Innova Captab Ltd (NSE: INNOVACAP) Q2 2025 Earnings Call dated Nov. 08, 2024
Corporate Participants:
Ayush Kumar Garg — Investor Relations
Vinay Kumar Lohariwala — Managing Director
Lokesh Bhasin — Chief Financial Officer
Analysts:
Amey Chalke — Analyst
Sarthak Nautiyal — Analyst
Sudarshan Padmanabhan — Analyst
Pritesh Chheda — Analyst
Abdulkader Puranwala — Analyst
Hiten Boricha — Analyst
Bhavin Chheda — Analyst
Rohan Vora — Analyst
Karthi Keyan VK — Analyst
Sagar Tanna — Analyst
Ankit Gupta — Analyst
Presentation:
Operator
Ladies and Gentlemen, good day and welcome to Innova Captab Limited Q2 and H1 FY25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to the management. Thank you, and over to you.
Ayush Kumar Garg — Investor Relations
Thank you, Rituja. Good morning, everyone, and thank you for joining us on our earnings call today to discuss the operational and financial performance for Q2 and H1 FY25. Joining us today on the call, we have Mr. Vinay Kumar Lohariwala, Managing Director; Mr. Lokesh Bhasin, Chief Financial Officer; and SGA, our Investor Relations Advisor. I hope everyone has had the opportunity to go through the financial results and investor presentation, which was uploaded on the stock exchanges and on the company’s website.
Now, I would like to hand over the call to Mr. Vinay for his opening remarks. Thank you, and over to you, sir.
Vinay Kumar Lohariwala — Managing Director
Thank you, Ayush. Good morning, and thank you everyone for joining us today on our Q2 FY25 earnings call today. Before discussing the business performance, I find immense pleasure to inform you that we have received drug manufacturing license from the Government of Jammu and Kashmir, Drug Control Organization Jammu for our greenfield plant. With our necessary approval already in place, we have begun manufacturing validation and trial batches. Now with the receipt of the license, we expect commercialization of the facility within Q3 FY25.
Now let me take you through our business performance in Q2 and H1 FY25 and Mr. Lokesh Bhasin will walk you through the financial performance. We are pleased to announce that Innova Captab has achieved a strong quarter, driven by volume growth in CDMO business, sustained momentum in the domestic branded generic sector, increased uptake in the Sharon business, and solid progress in the international market. Our profitability has also seen growth with both margin expansion and a significant improvement in absolute terms. I would also like to take this opportunity to express my sincere gratitude to the leadership team and employees for their unwavering support, as well as their dedication and commitment to improve efficiency and serving our customers.
Let me take — let me now take you through the performance of each business area. Number one, CDMO business. We cater to some of the largest Indian pharmaceutical companies as our client with our offering spanning to 2,900 plus products in varied dosage forms, which include oral solid, oral liquid, ointments, dry powder injections, and dry powder syrups. Our client base comprise — comprises of more than 190 companies, which include 14 of the top 15 companies in the pharmaceutical market. Volume growth in the business was very strong and we delivered year-on-year revenue growth of 10% in this quarter.
For H1 FY25, we recorded year-on-year revenue growth of 5%. We continue to witness traction in the business and are positive on its growth potential, domestic branded generics. We are engaged in development, manufacturing, and distribution of generic formulation products through our online and offline channel and have a strong network of 1.5 lakh touch points of distributors, stockiest, and pharmacists with a diverse portfolio offering of over 600 plus products. This business has expanded at an accelerated pace over the past few years and this quarter was no less. We clocked the highest-ever revenue in a quarter of INR59.1 crores, registering year-on-year growth of 19% for H1 FY25. The business grew 21%.
International branded generic. We export our formulation product to 25 plus countries and have 148 active registrations. We have a strong pipeline of 72 in-process product dossier [Phonetics] for exports. The business is also growing at a rapid pace and recorded year-on-year growth of 13% in Q2 FY25. For H1 FY25, the business registered year-on-year growth of 12%. Sharon. Sharon has strong formulation and API manufacturing capabilities with manufacturing units in Dehradun and Taloja, Maharashtra. Sharon recorded year-on-year revenue growth of 11% in this quarter. For H1 FY25, Sharon recorded revenue of INR97.4 crores.
Coming to our innovation endeavor, we boast a dedicated R&D laboratory and pilot equipment located in Baddi, Himachal Pradesh, recognized by DSIR for its in-house R&D work. The state-of-art facility is equipped with a comprehensive suite of necessary tools for developing solid or liquid doses form, including RMG, FBD, compression machine, and auto coaters. Along with this, we are setting up a new R&D facility in Panchkula, which will focus on increasing our product offering and development of complex generic formulation.
