Akums Drugs & Pharmaceuticals Limited (NSE: AKUMS) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Sahil Maheshwari — General Manager, Strategy
Sumeet Sood — Chief Financial Officer
Analysts:
Abdulkader Puranwala — Analyst
Gautam Gosar — Analyst
Naman Bhansali — Analyst
Shruti Jaiswal — Analyst
Darshil Jhaveri — Analyst
Vivek Agarwal — Analyst
Prashant Nair — Analyst
Palak Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the ACAMS Drugs and Pharmaceuticals Q3 FY25 earnings conference call hosted by ICICI Securities Limited. [Operator Instructions]
I now hand the conference over to Mr. Abdulkader Puranwala from ICICI Securities. Thank you. And over to you, sir.
Abdulkader Puranwala — Analyst
Thank you, operator. Good afternoon, everyone. And on behalf of ICICI Securities, I welcome you all to the Q3FY25 earnings conference call of Ecom’s Drugs and Pharmaceutical Limited. Today, on this call, we have with us the following members from the management team, Mr. Sanjeev Jain, Managing Director, Mr. Sumit Sood, Chief Financial Officer Mr. Sahil Maheshwari, General Manager Strategy and Mr. Ankit Jain.
I will now hand over the call to the management for their opening remarks followed by which we’ll open the line for Q and A. Thank you. And over to you sir.
Sahil Maheshwari — General Manager, Strategy
Thank you Abdul for the introduction. Good evening everyone and welcome to EECOM’s Q3 earnings call. I’m Sahil. Let me draw your attention to the fact that on this call our discussion might include certain forward looking statements which are predictions or projections of the future events. Our business faces several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied in such statements. ECOMS does not undertake any obligation to publicly update any forward looking statements whether as a result of new confirmations or future events or otherwise. Now let’s begin. I hope you have gone through the investor presentation that we posted on our website and on the stock exchanges yesterday. I would like to now commence with our performance for the quarter.
We take pleasure in declaring the Q3 results of the company and thank all the shareholders and the stakeholders of the company for the continued support to the company. Q3 was an exciting quarter for the company with our focus on establishing EECOM’s global CDMO footprint. We took a significant step by securing and signing a 200 million euro contract. The contract involves manufacturing supply of products to be sold in the European market. We believe this is the first of many such contracts and partnerships we will undertake to serve the European markets in the years ahead. On the domestic front, we continue to invest in our R and D. Total R and D Investment for the nine months of this fiscal is INR94 crore. We received DCGI approvals for seven products in Q3 taking a total daily for this fiscal to 25 of FY25 to 17 DCGI approvals.
Among this was the DCGI approval for Empagliflozin combination a major anti diabetic product sold globally. On the API front we received DSI accreditation for our Barwala R&D facility for APIs reaffirming a strong RD ethos. We continue to invest in APIs with significant market potential and process optimization of our existing market. Our commitment to R and D would similarly stay in the future as well. Along with this in house R and D we also in licensed few novel products from the global markets. For the Indian markets these included our partnership with Triple Hair from Canada and KGEN from South Korea which were in the Dermatology and the metabolic segments to further bolster our R and D capabilities. We will incur a capex of INR32 crore over the next two quarters to improve and upgrade our RND capabilities. This is largely for product development for regulated market and product development for niche dosage forms.
We continue to expand and increase our manufacturing capabilities and capacities as well. We have also expanded recently capabilities for nasal sprays, eye drops, bilayer tablets, ampoules and SFs small volume parenterals. Further, we plan to expand into large volume parenterals, dry powder injectables and lyophilize bile soon. In the nine months of FY25 we have incurred a capex of INR191 crore which is largely in the CDMO vertical and over the next two years we will likely incur CAPEX to commission new plants and production lines between INR175 to 200 crore annually. On the API front we are rationalizing our portfolio to focus on high margin products as well as reducing dependency on CEFA products and focusing on general APIs. We continue to do well in the branded exports and domestic formulation business.
Moving now to the key developments and strategic initiatives we have taken during this quarter. The first one obviously which we talked about about the European contract. As we mentioned we entered into a long term CDMO contract with a leading pharma company globally for the manufacturing supplier selected pharmaceutical formulations in the European market. This includes oral liquid formulations. The total agreement value is approximately 200 million over the length of the contract. This includes an upfront payment of Euro 100 million with approvals and product dossiers and manufacturing site approvals is expected by the end of 2026. Hence the commercial supply will commence from 2027 and will continue until 2032. Strategically this allows us to expand further our footprints in regulated markets and replicate the domestic success we had had in CDMO in the global markets as well.
