Ladies and gentlemen, good day and welcome to the PI Industries Q3 FY 2025 Earnings conference call. As a reminder, all participant lines will remain 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 the operator by pressing star, then zero on your touch-tone telephone. 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, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries Q3 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, Dr. Atul Gupta, CEO, Exports, 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. After that, we will have Mr. Agarwal sharing his views on the company's financial performance. Thereafter, 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.
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. Thank you, and good afternoon to all of you. Welcome to our call to discuss PI's third quarter and the nine-month performance for the year 2025. While I should provide an update on the operating scenarios, I should also bring in the perspectives on the strategy that we have embarked upon in the mid to long term. Our approach of aligning with innovators and working high-potential molecules and brands has helped us deliver stable performance amidst challenging market dynamics. In order to ensure a continued strong runway of performance, we are already actively engaged in multiple areas, and that will underline our progress for the coming years. The global crop protection industry is passing through a transition downturn. However, mid to long-term strength in the industry remains the same.
Despite earlier challenges like supply chain bottlenecks and fluctuation of input costs, the sector is adapting to the evolving landscape. Over the past few weeks, tariffs and challenge geopolitical scenarios have been making headlines, indicating a shift in the global trade dynamics. Since the underlying demand is there, the tailwinds could impact Indian exports favorably. We continue to focus on innovation, sustainability, and an efficient supply chain to play a part in creating a stable, productive future for agriculture. Domestically, the generic segment has faced an ongoing pricing pressure and ever-elevated inventory levels. Looking ahead to the next season, market sentiments will be strongly influenced by investment trends in the sector and overall health of the rural economy. Directionally, for a pure agrochemical CSM distribution opportunity size of $15 billion-$ 20 billion of innovative products, we will be chasing 10x market opportunity over the next two decades.
Addressing the multi-billion -dollar market of pharma, CRDMO, electronic chemicals, and biologicals, and new NCEs through differentiated business models focusing on niche segments with innovation and building talent and distinct asset capabilities with a systematic regulatory support, we are on the journey to evolve from becoming an Ag Science company to a life science company. During the year thus far, our performance has stood out, and we continue to deliver to clients. Trends during the period reflect strengths of our business model and a disciplined execution underscoring profitable expansion even in industry sentiments. Revenue growth for the ag chem exports was 9% on a high base, given volume gain and contribution from new products to about 35% year -on -year. Biologicals, on the other hand, have added growth, showing a 25+% increase. Let me now cover the trends during the reported quarter.
We saw consistent improvement in the ag chem exports backed by the scale-up of new molecules and launched in the past couple of years. The new products have delivered growth of more than 40% year-on-year. The new product growth is mitigating global headwinds. Over the past couple of years, this stood at six to seven molecules every year. New inquiries continue to come in, with over 50% of those from non-ag chem innovative products. This stems from consistent investments made towards novel chemistry platform, process technologies, and various technology support deliveries. Moving on to our domestic business, from a good base of 2024 compared to the markets, PI has grown 5% year-on-year. This follows decisions taken to drive superior product mix with enhanced margins and maintained quality of revenue. Our biological range has shown a strong growth of 25% over the prior years.
Domestically, we have already introduced six brands. Thus, for this year, beyond these, we have a pipeline of 20-plus products at different stages of evaluation and registration. Momentum to launch new innovative products would continue, each aimed at delivering visible gains to the farmer with a better sustainable offering. Our range in horticulture and biologicals is growing well. We will remain determined to develop new varieties of brands backed by a stable capital base and entrenched relationship with the innovators. While our existing business model of AgChem exports and brands will continue to generate strong momentum and a formidable future, in the coming three to five years, we will see a noticeable revenue now coming from our new initiatives. Fresh cash generation and strong balance sheet are driving growth opportunities. I will elaborate on some of the key perspectives.
As you're aware, we have invested and are continuing to invest to build a differentiated CRDMO offering in the pharma space, with high quality of talent being onboarded, assets being built to deliver the future, processes to benchmark with the best -in -class in the world, and customer portfolios to be admired. In 2025, financials reflect the transition of a new business model and the development spend, which continues to happen over the next couple of years. We add to our global industry veterans to lead the pharma business, but they have begun to deliver the results, supported by integrated process and newly refurbished assets in our location of Jaipur, Hyderabad, Italy, Lodi, and putting our expansion in doing business developments in the U.S. Biologicals have been a passion for over two decades. A passion has always told us to build a new recent acquisition.