Moving on to our manufacturing capabilities, we take great pride in the excellence of our products and facility. Our manufacturing units are accredited by leading global regulatory bodies, including WHO-GMP, EU-GMP, and the UK-MHRA. These certifications not only reflect the highest standard of quality we maintain but enable us to reach market around the world with confidence. Our new facility in Jammu will consist of four block including cephalosporins, BFS, general block, penum, penicillin, allowing us to manufacture a diverse range of products. These will include oral solid doses, dry powder injection, dry syrup, BFS, large volume parental, and respiratory volume — respiratory respule [Phonetics] products.
The addition of the facility will bring our total number of manufacturing facility to five with nine independent manufacturing blocks. With this expansion, we will significantly broaden our product portfolio, which now cover even more specialized formulation from BFS and large-volume parental to respiratory therapies and ointments. The strategic expansion in Jammu backed by a proven track record demonstrated by our strong fixed asset turnover ratio position us well to scale operation and generate substantial revenue. As we continue to grow, we remain confident in our ability to leverage this capability and meet the rising demand in the Indian pharmaceutical market, which is poised for sustainable growth.
At Innova Captab, we are focused on tapping into the immense opportunity. Our goal is to keep the organization progressive, innovative, and future-ready, as we work to provide high-quality healthcare solution to patients worldwide. This brings me to close my opening remarks and I would now like to call on Mr. Lokesh Bhasin, our CFO, to share his view on the financial performance for the quarter.
Lokesh Bhasin — Chief Financial Officer
Thank you, sir, and good morning, everyone. I will now take you through the financial highlights for Q2 and H1 FY25 — for Q2 FY25. In Q2 FY25, we recorded consolidated revenue of INR318.2 [Phonetics] crores with a year-on-year growth of 12.5%. The business mix was as follows, CDMO contributed around 52% for the quarter. Domestic branded generics was around 19%. International business was 13%, while Sharon contributed 17%. In absolute terms, business area-wise revenue were as follows. CDMO was INR165.1 crores vis-a-vis INR149.6 crores in quarter two FY24. Domestic generic business, we have received — we have achieved a sale of INR59.1 crores versus INR49.5 crores in Q2 FY24. International branded generics, this quarter revenue was INR40.5 crores versus INR35.57 crores last year. Sharon, INR53.6 crores versus INR48.1 crores in Q2 FY24.
EBITDA margins improved by 80 basis points to 16.3% versus 15.5% in Q2 FY24. On absolute basis, EBITDA grew 18.6% to INR51.9 crores. Profits after tax witnessed strong y-o-y growth of 52.8% to INR35 crores, driven by higher EBITDA margins and reduced finance cost. PAT margins expanded by 290 basis points to 11%. Now coming to H1 FY25, revenues came in at INR612.5 crores with year-on-year growth of 19%. The business mix was 54% from CDMO business, 18% from Domestic Branded Generic business, 12% from International business, and 16% from Sharon. In absolute terms, business area-wise revenue for H1 FY21 — FY25 were as follows. CDMO INR332.8 crores versus INR316 crores in H1 FY24. Domestic Generic business INR110.5 crores versus INR91.6 crores in H1 FY24. International Branded Generics, INR71.8 crores versus INR60.5 crores last year. Sharon, INR97.4 crores. It may please be noted that Sharon was consolidated in our financials after 30th of June 2023 last year.
EBITDA margins increased to 15.7% versus 14.8% during the same period previous year. On an absolute basis, EBITDA grew 26.2% to INR96.2 crores. Profit after tax for H1 FY25, this number was INR64.5 crores with a year-on-year growth of 59%. Our balance sheet continues to remain strong. We have repaid all our debts excluding the term loan borrowed for our Jammu project, which carries an interest-subvention benefit of up to 6%.
With this, we would like to conclude the presentation and open the floor for questions-and-answers. Thank you very much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amey Chalke from JM Financial. Please go ahead.
Amey Chalke
Yeah. Thank you for taking my question and congrats to Vinay Ji and Lokesh Ji for…
Operator
Sorry to interrupt you, but can you please speak a bit louder, we cannot hear you, sir.
Amey Chalke
Is it audible now?
Operator
Yes, please go ahead.
Amey Chalke
Yeah. So first question I have is, we have reported 10% growth in CDMO, is it fair to assume now that 10% is sort of volume growth what we are delivering and considering prices are now stabilized or is it still — there is still negative impact of prices built in these numbers?
Lokesh Bhasin
So, Amey, the growth that we have received 10% year-on-year on CDMO business is mainly driven by volume growth, and you’re right, it is mainly driven by volume growth. So there is not any negative impact of pricing. So year-on-year pricing impact is more or less neutral.
Amey Chalke
Sure. And the second question I have on the trade generic side, the 23% growth, which we have reported, is it led by seasonality or should we assume this as a quarterly run-rate for trade generic going ahead?
