Laurus Labs Limited (NSE: LAURUSLABS) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Unidentified Speaker
Satyanarayana Chava — Founder and Chief Executive Officer
V. V. Ravi Kumar — Executive Director and Chief Financial Officer
Analysts:
Unidentified Participant
Nitin Agarwal — Analyst
Bharat Sheth — Analyst
Jeevan Patwa — Analyst
Chirag Shah — Analyst
Tushar Manudhane — Analyst
Sajal Kapoor — Analyst
Foram Parekh — Analyst
Gagan Thareja — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Q1FY26 earnings conference call of Loris Lab hosted by DAM Capital. As a reminder, all participant lines will be in the listen early 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 Star then zero on your touchdown phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from Dam Capital. Thank you. And over to you sir.
Nitin Agarwal — Analyst
Hi. Thanks Steve. Hi. Good afternoon everyone and a very good evening and welcome to Laura’s Labs Q1F26 earnings call hosted by Dan Couple Advisors Limited on the call today we have representing Laura Camps Management, Dr. Satyanaranshawa Founder and CEO, Mr. Vivi Ravi Kumar and Ms. Executive Director and CFO and Mr. Vivek Kumar, ABP Investor Relations. I hand over the call to Dr. Chawa to make the opening comments and we’ll open the floor for questions. Please go ahead sir.
Satyanarayana Chava — Founder and Chief Executive Officer
Good afternoon to all our stakeholders. Your company made healthy progress to start the financial year. With increasing contributions from CDMO business and continued advancement of our pipeline with Big Pharma, we’re moving ahead with strong focus on commercial execution, realizing the full potential from mid and late stage pipeline programs and rapidly enhancing on service capabilities to meet complex needs of our customers and drive future value creation for all stakeholders. We announced three major capacity expansions during the quarter. One, first one microbial fermentation phase, one greenfield project at Vijac. Second one gene therapy and antibody drug conjugate, GMP facility at Shamirpet.
The third one finished formulation facility in Hyderabad under the Karka Joint venture. These investments will create more opportunities for growth and further strengthen our ongoing commitment of being a strong manufacturing partner on some of the new technology platforms at scale. Moving on to our financial results, our Q1 performance was in line with our expectations with the revenues of 1570 crores reflecting robust demand for our CDMO offerings and continued growth in the formulation business. Gross margins further expanded and are at 59% range and EBITDA margins expanded by 10.5 percentage points to close to 25% following better operating leverage, product and segment mix.
As we look forward, we remain confident in our outlook for improved growth in the rest of the year. To begin, I’d like to share key updates on our CDMO business. We are seeing a very good progress in this division with sustained demand in our high value integrated offerings. We achieved very strong growth for the Q1 registering its sales of 493 crores. This growth was mainly driven by several mid to late stage MCU deliveries and increase in sales from new manufacturing assets. Pipeline momentum was healthy across clinical commercial phase with the mics shifting towards increased big pharma projects.
In specific, a lot of customer interests in around biocatalysis, flow chemistry, high energy chemistry, controls, manufacturing, peptide manufacturing et cetera. As of date we have a pipeline of over 110 active projects, over 90 in human health and about 20 in animal health and crop sciences. We continue to invest in our capabilities and commercial offerings in line with what market believes. Accordingly, additional capacity buildup is in progress particularly in relation to complex molecules including peptides. When it comes to Larus Bio, our large molecule CDMO division, this Division reported subdued Q1 sales of 29 cores which was flat year on year.
The sales impacted from customer specific scale up challenges. However, we remain focused on building strong diversified pipeline across segment and customers. We have few potential long term partnerships under discussion with the new and existing CDMO partners utilizing enzyme engineering platform. As we discussed, construction work for the commercial scale fermentation Facility in YZ commenced this quarter. The plan is to create over 400 kilo litre capacity in phase one which is expected to go online by the end of 2023. We believe the new site will further accelerate on high quality CDMO service capability and growing our industry position in generics.
The division reported a growth of 12% and achieved sales of. Crores. This was mainly supported by volume expansion in both ARV and developed market sales quantra also seeing execution of contracts signed last year which helped improvements in our capacity utilization. On filings we filed over 90 DMFs till date and also one dossier file in formulations and three approved received in Q1. Cumulatively we have filed 88 products overall demand outlook largely stable in GenevX business. Our focus continued on rebalancing the generic R and D and manufacturing resources mainly to enhance product pipeline and meeting the delivery commitments on R and D front. Overall R and D spending to sales in Q1 was at 4.3% which is about 68 crores for the Q1 which was increased by about 6% year on year.
