Orchid Pharma Ltd
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Q4-2025 Earnings Call
AI Summary
Earnings Call on May 26, 2025
Sales Growth: Orchid Pharma reported Q4 sales of INR 237 crores, up 9% year-on-year, and full-year sales of INR 922 crores, a 13% increase over last year.
Profitability: Full-year EBITDA reached INR 156 crores, up from INR 140 crores, despite a INR 6 crore one-time GMP inspection expense and a INR 9 crore drag from the AMS division.
Guidance: Management anticipates a muted FY '26 due to ongoing pricing pressures and increased capex, but maintains mid-teen margin aspirations.
Key Projects: The 7ACA project has been delayed by six months, with mechanical completion now targeted for December 2026 and commercial launch expected in March 2027.
Merger Update: The NCLT has cleared the merger with Dhanuka Laboratories, with the combined entity expected to generate over INR 1,500 crores revenue and INR 175 crores EBITDA.
Product Pipeline: Enmetazobactam is performing strongly in India; however, insolvency of its German partner clouds international commercialization. Cefiderocol development is progressing on schedule.
Cash Flow & Working Capital: Receivables and inventory spiked due to late-quarter sales and holding stock amid pricing pressure, but are expected to normalize soon.
Market Challenges: Pricing pressure remains a concern, with margin levels believed to have bottomed out. Base business growth is expected to slow and remain slightly above industry rates.
Orchid Pharma delivered 9% year-over-year sales growth in Q4 and 13% for the full year, with EBITDA rising to INR 156 crores despite absorbing significant one-time costs and operating drags from the AMS division. Management attributes gains to volume growth and operational efficiency, but expects FY '26 numbers to be muted due to continued pricing pressure.
Management highlighted severe ongoing pricing pressure, mainly in two key oral solid products and the overall cephalosporin market, influenced by cyclical industry trends and competition from China. They believe margins have bottomed out and do not expect further significant declines, but also do not anticipate near-term improvement.
The AMS division, launched last year, posted an EBITDA loss of INR 9 crores and is expected to remain a drag for up to two more years. However, it has made strong inroads with hospitals and physicians, mainly leveraging the Enmetazobactam product, and is seen as vital groundwork for the eventual launch of Cefiderocol.
The 7ACA fermentation project has encountered a 6-month delay, with mechanical completion now targeted for December 2026 and commercial operations expected by March 2027. Management is increasing the pilot plant scale to mitigate future scale-up challenges. Capex spend on the Jammu plant has reached INR 120 crores, and project timelines remain under regular review with the government.
The merger with Dhanuka Laboratories has been approved by the NCLT, and the legal process is expected to conclude within the financial year. The combination is projected to generate more than INR 1,500 crores in revenue and INR 175 crores EBITDA. Synergy benefits are expected but not yet included in guidance.
Orchid claims broad product diversity within cephalosporins, manufacturing more than 30 products. Despite this, the top three products continue to dominate revenue, making the company sensitive to pricing fluctuations in those molecules. Management asserts there is little room left for further diversification within the current business scope.
The insolvency of German partner Allecra has complicated royalty payments for Enmetazobactam and clouded international expansion. Orchid is evaluating its legal options and has not received recent royalty payments or sales data from Allecra. In India, Enmetazobactam is exceeding internal expectations, with patient reach targets for the full year achieved in just six months.
A surge in receivables and inventory tied up cash flow at year-end, attributed to late-quarter sales and a conscious decision not to sell inventory at depressed prices. Management expects normalization in operating cash flows as receivables are collected and inventory is liquidated over the coming months.
Ladies and gentlemen, good day, and welcome to Orchid Pharma Limited Q4 FY '25 Earnings Conference Call hosted by Systematix Group. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Manchanda. Thank you, and over to you, sir.
