NATCO Pharma Limited (NSE: NATCOPHARM) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Rajeev Nannapaneni — Vice Chairman and Chief Executive Officer
Analysts:
Hrishikesh Patole — Analyst
Saumil Shah — Analyst
Arun Malhotra — Analyst
Unidentified Participant
Viraj Mahadevia — Analyst
Prashant Nair — Analyst
Hrishit Jhaveri — Analyst
Analyst
Presentation:
Operator
Foreign Ladies and gentlemen, good day and welcome to The NACTO Pharma Q3 and 9 months FY25 earnings conference call hosted by Batriwala and Karani securities India Private Limited. As a reminder, all participant line will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rishikesh Patole from Batliwala and Garani securities India Private Limited. Thank you. And over to you sir.
Hrishikesh Patole — Analyst
Thank you. Good morning everyone. On behalf of BNK Securities I welcome you all to the Q3FY25 earnings conference call of NATCO Pharma. Hope everyone is in good health and doing well. On behalf of NATCO today we have with us Mr. Raju Nanapanini, Director and CEO. Mr. Rajesh Tabiam, Executive Vice President, Crop Health Sciences. I now hand over the call to Rajesh for the management’s opening remarks post which we’ll open the session for Q and A. Over to you sir.
Rajeev Nannapaneni — Vice Chairman and Chief Executive Officer
Yeah. Thank you Rishikesh. Good morning and welcome everyone to NatCours conference call discussing our earnings results for the third quarter of FY25 which ended December 31, 2024. During the call we may be making certain forward looking statements or statements about future events. And anything said on this call which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I’d like to state that the material of the call except for the participant questions is a property of NATCO and cannot be recorded or rebroadcast without NATCO’s express written permission. So we’ll begin with the results highlight and then interact with QA session. I hope all of you have received the press release and financial which was sent yesterday. These are also available on our website. The NATCO recorded consolidated total revenue of 651.1 crore for the third quarter of FY25. That ended 31st December 2024as against 7.95.6 crores for the same period last year. Net profit for the period on a consolidated basis was 1 32.4 crores as against 21 2.7 crores same period last year. During the quarter the contribution from the export formulation business was lower. However, the company expects healthy growth of business in the ensuing quarters. Thank you all. The results are all communicated now. We’ll take the Q and A.
Questions and Answers:
Rajeev Nannapaneni
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 touch tone telephone. If you wish to remove yourself from the question queue you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sawmill Shah from Paris Investments. Please go ahead.
Saumil Shah
Hi sir, good morning. So we have this other income of 76 crores in this quarter. So what is that for? And if this was not there we would have ended up doing a loss in this quarter.
Rajeev Nannapaneni
No other income is primarily coming from interest income from the deposits that we have. And. And then we had a one time gain from the sale of land which was announced earlier. So we had a 90 crore one time gain
Saumil Shah
From sale of land.
Rajeev Nannapaneni
So that was. Sorry, from sale of land. 90 crore. You said we had a pre tax gain. Yes, so. So the other income primarily consists of stuff is part of the business. 90 crore came from the sale of land from 90 crore game pre tax gain we have from sale of land.
Saumil Shah
Okay, okay. And why, I mean the performance for this quarter was so weak this time
Rajeev Nannapaneni
We had practically no relevant. So I think completely there’s no rev element this quarter. I think that’s one of the biggest reasons why there’s a weakness in the quarter. And we also had a lot of R and D expenses which are continuing from the previous quarter. So I think that’s the reason why there’s a substantial R and D expense that is there in the books. And a lot of these projects that you start, you can’t stop and based on your cash flow there’ll be a mismatch between your cash flow and the actual expenses. I think that’s the reason why it’s a little weak. It’s a soft quarter. I mean there’s no two ways about it. But again we’ll get a new allocation next year. I think as you’re aware we’ll get almost 1/3 allocation of the total market as per our settlement and that will start kicking in the next quarter. I think we are confident that we’ll do very well in the coming quarters. But this is an exceptional quarter.
Saumil Shah
Correct. And so for this current quarter, can we expect, I mean it would be better than the fourth quarter of the previous year for this fourth quarter March?
Rajeev Nannapaneni
It all depends on. Yeah, as it said. No, We’ve been allocated 1/ nearly 1/3 quantity. So it’s all how it’s distributed. But yes, I think I’m confident we should do that
Saumil Shah
Better than the fourth quarter of previous year.
Rajeev Nannapaneni
I don’t want to say that, my friend. Okay, let the numbers come. We’ll see. I think it all depends on how much you stock and sell, but I can tell you the next few quarters will be good.
Saumil Shah
Okay. Okay. Thank you.
Operator
Thank you. The next question is from the line of Arun Malhotra from Cap Group Capital. Please go ahead.
Arun Malhotra
Yeah, thanks for taking the question. A couple of things. One is rev limit. Can you throw some light on volume market share? Currently we have.
Rajeev Nannapaneni
Right now we don’t have any quantity, my friend. That’s why there’s no, no sale in the last quarter. So we’ll get one third for next year. I think that’s as per the settlement.
Arun Malhotra
And that will start from the next quarter itself.
Rajeev Nannapaneni
Yeah, this. This quarter. This quarter.
Arun Malhotra
This quarter. Yeah. Sorry. And second, can it also throw some light on the settlement, especially on the GLP1 opportunity. I know we are tied up with Mylan and we have settled with noaa, but what is the total opportunity size for us and where are we? Is there any potential launch possible in 2026 in India?
Rajeev Nannapaneni
I think the settlement date is confidential. It’s not. It cannot be disclosed. It will happen. I mean, we can’t talk about the launch. But it is not. It’s not going to happen now. That’s for sure. I think when it goes closer to the launch, we speak about it. The opportunity, I mean, we have settled one product, we didn’t settle the other product, Olympic, we’ve settled. I think the weight loss one. I don’t think. I think the diabetes one. We have set. The weight loss, we have not settled. So one second. The opportunity, I mean, I think, you know, that opportunity is a pretty good opportunity. Again, I don’t want to start putting numbers and all. I think it’s a pretty good opportunity for the company. I will limit myself.
