Natural Capsules Ltd (BSE: 524654) Q4 2025 Earnings Call dated Jun. 04, 2025
Corporate Participants:
Abhishek Mehra — Investor Relations
Sunil Mundra — Whole-Time Director
Analysts:
Unidentified Participant
Yashvi Gandhi — Analyst
Nirbhay Doshi — Analyst
Madhur Rathi — Analyst
Unidentified Participant
Manan Shah — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q4 and FY ’25 Earnings Conference Call of Natural Capsules Limited. [Operator Instructions]
I now hand the conference over to Mr. Abhishek Mehra from TIL Advisors. Thank you, and over to you.
Abhishek Mehra — Investor Relations
Thank you, Yashaswi. Welcome, everyone, and good evening. Thank you for joining this Q4 and FY ’25 Earnings Conference Call of Natural Capsules Limited. Results and investor presentation are available on the stock exchanges. In case anyone does not have a copy of the same, please do write to us, and we’ll be happy to send it over to you.
To take us through the results for the quarter and the financial year and answer your questions, we have with us today Mr. Sunil Mundra, Managing Director; and Mr. Raj Kishore Prasad, Chief Financial Officer. We’ll be starting with a brief overview of the quarter for Mr. Mundra, which will be followed by the Q&A session.
I would like to remind you that everything said in this call that reflects any outlook for the future, which can be concluded as a forward-looking statement must be viewed in conjunction with the uncertainties and risks that the company faces. These uncertainties and risks have been included, but are not limited to what have been mentioned in our annual reports.
With that said, I will now hand over the call to Mr. Mundra. Thank you, and over to you, sir.
Sunil Mundra — Whole-Time Director
Good afternoon, ladies and gentlemen. On behalf of Natural Capsules Limited, I welcome you all to our Q4 and FY’25 earnings call. Thank you for joining us today and for your continued interest in our company. As we gather here at the close of another financial year, I would like to take this opportunity to reflect on our performance, the progress we have made, the challenges we have navigated and our outlook as we move forward into the next phase of our journey.
Let me begin with a summary of our financial performance for the fourth quarter and the full year, along with the relevant comparison to the previous periods. Revenue from operations for Q4 FY’25 stood at INR44.97 crores, registering a growth of 2.61% quarter-on-quarter and 11.81% year-on-year. EBITDA for Q4 FY’25 came in at INR4.38 crores, a sequential increase of 2.71% over Q3 FY’25 and a 6.55% rise over Q4 FY’24. EBITDA margin, excluding other income for the quarter was 9.74%.
Profit after tax for Q4 FY’25 stood at INR0.52 crores, a significant sequential jump of 392.62% over Q3 FY’25 of INR0.11 crores, though it is lower by 46.32% compared to Q4 FY’24 at INR0.97 crores. For the full year of FY’25, revenue from operations reached INR169.21 crores, an increase of 8.87% over FY’24’s INR155.42 crores. EBITDA for FY’25 stood at INR17.52 crores, a decline of 12.01% from INR19.91 crores in FY’24. EBITDA margin, excluding other income for the year was 10.35%, down by 246 basis points from 12.81% in FY’24. Profit after tax for FY’25 was INR0.62 crores, a decrease of 88.88% compared to INR5.55 crores in FY’24.
Turning to our operational performance. Q4 FY’25 was a stable period for our capsule business characterized by steady realization and robust demand, especially in export markets. Towards the end of the quarter, we observed a softening of gelatin price in the international market, our primary raw material for the capsule business. We anticipate that domestic prices will follow soon, which should support improved profitability in the coming quarters. A significant development during the quarter was the imposition of an 88% duty by the U.S. on Chinese HPMC capsules compared to a 14% duty of Indian HPMC capsule. This has created a substantial price differential, opening up considerable opportunities for Indian manufacturers in the U.S. market. We’re already witnessing a marked increase in inquiries from U.S. customers, and we are confident that this will translate into a rapid scale-up of our HPMC business in the U.S. over the current financial year.
Looking ahead to FY’26, we expect top line growth to be driven by our HPMC capsules which command higher realization and superior profitability. The softening of raw material prices should further enhance margins in our Gelatin Capsule segment. We have already secured firm orders in the HPMC business, providing strong visibility for improved performance in the capsule business. The operating environment in our API segment remains challenging with industry-wide pressure on product realization due to significant excess capacity in China, leading to heightened competition and declining prices.
As our API facility is part of the PLI Scheme, we have raised these concerns with the relevant Indian government authorities who are currently evaluating introduction of a minimum import price for the products manufactured under the PLI. We believe such a measure, if implemented, will support the domestic industry and improve operational performance.
