Alkem Laboratories Ltd (NSE: ALKEM) Q1 2026 Earnings Call dated Aug. 12, 2025
Corporate Participants:
Unidentified Speaker
Purvi Shah — Head of Investor Relations
Vikas Gupta — Chief Executive Officer
Nitin Agarwal — Chief Financial Officer
Analysts:
Unidentified Participant
Tushar Manudhane — Analyst
Kunal Dhamesha — Analyst
Amlan Jyoti Das — Analyst
Neha Manpuria — Analyst
Chirag — Analyst
Rashmi Shetty — Analyst
Rahul Jeewani — Analyst
Gaurav — Analyst
Gagan Thareja — Analyst
Neha Kharodia — Analyst
Presentation:
Vikas Gupta — Chief Executive Officer
Ladies and gentlemen, good day and welcome to The Alchem Lab Q1FY26 earnings conference call hosted by Motilal Oswal. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing 0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Tushar Manu Dhane from Motilal Oswal. Thank you. And over to you sir.
Tushar Manudhane — Analyst
Thanks Ishaka. Good evening and Warm welcome for first quarter FY26 earnings call of Alan Laboratories. From the management side we have Dr. Vikas Gupta, CEO, Mr. Nitin Agarwal, CFO and Ms. Purvi Shah, Head of Investor Relations. Over to you Purvi.
Purvi Shah — Head of Investor Relations
Thank you, Tasha. Good evening everyone. We appreciate you joining us for our Q1 FY26 results call. Earlier today we’ve released our financial results, press release and results presentation. All of which are available on our website and have also been filed with the stock exchanges. We hope you’ve had a chance to review them. Before we begin.
Please note that this call is being recorded and a transcript will be made available on our website shortly after the call concludes. Also, today’s discussion may include certain forward looking statements. So this should be viewed in the context of the risk and uncertainties associated with our business. With that I now hand over the call to our CEO Dr. Vikas for his opening remarks. Over to you sir.
Vikas Gupta — Chief Executive Officer
Thank you Purvi. And thank you Tushar. Good evening everyone and thank you for joining us for our Q1FY26 earnings call. Q1FY26 marked a strong start to the year with healthy growth across both our domestic as well as international markets. Our performance was driven by strong top line growth and an improved gross margin which resulted in a better EBITDA profile. These results reflect the disciplined execution of our strategy focused investments and a deliberate pivot towards value accretive products and markets. With a sharper focus on ebitda. We are strategically accelerating our focus on the non U. S business segment by extending our presence in high potential non U.
S markets as well and capturing new opportunities that align with our long term growth ambitions. I will now present the key highlights of Q1 performance. The total revenue from operations stood at rupees 33,711 million with bio y growth of 11.2%. India sales at rupees 22,656 million with a yoy growth of 12%. US business grew by 8.8% yoy to Rs 6,982 million. Non US business revenue grew by 9.1% yoy to Rs 3,556 million. EBITDA grew by 21.4% yoy to Rs 7,391 million resulting in an EBITDA margin of 21.9%. Net profit after minority interest was rupees 6,643 million with a yoy growth of 21.8%.
R&D expenses for the quarter were rupees 1184 million. That is 3.5% of total revenue from operations. Our domestic revenue contributed 68.3% to the total sales in Q1 of FY26, up from 67.6% in Q1FY25 according to IQVR data. SSA data for Q1FY26 the company registered a growth of 9.7% yoy compared to the IPM outperforming the IPM by 120 basis points which grew by 8.5%. We have outperformed the IPM across seven key therapies namely GI which grew 1.6x, vitamins and and minerals at 2.3x, pain grew at 1.4x of the respective market, antidiabetics at 1.4x, neuro CNS at 1.2x and respiratory 1.4x of the market.
We achieved strong overall volume growth of 2.9% outperforming the IPM volume growth of 1.5% by almost 140 basis points. This quarter marks the commencement of revenue generation from our Alchem MedTech initiative that we had started and we are really confident of scaling up this business. I want to take this opportunity to sincerely thank our teams for their unwavering dedication and commitment to excellence. Their efforts continue to be the driving force behind our progress and resilience. With a strong foundation in place, we are well poised to capitalize on the opportunities that lie ahead. I remain confident in our strategy and optimistic about what the future holds for us.
With that, let us now open the floor for questions.
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 their 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles the first question is from the line of Kunal Dha Mesha from Macquarie. Please go ahead.
Kunal Dhamesha
Hi, can you hear me?
Vikas Gupta
Yeah, hi, Kunal, we can hear you.
Kunal Dhamesha
Hi. Yeah, hi. Hi. Good evening and congratulations on the strong set of numbers with the Q1 backdrop. Given that we have done really well in terms of revenue growth and margins. Would you like to update our FY26 guidance?
