I now hand the conference over to Mr. Nishit Solanki from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries Q1 FY25 Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Mayank Singhal, Executive Vice Chairman and Managing Director, Mr. Rajnish Sarna, Joint Managing Director, Mr. Manikantan Viswanathan, Chief Financial Officer, Mr. Prashant Hegde, CEO, Domestic, and Mr. Atul Gupta, CEO, Exports. We will begin the call with key perspectives from Mr. Singhal. After that, we will have Mr. Manikantan sharing his views on the company's financial performance. Thereafter, the forum will be open for question-and-answer session. Before we begin, I would like to underline that certain statements made on today's conference call may be forward-looking in nature. A disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on stock exchange websites.
I would now like to request Mr. Singhal to share his perspectives with you. Thank you, and over to you, sir.
Yes, thank you. So good afternoon, and welcome to all of you to discuss the PI's first quarter 2025 performance. Let me share my perspectives and the broader progress the company is making. As you already know, the global agri input industry is passing through a challenging time due to extreme weather events, inventory destocking, commodity prices and more. The overall trend and sentiments have stayed moderate. While there is a very initial signs of improvement, it is expected to take some time for it, for the business as usual. On the domestic front, the monsoon showers were delayed, key cropping regions not ready to farmer initially taking guarded approach for sowing. Against these odds, we maintain a strong growth trend during the first quarter, building high base from the previous year. Overall, the revenue grew 24.38%, mainly driven by exports.
Agchem export revenue increased by 14% and volume by 24% in new products, where we are seeing continued strong traction. Domestic performance was moderate due to delayed sowing, erratic spread of monsoon in the initial phase. However, improvements in our product mix and working capital management contained the financial impact, with domestics, our biological revenue growing strongly by 39% year-on-year. The profit margins have improved mainly on account of favorable product mix and a high share of biological and operating leverage. As the monsoon has progressed well, for the last 3-4 weeks, rain momentum has caught on and expected that to give a healthy crop in harvest. A long-term runway for the agricultural demand in India is good, with sustained earning support, advanced mechanization and technology used on the fields.
Our product footprint in biologicals is rising year-on-year, with horticulture too, Jivagro has been delivering good performance. We have consistently created gold track record in growth, backed by unique strategic relationship with global innovators and best-in-class business processes. As the industry turns the corner, PI stays ahead with a clear growth visibility on the expanding base. We are growing our R&D pipeline, the early-stage molecules in CSM that are progressing well and are getting commercialized. For the current financial and fiscal, we are already commercialized 2 new molecules in Q1 and looking for the commercializing the 6 to 7 products for the sustained growth trend. An IPR-aligned service model for innovators allows us to go deeper in an engagement with partners for more collaboration opportunities.
Out of the new inquiries, about 50% of them are coming from non-Agchem segment, which is also helping us diversify into adjacencies. Now, on the domestic front, we also see a steady stream of new introductions, providing the farmer with the best of most advanced solutions in crop protection. We have launched two innovative brands in Q1. PRESSEDO, a patented broad-spectrum insecticide, OSHEEN ULTRA , a superior quality stable formulation for certain pests. Our product pipeline is under technology, crop and parameters is upscaling our products to market healthy visibility of growth in the coming years. Acquisition of Plant Health Care is indeed one where we will provide an access to cutting-edge peptide technology platform, allowing us to introduce new biological products globally. We are on track with obtaining the requisite court mandate approvals and hope to complete this process in the current quarter.
Now, coming to pharma, we are making strategic progress towards creating an integrated CRDMO that aligns with global innovator initiative in terms of infrastructure augmentation, business developments are underway. The momentum will scale up gradually over the next couple of years and contribute well to the overall picture. We are still in the initial stages as during this quarter, I have many levels with innovators these are in the music business performance. In a positive development, we are operational at Hyderabad research facility, while the GMP Kilo Lab in Lodi is nearing completion, then moving on to certification. Both these facilities will be significantly enhancing our offerings. We are further strengthening our board with the induction of a global Agchem industry veteran, Mr. Rafael Del Rio, who has an extensive long career in this industry.
His experience is well aligned, perfectly aligned to our long-term strategy growth and vision of expanding our global footprint. While the global industry landscape remains challenging, we maintain a growth outlook for the year, aggressively pursuing available opportunities to obtain momentum. We shall have a close monitoring of the emerging business scenarios and for a growth guidance in the coming months. With this, I conclude my remarks, and I invite the CFO, Mr. Manikantan, to continue the discussion, and thank you once again for taking and being a part of this journey with us. Best regards to you, Manikantan.
