Aarti Drugs Limited (NSE: AARTIDRUGS) Q1 2026 Earnings Call dated Jul. 21, 2025
Corporate Participants:
Adhish Patil — Chief Operating Officer & Chief Financial Officer
Analysts:
Dhwanil Desai — Analyst
Rehan Syed — Analyst
AM Lodha — Analyst
Majid Ahamed — Analyst
Analyst
Raman K V — Analyst
Dhruv Achrekar — Analyst
Rashmi Shetty — Analyst
Maitri Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for patiently holding. The conference will begin shortly. Please stay connected. Please do not disconnect. Thank you. Ladies and gentlemen, thank you for patiently holding. The conference will begin shortly. Please stay connected. Please do not disconnect. Thank you ladies and gentlemen, good day and welcome to the RT Jux Limited Q1 FY ’26 Earnings Conference Call. As a reminder, all participant lines will be in 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 star then zero on your touchstone phone. Please note that this call is being recorded.
With this, I now hand the conference over to Mr Adish Patil, COO and CFO from RC Drugs Limited. Thank you, and over to you, sir.
Adhish Patil — Chief Operating Officer & Chief Financial Officer
Thank you. Good morning, everyone, and thank you for joining us today for RTI Q1 FY ’26 earnings conference call. Joining me on the call today are Mr Harshit, our Joint Managing Director; Mr Harit Shah, Whole-Time Director; and ACA, our Investor Relations Advisors. I trust you have had the chance to go through our financial results and investor presentation for the quarter, which are available on the stock exchanges and our website. Let me begin with some of the key business updates on followed by the financial highlights. The quarter witnessed improved demand for active pharmaceutical ingredients, leading to a recovery and growth in volumes as compared to-Q1 FY ’25. Our API business grew by 5% on a year-on-year basis. In Q1 FY ’26, the total revenues grew by 6% year-on-year to INR591 crores with gross profit margins improving by 130 basis-points year-on-year to 36.8%. EBITDA has increased by 12% year-on-year to INR74 crores and EBITDA margins improved to 12.6%. Gross profit margin improvement is primarily attributed to the normalization of input cost. Looking-forward, we anticipate further improvement in EBITDA margins driven by multiple factors. These includes an expected growth in global API demand and higher penetration in regulated markets leading to uptick in selling prices as well as enhanced capacity utilization. On the capacity expansion side, our greenfield project at Gujarat has started trial production. This plant has been set-up mainly for backward integration into anti-diabetic products and their and is expected to largely serve internal requirements. This backward integration is a key strategic step that should help improve profit margins over-time and reduce the risk of input cost volatility. This project will support internal requirements for our antidiotic products and chling chloride contributing to backward integration, margin improvement and supply-chain derisking. Secondly, we continue to make progress on scaling up of our Tarapur greenfield site where we launched acid production, entering a market historically dominated by imports, while the plant faced some initial start-up issues, which is typical during the early stages of new products for in-house developed technology. These have been effectively addressed and are being implemented at the plant-level. The company is now focused on a calibrated ramp-up of operations. This is expected to begin contributing to the company’s financials from the 3rd-quarter of FY ’26 onwards. Current output levels still stand below 200 tonnes per month and we expect to ramp-up to 800 tonnes per month very soon and further expand installed capacity to approximately 1,600 metric tons per month. We view this ramp-up as strategically important, not just from a volume perspective, but also in strengthening domestic sales demand. This strengthens our product mix and supports diversification into adjacent value chains. With the manufacturing capacity exceeding 1,450 tonnes per month. ADL is one of the leading net manufacturers in the world. We are aiming for higher utilization. In future, we are planning for additional 350 tonnes per month of brownfield expansion. The launch of will further enhance and solidify the position of the company in category. During Q1 FY ’26, the company incurred capex of roughly around INR48.5 crores at a consolidated level, mainly towards capacity expansion, backward integration, safety and finished formulation R&D. For FY ’26, we expect capex to be in the range of INR150 crores to INR200 crores. In the business, we have grown by 14% year-on-year to INR80 crores in Q1 FY ’26. 57% of the revenue contribution for formulation is from exports during the quarter. We have commenced commercial operations in Latin-America and few African markets, along with undertaking new registration in export markets and government tenders. Our formulation subsidiary has achieved a key milestone with USFDA approval for its oncology facility and UK-MHRA approval for our oral solid dosage facility. In parallel, we are actively developing and registering new oncology across global markets. These efforts are expected to drive meaningful growth in our regulated market presence starting FY ’27 onwards. Lot of new regulated customer audits have been triggered under recently USFDA approved Tarapur API facility. We also plan to expand this facility by creating more production blocks in future. Additionally, we are rebuilding presence in the US market. This has been a meaningful development for us as it enables our reentering into the one of the most important regulated markets. While it may take some time to scale-up, this opens up future growth opportunities of several of our API products. Recently, the US government announced tariffs on pharmaceutical products and API imports from countries like China in a move to reduce reliance on Chinese supply-chain. This