We have acquired a leading technology platform in biologicals with patented proteins and peptide technology, a unique technology platform of proteins that are showing good results in the field. In addition to the existing markets of the U.S., Mexico, Brazil, and the U.K., we will now be introducing these products into India as well, while we continue to expand our foothold in the existing markets. We are also working on proprietary offerings to work under rigorous scrutiny. We have taken a critical step for the development of first AI insecticide, 'Pioxaniliprole' , in the midst of phase III trials from India in the regulated database product generation in different geographies by evaluations with partnerships, harnessing our competencies on innovation and advanced technology and capability-scale products by delivering standout products sustainably different from what's available in the market.
With these new avenues, we scale up and existing strategies continue to assist our plan. Moving on, I wish to underline our effort on the sustainability side and an anchor for us. As we seek to scale our business across multiple pathways, we are aligning our processes and strategies to contain an adverse impact on the environment. For PI, caring as one of our values for the Mother Earth is a way of life, far before ESG became a buzzword and companies began chatting about their sustainable program. PI has become a trendsetter thus far in the sustainability programs, in the chemical industry, in many of its firsts to its credit. Fast forward to now, we are proud to be ranked in the top 3% of ESG-weighted companies and included in the S&P Sustainability Yearbook in 2024.
We expect to retain our listing on the prestigious S&P Global Sustainability Yearbook, consecutive for the second year in 2025, which speaks volumes of our journey and our commitment to sustainability. New inquiries continue, setting up the stage for the equally impressive performance. At this stage, we request our Group CFO, Sanjay, to continue to discuss forward, and thank you very much, and over to you, Sanjay, to take it forward.
Thank you, Mr. Singhal. Good afternoon, friends on the call today. I'll summarize the company's financial highlights for the third quarter ending 31st December 2024. Please note that all the comparisons are on a year-on-year basis and refer to the consolidated performance. So to share the performance highlights, I'm sure most of you would have already looked at those results. During quarter three FY 2025, we have reported a revenue of INR 19,008 million, a growth of 0.2% over the same period of last year. Specifically, agrochemicals, which accounts for 97%-98% of our total revenue, is up by 4%, and EBITDA has clocked flat growth. AgChem business, AgChem exports, is up 2%, and within that, a new product growth is 40% year-on-year. Our total domestic revenue has increased by 5% to INR 2,806 million.
Pharma has seen a strong sequential revenue growth of 55% to INR 637 million in quarter three of FY 2025. Our ETR has increased from 14.7%- 22.5%, which impacted our net profit for this quarter. Let me also cover the YTD performance for FY 2025. Revenue is at INR 61,907 million, a growth of 4% over the same period of last year. Export revenue is up by 6% to INR 51,306 million. Once again, there's been a growth of new products, which remained a key feature of our nine-month result FY 2025. AgChem exports is up by 9%, and the new product growth is 35% year-on-year. Domestic branded revenue grew by 3%, and within that, the volume is up by 8%. If you look at EBITDA without our pharma business, while the pharma business is on a build-out mode, our EBITDA has increased by 17% to INR 18,760 million.
Profit overall has increased by 1% to INR 13,297 million. We expect the ETR for FY 2025 to be in the range of 22%-23%. Cash flows from operating activities increased by 8% to INR 12,482 million. This was due to good EBITDA growth and efficient working capital management. The trade working capital in terms of days of sales has improved from 80 days to 68 days. Similarly, better inventory management has led to a reduction in inventory days from 59 days to 46. On balance sheet, our balance sheet has further strengthened during the year. Our net worth increased to INR 98,660 million, and we have a healthy net cash balance of INR 42,091 million. That concludes my opening commentary. I'll now request the moderator to open the forum for Q&A. Thank you.
Thank you. Thank you, ladies and gentlemen. 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 remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Rohit Nagraj from B&K Securities. Please go ahead.
Thanks for the opportunity. So first question is on the pharma products that we were developing under PI umbrella before the acquisition of the new pharma business. What is the progress of that? Have we seen probably scaling up those products which are under our R&D into the new facilities? And a concurrent question on the pharma business is, where are we currently in terms of the margin profile, both on gross and EBITDA level? How are we forecasting it in the future, given that at least the top line seems to be increasing over the last two, three quarters? Thank you.