Lokesh Bhasin
So, yes, there are multiple reasons for growth in a business, but as far as this growth is concerned, it is a constituent of mix of both seasonality as well as organic growth on which our business has been working for quite some time.
Amey Chalke
Okay. So going ahead, there could be slight normalization basically, but we will continue to grow.
Lokesh Bhasin
Yes. And I would expect that the growth momentum will increase and we should be within this range itself.
Amey Chalke
Sure, sure. And the third question I have is on the Jammu benefits, which we will be getting related to GST and interest-subvention. So how would we report going ahead? Just from the modeling perspective, will it come in the revenue line, other operating income, or will you adjust in expenses like that would be helpful.
Lokesh Bhasin
So, Amey, yes, we are having few viewpoints and we are still discussing this with our statutory auditor, and as far as the applicable India standards, we will account for those line items accordingly.
Amey Chalke
Okay, sure, sure. And any reason for the gross margin improvement this quarter or anything to highlight? Are these gross margin sustainable going ahead?
Lokesh Bhasin
So, this is mainly due to — this quarter, at a console level, the increase in gross margins are mainly due to the product mix as well as a sales mix and we expect to remain in the range of EBITDA margin in the range of 15% to 17% on a long-term basis at Jammu.
Amey Chalke
Okay. Sure. Thank you so much. I will join back. Thank you.
Lokesh Bhasin
Thank you, Amey.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sarthak Nautiyal from AKCJ Capital. Please go ahead.
Sarthak Nautiyal
Hello, Vinay sir. Congratulations for the great set of numbers and as you have achieved the highest-ever net profits. Am I audible?
Vinay Kumar Lohariwala
Thank you. Yeah, yeah, thank you, thank you.
Sarthak Nautiyal
Sir, so just wanted to know one thing. Sir, can you give us a segregation of gross margin on different segments, CDMO, API, and branded? Hello?
Lokesh Bhasin
Sarthak, normally we do not track gross margins at a business area level.
Sarthak Nautiyal
Okay, you don’t track that. But just wanted to know why we have lesser gross margin as compared to our competitors Akums and Windlas, like they are having 35%, 38% level of gross margins?
Vinay Kumar Lohariwala
It will be difficult for us to comment on the competitive gross margin because everybody is having the different set of product and different style of market, So our is like — we need to be competitor — competitive for our customer and as well as we need to generate a good ROE, ROCE for our investor, so that is our punch line.
Sarthak Nautiyal
Okay. Sir, what kind of gross margin we can expect in future?
Vinay Kumar Lohariwala
So gross margin basically depend on the product mix, sales, business area, and all that, but largely if we see historically that remain in the same territory, like in Innova, if we see our gross margin remain in the territory of say 24% to 28% territory, and due to the Sharon and Univentis consolidation, our gross margin improved to say 35% of range, right, 32% to 35% range. So we see the gross margin or the material margin in the same range in the future also.
Sarthak Nautiyal
Okay. Sir, like our API business has better margins, I guess it has a lower margin than other segments, right?
Vinay Kumar Lohariwala
So, as Lokesh informed that we don’t track the segment-wise margins, but more or less what we see is the same range.
Sarthak Nautiyal
Usually API get lesser margins than the other segments, right?
Vinay Kumar Lohariwala
Yes, you are right, but in our case, our API is — mostly our sales come from the export or regulated or semi-regulated market. So, therefore, our margin profile in the API also in the same range.
Sarthak Nautiyal
Okay. Okay. So, sir, do we have any entry barriers in our kind of business?
Vinay Kumar Lohariwala
Of course, the entry barrier is there. If you see our domestic CDMO business, you will find there are only few companies who have crossed the INR1,000 crores marks, right? So, now as you see that the regulator also has imposed a lot of things like the revised schedule and now the pharma plant is like — it’s a big investment. So as we have now invested INR450 crores approximately in our Jammu facility. So, initially if you see, in our inception, our first plant was — we have the gross block of only INR5 crores, INR6 crores. So, in the last 15 years, 20 years, there is a day-night change in the plant side, investment side, and the technology side.
Then you need to have the product dossier, document availability, product development, everything. So, these all things create entry barrier in the industry. And of course, the relationship with the big customers, that is also matter, like we have more than five years or 10 years relationship with our all marquee customers, so that also somehow play a role in our business relations.
Sarthak Nautiyal
Okay. Sir, just a last question. So in 2024, we have achieved the revenue of INR1,085 crores, so are we going to double this revenue in the next three years with our Jammu facility?
Vinay Kumar Lohariwala
Yes. So, if you see, Jammu is having the revenue potential of say INR1,200 crores, INR1,300 crores in the next five years, and we see that in the next year, we will do approximately say INR500 crores, right? By starting the facility in the next December, the revenue and the plant will be stabilized in Q4, and from the Q1 to next year, the full four quarters will be available to us and we expect INR400 crores, INR500 crores revenue next year, right? So, with the help of Jammu and existing business growing at a healthy rate, we see that the revenue could be doubled from here to INR2,500 crores in next three-year time.