policies shift is likely to distrust global sourcing patterns, but it also creates a significant opportunity for Indian API players. At Drug, with our recently USFD-approved API facility and strong proven manufacturing capabilities, we are well-positioned to capitalize on this transition and cater to the evolving demand landscape in global markets. It is also worth noting that regulatory markets like Europe and the US offer superior margins. With more of our products receiving EU certifications from larger plants, we are shifting high-value exports to lower-cost platforms, improving our margin capture. While volume growth has been steady, we expect meaningful pickup from H2 FY ’26 onwards as our newer assets stabilized. Volumes are picking-up and we also expect better realizations as global API demand begins to normalize. Over the medium-term, we remain committed to our strategy of deepening backward integration and improving cost competitiveness. Finally, inching towards sustainability, we have continued to make progress. One key development in FY ’25 was the commissioning process of the 24.4 megawatt solar project through our joint-venture with rail power. This project is being developed to support part of our power requirements in Maharashtra and Gujarat. Once fully operational, we expect this investment to help lower long-term power cost and also strengthen our ESG profile by reducing our carbon footprint. This aligns with our broader effort to reduce dependence on conventional energy and move towards cleaner, more sustainable operations. To conclude, we remain focused on operational execution and disciplined cost-control in what continues to be a dynamic business environment. Looking ahead, we expect further improvement in margins, supported by a normalization in API pricing, ramp-up of using commission capacity, better capacity utilization and higher-value export opportunities in the radiated markets. The broader margin profile is also likely to benefit from greater internal sourcing and improved product mix. With that, I would now like to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question — question comes from the line of Dhavnil Desai from Turtle Capital. Please go-ahead.
Dhwanil Desai
Hi, good morning, everyone. Am I audible? Yes, sir, you are audible. Okay. Hi, Adish. Congratulations for a recent set of numbers. Sir, my first question is that we have seen a very good improvement in our gross margin both Y-o-Y and Q-o-Q. So — but the same gross margin delta is not getting reflected in EBITDA margin. So to the extent, of course, we have improved 70 basis-points, but some of that has been lost in the other expenses. So how — when do we expect this gross margin delta to fully flow-through to EBITDA?
And how — as we are saying that the backward integration and internal sourcing plus maybe better realization, if that happens over, let’s say, next three to six months, then how should we look at the gross margin going-forward?
Adhish Patil
Yeah. So , the gross margins have improved, no doubt with further backward integration of our plant we certainly hope that they will improve a bit further. Having said that, after that improvement, obviously, the regulated market sales will lead to higher selling prices, that will also lead to better gross margins. But having said that, with the current gross margins, what we achieved in this quarter, had we had better utilization of the capacity, then probably our EBITDA margins would have been better coming almost about 14.5% even with these gross margins. So this particular quarter, although the gross margins were good, but because of the slightly lower utilization of the capacities, it did not flow into the EBITDA margins. And there are obviously other factors as you pointed out, which can lead to further improved improvement in the gross margins itself.
Dhwanil Desai
Got it. So essentially, let’s say, from Q-o-Q perspective, let’s say next quarter onwards, do we see improve in the capex utilization or shall we expect that from H2 onwards only?
Adhish Patil
Yeah. So there are multiple — actually there are multiple factors from where the improvement in the financials will come from. One is definitely the higher utilization of the current API business itself, other is by getting newer customer approvals for the existing APAs in the regulated markets. And third but not the least, the we are experiencing out one of losses for the acid plant in last quarters. So that continues into this quarter as well.
As I pointed out in the press release that our current capacity utilization still had been below 200 tonnes per month and it will take somewhere around 600 tonnes per month of capacity and production for us to breakeven. So definitely with improvement in the utilization of acid plant, but definitely in two quarters’ time we see a betterment in the capacity utilization? And plus as new markets open up, the existing business will also have better capacity utilization in the coming years.
Dhwanil Desai
Second question is on the — you have mentioned in your press release that lot of customers with it from regulated markets have happened and are happening. So you also say that US may take a little more time. But if you can give some idea about where our current Europe business stands and how should you know-how do we perceive that Europe business growing in FY ’26 and FY ’27 are based on the USFDA approval that we have received for the plan?
Adhish Patil
Yeah. So definitely our US business is almost we just got the import elect listed in December and January we got the official letter from USFD as well. Our three of our products are already, you know, being referred in ANDA. So we are quite bullish about those three products to be launched very soon in USFDA market. But having said that, the USFDA — US market definitely takes more time, lot of gestation period is there. So probably by I can say safely after nine to 12 months, probably we can start with the commercial supplies if everything goes smooth.
