Sai Parenterals Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

3 Anil KK (Managing Director), Anil Kumar (Chief Financial Officer), Mark Thulborne (Managing Director, Noumed Pharmaceuticals)

Analysts

6 Arvind Arora (A Square Capital), Devanshi Shah (HUF Capital), Mohammad Nameer (Eiko Quantum Solutions), Mohit Oberoi (PJ Capital), Vandit Dharamshi (Anthra Growth Capital), Vanshi Shah (EVNA Advisors)

Financials & KPIs

Geographic & Segment Commentary

• India (Standalone): Q1 FY27 standalone revenue at ₹56 crores (+175% YoY) with EBITDA margin of 29% vs 20% in Q1 FY26 (+890 bps), driven entirely by operating leverage. Injectables remain domestic-only - units 1 & 2 are not EU GMP qualified, so exports to date cover only oral dosage formulations and cephalosporins. Operating JD under new HILT policy, upgradation within outer ring road (ORR) is no longer permitted, forcing relocation/rebuild strategy.

• Australia/New Zealand (NuMed): NuMed operates as an IP registration holder - holds TGA approvals and market authorizations while pharmacy chains own their brands. Portfolio covers 5 exclusive long-term contracts and 10 exclusive supply molecule contracts spanning 526 SKUs, serviced through Wesfarmers Health (Priceline) and Ebos Group (Terry White Chemmart, Pharmacy Choice) networks covering 2,900+ of Australia's 5,500 pharmacies. The OTC deal with Ebos was renewed (1 July 2026) at AUD 202 million (~₹1,300 crores) for 7.5 years + 3-year extension, with 12 new products to be added annually through the SAI R&D platform. Q1 FY27 was hit by West Asia supply disruptions from the Indian CMO network - moved inventory by air vs sea, absorbed costs but met all SLAs with no penalties. New 117 Adelaide facility targets physical completion January 2027, TGA inspection by March 31, 2027, and phase-one manufacturing from April 2027, backed by AUD 20 million under the Federal Modern Manufacturing Initiative.

Company-Specific & Strategic Commentary

• IPO Proceeds Redeployment: Board approved variation of ₹101.85 crores from facility upgradation (₹83.83 crores) and greenfield R&D center (₹18.02 crores) toward 60% stakes in two operating pharma assets. The Hyderabad Industrial Lands Transformation (HILT) Policy prohibits upgradations within the ORR, and the existing Gaddi Annaram site (~3,100 sq yds) is too small for an EU GMP injectable plant (needs 12,000-13,000 sq yds); a greenfield would take 7-8 months for land allotment alone. The proposed acquisition route is subject to shareholder approval.

• New Injectable Facility (Saikriti Pharma): 60% stake for ₹83.83 crores in a facility under construction at Gumardala (outside ORR) on 15,000+ sq yds, built to EU GMP + US FDA standards with lyophilization, GLP and general injectable capacity. Total project cost ₹215-217 crores - company contributes ₹83.83 crores (60%), promoters of Saikriti fund the balance 40% (₹56 crores), with residual via project debt. Delivers ~154.66 million units of capacity vs ~105 million units under the original plan (+47%) at unchanged capex outlay, completion extended by only ~1 month to April 2027. Adds access to Saikriti's existing domestic critical care sales (₹52 crores) that will be manufactured at the new site, providing opex break-even from day one.

• R&D Acquisition (Karthik Laboratories): Company proposes 60% stake for ₹15 crores (vs ₹18.02 crores originally earmarked for a greenfield R&D center) in an operating R&D platform at Genome Valley, Hyderabad with 3 years of operating history, 65 personnel (28 research scientists), and a pipeline of 150 SKUs across 86 molecules - including lyophilized, liposomal and nano-based complex injectables and oncology products. Acquiring an operating platform removes the construction cycle and eliminates the harder task of assembling a scientific team; development work can commence immediately with technology transfer of ~125 critical care injectables into the new facility. Expected completion on or before September 30, 2026.

