year, it is not for this year commercialization because they always talk of they always one year ahead in terms of planning and in terms of.
Nitin Agarwal
The newer order wins that you’ve been negotiating or talking to clients around. This is more on probably more products with existing clients or it’s more of more clients with the current portfolio.
Mark Saldanha
There have been a few new clients but basically it is more products with existing clients and newer products that we are coming which we are planning to launch also.
Nitin Agarwal
Okay. And for our SKU for the business still everything we mentioned in the press release that 2,000 odd crores of our revenues of the 2,600 crores is OTC. And so this cue towards OTC for the business will stay continue as it is despite our filing some more andas which we’ve been doing.
Mark Saldanha
It may grow Nitin honestly because we are very strong in otc. So like I’ve always said, you know, it may grow and you may see OTC having maybe 85%.
Nitin Agarwal
Got it, got it. That’s helpful. And secondly Jitendra on the you know on for this year I think we’ve had some amount of under utilize rather under leveraging of the Teva plant cost I presume which has led to this SGA cost being over ethically higher than what has been in the past in your assessment by when do we start to leverage those costs start to become like more in line the company average when you start leveraging your Teva plan better into it happen this year or it takes another year?
Jitendra Sharma
No, it should, it will happen this year. I think in the second half of this year we should be able to so our utilization levels definitely will increase and we will see operating leverage benefits from this year itself most likely. But from second half of this year. Onwards
Nitin Agarwal
and once we start getting operating leverage benefits on this newer facility, what kind of sustainable EBITDA margins can the business go back to.
Jitendra Sharma
See? I think definitely we can do 21 22% EBITDA margin once this kind of operating leverage gets in.
Nitin Agarwal
Okay. Okay. Thank you so much.
Jitendra Sharma
Thanks.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. We take the next question from the line of Viraj Mahadevia from Moneygrow India. Please go ahead.
Viraj Mahadevia
Hi Mark and Ritendra. Congratulations on stable results. Most of my questions have been answered. Quick, two questions. One, you commented in your presentation that part of the EBITDA margin impact was on account of freight costs. How are you seeing freight costs currently in April and May period and are you seeing it moderating and likely to be lower for the next couple of months?
Jitendra Sharma
Yeah, it has moderated already. So definitely last quarter was a relatively softer quarter in terms of the freight costs. But yes, the first two quarters of FY25 like you know, we did paid a very high amount of freight cost. So if I, if I see like you know, freight cost as a percentage to sales. So in FY25 it was around 5% as compared to 4% in FY24. So we ended up paying like, you know, more in FY25 as a whole. But yes, now it has, it has stabilized and I think it will come back to 4% in FY26.
Viraj Mahadevia
My next question is regarding, follow on to Nitin’s question which is the $220 million of order book mark that you mentioned. So can you read that as 50 million or 60 million dollars by FY26 over and above the base of 2,600 crores that already been delivered and then the incremental balance of 160 million spilling into FY27 in addition to whatever else we win between now and then. Is that the right way to think about it?
Mark Saldanha
Yeah. So when we talk about so the execution like I mentioned will start somewhere in September, obviously then, then we talk about trending because you will not within five months or six months actually do the entire 50 odd million because that 50 million is for the full year. Right. So it will translate into a proper revenue only next year if you want to look at it from an absolute 12 months revenue point of view. And then today what contracts we actually are talking about in this year, basically they talk of next year, maybe some may happen.
If you look at pain normally happens in April, digestive happens in latter part, a cold happens maybe in September of 2526. So it just depends on the product portfolios and the contracts that you actually get. But it shows obviously the strength of the business module, the continuity and the growth part of it. So when we talk of hitting objectives of 3000 odd crores, obviously we talk about the US growth, but we also have UK and other subsidiaries that are growing but US will still continue to be our growth driver. To hit those objectives. And then when we Talk of Beyond 3000 crores, we again we anticipate these additional contracts to fuel us to that level.
Viraj Mahadevia
Understood. Last question is, can you comment a. Little bit about your cash balances and the intended use for making acquisitions? Have you made any progress there? Are there any advancements, conversations going on?
Mark Saldanha
Yeah, so the cash balance is what is stated out there. Obviously we have increased our dividends to a level which is all time high for us. But at the end of the day we were in, we were in dialogue with some companies for M and A and we are still. But those basically fizzled out in the last, you know, last 10 days. It fizzled out in Europe and we continue to pursue European acquisitions. I mean we have given mandates, you know, and each of those acquisitions are 30 to 40 million euros potential. I mean if they do come our way, then, you know, we need that corpus with us to execute it and to fund that.
