Ladies and gentlemen, good day and welcome to the Q2 and H1 FY 2025 earnings conference call of PI Industries Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you.
Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries Q2 FY 2025 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. Sanjay Agarwal, Group Chief Financial Officer, Mr. Prashant Hegde, CEO, Domestic, and Dr. Ramesh Subramanian, Global CEO, PI Health Sciences. We will begin the call with key perspectives from Mr. Singhal. Thereafter, we will have Mr. Agarwal sharing his views on the company's financial performance. After that, the forum will be open for question-and-answer sessions. Before we begin, I would like to underline that certain statements made on today's conference call may be forward-looking in nature, and a disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on the exchange website.
Please note that some of the management team members are traveling and hence join on mobile connection, so please bear with us in terms of audio quality. I would now like to request Mr. Singhal to share his perspective. Thank you, and over to you, sir.
Yes, so thank you, Nishid. Thank you, and good afternoon to all of you. Very welcome to our call. To the PI's review of performance for the second quarter of the first half of FY 2025. I will start by providing a perspective on the current state of the global and local industry, update of our operational progress, and highlight the strategic milestones that we are working towards. As you know, the global crop protection industry is currently navigating a challenging landscape influenced by fluctuating agricultural markets, commodity prices, restocking, general product pricing pressure, rising inflation, and deferring purchase decisions, and so on. On the domestic side, delayed and rapid rainfalls impacting sowing materials of many crops, price pressures of generic channel inventories, etc., have also impacted the overall demand scenario and sentiment for the current season. PI, on the other hand, has shown resilience despite the generally poor industry sentiment.
We have once again achieved a strong financial quarter and H1 consistent with our plans. During Q2, we have delivered a 10% increase in active exports driven by volume growth and growth of new products. New products have shown a 42% increase year-on-year. In the domestic business, we saw a 7% improvement in branded products. The volumes have sustained a 12% impact on pricing across the industry. However, given the uncertainty in product mix and optimization of working capital management, the impact has been well mitigated. I wish to highlight that here, our biological portfolio has delivered a robust 18% growth year-on-year and has seen an enhanced profitability margin in line with the product mix and contribution from biologicals. As a leading player in the active ingredients sector, we are confident in our capacity to enhance engagement with innovators.
Driven by our ongoing commitment to improving key technologies and chemistries, our focus on high-end products has led to a collaboration with top innovators from the commercialization and advanced manufacturers. Additionally, as previously mentioned, the pace of these commercialization has increased in line with our investments in R&D and technologies. On the domestic front, the business model is well aligned to introduce new brands with high-value crop product segments and biologicals. During the first half, we saw four new brands launched. These were PRESSEDO, which is a novel broad-spectrum insecticide, DORITO, and once again, a broad-spectrum insecticide with cotton and brinjal, OSHEEN, as a superior formulation for certain pests, and SOLJU, which is a microbial biofertilizer. H2 has seen a couple of more brands getting introduced. This is an equally attractive runway of growth available in the domestic business, where we have demonstrated a superior product pipeline.
We presently have potential categories with active horticulture products and biologicals which will underpin margin net growth in the years to come. PI has a history of setting industry-leading outcomes. Our relationships with big global innovators and strong capabilities to phase 67 molecules getting commercialized will be maintained. Molecules have been commercialized in the recent few years and gaining scale, driving the runway of sustainable growth. I'm confident that the next batch of molecules should maintain these levels of traction and enhance our mix in the periods to come. The pace of new inquiries is healthy, with more than 50% coming from non-agro from innovative products. This work has been done in advanced research, new chemistry, and technologies, enabling this trend. We have seen recovery of our domestic revenue in the second quarter. Several high-performing brands have established in these crop segments and horticultural areas.
The recent initiatives on this biological front and further setting the focal upcoming growth areas for us. PI has set a stellar recovery execution and with a strong cash balance sheet in place we are comfortable to continue delivery as per plan, adjusting on such temporary industrial level disturbances. As we finalize the acquisition of Plant Health Care, following the successful completion of the leading regulatory requirements as planned, the business bolsters our export products, IP, and protein and peptide platforms for ag biologicals. This has experienced considerable success in the commercialization of peptide products. Both current and pipeline offerings present similar growth potential with plans to advance development efforts to continue to introduce more innovative class of biological solutions at a global scale. On the other hand, our pharma vertical is shaping as well, and upgrades are on the way to infrastructure and business development capabilities.