The expenditure including our spend on since we challenged June 30th the R& D spend is in line with our full year target and we continue to invest in portfolio with product specific approach based on complexity and scale economies besides accelerating adaptation of sustainable technologies. Let me share brief on quality in Q1 the company underwent close to 39 quality audits by multiple regulatory as well as key customers. Company has successfully passed audit inspections without any critical findings. In summary, our technology platform commercial performance today continues to enable meaningful advancement of pipeline projects as well as business development opportunities.
We remain confident in our strategic direction and commitment as the source of value creation now and well into the future. With that I would like to hand it over to Ravi to share some financial highlights.
V. V. Ravi Kumar — Executive Director and Chief Financial Officer
Thank you doctor and very warm welcome to everyone for this quarter. One FY26 earning call. Total income from operations is 1570 crores with a growth of 31% year on year. And the momentum has come from the CDMO and the generic division. Business gross margin maintained very healthy 59% which is more than 4% due to the better product mix and process improvement efforts. Apart from that raw material price improvement also EBITDA for quarter one stands at 389 gross with a margin of 25% progressively improved versus full year for FY25. Corporate after tax for quarter one is 163 crores.
Proceeds stand at 13%. But of course the continued capex investment which has not improved though it is improved by 3% versus FY25. On the capex front we invest close to 265 crores for the quarter our net debt stood at 2,388 crores with a debt EBIT of 1.8 versus 2.3 for the last quarter. On the capital allocation front our strategy remains unchanged and we will continue to prioritize investments into high value business segments to drive near and long term growth and returns for our shareholders. You can refer our IR presentation for more details. With this I would request the moderator to open the lines for qa.
Thank you.
Questions and Answers:
operator
Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touch tone telephone. If you wish to withdraw yourself from the question queue, you may press Star and two participants are requested to use handset 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 Bharat Some quest for value. Please go ahead.
Bharat Sheth
Yeah. Hi. Firstly I would like to congratulate Dr. Satya and Raviji for delivering a good set of numbers. And I’d also like to specially congratulate Krishna Chaitanya for delivering exceptional CDMO numbers consistently from past few quarters and coming to my questions. So there is a significant jump of gross margin in this quarter. It increased by around 500 basis points we are now at 59.5%. Can we expect this kind of high gross margin to be maintained in future too as the share of CDMO increases? Or do you see it as a one off and to able to expect this kind of high gross margin?
Satyanarayana Chava
Thanks master. If you look at our gross margins over several quarters, we are always informing and also maintaining around 50%. Now we can say as the contribution from CDMO business increases, we expect the gross margins will remain between 55% to 60%. That’s what we expect in the coming quarters.
Bharat Sheth
Thanks. And if you see the past trend Sir, CDMO in Q1 is generally weaker and as years passes by, Q2 will be better and Q3 will be much better and Q4 will be the top and generally H2 will be much better than H1. But this time surprisingly if you see CDMO in Q1 is very very strong. It is even better than last year Q4. So on this base do you still think H2 will be better than H1 for CDMO in FY26 too?
Satyanarayana Chava
CDMO business, you can’t count quarter on quarter but we expect good growth over last year for sure. Our manufacturing and delivery depends on their clinical programs so it will be bumpy. But we see we are in a good shape right now on our CDMO segment.
Bharat Sheth
And my last question is currently if you see the current cycle of global fund tender which is generally for three years, it is going to end. I think if I am not wrong, it will be going to end by end of June. December. End of this year. In December. Yeah. They know if Laura has won the next tender cycle.
Satyanarayana Chava
Generally they will run the tender little later and maybe September, October. See if you see our tender we are very successful in getting good share of the tender and we don’t see any challenges there.
Bharat Sheth
Okay, thank you. Thank you very much for all your.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is on the line of Jeevan Pathwa from Sahasar Capital. Please go ahead.
Jeevan Patwa
Sir. Firstly, congratulation for entire team actually for you know, so whatever hard work we have put in in last few years, I think that has started showing the results. I’m very happy for it. Only question I have is on the bio side. So on the food putting side. So we are basically you know about to set up facility for you know 2 million liter and then 4 million liters. So on the food putting side what is the progressiveness? Are we now started putting any work there? Are we. You know reactors has been already ordered as orders has been placed for the reactor, where are we in that?
Satyanarayana Chava
As I mentioned we are installing 400 kilo litres of fermentation capacity in Vizag Greenfield project. That is the phase one as you mentioned overall capacity at that site will go to 2 million liters in two more phases. In phase two, phase three put together it will go to 2 million liters. And we have very good visibility about utilization of that fermentation site. Which product, which customer and all like we are gaining confidence and gaining visibility in our small molecule CDM segment. We’re also seeing a lot of visibility now. What customer, what project, what price, what time length and our large molecule cdmo.