Good evening.
Gentlemen.
Yes, sir.
Sorry, sir, we have lost the line of the management. Please stay connected.
Am I audible?
Yes, sir. Rajnish, you are audible. It's the boardroom that's got disconnected.
Okay. Should I continue to respond to the gentleman?
Yes, please. Go ahead.
Okay. So thank you for your question. So the first part of the question about the products, earlier products, yes, during the COVID time, we have been working on. We also developed certain intermediates and supplied certain products, and those were specific to the COVID period. Besides, also, some of the development projects we were working, which are now part of the overall development pipeline that we have in pharma. So that is continuing. Regarding your second part of your questions on margins, as you have seen, I mean, the margins have been maintained. If we see quarter three last year versus this quarter, it is broadly around 48%-50% kind of margin level. But as we are now building and developing more of CRDMO projects, particularly CRO and early CDMO kind of projects, there, the margins will obviously, over a period of time, improve.
You will see that reflecting in our financials in the next one and a half years.
Sure. That is helpful. So second question is on the three areas that you mentioned, and Singhal sir also mentioned, into pharma, CRDMO, electronic chemicals, biologicals. So currently, where are we in terms of maybe revenue or probably number of products into each of these areas? And maybe three years down the line, how are we looking to shape up these verticals in terms of the overall contribution to our revenues and the number of products under each category? Thank you.
Yes, sir. Yeah. So I mean, both these areas, as our Vice Chairman explained in his speech, both these areas are new business ventures, pharma, as well as the biological, particularly the new technology platforms that we are talking, which we acquired. We very strongly believe that we are on the right scale of path. We are also transitioning, as you will appreciate, from the erstwhile business model to the new CRDMO kind of a business model. So there is also certain portfolio changes in products, new product inquiries, new type of projects are being added, new customers are being added in pharma. We believe that once this revenue and the business model is stabilized in, say, next one year or so, we will be growing by 20%-25% year-on-year in the coming period.
And this is what the visibility that we have in pharma for the next two to three years. Same way in acquired business of biological. So currently, we already have a reasonable-sized biological business in our domestic markets. Okay? On top of it, the business that we have acquired is currently at low base, but we are expecting to build on in the markets that the business is operating, the registrations that we have got. And this growth is certainly going to be reasonably high. We are already expecting more than 25%, 30% kind of growth next year, and thereon, we'll strongly be building that business. So all in all, both these businesses, although the scales are low, but we are anticipating and expecting aggressive growth in the coming two to three years' time and building on there.
So if I may answer that a little bit to this, PI is always looking to create a differentiated business model in these plays. These do take investments, time, and strategies to be shaped and then to embed the customers. So typically, these businesses have a long-term J-curve approach, and that is, as you would probably see, that's the PI way. And we've been able to do that, whether it's in the ag business in the early 2000s or whether it's custom manufacturing post-2008, 2010, where we've been building and stabilizing and putting things to the shape into the next level. And that's the state of these two initiatives are today. And I'm pretty confident with more experience in the past, these curves could be even sharper if not better.
Sure. Thank you so much on all the questions.
Thank you. The next question comes from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you for the presentation. One clarification and one question from my end. Firstly, with respect to these new products which have grown 40% on a year-on-year basis, would it be fair to say that they make up about 20% of the exports portfolio like you mentioned in the past, or has that number changed materially this quarter?
Yes, it's broadly in a similar range.
Sure. So still about 20-odd-percent of the exports portfolio.
Yes.
Got it. The second question, sir, was on margins. If you look at the EBITDA margins that you've reported on a consolidated basis, we've seen them improve pretty strongly. We've gone from about 22%- 24% to about 26% last year. And for the nine months, we're obviously close to about 28%. So congratulations on that. Just wanted to better understand this margin uplift, which clearly looks to be structural. Is this a function of your new products operating at a significantly better margin profile, or is there something that you've gotten on your cost side that's driving this very sustainable increase? I know you've mentioned in the past that the margin profile is a function of the product mix, which can change every quarter. But just some color on the gains that we made and the outlook going forward will be super helpful. Thank you.
So, we would say simply, you got the right last statement right, which is exactly the product mix, and there are multiple moving parts, and different-to-different quarters, things move around incoming. So, I think the guidance that we give, we keep that, yeah?