KGEN Talking about kgen, we have entered into an exclusive master sales agreement with kgen, a leading South Korean nutraceutical company and a biotech firm. We have been granted exclusive rights to sell certain Cajun products in India, leveraging their proprietary peptide based technologies. For Triple Hair we have partnered with Triple Hair Canada for the exclusive licensing of a patented topical solution targeting alopecia for the Indian markets. The partnership expands our dermatology portfolio with innovative air care science backed solutions to the Indian market. The product is patented until 2035. Acams has also entered into collaboration with Jagdale Industries in India to expand the underserved segments of the aseptic carton technology for ready to drink products in India. The partnership focus on wellness drinks, sports nutrition and therapy support products for critical care, diabetes and weight management. Now moving on to operating performance.
The operating performance of the company was robust, with overall adjusted ebitda growing by 12% year on year and adjusted pad growing 15% year on year. Driven by better profitability in our core CDMO segment, the EBITDA improvement showed a continued improvement in the product mixed API EBITDA losses reduced significantly in Q3 compared to the last quarter although prices of cephalosporin APIs still remain low. As I mentioned, the branded formulations continue to do well across exports and domestic segments. We have also been able to strategically reduce our losses in the trade Gen Z segment. We continue to take pride in stating that we are The India’s largest CDMO India focused CDMO commanding over 30% market share. Our company serves over 1500 customers including both Indian companies as well as multinationals with which we have long standing relationships. Today over 26 of the top 30 pharmaceutical companies in India are our valued partners. Finally, before handing it over to the CFO, I would like to update that Mr. Nand Lal Kalwa who had been on our board since 2014 has retired. We are grateful to his contribution to the overall company over his span as a board of directors.
Over to Mr. Sumitzer.
Sumeet Sood — Chief Financial Officer
Thank you Sahil. I think Sahil mentioned that the quarter had been exciting on the various contracts and you know, strategic partnerships. We did. I’ll take you through the overall financial performance of the company. If you look at the total income on a consolidated basis we see that we are at 1025 crores, 2% lower on quarter. On quarter basis which was 1047 crores and 6% lower on year. On year basis it was 1092 crore that time. Largely on account of falling API prices, we’ve sort of held on to the EBITDA and seen a growth there of 1%. So in Q2 we were at 134.6 crore EBITDA. We are at 136 crore EBITDA on a year. On year basis Our EBITDA is 12% higher from our 121.2 crores EBITDA growth is largely driven by the CDMO segment and the margins.
Our PAT stood at 66 crores. It was similar during the last quarter at 67 and it was however much higher than what we did in the Q3 last year which stood at 57 crores. The cash flow for the group stands at surplus at around 340 crore which is similar to the last quarter. But before for the IPO the company in the quarter had a debt of 322 crores. Net cash flow from operation increased from 19 crores to 91 crores on quarter on quarter basis. Further, our free cash flow increased from negative 73 crores in quarter two, 25 to a positive 50 crores in quarter three 25. On a year to year basis the cash flow from operations stood at 162 crores.
While our free cash flow stood at negative 27 crores compared to a positive 90 crores on a year to date basis, working capital saw a reduction of 40 crores. On YTD basis it was 1035 in December 23. And our working capital is 995 crores in December 24. If we were to spend a few minutes looking at how each of the segment has performed. We’ve been over the past stating that almost 78% revenue comes from the CDMO business and 18% from branded generics and 4% from our API segment. So if we were to look at the whole numbers it is almost 787 crores which would come from CDMO. Branded generics would do 182 crores. And our CDMO business which Sahil was mentioning is at 40 odd crores. Our CDMO business continues to grow at 15% margins. So that’s how the business has been. The CDMO business has increased a bit of 9% year on year. And this is largely because of better gross margins which you would see. Our branding generic business EBITDA has been at 10.8%. It is at 19.8 crores similar to Q2 levels of 10.3% and 18 crores. However, it is lower than the Q3 of last year which was at 13.8% and 24 crores.
