Piramal Pharma Ltd (NSE: PPLPHARMA) Q3 2026 Earnings Call dated Jan. 29, 2026
Corporate Participants:
Gagan Borana — Head Investor Relations
Peter DeYoung — Chief Excutive Officer
Nandini Piramal — Chair Person
Vivek Valsaraj — President and Chief Financial Officer
Analysts:
Tushar Manudane — Analyst
Abdul Kadar Puranwala — Analyst
Madhav — Analyst
Parikshit Gupta — Analyst
Shyam Srinawasan — Analyst
Vinod Sohanlal Jain — Analyst
Alankar Garud — Analyst
Dhruv Dobalha — Analyst
Avnish Tiwar — Analyst
Amir — Analyst
Avnish — Analyst
Tushar Manudane — Analyst
Abdul Kadar — Analyst
Presentation:
operator
Ladies and Gentlemen, good morning and welcome to the Piramal Pharma Ltd. Q3FY26 earnings conference call. As a reminder, all participant lines will remain 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 the operator by pressing Star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Gagan Borana, head of Investor Relations and Enterprise Risk Management for opening remarks. Thank you. And over to you Gagan.
Gagan Borana — Head Investor Relations
Thank you Ryan Good morning everyone. I welcome you all to our Post Results Earnings Conference Call to discuss our Q3FY26 results. Our results material have been uploaded on our website and you may like to download and refer them during our discussion. The discussion today may include some forward looking statements and these must be viewed in conjunction with the risk that our business faces. On the call today we have with us our Chairperson Ms. Nandini Piramal, CEO, Global Pharma, Mr. Peter D. Young and our CFO Mr. Vivek Palsaraj. With this I would like to hand it over to Ms.
Nandini Piramal to share our thoughts.
Nandini Piramal — Chair Person
Good day everyone and thank you for joining us on our post Results Earnings Call as guided earlier FY26 has been a muted year for the company impacted by the inventory destocking in one of our large on patent commercial products by the customer. Slower early stage order inflows in H1FY26 due to an inconsistent recovery in US biopharma funding and regulatory delays in the inhalation anesthesia for the ex US markets from the Diqwal facility. However, recently we are seeing early signs of a recovery with pickup in RFPs and order inflows on the back of improved Biopharma funding and increased M and A activities in the US Healthcare space.
Sustenance of this momentum along with the faster decision making by the customers would be the key to healthy growth in FY27. Complementing our complex hospital generics portfolio, Yesterday we entered into an agreement to acquire Kenalog from Bristol Myers Squibbling. Kenalog is a branded commercial injectable containing Triamcinolone Acetonide, a synthetic corticosteroid with anti inflammatory, antipyretic and anti allergenic properties. It is indicated as an adjunctive therapy in acute gouty and rheumatoid arthritis as well as other inflammatory conditions. Kenalog is a branded commercial injectable product with complex manufacturing requirements complementing our existing CHG portfolio. This complexity limits competition and enables the product to deliver EBITDA margins comparable to existing CHG portfolio.
The acquisition also broadens our CHG offerings and add revenues without significant incremental cost, particularly in the us, Europe and the Asia Pacific markets. This is an all cash transaction with an upfront consideration of US$35 million along with the additional contingent consideration of up to 65 million tied to the achievement of agreed upon operational and financial milestones. Talking about our performance during the quarter nine months of FY26 we reported revenues of 21.40crores and 6117crores for the quarter nine months, which is a YoY decline of 3 to 4% despite lower revenues. Impact on EBITDA was partially offset by our efforts towards cost optimization and operational excellence.
During the quarter nine months we reported EBITDA margins of 11% and 10% respectively. Talking about our quality and regulatory track record, we cleared 30 inspections including two USFD inspections without any OAIs during the nine months of FY26, therefore maintaining our best new class track record of zero OAIs. In addition to regulatory inspections, we have also undergone 170 customer audits so far this year compared to 142 in the same period last year. On sustainability, we showed a meaningful increase in our sustainability scores from global rating agencies such as S and p global and ecovadis with a 15 to 18% increase over last year.
This improvement underscores our continued commitment to responsible operations and sustainable growth. Moving on to business specific highlights starting with our CDMO business. Our CDMO business reported revenues of 1,166 crores and 3,207 crores during the quarter 3 and 9 month FY26 respectively impacted by inventory destocking and the slow early stage order inflow due to muted biopharma funding in the first half of the year. However, as mentioned earlier, we’re seeing some early signs of recovery in the last three to four months. The US Biopharma funding environment has witnessed a sharp rebound in the second half of calendar year 25 supported by increased M&A activity across the US healthcare.
Specifically, according to industry reports, US biopharma funding in H2 calendar year 25 was nearly double that of H1 and more than 50% higher compared to H2 calendar year 24. Sustenance of this funding momentum would be a key factor to support faster decision making by the customers and increase order inflow velocity, helping us build visibility for healthy growth in FY27. During the quarter we saw significant improvement in RFPs coupled with a good pickup in orders from both large farm and mid sized biotech companies. Order inflows at onshore facilities such as Greenschwap and Riverview were particularly encouraging.
