Ladies and gentlemen, good day and welcome to the Q4 FY 2023 earnings conference call of PI Industries Limited. As a reminder, all participant lines will be in a 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 and zero on your touchtone phone. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, Mr. Solanki.
Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries Q4 FY23 earnings conference call. Today, we are joined by senior members of the management team, including Mr. Mayank Singhal, Executive Vice Chairman and Managing Director. Mr. Rajnish Sarna, Joint Managing Director. Mr. Manikantan Viswanathan, Chief Financial Officer. Mr. Prashant Hegde, CEO Domestic. Mr. Atul Gupta, CEO Exports. Mr. Anil Jain, MD, PI Health Sciences.
We will begin the call with key perspectives from Mr. Singhal. After that, we will have Mr. Manikantan share his views on the financial performance of the company. After that, the forum will be open for question and answer session.
Before we begin, I would like to underline that certain statements made on today's conference call may be forward-looking in nature, and a disclaimer to this effect has been included in the investor presentation shared with you earlier, and also available on stock exchange website. I would now like to request Mr. Singhal to share his perspectives with you. Thank you. Over to you, sir.
Yes, a very good afternoon to all of you. Thank you for taking this time to join us today. We are assembled to review the Q4 and the annual performance of the company. Financial year 2023, we witnessed unprecedented challenges global economic activities experienced in a widespread, sharpened than anticipated slowdown, and inflation has risen.
The cost of living crisis, tightening financial conditions in almost all global regions, followed by Russia's invasion of Ukraine and the lingering effects of the COVID-19 pandemic have hurt economic outlook. Against the backdrop of the overall business and operational environment of 2022/2023, I'm very pleased to report we have delivered on our ambitious financial targets revised upwards in Q3. Team PI has excellently continued the growth momentum of revenue and EBITDA during Q4 and for the full year 2022/2023.
This growth came despite the forces challenges in the last year's high base, both in domestic and exports. I thank all PI team members for their winning spirits and our business partners for their continued support and trust in our relationships.
PI's model continues to deliver year on year. Our revenue growth for 2023 came in at 23%, with an EBITDA increasing by 35% and a post-tax increase of 46%. Further, a laser-sharp focus on net working capital management significantly improved the cash flow from operation activities for nearly three times of that of 2022/2022. Given our growth disposition, we delivered a healthy accreditation of free cash flows and investments in capacity creation and new research.
In line with the continuity of superior delivery of results, the board of directors have recommended a dividend of INR 5.5 per share, thereby giving a shareholder total dividend of INR 10 per share for the year 2022/2023.
I will also take this opportunity to convey yet another milestone in the PI journey. With the twin acquisition in the pharma CDMO and CRO space announced on 26 April 2022/2023, these acquisitions mark a solid and accelerated beginning of PI journey in the pharma space. Our unique ability to build concrete offerings from abstract situations and leveraging our capabilities across the complex chemistries and the value chain and business processes will continue again to create a differentiated value proposition to our stakeholders.
With the advanced range of crop protection brands, the domestic business has thrived at a 15% annual growth, with 8% in volume and 4% coming in increase of price in 2023. Our new launches in the recent few months have witnessed a good acceptance. With the portfolio of new brands and brand launches over the past few years, we have established a leadership in respective categories.
During 2023, we delivered one of the highest numbers of launches of new brands in the industry in a year. We have a strong pipeline of products at different stages of development and continue to enhance our portfolio with a differentiated offering. Indian exports at $24 billion-plus worth of chemical in 2022, the highest level achieved since year 2015.
In another 15 years or so, India expected to market of $850 to 1,000 billion, accounting for about 10% to 12% of global share. Specialty chemical exports from India are slated to scale 10 times between 2023 to 2030, in line with the growing consumptions in the consumer, agri, and industrial space. As per Crisil, Indian Agchem is slated to grow 10% to 12% in 2024, with exports accounting to 50%.
The China Plus One phenomena and the decline of the EU as a chemical industry powerhouse will support growth for India. India is naturally well-placed to absorb this new demand on account of development of value chain backed by its finesse in chemical engineering and technologies.
In the recent past, specialty chemical industry has been witnessing some headwinds, with the U.S. seeing recessionary pressures and Brazil expecting elevated channel inventories. Similar demands of the agrochemicals set to be turning lower in the EU and China as well. All this is more relevant to the generics and more mature products in the market.
PI, which is mainly engaged in the early-stage molecules, the demand scenario for such products largely remain unaffected given the inherited nature of its model. We continue to work with partners for the global requirement for their new molecules. PI has meticulously developed a model over the years that work best for the innovators and ensure high quality, timely supplies of next-gen products to global requirements. The quality and the quantum order book at the pace of inquiries testify renowned for developing advanced solutions.
