SHAILY ENGINEERING PLASTICS LTD (NSE: SHAILY) Q2 2025 Earnings Call dated Oct. 29, 2024
Corporate Participants:
Amit Sanghvi — Managing Director
Sanjay Shah — Chief Strategy Officer and SGA, Investor Relations Advisors
Analysts:
Anant Jain — Analyst
Aman Thadani — Analyst
Rupesh Tatiya — Analyst
Sanjay Kumar — Analyst
Mohit Surana — Analyst
Ritesh Shah — Analyst
Ankit Gupta — Analyst
Aman Vij — Analyst
Anant Shenoy — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Shaily Engineering Plastics Limited Q2 and H1 FY25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectation of the company as on the date of this call. The statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Sanghvi, Managing Director from Shaily Engineering Plastics Limited. Thank you, and over to you, sir.
Amit Sanghvi — Managing Director
Thank you very much. Good evening and a very warm welcome to all the participants to the post-results earnings call of Shaily Engineering Plastics. I have with me Sanjay Shah, Chief Strategy Officer, and SGA, our Investor Relations Advisors. I hope you had a look at our investor presentation that is uploaded on our website and the stock exchange.
Let me start by giving some highlights on the operational performance. We delivered a robust top-line growth of 22% to INR192 crores in Q2 FY25 and have improved our gross margins and EBITDA margins, which stands at 46.3% and 21.5%, respectively. This is mainly due to increased sales from our healthcare segment, which grew by 94% on a year-on-year basis.
In the healthcare space, we’ve adopted a scalable approach that will enable us to increase our revenues at a faster pace over the next five years. We had raised money, which we are using to scale the pharmaceuticals division. We anticipate that the medical device business will comprise 25% of our revenues over the next three years, enhancing organizational value.
I’m happy to announce that we’ve doubled the size of our team in Shaily, UK, and looking ahead, our focus is expanding our horizons to include contract manufacturing for medical devices, products featuring our intellectual property and personalized packaging solutions. The dedicated efforts invested in advancing our injection system platforms are beginning to show favorable outcomes. We plan to increase our own IP contribution going forward.
In the Healthcare division, during the quarter gone by, we successfully participated in CPHI Europe, Parenteral Drug Association Fair in Phoenix in October, and partnership opportunities on drug delivery in Boston at the moment.
In the Consumer segment, we have been awarded business for two new products from a marquee FMCG customer. Despite the ongoing geopolitical challenges, revenues from this segment grew by 10% year-on-year to INR139 crores in Q2 FY25.
In the Industrial segment, we have received new business from a new marquee customer during the last quarter. Revenue grew by 30% year-on-year and stood at INR16 crores for this segment.
That is all from my side. I shall now hand over the call to Sanjay Shah to give you the operating and financial highlights. Thank you very much. Sanjay bhai?
Operator
Sanjay, sir?
Sanjay Shah — Chief Strategy Officer and SGA, Investor Relations Advisors
Yes.
Operator
Am I audible to you?
Sanjay Shah — Chief Strategy Officer and SGA, Investor Relations Advisors
Yes. Am I audible?
Operator
Yes, you can go ahead.
Sanjay Shah — Chief Strategy Officer and SGA, Investor Relations Advisors
Yeah. Thank you, Amit, and good evening, everyone. I am sorry for this technical issue. And also, for the delay on the call because of some technical issues at the operator end. I should share with you the highlights of our operational and financial performance of Q2 and H1 FY25, following which we shall be happy to respond to your queries.
During the quarter, we processed 6,186 tons of polymers as against 5,673 tons in Q2 FY24. For the half-year period, we processed 12,088 tons of polymers as against 11,495 tons in H1 FY24. Machine utilization rate was around 42% at Q2 FY25 and 41% in H1 FY25. We expect this to increase in the coming years. Exports during Q2 FY25 and H1 FY25 stood at 75% and 78%, respectively, of total income.
Now I shall brief on consolidated result highlights. Revenue stood at INR192 crores during Q2 FY24 as compared to INR157.6 crores during Q2 FY24, a growth of 22% year-on-year. EBITDA stood at INR41.3 crores during Q2 FY25 as compared to INR26.6 crores during Q2 FY24, a growth of 56% year-on-year. EBITDA margin stood at 21.5% for Q2 FY25, an increase of 460 bps over Q2 last year. PAT stood at INR21.9 crores during Q2 FY25 as compared to INR10.8 crores during Q2 FY24, a growth of 103% year-on-year. PAT margins stood at 11.4%, an increase of 450 bps over Q2 last year. Cash PAT for Q2 FY25 was reported at INR32.2 crores as compared to INR18.9 crores during Q2 FY24, a growth of 70% year-on-year.
Coming to H1 FY25 consolidated highlights. Revenue stood at INR371.4 crores in H1 FY25 as compared to INR314.9 crores during H1 FY24, growth of 18%. EBITDA stood at INR77.4 crores in H1 FY25 as compared to INR54.2 crores during H1 FY24, a growth of 43%. EBITDA margins stood at 20.9%, an increase of 370 bps over H1 last year. PAT stood at INR39.3 crores in H1 FY25 as compared to INR23.4 crores during H1 FY24, a growth of 68%. PAT margins stood at 10.6%, an increase of 320 bps over H1 last year. Cash PAT for H1 FY25 was reported at INR59.7 crores as compared to INR39.7 crores during H1 FY24, a growth of 50% year-on-year. Our ROCE and ROE stood at 22.1% and 17.1%, respectively, as of 30th September 2024. Again, the growth in business has been achieved with disciplined use of capital. Our debt-to-equity stands at 0.45 times and our long-term debt-to-equity stands at 0.11 times as on 30th September 2024.