Vikas Gupta
Okay. So Kunal, the start has been very good to the year, but I would say at this stage it is just one quarter of the year that has gone by. So I find it a little too early to revise the guidance of it. But I can clearly tell you if the year progresses is the way, you know, we are, we are seeing for some more time then definitely, you know, we would overachieve on the, on the guidance that we have given. But at this stage, you know, I will stay with the guidance that we have issued primarily because it has been just one quarter, you know, that we have done though there are no one offs in this.
Any reason for, you know, the performance to slow down. But, but still, since it is just 1/4 of the year that has happened, I would stay with the guidance. I would say the probability of us, whatever guidance we have given getting there is much higher backed on a strong start on the Q1. So that’s my take on the overall guidance at this stage.
Kunal Dhamesha
Okay, thank you. Just slightly more specific. We had guided for our R and D expenses to be around I think 5% of the revenue versus that we have a 3.5. So is it more lumpiness of the expenses or.
Vikas Gupta
I think it’s more about, you know, phasing of the expenses. Our overall annual guidance has been within the range of 4.5 to 5%. And I stay, you know, put with that. And that is, I’m saying some of the coming quarters, you know, we will. You may have a higher expense in RD because if you see our filings trend as well, I think it’s loaded more towards, you know, in Q4 we do the maximum filings. So that is the cycle which has been following as far as R and D spend is concerned. So we stay put with that guidance.
Kunal Dhamesha
Sure. And last one from my side, is there any forex gain which has been offset against other expenses in this quarter?
Nitin Agarwal
No. So they at overall level there was forex gain. So we reported under other income. If there is a loss then that. Is reported under other expense. So in this quarter there was forex gain at the consolidated level. So it is reported under other.
Kunal Dhamesha
Sure, sir. Thank you. And all the best.
Vikas Gupta
Thank you. Thanks.
operator
Thank you. The next question is from the line of Amlan Jyoti Das from Nomura. Please go ahead.
Amlan Jyoti Das
Yeah, hi sir. Am I audible?
Vikas Gupta
Yeah, you’re on please. Yes, sir.
Amlan Jyoti Das
My question is regarding the India business. So I just wanted to understand what is the contribution from the new medtech business to your India revenues for this quarter?
Vikas Gupta
So see medtech business we’ve just started, so our first quarter revenue is around 2.5 crores, you know, which is very minimal. But we are pretty confident with the way we have started that business. And in the initial months itself the uptake has been. The response of customers has been quite positive. So we are bullish about that strategy and hope to scale it in the coming quarters. But I mean in terms of the overall contribution to the India business, it’s way too small at this stage. So is there any annual run rate.
Amlan Jyoti Das
That you see for this business in the coming quarters?
Vikas Gupta
Yeah, so we’ll scale it up, you know, quarter by quarter. I think we’ve already, you know, FY26.
Nitin Agarwal
Maybe we’ll achieve around 20 crores of revenue.
Vikas Gupta
Yeah, which, which would mean that by the, by the time we exit the year the annual run rate would be much higher. So you know, on an ARR basis I think by the end of the year should be around 40, 50 crores on an annual run rate basis. But yeah, I think that is, that is what it is. Okay, we’ll see quarter by quarter how it goes. We, we are pretty bullish about, about, you know, the, the start that we have got in that business. So, so, so it will be gradual.
Amlan Jyoti Das
Ramp up by the year end.
Vikas Gupta
Yeah.
Amlan Jyoti Das
Okay. And so my next question is regarding the other expenses. So it can, it has declined Q2. So it will be primarily because of the lower R and D expenses or was there any other one off in this quarter?
Nitin Agarwal
Right. It’s mostly because of R D expense because in last year quarter one we had a clinical trial expense on denisumab for our US market which was around 35 to 40 crores. So that technical trial has complete, got completed last year itself. And that’s the reason that there is a lower RP expense which is reflected in lower other expenses as compared in terms of percentage of sales.
Amlan Jyoti Das
Okay, so that answers my questions. Thank you.
Vikas Gupta
Thank you.
operator
Thank you. The next question is from the line of Siddhant Negandi from cwc. Please go ahead.
Unidentified Participant
Sir. Thanks for the opportunity. And. Just wanted to understand on the India business what was the growth in the branded formulations business versus the generics business.
Vikas Gupta
So Siddharth, thanks for your compliments, but we’ve never given these kind of breakups earlier. If you look at IQVR data, we are outperforming in our branded generic business. So I think if that is any reflection of our growths, then IQVR we are reflecting a 9.7% growth against a market growth of 8.5%. But what I can tell you is our majority business is branded generic business only. If you look at the India business, the major part of our revenue is from the branded generic business. And if overall business has grown strong, then that has contributed to the overall growth of the.
Unidentified Participant
Yeah. And therefore would it be fair to say that primary, secondary largely remains in line on an annualized basis?
Vikas Gupta
Of course. No. So you know, this is, this has always been the case, the India business, you know, you can never, if there are no such substantial new products which will lead to pipeline filling where. For which, for which there will be a gap in primary and secondary sales. So it has been a stable business which we are running for, for, you know, good number of years. So I think this is all I was referring to. More the recent part.
