Ladies and gentlemen, good day and welcome to PI Industries Q2 and FY 2027 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance with the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Siddharth from CDR India. Thank you. I now go to you, Siddharth.
Good afternoon, and thank you for joining us on PI Industries Quarter Two FY 2027 Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Mayank Singhal, Executive Vice Chairperson and Managing Director, Mr. Sanjay Agarwal, Group Chief Financial Officer, Dr. Atul Gupta, CEO, CSM Agchem, and Executive Director, Mr. Jagresh Rana , Global CEO of PI AgSciences.
We shall commence with key perspectives from Mr. Singhal, following which 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 call could be forward-looking in nature. A disclaimer to this effect has been included in the investor presentation that is available on the stock exchange website and has been mailed to you separately earlier. With that, I would like to invite Mr. Singhal to share his perspectives with you. Thank you, and over to you, sir.
Good afternoon, everybody, and thank you for joining the call today. Taking the industry, this has been a difficult quarter in a difficult year for the industry. The global crop protection cycle is at low points, and we are feeling like everyone in the business. What I want to do instead is to tell you what we are doing about it and why we believe PI comes out of this cycle stronger, more differentiated, and more valuable.
PI has been through cycles before. In each one, we have made the same choice. Keep investing in the capabilities that matter, take the hard decisions earlier than later, and come out with another side with a better business. This is exactly what we are doing now. We have a strong track record of identifying emerging opportunities early, investing ahead of the curve, and translating differentiated capabilities into scale businesses.
PI has always taken opportunistic and unique approaches to business. We start with innovative agri-distribution, moved into CSM three decades ago, and now I am proud to say we are invested in R&D beginning 12 years ago. We are now India's first and only agchem innovator. With these long-term visions, we have consistently delivered stronger execution and value creation.
We see similar potentials in the platforms we are building today across the pharma CRDMO, global biologicals, and specialty electronic chemical manufacturing driven by continued innovation, capability development, and customer engagement. These platforms are in the build-out phase, and we are confident these investments will increasingly contribute to our growth in time to come. PI's core is reflected in our innovation, manufacturing, and marketing excellence through a decade of experience. We have been able to build the best-in-class assets, leveraging differentiated technologies and assess newer areas of the market.
We talk a lot about innovation. We do so as the only Indian ag innovator. We continue to invest in deploying and building a moat around scientific talent, infrastructure, technology platform, and product portfolios. These investments propel us into a differentiated category from molecules to markets, deepening customer engagement, and helping us build multi-engines for future growth.
Turning to the global crop protection market, channel stocks are back to normal levels, and that part of the correction is behind the industry. Uneven weather across the key geographies, rising input costs, tight channel credits meant grower bought late, bought less, and bought cheaper. Generic pricing pressure compounded that. None of this change that structural picture. The world has to feed more people with less land, less water, tighter regulations, and what can be used. That is the only possibility with innovation in products and with supply chains that partner can trust. Those are the two things PI spent decades building.
In India, the season was defined by the weakest monsoons over a decade, with prolonged dry spells, delayed sowing as a result of lower pest pressures, Kharif acreage was flat, and seasons were lackluster. Going into Rabi, soil moisture and reservoir levels are below last year in several rain-fed belts. So we are planning for a cautious Rabi, will respond to how the season actually develops. On the brighter side, prices of major commodities have firmed up from their lows, which, if sustained, point for a better farm economics in the next season.
Now let me take you to the PI businesses. Let me address our export business. The environment remains hard, subdued crop economics, elevated input, genericization arriving faster than the industry expected, and pricing pressures across the board. Considering the global market situation, we took pragmatic pricing decisions in order to compete for a higher volume than comfort genericization. Conversely, we have commercialized 12+ molecules in the last three to five years in different parts of the life cycle, carrying differentiated process technology and innovator margins. Coupled with the ongoing diversification in our pipeline, there are the engines of the next leg of growth in the business.
Customer increasingly sees PI not just as a manufacturing partner, but a trusted scientific partner who is capable and can help them to address their needs and compete. This is a position earned over decades, not something that can be taken away by a short-term challenge. Our domestic business continued to hold its ground with strong year-on-year growth of 19%, despite the challenging market dynamics, supported by a portfolio of differentiated high-value crop protection solutions and strong market position across key brands. Our focus remains on expanding market share and capitalizing on the ever-changing market opportunity through robust, agile, go-to-market, and brand strength, with flagship brands continue to maintain leadership positions.
Biological deserves a specific mention here. Our domestic portfolio has grown by 45%. Our global portfolio has seen more than 250% this quarter. As farmers continue to adopt sustainable solutions, we have been building this platform potentially for two decades. What began as an India opportunity now is a global one, strengthened by our PI PREtec peptide technology. Globally, thousands of field demonstrated across crops, climates, and geographies keep confirming that we are believed early biological set alongside with chemistry at the center of the next generation of crop protection, and PI intends to capture both.
