Ladies and gentlemen, good day and welcome to Aarti Drugs Limited Q4 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then 0 on your touchtone. Please note that this conference is being recorded. I now hand the conference over to Mr. Adhish Patil. Thank you, and over to you, sir.
Thank you. Good morning to everyone present on the earnings conference call of Aarti Drugs Limited. I extend a warm welcome to everyone joining us today to discuss our financial results for the quarter and full year ended 31st March 2024. On this call, we are joined by Mr. Harshit Savla, Joint Managing Director; Mr. Harish Shah, Whole-Time Director of Aarti Drugs Limited; and Mr. Vishwa Savla, Managing Director of Mahek Lifesciences Private Limited and SGA, our Investor Relations Advisor. I hope everyone had an opportunity to go through the financial results briefly and investor presentation, which we have uploaded on the stock exchange and on the company's website. Let me begin with the highlight of the quarterly financial performance, followed by full year FY 2024. Our revenue for quarter four FY 2024 stood at INR 621 crores as against INR 743 crores, decline of 16.4%.
Decline is majorly on part of negative rate variance across our product stream. EBITDA stood at INR 87 crores with EBITDA margin at 14%, improved by 130 basis points year-on-year. PAT stood at INR 47 crores and PAT margin at 7.6%. For full year FY 2024, our revenue stood at around INR 2,533 crores as against INR 2,718 crores, decline of 6.8% on account of negative rate variance, along with sluggish demand in export markets for the API and specialty chemical segment. However, there was very good volume growth in domestic markets for the same segment. EBITDA stood at around INR 321 crores as against INR 308 crores. EBITDA margin stood at 12.7%, improved by 140 basis points. PAT stood at INR 172 crores and PAT margin at 6.8%, improved by 70 basis points. Now coming to segmental performance.
For full year 2024, with the visible geopolitical uncertainty, supply chain hurdles, and pricing volatility, our business demonstrated resilient performance in FY 2024, though decline in top line is attributed to lower realizations stemming from negative rate variance and subdued export market demand in API businesses. However, there has been a notable improvement in gross margin, credited to the stabilization of input costs noticed in the latter half of FY 2024 and operational efficiencies across the majority of our product lines. Furthermore, we project a further enhancement in gross margin in the near future, mostly driven by upturn in selling price levels due to anticipated growth in export sales. Amidst heightened interest rates, dollar shortages, restocking, supply chain hurdles, and conservative ordering, export demand encountered challenges in select segments during Q4 and FY 2024.
Nonetheless, we anticipate a positive shift in the export landscape in the near future on back of interest rate reductions, low stock levels, and upswing in demand. Despite these hurdles, our outlook remains optimistic on attaining our growth and margin targets. On a standalone basis, Q4 FY 2024 revenue stood at INR 160.64 crores as against INR 697.34 crores, a decline of 19.6% year-on-year, where 13.6% decline was impacted due to negative rate variance. The standalone business contributed approximately 89% to the consolidated revenue for the quarter, out of which 67% of the revenues came from the domestic market and 35% from the export market for Q4 FY 2024 for a standalone business. Within the API business, the antibiotic therapeutics category contributed around 45%, anti-protozoal around 17%, anti-diabetic around 15%, anti-inflammatory around 11%, anti-fungal around 9%, and the rates contributed around 3% to the total APIs for Q4 FY 24.
Formulations segment revenue at INR 68 crores for the quarter. For the quarter, for full year, revenue stood at INR 325 crores, with growth of 18.5% year-over-year. I would like to highlight a key update on our formulations segment that recently US FDA had carried out inspection at Baddi plant operated by our subsidiary, and on conclusion of the inspection, none of the observations were pertaining to data integrity, and we are working on resolving reported observations. Post this, we are optimistic of getting clearance on the US formulations plant as of earlier. Now coming to specialty chemicals segment. Although India's domestic chemicals demand is projected to remain robust in 2024, with low expectations in price increase, the market faces various challenges of finding equilibrium amidst the introduction of new production capacity within the country, shifting trade dynamics due to global demand, and fluctuating upstream prices.
The company's balance sheet continues to remain healthy, with leverage remaining comfortably at 0.44x. For FY 2024, our return on capital employed stood at 14.2%, and return on equity stood at 13.9%. As of 31st March 2024, our net cash flow from operations stood at INR 359 crores as against INR 133 crores as of March 2023. An update on the ongoing capital investment, the capital expenditure incurred during full year of FY 2024 amounted to INR 226 crores.