Thank you, Mr. Singhal. Good afternoon, everyone on the call today. I'll summarize the company's financial highlights for the first quarter ended June 30, 2024 . Please note that all comparisons are year-on-year basis, and therefore, to consolidated financial performance. As with singular share, our performance demonstrates a differentiated approach to doing business and a sharp focus on keeping operating parameters in line with our objectives. During Q1 FY 2024, we reported a revenue of INR 10,689 million and 8% growth over the same period last year. This was driven by a 12% growth in exports revenue to INR 7,494 million, and an 8% decline in domestic revenue to INR 3,195 million. The gross margins and EBITDA improved mainly due to favorable product mix and operating leverage.
Profit after tax increased by 17% to INR 87.88 million. Our balance sheet and cash flow have performed favorably in line with our clear financial strategy and disciplined execution, thereby enabling a superior performance. Cash flow from operating activities increased 103% to INR 6,145 million. This was due to higher operating profit and efficient working capital management. The paid working capital in terms of days of sales reduced to 65 days versus 82 days as from 30 June through 14 July. Inventory levels also reduced in terms of days of sales from 72 days as from 30 June 2023 to approximately 50 days. The surplus cash, net of debt, is INR 44,655 million. Our balance sheet further strengthened during the year.
Net worth increased to INR 91,859 million, with a debt equity ratio of 9.01. Effective tax rate for Q1 FY 2025 is 20.7% compared to 15% in the previous year. The EPS for FY 2025 is expected to be around 22%-23% due to tax exemption of our second SEZ at Jambusar, moving from 100% to 50%. This concludes my opening comments. I will now request the moderator to open the forum for Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Good afternoon, and thank you. So, a couple of questions from my side. First one on the margins, which have been very strong this quarter again, at about 28-odd%, and that's despite the INR 70-odd crore PBT loss in the pharma segment. So given this, you know, and the fact that we've been maintaining an EBITDA margin guidance of 26% for this year, should we expect that these, this current quarter's margins sustain for the rest of the year? And, you know, would you sort of like to upgrade your guidance for the full year?
Thank you, Abhijit. These margins are linked to the product mix, and as we have always explained, that the product mix changes from quarter to quarter, depending on the supply schedule and also our domestic season. So we maintain our guidance that we expect to achieve 50%-51% gross margin, 25%-26% of EBITDA margin, and these variations quarter-over-quarter will keep on happening depending on the product mix. But we maintain our earlier guidance of maintaining 25%-26% margin.
Sure. Thank you, sir. The second one was just with regard to the pharma segment. I understand there's some deferment of revenues there, but if you could please help us understand whether this is coming primarily from the Archimica business in Italy, the API business, or is it, you know, the CDMO shipments from Therachem in India? And given this kind of start to the year, a weak start, what kind of revenue number could we work with for the full year for pharma?
Well, now we call them PI Health Sciences, so I would rather say that it is mix of both the products being supplied to the innovator, and also one of the products which is being supplied from Italy, okay? And this is primarily because there is a good amount of inventory with the customer, and they have kind of... They are going a little slow now on, in terms of procurement. In terms of subsequent quarter or the year, I think we are still in the review with our innovative customers. It will take maybe a little more time for us to get absolute clarity that what is going to be the, the ongoing schedule of supply of these major products. So maybe by next quarter, we will have better clarity.
I appreciate it. Just one last quick thing from my side, if you will allow me. Just, in the CSM business, what would the contribution from new products have been in this quarter as percentage of revenues? I know it has grown well, but if you could help us with the percentage contribution.
It is more than 20%.
Okay, sir. Got it. Thank you so much, and all the best.
Thank you. The next question is from Ankur Periwal from Axis Capital. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity, and congratulations on a good set of numbers. First question on the CSM side, we are increasing our expected products launch to around 8-10, versus, you know, typical of 5-6 products for us. But will this be a mix of Agchem Pharma, and how about, you know, the other segments, electronic, chemicals, et cetera, that we were, you know, looking to expand in?
Yeah, this is mix of, both Agchem, electronic, chemicals, and other specialty chemicals. Yeah, it is all mix of that.
Will include pharma as well?
Pharma will be in the pharma business, not here in CSM.
Okay, fair enough. You on the gross margin expansion front, you did allude towards, you know, a favorable revenue mix here, and given that the new products had shown a good 24%-25% odd growth, fair to say that incremental, you know, these new products are all margin accretive to us, and which are the ones which will be driving growth?