Taking on R&D, which brings me to a historic moment in Indian agriculture. 12 years ago, we made a decision that was no Indian agrochemical companies ever made it before, to invest in discovering our own molecule, not just making others' people's. It was expensive, it was slow. As for most of that time, it showed up only as a cost. This quarter showed up as something else.
Pioxaniliprole, branded as Pioxazon, our first new chemical entity, has received a registration in India and has been launched as Pioxazon as insecticide that targets some of the most economically damaging pests in rice, corn, and Bengal gram, while we continue to expand our labels for different crops. Regulatory filings are progressing in other geographies across the world, and we are preparing a path for global commercialization in the coming years.
A molecule is a product, but the more important fact is our ability to discover molecule is now a platform. That platform now exists in India. Inside PI, it covers discovery, chemistry, biology, formulation, toxicology, agronomy, process development, manufacture, and so on, for the end-to-end capability. The first molecule program platform works. We're expecting to, on this platform, to bring another two to three chemical biological molecules in the global arena in the next few years, opening up a significant opportunity led by innovation to leverage global partnerships.
That is what makes PI different from every other company in the sector. We are not manufacturers or marketeers of molecules. We are now an innovator from growers, both Indian and global. We'll continue to bring innovation from India to the world and our partner-centric model.
Taking you to our future growth engines. The same logic, invest early and build patiently, is behind our newer platforms. These are the businesses that make the future, and we are building them with the same discipline as we built CSM for three decades, or the brand business in India. Capability first, customer alongside, scale when the economics are proven.
In pharma, we are steadily shaping a differentiated CRDMO. The center of excellence to support drug discovery at Hyderabad is up. The new QC labs in Lodi commissioned and certified, and the kilo labs, they are about to complete by the end of the year. We are engaging with customers, large and small, in several cases, co-developing business models. This is how long CRDMO relationships get built.
In the electronic and specialty chemicals, engagements are deepening. Commercialization is progressing. The kilo labs at Udaipur are being operational by the end of the year. We are being deliberate about where we play. Segments of our process chemistry capabilities and niche areas of application, given the real time to win. These will give PI three to four engines of growth from where today and how we have to do today.
Let me bring this all together. Our core business remains strong. We will plan conservatively, protect our cost positions, keep the balance sheet strong, and keep investing in building our future moats. The domestic franchise that takes shape in good seasons and bad, the export business that has reset when it has to, and is rebuilding a younger, harder, better margin molecule, the biological platform that is now global, a new platform in pharma and electronics coming to life, and for the first time, an innovation engine that has proven that it can take a molecule from an idea in our Udaipur labs to the farmers in the field in India and going to the world.
This achievement strengthens the ambition to build a global innovation-led science company, creating original science of intellectual property from India to the world. Cycles and capabilities compound. We have built a company on that belief for 80 years, and our commitment remains strong to create value for stakeholders. With that, I hand it over to Sanjay to take you to the financial performance. Thank you. Sanjay, over to you.
Thank you, Mr. Singhal. Good afternoon and a warm welcome to everyone. I will summarize the financial performance for the second quarter and first half of FY 2027. As Mayank outlined, while the industry continues to navigate a challenging cycle, our focus remains on strengthening the long-term drivers of value creation. This quarter reflects strong growth in domestic brands and biologicals, while sector headwinds impacted agchem exports. We continue building future growth platforms across R&D, pharma, global biologicals, and specialty chemicals for a well-diversified business portfolio. In this backdrop, quarter two FY 2027 consolidated revenue stood at INR 17,018 million, declining 9% year-on-year, and gross margins at 49% with EBITDA at 14%.
Moving on to the business performance, agchem exports declined by 18% during the period. We remain focused on driving volume growth post-genericization through price optimization, while cost escalation could not be passed through in this current market condition. Further, we are broadening the growth base through commercialization of new products. During the quarter, we added three new CSM molecules commercialization and continue to advance initiatives in differentiated technologies, including electronic and specialty chemicals.
Moving to domestic agri, the business delivered another strong quarter with 19% growth through crop reach and product portfolio. Our focused approach on biologicals delivered healthy growth of 45%, which accounts for 18% of the agri domestic portfolio. Growth was driven by differentiated product portfolio with new product launches and focused GTM.
Moving on to our global biologicals platform, it continues to gain significant traction across key international markets. We are expanding our distribution network across Brazil, Mexico, Spain, and the U.S., achieving 3x increase in distribution width. The revenue grew by 250% plus year-on-year, supported by registrations, commercial expansion, and extensive field activities efforts across key geographies. Our pharma business grew 20% year-on-year, supported by deepening engagements with customers, showing early shoots and building development and manufacturing capabilities. As we are in the investment mode for these businesses, we expect once they reach scale, operating leverage will result in profitability.
