Marksans Pharma Limited (NSE: MARKSANS) Q3 2026 Earnings Call dated Feb. 06, 2026
Corporate Participants:
Nitin Agarwal — Managing Director
Mark Saldanha — Managing Director and Chief Executive Officer
Jitendra M Sharma — Chief Financial Officer
Deependra Sharma — Chief Financial Officer
Analysts:
Unidentified Participant
Neeraj Isha — Analyst
Ahmed — Analyst
Ishika — Analyst
Sanjay Peek — Analyst
Aditya Pal — Analyst
Riddhansh — Analyst
Hitaindra Pradhan — Analyst
Mithil Nathia — Analyst
Miten Lathia — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to The Marksons Pharma Q3FY26 earnings conference call. 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 Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from Dam Capital Advisors. Thank you. And over to you sir.
Nitin Agarwal — Managing Director
Thank you. Good afternoon everyone and a very warm welcome to Markson Pharma’s Q3F26 earnings call hosted by DAM Capital Advisors Ltd. On the call today we have representing Markson’s Pharma Management, Mr. Mark Saldana, Founder, Chairman and Managing Director and Mr. Jitendra Sharma, Chief Financial Officer. I will hand over the call to the management team to make the opening comments and then we’ll open the floor for questions. Please go ahead sir.
Mark Saldanha — Managing Director and Chief Executive Officer
Thank you Nitin. Welcome everyone and thank you for joining us for our Q3 and 9 months FY26 earning conference call. We sincerely appreciate your interest and continued support for the company. I’m pleased to report that we have delivered a steady and resilient performance marked by healthy revenue growth, sustained margin expansion and continued progress on our strategic priorities. Our Q3FY26. For Q3FY26 operating revenue grew by 10.6% year on year and reached and reached 754 crore which is an all time high for the quarter. The growth was supported by stable execution across geography’s robust order book in US as well as a seasonal uptick during the quarter.
The performance is despite a high single digit price erosion in the RX product segments in the UK we delivered an improved performance on quarter. On quarter basis, the business is stabilizing after experiencing pricing pressures in Q1. This recovery is supported by new product launches and a favorable currency movement. Our product pipeline execution remained strong during the quarter. Our UK subsidiary Relon Chem received MHRA market authorization for multiple products including Mefenamic acid tablets and citrazene oral solutions. In the US Marks and Pharma Inc. Received ESFD approval for lopramide hydrochloride and enhanced presence in high velocity OTC categories.
These approvals are alignment with our strategy of focus and repeat demand therapies particularly in pain, allergy, GI and cough and cold segments. Strategically, we are taking measured but decisive steps to expand our global footprint. During the quarter, we incorporated Mark Suns Europe Ltd. In Ireland, Markson’s Canada Inc. And are exploring further expansions. These will strengthen our platform for the future.
Growth in Regulated Market despite external volatility and pricing pressures in certain markets, our focus remains deeply rooted in execution. Our priorities are clear, consistent market share gains, strong pipeline and filing and launches, disciplined cost management and prudent capital allocation. We believe that this focused approach positions Markson’s Pharma well to deliver substantial growth, healthy margins and long term shareholder value. With this, I’d like to hand it over to Jitendra for an update on the financials.
Jitendra M Sharma — Chief Financial Officer
Thank you sir. In Q3 of FY26 our operating revenue stood at rupees 754.4 crores, an increase of 10.6% on a YoY basis compared to rupees 681.8 crore. In the same quarter last year, revenue from the US and North American market stood at rupees 412.4 crore, an increase of 16.9% on a YoY basis. This was driven by volumes and supported by seasonal demand. UK and EU formulation recorded revenue of Rupees 258.2 crores flat on Yui basis as pricing pressure continued to persist. Australia and New Zealand market revenue stood at rupees 61.4 crores delivering 30.1% growth on a y wide basis.