Sarthak Nautiyal
Okay, so we will be growing at a CAGR of 35% something?
Vinay Kumar Lohariwala
Yeah, 25%, 30% — 25% plus, so three-year doubling is I think 26%.
Sarthak Nautiyal
Right. Okay, sir. Thank you, sir. Thank you for taking my question.
Vinay Kumar Lohariwala
Thank you. Thank you.
Operator
Thank you. The next question is from the line of Sudarshan Padmanabhan from JM Financial. Please go ahead.
Sudarshan Padmanabhan
Yeah. Thank you for taking my question. So just taking forward on the Jammu facility that is coming in, I mean, next year you said that INR500 crores is possible, and if my understanding goes, when I say that three times to four times asset turn is possible, historically that’s what we have done, we should be able to do between INR1,500 crores to INR2,000 crores of incremental sales, I mean, over the next few years. My question is more to understand on the margin side. I mean, today when we look at our margins at, probably 15.5% plus, and it has only been increasing over the last few years.
When I’m looking at the mix going forward, Sharon has got better margins, your Jammu, if I add back the GST, it will obviously have significantly better margins than the current business. My thought process is, say, FY 26, that is in the near-term, and probably say two years, three years down the line as the capacity utilization goes up with higher margins, where do you think your margins should kind of stabilize?
And sir my second question is, now that our debt is zero and the next two years we are going to generate fair amount of cash, and the fact is that we still have Jammu, I mean, still adding another INR1,500 crores to INR2,000 crores of sale, so where do we plan to deploy the cash for additional?
Lokesh Bhasin
Sure. So regarding your first question on margins. So on a long-term basis, at a steady state whenever Jammu is stabilized, and you are absolutely right, we are hitting a better margin profile in Sharon, and from Jammu, we are also looking forward to cover certain amount of additional benefit despite being transferring or passing through some of the benefits to customers. So on a long-term basis, we are looking at our EBITDA margins in the range of 17% to 19%.
Vinay Kumar Lohariwala
Yeah. So the second question is regarding the…
Sudarshan Padmanabhan
And next year, sir, I mean, I am just trying to understand, is the cost of Jammu largely going to impact us in the near term, or should we start seeing the margin expansion, as we achieve the INR500 crores itself?
Lokesh Bhasin
Sudarshan, can you please repeat your question?
Sudarshan Padmanabhan
No, I am just trying to understand, you talked about margin expansion, I mean, 18% to 19%, which is very strong. But as the Jammu facility comes next year and we achieve the INR500 crores target, should we start seeing the margin expansion next year itself? I mean, just trying to understand the cost and benefit.
Lokesh Bhasin
Yes, Sudarshan, see, when I am saying margin expansion — you would appreciate that there is always a ramp-up phase, and first, it is a soft stabilization and then there is a stabilization then steady state phase. So the way I am looking at it, so when I am able to reach at a steady state of Jammu, somewhere in the range of INR700 crores to INR900 crores, we should be positively looking at a benefit on margin expansion, and from there, we should move upward on margin also.
Sudarshan Padmanabhan
Sure, sure. Sure, sir. And on the cash side?
Vinay Kumar Lohariwala
Yeah. So it is a very good question that there will be a surplus cash when we move forward, so this can be deployed towards the acquisition or the greenfield project. So the acquisition could be some strategic fit for us. So some, say, like we are not present in the multiple sections like hormone or the liquid injectable, right? So if we find some opportunity to acquire some asset in that category that can be done, or we can look at the greenfield project also.
Sudarshan Padmanabhan
Sure, sir. Thanks a lot. I will join back the queue.
Vinay Kumar Lohariwala
Thank you.
Operator
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead.
Pritesh Chheda
Sir, I have two questions. One on Jammu, when you are at 30% utilization next year or less than 30%, let’s say, so about 30%, 35%, will you be having a company level margin or based at 35% Jammu unit will be margin dilutive? That’s number one.
Number two, the blocks that you are adding at Jammu, that — sorry, the blocks that you are creating at Jammu, are these complementary to your existing product offering to — in the CDMO or they are expansion of capacities of the existing offerings in CDMO?
Lokesh Bhasin
Yeah. So, see, Pritesh, on the Jammu margin standpoint, so by next year — most probably when we reach to a level of somewhere around INR400 crores, INR500 crores, so our margin should be within in line of our company level margin, and as I stated earlier also, when we are going to achieve that INR700 odd crores, INR800 crores level, from there we should see the expansion in our margins.
Pritesh Chheda
Okay. My second question on blocks that you’ve created.