As you were talking about our focus on food proteins. Food proteins we are focusing but focus as also on other proteins, cosmetic proteins, some polymers produced by fermentation. So the offerings are becoming very interesting which are also at scale.
Jeevan Patwa
Wonderful sir. Wonderful sir. And second question I have is in the immuno ad so how do you see the ramp up in number of SO capacity? I understand it will come on stream. By the end of September. But in terms of the response from the market I just wanted to understand your feedback on that. How is the response from the market? Are we also seeing a foreign national traveling to India to get this treatment done in India? Since the cost is much lower.
Satyanarayana Chava
There. Are some more treatments offered to foreigners. That was based on the hospital’s choice. What is also happening? We are also trying to build overseas presence by entering partnership with some big pharma in those regions. Maybe in the near future we will give you more details on our global expansion of Cardi therapy using Immunat.
Jeevan Patwa
Okay great. So great. And third last is on the gene therapy sir. So we are setting up a viral vector facility in Kanpur, right?
Chirag Shah
So. So any. Any update there sir?
Satyanarayana Chava
So there is a change in our approach because our thought process change from 2,500 square meter facility to 6,000 square meter facility. So there is no space available at Technopark in Kanpur. So we have moved idea of that facility to Hyderabad, Genove Valley where we have broke the ground for a 6,000 square meter facility and whatever gene therapy, viral vector. And also that building houses antibody drug conjugate GMP facility as well. So because we have added another therapy ADCs we start to move to Hyderabad.
Jeevan Patwa
Okay. Okay sir. Thanks a lot. Thanks.
operator
The next question is from the line of Rahul, an individual investor. Please go ahead.
Unidentified Participant
Thank you for the opportunity and congratulations on the great set of numbers. Dr. Shawa, if you can possibly paint. A picture for us over the Last five years we’ve kind of come a long way. The product mix has changed and now we see the CDM revenue contributing to 30 plus percent. Last probably five years ago it was less than 10%. At this point we see the contributions from Biodexim to be less than 5%. How do you see this product mix changing, you know, five years out? And what is the vision of the company over there? If you can, you know, share a bit on that, I’d be interested in listening.
Satyanarayana Chava
While we continue to focus on our core which is APIs and integrated offerings in generics, we are also increasing our investments, capex resources and technology platforms to offer wide variety of services for late clinical and commercial human health, animal health and crop science programs. As you mentioned, currently the CDMO contributes over 30% of our revenue. We expect it will continue to grow. We have in the near future, near to medium, we expect it has the potential to touch 50%. That’s our guesstimate.
Unidentified Participant
Thank you so much. Like this hypothetical question. At any point in time do you see these divisions becoming, you know, big? To the extent that, you know, there may be a possibility of listing these as, you know, separate entities in business?
Satyanarayana Chava
We don’t have any plans for that.
Unidentified Participant
Okay, thank you so much and wish you all the good luck. Thank you.
operator
Thank you. The next question is from the line of Chirag Shah from Whitebine Investment. Please go ahead.
Chirag Shah
My first question is on gross margins that we have seen. Would it be right to assume that the gross margin improvement is driven by non CDA business significantly or largely? Because CDM gross margins would largely be static in a range, right? Maybe 5% deviation here and there. So would it be a right statement to make that the sharp increment in gross margins over last six, seven quarters that we are seeing is driven by non business and it would be now almost closer to what we were three years back?
Satyanarayana Chava
If you look at our quarter on quarter performance, our revenue decline came from ARV and other generics whereas there was a growth from cdf. So I think these two contributed the gross margin expansion.
Chirag Shah
Would it be right statement that in gross margin in CDMO your gross margin would reasonably be stable irrespective of the stage of project, whether it’s an early stage or late stage or it materially varies across margins on the state of the project that you are.
Satyanarayana Chava
You are right. The generally the gross margins remain similar irrespective of stage and scale of the project.
Chirag Shah
Okay, it answers my question. So then in that case, which part of the non CDMO business has been contributing to margins because if I do some mathematics there is a significant improvement of almost 700,000 bits in non ceiling gross margin. So is it the ARV part or FDA part which is driving or if you can just share some light, it’s.
Satyanarayana Chava
Majority came from non ARV.
Chirag Shah
And is the further scope of improvement over there. Or. Rather what is driving that non ARV performance?