Thank you, Avirat, and good evening, everyone. On behalf of Systematix Institutional Equities, I welcome you to the Q4 FY '25 Earnings Call of Orchid Pharma. We thank the Orchid Pharma management for giving us an opportunity to host the call today. We have with us the senior management of the company represented by Mr. Manish Dhanuka, Managing Director; Mr. Mridul Dhanuka, Whole Time Director; and Mr. Sunil Kumar Gupta, Chief Financial Officer.
I'll now hand over the call to the company management for their opening remarks. Over to you, sir.
Thank you. Good evening, everyone, and thank you for joining Orchid Pharma's Q4 Financial Year '24 Earnings Call. I'm Manish Dhanuka, Managing Director. And over the next few minutes, I will walk you through our performance for the fourth quarter and full year ended 31st March '25 and the status of our key growth projects and other developments.
In the fourth quarter, we posted a sales of INR 237 crores, up by 9% over the same period last year and EBITDA of INR 40 crores. For the full year, sales rose to INR 922 crores as against INR 819 crores last year, an increase of 13%. And the EBITDA was INR 156 crores as against INR 140 crores last year. We achieved these gains while absorbing a INR 6 crore onetime expense in Q3 for GMP inspections. During the last 6 months, we were inspected by both European and U.S. authorities and both the inspections were completed satisfactorily. Besides the INR 6 crore, we also incurred a INR 9 crore operating drag from our Antimicrobial Solution division, which was started last year and is catering to the hospital sales business.
The last 2 quarters have been especially challenging in two of our larger oral solid products, and we see no meaningful improvement in current quarter either. Against this backdrop, our focus has been on mix management and operational efficiency. Going forward, the pressure on demand and pricing is still there and expect this year numbers to be a little muted.
Turning to the AMS division. The unit closed the year with a team of 70 members with engagements with over 500 physicians. Although still in its build-out phase, the division was EBITDA negative by about INR 9 crores and is likely to remain a drag for roughly two more years before turning profitable. We are comfortable with that investment horizon because businesses on brand image must be built patiently and credibly.
Let me now update you on our projects, 7ACA project first. Project construction is going on and detailed engineering is completed to the extent of 50%. We may be looking at some delay in execution of the project considering some challenges at the site. We could be looking at the mechanical completion date of December 26, which is an increase of 6 months from our earlier estimates. The first commercial product is targeted for March 2027.
Coming to our NCE Enmetazobactam. In India, the product is performing better than our estimates with strong early traction for Orblicef, our brand and the Cipla partnered launch. At the same time, Electrotherapeutics insolvency filing in Germany clouds near-term commercialization in the United States and other international markets. We are actively evaluating legal and commercial pathways to safeguard our interest and are in dialogue with our advisers and potential partners.
Cefiderocol next. Development and project execution remains on schedule for this project with the first validation batches expected towards the last quarter of 2026. Commercial launch will depend on regulatory approval in India, but it is expected to be in the second quarter of calendar year 2027.
Corporate structure. The National Capital Law Tribunal, NCLT has cleared the merger of Dhanuka Laboratories into Orchid Pharma Limited. We aim to complete the legal process within this financial year and expect the combined business to generate a revenue in excess of INR 1,500 crores and EBITDA of roughly INR 175 crores, offering investors a clearer, stronger platform from which to evaluate our progress.
Looking to financial year '26, we anticipate a muted year given continued pricing pressure and the ramp-up of CapEx on the 7ACA facility. Nevertheless, our mid-teen margin aspiration remains intact, supported by volume growth, mix optimization and disciplined cost control. We also intend to file 2 to 3 differentiated cyclosporin ANDAs for the U.S. market in the next 12 to 18 months, keeping Orchid at the forefront of complex anti-infectives for the coming future.
To close, I would like to thank our employees for their dedication, our partners for their collaboration and you, our shareholders, for your confidence. The journey from rescue to reinvention is rarely linear. But with backward integration, branded stewardship and focused global filings firmly in place, we believe Orchid is well positioned to create sustainable value while advancing its mission.
