Natco Pharma Ltd (NSE: NATCOPHARM) Q4 2025 Earnings Call dated May. 29, 2025
Corporate Participants:
Unidentified Speaker
Rajesh Chebiyam — Executive Vice President, Crop Health Sciences
Rajeev Nannapaneni — Vice-Chairman and Chief Executive Officer
Analysts:
Unidentified Participant
Hrishikesh Patole — Analyst
Nirali Shah — Analyst
Rashmmi Shetty — Analyst
Kunal Randeria — Analyst
Nitin Agarwal — Analyst
Rohit — Analyst
Bino Pathiparampil — Analyst
Abdulkader Puranwala — Analyst
Chetan Doshi — Analyst
Srihari — Analyst
Gagan Thareja — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Natco Pharma Ltd. Q4F525 earnings conference call hosted by PNK Securities. 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. Hrishikesh Patoli from BNK Securities. Thank you. And over to you, Mr. Patoli.
Hrishikesh Patole — Analyst
Good morning everyone. On behalf of BM220 I welcome you all. The Q4 and full year FY25 earnings conference call of Metco Farming. Hope everyone is in good health and doing well. On behalf of NATCO today we have with us Mr. Rajiv Nama Pameni Vice Chairman and Executive Chief Executive Officer Mr. Rajesh Chabian, Executive Vice President, Crop Health Sciences. I now hand over the call to Rajesh for the management’s opening remarks first which we’ll open the session for queuing. Over to you sir.
Rajesh Chebiyam — Executive Vice President, Crop Health Sciences
Thank you Rishikesh.
Good morning and welcome everyone to NATCO’s conference call discussing our earnings results for the fourth quarter and full year of FY25 which ended March 31, 2025. During this call we may be making some 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. Like to state that the material of the call except for participant questions is a copy of NATCO and cannot be recorded or rebroadcast without NATCO’s expressed written permission. We’ll begin with the results highlights and then follow with an interactive Q and A session.
So hope all of you have received a financial number test statement sent out yesterday. These are also available on our website. So NATCO recorded a consolidated total revenue of 4784 crores for the year ended on 31st March 2025 as against 4126.9 crores for the last year reflecting a growth of roughly 16%. Net profit for the period on a consolidated basis was 1883.4 crores as against 1388.3 crores last year showing a growth of 36% in its profit. Company has recorded its highest ever consolidated revenue and Profits during this financial year is the result of decades of our diligence and focused Strategy.
For the fourth quarter which ended in March 31, 2025, the company recorded a net revenue of 1087.3 crores on a consolidated basis as against 1110.3 crores during Q4 of FY24. Profit for the fourth quarter on a consolidated basis was 406 crore as against 386.3 crores same period last year. During the quarter, the company took an impairment charge of 50 crores in the crop and science business related to property, plant and machinery and a chargeback adjustment of roughly 25 crores in its year subsidiary. Apart from incurring higher R and D expenses as of today, the company has a strong cash position of over 3,500 crores as it prepares for headwinds coming from its US business.
During the financial year of 2016, the company estimates the possible dip in revenue by 20% and profits by 30% due to geopolitical uncertainties and pricing pressure in its core product portfolio in the US and increased R and D expenses. Thank you all. Now we’ll take questions.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking a question.
As a reminder to all the participants, please restrict yourself to two questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Nirali Shah with Ashika Institutional Equities. Please go see.
Nirali Shah
Hi Rajiv, congratulations on great set of numbers. I have three questions. I’ll begin with the first one. Could you update us on the current status of the risky plan litigation and are there any upcoming milestones or any legal proceedings that we should be aware of in the near term
Rajeev Nannapaneni
on rescue plan? I think we believe. I think if all goes well I think it will be reserved for order by end of this month. There’s only like one last hearing left. I think it will get done today or maximum. I think hopefully we’ll be able to close everything by end of this month and so we expect an order in maybe fourth holidays in June. I think Daily High Court is closed so I think July, I think July, August I think we should expect some order on that Right now we have not launched the product. We’re waiting for the clarity from the two benchmark two Judgments and then based on that we’ll strategize what to do.
Nirali Shah
So see if the order comes in our favor. Within how many months do we look at the launch?
Rajeev Nannapaneni
I think if the order is in our favor and everything is good, I would believe we can launch immediately.
Nirali Shah
Okay, my second one is on the clarity on the progress of NRC 2694. Any timelines or catalysts that we should be tracking
Rajeev Nannapaneni
at this time. I don’t have any timelines Niran, so I think we just kind of updated our NC and cell and gene therapy ideas. It’s there in the public domain in the presentation at this time. I think what we’ve done is we’ve taken a very late stage cancer subset of head and neck cancer and who have failed the conventional therapy which is keytruda.
So right now the trial is ongoing. We’re doing it both us and India. So I think I don’t want to give any timelines at this time. I think maybe in about year and a half we’ll have more clarity on this.
Nirali Shah
We are still on the patient recruitment or is it done?
Rajeev Nannapaneni
I think we need to get to a number where it is substantial. I think so far I don’t recollect the numbers so I don’t want to say anything but we have done, I think about little more. I don’t know how many patients we have done.
I think about between 10 to 20 patients. I don’t remember the number on top of my head but I think I don’t remember the protocol. Also how many patients we have to do. But I think once we get to about, I think 60 to 70, I think we’ll have an idea where we are. So we hope that we’ll able to recruit these patients in the next one, one and a half year and they will have clarity on how it works.
Nirali Shah
Okay. And my last one is on the Trump tariff and the Trump campaign. So regarding the aggressive drug price cuts and potential import tariffs, how do we see this evolving in terms of the impact that could be on our business?