Arun Malhotra
Sure. What I failed to understand was can there be a potential launch between us? India can be to be on two different dates because patent expires in 3132.
Rajeev Nannapaneni
As you’re aware, my friend, I think subject to regulatory clearances and other issues. I think March 26 is the India launch. So I think India launch will happen next year, subject to regulatory approval and any other issues to be resolved. So US Launch, I mean, is a date which is. It’s a confidential date. I can’t answer that question directly. But yeah, as I said, I think in the near term we look forward for the India launch.
Arun Malhotra
Sure. And just to confirm, we will have the first six months exclusivity in this.
Rajeev Nannapaneni
It will not be determined right now. We have a first to file. It will be determined at a later time, not at this time.
Arun Malhotra
Okay. And also one more product you have highlighted in this quarter is Rich D plan which is a $3 billion and growing at a much higher rate. Could you also throw some light on where we are in that and when do we have first a file on that?
Rajeev Nannapaneni
And I think we are shared ftf. I think there are two filers on day one. So, so I think to this we are, you know we are working with Sun Pharma on this one. So it’s a shared profits on this one. So this will be, I mean again litigation is just early stage at this time.
Arun Malhotra
Sure. And also the cash lying on the books, potential use of it. We have been mentioning about the acquisitions in the past but any headwind there, any leads or any comments you would like to make?
Rajeev Nannapaneni
We’re working on it. As of now we have as of December 31st we have 3264 crores of cash and shares liquid investments and we have about 241 crores of debt. So net cash would be about 3,000 odd gas. That’s where we are.
Arun Malhotra
And any, any, any leads on regarding use of it?
Rajeev Nannapaneni
We’re looking at acquisition as of now it’s just lying as cash.
Arun Malhotra
All right, thank you. Next call up. We’ll give an opportunity.
Operator
Thank you. The next question is from the line of Chetan Doshi from Tulsi Capital. Please go ahead.
Unidentified Participant
Yeah, good morning Rajiv. One question is that we are cash surplus. How come there is this finance cost coming every quarter. And last time the guidance given for the current quarter was somewhat similar to the performance what we’ll be doing in the 23rd of December. But this is where we, you know, where we.
Rajeev Nannapaneni
I’ll answer both your question. Your first question is the guidance and second question was the other one.
Unidentified Participant
Other one is finance cost when we are cash surplus.
Rajeev Nannapaneni
Yeah, yeah, I’ll answer both the question one, one at a time. First is we thought that there’ll be some quantity December. I most of the quantity was sold off in September. And, and I just said for the chargeback we didn’t have any money this quarter. So essentially we had no sale. We so but you know we did better last quarter. So I think that’s what happened. I think see we can make an estimate my friend. I can’t. You know we thought but we didn’t think this week. But you know, it is. What?
Unidentified Participant
Sorry to interrupt, Raju, but in Concord was in the month after the results of September. And that time you only told that. Yes, some sale will come in this quarter. So we’ll definitely do better than the December 23/4.
Rajeev Nannapaneni
That was what I thought, my friend, but. And I understand but I. You know, after hearing from our partner they said that we had a charge back and we had under and all the quantity was sold.
Unidentified Participant
Sorry to interrupt but there is no backup plan from the company that suppose this product doesn’t come in. Then the other product has to be.
Rajeev Nannapaneni
My friend. See, I think that question is wrong. I think you. We are here to state what the present financial position is. You can’t have backup plans for revenue. You have what you have and what you don’t have, you don’t have. I don’t think that question is right. What you have is what you have. What you book is what you book. What you don’t have. You just say that you don’t have. That’s how business works.
Unidentified Participant
Crop, health, science. This crop.
Rajeev Nannapaneni
My friend, I will not answer that question the way you. I don’t like the way you’re asking that question. It is what. What you have sold, you sold and what you don’t have, you don’t have. You have to accept it. That’s it.
Operator
Thank you. The next question is from the line of Viraj Mahadevya from Money Growth India. Please go ahead.
Viraj Mahadevia
Hi Rajiv and Sadhguru. Question just for clarification, just so I understand the limits is you mentioned Rajiv that in December quarter you had used up your quota. So does that mean you had sun tended sales in the early part of the year based on the allocation for the calendar year?
Rajeev Nannapaneni
Basically all the allocation that we have had, we have sold it off by September end and we didn’t have any further allocation. I think all of it was sold and there’s nothing left.
Viraj Mahadevia
And this year you will get a fresh allocation which is a higher number for my understanding.
Rajeev Nannapaneni
Yes, it will be about one third of the.
Viraj Mahadevia
Understood. And will this year be more evenly spread through the year or you can’t comment on that?
Rajeev Nannapaneni
I don’t want to answer that question. It’s such a tricky question. Because what they sell is what they sell, right? So we will recognize income based on what we get. And you have to live with the volatility. That’s the nature of the business.
Viraj Mahadevia
Understood? No, no. Absolutely no. No. I fully appreciate that. I understand.
Operator
Thank you. The next question is from the line of Darshan from Pinterest Capital. Please go ahead.
Unidentified Participant
Hi. Thank you. My question is already answered. Thank you so much.
Operator
Thank you. The next question is from the line of Raghav from Rajita Pharma. Please go ahead.
Unidentified Participant
Hello, Rajiv sir. Yeah, hello. Yeah, please go ahead. So what will be the quarter four, sir? Like how we can expect the results for quarter 4?
Rajeev Nannapaneni
As I said, we’ll get 1/3 allocation of the total market and I think some portion will be sold in Q1. I think we’ll have clarity from Teva. I think once we’ll discuss this up when we get the Q4 numbers. And and I think
Unidentified Participant
At this point we have got another two approvals.
Rajeev Nannapaneni
Sorry my friend.
Unidentified Participant
Recently we have got another two approvals on.
Rajeev Nannapaneni
And we had two more approvals. Yes, we had approval on Everlemus with Lupine and one with. Say that again my friend.