Our onshore facilities with differentiated capabilities have a superior gross margin profile which at optimum revenue scale can deliver healthy EBITDA margins. Despite a challenging year, we continue to believe in the long term growth prospects of our CDMO network and continue to back them with timely investments in capacities and capabilities. Our US $90 million investment to expand our sterile injectables and payload linker capabilities at our Lexington and Riverview facilities is on track. We’re seeing very good customer interest for our North American sites, especially those looking for onshoring in North America. During the year we also strengthened our business development team to adapt to evolving market dynamics and to deepen engagement with customers across key markets.
We’re seeing some positive results from the same customer delight remains our key focus area with strong execution across our network, superior quality and robust supply chain. During the year we’ve seen an increase in our customer satisfaction scores across multiple sites which should help us win repeat business and cross sell differentiated capabilities. Moving on to our complex hospital generics talking about our performance in the inhalation anesthesia segment, we continue to maintain our leadership position in the mature US market with our market share increasing to 47% versus 44% in March 2024. We have also commenced Stevo flooring supplies from a lower cost Sigwell facility for the rest of world market.
However, the initial ramp up has been slower than expected due to regulatory delays. In the intrathecal segment, we continue to maintain number one position in intrathecal baclofen in the US with a 75% market share in our injectable pain management segments, our efforts to resolve supply constraints have begun to yield results on the differentiated and specialty products we’re continuing to invest in in 505 e2’s complex generics, differentiated generics and branded products through in licensing deals and co development projects to enable long term growth. Moving on to our consumer healthcare business, we continue to develop strong growth momentum this quarter as well.
The BCH sales grew by 20% in quarter three and 16% over the nine month period driven by both broad based performance across the portfolio. Our Bauer brands once again led the growth engine delivering around 30% growth in Q3 and 23% over nine months. Key brands including Lidl’s, Lactocalamide, CIR and Irange outperformed in continued growth traction across markets. On the distribution channel side, our E Commerce business remained a standout performer, growing at over 50% during the nine month period and now contributing 26% to total PCH sales. This reflects increasing strength of our digital capabilities and the continuous shift in customer preference towards online platforms.
We have maintained a calibrated and disciplined approach to media and trade promotion investments with a clear focus on scaling up our brands into established and profitable brands. In nine months FY26, our media and promotion spend was around 12% of BCH sales, broadly similar to last year, reflecting consistency in our brand building strategy. In terms of new product introductions, we launched 30 new products and SKUs in the last nine months, thus summarizing the performance on the outlook going forward. I’d like to say while FY26 has been a muted year for the company, we continue to believe in the long term growth prospects of our businesses and back them with timely investments in capacities and capabilities.
We’re seeing some early signs of recovery in our CDMO business with a significant increase in RFPs and pickup in order inflows since October, primarily on the back of improved biopharma funding in the US Our overseas side, which have a superior gross margin profile, are witnessing good customer interest, especially those looking to onshore in North America on achieving optimum scale. We’re positive that our overseas sites will start contributing meaningfully to EBITDA going forward. We have also enhanced our BD team to better engage with customers and simultaneously strengthen our execution to deliver customer delight. With a good foundation in place in terms of capacity, capability and global network, we’re looking forward to optimizing them to deliver better value in the CHD business.
While we maintain our leadership position in the US market, we’re looking to broaden our product portfolio and expand our presence into ex US market to drive growth going forward. Adding differentiated and specialty products to our portfolio with limited competition will be an important lever for us. Acquiring niche brands like Kenalog is an important step in this direction. Finally, in our consumer business, we expect to continue our performance in our representative market led by our power brands and expansion for our distribution network. Before I end, I’d like to reiterate that Q4 has been historically the strongest quarter for the company and and we expect this trend to continue as well.
With this, I’d like to open the floor for the Q and A. Thank you.
operator
Thank you ladies and gentlemen. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone telephone. If you wish to Remove yourself from the question queue. You may press star and two participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Tushar Manudane from Motilal OSWAL Financial Services Ltd. Please go ahead.
Tushar Manudane — Analyst
Thanks for the opportunity. With respect to analog, while this product do not have patent, but interestingly there are still no generics. But if you could also share what kind of sales this product generates currently and where will this get manufactured once you acquired this product. So with respect to the sales, we expect annualized revenues between 30 to 40 million for the product. And on the manufacturing side, it’s made on behalf of the seller at the moment by one CDMO and it’s in the process of being transitioned to a second CDMO by the seller. And we will assume responsibility for that through the transition and integration. And so this product has been growing or it’s been pretty stable currently the. Product is generally in a value decline and overall it’s stable in terms of volumes and that’s typical for generics even with limited competition.
Tushar Manudane — Analyst
Got it, sir. That is from missing. Thank you.
operator
Thank you. We take the next question from the line of Abdul Kadar Puranwala from ICICI Securities. Please go ahead.
Abdul Kadar Puranwala — Analyst
Yeah, thank you for the opportunity. So my first question in regards to the CDMO business for the quarter and nine month nfe, include the inventory restocking, would it be fair to assume that the portfolio has grown in single digit?
Peter DeYoung — Chief Excutive Officer
Yes, that’s right. So if you were to look on a like to like basis, the portfolio has grown in a low single digit.
Abdul Kadar Puranwala — Analyst
Okay. And second, just on this acquisition again, so for Canada, you know, wanted to understand the rationale for purchasing this. I understand, you know, it’s being done at quite a reasonable valuation on in terms of the upfront payment. But how well does this product fit into a portfolio? And secondly, from year on, how should we look at this CSG business growth entirely with this inorganic and organic growth in place?