And as far as the Europe market is concerned, that will start much earlier than the US market is what we see, because our plant was already used compliant. But because of that import alert, lot of customers who are reluctant buying from that plant for the Europe market as well. So our Europe market has also opened up. And if you see our investor presentation, we have mentioned that in FY ’24, our Europe was around 14% and FY ’25 was around 12%. So that can significantly go up in — so you can safely assume that after nine to 12 months, the registered sales from our Karapur API facility, which has been recently approved by FD should commence commercial
Dhwanil Desai
Okay. So this 12% let’s say over next two years, can it go to 20% plus? Is that how we should know not
Adhish Patil
So definitely we’ll try to because it can go to 20% because there are multiple things which we are trying to think. So first of all, what we are doing is that all our CECs, you know, the European approvals we are trying to move to our existing plants, but the bigger plants, not the multipurpose, but doing predicated plants. So from there, you know, if you start supplying to the European market, we will be able to supply at a very, very cheap rate, you know, though that rate will be better than the other markets, but as compared to the same product is being sold at a very extensive rate as of today in the same market. So we can supply at much lower rate from that. So definitely 15% to 20% is possible.
And also our E22 facility, the GFD facility, we have adjoining land parcel where we are putting up more blocks, but that will take time around three to 24 months for blocks to run commission. But the approval process can be a bit faster for products because we will start to apply for the product from the existing production world so that there can be some overlap between the product approval process and the commercial operation from the newer blocks?
Dhwanil Desai
Okay. And last question, so at the start of the year, we were expecting 15% kind of a volume growth and negative price variance, let’s say, around 5%. So at least double-digit growth in revenue. And so first, are we on-track for that? And if I understand correctly in the base that negative price variances will be in H1 and in H2 probably if the prices remain same, there will be no negative price variance. So then H2 onwards maybe top-line growth will be upward of 15%. Is that how should we look at it?
Adhish Patil
Yeah, it is fairly possible what you said and H2 growth can go in double-digit. For the first-quarter, that is June ’25, on year-on-year basis, we had a volume uptick of around 9% and the negative price variation was roughly around 4.5% and that is why we achieved that 4% to 5% or 4% to 6% of growth in the standalone and consolidated company.
Dhwanil Desai
Got it. Thank you. I have more questions. I’ll come back-in the queue. Thank you.
Adhish Patil
Thank you.
Operator
Thank you. Thank you. The next question comes from the line of Rehan Sayat from Prinitra Asset Managers. Please go-ahead.
Rehan Syed
Hello. Am I audible? Yes, sir, you are audible. So sir, first of all, congratulations for the set of numbers. Thank you for giving you the opportunity. So sir, I have couple of questions regarding business. So first of all, sir, from your current pipeline of API formulation products, how do you plan to commercialize in FY ’23? Are there high-margin or niche launches in? Could you just clarify regarding I could not understand your question. Can you just?
Adhish Patil
Yeah, sure, sure, sure. So from the current offer of both API and formulation products, how many do you plan to commercialize in FY ’26? Are there any high-margin or niche launches and focus regarding the upcoming quarters or maybe even a year. Okay. So you are asking about newer product launches in the coming few quarters?
Rehan Syed
Yeah. Sure, sure. Yeah.
Adhish Patil
So the main product R&D we are doing what we are doing for formulation business in regulated markets for oncology as well as for other solid doses. So the regular doses are being, you know being developed and registered as you say, whereas the ongoing will take a little bit of time. What we expect is that by December of next year, that is December 2026, by that time, most of the R&D would be done for at least 10 oncology products and we’ll be filing the for approval.
And from there, we might — it might take around six, seven months for the approval. And then the commercial sales of the oncology products will start. As far as the APAs are concerned, it’s an ongoing process because in APAs, though we manufacture roughly about 450 molecules in a year, our top-20 almost contributes around 90%, 92% of the total sales. So all the trail molecules which are already there. So what we expect is slowly slow the demand of these trail molecules will increase. And similarly this new few of the other products as well in the The product basket. One such product which can grow and you might notice that the production capacity is a product. Already India is a leading product. We are — we have largest market-share and production capacities in the entire globe. Doing process as far as answering your question and.
Rehan Syed
Okay. And sir, one more just clarify just about the facility. You have just covered this at least repeat some more clarify regarding the facilities have started style production, when do you expect full commercialization and from which quarter which will see starts with impact on revenue and margins for any sales opportunities this quarter or maybe in-full year?
Adhish Patil
Okay. So the Saifa facility is mainly in mainly put for backward integration for captive consumption purpose. But along with that, there would be some, you can say side chain product which will be produced simultaneously, which we will have to sell outside. So we have started the trial production now and it’s a very-high temperature, high-pressure kind of a reaction so it’s very common for that kind of a plant whenever you start the operation for the first time to observe some in pipeline for some equipment and then you have to plug those likages and restart the facility.
So we have been doing this since a couple of months. And now we though we are pretty confident but within a week’s time we will come to know whether any more leakages are being or not and if they are not observed then we will be putting that facility to use in the September quarter itself. And if not, if we find some problems, then probably it might go to Q3, but very-high chances that facility might be put to you in Q2 itself.
Dhwanil Desai
Okay. So just wanted to clarify like you are targeting for quarter two and if something goes wrong, so it may be due to quarter three, right? Am I right?