• Australia Facility Completion: Final AUD 5 million funding now committed - AUD 3.5 million from the company via Singapore subsidiary (AUD 1.75 million infused ~6 weeks ago, balance AUD 1.7 million approved) and AUD 1.5 million from existing Australian shareholders (already invested). With this, the Australian program is fully funded and construction is on schedule.

• US Market Entry: Board approved incorporation of a US subsidiary to be held via Sai Parenterals Pte Singapore. Evaluation is at a preliminary stage, with entry strategy (sales platform vs. local manufacturing) yet to be decided; disclosures will follow as developments materialize.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

NuMed OTC Contract - Value, NPD and Growth Trajectory

• Question: Does the AUD 202 million order value include the 12 new drugs to be developed annually, or would those be incremental? Should more order wins of this size be expected? (Vandit Dharamshi)
• Answer: The AUD 202 million value covers only the existing supply portfolio - new product developments are incremental. First 24 NPD products (12 per year for first two years) are already identified: 8 to be developed by SAI (6 already started), 4 via exclusive Australasia supply contracts, and the rest through a strategic partnership with Catalent (softgels, which SAI does not manufacture). Standardized YoY growth runs ~8%, driven by new pharmacy additions (net ~16 pharmacies per year for Terry White/Ebos). Additional large order wins and CMO opportunities from multinationals are expected. (Mark Thulborne)

IPO Proceeds Redeployment & New Facility Strategy

• Question: What is the strategic rationale for acquiring a 60% stake in a new manufacturing entity rather than upgrading existing facilities as originally proposed? (Vanshi Shah)
• Answer: The HILT policy (Government of Telangana, Feb-Mar 2026) prohibits upgradations of red/orange category units within the ORR - existing units would need relocation anyway within 2-3 years. A greenfield would take 7-8 months for land allotment alone. The company discovered a facility already under construction at Gumardala (15,000+ sq yds) designed to the exact spec needed - liquid injectables, lyophilization, GLP, dry powder injectables and ampoule-vial combi lines. The seller initially proposed 100% acquisition but wanted to co-manufacture their own ₹52 crore domestic business at the site; after negotiations, a 60% stake was agreed. This route provides time savings, opex break-even from day one via the seller's existing business, larger capacity (+47%), and optionality for USFDA certification. (Anil KK)

R&D Acquisition - Capabilities and Technology Transfer

• Question: What are the key capabilities of the Karthik Laboratories team and the commercial potential of the pipeline? (Devanshi Shah)
• Answer: The team has 65 personnel (28 research scientists), with the top 5 possessing 25+ years of individual R&D experience. The pipeline includes 150 SKUs across 86 molecules focused on lyophilized, liposomal and nano-based complex injectables, oncology and critical care cephalosporin products. The biggest advantage is that with ~125 critical care injectables already developed, the company can transfer technologies directly to the new Saikriti plant without spending time on development. The R&D team will also support SAI and NuMed development work from day one. (Anil KK)

Management Bandwidth Across Multiple Initiatives

• Question: How is the company ensuring management bandwidth is not a constraint given simultaneous initiatives - NuMed integration, new capacity, R&D expansion and US entry? (Vanshi Shah)
• Answer: Acquisitions are structured to retain existing management - SAI owns 74.6% of NuMed with 25.4% held by Mark and his team who continue to drive execution. The Karthik Labs acquisition includes a 67-person team with 4 managers who have performed consistently for 3 years and are being retained (28+ years of experience each). SAI supports via manufacturing, funding, procurement from India and R&D, but does not attempt to run everything itself. (Anil KK)

Injectable Pricing Pressure and Export Potential

• Question: What is driving the downward trend in realizations for the injectable segment? (Mohammad Nameer)
• Answer: The existing units 1 and 2 serve only the domestic market and are not EU GMP qualified, so injectables have never been exported. All current exports are oral dosage formulations and cephalosporins. A market survey of ROW (rest of world) and Europe critical care injectable spaces found significant available market opportunity, which is the driver for the lyophilization and GLP capabilities at the new facility. The plan remains to target ROW and Europe first (Europe, Southeast Asia, Latin America, Middle East), with USFDA option to be evaluated later. (Anil KK)

