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DATE

Tuesday, January 27, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Badri
  • Group Chief Financial Officer — Vikesh Kumar

TAKEAWAYS

  • Revenue -- Increased by 4.6% year over year for the quarter, and by 5.5% for the first half.
  • Gross Margin -- Stood at 57.8% for the quarter, representing a 500 basis point improvement year over year; H1 gross margin was 59%, up 410 basis points.
  • EBITDA -- Reached 232 crores for the quarter with a 19% margin; up 25.4% year over year. H1 EBITDA was 450 crores at a 19.2% margin, up 20% year over year.
  • Operational PAT -- Achieved a record 140 crores for the quarter and 154 crores for H1; operational EPS for the quarter stood at 15.2, also a record high.
  • Reported PAT -- Reported at 132 crores for the quarter and 137 crores for H1, with the difference from operational PAT attributed to exceptional items.
  • US Market Revenue -- Reached $73 million for the quarter, up 2% year over year, with management emphasizing a strategy focused on profitability over top-line growth.
  • Other Regulated and Growth Markets -- Combined segment revenue reached 10,300,000,000 rupees, exceeding 1,000 crores for the first time and showing 14% overall growth, with the other regulated markets up 16% year over year and growth markets at $17 million with 7% growth.
  • EBITDA to Net Debt Ratio -- Improved to 1.65x at quarter-end from 1.9x in March 2025, with net debt at 1,449 crores and a reduction achieved despite a 71 crore adverse forex impact.
  • Operational Cash Conversion -- Operational cash for H1 reached 394 crores, representing 87% conversion of EBITDA to operational cash; free cash flow was 73 crores and used for debt reduction.
  • CapEx -- H1 investment was 149 crores, split between maintenance and growth, with future CapEx expected to maintain similar levels.
  • R&D Spend -- Management confirmed an annual run-rate of $15-$20 million, targeting focus areas including nasal sprays and Beyond Generics, with spend already reflected in the P&L.
  • Gross Finance Costs -- For the quarter, gross finance costs were 40.46 crores and net finance costs dropped to 20 crores, aided by a one-time finance income.
  • Cash-to-Cash Cycle -- Declined to 113 days, an improvement of three days quarter over quarter.
  • Return on Capital Employed (ROCE) -- Increased to 16% from 14.9% in March 2025, not including capital employed in "one source" (valued at 339 crores).
  • Product Pipeline -- Over 230 ANDAs filed and more than 215 approved by July; management highlighted disciplined timing on launches to maximize profitability.
  • Product Portfolio -- 70 commercialized products in the US, with 37 in top three market positions, collectively generating 75% of US revenue.
  • Controlled Substances Segment -- First full year of execution, with initial product launched; full impact expected next year due to lead times in quota allocation and production cycles.
  • Operating Costs -- Remained stable at 39% of sales, supporting EBITDA margin expansion.
  • Tax Rate -- Effective tax rate for the quarter and H1 was approximately 15%; management guided for a 15%-20% range for the full year.

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RISKS

  • Management described the access markets as "very lumpy" and donors' decisions as difficult to predict, stating, "the donor funding environment continues to remain challenging."
  • Adverse forex movement caused a 71 crore increase in net debt, though partially offset by debt reduction efforts.
  • Intense competition in select US and UK products was cited, leading to discontinued commercialization of several SKUs that failed to meet profitability standards.

SUMMARY

Stride, Inc. (LRN +1.16%) reported record operational PAT and EPS for the quarter, driven by significant gross margin expansion and ongoing operating leverage. Management reaffirmed both their US and international expansion strategies, with the other regulated and growth markets segment collectively surpassing 1,000 crores for the first time and achieving solid double-digit growth. The company’s disciplined approach resulted in stable operating costs, enhanced cash conversion, and continued debt reduction, while capital allocation remains tightly aligned with profitability and strategic pipeline objectives.

  • Vikesh Kumar clarified that finance income contributing to lower net finance costs is not expected to recur in the second half, resulting in a possible slight increase going forward.
  • Mid-term revenue growth targets for both the US and the combined other regulated markets remain in place, with management emphasizing a steady trajectory instead of sharp quarter-to-quarter acceleration.
  • Operational cash flows supported both CapEx needs and further deleveraging, maintaining a favorable EBITDA to net debt ratio.
  • R&D investments are set to persist at elevated levels, particularly directed at high-value pipeline areas such as nasal sprays within the Beyond Generics strategy.
  • Portfolio rationalization led to the discontinuation of certain products, reinforcing the company’s stated unwillingness to pursue revenue at the expense of margins.

INDUSTRY GLOSSARY

  • ANDAs (Abbreviated New Drug Applications): Regulatory submissions for approval to market generic pharmaceutical products in the US.
  • Operational PAT: Profit after tax from core operations, excluding exceptional or one-off items.
  • EBITDA to Net Debt Ratio: A leverage metric comparing earnings before interest, taxes, depreciation, and amortization to net debt.
  • Gross Margin: The percentage of revenue remaining after accounting for cost of goods sold.
  • CapEx: Capital expenditures, including spending on maintenance as well as investments for future growth.
  • Access Markets: Geographies or customer sets where business is driven primarily by time-limited or donor-funded programs, leading to high volatility and unpredictability.