Recently, greenfield project at Tarapur Facility for dermatology products had been commenced, and there are plans throughout the first half of FY 2025. Greenfield project at Saykha for specialty chemicals and intermediates is on track, which we plan to commence by the end of Q1 FY 2025 and then scale up in Q2 of FY 2025. With this, the operating leverage is expected to kick in from the second half year of FY 2025, with improved capacity utilization.
The company has incurred a CapEx of INR 543 crore in the last three months, mainly towards capacity expansion, backward integration, and new product launches across API and formulation segments. The majority of the company's INR 600 crore CapEx has been completed, and balance is expected to be completed soon. These initiatives are expected to reduce the cost along with the expansion in profit margins and the upward growth. The pharma API manufacturing industry is constantly evolving, and we are committed to staying ahead of the curve. In the upcoming years, we plan to continue expanding our capabilities and enhancing our offering to meet the ever-changing needs of customers by improving our capacity utilization. We also plan to invest in new technologies and equipment that will help us streamline our processes, reduce carbon footprint, and improve efficiency.
As we navigate through short-term challenges, our commitment to overcome these obstacles and achieving long-term success remains unwavering. Our journey may be characterized by uncertainty, but it is equally defined by our collective ability to adapt, innovate, and emerge together. Together united and determined, the company shall continue to steer the success story. I highly praise our positive outlook for both our API and non-API business, that is, the formulation business. Our ongoing projects, coupled with optimized capabilities, will serve as a cornerstone of steady growth in the coming years. Importantly, we anticipate continued growth in exports within the formulation business. With this, we can now begin question and answer session. Thank you.
Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge, who wish to ask a question, may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity, and good morning, everyone. So, first question on the pricing environment, Adhish, if you can comment on this, whether the API prices will be stabilized at the current level or if you see that there might be some upswing in the prices. In case it is yes, then what are the factors that would actually lead to the prices to go up? And also, if you can comment on the KSM scenario in a war-like situation, any increase in the KSM or in raw materials, are you seeing or are you noticing that?
Okay, thank you, Rashmi. So, as far as the pricing environment of API is concerned, we saw a decline in December quarter. Then, from December to March quarter, the prices have almost stabilized now, so they are not falling further. However, recently, we saw some upswing in the crude prices. So, if the crude goes beyond a certain point, then definitely that upswing will start creeping into the prices of crude derivatives like solvents, which we use. Almost 65%-70% of our raw materials are directly or indirectly dependent on the crude prices. So, that is the only factor which can, if at all, make the API prices go up. Then, as far as the availability of the KSMs, as of now, everything seems stable. The only hiccup we had recently was delayed shipments due to the Red Sea scenario.
Apart from that, there are no shortages in availability of any KSM. Even in a war-like scenario, I think Harish, I think you were able to answer that question earlier.
Yeah. As far as raw materials are concerned, most of the import raw materials are coming from China, so we don't see any issues regarding Red Sea, delay in shipments. And raw materials and KSM prices are quite stable so far. Unless crude goes up beyond $100, we will see some uplift in the pricing of raw materials at KSM. Thank you.
Okay. And related to this, so as of now, you feel that the prices will be more or less at this stabilized level, and currently, there is not much just from the raw materials, so at least we can expect some gross margin improvement in this year because of this. Also, if you can let me know, how much TPM are we adding for this new greenfield project, which is coming related to derma segment?
Pardon me, how much? What we are adding, you said?
Tons per month. How much production tons per month we are adding for this dermatology project?
Yeah. So, the final production capacity for the dermatology project would be around 2,000 tons per month, the final one. But it will be ramped up slowly in the first half of FY 2025, that is, in the next two quarters, because we are ramping up the production by putting up more and more reactors on a stepwise basis. Anyway, that will coincide with the gestation period of the demand.
Got it. Excluding this derma greenfield project, what is the capacity utilization at the company level currently?
Yes. So, excluding this greenfield project, it will be around between mid- to late 70s.
Got it.
Thanks.
Sorry, it is how much?
Between mid to late 1970s, 75%-79%.