We have been receiving investment in view of having integrated CRDMO with a global innovator. We are building leadership strength in the U.S., Italy, and other abroad business developments in scientific areas, and I'm very happy to say there's well in place which is going to take to guide the business into the future. During the first half, we've seen revenues remain impacted due to high inventory with innovators. We expect the order of visibility to transcend any run rates in H2. Initiatives for upgrading capabilities are progressing well, and in the coming years, the venture shows strong momentum in growth and scale. Our Hyderabad facilities are coming into operation, whereas upgrade of HP facilities is expected to be completed by the year end.
We have continued our efforts and initiatives to keep improving our ESG performance, which is reflected in the recent upgrade of S&P Global of CSA ranking at 97%, in reflection of our vision of reimagining a healthier planet. This has put us in the S&P Global Sustainability Yearbook 2024 as one of the only few companies from India. Entering the global industry scenario, we are realigning our outlook to high single-digit growth. Now, we keep updating this as the industry progresses through the transient phase. Growth in the second half of the year will be driven by demand, scale of new products launched in the last few years, capacity expansion and uptick, and momentum from a few inquiries. I would now like to conclude my remarks and hand over to Sanjay, our CFO, to move forward with the conversation, and thank you once again for being with us.
Thank you, and over to you, Sanjay. Thank you.
Thank you, Mr. Singhal. Good afternoon, friends. You all are there on the call today. I'll summarize the company's financial highlights for the second quarter ended September 30, 2024. Please note that all the comparisons are on a year-on-year basis, and we are referring to the consolidated performance. As Mr. Singhal has shared, our performance demonstrates a differentiated approach of doing business and a sharp focus on keeping operating parameters in line with the objectives. To share in specific highlights, during quarter two, we reported a revenue of INR 22,210 million, a growth of 5% over the same period of last year, which also translates into a three-year quarter two CAGR of 18%. Export revenues grew by 8% at INR 17,610 million and a 5% decline in domestic revenue to INR 4,600 million, while the revenue of the branded products grew by 7%. Volume growth was 12%.
There's been also a healthy expansion in the gross margin by 519 basis points to 52%, and EBITDA has increased by 14% and stands at 28%. Profit after tax increased by 6% to INR 5,082 million, primarily attributable to the EBITDA growth in spite of increase in our ETR to 23%. Let me also cover the YTD performance, which is for the half-year FY 2025. Revenue has grown; our revenue is INR 42,899 million, a growth of 7% over the same period last year, again translating into a three-year H1 CAGR of 19%. Export revenue grew by 10% to INR 35,104 million, and a 6% decline in domestic revenue to INR 7,795 million, while the branded revenue of the branded products grew by 3%. There's a volume increase of 9%.
Overall, the expanded gross margin and EBITDA stands at 52% and 28%, respectively, and profit after tax for the half-year improved or increased by 11% to INR 9,571 million. ETR for the past six months, YTD has been at 22.1%. We expect the ETR for the full financial year FY 2025 to be in the range of 22%-23%. Cash flow from operating activities also increased by 20% to INR 8,006 million. This was due to higher EBITDA and efficient working capital management. The trade working capital days in terms of days of sales has improved from 84 days to 70 days. Similarly, better inventory management has led to a reduction in inventory days from 63 days to 50 days. In terms of the balance sheet, as you would have noticed, the balance sheet has been further strengthened during this quarter.
Our net worth has increased to INR 95,454 million as of the 30th of September and a healthy net cash balance of INR 39,227 million. With this, I conclude my opening commentary. I 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 a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment when the question queue assembles. We'll take a first question from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah, hi sir. Thanks for the opportunity. First question on the pharma business here. We have been seeing pretty soft revenues, leaping past the one-time expenses that we incurred in this quarter, but otherwise also the margins have been keeping low. Just trying to understand your thoughts in terms of the volume, whether there is a volumetric decline as well or it is largely pricing and the trajectory going ahead over there.
Thanks, Ankur. So the key reason for softness is the temporary flip in terms of some of these products that we have been supplying. There is inventory at the innovators' level, and therefore the inventory picking is slow. And that has also impacted overall margin profile, as you see. The other impact is also one of our customers also filed kind of Chapter 11 in this quarter. And because of that, some inventory which was meant for them is also we are holding it. We are not yet supplying, and that has also impacted this quarter's projected revenues and therefore the margins because the development spend is continuing. I hope this answers your question.