And we also need capex of around 100 odd crores to 100 odd crores for our plants. So taking into consideration all these transactions that we have on our plate, you’re looking at a good 304, I mean minimum 400 odd crores being kept aside only for that. And then the rest is all fueling our working capital and our growth, aggressive growth strategies that are there to fuel. I mean so we don’t bother, we basically are debt free. So working capital will definitely go up based on this aggressive growth strategy that we have in place.
Viraj Mahadevia
Understood. Thank you. All the best.
Mark Saldanha
Thank you.
operator
Thank you. Next question is from the line of Bharat Shah from Ask Investment Managers. Please go ahead.
Bharat Shah
Yeah, hi, Censure, apologies because I could join only after 30 minutes of the call. So apologies if I’m repeating any question. But Trump for example, couple of days seem to have direct instructions to Walmart saying that they can’t pass on or complain about increased cost and they must absorb. Walmart is an important customer and clearly this kind of items for them to bear the entire burden, given Walmart’s relatively low cost, low pricing model, how that is kind of possible? So I’m confused. While I understand the impracticality of the situation, what is going on? On one end the tariff being imposed and all the time vacillating situation on that, plus to expect that the parties concerned will bear the burden.
Clearly unrealistic expectation, but that is what it is, at least on the record, that is what is stated. So how do you read about all this? I mean it leaves me utterly confused as to what is going on.
Mark Saldanha
So the president will do what he believes he has to do to calm situations down or to show the stage strength of whatever his are. I don’t think it is possible to control cost. If tariffs are in play, cost will go up. Some of the tariffs, you know, Bharat is literally double the cost of the product. So it depends on which country you are importing it. If the cost of a fruit is $1, the tariff itself is $1. So there’s no way for tailors to absorb it, you know, so they, they will have to. The, the manufacturers or the suppliers are not going to absorb it.
They are going to pass it down. And even for clothing and everything, they’re going to pass it down. Now, the question is for the retailer, if they want to absorb it, it’s their call. But it is most unlikely that anyone will absorb it and they will pass it down to the customer one way or the other. They may not very blatantly mention, oh, well, this is for tariff. They will slowly keep increasing their price and absorbing. I mean, this is what has happened during COVID also, right? All the prices of finished product went up, but they did it.
They didn’t mention, well, it’s Covid and that’s why we’re increasing prices. They slowly increase their prices and ultimately their prices are much higher than what it was historically because everything, all cost has gone up due to Covid. So technically, I do see retailers increasing prices. There’s no way they can absorb anything of that stuff. So Trump may want certain things and he may pressurize certain things, and it’s within his purview to do that, but I don’t think it is possible to stop it. So, and unless, unless the tariffs, you know, unless the tariffs are removed or is very nominal, then definitely retailers may say, you know, 4, 5% here and there, we can manage it, but otherwise there is no way that retailers will be able to absorb it.
And eventually it will go down to the customer and the customer will bear the brunt. And we are seeing, if you go to a retailer, you are seeing the cost much higher than what it was, even for essentials. So I don’t think that’s going to stop the retailer from doing what they have to do.
Bharat Shah
So essentially, Mark, what you are saying is there are four parties involved, Government of America, which is seeking to impose tariff. Retailer like Walmart, manufacturer and distributor like you, the poor, hapless final buyer of the product. You are basically saying that if US Government doesn’t relent, then no part of the burden will be borne by either the distributor retailer like Walmart or producer like Marks. And the poor hapless customer will be holding the baby in his hands entirely. Is that what we are? Is that practically how it, do you think it will work out?
Mark Saldanha
It is a reality. It is a reality practically, but it is a reality that everyone is aware that the end burden will be the customer itself. And, and that realization is not happening with the current administration because they believe their objective is to get production out here in the US and get everything made in us. But it is a fact that if continued tariffs do, if tariffs do continue. See, I mean to be fair enough, they have exactly exempted a lot of tariffs or they paused a lot of tariffs because it was having a direct impact on the cost of product.