The rest of the world revenue stood at rupees 22.4 crores. We continue to remain cautious for this market given the macroeconomic challenges. Gross profit for the quarter grew by 14.3% YUI to rupees 438.2 crores with a gross margin of 58.1% compared to 56.2% last year. The gross margin expansion of 184bps on a YUI basis is attributed to softening of raw material prices, a favorable product mix and also from benefits from foreign exchange movements. The recorded EBITDA of rupees 160.7 crores in Q3 of FY26, up 23.2% on yoy basis. The EBITDA margin for the quarter stood at 21.3%, an expansion of 217 basis points over Q3 of FY25 and 125 basis points over Q2 of FY26.
EBITDA margin expansion was driven by operating leverage and improved cost efficiencies. Profit after Tax stood at rupees 113.7 crores, an increase of 8.2% on a YoY basis. EPS for the quarter was rupees 2.5, moving to nine months of FY26 performance. Our operating revenue stood at rupees 2094.8 crore compared to rupees 1914.4 crore in the same period last year, an increase of 9.54% on a YoY basis. The US and North American market recorded revenue of rupees 1127.3 crores, up by 24.2% on a YUI basis and contributed 53.8% to our total operating revenue. UK and EU market revenue stood at rupees 707.3 crores contributing 33.8% to the revenue.
Australia and New Zealand market recorded revenue of rupees 179.7 crores. The rest of the world market recorded revenue of rupees 80.6 crores. Contribution from these two markets stood at 8.6 and 3.8% respectively. The gross profit stood at 1208.2 crores up 10.3% on a YY basis with a gross margin of 57.7% up by 43 basis points compared to last year. EBITDA for the period was at rupees 405.4 crores with the EBITDA margin at 19.4% compared to 21.2% in nine months of FY25, primarily reflecting the impact of weaker Q1, higher employee expenses and costs associated with scale up and integration.
Although profitability improved meaningfully in Q2 and Q3, profit after tax was at rupees 271 crore and EPS for 9th month of FY26 was rupees 6 in 9 months of FY26. Cash generated from operation amounted to rupees 263.2 crores with the capex during the period being rupees 97 crores. Our working capital remained steady at one hundred and fifty one days. We invested rupees 62 crore in R&D in 9 months of FY26 which amounts to 3% of our consolidated revenue. We continue to remain debt free and the cash balance stood at rupees 824.2 crores as of 31st December 2025. With this I would like to open the floor for question and answers. Thank you very much.
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 N2. 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 from the line of Nirali Shah from Ashika Stock Services. Please go ahead.
Neeraj Isha
Yeah, am I audible?
Jitendra M Sharma
Yes, you are?
operator
Yes, ma’.
Neeraj Isha
Am. Am I audible?
Jitendra M Sharma
Hello?
Neeraj Isha
Hello? Yeah, Am I audible?
Jitendra M Sharma
Yeah. Yeah you are audible for a minute. You just cut off from there but you’re audible.
Neeraj Isha
Yeah. Okay. Thank you for the opportunity. I had a couple of questions. So firstly on the US performance we have benefited on the US due to seasonal demand. Excluding the seasonality, are you also seeing improvement in volumes or customer traction that is supporting the growth beyond?
Jitendra M Sharma
Yeah, we are. We are seeing that. And obviously some seasonality does help during this. Normally the third quarter is always the strongest quarter. So basically it does help from all parameters. But overall the product, all other products also which are not seasonal also shown a decent growth.
Neeraj Isha
And on the us, on the UK business we are seeing some kind of sequential stability also after a lot of pricing pressure. So is this stability sustainable?
Jitendra M Sharma
Yes, it is sustainable unless something else happens geopolitically. But otherwise right now it is sustainable.
Neeraj Isha
Any color on the entire UK business.
Jitendra M Sharma
Pardon?
Neeraj Isha
Any color on the entire UK business.
Jitendra M Sharma
We are still very bullish. Obviously we have done a lot of filings in UK and we are receiving approvals every quarter. So that is basically, you know, changing product portfolio in that market. And it does help when there’s a price erosion to stabilize the pricing pressure that one experiences. So we do see ourselves only growing stronger and we do see a better quarter than the previous one.
Neeraj Isha
Lastly, on the employee costs, we have stepped up over the last few quarters and that is particularly by the driven by the GOA facility and the broader wage changes also. So what should we consider as the new normal for the employee cost?
Jitendra M Sharma
I think what you’re seeing is basically the one minute.