Full Conference Call Transcript

Badri: Thank you, Abhishek. Morning, good afternoon, and good evening to all who are joining in this call. We are extremely happy with the results. The performance demonstrates our consistent execution as we invest in sustainable long-term growth. I will cover this presentation and divide my speech into two parts. I will focus on all the growth metrics of the business. Group CFO, Vikesh, will cover all the metrics relating to efficiency as well as profitability. I will also speak about some qualitative aspects of the key businesses we have. In the end, we will take all the questions that need to be answered. From our perspective, Q2 has been very strong for us.

Our revenue grew by 4.6% year on year. Gross margins are 14.6%. EBITDA grew by 25.4%, and operational PAT at 84%. All I want to say is that consistency and sustainable growth have helped us to create the operating leverage, and the multiplier effect is very clearly seen from our results. A 4.6% increase in revenue growth resulted in almost three times increase in gross margin growth, almost five to six times increase in EBITDA growth, and almost 20 times increase in operational PAT. This is based on the quarterly performance.

As far as the yearly performance is concerned, the revenue grew by 5.5%, gross margin at 13.2%, and EBITDA 20% growth for the full first half and operational PAT at 82.6%. Again, the complete operating leverage is visible in the entire P&L. Overall, you can really see from the US market, I will go market by market now. The US market at $73 million grew two year on year. There has been intense competition in recent launches. Despite the competition, we have grown 2% year on year. We also launched three products in H1 FY26, and the total number of commercialized products stood at 70.

We continue to rank top three in 37 products, and we added one more product to this list, which contributes almost 75% of our US revenue. We have given a long-term outlook to the street in terms of the $400 million by FY28. We are continuing to focus on that and continue to execute based on that plan. We have got 230 plus ANDAs, and the ANDAs filed and 215 plus ANDAs approved as of July. The company has invested in new segments of controlled substances, and we are spending the new R&D on all those programs which are beyond $400 million.

I also want to cover some of the key points with respect to the US business and also the philosophy of the company in doing that business. As far as the US business is concerned, our strength has been on the timing of the launch. We wait for the market to get disrupted, and we launch it at the appropriate time. Second thing is in terms of the service levels. Our service levels continue to enjoy a very premium position as far as the US generic suppliers are concerned. We are able to maintain the service levels at a very high level, and it also creates a lot of stickiness as far as the business is concerned.

Our business discipline has been in terms of focused discipline on the entire capital allocation. We are focused on programs which are beyond the $400 million, and we are starting to invest now. Profitability has been the focus to see the first quarter. We also dropped a few products from commercialization because they did not meet our profitability threshold. We are continuing to focus on that top profitability as we go forward. Our US strategy has played out quite well in the Chestnut Ridge plant, delivering good outcomes for us. Also, in terms of the overall context of the external environment in terms of tariffs, almost a third of the revenue comes from the US.

The company continues to focus on execution and supply chain efficiencies. This is what has led us to a very consistent performance in the US in the last six quarters. As far as the other regulated markets are concerned, we are extremely happy with the progress of other regulated pockets. As you know, the other regulated markets are difficult to operate, and given that each market has got a regulatory pathway, making it a very high entry value. We are able to see green shoots in these markets.

As has been reiterated in the past, our rest of the world market, which we call it as another regulated markets plus the growth markets, have registered a very strong growth at 14% with other related markets at almost about 16% year on year. There are a number of markets which the company is focused on, which have got B2B market, B2C across all geographies, which are in various stages of evolution. If you go back and see the last six quarters, the growth has been quite muted. In the last two quarters, we have grown almost about 14 to 15% in these markets. We believe that all pivots are in place, and it has formed a new base.

We should be able to launch from now. Overall, if you really see, we are very happy with the 14% growth, including the other related pockets and the growth markets, and 16% in the other related markets. We believe that the new dollars will come from these markets as we start to spend and increase our regulatory efforts. Our long-term objective of mirroring the US market in the next two to three years' time remains intact. We believe that we have got all pivots in place to grow from here on. We are pleased with the base that has formed, and you will start to see accelerated growth in these markets.

Coming to the other regulated markets, we had a 16% year on year growth. The deal momentum continues in Europe with large Pan EU partners being onboarded. Onboarding a partner takes time, and we have already started to see green shoots in these markets. As far as the UK markets and other markets are concerned, it's very steady, and it has formed a new base. We are confident of good growth in the near term. The portfolio maximization and the portfolio buildup in the last quarters on the investments which have been made on various programs have resulted in this growth.

As far as the growth markets are concerned, the growth markets' revenue at $17 million grew 7% year on year. When we say growth markets, this consists of new markets where the new dollars are expected to come in the near future. Our Africa is very, very tall in this quarter. We are also starting to invest our regulatory efforts on the growth markets. A number of filings are being done. We should be able to see substantial growth beyond FY28 in these markets.

All the work is in progress, and we should be able to see a new amount of dollars coming in beyond FY27, FY28 in these markets for which all pivots are in place, products are in place, regulatory strategies in place, and the go-to-market is also planned out. As far as the access markets are concerned, it's very lumpy, and the donor funding environment continues to remain challenging. It's very opportunistic for us, and it will continue to be lumpy. We believe our second half should be slightly better than the first half. But, again, it has to be seen over the next two quarters how it pans out.