Unidentified Participant
Sure. So yeah. And accordingly, one can, one can get. Our sense on what the remainder of. The growth would be. Thank you very much. Thank you.
Vikas Gupta
Thank you.
operator
Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Neha Manpuria
Yeah, thanks for taking my question. My first question is on gross margins. You know, given that US Revenue has picked up, finally we still see an improvement in gross margin. And I think the sense was that because US Business was low, that was helping gross margins. What drove this gross margin improvement? If I was to look at the entire last year versus first quarter and from a sustainable basis, what should be the margin that we should. Gross margin that we should look at for the full year.
Nitin Agarwal
So yeah, first of all, I think there was a positive impact on account of lower API prices, so which was around say 0.8, 0.9%. And the mix has improved because our domestic contribution is higher. If you look at the overall growth. So whenever the domestic business will contribute more to the total sales, the gross margin will improve. There was negative impact on account of price drop in us so we still see 3 to 4% price drop in us in quarter one also. So the growth because in margins because of better mix has been offset by drop in prices in US market.
Neha Manpuria
In which case this should this gross margin level be broadly sustainable? I’m obviously factoring in the seasonal change. Should we Able to be. Should ALKEM be able to maintain the 65% gross margins through the year?
Nitin Agarwal
So we have given a guidance of around 64%. So we maintain our guidance of 64%. Because generally quarter one, quarter two, the. Contribution of domestic business is higher as compared to quarter three and quarter four. So at a full year basis we still maintain a guidance of 64%.
Neha Manpuria
Okay, understood. My second question is on the medtech business. What is the roughly, you know, the cost associated with this business? I just want to understand at what point does the medtech business positively start contributing to the ebitda?
Nitin Agarwal
So we are targeting medtech business to break even in FY28. So at full year this is for FY26 there can be the estimated say loss is around 40 to 50 crores. And for next year also it will be in the same range because we’ll be spending on marketing. And also the operating leverage will take some time to get reflected in the numbers. But in FY28 we plan to break even in MedTech. But for FY26, FY27 there may be losses of 40 to 50 crores per minute.
Vikas Gupta
And just to add, you know, these are newer businesses N so if they scale up faster, you know, we may have a break even even earlier. But at this stage, you know we are maintaining that guidance. I think we’ll see how it grows. The here the focus is scale up, you know, the business rather than just looking at percentage bottom line.
Neha Manpuria
Understood. My last question is on the margins. While I understand there is some phasing in R and D cost, usually our second and third quarter margins, alkym second and third quarter margin tend to be much better than the first quarter margins. So even if I were to adjust the R and D spend, is there any other reason which keeps us is sort of stopping us from increasing the margin guidance versus flattish margins? Because historically if I were to look at your numbers, second and third quarter tends to be much higher than the first quarter. Hence the question.
Vikas Gupta
Yeah, so see Q1 has been good for us. We are waiting for let Q2 also get over. We will have more clarity on if there are any headwinds that we are forcing in the near term which might affect our business at this stage we do not have that visibility and that’s why we are staying put with the margin guidance that we have given. But as I mentioned we are pretty bullish about our business, about our growth story. If these trends continue then definitely next quarter we will look at revising it further. Second point on the spends that might come in Q3 and Q4, one is on the R and D spends which are higher during that time.
Second, as we mentioned the you know, newer, you know, initiatives that we have started, especially the US plant, you know, in you know, on the biotech side we may have some of the OpEx, you know, that will come up, you know, in Q3 and Q4 because that plant will get fully operational by Q3. We will start, you know, getting operational from Q3 and may get fully operational by Q4. So in the light of those expenses that we foresee in Q3 or Q4 because of that our margins may look and that’s why we are staying put with the guidance for the overall year.
But as I mentioned earlier also if you exclude that then on a operational effectiveness basis we are continuously improving with every passing quarter in terms of our overall EBITDA profile. But it’s because of these expenses that we foresee may come in Q3 and Q4 that we are staying put at least. And this is just Q1. So we are staying put with our guidance. That’s it.
Neha Manpuria
Just last question on the CDMO revenue that starts coming through as well from the second half or it would take some time for that the CDMO revenue to start flowing through the P and.
Vikas Gupta
L. It has, it has started, you know, on a very small scale now as of now also. But that’s more from that’s just you know the lab see the CDMO revenue as I mentioned, the facility will get, you know, operational say by Q3 and by Q4 we should have the full operations and full revenue flowing in. So we do get some marginal revenue even now. But that’s a very small scale lab work that happens on that side. But I think if you are looking at a full scale how fully operational facility would contribute that should be around.
Neha Manpuria
Q4 and the depreciation and all the operating cost will also be in the second half for the new facility that will be up and running.
Nitin Agarwal
Right. So income OPEX expenses but the most of the capitalization will happen in the beginning of.