Unidentified Participant
You have two more approvals. One with Lupin and one with your marketing partner with Lupin and one with some other company.
Rajeev Nannapaneni
We can ridge. Yeah. This Everlimus product we tofs got launched and Bosantan. Bosantan we are. The launch date is not announced yet. We’ll announce at the time of the launch is bound by confidentiality. And Everlimus got launched, I think the two generics on that product. Quarter four or quarter one of next year? No, it launched this quarter. You’ll see the benefit of that launch in Q4 of this year.
Unidentified Participant
Okay sir, thank you.
Operator
Thank you. Ladies and gentlemen. You may press Star and one to ask a question. The next question is from the line of Gagan from Ask Investment Managers. Please go ahead.
Unidentified Participant
Yeah, good morning. I hope I’m audible. Yeah. My first question is Rajiv, you indicated that the R and D expenditure this quarter is elevated from your study state or normal run rate. Can you enumerate, I mean to whatever degree possible, you know, what would be as a percentage of sales and normal RD run rate and what has been the case in Q3?
Rajeev Nannapaneni
Basically what happens is we are spending probably about 8 to 10% of our revenue as R and D. So when your quarter is soft basically happens, the expenditure that you start doesn’t stop, isn’t it? Basically what you’re doing, you’re making let’s say a certain amount of surplus. So based on that surplus you say that I’m going to spend this much money but because the quarter is soft, basically what happens is the expenditure seems large relative to the revenue of that particular point. But you don’t stop spending something just because you’re going to have a soft quarter. Right. Reason why you have a mismatch and then you have that. But typically it’s about 7 to 8% of our net sales.
Unidentified Participant
Okay. Right. And how should we think of, you know, your India business and the em. You know, perhaps if one takes a three year view. How are you strategizing for these pieces?
Rajeev Nannapaneni
I think we have some good launches. I think one big launch. I think as we’ve spoken about Semaglutide Semaglutide is a very big launch, so we’re expecting that it should do well. Subject To regulate the approval and clearance. Another launch which is very interesting launch is reside plan in India. We have litigated in Delhi High Court. The judges reserved the matter and hopefully we have a positive verdict. We can launch that as well. So I think that’s a product that we’re looking at. We are the first generic on that. We’re hoping that we’ll be the first generic on that as well. So I think we have some very smart launches. I think if they come through I think the domestic should do extremely well. But again it’s all very product determined. I think these two will be the big ones in the next the
Unidentified Participant
Final one from my side on semaglutide. Can you elaborate a little more, you know on specifically in India Are you going in for both the injectable and oral solid and you know, in context of the purchasing part of the Indian consumer How do you see these two, you know, oral and injectable evolving over a period of time and are you backward integrated in sema? So these, these questions on the semaglutide
Rajeev Nannapaneni
I think we’ve answered that. I think we’ll outsourced API. Second is we’re focusing at this time only on the injector oral. We’re not looking at it this time. We’ll look at it maybe later but as of now injectable is what we’re looking at. Okay. In Canada. You will be there on the first wave. At this time we don’t want to discuss about our export strategy. I think weatris is our partner once we have clarity, I think.
Unidentified Participant
All right, thanks. Thanks for taking my questions. I’ll get back in the queue.
Rajeev Nannapaneni
Thank you. The next question is from the line of Prashant Nair from Ambed Capital. Please go ahead.
Prashant Nair
Yeah, my question was, I mean similar.
Operator
I would request you to please use your handset.
Prashant Nair
Yeah, just give me a minute. Is this better? Yes, sir. Yeah, hi. Yeah, thanks. So my question was similar. I mean on the R and D spend part, you know, I get what you mentioned. Would you be able to share what your say EBITDA margin was on a pre R and D basis? Just trying to, you know, use this quarter to get some sense of how your margins could look on an XEV limit basis. So that was the objective.
Rajeev Nannapaneni
I mean I don’t want to get into, you know, that sort of detail. I think everybody keeps asking me this question. I think I’ve answered this question in the past but let me answer it in a very general way. I think R and D expenditure is based on the cash flow that you’re going to have, right? So if you have good cash flow, you spend more money on R and D. If you have less cash flow, then you spend less money on R and D. Or you try to do a partnership deal so that you can offset some of the R and D expenditure. So I think you’re aware. I mean, we believe that this year we’ll probably end up with about 1800-2000 growth guidelines. That’s our expectation. I think we still meet, we’re still hopeful that we’ll meet the guidance even next year. I think our expectation is that we’ll be able to do that. And then the question is, everybody keeps asking me this question is what is it after 26 months? So what is it that we’re going to have? I think we have spoken and I think generally, I think we have said that our. Based on how we, we have other products that are coming in in 26, 27. We also expecting that the emerging market should do well and we expect that our crop sciences, which is losing money, should improve. And so overall we should probably see a drop. I mean, I think that’s the elephant in the room. I think you have to accept that earnings will drop in the 27th of March. How much will it drop? I think that’s the question I’m directly indicating. So it all depends on how you moderate your R and D experience and what kind of stuff that you are going to do. But you should expect, I mean, it’s hard to see. I mean, I don’t want to put a number to it, but you should expect a drop, significant drop, but you know, whether It’ll end at 50%, 60%. I mean it all depends on, you know, how that year goes. But you’re asking me to predict my 27th March numbers, which I think it’s a little difficult. I think we’ll have more clarity on it from here from now. But sitting today, I would believe that, yes, I think that’s the amount of drop that you should probably prepare for.
Prashant Nair
Fair enough. Yeah. Hello? Yes, sir. So then just one additional clarification you mentioned earlier, 8 to 10% is that, that’s on annual revenue, right. That you mentioned that you have spending.
Rajeev Nannapaneni
Yeah, yeah, absolutely. Absolutely.
Prashant Nair
Okay. All right. Got it. Thank you.
Operator
Thank you. Okay, the next, the next question is from the line of Rishi Javeri from PI Square Investments. Please go ahead.
Hrishit Jhaveri
Good morning, sir. So I just had a clarification about the rev limits. We are expecting 1/3 quantity this year. Can you give a ballpark market total size out of which we’ll get the 1/3 share?