Over the years, we've diversified our client engagement to cover newer markets, products, crops, and segments. PI's competitive advantage lies in technological edge, world-class infrastructure, suitable sustainable operations backed with human ingenuity to enduring the relationships with global innovators and large innovators in the world, in the chemical industry.
I'm confident of the underlying momentum in our core businesses and expect the company to deliver between 18% to 20% growth momentum with better margins in 2024. The pace of commercialization of new molecules has increased year-over-year, which is apparent in our performance. We expect to continue this pace with four to five molecules yearly and record scale-ups of existing molecules.
Our recent foray into the pharma through announced acquisitions presently is well-defined pathway into the pharma ecosystem with the help of integrated approach from R&D, starting materials, API, and single-stop solutions to our customers.
Once again, ESG remains the core of our initiatives. It's a way of life at PI. I'm pleased to report that team PI received several accolades during the year reorganizing our long-term quality, CSR, and safety programs. PI is committed to inclusive and responsible growth, aligning with the SDGs and creating a long-term sustainable solution towards our purpose of reimagining a healthier planet. With that, I now conclude my remarks. I would like to invite the CFO, Mr. Manikantan, to take over the statement of financial performance. Thank you. Over to you, Mani.
Thank you, Mr. Madan. Good afternoon to everyone, and thank you for joining us on the call today. I'll be summarizing the company's financial highlights for the Q4 ended 31 March 2023, and the year-end performance. Please note that all comparisons are on year-on-year basis and refer to consolidated performance of the company.
During Q4 FY23, we reported a revenue of INR 15,656 million, a growth of 12% over the same period last year. This was driven by growth in exports revenue by 13% to INR 12,814 million and 1% increase in domestic revenues to INR 2,842 million. The export revenue growth of 15% was led by price and a favorable product mix of 17%, offset by volume decrease of 2%.
In domestic growth, the 1% year-on-year was driven by volume increase of 2%, offset by a price decrease of 1%. Our gross margin improved by 74 basis points to 45% due to favorable product mix. EBITDA increased by 13% to INR 3,440 million for the quarter, driven by operating leverage benefits and tight control on fixed overheads.
Profit after tax increased by 37% to INR 2,806 million, attributable to EBITDA growth despite high depreciation. Cash flow from operations before tax during Q4 FY 2023 was INR 5,729 million. This was due to higher EBITDA and efficient working capital management. The trade working capital in terms of number of days of sales reduced to 79 days versus 103 days as on 31 March 2022.
Let me cover the annual performance for FY 2023. Revenue was INR 64,920 million, a growth of 23% over FY 2022. This was driven by solid growth in export revenues by 26% to INR 50,304 million and 12% increase in domestic revenues to INR 14,616 million. 26% growth in exports was driven by scale-up of existing products and introduction of four new products.
The growth was led by volume growth of 11% and 15% from price and favorable product mix. Revenue growth of 12% in domestic segment was driven by price increase of 4% and balance from volume growth. Rising input costs were offset by efficiencies and price increase in exports and domestic.
EBITDA increased by 35% to INR 15,489 million for the year. Favorable product mix and significant increase in operating leverage reflected an improvement in the EBITDA margin by 223 basis points to 24%. Profit after tax improved by 46% to INR 12,295 million. Effective on account of CTR, effective tax rate, improvement was 14.9% due to growth in export revenues.
Our balance sheet further strengthened during the year. Net worth increased to INR 71,985 million as on 31 March 2023. Total CapEx for FY 2023 stood at INR 3,385 million, and line is in line with our plan. Inventory levels also reduced in terms of days of number of sales approximately to 79 days to INR 13,976 million.
The company repaid its entire ECB loan during FY 2023 and maintained its strong liquidity position. Cash generated from operations before tax or FY, during FY 2023 of INR 17,572 million vis-a-vis in FY 2022, INR 7,038 million, including efficient working capital management leading to significant improvement in the cash position. That concludes my opening commentary. I will now request the moderator to open the forum for Q&A. Thank you.
Thank you very much, sir. 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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
We will wait for a moment while the question queue assembles. To ask a question, please press star followed by one now. We request participants to limit questions to two per participant in the initial round. If you have still more questions, please join the queue afresh. Take our first question from the lineup, Aditya Jhawar from Investec. Please go ahead.
Yeah, thanks for the opportunity. My first question is that, you know, we acknowledge that inventory situation for generics is much more, as compared to innovator products. Keeping that in backdrop, you know, a volume decline of 3%, in this quarter, you know, if you can throw some light, are you seeing a change in production schedule of customers and, or are you also seeing that, you know, there is a commentary which is suggesting that deferment of procurement by pharmas? In that backdrop, how is, you know, the volume momentum looking over the next few quarters? That's the first question.