It all depends on the donor agency's decisions at that point in time. Overall, if you really see, we are very pleased with the entire results. We are focusing on long-term growth. We are also focusing on EPS growth. We believe that all the pivots are in place for us from a long-run perspective and to make the company extremely valuable in the near future. With this, I will hand it over to Vikesh to cover the profitability and the efficiency metrics that have gone into the results. Then we will open the floor for questions from the management side. Thank you, and I will hand it over to Vikesh.

Vikesh Kumar: Thank you, Badri. Good morning, good afternoon, and good evening to all of you. As Badri mentioned, it's very pleasing to report yet another quarterly performance. Our performance has been exceptional across metrics of profitability, efficiency, and growth. I will start with the profitability metrics. First, I will focus on the gross margins. Our gross margins for the quarter are at 706 growth. It's a 90 crore increase from what we reported in '25, with a gross margin percentage of 57.8%. It's a 500 basis points improvement from our gross margins last year. For H1, our gross margins are at 1,381 crores, with a gross margin percentage of 59%.

So even for H1, our gross margins have improved by 410 basis points over H1 of last year. Coming to EBITDA, we are reporting a very strong EBITDA of 232 crores for the quarter, with an EBITDA margin of 19%. As Badri already mentioned, it's a 25% EBITDA growth year on year. For H1, we are reporting a 450 crore EBITDA with an EBITDA margin of 19.2%. The EBITDA margin has also moved from 15.8% to 19% in Q2. So that's a 320 basis points improvement for the quarter. Similarly, for H1, with 19.2%, we've improved by 230 basis points over H1 of last year. Coming to the operational PAT, our operational PAT for the quarter is at 140 crores.

140 crores is the highest ever operational PAT that we've reported in a quarter. It's an exceptional performance from a PAT perspective. An operational EPS at 15.2 is again our highest ever quarterly EPS. For H1, our operational PAT is at 154 crores with an operational EPS of 27.6 rupees. Our reported PAT for the quarter is at 132 crores, and our reported PAT for H1 is at 137 crores. All in all, if you look at all the profitability metrics, you can see the multiplier effect flowing in, and the EBITDA to operating PAT conversion is also at a very healthy 57%.

Focusing on a couple of other line items of the P&L, our operating costs have remained steady, in line with previous quarters at 39% of sales, which is also visible in the EBITDA margin expansion. Our gross finance costs continue to improve. For the quarter, our gross finance costs are at 40.46 crores. Our net finance costs for the quarter are significantly better at 20 crores due to a finance income that we reported in this quarter. For H1, our net finance costs are at 61 crores, which is significantly lower than the 105 crores of net finance cost we reported for H1 of last year.

We expect our gross finance cost to continue to improve while the net finance cost for H2 may slightly go up due to the income that we've had in H1. Our ETR for Q2 and for H1 has been around 15%, and we expect it to be in the range of 15 to 20% for the year. Moving to the efficiency metrics, I'll start with the operational cash. We are reporting an operational cash of 394 crores for H1, which is about an 87% of EBITDA to operational cash conversion. This strong operational cash has helped us deliver a free cash of 73 crores, which we have used for debt reduction.

Our net debt at the end of Q2 stands at 1,449 crores. We were also adversely impacted by forex on our net debt. That impact was almost 71 crores. Despite this impact, we were able to reduce our net debt by 73 crores, and consequently, our EBITDA to net debt ratio is now at 1.65x, improving from 1.9x that we reported at the end of March. We have also invested significantly in CapEx. Our investments in CapEx for H1 are at 149 crores. So in addition to maintenance CapEx, we've also made investments for growth, including acquisitions of intangibles for future growth. Our cash-to-cash cycle remains steady at 113 days. We've improved by three days quarter on quarter.

Our ROCE has now improved to 16%, compared to 14.9% in March 2025. Our ROCE does not include our both our capital employed and our ROCE not include the investments in one source, which is currently valued at 339 crores. This 339 crores is also not adjusted in our net debt and EBITDA to net debt ratio. Overall, it has been a comprehensive performance across metrics, and that is clearly visible both in profitability and the strength of our balance sheet. We hope to continue and sustain this momentum as we focus on our growth levers for the future. Thank you, and we can now open up for questions.

Abhishek: Dhanesh, you can take the Q&A, please.

Operator: Thank you, sir. Ladies and gentlemen, we'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use a headset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Anand Mundra from Soar Wealth. Please go ahead.

Anand Mundra: Hello. Good evening, sir. My question is with respect to other regulated markets. It has been strong this quarter. What are the key drivers, and is this growth sustainable? Is it clear to assume that other regulatory markets should grow faster than the US going forward?

Badri: These are the questions regarding other regulated markets. Yes. As far as the other regulated markets, I'll put it like this. Like, other one is in terms of rest of the world markets, you have to look at it as a bucket. Other regulated markets plus the growth markets minus the access markets. If you really see this quarter, we have reached a very important threshold of 10,300,000,000.0 rupees. That's thousand crores we crossed in this market. If you really see the last trajectory of the last six quarters, this market has been forming in various geographies. This is the first time we have just broken that trend, and we believe that is very sustainable in the future.