Deependra Sharma
So Nirali, there is an impact of 2.8 crore, you know, due to the new labor code accounting on gratuity and LIU pay. So barring that figure, I think everything else like you know, will. Will remain like, you know, in terms of the overall employee cost.
Neeraj Isha
Got it. That is helpful. Thank you.
operator
Thank you. The next question is from the line of Ahmed from Unified Capital. Please go ahead.
Ahmed
Yeah, thanks for the opportunity. Firstly, on the US business, can you give some comments? How does the order book looks like and what kind of growth you sort see coming in the next few quarters? We have done fairly well I think in the first nine months and over last few years. So how does the near term look like in terms of order bookings and the momentum in the revenue growth?
Jitendra M Sharma
Yeah, order books still stands at a very strong 220 million plus. We are still working towards our objective of going to the next milestone. So we are optimistic on the market dynamics and the US market by itself.
Ahmed
And if I see last year I think we’re commenting around 180, 190 a quarter guiding was similar to 20 sort of a thing. So does that sort of reflect that we should be able to grow at 20% odd in US in the upcoming financial year?
Jitendra M Sharma
Yeah, very close to that. Yes.
Ahmed
And coming to the TIVA facility, I mean we are supposed to launch a lot of new products and different formulations. How is that shaping up in our order book and how does the utilization look like in the current quarter which went by and in terms of outlook, the incremental revenue, does it sort of get captured from Teva facility and hence we have some operating leverage coming in?
Jitendra M Sharma
Yeah, operating leverage is very visible because of the TEBA facility. We are trending around 560 to 600 odd crores from the TEBA facility. Our objective was to hit about 800 odd crores. So we are getting there. Obviously the product mix has to grow and as and when we get new businesses it is looking healthier but it is adding tremendous, it is a tremendous value on, you know, operating leverage per se. So that’s very visible on our standalone numbers also.
Ahmed
And in terms of the new markets, Europe and Canada, I think we have incorporated subsidiaries, we’ve had some comments last quarter. Would you like to provide some sense what sort of progress we have made and in terms of the sort of contribution coming from those businesses, how far we are as of now?
Jitendra M Sharma
So obviously we are quite far where organic is concerned because we just started operations in Germany, we had first two employees join us literally on the first of Feb island, we formed a company. Canada, we formed a company. Market authorizations I think are being put in place so that we can start marketing. We need wholesale licenses, we need all these other approvals to basically make us so that we can sell. So it will take a couple of months. We are also exploring, as we’ve always repeated in the last couple of con calls, we are exploring MAs in these markets in various markets out there in Europe and we are in advanced dialogue to, you know, to try to push that across. But yeah, I mean we are optimistic that, that we will see tremendous progress in the next three to five years in Europe. Which will contribute decently for the company per se. It helps.
Ahmed
And lastly in terms of post the sort of a deal which happened, obviously it doesn’t affect us in terms of tariffs but in terms of the meant in the conversation, has there been any change in your conversation with your key customers, be it Walmart and so on. And secondly, would you like to give some sort of a sense as a blended as a whole this year we have done very well in US and some of the other markets in UK has been sort of a flattish. So as a blended as a whole, what sort of growth rate is practical to achieve in next financial year?
Jitendra M Sharma
Yeah, so basically tariff. It’s a very valid question and you are right, although we were not impacted by tariffs. But there has been a. I think it has basically put an ease to the uncertainty that prevailed, you know, in customers or consumers or clients minds. Right. So that is a big plus point that one could take away from this. The trade deal has cleared the uncertainties and the questions that surrounded the trade war that one saw in the last six months out in the us. So it is beneficial for the industry, beneficial for doing business out there.
And we have seen that traction happening. The outlooks from the client perspective also they are thrilled that all these uncertainties are put to rest. So definitely that’s a plus for a market like us from a growth standpoint of, you see, I mean we are still, you know, we are still working towards our objectives. Our next milestone is 4000 crores. So we are working towards that. And then once we cross that then we can talk about the next 5,000 odd crores. So, so we are, we still do believe that, you know, we are, we are on track where that is concerned.
Ahmed
And that will be ideally two, two and half years. Will that be a fair timeline?