Satyanarayana Chava
It’s based on some shipments. As I mentioned we expect the graph margins remain between 55 to 60. Earlier we used to say around 55. Now we are saying it will be between 55 to 60% so that’s very healthy and we expect we’ll be able to maintain that.
Chirag Shah
Sir, one last question. Any prevailing that you have witnessed or any indication of prevailing given the potential risk of of some tariff that could come across, is there any pre buying that you have witnessed from your customers?
Satyanarayana Chava
I think it’s very difficult question to guess and answer. We have to wait and as you have seen from our results see our dependency on formulation sales to us are not that big significant. So yeah great.
Chirag Shah
Thank you. Thank you.
operator
Thank you. The next question is from the line of Tushar Konudhani from Muthila Losal Financial Services. Please go ahead.
Tushar Manudhane
Am I audible?
Satyanarayana Chava
Yes, very well.
Tushar Manudhane
Just a medium of difference now that you know the animal health facility is commissioned even agrochemicals. So has this contributed meaningfully for the CDMO business for the quarter or the other way to ask is if we could break the CDMO business into human health, animal health and agritech and ingredients.
Satyanarayana Chava
The contributions from human health and animal health were there in this quarter. Nothing significant from crossover in this part.
Tushar Manudhane
Will that come up in the coming quarters? Is that the fair presence or it would take some more time to other facilities to sort of get.
Satyanarayana Chava
We expect meaningful revenues from craft senses will only come next financial year.
Tushar Manudhane
So just one more on this aspect from the return on investment perspective like KL facilities whether to utilize for ingredients for human health or animal health or crop sciences is it a similar chemistry and hence is just a different application or how to think about it strategically for next five to six years.
Satyanarayana Chava
So the facilities for animal health are segregated and dedicated. You can’t use that for human health or crop science. Similarly the crop science facilities are also segregated and dedicated so those can be used for own crop sciences. So interchangeability of these two facilities are not possible. Whereas human health we have large capacity where you can do these projects in multiple sites at multiple scales.
Tushar Manudhane
Understood sir. And just lastly on bio side where there has been Certain issues with the customer. So probably if that customer comes back or if we have new customers like 10 timeline approximately for this business to sort of revise.
Satyanarayana Chava
There is no challenge, it is only delay the project. Now the bottleneck was resolved, things are back to normal and we don’t see when we look at the entire year, we don’t see any big challenge achieving what numbers we got at the beginning of the year.
Tushar Manudhane
Thank you.
operator
Thank you. The next question is from the line of Sajal Kapoor from antifragilethinking. Please go ahead.
Sajal Kapoor
Yes, many thanks for taking my question. Dr. Satya, any progress update you can share regarding the velocity bio and AI driven bioengineering platform partnership we are progressing with? I mean what advantages does bioengineering provide over chemical, you know, conventional chemical synthesis in terms of efficiency, cost and sustainability? Please.
Satyanarayana Chava
This agile what programs we are working with Willow using the AI driven engine engineering platform, primarily hydroxylation platform, adding hydroxyl groups on steroidal backbones. That’s the one we are working. There are multiple programs, maybe in this financial year one program will go from lab to pilots mode and we expect two more programs in the next financial year.
Sajal Kapoor
And do we expect the learnings out of this program to be kind of integrated into some of our future ventures? I mean because bio is a very emerging promising area and we are just exploring the perhaps the tip of the iceberg.
Satyanarayana Chava
Our partnership with Willow is primarily meant for steroids and hormones where adopts our Bengaluru team is doing development whereas Willow is doing research. I think they identify the enzyme and then they give it to Bangalore team for optimization. So they’re working very, that partnership is working well and currently we are not intending to use that technology on any other program right now.
Sajal Kapoor
Okay, understood and thank you for that Raviji. This new CAPEX investment of over 5,000 crore that we have announced in Andhra Pradesh I guess will be executed over multiple phases and years. So and if my assumption is correct, can we therefore anticipate maintaining a healthy net debt to EBITDA ratio despite this massive growth? Capex?
V. V. Ravi Kumar
Yes, as we indicated before we are going to invest 5000 crores in the next five year time. I think cash flows, internal cash flows will sufficient to take care of it. As we indicate we don’t make our debt net debt is more than a 50% of our revenue any point of time.
Sajal Kapoor
Sure, sure. And and finally in the context of Trump’s make in America, a big pharma is investing heavily in biologics, gene therapies, weight loss drugs, even diagnostics. And more to expand capacity and strengthen their supply chain. And many of them, From Roche to AstraZeneca to Eli Lilly, almost all of them have announced multi billion dollar capex in the us. So how will these investments by innovators in the US affect the outsourcing and CDMO industry?