As previously guided, our focus this year remains on ramping up capacity utilization across all products to achieve cash breakeven. During the quarter, we capitalized the full capacity of our API facility. We expect this to begin impacting consolidated profitability from Q1 FY’26 with associated expenses related to interest and depreciation. We anticipate a meaningful pickup in sales from the end of Q2 and sequential improvement throughout the year. Our strategic priorities for FY’26 are clear: drive growth and restore higher profitability in the capsule business, focusing on regulated markets and value-added products, ramp-up capacities in the API segment, aiming for cash breakeven and securing the necessary regulatory approvals to unlock higher-margin business.
In conclusion, while the operating environment remains challenging, we are cautiously optimistic about the opportunities ahead. The recent regulatory changes in the U.S. market, the softening of key raw material prices and our continued investment in capacity and technology position positions us well for a year of growth. We remain steadfast in our commitment to executing our long-term strategies and delivering results for all stakeholders. Thank you.
I’m now open to any questions that you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] We’ll take a first question from the line of Yash, an individual investor. Please go ahead.
Unidentified Participant
So what is the sort of top line you can expect from the April facility in the first year of operation? And what sort of PLI benefits should be budgeting for this year? Any update like in the delay of the start of the PLI, have you taken this matter with the authority because the delay from the Pollution Control Board, we have lost production of a year and result in PLI also? [Phonetic]
Sunil Mundra
Okay. So Mr. Yash, thank you for asking the questions. The top line revenue that we expect out of API business in the year one is about INR65 crores. And the benefit from PLI, we expected about INR9 crores. The other suggestion given by you that we should take up with authorities, yes, we have done that. The reasons — there are many reasons other than the Pollution Control Board and then all these reasons, not only our projects, there are number of projects which have got delayed, and we have taken it up with the relevant authorities in the Department of Pharmaceutics. They have assured us that the matter is being taken up to the right level and at the appropriate time, government will resolve the issue.
Unidentified Participant
And sir, on your most conservative estimate, by when do you think you’ll be able to operate this API facility at the optimum utilization level and also with this new low realization of APIs, what is the sort of top line we can achieve minimum at optimum capacity from the API facility
Sunil Mundra
Optimum capacity for such kind of facilities, I would say, 60% to 70% occupancy of the — all the reaction results could be called as optimum capacity. Probably, we expect to achieve in the FY’28, where at the optimum level, we expect the revenues or at a minimum level, we expect the revenues to be in the range of about INR240 crores to INR250 crores.
Unidentified Participant
And sir, given the challenges in the initial scale of the API fermentation, what specific operational improvement or process changes have been implemented to ensure consistent quality and yield at the commercial scale?
Sunil Mundra
Consistent quality is definitely our goal, and we have to make it sure by introducing various standard operating procedures in the manufacturing batches. So both at fermentation level and synthesis batches level.
Unidentified Participant
I’ll be in the queue. Thank you very much.
Sunil Mundra
Thank you.
Operator
Thank you. We will take our next question from the line of Yashvi Gandhi from Molecule Ventures. Please go ahead.
Yashvi Gandhi
Hello. Am I audible?
Sunil Mundra
Yes, go ahead.
Yashvi Gandhi
Yeah. Good evening, sir. Thank you for this opportunity. So my first question is on the HPMC line segment. So you were — you’ve seen — you’ve already highlighted that there’s some pricing pressure happening on the Chinese market due to the U.S. tariffs. So can you please elaborate on the execution plan for this strategy and how quickly you expect this to reflect in the export volumes and margins? And also, in Q2, you had mentioned about two new HPMC production lines, which were going to contribute to the revenue. So if you could give a breakup of how much revenue contribution was there from this line segment?
Sunil Mundra
Okay. So HPMC capsule business, our first line started in Q4 of FY’24. But somehow, the anticipated exports could not pick up due to severe pricing competition from China. The pricing competition was so severe that the local manufacturer in U.S. went to court and got an antidumping suit, which was awarded to them and the results of which came just about a couple of weeks back.
The Chinese capsules have been levied with 88% duty, whereas Indian capsules have been levied with 14% duty. So this places us in a comparative advantageous situation. And post — this antidumping duty suit is all together different from Trump’s proposed duty. So this is anyway going to be there irrespective of Trump duties there or not. So lot of distributors, consumers in U.S. have been in contact with us for the last four months, and we have done couple of visits to U.S., and we found that there is a good opportunity for scaling up the business fast.
Last year, our expose to U.S. market was about 10% — 11% of our total expense, roughly around INR539 lakhs. And we expect this to grow much faster this year and with much better profitability. We are expecting to execute our two balance HPMC lines quickly. And the lines though got delayed last year due to one of the reasons was, of course, the less-than-expected offtake in U.S. market. Other was, of course, our idea to validate the design of size double zero capsule.