Turning to our margin profile, the moderation in gross margins was primarily driven by higher input costs by 5% and pricing pressure due to El Niño and genericization. These are cyclical input cost headwinds rather than structural issues. Our core overhead remains tightly controlled with continued investments in development of new businesses by 6%, R&D 2%, besides increase in energy costs by 3%. Further, we continue to invest 3%-4% of our revenue in R&D, which are fully charged to the P&L. A decade long, such investments have started showing results with Pioxaniliprole being the first and few more in pipeline.
Moving on to the balance sheet, we have maintained a disciplined focus on operational efficiency and capital allocation. Keeping business hygiene a priority, we reduced net working capital by 18 days, releasing INR 298 crore of cash as at quarter end. Strong operating cash flow generation of INR 9.1 billion versus INR 2.3 billion year-on-year, supported by focused working capital management, continue to reinforce our balance sheet strength. We ended the quarter with a healthy net cash position of INR 36 billion to support our strategic investments in multiple growth platforms while maintaining financial resilience. With this, I conclude my opening remarks, and I now request the moderator to open the forum for Q&A. Thank you.
Thank you so much, sir. Ladies and gentlemen, we will now begin with 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 please 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. First question comes from the line of Rohit Nagraj with 360 ONE Capital. Please go ahead.
Thanks for the opportunity. First question is, during first half of this financial year, how much was the contribution from the newly commercialized products in the CSM portfolio in percentage? Thank you.
See, all the new molecules which we have been commercializing, they account for 16%-18% of the agchem exports business, and it can obviously vary on quarter-to-quarter basis. On a year basis, it is around 16%-18%.
Perfect. Second question, referring to the slide number 10, we have mentioned that next wave, two, three molecules in advanced stages for chemical and bio segment. Can you just elaborate in terms of what is the market size for these molecules and what is the kind of market share that we are expecting once we commercialize these molecules, and any timelines of commercialization? Thank you.
I will answer that in reverse. The timeline in the next three to four years, we should have some of these markets show their colors. Clearly, they are in pretty interesting segments, and I would be too early to comment on the market size and share, but they are sizable in terms of what we are looking at the opportunity, given the investments that we will be making in this.
Sure. Thanks a lot, and all the best to the entire team, and Diwali wishes to everyone. Thank you.
Thank you. Next question comes from the line of Abhijit Akella with KIE. Please go ahead.
Good afternoon. Thank you so much for taking my questions. The first one is, within the 18% year-on-year decline in agri chemical exports, would it be possible to break out how much was volume and how much was pricing.
If you look, majority of the purpose of volume is about a lower single digit, about 2% to 3% to 4% in volume. The other has been on price and cost.
Okay, so 13%-14% pricing and then 3%-4% volumes. Got that. Thank you. The second one was with regard to the export revenue number that we have shared for the quarter. I presume this includes this INR 12,277 million, right? INR 1,227 crore that we have shared on slide four. I presume this includes pharma as well as biologics as well as agri chemical CSM. Would it be possible to just help us with the breakdown between these three buckets? Because we are not exactly able to back into the biologics number. Is it possible to just share the biologics number as well?
Yeah, so.
Export. It is in the export number is what you are asking? Are you asking the export number includes the biological sales internationally? Just to clarify. Yeah.
Yeah. So, for the quarter, the biologicals number would be in the range of INR 160 crore. The global biologicals number, which is part of the export revenue, is around INR 60 crore.
Breakdown of pharma is how much in that?
Pharma is around INR 75 crore, and the PI global biologicals business around INR 60 crore.
Biologics is around INR 60 crore, just to clarify. Okay.
Yes.
Got that. Thank you. With regard to your comment about the pressure on gross margin and the fact that it's happening maybe primarily due to higher input costs, and therefore margins should come back eventually over a period of time. You've mentioned that margins. What is the normalized level of margins that we expect? Both on the gross margin side and EBITDA margin side, if you could just share your perspective there.
The gross margin, as we said, is about today at 47%, 48%. The normalization, I have to be very honest, the way I would like to answer that, looking at the variabilities in the market today, whether it's oil prices, looking at the dollar with the geopolitical issues, we are putting all pressures to make sure that we continue to manage these gross margins at the levels we did today.
Sorry, sir. I just lost your audio right at the end. You're putting efforts to-
We will continue to manage the gross margin at 48% odd, 48%, 49%, what we continue today.
48%, 49%. Okay, that's the normalized level. Sure. Just one last thing from my side, and I'll get back in the queue. The development of new businesses, you've mentioned that that contributed to about a 6% increase in costs, overheads year-on-year. Is this primarily pharma and biologics, the increase in investment losses out there, or is it something else? Why such a sharp increase? What's behind that?