Vivek Valsaraj — President and Chief Financial Officer
So the first is the strategic rationale is the underlying customer alignment. So if you look at how we go to market in this business, we are very strong in the hospital and I guess that channel and our existing sales, marketing and distribution capabilities would be aligned with that channel. And so this product could be sold and distributed through our existing capabilities, particularly in the relevant markets where this is being sold with the largest revenue contribution. And so we see significant synergies because we can add the revenue and add this to our basket of offerings without significant additional operational cost and the ultimate customer or buyers would be the similar buyers and customers as what are buying our current portfolio and offerings.
And so we see this as being in line with our overall ambitions. And if you look at the underlying product, it is while it’s not a 505, it does have limited competition due to certain complexities in the manufacturing requirements that make it difficult for large numbers of competitors to offer it. And so we again think that that’s in line with our overall strategy and approach. So we see this as a highly synergistic and strategy aligned addition to our portfolio. And as you mentioned, we found the overall value to be beneficial in line with our financial metrics.
And in terms of the overall mix, we will continue to look at co development, licensing and acquisitions to add to the portfolio for the growth in our overall plan in addition to the growing the existing base business through the elements we described in our lrp. And so by the existing base business it would be for example leveraging growth of our inhalation portfolio outside the US as we get the additional registered markets from the Digwell facility.
Abdul Kadar Puranwala — Analyst
So sir, any color on what would be the sales contribution outside the US of the 3540 million talked about?
Peter DeYoung — Chief Excutive Officer
Abdul, we’re not giving a specific guidance at this stage and we’ll come back on that at a later stage.
Abdul Kadar Puranwala — Analyst
Okay, fair enough. And just on the $19 million investment, what you’re doing towards Lexington and Riverview facility. So by what is the time frame here in terms of, you know, when this capacity gets added and in terms of, you know, the kind of asset turn you would be looking on this capacity.
Vivek Valsaraj — President and Chief Financial Officer
So for the coming online, the linker payload expansion at Riverview is expected to come online this quarter. In fact it’s nearly ready and for the purposes of the lexing facility, I think that’s the end of calendar year 27. And in both cases we have strong interest and strong demand for those offerings, which is why we had interest embarked on those expansions. In terms of asset terms, I don’t believe we give individual production train specific returns, but I’ll let Vivek comment on our overall goals for asset terms.
Peter DeYoung — Chief Excutive Officer
So as you’re aware, the asset turns currently are below one for our overseas facilities and eventually depending upon the levels of utilization, we do expect it to go to between two to two and a half at scale.
Vivek Valsaraj — President and Chief Financial Officer
Just one more additional point maybe is that as covered in the talk track by Nandini, that the overseas sites are inherently structured with high gross margin and so Incremental revenue is highly beneficial to the financial metrics you described as it flips over on the assets.
Abdul Kadar Puranwala — Analyst
Sure, understood. And just final one from my end. So when we talk about Q4 being stronger for us, so in terms of say the YOY performance, are we expecting some kind of growth there as well or we are more talking about a sequential improvement? Those are the what we have done in Q3.
Nandini Piramal — Chair Person
I think Q4 is always historically strong quarters. We are expecting both. We’re expecting sequential growth. Obviously last year Q4 was helped by the large, you know, large order. So that removing that I think we should be okay.
Abdul Kadar Puranwala — Analyst
Thank you.
operator
Thank you. We take the next question from the line of Madhav from Fidelity International. Please go ahead.
Madhav — Analyst
Hi, good morning. I just wanted any incremental feedback on the 30 plus products which we have in phase three. Do we have in calendar year 26 any readouts for these products? I know you cannot name names but just in terms of how many products have the phase three readout or potential.
Vivek Valsaraj — President and Chief Financial Officer
For commercialization, we generally don’t comment on that number and we find it more useful to kind of give an annual update on the portfolio of Phase 3s. I would just comment that when we were recently at JP Morgan meeting with a lot of our current and prospective clients that there did seem to be general positive momentum for both our clients and the market in terms of progressing some of the late stage clinical assets as per their anticipation or desires. And so I’d say the overall sentiment for our portfolio and for the market was and people ability to raise money to progress the market for the clinical efforts, particularly late stage programs like the ones that we are working on was generally positive.
Sorry I can’t give you something more specific but I think that we have had a general feeling of overall for us and for the market, the progress of the clinic and I think also the FDA making timely decisions and finally the client’s ability to make fundraising actions.
Madhav — Analyst
I’m just thinking from perspective of the investment community how we should get confidence on the ramp up of the CDMO business given we obviously have a very large field phase three pipeline. But if you had to think from a three, four year perspective, how should we kind of think about it? That was the thing I was trying to understand.
Vivek Valsaraj — President and Chief Financial Officer
So I think we’ve demonstrated over, we think a period of time that the phase three pipeline has turned into sales in due course with the regular expectations around attrition and progression. And I think that maybe the second element to think about would be the general improvement in funding for our client base. Given our that we do target the emerging or the biotech customer segment and that shows up through the significant increase in RFP inflow that we saw last quarter. And if that trend continues we would expect to continue to have the potential to add new customers.