Okay. Just last question. If you are expecting that the new capacities will be coming in, prices will be getting stabilized, can we expect low double-digit kind of revenue growth both on the API segment as well as the specialty segment in the FY 2025, and what would be the EBITDA margin outlook?
Yeah. So, as far as the growth is concerned, we do expect a good volume growth. However, what we're forecasting is that, as we have seen in the last four quarters, the prices have gone down. So, probably FY 2025, we'll have prices for all four quarters similar to that of the last quarter of FY 2024. So, that might lead to a little bit of negative rate variance around, say, 5%-8%. So, considering that negative rate variance, still, we would target to reach that 10% volume not volume, the top-line growth. We will target that in spite of the negative rate variance. And as far as EBITDA is concerned, so we are now more and more confident that we should be crossing that 14% mark at the company level. And slowly, if the situation continues to be stable, then probably we'll try to reach the 15% mark.
Got it, Sir. That is really helpful. Thank you so much.
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good morning, Adhish and everyone. Adhish, my first question is, so if I look at our standalone and consolidated numbers, it seems that in the formulation segment, there is a big delta coming on the margin side. So, if you can talk a bit about that, is there any one-off involved in here, or how should we look at the formulation margin on the Pinnacle side?
Vishwa, can you answer this question?
Yeah, sure. So, basically, the formulation margin in Pinnacle has been increasing, basically, because of a switch in the business model and growing exports. So, as a conscious decision, we are trying to replace our domestic CMO business to more of a value-added export business in Latin America, Asia, Africa, and now increasingly in regulated markets. So, as in every year, every quarter, our international markets' contribution to sales is increasing, and majorly, that is what is leading to the higher margins. So, we see that trend continuing, and the margin level is being sustained to the level that we achieved in the current day of.
Okay. Because just to clarify, if I do the numbers, it is coming out to be 20%+ margins, and that's a big delta coming in. So, I just want to ensure there is no one-off and 20%+ kind of a margin on the Pinnacle side is sustainable. Is that a right assumption to me?
Actually, we had a good year in terms of, in general, in formulation industry because of lower API prices and reduced API prices in general that has had a small impact. So, if material prices rise up sharply in the year, that could slightly reduce margins. But the major delta that you're seeing is because of a switch from domestic CMO sales to international sales, and that is not a one-off. That is the continued part of Pinnacle. So, that margins would remain at a higher level.
Okay, got it. Second question on this USFDA audit under Pinnacle, and what is the significance of that? And I think we were doing expansion on the oncology side also. But if I look at your new product on the formulation side, I don't see many on the oncology side. So, have we already kind of developed those products, and what is the roadmap for us scaling up in the US market on the formulation side?
Right. So, our oncology plant is brand new. We just started the plant. We commissioned the plant a few quarters back, and with the first filing, we could trigger the USFDA inspection. We have a strong pipeline of products coming in oncology. We are developing about 12-14 oral oncology molecules, which would all come into filing over the next 6-18 months. And many of them are kind of day-one launches, with patents expiring from 2025 till 2027, 2028. So, with the FDA audit approval coming, hopefully, in the next quarter, we should have more and more filings, not only for US but also for international markets. And that would start bringing us revenues from the oncology segment.
So, how many ANDAs we have already filed on the oncology side for U.S. market?
Only one so far.
Only one. They start in the pipeline. We'll do the filing and approval process for 18 to 24 months. It's like 2 years out, right?
Exactly.
Okay. Okay. Third question on the API side, Adhish, I think we have said that we have almost completed our CapEx, a very large part of our INR 600 crore CapEx plan. And we have said that we'll go to INR 4,000 crore-INR 4,500 crore in five to six years. But if I look at historically, we have generally utilized our capacity in 2-3 years at an optimal level. So, where is this disconnect? Because I think we have mentioned that at the full utilization, we'll reach those revenues. So, are we looking at slower ramp-up, or is it because of the negative rate variance we think it will take much longer to reach that number, if you can throw some light there? So, the negative rate variance will definitely impact, no doubt about that.
As far as the utilization ramp-up is concerned, in terms of quantity, so along with this greenfield, we continuously keep on expanding the existing products in terms of by debottlenecking to existing plants. And that is the reason why the reason our capacity utilization stays in the 70s in terms of percentage of the installed capacity is because we keep on adding those small, small capacities every year wherever we see the demand.