Neha Manpuria
Got it. Thank you so much.
operator
Thank you. A reminder to the participants, please press star and one to ask a question. The next question is from the line of Chirag from DSP mutual fund. Please go ahead.
Chirag
Thank you for the opportunity. So this higher RnD that you’re talking about, this is, I mean typically last 5, 6 years you won an average done 5, 500, 550 odd crores kind of, you know, R and D spend. Is there something Higher that you are budgeting for and what are they on account of that higher budget?
Vikas Gupta
So you, you are asking about the absolute cost of RD or. Yes, yes. Yeah. So. Yeah. So see like I mentioned, we are also focusing on, you know, growing our non US business. So there are a lot of filings, you know, that we are doing in the non US markets as well. So and the kind of products, you know, that we are working on in our R D. So I think it’s just mix and sum total of all. Even in India, you know, we have to do certain clinical trials on certain products that we are undertaking. So this is why on an overall absolute basis the cost may be looking higher but if you look at percentage wise, it will be still within 4.5 to 5% of our overall revenue.
Chirag
Understood. And the second question, sir was on capital allocation. So just given we’re sitting on 5,000 crores of cash, business today is fairly cyclical. Given the large acute business that we have. Again, fairly seasonal, I would say not cyclical. But you know, just given that we are sitting on cash and there is such a large white space in chronic, how do we solve for the seasonality of the business? Is this something actively on your mind? Just how are you thinking about, you know, reducing the seasonality of the business? And just given that we have this large opportunity or white space in.
Vikas Gupta
So Chirag. I think there are two aspects to your question. One is on the seasonality. But you know, we’ve been running this business since long so I don’t think seasonality, you know, bothers me more. I think the bigger opportunity is on the chronic side. And as I mentioned earlier, you know, it’s good to have cash reserve and we are waiting for the right opportunity as and when we see we are pretty open to look at any acquisition target more so in chronic space, if it comes to the table, we would definitely look at getting it at the right, of course, at the right price.
So we are open to that. I mean more than that, I would say there is no such opportunity that has come our way as yet. You would have seen in the last quarter we had announced that in the Dharma space there was an opportunity and we had capitalized on that. So as and wherever there will be an opportunity for us to acquire and grow our chronic business, we would do that. But even otherwise, the growth from our chronic business is also very encouraging, which is the organic part of the story. So organically, you know, we are, even if you look at diabetes is the bigger segment, neurology is another big Segment that we are in, respiratory, chronic respiratory, is another segment that we are in, dermatology.
I mean, if you look at all these segments, you know, we are growing much faster than the market and internal growths are encouraging. While we continue that journey organically, we are open to any asset, you know, that might come, you know, for on the, on the chronic side especially, you know, to acquire.
Chirag
Understood. Sir, is there a, is there a ticket size in your mind or a size of business in your mind, you know, which is an easy one for you or just, how should you know, just what are your thoughts around, you know, because there can be multiple things that you might have looked at. But is there a ticket size in your mind or a size of business in your mind that that is ideal?
Vikas Gupta
No, I don’t think we are limiting ourselves to ticket size. More to say we have good amount of cash on the balance sheet and if there is a need to leverage, provided we feel that we can create value both strategically as well as in terms of the financials to our overall business, I don’t think the ticket size would be a limiting factor for us. So we are not, rather than looking at ticket size, I think the way we look at any opportunity that comes our way is what value we can add to that business. How can that business grow in our hands strategically? Is it of importance to us? I think those are the bigger evaluation points rather than just the ticket size.
Chirag
Understood. And just the last question, sir, if I may. If you look at the full year of FY26 and would you say that the, what would be the, you know, what would be the India contribution to the overall EBITDA for the business? You know, there is a sales number that we have, but what is the EBITDA contribution of the India business for you in the overall mix?
Vikas Gupta
EBITDA contribution from India business, you mean?
Chirag
Yes, sir.
Vikas Gupta
I don’t think we give country level, you know, EBITDA breakup. I can, I can talk about, you know, the growth numbers from India market and I think if human trends have to be believed, I’ve always said that we will continue to grow, you know, at least 100, 250 basis points faster than, you know, how the market is growing. And I maintain that as a trajectory. But I think at an EBITDA level to break it up from country and stuff like that, I don’t think I’ll be able to give that guidance at this stage. Let me ask the other way around, sir.
Chirag
Is the US Business margin in line with the company average today, just given.
Vikas Gupta
The scale no, it is lesser. We all know US markets has its own pricing pressure. So US margins are lesser than the company average. But there are certain, sometimes there are certain opportunities which are high margin opportunities as well, especially in certain newer products. But overall international business, if you see rather than looking at US business in isolation if you look at the overall international business there we have decent margins, you know especially on the non U. S side, you know the margins are much higher. So if you look at, you know I think that is the ideal way to look at.
Chirag
So exports as a bucket total, will it be in line with company average margin sir, in US and non US put together.