Rajeev Nannapaneni
What, what is the ballpark size of the market you’re saying?
Hrishit Jhaveri
Yes. Out of which we’ll get the 1/3 of.
Rajeev Nannapaneni
1/3 of. I’m sorry, I didn’t understand what you say.
Hrishit Jhaveri
The total quantity which. Hello?
Rajeev Nannapaneni
Yeah, I didn’t. I I couldn’t catch a question, my friend. Could you repeat that again, please?
Hrishit Jhaveri
The total quantity out of which the 1/3 quantity, which we will get to do business this year. Correct. In the development space.
Rajeev Nannapaneni
It’s 1/3 the size of the market, my friend. That’s all I can say. Is that what you’re looking for?
Unidentified Participant
Yeah, but what would be your view on the total market size? Any number there
Rajeev Nannapaneni
Then you’re asking me to estimate the price erosion. I can’t do that, my friend. I can’t. I can say one third of the total volume. I think that’s all I can tell you.
Hrishit Jhaveri
Okay, sir, thank you and all the best.
Operator
Thank you. The next question is from the line of Dikshit Doshi from White Strike Financial Advisors Private limited. Please go ahead.
Unidentified Participant
Hello. Yeah, thanks for the opportunity. A couple of questions. Firstly, you mentioned that obviously post FY26 we will see some drop in the revenue because of the rev limit. But other than the semaglutide in India which are the bigger launches you are expecting and my second question is regarding the Olaparib timeline, if you can broadly speak about that.
Rajeev Nannapaneni
We are at this time trying to pilot in multiple markets. At this time it’s very premature to come back to the timeline of La Pallip Semaglutide India. We already spoken, I think other SD plan we’ve spoken about India subject to how patent litigation goes. These are the near term triggers for India and export business I think is doing very well. I think Brazil and Canada were expecting a of approvals in our oncology portfolio. So I think we expect some good launches there and we’re doing reasonably well now in Middle east as well. So overall our RRW business is doing reasonably well and I think that will probably drive the base business post 2016.
Unidentified Participant
But Olapari, can it come in FY27 or. It is difficult to judge at this point.
Rajeev Nannapaneni
It depends on which market, my friend. Some markets is open and rarely some markets there’s litigation so it’s tough to judge
Unidentified Participant
In terms of us.
Rajeev Nannapaneni
I can’t answer that question. It’s a paraphernal education. I can’t answer that question.
Unidentified Participant
Okay, fine.
Operator
Thank you. The next question is from the line of Priyansh Dalmia from Oculus Capital. Please go ahead. Mr. Priyansh, I would request you to unmute your line and speak please. Due to no response from the current participant, we will move on to the next participant. The next question is from the line of Badri Vishal Bajaj from Bajaj Shares and securities. Please go ahead.
Unidentified Participant
Yeah, good morning. Thanks for the opportunity. Yeah. Sir, I have specific questions on sequential earning of segment wise revenue in export of formulation products. The basic reason I wanted to know that it has fallen below 20. If you take Q2 to Q3 of 222025. So reason for this sudden fall. Please enlighten us sir. Thank you.
Rajeev Nannapaneni
Because there’s no relevant. My friend, I think that’s a simple answer. There’s absolutely no relevant. That’s the reason why there’s a fall. That’s a big product for us and it’s not. It is very significant on our earnings also. That is what is it the only reason or any other. That is the only reason. That’s absolutely right. Right on the money.
Unidentified Participant
Oh, thank you. Thank you sir. Good day. Thank you.
Operator
Thank you. The next question is from the line of Praful Rai from Arjun Partners. Please go ahead.
Unidentified Participant
Any timeline you have for the launch of Rev Limit. Sorry semicote,
Rajeev Nannapaneni
Which market you’re saying?
Unidentified Participant
Indian market
Rajeev Nannapaneni
The US is saying or India.
Unidentified Participant
India. India.
Rajeev Nannapaneni
I think our expectation is March 26 subject to regulatory approval and settlement of other issues, I think.
Unidentified Participant
Thanks.
Operator
Thank you. The next question is from the line of Nirali Shah from Ashika Institutional equities. Please go ahead. Ms. Nirali, I would request you to unmute your line and speak please. Due to no response from the current participant, we will move on to the next participant. The next follow up question is from the line of Gagan from Ask Investment Managers. Please go ahead.
Unidentified Participant
Yeah, thanks for taking the Follow up in US Barring rev limit, you have a good pipeline of 24 FTFs. If I, I mean have it correctly from your presentation, can you, I mean to whatever degree you’re comfortable, can you share on the timeline of the launches and what would be the key ones? Perhaps with you know, a three to five year time frame and you know what could possibly be a ballpark revenue outcome from these.
Rajeev Nannapaneni
That’s a tough one. But what I’ll do is I’ll tell you by size what are the biggest ones that we have. So we take a next, you know, I mean obviously all of them will play over the next seven to ten years. I mean all of them will play out over the next few 10 years. But you want to start, I mean this year we have Rev Limit and then we have wegovy and Ozempic, whenever that happens. But that’s the next big one. And then we have Ola Parib, that’s a very big one. Then we have Irbutinib where we are sold ftr. Then we have Adapritinib which is where we are sold FTF. The ones which are shared as sole FTFs are probably the most valuable ones. And I think that’s, I think that’s, that’s what I would look at. The ones that I mentioned probably in terms of economic value are probably the biggest ones and like a mid level value would be like, you know, 10 milligram and I think these are like medium level and most Santan will be also medium level. But I think the ones I mentioned earlier are probably the bigger ones, revenue estimations and all. It’s tough to judge all these things at this time, but I think in terms of upsides, these are the biggest.
Unidentified Participant
I mean, would it be safe to say that if we keep revlimid aside for a moment, you know, on the base business, these products can give you a handsome growth when they happen?
Rajeev Nannapaneni
Yes, yes, yes, they should. When they happen. Yes.