Thank you for your attention. We are now happy to take your questions.
[Operator Instructions]
The first question is from the line of Sajal Kapoor from Antifragile Thinking.
Manish, we discovered that this business development activities in the U.S. faced a significant setback because few customers could utilize Orchids products due to the site limitations, right, as you called out. Is this limitation or limitations, are they related to facility design and the GMP considerations or something less serious?
Limitation is not pertaining to our facility. Actually, two of our customers, one in the U.S. and one in India, who was exporting the finished formulation to the U.S., they faced the U.S. FDA setback. So as a customer, they could not buy the product from us. It was not in our facility. It was in their facility.
Okay. Right. So -- and we are exclusively dependent on those customers to initiate our business development into the U.S. market, right?
Yes. As of now, yes, I mean, we only had the API facility, but the new projects that we are setting up in collaboration with Shionogi, like under licensing from Shionogi, in which we shall be manufacturing Cefiderocol. So we have the opportunity to file ANDAs from here. And also, we are trying to work through a CMO, which is U.S. FDA approved to file our ANDAs from their site. So we are progressing in development of our own ANDAs so that we are not dependent on just the customers for the consumption of our raw material.
Okay. No, that's helpful. And then looking at the balance sheet and cash flows this time around, obviously, sudden surge in receivables and inventories is causing a lot of cash to be tied up there. Can you shed some light on this? I mean, are we trying to push some sales into the channel inventory and that's why this sudden surge in receivables? Or are these the sales that only went out in the month of Feb and March and obviously, we'll have to face because the operating cash flows are down significantly Y-o-Y.
Yes, it's largely the latter only. The sales happened in the last 2 months. So those receivables should be realized in the next 2 months. I mean, would have been probably realized by now. And the inventory was a little higher because of the pricing pressure. We did not give into selling at lower prices. So -- and as we had ramped up our capacities, so in expectation of generating higher sales, we have created some inventory, which will be liquidated over the next few months.
Sure. And in terms of this pricing pressure, Manish, I mean, clearly, we would have seen that coming given the standard operating procedure from China. The moment they figure out that their capacities getting up and running. So PenG Aurobindo as an example, they play this by the book really by squeezing the raw material pricing. So all this should have been part and parcel of our original or initial planning, right? Or did this come as a complete surprise?
See, in my experience, I have seen the B2B business is generally cyclical. It runs over a few years as the demand grows, everybody feels comfortable and then people ramp up their capacities. So for a certain phase of, say, 6 to 8 months, the supply position becomes a little over the demand, and it will stabilize over the next few months. So I've seen these cycles of every 2, 3 years over the last 20 years. We are expecting maybe just like we ramped up capacity having faced 2, 3 good years in the last 3 years -- last few years, maybe competitors also ramped up their capacity.
No, okay. And then finally, on this AMS division, what is the targeted steady-state ROCE, assuming we breakeven sometime around F '28 and then we build from there? I mean, what is the back of the envelope aspirational ROCE from this venture?
So we do expect to break even in the next 2 years because we just launched in the month of October. So I would say last 6 months were kind of learning for us. And fortunately, we had our own molecule to piggyback on, which gave us a very good head start and a good recognition with most of the large hospital chains. And with this learning, we are developing our sales and marketing model, which is differentiated from the traditional one. And we hope in this year, we should get, I would say, a good growth. And next year, probably, we should be able to break even.
And the major objective is to market Cefiderocol because this product will come for commercial sales in 2027. So we wish to be present in almost all big hospitals so that we can launch Cefiderocol successfully, which will be a very critical molecule for, you can say, last resort antibiotic for the hospitals. And if we can launch it exclusively, that will be a big boost to our business.
[Operator Instructions]
The next question is from the line of Viraj Parekh from Carnelian Asset Management.