Sure, sir. I'll then rejoin the queue. Thank you so much and all the best.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Siddharth Gadekar from Equirus. Please go ahead.
Hi, sir. So the first on the diamide that we are targeting to launch, can you give us some color that in terms of field trials, where are we today? When do we plan to launch this product? And given that we are looking to launch it in India, can our India business materially double from here in the next two-to-three years?
As you know, innovation comes at a very different challenging space, but giving you specific answers, we are pretty confident and happy with what we see as a product. One, with our experience of what we know of the field, and we see the potential of that in India and globally, critically driven by the sustainability lens and our capability to ramp up new products and ideas into the market. Today, where we stand, we are in the third phase of trials and data generation. We believe in a year or so, we should be looking to get to look at the regulatory framework, and maybe a couple of years down the road, we should be in the market.
I think once we see what the product does and performs, that gives us the confidence to take it to the next phase, typically for any new launch, for any new AI that you've done historically. I'm sure we have this strong capability of a few decades of taking new innovations to the market and scaling them to create an impact is an experience which we are very confident will be more embedded, if not more aggressively embedded into our own product, at least in the geographies that we operate. For the geographies, we should look at partnership approaches.
So secondly, in terms of the impact on the margins of the Plant Health Care acquisition, can you just quantify that number?
Sorry?
Oh, only with the Plant Health Care, it's a small business at this point of time, so the numbers won't materially change.
Okay. Thank you.
As we mentioned here, to be very clear, this is a technology platform which is very promising to us. We see some very interesting data and facts globally, and based on that, we are in the process of, again, knowing the business as you know, and the regulatory framework, it does take time to get them into the market and development, so we will be investing aggressively in that timeframe globally over the next couple of years, if not more, to really take this product and scale this platform, the products which are there, and use the platforms to create new technologies and new products, yeah?
Thank you.
Thank you. The next question comes from the line of S. Ramesh from Nirmal Bang. Please go ahead.
Thank you and good evening, so when you talk about this 20%-25% growth in pharmaceuticals, CDMO in the next two to three years, what are the kind of revenue you need to break even at EBITDA? And what is the timeline to achieve, say, critical mass, maybe in the range of INR 500-INR 750 crores when you see that materialize?
I definitely say, if you see the numbers, I would give it a couple of years or more. As you know, the pharma development space or the unique space that you're going to operate has a longer gestation period. So some of this could become very quick, shortfall, then could multiply, and some of them, because we are looking at differentiated model here, and some would miss, but I would say give it a good two-year run before we get to those spaces.
Okay. And biologicals, is it possible to share what is the current share of biologicals in your domestic portfolio, and what is the kind of overall market potential you see in India and exports?
Biologicals, I think if I was to look at the Indian market, we are pretty well poised. We are in the top three players. We have an aggressive at least 15% of our revenue portfolio coming from biologicals. And with this growth path, we definitely want to make some impact to become one of the largest biological players in the country. And some of these technologies could have a crossover to other geographies, while the technology that we got could have a cross into the geography. So our strategy to become a dominant player in this space is on its path, and we have a very good execution capability as demonstrated by the fact over the last two to three years in the growth rate in the challenging domestic market. Yet, we continue to show that with more than over 20%+ growth.
So giving us the confidence that we have gotten a machinery which knows how to work, and we're now going to look at putting more portfolios of products and delivering that.
If I may. It would also be important, gentlemen, to add here that biologicals as a measurement globally is growing much faster than chemicals, okay? From current maybe $10 billion-$11 billion, it is expected to maybe $20 billion in the next three, four years, okay? And therefore, we believe that we are positioned very well, both in India as well as now with the acquisition of the technology platform. And not only the technology platform, but there are also four products which are registered in the most developed market globally. We believe that we'll be very much part of this growth journey that we are expecting in biological space globally.
Okay, so if I may squeeze in one last question. In your slide, you mentioned that you expect a recovery in the second half of this calendar year in the custom synthesis exports, so in terms of the basic agrochemical cycle, do you think that it will synchronize with the potential recovery in the distribution of agrochemicals or will it happen with the lag? And once you see the recovery in the second half, do you see the volume growth revive in the traditional CSM exports and agrochemicals?