Jitendra M Sharma
Yeah, I mean, you know, anywhere between two to three years is what we should hit our first milestone.
Ahmed
Thank you so much.
operator
Thank you. The next question is from the line of Ishika from Perpetuity Ventures. Please go ahead.
Ishika
Yeah, hi. The cash on the books is around 824cr. Is this just in India or is this placed in any subsidiaries in US or UK as well?
Mark Saldanha
So Ishika, this is spread across our subsidiaries so broadly. I think almost 50% is in India books and another 40% is in our UK books and rest is spread across US and Australia.
Ishika
Okay, thank you so much.
Mark Saldanha
Thank you.
operator
Thank you. The next question is from the line of Dipesh Sanchetti from Manya Finance. Please go ahead.
Sanjay Peek
Hi, am I audible?
Mark Saldanha
Yes, you Are okay.
Sanjay Peek
Congratulations on set of numbers. Wanted to understand from you what will be the effect of Trump RX program. Whether it will affect any of our products in the prescription segment.
Mark Saldanha
No, it’s not going to affect any of our products. We don’t fall in that category. And again our RX portfolio is relatively very, very small compared to overall revenue. So it has no significant impact on us going ahead.
Sanjay Peek
When we are trying to double our revenues from US Will that will be affected?
Sanjay Peek
No, no, no it won’t.
Sanjay Peek
Okay. Now you gave a strategic roadmap about the 3000 crores. I’m sure you’ll be able to achieve that in this year going ahead. You mentioned the last con call that 5000 crores by FY30 will be is a possible figure. Do you still maintain that?
Mark Saldanha
No, I have mentioned in the next two to three years is 4,000 odd crores, not 5,000 crores. But yeah, we then after that obviously we will go to the next milestone which will be 5000 odd crores. So we are working towards those two milestones that you know that we have set ourselves out to 4,000 crores by FY28 next two to three years.
Sanjay Peek
Okay, thank you.
Mark Saldanha
By 28 or whatever. 29.
Ishika
Right. And what is the order book? Right now
Mark Saldanha
it’s a 220 plus.
Sanjay Peek
220 plus. Okay, great. Thank you.
Mark Saldanha
For the U.S. for the U.S. all right.
Mark Saldanha
I’m talking about for the overall as an order book.
Sanjay Peek
Well, there are different markets. It becomes difficult to know which market has what order book. So normally we always talk of the order book for the US market because that’s where the growth outline is.
Sanjay Peek
Right. Because last time you mentioned that it will be around by FY28. We are expecting 300 million order book.
Mark Saldanha
So that’s for the US.
Sanjay Peek
And the new subsidiaries which we have created in Ireland and Canada. How big is the market which you feel will it be. Will it be bigger than the Australian market? I mean what we are doing in the next one or two years.
Mark Saldanha
So Europe by itself is a huge market. It is bigger than the UK market also because it’s a cluster of many countries. It’s not one country. So it’s a cluster of many countries. Canada is relatively a smaller market, but definitely it will add value to our business. But I mean Europe by itself, hopefully maybe in the next five, five plus odd years it could be a very prominent contributor to the company.
Sanjay Peek
So with this EU deal signed, will it affect or that doesn’t have any ramifications on our sales?
Mark Saldanha
No, it does Not.
Sanjay Peek
Okay. And going ahead what capex we are looking to do.
Mark Saldanha
So it’s basically so we normally spend our regular capex of 50, 60 odd crores just on optimizations and everything of that stuff. But if we are going to look at, if we are going to look at a new block or a new manufacturing plant depending on how well our order book shapes up and the demand creeps up and for us to go to another level altog then obviously the capex could be anywhere between 150 to 200 odd crores. But as of today we have not yet reached that benchmark to trigger that off.
Sanjay Peek
Okay, and the UAE acquisition which we did, has it fruitified or we have not invested anything else on it?
Mark Saldanha
No, we have not invested much but we have done a lot of filings out there. So those return, those approvals and returns have to yet come. But it’s a standalone profit making business and it’s still the return on investment has already, we’ve already got the return on investment on what we’ve initially invested in that company.
Sanjay Peek
So are we looking at any other bigger acquisitions especially in Europe or something?
