Hello and welcome. You're watching All About Your Company here on ET Now. Today we're going to be talking about a play which is an India pharmaceutical play. It's an innovator drug company from India and the upside here could be extremely large if the story starts to play out. And 2026 is a critical year for Wockhardt. Why is that? So, there are approvals which are likely to come through the latter half of this year or rather middle of this calendar year. Starting from the middle of this calendar year, you have India approvals, you have US approvals somewhere in the middle of the year. Towards July-August, you will start to also likely see European approvals come through for key drugs with a very large market size, 3 to 4 billion dollars. That's not the market cap of the company, but you could well see that play out on the face of the company itself. And that's why we're going to talk about what that means and what the strategy for the company would be if even one or two of those approvals come in through the course of this year. So, what could that be? How would that play out on Wockhardt? Let's try and revisit that.
First thing, it's a company which was incorporated in 1999. It's in the India pharmaceutical industry. It has been doing generics, which is copycat drugs, technically speaking, for the better part of its lifetime. Now, they're getting into original drugs. They're going to produce it themselves through their own R&D processes. In very simple terms, it has been promoted by Dr. Habil Khorakiwala, and we will have him here in just a few minutes to speak to us about that. I'm going to run through the presentation so that I can speak to him. Now, in terms of Wockhardt itself, it's a pharma company that's trying to move away from generics, which are typically copycat medicines, to new antibiotics, especially for drug-resistant infections. That's what they're looking at. And particularly, they also have a niche within the diabetes segment. So, different pillars: one is for drug-resistant infections, the other piece is diabetes as well. And they serve the diabetic market both in India as well as abroad, and it's the high-end diabetic market that they serve. So, broadly, that's the case. Now, let's talk about products.
They have some of their key drugs: Zydus, Ordrate of Forus, Macleods, and Emrock. Those are broadly the biggest products. And among all of them, Zydus will be the biggest, very likely once the approvals come through both India as well as US. A very large market size available for Zydus alone, so that itself gives a substantial upside. Outside of that, there's also Macleods. Macleods is more towards the India and the EM market. It's less of hospitalization, more of a specialized kind of a drug without hospitalizations or pre-hospitalization. So, that's really the tilt. And of course, that one is also very large in terms of size. So, we're going to focus on those two drugs today when we speak with management.
Now, in terms of geography, currently, 22% comes from India, 78% is exports. From that 78%, 51% is Europe and UK. US is just about 3% now, and rest of the world is 24%. So, that's the split of that 78% bucket. That may well change as Zydus and Macleods both get approvals. And depending on the timing of the approval, that may change a little bit. But currently, that's the split. Let's talk about the business model. They do their research in-house, so it's integrated within the company itself. 11% of their top line goes to research, so they have a very large allocation in terms of R&D in the budget.
They develop and they get their approvals also, because that is very important in an industry like this. You can't just do R&D. The drug has to go through the approval process. It has to get tested as well. Efficacy has to be checked. Thereafter, manufacturing starts, and they have manufacturing capabilities both in India as well as Europe with US FDA-approved facilities in both places. And thereafter, it goes for global commercialization. And when it does that, you really have the drug open globally with a patent out there to ensure that you are protected in terms of copycat drugs, as well as it allows you to earn higher margins on the drugs that you put out, depending on efficacy. And commercialization, of course, also involves marketing costs. They go through a distributor, through other pharmaceutical companies, the way in which you partner with them, how much you pay them in terms of commission, all of that starts to play out in the global commercialization story.
Now, let's talk about the last 3 years of the company, as we always do. In terms of the top line, it's been weak. It's been a flat top line over the last few years. Why is that? There's no growth. US generics was a loss-making business, and therefore profitability did not come through. I'd request you guys to keep flipping the slide and show the EBITDA numbers and show the patient numbers as I go through it. High interest, high depreciation costs, and there were exceptional items as well. US write-offs etc., which have impacted the numbers, and therefore you're seeing a loss-making company currently, but of course, with a very strong pipeline in terms of product and very close to realization in terms of three or four products, not just one. So, that may well change. In terms of the margin trajectory, we're neutral from a forward-looking perspective. You look at the margins and the 9-month picture also, it's not really improved materially. But that's broadly the way it's structured.
Let's talk about the margins now. High R&D spends impact margins. There are also large one-offs, impairments, the US business impairment that they had to recognize, deconsolidation of the US business, restructuring, low-margin generic business, and high-margin biosimilars. Depending on the year, it keeps extremely choppy. But more stability to the margins as and when biosimilars occupies a larger share of revenue. And that will likely come with the approvals for Macleods and Zydus. Now, let me talk about the balance sheet. As would be understandable, because it's a loss-making company, you have debt sitting out there. But they've diluted some amount of equity as well, as a result of which the equity or book value of the company has expanded. You can see that on the balance sheet. The borrowing number though, the debt-to-equity is 0.5 at this point. So, that's how it shapes up. In terms of cash flow, it's been very choppy, as would be understandable, heavy capex R&D kind of businesses. And therefore, that choppiness on the cash flow front is visible on your screens.
Let me also talk about the return ratios. Again, looking backwards, it's looking extremely tough in terms of return ratios. That's how it is. But that's obviously because of everything we have just detailed in the P&L. The shareholding pattern currently stands at around 49% promoter holding. That's the good part. Promoter holding is still very strong. FIIs, DIIs have also participated. And what you're seeing overall is public owns a very small chunk. When you're looking at how to value Wockhardt, it's at 20,000 crore market cap. The opportunity size is very large. For example, Zydus has a 3.5 to 4 billion dollar market size. And therefore, you could well see a very interesting play in the form of Wockhardt. Let me go across to Dr. Habil Khorakiwala in just a bit. We'll slip in a very short break. Valuations are not really clear, but we'll get a sense from Dr. Khorakiwala as to how things are progressing. And thereafter, we'll touch upon valuations of what could play out if things go well. Stay with us.
Okay, but now we spoke about this, and let me bring on board Dr. Habil Khorakiwala to give us a perspective. He's of course founder and chairman at Wockhardt Limited. Dr. Khorakiwala, it's great having you. I was just telling viewers that the better way to look at Wockhardt is looking forward, not looking back, because the last 3 years' numbers don't do justice to the kind of market cap you've built and the organization you're looking to build. So, I want to first start off with the key drug, Zydus. Now, tell me, with regard to Zydus, when is the India approval expected now? We've had a considerable positive development in the month of March 2026. How quickly can we expect the India approval to come through?