Rajeev Nannapaneni
I mean obviously we are.
A lot of our business is in the US so obviously there will be some impact. I mean so far I think we are okay. So let’s wait. It’s a very dynamic situation. So I think let’s see how things go and then we can make an adjustment of what will happen. It’s too early to say.
Nirali Shah
In the opening commentary you mentioned about 26. So do we look at it as a softer year for us because of the evolving scenario? I’m saying in the opening commentary you mentioned about.
Rajeev Nannapaneni
Yeah, Hedgewood. Yes, yes. Yeah. What about it? Nirani? What about it?
Nirali Shah
Yeah. So we do see, I’m saying that because of the Trump issues and whatever is going on in the US because of the policies, we do see that our portfolio will be hampered because of this. We do face the headwinds,
Rajeev Nannapaneni
I think. See, we don’t really know what’s in store in the future. I think that’s what I’m trying to tell. It’s very, I don’t know what’s going to happen in the next few months. So I think once we have clarity on what’s going to happen and what their policies are going to be, I think then we can make an assessment of what the impact is going to be.
But as of now, I think we’re just waiting for clarity on what’s actually going to happen. So I would be, you know, we’re premature to say anything at this time so I would just reserve saying anything but I would just say that once we get clarity and then I think we can make an assessment of what’s actually going to happen, what the impact is going to be. Yeah.
Nirali Shah
Yeah, that’s it. Thank you.
Rajeev Nannapaneni
All right, thank you. Let’s give a chance to another person. Thank you. Next caller.
operator
Thank you. Next question comes from the line of Rashmi Shetty with Dollar Capital. Please go ahead.
Rashmmi Shetty
Yeah, thanks for the opportunity. Sir, in the opening remarks, if I am clear, you mentioned 20 dip in the sales and 30 dip in the profit for FY26, right?
Rajeev Nannapaneni
That’s correct. That’s correct.
Rashmmi Shetty
Yes. Yes. Sir, is this also because you’re going to see any sort of erosion in your revenue mid product despite we will be taking the maximum market share right. This year?
Rajeev Nannapaneni
I think it factors everything in. I think we are, we believe, I think we should do well in the next couple of quarters. I feel June quarter and September quarter we should do well.
But I think after that it’s very difficult to judge what’s going to happen. So we’re being cautious. So we gave the guidance upfront so that investors are aware of how we see the business. And I think that’s our assessment because as I said, there are multiple things happening. This among development pricing scenario is very tough to judge. I mean political scenario is very difficult to judge. And also we have also decided to start spend good amount of money on R and D and so we have very good surplus. We’re using the surplus to spend on R and D budget.
So I think because of these three factors I think we have sort of made our best guess estimate of what we think the year is going to be.
Rashmmi Shetty
And it is also supported by the fact that, you know, rev limit might see a higher price erosion compared to this year.
Rajeev Nannapaneni
I think so, ma’ am. I think that’s, that’s the. I think at the end of the day I’m making a guess. I mean I. Based on what, what’s going to happen. But yes, I think we factored. That’s the mind which I think, you know, we made an impact what we believe will happen.
Rashmmi Shetty
Yes. Okay. And so related to R and D, you said how much is the R D in this year you have spent for the entire year and how much are you expecting? In FY26
Rajeev Nannapaneni
we spent 373 crores which is 8.5% of our standalone revenue in R and D for the financial year ending March 2025. I would want to spend I think a similar amount of money this year as well. We have some very nice projects that we lined up and I think the really good ones are always very expensive. So I think that’s what we’re trying to do.
But I think we want to spend about in that range up to 400 crores is what we’re targeting.
Rashmmi Shetty
Okay. And one last question on the India business. You know, this year every quarter we had done in the range of 95 to 100 crores, you know, and we are also planning to see some acquisitions of the cash flow. But till the time the acquisition doesn’t happen, what kind of growth, you know, we can expect in FY26, will it be in the similar range of that 2, 3% growth or you know, we should expect, you know, a higher growth this year.
Rajeev Nannapaneni
I think of the publicly announced pipeline, I think the base business should grow around 7 to 10%. But I think the two major launches that will drive the growth, I think one is Resclam, subject to the court decision and of course semaglutide, which we’re expecting maybe end of the year. So these two are going to be very critical to the growth. If these two come through, I think you’ll see a very, you’ll see much more than 8, 10% to see much more. But I think getting these two right would probably be very important for us to see very good growth.
But I’m optimistic that both will work subject to obviously in the court decision and semangyoted once we have the market formation and get the approval, when we have clarity, I think both these parts should be very Interesting. And I believe that domestic should do well. You’ll see much better growth than what you’re seeing now.
Rashmmi Shetty
Okay, sir, thank you. Thank you so much.
operator
Thank you. Next question comes from the line of Kunal Randaria with Access Capital.
Kunal Randeria
Hi, good morning, Rajiv. On rev Limit. I thought you would be booking some profit next by 26. Also for the sales that Tega would have made last year.
And since day one’s quota has gone up this year, I thought some of it would also be booked in FY27. So does that still hold or has the accounting changed?
Rajeev Nannapaneni
I didn’t understand your question, Kunal. I’ll tell you what I understand from it. I think for the new quota that we got, we booked some amount in the March quarter, which is the January to March quarter in 2025. And this quota, we will start selling. We’re selling now. And we’ll sell in the June quarter and the September quarter and then I think December. I’m not able to predict what’s going to happen.