Yes, primarily it's pharma and biologicals. Pharma not as much as biologicals. As you would see that we've taken up to expand in three geographies, which is U.S., Brazil, Mexico, and which are not cheap, let me be very honest. Expanding the footprint to make sure that we create the platform for growing our business while we develop the products in the market, and enabling development and expansion of the reach requires huge investment, both in people and spend. That is really the primary driver, which is based on the long-term strategy of growth.
Okay, got it. Got it. Thank you so much. In case it's possible to share the loss amount at the biologics business, Plant Health Care globally, that would be really helpful. Thank you so much.
It's about $10 odd million , that $10+ million that we have lost there.
For the full year.
Sorry, $10+ million is the loss for the full year expected from Plant Health Care?
Correct.
Okay, understood. Thank you so much and all the best.
Thank you.
With PI Agro.
Our next question comes from the line of Ankur Periwal with Axis Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Within the agri chemical CSM side, you did mention that revenue share from the newer molecules is standing at largely similar range, as we saw historically. Is it more a macro phenomena because of the environment and we know that there has been slower growth, or there is something more to it? Just looking at the ramp up of the, let's say, non-product portfolio here, the other part of the business.
Good question. I think as you would understand, the external pressures both in the consumption factor, the pricing cost economics, the adaptability also gets slow for new products. I believe when that economic, the global scenarios change, that could show an acceleration. But the interesting fact is that we are having and holding those capabilities, delivering, and we expect if the farm economics and global scenarios change, they could accelerate the harder percentage across everything.
Sure. So, we have already started seeing uptick in global prices. How long do you think it will take for this transition to happen? It is more of maybe a quarter here or there, or probably it will take slightly longer from a ramp-up in-
Let me honestly, I see pressure in the next couple of quarters, but I think by the end of the next two, at the end of the financial year, I am already seeing certain green shoots with certain volume pickups and demands which we are seeing from our partners.
Sure, that is helpful. Second question on the pricing bit. You did highlight it, the pragmatic call not to take price hike and probably impacting some bit of RM inflation. Both on the core as in the top product as well as other products, is it more near-term phenomena or structurally our focus is more to ramp up on the volumes even at the cost of margins in the near term?
As you see today, as you see the external pressures are making sure the pricing pressure is becoming challenging for our partners. And I think given our long-term capabilities and gestation period that you work with a customer, we are continuing to hold the market share. And if the market turn for better costs and pricing, that should definitely give a positive impact to our performance.
Yeah, sure, that is helpful. Just on the other products as well, the newer launches, is there incremental pressure that we are seeing on a, let us say, last quarter versus this quarter, or it is a continuation of the older ones?
I think there is an incremental pressure is now a question which I will honestly tell you. Today it's incremental, tomorrow it's not incremental. As you can see the swing in the dollar or the swing of the fuel prices, all these are playing. So we are actually making. We put a very agile structure to stay and partnering, and this is where our strategic partners are playing a role, because in the long term, we want to hold the volume. We are cooperating to see that how we can continue to do that, and on a dynamic basis, take calls and continue to hold the market.
Sure, Mayank. That's helpful.
The way it will be high, as you guys will understand.
Yeah. That's helpful. Just one last question on the electronic segment. We have been talking about it for a while, plus the new launches as well that you highlighted earlier. By when do you see a ramp-up in this coming in? Maybe broadly, if you have some number in mind, this could be X percentage of our revenue in terms of size and scale that should be.
As I mentioned last time, this is a longer gestation. Yes. What I can tell you, we already started to see early shoots for the ramp-up. Next year, we will see some good ramp-up happening there. And in the period of three to four years, as we said, we've tried to target $100 million business in this segment, in the niche areas.
Sure, Mayank. That's very helpful. Thank you and all the best. Wishing you all a very happy Diwali.
Thank you. Our next question comes from the line of Sumant Kumar with Motilal Oswal. Please go ahead.
Hi, sir. My question is for this export business. What we understand, the key molecule got off-patented, and we have a realization pressure. This quarter, we have a higher RM pressure. Do you think ease out in the RM price expected, and we can see some margin recovery in that key core product in export segment?
Yes, if the RM pressures do go away, yes, that could help us get a better margin profile for these products.
Okay. Can you talk on realization side? The off-patented key product realization has declined. Going forward, is it now normalized, or we can expect further correction in the price?
Looking at the market dynamics today, it will not be a straight answer for me to give. But yes, there is some are at that sum, and they are also already swinging up and down, depending on the market situation.
Okay. Every year, we are launching four, five molecules in the CSM side. We know that now last five years, everybody is talking about overall the impact on realization and also market pressure going forward. As the top management team, what we have strategized that time when we know that this is going to a big risk for the company. What are the key steps, do you think, going forward, the kind of decline we have seen in this quarter in the margin as well as top line, last four, five quarters? What are the key steps we have taken which has not fructified, and going forward, it is going to fructify, and we can see some growth in CSM?
