Eris Lifesciences Ltd

NSE:ERIS

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Eris Lifesciences Limited. Today, we have with us on the call, Mr. Amit Bakshi, Chairman and Managing Director; Mr. V. Krishnakumar, Chief Operating Officer and Executive Director; Mr. Sachin Shah, Chief Financial Officer; and Ms. Kruti Raval, Vice President, M&A and Investor Relations.

[Operator Instructions] Please note, this call is being recorded.

I would now like to hand the conference over to Mr. V. Krishnakumar, Chief Operating Officer and Executive Director of the company. Thank you, and over to you, sir.

[Krishnakumar Vaidyanathan, executive]

Thank you. Good evening, everybody, and welcome to our Q1 earnings call.

So to get started, the key highlights of the quarter. The Domestic Branded business segment, which is now representing the fully integrated segment consisting of all acquisitions, it has grown 11% this quarter, thereby outperforming the IPM by 330 basis points. And if we exclude the impact from discontinued FTCs and some insulin shortages we've seen this quarter, the segment growth was 13% to 14%. The operating margin of the DBF segment has expanded to 37% despite the addition of 300 MRs this year.

The value creation in the Biocon segment continues. The Q1 operating margin for this segment was at 30%, which is up from 19% at the time of acquisition. The EPS acceleration has kicked off as per our guidance. We recorded a 41% growth in PAT/EPS in the quarter. We have taken a decision to ramp down the Trade Generics business. We took an EBITDA loss ex DBF of around INR 5 crores in this quarter.

After significant delay, we are happy to share that we have commenced the manufacturing of insulin vials at Bhopal, and we expect the production of insulin cartridges to commence from quarter 4. We expect the upside from the RHI Cartridge market opportunity to accrue starting November, December of this year, and the OCF-to-EBITDA ratio from routine operations came in at 65% this quarter and, post adjustment for strategic stocking up of Biocon products inventory, stood at 40%. We'll talk more about this going forward.

The key numbers for the quarter. DBF revenue of INR 702 crores versus INR 632 crores, so 11% growth year-on-year. DBF EBITDA margin, 37.2%, an expansion of 155 bps year-on-year. Biocon segment margin of 30% versus 19% at acquisition. Consolidated revenue of INR 773 crores, up 7.4% year-on-year, Consol EBITDA margin of nearly 36%, up from 35% in the last -- into Q1 of last year. And consolidated profit after tax of INR 125 crores in the quarter, up from INR 89 crores in Q1 of last year.

Some key updates on the insulin business. So the DS shortages, by and large, behind us. However, the DP shortages continue to persist. So we took a revenue hit of around INR 10 crores in this quarter on that account. In response to that, we have created a strategic stockpile of insulins to help us in the subsequent quarters. This has created a working capital increase of INR 73 crores in this quarter with a consequent impact on OCF.

Bhopal vial manufacturing commissioned as already articulated, and we have also initiated the supply of Insugen vials from MJ Biopharm's site as an additional source. The cartridge operation in Bhopal is expected to be commissioned in Q4, and we are on track to leverage the market opportunity in RHI pencils starting November, December. This is the visual of the vials line which is operational at Bhopal, which is capable of handling liquid as well as lyophilized biologicals.

Key updates on the GLP front. So the cartridge line from Bausch+Strobel is under installation. It is the latest KFM series line, which is built to regulated market standards, and we will be using this for RHI, Glargine as well as GLP-1. In terms of the market front, we see a significant uptick in the market activity and the market buzz around the weight loss therapy. So this is more or less in line with our expectation that there would be a large GLP-1 market formation in India post LoE.

In terms of driving DP self-efficiency, we have initiated the validation of synthetic semaglutide at our Swiss Parenterals facility in Ahmedabad. We have the cartridge line under installation as discussed. And we are planning to take validation batches of our recombinant semaglutide at the Bhopal site in quarter 4. Also happy to share that the recombinant sema candidate is on track to enter Phase I in quarter 4. So we retain our position that we expect to be among the first launches in India post LoE.

Moving to our small molecule R&D pipeline. We have shared with you before that we have 25 candidates that went into development this year. This is a combination of oral solids as well as injectables products. So some of the launches where we have clarity on calling them out for quarter 2 and quarter 3, as outlined on this slide including several combinations of dapagliflozin, sitagliptin and esaxerenone.