Yeah, I mean, on a blended basis, the margin expansion is not only from CSM products, particularly new products, but also the product mix at our domestic area, which is also driven by biological. So you see, there is a favorable product mix on both sides, which is contributing into this.
Okay, fair enough. And sir, last question. On the pharma side, you know, your commentary suggested deferment in terms of revenue, and hence, hence a lower number here. Our overall guidance here was around 25 odd % growth in revenues for this financial year, with gradual improvement in EBITDA margins. Any changes or any clarity you can provide there, given where we are now in terms of our discussion with the clients?
As I said, to the earlier participant, that we are currently reviewing the inventory and order book position for some of the key products, and we'll be in a better position in coming quarters to comment on that.
Okay. Sure, sir. Thanks a lot. That's it from my side. I get back into the queue. Thanks.
Thank you. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead. Vivek Rajamani?
Hi, sir. Hi, sir, and thank you so much for the presentation, and congratulations on a very strong set of numbers. Just one question on CapEx. I think in the presentation you've mentioned the CapEx capacity expansion is in line with the plan. I just wanted to get a sense of, you know, what is the CapEx expectations for this year, and given that you've seen such a good ramp-up in some of these new products which have obviously been growing well, is there a plan to maybe augment some of these new products with any kind of dedicated capacities? Any color on that would be super helpful. Thank you.
We have plan of close to INR 800-INR 900 crore CapEx this year, and we are moving in that direction. Apart from fresh CapEx and building new capacity, we are also, as we have alluded in past, optimizing capacity utilization and also improving throughput by adopting various technologies. And that also gives us good enough room to kind of, you know, maximize the capacity utilization, because so many new products are also now getting commercialized. Obviously, in the initial phases, there will be relatively lower volume, but our capacity optimization also helps us commercialize these many number of products without very heavily investing still on the ground. And that is a great achievement of the team over the last couple of years, which is also helping us in the capital efficiency.
Yeah, for this year, we have INR 800 crore-INR 900 crore kind of CapEx plan as of now, but we'll also keep reviewing it as we progress.
Sure, sir, very clear. And just one small clarification. You mentioned that you've obviously been optimizing your capacities, and you've obviously benefited from that. I'm just wondering if you still have, you know, more significant levers to that extent, where you can continue, you know, optimizing for the foreseeable future, or do you think you're kind of getting to a point of, you know, demand and you know, how these products are, you know, getting accepted? You may have to, you know, start considering for some of these products. Just wanted to get a sense of where we are in that evolution. Thank you.
Atul, maybe you can add something on this?
Yeah, yeah.
Yeah.
So-
Go ahead.
I mean, you know, as we said, that, you know, there are new products in the product portfolio, so there is always, you know, a room for improvement through the operational excellence initiatives to improve the capacities by a different lever. So that's how we keep on continually working on optimizing the capacities on the new products, as well as the existing products by various initiatives, and that's how that's an ongoing process. This year also, we have similar kind of plans by which we intend to improve our, you know, the capacity utilization of the plants. I hope I answered.
Thank you so much. Yeah, thank you so much, and all the very best.
Thank you.
Thank you. The next question is from Rohan Gupta of Nuvama Institutional Equities. Please go ahead.
Hi, sir. Good afternoon, and thanks for the opportunity. First of all, congrats on the strong set of numbers, especially chemicals. Okay, question is one about pharma part of the business. You mentioned that there is a high inventory with the customer. Can you just explain it a little bit? Because we understood so far that the higher inventories were only problem in agrochemicals. So just in pharma, please, if you can explain and how long it may continue to impact our revenue.
No, I don't think the inventory is only a challenge with them. I mean, I've heard this is also a situation even in pharma, but in this case, and particularly in our case, this is a long-term customer, and obviously, these are new drugs. And one of the products for this new drug, I mean, in anticipation, they have already taken good enough inventory, and now they are positioning the product. So obviously, going by that assessment, they are now going a little slow in terms of further procurement till the time they kind of you know come to a reasonable level of inventory.
It was just only related to one product with the one customer?
Yeah, it's basically not one product, but two products related to two different customers.
Okay. Sir, in pharma piece of the business, we have been looking at, and we have been guiding for over the next two to three years, that this part of the business, INR 1,500-2,000 crores, with the margin in line with the company's margin. That the kind of guidance you shared at the time of acquisition of, we are almost already one half year over now. Just wanted to understand, sir, that how you see that this pharma piece of the business, in your initial guidance and how it is progressing so far now, given the current weakness in pharma?
