SMS Pharmaceuticals Ltd (NSE: SMSPHARMA) Q4 2025 Earnings Call dated Jun. 02, 2025
Corporate Participants:
Unidentified Speaker
P. Vamsi Krishna — Executed Director
Lakshmi Naryana Tammineedi — Chief Financial Officer
Analysts:
Unidentified Participant
Pranav Gandhi — Analyst
Surabhi Sutaria — Analyst
Anmol Ganjoo — Analyst
Srihari Chintalapudy — Analyst
Presentation:
operator
You are joined to the conference. The conference is now being recorded. It SAM IT IT. Ladies and gentlemen, good day and welcome to the SMS Pharmaceuticals Limited Q4 and FY25 earnings conference call. This conference call may contain forward looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not 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. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone phone.
Please note that this conference is being recorded today. We have with us Mr. Vamsi Krishna Potluri, Executive Director, Mr. Lakshmi Narayan Taminidi, Chief Financial Officer, Mr. Thirumalesh Thumma, Co. Secretary and Compliance Officer. I now hand the conference over to Mr. Vamsi Krishna Portlouri, Executive Director. Thank you. And over to you sir.
P. Vamsi Krishna — Executed Director
Good morning everyone and thank you for joining us on today’s call. We appreciate your continued interest in SMS Pharma and the time you’ve taken to be with us this morning. I trust you had a chance to review our financial results and other investor material that were uploaded to the stock exchange in our company website earlier. Let me begin by saying that FY25 was the landmark year for the SMS pharma. We delivered a 39% growth in PAD which marks one of our strongest earnings performances in our recent history. This was driven by volume growth, cost efficiencies and continued focus on execution.
These outcomes are the result of consistent strategy we followed over the last four, five years built on scale up, process optimization and optimal product mix. I’d like to highlight a few points, a few important milestones on this journey. We’ve launched Asia’s largest dedicated and automatic automation production block for Ibuprofen. We’ve invested close to 150 crores in backward integration projects for cost efficiency and margin sustainability across our API portfolio. Our facility successfully cleared EUGNB and US FDA audits which is a reflection of our strong compliance culture. We added few new products and in several of them we’ve already attained leadership positions.
And most importantly, we remain committed to maintaining a diversified product mix which has helped us protect and expand gross margins even through industrial cycles. Performance Overview Moving on to our financial performance in Q4, FY25 revenue grew subsequently by 43% to 248 crores, showing a strong recovery in demand and execution for the full year, revenue rose 10% to 783 crores driven by good traction in anti inflammatory and ARV products. We have also scaled up ibuprofen production significantly and are now among the top producers in India. Coming to profitability in Q4, gross profit rose 18% year on year to 75 crores with margins improving to 30% up 444 basis points.
For the full year, gross profit grew 23% to 259 crores and gross margins improved to 33% up 330 basis points from last year. This comes from a better product mix and benefits from backward integration. EBITDA in Q4 was 41 crores up 21% year on year with margins at 16%. For the year, EBITDA stood at 139 crores up 19% with margins improving to 18%. These factors translated into the strong profit growth I mentioned earlier. FAT for Q4 was 20 crores up 18% from last year with margins at 8% for FY25. Pact grew 39% year on year to 69 crores supported by margin expansion, volume growth and lower finance cost.
Therapeutic and Segmental Updates Let me also take a moment to walk you through our segment wide performance for the year. Anti Inflammatory and ARB segments were key growth drivers. In FY25. Anti inflammatory grew 22% year on year to 148 crore in arbitrary rose 15% to 163 crores. Anti epileptic saw the fastest growth up by 1 or 6% year on year to 29 crores driven by strong demand and expanded market access. Anti Diabetic remains our largest segment at 185 crores growing 5% year on year despite prices softening this year we have also seen strong growth in ed and other APIs rising 15% year on year.