Most of my questions were asked by the previous participant. Just a few bookkeeping questions. So as we grew like 12.5%, 13% in value this year, could you quantify the volume growth? And second would be, I'm seeing a little bit slightly more increase in our employee expenses, other expenses, I'm assuming there will be some kind of one-off costs. But if you could just give me some kind of a breakup of the increase in employee expenses for this year.
Yes. Thanks, Viraj. So in terms of volume, roughly 18% to 20% growth is there Y-o-Y. And to answer your second question on the employee, largely, it is a drag due to the AMS where we have hired the team and the sales have just started. So roughly -- practically, you can assume the entire thing of the INR 9 crore drag is kind of the people cost of AMS division.
Right. Just second question would be, we've given like the NCLT approval for the merger, and we are expecting a company at a INR 1,500 crores top line and INR 175 crore EBITDA. Is this considering the current pricing pressure? Or is this an optimistic scenario which we are looking in FY '26 as a company as a whole?
This is the merged numbers, Viraj. This is not Orchid individually. This is the merged entity numbers.
Right. So I'm asking from the merged entity point of view. So do we see these numbers improving? Or are these like steady-state numbers as on FY '25, given the guidance we are giving muted for next year? How should we look at the merged entity level?
So we have not considered the benefits of the synergies in this. We have just kind of added mathematical addition of what happened this year. But the savings from synergies as we merge -- we merged two businesses would be an additional margin.
Sure. Just last quick question before I get in line. You highlighted in your initial remarks that Enmetazobactam India is performing better than your expectations. So just -- can you just elaborate more on the numbers of where we are penetrating and some kind of a margin profile for this product in the Indian market?
Secondly, unfortunately, as Allecra has declared insolvency, you highlighted that you are talking strategies with your legal team. If we can understand what options are available to us at this point in time and...
Yes. Thanks, Viraj. Unfortunately, this is a public call, so I will not be able to share with you the options. Once we have them, legally, we have to figure out our strategy. So it's a little too early because the announcement has just come. We are evaluating all the agreements in place. So right now, we don't even have any access to documents from them. So it's going to be a long process. The idea is how do we maximize our return.
And on your second question, I cannot share any margin profile for Enmetazobactam in India. I can definitely tell you it is better than our blended gross margins as they appear right now. And in terms of numbers of expectation, roughly about 10,000 patients work we have done, while our estimate for full year was 10,000. We have managed to do that in half year of last year.
The next question is from the line of Rupesh Tatiya from Shriram Managers PMS.
I have several questions. So first starting with Allecra. So we -- I mean, some idea, if you can give about -- we had some royalty due, right, for last 2, 3 quarters. Have we received that? And I mean, in terms of classification, we stand where we have secured creditor, unsecured creditor, receivable -- I mean, receivable party, where do we stand in terms of classification of Orchid Pharma?
Yes. Thanks, Rupesh. So on this question, Allecra has right now appointed a preliminary administrator. So we only have a notice of the process starting. So because they are Germany-based, we don't even know as of now the rules of that system. So I will not be able to tell you where we stand in that. And in terms of the royalty, the first quarter number we had received, Q2 payments were not received -- Q2 -- sorry, Q2 -- Q4 of calendar year last year, we received the sales numbers, but we did not receive the royalty amount. And for Q1 of this calendar year, which is Jan to March, we have not even received the sales number. So we don't know any more details of how much royalty would have been there for that quarter.
Okay. Okay. And then, I mean, in terms of licensing agreement with Allecra whenever Orchid did, were there some clauses if Allecra was became insolvent, I mean, or that was like completely -- no clauses were there and now we have to find a way?
It's a very good question, Rupesh. Unfortunately, we are still evaluating those options because those agreements are more than 10, 12 years old. So we are evaluating all our options.
Okay. Okay. And then the second question is...
Sorry, it's too preliminary for those things. We would like to first understand from the lawyers and then maybe make a statement.
Okay. Okay. We'll wait for that. And then second question is Dhanuka Laboratories, can you give annual numbers, annual sales, EBITDA and PAT?