Cutting over to the international business. Glad to share that most of the investments that have gone in over the last 12 to 15 months have -- we can see clear line of sight now. So just to give a bit of recap. At the time of acquisition, Swiss had a 20-year legacy in injectables but largely from the ROW market. So despite having 2 EU-approved plants, Europe accounted for less than 3% of the revenue. And this revenue mix was carried forward in FY '25, and the current year is also likely to be similar.

One of the biggest decisions we took post deal was to pivot the business so that we deepen our EU presence. We consciously chose the CDMO model so that we would have proprietary contracts with marquee generic companies. We have been able to leverage our advantage of having the widest range of dosage forms among all the EU-approved injectable manufacturers in India. And what we essentially sought to do was to migrate the business to the top of the pyramid in terms of clients as well as market. This has been our strategy in our DBF business as well, and this is something that we sought to mirror in international.

So happy to share that this business is on the cusp of exciting growth starting the next financial year. We have confirmed contracts of more than INR 100 crores revenue per annum, which are in various stages of execution, and this is just to give you a flavor of what some of those contracts look like. So we have a contract for a range of corticosteroids across several EU countries. We have some niche betalactam DPI. So the whole EU accreditation has opened up Canada and ANZ for us as well because the same GMP is adequate to supply to these markets.

The client mix consists of global and regional generic players. And starting with less than 3% in FY '28, we expect that at least 3 out of the top 5 European countries will rank among our top 10 international markets. The quarter 1 update, export revenue of was INR 68 crores versus INR 74 crores year-on-year and EBITDA consequently of INR 22 crores. And in terms of the regulatory updates, we received the EU-GMP approval for both the injectable sites as well as a bunch of additional approvals. In terms of the key inspections done during the quarter, the Latin American inspections are among the top in terms of commercial significance.

Our new product development approach has also been pivoted with an EU-centric approach. So we added a very interesting LoE opportunity to our injectable pipeline. We are targeting to be among the first generic launches in Europe. We also added several niche products in critical care, women's health, where there are only 1 or 2 players in Europe. So these are all products that we will look forward to launching in subsequent quarters. We are on track to deliver the guidance.

Swiss is a lumpy business. Quarter 1 is the lowest quarter for them. Though growth over the next 18 months, as we have called out, will be driven by migrating to the top of pyramid in terms of markets and clients. We do have some capacity constraints in a couple of lines, which will ease up once the new unit gets commissioned.

Summary of consolidated financials. Revenue of INR 773 crores for the quarter with a growth of 7.5%. So a couple of things dragging it down. One is exports, which is lumpy as we called out. And the second piece is the Trade Generics business, which we have started ramping down. So we got a revenue of INR 3 crores this quarter versus INR 13 crores in the quarter 1 of last year. This was also led to an EBITDA loss of INR 5 crores at a consolidated level.

EBITDA margin for Q1 has expanded from 35% to 36% at a consolidated level. And we got around a 20% interest reduction -- interest expense reduction year-on-year. So quarter 1 PAT stands at INR 125 crores, which is a year-on-year growth of 41%.

So quarter 1 net debt stood at INR 2,300-odd crores, which is 100% -- sorry, INR 100 crores over what we closed FY '25 at. This has been on account of a couple of factors: CapEx of INR 66 crores and inventory buildup of the Biocon products. Having said that, we reaffirm our net debt guidance of INR 1,800 crores by the end of the year, which will bring us to a net debt-to-EBITDA of around 1.5x.

The details of our consolidated financials, I think we've covered all the major points on the earlier slide, EPS for the quarter came in at around INR 9 and cash EPS at around INR 12.5.

In summary, we are on track to execute all our strategic priorities for the year in the anti-diabetes segment, in the base business, in the international business as well as with respect to our balance sheet. And we reaffirm our consolidated guidance for the year as called out in the previous quarter.

This brings us to the end of the presentation and now we can take questions.

[Operator]

[Operator Instructions] The first question comes from Harith Ahamed.

[Harith Mohammed, analyst]

So my first question is on liraglutide. In the past, you had said that this should be an interesting opportunity for us. But when I look at AIOCD data, we don't see much traction for us -- for our brands. So given that this is the only GLP-1 drug approved for obesity indication that's launched in India till date, the slower ramp up is a bit of a surprise. So any color here?