So now going forward, in the current year FY’26, we anticipate that HPMC business which last year gave us a top line revenue of INR9 crores should give something around INR27 crores of top line revenue in the current year.
I hope I have answered all components of your question.
Yashvi Gandhi
Yeah. Sir, my next question is on the execution front. We saw great execution from your end in the Capsule segment in FY’21 and ’22. However, we’ve been constantly missing on our targets and guidance. Quarter-on-quarter we’re worrying about some challenges and delays that are happening. So do we see that FY’21 and ’22 were just the one-off years and we’re not going to see any spike? Or can you please highlight the reasons for the same and tell us what do we expect from the Capsule segment going forward? And what would be the sustainable profit margins from this business be in FY’26 and beyond?
Sunil Mundra
Yeah, I would say that FY’21, ’22 were definitely one-off years in terms — because they were backed with the COVID demand. Post FY’22, there was a drop in demand, which has increased during quoting period, and there was excessive pipeline stocks which slowly tapered down and subsequently demand stabilized. There was a drop in demand, which led to drop in our selling price, thereby leading to the correction in our margins or reduction in the margin. But post ’22, we have taken several measures, corrective measures which are giving us confidence that our bottom line is going to go up now.
One of that measure was that our focus on taking away from the ROW markets where the prices were low or there was a chance of currency fluctuation leading to drop in prices in those countries going to some of the developed countries market. Second, in domestic markets, focusing on large volume, large buyers, companies which are Indian top 40, 50 pharma companies. And then our focus is on — that we consistently manufacture our volume growth. So prior to ’21, ’22 — during ’20, ’21, ’22, we had done a significant jump in our production capacity by almost 180%, 190%, from 7 billion to almost 18 billion, 19 billion.
So if you can notice the turnover increase in last four years from INR135 crores in ’21, ’22 — to FY’22, INR173 crores, then INR153 crores and INR166 cores now. So as you can see, there is a drop from FY’23 to ’24. But post that, again, we have got our momentum back, and there is a growth of almost about 9% to 10% in the top line. So we are convinced that going FY’26 and FY’27 in Capsule business, we should do top line revenues which should give us, I mean, the incremental revenue in the mid-teens.
And going forward in FY’26 also we should do about 8% to 10% growth. So I see definitely a good future for capsule industry, especially our company where we have been strategizing our marketing and focusing on profitable business.
Yashvi Gandhi
Okay, sir. And my last question is about the drop in the gelatin prices that you mentioned, the decline in the gelatin prices, that will also tickle down on the final product realization, right?
Sunil Mundra
Yes.
Yashvi Gandhi
So do you expect the revenue growth to still remain subdued this year? And does the profitability get impacted? Or is it the other way around?
Sunil Mundra
No, I said in gelatin prices, gelatin is our raw material. So I think this will lead to increase in our bottom line. I don’t foresee any drop in our selling price. Our selling prices are going to go up because of our change in marketing strategy, change in our product composition like HPMC revenue going up. So the bottom lines are going to definitely go up. Gelatin prices drop will increase our bottom line.
Yashvi Gandhi
Okay. Yeah. Thank you so much, sir.
Sunil Mundra
Thank you.
Operator
We’ll take our next question from the line of Nirbhay Doshi from Western Research. Please go ahead.
Nirbhay Doshi
Hello sir. Congratulations on different types of results.
Sunil Mundra
Hello. Yeah, please go ahead.
Nirbhay Doshi
Sir, on API side, there is significant delays from both our side and Pollution Board. The API capex has doubled from INR100 crores to INR200 crores. This has levered our balance sheet. But sir, revenue are not yet to flow in. So our net realizations are down. From on a board level view, how do you see this capital allocation decision given the current profitability and balance sheet impact?
Sunil Mundra
Yeah Nirbhay, thank you for asking the question. API project had suffered delays due to various reasons and majorly, it was due to governmental statutory approvals, which got delayed. You mentioned that the increase in capital outlay was from INR100 crores to INR200 crores, which I would say, needs to be seen in a correct perspective.
At INR100 crores, the capacity of the project was at a much lesser level. It was at about 17 metric tons of API production. Now the revised outlay — actual outlay is about INR167 crores of — for this thing. With other expenses capitalized, it is coming to capex block of INR200 crores. So the increase in the capex from INR100 crores to INR167 crores was made — had made the capacity increase from 17 to 37 metric tons. So this increase became necessary keeping in mind our commitment given under PLI Scheme for three products and which we hope to capitalize upon now once we start the full-scale manufacturing and selling.