API business, our losses reduced this quarter. EBITDA losses declined to almost 11 crores in Q3 compared to 14 crores in Q2 and 16 crores in Q3 last year. This was largely driven by rationalization of portfolio and focus on higher margin products. We continue to improve our margins and achieving breakeven in this business. I think that’s the overall gist on the financial side from the company.
We are very happy to take questions from all of you. 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 touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. The first question is from the line of Gautam Gosar from Monarch AIF. Please go ahead.
Gautam Gosar
Hi sir. Thank you for the opportunity. My first question is on the formulation of business. So sir, can you highlight what was the revenue for the trade generics specifically in the formulations segment in Q3 as well as in nine months and you indicated some provisions in the trade generic business. So if you could throw some light on that and quantify it as well.
Sumeet Sood
So you know, while we don’t give a complete breakup of a marketing business but the way we broadly look at is almost 65% of this business comes from our export business, from our recommenders business. Uno source does 21, 22% and the remaining is trade generic. I think that’s the limited information we can give you because beyond that, you know, we don’t give financial but we are happy to. I mean the businesses, trade generic business, as we mentioned, we had consolidated, consolidated over a period of time and it is, you know, doing well. So I think that would be where we would limit, limit our answers specifically for the, you know, sub segment of a segment which we are not disclosing in our financials. I don’t know if I missed out something. You can, you can ask me but have I answered your question? I’m sorry, can you repeat please?
Gautam Gosar
You indicated some provisions in the trade generic business, right. So if you could highlight what is the provision about? Is it a write off we have taken or what is that exactly?
Sumeet Sood
Oh so, so you know the way, the way, I don’t know where the question is coming from but the way the trade generic business provisioning works is there are date value medicines that we have, right? The date value medicines if are unsold then those would be provided. That is in the normal course of business. And I think the larger provision we made was during COVID when some of the distributors and some of the medicines which sort of expired because fortunately Covid went over. So, so I think that was the two limited provision that we do in this business and that’s what we have done.
Gautam Gosar
Also sir, the reason for asking this question is that if the formulation share is increasing in the overall branded formulation business then why are our margin stuck at around 10% only they should have increased.
Sumeet Sood
So I think the way we look at this business is that the margins, if you look at the last period, our margins were around 10.3 odd percent, right. And we are at 10.8%. So I don’t think that the margins are decreasing but from a period last time, right. If you are trying to ask from there that there is a dip, but I think the margins are slowly recovering back to those levels.
Gautam Gosar
So sir, can we expect some CDLO level margins in the formulations business?
Sahil Maheshwari
So let me help on the margins of the formulations business. So as I said, Accumentis as well as unosource, they operate above the corporate average margins. Right. Trade generics where we are reducing our losses so gradually you should see an uptake. Also we’ll also have to acknowledge that the UNO source margins also has R and D expense to it for various countries that we enter and file our dossiers and the regulatory approvals for. So this is also an investment we make to the future growth business. So having said that, slowly and gradually. Yes, you are very right that these margins will move up to the corporate average margins.
Gautam Gosar
Okay. And secondly on capacity utilization. So what is our company level capacity utilization right now?
Sumeet Sood
So this is around 40 odd percent.
Sahil Maheshwari
Okay, sorry. And we are slowly commissioning new injectable facility and other buddy facilities.
Gautam Gosar
Yes. So the utilization for the injectable facility would be currently.
Sahil Maheshwari
So this has recently started. Right. So we started our operations in the last week of August. The new injectable facility you are mentioning about. Then we recently in January also received the WHO GMP approval. So slowly and gradually we’ll now see client audits and subsequently orders from the clients. So as of today this operates. So the utilization is insignificant. But I think this is a better question if we address six months down the line.
Gautam Gosar
Sure. And for this business the margins will have uptake. So it is a higher margin business. So if you could guide on around how much margins can the business do with optimal utilization?
Sahil Maheshwari
So injectables and not just injectable. So we also do complex dosage forms within oral solids as well. So as I mentioned, bilayer tablets, it’s something we have recently started. Then we also have other complex doses formed within oral solids. We have some complex formulations in all the dosage forms. Right. So that is there injectables we have been doing since 2007 when our first plant was there. Subsequently, almost half of our facilities today are either completely sterile or have significant sterile blocks. So I don’t think that you would see a relatively a huge jump just because of this one injectable facility. While this will contribute significantly to our injectable portfolio. But I would still say that our overall EBITDA margins for the CDMO business should remain in the zip code we operate today.
Gautam Gosar
Okay, thank you.