So we still maintain this, you know, robust outlook on pharma. As we have always said that it is going to be taking a little time for integrating, building this differentiated model of completely integrated CRDM, which is what we are doing. There are a lot of successes in terms of, you know, improving the setup, infrastructure, modernizing that, getting in a new pipeline of customers and inquiries, et cetera. So all that is going as per plan. This, you know, temporary glitch is, I would say this is all temporary and then this happens. But yes, in terms of mid to long-term outlook, objectives, visibility, everything remains in line with our initial expectations.
So second question is on the CapEx. You mentioned it's still roughly INR 800 crore-INR 900 crore, while we are sitting on almost INR 4,000 crores of kind of cash. And if you see that there is not enough desirable opportunity, because we have been looking at for last 3-4 years, do you see that the possibility of returning this cash to the investors in terms of either buyback or any other thing?
Well, we are seeing a lot of opportunities. We are also actively evaluating several inorganic opportunities. So I'll not say that there's a dearth of opportunities in the area of operations that we are in and the long-term strategic objectives that we have. There's no dearth of opportunities. There are opportunities. We are evaluating many opportunities. We have also taken action on some of these opportunities in the last two years. But yes, at an appropriate time, the board will obviously take a reasonable view on both the cash situation and also the opportunities that would be in front of us, and we'll action accordingly.
So last bit from my side, and I'll come back in queue. So despite a very solid gross margin expansion of roughly 500 basis points to 52% in the current quarter, so you are still maintaining roughly 50% kind of gross margin guidance only. And, so you see that you are just being cautious, or you see that, there can be this quarter had some kind of anomaly and higher margin because of this, better product mix and will normalize in the rest of the quarter, or you're just being cautious in sharing the outlook?
No, I mean, I maintain the same position as I explained to the earlier participant, that these margins, gross and EBITDA, are all linked to the product mix. The product mix keeps changing, you know, quarter on quarter. So our guideline that we will maintain around 50-51% gross margin, and accordingly, the EBITDA margin remains.
Okay, so that's it from my side. Thank you so much.
Thank you.
The next question is from Ajit Motwani from Dymon Asia. Please go ahead.
Yeah. Thank you, team, and congratulations on good set of numbers. On the overall revenue guidance, for the fiscal year 2025, you know, you had given a guidance of 15%-20%. Our first quarter numbers are at about 8%. Would you, would you be able to throw some light in the sense that is it under review, or you, you still confident of delivering on those growth numbers?
Well, a lot will depend on how the domestic season pans out. As we have explained in our presentation also, that the first quarter, due to delayed monsoon and scattered rainfall, I mean, the season also, you can say, got delayed. But now things are progressing well. But yes, I mean, we'll have to keep a watch that how this whole Kharif season pans out in next couple of months' time, and that will also help us build better visibility that where will we land in terms of our overall growth in coming quarters. Prashant, you may want to add something, Prashant?
Yes, overall, second quarter is looking positive. First quarter, you already highlighted. Our focus was basically on in terms of placement, but we also made some strategic adjustment as well, because a couple of we reduced strategically our dependency on some of the old generic products, and we launched a few products in first quarter and a couple of products in second quarter. Our focus will be on scaling up these products as well. So all these should have a positive momentum in quarter two.
Sure. On the CSM business, I think this quarter was 13%. That business, you know, in the sense, you have some visibility because of the order book. On that business, do you see you, you delivering on those high numbers or, you know?
Yeah. So that business certainly has much better visibility, because there we have the order book position, there we have, you know, schedules. That business surely has better visibility.
Got it. Sure. And, one last question on the pharma business. You know, from the time we acquired, you know, the revenues have come off very sharply. I know you alluded to issues in two products, but, you know, apart from that, you know, the discussions or the deferral of the client, can you just elaborate to us, is it beyond products? Is it discussions on plant restructuring, process restructuring, people recruitment or some sort of insight into the way that business is shaping up? Because, twenty-five crore revenue a quarter looks pretty low.
Yeah. So as far as revenue point is concerned, that has already been explained. But, as I said earlier, that on all fronts, whether it is, integration, whether it is, upgrading the manufacturing setup, building additional kilo plant, set up initially, commissioning our R&D, pharma R&D setups in Hyderabad, also investing, leadership teams, both in, research development area as well as in manufacturing area, business development areas across the geography. I mean, there have been lot of, initiatives and successes, across. So let's not, look at only, one quarter, INR 25 crore revenue as the benchmark of the progress. There are so many things have been done, and we are progressing very well in terms of, our plan, overall long-term plan. And, we, we shall certainly be, reviewing the in the coming quarters.