Sure, Rajnish. Just to follow up there, from a volumetric perspective, is there a significant decline in terms of volumes as well? What we see in the revenues, and how do you see the trajectory picking up?
Yeah. So for H1, there is certainly volume reduction, but we are now seeing the volumes picking up in the third and fourth quarter.
Okay. Fair enough. Second question on our guidance, wherein now we are expecting a high single-digit number versus, let's say, a 15% sort of a growth earlier. What is driving this guidance revision? Is it the domestic AgChem business, which has declined year-on-year in H1, or the pharma, or the CSM, or all of them?
It is mainly in any case, as you know, that pharma doesn't contribute significantly to the overall PI's revenue, etc., as of now. This realignment we are doing in view of the global industry landscape that we are seeing. We are also experiencing that, at least for the short term, people are in wait-and-watch kind of a situation where they are sort of still monitoring and very critically monitoring the inventory levels. You must be also reading in commentary of these global companies that everyone is monitoring their inventory levels, and they are kind of in a wait-and-watch kind of a mode as of now, deferring their procurement decisions. In view of this transient kind of a phase, we have also kind of realigned our growth guidance for FY 2025, which we were earlier predicting in double digits.
We are now seeing that we should certainly be aiming for higher single-digit or early double-digit kind of a level.
Sure. Just a clarification here. So when you say deferment in the short term, essentially we are referring to the entire H2 then, right? Because this is a peak season from a business perspective for us. So any deferral here is going to the recovery will be further back-ended in FY 2026 then. Is that the right way to look at it?
I'll not, at this point, kind of comment on mid to long term because, as I said in the beginning, this is kind of a wait-and-watch kind of a situation at this point. But yes, we are clearly able to see next two quarters. And seeing those next two quarters kind of scheduling, we believe that, yes, we should be getting higher single-digit or near double-digit kind of numbers.
Okay. Sure. That's very helpful. Thanks for the answers. I'll get back into the queue. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, kindly restrict your questions to two at the first round. You can come back in the question queue for follow-up questions. We'll take our next question from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi sir. Thank you so much for the presentation. Am I audible?
Yes. Yes.
Yeah. Thank you so much, sir. And sorry, just to kind of go back to the previous question, and you've mentioned that you're facing these inventory issues. Just wanted to check if these issues are actually more focused on your legacy portfolio. And given that you were actually reporting very, very strong volume numbers for the past many quarters, I just wanted to understand if that's actually what has caused a bit of an inventory pile-up. And just wanted to get your assessment in terms of how severe you think this could be, a bit of an extension of the previous question. Thank you.
Yeah. So this is certainly pertaining to some of our existing products because if you see in terms of new products, we have registered an impressive growth of close to 42% in this quarter in CSM. If you also see that in the last two quarters last year as well as before last year, we have been, I mean, growing at a very, very decent pace, I mean, 20% plus a year before and 30% plus before that. So yes, I mean, some of these existing products, it seems that the customer level, channel level, they are kind of witnessing some sort of inventory. And therefore, given the overall industry scenario and also general pressure on these companies to rationalize their working capital, etc., they are kind of rationalizing some inventory levels, etc. So that is one effect.
In terms of new products, new product portfolio, I think those are doing well, which is also reflecting, as I said, in terms of growth, year-on-year growth that we are witnessing.
Sure. So that makes sense. And the second question I had, it's a bit of a two-part question on the margins. Again, the margin trajectory has been very, very strong. So just wanted to understand how much of this is actually coming from the newer products. So if you could just give us some sense of how much these new products are making up of your overall export portfolio and just how different are the margin profiles here compared to, say, your legacy portfolio. Thank you so much.
New products account for anywhere between 16% to 18%, and it depends on the quarter that we are talking. The margin profile is generally, I would say, similar, not significantly different. Yes, in case of new products, as we produce campaign after campaign, we keep improving the processes, and therefore some margin improvement is always there, which is also shared with our customers. But yes, the profile is, I would say, broadly similar.
Sure, sir. Got it. Thank you so much and all the very best.
Thank you. We'll take our next question from the line of Madhav Marda from Fidelity International. Please go ahead.