Now coming to consolidated segmental revenue breakup for H1 FY25. In the Consumer segment, revenue stood at INR271.3 crores in H1 FY25 as compared to INR246.7 crores during H1 FY24, a growth of 10%. In the Pharma segment, revenue stood at INR64.9 crores in H1 FY25 as compared to INR42 crores during H1 FY24, a growth of 55%. In Industrial segment, revenue stood at INR35.2 crores as compared to INR26.1 crores during H1 FY24, a growth of 35%.
That is all from our side. Now we can open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Anant Jain, an Individual Investor. Please go ahead.
Anant Jain
Congratulations on a good set of numbers, and thanks for the opportunity. My first question is on the pens business. Looking at our new insulin pens order, can we expect our volumes in pens to be double nearly for the second half of this year? That’s the first question. Second question is, for how many projects do we expect to supply commercial volumes in FY25 and FY26? Third question is on Lira and Teri, when do you expect the commercialization of these molecules, commercial supply of pens to start for these molecules?
And since Sema, Rest of the World patent is expiring in Jan ’26, are we expecting a huge ramp up in GLP-1 devices, like sales could go in like tens of millions in FY26, because that’s the number that we keep hearing. We keep hearing much larger numbers than that. And how big can US, India, Brazil and China, if you have some rough estimates, if you have some inquiries for these markets, if you can — and what kind of potential market share do we see here, because we are the only ones with spring-based pen. And these markets are price-sensitive. So, do we expect the devices to have a similar price for us, like when we supply to developed market versus like rest of the world, do we expect a similar realization per device?
And any reasons for Teri launch, because Teriparatide, we were expecting the launch to happen maybe like Q1, Q2, but it’s gotten delayed. And where do you expect the launch to happen first in EU or in the US? I have more questions, but I think if you can respond to these, then I can give one or two more.
Amit Sanghvi
Sure. To your first question, we do expect pen volumes to double in the second half. Now exactly double from which month is a little difficult to say because we are still undergoing installation of our new 8-cavity tooling. So, we are hoping to start that — start production in December, which means that some part of this quarter and large part of the next quarter, we will see double the volumes on those pens.
Teri launch is expected in Europe first. Yes, I realize that US launch has been delayed. Unfortunately, it’s not in our control, neither our customers’ control. But we know that Europe launch will be coming up shortly as fast as quarter one Calendar ’25. So, that’s kind of where we are on Teri. So, we are producing commercial batches for a customer to launch. On Liraglutide, its launch is expected towards the end of ’25, calendar quarter three or quarter four of ’25. And on Sema, we have been hearing everything from 5 million to as high as 200 million requirements from various customers. We actually don’t know what is the right capacity to build. But right now, we are looking at building 35 million pens a year capacity on Semaglutide.
With Canada, Brazil and India, and some ROW launches coming up in ’26, we are looking at roughly an order book of somewhere around 6 million to 7 million Semaglutide pens, spreading between ’25 and ’26. So, exact supply timelines are not known. We have started supplying some small quantities for commercial batches, but the larger quantities will start towards the second half of ’25 and spill over into ’26.
Anant Jain
Sounds good. Just one or two more questions. One is, do you think looking at the entire market of both Semaglutide and insulin, we are a little behind in terms of CapEx because any kind of CapEx that we want to do would around — roughly take 1.5 years, I would assume. That’s the first question. The second question is, you mentioned consumer and new business under discussion. Can you give some idea about what this business is? What size this business can be? And do we plan to raise capital, because I would assume that both our pens and if you see consumer as a significant opportunity, we would require funds?
Amit Sanghvi
On to your first question, I think capacity in general in the device business globally is at constraint right now. So, the way I would look at it is that capacity build is happening always a little bit behind what the market needs. But at the same time, people are cautious of not having an overbuild of capacity because the way Semaglutide is going, we don’t know how commoditized it will become by the time it launches and becomes a little bit mature. So — although we are slightly late on the capacity build, the opportunity is not lost because I think everybody has a lack of capacity right now.
On the consumer, I’ll let Sanjay bhai answer that question.
Sanjay Shah
So, on the consumer space, we are still exploring that opportunity. And as we mentioned last time, as and when we have some definite reply, we will get back to you on a call about the same. Even on expansion, we are working out whatever requirements would be. And based on that, once we have exact details in terms of what funds are we looking at anything, we will see how we would want to fund that. So, we do not have an idea of how we are going to look at funding our expansions right now.
Anant Jain
Okay. Great. Thank you. Thanks for responding and all the best.
Sanjay Shah
Thank you very much.
Amit Sanghvi
Thank you.
Operator
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. The line for the current participant has dropped off. We’ll move on to the next question that is from the line of Aman Thadani from Solidarity Investment Managers. Please go ahead.
Aman Thadani
Hello. Sir, am I audible?
Amit Sanghvi
Yeah, Aman. You are audible.
Aman Thadani
Yeah. Thanks for the opportunity. Sir, my first question is, we recognize the significant opportunity that we have in GLP-1. So, could you share your perspective on the potential risk, both external as well as maybe internal execution related that you sort of anticipate?
Amit Sanghvi
The risk is, as I answered the previous caller’s question, is that capacity buildup between — first, the demand is constantly changing. And what we have seen in GLP-1 is that the demand is constantly growing. Our customers are also not able to fully anticipate what a realistic forecast looks like. So, from whatever information we have gathered from our existing and new customers, we are looking at building up capacity to manufacture 34 million to 35 million pens a year for Semaglutide. So, this capacity will go on stream in the first half of ’26, not FY, Calendar ’26.
We have started the capacity buildup on Semaglutide. We have existing capacity which we can cater up to 10 million a year. And we are building new capacities to add another 25 million.
Sanjay Shah
The internal risk and the external risk. I think there is — although we’ve been — we go through about maybe close to 100 different audits a year, we still haven’t been audited by the US FDA. So, as and when that happens, that will happen at some point. There is certainly a risk that shouldn’t be a major risk, but there is certainly a risk because we are MDSAP certified with the US FDA scope. So, we believe that we are confident the risk is minimized, but there’s always a certain risk of some minor findings.