The development of team there in terms of building out headcount, you know, to ramp up, there, that is going on track or, or is, is, that will follow the once you're done through the plant integration and all?
No, your question was not very clear to me. Can you-
I'm saying, you know, you had alluded to that, you know, you'll need to build a pharma team as well, you know, so today, you're, let's say, you know, trending some plant integrations you're doing. So the development of the team or let's say, increasing headcount for the pharma piece of the business, that will follow once the integration is done or that is already in place?
No, no, this is already done. I mean, this is what I was alluding to, that, research team, business development team, strengthening our, even, process research team, all that is already in place. Very much in place.
Good. Thank you. Thank you so much. Thanks a lot.
Thank you. The next question is from S. Ramesh, from Nirmal Bang Equities. Please go ahead.
Thank you, and good afternoon. Is it possible to share the breakup of the order book of $1.75 billion, between agrochem and non-agrochem? And similarly, in the share of new products, would it be possible to share the breakup between agrochem and new products, and non-agrochem segments?
Well, order book is normally of mostly the Agchem only. There is nothing like non- Agchem , because those are at initial stages, and those order books are more like there are the purchase orders for a year or two or something. So those are not part of our so-called order book solution. The other question of yours, that which are the new products. So I think more than 40% of our products, new products, that we are commercializing are all non- Agchem . Even at R&D scale, if you look at our R&D pipeline of various molecules that we are scaling up, more than 40%-45% products are non- Agchem areas.
Okay. Secondly, is on the domestic business, despite the strong growth in bio, there is a decline. We understand there is a seasonal impact on the other portfolio. And if you see the balance sheet details given in your annual report for Jivagro , while the gross margins have improved, the revenue has gone down, and it's mostly earning, you know, less than 10% net margin in ROE. With Jivagro , do you see any measures you are taking which will help you improve the performance over the next 1-2 years?
Similarly, in terms of the new product launches for the domestic business, what is the kind of pipeline you have for the year in, you know, the domestic formulation, by excluding Jivagro , and how many new products are planning in Jivagro ?
Well, my friend, you have so many questions in this one question, but let me try to answer one by one. So you said, about our domestic business, growth. Yes, it was, little subdued, but let me also clarify that if you look at our brand business, the domestic brand business, I mean, it is, it is almost as far, maybe 1%, 1.5% down compared to last year. The other impact is coming because of this domestic supplies of some of these products that we are keeping. So the domestic business, brand business is maybe 1, 1.5%, down compared to last year. In terms of introduction of products, maybe, Prashant, I will request you to kind of enlighten in terms of what, how many new products we are introducing this year, how many we are introducing in Jivagro also.
Yeah. So, we are, we have launched 2 products in quarter one, and, we are launching, another 5 products for the rest of the year, that spread across both the agrochemical side as well as even biological side. Even on Jivagro as well, first quarter, we did not launch any new product, but rest of the year we have 6 products, including 3 in quarter two and then 3 in H2. So this is what, which we are, have planned for Jivagro . Your question on Jivagro growth. Jivagro , we have registered a growth even quarter one as well, and on a full year basis, again, the momentum is good, and we are expecting a good growth for the rest of the year.
Okay, thank you very much, and I have done it.
Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. For follow-up questions, you may rejoin the queue. We take the next question from Tarang, from Old Bridge. Please go ahead.
Hi, good afternoon. Three questions, all on PI Health Sciences. One, of the 700 R&D staff, or 700 scientists that you have on your rolls, how much would be dedicated to PI Health Sciences and how many to, PI Industries? Second, in the current nature of the PI Health Sciences business, is it, more indexed to, you know, generic APIs or, you know, generic intermediates? I mean, if you could just give us a pulse of what the current structure of the business is, and how do you intend to, you know, transform this business over the next two years or three years as you achieve the $200-$250 million run rate. And number three, what are the internal milestones, that you have?
You know, if you could just give us some sense, qualitatively to calibrate the traction in this business. Considering that it's been about 14, 15 months, how have you progressed in terms of, you know, reaching those milestones that you had set out initially, and what are the milestones going forward? So 3 questions from me. Thank you.
Yeah. Is this clear?