Vinay Kumar Lohariwala
Yeah. So, we have four blocks there in Jammu. One block that — cephalosporin is — already we have, that is the common in Jammu or Baddi, and the rest three blocks are new to our market. [Speech Overlap]
Pritesh Chheda
Additional offerings to your CDMO customers?
Vinay Kumar Lohariwala
Pardon, come again. Hello?
Pritesh Chheda
Hello?
Vinay Kumar Lohariwala
Yeah, you need to repeat.
Operator
Mr. Pritesh Chheda, please go ahead with your question because your line is not clear.
Pritesh Chheda
Okay. So, I was saying that the additional — the three blocks that you are referring to, one you said is cephalosporins, so I am assuming it’s capacity expansion of existing offering, everything else is newer offering to your CDMO customer?
Vinay Kumar Lohariwala
Yes, yes. [Speech Overlap] yeah, 75% [Speech Overlap] you can — yeah, please go ahead.
Pritesh Chheda
Sorry, sir, please go ahead, sir.
Vinay Kumar Lohariwala
So what I’m saying that 75% of the portfolio is the new to our market that will be a new offering to our CDMO customer, and if you see the cephalosporin is — already we have the EU-GMP certification, so that facility we will dedicate for, say, catering to ROW and regulated market in export, and Jammu facility will cater the domestic business for — even for the cephalosporin. So there we — as you know that we have the 12% GST incentive for the domestic sale.
Pritesh Chheda
Okay, I understood, sir. And when you say 75%, we are assuming 75% of the INR1,200 crore revenue — INR1,200 crore, INR1,500 crore revenue that this block can generate, right? That’s how we should…
Vinay Kumar Lohariwala
Correct. Yeah, roughly you can say, yeah.
Pritesh Chheda
Okay. My last question is, being a CDMO player where you are selling — largely servicing Indian pharma companies, what is the thought process behind creating your own branded generic?
Vinay Kumar Lohariwala
So let’s say that, we see that as an independent vertical of the branded generic business, and that is the name and style of Univentis Medicare, and they are working there independently in the market, and Univentis also help us in early identification of product, and what you can say that we are near to market. We have the market intelligence, market insight because of the Univentis. So we can understand the market better, and we can serve the CDMO customer also because of that Univentis in a better way.
Pritesh Chheda
Will the product lines be similar as what you would supply to a domestic CDMO and what you have as an offering in branded generics?
Vinay Kumar Lohariwala
Yes. It is generally the — it could be similar to the offering to the Univentis. We treat in Innova. We treat Univentis as a CDMO customer only.
Pritesh Chheda
Okay. Univentis is where we have direct holding or anything or…
Vinay Kumar Lohariwala
It’s a 100% subsidiary of Innova Captab.
Pritesh Chheda
Okay, okay. Okay, sir. Does it [Speech Overlap] yeah, thank you, sir.
Operator
Thank you. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Abdulkader Puranwala
Yeah, Hi. Thank you for the opportunity, and congrats on the good set of numbers. Sir, my first question is on the Jammu facility. Could you please highlight what is the total capex you have incurred so far on this plant?
Lokesh Bhasin
So the estimated capex on this facility is INR450 crores, Abdul.
Abdulkader Puranwala
Okay. And that is entirely spent or is there any imbalance to happen in the quarter?
Lokesh Bhasin
Almost on this. We are already on the ballpark of this range.
Abdulkader Puranwala
Okay. Okay. When we talk about commercializing the facility in Q3, so we — so we are commencing operations at all the four blocks or that will happen in a staggered [Phonetics] manner?
Vinay Kumar Lohariwala
So this will be like all together.
Abdulkader Puranwala
Okay. Okay. And just one more on Jammu. So, sir, I mean, we are talking about generating INR500 crores of sales and this is almost equivalent to the current CDMO revenues what we have. So what is the — what is driving this confidence in terms of the sales which we can achieve? Do we have certain commitments from your existing customers or what’s the plan which can drive this kind of sales ramp-up here?
Vinay Kumar Lohariwala
Yeah. So Abdul, as we are in the last leg of starting the facility, we are in discussion with our all marquee customers, and we are getting a very good response. So based on that feedback and requirement, we are confident that we will achieve this target of INR400 crores, INR500 crores sale in next year.
Abdulkader Puranwala
Okay, okay. And sir, just on the incentivization, so — I mean, how does this work? Is it only applicable on the third-party sales, so what you would be — I mean, for the products would you be manufacturing at Jammu or is it for your subsidiaries also what you typically do at your Baddi plant? So will that manufacturing also get covered under the incentivization plan?
Vinay Kumar Lohariwala
So from Jammu, whatever we sell to the domestic customer, including our subsidiary on arm-length basis, that will be covered.
Abdulkader Puranwala
Got it, sir. I’ll get back into the queue and wish you all the best.