Mark Saldanha
Yeah, we are, we are looking at Europe actively.
Sanjay Peek
All the very best Ma. Thank you so much.
Mark Saldanha
Thank you, thank you,
operator
thank you. The next question is from the line of Aditya Pal from MSA Capital. Please go ahead.
Aditya Pal
Hi. Am I audible?
Mark Saldanha
Yes you are.
Aditya Pal
Thank you so much for the opportunity. Good set of numbers. Just wanted to double click on the US performance. So even though we’ve grown at good double digit revenue but there has been a deceleration of growth. So is this a, is this growth a new normal or is this just a pause before we come back to our older growth rates? And more importantly is this because of a base effect?
Mark Saldanha
No, I think, yeah, I think you know, 2025 there was a lot of geopolitical uncertainties that evolved around the US right. So technically you are looking at, you know, the tariff uncertainties, you look at different other angles. So was a challenging for six months, let’s put it this way, until dust settles. So we are quite optimistic that it will come back to its normal growth rate and we are seeing that difference happening once a trade deal has been signed and everything of that stuff. So we are quite optimistic where that is concerned.
Aditya Pal
Perfect. And some question to this would be that you said that 220 odd million dollars of order book and if I, if I look at 400 crores of Q3 revenue that that is a 1600 odd crores of analyzed revenue on it which is roughly 177, 175, $177 million. So how should, how should we think of the $220 million in terms of visible on our P and L?
Mark Saldanha
Yeah, you’ll see it in the next financial year because what when we talk of the order books sometimes. So once you. It takes us about anywhere between five to six months to commercialize those awards and that’s where there is a bit of a lag that goes on. But I think by the first or second quarter you should see the trending happening to that.
Aditya Pal
Understood. And on your Europe and Canada operations. So when can we expect revenues to be visible from both these geographies? Obviously more importantly from the European geography because that seems like a much larger pie and it looks like an inflection point for company. For the company.
Mark Saldanha
Yeah. So Canada, you may see it trickling maybe in the next financial year. It’s trickling in because we’ve done a lot of filings out there. Europe is a bit more complex because it’s a cluster of many countries and starting from set up to everything has to be put in place. Even getting a wholesale license has to be put in place, especially when you’re doing certain greenfield startups. But that’s said and done. I think Europe will make up for some lost time with Some M&As and some platforms that we plan to acquire. So that will help us. But once it crystallizes, I think you’ll have a better shape and color on that.
Aditya Pal
Is there any timeline you would like to share?
Mark Saldanha
I think 2026 will be turning point where that is concerned. 2026, we may see a couple of M and A is happening out there.
Aditya Pal
Understood. Just a couple of bookkeeping questions. So when I look at your employee benefit, benefit expenses. So one thing, does it take into consideration the European and Canadian team that we would have hired because of which this number is looking elevated?
Deependra Sharma
No, no. See the Canadian, Canada, we haven’t hired anyone as of now and so we will be doing hiring in this year and for Germany also, we right now have just two employees and we may have more in coming quarters. So that way it will increase to the extent of new employees in newer geographies. But so far as our current operations are concerned in EU and in India specifically, we don’t see any significant increase in our hirings.
Aditya Pal
The reason that I’m asking this is because if I look at your EBITDA margin, it has come to a good level of 21% but majority of the pull has come from an increase in gross margins. So I’m just trying to understand that when will our employee benefit expenses streamline and we will come back to our old 13, 13.5% of revenue.
Mark Saldanha
I think we should be able to see that number pretty soon, maybe by the second quarter of next financial year. And you know, we don’t see any incremental hiring but of course, you know, the annual increments and like, you know, the wage, the minimum wage again like, you know, are increasing across the geographies, you know, everywhere in uk, in us even in India also. So there is a pressure on employee cost for sure, but at least in terms of the headcount, we don’t intend to increase it further and we will basically see some better numbers out there maybe from the second quarter of next year.
Aditya Pal
Perfect, perfect. Wishing you and the team all the very best. Again, very good set of numbers.
Mark Saldanha
Thank you.
operator
Thank you. A reminder to all participants, anyone who wish to ask a question may press star N1 on their touchstone telephone. The next question is from the line of Ridhansh from Unifi amc. Please go ahead.