Vikas Gupta
Total exports I would say within the range of company margins, you know, not way off but lower. Yeah, it depends on product mix, country mix and you know this thing. If US contribution is higher then marginally lower. If US contribution is lesser and has more and more. Yeah, this is helpful.
Chirag
Thank you so much.
Vikas Gupta
Thanks.
operator
Thank you. The next question is from the line of Rashmi from Dollar Capital. Please go ahead.
Rashmi Shetty
Yeah, thanks for the opportunity. You know this quarter we have seen a good in the US sales so what is really driving this? And have you launched Valtartan Sacuvitril in the US and will this be the new base now in the subsequent quarters also? Or you still maintain your mid single digit US growth for full year?
Vikas Gupta
Yeah, so Kashmir I think 2, 3 points that you had asked on the secuital versatile. We have launched, we have launched with everyone else. You know as far as the US business is concerned on the. Your other part was on the growth from the US market. US market like I said has grown the trends, the pricing trends continue over there. But what had happened is like I said we were battling with our supply chains and stock positions. At least you know we are doing a lot better as far as you know that is concerned. So overall I think our guidance was about mid single digit kind of, you know, growth from US markets.
I would, I will maintain at least that growth. But looking at the trends, if everything remains favorable we may even surpass that. But it will be too early. It has been like I said, it’s just one quarter. So I am not commenting on what’s going to happen especially with the geopolitical scenario and the tariff discussions that are happening. I’m not too sure about how US market will play. But yes, if these trends continue the way we have seen it, we will have mid single digit to a higher single digit kind of growth from US market.
Rashmi Shetty
And in case of tariffs, what will be your strategy going Forward in case if it gets executed like will you be ready to put the capex in the US for the facility or you would just focus on the non other US markets.
Vikas Gupta
So I think tariff is a very hypothetical question. We all are waiting for what shape it takes. So I think anything that I comment will be very speculative or we will deal with it as and when it comes. My sense is that some part of the costs that will get laid we will be passing on to the consumer and wherever we will try and get more efficient in terms of getting backward integrated or we will look at the other options that might be there in front of us. I think all of that would depend on what kind of tariffs when it comes, whether it is product specific, whether it is.
So there are a lot of issues to be seen. Once that tariff comes, I think we’ll be more clear with what strategic interventions we will have to take. Irrespective our focus on non US business has gone up, irrespective of that, our intent to grow the non US Business remains very strong and we have started that work even in our overall growth. It is helping us. We are filing in a lot more products in the non U S markets than we were doing in the past. So I think our focus on non U S markets, you know, would continue strong irrespective of whether tariffs come or they don’t come.
Rashmi Shetty
Okay, and one more question on India business, you know, given you know, the base was low in your second quarter and third quarter also because last year the season did not pick up and this year we are seeing a good recovery. So is it fair to assume that, you know, probably for the full year, you know, we would be able to do at least 11 to 12% growth assuming that the overall IPM growth would be in the range of 8 to 9%.
Vikas Gupta
See I, I just answered. I think if the IPM growth remains within 8 to 9%, we will be surpassing the IPM growth by at least 100250 basis points. So for us to grow at 11 to 12%, maybe I’ll expect the market to grow at, you know, ten to ten and a half. Ten to ten and a half, you know, percent kind of, kind of growth. But yes, no more than a percentage here or there. I would say our focus on India business is stronger than ever if it takes to put more investments in India business behind opportunities where we can grow continuously.
We have been looking at that, evaluating that, doing that and I think so. India business is our core. India business is something which, which we do very well. So I think our focus over there is not, you know, deviating. So that will be our core highest focus which we will continue, you know, in times to come as well.
Rashmi Shetty
So you mean 100 to 150 basis point, right?
Vikas Gupta
Yeah. Higher than the IPM.
Rashmi Shetty
Okay, thank you. That’s it for me.
Vikas Gupta
Thank you.
operator
Thank you. The next question is from the line of Kunal Dha Mesha from Macquarie. Please go ahead.
Kunal Dhamesha
Hi, thank you for the opportunity. Again few quick clarification. The US price erosion of 3 to 4%. Is it on a year on year basis or a QOQ basis?
Vikas Gupta
YUI basis.
Kunal Dhamesha
Okay. And was there any contribution from adroit in this, in this quarter?
Vikas Gupta
Yeah. So see Edroid has been a small company so there was around 15 crores overall revenue that we recorded from Edroid which is in line with you know, our plan when we had acquired that company.
Kunal Dhamesha
Sure.
Vikas Gupta
And that’s largely domestic play.
Kunal Dhamesha
And it got closed in quarter one. Only the quarter four.
Nitin Agarwal
Yeah, we completed the acquisition in quarter. One, mid of April somewhere. Long way to.
Kunal Dhamesha
And, and what would be a capex outlook for FY26 and 7?
Nitin Agarwal
Around 750 crore. This is what we have said before.