Vinay Kumar Lohariwala
Yeah, thank you.
Lokesh Bhasin
Thank you, Abdul.
Operator
Thank you. The next question is from the line of Hiten Boricha from Sequent Investments. Please go ahead.
Hiten Boricha
Hello. Yeah, good morning, sir. Thanks for the opportunity. My question is again on the Jammu capacity. So just wanted to understand, you mentioned we are going to do a revenue of around INR500 crores next year, so at what sales this Jammu facility comes at breakeven level, sir? So the question I am asking this because I wanted to understand this impact on the margin. So if our Jammu facility is starting commercializing in Q3, the cost is going to come in Q3 and Q4 itself, right? So just wanted to understand the impact on margin in H2.
Vinay Kumar Lohariwala
Right. Hiten, if you see, generally it takes, say, six months to one-year to cross the breakeven level. But in Jammu, what is the beauty that we have the 12% GST incentive, right? So our expectation is that after Q4, means even in Q4, there may be some lag, but from the Q1 next year, we will be — we will cross the breakeven level and start positive EBITDA generation from the Q1 next financial year.
Hiten Boricha
Understood, sir. But the answer is not clear. So want to understand if — are we going to generate revenue in Q3 and Q4 also? And if we are generating a revenue, it will be an EBITDA loss, right, on Jammu facility. So eventually it should expect a 15% margin on blended [Phonetics] basis.
Vinay Kumar Lohariwala
Right. So in — as we are saying that we will start commercialization in the next month, so in December, the revenue number will be very less, but from the Q1 numbers will start updating. And next year it will be EBITDA positive.
Hiten Boricha
Okay, okay. So there is no cost incurred in H2 from Jammu facilities that is my understanding, correct? So this 15% margin is going to sustain.
Vinay Kumar Lohariwala
At company level, yes.
Hiten Boricha
Okay, sir. Okay. Yeah, understood. Thank you, sir.
Vinay Kumar Lohariwala
Thank you.
Operator
Thank you. The next question is from the line of Bhavin Chheda from ENAM Holdings. Please go ahead.
Bhavin Chheda
Yeah. Congratulations on the excellent set of numbers and commercializing the Jammu plant soon. Sir, a few questions. First on Jammu and then the other businesses. On the Jammu plant, will you do — be doing only CDMO or you would be doing there domestic branded, international generics from that plant?
Vinay Kumar Lohariwala
So, at Innova Captab level, if you see, we will sell to Univentis Medicare also, that is our domestic branded generic arm, right? So we treat that as a CDMO. But in consolidation, that revenue will go and fit in Branded Generic business. And this facility will be — we will target the export business also. We will register in the ROW and semi-regulated, regulated market as well as the time proceed. So the facility will be a replicate of our Baddi facility that we are doing the export business, CDMO business, and trade generic — our domestic trade generic, branded generic business also.
Bhavin Chheda
Yeah. Second thing on your guidance of INR400 crore, INR500 crores turnover in next fiscal, this purely would be an incremental turnover or there would be some cannibalization effect of the Baddi turnover also since, obviously there are very high incentives from this plant. So obviously, when this ramps up, majority of the sales to be booked from the new plant makes more sense. But my question was that, will there be a cannibalization of some part of the turnover from the Baddi plant here?
Vinay Kumar Lohariwala
So, the INR500 crores will be the incremental turnover. There will be some cannibalization from the Baddi facility. The domestic cephalosporin business will be transferred to the Jammu facility. But as we have the capacity constraint in our existing cephalosporin facility, this facility will be used for export to the ROW and regulated market, and we are hopeful that in that category we will get the order there also from the ROW market in our Baddi cephalosporin facility. So overall, what we expect is the INR500 crores will be the incremental turnover.
Bhavin Chheda
On the third question, sir, if I see your CDMO revenues from the presentation, for last three years, it was on a declining trend whereas the customers were going up. So, I understand part of this was probably due to pricing pressure though there would have been volume growth. Can you throw some light since last three years CDMO has declined from INR687 crores to INR680 [Phonetics] crores to INR622 crores in FY24? We have managed growth in first half and this quarter looks to be a very strong 10% growth.
And I think at the start of the conference call you mentioned this was purely driven by volume and price has stabilized. So, can you throw some light of what happened in last three years, where CDMO turnover was declining despite increase in customer count? And now it has started growing, what has happened, do some accounts have given — some clients have given big sales or what has happened in first half?
Vinay Kumar Lohariwala
Yeah, sure, Bhavin. If you see that after COVID there is a decline in the API prices. So as you know that our pricing with our customer is the transfer through model that if the API price goes up, our pricing goes up and if it is reduced then our transfer price is also reduced. So due to the — there is continuous price decline, we see that top-line decline in the case of CDMO. But if you see the volume in the CDMO sector, there is a consistent volume growth in the CDMO section. So that’s why the margin gets better.