Our focus on maintaining a balanced and diversified product mix continues to help us navigate volatility in any one segment and support margin stability over the long term. Strategic and Operational Highlights we have also made meaningful progress on our long term strategy this year, laying the foundation for stronger growth going forward. First, our backward integration project has received all the necessary licenses and approval. Commercial production of Key Intermediate is set to begin this quarter. This will help materially improve margins starting Q2 FY26. Second, we continue to deepen our customer base in regulated markets. In FY25 we onboarded several large clients across our API portfolio and saw meaningful scale up in key molecules.
This improves not just the revenue visibility but also the customer base. Third, we have approved a new capex plan of 250 crores over the next 18 months. This will support expansion in both existing and new products. The product mix of this capacity addition includes a healthy balance of high volume and high value ABI’s and will also expand our CMO business. Additionally, the board has approved a 10 crore investment in SMS Peptide Private Limited to be executed in one or more branches. Fourth, we’ve made meaningful progress over building a robust pipeline of new molecules to drive our growth over the long term.
Outlook looking ahead to FY26 we are entering the year with strong momentum. We are targeting 20% revenue growth and aiming to expand our ebitda margins by 20%. This should enable us to deliver another year of strong earning performances. Revenue growth and margin expansion will be driven by the benefits of backward integration, improved scale and volume growth across our key products. Our recent announced 250 crore capex plan will further support this growth by adding capacity in high potential molecules. We believe we are on the right path. Having laid a solid foundation for sustainable and profitable growth.
With continued focus on execution, cost control and quality we are well positioned to end FY26 stronger. Thank you. We are ready to answer any questions.
Questions and Answers:
operator
Thank you sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchstone telephone. If you wish to remove yourself from the question queue you may press time to. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Pranav Gandhi from Lotus Wealth. Please go ahead.
Pranav Gandhi
Thanks for the opportunity. I was going through the balance sheet and noticed that inventory was rupees 285 crores. If our gross margin is at 44% and the quarterly results are 248 crores of heaven, we are holding inventory that is almost seven to eight months of our sales. On the other hand, we have got a debt of 311 crores on which we pay 20 crores of interest every year. Yet we are sitting on an expensive stock that doesn’t add up. Also, why is that a company is keeping almost three times of what their companies keep in their inventory.
P. Vamsi Krishna
Hello. Yeah, thank you. Thank you for your question. So if I got your question correct I think you’re mostly asking about the inventory levels, right?
Pranav Gandhi
Yes.
P. Vamsi Krishna
Even for the high inventory that we are currently maintaining. So. Yes, yes. Inventory that we are currently maintaining. Is because we have some high volume products that we are currently moving in terms of volumes like for example Ibuprofen which is high volume product. And also we have some old products where we are sitting on on some inventory like HCQ and some Covid related product which is not moving but we are sitting on that inventory. But definitely in the next coming year we have plans to reduce our inventory level. It will definitely come down but definitely we will be carrying higher inventory levels because we are sitting on commodity products where the delivery cycle like my lead time for any orders that we get is hardly like four days or five days.
So we have to sit on sufficient inventory or else we have. We run the risk of losing those orders. These products I’m talking about are commodity products that we talk about like Ibuprofins or Tenosabeer or these are all little commoditized products. And if we don’t sit on these inventory we will have a risk, we’ll run the risk of customer placing the order to our competitors. So we are sitting on. So our inventory levels over the past have definitely increased because of the product mix and the different set of products that we’re currently manufacturing. But definitely our plan is to reduce the inventory in this coming financial year.
Pranav Gandhi
I have a following question to this. How much amount of written of inventory are they looking forward in the coming years?
P. Vamsi Krishna
So no written off inventory. I don’t have any. It’s a slow moving inventory.
Pranav Gandhi
Suppose we have 80 to 90 crores of inventory from the COVID which is more than three years and it is impossible to use it in the following formulations and drops. Shouldn’t the portion be like written off by now?