That's again a good question. I think we are working on three, four different agendas. One is to say within these products, we are working on technologies and innovative ideas in proper sites, which have a longer gestation to increase. We keep on good outcomes on that to be globally competitive. On the other hand, looking at this is also the normal side. The company has taken the three, four pillar initiatives, expanding in the newer higher growth engines of biological and taking that a global footprint, going to more value-added leverage capability with CRDMO, and further in the electronics segment that we're investing in those.
More importantly, if you look at the Ag segment, the biggest bend around the curve we've taken is a global innovator play, which will completely differentiate this. Although the gestation period has been 12 years already, but trust me, another five, six years before that, we'll create a very differentiated moat for us as a company. Because these cycles will come, but how do we mitigate and compress these cycles to outshine because of the initiatives we take?
In the pharma side also, four, five years ago, we have acquired company, and we had a big plan. Still, we are seeing we are lagging, and whatever we have a thought process in that segment, still we are lagging in that. Any thought process on the profitability side and scalability side in the pharma?
You're right. We're not lagging, I would say. This, as we've been saying, is a long gestation. Again, as you see, for the last three to four years, we've been investing, building capabilities. As said earlier, we built the capabilities both internally and externally, from customer intimacy to building apps and ways to service the customer. Some of these are coming to life. But I'm happy to say that I see a couple of deals in the pipe which could look at fructifying, maybe small steps for the bigger things, but that sets the boat rolling to the next step, and that's really where we are today.
Yes, it is taking time because we are trying to do a differentiation by co-creating business models with partners, but we are moving in that direction in a positive way.
Okay. Thank you so much, sir.
Thank you. Our next question comes from the line of Tejas Pradhan with Citigroup. Please go ahead.
Yeah. Hi, sir. Just one clarification. So earlier you mentioned gross margin level 48%-49% as the level that one would target. Is this assuming the current level of input prices sustain? And if we assume that the sort of inflation that we have seen so far that reverses, then that additional, say, 5 percentage points can increase from the gross margin level?
As you would understand, the cycles that what we have today is already a plan for the next quarter and a quarter and a half. The two quarters, but these are well lined up. Building on that, I see this as a position, but as things swing, certain areas could swing positively, but it takes a lag of a couple of quarters to create the impact. Therefore, I would hold to that for now, yeah?
Okay, understood. Secondly, on slide number four, you have mentioned the impact of costs on new businesses and new molecule launch expenses, et cetera. Could you quantify this as absolute number of rupees crore that would be recorded in the current quarter?
If you look at the overhead, you would take that 6% and 2% and 3%, that as a percentage of the overhead, that is what is the increase, right? So the increase is 13% minus 6%, what's the number coming to? I don't have the exact number in front of me.
It's broadly, if you see last year, quarter two was INR 530 crore, this year it is INR 609 crore. So broadly INR 70 crore increment what we are seeing is primarily driven by investments. The increase is primarily driven by investments in development of new businesses, energy costs. So you can just take a percentage of that, which is INR 60, INR 70 crore into six, so INR 36 crore or primarily development of new businesses according energy cost and R&D.
Okay, so this percentage number mentioned is the YoY increase that is attributable to these particular heads. Just to sort of complete over there, how long would these expenses continue? When can we expect these to sort of roll over?
There is, as I always put it very straight, there is a startup cost. The startup cost in these businesses take about two to three years. I believe that the most aggressive investments are happening in our global footprint of biologicals, which is already showing some positive results with great products in the pipe. I believe in the next two to three years, we will be able to flatten these out before we start turning them positive. Also, the similar is happening in the other businesses, yeah?
Understood. Thank you.
Thank you. Our next question comes from the line of Tarang Agrawal with Old Bridge. Please go ahead.
Hi. Good afternoon. Am I audible?
Yeah, we can hear you a little clear. Yeah.
Okay. Couple of questions. This 49% outlook that you have given, it seems more from the point of view of how you are looking at the next two, three quarters, or is it something that, in your view, could last a little longer?
Well, to be very honest, as we said, based on what was the exception last year, we had a guidance of 52%, 53%. 49% is what I am seeing the two, three quarters in this today VUCA world for guideline to say that this is what will remain or would get better or get worse would be too much of a statement to make. But I believe that keeping that and trying to improve that should be our objective in the next two, three quarters, continue to improve that, and I do see that happen.
Okay. Just to understand, one of the primary molecules that you have got in your exports business, if you were to do a cost benchmarking, because you have been the prime supplier of the molecule, and even though it is gone generic now, there are certain steps that you have taken in your supply chain to sort of address it. So, just from purely from a cost competitive standpoint, where do you think you would be today?
No, we have a competitive position at a global play. There is always, my friend, when genericization is a deed and rely on input cost vis-a-vis output cost. I think the stabilization should take place in a couple of years. What we are continuing to do is continue to hold the volumes, the market share, and with that price point, it always spread the volume towards the growth. That is really how we are addressing that. We believe we are in a good position to play that up with our partners.