Yes, sure. I mean, if you look at the market recovery for sure, the benefits of that would pan out for everybody, and we should be also well poised to do that, and it's expected, we're looking at the global situation, that we must have understood that, yes, India, the season has not gone well for this year. We have looked at also the challenges globally, one of the biggest markets in Brazil, where there have been drought challenges, but it's expected next half year things will pick up, and I think the industry will start tuning up.
Thank you very much, and we shall do this.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Krishan Parwani from JM Financial. Please go ahead.
Yes. Hi, sir. Thank you for taking my question. So firstly, on agri- CSM business, how does your order book look like in CY25? As in, would that be able to give you a double-digit growth in, let's say, CY25 or FY 2026?
Sorry? Yeah, so the growth of the business doesn't come only from order book, by the way, because there are annual businesses and there are long-term businesses. So yes, our long-term businesses give some visibility, but also the annual businesses are also part of the growth for any year for this business. As Mayank explained to the earlier participants, the business or the global industry is in transitory mode. There are a lot of trade wars, tariffs, other challenges that the industry is facing as of now, so maybe next one or two quarters, we will have more clarity in terms of overall growth for 2026 or 2027, but as of now, we are reasonably maintaining, sustaining the volume that we are operating today.
Noted. Excellent. Secondly, has there been any progress on our own AI Pioxaniliprole ? I mean, where are we in that? I mean, is that registration started, or which stage are we at?
So as we explained in our communication presentation as well as opening commentary, there are certain leads progressing very well in the development phase. One of the leads is even more advanced, and we are also developing the registration packages for particularly for India and to other countries, and that is progressing very well. Maybe Mayank, you may want to add something else?
No. So as I mentioned earlier, that's the stage that you rightly mentioned. We are at that stage, and we're pretty confident how this looks. So this will be really what I want to create a mark in what PI has been able to do globally in the innovation space.
Got it. And just two small clarifications from my side. On pharma, you've incurred close to INR 100 crores CapEx in nine months FY 2025. So when do you expect that to start contributing to the top line or margins, if that was for the backward integration or for some other CapEx?
So let me answer this to you. We are not in the business of backward or forward integration here, to be very straight. We are in the business of creating offerings and capabilities in the various facets of the value chain, from discovery to markets, from backward strong science and technological capabilities. For each of these, we are making investments both in hardware and software, software typically being human capital and skills, hardware being assets. And the other critical part of this integrated piece is a regulatory framework, which has a gestation period to give a value-created offering to the customer. And those investments are in pipeline. And that will take a couple of years to shape up to meet the requirements from a regulatory standpoint to deliver value to the customer.
Got it. And the last bit was on the Plant Health Care. I don't know whether you mentioned earlier, but how much was the contribution to the top line this quarter and to the margins, if you can share?
I mean, as you mentioned, this is more of a development platform for us. And for now, the revenues are not any significant at the top level.
Got it, sir. Thank you for patiently answering my questions, sir. Wish you all the best.
Thank you.
Thank you. The next question comes from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Good afternoon, and thank you very much. My first question is with regard to the depreciation and amortization expense, which seems to have increased quite significantly quarter on quarter. If you could please just help us understand the reasons for that and whether this is a good run rate to trend off of going forward?
So yes, the incremental depreciation charge is primarily because of the amortization of the intangible, which has been added during this particular quarter on account of the PHC for the biological business, which we have acquired. So it would be fair for you to take this run rate going forward.
Thank you. The second question is just with regard to, I guess, number one, if it's possible to share the order book number as it stands at this point in time.
Just to clarify whether the revenue growth guidance, which has been mentioned as single digits in the presentation, last quarter it was high single digits. Should we interpret that that has been reduced a little bit, or how should we interpret that?
So we maintain the growth guidance, what we had indicated last quarter, okay? Because we are also currently in the Rabi season and also the overall export scenario that we have explained earlier, whether it will be mid-teen or high-teen, that we will figure out. But yes, we maintain the growth guidance, and this is what we are targeting as of now. Your other part of question about the order book, so yeah, I mean, it's around the same level, around INR 1.4 billion, okay? That's the response to your two questions.
Thank you, sir. Just to clarify, you meant mid-single -digits or high -single -digits, right? Just now you mentioned mid-teens or high-teens. So I just wanted to clarify.