Hi, Madhav. Thank you so much for your time. My first question is on the margin profile. If I look at PI's longer-term history, generally, gross margins for us have been about 45%, 46%. In the last two, three quarters, this number obviously has moved up to a very healthy 52%, 53%, which is helping EBITDA margins as well. Just could you give us some sense in terms of sustainability of these gross and EBITDA margins for the company on a longer-term basis? Is it because, is it a product mix thing, or is it like domestic is a bit weaker, which is why margins are a bit better for us? Could you help us understand something there? Thank you.
Yeah. So this is on account of product mix mainly because product mix, when I'm saying product mix, this also accounts for the mix of existing and new products in our exports. This also accounts for our domestic business, where we are also commercializing a lot of new products, and particularly biologicals. So yes, I mean, the product mix has been favorable for us over the last few quarters, and that is certainly driving this margin improvement that we are witnessing both in terms of gross margin and in terms of EBITDA margin.
So is that a sustainable trend, or once some other parts of the business probably come back? Of course, there are some parts of the portfolio where maybe growth is a bit slower because of challenges that you highlighted. So once that comes back, do we see better revenue growth, but with more normalized margins in line with historical, or is this a new base for margins for the company?
Yeah. So we consider 26%-27% margin to be sustainable, particularly in the core business that we are talking, which is exports and our domestic. Yes, of course, as you know, on the consolidation basis, we are also investing in some of these new businesses, whether it is Health Sciences or whether it is our biologicals, global biologicals. But yes, on core business basis, 26%-27% margins are very much sustainable.
Got it. Got it. Okay. Thank you so much. Thank you.
Thank you. We'll take our next question from the line of Abhijit Akela from Kotak Securities. Please go ahead.
Good afternoon. Thank you so much for taking my questions. Sir, if you could please just help us understand of this high single-digit revenue growth guidance for fiscal 25, what sort of expectation do we have for the agrochemical CSM business in particular, and then maybe any of the other lines as well?
So maybe if you can please explain a little bit, Abhijit. I couldn't get your question.
I mean, high single-digit guidance, I presume, is for the overall company level.
Yes.
So within that, for the agrochem CSM business in particular, is there some sort of range we can offer, a guidance range?
Yeah. Yeah. So, as you know, that we have already done reasonably well in terms of our exports. We have grown by almost 10%, 10%, 11% in the first half. The domestic branded business was a little relatively subdued, but given the positives on reservoirs and prospects of reasonably good Rabi, we believe that we should be doing well in our domestic branded business, maybe double-digit or early double-digit kind of growth. And on the other side, because of scheduling, many of the products we have been able to supply during the first half. On export side, it may be higher single-digit kind of growth or single-digit kind of growth that we are seeing. So on a blended basis, that is the reason we are saying that we should be reaching close to, I mean, higher single-digit or near double-digit kind of numbers.
Thank you, sir. Just to clarify, these numbers you mentioned, early double digits for domestic and high single digits for exports, this is for the second half only or for the full year?
No. Second half. Since you asked me for second half, I was trying to explain you for second half. And for full-year basis, this will result into higher single-digit basis our estimates.
Okay. Okay. Thank you. That's helpful. And just one last thing from my side. One is the other income seems rather on the higher side. So what exactly has contributed to that, and how sustainable is that? And also, just on the revenues from new products, it's 16%-18%. That pertains only to the CSM business, right? That 16%-18% of CSM revenues is what we are seeing. Just to clarify that.
Yes. Yes. Yes.
Also.
Yes.
Yeah. Also, on the other income, the figure has gone up due to interest earned on higher cash balance. So if you see, this year, we have INR 3,922 crores versus INR 2,890 crores last year. So the base of the cash balance, what we have has gone up, say, by around 25%. So that has led to higher interest income. And then there are small one-off gains, primarily due to some favorable orders we received on tax litigation. Yeah. So that broadly adds up to the other income increase. So the one-off items, was it possible to just split out how much that might have been?
That won't be that significant. Primarily, as I said, it's because of the higher cash balance what we have, which is more on a consistent basis.
Okay. Thank you very much and all the best.
Thank you. We'll take our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yes. Thanks for the opportunity. So first question, again, delving onto the CSM part of the business. So given that probably our customers, innovators, would have finalized the volumes for 2025, so how do we have a visibility on our legacy products and new products from a calendar year 2025 perspective, although you have given largely for the second half, but just to be a little bit on a broader perspective for 2025? Thank you.