P. Vamsi Krishna
No, it is not 90 crores. It is 40 crores. And it is. And this is also not one product. This is HCQ also is part of that. And HCQ is not a Covid related product. It is a regular product where the customers already filed our product in the U.S. they are anticipating the launch maybe in the next two, three months. So we have plans to liquidate that inventory sooner. So that’s the reason. And there is a slow moving inventory.
Pranav Gandhi
Okay. Also I wanted to ask another question. To increase the ROC and roe we need to. We need to have a tight counter on the inventory. What’s the management’s view on the inventory supply chain management and the efficiency.
P. Vamsi Krishna
So again as discussed, right. I think we plan to reduce the inventory going forward. Again if you’ve seen up typically SMS is a very conservative company. We don’t typically keep a huge inventory at our books. But you know, up to now, the product mix that we’ve come up with is product where our inventory levels need to be a little on the higher side. But definitely I think based on the increase also in our top line. Right. So our growth is also in that sense. So we are maintaining higher, little higher level of inventory compared to previous years.
But that is, I think that will go down this year, but it will not go down to the level that was there like three, four years back. Because that sort of level inventory is needed based on the product that they’re currently manufacturing.
Pranav Gandhi
Okay. Okay. Thank you so much and congratulations on your numbers.
P. Vamsi Krishna
Thank you.
operator
Thank you. Participants, please restrict yourselves to two questions. If you have any more questions, kindly rejoin the queue. The next question comes from the line of Aryan Jain from Stern Capital. Please go ahead. Since the participant has dropped, we will move to the next participant. The next question comes to the line of Arnav Dharmashi. Please go ahead. I’m sorry to interrupt. Arnav. We are not audible. Please speak a little louder. Just a little. Yes, please be a little louder.
Unidentified Participant
So congratulations on. Good number. So one, I just wanted to understand that in terms of across margin gain and what percentage of gain came from backward integration?
P. Vamsi Krishna
What? Sorry, I didn’t get you. What percentage?
Unidentified Participant
Yeah, yes, our gross margins are burner upon account. Better product mix and backward integration as well. So just wanted to understand how much of that came from backward integration and how much of that was from product mix.
P. Vamsi Krishna
So product mix, I think I would say around 60% product mix, I think 30% from backward integration. Because our backward integration product, I mean the project was just commercialized in not. Not fully, but you know, part of it was commercialized in the last quarter. So this year I think that that percentage will be much higher for backward integration projects. So just for FY26.
Unidentified Participant
Okay. Okay. And we’ve spoken about some of. I mean we’re looking at launches for our API individual and so what kind of pipeline are you looking in terms of our EPI supply?
P. Vamsi Krishna
So we are very strong in therapeutic categories, definitely. So those therapeutic categories are a key focus and along with it we have some interest from few other customers for different products. So we are looking at a mix of our existing therapeutic categories, also a few categories which we are attracting good interest. So it’s, it’s a mix of both.
Unidentified Participant
Okay. Okay. And last question is for the incremental 250 crore capex that we are looking for over the next 18 months, what kind of acceptance are you looking at on that Capex So we are looking.
P. Vamsi Krishna
At an asset turnover of one.
Unidentified Participant
No. Okay, I’ll join back in with you. Thank you so much.
operator
Thank you. The next question comes from the line of Surabhi from NV Alpha Fund. Please go ahead.
Surabhi Sutaria
Hi, thanks for the opportunity. So my first question is regarding your IBU segment. So your ibook currently, what is the mix that you’re selling in your regulated markets versus the non regulated market? And how much of your ibuprofen would be backward integrated currently?
P. Vamsi Krishna
So right now it is around say maybe 40% to regulatory markets and 60% to domestic and RW markets. And like when I say regulated market it is including the deemed export also. So where the product is sold in India for the end finished dosage sales in the US so I’m considering that. I think it’s around 40% to the regulatory market and 60% of our listings to the domestic market. And coming to the backward integration part. So we have two major intermediates. One of them is already backward integrated, the other one is in the pipeline.