Just to get a context, what would be your global market share?
I would be not in a position to answer because that is more for our customer who is dealing with it. I think it is a substantial market share, market-standard share.
Got it. Just the last question on, when do you think the Plant Health Care business sort of reaches an inflection point?
As I said, in the next two to three years, we should be well in the inflection point.
When you call out inflection, what is your definition?
One, we give an EBITDA positive, and the growth numbers come to a stable state share to say what more we can do with that platform.
Okay. Thank you.
Thank you. Our next question comes from the line of Charul Agrawal with Bank of America Securities. Please go ahead.
Thanks for taking my question. Sir, my first question is if you could share the order book number.
Yeah, I think the order book-
Order book position is around $1.25 billion.
Got it. Sir, my second question is on the pharma CDMO business. Last quarter, we had mentioned that there is going to be some slippage of a contract. So, the Q2 increase that we see, does that fully reflect that slippage? Going ahead, how do we see the pharma CDMO growth, given that we were earlier expecting that over the next two to three years, we would reach INR 500 crore-INR 600 crore, and an EBITDA breakeven? Do we still remain on track for that?
Yeah, that's a target. We still continue to work on that, yeah.
Thank you. That's it for me.
Thank you. Next question comes from the line of Dhruv Muchhal with HDFC AMC. Please go ahead.
Yeah, sir. Thank you so much. You mentioned about the input price pressure, and as we understand the CDMO model, agri-CDMO model, it's largely a pass-through model. But here, do you expect this input price pressure to continue for the next two, three quarters? I'm just trying to understand, has the structure changed, or is the price pressure linked to that specific molecule? Input price pressure.
So what the price pressure pass-through is, yes, is this fundamental principle understanding, but given today, there's a limit to which a customer can take, correct? And the economic change. So having taken that with our strategic alliances with our global partners, we have come together to take certain calls to continue to keep the market share so that we don't lose that opportunity, which is more difficult to develop if you lose the market. So I think that's what we are focusing and doing.
Got it. So this is not linked to a specific molecule, but broadly across your portfolio?
Yes, it's a broader phenomena, but we're optimizing and maximizing, optimizing volume, and the focus on volume growth and through price optimization. That's the approach we're taking, ye ah.
Got it. And the revenue decline of about 18% in the agchem exports business, is it also- Probably this was answered earlier, but I didn't get it. Is it also across broader portfolio, or it's linked to the specific molecule? So the point is the remaining portfolio largely flattish or growing, or that way?
It is across the portfolio. As I said, we continue to maintain the share of the other market because the problem, the whole industry is in that place.
Got it. The last question is, the pricing actions on the generic molecule, the largest molecule. Based on your assessment as of now, do you think, probably based on the spot pricing of the alternates, do you think the current levels are the level that you have to achieve, or unless probably the alternates reduce further, or this is the max you have to go?
Got it. Base pricing, I think the base pricing will be, again, market situational-led and opportunity-led. The pricing will play accordingly, right? As we are in that phase, we continue to play along with that phase with a competitive edge.
Yeah. No, I mean, at the current level, just to get an intermediate sense of the situation. At the current levels, is the pricing action max that you had to do, or you will have to take more actions?
It is the best what we see for today. It would be too much of competitive information to disclose otherwise to be fair. But I believe we are in a good position and place to take the final.
Got it. Sure. If I have more questions, I will join the queue. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participant, we request you to limit your question to two questions only per participant. If you have a follow-up question, please rejoin the queue. Next question comes from the line of Ram Aravind with ithought PMS. Please go ahead.
Hi, thank you. My first question is on the electronic chemicals that we have. If I am not wrong, there is about two or three which is going into the kilo lab soon. Can you give us some sort of number or some sort of indication on how you see the electronic chemicals playing out in the next two, three years? Since your investor presentation also talks of the increase in new inquiries, about 75% is coming from the non-agchem side. Is this coming from the pharma side, or do we see more traction towards the electronic chemicals? That will be my first question.
In the pharma, separate, but it's the non- Besides pharma, the non-agchem side, and the electronic chemicals that we've stated, we're targeting about INR 100 billion business in three to four year time, and we are seeing the trajectory of that right now.
Right. All right. The second question will be on the contract assets. Currently, over the last six months, if we see, the contract assets have only risen about INR 30 crore roughly. How do we look at this contract assets exactly? What is the implication of this? Is the slow rise in contract assets because some of our customers are probably ordering much less ahead of their needs, or has the mix kind of shifted away from our main molecule to other molecules such that the contract assets are not growing? Am I right in assuming that if the contract assets were to not grow, that would mean that volumes are actually being shipped out?
Yeah, that's right. These level of contract assets, as you've seen in the last few quarters and this quarter and next few quarters, we expect it to be in the same level. They are comparable, and as you know, these are committed purchase orders and working for the patented innovator product. Yes, they continue at the same level for a few quarters now.