[Amit Bakshi, executive]

Yes. So Harith, look, a little bit of a check there. We have 2 products which have been approved for obesity in India now. The first one we all know was Mounjaro, and then subsequently, Wegovy also kind of got approved with the similar indication. And the last thing is we haven't yet got the -- our obesity lira, which is 3-milligram lira, commonly called Saxenda. We haven't got the permission yet. So we are just waiting. There's some little bit hiccup there. So that's under obesity approval in India.

Second, why is lira not picking up? Lira is -- look, now the competition is stiff. What we believe is that till the time the higher-cost GLPs are available, the patient would logically get on lira as a follow-up. But that will take some time. That will take a lag, another 3 months roughly. So our plan was to kind of ramp up our Saxenda, generic Saxenda, which hasn't been launched yet. And we were not expecting so much of action from 2 brands which have come in. We were thinking about one brand, which would have come at this point of time.

So our expectation from generic Saxenda has -- internally, we have lowered it for the remaining part of this year. But I think Lira should ramp up, give us another 3 months, it should ramp up. But please remember, we've always talked about post-sema patent expiry, lira would have a limited run.

[Harith Mohammed, analyst]

Okay. And second one on sema. You mentioned that you confirm that you're planning to be there at market formation. Just to confirm whether this is for both indications, diabetes and obesity. And if you could give some color on the status of development for your partners. Have they completed the trials? Any indication on their filing time lines, et cetera? Just to get more comfort around the launch?

[Amit Bakshi, executive]

I completely agree with you. So yes, we maintain that we should be first off the block in sema as far as the regulatory approvals are concerned. So we would be having our last patient in by the end of August. So the randomization has been done. The last patient, we have recruited -- the larger part of the patients have already been recruited. So we will have the last patient in by the end of October. So by the end of August, which makes it 6 months from there fro the final report which is, say, December, Jan, and then another 2 months for approval on a higher side. So that's how we are placed. So as of now, it looks safe to say that we should be there.

[Harith Mohammed, analyst]

Okay. And with your permission, if I can ask one more. Your comment that shortages persist in drug products. So while the opportunity in human insulin due to Novo's exit is going to open up later this year. Will the shortage of capacities for drug product be a constraint for us in terms of capturing a share of that opportunity?

[Amit Bakshi, executive]

Yes, Harith. So I indicated earlier that there will be a little touch and go when it comes to DP. But the situation is getting actually a little better. So the thing which we were expecting to happen earlier in terms of shortages will now take a while longer. And if you would have seen the presentation, there's a picture which we show of Bausch and Strobel machine being installed. So we received the machine in the month late in July, and the ramp-up is starting.

Now if you're lucky and both of these things kind of coincide, then it would be a huge amount of supply which we will have. And if it takes 1 month or 2 months, we will have to struggle for that time. Our struggle is, say, limited to 20% of what we wanted. So if we were planning for 10, we are good at 8. So that 20% gap still persist. We have added another site for insulin, but that is again for vials because vials is also something which we will kind of -- we were having a little bit of a shortage.

So as of now, the plans which we have given has been keeping in mind the kind of supply we had. But because it has got delayed and this is also coming, so if it happens together, then we are actually in a better position. But we will wait it out for the next quarter to be really on top of that.

[Harith Mohammed, analyst]

But Amit, specifically on the cartridge front because that's where the opportunity is opening up, right? So how is our readiness on that front?

[Amit Bakshi, executive]

Readiness in terms of the new facility you're talking, right?

[Harith Mohammed, analyst]

Yes, yes, yes. Will we be ready with the new capacities? Or will the shortages on the cartridge front ease by the time -- towards the end of the year, which is what you indicated?

[Amit Bakshi, executive]

That's the calculation which we are going as of now. This is the calculation. Our machine has already arrived. It will now start -- the whole process will start. Then we will take the validation batches and all those things. So as of now, it looks good. So we are still saying that Q4 is the time when we will get it out. And we are also saying that November, December is the time when the shortages will actually kick in. If we have to go inside, then we are better than what we think. If there is a delay, then again, we have a 20% kind of a risk which lingers.

[Operator]

The next question comes from Kunal Dhamesha [Operator Instructions].

[Kunal Dhamesha, analyst]

Can you hear me?

[Amit Bakshi, executive]

Yes, Kunal.