Yes. So the sales was INR 506 crores and EBITDA was around INR 35 crores.
Okay. Okay. Actually, I'm looking at the merger notification you sent to exchanges, 9 months EBITDA itself was INR 39 crores, INR 40 crores, right? So EBITDA in Q4, there was EBITDA...
Maybe I said correct [indiscernible].
This EBITDA is around INR 48 crores.
INR 48 crores.
Yes. Yes.
Okay. Okay. And in terms of the investable innovator production of the product, Cefiderocol, I am confused whether the time lines are calendar year or financial year. So you said Q4 of 2026 is when the construction will complete. That is December '26 or March '26.
No, December '22. So that was calendar year. So the validation batches are planned sometime around end of calendar year '26. And then it will depend on how long it takes for registration in India. But I'm being a bit optimistic considering the doctors are already importing the product, although it is 10x more expensive and using it for patients. So I am hoping that DCGI will give us a faster clearance and we can start selling in, say, September of 2027.
Okay. Okay. That's very clear. And India market, maybe -- I mean, are you planning to share at least annual numbers, at least, either, I don't know, revenue sales or I don't know, number of prescriptions or something?
Yes. So Rupesh, actually, because our license agreement is in public domain, it is a cost-plus model. And right now, we are not sure of the price which GARDP will allow us to sell in India. So without that, it will be very difficult to tell the numbers and what is the price elasticity. So in terms of potential...
Sorry. Sorry, let me interrupt you there. I'm asking about Enmetazobactam.
Okay. You're talking about Enmetazobactam. Enmetazobactam I shared...
Enmetazobactam in India. I'm asking in India.
10,000 patients was our plan for the full year. We have managed to reach that in half year.
So that is you alone or that is you and Cipla combined?
Combined.
Okay. Okay. And you don't see any slowdown in growth or anything for, let's say, 2, 3 years?
It's difficult to say what is going to be the increase in the sales going forward. But definitely, since it's doing better than our potential and it just launched, we do hope for the next 2, 3 years, it's going to be very fast-growing molecule for us.
Yes, I can say that the product, whatever the microbiological tests the hospitals have done, they have found the results of the product very good, and it is able to solve a lot of issues, a lot of patients were cured, which were not being cured through the first line of antibiotics. So the potential seems to be good, and that's where we are investing in our sales and marketing team. And I'm very positive that if we can market the product properly to its potential, we see a significant growth in the next 2 years.
So you had indicated that it will remain a significant driver of profitability in FY '26. So that -- no change on that front?
So in that sense, the AMS division will also have a drag because we have already hired a large team of 70 people. So I cannot say that it will be the driver of profit, but our purpose is to become a significant player in the Indian hospital segment so that when Cefiderocol comes, we can convince Shionogi and GARDP to give us the exclusive license for marketing as well. And that is our end goal because Cefiderocol will become the driver of profit after that.
Okay. Okay. And then another question is on penicillin. So how -- I mean, is there like a further price compression, further dumping by Chinese player in quarter 4 and then 2 months of this FY '26 and do end product prices are still tracking to that penicillin prices? Or -- and I mean, you said in the opening commentary, you don't see any respite, but then can we see respite in second half?
Yes. So there is a reduction in PenG price, which is leading to the price reduction. But only one product that is Cefixime depends on PenG out of our product range. But we are actually -- I would not like to comment directly because it will depend on how Aurobindo reacts and how the Chinese react to his price reduction. So we are not directly -- we don't have a direct visibility of how the prices are moving because we only buy the intermediate from the users of penicillin G, which is a [indiscernible].
Let me ask you other way. Next year, FY '26, I mean, this year EBITDA margins and gross margins on the base business, non-Enmetazobactam, non-other AMS division, those margins, when will they bottom out? Or have they already bottomed out? And when will we start seeing improvement?