It is a little early. As I said, that since at this point in time, people are in wait-and-watch kind of mode. For many products, yes, there is a clear indication and longer-term understanding is there. For many of the existing products, still, there are assessments being done at their end. We will be able to know of a clear picture maybe in the next one, one and a half quarter.
Fair enough. So second question is, usually, we give our order book, which is missing during this particular quarter, in the presentation. So is it because the way you answered the earlier question in terms of the visibility that we have, or there is some order book which has probably got dissipated because of the impending issues? Just your thoughts on the same. Thank you.
Nothing. Nothing. There was no significant improvement to report, and that's why it is not featured there in our communication. But yes, we still maintain $1.45-$1.425 billion kind of order book position as of now.
Sure. Thanks a lot for answering the questions and all the best. Thank you.
Thank you. We'll take our next question from the line of Kalpit Narvekar from EFG Asset Management. Please go ahead.
Hi, sir. Thanks for taking my question. So my first question is on the growth for the ag chem exports business, right, which was about 10% for the second quarter, and you flagged that the new molecule growth was 45%. So could you elaborate a little bit as to because when my background shows that maybe the growth in the legacy molecules is only 2%, 3%? So could you kind of elaborate?
I'm sorry to interrupt. Kalpit?
Gentlemen, your audio is not at all clear.
Yeah. Kalpit, may I request?
Am I audible now?
Yeah. It is better.
Yeah. Am I audible now? Yeah. So my question was that the new molecule growth for this quarter has been 45% on about 18% of your business, right? So that may be contributing 8% of the total growth, and the total growth was like 10%. So that kind of tells that your old legacy molecules are probably growing at like 2%-4%. So could you just elaborate on why that legacy molecule growth has kind of slowed a little bit?
Yeah. Obviously, this is what I was saying, that some of our old legacy molecules have grown slower, whereas the new introduction of newly commercialized molecules in the last two, three years, the pace of growth there is certainly much higher, more than 40%. Even I recall last quarter also, it was more than 20%, 24%. So yes, I mean, this is the kind of change that we are seeing. Two things are happening. One is that we are very aggressively introducing new molecules. This year itself, we would be launching or commercializing seven, eight products, six, seven products. Okay? We already commercialized four products in the first half. And on the other hand, the growth of these newly commercialized products is also higher because obviously, they are growing on a lower base. Yes, this is what is reflecting in overall growth of exports, CSM exports.
Sure. Sure. Thanks. And so my second question was on the second half outlook that you mentioned, right, that you expect kind of high single-digit growth for the ag chem exports, but that growth was like 10%, 11% for first half, and the other way around for the domestic, right? So essentially, you're seeing some softness on the ag chem export side, right? So what are the key reasons of that kind of slowdown from 10%, 11% to high single-digit levels on ag chem exports, right, for the second half? Is it more because of the industry that the destocking you thought was coming to an end, and maybe it's not, or is it some competition? Just to get some reasons on that, right?
Yeah. It is mainly because of, as I explained earlier, it is mainly because of inventory levels and the initiatives of these global companies to kind of bring down their overall working capital investments, exposures, etc. So that is the key reason.
Just any kind of visibility on when it can potentially when the inventory is kind of normalized and stuff, or is it still too early to kind of call out on that?
We get different kinds of indications, I would say. So yes, some indications suggest that maybe two, three quarters more before the whole thing is normalized. We also, by the way, very interestingly get certain scenarios where we were indicated that there is a slowdown in that specific product requirement, and then suddenly, one month later, two months later, we are shipping products by plane, by aircraft. So you can imagine there are different kinds of scenarios here. And this is the reason I believe this is more a wait-and-watch kind of a situation, a transient situation, a very temporary kind of a situation.
Because if you ask me in terms of fundamentals of this business, so given the growing population, given this increasing climate change concern and food security concerns and all those aspects, we are not seeing acreages going down, by the way. Okay? So demand in mid to long term has to be there, will be there. It is only these temporary phenomena that because of some of these generic pricing pressures, some of these commodity pricing scenarios, destocking in some of these markets, that it is reflecting on overall behaviors at this point. But we believe that in the next few quarters, these things should streamline to a great extent.
Great. Thank you so much. Congratulations on the recent quarter. Thanks.