Yeah.
So coming to your first question, so this 700 research scientists you mentioned, in fact, these are all for our Agchem areas. For pharma, we have another. I would say around 110 scientists, specifically working in the pharma space, both at Hyderabad and Jaipur. Your second question about the business model, well, I would say it is mix of it, mix of both. So, we have lot of projects working with pharma innovators in a similar kind of a business model that we have in Agchem, which is CRDMO or CDMO kind of a structure. But, as a legacy, we also have certain generics that we are doing in our API setup in Italy. That is continuing.
The long-term objective is that we will only be kind of aggressively growing this CRDMO model and leveraging our integrated service facilities both in research in development and also kind of raising traction for CMO kind of business as well by leveraging our API setup, USFDA approved setup in Italy.
Coming to your third question, that what kind of milestones, I guess I've already answered that question to the earlier participants, that, in terms of, integrating, modernizing, establishing our research setup in Hyderabad, also modernizing our research setup and, you know, development setup in Jaipur, also kind of setting up kilo pilot plant in Italy, also kind of establishing systems, processes, upgrading those systems and processes, what we have acquired to a global level. Strengthening our team all across research area, development area, business development, also on the other service areas, manufacturing side as well, supply chain side as well.
So all that, all those initiatives, all those, milestones that we had set in the first year, I mean, they have almost, almost all of them have been achieved. During this year, we have already, as I told earlier, we already commissioned the Hyderabad research setup, which is also helping us build a good pipeline of new customers, new inquiries, new businesses, at the R&D stage. And likewise, I mean, even on, manufacturing side, we have been able to kind of demonstrate lot of these upgrades in our facilities, invite many of these new pharma customers and demonstrate them the potential of collaboration with them and all. So that all is progressing well and satisfactory.
Okay. So just to follow up, sir, is this business indexed to cater to big pharma, or is it indexed to, you know, cater to the requirements of EBPs? And second, are you looking at, focusing on specific therapeutic areas or, you know, specific technology, platforms, right? I mean, yeah, just to follow up.
Yeah. So let me take that. The fact is, you know, the big pharma and EBPs, I think you have to build certain capabilities to get into the big pharma. We're clearly looking at strategy, that technological levers, as you asked, as you last asked, as the last point that you made. Clearly, the industry is evolving, as we are right now building the basic infrastructure, which can then get into any strategy. And as you would appreciate in this business, getting the infrastructure, the resources, and the processes integrated work before you approach customers, has its own destination. That's the stage where we are. And once we're able to put this together, we obviously be differentiating ourselves with technological capabilities. That's the strategic broad outline I can give you for now.
Okay, thank you.
Thank you. Before we take the next question, a reminder to participants to please limit your questions to two per participant. The next question is from Siddharth Gadekar from Equirus. Please go ahead.
Hi, sir. Good afternoon. So just first on the PHC acquisition, can you throw some light in terms of how should we look at the revenue shaping up over the next three to five years? That is one. Secondly, in terms of manufacturing, as per PHC's annual report, they were outsourcing the products to a European player. Are we looking to start manufacturing those products in-house now, once the acquisition is completed?
Okay. So well, let me put it this way. Right now, it's too early to comment, to make comments on this. I think strategically we acquired a technology platform which has potential of growth, and it's showing good signals of growth. And we've already mentioned that we're looking at a 20% CAGR over the past year. So the idea is that once we have the full grip on the strategies, we will evaluate and debate once we get a deeper understanding before we can give you specific answers.
Sir, secondly, on the product that we have launched on our own, any talks we have started with any global innovators to tie up that product? Or how should we look at the product progressing over the next three years?
Yes, we are in dialogue with a few, and I think that's where we are right now.
Okay. Thank you so much.
Thank you. The next question is from Naushad Chaudhary from Aditya Birla Sun Life. Please go ahead.
Hi, thanks for the opportunity, and congrats on a decent set of number. Two clarifications, sir. Firstly, on the Agri CSM business, we have talked a lot about this division. Just wanted to understand, given now the size we have reached, do you think, the size is now, size and base is now a problem for us to, you know, keep enjoying the past growth run rate we used to enjoy?
Not really, Naushad. This is what we have been telling, that while size is one issue, but over the years, we have diversified into adjacencies into other specialty chemical areas, and that's what is driving growth. And apart from the other specialty chemical areas, we have also kind of deepened our business model into process innovation as well, which is also giving us additional lever to grow in even in the existing CSM space.