Riddhansh
Yeah, hi team, two questions, you know, in the third quarter, especially for uk, could you call out how much of the proportion was on account of, you know, attributed to new launches, how much of the stabilization took place because of the currency tailwind and how much came because of the most, the base portfolio recovery? Actually.
Mark Saldanha
Yeah. So see, new launches have started contributing definitely. And so as the currency also have helped. But again, I don’t see that, you know, having a significant impact during the quarter. It should, you know, keep giving us better numbers in coming quarters, specifically new launches, again taking market share. It will happen gradually. So we will see, you know, incremental revenue coming from new launches on a quarter, on quarter basis. But again, nothing significant per se in one quarter. And so far as the foreign exchange is concerned, you know, we, we definitely have like, you know, some better, you know, revenue or impact on margins due to foreign exchange, rupee depreciation. It has helped. But again I think that so far as we take average like you know, in the quarter and we haven’t seen any, you know, very major, significant, like an improvement on that front as well.
Mark Saldanha
But yes. Yeah,
Riddhansh
sorry, please continue.
Mark Saldanha
No, so as we get into the next quarter, I think, you know, definitely that in the rupee depreciation will help. But let us see, the levels should sustain. So if these levels sustain, then definitely we will have better numbers in coming quarters.
Riddhansh
Understood. So sir, thanks for that. So is it a fair assessment that there is Recovery in the base portfolio and the price erosion that we had witnessed is, is bottoming out in the uk. Is that a fair conclusion?
Mark Saldanha
Yes, definitely.
Riddhansh
Okay, done sir. Thanks so much and all the best.
Mark Saldanha
Thank you.
operator
Thank you. The next question is from the line of Hitendra Pradhan from Maximilian Capital. Please go ahead.
Hitaindra Pradhan
Yeah, so my question is like you guys called out this prescription products, you know, be price erosion that is happening in both US and uk but your gross margin has stayed intact. So what has, you know, contributed to your gross margins?
Mark Saldanha
The gross, I mean it does, it does have an impact. Obviously our portfolio is very small in the US so the impact is slightly lesser. But in UK it is much larger. The RX portfolio is much larger. But price erosion does have an impact both on top line as well as the bottom line. But it just depends on which geography we’re talking about.
Hitaindra Pradhan
And so what is our like in the UK market? What is your strategy to navigate that? Are we launching.
Mark Saldanha
Yeah. New product? Yeah, that’s what we explained in the first half, that new product launches are absorbing some of them. It’s too early for it to contribute big time, but it is absorbing some, some factors out there. And as new products do get approved, it will just get healthier, you know, quarter on quarter basis.
Hitaindra Pradhan
Okay, so enter the milestone or the target that you described earlier, 4,000 cr. So, so that, that is only for our current portfolio or that is including our like eu, Canada and all those things as well?
Mark Saldanha
No, it’s on their current portfolio right now.
Hitaindra Pradhan
Oh, okay. Thanks.
operator
Thank you. The next question is from the line of Miten Latia from Fractal Capital. Please go ahead.
Miten Lathia
Yeah, thanks for the chance. The employee cost question has been asked a couple of times already, but I just wanted to understand one thing. In FY23, we were at 13% of employee cost to revenue. And since then our sales have grown at a healthy clip while employee costs have moved to almost 15% of revenue. What should we keep in mind that would have led to that sort of an increase?
Mark Saldanha
See, so far as the new facility at Goa is concerned, you know, we have done, you know, maximum hiring and the capacity utilization right now we are still at around 50%. And that’s where like you know, when the capacity utilization goes up, we don’t see, we, you know, the, as a percentage, the employee cost will start coming down. So that’s what I have said earlier, that by second quarter of next year we will definitely see reduction, you know, in terms of the employee cost percentage to save.
Miten Lathia
Got it. Thank you.
Mark Saldanha
Thank You.
operator
Thank you. The next question is from the line of Mihir from Freedent amc. Please go ahead.