And as also mentioned, the top track we had a good bit of order booking in the third quarter which didn’t make up for the prior quarters where funding and decisions were muted. But Q3 does seem to be a leading indicator of clients ability to raise money and spend it on CDMO services and also our ability to capture some of that share of wallet. Obviously we’ll have to see how a lot of the RFPs that came in last quarter play out. Just as a rule of thumb, it’s about 180 days from when an RFP is quoted to a typical decision for a new client project that hasn’t been with us before.
And so we will see that play out in the coming quarters. But we do see a reason for cautious optimism or improved sentiment or improved outlook, particularly on a leading basis if what we saw last quarter continues into this quarter and the next.
Madhav — Analyst
Just one last clarification. Is it a fair understanding that of these 30 plus phase three products, which we have a lot of it are levered more to emerging biotech type clients rather than Big Pharma? Which is why a lot of our comments are steered towards recovery in the biopharma funding environment? Is that a fair assessment to make?
Vivek Valsaraj — President and Chief Financial Officer
I’d say that it’s actually a reasonable mix for those programs because even if we sign them up as being a biotech, typically a common place of takeout from Big Pharma with M and A would be at that phase three pre commercialization point. And so we have a couple instances in our phase three program where we signed them up when they were biotech and now they’re in our same portfolio as a large pharma. And so I’d say that it’s actually an even mix. And we would see that as these companies go commercial, a fair number of them may end up being Big Pharma by the time they launch.
And it’s not obviously a hard and fast rule, but we do see that a lot of companies, once they get that pivotal Phase three data or they get that confidence that the target action date with the PDF date with the US FDA is going to be favorable, they view that as a value point in some cases and then it flips. So I would say actually it’s a reasonable mix. The reason why we keep talking about the biopharma funding environment is because that’s how you add new clients to restock that 30 Phase 3 pipeline with new winners.
And so that’s really important for us too. We call it fill the bucket sales. That’s how we keep adding new logos, new programs because that’s where the innovation is. If you look at new drug approvals, the large majority would be still from this segment. And so if you want to find the innovation, you got to go where the innovation is. And the innovation is predominantly happening particularly for the clinical phase in that segment.
Madhav — Analyst
And do we still think the longer term guidance for CDMO holds like to get to the 11 plus billion dollar sales in next like 3, 4 years given the pipeline that you have?
Vivek Valsaraj — President and Chief Financial Officer
At this moment we continue to reaffirm our LRP guidance. We see no reason at this stage to change it. We do obviously recognize that it will require more catch up over the remaining years of the period. But this stage we don’t see reason to change that. But obviously we recognize that we are further from that than we would like at this moment.
Madhav — Analyst
Thank you.
operator
Thank you. We take the next question from the line of Parikshit Gupta from Fair Value Capital. Please go ahead.
Parikshit Gupta — Analyst
Thank you very much for the opportunity. My first question on the complex health generic business about Sevoflorain, would capturing the rest of the world markets come at a cost of margins for the first one to two years? Also which countries are we initially targeting for rest of the world? Considering that the digual facilities accredited for us, UK and Japan. So if you could first articulate on these please.
Vivek Valsaraj — President and Chief Financial Officer
So we are seeing the overall market being a little bit increased competition for the ROW markets vis a vis China suppliers for Sevoflurane. And we decided to not be overly aggressive on price to try and manage the margin growth trade off. And so we do anticipate being able to grow there, but we didn’t want to rush it at the expense of being undisciplined. From a margin perspective we do have significant cost advantages in supplying from that site. And so we don’t anticipate it being margin dilutive, but we want to approach it in a segment a stepwise and disciplined manner and therefore we’re willing to trade off a little bit slower revenue growth than our initial ambition to be appropriate in our margin.
We have an additional cost improvement program even at our Digwell site combined with our DHEA site that should allow us to continue to see ourselves to be competitive with those markets. In terms of row. We are already approved in India for India through our partners and ourselves and we have a number of what you would call the lesser regulated markets that may be earlier to provide approval. And while we do have approval to supply from India to the regulated markets, we’re targeting the lesser regulated markets first for the reasons mentioned. And so we would see those individual, I’d say row markets outside of the ones you mentioned being approved in the different as the individual regulators approve them in them over the coming, let’s say 12 to 18 months.
Parikshit Gupta — Analyst
Okay, thank you. Second question on the Kenalog acquisition. Again I understand that the limited competition and the cross sell synergies but do you anticipate any risks from non steroidal anti inflammatory immune regulatory solutions? Because such therapies have been consistently increasing in other diseases considering the side effects of the long term use of corticosteroids.
Vivek Valsaraj — President and Chief Financial Officer
So we’ve looked at the overall market for this and we feel that there will be room for therapy of this category for some time. We have not anticipated it to grow and we have not anticipated in fact we would assume some amount of price decline. And given the overall value equation for what we looked at we think that the incremental benefit is meaningful to us given our position and our portfolio. But we aren’t looking for this to be a grower. We’re looking for this to be a near to medium term contributor and anything beyond that would be great.
Parikshit Gupta — Analyst
I understand. On the CDMO business, please, I know you mentioned that you cannot share much details on the phase three trial molecules but can you please mention any specific therapy tam for example, some molecules which are nearing approvals or have been anticipating since a while now. What kind of addressable markets for those therapies can we anticipate?