Kunal Dhamesha
Also 750 crore for FY26. Is it just for FY26?
Nitin Agarwal
FY26, yes.
Kunal Dhamesha
Okay, sure, sure. And one more I would say broader question. When I see the company now versus let’s say three years back we now have I would say four distinct engines of growth. One is branded generic or the domestic market business or the pharma business so to say. Then we have biosimilar business which is basically going to fire maybe in the coming years. Then biologic CDMO business and then lastly the metric business. So how is the management bandwidth being allocated to these businesses in terms of maximum importance to minimum importance?
Vikas Gupta
Yeah, I mean amongst the management team I, I guess the branded business, you know, is our, is our highest, you know, contributor. So the maximum time, you know, goes over there.
operator
Mr. Kunal, may I request you to mute yourself while the management is speaking because there is some voice coming from your line.
Kunal Dhamesha
Definitely.
operator
Thank you.
Vikas Gupta
Yeah. So from a management bandwidth point of time, of course, you know, the branded business takes, you know, the maximum time and for the right reasons because that is our biggest contributor. Then I would say the CDMO business and the biosimilars business, you know that takes the, that takes even the other chunk of the business of the management bandwidth. For the medtech business we have one of the leaders, Costo who manages the medtech business. So I think he dedicates maximum time over there. But from an overall management bandwidth point of view, of course it’s the smallest business.
It takes whatever time is due to it, the management gives it. But we have a dedicated person, you know, who looks at scaling up that business. So I think that’s how we have divided the time responsibility in us.
Kunal Dhamesha
Sure. And the capital allocation question between these four businesses, how does the, you know, how do you view the packing order there in terms of the cash that we have on the balance sheet? Where do you want to deploy more on this four lever?
Vikas Gupta
So again, you know, the largest capital, you know is put behind the branded, you know, business. But you know, it’s not a very capital intensive business, so to say. So, you know, there’s no. In terms of, if your question is more about the capex etc. I think the largest capex at this stage is going behind the biotech and the CDMO opportunity because that business needs that kind of capital. But that doesn’t mean that we reduce investments in our core business, which is our largest generic business, whenever there is a need for capital to be deployed on that part of the business.
That of course remains our biggest priority and we continue to do that whenever there is a requirement to be done for the largest branded business. But I would say at this stage the maximum capital is getting deployed behind this future opportunity of cdmo.
Nitin Agarwal
For this year, for this last year, the picture may change, it will change.
Vikas Gupta
In the coming years because this is a plant that we are setting up. So it needed that kind of support. That’s why we are going with that business right now.
Kunal Dhamesha
And sir, last one from my side, between these four levers, where do you see maximum return on capital employed or roi? I’m sure it’s a branded business. Right. But let’s say between the three others, you know, where do you see most accurate you to the return on the capital?
Vikas Gupta
Yeah, if you see, you know, our ROCE profile, you know, our ROCE also improved, you know, over a period of time in last two to three years. So whatever capital we are employing, you know, I think overall it is in line with the overall ROCE that we have as an organization. But of course the branded business is a much higher ROCE business. But there I guess we have an engine running full steam. So there is no major requirement in terms of putting up specific capital so to say. And that’s why the ROCE is, you know, much higher over there.
So I think all the, all the other areas, wherever we are putting up Capital we have the roce expectation in line with whatever we do from whatever we have at a corporate level. So I think it is in line with that. That’s how I’ll put it. Sure, sir.
Kunal Dhamesha
Thank you. And all the best.
Vikas Gupta
Yeah, thank you.
operator
Thank you. The next question is from the line of Rahul Jivani from IIFL securities limited. Thank you. Please go ahead.
Rahul Jeewani
Thank you for taking my question, sir. So. So. So this 12% growth which we saw in the India portfolio this quarter, can you call out what was the organic growth in the business given that we had some asset acquisition. So you called out adroit, contributed 15 crores. There was Bombay Ortho as well. So if you can just call out this organic inorganic piece for the India business.
Vikas Gupta
I think those are the only two inorganic, you know, you know, numbers which is very small, you know, which is not. I think 0.4 to 0.5% is something, you know, that would have come from that inorganic piece. Otherwise, you know, the growth is largely organic.
Rahul Jeewani
Okay. Sure sir. Thank you. And sir, in terms of, let’s say your comment that the focus is largely on branded business in India and scaling up the non US exports piece. So given the focus on these businesses what is the kind of EBITDA margin trajectory let’s say you envisage for the overall business three to four years down the line. So just some clarity there would be helpful.
Vikas Gupta
Rahul, I think, you know, I’ve always maintained if you look at operationally, you know, we would continue to improve at least say a 1% kind of improvement on the overall margin profile every year. Right. So till the time, you know, at least we get into say mid-20s kind of level and so far we are on track, you know, with, with that aspiration. So I think you can do your, you know, you can run your numbers on the basis of this assumption that that is what we have maintained and that is what we are seeing you know, also happening at least over the last two years.