The second is how quickly can you scale up? I think operationally speaking, given that Shaily has a larger business, we do have enough operational capabilities that we can — there are fungible in terms of human resources across the various businesses that we have. So, operationally speaking, it’s always easier to potentially hire and train on the consumer side of the business than on the pharmaceutical side of the business, which means that those with the experience on the consumer side can be taken onboard the pharmaceutical side to help with the operational scale up. And to mitigate the kind of the US FDA risk is that we’ve already started the project of automating our entire QMS documentation, which is a project that will — that has started earlier this year and will go on for 24 months, but we should be fully online, fully digital in terms of all our documentation. Aman?
Aman Thadani
Okay. Very well. Yes, sir. Sir, my second question is, sir, over the next decade, Healthcare division would sort of become a substantial part of our business and it’s sort of very distinct from the other segments of the company. So what sort of initiatives are we taking to recruit more talent Shaily in India, maybe probably from the healthcare background to sort of help us expand this segment of the company?
Amit Sanghvi
I mean, recently, we have recruited a very large tooling team, right, like one of our biggest, at the heart of the business is making sure that the tools we manufacture or outsource are done rightly. So, a lot of focus has been on recruiting the right tooling team. I think we have recruited upwards of 17 engineers on the tooling side in the last four months itself. And we continue to grow that team. So, both manufacturing tools internally as well as having the right competency to run several projects at the same time is what we are doing in India at the moment. So, India very much focused on manufacturing and tooling in terms of recruitment right now. Of course, we are also looking for senior management on the operations side.
Aman Thadani
Okay. Sir, my third question is, we sort of don’t disclose the specific pricing details for our pens. Maybe could you provide some insights into the pricing differential between a like-to-like pen or, let’s say, Shaily Engineering and Becton Dickinson so that we sort of understand that is there any advantage for a player to manufacture in India?
Sanjay Shah
Aman, I’ll let Amit answer part of the question, but pricing, I don’t think we will want to disclose anything in terms of how we are pricing it to whatever competitors are. I don’t think that’s a question we would want to answer on a call.
Amit Sanghvi
Aman, the right way to look at it is what market you’re supplying to. Insulin is price-sensitive. So, there’s a x-price for pen being sold on the insulin business. Of course, there are also different SKUs altogether. And then Semaglutide is going to be at a different price point. We also have the advantage that we are the only spring-driven pen out there. So, I would say, against potentially a BD or another competitor, we would be priced either on par or potentially at a premium.
Aman Thadani
Even for a like-to-like pen with sort of like having manufacturing facilities in India, then to — would it be at a premium to BD?
Amit Sanghvi
Well, see, it’s not a like-to-like pen. BD does not have a spring-driven tech at the moment. So, for GLP-1s, particularly for Semaglutide, we have got a device, which functions just as well as the innovator device, which gives us the ability to market it at a slight premium.
Aman Thadani
Got it.
Amit Sanghvi
Second is also the money spent. It’s not just the manufacturing margin. The money spent on developing the IP technology platform, all has to be considered as part of pricing.
Aman Thadani
And sir, my last question is on the industrial business. Sir, we received order in that business. So sir, can you provide some color like what product is it and what would be the size of that order?
Sanjay Shah
That’s a new customer we have added on the automotive space. It’s a start which we are trying to do with this customer. As we move forward, we will look at building up the relationship with this customer.
Aman Thadani
Okay. And sir, the total orders that we received in Q2 FY25, what would be the size of both these orders from the Consumer as well as from the Industrial division?
Sanjay Shah
We are not disclosing the numbers here. What we’re trying to disclose here is we’re basically adding businesses across different businesses.
Aman Thadani
Understood, sir. So those are my questions, sir. Thank you so much. I’ll get back in the queue.
Sanjay Shah
Thank you very much. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rupesh Tatiya from Intelsense Capital. Please go ahead.
Rupesh Tatiya
Hello, sir. Thank you for the opportunity. My first question, sir, is on this device —
Operator
Sorry to interrupt Mr. Rupesh. Sir, your audio is not clear. Can you use the handset mode while speaking?
Rupesh Tatiya
Sorry, I’m already on the handset. Is it audible now? This is my best. Yeah. It’s better, right, sir?
Amit Sanghvi
Yeah.
Rupesh Tatiya
Yeah. Okay. So, sir, my first question is this spring-based device you have talked about, we have recently seen announcements from generic players, three, four of them, that they have settled with the innovator for Semaglutide, Novo Nordisk — the settlement is with Novo Nordisk. Sir, my question is our device part of any of these settlements?
Amit Sanghvi
I will not be able to answer that question.
Rupesh Tatiya
Okay. Okay. And sir, I mean, at least in — one of them at least, I know that it’s not a spring-based device where the settlement has happened. So how does that impact your competitive positioning? Do you still hold the view that we will still be able to get 60%, 70% of the generic market share?
Amit Sanghvi
That view is based on the number of generics we have actually signed on. So, it’s not really anything else, but what’s also happening is — the number of players getting into Semaglutide are also increasing on a daily basis. You have almost an equal opportunity. If we look at the volumes, US is going to contribute 30% to 40% of the global volumes going forward. You have — basically, the ROW markets are simply not supplied at the moment by the innovators because of capacity constraints. So, you have an equal opportunity on the ROW markets as well. And we’ve seen — we are seeing a lot of scale being built for the ROW markets. So, yes, I think, my view would still probably hold that based on customers that we have signed on and those we are working with, at a global level, we should have a very significant market share — a dominating market share on the Semaglutide business for generics.