I would expect that the margins have bottomed out because I think margin pressure is there on all competitors. So I would not say that margins will go any further down.
And then on the base business, you've been saying 15%, 20%, 20% to 25%, whatever will our capacity supports that kind of growth, and we'll continue growing the base business at 20% for 2, 3 years -- that's still fair, right?
I want to correct you. The base business will not continue to grow at 20% from here. That would include all the other things. So whatever the capacity utilizations, CapEx, which was done in the past, all of those have become operational, okay? So...
So I'm asking I mean, non-7ACA. 7ACA will come when it will come. Cefiderocol will come when it will come and Enmetazobactam will grow the way it will grow. I'm asking outside of all the base overall...
Yes outside of all of that, then there is no possibility of growing at 20% for the next 3 years. Okay.
So is that because of capacity? Or is that because of we have -- our market share now is kind of significant?
So yes, to fight more than that, we will have to compromise on our margins, which we don't intend to do.
So then from here on, base business will grow as for the industry?
Slightly better, but definitely not what we were doing earlier where there were lots of gaps and inefficiencies where we could have identified.
The next question is from the line of Rohan Shah from Stern Capital.
Am I audible.
Yes.
Yes. Sir, I had a couple of questions. Like firstly, how insulated will our API cost structure be from this Chinese price volatility after the 7ACA is fully ramped up?
So when we have 7ACA fully ramped up, so with respect to 7ACA, we should be insulated from China, but that's always going to be on an arm's length basis, the pricing. Unlike PenG, where the price multiplied by 2x or 3x in the last few years, 7ACA prices have been largely stable over the past 12, 15 years. So we don't see much change in that.
Okay. And another question, like in the last quarter as well, you mentioned that the price correction in the top 3 products has impacted our revenue despite volume growth. So why has there been no diversification from this heavy reliance on a few molecules like after so many quarters of volatility?
So the largest products cycle take a larger market share. Orchid has the most diverse range of cephalosporins in the entire world. We make more than 30 products, while our closest competitors make 15. So in terms of diversity, any cephalosporin in the world, Orchid probably makes that. So I don't think there is any room for diversification. With respect to penetration, if there is a market potential of 1,000 of a product, I need to take more share over there rather than a product which has only 20 market potential, right?
Yes, definitely. But just the heavy concentration has impacted like any reduction in prices can hamper our sales, which we have gone through. So it was just a question regarding that.
Yes, yes. This will continue to happen. The top 3 products will continue to remain the top 3 products over the foreseeable future.
[Operator Instructions]
The next question is from the line of Aditya from Elara Capital.
Correct me if I'm wrong, there's a planned CapEx of INR 600 crores for the Jammu plant, out of which only INR 40 crores have been utilized. I don't think the plant would be finished by the FY '27.
So I don't know what's the question, Aditya. You made the statement.
Do you think the plant would be finished by FY '27?
Yes, that's what we have said.
But given the utilized CapEx of INR 40 crores out of INR 600 crores, I don't see that -- it's on track yet. And land has also not been yet acquired.
What is the number that...
So you see the major expenses happen at the end of -- I mean, there's still 1.5 years. I mean, December '26 is still 1.5 years away, right? And major expense happens at the end of -- I mean, right now, what you would do is you will just pay 10% advance. So INR 45 crores means almost all advances have been paid. The machinery delivery will only happen after 6 months, right?
Sir, one more thing. INR 45 crores figure is not correct. Actually, we have spent around INR 120 crores?
Aditya, maybe some clarification in terms of numbers is needed.
Sorry to interrupt, sir. Mr. Aditya has disconnected.
Okay. So just like our CFO clarified, it's INR 120 crores investment has gone in, not INR 40 crores.
[Operator Instructions]
Yes. The next question is from the line of Narendra from White House Capital.
Can you hear me?
Yes.
In fact, can you share some data from the post-marketing [indiscernible] if it is ready [indiscernible] something it will be available?