Operator
Thank you Ladies and gentlemen, you are requested to please restrict your questions to two per participant. If you have any follow up questions, you may rejoin the queue. The next question is from the line of Naman Bhansali from Nine Rivers Capital. Please go ahead.
Naman Bhansali
Hi sir. Thank you for the opportunity. My question is on the CDMO side. So while we’ve seen some decline in revenue and as you talk about API prices falling impacting that, what would be the volume growth in the nine month period that we’ve seen in the CDMO business?
Sahil Maheshwari
So I’ll break it down. So for the CDMO in the nine month we had a volume decline of roughly 1%. If you look at this business, we had almost a 13% volume growth in the first quarter and an 11% volume decline. If we compare it to the previous quarter, we have grown volume by almost 0.6%. If I talk about complete 2024 to our 2023 levels, we have grown our volumes by 1.6% where the industry was largely flat. Right. So a quarter two which had a sizable volume decline. We are seeing some green shoots and we are already turned positive in Q3 compared to Q2. Q4 also looks good.
Naman Bhansali
Got it, got it. Second question is, you provided the scale of the European business that you’ve signed, can you provide us more insights into the addressable market or the potential benefits that we can get from the Triple hair and the Kerogen as well as the ready to drink agreement that we’ve signed?
Sahil Maheshwari
Sure. So these three are in licensing and not manufacturing. So these are not global cdmo but these are manufacturing for the Indian markets. Right. So obviously the opportunity size is smaller compared to that one large contract we had. Having said that, Triple A, if I talk about it is a patented product, combination product, topical product for the hair loss segment. This is a large segment driven by a few molecules. Right. So this has a large target addressable population. With our patented product which we launch in 2027, we will make some inroads into the hair care segment. Similarly Cajun it has biotech peptide based products for skin care as well as hair care and has a metabolic product as well. Right. Similarly Jagdale it is a partnership for retrofitting formulations for the sports and wellness nutrition as well as care. So individually as a basket.
So the beauty about this business is none of the products or a segment of a product becomes large enough that we are concentrated in our offering. So this is similar to the R and D project that we do that each of the product will have some size and scale. But if your question is hinting towards will it become sizable within the overall CDMO business. That will not be the case. Unlike the global European CDMO contract which we signed.
Naman Bhansali
Got it. Got it. Understood. And lastly the Mumbai R and D project that we are taking up. So the rationale here would be more to be closer to our customers or gaining more customer traction sitting in Mumbai. Or is it some other rationale that we are seeing here?
Sahil Maheshwari
So we already had R and D in Mumbai. If you see we have four R&D’s. Couple in Haridwar, one for API in Parvala and one in Mumbai which we already had. Right. So what we are doing is we are expanding and upgrading the R and D for the new dosage forms as well as the additional additional markets we had. Also the previous one which we had was on rank. Now we are moving to a property which we’ll own.
Naman Bhansali
Got it. Good. Thank you. That’s it.
Operator
Thank you. The next question is from the line of Shruti Jaiswal from Indira Securities Private Limited. Please go ahead.
Shruti Jaiswal
Hi. Am I audible?
Operator
Yes ma’am, you are actually.
Shruti Jaiswal
So if I have missed out, I wanted to ask the capacity utilization for the current facilities and the optimum level.
Sahil Maheshwari
Can you please repeat? I think if. Are you asking the capacity. Yes. So as I said we largely operate on a 40% capacity utilization for our already commercial established facilities.
Shruti Jaiswal
Okay, sir. And another question is what would be the margin, operating margin or any guidance for the upcoming period? As you have CDMO contract and so many other deals like Triple hair and Caribbean etc. Partnership. So what margin can be expected in the upcoming period?
Sumeet Sood
So both the European contract as well as Triple Hair will kick start contribution to the PNL in 2027, the calendar year. Right. And also these are on the margins which we’ll operate usually in cdmo. So I don’t want to comment that on the margin. Specifically what do we guide the market towards is the margins which we currently operate at.
Shruti Jaiswal
Okay. Thank you so much.
Operator
Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Darshil Jhaveri
Hello. Good after. Good evening sir. Thank you so much for taking my question. Hope I’m audible. Hello.
Sahil Maheshwari
Yes. Yeah.