Unidentified Participant
Yeah. Hi. So I have one question. Your RME spends seems to have been very elevated this year. So this year in the first nine months you spend more than what you spend in FY25. Almost 3% of your total spends are towards R and D. However, we’ve not seen a material escalation in growth. So when do we see that translating to growth and whether you would expect this 3% R&D percentage to sales as the new normal?
Mark Saldanha
Yeah, the R and D spend has gone. Because we are doing quite aggressive filings in uk, we are working on a portfolio for Europe also. So as when we talk of new geographies, we have to spend on development based on country specifics. But UK we are literally filing four to five products, you know, every month. So it’s quite a. We’ve taken an aggressive approach looking at, looking at the dynamics that we are seeing prevailing out there in uk. But this is again based on our, based on our objective of what we expect the UK market to perform in the coming years.
Unidentified Participant
Should be fair to say that the 3% R&D2 sales will remain there for at least next year.
Mark Saldanha
Yeah, yeah. I mean it will. It will probably be between 2.5 to 3%, you can say for the next year.
Unidentified Participant
And second is you highlighted a couple of times that you might be looking at closing out two acquisitions in the European region. Would you also like to quantify the amount? Because there’s a difference between acquiring like an equation of 100 crores versus 800 crores and you have a substantial amount of cash flow combined equation, what can be the net output which you are expecting that can happen in calendar year 26 or FY27?
Mark Saldanha
Again, it just depends on the target company. So I mean, if you’re looking at a company which has a pan Europe, because you know Europe is not a country, it’s a cluster of various countries. So having distribution all over Europe is always a challenge. Those countries companies are much more premium and much more bigger, larger in size that have operations out there. But if you look at cluster of countries, then basically again, it just depends on what deals we close. It’s difficult to give a number right now, but because we are in talks and once we come closer we’ll have a better understanding as to what, what amount of money would be spent in M and A s out there in Europe. Maybe in the next three to four months we’ll have a better visibility on that.
Unidentified Participant
Got it. And just one bookkeeping question. There seems to be a reclassification of around 8 crores from other income to other expenditure in the base quarter. So can you highlight what exactly has happened there? I think.
Deependra Sharma
Yeah, yeah, you’re right. So basically it is just a reclassification of, you know, the mark to market provision on foreign exchange which we do so earlier. Like, you know, it used to go into other income or other expenses. So we have done a bit of reclassification and now we are netting it off in other income itself. So due to that, you know, that impact you are seeing and it is, yeah, it is appearing in the note also in the results. We have, you know, specifically shown that number separately in the notes.
Unidentified Participant
Got it. Okay. Thank you. And all the best.
Mark Saldanha
Yeah, thanks. Thanks.
operator
Thank you. The next question is from the line of aditya Pal from MSA Capital Ltd. Please go ahead.
Aditya Pal
Hi, thank you so much for taking up the follow up. Just wanted to double click on the previous participants question on UK geography. A couple of quarters back or even last quarter you had mentioned that the new products that we are introducing in UK market have higher gross margins than our current base company margin. So just wanted to understand this 58% of gross margin that we have today has come in because of raw material prices softening. But now that we are introducing launching new higher margin products, how should we think about gross margins? Say maybe 18 to 24 months thought process and the resulting EBITDA.
Mark Saldanha
Yeah, so when everything is going normal, it would have been a much more easier question to answer. However, these gross, these better products, obviously we’ve just launched a couple of them right now. So it has to take shape. It’s some time to take shape. But you are right, the profitability and the margins are much better on the products that we are launching. It is not so much from a value top line point of view, it’s more from a bottom line point of view. However, you know, that gets negated if there’s a price erosion and volatility at the other portfolio, other part of the portfolio which is obviously much more larger part of it.
Right. So it just depends on how the market dynamics plays out for maybe a quarter or two that yes, the price erosion has stopped and now we see some correction, obviously at least some stability on the price erosion happening. So then, so that we basically, then you can, you can define what the new products actually contributing. But historically, historically if there is no price erosion or no predictability of price erosion, then obviously the profitability would have improved substantially.
Aditya Pal
Understood. So my Thought My thinking is there are two levers that you are playing with at this moment. One is our new product launches which are, which have better margins and the other is the operating leverage which will come in once revenue growth normalizes and the US market again a higher growth rate. From here.
Mark Saldanha
Yes.