Satyanarayana Chava
These big pharmas have very large pipeline. Maybe part of the supply chain will be located in us, part of the supply chain located outside. We have to see how it evolves. Everybody is announcing a lot of investments in us but we don’t see beginning of impact. So as we mentioned, they will not move core chemistry to us. They may move cell and gene therapy finishing steps. So the demand for intermediates will remain constant or increasing. Maybe.
Sajal Kapoor
Yeah. And maybe small molecules APIs as well. That’s not going to move to us.
Satyanarayana Chava
Yeah, that’s what we believe.
Sajal Kapoor
Yeah, sure, sure. That’s all from my side. Thank you. Thank you so much.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is from the line of Vivek, an individual investor. Please go ahead.
Unidentified Participant
Good evening sir. I have a question regarding the Loras bio. Sir, you have mentioned that there is a pricing challenge in that particular slide for the Laris bio. Could you please share the details on the pricing challenge? And the second question is that what can be the how big it can become in next five to 10 years at Lars buyer itself.
Satyanarayana Chava
See, the pricing challenge at Bayo pertains to hiring reactor months to product billing. So that was the one shift happened because in the clinical, not clinical trials, since we don’t know how many days fermentation will take, how many days the downstream processing happens. So customer is to pay per month or per batch. Once the product stabilizes then the building will go to per kg. So that’s the pricing shift happening when the product mature. And the question regarding the opportunities in the next five years we see significant potential. That is the reason we are investing a lot of money in greenfield projects.
As we mentioned, the phase one itself, we are creating 400 kilo litres capacity and eventually it will go to 2 million liters fermentation capacity.
Unidentified Participant
Okay, sir, thank you for answering the question, sir. I will join in the queue sir.
Satyanarayana Chava
Thank you.
operator
The next question is in the line of Abhijit, an individual investor. Please go ahead. Mr. Abhijit, your line has been unmuted. Please go ahead with your question.
Unidentified Participant
Yeah, Am I audible?
Satyanarayana Chava
Audible Abhijit?
Unidentified Participant
Yeah. Great set of numbers. I have a question with regards to the fbf. If you can see on a quarterly basis there’s been a reduction. Is this the volatility in these numbers have been there for the last four quarters as in the presentation. So is this going to continue? Is there any stability that is going to be there in the generic FDF and generic portfolio? That’s one question.
Satyanarayana Chava
The majority delta in our sales in FDF is coming from how many millions of packs of anti red travel we are shipping in the quarter. So overall we are shipping the same numbers but depending on the approvals from various countries to ship logistics and all regular recognition because most of them are sea shipments. So those are the factors contributing to the variation in the genetic formulation sales.
Unidentified Participant
Okay, my next question is with regards to this crazy move that everybody is making in India and globally about peptides and the opportunity for GLP1 and weight loss drugs basically and also other peptide products. Is there any opportunity that is available for laurus also in this space?
Satyanarayana Chava
We believe so.
Unidentified Participant
Okay. You don’t want to go more further about it? I mean you don’t want to disclose I guess. Okay.
Satyanarayana Chava
Yes.
Unidentified Participant
Thank you. Thank you.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is from the line of Mahajan from Shantam Wealth. Please go ahead.
Unidentified Participant
Congrats for a good set of number. Can I get a pickup of this 5,000 crore capex? How much is going for the CDMO over the next five years?
Satyanarayana Chava
No, we are not disclosed that it will interchange based on the business opportunities.
Unidentified Participant
Thank you sir. Thanks.
operator
The next question is from the line of Tushar Manudani from Motilal Visual. Please go ahead.
Tushar Manudhane
Slide please.
Satyanarayana Chava
Yeah, just give me one minute. We’ll give you the ARV APIs is 363 crores and the formulas is 284. About 640 crores.
Tushar Manudhane
Sorry, 647.
Satyanarayana Chava
Yeah, around 640 crores. Both the APIs and formulations could do that. 360 and 280.
Tushar Manudhane
So the non ARV formulation. If you could share how we think of growing and doing.
Satyanarayana Chava
We are expanding our capacity for non ARU formulations and which will be qualified by end of this year. So we can expect non ARU formulations should grow from Q4 onwards.
Tushar Manudhane
But on the product approval side also there has been.
Satyanarayana Chava
Revenue growth primarily comes from contract manufacturing of integrated formulations both API and sbf. So once the capacity we are doing tech transfers. When the capacity is qualified we don’t see lag in revenues.
operator
Thank you. The next question is in the line of Chirag Shah from White Pine and Investment. Please go ahead.