Darshil Jhaveri
Yeah. Hi sir. So I just like wanted to know how do we look at API currently? Because I think even though absolute terms are EBITDA losses have come down but on a percentage terms it increases right quarter on quarter. So just wanted to know what is happening currently. What do we look at like the Turnaround coming in because 10, I think it’s a 10 crore loss on a 40 crores revenue. Just eating up our good work in CDMO and formulations. Right. So. So just wanted to know what do you see the business are currently going.
Sahil Maheshwari
Sure. For the entire group as well. Let me spend couple of minutes on API. So as you rightly said, API we have reduced our revenue to 40 crore which was roughly in quarter two or 60 crores and the quarter three of last year was roughly 55 crore. The challenge is not driving sales. We’ll have to understand that number one is the market wherein the overall cephalosporin prices which were almost 90% of our revenues, they dropped by 22% with our COGS being over 80%. Most of the cephalosporins which we marketed, we thought it’s a wiser decision to reduce our sales in a way which will reduce our losses as well. Right. So I just want to give you comfort that this is not the sales which is declining. It is a conscious decision that we took in a way to reduce our losses.
If you really look at it, we have been able to significantly reduce our losses from 17 crore in the last Q3 to just 11 crores in this quarter now bringing on then what we’ll do next. So there are two things in pipeline. One is we are also reducing our dependence from the SIFA oriented APIs. Right. So within Lazlo we had good commercial success in three APIs. Right. We are also bolstering our R and D efforts to move to more general APIs in a way that while SIFA in the near future and a couple of other two or three years down the line will still contribute more than the general facility but the share of general products will increase. In a way this will limit our exposure to one segment of the API. So that is one.
The second is we are also with our database which is the cephalosporin facility. We’re also targeting exports. We have already kick started exports. This is in high single digit percentages. We are targeting that we expand our exports where the realizations are better. And also we go into regulated markets for this. We are already in works in our R and D and slowly and steadily we’ll see commercial successes. I think it’s a transient phase wherein we have brought down our revenues but have dramatically increased our profitability over the next one one and a half years. We are continuing our efforts on R and D and improving our product basket will surely have good results in years to come.
Darshil Jhaveri
Okay. Okay, sir. So, sir, just wanted to know, like, on overall terms, what kind of revenue can we expect, like in FY25 and overall margin? If you could guide for you know in FY26 even like a range would do sir.
Sumeet Sood
So, so you know the way we’ve been guiding the markets on most of our calls is that if you look at how the business has performed over the last three quarters. Right. So and the margins if you look at so, so if you look at the, the the three quarters we are, we are at almost 3,006, 3,062 crores or top line and we have you know almost an ebitda margin of 401 crore. So we sort of see that as we have guided earlier that for this period and the way we are riding is that the business should see similar revenue and similar ebitda. So that’s how we have been guiding. We had said H1 would look similar to H2. So Lally, I think if we look at the organic part of the business and some of the new initiatives that Sahil spoke about some of them were long term. Some of these sickle cell business which didn’t sort of trigger for us this could have been another segment of revenue which would have come in. So the way we are guiding the markets is as is the business is pretty similar and I think we should perform the way we have done it over the past three quarters.
Darshil Jhaveri
Okay, fair, fair enough. So I’m just on a last like again. So you were saying about. Just one more last question about API. So the turnaround like when will we. When do you see the pro? You know business will be break even like on a PBT level or on EBITDA level like so maybe it’ll be a year or so. You know, just range. What do you think sir?
Sahil Maheshwari
So while it’s there we are progressing well. I think this is in a zip code of one to two years when we’ll in a way break even.
Darshil Jhaveri
Oh okay. Okay, fair enough. So yeah, that’s it from my side. So thank you so much.
Operator
Thank you. Yeah. Sorry. Thank you. Ladies and gentlemen, to ask a question you may please press star and one. We have the next question from the line of Vivek Agarwal from Citigroup. Please go ahead.
Vivek Agarwal
Hi. Thanks. Thanks for the opportunity. Sahil, you highlighted that as far as this European contract is concerned that this is one of the many contracts that you are going to sign. Right. So just want to understand what gives you the confidence that you will get many more contracts of similar kinds. Are you in discussion with any players, any company in the Europe or it is for example that the this particular contract has given you the confidence thank you.