Our long-term objective of mirroring the US market in the next two, three years and with the rest of the world markets, it consists of, again, other regulated markets and the growth markets minus the access markets. We believe that we can mirror the US market in three years' time from now. We have got enough pivots in place, and you should not look at it from quarter to quarter. Over the period of three years, I think we should be able to get there.

Anand Mundra: Okay. So if I look at the US market, it is flat for the last six, seven quarters. So not for one, two quarters, but we have come back to the same level what we were doing it quarters back.

Badri: Yeah. If you really see that we have also specifically said that as far as the US market is concerned, there has been some intense competition in certain select molecules. If you really see the entire buildup for the US market, focused on profitability, and we are focused on various other metrics which are outside the in we are also focusing on a number of metrics. We believe that long-term is intact. As far as we are concerned, we are focusing on long-term. We are focusing on value. Both on the quarter on quarter trend.

We believe that we have got enough products as well as these strategies in place to get there in the next two and a half years to three years' time frame.

Vikesh Kumar: Yeah. Okay. Badri, just one point I would want to add. So specifically on the US market, in '25, we had reported roughly about $6,566,000,000 dollars in terms of revenue. Then over the last five quarters, we've been upwards of $7,070,000,000. It is a very calibrated approach that we focus on profitability rather than revenue growth. You will see that, be it in the US or in other regulated markets. So other regulated markets, historically, for many quarters, we were at 40,000,000, and now we've stepped up to that, you know, to that 44,000,000 range, and we expect to remain there. Similarly for the US, you know, four quarters back, we had stepped up from 65,000,000 to a 70,000,000 plus.

We have studied in that range despite the competition that has been there on certain molecules. We have been able to maintain and grow revenues. Our focus continues to remain on profitability rather than chasing revenue growth.

Anand Mundra: Understood, sir. So the second question is with respect to profitability only. It is largely driven by an increase in our gross margin. So this 58-60% gross margin, is this sustainable, sir, given the rising competitive intensity in the US?

Badri: Yes. We have remained in that range for the last four quarters.

Anand Mundra: This is helpful, sir. The third question with respect to our other income, which is 18.5 crore, this is being reported as a part of finance cost you have reduced. What is this related to, sir?

Vikesh Kumar: So this is related to interest on certain refunds that we've got. Largely, we've seen this income coming in year on year, so it is more a timing of the income rather than that. So the way we are looking at it is net finance cost for H1 is at about 60 crores. 61 crores. With this level of income not repeating in H2, it may slightly go up. But overall, we've seen our gross finance cost coming down quarter on quarter for the last many quarters.

Anand Mundra: On a run rate basis, it's clear to assume 40 crores, sir?

Vikesh Kumar: It should be less than that.

Anand Mundra: Okay. Okay. Thank you, sir. Thanks a lot.

Operator: Thank you. Our next question comes from the line of Akash Jain from Moneycom's Analytics. Please go ahead.

Akash Jain: Yes. Thank you. I think it has been an extremely positive effect on margins, and I think the management team should get fully accurate on that. I think I just want to also understand a little bit on is there an interplay between margins and revenue? Because I think a little bit of that you referred to earlier. But, for example, are we forgoing or are we stopping some reducing some revenues going to profitability? Just to understand a little bit what are we is some of this margin also come at the cost of revenue? Because the margins look great.

But the revenue has been obviously, the retail has been lower than what we had expected and one will write it up here. So just a little bit qualitative and qualitative aspect of is happening on revenue growth versus trying to manage and try to do much.

Vikesh Kumar: Yes. So I will take this. So if you look at the EBITDA, while the margin has been healthy, even the absolute growth in EBITDA and profits has been healthier, and which is where you also see the multiplier effect right at EBITDA and at PAT. So the focus is both on absolute profit growth and margin growth. So what we are saying is we don't want to we want to take in revenues that either meet our strategic margin thresholds in terms of profitability or they should help our under recoveries, which helps in improving our operating leverage. That philosophy has played out.

So we don't factor it is just that we don't want to do loss leaders or don't want to chase extremely low margin products just for the sake of revenue. It's a very calibrated approach. We've achieved leadership positions in the products that we sell, and we want to maintain that niche.

Akash Jain: So we have said that we will launch 60 parts in the US in the next three years. But I think if you look at actual, the number has been significantly lower than the run rate that is required. So I just understand it. Right? And in the light of the fact that you said that the target for doubling US revenues. So the sorry. The target for revenue growth in the US image and tax is also what you are guided earlier. So how do I understand the move to that in terms of filings and approvals versus revenue growth versus what you're seeing actually next one?

Vikesh Kumar: So if you follow our historical trends as well, it has been a very calibrated approach in terms of launch. Right? We don't launch products as soon as we get approvals. We wait for the right timing both in terms of pricing and market. We prepare ourselves. And make sure that when we launch, we launch it at a very profitable and at a very stable level. That strategy has really played out well for us. So we continue to remain focused on that. Given that we've got the pipeline, we've got the products, from a long-term standpoint, we see that to be intact, which is what we continue to mention.

While there are some near-term headwinds, our long-term remains intact.

Akash Jain: Okay. Thank you. Thank you.

Operator: Our next question comes from the line of Amrish Kumar from Capital. Yeah. Congratulations on a very strong set of numbers. So the first question would be on our Beyond Generics. So we had launched our nasal spray. Is there any update on that in this quarter?