Vivek Valsaraj — President and Chief Financial Officer
We see a lot of our work being in the area of oncology. We also see a lot being in the broad area of let’s say metabolic disease, whether it be cardiovascular or obesity. We see a lot in the area of rare disease, I think those would be three example categories. I know they’re very broad and that’s but I’m trying to answer as generally as I can but I’d say we are generally aligned with the areas where innovation is happening because we’ve invested in technologies that allow us to compete and provide services in those areas. And so if you look where new drugs are being approved, frankly that’s a lot of where we’re seeing our clients outside of biologics mabs where we aren’t present.
Parikshit Gupta — Analyst
I understand. On the on patent commercial manufacturing, what are you anticipating? The percentage share of the overall CDMO business for FY26 and what is the aspiration for FY27? Essentially I would like to understand the lost revenues from the customer with the inventory issues. Are we expecting that to reverse in the next year.
Vivek Valsaraj — President and Chief Financial Officer
With respect to FY27 guidance of all sorts? We’ll give that in a subsequent board meeting when we have laid out our plans for the year and we have increased certainty and so we would refrain from making forward looking comments about the next fiscal year guidance in terms of the current year breakup. We’re, we’re not really giving quantified breakups with and without that customer and we’re going to try and move away from that going forward. And so I would just try and articulate that we are seeing growth in our underlying like to like based business. Obviously not at the level we’d like, but it is growth and we anticipate even more significant growth as we look ahead.
But the quantification of that we would have to reserve for our subsequent board meeting when we give the guidance.
Parikshit Gupta — Analyst
Okay, my final question please. What amount of growth CAPEX have you anticipated or planned until your aspirational target of a $2 billion top line?
Peter DeYoung — Chief Excutive Officer
So on an average our spend of capex is anywhere between 70 to 100 million. It is slightly higher in the immediate term when we are doing big term expansions like in Lexington which we and review which we have announced and we do expect this to be the momentum in the immediate term for slightly more longer term. We’ll come back at a later stage.
Parikshit Gupta — Analyst
I understand. Thank you very much. I’ll get back in the queue for any further questions.
operator
Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant and rejoin the question queue. We take the next question from the line of Shyam Srinawasan from Goldman Sachs. Please go ahead.
Shyam Srinawasan — Analyst
Hi, good morning. Thank you for taking my question. Just one on the qualitative comment from your press release and your comments as well. RFP RFI trends for overseas facilities have started improving since October 2025. So you know, maybe you know what is the kind of conversations or discussions that are happening, whatever you can share qualitatively and just the comment on onshoring as well. If you could double click on this please.
Peter DeYoung — Chief Excutive Officer
So we noticed starting in October and maybe the backdrop, I mean for many in the call it’s obvious but maybe just to restate is we think that part of the sentiment increase was some of the industry arriving at MFN Deals with the US Administration may have created some amount of RE rating in the sector and increased ability to raise money. And so we saw that start to happen in kind of that October timeframe and saw then also aligned with that an increased interest in overall RFPs across our network, but particularly strong in our US facilities at which we have three in Sellersville, Pennsylvania for solid oral dose and liquid creatine ointment, in Riverview, Michigan for the high potent API and linker payload for ADC and then the Lexington sterile fill finish site for liquid and lyo.
So we’ve seen not just there but also there an increased amount of proposals since October. And I would say it’s a significant increase. We aren’t quantifying it, but it’s not trivial and it’s, I would say it’s large. And I would also say that we did obviously encounter this before and the proof will be in the one proposals which will play out over the next 180 days. But we do get the feeling, and I can’t give you data yet because we don’t the clock hasn’t run out to the decisions that people because they’ve raised the money.
This seems like there’s a certain proportion of this that is genuine and we hope to translate it to decisions. And that’s why we’re seeing a little bit more optimistic outlook. But it only will be proven out when we have the decisions. The only other point I’d say is if you Compare last year JPMorgan our experience to this year JPMorgan our experience, we have a higher percentage of or count of clients who were with money, a need to make a decision and a needed decision reasonably urgently to progress their ambitions. And we had a lot less of that last year.
And so we’re hoping that all of this factors into improved future numbers. But at the moment it’s to some degree a leading indicator, not a lagging indicator.
Shyam Srinawasan — Analyst
Thank you. Thank you, Peter. Second question just on the Kenalog acquisition, the contingent considerations of 65 million. So you know, while you said annualized sales of 30, 35, so what triggers this contingent considerations?
Vivek Valsaraj — President and Chief Financial Officer
We haven’t really shared a lot of details about the specific triggers, but it would be linked to elements around financial performance and transition along the lines that would be expected. And the way we’ve tried to structure it with the seller is that we are highly aligned. So as in if we pay it, it’s really good for us because we want to pay it and it’s really good for the seller because they get the benefit. And so we would see the structure as highly aligned such that we would have the financial metrics that we would want and the seller would want in scenario where we pay it or we don’t pay it.
So as in it’s good for us to pay it and it’s good for the seller if we pay it. And so we believe that the structure is aligned and it’s related to financial performance of the asset post close and some of the transition related activities that need to happen.
Shyam Srinawasan — Analyst
Got it. And just last question. I know. Third, just if you could reiterate our fiscal 26 guidance please. Revenue EBITDA. Thank you.
Nandini Piramal — Chair Person
I think we’re not changing the guidance at the moment. We recognizing that it is a stretch but I think we’re going to endeavor to meet it.
Shyam Srinawasan — Analyst
Thank you. Thank you.
operator
Thank you. We take the next question from the line of Vinod Sohanlal Jain from Wells Fargo Advisors. Please go ahead.