Sahil Maheshwari
Sure. So first I’ll talk about the infrastructure. I think we are already in pipeline for a few more facilities will be European gmb. Right. So one is we’ll have the scale and infrastructure along with product development capabilities. That is out there. So we are ready for opportunity that knocks our door. Second is we already have started our presence within the European market, the business development team. Right. So while this is a large contract, we already are seeing some discussions around contracts which are not this big. But this is. This is a phase where you will understand that this is proving yourself right. For the first two products and then getting deeper within. This is the same that happens within the domestic CDMO as well. Right. So this gives us confidence that over the next two, three years we’ll also have a good business coming from the European cdmo. And Europe is just one of markets. I think the focus is regulated ex us as of now.
Vivek Agarwal
Understood. Just one more thing on this contract, right? You starting you are expecting the revenues to kick start in Cy 27. So is it going to be spread across the like five, seven years or it is like some kind of back ended or front end kind of revenue realization? That is going to be. Right.
Sahil Maheshwari
So just to clarify, this will start in calendar 27 so likely Q4 of 27 or quarter one of the next fiscal and this will be evenly spread across the year.
Vivek Agarwal
Understood. And one clarification here that. So you mentioned that the margins in this particular business will operate in line with the CDMO side. So is it your CDMO business that you are talking about or the. Or our global CDMO industry that is operating in the European market?
Sahil Maheshwari
This is our CDMO business.
Vivek Agarwal
Okay, thanks. And just actually one more question. If I can squeeze in as far as the volume growth is concerned, right. If you look at next couple of years down the line, right. So what kind of the growth you are expecting, is it going to be in line with the overall IPM or is it going to be higher than the IPM or what kind of for example the tech delta that you can have and what is going to drive that? Thank you.
Sahil Maheshwari
So I’ll maybe answer it historically and then because future is something in volumes, I think we both can sit and have a long debate. But still we’ll be still debating, debating and discussing. So if we talk, if we leave this FY25, if you have to see ourselves as a five year historic period, largely we grew in 6 to 8% of volume on an average. Right. So this was always two, two and a half times higher than the market. If you Also look at 2024 where we grew 1.6%, the industry was largely flat. Right. So we sit in the market, right. So obviously our volume growth is definitely tied down to the market. But what we have always delivered is we have delivered a good growth over what the market growth is. Having said that, the volume should come back.
I think this is a transient period. The volume should come back. We are seeing good green shoots in Q4 as well. Q1 also looks good. As you understand this business, we already have 60 days of orders in hand and hence we can deliver them. So Q4 sitting out of Q4, today’s Q4 looks good. And similarly we should have continued good success in the next fiscal as well.
Vivek Agarwal
Understood. So barring the blip in this particular year. Right. You don’t see as far as the story changing as far as your ability to get the kind of market share in India, especially in the CDMO industry.
Sahil Maheshwari
Absolutely. Absolutely right. And if you really recollect what I said, the new dosage forms that we are adding, whether it is small volume parentals, large volume parentals, bilayer tablets, dry injectables, the whole focus if you really carefully think through, is to drive value products rather than volume based products. Right. So while volume growth is there and we are still in the market where it is dominated by solids, our continued focus is how we can improve the overall product mix.
Vivek Agarwal
Thanks. That’s from my side.
Operator
Thank you. The next question is from the line of Prashant Nair from Ambit. Please go ahead.
Prashant Nair
Yeah, hi. Thanks. So just a couple of questions, Sahil, I don’t know if you mentioned this before because I got disconnected a couple of times. What was the volume growth in CDMO this quarter?
Sumeet Sood
Volume growth in CDMO for quarter three was 0.6% compared to quarter two of FY25.
Prashant Nair
All right, thanks. The second question is on the API business. Now when you say that you have rationalized your portfolio, so can you give us some sense of scale? So for example, if Your sales was 100 earlier, how much would the balance portfolio which you have left with you, how much would that. I mean, just to get a sense of how much you have cut out, that will help us also take a call on how you will grow.
Sahil Maheshwari
So Prashant, honestly I also don’t have an answer to this as of now. But if you really look at our Q to Q3, we have dropped by almost 19 odd crore in our revenue. This is largely on account of few cephalosporin APIs which we used to do sales but they were simply too competitive for us to be in the market. Right. So Q2 to Q3, if I talk about for the products which are of higher margin, they still continue to remain that kind of sales. But the drop in the sales was largely on account of the ones which we discontinued.
Prashant Nair
Right. And when you say you discontinue I mean, is this. Would you retain the infrastructure, the product capability? And come back into the market if pricing improves or.