Thank you. Ladies and gentlemen, a reminder, kindly restrict to two questions at a time, please. You may join back the queue for follow-up questions. Next question is from the line of Aditya Zawar from Investec. Please go ahead.
Yes. Thank you for the opportunity. Sir, just one question. What has been the pricing trend for some of our key older products? Are we seeing any change in that?
Those have been, I would say, recently stable pricing. Of course, wherever there is some softening of raw materials, I mean, those impacts are obviously reflecting in the selling prices. But if your question was more about our exports, existing molecules, yeah, it was reasonably stable, I would say.
Okay. Okay. That's good to know. And you explained well about the inventory buildup. But sorry to harp on the same topic. So clearly, since you cater to the innovators, the supply is fairly curtailed in that sense. Now, are we seeing a situation on the ground where some of the products are seeing increasing competition? Are we seeing a shift towards the generic, maybe downgrading because some of the generic companies have reported a strong volume growth? Any specific thing that you would like to call out on product-specific issues?
To be honest, we have not so far seen that sort of scenario that some of these products' volumes are getting curtailed or some genericization impact is coming. At least as of now, we do not see that sort of a situation. In fact, we have also not seen a significantly great performance coming from some of these generic companies as well. I don't know what kind of generic movement that you are indicating to us. Yeah, we.
I just want to highlight, and I want to highlight that we may also need to look at their base from last year while they're showing the growth of whatever the growth. Please look at the drop in the base from what it was last year, and then you can probably get a better sense.
Sure. Sure. That's helpful. Final question on the CapEx. Yeah.
This is what Aditya was also explaining, that if you see any kind of buildup of this growth, so for example, last year, same quarter, we grew by 24%. Before last year, 29%. Even first half, if you see, last year, we grew by 22%, and before last year, almost 30%. So point being made is that this buildup is over a period of time, and because of some of these, not specifically for our product, but in general, some sort of challenges in the industry. And whenever you have these sort of challenges, I mean, obviously, rationalization, optimization, all those things come in. And yes, those will have their own impact.
So, final question. Sir, could you please remind us which are the key markets for our main product where registration process is still ongoing? We are yet to launch in some of the major markets.
For what? For this product?
One of our biggest products, pyroxasulfone, which are the key markets where the registration process is still?
Yeah. There are many.
You would not be in a position to comment.
Yeah. I mean, because registrations are generally taken up by the innovator, not by us. Our product is.
Sure. Sure. So there is geotagging also for our location. So we might have last time, I remember you indicated about 12 markets, and just wanted to get an update on that. So we'll take it offline. And final question, sir, any change in CapEx outlook considering the change situation?
No. We are going with the same plan, 800-900 growth this year. That is the plan.
Perfect. Perfect. Thank you. All the best.
Thank you. We'll take our next question from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Yeah. Thanks. On the pharma business, what is the outlook for the business from here on, and if I can, from the time you acquired the business, what has not really played out to plan?
So outlook, I already explained to the earlier participants that we are seeing volume uptake from second half. This is what the current assessment is. In terms of your second question, that what has not stayed? So I'll say, I mean, I do not see anything that has not stayed because we always maintain that we are acquiring these companies to build this platform. A lot of development effort will be there, and this is what we are currently doing, whether it is upgradation of the facilities that we have got with these acquired entities or whether building leadership teams both on the research side as well as on the business development side, building new clients, pipelines. So a lot of development spend is happening. I would also request maybe Ramesh, who is there, my colleague, to put some light on this. Ramesh, you are there?
Yeah. I am. Yeah. So as Rajnish pointed out, what we focus on is to add the right people to the team. We've now almost fully staffed both on the business side and on the scientific side. And the second part we focused on is operationally to get the right cadence going. So we focused on the sites that we acquired to make sure that any customer that comes in is able to scale with us. So the people who come want to stay with you for a longer time, and that's how we build a sustainable business. So to that extent, we have sort of back-integrated one of the sites that we got in Italy by putting a serial lab in, that should be operational. We're almost there. That should be operational in Q1 FY 2026 so that we can begin projects there.
And the R&D center in Hyderabad and the Jaipur facilities are also now operational. So we got the operations thing almost done when we finished the key hires. And we've had some headwinds in terms of the general market also in the pharmaceutical business. And we see that also sort of fading off and green shoots happening in terms of the future. So starting from H2 this year and for the future, we expect to provide you with a lot more detailed answers on both the pipeline buildup and future growth.