Nandini Piramal — Chair Person
I’m sorry, there’s a lot of disturbance.
Vinod Sohanlal Jain — Analyst
Okay, I’ll be a little louder. My. I have two questions. My first question relates to the 2030 projections. Do we stand or would you like to revise them?
Nandini Piramal — Chair Person
This is a 2030 guidance. I. We would like to continue to stand by is we’re not changing it at the moment and we are talking to a lot of customers in our CDMO business and we hope to get that.
Vinod Sohanlal Jain — Analyst
Okay. The second question relates to taxation. We see that there is continued negative profit over the quarter and yet the tax incidence continues. Now we have been explained that this is because of the divergent profitability of the various. Now this argument of course is valid, but in the long run how do you propose to mitigate this argument? By ensuring profitability of the loss plans or closure or reduction of those plants.
Peter DeYoung — Chief Excutive Officer
So Mr. Vinod, as you rightly identified, the reason for the tax outflow currently is because we are present in multi jurisdictions, the outflow happens at the tax rate which is prevalent in those jurisdictions. At our overseas facilities currently our scale is sub optimal as the capacity utilization improves because of the better gross margin profile, we do expect the profitability to improve thereafter and on a long term basis. We have guided that our effective tax rate across all sites would BE in the 24 to 25% region ETR. So it’s more about improving our capacity utilization specifically in our CDMO business across overseas facilities for which there are a lot of initiatives underway which we spoke about in the earlier part of the call.
Vinod Sohanlal Jain — Analyst
So the 24 25% guidance is that inclusive of any broad power losses, income tax Losses or those would.
Peter DeYoung — Chief Excutive Officer
So there’s a difference between the accounting and the cash flow. Because we have the carry forward tax losses available, we will be able to utilize them. From an accounting perspective, it would be in the range of 24 to 25%.
Vinod Sohanlal Jain — Analyst
Okay, thank you.
operator
Thank you. We take the next question from the line of Sukrit Tea Patil from Eyesight Fintrade Private Limited. Please go ahead.
Vinod Sohanlal Jain — Analyst
Good morning to the team. I have two forward looking questions. My first question is to Mrs. Piramal. With global demand dynamics shifting in regulated markets and pressure on generic pricing still going on, how is Piramal Pharma prioritizing its portfolio tactics, particularly between complex generics, differentiated those forms and specialty injectables to sustain growth and keep the margin stable? Additionally, how are you aligning your R and D and business development efforts to capture emerging opportunities in high growth segments while managing competitive intensity? That’s my first question. I’ll ask my second question after this. Thank you very much.
Nandini Piramal — Chair Person
Thank you. I think we’re continuing, when we look at our generic portfolio, we’re looking at doing hard to manufacture or hard to distribute product. The Kenalog product is one example. It is a complex molecule that is hard to, that is hard to manufacture. And while it has been generic for a long time, there is still limited competition in the market. We also, while we are strong in the regulated market, there are some rest of world markets that we do not have a very good presence. Which is why we actually invested in our Degwal facility and are looking to continue to focus on rest of oil cells from there.
We have in both internal R and D as well as BD that are looking to develop on our own and in license similar complex products as well as differentiated. So I guess presentations for the business.
Vinod Sohanlal Jain — Analyst
Thank you. I believe Mr. Vivek is also on the call today.
Nandini Piramal — Chair Person
Yeah.
Vivek Valsaraj — President and Chief Financial Officer
Yes.
Vinod Sohanlal Jain — Analyst
Yeah. Good morning, sir. My question is given the interplay of input cost volatility, pricing pressures across the globe and capex and capital intensity of complex generic development, how are you thinking about margin growth and cash flow keeping in mind the targets near term to medium term targets. To be more specific, could you also elaborate on your capital allocation framework, especially as it pertains to balancing investments in R and D capacity expansion and while maintaining steady financial discipline. Thank you.
Vivek Valsaraj — President and Chief Financial Officer
Sure.
Peter DeYoung — Chief Excutive Officer
So firstly to answer the first question with respect to margins, as you’re aware that our complex hospital generic business already enjoys a stable and a high level of margin. The enhancement in margin year after will largely come in from our CDMO business. And our consumer products business. Our consumer products business has already broken even. It’s contributing with a small EBITDA margin right now and will start showing expansion in margin hereafter. A predominant portion of the margin expansion in the CDMO space will come from our overseas facilities as the capacity utilization enhances. It has an inherently high gross margin profile and as the overall utilization improves due to fixed cost leverage, you will see an improvement as far as the margins are concerned.
The second question with respect to overall capital allocation, our consumer products business is self funding and therefore does not need any external capital infusion. It manages its own growth between the CDMO and our complex hospital generics business. As a part of our strategy exercise we have year marked what would be the potential areas for investments in these spaces. The Lexington expansion is one such investment that we have done in this business and which we have announced and is underway and likewise in our complex hospital generics. Adding differentiated and niche products is part of the growth portfolio and the Kinalog acquisition is another example of how we are doing it.
So each of them have got their own business rationale. We do use payback metric to see how this fits within the overall return on capital employed expected in these businesses and the investments therefore will flow in line with the long term plans that we have for these businesses.
operator
Thank you. We take the next question from the line of Alankar Garud from Kotak Institutional Equities. Please go ahead.