Thank you, Aditya. Yes, as you explained that, the backdrop of falling, you know, given the inventory, overall inventory in the channel and the trends of procurement of generics, that is fine. In case of products or particularly the products that we operate, the early-stage molecules, we are not currently witnessing any kind of, you know, significant change in the demand scenario-
-for us going forward a s far as Q4 volume decline that you are referring to, this is very much as part of our annual plan, okay? This was in line with the annual plan because there were supply schedule of different products for different customers in quarter one to quarter three. Accordingly, as per the planned schedule, certain quantities were scheduled in Q4 .
Therefore, this volume growth or volume de-growth and the overall value in Q4 is absolutely in line with our plan. In fact, overall financial year 2023, we basically delivered better than what we had anticipated for this year for our exports.
This is obviously based on the search on, in some of the existing and new products that we have seen. Going forward in coming quarters, as we have also again guided, we are seeing similar trends. We are expecting 18% to 20% growth going forward, and this will surely be seen in coming quarters. In certain quarters, this growth may be higher. In certain quarters, again, this is the scheduled growth may be little lower than 18% to 20%. Overall, for the year FY 2024, we are very confident, and we have a very clear visibility of growing this business close to 20%. I hope this answers your question.
Yeah, that's very helpful. Sir, one bookkeeping question. When we look at, you know, export database, that and what numbers PI has reported, there is clearly a difference of about $50 million. In terms of, sir, revenue recognition, do we recognize the revenue once, you know, the shipment reaches, or it's based on, you know, the export?
Yeah. This is based different Incoterms with different customers, different contracts with different customers. I mean, revenue recognition is absolutely accordance to the, you know, accounting standards, you know.
The ballpark, which is a large part revenue, you know, after it reaches or when it is shipped.
This, as I told you, this is certainly according to the Incoterms and also the with different customers. I'm obviously it is not in front of me to tell you that what percent is to what kind of Incoterms.
Sure, sure. Final question is around margins. If you can throw some light, you know, we saw sequential margin compression. How should we think about margin going into FY 2024? What are the key monitorables that, you know, we should look for?
Yeah. Margins again, I mean, as if you see, there is in Q4, there's a dip of close to 2.5% in gross margin, that is directly linked to the product mix. The product mix and as I said earlier, you know, different quarters will have different product mix. While in Q3 or Q2, this product mix was different. Even the business composition was different i n Q4 it was-
-slightly different, and that is this gross margin dip is clearly reflecting the product mix change. Besides this, I mean, being the last quarter of the year, there are also annual provisions and charges, they were also one-off pertaining to some of these strategic initiatives that we were taking throughout the year.
Yeah, I mean, that is even around less than or around 1% or so. That is. I would consider that to be a one-off kind of case g oing forward, FY 2024, we are expecting to certainly improve our overall FY 2023 margins, I mean, it would be difficult for me to quantify it, but yes, as the volumes, values we are expecting to grow by 18% to 20%, operating leverage benefits and also some qualitative improvements in the product mix, we are expecting to further improve EBITDA margins going into FY 2024.
Yeah. The final question is on CapEx, sir. How should we look at the number combined CapEx for, you know, even the acquired assets in FY 2024 and 2025?
As we guided in last quarter, we are, we have some carried over CapEx of close to INR 300 odd crore. We are also expecting to do another INR 600 odd crore CapEx in the core business areas, okay? Which is exports and domestic and all that. So close to INR 900, INR 850, INR 900 crore CapEx we are seeing in the e-chem business areas.
A s we guided earlier, in case of pharma, we are still to get into the depth of the current assessing the current state and all that. But yeah, tentatively around $10 to 12 million is what we are projecting. Yes, these numbers, pharma related numbers will get summed up only when we get into more details and we take full control of these acquired entities.
Perfect. Thanks a lot, sir. All the best.
Thank you.
Thank you. We take the next question from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you so much for the presentation. One clarification and one question from my side. Just an extension to the previous participant's question on the margins. You mentioned that the dip in this quarter was because of the product mix. I just wanted to clarify, does this product mix typically happen in the Q4? In the last couple of years as well, the Q4 margins have gone a bit below the previous quarters. Just wanted to check if this is a Q4 phenomena normally or it's just something which has specifically happened in this year.
I'll not say this is a very normal or a regular phenomena. Yeah, I mean, every year the scheduling of the product may undergo some change depending on the, you know, specific market or customers or product specific requirements. Yeah, I mean, the product mix may vary year to year. I mean, there is no fixed, I would say trend or there is no specific trend on this for specific quarters.