Right. Do you have some sort of guidance towards the contract assets particularly?
Yeah, so we are currently around INR 700 crore, and we expect to be in the same range, yeah.
All right, thank you. The next question will be on the Pioxaniliprole. So how do you assess the market for this molecule? Do you think you will expand your labels beyond rice, maize, and Bengal gram? Secondly, what sort of revenues do you see coming from this molecule for the next two, three years?
Well, yes, we are looking to expand beyond these three crops. Clearly, as you would see, we have done a lot of effort of developing this product. We have since now, we are going to be putting it out into the market in this month. The usual in a typical new product launch, it is first putting it in the market, taking it to the farmer in the one season, and getting a sense of its adaptability, understanding the value proposition at a larger scale.
Once we have the right understanding, which we believe we have with the product here, we will be taking up to get a better assessment as to how we want to scale and put in the market. That would probably happen by the end of this year. At that point, we are in a better position to answer what numbers and scales are we looking to achieve here.
Right. So right now, you don't want to commit to a particular number, is it?
Yes, because we want to be very honestly evaluating it at the ground level of the first step of commercialization. Typically, that's always done in the ag business for generations that we've been doing. Take a product, take it to the market, get a sense, then start setting your targets and committing to that.
All right, sir. Thank you so much. Yeah, that'll be all from my side.
Thank you. Our next question comes from the line of Darshita with DSP Asset Managers. Please go ahead.
Yeah, hi. There are roughly about 13%, 14% odd of pricing led decline that we've seen in Ag this quarter. Is this specifically for one product, or is this I mean, it's such a large quantum across all products.
Well, the pricing discounting is across the crop portfolio, including domestic and global, given the present situation, as I mentioned, yeah.
All right. Secondly, just on the 12+ molecules, as you mentioned, that you've commercialized over the last three, five years, you've added some new molecules this quarter around. If you could just give us a certain number as to how should we be thinking about it with respect I mean, say the situation were to improve, and you said you're seeing some green shoots fourth quarter onwards. What kind of an upside should we think from here on? What is the peak potential of these products? How many of these are intermediates? How many are these technicals? Are these contracted to a certain extent? Are these registered products? Some sense on these products, please.
Most of them, they are contracted because they're contract manufacturing business. Clearly, as we said, 17%-18% is already the revenue share of these. But clearly, given the market dynamics, new products always grow at accelerated pace. We expect this to take a larger share of our revenue with that, once the market dynamics change.
Any peak potential that you would have in mind, $300 million, $400 million , something like that you can share, I mean, for all the products put together?
It would be difficult for me to put that on table today, because as you see again, we are developing new products, and they are well tightly-tied with our partners as innovators. But potentially, we have an estimated idea, but I would not throw that out today. But yes, it could be in that range in three to five years.
Got you. $300 million, $400 million- over the next three, four years.
I would not hold myself to that number, but
Okay.
as I said, it is difficult to put that down.
All right. Okay, great. Thanks a lot.
Thank you. Next question comes from the line of Bhavya Gandhi with Bajaj Alternate. Please go ahead.
Yeah, hi. Thanks for the opportunity. Hope I am audible. Hello?
Yeah, we can hear you.
Yes, sir. Audible.
Yeah. Just wanted some clarity on gross margin again. Let's assume INR 100 is the raw material price. You are going to price it at plus percentage, certain percentage, and let's assume it is 52% in your case or 53%. Keeping the RM inflation aside, can we assume that that percentage margin number that you are going to price your product on is structurally getting down, seeing a downtrend? Is that the right assumption, keeping RM inflation aside?
We are in a B2B, majority of the business in a B2B business. Again, the pricing front is also a high variable front, driven by external factors, as I said, crop economics, environmental conditions. If you see me in the middle of the track, right? Back end is the inputs and the geopolitical challenges. The front end is the crop economics, environment, and consumption patterns, keeping and competitive landscaping from the genericization pressures. Looking into that, we look at optimizing and trying to continue to maintain that.
Sir, if you can provide some more clarity on this. Is it, suppose, structurally trending downwards because it is difficult to fathom exactly? Because there are a lot of other elements also, variables, like the RM inflation and all those. Keeping those asides.
I mean, I am not very clear why would. Because this is not a cost-plus business model only. It is a combination of a few. I am also not very clear on your question. If you can just further clarify.
Okay. Basically, it is not just cost plus certain percentage. You are saying there are other variables to it as well.
Yes.
Yes. Structurally, will it be, assuming the RM inflation eases out, maybe Q4 onwards, will we get back to the original percentage margin that we were at?
Well, with original percentage margin, depends what are you looking at original, because we have given a 50%-52% margin. Yes, that will be the target, obviously, to get there. But not what happened last year was an exceptional year, as everybody well knows. That was again by the great initiatives that the company took in optimizing and maximizing its technology play. But our guidance has been between 52 odd percent margin, yeah.