[Kunal Dhamesha, analyst]

The first one on the current GLP-1 market. So both Lilly and Novo is in the market. Do we have any view as to, let's say, the current market size whether these medications are primarily being prescribed for type 2 diabetes or for obesity or any proportion in between?

[Amit Bakshi, executive]

Kunal, it's early. But you remember, maybe we were one of the first to call out that we expect this market post LoE to be INR 2,000 crores to INR 3,000 crores. And at that point, in fact, we had a discussion on this. But as the things are getting clear, as we can see more now, our confidence is only going up.

So let's get the first thing which we spoke last time, maybe a quarter earlier, that the market formation is very encouraging, right? The pent-up demand was there for weight loss, and we see the pent-up demand being met. The first of the hook is the weight loss guys, they are more motivated. With the current cost prices, they are kind of more -- the readiness is bigger. So unless and until the practice comes down, which happens after LoE, I feel it could be more like 70-30. But once it opens up, I believe it will be 30-70, 30 for weight loss and 70 for diabetes.

[Kunal Dhamesha, analyst]

Which is what it is globally now, right, for the Innovators also, it's roughly 70 for diabetes.

[Amit Bakshi, executive]

You're right. You're right. This is what has happened after a decade of these drugs being available. So for us, it will happen little early, this is what I estimate, Kunal. It gets very interesting, Kunal. We are working on the adjacencies also and we find even that is very interesting. We'll talk about it later. But the adjacencies to GLP seems to be very interesting.

[Kunal Dhamesha, analyst]

Sure. That's great. Second one on the export business. I mean it has obviously, year-on-year, it has come off, and you have suggested that the timing of shipments, et cetera. But is there any change in the outlook for that business for FY '26? Or do we stick to it, there's deferred shipment which would come in Q2 or something?

[Amit Bakshi, executive]

So right now, we don't believe that there is any change in what we have said. And the business has been look, 30%, 35% has always been in H1 historically. So nothing changes from that point of view. In fact, we have told you, we have tried to convey on this slide that how we are trying to improve. The only problem which we see in the export business injectable is a little bit of a capacity problem. And this will remain for at least 1.5 years.

So most of the growth or all of the growth will come from a higher ticket size of what we have been preparing in the last 1.5 years. And we showed you in the slide that we have some deals dotted down already and some of them are in the pipeline. But all in all, we got the EU approval, which was a good thing for us to get, and the other approvals are also work in progress. So we -- our belief is that we will be able to rack up the ticket size, but the volume will remain a little bit of a problem unless we have the new capacity coming up, which will take 1.5 years from where we are, right?

And this is not conservative. So it can be 1.5 to 2 years on the other side. But once it comes up, Kunal, we are then preparing for the 3x capacity of what we have because the numbers which is now we are doing a lot of -- there's a lot of rationing, which is happening, not being able to supply the lower margin for us and concentrating on the higher margins. And what it also takes -- once you get into EU markets and get bigger clients, then what happens, you have to call the companies also for an inspection. So those guys also come for inspection, and that cause a little bit of delay on the average production time.

So altogether, we believe there will be -- the numbers will be done in this year and the ticket size would improve. And once the capacity comes in, this business might see a better-than-expected ramp up.

[Kunal Dhamesha, analyst]

And then what should be the steady state profitability of this business, let's say, without taking into account the new capacity with the current existing capacity?

[Krishnakumar Vaidyanathan, executive]

So Kunal, the base ROW business has been always been a 34%, 35% operating margin business, and there's no reason to believe that it should change. I think from a quarter 1 perspective, you see a slightly low number because it's carrying the cost of some investments which we have made, which we'll start seeing results in '27 onwards. But there's no reason to believe that the profitability of the business is going to change. Substantially, if anything, with the product mix and the market mix and the client mix improvement, which Amit spoke about, it should only improve.

[Amit Bakshi, executive]

We are inducting a lot of people. So -- but that's not a cost, which is really kind of the rule.

[Krishnakumar Vaidyanathan, executive]

Like CDMO is a whole new team because the CDMO business is a very different business in terms of -- its a solution selling business, not a product selling business. So it's a different ecosystem altogether. So all those costs are being carried by the business, but the revenues are not here yet.

[Kunal Dhamesha, analyst]

Right. And CDMO revenues, we are expecting it to start from FY '28?

[Krishnakumar Vaidyanathan, executive]

Quarter 1 '27.