Sure, sure. Thank you. The second question was more on CapEx. you know, even after the recent acquisitions, you still have a lot of firepower with respect to your balance sheet and cash. Just, you know, looking slightly beyond FY2024, FY2025, could you just maybe provide some color with respect to your more medium-term ambitions, with respect to how you're thinking of deploying this cash? Thank you so much.
Yeah. I mean, we have several strategic initiatives that we have, you know, clearly identified for our long-term growth of the organization. Obviously these cash on the balance sheet will get deployed over the years as we progress on some of these initiatives. These initiatives are some of the initiatives would be bolt-ons for pharma, some of the initiatives even to strengthen our product portfolio in the domestic market l ooking at some technology, some product.
T hen we are also, as you know, in past we have been evaluating, looking at, and still looking at some of the opportunities of nearshoring, and then expanding our global manufacturing footprint going beyond, you know, India.
Yeah, I mean, there are several of these strategic objectives that we have clearly identified, and we are regularly evaluating, actively evaluating several, you know, inorganic opportunities to meet these objectives. We'll eventually, as we will, keep zero down on some of these opportunities, we'll keep deploying the cash on the balance sheet.
Sure, sir. Thank you so much and all the way best.
Thank you. We'll take the next question from the line of Subhashis Mukherjee from Bajaj Finserv AMC. Please go ahead.
Yeah, hi. Thanks for the opportunity. My first question is a clarification on the growth guidance given between 18% to 20%. This is excluding the pharma CDMO consolidation that will happen or I mean, this is including that?
Yes, this is excluding that pharma consolidation.
Okay. Okay, great. A follow-up to that is, you know, if I looked at your FY 2023 revenues, it's grown at 23% and the CSM exports basically grown at 26%. Large part of that also came from the benefit of, you know, currency, depreciation. What kind of volume growth, if I may ask, that you are looking at in FY 2024?
Yeah. It will be broadly, I would say it will be broadly the volume growth that we are indicating 18% to 20%, because we are not expecting a significant price movement or currency movement from here. Okay? Yeah, I mean, it is majorly coming from volume basically.
Okay. Okay. Is there any skewness, probably towards H1 or H2? Like, I mean, you are seeing, depending on the, you know, client orders and all, will it be rather back-ended or it will be evened out, during this year?
Yeah, there's no, I mean, major skewness that we see here. I mean, it will be broadly spread. Yes, as you see domestic season is the domestic business is, I would say majorly in the first half, at least 60% of it. When we talk about exports, it is, broadly, I would say evenly distributed in H1 and H2.
Last question from my side is, you know, how should one look at the tax rates for FY 2024 and 2025?
On a unit year.
On the effective tax rate will be normally within the range current. For the current year is 14.8%. However, for the next year it will be between 15% and 16.5%.
Okay. Thank you. That's all from my side. All the best.
Thank you.
Thank you. We take the next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the opportunity and congrats on a good set of numbers. First question is on the pharma acquisition. Is it possible to give, broadly what is the kind of asset turns, both Archimica and TRM have and, basically what kind of, you know, incremental projects that they are working on?
Sajan, do you wanna take that question?
Yeah. In that right now, as Rajnish said in the initial deliberations, we are in the phase of detailing it out. You know, one transaction is closed, other is in the process right now. It will take some more time for us to, you know, assess that part. You know, we are not right now having the entire detailing, which we are in the process of doing it right.
Sure, sure. No worries, sir. The second question is particularly from the domestic market. We've been hearing that there are a good amount of channel inventories in the system and influx of China, you know, generics. Will that also have an impact on our products based on, you know, last one and a half months of placements that we have done for the current season? Thank you.
Prashant, do you wanna take that?
Hi, good afternoon, everyone. Our channel inventory, we are maintaining as per our practice and strategy, which we have been doing for last few years. I don't see any abnormality in the channel inventory. Whatever growth which you are forecasting for Q1, it basically we are optimistic and positive on that.
Sure, sir. Thanks a lot.
Just to add to this, you know, PI is in any case into specialized products, not so much so into these generics and me too kind of products. The steep fall in pricing or inventory, general inventory that is being talked about, I mean, it's not so much so relevant for our kind of products.
Right, sir. Got it. Thanks a lot and best of luck, sir.
Thank you. We take the next question from the line of Praful Kumar from Dymon Asia . Please go ahead.
Hi, sir. Thanks for the opportunity. Sorry, I missed the CapEx numbers, sir, for next year. What is that? INR 2,000 crores, are you saying?
Yeah, around INR 900 crores that we indicated.
Okay, understood. Secondly, sir, in terms of your acquisition plans, you said there are a few other opportunities that you are working on. Broadly want to understand what exact, what space geographies or alignment to the business they will be?