That is going on. I think we have to share it with the DCGI first before we share it with the public as it's a new product.
Okay. That's fine, sir. Sir, are you witnessing increased prescription repeatedly from the same doctor? Or are you witnessing more demand from the hospitals where you have supplied it already?
Yes, we are finding doctors to prescribe this quite frequently. And we are seeing the growth month-on-month of the product.
Okay. The other question is on reaching the hospitals. Have you reached all the hospitals in the metro cities where in major hospitals where it is being used? Or is there some more hospitals to be covered?
So we have started in North, South and West, not yet started in the East. But I think most of the large corporate hospitals, our product has been entered in the formulary.
Okay. Sir, other thing which I want to ask is because you have been marketing Enmetazobactam as a carbapenem staring agent, right? But if you compare the antimicrobial spectrum, it is not as bad spectrum as meropenem, which is commonly used. But the price point of Enmetazobactam is higher than meropenem. How does doctors perceive this? Are they okay with the pricing?
So the pricing has been kept considering the optimum level between meropenem and other expensive antibiotics like Ceftazidime, Avibactam. And the purpose of the product is to spare carbapenem for future generation. And the doctors don't want carbapenems like meropenem to develop resistance as fast as it was developing. That is the whole purpose of the molecules to be introduced, which can actually replace the resistance of Ceftriaxone and Piperacillin, Tazobactam. That is the purpose.
And the price point that we have kept here is not actually detrimental that the hospitals cannot afford or the patient cannot afford. That's why we've optimized the price in such a way that it is affordable. Yes, it is more than meropenem, but meropenem has more than 200 brands. So it faces that kind of a competition. And obviously, every molecule has its own costing. That's why we have discussed, consulted with Cipla and kept a price point, which is very much affordable.
Sir, can you name what are all the antibiotics you have introduced under your AMS division?
So we have a large range, all first-generation antibiotics, then all MDR molecules like ceftazidime and avibactam, tigecycline, teicoplanin, and we have a large range of antifungals also.
The next question is from the line of Rohan Shah from Stern Capital.
I just wanted to go back to a previous participant who asked about the land acquisition. I guess you said it was INR 40 crores, and you corrected and by saying it's INR 120 crores. So I just wanted to know like on the balance sheet, the current capital work in progress is about INR 65 crores. So maybe there's some sort of balance sheet anomaly maybe I'm guessing.
Guptaji, can you answer that? How much of that is advanced, which will not be in CWIP possibly?
Actually, that CWIP will not come in OPL balance sheet, it is in subsidiary balance sheet.
Okay. Got it. So I guess it's capitalized in the subsidiary.
Yes, yes, yes. If you see our subsidiary balance sheet of OBPL has been made. And if you see the investment in there, there -- just now I checked it, it is worth more than INR 120 crores. INR 124 crores exactly.
Okay. So maybe because I was checking on the subsidiary that we have, it's a wholly owned subsidiary. So I...
Yes, that is a correction. Yes, yes.
Yes. So maybe I got along that line [indiscernible].
The next question is from the line of Richa Chowdhary from Electrum PMS.
Now that we see that 7ACA project has been delayed mode, have we got any communication from the government side? Like how do we see it as a risk?
So Richa, like I've highlighted earlier, we have been in constant communication with the government. We update them on a quarterly basis what is the status of the project. And we also have an application with them to extend the date of the letter that they've provided us. And like I've alluded on the earlier calls, they have always given us a comfort that don't worry, we are there with you. But unfortunately, they have not given anything in writing.
And my understanding is they have not given this in writing to us or to Aurobindo, who was also 2 years late or any other PLI player. But they are launching new schemes and they are in full support and which is also evidenced by their actions in constant support to us writing to Jammu government to help us in faster execution of the project.
The next question is from the line of Vishal Manchanda.
Sir, just a clarification on this delayed time line. So we'll start commercial production in December '25. Is that right?