So that’s why we’re being cautious. And the March of the 26th year, it will be, you know, it’ll be a lot of competition. There won’t be any quantity restrictions. So it will be, you know,
Kunal Randeria
I got that. Sorry. What I was asking is typically you manufacture and sell it to Taylor and Teva, then sells it to the distributor and once Teva gives you the profit, typically there’s a lag or, you know, you recognize it maybe a couple of quarters late. So whatever Teva, let’s say in September, I think you book it in December or March. So that was my question.
Rajeev Nannapaneni
I think what we had gave to Teva, we already gave. I think the quandary that we’re supposed to give, we already shipped to Teva already. I think what we are only now we’re booking now is only the profit share. So we booked some amount last quarter and we continue to book in the coming quarters as we go along.
Kunal Randeria
Right. Okay. Okay. So if my understanding is correct, you have already supplied for the six to them. Okay, perfect. Okay, that makes sense. Thank you. Yeah. Just a couple of more questions. Sorry, guys.
Rajeev Nannapaneni
Yeah, go ahead.
Kunal Randeria
Yeah. So Semaglutide, will you be needing some investments to promote it in India Salesforce or will you be partnering with the larger players?
Rajeev Nannapaneni
We are thinking of both the models, Kunal. I think we’re looking at both P2B model and also our own Salesforce. We have built the Salesforce to cover this segment over the last three, four years. We have actually able to you know, build a sales force to cover the doctors that are required for this product. I’m not we have the setup but obviously we’re looking at both dual revenue. We look at both P2B and our own brand as well.
Kunal Randeria
Sure, sure. And just one more. I’m a bit surprised with the impairment in this property plant equipment of the agriculture business. So are you kind of scaling back your plans for this business?
Rajeev Nannapaneni
No Kuna, it’s just an accounting entry. It’s a non cash entry. Essentially what it is is the business has not done well in the last two, three years. We have not made money. So I think with our consulting with our auditing firm I think they assess that we need to take impairment of this, this can be reversed. Let’s say for example in 26 the business starts making money than which we hope to then some of the, some of the impairment can be reversed.
But this is taken a conservative position and I think it’s judicious to prudent to do it. That’s why we’ve done it.
Kunal Randeria
Got it, Got it. Thank you. Okay,
Rajeev Nannapaneni
next call up you.
operator
Thank you. Next question comes from the line of Nitin Agarwal with Dan Capital. Please go ahead.
Nitin Agarwal
All right, thanks for the question. Rajiv on R D How many products have we filed this year and how many were meaningful in your assessment in F25 and how are you looking at 2627 if you can
Rajeev Nannapaneni
give me a moment. Google filings. I think in the US we had about five filings in the US and meaningful ones means a lot of them are shared exclusively.
I think there’s nothing special that comes to mind other than the ones that we’ve already announced. But that was the question, right? How many we have filed and next year how many? Seven to eight is what we’re targeting and interesting ones that we got this. Yeah, go ahead, go ahead.
Nitin Agarwal
Exactly the same point. Interesting one that you got this year and how many do you probably see coming through over the next couple of years from a filing perspective?
Rajeev Nannapaneni
I think the interesting one that we got this year was probably I think was one of the strengths of semaglutide where we’re sold FTF.
We filed something in April 2024 so that was probably the most exciting one that we filed. We filed residiplam that’s also shared ftf. We are one of the two. So I think these are two big ones that we filed in the last mention. The interesting ones Nitin, I mean we spoke about this many times. I mean semaglutide probably is probably the biggest one that we have where we have some strength. We have solar, so that’s probably the biggest one that we have. Then we have, I think subject to the legal clarity and approval. Olaparif could be very interesting.
Then we have median size. We have had dafetinib, capnitinib, that’s also an interesting that we filed. Then we have shared FTF on yonder list and then cartelizoman and then we have Irbutin subject to the legal outcome. So we have like seven or eight things. So I think it plays out over the next 10 years. So maybe we don’t have anything in the next one or two in the near term but I think the next you take an 8 to 10 year view. We have these and also we updated our investors on some of our in C and cell and gene therapy investments.
I think the most excited one, I mean some of them are smaller ones and some are bigger ones. The big ones that I look at is probably the NRT 2694 which is a late stage head and neck cancer where we’re doing a phase two. So we have very interesting phase two. We can probably even get it approved with limited number of patients. So that is one possible excitement. And another one is one of our. We made an investment of $8 million in E Genesis. They were the first one in the world to do an adrenal transplant where they transplanted a genetically modified pig kidney into a human.
And there’s one particular patient who is actively on the kidney. And I think it’s been about four months and it’s still doing well. So these are probably the most exciting ones in our MC cell and gene and then probably the. So the idea here, Nathan, is that we build a pipeline of about 15 of them. I think even if you get like six or seven of them. Right. I think you’re home. I think that’s the idea. Okay,
Nitin Agarwal
right. And just last one on revenue. Have you been surprised by, you know, the. From some of your earlier expectations versus the way the market is really playing, expected to play out in 26 or you seeing it play on 26?
Rajeev Nannapaneni
I’m not, honestly, I am not surprised.
I think I’ve always been very conservative. I always believe that you’ll see erosion as time goes by. I’m not actually surprised. I’m actually just fitting in pretty much what our expectation was.
Nitin Agarwal
Thank you so much.
Rajeev Nannapaneni
Okay, thanks.
operator
Thank you. Next question comes from the line of Rohit with I thought bms please go ahead.
Rohit
Yeah, good morning. Thank you. And congratulations on all the hard work the team has done. Ravi. Most of the questions have been answered, just two or three of them as a follow up. So one is on this agro business. So this was of four A38 started three years back and I think it’s below expectations.