Fair enough. Second question is regarding the order book. How do we calculate the order book? Is it at current realization of the product that we decide the entire order book number, $1.25 billion? Does it change over time if the realization drops?
Well, that is the order based on the contract value, right? So that is what is called the book. Now, during the contract, things could swing and change. There have been times where costs have gone up, we have taken extra pieces. There are times when the market is challenged, we are discounting. But that is the guideline. Actually, I would not take it as a That is the guideline which we have been providing over years, where the order book sticks. The precise number to the point delta would be very difficult to answer today.
Okay. In your last call, you had mentioned about low single-digit growth for FY 2027, with the commercialization starting for electronics in H2. Can we assume that number holds?
Yes. I would say we have said we are looking at a flattish approach given the external dynamics, as you can see the whole industry trend. We are still trying to see that we will be around the flattish area, given the situation that we see internally today. You can also best judge that from the competitive environment.
Got it. Fair enough. Thank you so much and wishing you all the best. Thank you. That is it from my end.
Thank you. Next question comes from the line of Bharat Sheth with Quest Investment Managers Private Limited. Please go ahead.
Hi, sir. Thanks for the opportunity and congratulations on the launch of innovation-ready product. Hello? Am I audible?
Yes, go ahead. We can hear you, yes.
Sir, what is our philosophy or strategy for taking this innovative product to global market, and what will be our marketing strategy for the same whenever we start getting the registration?
As I said, PI has this unique position that we want or do the biological play. We have a platform we built to develop products in the developed economy, Brazil, Mexico, and America, and partnerships. Added to that, we will take these products through our strong partnerships, which we have had for decades, to support to take these products to the market. That's the approach we are taking.
Okay. It will be in the partner brand or our brand, or we don't have to invest at front end. Is that fair understanding?
Well, all this will be based on the best techno-commercial opportunity the company sees and will contract differently with different partners and different markets.
Any timeline that you have in mind? I mean, approximately when do we start that whole process?
Some of them we should be hopefully filing the regulatory piece in the next year or two. I think next two, three years, we may see some of them [audio distortion] for going into the market.
Thank you and all the best, sir.
Thank you. Ladies and gentlemen, we will take the last question from Surya Narayan Patra with PhillipCapital India Private Limited. Thank you.
Yeah. Thanks for the opportunity, sir. Hello? Am I audible?
Yes, sir, you are.
Yeah. You just mentioned that there is a pricing pressure that is visible across the portfolio. Is it fair to believe now that even the patented molecules are also kind of facing pricing pressure, which was not the case earlier, which was only restricted to generic products?
Yeah. Let me give it to you, to give a better understanding of this. You see, the farmer economics are determined what money he makes from the crop, right? If the economics were large and the price, there is a certain price you can put a solution in for. Now, because of cost structure, the price goes, the economics changes for the farmer, the demand comes down. If we can continue to maintain a certain price to develop them, that is what is called the pricing pressure on the product, even on innovation basis. Because innovation in ag needs to come out of the value proposition. When the farmer is having a challenge of the value proposition in the present economics, that becomes a less priority. But as the economics improve, they also improve.
Okay. My second point is about the scope of any inorganic growth. We are likely to see a kind of a meaningful dent because of a larger dependency on a bigger product. Can that be compensated with any inorganic growth scope? Because we are having a very strong balance sheet also.
Yeah. The company is continuingly evaluating what we can do in that space. As and when we come up with some opportunities, we will be definitely looking at those ideas.
Okay. That would be in the agri side or beyond agri, given the challenges that is in the agri business?
As you see, we have both the platforms, the agri, the pharma, and the specialty. We evaluate across the sectors so that we can propel some growth in those areas.
Okay.
Agri biologicals could be a great opportunity too, so I'm just putting that out.
Okay. Sir, last point on the capacity. Say, capacity is what we have already created and our CapEx investment plan. After we are facing kind of a dent to the overall volume visibility of the leading product, what utilization that we will be at currently, and what would be our CapEx plan going ahead and in which areas?
Sir, if I were to say, we're not facing a dent structurally in the volumes. The volumes are looking to- Okay, they are a little depressed, but they look positive on the other hand. We have enough capacity to address what we need, which we have built. It's a cyclical play, right? You build capacity, then the game comes. I believe the investments have come to a saturated maturity to take care of the next two to three years in the agchem sector. We are now building capacities in the other new engines of growth that we have identified, and that's where the CapEx will go.
Okay. Sure. Thank you, sir. This is all, sir.
Thank you so much.
Thank you.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
Once again, thank you to all of you. Thank you all for joining us today. We look forward to catching up in the next one. Thank you. And a happy Diwali to all of you, and the best to your families.
Thank you, sir.
Thank you so much. Ladies and gentlemen, on behalf of PI Industries, that concludes today's call. Thank you for joining us, and you may now disconnect your line.