Rahul Jeewani
Sure, sir. And this 100 basis point kind of an annual margin expansion, this should continue despite let’s say whatever initiatives we take in some of these newer businesses like the CDM or the metric business.
Vikas Gupta
Let me clarify. So like I said, this is keeping the new opportunities aside but even if you will look at our, this year’s guidance had been 19.5% within that range 19 to 20%. That was because operationally we might improve by a percentage. But there are certain topics that might be consumed by these newer initiatives that we would take. But I think full blown Once these initiatives also start contributing, you will start seeing in the overall numbers as well. So that’s how, you know, I’ll put it.
Rahul Jeewani
Which would then be from FY28, given that the drag from these businesses should not be there, FY28 onwards.
Vikas Gupta
Yeah, yeah, I think that’s a fair, that’s a, you know, fair assumption to assume. Yeah.
Rahul Jeewani
Yeah, sure. So thank you. That’s it from my trip.
Vikas Gupta
Thank you. Thank you.
operator
Thank you. The next question is from the line of Sandeep from Clindas. Please go ahead.
Unidentified Participant
Hello sir. Thank you for taking the question. Can you provide some insights on when do you plan to submit enzymes in. The U.S.
Vikas Gupta
sorry Sandeep, your voice is not clear. Can you repeat please Question.
Unidentified Participant
Can you provide some insights on when do you plan to submit enzymes denisumabsimilars in the. US
Vikas Gupta
So we’ve already filed the bla, you know, in US as far as denizumab is concerned, the expected time frame is somewhere middle of next year, you know, when, when we are expecting the approval provided the regulatory path is complied. So we will be looking at commercializing it subsequent to that. The patent expiry is around May 26th. So we should, I mean in that range depending on the litigation outcomes that the innovator has with other players. So I think we should be commercializing basis that whenever that opportunity opens up.
Unidentified Participant
Thank you, sir. Thank you.
operator
Thank you. The next question is from the line of Gaurav from Antec Stockbroking. Please go ahead.
Gaurav
Yeah, thank you. And good evening. So the sequential improvement in the US Business that we saw this quarter, does that have any benefit of Sacubital Versatile?
Vikas Gupta
No, Sacubital Versatile got launched in the month of July towards the last part of July, you know. So that will. That you will see in Q2.
Gaurav
So this is improvement in base business or some other new launches that happen in Q1 then?
Vikas Gupta
So this is a blend of the base business, some new launches as well as some of small portion from CDMO revenue as well.
Gaurav
And this would see a bump up with the new launch in Q2 as well. Would that be.
Vikas Gupta
Yes, we should be, you know, so we should see this activated Valsartan getting revenue getting recognized in Q2, which should add overall. But of course there is, you know, in US business you keep losing contracts. You keep getting contracts. So I think in base business, you know, whatever trends are continuing of erosion that may continue but there are some new products that may get added. So that’s a part and parcel of the, of the game.
Gaurav
Yeah, got it. Thank you staying on the US for, for Deno we would have filed for both Prolia and xchiva. Right. And this front end commercialization we would be investing in the assets and it will be through Alchem’s front end only. Right.
Vikas Gupta
So we will, we will choose the go to market, you know, closer to, you know our, our approval. Once we have that approval, you know we are, we are evaluating is it better to go on our own or should we find the right partner. But I think we’ll update you closer to the marketing.
Gaurav
We would have filed for both the or so indication as well as the encore.
Vikas Gupta
We will just get back on this specific, you know just, just Purvi will, you know revert to you on that.
Gaurav
Sure. Thank you. Just on the staff cost this quarter we saw almost a 15% year on year increase. Would this be the new ways or is there any one offs here? Would it be just annual hikes, team expansion? Could it shed some light on this?
Vikas Gupta
Yeah, it’s a function of you know one, you know the annual increments that we have to give. Second, you know, since the performance in India business is also very good, there is a higher incentive payout, you know that is there. So if rather than looking at just percentage growth, you know, if you look at the percentage to revenue, I think that is fairly, I would say similar to what it was in the previous years. So in a good quarter there is a higher incentive payouts to the team. So that adds to the overall increase in the manpower cost.
Nitin Agarwal
Overall the manpower growth which you saw in quarter one. So in balanced quarter there will be lower growth as compared to quarter one.
Gaurav
Got it. So that helps us. Thank you and all the best.
operator
Thank you participants. To ask a question Please press the RN1. The next question is from the line of Tushal Manodhane from Motilal Otswar. Please go ahead.
Tushar Manudhane
So just one question. With respect to the additional operational cost with respect to the CDMO facilities which would come up of Q4 onwards. But what quantum should be considered.
Nitin Agarwal
On. An average once the facility will be up and running you can the estimate is around 50 crores per quarter in INR terms for the US CDMO facility.
Tushar Manudhane
And for metric business. Sir, how much is the OPEX probably in this quarter or subsequently how much much to sort of stabilizes.