Your question about the capital allocation. Capital allocation is done based on the decision taken by the Board of Directors based on the opportunities — marketing opportunities and strategic decision making.
Nirbhay Doshi
Yeah. And sir, secondly, I say that you have capitalized the entire asset, but there is no major difference in depreciation and interest cost. Why so? And sir, what would be the depreciation and interest cost on consol level from the next quarters onwards?
Sunil Mundra
Okay, so depreciation and interest, we did capitalize at the end of the quarter. So there was no significant impact on the depreciation of the quarter Q4 of FY’25. However, going forward, we see that depreciation would hit us by about INR2.3 crores and interest of about INR1.5 crores to INR1.55 crores from the subsidiary company, giving an impact to the consolidated balance sheet.
Nirbhay Doshi
Okay, sir. Perfect. And sir, lastly, in terms of profitability of the capsule business does not improve, how do we plan to finance the working capital requirement, and that will come up from the API facility? So through debt, what is the peak debt we can express at consol level?
Sunil Mundra
Profitability of capsule business is definitely going to improve. We are confident about it. But in a scenario if the profit doesn’t improve, how are we going to finance the working capital? Working capital is all well financed at the moment. We are well financed on the capital and the incremental working capital need will be met by the internal accruals. Total debt position of the consolidated group level at the moment is about INR102 crores. And we hope that it will remain around the same level, probably going forward by FY’26.
Nirbhay Doshi
Okay, sir. Thank you.
Sunil Mundra
Thank you.
Operator
Thank you. We’ll take a next question from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead, sir.
Madhur Rathi
Thank you for the opportunity. Sir, my first question is around API plant. Sir, at the INR65 crore revenue, sir, what kind of margin or what level of losses can you expect for this year? And the second one was, sir, we see that the fermentation-based APIs are very difficult to scale up. So since you have been two months since you have commercialized this, so how is the scaling up been for this product? And in pricing terms, sir, how are you seeing pricing currently for this API, like based to either prior year or earlier?
Sunil Mundra
Yeah. So API current year, we have estimated about INR65 crores of top line revenue. We expect a modest EBITDA margin of about 7% because our idea is that we will be selling mostly companies which are — do not require any kind of approvals, so which we expect this margins to improve in the coming year once we get into a better quality of customers. Now you mentioned about the scale-up challenges, yes, scale-up challenges are there in all the projects, but we have taken measures so that all the scale-up challenges are built sufficiently, and we don’t encounter any surprises.
Now regarding the prices of these APIs, as you might be aware that all the APIs are facing a sudden slight down in terms of pricing. Basically, there is overcapacity across China as well as maybe, to some extent, in India. Then there is maybe less-than-expected growth in demand, which has led to slight down in pricing. Compared to last year, I think the prices have slided downwards by about 12% to 15% in most of our segment of APIs.
Madhur Rathi
Got it. Sir, our quality — sir, is the product being — so what was the quality expected from these products? Are we able to manufacture to that quality? Or do you need some more further improvement going forward?
Sunil Mundra
The product quality is a basic requirement if we have to sell. So basically, we are selling all pharma-grade products. So they will have to comply with the pharma standard. So quality is not an area of concern, which is always has to be met, whereas the yield of the process is an area where we need little improvement and where I am confident with the continuous monitoring of the ongoing batches and continuous constant improvement in R&D, we will be able to achieve the yield levels matching to the industry standard.
Madhur Rathi
Got it. Sir, on the capsule side, sir, if I consider — my question is in two segments. Sir, how much percentage of our capsule revenue of the INR170 crores we did last year would be coming from regulated markets? And sir, what is the margin differential if we sell to the regulated markets versus our selling into domestic or rest of the world market? And sir, how big could be the U.S. opportunity? That is the first question. And sir, how much was earlier catered by these Chinese players?
Sunil Mundra
Out of INR170 crores, our expose to some of the regulated and semi-regulated markets, our total exports was about INR48 crores. So I would say, exposed to regulated markets like U.S. and probably Canada, the markets like Brazil, South Africa were about INR20 crores. So we did about INR20 crores of exports out of INR170 cores. Now talking about the U.S. opportunity in terms of these latest changes in the duty structure, I foresee that we will significantly improve our business to U.S. Currently, we did about INR5 crores. I think going forward, we anticipate that this could increase to about INR20-odd crores. INR22 crores is what we expect, so the jump in the U.S. business, which will definitely come with a better margin than our current margin.
Madhur Rathi
Got it. And sir, if you can just give me a broad range of what would be the margin? So if we made 10%, 11% last year and in a steady state, we expect it to go to 15%. So would the margins in regulated market be 25% or even higher than that or lower than that?