So what is the thought process now? How do you see it over the next two, three years? If you can maybe share your strategy and thought process there. That was one second was given the cash that we have and you talked about acquisitions. So anything that any update or anything that you’d like to share on that in terms of any thoughts that have evolved over time.
Rajeev Nannapaneni
Okay, sure, sure. Let me just answer these two questions. So let’s. Let me just answer these two then you can. So the first question that you had was on the.
Just refresh me again. Obviously it’s not done well. It has not met our expectation, but it is what it is. So I think this year I think we feel we are going to hit that critical mass where we’ll start breaking even. I think our expectation is that we need to hit about. We’re doing what, 60 crores net revenue, so last year. So I think we need to hit about 160 to 170 at least to have that EBITDA positive. So I think that’s the idea. So I think hopefully we’ll hit that number this year and hopefully the goal beyond that, then we’ll actually be profitable.
I think 26 is the year that 25, 26 is the year when it’s going to turn around. The other question was on the cash. Right. As we announced we had about 3000 crores of cash. Now I think we received further receivables. So I think we are probably sitting now at 3,500. It’s a good place to be. Honestly, I wouldn’t complain. How do we use the cash? They’re looking at acquisitions. We’re looking at a lot of active acquisitions. I think I’m positive that we’re able to close something in this financial year. I think that’s the idea.
That’s all I can say at this time.
Rohit
Right. And
Rajeev Nannapaneni
I’m sorry.
Rohit
Yeah, so one follow up again on agro. So while you shared that this may be the year where we’ll turn around but slightly longer term in terms of the strategy here. I remember you wanted this business to get to about 3,400crores or around that number in your like scaling this business up. So just, I mean from here on, of course it did not pan out and that’s fine. But from here on, are you sort of still like positive on this, on this overall opportunity? Anything on that? And then one more question on.
I think you’ve given out this NCE and your sort of the NCE and all the other moonshots that you have, investments that you’ve done. Should we look at it as like your conviction in them has become better and you’re closer to some kind of an outcome and that’s why you’re sharing now because in the past people have asked me these sort of really not stocks, a lot on them and I’m sort of hearing you for the first time speaking a bit more. So is it sort of should we take it as like your mix in them has improved as you get more information or as you get more closer to sort of outcome there? So these are some of the questions I have.
Rajeev Nannapaneni
So one question is on the nce. Another question was on the what is called the Agno success. Let me tell you, I mean what I. We make certain judgments as a, as a business and some businesses take. Some businesses turn around in two years, some business take five years, some business take eight years. So it’s a cycle that you just have to live with based on how you sort of execute. And sometimes you get them right, sometimes you don’t get them right. So I think agro is something that it’s probably taking longer, but it is what it is.
As I said, you just have to deal with it. But my personal sense is that it will get better. I think the first point I always look for in a business is that it has to start breaking even. So once it starts breaking even, it doesn’t cause a strain on the balance sheet. And then just you need that one idea which can always suddenly start turning profit side because to build a successful business you need to have the core portfolio which kind of pays the bills and then you’ll have what you call one idea that will just take that business to the next level.
So I think hopefully we reach that stage in agro shortly by hitting that number. But 150, 160 is what we probably need to hit. So I’m starting small. Let’s hit that number. I think then we’re not losing money and then we can target the next number. But it’s a two to three year journey to get that to that level. Regarding my entry and the cell and gene therapy. Yes, I think so. I generally don’t like to talk about when they’re early stage. I think in the past a lot of people have asked me and I said, no, it’s too early stage.
We’ll talk about it later. I think now, I think I feel more confident that these things are coming to a stage where we can probably hit something. So that’s why I’m talking about it. So I think, yes, specifically, yes, when she grows to assets that I mentioned a few minutes ago, I’m very excited about both these assets right now. So, again, as I said, there’s no guarantee that everything will work out. But I think, as I said, the idea in this business is that you build about 10 to 15 ideas and then even if you get half of them through, then you’re home.
And I think we’re also sort of. You had to reimagine your business every few years. Right. So the pure generics play is going to be very competitive. And your moonshot ideas cannot stick only to generics. Right. You need to also look at npe. So I think doing an NPE program in our balance sheet also becomes very stressful as well. So what we have done is we adopted a strategy of what it costs. We’ve done some smaller investments and larger ones, but obviously 2694 and the Zeno transplant one are probably the bigger ones. So if something good happens there, then obviously we all have a good upside.
That’s the expectation. Yeah. Okay.
Rohit
Yeah. Thank you.
operator
Thank you. Next question comes from the line of Bino Patiparambal with Elara Capital. Please go ahead.
Bino Pathiparampil
Hi, good morning, Rajiv. First of all, when you say profit decline of 30%, are you talking about EBITDA decline of 30% or at that level, 30? Okay. Second, you know, you have done, you have scaled up your RD investment because you had a lot of money coming from Revolimit etc. So going into FY27, although it is a bit early, is there any kind of an indicative margin range that you can give at the EBITDA level
Rajeev Nannapaneni
at this time? No, it’s hard to predict anything right now because there’s so many moving parts.
The moving parts would be that some of our. If some of them come through, there could be some upside there. And then obviously the semaglutide upside is probably not factored in the 27 numbers. So I think it’s very dynamic. So I think once we’re coming closer to the. As the year progresses, then I think we’ll have more clarity of how 27 is going to look then I think we can give some guidance at this time. I would dissuade from doing that. I think it’s too early.
Bino Pathiparampil
Okay. And the risky plan, if you get a favorable judgment, would you expect other Indian players to join come into the market as well? Immediately.
Rajeev Nannapaneni
We’ll see some competition, but I have everything goes well and we launch then we’ll have much more advantage. So that is always good. In this business, being first mover is everything. So theoretically, yes, if we get a favorable order, other companies can also come. Theoretically, yes, that is possible.