So, the thing is, 4,000, it seems doable, not that it is too optimistic. But definitely, last year, we suffered a lot because of the sluggish export demand. That was one of the factors which pulled us back. Apart from that, our domestic market did a fantastic growth of around 15, almost around 15%-17% in terms of volume growth. But it was the export market. It was almost around 10% volume growth was observed if we compare entire FY 2024 with respect to FY 2023.
No, I get that. So, my question is that earlier, our target was that once the CapEx is commercialized, we will optimally utilize it in 2.5 to three years. So, now we are at the end of commercializing most of the CapEx. Maybe a little bit of that is still remaining. But so, I'm saying journey to 4,000 or 4,500, whatever number you want to take, will it take 3 years, or will it take 5-6 years? In your presentation, you talked about five to six years.
Yeah. Actually, we need to update that a little bit, but we feel that once the project is streamlined in terms of the production capability, within three years, we should be able to scale up.
Okay. Got it. And last question on the margin, I think we have all along been saying that our normalized margin is around 15%-16%, bearing the volatility in RM and realization. And we have done that in the past. And with the new Capex being on the higher margin side and formulation kicking in, which again, we are moving to higher margin trajectory. So, once everything is fully utilized, is it that the company's margin profile will change from 15%-16% to maybe more like 17%-18%? Is that a right assumption to work with?
See, if everything goes well, it will achieve. The thing is, as of now, we have a very diversified basket in terms of APIs also, testing, and also formulation. So, even in the API segment, we manufacture almost around 40-50 molecules in a year. The top 20 is what is contributing the most, but the tail molecules will probably grow bigger in the coming 5 years. So, what happens is a few products here and there always are in negative cycles. So, reaching that 17%-18% EBITDA margin mark might be slightly difficult, but at least hitting that 15%-16% mark would be easier than what it is right now, I would say.
Okay. Got it. Thank you. That's it from my side. Now, I'll give it to you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Pooja Mehta from JC Securities. Please go ahead. Pooja Mehta? Participant line got disconnected. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Pramod from Unifi Investment Management. Please go ahead.
Yeah. Hi. Thanks. Good morning to everybody. Just if you can give some data on the volume and the price. Price variance is already given. When we look at the API, what will be the volume in the domestic and the export market?
Yeah. So.
Before?
Should I give you a few FY2020 quotes? Because sometimes what happens is demand of first quarter gets moved to second quarter. So, probably, I would first give you the landscape of volume growth for the entire financial year, that is, FY2024 versus FY2023. So, if you see, compare the entire financial year, we had a volume growth of, I think, 7% on a total basis. However, the domestic market performed well, and the volume growth was almost 16%-17%. Whereas the export market, there was volume degrowth of around 9%-10%. So, this was about the volume as far as the entire year is concerned. And as far as the quarter is concerned, means so, if you compare year-over-year basis, March 2024 quarter versus March 2023 quarter, we had a quantity negative growth of around 6%, and that is mainly because of the export market.
Because export market, we saw a degrowth of almost around 15% for the last quarter. Whereas for the domestic market, it was almost flat. Hardly 1% declined out there. But in domestic market, I would say still the performance was good because March 2023 quarter, that is the last financial year, what happened was that the first three quarters, selling prices were so high that there was continuous destocking of API by the formulation company. And when the prices collapsed finally in December 2022, that is when, in the March 2023 quarter, suddenly, there was a lot of buying of API by the formulation company. And hence, the volume domestic market in March 2023 quarter was very high. And comparing to that quarter, now we have done almost just 1% less.
So, I would still say that the volume in the domestic market is good, but it is the export market where we need to perform really well. And we are hoping that in the coming financial year, all those destocking is completed. The interest rate cycle now will move downward. So, there will be more government tenders in terms of the foreign countries giving tenders to their local formulation companies, which in turn creates export market demand for us. So, it should be better for exports.
Okay. So, when I say the export is down 15%, it's a volume term, right, in the Q4?
Yeah. I was talking about the volume. Yeah.
Okay. And then as you said that the situation is improving now, so what we are hearing from the customers now, is it the destocking is completely over, or still they are into the same phase? And another to that was, earlier, there were a few of the countries that were facing the dollar issues, the availability of the dollar. So, are our customers or the countries in South America or Africa have overcome those issues now? Any update from the customer?