Chirag Shah
Yeah, thanks for the opportunity again. And sir, apologies on going back to the gross margin point. So on the non ARV side, would it be a right statement that we are almost at the peak gross margins that we had in the past year on 2021? On the non CDMO aggregate gross margin, it could be a function of which I’m not going to those details but non CDMO gross margin would be closer to the peak maybe of F21 or 22 that we had.
Satyanarayana Chava
It’s a difficult. But maybe we had a very good grass margin. I’ll put it that way.
Chirag Shah
Yeah. Some actual question is what are we doing from here on to improve that part, that piece of gross margin for that?
Satyanarayana Chava
As we grow our CDMO business as we see today, we haven’t achieved operational efficiency, still lot of unutilized capacities and all. As we grow our revenues, we are not going to grow our R and D and quality staff proportionately. We are going to increase our expenditure proportionately. If you look at when our revenue was less, our cost of employees went up to 60, 70%. Sometimes it was around 10%. So we have, we are at the beginning of that benefit of operational efficiency. Yeah. Once we improve revenues, our percentage of expenditure will come down. So that is another metric which will help us to improve our numbers EBITDA as well as return on capital.
Chirag Shah
So my question was more on the non CDM of gross margins. Either non business mix changing that it can see a significant uptick from what was the historical peak on the gross margin because that will directly flow to EBITDA and pat also in that sense. So is the business model changing where we can see a higher peak gross margin in non CDMO fees?
Satyanarayana Chava
I think there is no business mix change. There’s only product change. In some products we get more margins maybe shift in this quarter. So it is fundamentally the business is not changing significantly.
Chirag Shah
Okay, great. Thank you. And all the best, sir.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is from the line of Nitin Agrawal from DAM Capital. Please go ahead.
Nitin Agarwal
Thanks for taking the question, Doctor. On the CMO business which we have in both API and formulations, can you give us some color on when do you see momentum picking up on those pieces? Because we’ve seen sudden flattening out of the API business in the formulation business. Extra PRV is also not seem to have picked up much over the last few quarters.
Satyanarayana Chava
It will pick up from Q4 onwards. Meeting. Yeah.
Nitin Agarwal
Is this driven by certain specific contracts or what will drive the timing from Q4 onwards on these. On these businesses?
Satyanarayana Chava
Right now the tech transfer batches are going on in formations and capacity announcement is also going on parallel. So both we expect will be handy to get higher supplies and higher revenue from Q4 onwards.
Nitin Agarwal
And for the APIs API, what is.
Satyanarayana Chava
Happening with that contract? We are doing more integrated so we’re doing making API and converting that into formulations. So we may not have. We don’t expect under the contract manufacturing or API revenues will grow. Will not grow to the extent formulations are growing.
Nitin Agarwal
And sir, on the API business X of the arv, you know last year we had a bit of a slump in the oncology part. Till the time you were disclosing that. I mean how do we see the non ARB API piece going forward? Are we seeing momentum coming in that. Business at some point in time?
Satyanarayana Chava
Not in the next few quarters.
Nitin Agarwal
And then what is the reason because of which there has been some challenge on this piece over the last.
Satyanarayana Chava
It’s not challenge, is it by choice Actually the reason is we have allocated more resources to take up more CDMU projects in Silapore allocating to significant number to generic API development. So we took that as a decision made by internal people. I think we are also expanding our R and D strength. Once that is done, we will put resources back in development validation of generic APIs. We also need capacity to do that. So there are multiple things. So right now we made an informed decision internally to allocate resources to CDMO projects.
Nitin Agarwal
Okay, that makes sense. In terms of the CBMO business, I think the question was asked earlier also because we’ve had three very strong consecutive quarters on the business. The growth has come through sequentially for the last few quarters on a Q2 basis. Now on this day, sir, how should we think about quarterly growth for this business? Is it going to be linear or we expect some lumpiness as we go.
Satyanarayana Chava
Forward overall here we can comment is going to be healthy growth.
Nitin Agarwal
Okay, probably some volatility on a QQ basis as we go through the quarters.
Satyanarayana Chava
We are not expanding that because ARV some business we know very clear. See, it is not that we will get an order for CDMO in July and we deliver in September. It’s not that. So the long term we know very clear what molecule we are making, how much we are making, which is the customer price and all pretty well for this year. So we see comfortable and we expect good growth in CDM revenues overall for the year.