Mechanical completion. Maybe production, I said say March or April of '27.
Okay. So around that time, we'll start commercial production, first quarter of FY '27?
March '27 would be FY '28 -- last quarter of March '25-'26.
Sorry, sorry sir. Okay. So a significant delay. And so are we kind of trying to kind of hedge this by doing scale up alongside and maybe like so that we don't waste time. So once we start commercial production, we'll also face challenging -- challenges in scale up. So are we kind of trying to do something alongside that the scale-up challenge is reduced?
So some of the actions that we are taking is besides our pilot plant in Chennai, which was at a very small scale of 10 liters. We are scaling up there to the extent of 1,000 liters. So 100 times scale up from where we are today before we commercialize in Jammu. So that should help us mitigate those risks. But like I said in the earlier calls, learning from the experience of other fermentation PLI players, it takes a long time and Aurobindo has unlimited resources. We are very small compared to them. So they have not managed to stabilize in 15 months. So there could be delays on commercialization to full capacity.
I believe a fermentation unit of this size is probably -- this will be the second after Aurobindo penacillin-G plant. I don't think we have seen a fermentation unit of this size in India as of now. So I mean, we have faced challenges, but there are learnings, and we feel it's a complicated engineering. It's better to do things right and then rather hurry up and end up in trouble at the time of commercialization. So there have been some learnings, and we are trying to correct those and do the things right first time. That's what I would say.
Right. And just on -- are we kind of -- so we are facing pricing pressures, but can we deliver volume growth, say, mid-teens volume growth next year? Do we have the capacity to deliver that?
Yes, we have the capacity to deliver that. But like I said earlier, we don't want to be price leaders. So we will not strive for higher volume growth at the expense of our profit and pricing. But of course, we will have to compete in the market. So it's a balancing act. Maybe we'll know in a couple of quarters how things are.
Difficult to make a statement. Obviously, every businessman tries to optimize between price and volume. And obviously, we try to find newer revenues, newer markets where we can get a better margin and then try and optimize between how much to sell at what price. But you can't always predict how the competitor will react. But yes, we do have capacity, and we are trying to diversify our mix so that we neither compromise on the volume of sales nor on the bottom line.
So like when it comes to the U.S. market, I think none of the Indian players are currently supplying a sterile cephalosporins to the U.S. market. And so just wanted to understand, as of -- as we stand today, is there a differential tariff? Like is China facing a tariff for their products in India for sterile cephalosporins? And does this give Orchid an opportunity?
So I think that mostly, it's the finished formulations of generic products that's going into the U.S. And if my understanding is correct, as of now, there's nothing in pharmaceuticals. And I think there is no differentiation between duties from India because pharmaceutical is still on hold, I think.
Okay. So are we seeing any opportunities for Orchid to supply to the U.S. in the near term, 1 or 2 years? So are there any efforts in place and whether these can be monetized maybe in the next 1 or 2 years?
I don't think in the next 2 years, it would be possible because I mean, either we will start from our formulation unit that we are setting up or through a third-party CMO, and that takes 2 to 2.5 years at least for the registration purpose.
As an API supplier, if not as a formulation player?
So there is no -- Vishal, there are no API buyers actually.
No, there is [indiscernible]. So there is a possibility. There some development work is going on, but we would be not in a position to commit because it will depend how fast they move their registration. But there are two customers who are registering our product who are now once again taken the API and they are registering.
These are innovators or these are generic players?
Generic players, generic players.
Generic player. Okay. Okay. And so we have not recognized any royalties from Allecra this quarter because we don't have the numbers.
Correct. No we don't.
Okay. That's all from my side.
As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Dear investors, I thank you very much for your time. We always -- as I always say, we take pleasure and we take a lot of learning from your questions. And if there are any further questions, we'll be happy to answer on the e-mail. Thank you once again for joining this investor call.
Thank you. On behalf of Systematix Group, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.