Bino Pathiparampil
Right, Right. One last question on Semaglutide. So have you sorted out all your device etc and with your fill and finish being internal, I will figure all those things out.
Rajeev Nannapaneni
I think so. I think we’re getting there. Our clinical trial has already started in India. So we’re hoping that we’re able to complete everything on time and we’ll able to be on there when the market formation happens early next year.
So I think that’s our expectation. I think in good shape as of now. I think everything looks good. Let me come closer to the launch here.
Bino Pathiparampil
Okay. And you’re planning your own capacity?
Rajeev Nannapaneni
We are planning our own capacity. No, I. We are using a CMO for the one source only.
Bino Pathiparampil
Okay. Okay. API will be yours.
Rajeev Nannapaneni
All right, thank you. Next caller. Thank you.
operator
Thank you. Next question comes from the line of Fisher Chaveri with PI Square Investments. Please go ahead.
Unidentified Participant
Good morning sir. First question, the Capex plan. Do we have any significant Capex plan for next year? 26,
Rajeev Nannapaneni
we have general CapEx.
I mean there’s always something going on. Every year we spend about 300, 350. So I mean we have a Capex plan of about 500 to 600. But I think per year I think looks like we’re going to spend about 300. I think we could take about one and a half, two years to build these projects. 300, 350 seems, I think a reasonable amount of Capex that we’ll do per year.
Unidentified Participant
Okay, understood. And sir, on the guidance which you gave, I think that first half of FY26 will still have some good growth in terms of June and September.
So are you seeing the H2 to be really bad? That’s why the entire year will take a hit. Or H1 and H2 both will take a significant hit as compared to the SV5.
Rajeev Nannapaneni
I think. I mean, I will not use the language that you would use, but I would say that the first half will be good. The second half will not be as strong as the second half. The second half will be weaker than the first half. I think the first half should be strong and the second half Will not be as strong as the first half.
Yes. You’ll definitely see a difference. Yes. Because there’s so many moving factors. So that’s why I think we’ve been conservative in our guidance. Yes, but you’re right. Principally you’re right. I think the first half should look good and the second half is as you would say, you know, not as. No, I would say not as strong. Yes, that’s correct.
Unidentified Participant
Okay, understood. Sir, just the last question. Given the guidance, you’ve already discounted the higher tariffs from the US Government or we have not discounted it and if we already discounted it, any relief there would drive up the guidance significantly.
Rajeev Nannapaneni
As I said, when we make an estimation we consider multiple factors and multiple assumptions. If I have to change my assumptions, I’ll come and tell you based on how the policies change. But we have assumed the political risk and the change in the portfolio and the R and D expenditure. So I think we factored certain things in. But again, there’s too many moving parts, my friend. So you can’t say this event happened, that’s the reason. Why did this go up or something? I don’t want to get into it because what we can do as a company is only make an estimate.
So I think that’s what we’re trying to do based on the success. And I think it sounds reasonable. I think generally our estimates are. I don’t. Generally we mean very reasonable in our estimates. I think one or two times we are also surprised. But for the most part, I think most of the times we get our estimates right. So I think. Yeah, I think. I mean again, there are always some things that I can’t control which will change things. But as of today. Yeah, I think that’s what it feels like.
Unidentified Participant
Correct. And any inorganic deal on the table right now or no.
Rajeev Nannapaneni
Yes, we are pursuing a couple of these. But again, you know, we all have been saying that. So hopefully we’ll able to close something this financial year.
Unidentified Participant
Okay, thank you. And all the best, sir.
Rajeev Nannapaneni
Thanks. Next call.
operator
Thank you. Next question comes from the line of Abdul Kadar Puranwala with ICC Securities. Please go ahead.
Abdulkader Puranwala
Thank you for the opportunity. Firstly, on the R and D budget of 400 crores over the market for this year. So I know what percentage of this would be spent on the NCE projects and in agriculture. If you could help us.
Rajeev Nannapaneni
Of the 400, how much are you going to spend on NCE and how much the NC will probably see about? I think 25 to 30 crores. 30 crores. I would estimate in that amount. I mean making an estimate of the loan. Don’t hold me to it. But yeah, if I were to make a like an educated guess. Yeah, I think about that. And rest of it will be on gender.
Abdulkader Puranwala
Sure. Understood.
Rajeev Nannapaneni
I think we deliberately didn’t want to do too many NPE programs because it becomes too much strain on the balance sheet. So a lot of the other programs we have done only equity investments.
Because we want to balance trying to get the right amount of R and D at the same time. Don’t want to tie up too much of the surplus and expensing too much R and D. So again that’s the balance we’re trying to strike.
Abdulkader Puranwala
Sure, sir. Understood. And next one from here on. So R and D you applied Apex, you said another 300, 350 crores. 700. 750 crores. Spending every year. You know, for any inorganic pursue ahead, would you even want to raise your balance sheet? Some debt on the balance sheet if the need may be.
Rajeev Nannapaneni
Right now we don’t need debt. No bill. I think right now we’re very comfortable. I think when it comes to costing, we’ll see. I think as of now I don’t want to comment. As of now we’re comfortable.
Abdulkader Puranwala
Okay, sir. Thank you.
Rajeev Nannapaneni
Thank you. Next call.
operator
Thank you. Next question comes from the line of Chetan Doshi with Tulsi Capital. Please come in.
Chetan Doshi
Good morning, Rajiv. And thanks for giving the opportunity. What I have been observing is you are very conservative in giving the, you know, forecasting about the overall business. And you always exceed whatever you say.