Nitin Agarwal
And sir, if you can, on the CDMO part, how many products are we supplying? How many have got? Again, we should be commercial supplies at this point of time. And typically, how should we Think about typically given your pipeline how many new products can get commercial typically on an annual basis Given a pipeline over the next couple of years it is difficult.
Satyanarayana Chava
We don’t want to get that number and confuse all the investors. I think as you have mentioned we have grown significantly in CDN quarter on quarter for the last five quarters and numbers only will speak. That’s what we, we don’t want to forecast our partner products. Yeah when it comes to here we are selling will be around 2,500 crores plus or minus 200 crores. We have visibility there in CMO in generic we have visibility in CDMO. We don’t want to guess and give a number.
Nitin Agarwal
And then in your opening last one on this, on the opening comments you made a few references to the fact that a lot of big pharma contracts, supplies have started or are scaling up. You know for a CDMO business. I mean is this so if you can highlight the big pharma part, you know how should one read it? Is it essentially leading to larger contracts or these are more strategic partnerships?
Satyanarayana Chava
Nitin, I think we are going, I think we cannot disclose more than what we have done on this.
Nitin Agarwal
Okay, sure, no problem. Thank you sir.
Bharat Sheth
Thank you.
Satyanarayana Chava
Thank you.
operator
The next question is from the line of forum Parek from Bank of Barota. Please go ahead Mr. Forum Baik, your line has been unmuted. Please go ahead with your question.
Foram Parekh
Yeah, thank you for the opportunity and congratulations on a very good set of numbers. There was one comment made on the CDMO side which was very big that the contribution is now 30% of the sales and we expect it to touch 50%. So can you give some more clarity and I by when can we expect this kind of contribution to come in from cdmo?
Satyanarayana Chava
We mentioned it has a potential to go there and we are not attaching any year to that. Okay.
Foram Parekh
Yeah but like somewhere in five years down the line can we expect this kind of potential run rate?
Satyanarayana Chava
We were not giving any forecast.
Foram Parekh
Okay and secondly on the ADC front we have mentioned couple of times that the India got to go into the ADC side also. So may I ask which part of the ADC are we looking at? Is it the payloads, linkers, bioconjugation? Any color on that?
Satyanarayana Chava
We already make payloads and linkers and we don’t want to make maps. We’ll do conjugation, purification and field finish. That’s the infrastructure resources we are building internally. We make payloads link ups and then do bioconjugation, purification and fill finish. We will not make maps.
Foram Parekh
Okay. Got it. And out of this 5,000 crore capex that we have announced would it be possible to give some color there? Like how much of it would go towards the ADC side?
Satyanarayana Chava
ADC’s invite. This new 5000 crore capex is in Vizag. None of that capex will go to adc.
Foram Parekh
Okay. Got it. Thank you.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is from the line of Gaurav from Antique stockbroking. Please go ahead.
Unidentified Participant
Hi. Thank you, doctor. Good evening. This quarter we’ve seen a significant jump in your employee expenses. Almost 23%. 21%. Quarter on quarter. Year on year. Any non recurring expenses here or. This is the new base.
V. V. Ravi Kumar
The part is non recurring in this sense. Once in a year you will get. Actually we are giving long term service. Hours for the people who stayed as. For a longer period. And of course there is an increment over the last year, last quarter that’s also reflected apart from the additional manpower.
Unidentified Participant
So quarter on quarter we may see some decline in Q2 right from this.
V. V. Ravi Kumar
I don’t say decline but it will not have that kind of an increase. We’re also expanding our team strength. So we keep on recruiting more and more to expand IT facilities. So it will maybe you can consider as a new norm. Maybe.
Unidentified Participant
Got it. Thank you. On the ARV side, we’ve seen growth this quarter. Year on year. Growth in this quarter. But you’re still maintaining your guidance of no growth for an overall full year basis. Any particular reason why still you’re not seeing growth in this segment for the full year? Is it just uncertainty on the global tender?
V. V. Ravi Kumar
We kept some margin. We have seen significant price drops in arb. If there is no price drop we may go a little better. If there is a price drop, our incremental volumes will compensate the price drop. So we are keeping that cushion when we are committing 2500 crores ARV plus R minus 200 crores. That is the reason we kept that to Delta.
Unidentified Participant
Yeah.
operator
Does that answer your question? Hello.
Satyanarayana Chava
It must be dropped off.
operator
Yes, sir. We’ll move on to the next question. It’s from the line of Yashir. Please go ahead.
Unidentified Participant
Greetings Dr. Satya. Congrats and a great performance.
Chirag Shah
You know what?