Sunil Mundra
Regulated market margins are definitely better. I can’t say that it would be 25% in the domestic margins at 10% to 12%, regulated market could be about 17%, 18%. But at the same time, last 1.5 years, the geopolitical situation caused all the international freights to go up and down and there — that was a big drain on the bottom line on that. So freight, especially on the sea freights and air freights cost had gone up in some of the shipments. So it was down. Otherwise, margins are better, I would say, by 7% to 8% EBITDA margin.
Madhur Rathi
Got it. Sir, just a final question from my end. Sir, if I look at the industry landscape, sir, ACG is like the biggest player that we can — based on our research findings. Sir, how do we gain customers? Or how — what is the value proposition of Natural Capsules in pitching to clients and gaining customers versus ACG or any other player globally?
Sunil Mundra
Yeah. That’s a good question. ACG is the biggest player in the market with almost closing — 50% of the market share, whereas we are close to 10% market share. ACG, because of being an entrenched player, more than a 60-year-old company, so they had a much bigger customer share and — I mean, of the bigger companies and those of the regulated market business. So now the strategy, we are working on strategy how to gain customers from ACG. There — ACG has got a very long lead time on delivery side. We are — because of the virtue of our own high-speed machines, we are able to deliver quickly. Our quality is at par with ACG and we — because our pricing is competitive as compared to ACG and therefore we are able to convince the customers of ACG or other larger players like Capsugel Lonza, and we are able to supply those and thereby acquire more new customers.
Madhur Rathi
That was very helpful. So thank you so much. Sir, just a clarification, sir, we are planning a mid-teens kind of growth in our capsule division for this year, right?
Sunil Mundra
Yeah. There are two HPMC lines, which was supposed to come last year, got delayed, but now they are on track. So currently, two more HPMC lines are getting added.
Madhur Rathi
Sir, this is — on this mid-teen revenue growth, sir, what kind of margins can you expect? Can you expect some improvement over the 10%, 11% depressed margin that we did last year?
Sunil Mundra
The incremental revenue definitely should be higher than last year’s this thing — business because we’re expecting the incremental business to come from export markets and I anticipate that those revenues should be much better. So I would say, they will be in the range of about 18% to 19%. So thereby our overall margin should improve from current about 10%, 11% — 10.5% to 14% and especially stand-alone on the capsule business for the overall business.
Madhur Rathi
Got it, sir. Thank you so much and all the best.
Sunil Mundra
Thank you.
Operator
Thank you. We’ll take a next question from the line of Praveen Sharma, an individual investor. Please go ahead.
Unidentified Participant
Hello. Am I audible?
Sunil Mundra
Yes, sir.
Unidentified Participant
Yes. My first question is, do you — is there any anti-dumping duty placed by U.S. on gelatin capsules also? Or it is only on HPMC?
Sunil Mundra
It is only on HPMC, not on gelatin.
Unidentified Participant
Okay. Because I was reading somewhere it was high at gelatin, so maybe okay. So basically, what is the share of the Chinese player currently in HPMC capsule as far as U.S. concern? Means what is the space which is going to be vacated by them?
Sunil Mundra
I think the U.S. market at a macro level is about in the range of about 110 billion capsules and the domestic production is hardly about 20 million, 22 billion capsule there. The rest of 90% of it was getting imported from China. So there’s a big amount of opportunity there. I think they are vacating almost about 80 billion capsules capacity which is coming up. But at the same time, having said that, Chinese are also trying to put up very quickly some plants in U.S., all that’s said and done, but still there will be a big opportunity for companies like us.
Unidentified Participant
Okay. And you don’t think that they will be dumping those capsules here in India once they are prohibited from U.S.?
Sunil Mundra
I think there is an import duty already in place, 30% import duty is there in India, on gelatin and HPMC capsule.
Unidentified Participant
Okay, okay. Okay. And sir, what is the — gelatin capsules is apart from the prices, which will boost our margins. Do we see demand pick up as far as these gelatins are concerned, especially in light of this new COVID rate.
Sunil Mundra
Yes. Yes. I would like to submit that demand for capsules has always been growing. There has been never a degrowth. It grows at a consistent rate of 6% to 7%. So why there is a sudden up and down in the demand supply gap is due to the periods of excessive capacity additions and periods of no capacity addition. So it plays in between. So I would think that during COVID period, lot of capacity got added and there was a huge demand, subsequently there was a drop.
So now the demand and supply gap is stabilizing at the macro level. And at company level, we are already well placed with order backlogs of about three to four weeks on most of the sizes, and we are — our target at this point of time is to improve our customer profile by concentrating more on large volume, large value, large profitability business and customers.
Unidentified Participant
Okay. And sir, basically, in the capsules being in the expedient category, is there any entry barrier? I mean, how difficult it is for somebody to start new lines and just start putting up selling its production or it takes approval from the end customer and it takes time to do that?