Let me put it this way: In your entire Agri CSM basket, in your entire commercials, you should have done roughly 40, 39, 40 commercials. How many of them do you think have a visible potential to be INR 700 crore-800 crore plus revenue in next 3-4 years? How many of them you have some visibility?
No, I didn't get your question. So what, 30, 40 you are referring to here?
I mean-
What 30, 40?
The number of commercials we have done in last couple of years, how many of them do you see have a potential to be INR 700-800 crore plus revenue for you in next 3-4 years?
Well, many, many of them. First of all, I don't think we have done 30, 40 products in last couple of years. I mean, 30, 40 products we would have done in maybe last 7, 8 years. But what I can say is that there are many products which we have commercialized, or those we are currently evaluating, scaling up at R&D scale, have this potential of more than INR 500 million, kind of a global opportunity, yes.
Just last one. In the domestic, biological segment, what kind of opportunity you see in this, piece of business in next 3-4 years? And what kind of edge do we have here versus our competition?
Well, I think this question is already answered to the previous participant, that it would be too early. But, what we see here is a cutting-edge, unique technology platform in peptides. And then this will open up huge opportunities for us to kind of, you know, build products, keep coming up with new biological products. And also we get the access to some of these large global markets. We use this unique approach of getting into those markets through these, you know, unique technology. It's going to be a differentiated sector for us.
Okay. Yeah, all right, sir. Thank you so much. I'll come back. Thank you.
Thank you.
The next question is from Madhav Marda from FIL. Please go ahead.
Hi, good afternoon. Thank you so much for your time. I just had one question on the, the CRDMO business which you are looking to build. If I just understand, looking at the landscape, in India, and just how companies evolve, it probably seems like from your commentary, that in the CRDMO business, we are more in the earlier stage of scale-up, where we're trying to build out the infrastructure resources. It's a fairly long gestation business, is what I understand at least. So would it be fair to say that next, two or three years, we're just going to look to build out, sort of the client engagement and build out the pipeline, and then scale-up is a bit more beyond that?
Or, in the next couple of years itself, we expect very strong scale-up in this business. Thank you. Just wanted to understand where we are in the sort of scale-up journey for this segment.
Yes, you are right. If one starts from scratch, the gestation is longer. But the only difference here is that since we have you know acquired these two businesses, along with set of customers and products, portfolio and pipeline, et cetera, it would be relatively faster. But yes, you are right that in terms of large scale-up, it will take little time. But yes, we will be in a better position because of leveraging some of these existing customers and pipeline of products that is there.
Understood. And, is it, also try to understand that the kind of pipeline we want to build here would be, for, like, novel molecules which, sort of customers have. So we would have, at some point, certain number of projects in phase one, phase two, phase three, and then as we kind of move through the development cycle, we would look to scale up, you know, as some of them commercialize. So is that, is that how we should think about this business model, going ahead?
Broadly, yes.
Okay. So today, could you share how many projects do we have in the pipeline today? Like, is that, is that something that, that you could, help us understand? Like, do we have 20 projects, 30 projects, something around that?
Yeah. So we would have maybe close to 12-15 projects, all in all.
Okay. And any skew towards phase one, phase two, phase three?
Well, that I may not have in front of me.
Okay, yes. Perfect, makes sense. Thank you. Thank you.
Thank you. Before we take the next question, a reminder once again to participants, that you may press to please limit your questions to two per participant. For follow-up questions, please rejoin the queue. The next question is from Krishan Parwani from JM Financial. Please go ahead.
Yeah, hi, sir. Thank you for taking my question. Firstly, since you maintained—you know, you've maintained 15% full year revenue guidance and 26% EBITDA margin guidance, that translates to about a 12% YY EBITDA growth for the next nine months. So, are you being conservative or is this a realistic guidance?
Well, it is realistic, given the current industry scenario.
Got it. Got it, sir. And secondly, on the tax rate, do you still maintain that 24% tax rate guidance or, or any changes there?
We just indicated that as per the current estimate, we see close to 22-23%.
Got it. And lastly, if I may, can you please highlight what led to a sequential decline in other expenses?
Manik, maybe you can explain this if you have in front of you. Yeah. In the last quarter, we had a one-off expense there. That is the reason for that.
How much was that one-off?
Twenty-five crores.
Okay, got it, sir. Thank you and wish you all the best, sir.
Thank you. The next question is from Lokesh Garg from UBS. Please go ahead.