Alankar Garud — Analyst
Hi, good morning everyone. First question, do you have any update from your client on the resumption timeline of supplies for the large contract? And typically what is the lead time between getting visibility from the client and then starting supplies?
Vivek Valsaraj — President and Chief Financial Officer
We don’t have anything material to update on that. We’re in regular touch with the client. We have other ongoing business with them and we anticipate that whenever they let us know we will be able to act on that. I’d say it’s rough rule of thumb would be 3/4.
Alankar Garud — Analyst
Just to get that right. 3/4 is the lead time between getting visibility and then starting supplies. Correct, Got it. Secondly, you had mentioned Peter in the previous call that getting tech transfer projects is one of the key priorities for the sales team. Can you provide any qualitative comments on your progress towards adding any incremental tech transfer projects?
Vivek Valsaraj — President and Chief Financial Officer
Yeah, I think that I alluded to that a little bit in the discussion of the recent experiences we’ve had with new proposals and also our JPMorgan client interactions. I would say that particularly it used to be that you had to follow the molecule and you have to start at the beginning and wait for the client to progress. But we have seen increasingly volatile entry points across all stages. And one such entry point is at the phase three, where people want to have a second source. And I think with the overall increased desire for supply chain security, an alternative to China or an onshore desire, we are seeing a lot of RFPs for these Phase 3 or late clinical programs.
And so that’s part of the RFP bolus we’re seeing. And we have to see how our potential clients decide. But we are seeing that as being an important part of the mix of proposals we’re seeing and perhaps maybe a more important mix than we would have seen three or four years ago, by contrast. So that’s part of why we are cautiously optimistic about the potential and we’re hoping that some of those translate in a favorable way in the next 180 days that I mentioned is a typical lead time from proposal to decision.
Alankar Garud — Analyst
Got it. And the final question, in the CHG segment, you spoke about regulatory approvals coming in from Digwal over the next 12 to 18 months. So I mean, the last nine months have not been great in terms of pickup from Digwal. Realistically, when should we expect a pickup in growth led by Digwal in the CAG segment?
Vivek Valsaraj — President and Chief Financial Officer
So first we were open to selling out of Bethlehem at a different margin structure if the opportunities met our medium term price targets. So we weren’t not going after the revenue because we didn’t have the approval. We weren’t comfortable with the pricing environment and we wanted to go step wise and sequentially to make sure we were disciplined. That being said, in addition, I agree that the ROW approvals did take longer than we initially had thought. We would anticipate that the combination of the approvals coming in and our, I guess, experimentation with price decline should show some benefits in the next fiscal year.
But again, we’re going to, we do anticipate it working, but we’re really trying not to rush it so that we do the right decisions. But we do anticipate that benefiting us next fiscal year.
Alankar Garud — Analyst
Fair enough. That’s it from my side. Thank you.
operator
Thank you. We take the next question from the line of Dhruv Dobalha from Lotus Wealth Family Office. Please go ahead. Dhruv, please proceed with your question.
Dhruv Dobalha — Analyst
Hello.
Vivek Valsaraj — President and Chief Financial Officer
Go ahead.
Dhruv Dobalha — Analyst
Yeah, thank you for taking my question. I wanted to understand your take on the India pharma exports to the European Union as to how much do you think time will take for these exports to double? Because we can say that approximately one year will go for ratification. So by 2030 do you think there will be a significant number there from Indian exports?
Nandini Piramal — Chair Person
So I think overall the EU trade treaty for formulations and pharmaceuticals, the duties are actually not very high. There are kind of larger barriers to entry such as the EU wants all products to be tested within the EU and they also want EU inspectors to visit. So there may be bigger changes in things like specialty chemicals and ksm. But we’ll have to see when we get more detail if there will be a significant difference in formulations and pharmaceuticals.
Vivek Valsaraj — President and Chief Financial Officer
If we wanted to see a big change. The non trade barriers, tariff barriers that have to be addressed and I think just to summarize, the ones that would make the biggest difference for Indian exporters of drug it would be the requirement to have a European domicile qualified person to do the release to have a European domiciled QC testing, the lack of mutual recognition of Indian inspections. I think those elements I would say would be pivotal in driving a more rapid growth in the current understanding of the current trade deal. Those would be not yet present.
So I’d say it’s modest in our view the benefit to kind of the end formulations for exporter.
Dhruv Dobalha — Analyst
Okay. And my second question is on the impact on China. So what do you think would be the impact on the exports that China does to European Union in the pharma that can be affected due to this agreement?
Nandini Piramal — Chair Person
I don’t think we can comment on that.
Dhruv Dobalha — Analyst
Okay, that will be all, thank you.
operator
Thank you. We take the next question from the line of Avnish Tiwari from Vicaria Investment Management. Please go ahead.
Avnish Tiwar — Analyst
Hi. This increased demand conditions you have observed in December quarter versus prior periods, is this in the research and development area of CDMO or even in the manufacturing area as well?
Nandini Piramal — Chair Person
I think so. Overall it can be traced to the improvement in biopharma funding. And that’s for that would. That would be primary funding but also ma that has been happening. So when our clients such as biopharma companies get funding they are more likely to do both R and D and Medicare. So I think it’s. I’d say it’s both.
Avnish Tiwar — Analyst
Okay, great.