Unidentified Participant
Yeah. Right. And second one on semaglutide India, I mean how do you see, I mean what, what sort of scale do you see the market getting in the first year and then over perhaps three to five years? And how does it impact perhaps the other treatment lines in diabetes in the market currently?
Rajeev Nannapaneni
Honestly, I don’t know. I think we let the approval come in. I think once you get the approval and when we launch and we’ll see how once the market forms, I think we’ll be able to make judgments about what everything that you said looks like. It’s getting multiple, you know, indications and multiple approvals in different settings. I think it’s a very exciting molecule. Honestly, I don’t know my. I think once we launch and once the market forms, I think we can give you more color on that.
Unidentified Participant
Okay. I think the innovators. Can I take one more or would you rather that I get back in the queue? So the innovators have also expressed their interest in launching in the Indian market and perhaps they also want to preempt some of the other companies and establish themselves. Do you see that in any way detrimental to the prospects of Natco or some of the other peers?
Rajeev Nannapaneni
I think the innovator will obviously have his share. I think you can’t deny that. But obviously generics also play a very strong role because of the affordability at the minute. For the record, my friend, the innovator has not launched the injectool product yet in India. I’ve not seen the product, they only launched the oral which is used. But I think most of the market is the injectable. So as of now, we’re launching the market because of es so much demand elsewhere that he has not supplied in our part of the world.
Unidentified Participant
Right. Thank you, sir. Thank you. I’ll get back to the two.
Operator
Thank you. The next follow up question is from the line of Sawmill Shah from Paris Invest. Please go ahead.
Saumil Shah
Hi, thanks for the follow up. Sir, as you mentioned we have about 3000 crores of cash and probably by next year end we would end up at around 5000 crores or maybe around that. So why don’t we. I mean if you are not getting any options of acquisitions why don’t we do a buyback and reward our shareholders and maybe even promoters can participate.
Rajeev Nannapaneni
Good question. I don’t have an answer to that question either. I. We are looking at the capital acquisition. I think my present position is that we’ll just look at an acquisition. I. I’ve not thought of it at this time. I don’t have an answer.
Saumil Shah
Okay. Because one more reason is. Okay, these are just my views. One more reason. Doing a buyback. I mean maybe, maybe next year whenever profits go down. Okay. By doing a buyback we are reducing our equity so at least our EPS hit won’t be so much. I mean just my views
Rajeev Nannapaneni
Of course. No harm in having a view. I personally feel I will make that call then my friend. I don’t want to make that call today. Give me, give us some time. We have, I’m still looking and I believe we’ll able to do some transactions. So we’ll make that thing. If it is what you just said, I mean that we are unable to do an acquisition and yeah certainly I think that is the way forward. But for now I think the idea is that we’ll use this money for acquisition.
Saumil Shah
And one of the previous,
Rajeev Nannapaneni
And one of the previous participant had asked about the interest cost. I think that question was unanswered. So maybe we have some cash. I’ll tell you a simple math. It’s 200 crores of debt that we have. About 100 crores is what you call discounting. 100 crores are tax payments that we make for the advance tax. So basically what happens is the borrowing cost of this money is around 6% and the deposits are giving us 8% so they don’t make sense to break a 8% deposit and which you can borrow at 6%. This nature of this money is short term debt. It’s usually payable in 60 days to 90 days and generally we, we get cash flow which pays off this debt. So that’s the reason why we borrow. But it’s not a large amount. It’s not any given time, it’s not more than 200. That’s the reason why we borrow.
Saumil Shah
Okay. Okay, that’s it from my side. Thank you.
Operator
Okay, the next follow up question is from the line of Chetan Doshi from Tulsi Capital. Please go ahead.
Unidentified Participant
One thing, Raju. This year we are going to make record profits. But our interim dividend is very less. 1.5.25 or 1.5. Are you waiting for much more profits to distribute to the shareholders? On a lighter note, please.
Rajeev Nannapaneni
Again I’ll give you my stated position. We believe that we’ll do an acquisition. I want to preserve the cash for the acquisition. I don’t want to give it up. We’re giving a modest dividend. I’m aware of that. But I’m waiting for an acquisition. So that’s the reason why I don’t want to use the cash and on books. So I can’t hold it.
Unidentified Participant
And can you show some color on the crop sign business, how it is performing?
Rajeev Nannapaneni
It’s doing what, 15, 16 crores a quarter. I think it’s still losing money. But we believe, I think next year we should able to break even. I think that’s the objective. So I think we’ll probably circle around. I think 130, 140 crores is the next year target at least minimum. So I think if we’re able to do that, I think we’ll come close to a break.
Unidentified Participant
Thank you. Good.
Operator
Thank you. The next question is from the line of Nirali Shah from Ashika Institutional Equities. Please go ahead.
Unidentified Participant
Hi, I’m audible.
Operator
Yes, ma’am.
Unidentified Participant
Yeah, Just one question I had. So how should we look at FY26 in comparison to FY25? Just wanted to understand what kind of growth should we pencil in for FY26 and do we expect fourth quarter?
Rajeev Nannapaneni
It all depends on the relevant price erosion. So I think that because it plays such a big role in our earnings, I don’t know, I think it should do well. I think at this time we are thinking that it will able to maintain the same earnings. So we have this here. But again, once we have clarity on how much erosion is, I think we can put much color on that. But that’s the base case. Hopefully we’ll able to it all. Again, whatever I’m saying is all depends. It’s a function of the price erosion. So I think we’ll have more clarity in the coming quarter.
Unidentified Participant
Should we take 20% on a conservative basis? So that is the guidance that.
Rajeev Nannapaneni
No, no, I’ll not fall into that trap. No, I refuse to give guidance. I. I’ll tell you when the numbers come. We will share the numbers and then we’ll see how it goes. Because it’s hard to predict the distance.
Unidentified Participant
Okay. Okay. And just on the fourth quarter, will it do we expect it to be weaker than the third quarter?
Rajeev Nannapaneni
And say that again Miss, Say that one more time.
Unidentified Participant
Should we expect the fourth quarter to be weaker than the third quarter? Because first half has been fabulous for our company. So do we expect fourth quarter to be a little bit more weaker again?