Thank you. And Ramesh, do you expect the business to be a bit positive? When do you expect the business to become a bit positive from which period of time?
We certainly hope that the trend will begin even in H2, but I'll be able to give you a lot more clarity as we go into Q4 next year. So if you can just hold us back as I push through.
Okay, and so if I can have a last one. What is the pipeline like on the CDMO side in your business right now? How many products do you supply commercially, and how many more do you expect to go commercial?
So the pipeline buildup in general, I can comment saying that we engage with several customers both on the early development side and the late development side. Right? On the commercial side, although we are talking to customers with multiple customers, commercial projects are not easy to come by. So typically, we try to get into the late phase and then go into commercial. That's what we're trying to do.
Okay. Thank you so much.
Thank you. We'll take our next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good afternoon, and thank you very much. In the pharma business, you have mentioned on slide 13 some new addition to your business like three CDMO orders and three new projects. So is it possible to quantify this in terms of what will be the impact on revenue and by when? And some color on exit revenue for FY 2025, if I may ask?
Sorry. Come again. What was your second question?
The second question was what do you hope to achieve as revenue by the end of March 2025 or exit revenue for the base for FY 2026?
Yeah. So we are targeting to achieve INR 250-275 crore by the end of this year. But yes, we are also monitoring the inventory situation and talking to these large customers that are there currently. But yeah, this is more of the current assessment that we can share. In terms of your other question, projects identified for near long term. So again, I think it will be too early for us to kind of quantify these numbers. But yes, the key point here is that there is a significant base that these new customer interaction, engagement, and development is happening with the strengthening of our team both in the U.S., Europe, and also in India, and by the way, this is only the second year of this business.
So as we have indicated in part, that it will take for us a couple of years' time to kind of bring this to a faster pace from the level that we have acquired it. And we are still very, very confident that in the next three, four years' time, we'll be taking this to a completely different level, making a meaningful contribution to the overall PI's business.
Okay. That's useful. And secondly, if you look at the domestic business, I think the revenue of INR 460 crores is very hot and possibly is one of the highest. So in the context of the growth in new products you talked about and the pricing pressure, can you highlight what is the kind of timeline you see for the pricing pressure to abate? And any key segments or crops where you saw the growth? And how do you see the second half based on the strength in the Rabi fundamentals helping you in terms of the second half performance of the domestic business?
So there were too many questions, so let me try and respond one by one. So I think I already explained to the earlier participants about our current outlook for the second half. We expect to do better in terms of our domestic revenues distribution business. We expect Rabi to be going well. We already have launched a host of new products. There are already very, very interesting products that were introduced in the last two, three years. So we have a very decent portfolio where a lot of effort is going on, and we expect that we should be growing in double-digit terms at least in our domestic distribution business in the second half. As far as our exports are concerned, second half, as I said, we will be in the high single-digit kind of level given the overall industry scenario, global industry situation that we are seeing.
And then for pharma, I think we have separately explained to you. So probably this answers your question.
Okay. So on pharma, one last thought. You have given some CapEx details. So can you give us some sense of how much you plan to spend for the full year in CapEx in pharma for FY 2025 and for the next couple of years?
For this year, I think we already indicated the CapEx is to the tune of some INR 100-125 crores for FY 2025. And for next year, it will be half of it because a lot of spend is already done this year in pharma at least.
Okay. Thank you very much, and wish you all the best.
Thank you.
Thank you. We'll take our next question from the line of Siddharth Gadekar from Equirus Securities. Please go ahead.
Oh, hi there, sir. So given that we have completed the Plant Health Care acquisition, can you give us some color in terms of how are we planning to scale up this business in terms of both domestic and global launches?
Yeah. May I intervene? You may want to add something.
Sir, I'm sorry. My answer is not there on the call.
Okay. So on Plant Health Care, as you know, we completed our acquisition this quarter. Now, our objective is basically to make investments in development of their market, development of their existing portfolio, and also research development of their pipeline because it's a cutting-edge kind of platform, a peptide platform that is there. They have three products which are already commercialized in major markets like the U.S., Brazil, and Europe. We would also be commercializing some of these products in India for which initial effort is already started. And in other markets, a lot of development work because these biologicals need a lot of initial development for market development. So those efforts will be made. And because all these three products have a significant growth potential across these major markets that I explained. The other market I forgot to mention was Mexico. Okay?