Sahil Maheshwari
Yeah, Prashant, certainly. So. So when I say discontinued is discontinued at the current price levels, as I said, syphilis puddings are almost down 25, 30%. Right. While the KSM prices have not moved down that much. So whenever the prices normalize, we already have done investments in RND and process optimization of the products. We already have the infrastructure, the reactor and the blocks in place. So whenever it is commercially viable, it is just a matter of KSM procurement and supply.
Prashant Nair
Okay. And one last question, maybe not exact numbers but can you give us some flavor of say the mix of customers on the CDMO side, say how much would be going to the prescription market which is say captured by IQAI or Avax and how much would be to trade generics or any other segments?
Sahil Maheshwari
Unfortunately Prashant, we do not calculate customers that are revenue that way.
Prashant Nair
All right, thanks. That’s it for me.
Sahil Maheshwari
I don’t ever think of it.
Prashant Nair
Yeah, no worries. Thank you.
Operator
Thank you. Participants, to ask a question you may please press star and one. We have the next question from the line of Palak Shah from Entrust Family Office. Please go ahead.
Palak Shah
Hey. Hi sir. Thank you so much for taking my questions. Just a couple of them. Firstly, on the API side you mentioned that you’ve discontinued few of the products. Are they actually below or negative gc and is that the reason why you’re discontinuing the product?
Sahil Maheshwari
Yes. So gc and on top of it, if you add just the direct manufacturing expenses of manpower and utility, they would be the amount will be higher than the current selling prices.
Palak Shah
Okay. Okay. Given that we are actually underutilized on the capacity when this discontinuation of the product, where would our capacity utilization stand now? And just to go inch up back to 65% or which makes us break even on this capacity, what’s the delta that we need to generate in terms of the number of products or absolute revenue?
Sahil Maheshwari
Sure. So just on the capacity utilization, as I mentioned, this was directly variable cost associated with that production. So. So capacity under utilization does not impact the business of this product. And on the API side we are largely at a 30 odd percent utilization. Right. And that’s broadly about it as of today.
Palak Shah
Okay, so is the math right that we need to reach at least 60, 65% to break even on the operational cost? I mean EBITDA level?
Sahil Maheshwari
Yes. So not that high. But yes, as we scale up our capacity utilizations, we will in a way absorb the fixed expenses.
Palak Shah
Correct? Correct. Secondly, on the vendor generic side, last quarter we mentioned we used to have a 1/4 month, 1 crore per month loss in that business of trade centric. Adjusting for that, our margin should be around 12, 12 and a half percent during this period. Can you give us just some broadly given that we’re doing R and D in the global side on the UNO source side and the augmented side would not have such a large cost of R and D fixed cost. What were the percentage difference in margins there? And when you look talk about going to company level margin which is close to 14% or how fast a delta can accrue as the cost absorption of owner source R and D happens for us.
Sumeet Sood
So you know the trade generic business that we had mentioned is where we had consolidated. Right. So while I was mentioning to an earlier participant that we don’t, we don’t give a breakup of it, but largely the ebitda margins for Unosource and Acumentis remain in 80 to 20 percent, you know, bracket. Right. So that’s as Sahil was mentioning, higher than an overall CDMO business which is close to 15.4%. I think the trade generic business which you mentioned is the one which is at, you know, is still at a negative EBITDA.
Palak Shah
Yes sir, but even if I adjust for that 1 crore loss per month, you are at 13% margins. So if your UNO source and augmentus are about 18 to 20% margin then what is leading to this almost a 6% 7% gap in the margin delta adjusted margins?
Sumeet Sood
No. So I think the way you’re looking at, you know, the trade generic losses, it is, it is slightly higher. It is slightly higher. It’s low. It’s around 2 crores per month.
Palak Shah
Okay, okay,
Sumeet Sood
Okay. Then your match would tally. I think you we can get the exact figure but then your match should tally.
Palak Shah
Got the point Sir, I maybe take it offline with you. Just one last question on the cdm. Sure, sure. Just last name is CDMO business. You reported a nine month volume growth of 1% but the revenue growth decline of 7%. So the effective 8% pricing impact that you’ve seen again in the previous calls you have mentioned that you usually run two to three months ahead of the industry because you supply to the industry. And when the IPM shows the growth, given that even in this quarter we are effectively sort of a flat on the volume. But if you talk to peers, they’re still talking about a volume growth in Q4 for them. I’m saying your customers are still talking about a volume growth in Q4. While it’s a subdued quarter for them, but still on a YY basis, they’re still expecting a growth. How do we marry the two? Because in our IPO roadshows we have mentioned that we want to grow ahead our spot expectations always to go ahead of the industry in volume terms, not only absolute revenue terms.