Hi, sir, good afternoon. Just wanted to ask you a few questions on the CSM business, just to get a little bit more clarity of it, looking at differently. You have shared 24% growth in new molecules. Similar to what you reported in 4Q presentation, could you also report off the 14% growth that you have reported in total in Agchem business? What proportion of that growth sort of comes from new molecules?
I really don't think I've understood your question.
Basically, look, the growth that has come in, which is, let's say, 14% that you have reported, is originating from two parts. One is, legacy molecules, another is sort of, new molecules. Last year, FY 2024 presentation, you had presented a breakup of what... Of absolute percentage, like of the 19%, you had broken up into 14% from new and 5% from, let's say, older, more than three years old. Is that something like that possible this quarter also?
We don't have, but I think I mean, I responded to one earlier participant that I think close to 20% is coming from the new product.
Yeah, that is the revenue share today. I was asking about the growth share, basically. The incremental 14% that you have grown, incremental something like, 250-
Maybe I think on the sideline, if you can please discuss, because we may not have right now in front of us.
Sure. The other way to look at it is, this new products is a rolling number, right? Because you define it at three years, so basically-
Yes.
Every year quarter, it's a rolling number. If you have that number possible, if you were to do it, let's say six years, what would be that proportion today of the molecules being done?
No, not in front of us.
Okay.
Not readily in front of us, yeah.
Thank you.
Thank you. The next question is from Darshita from Antique Broking. Please go ahead.
Since you have not mentioned-
The audio is come... The audio-
We can't hear you clearly. If you want to hang on-
Is it better? Is it that better?
Yes.
Yeah. My first question was regarding the order book. Given that we have not mentioned anything on the order book this time, do we assume it to be sustained at around $1.75 billion?
Yes, around $1.5 billion-$1.55 billion, yes.
Got it. Okay. For the domestic part of the business, how much would be the domestic brand business, and how much would be the B2B part of the business, if you could give a contribution?
It's mostly brand, very low, maybe I think few percentile would be the institutional.
Okay. Why I was asking is because you mentioned that the domestic brand business saw a decline of barely 1%-1.5%, whereas the domestic business actually has seen a growth, or a decline of about 8-odd%.
Yeah, yeah. The reason for that is not the domestic, so-called domestic, business, but it is... You know, sometimes the products that we are exporting, the customer also wants delivery in India. Now, that's because of this destination gets clubbed in domestic, which is basically not a domestic business or brand business.
Got it. Got it. And, what would be the biological contribution be to the overall domestic business for FY 2024 and first quarter 2025?
Prashant, do you have these numbers?
Yeah. As of for now, it is 10%. But the biological is growing faster than the agrochemicals. This may change at the end of the year.
What would this be for FY 2024?
We are basically the biological definitely grow in double-digit number, and our aim is to at least we should contribute for up to 3% of our total revenue in domestic brand.
Got it. Perfect. Okay. Thank you so much.
Thank you.
Next question is from Sabyasachi Mukerji from Bajaj Finserv AMC. Please go ahead.
Yeah, hi. Two questions from my side. You know, of this, AgChem CSM business of, you know, seven and a half thousand to eight thousand crores odd, annually, we did somewhere around two thousand crores this quarter. So how much would be, non- AgChem? I understand that out of the new molecules, almost 40% is non-AgChem, but, on the, on the revenue side, is it meaningful yet?
Not really. It will be less than 5% as of now, but it has significant potential for scale-up and growth.
Any, sir, any ballpark number, let's say from five years from now, how big could be this non-AgChem, non-pharma, business?
It could be easily more than $2 million, a few hundred million dollars.
Okay. And then going ahead, can we expect a separate segment from your side in the reporting? We already have AgChem and pharma. Can we expect this?
Well, again, you know, the manufacturing setup is the same. The all activities being done or handled by the common team, the even plants are the same. So, you know, it is all common. There's nothing like even R&D, scale-up, development, everything is same or, or common. So unless and until we get to a point where we have kind of built up a completely independent setup, et cetera, then yes, then it would surely make sense to kind of separate. But at this point, and, and in foreseeable future, we do not see that kind of independent setup happening. But we will surely keep reviewing it.
Okay. In terms of gross margin or EBITDA margin profile, will it be very similar to the
Yeah, broadly, broadly similar.
Okay. Okay. Thanks, sir. That's all from my side.
Thank you very much. That was the last question for the day. I would now like to hand the conference back to the management team for closing comments.
Yes, thank you for all your support and guidance and, look forward to better quarter from here.
Thank you also.