Adhish Patil
Correct. Correct, correct.
Rehan Syed
Yeah, yeah. Okay. And sir, last one bookkeeping question. If you have for INR100 crores to INR200 crores second this year. So how much of this will directly contribute to growth? Is that auto loan capital you are expecting deposit approval in this quarter?
Dhwanil Desai
Yeah. Your voice is a bit not clear.
Rehan Syed
Yeah. I have to a bit. You guided for INR150 crore to INR200 crore capex this year. How much of this will directly contribute to growth, if you can — what ROC you can expect target about?Okay, okay, understood. So see roughly 50% of this probably will be investing in the new product R&D in the formulation business, mainly towards oncology and a bit towards non-oncology as well, but targeting the regulated markets, roughly 50% of it. And the risk would be done in the parent company for brownfield expansion of a lot of products. We have certain products in mind like some antifungal products, then cardiovascular products and we are also putting up new block for our USFDA facility. And even our anti-diabetic, we are trying to expand. So there are lot of brownfield expansions involved. So you can say that other than you can say 10% — let’s say 10% to 15%, rest all, 80%, 85% would be focused for growth and not for maintenance in this and
I definitely your voice is not coming
Adhish Patil
Sorry, and now can you hear me? Are you ready?
Rehan Syed
Yes, sir, your audible.
Adhish Patil
Yeah. So definitely, as we speak, we are doing a lot as far as safety is concerned. Since last one and a half year, we have spent almost around INR10 crore INR15 crores in for better equipment — for better GMP equipment for this and safer equipment so that the accidents or small, small mishaps what happens in at plant-level, we are trying to reduce that by having better equipment, better maintenance and also optimizing most of the things better and doing lot of things on the safety part. So definitely that has also been one of the key focus areas as far as capex is concerned.
Rehan Syed
Okay. So thank you for detailed explanation. Thank you.
Operator
Thank you. Participants, you may press star and one to ask the question. The next — the next question comes from the line of AM Lodha from San Consultants. Please go-ahead.
AM Lodha
Hello. Am I audible, sir? Yes, sir. So sir, just we would be — I would feel highly obliged. If you management give some guidance about volume in FY ’26 and FY ’27 and value-wise growth in FY ’26 and FY ’27?
Adhish Patil
Okay. So when we started the year, we had certain volume growth in mind for FY ’26 and FY ’27, we had roughly a CAGR growth of 15%, roughly 15% year-on-year growth for this coming two years. It can — it might so happen that we can get 10% here and 20% in next year. That we cannot predict much, but roughly 15% CAGR growth in volumes we had targeted for the — in FY ’25. And for this year, the first-half, year-on-year, there can be a negative price variation of around minus 4% to minus 6% for the first-half only.
And from the second-half onwards, the price — negative price variation will go away. So whatever growth in volumes is there, that will translate into value as.
AM Lodha
Okay. What about FY ’27, how much value growth we can expect?
Adhish Patil
15% on the prevailing prices. Yes, yes. Based on the prevailing prices, we expect, 15% on each year. 15% on each value growth.
AM Lodha
Okay, sir. What is the net-debt? My second question is what is the net-debt of the company debt? Yes. So on a consolidated level, it is slightly below — somewhere near about INR597 crores, of which around 56% is a long-term rate and 44% is working capital rate. Can we expect some reduction in the loan is almost the capex is — mid capex is over yes, actually, what you say is correct that in-spite of doing capex and having two big shareholder payouts in last two financial years, almost to the tune of roughly around 80 crore to 85 each year.
Adhish Patil
So both combined, it would be somewhere in the range of INR170 CR or something plus the capex we are done, still we are able to manage the debt at this INR597 crores level. So we do feel that if we don’t, you know, take-up new capex or new capacity expansion, this debt level can further come down drastically.
AM Lodha
Okay. Thank you very much, sir. Thanks a lot. I have done, sir.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. Thank you. The next question comes from the line of Majid Ehmad from Pinpoint at X Capital. Please go-ahead.
Majid Ahamed
Am I audible, sir? Hello.
Adhish Patil
Yes, sir. Yes, sir.
Majid Ahamed
Thank you for the opportunity. Sir, I just want to understand like you had in your presentation you have mentioned INR1,200 crores of revenue that’s going to come and communicated. And so if I take INR1,200 crores of top-line, like it could be starting on H2, but even if I take those numbers and it is around from the current level of revenue, it is around 45% to 3% growth from the current level of business. So I just want to clearly understand like as you are saying 15% volume growth and not much pricing growth in-place.
And you are saying INR300 crores of captive consumption. I’m just want to understand impact of this number be?
Adhish Patil
Yeah. So the thing is for the full water capacities we are putting in right now for the full benefit to translate into financials, it might take around three years. So it might flow into FY ’28 for the — for optimum utilization of all this greenfield capex what we are doing right now. So be — the revenue will start coming more in an offer phased manner, which INR1,200 croress, it will come up in a phase manner. You’re very miscorrect.