[Kunal Dhamesha, analyst]

Quarter 1 '27. So then in that case, some on these products should already be in a tech transfer state? Is it fair to...

[Krishnakumar Vaidyanathan, executive]

Tech transfer, validation, multiple stages. So we've outlined 5 contracts on a no-name basis. So those are -- those are illustrations of the kind of products we are dealing with. And as you rightly pointed out, they're in various stages of development.

[Kunal Dhamesha, analyst]

And just a last clarification. What does DPI stand for?

[Krishnakumar Vaidyanathan, executive]

Dry powder injection.

[Kunal Dhamesha, analyst]

Betalactam is an antibiotics, right?

[Krishnakumar Vaidyanathan, executive]

Yes, yes.

[Kunal Dhamesha, analyst]

[indiscernible] I can take that off-line.

[Krishnakumar Vaidyanathan, executive]

Yes. So there are general -- there are DPIs which are non-betalactam which is part of Unit 1. And then we have...

[Kunal Dhamesha, analyst]

Okay. Got it. Dry powder injection.

[Operator]

The next question comes from Tushar Manudhane. So there seems to be no response. The next question is from Bino Pathiparampil.

[Bino Pathiparampil, analyst]

Can you hear me?

[Amit Bakshi, executive]

Yes, we can.

[Bino Pathiparampil, analyst]

Couple of questions. One, just looking at the depreciation and amortization number. Compared to last year's quarter, it has come down by INR 7 crores, INR 8 crores at INR 70 crores. From your notes to account, I see that you have done some reclassification in the Swiss Parenterals assets. Is that the only reason? Or any other reason?

[Sachin Shah, executive]

Depreciation coming -- So the reclassification is because of PPA, the impact is only [ INR 1.13 crores ]. So that's a general time line that happens that we do the initial PPA based on basic numbers, and then the final report comes in and we do that. But that impact is only INR 1.13 crores. So the impact that you see in depreciation because of the assets. So large number of assets were capitalized last year. This year that number is different. So you see there is no change in amortization, the change is in depreciation.

[Bino Pathiparampil, analyst]

Okay. That I understood. But if I look at your intangibles as of FY '24 and FY '25, FY '25 has gone up over FY '24. So why would the depreciation -- sorry, amortization number come down in this year?

[Sachin Shah, executive]

Amortization has not come down. Depreciation has come down. That's what I'm saying.

[Bino Pathiparampil, analyst]

Okay.

[Krishnakumar Vaidyanathan, executive]

Amortization has been INR 56 crores for both the quarters, current quarter as well as quarter 1 of last year.

[Bino Pathiparampil, analyst]

Okay. So your fixed assets have gotten depreciated. So this INR 70 crores is the number we should assume is a sustainable number for the near future?

[Amit Bakshi, executive]

Yes, on a base -- at a basic level, yes. But more and more assets coming in and we're doing a lot of capital investments this year. As and when they capitalize, the depreciation will go up.

[Kruti Raval, executive]

Bino, Kruti here. So if we have guided that for FY '26, the depreciation and amortization for the full year will be about INR 335 crores. So I would request you to not take a quarterly -- not go for quarterly trend, but look at this number more as an annual figure.

[Bino Pathiparampil, analyst]

Got it. That's fine. INR 335 crores. Perfect. Second question on the insulin shortage. Could you elaborate on the nature of the shortage? Because you said that you lost some sales because of shortages, but then you also said you have taken some strategic reserves. So how can both these happen? You need some excess to take a strategic reserve, right? So is it a different product? Or could you elaborate on that, please?

[Amit Bakshi, executive]

Yes, sir. I will. So there are 2 different things. One is the drug substance, which is the API, and the second is the drug product, which is the formulation. So it is the API which we have bulked up considering that our own facility will start soon. The problem which we kind of were talking about was more from the formulation point. So we typically call it in our column drug-to-drug product. So that's the difference.

[Bino Pathiparampil, analyst]

Understood. So okay. So -- but API, there is no shortage, per se, right? And then how does this strategic reserve help?

[Amit Bakshi, executive]

API is a challenging thing, boss, in insulin because our dependency is only in Biocon. So we would always like to maintain a large reserve as far as possible. So the reserve will always be much higher than the other products, which are easy to get. This is a moat product. So it's our moat. And there's only one supplier, which we completely depend upon. So we would generally also build a larger inventory, and this time, we just kind of exceeded that number also.