FY27 / FY28 Guidance

• Question: Is there any upward revision planned for FY27 or FY28 guidance given the acquisition acceleration? (Arvind Arora)
• Answer: FY27 guidance remains at ₹750 crores revenue with 17% EBITDA margin - Q1 performance was actually ahead of the implied 44% H1 target. FY28 guidance will only be provided once Q2 and Q3 FY27 performance is assessed; management wants to be confident before committing a number to the market. (Anil Kumar, CFO)

Saikriti Ownership, Related Party Status and Funding Mix

• Question: Is Saikriti a related party? Who are the 40% shareholders in the new entity and what is the plan for the balance stake? (Devanshi Shah)
• Answer: Saikriti is not a related party - it was established by its promoters independently; SAI has no connection until shareholder approval is obtained. The current 100% is held by Kritijin Pharma (subsidiary of Questus Pharma), which will retain 40% after SAI's entry. Their ~₹56 crores investment is already deployed toward land and ongoing construction. Their ₹52-53 crores of domestic sales will be manufactured at the new facility, and exports and CMO work will flow through Saikriti directly. (Anil KK)

US Entry Strategy and Rationale

• Question: What is the precise US strategy - sales/commercial platform or local manufacturing? And is the Singapore holding route driven by tax or tariff considerations? (Mohit Oberoi)
• Answer: US entry is at a preliminary evaluation stage with no decisions made. The Singapore entity was established as an investment arm with tax benefits between Australia and Singapore (used for the NuMed acquisition). US-specific tax/tariff benefits have not yet been evaluated; the company will revert as progress is made. (Anil KK)

Debt Trajectory and Deleveraging Path

• Question: With ~₹310 crores existing debt and incremental debt for new initiatives, what should peak debt be and what is the deleveraging path? (Mohit Oberoi)
• Answer: Debt reduced by ~₹10 crores in Q1 FY27 (from ₹319 crores to ₹310 crores) after repaying ₹50 crores (Tata Capital ₹14 crores + acquisition loan ₹36 crores). Group debt without new projects is "fairly well placed" and will keep declining. For Saikriti, additional project debt will be raised at the subsidiary, with debt-equity expected to remain around 0.6x. Peak debt is expected in FY27, with deleveraging beginning FY28 as new assets contribute. (Anil Kumar, CFO)

Key Takeaway

Sai Parenterals posted a mixed Q1 FY27 on the enlarged consolidated base: revenue of ₹188 crores (sequential decline from ₹201 crores in Q4 FY26) and EBITDA of ₹27 crores at 14.9% margin, impacted by West Asia supply disruptions that forced air-freight substitution in Australia, with YoY comparisons rendered non-comparable due to NuMed's consolidation in November 2025. Growth strategy is centered on two proposed acquisitions using redeployed IPO proceeds (₹101.85 crores, subject to shareholder approval): a 60% stake in Saikriti Pharma's under-construction EU GMP/US FDA injectable facility at Gumardala (154.66M units, +47% vs original plan, completion April 2027) and Karthik Laboratories' operating R&D platform (150 SKUs, 86 molecules, 65 personnel) enabling immediate tech transfer. The Australia facility is fully funded, targeting TGA licensing by March 31, 2027 and phase-one manufacturing from April 2027, while the renewed AUD 202 million Ebos OTC agreement (7.5+3 years) locks in recurring revenue. Management maintains FY27 guidance of ₹750 crores revenue at ~17% EBITDA margin with a 45:55 H1:H2 split, positioning FY27 as a "year of building" with benefits and deleveraging expected from FY28 onward. Key watch points remain shareholder approval of the IPO proceeds variation, execution across simultaneous initiatives, and the proposed US entry's eventual shape and timing.