Badri: We have one question. Yeah. We have already filed for one product, and we expect to file a few more in the next twelve months.

Amrish Kumar: Okay. And the second question is on the balance sheet. So it was happening to see that the debt coming down. With the free cash flow this first half. So do we foresee some more debt reduction going forward? I mean, some reduction in further finance cost? Gross finance cost. No.

Vikesh Kumar: We will continue to focus on profitability and efficiency. Okay. So we expect finance cost to come down, and from a free cash generation, whatever free cash we generate, our aim will be to reduce that.

Amrish Kumar: Okay. And, sir, when delivering on the same points of the previous two speakers, so last our run rate is about $300,000,000 in the US currently, more or less. And in this rate, it was increasing very fast by about 25% till about a year back. We are still maintaining that we will go from current $304,100,000,000 dollars by FY '28. So are we going to see some step-up jump, or will we see gradual increase from here?

Badri: Yeah. It will be very steady. That's all we can say that in the next two and a half years. Should be able to get there. Is our hope. But, of course, external events are there. We have to watch out, and we want to take step by step. Most important thing is we are focused on sustainability of that. Revenue or sustainability of that target. Important for us and as a company, and that's what we are focusing on.

Amrish Kumar: Got it, sir. Got it. Okay. Thank you so much, and congratulations on sitting on a very strong set of numbers. Thank you so much.

Operator: Thank you. Our next question comes from the line of Krishna Mehta, an individual investor. Please go ahead.

Krishna Mehta: Hi, sir. So on our CapEx intensity, it has increased to 149 crores in H1 FY26. Could you highlight the major areas of investment? And what will be your incremental spend in H2 FY26 and FY27?

Vikesh Kumar: So I already touched upon the CapEx spends. It has gone towards maintenance CapEx as well as for future growth. So including certain investments for intangibles that we have done. We expect to maintain it at similar levels for H2.

Krishna Mehta: Thank you, sir.

Operator: Thank you. Our next question comes from the line of Rupesh Tatia from Long Equity Partners. Please go ahead.

Rupesh Tatia: Yeah. Hi. Hi, Badri. Hi, Rakesh. I'm on a fantastic set of numbers. I have a few questions. First question, because I reported the PAT is 131 crore. Operational PAT you said in the presentation is 140 crore. So can you do some reconciliation maybe line by line? And, also, this 71 crore, the advanced currency impact what portion of that you know, is routed through P&L?

Vikesh Kumar: So on the first part, the difference between the operational PAT and reported PAT is the exceptional items. So these are expenses related to past events and that are incurred in the quarter and are not relating to the performance for the quarter. So that is the exceptional loss. It's just one item that's the reconciliation item.

Rupesh Tatia: So these are, like, one-offs, basically?

Vikesh Kumar: Yeah. These are one-offs.

Rupesh Tatia: And the 71 crore, what has grown in terms of the 200? In terms of the 71 crores, so that is the balance sheet position as of the date, as of the date. So if you look at the average rate versus the closing rate, the closing rate is much higher than the average rate. So the performance exchange does not flow through in the P&L. Whereas from a balance sheet standpoint, it gets restated by the end of the quarter rate. So there is some portion of that would have flown through the P&L, but it is what happens is it comes the impact in the P&L comes with a lag.

Rupesh Tatia: Okay. Whereas the balance sheet is immediate. Balance sheet is immediate because it is as of that date.

Rupesh Tatia: Okay. Okay. Understood. And second question, Badri, is where are we on the controlled substances execution? I think in one of the investor conferences, I think hosted by Antti, you said we can hit $25,000,000 near term. So, I mean, what is near term? Have you figured out how quotas work? Have you launched the products? Get some color or qualitative and quantitative around that would be very helpful.

Badri: Yeah. As far as the controlled substance is concerned, this is the first full year of execution from a We had some approvals of few products. This year also, we have launched one of the products in the controlled substance space. So this is a business which we are seeding in, and we are also very hard to execute it much better. The full impact of the controlled substances will be seen only from the next year onwards. I will put it that way because there are time lead times which happen between the quota allocation, purchase of API, manufacturing, and then selling.

So all of this and this will be a very good investment here where the entire various legs of the control substances. We should see the full impact of that in the next year.

Rupesh Tatia: And just one clarification, but is there that we have 15, 16, and that and the $34,000,000 per product kind of No. Revenue realization.

Badri: No. I don't think so. That is right. Overall, as a controlled substances has a bracket, you could really see if you are able to get to the full potential, it will be slightly meaningful in the coming years.

Rupesh Tatia: Okay. Okay. And final question, Ravi, where Q4 exit on that US $80,000,000 other regulator in that market, 50,000,000. Is that good? Does it have good probability that we will get there by Q4?

Badri: We don't want to make any forward-looking statements within the year. All I can say the risk? Let me ask you another way. What is the risk to those numbers? That $400,000,000 were a three-year period, you should look at us long-term. Quarterly, that can be here and there, but it all depends on the market. All I can say is that our aim is to grow. If you see the other regulated markets, has other regulated many say, rest of the world markets, which includes other regulated markets plus growth markets minus the access markets have reached a 10,000,000,000 mark. There is a thousand crores. When we see all of that, we should see it as a basket.