Brazil, Mexico, US, Europe, and of course, India. We are also kind of very actively currently working with the research team of Plant Health Care and looking at opportunities of working on joint development along with our research setups, agri research setups in PI. And so both from biological side and chemical side, how we can kind of work on these two different streams and come up with some very, very interesting solutions for the regenerative and sustainable farming. This is the next goal for us in this business. But yes, I mean, it suffices to say that we have a very interesting technology platform in front of us, an interesting portfolio in front of us. And now the whole effort is to do the development work and take these products and businesses and pipelines to their potential. That's the idea.
Secondly, in terms of manufacturing these products, would we be looking to also manufacture these products in-house, or we would continue with the existing vendors from Europe? How would we think about that?
We are evaluating various options. So for now, we are continuing with the existing sources. But yeah, I mean, for future, we are already evaluating several opportunities.
So just one last question. Plant Health Care had spoken about $100 million plus revenues by 2028, 2029. Do we think that we could get to that number now that given that we have a strong balance sheet size as well?
Yes, that is very much possible given the significant potential those products have.
Okay. Thank you so much.
Thank you. We'll take a last question from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Yeah. Hi, sir. So for domestic business in the last two quarters, and we have seen a 6% growth. When we see the industry growth is in higher single-digit or double-digit, and other agrochemical companies are performing. So is there any issue with our any product which we had the price is declining apart from what institutional sales growth you are talking about?
Yeah, so as far as our domestic brand business is concerned, there's no degrowth, and that is the reason we try to also explain in our investor communication that there is volume uptake that we are seeing. For example, for the first half, we have seen close to 9% kind of volume growth. Yes, we have seen some price reduction or price pressure in some of these old molecules of ours, but yes, overall, there is 3% growth. In the second half, as I mentioned earlier, yes, we are expecting double-digit kind of growth, and which is mainly driven by many of these new introductions that we have done over the last two, three years. Maybe Prashant, if you are there, you may want to give some color on domestic brand business. Prashant?
Yes. Yeah. Hi. Yes, domestic brand business has registered a growth of volume growth of 12% and overall growth of 7% in quarter two. In H1, volume growth of around 9% and overall growth of 3% because there is a price correction. Second half is looking good. Water in the reservoirs are better. Hopefully, adverse weather-related events, what we have seen in the first half, are behind us. Hence, we are seeing a good momentum, especially in crops like chili, rice, pulses, and fruits and vegetables. Plus, the three new products which are launched in the first half and another three more products which are scheduled for launch in the second half. These things should help us to register a good growth in the second half.
Thank you. Thank you.
Thank you.
Mr. Sumant Kumar, you are through with your question, right?
Yes. Yeah. Thank you.
Thank you. We'll take one more last question from the line of Krishan Parwani from JM Financial. Please go ahead.
Yeah. Hi, sir. Good afternoon. By when do you think our recently acquired Plant Health Care business could turn a bit positive? And does this quarter contain any one-off expenses from the acquisition?
Yeah. I mean, there were some one-offs, not in front of me, but yes, there were some small one-offs in this quarter. But yeah, it will take, I would say, a couple of years' time, two, three years' time for this new business to come up. And mainly because a lot of development spend would be needed because there are products, there are existing products and pipeline, as I was explaining, and a lot of development spend would be needed to kind of grow these markets, the large markets that are there from the US to Brazil to South America to Asia to Europe. And also a lot of research work which will happen. So yeah, maybe in a couple of years' time, we would expect this business to contribute in terms of profitability.
Noted. And lastly, if I may, so let's say despite negative contribution from PHC and also our Health Sciences business, you expect this 26%-27% margin. So you are expecting a decent performance in the CSM business. Is that correct?
Yes. So this is what, when we share our outlook on margin, we account for these development spends that are happening. So yes, we will continue. I mean, the strength of our portfolio, both in our export as well as in our domestic, so strength of our product portfolio, the technologies that are helping us keep on improving processes and margin profile of these products basically differentiate us in the industry, and that strength will continue.
Understood, sir. Thank you so much for answering my question. Wish you all the best, sir. Thank you.
Thank you. So thank you so much. Thank you all for your continued interest in PI. We really appreciate your time and effort in joining this call. Thank you so much.
Thank you, members of the management team. On behalf of PI Industries Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.