Mid-single digits or high-single digits , that's the single -digit game.
You are right. You are right, Abhijit.
Okay. Thank you, sir. Just one last thing from my side. On the pharma business, last time we had mentioned that we see full year revenues in the range of INR 250-INR 275 crores. I think we've done something like INR 130 crores in the first nine months. So how does that target sort of look at this point in time?
Yeah, we are targeting the same number that we indicated last time. Yes.
Around the same range.
Got it. And sorry, just one really last thing from my side, if I may. Just on the pharma business, any sense you could provide within terms of new customer additions, number of new customers, or some metrics around that would be great. Thank you so much.
Mayank, Ramesh, you can come in.
Yeah. So we continue to gain traction from a new customer addition perspective. In Q3, we had between five to 10 new customers. I'll just leave it there. But the quality of the customers has been excellent. But we're also focusing on the quality of the projects, right? There are certain projects that would give good long-term sustainable revenue. That's where the focus has been. So we hope that those projects continue to go through that clinical pipeline and lead to good results for the investors.
Abhijit, does that answer your question? Since there is no response, we move on to our next question, which is from the line of Bhaskar Chakraborty from Jefferies. Please go ahead.
Thank you very much. Could you give us some color on the CDMO orders secured with the new program that you have mentioned in the presentation? How long the duration that is, and would that drive growth in FY 2026?
Actually, what do you mean? CDMO what?
Under PI, actually.
Go ahead, please.
Yeah, yeah, I can. So this is for a new development project. It's actually a life science application. It's an interesting and exciting program for us. It's a commercial product. The product is now being tested. So if it works out, it certainly has since it's only a commercial application, it has a good long-term potential. What we're waiting for is to see the successfulness of the application, which we would know in the next six months or so.
And the one line disclaimer I put, rather than going into the details of the project, this is the nature of the business and confidentiality and the stage gates of various approvals. For this factor, you know better. So that's why we would say yes. But what is exciting to us? We have three interesting projects, and they're looking at a near-mature gate approach. Yeah.
So is this like a pilot right now that can convert into a long-term order in the next six months?
Yeah. This is an end application that we have supplied the material in for, and the market is being tested with that application. It's a life sciences application.
Okay. Thank you very much.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Rohit Nagraj from B&K Securities. Please go ahead.
Thanks for the follow-up. One question on the next year's guidance. I mean, obviously, we'll not be giving it right now, but we have said in the CSM part that demand will start improving in the second half of CY25. So is it safe to assume that FY 2026 also would be in transition? And given that the legacy business is still having some kind of volatility, is that the right way to look at it?
I would surely suggest that we should wait for another quarter, and probably post the fourth quarter, we will be in a better position to kind of give a very clear visibility of next year. Because as we explained in the earlier part, that there are a lot of moving parts right now: global situation, tariff situation, also the industry inventory scenario, etc. We believe that in the next three, four months' time, we would have a better visibility and understanding.
Yeah. Second question, again on the pharma CDMO front. So in terms of customer profile, are these the large innovators we are working with, or these mid- and small-sized innovators? And usually, from an approval perspective, does it take relatively longer and lesser time as compared to maybe working with the large innovators? Thank you.
So the way I would put that answer, there is a strategy which we have, which is probably not only customer-centric, it's one piece, but also technology, platform, and application. So it's a combination of that. So I would not talk about large or small and our offerings for what value-added services to which customer we could play an influential role. And that's really where I would leave that because customer strategy is dependent on how best we are fitted to. And some we fit in the big, and some we fit in the small, and some we would fit in the startup area. Yeah?
Sure. That's excellent. Thanks a lot, Mayank, for this.
Thank you. The next question comes from the line of Tejas Pradhan from Citi. Please go ahead.
Yeah. Thanks for the opportunity. On the non-AgChem side of the portfolio in, say, electronic chemicals, which you have mentioned, is there any material contribution to revenues from that side so far? Any color you can provide on your plans?
We have actually already commercialized three, four projects over the last two years, so this is not some inquiry level or R&D level kind of development we are talking here in electronic chemicals. We are already working with some of these global players in Japan and in Europe in this space, already commercialized three, four projects this year. Current year also, we have commercialized a few projects, and there is also a very healthy pipeline in the R&D where we are doing evaluation and scaling of those projects. Maybe Atul, you may want to add something?