Majid Ahamed
Okay. And so going-forward, like as we are also so reinvesting our operating cash-flow going-forward and you also mentioned a dividend payout, like how are you then going to manage your debt as well going-forward? Yes. Can you manage and reduce debt post?
Adhish Patil
Yeah. So I was just talking with the previous caller that in-spite of doing around 170 crores of shareholder payout, either in the form of buyback or dividend and carrying the capex of roughly around INR150 crore to INR200 crores each year, still we were able to keep our debt at INR597, which roughly translates to around 0.42 or 0.43 debt-to-equity ratio.
Nd in last two, three years, our debt-to-equity ratio has been, you know, systematically coming down in-spite of doing capex as well as you know, giving out shareholder shares. So the company’s policy of 25% shareholder payout, we can easily maintain that policy and still keep our debt levels very much in control. So that won’t be an issue.
So the debt level of debt-to-equity of 0.4, 0.5 would be maintained going-forward yeah. So we — as a management, we feel that around 0.4 — roughly around 0.4 to 0.7 is a fair enough number to keep debt-to-equity levels because it also helps in achieving higher ROE because of the leverage, debt leverage. So that would be a good number to state. Having said that, that if we don’t do shareholder payout for any reason.
For any reason, if you don’t do it, then our debt-to-equity ratio will fall down significantly. Got it. And my third question is regarding especially now your earlier effects Q1 FY ’25 to ’26, the API contribution has went down from 80% to 79.6%. So going-forward, like what would be the overall revenue contribution between API formulation and other? Like what the direction that been. So a couple of percent here and there is what we have been seeing in our recent last few quarters. And the main reason for that is a slight volatility in the demand or tenders of formulation business.
So sometimes you know if the sale of formulation business is less, then suddenly the API component looks higher. Having said that, I will just be a fair enough range. As of today, our business is roughly around 78% to 80% of APIs, roughly around 8% of step chem and intermediates and rest 12% to 14% is formulation. That is the rough plate what we have as of now. And given our expansion plans, you know, so we are expanding our formulation business and in three years horizon, we do feel that formulation business will almost double from here or it might reach to around INR550 crores to INR600 crores once the oncology also commercializes. Along with that, the two main greenfield capex what we have put in the standalone company, the chalicylic acid probably would go in intermediate and intermediate space, salicylic acid, though it has a final application in dermatology as well, but we might classify most of the sales as a part of intern because it goes in the manufacturing of which has lot of application in perfumes and you know flavor industry and facility which has come up that will have backwards — that will help in backward integration for our antirabetic portfolio as well as some specialty chemical products will come out from there, which we’ll be selling outside.
So our spect chem and intermediate percentage might go up from that 8% to, let’s say, say 15% in three to four years for I think so API might be around 75% or something like that, 70%, 75%. It can an might grow little faster and the formulation will also grow to the same extent?
Majid Ahamed
The final question that I have is going-forward like if we have to make sure that the margins because they are saying you’re going for with the plan coming in as a backward integration, what type of gross margin expansion that we’re looking at? Any numbers can here?
Analyst
So though it is very difficult to predict for the next two years, but what we — what we see that if you look at the current pricing levels of those intermediates, you know, then definitely a percent or two that — I would say that plus the regulated market would put together, it can definitely help us to improve the gross contribution — gross contribution margin by around couple of percent. The higher regulated market sale plus the backward integration of cycle. So if I can actually gross margin expansion of 200 250 bps plus if you can do cost rationalization of the fixed-cost. Can it move towards like 15% 16% EBITDA within the coming year? Yeah. It is fairly achievable if everything goes right.
Majid Ahamed
Thank you so much. All the very best. Thank you.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Raman Kevi from Sequent Investments. Please go-ahead.
Raman K V
Hello, sir, can you hear me?
Operator
Yes, sir, you are audible. Please go-ahead.
Raman K V
So what is the current TAM of this salic asset in India?
Adhish Patil
So the market potential?
Raman K V
Or total addressable market.
Adhish Patil
Yeah, so is roughly has almost 20 kiloton per annum kind of a market in India and who are the producers? So there are three main producers in China from where the acid is being imported. The Indian capacities are very limited as far as acid is concerned. So what the capacity — the — the market potential, which I told you is purely imports, which is happening from China. So basically, we are competing with China.
Raman K V
So what will be the cost of production for them and like this particular intermediate in China versus our cost of production?
Adhish Patil
Yeah. Yeah. So you know salicylic acid when we started the commissioning of plant and till we aimed the stage and started actually selling the product in the market a little bit. Till that time, the margins were very-high, but as soon as we started manufacturing the product, definitely the Chinese competition has reacted and trying to create entry barrier by you know, dumping the acid into India and reducing the prices significantly as compared to the trend what we have seen in last four to five years. So that makes a very special case.