Sunil Mundra
Yes, those capsules are an excipient category. They are important component of any finished capsule product because the product needs to be filled at the customer place. The capsule is a fragile product. It is transported through air-conditioned transportation, and nowadays, the capsule filling equipment are very high speed. So if the capsule formation is not as per the expected lines and suitable to the machine, it will lead to rejections.
And therefore, customers generally do not change their supplier just because somebody is offering a little lesser price. So there is a consistency from the customer end also. And therefore, any new entrant coming into the industry also would require some time to stabilize this quality, gain entry into some of the large volume customers, and therefore, there is some sort of indirect entry barrier there.
Unidentified Participant
Great, great, great. Sir, my last question is on the API. So you said if I heard correctly, is the depreciation and interest is 1.5 [indecipherable], so yearly it is INR16 crores, correct?
Sunil Mundra
Yes. I think it will be about roughly — quarterly about INR3.8 crores to INR4 crores. Yes.
Unidentified Participant
Okay. And we expect to make an EBITDA of INR7 crores and over and above that PLI of INR9 crores. So that should offset it, correct? Is my understanding correct?
Sunil Mundra
Yeah. We said 7% EBITDA, so that should be something like about INR4.5 crores or so.
Unidentified Participant
Okay. And INR9 crore PLI, correct?
Sunil Mundra
Yes.
Unidentified Participant
So it should be around INR12 crores of — okay. Okay. Okay. So this year should be some kind of loss at that level? And at consol level, capsule should take over and deliver the profitability?
Sunil Mundra
Yes.
Unidentified Participant
Last question on the same is that we are supposed to get Indian approval and European approval for the PLI — sorry, for the API. So what is the status on that?
Sunil Mundra
So Indian approval in sense, the local drug licenses, GMP are already received, the WHO GMP which is also issued by the Indian authorities is expected by this year-end. European CEP filing is going to happen by this year-end, and we expect CEP approvals by Q3 of FY’26.
Unidentified Participant
So without GMP approval in India, we can sell it to the Indian customers, domestically?
Sunil Mundra
Yeah, only we have — no, no, no, without GMP approval, you can’t sell. I said GMP approval is already in place. In the WHO GMP, there is another round of GMP inspection done in guidelines with the WHO. That is expected by December this year.
Unidentified Participant
Okay, great. Great, sir, thank you very much and all the best.
Sunil Mundra
Thank you.
Operator
Thank you. We’ll take our next question from the line of Manan Shah from Moneybee Investment Advisors. Please go ahead.
Manan Shah
Yeah. Hi sir. Thanks for the opportunity. Sir, you mentioned on the API side, we are not yet at the industry average yield. So at what yields are we and what would the industry average yield?
Sunil Mundra
That will change product to product. So I would say, for any products like betamethasone, probably the industry yield, we are the only manufacturer at this point of time in India. I would compare it with Chinese. Chinese are in the range of, say, 42%. We are at about 34%, something like that. So we need to improve the yield to become competitive with reference to the Chinese prices.
Manan Shah
Okay. And have you been able to identify areas or ways how you can improve this yield? And the margin guidance that you gave of 7%, is that assuming your current yield or the improved yield?
Sunil Mundra
So the margin guidance is given as per the current yield only. And as to the — efforts are being made to improve the yield on a continuous basis because in a plant like API manufacturing, R&D is a continuous effort. And therefore, we are hopeful that as we go by, as the time passes, the more and more batches, the yields will improve, and as we work on new technologies, new routes of synthesis, yields are definitely going to go up.
Manan Shah
Okay. Then you mentioned on the HPMC lines, which were expected to be delivered last year, now when are you expecting them to be delivered and then get into commercial production?
Sunil Mundra
Yes. We have lined up down since we are seeing sudden demand pick up from the Western markets. We have lined up one coming Q2 and other one maybe by end of Q3.
Manan Shah
Okay. And on the capsule side, then your current lines are fully utilized or there is still potential to get better production out of the current line?
Sunil Mundra
So current lines that generally, we work on a 100% capacity utilization. Last year, our capacity utilization was about 94%. So the growth will come, one, maybe to some extent by utilizing a little more optimum utilization of capacity, then by improving the profile of the customer. So that would also add to the bottom line as well as the top line. So some of the low-end customers, which — where we sell the same product at a slightly lower price, we cross over to new customers where the pricing is higher and the bottom line is higher.
Manan Shah
Okay. But you also said that we are looking at 15% or a mid-teens sort of revenue growth, right, for the capsule business. So that is — so you think the primary driver in that is going to be the realization and not the volume?