Sahil Maheshwari
So if you really look at SO volume growth, as we mentioned, so quarterly, looking at quarterly volume growth, I think is not the right reflection for the kind of business. Right. Because while these are two different businesses, marketing is secondary to the patient. Right. And hence that’s where the uptake is for us. It is batch manufacturing and shipping at their warehouses. Right. So a 12 month period is a better way to look at these businesses. And As I said, 12 months we have done our 1.6% volume growth. The industry numbers out there with whichever database you wish to consider, but these are largely flat. Right. While we acknowledge that the volume growth was subdued this time, but barring a few quarters, we have been fairly doing well in terms of volume as well.
Palak Shah
So what will get us our volume back to like 4, 5%? Because our aspiration to grow ahead of IPM, which is 12 at least average, we take a 9 to 10% anywhere 12, 13%. The pricing, sales swings, comes back to normalization, that’s 8% delta. Would you expect the volumes to grow at 4, 5% for you thus achieving the 12 to 13% approximate revenue growth in CDMO?
Sahil Maheshwari
Yes. So 4 to 5% certainly. Right. So what are we doing? I think essentially everything we do. Right? Right. From R and D to establishing manufacturing capabilities to the client engagement we have. Right. Everything we do is to sustain the business and drive volumes. Right. Ultimately, this is how based on three things, how quickly we can supply the quality we can supply and the pricing which is there. Right. So everything we continuously work on and the ultimate aim is how much market share we can command. But thank you so much for this. I’ll come back for that. Margin questions on the trade centric side.
Palak Shah
Thank you so much for taking my time.
Operator
Thank you. Ladies and gentlemen. You may press star and one if you wish to ask questions. The next question is from the line of Abdul Kader Puranwala from ICICI Securities. Please go ahead.
Abdulkader Puranwala
Yeah, hi. So this first question on the CDMO business, you mentioned that there are certain new contracts for the next which are to be executed for the next six months. Could you provide us some flavor as to how that translates in the CDMO growth for you? Maybe in terms of volumes for the next two quarters at least.
Sumeet Sood
Sorry, Abdul. So which contracts on the next six months? So, but the contracts which we talked in our call earlier were largely commercializing in 2027.
Abdulkader Puranwala
Now I was talking with the reference to the order book for the CDMO business. Okay. So if that gets executed as what you would have planned, then at least for the next six months, what would be your volume growth like?
Sahil Maheshwari
So as I said, we have visibility for Q4, right? Sitting in early Feb, 60 days is what we are. So I can only talk about Q4 and not the next fiscal. Right. The volume growth looks decent as of now. I’ll not be able to give a number to it because ultimately this is on production and final delivery. Right. But the pressures on volumes which we had mid year this fiscal, these look to be a story of past as of now.
Abdulkader Puranwala
Okay. Okay. And my second question is with regards to the European contract, so on in the PPT you mentioned that 100 million euros or something there would be an upfront consideration. So. So has it, has it already been received or this is kind of a milestone income which will come in due course of your contract period.
Sumeet Sood
So. So you know the money has been transferred from overseas and we are still to receive it in our account. Right. So. So it’s, it’s the not true account of the bank. Right. So once, once we receive it, it’ll be an advanced advance received against that contract.
Abdulkader Puranwala
Okay. Okay. And a final one on the EPI business on the losses. So I understand you know, you’re trying to cover the losses then any color by when we can break even in this particular segment. Maybe in a year’s time or two years times. I know some color if you could provide would be helpful. Thank you.
Sumeet Sood
Yeah, so we just talked about Abdul. So I think we still need at least 10 years where we are targeting. So one, one and a half, two years at max. This is something which we are looking at.
Abdulkader Puranwala
Perfect. Thank you so much.
Operator
Thank you. Participants, to ask a question, you may press star and 1. Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Sahil Maheshwari
I think thanks a lot everyone for this engaging discussion. We continue to work on our strengths and looking forward to catching up with you all in the next quarter. Thank you.
Operator
[Operator Closing Remarks]