So you exceed in the end of the year. That is my observation. So Anyway, congratulations. Even 30% drop on current profit, that is close to Finance India 24. That much profit will do. So don’t you think you need to be little bit liberal on distribution of the profits to the shareholders? And second question is, what is the cyber acquisition you are looking forward to which we intend to close in this financial year?
Rajeev Nannapaneni
Either the acquisitions. I don’t want to comment. Very premature. So I don’t want to answer that question. Regarding distribution of the money as of now I’m saving all the money for the acquisition.
So we believe that we’re able to close something. That’s the reason why we have not given an aggressive. So I think you’re right. Regarding the guidances, I think it’s always you people are harsh. When we say something higher and then we deliver, then market is harsh. It’s better to say something less and deliver more. So I think that’s what I’ve learned
Chetan Doshi
you surpass if you can surpass your current year profits Also one of the idea it goes on floor then it is a big boost to natcore that is for sure.
Rajeev Nannapaneni
Thank you sir. Thank you so much. The next call.
operator
Thank you. Next question comes from the line of Sri Hari with PCs Securities. Please go ahead.
Srihari
Yeah, Am I audible?
Rajeev Nannapaneni
Yeah, please go ahead.
Srihari
Yeah, thank you. Two questions. Firstly if you could please talk about the non US formulation exports, markets and secondly if I look at the cost base hex of R D you have spent close to 1200 crores in FY25. So what is the kind of scale down you have penciled in for fy? Thank you. I.
Rajeev Nannapaneni
I didn’t catch a question. Can you rephrase both your questions? I didn’t catch both of them, I’m sorry, I didn’t understand what the question.
Can you say that again one more time please?
Srihari
Yeah. Formulation, exports, sex of US and the cost based X of R D. How much scale down you’re looking at
Rajeev Nannapaneni
scale down because of what?
Srihari
You obviously have some pressure at the EBITDA level so you might have planned some kind of cost reduction.
Rajeev Nannapaneni
I’ll give you a general answer. I’m trying to understand what your question is. The R and D spend is driven by obviously the EBITDA that we have. So I think we have a pretty good plan this year and last year we spent good amount of money.
Next year even the 26th of March we should able to do well. Regarding the RNA expenditure in 27 I think we’ll make that assessment based on what surplus we see that year and I think we’ll make that judgment. Maybe we can give you some light on that end of the year the R and D expense is obviously linked with the above EBITDA that you’re making and based on how much money you believe you’re going to make then you have to make a plan. Okay fine, I’m not making so much surplus and I scale it down but if I believe there’s reasonable amount of surplus then I’ll continue to spend this much.
So we’ll make that judgment closer to the time as of now it’s hard to comment. Okay, and what was the other question you said? I didn’t catch.
Srihari
I was talking about. I was talking about expenditure X of R D that was I think around close to 1200 crores for FY26. So are you looking at a reduction there?
Rajeev Nannapaneni
Reduction what the exports for us you’re saying or.
Srihari
No, no, no. The expenditure X of R and D
Rajeev Nannapaneni
do I see any reduction in the expenditure X of R and D? Is that what you’re saying? Okay,
Srihari
exactly.
Rajeev Nannapaneni
I think we have. I mean, we’ll see. I mean we always want to challenge ourselves on whether we can reduce our cost. Beyond that, I think we have done a lot of cost cutting. We’ve done a VRs program about two years ago. I think costs, we’re looking at it all the time. Yes, it’s an ongoing process all the time. I think it’s something that everybody does.
Srihari
Yeah. And the first question was exports of formulations. Except for us. Except us. Give me a moment. So I would say about 800 to 900 puts minus. Is that the estimate for 26 or critical number?
Rajeev Nannapaneni
Yeah, I don’t have a split, my friend.
I’m making an estimate because I don’t have to split literally the way you want it. I’ve not come prepared to answer that. I’d be better prepared next time. But yeah, I don’t have the number, but roughly about that is what I feel.
Srihari
Okay, fine. Okay, thank you. Thank you.
Rajeev Nannapaneni
Okay,
operator
thank you. Next question comes from the line of Gagan Pareja. Ask investment managers.
Gagan Thareja
Good morning. I hope I’m audible. Hello.
Rajeev Nannapaneni
Yeah, go ahead, go ahead, Keep going.
Gagan Thareja
Yeah. Does your guidance bacon the launch of residcam and SEMA next year?
Rajeev Nannapaneni
No.
Gagan Thareja
Okay, fine. And India, you know, you point, you’re pointing to a substantial improvement in sales next year.
Can you elaborate? I mean, is it basis launches other than sema?
Rajeev Nannapaneni
These two are the big ones, my friend. These are the two big ideas. If they work, then that will drive it. Otherwise, you know, see, you need to understand, I mean, I think generally the business is very competitive. I mean you look at our peers, everybody’s well financially strong. So the opportunity only happens when you do that special product to do something that everybody is doing. It’s very difficult to get growth. You only get that anemic 7, 8%, 10% growth. But you want something dramatic to happen.
You need that special product. And I think that’s why I keep talking about these special products because this is what drives the growth. So I believe that if you want to get above market growth, you need to get these two right. I think in my view at least top of my mind right now, these two are the big ones we have to get right.
Gagan Thareja
And for the non US markets, Canada also, would you be there in the first wave for 7 glutide launch? And generally on that base of 800, 900 crores, how do you see growth happening next year?
Rajeev Nannapaneni
I think we are not going to be in the first phase.
I think we are working on it but we are not in the first phase in capital. I think that’s my design. And we’re tied up with Mylan on this product. We at risk with this product. We’re not doing it directly
Gagan Thareja
but otherwise is the growth going to be, you know, healthy in the non US export markets for you on the current base?