Vinod Sohanlal Jain — Analyst
Thank you.
operator
Thank you. We take the next question from the line of Amir from THLK Partners. Please go ahead.
Amir — Analyst
Hi, this is Amir from GM Financial. Thank you for taking my question. So I most of my questions have answered have been answered just one question on one of the products which we had disclosed last year or last, a quarterback New Amsterdam product. When should we see start revenue coming in from this product? And also will it start from the our overseas facility first and then Indian facility. How it will happen. Thank you sir.
Vivek Valsaraj — President and Chief Financial Officer
For the future of that client, they are publicly traded. I would encourage you to look at their public filings in investor communications as being a primary source. And so I would. While we are really pleased that they chose to do a joint announcement with us that we’re working together and really pleased with what we can do for their patients, I would encourage you to look at their public disclosures around their plans and we’ve made it clear what we’re doing for them in that joint announcement. And you can deduce the impact of the timing as we are, per our understanding the only supplier for that particular combination for them.
And we’ve listed out the sites where the supply will be coming from. So I would encourage you to look at them as the primary source.
Amir — Analyst
Sure. So they intend to. I believe the approval is expected somewhere in first half of next FY27. So is this product going to be like as big as the product where we are witnessing destocking is any color you can provide on that.
Vivek Valsaraj — President and Chief Financial Officer
I would make one observation that the work we’re doing for this client would be on the formulation side and the work we were doing for the other client was on the API side. And so from a proportion of value the steps in the value chain are different in terms of the activity being done. And as you would know, APIs are typically can be a larger part of the overall value chain in terms of specific revenue guidance, we aren’t giving that but we do think this is a meaningful customer for us and we look forward to growing with them as they succeed.
In terms of specific timings, I would encourage you to read their investor presentations a little bit more carefully because there’s different times for different markets and they’re currently pursuing directly and through partners strategy. And so I’d encourage you to kind of look through those communications.
Amir — Analyst
Sure. And just last thing on the debt, is it possible to tell how much is the debt right now and what is the guidance over there? Thank you so much.
Peter DeYoung — Chief Excutive Officer
So Amit, the debt levels are the same as it was in March. We are at about 4200 crores of net debt. We would see a slight increase in the debt towards the close of the financial year.
Amir — Analyst
Sure. Thank you so much.
operator
Thank you. Thank you. We take the next question from the line of Avnish from Vicaria Investment Management. Please go ahead.
Avnish — Analyst
Hi, good morning. I just have one question regarding this large product for which we are seeing the inventory destocking. I just Wanted to know whether the specs are fungible within market, as in across markets. Which means basically what I’m trying to understand is that is the same product, if it can be sold in the us can it be sold in China also? And if you see, let’s say, lesser of a demand in China, can that product be then sold in the us Is that a possibility? Or the specs are different for different markets?
Vivek Valsaraj — President and Chief Financial Officer
I think this may be a level of detail that’s beyond our ability to disclose on behalf of our clients. And I think we have to respect our agreements with them.
Avnish — Analyst
All right. Okay. Just one more question. I was just going back to the comment made that the base CDMO business has grown in low single digits. It seems, and I’m also tying this up with your earlier comment that in the base year FY25, the revenue were almost evenly spread across the four quarters. These two statements are not aligning. I mean, it seems that for a low single digit base business growth in CDMO, the third quarter of FY25 should have a much lower contribution from this large PO. Can you just align these statements for me? Is that true that third quarter of FY25 had a unusually low quarter for the large drug?
Peter DeYoung — Chief Excutive Officer
That’s right. That the third quarter had relatively lesser contribution from this large product and then it resumed back in quarter four?
Avnish — Analyst
Okay, great. Okay, thanks. I’ll get back to you.
operator
Thank you. We take the next question from the line of Tushar Manudane from Motilal OSWAL Financial Services Ltd. Please go ahead.
Tushar Manudane — Analyst
Yes, most of my questions have been answered. Just one last clarity. If you could share like. While you indicated you have year over year growth in revenue for fourth quarter, given the visibility of the contracts will also that convert to growth in EBITDA as well.
Nandini Piramal — Chair Person
It is sequential growth from quarter 3 to quarter 4. As we mentioned, quarter 4 last year had a large portion of the large customer growth. So therefore There won’t be Q4Q versus Q4 growth.
Tushar Manudane — Analyst
Both in terms of revenue as well as EBITDA, right?
Nandini Piramal — Chair Person
Yes. Yes.
Peter DeYoung — Chief Excutive Officer
Okay, thanks. That’s all.
operator
Thank you. We take the next question from the line of Abdul Kadar Puranwala from ICICI Securities. Please go ahead.
Abdul Kadar — Analyst
Yeah, thanks for the follow up. One question. What is the timeline for closure of this analog acquisition?
Nandini Piramal — Chair Person
Approximately three months, give or take.
Abdul Kadar — Analyst
Okay, thank you.
operator
Thank you, ladies and gentlemen. With that, we conclude the question and answer session. I now hand the conference over to Mr. Kazan Borana for his closing comments.
Peter DeYoung — Chief Excutive Officer
Thank you very much. We appreciate you taking time and joining us for the call. In case you have any follow up questions or any clarification that you need, please feel free to reach out to us. Thank you and have a good day.
operator
Thank you. On behalf of Piramal Pharma Limited. That concludes this conference call. Thank you for joining us. And you may now disconnect your lines.