Bharat Sheth
Like some qualitative inputs in terms of EDMO business. Is it large volumes of chronic drugs? Are they in the rare or orphan space? Secondly also what could be our mix between say big pharma and small biotechs or the CDMO business?
Satyanarayana Chava
We can’t give you therapeutic mix of our CDMO revenue. Yeah. And. But the majority of revenues are coming from medium and big pharma, very less from small and virtual biotechs. You are not audible.
Unidentified Participant
Are we the primary source in these cases or are we like, you know, are these projects where, you know, big pharma customers want to diversify the supply and we are probably a second source, you know, any sort of insights.
Satyanarayana Chava
I think those insights are very difficult to divulge. I’m sorry.
Unidentified Participant
No, no, no worries. Congrats again once to your entire team. Thank you. Thank you.
operator
The next question is on the line of Abhijit, an individual investor. Please go ahead.
Unidentified Participant
Thank you. For the second round of opportunity. I have a question with regards to the debt. So the net debt for EBITDA right now is 1.8. Obviously it’s come down because your EBITDA has gone up. What is the management’s guidance for the debt over the next two years or next three years?
V. V. Ravi Kumar
We are not expecting a significant increase in the debt. So we will manage in the. As we said, we try to manage with 50% of our revenue levels, the annual revenue levels. That means EBITDA debt by ebitda maybe two, two and a half is max.
Unidentified Participant
Okay, so two, two and a half is the maximum net EBITDA to debt levels. But the 5,000 crores that you’re going. To plan to do in the next. I presume next three to four years. Right. We’ll not do it overnight. It will take three to four years. Okay, four to five years. You are going to. What is the breakup like? Are you going to do internal accruals or you are planning to do more JBS with other companies or you want to do mostly everything yourself?
V. V. Ravi Kumar
Mostly, Mostly for the. From the Loris lab side and majority of funding will be through internal approvals.
Unidentified Participant
Okay. And another question is with regards to the business strategy, are you looking at more opportunity because of this tariff tantrum that is happening around in the U.S. i know that Lawrence does not have a large amount of exposure to the US market directly apart from the generics in the other premium, more, I would say more complex drug products. Is there any opportunity that is coming about? Are there any meetings going on with the large companies?
Satyanarayana Chava
No. No.
Unidentified Participant
Okay. Thank you. Thank you. That’s it.
Satyanarayana Chava
Thank you.
operator
Thank you. The next question is from the line of Gagantareja from Ask Investment Managers. Please go ahead.
Gagan Thareja
I hope I’m audible.
Satyanarayana Chava
Yeah, you’re audible.
Gagan Thareja
The first question is on the cdmo. Is it possible to understand within cdmo, you know, revenue breakdown in terms of what is coming from commercial supplies and what is coming from phase one, phase two, phase three and how that will evolve over the next two, three years.
Satyanarayana Chava
We are not dissecting those numbers into commercial phase three, phase two, phase one and customer. That’s. We can’t divulge customer and products. So I’m afraid we can’t give you that breakup. Okay.
Gagan Thareja
So. Okay, the second question is, you know, as the percentage of CDMO in your total sales sizes and since cdmo, you know, is a higher gross margin business for you, is it reasonable to assume that it will have, you know, it will take the aggregate or average margin, overall margin or trajectory of the company upward?
Satyanarayana Chava
Yes. As the contribution and percentage from CDMO grows, we expect both gross margin and EBITDA margins should continue to go up.
Gagan Thareja
All right. And sir, final one is, you know, on the ARVs, you know, Lena Capaveer and Cabotegravir both have issued voluntary licenses even who today now, you know, seems to stand very strongly behind bringing in Lenacapavir, advocating for Lenacapavir as probably the preferred treatment and bringing it in the emerging markets as well via the voluntary license route. So first question is, would Loras have an opportunity in Linacapavir?
Satyanarayana Chava
We are not part of the licensee of Lanka Pivir and Lana Kapavir will be part of the guidelines for prevention Drive on the treatment. That’s one. And the capital we have developed API and we have few partners using our APIs land couple. We are not part of the licensee.
Gagan Thareja
Okay. Okay. Thank you, sir. I’ll get back. Thanks for taking my questions.
Nitin Agarwal
Thank you. Ladies and gentlemen. That was the last question for today’s conference call. I now hand the conference over to the management for their closing comments.
Satyanarayana Chava
Thank you Nitin and Dante for hosting this Q1 investor conference call. And thanks for asking very patient questions all these stakeholders. Thank you.
V. V. Ravi Kumar
Thank you.
Nitin Agarwal
Thank you on behalf of DAM Capital. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.