That's what I was, you know, explaining that this is in different areas. For example, there are certain other technologies that we are evaluating to further strengthen our portfolios of marketing and distribution space. There are opportunities which may also help us, you know, de-risk our manufacturing concentration in India and have more global manufacturing footprint near showing the markets and all.
There are also opportunities that may add more value and help us, you know, further strengthen our pharma business model with the bolt-ons to that. There are different opportunities, bolt-on technologies, yeah. Over the years, we will surely be, you know, kind of, to meet our long-term objectives, we'll be, you know, kind of deploying our debt on the balance sheet towards these areas.
Got it. Finally, sir, on the asset term that you incrementally deploy would be similar to what asset term you have currently, or these are better opportunities or newer molecules?
This would surely be our objective. As you can imagine, that whenever you get into a new business area or new asset, you'll have to make some development spend and there will be initial period. After that initial period of integration, yes, this will be our objective to improve on our current financial metrics, including asset terms, margins, asset returns and all.
Got it. Got it, sir. Congratulations, sir, and looking forward to a very strong year next year. Thank you.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time and fairness to all participants, please restrict questions two per participant. If you still have more questions, please join the queue afresh. We take the next question from the line of Ankur from Axis Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. First question on the CSM side. You know, if you can highlight the revenue contribution from, let's say, the newer products which we would have launched, you know, over the last few years or the freshness index that you usually share, in terms of, you know, the ramp-up?
Yeah. Again, last four, five year products that we have, we have commercialized, 17% to 18% is the revenue coming from those products, because generally that is the metric we look at.
Sure. If I'm not wrong, last year this number was around 15% to 16%.
Yes. 16% to 17%. Yeah.
Okay. Sure. Sir, on the domestic side as well, while, you know, on an overall basis there is a pricing and a volumetric, you know, growth, and you have mentioned an 8% odd growth for the full year. How has been the ramp-up there from the new products and the older ones? A light question to that, you know, is there any downgrading or any slowdown in terms of, you know, the uptick in sales?
Prashant, maybe you may want to, take this.
Yeah. Overall, in terms of new products, it is continued to grow. We don't see any challenge on the products which we have launched. These are very specialized products and there is a requirement in the market. That is why, we strongly feel even in this year as well, these products continue to do well. That is what I can say.
Sure. Just a follow-up, if I may. The working capital reduction that we have seen, you know, pretty impressive, performance there. Should we expect that to sustain going ahead as well, especially on the inventory side?
Yes. Again, I would say by taking some of these initiatives, I mean, we have substantially, significantly reduced the working capital, particularly on the inventory side. As you may know that for last 1 and a half years, because of COVID and uncertainties in supply chain, shipping lines, so on and so forth, obviously we were operating at higher inventory levels and working capital levels.
By taking these initiatives, a significant part of it we have already kind of normalized in last couple of quarters. There is still some room and on both sides, domestic as well as export side, we'll be working on it. There is some scope. Yes, I mean, I would surely caution the analysts to not to extrapolate from the current trends or current levels.
Sure, sir. Appreciate that. Thank you.
There is scope for improvement, what I meant.
Yeah, yeah. Thank you, sir. All the best.
Thank you. We take the next question from the line of Madhav Marda from Fidelity. Please go ahead.
Yeah. Hi, good afternoon. Thank you so much for your time. I just wanted to broadly understand when customers are asking for more nearshoring of capacity, like, I would assume, you know, cost of manufacturing or CapEx cost would be a bit higher if you were to make the same product in Europe or in the US. I mean, what's the key reason for having this nearshoring? I mean, yeah.
Nearshoring may have many, you know, strategic reasons. One is obviously, some of these strategic projects they may want to have closer to their sites, closer to their, their markets. Okay. Plus, nearshoring also helps in overall supply chain management because sometimes it is not that the final product that you supply, you are part of the overall supply chain and there are other people, other suppliers also involved in a particular product.
Therefore, from the overall supply chain, efficiency point of view, it is, they find it better to have some of these suppliers nearshoring or near the markets or their setups. Some of these reasons are there. Obviously as far as cost is concerned, from our point of view, we would always want to be sure that the cost advantage that we have, being operating in a relatively low-cost country always remains. There's no point on, you know, giving away that kind of benefit.
Got it. Just second question from my side is when we look at our pipeline, you do mention the mix between agrochem and non-agrochem pipeline. Within the agrochem, for example, is the pipeline more to do with new patented AIs that we're looking at? Or is it more intermediates? If you give us some broad sense in terms of how like how does the pipeline mix look like?
Well, when you look at the two areas of... It is, I guess it is in the IP space, whether it's new AIs or advanced intermediates. That's where we play, which is more complex and technological related products. Yes.