[Bino Pathiparampil, analyst]

Understood. Last on your guidance. So if I remember correctly, your original guidance was a growth in the range of 15% to 21%. First quarter is a bit low at 7% or 7.5%. So would you be revising that? Or for the time being you will maintain it?

[Amit Bakshi, executive]

Yes. So for the time being, we will maintain it. Other than the caveat that there was a INR 50 crore number last year. So we will talk about -- let's talk about DBF, which is very a large part of the sales and also a larger part of the profit. So within the DBF, we maintain our guidance, and that's the guidance which we have given. At a consolidated level, the only moving part as of now looks like the generic piece, which we want to ramp down. So that did almost INR 50 crores last year. We don't expect more than, say, INR 7 crores, INR 8 crores in this year. So that is the gap which might come in the consol numbers. But it was never profitable. So that's the reason we are ramping it down. So because of that reason, the EBITDA might not have any impact.

[Operator]

The next question comes from Madhav Marda.

[Madhav Marda, analyst]

My name is Madhav Marda, I'm with Fidelity International. My question was on the generic semaglutide opportunity. You said that the opportunity could be larger than what we earlier thought, which is INR 2,000 crores to INR 3,000 crores. I think that's what you had indicated earlier. Could you give some sense in terms of how you are all thinking in terms of the market opportunity for the first year? And if you could break it down in terms of what could be the price point at which the generics will be launched as well? That would be very helpful.

[Amit Bakshi, executive]

Yes. So this is something which we've already stated in one of our calls. So I was just trying to reiterate that. So we were confident that this will be INR 2,500 crores to INR 3,000 crores in the first year of LoEs. And now we are more confident about that, looking at how the market is accepting the whole thing. The price point, you'll have to wait it out. So we have a certain price point in mind, but that is a little strategic in nature. So not being able to tell, but it will be very, very significantly lower than what you see in the innovators' product at this point of time.

Regarding how has -- how do we see that playing out in the market, the acceptance is really going up. And we feel a lot of people are now ready to adopt. So we have been selling liraglutide for quite some time now, and we were seeing it slowly kind of us building up. But then as soon as these products were launched, it just ramped up to a different level. And the kind of awareness which is happening today in the marketplace, the number of education programs which are going up, the amount of talk which is there and the kind of confidence I see among the practitioners, so that gives me more confidence that this is going to be a large market creation.

[Madhav Marda, analyst]

Okay. Got it. Got it. And just the second question was on the domestic, the DBF business. Could you help us with how much of the Biocon business? I think you usually split that up, but I'm not sure if I saw it in the presentation.

[Amit Bakshi, executive]

Yes. So Madhav, we split it up for 1 year's time. That's the standard practice. So once the 12 months or 4 quarters are over, then everything comes together.

[Madhav Marda, analyst]

Okay. Sure. No, makes sense. But what I just want to check is the, I guess, this business was facing some issue with the supplier side, which you said will take a bit of time to resolve. So when do we see traction building up for this? I don't know if you already answered that, but when do you see sort of this ramping up again for us?

[Amit Bakshi, executive]

So there are two parts. If you isolate the whole thing from the opportunity which we are getting from the discontinuation piece, the ramp-up is quite nice. The growth are very good. Everything is online. We are more or less in line of what we had thought. But if you take that opportunity which is a large opportunity, that is still to come. So that, we think we have mentioned in the slides. We think that November, December was the time when that particular piece kicks in. And if we are ready by that time with our own facility, we will be having enough and more capacities. And if there is a gap, then we will have a little bit of here and there as far as capacities are concerned. So that's where we stand as of now.

[Operator]

The next question comes from Kunal Randeria.

[Kunal Randeria, analyst]

Kunal from Axis Capital. Amit sir, just a clarification on this human insulin opportunity. Sir, is Novo exiting all the human insulin brands that it has in the country? Or is it just Mixtard? And even in Mixtard are the existing -- I mean, is it an entire exit? Or is it just a few forms like a cartridge or a vial or a pen. If you can just elaborate on that?

[Amit Bakshi, executive]

The information which we got from the press release was that all human insulin cartridges will be discontinued. All human insulin cartridges will be discontinued. They would still play in the vials category.

[Kunal Randeria, analyst]

Right. So India was largely a vials market, right? So cartridges opportunity would be how big? Mixtard would be less than INR 800 crore brand. So how big would the cartridges be?