Rupesh Tatiya
Okay. Okay. Okay, sir. And then, sir, other question is Canada patent expires by Jan ’26, so I’m — for Semaglutide. So, I am a little confused on the timelines you said. So, the Semaglutide supply will start in Calendar ’25? Or it’ll start in Calendar ’26?
Amit Sanghvi
It will start in calendar ’25 and spill over into ’26.
Rupesh Tatiya
So that 6 million to 7 million number you said we can hit that is calendar ’25?
Amit Sanghvi
Like I said, it will start in calendar ’25, and you not supply the entire $6 million to $7 million in calendar ’25, so there will be a volume that spills over into ’26.
Rupesh Tatiya
Okay, okay. And the two questions on this non-US market supply. So, is entire supply going to be spring-based device? Or will it be some other platforms as well? And what would be the pricing differential between, let’s say, other regulated markets versus, let’s say, some ROW emerging markets, if you can give some view on that?
Amit Sanghvi
Our pricing is very much based on volume. So, regardless of the market you’re operating in, our pricing is more or less the same. It’s staggered pricing. You’ve got volume slabs. And between the spring-tech and the non-spring-tech, the pricing differential would be, I think some to be 7% to 10% depending on market, but yeah, that’s about it.
Rupesh Tatiya
But there will be some non-spring-tech-based Semaglutide supply?
Amit Sanghvi
Yes, we have non-spring-based Semaglutide supply also.
Rupesh Tatiya
Okay. Okay. And then, sir, my final question is you have said Healthcare will be 25% of our business in two, three years. Can you maybe give a similar view for consumer electronics business?
Amit Sanghvi
We are still working on kind of the consumer electronics business. So, it’s hard to give you any indication.
Rupesh Tatiya
A broad range will do like I mean it’s — we shouldn’t even consider it to maybe it will be a decent part of our business. Some qualitative comment around that.
Amit Sanghvi
It can be, but the journey is very early right now. So, we are very much in the nascent stages of that journey. It can be, but given that consumer electronics is a fast-moving industry, we can see there’s a potential to scale up faster if we have success in whatever we are trying to do right now.
Rupesh Tatiya
So, that clarity you would be able to give in another maybe two, three quarters?
Amit Sanghvi
I cannot give you a comment, unfortunately. But as and when it happens, we will provide that clarity.
Rupesh Tatiya
Okay. Okay. Thank you, sir, for answering my questions.
Amit Sanghvi
Yeah.
Operator
Thank you. The next question is from the line of Sanjay Kumar from ithoughtPMS. Please go ahead.
Sanjay Kumar
Hi, sir. Thank you for the opportunity. First question on Healthcare. Is there a revised target for the number of pens for FY ’25 and ’26, if you could give the updated guidance for the number of pens?
Amit Sanghvi
No, there isn’t — Sanjay, there isn’t a revised target. I think the target we gave at the beginning of the year for this year is what we are sticking with. I think we need to be cognizant of when — see, we fully rely on our customers getting approval for our business. So, until we have confirmation that approval has come in and we will start supplies, there’s no revision in targets at the moment.
Sanjay Kumar
Got it. Okay. And second question, how many unique OEMs do we have for Ozempic and Wegovy and if possible, also for Tirzepatide. Also, are we talking to customers who have filed with someone else but are looking to switch for various reasons? And has any client switched from us to some other competitors for any of the GLP-1s?
Amit Sanghvi
Okay. We have probably, I’d say, somewhere around 14 or 15 active Semaglutide projects, some completed, some ongoing, so that would include both Ozempic and Wegovy.
Sanjay Kumar
Okay.
Amit Sanghvi
We have —
Sanjay Kumar
By projects, you mean the different variance within — dosage variance within Ozempic and Wegovy?
Amit Sanghvi
But project I mean unique customers.
Sanjay Kumar
Okay. Got it. And Tirzepatide?
Amit Sanghvi
This is also a business where there’s a lot of front-end partnerships happening, right? So, you’re not going to see Semaglutide — everybody is not going to jump in and compete on Semaglutide. There’s going to be a lot of partnerships. So, you’d have a combination of several two or three pharma companies partnering together on a particular project, someone who takes care of manufacturing, someone who frontends the business development side of it and the sales side of it, someone potentially being an API supplier. So, there’s a lot of partnerships happening on this — on Semaglutide, particularly. Tirze is, I think 36 is the earliest launch possible, maybe beyond 36. So, we are right now only working on those — with those partners who are interested in the NCE -1 filing.
Sanjay Kumar
If you could give a number.
Amit Sanghvi
We’ve said that, I think from a timing perspective, the most we can do is five, and we have signed on more than 50% of that number. So, we have got room for one or two customers at the moment for Tirzepatide. Again, only keeping in mind the NCE -1 filing deadline. Anyone like to do Tirze beyond NCE -1, we will have plenty of capacity.
Sanjay Kumar
Got it. And third question, just an extension to one of the previous participants. So, on this non-spring-based device, is human factor study not such a big deal for pharma companies that they’re choosing to not use spring-based pens. How do I look at the market based on these human factors.
Amit Sanghvi
Human factors has to be overcome. So, a comparative human factor study is needed for a non-spring-based pen.
Sanjay Kumar
Can that disrupt — let’s say, will other OEM or pharma companies also follow suit and go for a non-spring-based pen? Is that a risk from that perspective, is my question.
Amit Sanghvi
So there will always be several who opt for non-spring-based pen and several who opt for a spring-based pen. Everybody has a different strategy. From the perspective of user experience, certainly, a spring-based pen has a better experience for the user. So, I don’t think it’s all about pricing. It’s a number of components essentially and either pen don’t really change much. You’ve got springs, which are — obviously add to the cost. And then the rest of it is really around the money spent on developing the technology. So, I think you have a combination of everything, people who opt for a spring-based pen and those who don’t.