Most important thing for us is to grow wherever the opportunity is. That's what we are trying to focus on, not losing sight of the long-term what we have kept for ourselves.

Rupesh Tatia: Okay. And just final clarification. Historically, H2 has been better than H1. So Yes, sir. Yeah. I'm really sorry.

Operator: Mister Tatya, I'm really sorry to interrupt you. I request you please email your question. One very simple question. I'm sorry. Is this a very simple question?

Badri: Yeah. Please go ahead.

Rupesh Tatia: Yeah. Yeah. Yeah. So H2 historically has been better than H1, so nothing has been renewed this year as well. Right?

Badri: Yes.

Rupesh Tatia: Okay. Thank you.

Operator: Thank you, sir. Our next question comes from the line of Prateek Uthari from UniqueBMS. Please go ahead.

Prateek Uthari: Yes. Hi. Good evening, and thank you. Sir, one question on competition. So last quarter, we had called out some intense pricing pressure in the UK. Again, this quarter, are talking about I mean, in the presentation, have spoken about the US, we are writing discontinued five six production first half. Just across two markets, anything to read into it, how to look at I mean, is this just one of some products coming in? Is this I mean, some intense increase completion that we saw three, four years back? Some color, please.

Badri: See, Prateek, just to give you a clarity on this. It's a competition. Is something which no company has got control of. Right? So from our perspective, at the end of the day, you have to look at it as a book portfolio. Some you will gain, some you will lose. Right? So from that perspective, you really see there is definitely some competition in the marketplace. What is more important for us to focus is that how we are ahead of the competition. That's what the company is working on. But the most important thing is we don't want to compromise the profitability of the company at the cost of top-line growth. That has been the philosophy all throughout.

If you really see that this quarter, we have added one more product to the 37 out of 70 products or at a market-leading position. So it has to be it is a trade-off between the competition and the profitability as well as the you know, what you want to do as a company. Our disciplined execution has really helped us to get here. I think that is the right way to look at us. If you don't want to be looked at every quarter in terms of ups and downs. But overall, what we are chasing is something which is very value-driven, the volume or the price-driven.

Prateek Uthari: It's actually the point that I was coming from was because it happened over two quarters, two geographies, some and hence the question. Right? Because and yeah, I mean, is it just some product specific? I mean, is it just the number of peers finding has gone up or maybe last two years were good for the US generic market? And now someone's taking price type or market share at cost of pricing. I mean, obviously, we're too soon to call out any trend, but what you're saying is you're not done.

Badri: Correct. There is no specific trend. All I am saying is competition will come and go. What Stride, Inc. will do is to how to stay ahead of the competition is what we are focusing on. Quarter on quarter is something which you should not even look at. From a long-term perspective, I think we have got we have got enough strategies in place and we'll continue to execute on our strength which will give us all the value which we are chasing.

Prateek Uthari: Yes, ma'am. Point again. So second one, R&D, we were to double our R&D spend from $10,000,000 last year to 20. So, I mean, is run rate already hitting our P&L? Have we run that up?

Vikesh Kumar: Yes. We have we said that it will be between 15 to $20,000,000. We are on track to spend that. R&D expense.

Prateek Uthari: Fair enough. And earlier, Vikesh mentioned about this spend on intangibles, and that is what we see in the balance sheet. Intangibles have gone up about 100 crores. So let me just highlight this is just few registrations, etcetera, or it's gonna highlight the nature of this intended? Nikesh, you would like to take that?

Vikesh Kumar: Yeah. So it is few intangibles. There's more few NDAs that we have acquired, and it is for near to medium-term growth. So it is in the 100 growth. It is a combination of the acquisition as well as exchange rate impact because exchange has also moved significantly in the last six months. So that is also that will also impact when you compare year on year numbers.

Operator: You, Mister Kotari. Please rejoin the queue if you have more questions. Thank you.

Operator: Our next question comes from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal: Badri, congratulations on our team for a very good job. Performance. Just one question on the R&D. Now R&D, the $1,520,000,000 dollars that you're looking to spend, are there any particular areas that you're gonna be focusing on more that you can highlight?

Badri: So we have said that we'll be focusing on nasal space and the Beyond Generics. There are certain specific domains we have identified within. It's early days. But we are committed to focus on that. But nasal spray is one thing something which we need to call out at this point of time.

Nitin Agarwal: Okay. And secondly, Vijay, on the CapEx, so this year is about 300 crores or thereabouts. Is this a run rate we should work with on these future years also?

Vikesh Kumar: Our maintenance CapEx is going to be between the 100 to $1.50 crores, and the rest is more quarterly driven rather than being a trend. So it is more event-driven. Is what I would say.

Nitin Agarwal: Okay. And lastly, on the overheads, I think we've done a pretty commendable job in terms of setting out creating operating leverage on the overheads over the last few quarters. I mean, do you still see opportunities to create more operating leverage on the overhead part of the business and this overhead going forward?

Vikesh Kumar: So we still have some level of under recoveries across our plans, and that is where we are focused on to get in the incremental revenues without the need to spend in new operating costs. So there are surely some legs that are left as far as the operating leverage is concerned.

Nitin Agarwal: Okay. Sure. Thank you so much.

Operator: Thank you, sir. Our next question comes from the line of Siddhartha Bhattacharya from Autumn Investment. Please go ahead.