So even having said that if you reach at around 800 tonnes per month kind of a capacity, we can still breakeven even with the current pricing build-up — the — you can say the pricing equivalent to the dumping of acid by Chinese manufactured into India. Even at that level we can make a breakeven at around 800 to 900 tonnes per month. Now the thing is because they have reduced the prices sharply after an Indian manufacturer has come into existence, it makes a very good case for anti-dumping duty. So we are approaching government for that. We are making a case.
We’ll be filing it soon once we compile the entire data. We also introduced salic acid into BIs, that is a Bureau of Indian Standards in last year. That also is a part of creating a little bit of barrier for the Chinese producers to sell that product into India. So it’s a very tough job to compete with China, no doubt about that. But for most of the product basket which we have in API space, our main competition is only from China. So we are pretty much you habitated to the Chinese competition. So it will be like any other product for us.
Raman K V
So one last question on this particular part. So what is the current prices of salic electric acid and what will be the price if the ADD is imposed?
Adhish Patil
So the ADD, we won’t be able to tell you right now because that depends on the of government. But the selling price — current selling price is roughly in the range of INR19 to INR120 Per kg for salicylic acid after paying the duty. INR190 to 120, no 119, 1192, 120 and this prior to Chinese player dumping what was the price? It was roughly in the range of INR150 per kitchen, 150 to 150.
Raman K V
Okay, thank you sir
Operator
Thank you. The next question comes from the line of Dhruv from Tiger Asset Private Limited. Please go-ahead.
Dhruv Achrekar
Hello, sir. Good morning. Am I audible?
Operator
Yes, sir, you’re audible.
Dhruv Achrekar
Yes. Thank you. So my question is that the US has imposed a high tariff on the Chinese APIs. So how the RT expects to capture opportunities in the US and as well as in the other market and resulting demand upticks and the cost contract bills so this US so these tariffs basically would matter in relative terms. What I mean is mainly there are which are two major APIs in the world, China and India.
Adhish Patil
So if the Chinese tariffs are higher than Indian tariff that will definitely help us in getting better margins and keeping our cost definitely. But having said that, as far as US market is concerned, our cost of production is not that big of an issue for us because we are competing with China even with the even in the unregulated markets in the rest of ROW markets. So definitely this tariff will help us are mentioned just like the way China Plus One strategic trading during the COVID period.
So it will help us, no doubt about that. And fortunately, this has come right when we got the use of the pullback. So definitely the customers might also feel the customers who are solely dependent on China, we will feel the need to approve more Indian sources. So that will definitely help us in getting more approvals, no doubt about that.
Dhruv Achrekar
Okay. Okay, sir. And my — like last question is regarding the capex. As you mentioned that there is a capex for Q1 of around INR48 crores for FY ’26 guide INR150 to INR4 crores. So how is the capex?
Operator
Sir, your audio is.
Dhruv Achrekar
Hello. Hello?
Operator
Hello.
Dhruv Achrekar
Yeah. Yes. Well,. Yeah. Sorry. So my last question is regarding the capex as the own capex is around INR40 crores and the FY ’23 guidance of INR150 crores INR200 crores so how is this I was not able to hear the sentence clearly yeah, so like question
Operator
Your audio is not clear. The voice is breaking.
Dhruv Achrekar
Is it breaking now? Am I audible now?
Operator
Yes, sir.
Dhruv Achrekar
So my question is, which is being financed for — and what is the expected written for the profile?
Adhish Patil
If I get your question correctly. I think you’re asking about the — how are we going to finance the capex?
Dhruv Achrekar
Yes, yes, yes. Okay. So typically what we do, whenever there is brownfield expansion, we do it from the internal accruals itself and only for the bigger greenfield projects or the newer big projects, relatively big projects. We take some term-loan financing from banks because our cost of debt for the long-term would be roughly was roughly in the range of 8.3% to 8.5%, but now it will come down drastically because of the reduction in the interest cost. Okay. Okay, sir. Thank you.
Operator
Thank you. Thank you. Thank you. The next question comes from the line of Rashmi Shetti from Dolat Capital. Please go-ahead.
Rashmi Shetty
Hello. Am I audible?
Operator
Yes, ma’am.
Rashmi Shetty
Yeah. Thanks for the opportunity. Just two clarities. One is on tax-rate. So from last two quarters, we are doing a tax-rate of around 20%. So in FY ’26, ’27, will it be in the range of, 24% ’25 or it will be in the range of 20% to 21% given the preferred tax-rate,
Adhish Patil
Yeah, yeah. So next financial year, that is FY ’27 onwards, it will be like 25% probably. This time, we have been making lot of income tax refunds in this financial year and even in last week also. So whatever refunds we are getting, we are adjusting in the tax provision directly. So that is the reason why the tax provision might look a bit lower in this year and last year.
Rashmi Shetty
So then what will be your guidance for FY ’26. Yeah, FY ’26, how much should we assume? I mean, how much should we model in?
Adhish Patil
Okay. I don’t have the exact numbers as of now, but probably the month around INR30 crores of tax we might get. So that much provision we might do this for the interior.