You know, even for computers they paused tariffs from China. So because they, you know, the computer cost was going up, cars now cost are going up because all the spare parts are going up. So technically the car manufacturers have already increased their prices. Literally it is like 30%, 40% more expensive, expensive to buy a car today. So if car manufacturers or dealers are increasing prices, I don’t see why Wal Mart and all will not increase prices. Then they come into play. Obviously tariffs are relatively very new. It’s happened only in the month it started, only in the month of Feb, towards March you could say technically.
And then again in April it was paused and then again it has come back to some extent or revisited some extent. So there’s a bit of chaos and uncertainty happening out there. But at the end of the day there is inventory in the system which once it gets depleted, the retailers will have to bear the brunt. And I’m seeing clothing, you know, the clothing industry, whether it’s from India or whatever they are, they have very clearly told the retailers that they cannot absorb it and they are going to pass it down to the retailers and guess what the retailers are going to do? The retailers are going to pass it down to the customer.
Bharat Shah
And just one last bit, how much of what we supply to America would you describe is essential that they can’t do without and how much of it is somewhat dispensable category where cost becomes an area of concern, that people may dispense with the consumption itself altogether.
Mark Saldanha
So we don’t, we don’t supply any patented drugs or any products that you could term as life saving unless there’s a Covid happening and people start taking pain. They need something for fever or pain or some of that stuff. So we don’t have any Patented items basically to fall in that category that people have to use it and don’t have a choice. But that said and done it is something where when I talk of essentials I’m talking more on the grocery part of it. Right. Those people have to buy vegetables, poultry or meat and everything of that stuff.
So those costs are going up. So people will definitely need to spend on that first and then later on on medicines. So technically all said and done and that’s why people, that’s why there was this rumors or speculation or d Doubts whether US will go into recession because you know of this issue. But I think the government will eventually back off from tariffs and they. The intent was good but the execution was not very great. So the intent was to have arrangement but the execution was horrible. So that. And eventually they will back it back off.
I do believe they know it’s not sustainable.
Bharat Shah
Sure. No, I’m aware your OTC business is the dominant one in America. It’s somewhat reversing uk but given the pill popping culture in America and excessive predisposition towards consuming medicines and drugs for any and everything and given lack of easy access to doctors for most of the things that people have, I think America has become what it has become a pill popping kind of a society. Recklessly I would say to the detriment of. To the benefit of businesses of your kind. But within what you supply, given the habits and behavior of the society in America, you don’t suspect that really speaking what you to supply can just be dispensed with by the customers.
In other words, where prices begin to bite and they say okay to help with it and not to buy some of the medicines. You see that is a possibility. Assuming all this comes to pass.
Mark Saldanha
I hope not, number one. Number two is obviously if the country goes into recession then it’s new unchartered territories for all of us. But I don’t foresee that happening.
Bharat Shah
Sure, sure. And therefore you believe these 25% odd growth, which is what I spoken to Jitendra last time and I had learned. I don’t know what you said in this call but 25 odd percent growth for US, UK and other territories put together for next three to four years. Those plans are intact and those seem to be on track. Right.
Mark Saldanha
So the us Yes, I can talk for the us, for the company by itself we are giving year on year growth, growth of anything above 17.5 18% year on year growth as a corporate, but the US market, our base being very small, I do believe it is.
Bharat Shah
Doable so 25% plus for us and marksons in entirety at about 80%. 3 to 4 year. Kind of a top line growth.
Mark Saldanha
Yeah. For the next three years I would like to restrict to three years. We are optimistic. Obviously we’ve not given a three year projection, but we are aiming for that.
Bharat Shah
Taking into account all the drama that is going on.
Mark Saldanha
Well, it just depends on how you define drama. Right. And nobody wants a worse drama. I mean, there are force measures which are beyond your control. And if tomorrow war breaks out, it’s pretty much saying that it’s free fall for everyone. But we are still very optimistic based on the current situation.
Bharat Shah
Okay, fantastic. All the best. You have really interesting spectacle to deal with. So good luck to you.
Mark Saldanha
It’s the nature of the beast. We overcome it.
Bharat Shah
All right, thank you. And thank you, Jeetendra.
Mark Saldanha
Thank you.
operator
Thank you. Ladies and gentlemen, in interest of time. That was the last question. I would now like to hand the conference over to the management for closing comments.
Mark Saldanha
I’d like to thank everyone for spending their valuable time and continuing their interest in our company. I wish you all the best and have a great day and be safe. Cheers.
operator
On behalf of Alara Securities India Private Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.