Rajeev Nannapaneni
I would believe so. I think we’re doing very well in the MENA region and we’re doing very well in Canada and Brazil. We have very good launches. So I think so. Yeah, we should do that.
Gagan Thareja
The final one. Sir, last quarter you indicated, you know, it would make a lot of sense for you to get a manufacturing or a distribution base in US given the current circumstances. Would be. Would the acquisition that you’re considering be, you know, in. In that direction?
Rajeev Nannapaneni
Yes, that’s one of the acquisitions we’re looking at. Yes.
Gagan Thareja
Okay, thanks. I’ll get back in the queue. Thanks for taking the questions.
Rajeev Nannapaneni
Thank you so much. Next call.
operator
Thank you. Next question comes from the line of Rahul and individual minister. Please go ahead.
Unidentified Participant
Hello. Yes sir, I just wanted to know a couple of questions.
Is the court have you informed the US FDA that Codehood plant is ready for reinspection warning letter or how does it happen? Have we sorted out
Rajeev Nannapaneni
giving constant updates on. Yeah, I think we constantly give updates on the things that we’re doing. So our update, our remedial action is going on and updations are given. We hope to inform them. I think sometime this year. I think we’re not informed them. Question is did you inform FDA for a reinfection? No, not yet.
Unidentified Participant
In a sense I want to know whether it is over the remedy. Remedy is still ongoing.
Rajeev Nannapaneni
It’s still ongoing but we continue to supply from the site. It’s not that restriction on supply on the site but we don’t. We’re not getting approved new approvals on the site. I think that’s what happening.
Unidentified Participant
Yes sir, There was a 2009 article on your company. It said a lot of things about the history and all of it. But it also said something like our company holds close to 400 acres of land. And you know, I’m just saying because last year we sold a little bit of it including plant. Including where your plants are there. Sir, is this like untapped gold mine still? We have or we have sold most of it or what is the status there? Sir,
Rajeev Nannapaneni
it’s still there my friend.
It’s still there. I think but to monetize an asset like that, usually what happens is it is, I mean something you could always monetize. I think when we get the right party like Microsoft. In that particular example, we sold it to Microsoft for a data center. So it was a good rate and we got it. But you need to do some amount of work. You need to do the basic infrastructure. And usually when you have a large parcel like that, you always have these niggling litigations on some portion because you know, in India land titles are always very tricky.
But if you’re able to, I mean, I’m not saying that there’s litigation for all the pieces, but there are always some, you know, some pieces here and there, you know, few items here and there is always some, you know, privilege litigation. So it can be monetized over a period of, let’s say if you were to take a four to five year view. Yes, yeah, we can definitely monetize it’s valuable property. It’s one half from the city of Hyderabad so you know, near a Metro. Always it’s valuable. But yeah, I think, yeah, hopefully we’ll able to bring some value there as well.
Unidentified Participant
I was just going through the segment reporting in the, you know, the crop health division. Actually year on year our top line has reduced. The sales have reduced and obviously the losses have also increased. I think we did it on. We have said the segment loss over 150 crores this year. Your optimism, you know, in the coming years is based on what, sir? Because historically have reduced numbers. What is the.
Rajeev Nannapaneni
I’ll tell you, I’ll tell you. Okay. The loss also represents the impairment that we’re taking. Let’s start with that. And the second is, see what has happened was when we stopped the product two years ago and then basically what happens is a lot of stock came back as returns.
So the sale reduction is because of returns of the previous year. It’s a new business. I know, I mean it’s not a good place to be. But because it’s a new business, it took us a while to sort of figure out how the distribution works. How do you manage the controls, how do you make sure that the stock is liquidated. So I think it’s getting better. I mean as I said because of the returns and all, we had to take a loss and the reduction in sales. So when somebody comes back as returned, then you have to reduce the sales.
But I think it’s looking better. I think if you look at the cash flow we have even the sale of 60 crores, we actually had a cash flow of almost 85 to 90 crores. So cash flow in my world is a true indicator of whether you’re selling the product. So I think they’re getting there. So I think 150 is a number that need to be there. So I believe that we’re able to get there this year. But see I tell you my friend, generally when you start a new business it is not a fairy tale.
You come in and then you start making money on day one. And especially when you’re doing a business that you’re not having a setup. What do you call before A greenfield is always going to be a challenge to build a business in my experience has always been it takes about four to five years and sometimes you get lucky and things turn around in a year or two. So unfortunately Iagro is coming in that median where it is a four to five year time. But I think we’re getting there. It’s not as bad as it looks.
Unidentified Participant
We are not calling it quits out here. No sir, I mean it is going to become stronger because this is something we were all hoping would be a great pivot.
Rajeev Nannapaneni
Thing is in a business you want to get it’s going to take some time and this is one of those businesses that’s taking time. But we believe that sometimes. See what happens is obviously people don’t. Nobody likes losing money. But what happens is sometimes businesses do take four or five years to build and it is one of those. But I believe that we are at the end of the tunnel and I think it should able to break even.
Unidentified Participant
This I had the good fortune of hearing a 2020 Money Life interview. Your comments and your outlook and all. It’s just the same all these five years. But sir, you have a disdain for mutual fund industry. Sir. And we need more institutional investments or do we as a corporate strategy have any like, you know, I mean it’s not working out. We just go up and down. Now it’s too monetized market cap. I mean do you think honestly it was right there.
Rajeev Nannapaneni
So see, I tell you something. See what happens is our business has volatility. I think I’ll be very honest with you.