Sanjay Kumar
Got it. Okay. And fourth on insulin, what is our own IP capacity? I believe the client who has given us the 10 million order is planning for a much bigger production capacities, and it’s almost in the tune of 4x, 5x. We will need more capacity for own IP insulin also, right? Are we not expecting any further orders from them?
Amit Sanghvi
No, we are expecting further orders, and we are also building more capacity on insulin pen.
Sanjay Kumar
So if you could give the current own IPI insulin capacity and what’s the CapEx expansion?
Amit Sanghvi
Yeah. Once our 8-cavity tools go on stream, we have a capacity of 11 million to 12 million pens a year.
Sanjay Kumar
And expansion will be?
Amit Sanghvi
I think, if we expand, I mean, any expansion we do. So, that was our first automated line at 40 parts per minute, hence, for all our lines are essentially going to be 80 parts per minute line. So, roughly about 24 million to 25 million per line for capacity increase.
Sanjay Kumar
Perfect. And finally, just a follow-up, sir. So, are we talking to people who are looking to switch and also on similar lines, have any clients switched from our GLP-1 platform to a competitor?
Amit Sanghvi
Any clients who has switched from our GLP-1 to competitor? I don’t know. There are people who are running multiple programs and multiple partnerships, and everybody is going to slightly derisk because they don’t know who is going to succeed. So, yes, I think we have — we do have partners who are running multiple programs. And one which would include our device, one which would include someone else’s device, someone else’s manufacturing capacities and someone else’s potentially even API. So, there’s a lot going on, Sanjay, that there’s a lot of uncertainty, but a lot of optimism on Semaglutide. So, let’s leave it at that.
Sanjay Kumar
Okay. Okay. And can I squeeze in one more? Do we expect patent challenge for Ozempic?
Amit Sanghvi
I mean, given the recent settlement, I would anticipate by the time everybody gets to market, yes, there will be patent challenges. I don’t think the innovator is just going to allow everybody to walk in. But —
Sanjay Kumar
Got it. Got it.
Amit Sanghvi
Most of these products are going to be kind of litigative products. So, there isn’t a whole lot anyone else can do about it.
Sanjay Kumar
Perfect. Okay. Thank you. Thank you, sir. I’ll come back in the queue.
Amit Sanghvi
Thanks.
Operator
Thank you. The next question is from the line of Mohit Surana from Monarch Networth Capital Limited. Please go ahead.
Mohit Surana
Hello, sir. Thank you for the opportunity. A couple of questions. One, can you give some insights on the Shaily UK business? How do we record revenue orders? Is it on a project basis? And we are not paying taxes on that business as well. Is it that because we have some tax loss carry forwards? And how long can we continue to pay no taxes on it? Second, if you can give some insights on the — you mentioned the risk about the US FDA approval for your platform pen. I think it’s related to the insulin, I am not sure. If you can give some insights on how significant it can be and what measures need to be taken so that we are on the approval side?
Amit Sanghvi
So, to answer your second question first, see, we don’t file a product. We only file device components. So, there is a device master file that either we file or we give the dossier to our customers as part of their ANDA filings. All of these products are combination products. So, they are filed by our customers. The risk of approval is entirely on them. From our side, we just need to make sure that our dossiers are as comprehensive as possible. And then there are no manufacturing issues. There’s essentially no QMS issues. Whatever we have defined as our quality management system is exactly what we should be following in the plant. So, from that perspective, like I said, we go through maybe 150 audits a year by customers, by third-party external auditors, by MDSAP auditors, ISO 13485. So, we are relatively confident that we will not have any significant challenges at a future date when there is a potential audit. And that confidence also comes from our customers auditing us and letting us know that look, yes, your systems are in line with the requirements.
Mohit Surana
Understood, sir.
Sanjay Shah
Taking your first part of the question, when we record revenue at Shaily UK, we have agreed milestones with the customers and as and when those milestones are completed, that’s when revenue is recognized. Currently, we have patent box and R&D benefits, which are available in Shaily UK, just because of the development, which we have been doing and the patent, which we have been developing there. So, that basically helps us to get to zero taxes.
Mohit Surana
Right. So, just to understand the kind of R&D business that we get on a milestone payment basis, it’s like developing a product as per the requirement of the client. And then based on the milestone, you record the revenue. So, just wanted to understand how come we are not paying any taxes on it? Is it the regulations that if we are spending on R&D, then we don’t have to pay taxes?
Amit Sanghvi
Yes. There is patent box and R&D benefits that you get in the UK. But I also don’t think that it will always be the case because under patent box, you have favorable tax regime. You don’t have a zero tax. That’s just what has happened in the first three years of the business, but we will, of course, be paying taxes.
Mohit Surana
Understood. Thank you, sir.
Amit Sanghvi
Thank you.
Operator
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Ritesh Shah
Yeah. Hi. Thanks for the opportunity. I hope I’m audible. Amit, in the first line of the call, you indicated you need to adopt a scalable approach that will help us increase our revenues. So, you used the word scalable approach. And you also indicated that we will look to increase contract manufacturing capacities. Can you please provide some more context to the word scalable approach and the increased contract manufacturing capacity?
Amit Sanghvi
Yes. So, when we talk about a scalable approach is that, you actually, in manufacturing, you want to stop doing — you want to stop experimenting when it comes to manufacturing. So, now that we have kind of our first capacity built up on the insulin pen, we figured out what is the right size of capacity per product. So, what is the optimal size of capacity? You get too large a tooling cavitation, it becomes very complex to manage because you’re dealing with very small tolerances. So, basically, 16-cavity tools and 80 parts per minute line are essentially, what we are talking about, is what we feel is the right combination of the highest output with the potentially as lower complexity as possible.
So, every time we scale, it will be multiples of this number. That is what I meant when we talk about scalable approach, is that we basically want to get out of experimenting and manufacturing operations, keep it as streamlined as stable as possible, making sure that you have the right quality of product being manufactured every time.
Ritesh, what was your second question?