Nitin Agarwal
So once it will stabilize the OPEX will be in the range of you can say per quarter it will be around say 25 to 30 crores.
Tushar Manudhane
And what would trigger, you know, additional topic for both the segments. Actually.
Nitin Agarwal
Sorry, I Didn’t get the last.
Vikas Gupta
Is your question would we need. Would we need more opex? You know, in times to come.
Tushar Manudhane
Of course, as the business grows, we’ll need it. But let’s say for the foreseeable Future, for next two to three years.
Nitin Agarwal
When I say 50 crores for Engine CDMO facility and say 25 crores for our MedTech this is considering 100 utilization of our current capacity which we have built for both these facilities.
Tushar Manudhane
Understood. This is per quarter just to re.
Nitin Agarwal
Yes.
Tushar Manudhane
That’S it from us.
operator
Thank you. The next question is from the line of Gagan Tereja from Ask Investment Managers. Please go ahead.
Gagan Thareja
Good evening. I hope I’m audible, sir.
operator
Yes.
Vikas Gupta
Yeah, you are. Yes, please.
Gagan Thareja
Okay, so the first question is, you know, if. If one splits your domestic sales in NLEM and non NLEM buckets. Given that the WPI linked price increase in Nlem was around 1.8% this year, is it a reasonable inference that the non LLEM piece would have grown by 15% plus?
Vikas Gupta
I do not have the data handy. You can check it from the IQVR data but we have never given product level or segment specific this thing. What I can tell you is our NLEM percentage. The portfolio that we have is around 30% and there is volume growth, price growth is just one piece. Even if you look at the volume growth, we are growing much faster in terms of volumes even on this portfolio as compared to market. So I think that’s the way we look at.
Gagan Thareja
If you do the math and take a 5% increase on the NLEMP piece, which is a third of your portfolio, arithmetically the balance of your portfolio should grow by 15%.
Vikas Gupta
To give you. From where did you get this 5% number?
Gagan Thareja
I’m saying 1.8% WPI. The rest comes from volume is what I’m basically assuming.
Vikas Gupta
So volume growth is pretty, you know, product specific and this thing. So I think, you know, I do not know what we are trying to get at, but I’m sure you know the. Of course the non LL portfolio in general, even in the market is seeing a higher growth. So similar trends, you know, we would have internally.
Gagan Thareja
Okay, all right. And is it possible to give some idea of how the enzene revenues and you know, profits would have worked for the first quarter year on year basis.
Nitin Agarwal
So in first quarter at total level the engine revenue was around 90 crores. This is including CDMO business in US and we EBITDA. I think we first quarter was including both the units, the Pune units and the US unit. So there was a break even including both the units.
Gagan Thareja
What would the corresponding figures for last year be?
Nitin Agarwal
Last year? We need to check. We will revert to you on this, we will revert to you on this last year.
Gagan Thareja
Okay, all right. And what would the effective tax rate for the year be? And going ahead, what would, how would it evolve?
Vikas Gupta
So full year will be in the.
Nitin Agarwal
Same range as you saw in quarter one. So there will not be any material change. So I think in the beginning of the year we have given a guidance of 13 to 15%. So in our guidance, 13 to 15% of tax rates.
Gagan Thareja
All right, all right. And final one from my side, sir, you, you mentioned that the base business operating margins will improve by 100 basis point annually. It will obviously to a certain extent be offset by the OPEX from the new businesses. But on balance that would still lead to a certain amount of operating margin improvement till the time the base business breaks even. Is it possible to give some broadband of perhaps, you know, basis point number over which you believe the net operating margin improvement could come in?
Vikas Gupta
So I think like I mentioned some time back, it is, we will look at improving, you know, within the range of hundred basis points now, you know, depends on, you know, how our new initiatives get scaled up, you know, sometimes. So I think whatever gets offset, our estimate is that that will get for this year will get offset by the operational expenditures on those side. That’s why our guidance of around 19.5% initially, which was there, which as of now I’m staying put and we’ll wait for one or two more quarters to really revise it upwards if at all.
So. But I think irrespective, rather than chasing a number over there, we are pretty confident of the initiatives that we have taken internally. The kind of focus that we have brought in on our core businesses and their growth will continue to add to the overall expansion margin expansion as well. So I would refrain from putting a number to it, but I, I mean this is the guidance that I’ll stand put with.
Gagan Thareja
Okay. All right, sir, thank you. And we show all the best. Thank you.
Vikas Gupta
Thanks.
operator
Thank you. The next question is from the line of Dr. Neha Kharodia from Abacus. Please go ahead.
Neha Kharodia
Yeah, hi, thanks for the opportunity and. Congratulations on the great set of numbers. 1.
operator
The line from the participant has been drawn, ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Purvi Shah
So thank you all for joining today’s call and your questions and the engagement. If you have any follow up queries need any clarification, please feel free to reach out to us directly. So thank you once again.
operator
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal and Alchem Lab, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.