Rajeev Nannapaneni
See, we’re getting quantity in March, so you only have one month of sale. So over will start off slowly, but.
Operator
Ladies and gentlemen, we have lost the connection of the management. Please stay connected while we reconnect them. Ladies and gentlemen, we have the line for the management.
Rajeev Nannapaneni
Again, I’m sorry, I, I, we got disconnected. Can you repeat that? I didn’t catch the question. Can you repeat it?
Unidentified Participant
Yeah. So. So I was asking will the fourth quarter be a little weaker than the third quarter? So this is in the hindsight that the first half has been really good for the company. And given that 20% growth on the bottom line. So even if the fourth quarter is weaker than third quarter we would still be able to achieve that growth. So it’s just one month away from closing the fourth quarter.
Rajeev Nannapaneni
It’s hard to predict. I don’t want to come and say something and again. And then I’d be caught by a surprise. What I know, I’ll tell you. We have a 33% allocation. We will launch it in March and we believe that we should have a good year. And how much quantity we sell in every quarter. I think we’ll just see how the market plays out.
Unidentified Participant
Understood? Understood. Thanks.
Operator
Thank you. The next question is from the line of Manish from Ducita Pharma. Please go ahead.
Unidentified Participant
Hello Rajiv ji. Hello Rajiv ji. Good morning. How are you? Sir, this is Manish. Glory. You have told about. Yeah. Yeah. You have told about 1/3 market. Will this mark Q1 and Q2 sales are. It will increase or decrease in Q4.
Rajeev Nannapaneni
Can you repeat your question is Q4.
Unidentified Participant
You. You told. You have told that 1/3 market will be there in Q4. Hello. But. Yes. Yeah. Yeah. Yes. Correct. Yes. A prevalence. So this will be better than Q1 Q2 or it will be decreased.
Rajeev Nannapaneni
I think I. We have not answered that question, sir. I think what we have said is that we’re getting an allocation. It will start off in March and we should do well during the year is what I’ve said. We have not given how much will sell in Q1, how much will sell in Q4, how much in Q1. We are not given guidance. We just said that we had one third of the quantity. Correct. That’s all we said function of market share and market erosions
Unidentified Participant
And what is the size of even. And next year.
Rajeev Nannapaneni
Yeah, total market is about 120 million and there are two generics and we have a 5050 share with apartment so.
Unidentified Participant
So it will be impact in Q4. Some portion of it will come in. Yeah, some portion will come in Q4. Yes, some of it. Yes, some portion will come in Q4. And what about next year? You are looking good to this product.
Rajeev Nannapaneni
Yes. Yeah, we’re looking good. Yes, yes
Unidentified Participant
You are looking good. Now I am ending my this portion along with one request. Kindly look on the investor side also sir, please.
Rajeev Nannapaneni
Hello investment side
Unidentified Participant
I investors. Please look on investors also sir. I know we are looking at investors. We are doing what is right. Invested in your company, seeing bright future but result was very bad.
Rajeev Nannapaneni
See I tell you, let me answer this question. See one fundamental thing that you need to understand with us is our company chases big jackpots and sometimes you’re going to live with volatility and they’re so dependent on particular one particular event or one or two events happening, it causes huge volatility. If you’re an investor in our company and you’ve been around long enough, you’ll know that you will have volatility. But. But you look at it in terms of a long term view, we have always delivered great earnings. It’s just that sometimes you’ll have quarters which are going to be difficult and you’ll have probably a year or two when sometimes it’s difficult. But the pipeline, the product filings are always very lucrative. And I think in terms of our gross margin we’re probably the best in the industry. But you have to understand that you have to live with the volatility. And I’ve said this many times, I’ll repeat it one more time. You have to live with volatility and that’s the nature of our model. And unless you’re willing to accept that you will always see these highs and lows. We are not the company which will deliver 10% core on growth, 15% consistent earnings. We are not that type of company. And because we chase jackpots, that’s the nature of our business. There’s always uncertainty. I think that’s the way it is.
Unidentified Participant
Thank you.
Rajeev Nannapaneni
Thank you. Next caller.
Operator
Thank you. The next question is from the line of Raghav from Rajita Pharma. Please go ahead.
Unidentified Participant
Hello. Yes sir, you’re. Yeah, please go. Sir, any good news for investor type?
Rajeev Nannapaneni
Like in future, any positive. That’s all I can tell you. We’ll have next year. We are hopeful that we’ll have a good year based on the assumptions that we have made.
Unidentified Participant
Yeah. Not only the financial wise, but also stock wiser.
Rajeev Nannapaneni
I don’t control stock price. I can only control. See, my friend, my fiduciary responsibility is to tell you the way it is. What we are learning, what we are not earning, what is our jackpot, what is. Is not a jackpot. End of the day it is for you to value us on based on what we are saying. Okay, next caller please.
Operator
Thank you. The next follow up question is from the line of Gagan from Ask Investments Manager. Please go ahead.
Unidentified Participant
Yeah, thanks. You indicated that you’re looking aggressively for an acquisition that possible to spell out, you know some, you know give some color on which areas or which markets would would be priority for you. How are you likely thinking about the acquisitions?
Rajeev Nannapaneni
One is we want to strengthen our RW business. I think that’s one acquisition. We’re looking at another one possibilities also be to strengthen our US front end because our US front end doesn’t give much sales. So that’s you want to strengthen that portfolio. I think these are two active areas we’re looking at.
Unidentified Participant
Thank you.
Rajeev Nannapaneni
Thank you.
Operator
Thank you. The next question is from the line of Gaurav Sudhir Shah from Kotak Securities Ltd. Please go ahead.
Unidentified Participant
Hi, I got a very simple question. I was just looking at the trend generally. Is it so that the Q3 is little soft for us. Has that been historic and what could be the probable reasons for this cyclicality?
Rajeev Nannapaneni
Say that one more time
Unidentified Participant
In the third quarter or the quarter that passed for years.