AI is an advanced intermediates or patented molecules, right?
Well, a mix of both.
Okay. All right. Yeah. Thank you so much.
Thank you. We take the next question from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Sir, you have mentioned in the PPT the five innovative product we are going to launch in FY 2024. Can you talk about how many product is patented and which any other, any product is very, the good product and high opportunity segment?
As we explained to the earlier participant that most of the products that we commercialize in our export are early-stage molecules, be it AI or be it intermediate. Okay. Even in the domestic area, most of the products that we introduce, the new brands that we introduce are specialty products. I mean, they are innovative, patent or no patent, but these are all specialty products. They are being introduced in the market for the first time and all that. That is the broad, I would say.
I'm asking for the domestic products, sir. I'm asking for domestic market. Branded formulation.
Domestic market also, these are all specialized products.
Okay. Any product you want to highlight, it's likely to do well or, high opportunities area?
Yeah. Most of these products, you know, whether it is BROFEYA whether it is Actyn, DINOS. Maybe Prashant, you may want to elaborate on it.
I don't want to get into a product very specifically, but I can say that these products, we can do very well on wheat, we can do well on rice, we can do well on horticulture crops. On top of it, we are adding few biological products. They are crop agnostic. They can move into many other products, many other crops. Sorry. It is a mix of, obviously biologicals as well as, crop protection products.
Any exceptional item in or Forex loss and gaining other expenses this quarter?
The other expenses you're talking about?
Yes.
The other expenses in this quarter is, we have, prepared a ECB loan. There is a Forex thing. There are expenses in any Forex exchange.
Any one time expense in other expense this quarter?
Yeah. We have told that there are some one-time expenditure on kind of the strategic initiatives for the quarter, which has been discussed. As for the some sure year-end cost will be there, provisions will be there.
Can you quantify that?
Yeah. Close to INR 20 to 25 crores.
INR 25 crores.
INR 25 odd crores. Okay. That is not going to continue next quarter.
Yeah. Those are annual features, and the strategic initiatives are one-off.
Okay. Thank you so much.
Thank you. We take the next question from the line of Sanjaya Satpathy from Ampersand Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. Sir, if you can just explain us that your revenue growth is coming in despite volume not growing as much. The price hikes, how much of it is because of product mix change, and how much of it is actually you taking price hike?
Well, we don't have this much detail in front of us. As we explained, the overall, if you see the annual number, I mean, we have said that close to 11% of the growth that has come in our export is from volumes and rest has come from change of product mix, price, currency, because we have seen all these things moving. These things are also have overlapping impact, you know. It is very difficult to segregate price from product mix and then to currency.
To understand, sir, the primary reason why, we are asking this is that, nowadays, mostly we are in a bit of a deflationary environment, and, whereas your numbers are pointing out, as you say, you have been taking a lot of price hikes. I was just trying to kind of understand whether it is actual price hike or it is getting into some different products?
No, it's not price hike. I mean, if you talk about last year, FY 2023, the numbers that we are talking, yes, there was inflationary impact on the raw material prices and all. As you know, our business model is that all these inflationary impacts are passed through to the customer so that we can sustain the kind of margins that we are operating at. That was the reason of the price increase. It is not that there is a deflationary trend in raw material cost and other costs, and we are increasing the price. That is not the scenario.
Understood. Sir, my related question is that in your guidance, you are really looking at next year, that is financial year 2024, as more driven by volume growth, that is 20% growth, rather than price increase.
Yes. Yes.
Uh.
We do not see, you know, this inflationary trend and the currency trend moving forward or moving up from where we are today.
Yeah. At the same time you're looking at better margins, so it must be because of better utilization and operating cost savings.
Yes, you are right.
The last thing I just wanted to understand, though you might have already explained, that there is a steep jump in CapEx, and it's different, that INR 900 crore doesn't include the acquisitions, I assume. So this steep jump partly is because of the delayed deferred CapEx. Is that right, sir?
Yes. we are scheduling over close to INR 300 odd crore from FY 2023, as we explained earlier.
Okay. The benefit of this new CapEx will be realized in financial 2025 onwards.
Yes.
Thanks, sir.
Thank you.
Thank you. Ladies and gentlemen, please restrict your questions to two questions per participant. We take next question from line of Vishnu Kumar from Spark Capital. Please go ahead.
Thanks for your time. Just a connected question from the previous caller. Are you seeing currently deflationary trends starting to play out now, some raw materials that is coming off now and, which you would have to kind of pass on to your customers at a later part of the year?
This is quite, you know. I mean, there is no, I would say, common scenario here. I mean, it varies from product to product. As we were talking earlier, in case of generics, in case of many of these commodity chemicals, yes, there is deflationary trend that we are witnessing.