Siddhartha Bhattacharya: Hi. I'm audible.

Vikesh Kumar: Yes.

Siddhartha Bhattacharya: Alright. Yeah. So a couple of questions. First, I wanted to understand about the gross margin expansion. You know, how structural is that and, you know or is that a function of the product mix that we did during this quarter? Or the first half? You know, if you could throw some light on that.

Vikesh Kumar: It is fairly structural. I mean, if you look at the last six quarters, we've been in that range. And expanding in a very calibrated manner. So H1 FY '25, we were at 55%. H1 FY '26, we are at 59%. Q3, 458%, and so it is in line, and it has got to do with the discipline that we follow across markets in terms of how we onboard new business.

Siddhartha Bhattacharya: Okay. Alright. And the second question I have is that H1 to H1, I look at numbers, you know, your gross margin increase not really translated into corresponding EBITDA increase. Know, which tells me that there is some variable cost that has grown much faster than the gross margin increase. So going ahead, you think that will sort of taper down lead to EBITDA expansion? In the coming quarters?

Vikesh Kumar: Yes. So if you see Q1 of last year, the expenses were significantly lower. The revenue was lower. And from Q2 onwards and that is where the year on year, difference, you're able to see much more stocker. But when you look at Q3, Q4, the last four quarters, it has been fairly in a very steady range.

Siddhartha Bhattacharya: Okay. Okay. Okay. Got that. Thank you so much.

Operator: Thank you. Our next question comes from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.

Sarvesh Gupta: Hi, team, and congratulations on a steady set of numbers. So first question is on the tariffs. So now that we have seen one month post tariffs in the quarter gone by and one month in this quarter, how do you if you can throw some color on the impact on of the tariffs that we are seeing on our business.

Badri: Currently, there is no impact, and we continue to watch the external development. Things are changing every day. But at least some clarity has come in that tariffs are not going to be there in the near term. But it's as good as news every day. Right? So we have to watch out. So far, there has been no impact for us for Synty Pharmaceuticals.

Sarvesh Gupta: Understood. And, you know, you said that the other regulated market business would mirror the US business. So now the US business itself on a quarterly run rate can grow to maybe $100,000,000 in another two, three years. So do we mean that the other regulated business will also reach to that level in that time frame, thereby increasing by almost two and a half times?

Badri: Yeah. I just want to make a small correction. What you said. And you said that US market, we have got a plan to go to 400,000,000,000. I named the other than you other than US which I call it as rest of the world, which consists of both other regulated markets and the growth markets reached at 10,300,000,000.0 rupees, thousand 30 crore which is the first time we are crossing thousand crores in that market. And that's growing steadily at about 14% on a start for the last two quarters. And if you keep up the same trajectory, we should be able to mirror the market the US market in the next two, three years. From now?

That's the thing I said. You have to I didn't say other regulated markets. Other regulated markets plus growth markets minus plus group markets. That's it.

Sarvesh Gupta: So that should also reach a run rate of $100,000,000 in two, three years.

Badri: Yeah. That is what that is what is our plan. And it will it's, again, that's a long-term aspiration. When it will happen, we don't know. But we are working towards it with the growth whatever trajectory that is there. We believe that it can catch up.

Sarvesh Gupta: And finally, on the expensed out things versus capitalized, so you have $1,520,000,000 dollars of R&D that you mentioned. Then you have a maintenance CapEx of 100 to 150 crores. And then you have filing related intangible expenses, I think. So how much of these items are going through the P&L, and how much is going to get capitalized. And under what time frame.

Vikesh Kumar: So everything that we spend internally except for the filing fees goes through the P&L. Anything that is bought out is what goes through the balance sheet.

Sarvesh Gupta: No. So this R&D expense and maintenance CapEx, are they going to the P&L?

Vikesh Kumar: Maintenance CapEx is for the factories. That does not put into R&D.

Sarvesh Gupta: And the R&D expense of $1,520,000,000 dollars?

Vikesh Kumar: It's already in the P&L, in the reported numbers.

Sarvesh Gupta: Oh, okay. Thank you. And all the best.

Operator: Thank you, sir. Our next question comes from the line of Kiran from Table Free Capital. Please go ahead.

Kiran: Hi. Congratulations, sir, on a very good set of numbers. Couple of questions. One, we are talking about 200,000,000 in the US, maybe 200, $220,000,000. I mean, just in one so one plus growth market is 400,000,000. So I'm thinking one will be somewhere around $202.50. So again, not asking for a quarter to quarter, but at least from a run rate perspective, we should at least start hitting $80.85, 90 in the US and probably 15 other related markets. Do you see this happening in FY '27? Again, not for a particular quarter, but at least some run rate growth that we have to see to reach 400. Right? It's not certainly down to 400.

Badri: Yeah. So just to reiterate. This is an aspirational goal. Right? And we are starting to see growth. All we are saying is that the last six quarters of market formation has resulted in a growth. For the rest of the world markets, excluding access markets. We believe that if you are able to grow in the same trajectory, we should be able to mirror that market in the next two years. That's what we are expeditiously working on. You will see that the narrowing in as we go along from quarter to quarter. Between US family, rest of the world markets, includes both the other regulated markets and the growth markets.