Sunil Mundra
Realization is one. And of course, the addition of HPMC capacity.
Manan Shah
Understood. And in terms of margin for the capital business, is it fair that we can target mid-teens sort of a margin for this year?
Sunil Mundra
Yes, we are looking at margins in the current year to the range of about 14%, 14.5% on an aggregate basis. On HPMC, definitely, it will be higher. And therefore, HPMC, the volumes are going up. We expect this current level of 10.5% to go up to 14%.
Manan Shah
Okay. And on the API side, we were undergoing stability study with various customers. So where are we over there? And when do you expect these customers — customer approvals to come through and you can start selling with the approved customers where the margin profile can be higher?
Sunil Mundra
Yeah. So our products are in stability studies of various customers. So far, we have supplied our samples to almost 33 customers and 18 we have started supplying. And going forward, this — once the stability studies of more customers get approved, our volume of business will increase. Stability studies the customers do at their formulation level. It depends on what grade of customers, which market they are selling. Therefore, stability studies is some type — for some companies is a basic requirement, but for some companies, extended stability studies become requirement. Some of those who want to go for regulated market, the requirements are much tougher.
Manan Shah
So how long do these generally last? Because I believe we’ve been doing this for at least six to eight months now?
Sunil Mundra
Yeah. So I think the Indian companies would look for about six to nine months of stability studies, whereas those who are wanting to go for U.S. and all, they would look for 18 months of study.
Manan Shah
Okay. And the quality that we were able to manufacture out of the commercial batch was at par from the kilos scale batch? Or there was any improvement or deterioration or anything on that part?
Sunil Mundra
So I answered that question. Quality is a basic requirement. We can’t sell anything less than the quality expected by the customer, which is also the quality standards defined by the government in pharmacopeia. So basically, quality is always — has to be matched, then only we can supply that.
Manan Shah
Okay. And currently, we’ve only commercialized dexamethasone, right or no?
Sunil Mundra
No, we are selling dexamethasone and derivatives. We are selling betamethasone derivatives and prednisolone derivatives, hydrocortisone derivatives. Earlier, we were importing intermediates from China and converting them into base API and derivatives. Now we are trying to backward integrate having our own intermediates manufactured here in the site, and sell the same capsules — sell the same API, which we have been selling earlier using the Chinese inter.
Manan Shah
Okay. So as and when we are able to make these intermediates, our margins should also improve?
Sunil Mundra
Yes. Absolutely.
Manan Shah
Okay. And what is the debt repayment obligation for current year?
Sunil Mundra
Debt repayment obligation at the subsidiary level, API level is about INR6 crores — INR5.5 crores to INR6 crores and at the parent company level, about INR4 crores. So I think total debt repayment is roughly around INR10 crores.
Manan Shah
Okay. But you also mentioned that we are looking to maintain the gross debt. So we are looking to refinance it primarily?
Sunil Mundra
Yes, probably. Yeah, it could be because of the increase in working capital.
Manan Shah
Okay. Okay. Understood.
Sunil Mundra
As our top line revenue — the top line goes up, we might seek additional working capital.
Manan Shah
Okay. Understood. And last question, sir, on the API, our subsidiary, I believe there was a clawback clause, which I think gets triggered by end of current year, right?
Sunil Mundra
Can you please repeat the question? Drawback clause?
Manan Shah
Clawback clause.
Sunil Mundra
Clawback. Yeah. Okay. Okay. Okay. You’re referring to the investment done by private equity?
Manan Shah
Yeah. So I believe we won’t be meeting the targets that were set, right?
Sunil Mundra
So that clawback clause is referring to FY’27, actually. FY’27 was a year five in which the investor wanted the clawback to be given, but we have requested the investor also to extend it by a year or so.
Manan Shah
And the investor has agreed?
Sunil Mundra
Informally, they have agreed. Of course, not in writing. Informally, they have agreed.
Manan Shah
Okay. Thank you. One last question. Sir, one last question on the PLI side. This PLI incentive will be largely recorded in the Q4 or it will be evenly spaced out throughout the year?
Sunil Mundra
No, the government rules permit quarterly release of these funds. We expect, of course, our major ramp-up happening in Q3, Q4. So we expect it to receive in Q3, Q4.
Manan Shah
Okay. Thank you so much.
Sunil Mundra
Thank you.
Operator
Thank you. We’ll take our next question from the line of Pankit Shah from NSFP. [Phonetic] Please go ahead. Please go ahead with your question.
Since there is no response, we’ll move on to the next question from Yash, an individual investor. Please go ahead.
Unidentified Participant
In the API business.
Operator
Can you please be louder. [Phonetic] We cannot hear you clearly. Can you use your handset mode, please?