Yeah. So pharma. I'm sorry, the electronic chemicals business is faring very well. This year, so far, we have commercialized two molecules. And in the next quarter, there are another two molecules in pipeline which we intend to commercialize. And out of the total inquiries, we have achieved more than 50% inquiries are from electronic chemicals. So there is a good traction for the future as well, what we see at this time going forward in the electronic chemicals segment.
Okay. Okay. Sure.
The advantage here is that apart from having access to the global players with whom we are already doing this business for the last few years, there is also a huge opportunity that is coming in India in the next couple of years as the semiconductor projects are going live in India as well. Yeah, I mean, I can say that we are very well positioned here in this segment of specialty chemicals.
Sure. Sure. And just to sort of add more, what could be the percentage contribution ballpark currently, and maybe three, four years down the line, how much could this increase to?
It would be a difficult question to answer right now because, as Atul mentioned, there are already three, four projects commercialized, and several of them are at scale-up stage. So maybe in the next one year's time, we will have a very clear picture that how much percentage or what kind of value it can add to growing CSM business of PI.
Sure. Thanks. Thanks a lot.
Thank you. The next question comes from the line of Somaiah from Avendus Spark. Please go ahead.
Thanks. Sure. First question on the AgChem space. So based on your interactions, generally, for the industry, the inventory and pricing trends, so is it still in a bit of a decline mode, or the decline has now stopped, and then things are kind of stabilized? How are you seeing it for the industry, the pricing and inventory?
It's a mixed scenario, I would say. We are talking to almost all major innovators in this industry. So it's a mixed scenario and also very specific to products. So for certain markets, there is improvement. Inventory levels have come to normalization. Also, the general demand scenario is there. So yeah, I mean, those geographies are more recovered than a few others. Specific to certain products, yes, certain products still are facing the inventory restocking kind of a situation. But mostly, this belongs to the generic category of products. Yeah. So I mean, it is very difficult to kind of summarize the overall situation at this stage. But yeah, it's a mix. That's why most of them expressed that maybe next two quarters' time, we should be overall industry should be in a better position than what it is today.
But yes, compared to last one year or last one and a half, two years, yes, it is certainly a better position.
Got it. The second question is on the CapEx for the AgChem business. So how are we seeing it for the next one year? What is our CapEx plan? And also, any MPPs that we will be bringing on?
MPP?
Sorry, if you could just speak a little louder, we could hear.
Sorry. Sorry. My question, I hope I'm audible now. My question was on CapEx for the AgChem. Any new plants? Any new plant that we plan to bring online in the next couple of?
Yeah. So if I may answer that, the CapEx which we had during the forecast, in the coming year, we are going to build the two new multi-product plants to meet the future requirement and the visibility of the business what we have. So that's the one major CapEx investment which is going to come.
Sir, any CapEx number that we can give as a guidance for the next year?
We've already indicated.
It's between INR 800 and INR 2,000 crores.
Sorry, sir. I was not able to follow.
I said it would be between INR 800 and INR 2,000 crores.
Got it. Thank you.
Thank you. The next question comes from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
Yeah. A couple of acquisitions that we made, what is our assessment? Have they lived up to our expectation, fallen behind, or where is the—what is the assessment on it?
As I would argue, I think they are completely in line with what we thought we wanted to do with them. The business model, as you know, PI, well, takes time to really, these are very small entry points into these businesses, and we've not been silly about our capital allocation either from multiple points. We've got into certain areas by abiding by some regulatory timelines to announce our growth plans, and investing in these to really differentiate these models. I would say, yes, the investment size and the technology and the capabilities that we work are marginal. Now, we're building and adding to those capabilities, and I do believe we will see some good outcomes in the next two to three years, where the graph will start up showing some marks of moving up.
So I would say, from our internal perspective, we're excited about them, and we see a good future for them in the future.
But, Mayank, are we seeing it will take two to three more years before we see meaningful results?
Yes, sure. I mean, you can see that things change for sure, as you see. But some of these, I mean, today, if you look at the Harpin technology platform, if you want to bring these products and bring to scale, there's a regulatory framework. There's a development framework. It takes time. And it's like any molecule, right? As an example, there's a platform, and then investing in R&D to create a pipeline. You take the PIHS, CRDMO, entering the customers, building the capabilities, the early-stage development, building, and getting into the approval cycle numbers. It takes time. And these are the long gestation periods which start, and also, as you move into them and you create your own uniqueness and capabilities, it takes. You build your moat.