Kiran: My question was different. So my question is simply was we should see some run rate increasing. Right? At least in the US markets to 80, eighty five. Growth markets, not growth market, I think the world markets to 40, 50, So I'm asking is that one rate that we're gonna see in FY '27? That eighty five kind of run rate in US and forty five fifty in Warren next year?

Badri: Yes. Because, see, I don't want to get into specifics on how you are thinking in terms of modeling. But all I can say is if I have to mirror the markets in two, three years, all of it, what you said is true.

Kiran: Got it, sir. Got it. Second question, sir, in terms of nasal sprays, we said we'll launch one nasal spray. Most of our nasal sprays are going in so R&D is also going around majorly in nasal spray. Is there any particular therapy area, sir? Because some industry players do thousand crores molecule in a single product. Right, in nasal spray. So just wanted to understand if there's any therapy area that you can talk about.

Badri: No. We are not going to specifically talk about any therapy play. All we are saying is that we filed one product, we are in the process of filing few more in the next twelve months. Once we get an approval and then we'll have to look at launch, at least it is about eighteen months to twenty-four months away from the current date.

Operator: Okay. So please rejoin the queue for more questions. Thank you.

Operator: Our next question comes from the line of Chirag Shah from White Pine Investment Management. Thank you. Please go ahead.

Chirag Shah: Yeah. Thanks for this opportunity, and congrats for a good set of numbers. Sir, these questions. First question is on currency. So what is our average rate of duration when you will see the benefit of top INR depreciation in DNS, That's one. Second, on this intangible and or and that you have what if you can give more color on that in terms of number or what kind of opportunities size it will target if everything plays to the playbook? And third was on this on the on the US competition, you know, in general, a lot there's competition that we see.

If you can just give us color, how should one look at it simply because we all have refreshed memory of competitive intensity what happened after COVID. Which lasted very long. But if you go back into the history, generally, it's is the competition or short term one to two quarter, event or and how is the generally tends to be?

Vikesh Kumar: Yeah. Thanks, Chirag. On the currency, I did not follow your question.

Chirag Shah: I will repeat it. I think we indicated minimal amount of heavy loss accounting hedge loss, when I say hedge loss, given the currency. So how what is the duration of our current budget? Outstanding And from when can we see the benefit of current INR, for example?

Vikesh Kumar: So we are seeing the benefit of the current INR rates. You should also appreciate that we have a large part of our operations outside of India. Where there are costs that are in USD. But, largely, the way we really focus on is that on a net basis, the currency impact benefit flows through. We see that load flowing through in terms of the P&L. The impact on the balance sheet comes in when the depreciation is far steeper than what it is during the course of the period where the currency benefits come, come with a lag over subsequent quarters. If the currency rate stays.

So if the currency stay rate stays, that benefit should flow through the next few quarters. As far as the ANDAs or the products, the products are they are in line with our strategic profile in terms of how we look at products internally. We expect to launch them in the near to medium term. So those are very small tuck-ins that we really saw value in and took them over, but we cannot get into specifics of it. They will form part of our pipeline. And growth in the near term near term to medium term. As for the competition and the intensity, it is very specific to the new launches that we've had over the last twelve months.

If you really see across the rest of the portfolio or the large part of the portfolio, we are not seeing any erosions. In fact, we continue to maintain our market leadership position both in terms of volumes, and which is where you also see that gross margins are steady. What the impact on these products meant is that what could have been a very solid growth that growth did not come through because of these impacts.

Chirag Shah: Just a clarification. So first on HP, what I was referring to is whatever balance sheet law hedges losses that we have booked would be with to the outstanding product you would have taken for forward booking of revenue. Right? Potential revenue.

Vikesh Kumar: We have not booked any balance sheet loss or hedges. I mean, that impact is not much. What I spoke about was the impact of restatement of foreign currency debt.

Chirag Shah: Okay. Okay. Restate. What about restatements? Okay. I understand now. More of foreign currency debt. We don't have any significant outstanding hedges that are impacting.

Chirag Shah: And just clarification on this competitive intensity, but generally in the past, if we exclude the post-COVID period intensity, how long does of you will be in a better position to make a guess than us understanding that it's a forward-looking statement. It may or may not hold to. I understand that. But how long it's in the law? How long it lasts? Forget about the intensity, but generally, because there are multiple if you can just hyper understand because we all think that when competition testing, it can last for two, three years and the price erosion could be very severe. Given the recent experience of post-COVID.

Vikesh Kumar: Yeah. I mean, like we had said, our focus remains on profitable expansion. We continue to remain focused on that. We expect that through our EVD programs and cost improvement, cost improvement plans, we will be able to offset the mitigation. We'll be able to mitigate and offset these impacts. It is just that when an impact comes in, it comes immediate, whereas your improvement takes six to twelve months to get back those margins. So that is what we are focused on. That we need to recoup. It's a competitive market. We have to continuously work on our cost and keep improving our cost across line items. And retain our leadership positions.

Operator: Thank you, sir. Ladies and gentlemen, due to the time constraint, that was the last question for today. I now hand the conference over to the management for the closing comments.

Badri: Thank you, everyone, and wish you a very happy weekend. All we are saying is that we'll continue to focus on long-term sustainable business with EPS accretion.

Operator: Thank you. On behalf of Stride, Inc., that concludes this conference. Thank you for joining us. You may now disconnect your lines.