Surabhi Sutaria
Got it. And you also mentioned about backward integration for some of the other APIs. So. So is this going to be in the high volume API segment or the high value API segment? And just a follow up to the previous one, is there scope to increase your ibuprofen shares in the regulated markets from 40% like can that inverse to like 60%?
P. Vamsi Krishna
Yes, definitely. I think it can, definitely. So the thing with regulated market is we have so one by one we are getting approval from some of the US customers. So you know the US it takes time, right. So they have to take validation batches, they have to load up the stability file their pa then they get commercial approvals. So apart from these customers, I think we are targeting a good number of regulated customers where our product is already sampled and it’s at various stages for different, different customers. For sure next year we definitely that proportion is going to increase, not to 60.
I think it might even go to 70% also. So that’s the plan. But slowly, one by one once we start getting customer approvals it’ll take time but we’ll be getting them soon. And I’m sorry, what was your other question?
Surabhi Sutaria
So what other APIs are you looking in backward integration? Like which therapy is it the volume category or the volume category?
P. Vamsi Krishna
So actually it is mostly the volume categories like 80% major focus will be on the volume category because that’s where the cost pressure is on the volume ones. Like some of the anti diabetic segment is a critical one and anti Epileptic is one segment we’re currently looking at and high low volume are decent margins. So currently like our focus is there but it’s limited. Most focus is mostly on the high volume.
Surabhi Sutaria
Got it. And this last question, what is your current capacity utilization across both facilities?
P. Vamsi Krishna
It is around 75 to 80%.
Surabhi Sutaria
Got it. Thank you so much. Thank you.
P. Vamsi Krishna
Thank you.
operator
A reminder to all participants, you may press star and one to ask a question. Participants please press star and one to ask a question. The next question comes from the line of Anmol. Jangu from Shanika, please go ahead.
Anmol Ganjoo
Yeah, hi. Thanks and congratulations for a good quarter. Just a couple of questions. One is that what is our capital expenditure plan for the outlook as well as what did we do in terms of CapEx for the last year?
P. Vamsi Krishna
So the CapEx that we’ve spent in FY25 was around 150 crores. As discussed earlier it was mostly for backward integration of some of our key APIs. So that was where capex has gone through. So this year the capex is close to around 250 crores. So we are adding new blocks and where we’ll be manufacturing, increasing the volumes of our existing product mix and also we’ll be adding new products and also we’ll be dedicating some capacity for CMO. Also where we are actively getting a lot of interest for some of our, I mean some for the plant we are getting a lot of interest on CMO activities also.
So it will be a mix of 3, 4 segments that will be spending this 2026 CapEx on.
Anmol Ganjoo
Just help me understand this answer. The last year 150 crore that we spent in terms of addition to net of the maintenance CapEx, you know what is the asset term that we are aspiring for on that and when you’re making your capital allocation decisions in terms of what are the areas you’re going to be investing in, what is the basic maths that you’re working with and how do you see this addition to this gross block start contributing to revenue and then what time frame? So if you could just walk us through this whole thought process in detail would be helpful.
P. Vamsi Krishna
Correct. So last year based on our investment I think 567, 0.67 is the actually total asset turnover last year was 0.67 for FY25 and definitely I think this year again it’s gone into the capex. So the capex as I was highlighting in my speech, the vertical integration, the block setup, everything is completed right now we are taking validation batches at this point of time. So the revenue will start factoring in, the margins will start factoring in. You will see our increased revenue from Q2 FY26 for the last year project that we’ve done and coming to this year we are adding 250crores approximately to add new block, to add more products and increase our capacities for our existing products.
So definitely I think this revenues. So we are again targeting an asset turnover of 1. So for FY26 end, we are anticipating that commercials to start in early FY27.
Anmol Ganjoo
Right. So basically with a lag of 1215, 1215 months, your each capital expenditure should yield an asset turn of one. Is that fair in terms of understanding and the incremental capex that you’re spending, Say for example, if you look at the 250crores, there’s a part of that which is going to CMOs, etc. And if you benchmark it against peers, that number tends to be higher than one. So any thought process there because one is just right on the fence and given the commodity nature of some of these products, there could be reasonable periods of time where even cost of capital can’t be recovered.
So on a blended basis and also on an incremental basis basis, when you’re doing your capital allocation business, what are the areas you’re trying to get into and how are you thinking about the cost of the capital versus return On a sustainable basis, you take the point that there’ll be a lag between the time you put capacity and it starts yielding. But on a consistent steady state basis, what should asset turn be and what is it that you’re targeting?
P. Vamsi Krishna
See, the target is one, to be honest with you, right now it is 0.67. If you look at at our pharma industry, I think the average that is currently at this point of time, like from our peers, almost 20 companies like Very close to us is close to around 0.6 to 0.7 range. Okay, so we are targeting to be around 1, which is a very, very good number and very aggressive number. But right now we are at 0.67 which is as per the industry standard at this point of time, the total asset turnover, that’s the thing.
And with respect to the margins that you are mentioning, see if you see that though you mentioned commodity products. So though we are doing products like ibuprofen and which are very commodity in nature, if you see our product, our profitability has gone up significantly. I think this year we’ve closed at 40% higher than the previous year. So my distinction is like though we are working on commodity products, it is more crucial that we are vertical integrating on some of these products to make sure that our profitability remains and our profitability increases. That is the target that we are planning to do.
And again to coming back to your question, I think we are targeting our target will be asset turnover ratio will be one.
operator
Does that answer your question on Moon?
Anmol Ganjoo
Yes, it does. Thank you.
operator
Thank you. The next question comes from the line of Shari Hari from PCs Securities. Please go ahead.
Srihari Chintalapudy
Yeah. Am I audible?
operator
Yes.
Srihari Chintalapudy
Yeah. Thank you. Yeah. So for your main two therapies that is anti diabetes and ibuprofen, if you could please share the volume growth and I would also like to know the price outlook for the two segments. Thank you.
P. Vamsi Krishna
So price for ibuprofen has sort of stabilized. Right now it’s stable I think since last one year it was on the downtrend but since last quarter it sort of stabilized. And you know it’s at a good point. And with respect to the growth, so volume growth I think it was 22%. Anti inflammatory ibuprofen is around 22% and antidiabetic growth in terms of volume was around 5%. So in antidiabetic I think we have two, three critical products on the anti diabetic segment and yeah, so we anticipate the same volume because on the anti diabetic segment one key factor was that the patents had gone off but still we were able to retain the market share and retain the volume which was a very good thing.
The patent went off in Europe in 26, in 25. So we were still able to retain that market share. And anti inflammatory I think we are taking good steps to increase our market share.
Srihari Chintalapudy
So if I’m not mistaken the value growth was 22% and 5%. I wanted to know the growth.
P. Vamsi Krishna
So currently we don’t, I don’t have the numbers. I think we are on 2200 for the current year. FY25. 1800 is the TVC. Okay. 1800 tons. 1800 tons was what we’ve done last year And I think 2,200 tons was what we’ve done this year.
Srihari Chintalapudy
And can you, can I have the corresponding number for.
P. Vamsi Krishna
Sita Liftin I think is a little more confidential because you know it’s a joint venture project. So unfortunately we will not be able to disclose the exact volume that we’ve done at this point in time.
Srihari Chintalapudy
Okay. Any target for ibuprofen volumes this typical.
P. Vamsi Krishna
So we are targeting close to around 5000 tons.
Srihari Chintalapudy
5000. Vis a vis 2200.
P. Vamsi Krishna
Yes.
Srihari Chintalapudy
Okay, fine. Thank you.
P. Vamsi Krishna
Thank you.
operator
A reminder to all participants, please press Star and one to ask a question. Participants, you may press Star and one to ask a question. The next question comes from the line of Arnav Dharamshi from ASHMI Enterprise. Please go ahead.
Unidentified Participant
Hello.
operator
Yes, please go ahead.
Unidentified Participant
Yeah, yeah, I just wanted to check. Is there a possibility where we are able to gain some market share say from the large MNC competitor on account of better pricing?
P. Vamsi Krishna
Sorry, could you repeat that question?
Unidentified Participant
Is there a possibility that we are able to get more patients from a large MNC competitor on ibuprofen on account of better pricing and good product?
P. Vamsi Krishna
Yes, definitely. I think we launched this product one and a half year back and we have a decent market share right now. So definitely. I think the market share, I mean the volume for ibuprofen has not increased significantly. It’s sort of stable. Right. But once we are getting more market share we are obviously taking it from a competitor right now. So we are definitely taking it from a big competitor. We’re pulling some market share based on the pricing.
Unidentified Participant
Understood. And secondly, I think for large part of our capex has been focused towards backward integration. What are your thoughts on growth?
P. Vamsi Krishna
Growth in the sense growth.
Unidentified Participant
I mean growth. I mean for the business over the next 23 years. How do you see the business shape up over the next two three years in terms of revenue quality?
P. Vamsi Krishna
Yeah, so we have basically again so last year what we’ve done was for backward integration so that revenue will come in Q2 FY26. So the revenue you will see through from the last year budget backward integration you will see in Q2 FY26. And this year again we’ve taken up a 250 crore budget to add new products and also increase the capacities for existing products. Not only ibuprofen but a few products that is catching good interest. And also CMO is a good space that we want to be already there in the CMO space. But we are adding more new products on that space.
So this additional CapEx that we’re doing will fund all this. And again as highlighted in my speech, we are anticipating a 20% growth on the top line and a 20% growth on EBITDA as well for FY26.
Unidentified Participant
Okay, I just want to clarify. I think since the press move 20% EBITDA margin as guidance. So is it 20% EBITDA margin?
P. Vamsi Krishna
Sorry, I find corrected. I think it is 20% EBITDA margin.
Unidentified Participant
Okay, so okay, okay. And say from Q2, if I pretty say X, what kind of gains are we looking at led by backward integration? Because it is by then that we have a full, full triple payout. So by what kind of gains are we looking at?
P. Vamsi Krishna
If you see our PAT margins have increased significantly, I think almost close to 39% to previous financial year. Again we are anticipating a growth of I think around 20% on the conservative side for the margins for the next financial year also. So in a landscape where there is a lot of pressure on pricing and we are able to navigate this through backward integration and trying to be more cost effective and get some market share as well and at the same time increase the profitability.
Unidentified Participant
But my question was regarding largely on GROSS Profit starting Q2 because you mentioned in the presentation, we spoke about it in Q4, gross margin was close to 3%. So because of, because of backward integration, what do you see that number go to say from 30% to what number? Because of the network integration being that we make.
P. Vamsi Krishna
See, I’m not talking about the thing. So what I said was the Entire year is 20% will be around 20% growth.
Unidentified Participant
Okay, okay, okay, got it. Thank you.
operator
Thank you ladies and gentlemen. That was the last question for today. I would now like to hand the conference over Mr. Vamsi Krishna Potluri for the closing remarks. Thank you. And over to you sir.
P. Vamsi Krishna
Thank you all for joining us today. FY25 was a year of a strong execution and meaningful progress across our strategic priorities. As we enter FY26, we do so with great momentum and a clear focus on delivering stronger revenue growth and margin expansion. We appreciate your continued trust and interest in SMS Pharma’s journey. For any further information or clarification, please feel free to reach out to our IR partners. Eqs Ponent. Wishing you a great day ahead. Thank you.
operator
Thank you, sir. Ladies and gentlemen, on behalf of SMS Pharmaceuticals Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.