Aditya Pal
Perfect. Perfect. Thank you so much for this. Thank you so much.
Mark Saldanha
Thank you.
operator
Thank you. The next question is from the line of Nitin Agarwal from Dam Capital. Please go ahead.
Nitin Agarwal
Thanks for taking a question mark. Just on the Canada and the EU geographies are you looking to enter now here the product portfolio is going to be largely OTC driven or this is going to be RX driven business like the uk.
Mark Saldanha
So in Canada it will be more tilted like similar strategy of the US part of it. So we would have probably 80, 20, 80 OTC, 20 RX. But in Europe it will be prima facie 90 RX and maybe 1010 OTC.
Nitin Agarwal
And why would you go in for a primarily RX strategy for Europe given any drivers for that?
Mark Saldanha
Yeah, Nitin, it’s just country specific. We have to adopt, we have to adapt to like in Rome we do as the Romans do. Right. So we have to adapt based on different geographies in different countries. And if you look at certain countries, they are very tender prone, very tender driven. They do not have those retail outlets like how you would have in UK or US they have, they don’t have a, they don’t have chains that, you know, you could play that private label game. So they are very insurance driven, more on RX and very, very fragmented on the OTC front of it. So basically certain markets do promote and even in Europe certain markets are only branded, they’re not even generic. So I guess we have to define it based on country specific. But prima facie all the big markets that you see, they are more RX driven in terms of value drivers than otc.
Nitin Agarwal
Thanks. And secondly on the R and D, if you can give us some more color on any specific areas where you’re spending, investing more in rd. What are you focusing on R and D going forward?
Mark Saldanha
Well actually our increase in spending has happened mainly in the filings or the focus filings of UK where we have up our filings per month and the number of products we are developing, basically products that we are developing in the pipelines that we are developing for the UK market which we plan to leverage a decent amount for the Europe. Also take into consideration that we are looking at Europe from a short term to medium point of view. So we are looking at really focusing on developing a lot of niche and complex molecules for the geography by itself.
Nitin Agarwal
And how are you thinking about portfolio expansion for the US.
Mark Saldanha
Portfolio? That goes on, you know, that goes on continuously. We find about 7 to 8 NDAs a year. So that continues going on. We do different dosage forms. We do different dosage forms. We are looking at different dosage forms for the US market also trying to differentiate ourselves. But I think US is pretty much on track where our strategy is concerned. Like I said, 2025 was a bit of a weird year because right from April onwards this geopolitical uncertainties of tariffs came into play. But otherwise everything else in US is looking okay.
Nitin Agarwal
And if you can take one last one on the, you know, on the US this whole, there has been this thing going around that President Trump has been looking to push more substitution of OTC products. I mean, does that in any way influence change of strategy for the US market? Does that change your product development strategy in any form?
Mark Saldanha
It does not actually. He comes up with statements every day. It’s difficult to keep a track of what he says, but it does not. So honestly, I don’t see any impact on that.
operator
Thank you. The next question is from the line of meat from Aquiris pms. Please go ahead.
Mithil Nathia
Yeah, thanks for taking my question, sir. I just wanted to understand whether there is any seasonality factor present in our UK business in Q4 and considering that prices, prices are now stabilizing, can we Expect a healthy GOQ growth in UK business in Q4?
Mark Saldanha
Well, yeah, I mean we are expecting a stabilized performance in Q4. Let’s put it this way, seasonality obviously does help. We do have a lot of cough and cold items out in UK too. So seasonality does help in cough and cold and in pain segments. But that said and done, we are seeing a bit of leveling out in the price erosion part of it. So I don’t know, maybe, maybe geopolitically with the trade deal happening in so many countries, I think a bit of stability and markets are opening up so people are not focusing on, you know, a certain market or different geographies. So I think, I think if, if that happens, you know, predictability will be much better.
Unidentified Participant
Okay. Okay, got it. Yeah, that’s all from myself, thanks.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Mark Saldanha
I’d like to take this opportunity to thank everyone. I know it’s late in the early part of the evening or late for those who are traveling, please be safe and thank you once again. Thank you.
operator
Thank you. On behalf of Dam Capital Advisors, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.