If we say there is a API price reduced or transfer price reduced, but our margin that’s why improved in — that margin is basically a function of — totally a function of, say, volume. So that is why our margin gets improved. And this quarter what we have seen is that, there is a normalization in the API price, now there is no further decrease or more or less the price are in the stability territory. So that is why we witness the growth in the top-line also.
Bhavin Chheda
Yeah. That will be helpful. Last one on generics. Branded domestic plus international has reached INR100 crores run rate in this quarter and also grown at almost like 17%, 18% combined I am saying. So will this continue and what kind of scalability you are projecting here in two years to three years?
Vinay Kumar Lohariwala
So let me take the first domestic branded generic business. So last year, we have done almost INR200 crores and that business has last year also witnessed a 25% growth. So we see the same momentum to continue in the near future. So, there we can grow at the same level of 20%, 25% plus in the near future. And as far as the international branded generic is concerned, with the acquisition of Sharon Bio-Medicine, so that is 100% or what we can say, 85% revenue comes from the export only that covers the regulated, non-regulated market, and with the Innova, we are well-focused on our international market presence also. And with the Jammu facility, we are going to register that facility also into the export markets in the different territory, and we feel that the same growth rate will be continuing in that segment also.
Bhavin Chheda
Thank you, sir. Thank you and best of luck.
Vinay Kumar Lohariwala
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. If you have a follow-up question, you may rejoin the queue.
The next question is from the line of Rohan Vora from Envision Capital. Please go ahead.
Rohan Vora
Hello. Thank you for the opportunity. Sorry if the question was already answered, I joined the call a little late. So my question was on the interest cost. So basically, we see borrowings on the balance sheet, however, interest costs have substantially reduced over the last two quarters, so what is the reason for that? Thank you.
Lokesh Bhasin
Yes, sir. So the borrowings are still there, but — so the major part of the borrowing is of INR230 crores of term loan that we have taken on our Jammu project, and that loan carries an interest subvention benefit of up to 6% on the overall rate. So hence that is the main reason why you are able to see the debt, but the cost is not showing that much in the P&L.
Rohan Vora
Okay. And when does the cost start flowing to the P&L?
Lokesh Bhasin
So post-commercialization.
Rohan Vora
Okay. So basically [Speech Overlap]
Lokesh Bhasin
Even at that time also, the net landed cost of interest would remain at a range of 2% to 2.5% only after considering the interest subvention benefit.
Rohan Vora
Okay. So 2% to 2.5% will be the impact in the P&L in the coming quarters?
Lokesh Bhasin
Yes, after commercialization of the project.
Rohan Vora
Got it. Got it. Thank you, sir.
Operator
Thank you. The next question is from the line of Karthi VK from Suyash Advisors. Please go ahead.
Karthi Keyan VK
Sir, good afternoon. Couple of clarifications. You were answering the question on pricing for CDMO, can you elaborate a bit more how do you benchmark your API prices? What is the benchmark? And how do you determine your markup? Some thoughts on that could be helpful.
Vinay Kumar Lohariwala
So the API price is the market price. The price with — at which we are buying the API. So that is available to the customer also and to us also, right? And then, let’s say, we have the bill of material cost and then the cost of conversion, cost of packing, analytical cost, and then we have the markup — margin markups.
Karthi Keyan VK
Right, right. And typically, how low do you go, sir? I mean, assuming there is competition, how do you work backwards? Do you work on, say, 18% IRR basis, 24%, how exactly do you think about that? I’m asking this because if it’s a cost-plus model, it seems fairly attractive for incumbents, which is why I’m asking you this question.
Vinay Kumar Lohariwala
So, that is in line with the industrial standard. That profit margin, cost of conversion, cost of packing are in line with the industrial practice.
Karthi Keyan VK
Industrial practice, okay. The other thing, sir, can you elaborate on what would be your typical, shall we say, market share for a particular customer for a particular molecule? Would you have some sense of that? What is the highest you would be supplying to any customer and a range in which you would be typically supplying?
Vinay Kumar Lohariwala
So, sir, basically market insight about the detailed data of the CDMO is not available. So it is difficult to comment on this question.
Karthi Keyan VK
You would have some sense of at least what volumes they purchase and therefore, how much of that you cater to?
Vinay Kumar Lohariwala
No, sir. No, we cannot track that.
Karthi Keyan VK
Okay. Fair enough. Thanks for answering the questions and best wishes.
Vinay Kumar Lohariwala
Thank you. Thank you.
Operator
Thank you. The next question is from the line of Sagar Tanna from Alchemie Ventures. Please go ahead.
Sagar Tanna
Thank you, sir, for an elaborate discussion on Innova. I have one question. What are our thoughts — what is the capacity utilization in Sharon currently? And what are our thoughts in ramping-up that asset?