Rajeev Nannapaneni
It’s very simple actually. Basically what happens is you get a call it. You get a quantity allocation in Q1 which is not sorry in March. So basically what you do is you sell some portion in March, you sell some portion in June and you’ll sell some portion in September and the last and if you have anything left you sell in December. And usually December tends to be the weakest and your June and September tends to be the strongest and March is probably the most moderate month and if you have enough So I think that’s how it works.
Operator
Thank you. The next follow up question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited. Please go ahead.
Unidentified Participant
Yeah, just one follow up. You mentioned that next year growth depends on the price erosion on the rev limit as well. Because I was assuming that price erosion will happen only once it goes off patent post January 26th or it can or price erosion can happen even earlier. Also
Rajeev Nannapaneni
It all dep. There is some. I don’t want to get into the pricing of the product. I. I think I’m putting my caveats out based on what I believe will drive the earnings. It’s a function of the market and market formation. That’s the best way I can answer it.
Unidentified Participant
Okay. But usually let’s say historically in other drugs also have we seen the price erosion even before the patent expiry. Because right now it is controlled market only. So why would price erosion will happen?
Rajeev Nannapaneni
There is some. I don’t want to get into it, my friend. I must have handling the marketing and there’s a lot of other dynamics and other generics are also there. So I can’t answer that question. But there is erosion. Hopefully it will hold up to a point so that we can make some money.
Unidentified Participant
Oh. Okay. Fine. That’s it. Thanks.
Operator
Thank you. The next question is from the line of Rishikesh Patole from BNK Securities. Please go ahead.
Unidentified Participant
Hi. Am I audible?
Operator
Yes sir.
Hrishikesh Patole
Yeah. So just quickly what were the subsidiary sales in 3Q and for 9 month as well. Can you just provide some numbers?
Rajeev Nannapaneni
Year to date sale of the subsidiaries is about 480 crores. 480 crores.
Hrishikesh Patole
408. 408. 408. And for 3Q
Rajeev Nannapaneni
Q3 is 109.
Hrishikesh Patole
Okay. So on the any. Any update you can provide on the Kotur site. I mean what. Where do we stand with the progress?
Rajeev Nannapaneni
I think our remediation action is ongoing and I think so. As of now we are still supplying. But we have moved a lot of the key products to Vizag. So I think nothing does. So does that answer your question?
Operator
Thank you. The next question is from the line of Ashish Kabra who is an individual investor. Please go ahead.
Unidentified Participant
Hello. Yes. Hello sir. I Just one question related to. Sir, at present we have 3,000 crores of cash. And by next year as my previous participant told that we’ll be around 5000 crores. So sir, are we. Can we take debt also to take this takeovers that you talk about or
Rajeev Nannapaneni
Possible let the takeover happen and I think we’ll. We’ll see how much cash we have to use. How much debt we have to use. All that stuff. We’ll decide that.
Unidentified Participant
Okay answer. You told. You told that you told. The takeover will be from geography based. But in what sectors that will be. Can you just give some color on that?
Rajeev Nannapaneni
I think we said nothing. One in the US market and one in the rest of the world market.
Unidentified Participant
Advanced regulated markets, rest of the world. Yeah but that is like geography front. But in what sectors?
Rajeev Nannapaneni
Like formulations or pharmaceuticals. I mean therapeutic prescription pharma.
Hrishikesh Patole
Okay, okay, thank you.
Operator
Thank you. The next question. Next. The next question is from the line of Rizmic Oza from nine Race Equi research. Please go ahead.
Unidentified Participant
Thanks for the opportunity. Sir, my simple observation is you know this quarter, December quarter we didn’t have sales of rev limit and we did 475 crores of revenue. Does it mean that in between March to September we’ve done roughly around close to 2,500 crores of rev limit sales and which is significant because the calendar year is end last calendar year. If you could just provide us absolute figure of what kind of revenue sales we did last calendar year it will help us to understand what kind of growth we’ll see in this calendar based on 1/3 market share.
Rajeev Nannapaneni
I will not do a split of marketing reasons, comparative reasons. Second question is you know that you’ll have 1/3 share. It all depends on the erosion that you can’t predict last quarter sale with next year sales. That is not possible. We’ll just see how the price erosion is and we’ll see.
Unidentified Participant
Okay. Okay. Second question sir, on the base business, any guidance you would like to give what kind of growth you are anticipating for the next this calendar year or FY26.
Rajeev Nannapaneni
I think India launches we have spoken about. I think we’re expecting our RW business also to do reasonably well because we have a lot of approvals expected In Brazil almost 7,8 approvals are expected in this coming year. And Canada also we’re expecting some good launches. So. And Middle east also we’re doing reasonably well. I think we should do well. Again I don’t want to give a particular number but yeah, I think yeah we should do well.
Unidentified Participant
Any guidance on the agrochemical business because that’s been quite volatile in the last many quarters. How do we see this panning out?
Rajeev Nannapaneni
We believe, I think next year our target is that we should at least break even. We’re doing about 60 crores a year right now. Our target is that we should target about 120 to 150 crores next year. So that will help us come closer to bring.
Unidentified Participant
Okay. Okay. Thank you sir. That’s it for my side.
Operator
Thank you. The next question is from the line of Vignesh who is an individual investor. Please go ahead.
Unidentified Participant
Sir, good morning. I have a question regarding the current scenario in US tariff. What my question is in case the US laid some tariff on import on pharmaceutical products from India. Will this impact our revenue? And if yes, what is the strategy? We are planning to escape from this impact.
Rajeev Nannapaneni
I think as of now it’s premature to answer that question. But it’ll affect the whole industry, right? I think because a lot of the manufacturing is out of India.
Unidentified Participant
Yes, sir. This affects the whole industry. But what I’m asking is do we have any specific strategy to escape from this like expand to some other countries like that. The only escape is you need to build. You’d buy a front end and friend manufacturing in the us.
Rajeev Nannapaneni
The only escape is you need to build. You’d buy a front end and friend manufacturing in the us. That’s the only way you can go forward. The only solution. I think as the earlier we said now we’re looking at a front end in the us. So I think you’re able to get a manufacturing asset also make it interesting. But yes, I think that’s the only solution to this for which we don’t have a trend in manufacturing in the U.S. in the U.S. but that’s the only solution if at all that problem were to happen.