Yes, there are still several of these raw materials or specific chemicals, their prices are quite stable, in few cases even increasing. It's a very mixed kind of scenario. Yes, as a business model, as per our business model, whenever we see these kind of improvement changes, even downwards, as per our understanding with the customers, these are all passed through.
Understood, sir. Sir, earlier you used to say that we were lot of efficiency gains you are bringing in terms of our manufacturing practices, and hence we were able to increase revenue and volumes with a limited CapEx. Where are we now? Have we maxed out that? If you could also talk about your INR 300 crore carryover plus INR 600 this year. Next year, what kind of agrochem CapEx you'll be doing over the next 24 months and how many new multipurpose plants or if you can just give some commentary on this.
Yeah. I mean, obviously over last two years we have taken a lot of initiatives, towards the, you know, towards the improving, increasing the plant throughput, improving the capital efficiency. This is all reflecting in, as you can see, the asset turns and all. I'll not say that this kind of trend, in this magnitude will continue, but yes, there is still, there are a lot of opportunities still. Our teams will keep working on further improving these efficiencies from here as well. What was your next, I mean, second part of your question?
I just wanted to understand the nature of the CapEx you are doing in agrochem. Close to INR 900, including the carryovers of previous year. Whatever you have some plans in terms of putting next year, what will it be new multipurpose plants or what is the nature of CapEx or how many new plants will be coming in? Any idea on this?
The major part of this CapEx is towards capacity building. We are, you know, putting up two more multiproduct plants which will be coming up. The other part of this CapEx is obviously towards further, you know, automation and towards the qualitative improvement of these sites, R&D and other technology upgradation of these plants.
Understood, sir. Sorry, one clarification on a previous question you made, or point you made, sir. Sir, you mentioned that there are some contracts where you will recognize based on revenue recognition. More to Mr. Mani, sir. Are there any contracts where you probably have exported some volume, but it is still not reached to the customer? Only when it reaches more of a CIF basis, then only you'll consider as revenue? I think the first participant asked this question, so just a clarification on that.
Maybe. I mean, you see, as per the accounting standard, if there are contracts where you are producing exclusively for one customer, you know, they also very specifically mention that you produce and keep this in, say, at the port or at some warehouse or something.
Those things are as per the agreement and exclusively for the customer. As per the accounting standard, those things are recognized accordingly. That's what I'm saying, that each contract, each product, there are different input terms, there are different inventory terms and then supply terms, and accordingly, the revenue is recognized. All this is done as per the accounting standards.
Understood, sir. Thanks, sir. Thanks, and all the best.
Thank you. We'll take the next question from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Good afternoon. Thank you so much for taking my question, sir. On the pharma acquisitions, would it be possible to share some rough guidance regarding the sort of EBITDA contribution they could make in FY 2024? Also one corollary to that, for Therachem, we don't have the FY 2023 EBITDA. In case you have it handy with you, could you please share that as well?
Yeah. We are still in process, Abhijit. As I told you last time, we have still to close the, those, I mean, particularly Therachem transaction. We are not currently on these numbers. FY 2023 numbers are not readily available with us. But tentatively, our projections are anywhere between INR 550 to 600 crore run of revenue. Again, it will all depend on when we close and when will these numbers get consolidated with EI. Also, you know, 15% to 18% of EBITDA on that.
15% to 18% margin. Okay, I was under the impression that Therachem was doing much better than that, from the FY 2022 numbers.
There will also be going to be some development spend in the initial year in consolidation. You know, we are also putting up our R&D side. There are also going to be some development spend in the initial years. Let me answer. We are in the process of building a unique business model, and acquiring and taking to the next level requires a certain different plane t hose investments will happen over the next couple of years, whether it's in overheads or whether it's in structures or whether it's in building assets. We are looking at that as a growth engine before we get better effect going forward.
Understood, ma'am. That's clear. Helpful. Thank you. Second thing was just on the new product contribution. You know, the percent of revenues from the new products has been sort of stable at around 17% to 18% for, you know, some time in the past.
As we move into the next three to four years and try to bring down our product concentration within the agrochemical business away from the top molecule, you know, how confident, how much confidence can we derive from the traction in the new molecules that we are moving in the right direction? What sort of improvement could we expect to see there?
Well, the fact of the case is this is a constant pipeline and things which keep coming, right? There are peaks and troughs for each product, and at each different stage, different products take the lot. If you look at it, the cycle of 15, 20 years, that's the life cycle of a product. That's when these graphs will be. They will remain the way we are i mean, if you look at the history of last four, five years, it is between that range of 16-18.
That's the typical scale of time life cycle for a new product. Many of these new products that we have, you know, added to our portfolio, I would say both on the export side, as well as on the domestic side, they have significant potential.