Let me remind for those, I mean, you know very well that it took about 10, 12 years of hard work before CSM started showing colors. But that's not what we're expecting here. This is much faster than what, and therefore, we went in the entry to an acquisition point to buy those timelines. Yeah?
Sure. Sure.
Just wanted to add, Bharat Bhai, that when we are saying two, three years, it is more from the point of view of them making any meaningful contribution to overall PI, which is a billion-dollar-plus kind of a business today, okay? Because of the scale of these investment acquisition investments is the reason that we are saying that it will take maybe a few more years to be able to contribute meaningfully. It is also important, Bharat Bhai, to articulate here that if you see PI's progression over, I'll not say a few quarters or a few years, but over the last 20 years, we have been able to scale up and build business and grow more than 20%-25% CAGR growth over two decades by building new businesses and verticals and all this, okay? And all this was achieved by chasing only agrochemicals, okay? Mostly, okay?
And now, for the next two decades, to sustain that momentum, we have created these growth engines with relatively smaller investments. And therefore, they are also currently operating both these initiatives like pharma as well as biological at a relatively smaller scale. But the kind of growth opportunities that are there, both in pharma, maybe another $100 billion kind of addressable market that we'll be chasing, and same way in biologicals, which will be more than $20 billion-$25 billion kind of addressable market that we'll be chasing, we strongly believe that by adding these two or three verticals, we will be in a much better position to sustain the kind of growth story that we have delivered over the last two decades.
If I may add here that given that we have entered the next year's build, we have strong balance sheet leverage to scale up and accelerate value creation in these places where the foundations are laid well.
On that, there is absolutely no doubt. We have patiently nurtured capabilities and strength in the business to develop and grow the business in a significant way for a long period of time. Bit by bit by bit, each product we have nurtured and brought it to the shape and size where the business tends to be. I was only speaking from the perspective whether the acquisitions have met with our strategy as well as capital allocation objectives, or you have any, I mean, supposing these opportunities were to come all over again today, what would you do different than what you did when you acquired?
Sorry. What would I do different than when we acquired?
Yeah. Supposing the same thing were to be acquired today, if the offer was on the table today instead of when we did, when we acquired them, what would we do differently about the same offer if it were to be on the table?
So, Bharat Bhai, taking the PHC we offered it today was at least not too long. So I think I would still go for it and bite that bullet without a question. The offer that we have on the pharma, I think I would still say yes, it's a good bite. And we still bite that bullet because what we are building, we are very excited about. And what we've been able to build on the softer aspects, whether it's in talent, global offering capabilities, customer mindsets, and also certainly intrinsic parts of the assets that we've been shaping up to deliver the value, it's something completely different. And these take time. Both, one, not only to build and deliver. You have to show the best car, but eventually to make the car win, you need to train the driver.
That's also what has to be, well, the car and the driver. Now, we need the crowd, which takes a bit of while after even a few races, then only when the crowd follows you. That's really where we are today in the step.
Sure. Appreciate it. And one last bit. I could join only a little later, so I might have possibly missed this. But did you offer any view about the upcoming year, 2025, 2026, in terms of likely growth that the overall business and the markets will witness?
Please, you want to take that?
Yeah. So, Bharat Bhai, we responded to these questions that we will wait for another three, four months to be able to give a very clear guideline on that.
Okay. So that will come after the March quarter results?
Yes. Yes. Yes.
That's because there is currently haziness, or there are things that you need to get your hands around before you want to put out that?
This is not so much so pertaining to only us or particularly for us, but this is about the haziness that we are seeing today almost everywhere, post this recent regime change in the developed state, that a lot of trade wars are currently being anticipated. And therefore, a lot of moving balls, I would say. And that is what most of these large customers are expecting to settle down in the next few months' time. And therefore, everyone will be in a better position to kind of predict rather than speculating at this stage.
Sure. Appreciate it. Thank you and all the very best. Mayank, Sarna Sahab, all the best. Thank you.
Thank you.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.
Yes. Thank you, everybody, for your kind support. And we very much look forward to your continued support. And all the best to our team to continue to put in great effort. Thank you.
Thank you. On behalf of PI Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.