And what happens is, I mean there are some mutual funds who are with us and I think they understand our volatility and they’re willing to be with us and willing to ride the volatility. And look at our return on capital, the profits that we generate, they’re as good as any of the top 10 Indian companies. Right? But the issue is a lot of the times. Again, it’s not a criticism, but it is something we need to. People don’t want volatility in their nav. I think what they want is something that delivers 10%, 15% compounded growth consistently without too many volatile elements coming in.
And those assets have higher value than assets like us who deliver great profits but have a little element of volatility. And I think people who understand are there with us as investors, people who don’t understand that are not there. And they also have their own, what I call, you know, limited. See, you can’t change what you’re doing, right? I mean, it is what it is and you just have to communicate what you’re doing and people will come along. That’s how you have to look.
Unidentified Participant
This new investment that we’re looking for will be a streetcar investment, right? Won’t be a moonshot.
And it’ll be like buying a business or something which is do existing business. Like it’s a brownfield investment you’re looking for.
Rajeev Nannapaneni
No, I think what we’re trying to. When you do an acquisition, if you’re buying a front end or you’re trying to buy a new market, it will be a bounce in. Yes. And of course moonshots make money, my friend. Don’t discount moonshots. All our kind of stocks, a lot of our moonshots have been successful.
Unidentified Participant
So I have one last question. How are we going to monetize Telogen? Sir, because that is not a company that we own.
It’s just like when it gets displayed, we’ll get money. Like, what is it for us?
Rajeev Nannapaneni
Very early stage, my friend. It’s a very early stage company. It’s too early to talk about it. They have a very interesting Kati pipeline and Katri is something that we don’t have a skill set in Nashville. So that’s why we invested in them. But they’ll all come to fruition. You just have to be patient and we’ll get the opportunity if all. Any business idea will always take you five to seven years. Otherwise it doesn’t happen. That’s how it works. Okay, then let’s give a chance to someone else, please.
One last question. One last question. Thank you.
operator
Thank you. Next question comes from the line of Nitin Agarwal with Dan Capital. Please go ahead.
Nitin Agarwal
All right. Thanks, Rajit. Thank you. Question again. Two things. One is on the NC molecule, how should we think about the milestones and next steps on this product?
Rajeev Nannapaneni
Which one? The NRC2694, I think the NRC, the way I’m looking at it in Nitin is that. Yeah, yeah. So I think the way we’re looking at it is what we have done is we’ve taken a very end stage disease where there’s no peripheral, all the first line, second line is completed and there’s no other treatment options which are left.
So we’re doing that subset of patients. So advantage of doing a trial on something like this is you don’t have to do like many patients if you’re able to demonstrate efficacy. And we are doing a single arm study, we are not doing a comparison study either because we are using a subset for which there are no therapies available. So they are able to show response. You will get an approval. Even with, if you have very good phase two data with a reasonable number, you can get an approval. So I think as long as we are able to recruit those patients and we are able to do it, I think we’re home, so we’re targeting something niche.
I mean, again, the disease is obviously a niche disease and it’s not going to cater to a very large number of patients, but it will be a very critical item that you need in the event that the first line, second line is not working. And I think this is a good one to do and relatively easier to do. And I think hopefully it will work. I think that’s the idea.
Nitin Agarwal
And how much time do you think you’ll be required to complete your recruitment given the challenges which are there in such areas? It’s a recruitment,
Rajeev Nannapaneni
I think difficulty that we’re facing on this trial is the fact that we are unable to get keytruda failure patients.
The reason is keytruda fail. Nobody uses keytruda in India. The limited number of patients who use keytruda because keytruda itself is so expensive. So I think that’s a challenge that we’re facing in recruiting patients and typically, generally people who are already on Ketrida failure are already very ill. So it’s very difficult to recruit patients. But see, I think we are taking up a challenge. Hopefully I think we’ll have some clarity in the next one month and a half year where we’re going. We’ve already done some patients so far it looks good. So I think, as I said, it’s a single arm study, it’s not a comparison study.
So, so relatively easier to do. But the problem we’re facing is the recruitment. I think if we’re able to get around that, we have done some amendments to the protocol, so hopefully we’ll have some clarity and then we’ll be able to recruit. So if you’re able to recruit then I think it would be interesting. But give us a bit of time though. Nitin I think I can’t answer that. We’ll have some clarity maybe in the next 12 to 18 months. You can always ask people updates every quarter. But as of now I think give ourselves about 12, 18 months to get more clarity on this.
Nitin Agarwal
And secondly on the non US businesses, you know 800, 900 crore is I think is a meaningful step up from the numbers we discussed last. I still remember. So which are the major geographies that will be making up this business and what is the drivers for these businesses as we go forward? Which any specific products?
Rajeev Nannapaneni
I think it’s an overall portfolio. I think Brazil and Canada are the biggest ones that’s driving this business and to an extent now MENA is also driving this business. These are three geographies that we’re doing very well in terms of products is mostly our cancer portfolio.
I think Brazil and MENA has done extremely well. It’s mostly from our cancer portfolio. Not a product specific. It’s like a basket of products that we have. So which has been a difference and going forward any specific launches that will drive the portfolio or this is going to be this. I think at this time we are just saying it’s for cancer portfolio. We’re not giving any guidance on specific. Okay Nathan, thank you so much. Thank you. I thank you everyone. Thanks for the time that you guys have taken to interact with us. We appreciate the time that you’ve spent with us.
Thank you so much.
Rajesh Chebiyam
Thank you. Thank you all.
operator
Thank you. On behalf of Natco Pharma Ltd. That concludes this conference. Thank you for joining us. You may now disconnect your lines.