Rashmi Shetty
Okay, so roughly then it would come in the range of 2021%.
Dhwanil Desai
I haven’t done the calculation yet
Rashmi Shetty
Okay. And. So it would be pretty lower in case if it is INR30 crores, right, in case if it is if the refund is coming in that range. Anyways, I’ll take that offline. So on the EBITDA margin front, you know you mentioned that 15% to 16% EBITDA margin is achievable of that 15% to 16% you are guiding it for starting from FY ’26 only or you believe that this will happen only in FY ’27?
Adhish Patil
So that — for the entire year, it should happen only in FY ’27 this year probably downgoing the last quarter of this financial year, probably we might try to achieve that, but the main annual numbers, if you look at probably I would suggest FY ’27 would be the right way.
Rashmi Shetty
Okay. And FY — so FY ’27, basically 15% value growth is what we are expecting and EBITDA margin of around 15% to 16% is something which is achievable with whatever you know factors which will be driving the growth and margin, which you have already mentioned.
Adhish Patil
Yes.
Rashmi Shetty
Okay, okay. Thank you. That’s it from my side.
Adhish Patil
Thank you.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Shah from Capital. Please go-ahead.
Maitri Shah
Yeah, hello, my how are they? Yes, ma’am, you’re audible.
Operator
Yeah.
Maitri Shah
A few clarities. So the value decrease you said for the first-half will be 4% to 5%. So what sort of increase are we expecting in the second-half and FY ’27?
Adhish Patil
Yeah. So for the first-half of this FY ’26, we are having a — we might be having a negative price variation of roughly around 5%. So what we feel is that the current value-wise growth of 5% to 6% is what we will have in the first-half and we will try to increase it to around 10% or more in the second-half of FY ’23. Having said that, I would just like to point out one thing that the Q4 of FY ’25, that is the March ’25 quarter, our sales, the demand and the volumes were quite high. So that is — that would be one of the challenge, but otherwise, 10% volume-based growth is fairly means you know, we can easily try to target that.
Even we can even try for 15%, frankly speaking, in the second-half of FY ’26.
Maitri Shah
So this is the value growth, not the volume growth, right?
Adhish Patil
Yeah. So second-half value and volumes would be more or less similar in both the way.
Maitri Shah
Okay. Value volume. And for FY ’27, the same range because we are also entering the recognated markets and all?
Adhish Patil
Correct, correct, correct.
Maitri Shah
So again, 10% to 15% On value and 10% to 15% on volume. Is that correct?
Adhish Patil
Yes.
Maitri Shah
And for the EBITDA, we are targeting 15%.
Adhish Patil
EBITDA — yeah, we are targeting 15% with optimum utilization of all these capex what we are putting in.
Maitri Shah
And salicylic acid, the sales will be only domestic or we targeting any international sales as well?
Adhish Patil
So as of now, so definitely where we find the pockets in global market we will try to target them because we do have a very good distribution network across the globe, we are exporting more than 100 countries or as far as APIs and intermission spectrum is concerned. So we should be — so wherever pockets we find in the — across the world, we will try to target that as well, no doubt about that. Having said that the main market of acid is here in India, right? So
It will be more skewed towards domestic sales.
Maitri Shah
And the formulation business, you said you’re targeting INR550 crores to INR600 crores through oncology. So that will happen post two years or within like the next three years,
Adhish Patil
It will take three years. It will — there will take three years. So this INR550 to INR600 as of now I’m saying means in three years’ time is because of both the oncology as well as the other OSD registrations what we are doing across the globe. As you say that we got UK-MHRA approval for a regular OSD facility in. We already have peaks approval for the same. And as we speak today, we are also having a ongoing audit for another regulated market. So if that goes well, then we will be on the right path to manufacture more-and-more regulated formulation products in our own facility and export it to the regulator market.
So 550 to 600 by FY ’28, I would say, because the oncology piece will play I was saying — I was telling that by December ’26, probably most of the work-in R&D will be done for eight, 10 products, then we’ll be filing those and then we can assume six to nine months for two and four within the regulatory authorities and then we will be able to start the commercial phase. But meanwhile, we do have a USFDA approved oncology plant. And if there are some other formulation companies in India or abroad who wants to get coal manufacturing done in a US-FDA accrual facility for oncology, which are very few across the globe.
So if we get those opportunities, we will do that to increase the utilization of the plant? Are any of those in pipeline or it’s just an opportunity? Good here talking with you. I cannot give a estimates on that, but we are talking with you.
Maitri Shah
Okay. And any idea on the tariff differential that will happen for like China and India from the US?
Adhish Patil
Yeah. So see, the only concern for us would be if the Indian — Indian tariff should not be more than Chinese tariff, which seems very-high it seems unlikely. So we are not worried that much because if you speak about API market in US, cost is not that much of a big factor. It is mainly you should be able to get the in the US market. So it’s more about marketing than the cost because we are not worried about the cost as far as water products we are manufacturing in the USFD front.