[Amit Bakshi, executive]

So I don't -- I mean, what I remember, the whole cartridge was more like INR 500 crores, INR 600 crores. So the entire cartridge piece, which according to us will get discontinued, it's more like INR 600 crores to INR 800 crores.

[Kunal Randeria, analyst]

Right, right, right. So that includes Mixtard and other brands that it has in the country, like Actrapid and all these?

[Amit Bakshi, executive]

Yes, absolutely.

[Kunal Randeria, analyst]

Right, right. That's helpful. Second question, just on your CDMO opportunity and you said that you have a visibility of INR 100 crore plus order. So if you hope to have, let's say, 3 of the top 5 players. I'm wondering what's the kind of investments you are looking to make? Because I'm sure I would like to make this business a big one in the next 5 years. So the kind of CapEx you would be doing, what's the current gross block? And what's the 5-year kind of a revenue opportunity?

[Amit Bakshi, executive]

So Kunal, look, at this point of time, we are not very fancied about CDMO and all those kind of things. This is a natural progression which we are leading the business to because the plant is EU-approved, it was always EU-approved and we are getting more approvals. So right now, what I can tell you that in the next 2 years, the capacity is a constraint. Post the capacity opening up, the ramp-up could be very significant but we don't -- what clarity we had till this point of time, we have put it in the slides. We feel in the next financial year, we would create INR 100 crore opportunity from the CDMO business. Beyond that, everything will work out depending upon how fast we are able to put our -- the new facility and how fast we are able to ramp it up.

Now revenue, if you remember, we have talked about that there is a good possibility of the international businesses going up to INR 1,000 crores in FY '28, '29. That was a number, right? And that will also include our OSP business where we've already had the inspection, and we are expecting the ANVISA approval to come at any point of time, which, of course, we'll inform.

[Kunal Randeria, analyst]

Right. So it's more of a longer term post FY '28 is something that you would be keen to explore. As of now, it would be largely DBF driven by insulin and then GLP-1?

[Amit Bakshi, executive]

Yes, yes.

[Operator]

[Operator Instructions] The next question comes from Nirali Shah.

[Unknown Analyst]

I just wanted to continue on the CDMO question. So we have mentioned about INR 30 crore plus CDMO pipeline, which is set up to ramp up from FY '27. Could you give some more color on this? Basically, I wanted to know how much of it is formed up via binding agreements and how much of it is in soft commitment?

[Krishnakumar Vaidyanathan, executive]

Yes. First, the number we called out is INR 100 crores, not INR 30 crores.

[Unknown Analyst]

Yes, I mentioned INR 100 crores.

[Krishnakumar Vaidyanathan, executive]

Okay. Sorry. I must have misheard. And then we -- so this INR 100 crores is basically what we've put out based on confirmed assignments. And we've also given you described examples of some of the contracts that are under execution. So this is not a prospective number. This is a number based on confirmed contracts.

[Unknown Analyst]

Understood. And one more question I had. On the Biocon margin, so it has improved from 19% to 20%. Just wanted to know what's the steady state margin that you can expect for this vertical once cartridge volumes normalize? And how much is the further scope that we see for FY '26 and onwards, '27, '28?

[Krishnakumar Vaidyanathan, executive]

I mean, it's a little difficult to put a specific answer to that, but I'll try to answer it in a different way. So I mean, you've seen how our acquisitions have played out. And what I would say about the Eris system is that I think it automatically rejects anything, which is not high margin or does not have the potential to become high margin. So our DBF aggregate margins are at 37%. So I would say that is the kind of aspiration we would have at the very least.

[Amit Bakshi, executive]

Correct.

[Operator]

The next question comes from Pragati Lunawat.

[Unknown Analyst]

Am I audible?

[Krishnakumar Vaidyanathan, executive]

Yes.

[Unknown Analyst]

What are the reasons for the ramp down in the generics segment?

[Amit Bakshi, executive]

I think our ability to ramp up that business didn't come through. And March, we didn't have any -- at least we couldn't have kind of thought about good margins in this business. So we kind of did our work and we found even if we scale up to, say, 4x where it is today, the margin will still be very scratchy. And we have so much on the plate at this point of time, and a lot more is happening actually. So we just wanted to preserve ourselves to get to the core of the business. Did I answer your question?