Ritesh Shah
You said you would look to increase our contract manufacturing capacities.
Amit Sanghvi
Yes. So, maybe as part of our first earnings call, we talked about the fact that we are developing capabilities to potentially work with more innovators. I think we have been working with Sanofi for a very long time. So, we are developing capabilities to kind of work with more innovators. And as part of that, one is that building technology that is more suited that we think are the future of drug delivery, so to speak, where sustainability is a big topic. So, we are working towards developing those products and also putting in the capacities in place to demonstrate that we can manufacture at scale for large innovator companies.
Ritesh Shah
Sure. Just a few more. Given the outlook is so good, are our clients asking us for committed capacity?
Operator
Sorry to interrupt, sir. Your audio is not clear, Mr. Shah.
Ritesh Shah
Am I audible now?
Operator
Sir, you’re sounding very soft.
Ritesh Shah
Hi, is it all audible now?
Operator
Sir, it’s slightly better. Please proceed.
Ritesh Shah
Yeah. Sir, my question is, are any of our clients asking for committed capacity?
Amit Sanghvi
Ritesh, there’s a lot of background noise in your — on your line, unfortunately. If you can —
Ritesh Shah
I’ll just try one other and I jump back in the queue. My question is, are any of our clients asking for commitment capacity from us?
Amit Sanghvi
Yes. We have some clients who ask for committed capacity, but then — if there is an ask for a committed capacity, it has to be contractually binding on both parties.
Ritesh Shah
All right. So are we facing that constraint or that particular variable, which is probably a win-win scenario?
Amit Sanghvi
Yeah. I think in some cases, we are having very good discussions and potentially leading to those contracts, but the market is volatile. No one — I mean, people will struggle to make a sure-shot commitment to buying an X volume. I think that sure-short commitment of buying an X volume comes essentially when you get closer to launch. So, we know that ’26 will be launched in some markets. We are getting those commitments on what is the anticipated volume. So, a lot of our design development and exhibit batch contracts are being translated into supply agreements.
Ritesh Shah
Sure. And this extension today, are clients okay to invest in —
Operator
Sorry to interrupt Mr. Shah. Sir, your audio is not clear.
Ritesh Shah
I’ll jump back the queue. Thank you.
Operator
Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Yeah. Thanks for the opportunity and congratulations for great set of numbers. So, my first question was on our own IP pens on the insulin side. So, as you said, we are doubling the capacity to 25 million pens. So, when is this capacity expected to come on stream? And how fast can we utilize this capacity given a lot of innovators and there is a lot of innovator moving away from insulin and the demand for the insulin pens also is very high?
Amit Sanghvi
Commercially manufactured products from this new capacity is, I’d say, 16 months away — 14 to 16 months away, when we can start supplies from the new capacities.
Ankit Gupta
Sure. So, it will be most likely to contribute to our revenues in a big way from FY27 onwards?
Amit Sanghvi
Yes.
Ankit Gupta
And sir, in your last participant’s question, you’re also saying that we are also looking at — like building capacities and working with innovators like Sanofi for more insulin opportunities, pens in that direction. So, will that be a contract manufacturing opportunity? Or we will also be developing our own IP pens for them?
Amit Sanghvi
It will be a combination. Some will be contract manufacturing opportunities. Some might be a play on one of our platforms. So — but typically, when you work with the innovator on a novel molecule or potentially large molecules, the relationship tends to be more exclusive, unfortunately. So — but I think the opportunity really is to work with one of them and see potentially very significant volumes on a product.
Ankit Gupta
Okay. So, for our contract manufacturing that we do for insulin, how much is the capacity currently? And are we also looking to expand it, as we are doing for our own IP pens and insulin pens?
Amit Sanghvi
We are expanding capacities on, I think, all of our platforms. So, we will need capacity on our auto-injector — 2-step auto-injector, which is Toby. We will need capacity on Neo, which is the spring-driven pen. We are increasing capacity on, what you call it, Protean, which is our insulin pen. So, at least these three are going through capacity expansion. And then on products like Teriparatide, we are not necessarily going through a capacity expansion, but we will have a requirement for a new set of tools purely because the old set was always meant for clinical batches and now commercial batches will come from essentially a higher capacity tool.
Ankit Gupta
Sure. Sure. Sir, on — we are seeing a lot of like a lot of device manufacturers and even CDMO players, who work on drug and device opportunities. We are seeing that for the incremental opportunities, they want their clients to participate in the CapEx as well. Ypsomed has talked about expanding capacities where innovators will also be participating in funding the capacity expansion. Any talks that we are having with some of our customers, where they also put in money or we are able to get some that ensures locking from the customers also about some capacity or assured volume of capacity for further expansions?
Amit Sanghvi
Yes. Either customer participates on the investment or guarantees a certain volume. See, when we build large capacities, we build based on — we don’t — I mean to a certain extent, you can do it based on a forecast. But when you start looking at investing millions of dollars into capacity enhancement, then we look for commitments to customers either in the form of joint investment or participating in the investment or in the form of kind of a capacity commitment, take or pay, for next volume for the next number of years.
Ankit Gupta
Sure. Okay. Okay. And sir, just one last question on the — our nominal consumer business. So, how is that doing? And how do you expect growth for this segment for the next year or two years, both on plastic side as well as carbon steel side. So, if you can talk about that?
Amit Sanghvi
We have participated in quite a large RFQ on the consumer business. So, we are anticipating that we will have decent growth over the next, I think, starting — probably start to commercialize some of these products in the next eight months to 10 months. So, we are expecting good growth in the upcoming years for the consumer business, both carbon steel and plastic.
Ankit Gupta
So, in the last two years, last two, there years that we have been facing or the client also has been facing some challenges on the growth front. So, is it like they’re — the business is expected to revive or we are garnering more market share from our competitors in India as well as abroad?