Unidentified Participant
Yes. Am I audible now?
Operator
Your volume is very low.
Unidentified Participant
Is it better now?
Operator
It’s still the same now. Please go ahead.
Unidentified Participant
Yeah. Sir, in the API business, can you please share a road map of achieving the regulatory approvals, like by when we can expect which approval and by when we can expect the commercial supply in the regulator market?
Sunil Mundra
Yeah. So in regulatory approval, there are two major approvals from Europe and from U.S. Our target is that we are expecting our WHO GMP audits to take place by Q3 of the current financial year and received the approval by Q4 of the current financial year. We start filing our CEP and DMFs by Q4 of this current financial year. CEP is for European Union approvals where they require about nine months of review and post review, the granted the CEP. We expect the CEP grant to happen by Q4 of the next financial year.
Similarly, DMF requires about 12 to 18 months of review by the customers and by the regulatory authorities. We expect that to happen by Q3 of FY’28. And there, after both the Europe and the U.S. business once the DMF and the CEPs are reviewed or approved by the customer or the regulator, then we start inviting inquiries and the audits.
Unidentified Participant
Great. Great. And sir, given the increase in focus on regulated market, what additional investment in compliance are planned for the next 12 to 14 months?
Sunil Mundra
I think the site has been constructed and all the facilities erected keeping in mind the regulatory requirements. So fundamentally, there is no major investment required other than maybe incremental requirement of some of the equipment, which could be specifically required for those regulated market requirements, like particle size, PFC units and all that. I don’t foresee any major expenses.
Unidentified Participant
Okay. Okay. Thank you very much, sir. And all the best.
Operator
Thank you. [Operator Instructions] we have a question from the line of Ratnakar Gokhale, and individual investor. Please go ahead, sir.
Unidentified Participant
Good afternoon. Thank you for the opportunity. My question is related with the growth we are expecting in the coming year. So out of this INR170 crores, what we have done, how much is — what is the revenue percentage of the capsule business? And how much have we done through the API business?
Sunil Mundra
So I think it is — majorly capsules only, API business was very marginal, just about INR1.26 crores because basically, in API business, we are selling only for sample submissions.
Unidentified Participant
Okay. So — and out of this — then out of this INR170 crores, we have done approximately INR5 crores from the export to U.S.A. if I understand correctly. And that is expected to go to, let’s say, INR20 crores in the coming year. So we are expecting a INR15 crore jump from the U.S.A. business. But for a company as a whole, in order to, let’s say, get a 15% revenue jump, we will need to reach the target of INR195 crores or INR200 crores, out of which about INR15 crores is going to come from U.S.A. supposedly. Where would the next balance of the INR15 crores or INR10 crores will come from?
Sunil Mundra
Yeah. See, the U.S. exports is one part of the exports of the HPMC capsules. There will be still capacity in HPMC lines remaining, which we intend to sell in India and other parts of the world. We anticipated the increase is coming more out of the HPMC business.
Unidentified Participant
So if you are expecting 10%, 15% growth there, then on company level, how much is the revenue growth that we expect in the current year?
Sunil Mundra
No, I said the company level revenue is about INR195 crores to INR196 crores, which is — which means about INR25 crores, INR26 crores of incremental business. Out of which about INR15 crores can come from U.S., another INR10 crores will come from HPMC business, incremental increase in margin of gelatin from — coming from other sources by selling into better customer profile. So that is how the revenue is going to come.
Unidentified Participant
And sir, once this API is — supposedly in the next year, API all start firing dexamethasone and rest of them, then how much — right now, they’re contributing 1% to the revenue, how much you expect them to contribute in the next year to the revenue of the.
Sunil Mundra
So next year, we are anticipating about INR65 crores of revenue from the API business, on a consol basis INR260 crores. So roughly, there will be about 27% — 25% to 27%.
Unidentified Participant
So if at all, the API business is going to ramp up to that much, then should this not — the entire revenue, should this not go up a little bit more than INR195 crores?
Sunil Mundra
Could you please repeat the last question again?
Unidentified Participant
I said if API business is going to contribute 27% of the revenue, so if INR195 crores is the total turnover, which we expect, then.
Sunil Mundra
No. So the total turn on consol basis will go up to INR260 crores.
Unidentified Participant
Okay, sir. Thank you.
Sunil Mundra
Thank you.
Operator
Thank you. As there are no further questions, I now hand the conference over to Mr. Sunil Mundra for closing comments. Over to you, sir.
Sunil Mundra
Yeah. Thank you for joining the call. Please be assured we are working very hard to regain growth and profitability, and we’ll keep communicating and updating you on our progress. Thank you. Thank you, everybody.
Operator
[Operator Closing Remarks]