Unidentified Participant
So we are ready to move our manufacturing in the US itself. That’s what you were saying, right?
Rajeev Nannapaneni
Some products you can. I mean you can’t do everything. Honestly it doesn’t work out. But yes, I think you have to move some product to the US I think most probably, I think to answer your question, if there were tariffs and then what is your plan B? That would be a plan.
Unidentified Participant
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Arun Malhotra from Cap Group Capital. Please go ahead.
Arun Malhotra
Yeah, thanks for the follow up. Just wanted to ask what has been the price erosion until now in revenue made from day one and number of players present?
Rajeev Nannapaneni
I can’t answer that question. I’m sorry my friend, I can’t answer.
Operator
If you have any other questions, please have. Thank you. Thank you. The next follow up question is from the line of Chetan Doshi from Tulsi Capital. Please go ahead.
Unidentified Participant
Yeah. Thank you for the opportunity again. Rajiv, something which you would like to share with the shareholders which on immediate basis some share up from the company. See, in spite of certain bad things happening, some good things are also happening in the company which we don’t know. If you like to share something, we’ll be very grateful.
Rajeev Nannapaneni
I think overall, I think. See, let me answer you asking very philosophical questions. I’ll give you a philosophical answer. I think what we’re doing. See, my job is only to tell you what we’re doing. I think we can tell you like this is the product that we have filed and this is what we think the outcome is. And this is what is the volatility And. And I think my fiduciary responsibility tell you what we’re doing. That’s all I can tell you. And at the end of the day, we hope that a lot of the strategies that we pursue will work. And I think sometimes they don’t work. And that causes volatility. It’s the nature of the beast. That’s all I can tell you at this time.
Unidentified Participant
Yeah. Thank you.
Rajeev Nannapaneni
I’ll take my last question.
Operator
Thank you. The next question is from the line of Rahul Chaudhary, who is an individual. Investor please go ahead.
Unidentified Participant
Hello sir, will it be fair to assume that X rev limit our operating margins would be around 18 to 20%
Rajeev Nannapaneni
In as of whatever talking about.
Unidentified Participant
Yeah, whatever other business we are doing. Because I mean the, the numbers talk to me as if. I think we are doing like an 18% operating margin if I remove the R and D that you talk about. Because this quarter is like X rev limit, right?
Rajeev Nannapaneni
Yeah. I mean again, yeah, possible. I think it depends on the quarter. Yes, possible.
Unidentified Participant
Yeah. Because I mean if you have to forecast like asking us to do it two years later, ex rev limit. But sir, domestic.
Rajeev Nannapaneni
Yeah, see Rahul, I’ve answered that question. So basically what I said is that we should do well this year, we should do well next year. But you should assume in 27 that we should see a drop of more than 50 to 60% in our earnings. I think that’s already there. It’s factored in and I think this has been told many times that we should see a dip. And I think we have been telling that. I think you have to accept the volatility because when something big goes away it is going to impact and we are very honest about it. I think we’ve been upfront about it.
Unidentified Participant
No problem sir,
Rajeev Nannapaneni
I replay it one more time that you have to accept that this is how it’s going to be. But you have to assume that we have these other products and some of them will come through eventually and that you will see a period of volatility. But that’s the way the business works.
Unidentified Participant
But like you said, we have a fiduciary duty also to do the. Do what’s the best last nine years. If you look at the company’s market cap and we shareholders, we don’t get any salaries or whatever. So we are working on the capital appreciation. So that hasn’t happened. So do you think the strategy is still working? It must be working because you are. You’re earning. Yeah. Because for nine years the strategy you have applied. I mean that is where we are right now.
Rajeev Nannapaneni
What I’ll do is. Okay, see what we are trying to do is I think we try to maintain the best governance that we have and we try to do the best we can based on what we believe the market is. If you look at our earnings, I think we’re probably one of the best earnings in the industry in terms of hard earnings will match any of the larger cap companies. The fundamental issue here is that there’s an element of volatility that comes in our earnings and it is the way it is. I mean, I don’t have a better answer to that question. But what I can strive to do is that we try to build a business which is more stable at a base level by doing an acquisition which we’ve not been able to execute. Obviously, I’ll be very honest about it. That’s probably one thing you probably didn’t get right. But I think we’re trying to see what we can do to get that right. But having said that, in terms of our ability to deliver, I think we’re probably the best. You know, we’ve done as good as anybody else.
Unidentified Participant
So my, my last follow up, my question is I think apart from Revlimid now what we are looking forward to is a domestic opening up of semalglutide market because I think that is the, that is the thing that is going to replace somewhat the earnings right now. So, so where do we as investors get to follow up as to where natco is in the permission queue? How do we, I mean which is the website or how do we get to know? Last I read that Sun Pharma and you had both applied and I think some waiver you’ve got because you’ve already done some global tests and all that. So how do we track off that?
Rajeev Nannapaneni
You asked me, so I’ll ask you, I’ll answer the question. So basically what the DCG has done is they asked everybody to do a bio equivalence study. So we have done a bio equivalence study and we shared that data. Now we’re awaiting the clinical permission. Sun and Reddy’s I think have already started the clinical and I think we are hoping we’ll get our clinical permission shortly. I think everything is clear. We’re hoping to start and if you start the clinical trial then quickly we need to dose and show efficacy. Hopefully we’ll able to complete this trial by end of the year and then we submit for permission by end of the year and all goes well and regulatory permission, all issues resolved, hopefully we’ll able to launch it next. I think that’s, that’s the timeline.
Analyst
All right, thank you very much, sir.
Rajeev Nannapaneni
Thank you. Okay, thank you so much. Thank you everyone.
Operator
Thank you so much. Thank you. Ladies and gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to the management for closing comments. Thanks.
Rajeev Nannapaneni
Thank you all again, great questions. Have a good day.
Operator
On behalf of Batliwala and Karani securities India Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.