Lokesh Bhasin
So, yes. So, our capacity utilization currently is — formulation is around ranging between 45% to 50%, and considering the normal formulation business, the optimum capacity range between 70% to 75%. So since its acquisition, we have already started working on developing the products and as already submitted that Sharon is into regulated market in exports. So basically, onboarding a customer or onboarding a product carries a long gestation period, so that period resources and product investment has already been started with the help of our R&D and our strong RA team. So over the next coming years, we are very much positive to ramp up this available capacity through introduction of new customers and new products.
Sagar Tanna
So do you expect that you will be able to ramp it up to 70%, 75% in FY26?
Lokesh Bhasin
The way we see it, we are looking at a growth of roughly around — so the way we are looking is, since I believe that it is — these things — regulated market onboarding carry some longer gestation time. So the way we look at it is that we are looking at growth of Sharon in early teens of in coming years.
Sagar Tanna
Got it. Second thing, sir, just one clarification. Since we have not commercialized the Jammu plant and hence the CWIP is showing still on — as on September, is my understanding correct?
Lokesh Bhasin
Yes, you are absolutely right. We are showing a CWIP of INR452 crores on 30th of September, and the majority of it carries our Jammu project cost.
Sagar Tanna
So now since that plant will get commercialized in this quarter, this will move to the gross block, is that correct?
Lokesh Bhasin
Exactly. This will move to PPE [Phonetics] accordingly.
Sagar Tanna
Got it. Thank you so much and all the best, sir.
Lokesh Bhasin
Thank you, sir.
Vinay Kumar Lohariwala
Thank you.
Operator
Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Thanks for the opportunity and congratulations for a good set of numbers. My question was on the CDMO side…
Operator
Can you please speak a bit louder? We cannot hear you, sir.
Ankit Gupta
Sure, I’ll do that. Sir, my question was on the CDMO segment. So given the schedule — schedule M changes, how is that impacting some of the larger players like us? How has been the movement from a lot of formulation companies, marketing companies to established CDMO players like us? If you can elaborate upon that and how do you see the impact of the same on our growth over the next year or so?
Lokesh Bhasin
Ankit, I’m sorry, but can you please repeat the question? We were not able to hear you properly.
Ankit Gupta
Sure, sir, I’ll repeat that. So my question was on the CDMO segment, given the changes in the Schedule M, which is happening from the government, how do you think this is expected to benefit and establish and maintain plant player like us? So, if you can elaborate on that, how has — like how has been the inquiry pipeline from the formulation players post this changes are taking place?
Vinay Kumar Lohariwala
Yeah. So if you see, there is an implementation of revised Schedule M, and due to this new act — new revised Schedule M, there is a strictness in the plant guideline and so that is at par with what we can say is the international guidelines. As most of our facility is having SRA approvals like EU-GMP or MHRA or WHO-GMP, so we are complying with all these guidelines. So, we see it as a positive trigger. The industry will further consolidate to the larger players due to this implementation of the stricter norms.
Ankit Gupta
Sure. But have you already started seeing some changes in how the — in the inquiries from the formulation players — from the marketers?
Vinay Kumar Lohariwala
Yeah, definitely. So this is happening since last one-year or two years that the business is getting consulted towards the larger players.
Ankit Gupta
So has there been a few instances of some of these smaller players shutting their shop or available for sale or the plant is available to sale to larger players like you?
Vinay Kumar Lohariwala
So that is the part and parcel of the business that always happen, that consolidation and all that, but we need to look at that if the plant is complying and it is strategically fit, then only we can go and — go ahead with the acquisition.
Ankit Gupta
Sure, sure. And our plans to set up almost or spend almost INR450 crores in the Jammu plant, it was also — like was — also like we had thought about it keeping in mind the revised guidelines which have happened in Schedule M.
Vinay Kumar Lohariwala
Yes. So the Jammu facility is designed and in compliance with all international guideline, as well as our local FD guidelines. And it is a state-of-art facility complying with all guidelines as well as, let’s say, that all equipments are with the latest technology.
Ankit Gupta
Sure, sure. Thank you. [Speech Overlap]
Vinay Kumar Lohariwala
Effeciency-wise also. One is the guideline, other is the operational efficiency. So this facility will give the highest efficiency to us.
Ankit Gupta
Okay. Okay. Thank you and wish you all the best.
Vinay Kumar Lohariwala
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Vinay Kumar Lohariwala
Thank you, everyone, for joining us in the earning call. We appreciate your time and showing interest in our company. In case of any inquiry, you can get in touch with us or SGA, our Investor relations advisor. We look forward to meeting all of you over the next call. Thank you.
Lokesh Bhasin
Thank you.
Operator
Thank you. On behalf of Innova Captab Limited, that concludes this conference. [Operator Closing Remarks]