Maitri Shah
Okay, thank you very much. All the best. Thank you.
Operator
Thank you. The next question comes from the line of Neet Mehta from Prasun Exponentials. Please go-ahead ladies and gentlemen, we’ll take this as a last question for today the next question comes from the line of Dhwanil Desai from Turtle Capital.
Dhwanil Desai
Hello. Yeah, good morning. Yeah, hi. Just one question. So if we go back-in time, you know, even pre-COVID with, let’s say, 35% or even less gross margin, we were doing 15% 16% EBITDA margin. And currently, we stand at close to 37% EBITDA margin with room for improvement. So below gross margin, as and when I understand currently the EBITDA margins are lower because of the lower capacity utilization. But as we achieve optimal capacity utilization, shouldn’t we expect EBITDA margin north of 16%, you know, probably going by historical numbers or is there any cost which has significantly increased below gross margin, which would keep margins in check to, 15% 16%, if you can help us understand this dynamic, what was in the past, what can happen in the future.
Adhish Patil
So if we look at the standalone profitability for the March ’25 quarter, I just say you are right that even with the gross contribution of around 35.2%. We were able to do an EBITDA of 14.5%. So already we are like more almost 1% better so that 14.5 months I should be around 15.5% and with a better gross margin, why not 16.5% or 13.5%. So the — yeah. So the theme is — you’re correct. So in the best possible quarter, in the best possible quarter where the utilizations are very-high, everything is good, probably we might be able to hit those margins because even see our power expenses, which would be roughly around 3%. So with the solar power coming in, our manufacturing expenses will go down a little bit. Our manufacturing expense, as you’ve seen, if you look at all the past five quarters, they don’t go up much significantly even if the sales goes up, you know. So definitely an incremental profitability of 25% is there. What I mean is after INR500 crores INR600 crores, if I do INR600 crores of more sales, probably it adds around INR25 crores to my bottom-line in the PBT cost. So that much leverage is possible. When the plant come in, definitely the expenses will go up because right now we are not expensing it out because it is in CWIP. But the sal, the good part is that the acid plant where the — it hasn’t come into sales much, but the entire cost is being expensed out as of today.
In fact, for last five quarters, we have completely expensed out the cost as far as think acid plant is concerned. So once that goes in profit, definitely, it will help in improving the EBITDA margin by almost around 1% at the company revenue.
Dhwanil Desai
Got it. So what you are saying is that there is a potential, but you are currently guiding for 15% 16%. Yes
Adhish Patil
, correct.
Dhwanil Desai
Okay. And one more question on acid, you mentioned that at 800 tons with the lower prices that China is dumping at, you will do breakeven, but I’m sure that all endeavors are to again at least not get to that company-level EBITDA margins. So is it fair to assume that without antidumping duty, difficult to get to that 14%, 15% EBITDA margin in acid?
Adhish Patil
Yeah. So one thing is that as of now, I mean that is already factor into our financials. Whatever EBITDA margins we are showing right now is with the loss of selling. That is one thing. Secondly, yes, on a standalone basis for that acid project, the thing is right now, we are talking about 800, but the final aim is going to 1,600 tonnes per month. So when we reach at those levels, 1,500 to 1,600 tons per month definitely, we feel that the margins will look much better. And typically what we have seen that when we start manufacturing a product day-in and day-out in a dedicated facility, then we get lot of new to reduce the cost.
But right now what is happening because of the equipment, we were not able to run the production smoothly in a continuous form and that is the reason Why we are not able to bring in the cost-reduction efficiencies in as of now. But we are confident that once we reach that 1,500, 1,600 tonnes per month kind of a level then the company-level margin should come in. And having said that, what we feel that as of now, since China is even from January to July, in this period also, they have further reduced the acid price by around 6%, 7% and that is only to discourage the Indian manufacturers from provision. But fortunately, actually, had you been the standalone company which manufacturing only acid is in a situation for us. But we have such a big product basket that the other products can easily absorb the loss of acid as of now. So as soon as you breakeven, we will be much better-positioned at a company-level. And then from that point onwards, when you go to till 1,500 to 1,600 tons per month, we will be even better. And there is always a scope of salicylic acid derivatives manufacturing because in India, most of the companies are manufacturing the derivative of salic acid and exporting it to the world. Export, that has a lot of export potential. So that is always there. But as of now, we are not focusing on that because first of all, we’ll try to focus on selling salicic acid to those Indian customers. And if that doesn’t work well, then we have an option to go for the derivatives.
Dhwanil Desai
Got it. Very helpful, Rajesh. Thank you and all the best.
Adhish Patil
Yeah. Thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraints, we’ll take this as a last question for today. I would now like to hand the conference over to the management for closing comments.
Adhish Patil
Thank you everyone for joining us today on this earnings call and we hope you have been able to answer to most of your questions. We appreciate your interest in Limited. If you have any further queries, please contact AJ, our Investor Relations Advisors. Thank you.
Operator
Thank you. On behalf of RT Drugs Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines