Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Viyash Scientific Limited (NSE: SEQUENT) Q4 2026 Earnings Call dated May. 20, 2026
Corporate Participants:
Abhishek Singhal — Investor Relations
Hari Babu Bodepud — Wholetime Director and Chief Executive Officer
Ramakant Singani — Chief Financial Officer
Analysts:
Unidentified Participant
Sajal Kapoor — Analyst
Presentation:
Operator
Ladies and Gentlemen, good day and welcome to v Ash Scientific Limited’s Q4FY26 earnings conference call. 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. I now hand the conference over to Mr. Abhishek Singhal.
Thank you. And over to you, Mr. Singhal.
Abhishek Singhal — Investor Relations
Thank you Michelle. A very good evening to all of you and thank you for joining us today for VR Scientific Emitter’s earnings conference call for the fourth quarter and financial year 2026. Today we have with us Dr. Hari Babu, Managing Director and Group CEO, Mr. Rajaram, Executive Director and CEO Animal Health and Mr. Ramad Khan, CFO of the company to share the highlights of the business and financials for the quarter and financial year. I hope you’ve gone through our results release and the quarterly investor presentation which have been uploaded on our website as well as stock exchange website.
The transcript for this call will be available in a week’s time on the company’s website. Please note that today’s discussion may be forward looking in nature and must be viewed in relation to the risk pertaining to our business. After the end of this call, in case you have any further question, please feel free to reach out to the investigation team. I now hand over the call to Dr. Haib Mabu to make his opening remarks.
Hari Babu Bodepud — Wholetime Director and Chief Executive Officer
Thank you Abhishek. Good afternoon everyone and welcome to VR Scientific Investor Call for the quarter four and financial year 26. Thanks for taking the time to join us today. Today is an important milestone for us as we are discussing first time combined entity 12 months annual results. Q4FY26 is the strongest quarter in the company history. EBITDA surpasses 200 crores FY26 EBITDA up by 59.6% and padded by 1324%. Last year it was negative with a good free cash flow and most important strong foundation for future growth.
Fiscal year 2026 has been a transformative year for VR Scientific Ltd. Marked by the successful integration of business operations and corporate functions into one unified strong platform. The integrated platform has strengthened execution, improved operating leverage, contribute sustainable growth which reflects quarter on quarter results. As we enter FY27 we are very excited about our product pipeline infrastructure, strong management team and sustainable growth roadmap with a significant leverage balance Sheet.
We are also actively evaluating selective inorganic opportunities in addition to organic scale up to further strengthen our platform and create long term value. As we explained earlier, operationally we have taken multiple actions across all the businesses over last few quarters which are reflecting in the results on the animal health formulation business. All regions are growing very strong and we believe the growth will continue with our continuous focus on new product launches Geo extension for all our existing products to various countries Expanding R and D and accelerating new product developments.
Manufacturing expansion at Spain and debottle lacking capacity at Turkey manufacturing which are very important to grow for future business we have initiated, we are working on that strengthen front end team to expand business new markets and scale up existing markets, many existing markets. We try to add products, we try to add people in addition to adding the new markets Coming to the human health formulation business. I think it was a great year for human health formulation us we have done fantastic job FY26 accelerating new product development and moving into complex products with internal APIs.
As I mentioned earlier also finished products. We changed our strategy last two years One is changing our product mix moving into little more complex products and all mature products volume products. We try to internalize APIs and also bringing manufacturing into India manufacturing. That’s where we are able to sustain the products and grow. And also most important margins are growing. Recently we initiated dedicated creating dedicated potent lab in RD to take care of all our new oncology product development for finished product coming to APA and CDMO business.
This is again one of our core business and strong business. And most important to note this year animal health all you guys must be tracking last couple of years. Last five years it was stable neither growing nor actually de growing. It was 350 plus or minus 10 crores business the first year. After four five years we are able to take it to 400 crores run rate. And we are very confident coming years it’s going to grow very strong and already we see the growth and we are going to grow very strong in next coming years.
And most important animal health. We really looked at the entire strategy. Of course that’s a part of strategy of synergy exercise. We identified few areas execution capability especially on the manufacturing and most important R and D speed, efficiency and portfolio development. We initiated all those areas last six months. It’s working very well on those things. We’re able to develop couple of products already last six months and we are covering product development up to at least 2035 patent expiry and we see the huge potential to grow on that business.
And other area operational efficiency improvement. And we see tremendous improvement in animal health API operations. Last six months and capacities are growing. We are able to optimize. That’s where it shows growth as well as margins improvement. Coming to human APIs like formulation business. Last two, three years we tried to optimize in various aspects. Taking out commodity products, taking out little intermediates into taking out and converting into API business. We did a big exercise last two, three years.
That’s how we are able to improve the gross margins drastically. So last year also we did some optimizing of intermed business. All intermediates. Whatever we are doing either we are trying to convert into API and which in fact is going to convert into finished products. We started last 18, 24 months and started getting approval. That’s where you can see the growth in the future. And other strong area for APIs are continuous development of the new products. As I mentioned earlier, Carl also lost 12, 18 months.
We moved out from general volume products to complex and little more hypotent areas. We were able to do large number of products validated and lock in with many customers. Launches are going to come near future and also in the long term perspective. And whatever we developed last three, four years. You know, we acquired these companies 21 and started rebuilding R&D from 22 and filing many products from 23, 24, 25 which started coming approvals. Now this year onwards we are expecting reasonable number of approvals which give good value for top line as well as bottom line and other area where strategically we are focusing.
Of course we were talking CDMO different areas. One of the area where we are strongly focusing with innovative business on the life cycle management and all you guys are aware animal health almost 70, 80% goes to innovators. And we see the strong potential to grow near future. Whatever we are doing this year, I can expect next year at least 30, 40% growing innovative business. You know, innovator business is quite sustainable and reasonably profitable business. That’s where we are focusing. And we see good potential to grow.
And you can see 27 itself growing that business finally which is very important. Of course integration and synergies. As I mentioned earlier, teams have been integrated very well. Whether it’s operational or business or most important corporate functions. And most important thing is entire team is fully charged up for future growth. That’s where is my excitement personally. And coming to the synergies. Synergies are tracking pretty well. It’s tracking better than what we anticipated during the merger.
And we are continuously looking for additional synergies at this point I will stop and today maybe we’ll allow time for more questions or clarifications with this. I will hand it over to Ramadan to take care of financials. Thank you everyone.
Ramakant Singani — Chief Financial Officer
Thank you doctor Good evening everyone and thank you for joining us. I’m pleased to present the highlights of our strong financial performance for Q4 and full year FY26. I begin with the highlights for Q4 FY26 total revenues today 920 crores reflecting a year on year growth of 19.1%. Formulations revenue increased by 28% to 499 crores while API revenues grew 5% to around 384 crores. Gross margin improved by around 236 basis points to 55.1% compared to 52.8% in the same period last year. Adjusted EBITDA rose sharply by about 64% to 200 crores with EBITDA margins expanding by 593 basis points to 21.7%.
Profit report has improved significantly moving from a loss of 37 crores to a profit of 125 crores in the current quarter. Profit after tax also recorded a strong turnaround rising from a loss of 32 crores to a profit of 66 crores year over year coming to FY26 full year performance. Total revenue for FY26 reached 3420 crores representing a growth of 13.8% over 3007 crores reported in FY25 formulations. Revenue grew 18% to 1866 crores while API revenue increased 8% to 1,491 crore. Gross margins expanded by 321 basis points to 54.3% compared to 51.1% in FY25.
Adjusted EBITDA increased 59.6% to 702 crores with margins improving by 590 basis points to 20.5%. Profit before that grew more than 26 times to 349 crores compared to 13 crores in the previous year. Profit after tax increased more than 14 times to 225 crores up from 16 crores last year. Our balance sheet remains strong supported by healthy liquidity and comfortable leverage position which gives us flexibility to pursue growth opportunities both organic and inorganic. We continue to focus on disciplined working capital management ongoing improvements in operational efficiency across the business.
These strong financial parameters were reflected in the external credit rating upgrade with long term rating moving From A to AA minus and short term rating improving from A1 to A1, plus looking ahead to FY27. Our key priorities include strengthening merger synergies, improving operational performance, allocating capital efficiently to drive sustainable growth, further reducing debt and maximizing cash flow generation. With that, I conclude my opening remarks. Thank you for your attention and I would like to invite the moderator to open the floor for question and answer session.
Questions and Answers:
Operator
Thank you very much, sir. Yes, sure sir, we’ll open the floor. Thank you very much. We will now begin with a question and answer session. Anyone who wishes to ask questions may please press Star and one on the Touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vishal Manchanda from Systematics.
Please go ahead.
Unidentified Participant
Hi, good evening everyone and thanks for the opportunity. Congratulations on a very strong set of numbers. Could you kind of share some color on the CDMO business as to like how we are looking to build that and how we are placed currently in terms of either number of clients or number of products that we are doing on CDMO side and any potential leads that we have to take this forward in a meaningful manner.
Hari Babu Bodepud
Yeah, sure. Thank you. I explained last call also the same thing, cdmo, you know cdmo, there are three, four models working with innovators on NCE molecules. Okay. Where we start with phase three, move to the commercial things and second thing is start with the life cycle management, whatever their products. Normally once it’s patent expires they look for alternatives. That’s the second business and third business. Now there’s a lot of opportunities for specialty companies both in Europe and also India.
Big companies where they don’t have infrastructure to develop and manufacture. So they are coming and looking for CDMO business for specialty products. So first one I’ll come little later. The second and third life cycle management business. Now I can say at least we work with eight to 10 innovators, big innovators, both human health as well as animal health. And I see good traction last six, nine months. Okay. You know animal health we were struggling little bit on delivering their expectations.
But now we have come out from those things. We are able to grow a lot life cycle management products in next one, two years. So with eight to 10 customers, few products are waiting for approval. What we initiated two, three years back, it’s coming for approval start from end of this year. So started getting approval from a Few markets. But enter the global thing. It’s going to happen by end of this year. So like that we see good growth potential near future FY27. I can say at least innovator business on this life cycle management I am expecting to grow 40% and the base is around 225 crores from that.
And the third thing, specialty companies last time also explained two, three models. We develop the product, we manufacture and they file the product and we have some profit share. Also we did almost 16, 17 products. I don’t have a number but it’s a little more than 16 products on that coming for all. These are complex products coming for little later launches. So start from maybe 29 to 30 kind of thing and it goes up to 2035, 37. So that we are adding continuously on that and we see the good potential on that.
In the same category we also adapted one more model on that. Instead of just working, developing and doing for them with some profit share. We also initiated few products. Complex products, joint development, pure formulation player where they have strong presence on developed markets. We are working with them with the joint development program. So we take risk on the API development and API quantities and they develop formulation. So one way it’s very faster development since they are reasonably stronger formulation where we are strong on API.
So. So the development cycle is faster and simple and more important it’s efficient. So we initiated three, four products Already we have done one product in addition to that partnership few products. Last call I mentioned mature products. These two areas growing very fast. But Vishal, you know these things will take time. When you are looking for CDMO always it’s a longer term perspective. And any CDM starts with life cycle management. Once you have strong relationship, build with innovators and go to the first one actually where you can start with phase three and converts to the commercial.
That’s where we are building infrastructure. We are building, started building resources this year. Okay, that takes couple of years. So that’s our cdm. I am not. I am very practical on this. It’s easy to say CDMI can work with innovators but I don’t want to go into that. Whatever we say, we follow. So that’s our second and third areas. We are working very actively. But the first one NCE it takes time to be done. So that’s where we are building. We are looking at various opportunities. If we get something on that area, some inorganic option we are open to look at.
So we are looking continuously but we don’t want to acquire. But just for sake of showcase something or showcase numbers. We are looking at the good asset if something comes out. So that’s where we are looking on that. Hope I answered your question.
Unidentified Participant
Just follow up on this. Basically. So when you say specialty you mean you. You do the. So you do only the API right? Not the formulation. But the API is basically. Maybe it’s a complex API. Is that how we should look at the specialty? Two
Hari Babu Bodepud
Things here. We shall
Unidentified Participant
Formulation.
Hari Babu Bodepud
We have our own setup already most of our products we do that way. I will. I will explain that this is mostly these API CDMO partnered with our formulation partners are reasonably complex or high potent. Because as you know, we have two I potent dedicated facilities. Capability starts from as small as half a kilogram or 1 kilogram to 100 kilograms batches. These capacities. Very few companies are having that flexibility. That’s where our strength with R and D scientists we are able to do that. The formulation, as I mentioned in my remarks, we are moving it to the complex.
That’s how we are building our R and D Oncolab which is getting ready soon. Mostly this quarter and next quarter we are moving into the complex products in formulation. The formulation is always partnership model beneficial. What we do today we develop the products. Once we have, we identify the product and once we come up with proof of concept, we go to the partners. All big companies and we work with them. So they pay for development and we continue development. We get approval and we do manufacture and profit share is mostly 50, 50%.
So formulation entire business. What we do is directly or indirectly comes into the CDMO business. But it’s mostly with the big generic players like Cipla or Duck Redis. All big players in the U.S. That’s what we do.
Unidentified Participant
Got it. And like you said, about 200 crores of the business is currently CDMO. So you have the top line in API is about 1500 crore. So roughly 15%. So over next two, three years would this become let’s say about 30, 35% of your top line the CDMO business. And are these relationship with innovators very old? Or you have recently built this relationship and hence there is a scope for you to ramp them up much larger.
Hari Babu Bodepud
Most of the relationships are very good long maybe last 10, 15 years. There are two things. One is relationship with Vash, relationship with Sequent animal health. And also our past relationships where we work. Most of us we worked in big companies. I had experience with these guys. But most of the relations are ships are already commercially demonstrated. This 200k gross business, it’s coming from last 780 years. You know the sequent bigger business is that. But last six, nine months that credibility of the relationship is improved further.
Where we focused on the quality. Quality on the R and D products or efficiencies improving quality systems. That’s where they started getting more comfortable and looking for more products on that Visha. So to answer to your question maybe 90 plus percentage of existing relationships 2, 3 product what we are anticipating approve this year next year. Those are the relationships we built in last two years.
Unidentified Participant
Thank you very much. I’ll join back. Thank you.
Hari Babu Bodepud
Thank you.
Operator
Thank you. The next question is from the line of Surbhi from NV Alpha. Please go ahead.
Unidentified Participant
Yeah, that’s a good set of numbers. So my first question is. You know there is almost a 14 crore quarterly gap between the reported pad and the pad the minority. So wanted to understand which subsidiary accounts for this minority interest. And what is the scale of the subsidiary in terms of revenue? Ebitda and how is that going to grow in FY26? That’s my first question.
Hari Babu Bodepud
So we have. I will start. Maybe Ramakanth can add if something I miss. We have two subsidiaries. One is in USA which is human health formulation. We have manufacturing in US of course R and D. Neither of us that manufacturing is a subsidiary. We have majority control on that. And revenue. I think we reported that revenue is around 300. Sorry. 425 crores revenue. And I don’t know EBITDA, Ramakana Patty you can tell and other subsidies is in Spain. Both are having majority. We are working on that next one two years actually how to get that remaining thing.
We are working closely with that. We have option to buy back that I think Spain. Raja, correct me if I’m wrong. Spain by 28. I think there’s option to buy back and yes we have option to excise anytime. Okay. We are looking at various options. Maybe we look at next 12 years on that. The numbers specific to. I don’t know whether you factored specific pat numbers but overall percentage is. Maybe Ramad Kant you can explain.
Ramakant Singani
Yeah. So as Dr. Mentioned the APCO we have. We own the US formulations business. We own 60% of the state and minority remains at around 40%. And annual revenue is about 400425 crore. In Spain again we own 60% and the revenue from Spain is about 550 crores for FY26. So currently whatever you just mentioned about 20% of the EBITDA profit margins are coming from minority. 20% of Pact. 20% of Pact is from east minority interest.
Unidentified Participant
Got it. And just if you could throw some more color on the animal health portfolio. You know you mentioned that since the last five years it was kind of stable. And this year you want to grow and more contribution from the innovators. So what kind of products and geographies are you targeting and how much of it will be companion health in this? And also some color on the distribution partnership with Boringer England for the India portfolio.
Hari Babu Bodepud
Two, three things in animal health portfolio what I mentioned. One is API. API. You know we do majority business with innovators. It goes to everywhere, every geography in the world. So most of the products what we have been doing till today last year are the mature products like Albendazole, Penbenazole. Okay. There are few mix of large animal as well as companion animals. Most of the products are mature products. Last two years of course we started a few new products which are coming out of patent from 28 onwards.
That’s where our focus is going to be on API while expanding that existing mature product business. Adding most important on the new API products which are coming out of patents up to 2035. We looked at our R and D started working up to 25. We identified almost 15, 20 products and 5, 6 products are very large products coming out of patents. If you know a little bit on the Lanners, those are the big products on the the another advantage of developing an API this since we are in the formulation these things we can extend to the formulation development also.
That’s what we are doing. So that’s where API business few products, existing clients are adding and few products. It’s adding geography. One or two products they are doing for only India now. They started qualifying last year for all other geographies which are bigger geographies like China, some of the Europe countries. That’s where that Android whatever I mentioned is the existing product. So adding geography on that all new products, whatever is coming it reflect from maybe 28, 29 on that. And also it helps us to protect and lead formulation business with internal APIs.
Couple of products are specialized APIs. It’s not easy to get sourcing. And even if you get there are very limited sources. That’s how to protect and grow the product formulation. We are doing that coming to the formulation. There are two segments. One is large animal thing where we had lot of focus till last year. From last year we are extending that focus to component animals. One large animals. We are adding few geographies like we are very strong in Spain. We are very strong in Turkey. Last two years we started expanding GEO expansion trying to add all European countries because both sides are approved by EU GMPs and whatever products.
We are manufacturing injectables at Turkey and powder solutions at Spain. We are expanding to Europe markets on the large animals the same way. You know the Brazil we have manufacturing site for large animals that we are expanding expanding it to the latam countries. And we see good growth from Mexico this year. Other area, few other countries, Southeast Asia countries like Vietnam. We just started our front end activity. That’s one of the bigger market for large animals. And also we are exploring for Africa all the large animal products.
Large animal products advantage is we covered almost 80, 90% of the entire portfolio in that segment. So the growth comes on the market expansion on that coming to the companion animal which is the strategic growth area for us next five, six years. Multiple things we are doing. One is with partnership with ba. That’s the first we started last quarter. We want to expand entire component animal platform printed through this partnership. We are going to distribute entire BI segment whichever are coming given feature.
Also we are going to do that with that platform we are able to develop and get actually get into the market and be expanding a lot in the component animals. We already initiated R and D expansion. It’s going to happen next six months and the product development is going to increase by five, six times. Whatever we are doing few products today it’s going to add large number at least we are looking at seven, eight products for year. And most important the products are coming out of patent maybe 29 or 30.
And some of those products are differentiated products. As you guys know. Cat and DAS requires various combinations on that. So we are working on that little bit differentiation at new products. R and D started expansion we are building. We gave CAPEX clearance for R and D on the company people we started hiring and most important manufacturing infrastructure. Also we’re adding this year. That gives a lot of opportunity to expand the company. So India we are expanding front end. Whatever product portfolio we are doing.
We are going to launch everywhere. Most focus areas are at first phase, Europe and India and where we have presence today, strong presence like Turkey and Brazil. So this year FY27 is a building platform building for component animals, R and D manufacturing and front end wherever is required. And also we are looking at some inorganic options for these things. We are looking at few options. So that’s a broader area component. So this focus area on that.
Unidentified Participant
Got it. Thank you so much. Thank you.
Hari Babu Bodepud
Welcome. Thank you.
Operator
Thank you. A Reminder to all the participants that you may please press star and one to ask questions. The next question is from the line of Sajal Kapoor from Anti Fragile thinking. Please go ahead.
Sajal Kapoor
Yeah, thank you, Dr. Hari. Pure play intermediates and API companies such as Alivis Life Sciences have been reporting gross margins in the 55 to 60% range. Now, given Vyash’s exposure to formulations, API, CDMO complex intermediates, how should we think about the sustainable gross margin profile over the next three to five years? Do you see gross margins inching up from here? We are already at a decent level. But when you add formulations, you expect a higher gross margin. Otherwise there is absolutely no point doing formulations in addition to APIs.
Hari Babu Bodepud
Yeah, I think you answered Kushnaval’s help. One is when you say it’s a decent gross margin. As I explained, intermediate and API standalone maintaining 55% gross margin for generic play. It’s not easy unless you have different strategy. That’s how we follow last two years our gross margins. Three years back. If you compare our EBITDA gross margin or PAT three years back, which was completely different. Why? Because mix of intermediates and API where we sell and large business, actually intermediate contribution used to be much more.
That’s how we changed our strategies to maintain or improve gross profit margins. What we have adopted, wherever there are intermediates, where we have strong presence, try to do forward forward integration. What it mean? Forward forward, intermediate, take it to API, take it API to formulation wherever we can do that the similar way, wherever we are strong in the formulation or API, try to backward integrate. So we try to optimize continuously taking out commodity products where we’re not able to make good gross margin.
Generally commodity gross margins are 30, 35% and making those products in highly regulated environment, you are able to survive. But it’s not easy to improve. That’s how we try to optimize the product mix. We did very well last two years. So with that mix we sell intermediates with reasonable gross margins and also sell intermediates wherever we are using API so that we can utilize the capacity. That’s how we are trying to do that. So with this mixed strategy, moving to API, API to formulation, formulation to back, we are able to manage that gross margin.
But knowing this business last 30 years, even if it improves plus or minus 1, 2%. But unless maybe after five, six years, unless we till we go to that, I think these gross margins will be maintained. Once you move to CDMO and see, we may be improved, but otherwise at this stage I feel this is reasonable and we are confident to maintain those gross margins here. Are there plus or minus 1 or 1.2% kind of thing?
Sajal Kapoor
No, that’s helpful. That’s helpful. And I was following the commentary from Zoetis Management, the animal innovator leader in the US and they sounded cautious in terms of generic opportunity. And the reason is that some of the American consumers are consciously shifting into generic or more affordable drugs for their companion animals. This was not a trend that was seen earlier. So in this changing landscape, I mean, logically thinking companies like us should be able to gain more traction maybe through life science and life cycle management and even directly offering our own IP and the generic molecules.
That is. I mean, what is your thought process? Thank you. So
Hari Babu Bodepud
That’s exactly what we are trying to do. It’s the entire component animal segment, what we are projecting, what we are strategically working. Next five years Europe component animals. It’s moving little faster genericization, you know, today developed markets, innovative controls, fully animal health segments, whether it’s animal or component animals. And underdeveloping countries moved into the generic business. But developed countries still controlled by innovators. For our competent animals. It’s moving fast.
Last two, three years. If you say still it’s a large opportunity because the volume is growing. So there’s no rocket science here. Last three, four years Post Covid pets are growing day by day. Okay, Pets is like kids. So every country is growing. I was surprised to see yes, there were 9.4 crores dogs and 9.2 crores cats. So that together 18.6 crores. That means each family is having at least one. And Europe is growing every day. Surprisingly, cats are growing much better faster than dogs when the volume is growing.
And another issue in this, especially Europe, unlike human health insurance coverage is not full. It’s covered by 25%. We visited all distribution centers and hospitals, everything. So insurance covered Is by only 15%. So volume is growing. It’s natural. It has to convert into generic. That’s where we see the bigger opportunity. That’s how we want to do. Start with Europe, India, where the bigger markets are growing and next step is go to us. US is still little complicated, especially competent animals.
Guidance is not very clear, is it? Actually, some of the solutions we do something for human. But bab sometimes it’s not acceptable same as human. It requires a little more studies. So it’s little complex guidance in a year. That’s where actually our next two, three years focus is on where we can do faster growth. Since we have experience exposure. Actually we Say that’s a faster growth. Next phase is going to just by doing ourselves or look for something else. So exactly we are doing that. That’s the, that’s the area where we are accelerating.
That’s the reason we decided to go quickly. R and D expansion as well as manufacturing expansion for component animals.
Sajal Kapoor
Very, very helpful. Thank you. And lastly this time around the receivables growth and that’s common. I mean receivables often outpace the revenue growth in a scaling business is a common observation. Nothing unique to us. But it has happened this time around. So as manufacturing eases and next constraint may shift somewhere else. I mean what is the next bottleneck you see in the system and what operating discipline will keep cash conversion and execution quality intact as the complexity increases going forward.
Thank you.
Hari Babu Bodepud
Few things when you are, when you want to grow faster and big. Okay. These are the natural things sometimes inventory receivables. Few countries, you know, countries like Turkey, all these countries credit period is very high when you are growing bigger thing where we don’t see any risk. But looking at various things we always look at networking capital things. And this year our focus area. You might have seen this quarter when our EBITDA is 200 crores versus PAT 60 crores. That’s one of the key focus area.
How can we convert into EBITDA to pat better various options. Of course our finance pattern is going to come down and we are looking at the stack structure also differently. That’s how we are moving couple of seconds subsidiaries from old tax regime to new tax regime. Old tax regime, you know India 34, 35% it’s moving to 25. So we are looking at the various options but sometimes it’s exceptions receivable when the market demand. We are working closely on all these things. Ramakant, if you want to add something, you can.
Ramakant Singani
Yeah. So just to add, I think absolute number does reflect the growth in revenues. That absolute number of receivables. If you see that increase is majorly because the revenue growth. But if you look at the number of days it has been within a small range, maybe about 5, 6 days of increase that we have seen in Q4, which we believe is in control. We don’t see any concerns there. But as Dr. Said the focus continues to remain on how do we convert from EBITDA to net profit. How do we optimize this conversion or maximize this conversion is the focus area for the next couple of quarters.
Sajal Kapoor
Thank you. Thank you so much for answering all my questions. Thank you.
Operator
Thank you. We’ll take the next question from the line of Kumar Saurav from Scientific Investing. Please go ahead.
Unidentified Participant
Hello sir. So in last phone call you had spoken about companion animals generic present year penetration being just 15, 20%. If you can talk more about that data in terms of what is the total addressable market both in India and globally and what is relevant for us how this market is growing. If you can give more details on this,
Hari Babu Bodepud
I think our where we are focusing market. Raja, maybe you can add if I miss something. Compton animals mainly Europe is the thing. Us we are not of course bigger market is us since most of the market is the branded market. I think Europe is close to a billion dollar market. Right Raja, that says.
Unidentified Participant
Yeah. Bit more without the addressable market would be that if you leave out vaccines. Yeah, yeah.
Hari Babu Bodepud
Without accents. Where we are planning it’s close to a billion and most of the products we are working on that. That’s the thing. And also we see that genericization also is improving on that market. That’s a more developed market. India market is not big but we see at least it’s going to grow. India we are also looking at various things near future at this point. Mostly we look at medicines. So that’s what we distribute vaccines for ba all products. But it’s going to be few hundred crores in India.
But the rather addressable what we are looking at the billion dollar market in Europe at this point and we are preparing all for that whether it is RD front end or manufacturing. On that perspective US is the next phase. That’s the bigger market. So we take it in the next phase if in between if something comes up. Right. Opportunity inorganic we may look at. But our first priority is to address Europe and also to address countries like Brazil. These countries
Unidentified Participant
And if I may just add, I think the important thing is that unlike human genetics where the pricing drops very drastically to almost 10, 15% of the innovator’s price. I mean what happens in animal health generics is that the pricing drop to the generic is far slower. It tends to be more like 60, 70% of the innovators price. And therefore you’re right in observing that one. There is a 15, you know is much less in animal health. It is increasing very fast. Europe’s an interesting opportunity and also because you know there is an opportunity if you have a front end to actually distribute branded generics at reasonably good margins.
I think that the other piece which is there. Thank you. Good
Hari Babu Bodepud
Thing about our strategy is now we have understanding on everything front end we have great understanding since Already we are doing and we are very strong on API. We are strong on operations. So with the integrated play definitely we believe we can do great differentiate base and grow bigger. Thank you.
Unidentified Participant
Great. Thanks for the detail. The sponsor one last question and our performance has been commendable. I think what you guided for FY28 you achieved much before and we are much above the 20% guided margin. But do you see further scope for synergies and cost advantages or like this is the optimum we should consider or is there more to you know extract in terms of optimizing the margins?
Hari Babu Bodepud
It’s a two things we have to balance margin versus growth. So this year we are going to invest a lot. As I mentioned we have an R and D investments are growing a lot. Okay. Substantial investment is going to happen on Finch product formulation. Both human health and companion animals. And most of these are complex molecules. We are going to invest a lot on R D. And also when you are building additional capacities there will be some pre opex on that. So it’s a try to balance. But we are very confident to maintain these margins.
But once you actually next phase is the investment phase. Whatever we did last two, three years optimizing existing infrastructure. Existing. But next two years we are going to build and invest on the R and D all those things. But we are very confident to maintain these levels. I am always trying to be practical on that. Okay. If we get some few products, good thing we may. But we are, we are thinking at this level.
Unidentified Participant
Sure sir. Thanks a lot. And I will come back in the queue. Wish you all the best sir.
Hari Babu Bodepud
Thank you. Thank you. So thank
Operator
You. Thank you sir. We’ll take the next question from the line of Chintan Modi from Oakland, Oakland Capital. Please go ahead.
Unidentified Participant
Yeah. Hi sir. Thank you very much for the presentation. So my first question is respect to the energy benefits. I think we are targeting something like 60, 70 crore. Can you tell us and you mentioned that there could be some more synergy benefits. How much has been accrued and how much more we can see in the next year.
Hari Babu Bodepud
So rough math, I can say annualized beer accruing close to what you mentioned. 50, 60 crores. Initially when we decided this measure we anticipated 50, 60 crores overall. But now we are going to do much more. So at this point I think tracking 50, 60 crores annualized number. But again the bigger portion also is coming to come in next 12, 18 months because the synergies operations, you know we have to develop and file approval. All these things will take its own time. And as you know last quarter also I mentioned we invested Capex for all Benazole capacity increase
Unidentified Participant
In
Hari Babu Bodepud
V as so we are waiting for approval. Once that comes, it’s going to have another. So we are hoping altogether at least maybe 125, 150 crores at this point analyzed. But at this we are tracking at this point 60. But next 12, 18 months it’s going to happen that under 25.
Unidentified Participant
Got it. Next question is that because of the recent geopolitical issues many chemical companies have been facing raw material availability issues as well as volatility in prices. Could you throw some color on that on how we are placed over next 1 2/4 and is the role raw material availability secured for us?
Hari Babu Bodepud
So as you know it started beginning of the March. There was a small impact in March but it’s not material. Few things we are able to manage. One is inventory. All three materials we have enough inventory to manage say one or two quarters. The bigger impact on two things, One is the solvent where we cannot keep inventory for months together and the second one is freight. Freight impacted little bit 12 crores in fourth quarter solvent. There was impact but we are able to how we are balancing since we are recovering very efficient solvents that the consumption is.
We are trying to minimize whatever best possible. And another area we are trying to increase the prices. We are able to increase the prices to balance these things. So far we are able to manage very well till now. This quarter also we are confident to manage. But if it continues further, okay, maybe next 1 2/4 we need to see that how much we can increase the price. But at this point I don’t see any material impact on that. Whatever we do price increase versus raw material increase or freight increase we are able to balance.
But there may be little impact. But I don’t see bigger thing at least for this quarter. Next quarter we need to work on. We are managing very efficiently on that way.
Unidentified Participant
So with respect to tax rate, how much should we model for FY27 and 28 as a percent of LVT?
Hari Babu Bodepud
I think around 27%. Yeah.
Ramakant Singani
The average tax rate should be around 27%.
Unidentified Participant
27%.
Hari Babu Bodepud
So this quarter was more because of we are moving from old regime to new regime. Old regime some of areas are 35%. There was some tax adjustments because of integration or mature. So all these things are going away. That’s also we are trying to optimize that. I think next year onwards it’s going to be 26, 27% level.
Unidentified Participant
That’s right. And so one last question is with respect to let’s say overnic five years and given that we have multiple levers for growth lined up across formulation, API and cdmo can we expect a growth rate of in the range of let’s say 15 to 20% kind of. Is it possible given the market set conditions also and the initiatives that we are taking?
Hari Babu Bodepud
Yes, 15% definitely quite possible. Still we are working on the details strategy. Maybe sometime in June we are trying to hold a investor meeting. It’s a detailed strategic plan. What we are going to do, how we are going to do that. Am I able to tell you that looking at our current business and what I have idea, I think 15% is possible.
Unidentified Participant
Got it sir. That answers all my questions. Thank you very much.
Operator
Thank you. The next question is from the line of Shreya Wazir from BMSPL Capital. Please go ahead.
Unidentified Participant
Yeah. Hi. So I want to understand how you see the company’s journey from a bit of 700 crores that we do today to thousand crore and then to 1500 crores. So in how many years can we achieve these EBITDA growth targets and how does margin volatility due to raw material cost volatility in different geographies that we do business in, quality in different business segments we operate in impact our EBITDA growth target?
Hari Babu Bodepud
So I will answer second question first. Market volatility, raw material. As you know
Unidentified Participant
We do
Hari Babu Bodepud
Most of our business API business especially the quality markets, developed markets or regulatory markets. The pricing was reasonable, little bit sustainable. We are able to pass it on year and there. But with my experience last 5, 10 years, these are the things sometimes it comes we have to manage time to time with our base, with our product pipeline, with our market access. I don’t see any volatility in going forward. These businesses, what we do, API formulation. There are few businesses, you know like us business post Covid there were three, four years it was bad time.
Large number of players came from India. It’s became highly commodity, commodity business. That’s how we restructured our business. Tried to move to entire internal API and also move manufacturing. That’s where you are able to manage that few markets, other markets like Turkey, volatile hyperinflation, whatever it is. We see the good growth last one year FY26 also we see the good volume growth in addition to whatever adjusting inflation. So in the all looking at our product pipeline, market access, all those things, I don’t see much volatility or impacting margins or growth.
The first one, whatever you ask 700 crores versus going 2000 crores and 1500 crores. You know we, we indicated 800 crores. FY27, 28. Somebody says 28. Somebody says 28 but 27. My internal target was 27. But we are able to achieve that run rate. Now you have seen last two, three quarters start from quarter two numbers. That’s where we started integrating two companies. So couple of things. Synergies and market access happened better than what we anticipated. So thousand crores we are targeting. So maybe next two, three years.
Of course next session when you come in June, June meeting. So mostly we’ll able to indicate but at this point thousand crores. But I’ll confirm this. Don’t take it maybe 29 or whatever it is. Dr. You
Ramakant Singani
Already said that.
Hari Babu Bodepud
Yeah.
Ramakant Singani
Annual growth rate could be 15 from there. Easy guess on when we’ll hit thousand crores.
Hari Babu Bodepud
But anyway we’ll come up during that investor meeting.
Unidentified Participant
Okay. Okay. Thank you and all the best.
Hari Babu Bodepud
Thank you.
Operator
Thank you. The next question is from the line of Krisha Shah from Mangal Keshav. Please go ahead.
Unidentified Participant
Hello sir. Yeah. Post the merger we have been bullish on API as a business. But if we see the numbers recently on a quarterly and year on year basis growth has been around 7 to 8% like a single digit growth. So is there any particular reason for this? Like taking into consideration that our business may be lumpy or is it sustainable or do we look forward to double digit growth in the API business?
Hari Babu Bodepud
Yeah, two things. Synergies is not only API. First of all to answer to the second thing is API why this growth is single digit for this year? As I explained earlier we try to optimize low hanging or actually commodity business internment business. So we are growing API business which is a quality business like animal health business. It has gone from 350r to crores to 400 crores. And API also APIs are growing double digit and Internet actually we purposefully reduce that sales. So that’s the reason quality of the business is growing.
But going forward you can see double digit growth. Now we are seeing large number of approvals coming this year, next year on human health APIs. And we see animal health API step up this year so you can see comfortably double digit growth next year. More or less same as formulation growth.
Unidentified Participant
So one more question that I have is that now that we are expanding do we have any plans on hiring more R D talent or investing in R D expansion or taking forward the scientists?
Hari Babu Bodepud
We are API R&D. We have a big team we are together close to including analytical process altogether close to 250 scientists. It’s a very strong team which is enough for APA and finish formulation we are expanding the team as I explained large expansion in animal health and formulation also we have reasonable good number of team human health around 55, 60 scientists. That’s good enough only wherever it requires specialized talent. We are adding in human health formulation but animal health formulation we are expanding a lot.
That’s the focus area this year. R D scientist, capex everything we are adding on that. So we are going to add actually big thing capex also and R and D resources for animals.
Unidentified Participant
Okay sir, thank you. And just one last question on the bookkeeping side. So if you could give some color on the depreciation going forward. Like if we see this quarter our depreciation expense was slightly on the higher side. So if we are doing further capex in the future do we see it increasing or. Yeah, some color on the depreciation.
Hari Babu Bodepud
The two things in this depreciation this quarter of this year, okay every quarter there’s a close to 25 crores depreciation on goodwill amortization that’s going to be reduced next quarter onwards. So last year it was 100 crores on that this year it’s going to be 35 crores. Second half it’s going to be zero. That 25 crores 50 plus second quarter maybe 10, 15 crores that depreciation is going to cross come down around 65 crores from existing base annually. And the new capex whatever we are adding I don’t think it will increase substantially.
Why? Because it’s a. I think it’s. The run rate is going to go same level whatever. Is the new Capex existing depreciation I don’t see much difference on that from a competitive. Can you not? Yeah,
Ramakant Singani
That’s right. As Dr. Mentioned the current numbers if you look at the annual number about 100 crores is depreciation or amortization coming from amortization of intangibles that will go away in the next year it is going to be at about 35 crore and the depreciation excluding this amortization we believe that it will be similar to the current year. Okay.
Unidentified Participant
Yeah. Thank you sir, that was helpful. Thank you.
Operator
Thank you Ladies and gentlemen in the interest of time we’ll take that as the last question for today. I now hand the conference back to the management for closing comments. Thank you. And over to you sir.
Hari Babu Bodepud
Thank you guys. Thank you. First of all let me say thank you so much for your continuous support. I know you guys had a lot of patience last four, five years. And it’s hard to believe also when we said the Guy company is going to go turn around. But fortunately, we have fantastic team. We are working as one team, both companies, and things are going well. I’m very confident this company will have great potential in future. Thank you. Thank you so much for your support. And we are always available if somebody needs any clarification or anything, whatever we can do, you know, the timing, there’s a sensitive wherever it is, we can explain.
Explain. Thank you, everyone.
Abhishek Singhal
Thank you.
Operator
Thank you, sir. Thank you, members of the management, on behalf of VR Scientific limited that concludes this conference. We thank you for joining us. And you may now disconnect your lines. Thank you.