On domestic side, some of these products are multi-crop, multi, crop-based segment, products, not specifically for a single crop or per segment. Okay? They have much larger market potential. Same way on the export side as well, I mean, some of these are, you know, either AIs or pieces of very large global molecules. Yeah, I mean, they have a very good market potential of growing big.
Got it, sir. Just one last quick thing. slide 11 of the presentation, sorry, slide 16 of the presentation, talks about working with some global advisors for integration and transformation, you know, for value creation initiatives. If you could please share some details on that, you know, what direction are these initiatives towards, that would be really helpful.
This is as you've seen in the pharma initiatives, we definitely need to get various expertise, and that's what we're doing. That's where we are working to drive it towards the integration of these acquired entities and also, you know, transforming, and helping us build this differentiated model.
Understood. Thank you so much. All the best.
Thank you.
Thank you. We'll take the next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good afternoon, thank you very much. In terms of the outlook for next year, if you're looking at, the entire top line growing from volume, how would you expect to maintain margins under 24%? Will there be some stability in margins per unit? The reason why I'm asking is there is some decline in prices, compared to the base of last year. To the extent that, you know, there's a decline in the top line, the overall trend will be down. Yeah, in terms of the margin outlook, can you give us some sense what to expect?
Yeah. As explained earlier, we are expecting to improve on margins, and this will mainly be driven by operating leverage because we are expecting to grow 18% to 20%. There are also efficiencies that, I mean, several initiatives that we are working on to further improve efficiencies, around our manufacturing as well as on marketing side.
Okay. On the pharma acquisitions, is it possible to indicate what is the timeline you would expect to bring the ROCE in line with your current blended ROCE? Can you give us some sense in terms of the development expenses you will have to incur, both for development as well as integration costs? What about broad estimates you can give?
Yeah. you know, it generally takes, and the kind of, acquisitions and the differentiated, model that we are planning to build, it will take anywhere between 2.5-3 years for us to kind of get to the level where it will start rematching to the kind of, margin and return profile that we have in PI today.
And then yeah-
Thank you. We take the next question from the line of Rohan Gupta from Nuvama. Please go ahead.
Yeah, hi, sir. Good afternoon, and thanks for the opportunity. Sir, in our exports market last year, we had a rough volume growth of 11%, but balance was currency and product mix change. Sir, if you can just give some sense how much of this volume growth of 11% was primarily driven by pyroxasulfone on the single product, and how much would have been from the other products? The guidance which you are giving for the current year, 18% to 20%, is it mainly on net revenues or it's mainly driven by volume?
Yeah. Thank you, Rohan. Firstly, I mean, as we have discussed in the past, we cannot share the product-related growth and volume and, you know, trends with you. The growth that we have seen in last year is certainly widespread. It is not coming from a single product. There are four or five new products we have commercialized in FY 2023.
Apart from that, there are several existing products, including the one that you're talking about, which has scaled up, you know. This is where, I mean, FY 2023 that we talk about. Going forward, FY 2024, again, the growth that we are projecting, volume growth, I mean, it is majorly coming from volume, as I explained to the earlier participant.
From here we are not expecting a significant change in terms of inflationary impact on the raw materials or currency or something. The major contribution to this 18% to 20% growth is, or major driver for this growth would be the volume scale-up. Again, this will also be widespread. It is not going to be one odd product that will be driving this volume growth.
Sir, second question is on our cash flow w e have roughly INR 3,200 crore cash on the balance sheet as of now. I understand INR 700 crore will be paid for the acquisition w e still have INR 2,500 crore. We have INR 900 crore CapEx for FY 2024, that can be easily funded through the cash flow generated from in the current year itself.
Sir, INR 2,500 crore rupees cash we are sitting on the balance sheet. If you can, sir, give some guideline on that, how soon and how soon we can deploy this cash in terms of other opportunities or any scaling up further CapEx plan or inorganic growth, if you can give some sense on that, sir.
Rohan, as you see, obviously we are, we know we are looking at opportunities as mentioned earlier, and we'll continue to look, but doesn't mean that how soon is not an answer that I, we can answer at the moment because it's got to be right opportunity which fits and is in the strategic right path we as in jet, which is technology, scalability and areas which we want to operate in and the right strategic fit. Clearly the company has a focus on it. The leadership is driving as Sandeep mentioned and the areas that were mentioned, that's where we are looking at it. That's where we are right now. Yeah.
Thank you, sir. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir.
Once again, thank you everybody for joining the call today. I appreciate your time and your continued support. Look forward to a great year ahead. Thank you.
Thank you, sir. Ladies and gentlemen, on behalf of PI Industries Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.