Amit Sanghvi
I think it becomes a combination of all of the above.
Ankit Gupta
Sure. Sure. And any update on the carbon steel facility like how are we doing in terms of capacity utilization and any updates on how we are seeing margins? And —
Sanjay Shah
Yeah. Compared to last year, our utilization levels are better. We expect the utilization levels to be better in H2 as compared to H1. And we should probably end the year where we should be EBITDA positive.
Ankit Gupta
Okay. So for the entire year, we’ll be able to breakeven?
Sanjay Shah
That’s our expectation right now.
Ankit Gupta
Okay. Okay. Okay. Thank you and wish you all the best.
Sanjay Shah
Thank you very much.
Operator
Thank you. The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.
Aman Vij
Yeah. Good evening, sir. Congrats on good performance. I have a couple of questions. So, first, on the Healthcare side. So, I believe in the initial part of the call, you talked about, we are expecting only one commercial launch this year. And you indicated Lira, that project, which you were expecting, is happening in FY26. So, for FY26, is it safe to assume that the number of commercial launches for us can be like maybe a dozen or so given there are a number of projects in Teri and Lira also and maybe a few Sema. So, what is your expectation in terms of number of commercial launches in FY26 for us?
Amit Sanghvi
So we — FY26 runs up to March ’26, right? Between FY26 and FY27, we expect Teri, Lira and Sema to be launched in multiple markets across the world.
Aman Vij
Sure. So —
Amit Sanghvi
And all of these programs would have multiple customers. So, I won’t comment on potentially how many we are expecting to get approval, but all — three of these products will be launched in FY26 and ’27.
Aman Vij
Sure, sir. Sir, for Lira, some of the projects will happen in FY27, I thought most of them will be launched by FY26 itself. I’m saying March 2020 —
Amit Sanghvi
Yeah, yeah. No, I see, there isn’t an IP challenge to launch the product. Right now, it’s just about who’s getting approval faster or which one of our customers gets approval first.
Aman Vij
Sure. My next question is on Tirze. So, you’ve talked about we have maybe three odd customers and maybe one or two, we will try more. So, the batches — the exhibit batches, have they started? Or when are they expected to start?
Amit Sanghvi
Q4 of the current financial year is when we will start supplying exhibit batches.
Aman Vij
And is it safe to assume that the first scaling up of Shaily UK in terms of this will come? So, maybe in Q3, Shaily UK Tirze’s projects will start coming?
Amit Sanghvi
Yes, I guess that’s safe to assume. All these projects are payment — we only invoice based on milestones achieved. So, you’ll see the fee spread between Q3, Q4 and Q1 of next year for Tirze.
Aman Vij
Okay. And generally, on Shaily UK side, H1 was quite good for us, but normally H2 is much better. Do we expect the same trend, maybe like very good growth in H2 Shaily UK compared to H1?
Amit Sanghvi
I think H2 will be comparable to H1 in Shaily UK. Plus or minus some, but essentially it will be very comparable.
Aman Vij
But not a ramp-up, like in the number of pens you are saying, we will see a ramp-up.
Amit Sanghvi
No, because we don’t sell any pens in the UK. We — it’s purely creating intellectual property and then managing end-to-end projects and design and development work for particular customers on various molecules. So, Shaily UK will have very similar revenue as the first half of this year. It could be a little bit higher or a little bit lower, but essentially it will be more or less the same.
Aman Vij
Sure, sir. And you talked about good hiring in — we have doubled the number of people in the UK. So, when do we expect, say, some new kind of projects or maybe innovative projects or contract manufacturing, not related to the GLP necessarily, but when do we see some concrete project orders or some projects?
Amit Sanghvi
We have seen some themes on drug delivery or evolving themes. And we have got maybe our own take on what is the future of GLP-1 drug delivery. So, we are looking at developing two types of new platforms. One is based on our fixed-dose pen, which is the Axiom, but being able to deliver a much larger volume. So, Axiom currently delivers 80 microliters. For GLP-1s, you typically need something to deliver 500 to 750 microliters. So, we are working on a product on a platform that delivers the large volume needed for GLP1s. But the user experience, instead of dialing, it becomes simply a pull and push to deliver. And then, we are also looking at potential unique opportunities on auto-injectors, high viscosity drug delivery. So, with the increased size of theme, we will be looking at a couple of new platforms and products in the upcoming years. So, hopefully, either next CPHI or just shortly after we should be able to showcase some of our new developments.
Aman Vij
Sure, sir. That is good to know. On the capacity, sir, you’ve talked about we are planning to expand insulin maybe around 25 million, it will be after expansion, then Sema 35 million, then I am assuming the rest of them will be another 10 million, 20 million. So, is it safe to assume we are talking about almost doubling our capacity from 35 million, 40 million to maybe 70 million, 80 million, 90 million over the next two years?
Amit Sanghvi
Yeah. Insulin, we have 11 million right now. We’re adding 24 million. So insulin will become 30 million to 35 million capacity. Sema will be 35 million and then everything else together would be at least another 25 million to 30 million.
Aman Vij
And all this expansion can happen in our current facility or do we require a new place because this is like a 100 million number?
Amit Sanghvi
I think another — let’s — to — 30 million and 30 million — so 25 million and 25 million can happen in our current facility, which means up to another 50 million pens, we should be able to manage in our current facility. So it will require, of course, machines and assembly lines and tooling and all of that, but the size of the facility should be able to manage another 50 million — 45 million to 50 million pens and then we will require a new facility.
Aman Vij
Okay. That makes sense. And just a couple of more on this and then other part. On lanreotide, we heard that one of the players have launched the product. So how many customers do we have for this product? And do you think this can be a contributor this year to our revenue or sales or only into next year?
Amit Sanghvi
Lanreotide is a very — I mean, I guess it’s a niche product. So we don’t have — I wouldn’t say we have too many customers on Lanreotide. We will look at generating a part of the revenue for Lanreotide in the current financial year and then a more significant number in the next financial year.