[Kruti Raval, executive]

Can we take the next question, please?

[Operator]

The next question comes from Tushar Manudhane. There seems to be no response. Our next question from Rahul Agrawal.

[Rahul Agrawal, analyst]

This is Rahul from EverFlow Partners. My question is that on the insulin side, with the exit of Novo, what's the current run rate that you are at? And once all of the stocks are out from the market over the next 3, 4 quarters, what sort of run rate are you targeting?

[Krishnakumar Vaidyanathan, executive]

Yes. Rahul, we've called out earlier that this market opportunity is something where we can get an upside of INR 200-plus crores per annum on a steady-state basis once all the stocks are exhausted.

[Rahul Agrawal, analyst]

INR 200 crores on top of what we have today?

[Krishnakumar Vaidyanathan, executive]

Yes. This is the plant -- I'm assuming you're talking about the RHI penfil opportunity.

[Rahul Agrawal, analyst]

Exactly. Yes. INR 200 crores per annum incremental to our current base.

[Krishnakumar Vaidyanathan, executive]

Yes, because the current market that is being vacated is of the order of INR 500 crores per annum.

[Rahul Agrawal, analyst]

Got it, got it. And on regulated markets, I think Amit made a comment that you're talking about INR 1,000 crores by FY '29. So I'm assuming Swiss today is around INR 350 crores, INR 400 crores, INR 100 crores from the CDMO in Europe next year. And the balance INR 500 crores, INR 550 crores from other semi-regulated markets and as the new capacity comes up. And that happens over FY '28, '29. Is that understanding broadly correct? Or...

[Krishnakumar Vaidyanathan, executive]

Yes, Rahul. INR 1,000 crores is the number, all international put together, which is regulated and ROW, which will be a combination of all of these things coming together, which is the ROW-based business, the CDMO business, the OSD exports business, there is also B2C piece which we are working on which we are not -- we can talk about it to you in a few quarters. So all of this coming together will get us to the INR 1,000 crores number.

[Rahul Agrawal, analyst]

And today, the base that is only about INR 350 crores, INR 400 crores, right?

[Krishnakumar Vaidyanathan, executive]

That is right.

[Rahul Agrawal, analyst]

Got it. And on GLP-1, your presentation mentioned that the line is going to be in line with regulated market standards. Do we have plans to potentially go beyond just a branded generic opportunity in GLP-1 to export? Or we'll just stick to the domestic market?

[Amit Bakshi, executive]

Yes. So this is something which we are exploring at this point of timing. So largely how I would like to put it in a manner that, look, having the card facility, a [ biocard ] facility at this point of time is quite a good thing, and our capacities are good at this point of time. So there are people who are talking about different things, including export because both our line and our setup, we think is completely doable for regulated market like EU and ANVISA. We don't talk about U.S. at this point of time. So a lot of things are happening, but we will not be able to put a finger on that. But yes, we are open and we are talking.

[Operator]

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. V. Krishnakumar for the closing comments. Over to you, sir.

[Krishnakumar Vaidyanathan, executive]

Thank you all for your participation today. In summary, we delivered a DBF revenue growth of 11% in the quarter with an EBITDA margin of 37% and a year-on-year growth of 16%. We continue to create value in the Biocon segment, which clocked a 30% EBITDA margin in Q1 even before we bring the insulin production in-house. Q1 consol revenues stood at INR 773 crores with an EBITDA of INR 277 crores. Year-on-year consol EBITDA margins have expanded from 35% to 36%. Quarter 1 PAT came in at INR 125 crores, which represents 41% year-on-year growth.

OCF from routine operations came in at 65%. We incurred a CapEx of INR 66 crores largely towards insulin, GLP-1 and general injectables in the quarter. Net debt stood at INR 2,300-odd crores, and we reaffirm our net debt guidance of INR 1,800 crores by the end of the year. The International business delivered a Q1 revenue of INR 68 crores, and the European CDMO segment is well on track for commercialization in FY '27 with significant contribution expected from the top 5 European markets. We are well on track to execute the strategic priorities outlined for the year in the areas of insulin, GLP-1, our R&D pipeline and international operations.

Thank you, and a good evening to all.

[Operator]

Thank you very much, sir, and thank you, members of the management. Ladies and gentlemen, on behalf of Eris Lifesciences Limited, that concludes this conference. Thank you for joining us, and you may now exit the meeting.