Aman Vij
Sure.
Amit Sanghvi
So we will start supply four clinical batches in the current financial year.
Aman Vij
Okay. Makes sense. And we have like two, three customers or much more here?
Amit Sanghvi
No, no, no, no. No, just about two, three. Yeah.
Aman Vij
Okay. And how — sir, in the presentation, you talked about we have participated in a lot of conferences this year like PDA and PODD. So how was the response? Did we get any major breakthroughs in some of the big 20, 30 pharma companies or anything which you want to highlight?
Amit Sanghvi
CPHI was very, very, very good for us. I’ll be very honest, we did not have time to breathe at CPHI. Lots of — the discussion was largely around at CPHI, especially on the capacity buildup. I think several of the investors have asked today. So, a lot of the discussions with customers was on capacity built-up. And how does that partnership evolve into a commercial partnership, which is kind of beneficial for both. At the same time, guarantees the customer an X capacity, but also protects us from overbuilding or investing upfront without a commitment. So, largely, the discussion was very much GLP-1 and capacity built up.
We have seen a lot of interest in our wearable on-body injector, Mira. So, we are looking at developing Mira further now based on the inputs that we have received from potential customers. PDA, which is very much kind of a learning experience, I would say. So, it is a conference, but you learn about emerging trends. You learn more about emerging standards and regulation and how does that combine — how do you get combination products out? What is the best possible way to get a combination product through the regulatory authority? So, we participated in PDA and that is where we have kind of enforced the thoughts we had around what are the next generation of products that we should be developing.
So, the auto-injector, high viscosity auto-injector, fixed dose, larger volume delivery are all in line with the themes that we have seen this year on drug delivery. And PODD is still happening. So, I am in Boston at the moment. Today is the last day. And, yes, it’s a much smaller conference, but certainly some good conversations. So, PDA and PODD are actually where you get to meet large innovator companies. They don’t typically show up at CPHI. So, meeting the likes of larger companies like Eli Lilly or Novo Nordisk or Pfizer, you would see them at these conferences more.
And I would say that we have had some good conversations, but how quickly will they translate into business is an unknown, I would 24 months at a minimum.
Aman Vij
Sure, sir. Final questions on the applicator project. Have it started? And if you can talk about, is it for which molecule and any other similar projects we can get from other — of our customers?
Amit Sanghvi
The applicator. I also don’t know which applicator Aman you’re referring to.
Aman Vij
They were supposed to be a project started in Q2, I think Sanjay, sir, maybe can talk about in, a project which is on —
Amit Sanghvi
I think this is Astra deal applicator. Yes, we have started manufacturing and supplying.
Aman Vij
Okay. And any other projects of this size, which we can get from customers?
Amit Sanghvi
No, not at the moment. I think there’s enough on our plate. We need to focus on capacity built-up and supplies right now. We are focusing on next generation of drug delivery, but we certainly need to focus more on the capacity built up and supplies.
Aman Vij
Make sense. Final question on the overall company’s utilization level. So it has — good to know it has started inching up at 40%, 45% for this quarter. But say, Q4 exit for FY25 and exit for FY26. So can we expect maybe like 55%, 60% exit run-rate for this year and maybe 70%, 80% exit run-rate in terms of utilization? I’m talking about exit run rate, not for the full year.
Amit Sanghvi
Sanjay bhai?
Sanjay Shah
Yeah. I think so. But a lot of people —
Amit Sanghvi
I think so, Aman.
Aman Vij
Sure, sure. Okay. Thank you.
Operator
Thank you. The next question is from the line of Anant Shenoy from AS Capital. Please go ahead.
Anant Shenoy
Hi, good afternoon. Am I audible?
Operator
Yes, sir. Please proceed.
Anant Shenoy
Yes. So, my question is on Shaily UK. So, in the past, you have mentioned about drug delivery devices like soft mist inhalers and on-body injectors. And now you’re talking about newer projects like high-viscosity auto-injectors and all. So, given these exciting things happening there, like what is the revenue visibility like do you see for FY ’26 in Shaily UK?
Amit Sanghvi
Anant, we develop a lot of these platforms based on where we see drug delivery going. So, they’re not necessarily custom-developed for a particular customer. We will develop a platform and essentially — generally, we know what is the demand out there for a particular type of technology. Revenue in Shaily UK has — I mean, first half of this year has scaled up quite nicely compared to last year. We anticipate similar run rate for the second half and probably a similar number for the next financial year as well. You would have — I am not looking at exponential growth in Shaily UK, but you’d have decent growth, probably 10% to 12%, 15% growth in Shaily UK.
Anant Shenoy
Okay. Got it. My second question is on the overall like you have mentioned about all this capacity announcement for insulin going to 35 million, Semaglutide going to 35 million. What is the overall spend that we are doing in this one?
Amit Sanghvi
The overall spend?
Anant Shenoy
Yes. What is the amount for —
Amit Sanghvi
Some of the spend we have already done. The overall spend is a little difficult to give you an exact number right now, but all these capacities, it’s not — we are not going to spend everything on day one. So, spread over the next 36 months, we would be looking at spending probably INR150 crores to INR200 crores on the capacity built-up.
Anant Shenoy
Okay. Okay. Okay. Thanks a lot for answering questions.
Operator
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for any closing comments.
Amit Sanghvi
Thank you. Thank you, everyone, for participating. I hope we’ve been able to answer your questions adequately. For any further information that you need, I request you to get in touch with SGA, Investor Relations Advisors. Thank you once again, and have a great evening.
Sanjay Shah
Thank you, everybody. Happy Diwali and Happy New Year.
Amit Sanghvi
And Happy Diwali. Yes. Thank you.
Sanjay Shah
Thank you.
Operator
[Operator Closing Remarks]