As far as dollar shortage issues are concerned, definitely, those are minimized as compared to last year. Last year, it was much severe. However, what we need to be watchful of is the current geopolitical tensions in the Middle East. More and more countries should not get involved in the conflict. Otherwise, then the situation might be a little dicey.
Okay. We are waiting for the FDA inspection for our API plant. So, any update on that? Have they come back, or they're still status quo?
Yeah. So, it is status quo, frankly speaking. Though we have recently sent a reminder also to the FDA office. So, as we said last time, that our file has been moved from the response review department to the warning department now. That is the inspection department. So, because we have import alert on the API facility, standing import alert, I think most probably, the inspection will be surprise one.
And because the FDA calendar, we really start from October to September. And from October onwards, only the file has been moved to the inspection department. So, we are hoping that in this year, this year of FDA's financial calendar, there has to be some activity. So, this might lead to triggering inspection. And three of the ANDAs are active, which are between our DMFs from that USFDA plant. So, those customers are also calling us to the FDA now. So, we have also reminded directly to the FDA inspection office. So, probably by September, we are checking further because there might be some kind of surprise inspection.
Okay. Great. When you said that on the formulations, yeah, that we have filed one for the US market, and we are going to file another 12-14 more molecules, what kind of a total capacity we are looking in the formulations over the next one and a half year, once all this filing is done? And what kind of the revenue we can target, say, in 2026?
Yeah. We shall.
Formulation.
Specifically for the oncology segment that I mentioned, 12-14 products, the potential revenue, the new revenue that we can target is about INR 300-350 crores of additional revenue, which would take the next 24-36 months considering the approval times and for the products to be launched. But yeah, 24-36 months down the line, oncology revenue should be at about INR 300 crores. And apart from the oncology, even in the non-oncology space and non-US markets, we are filing a lot of cardiac, diabetic, and other segment products, which would also lead to a good growth on the non-oncology segment as well.
Okay. Okay. Great to hear that. So, that means our current rent, which is around INR 300 crore today in the formulation, can actually double over the next more than double over the next 2-2.5 years?
Over the next three years, I can say. Yeah.
Next three years. Okay. Great. Thanks. This is from I will come back on the queue.
Thank you. A reminder to all the participants, you may press star and 1 to ask a question. Ladies and gentlemen, you may press star and 1 to ask a question. The next question is from the line of Pooja Mehta from JC Securities. Please go ahead.
Hello, sir. So, I have a couple of questions. So, what margins in future do we expect, given the raw material prices and selling price fluctuating? And we have a good cash flow from operations on March 2024 due to releasing working capital. The short-term borrowing has increased versus March 2023. So, could you throw some light on the same?
Yeah. Actually, the short-term borrowing is only INR 215 crores at a consolidated level. Probably, that might be the term loan installment what you're talking about. The short-term borrowing is now only INR 215 crores. So, it must have decreased as compared to last year. Our long-term borrowing is up to INR 348 crores. So, the total debt stands at INR 563 crores at the consolidated level. So, for the debt-equity, it has also gone down to 0.44 at a consolidated level and 0.4 at a standalone level. Now, as far as the margins are concerned, gross margins have been continuously improving on a sequential basis in the last financial year, quarter on quarter basis. So, with the current selling prices of API, we expect that the gross contribution should go at least till the level of 35%. And right now, it is just below 34%.
We hope that around 1% more improvement should be there as far as gross contribution is concerned.
Okay. Got it, sir. Thanks a lot.
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and 1 to ask a question. Next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Yeah. Thanks for the opportunity again. Can you just guide on the CapEx because for FY2025 and 2026, since we have already completed the major CapEx?
Yes. So, last year, we almost did an investing cash flow from INR 226 crore. So, our two greenfield projects, one was almost done, which it was put to use. Only some ramp-up was pending, which is still pending now. And the Saykha one that will come in towards the end of Q1, I would say. So, that's where our CapEx would be there for FY 2025. And we are estimating we have set a budget of around INR 200 crore-INR 250 crore for the coming financial year, that is FY 2024 to 2025
Okay. And so, this will be the last leg of the CapEx from FY 2026. We can just expect maintenance CapEx to go up?
From FY 2026, other thing is, we will still be introducing few products, but the CapEx required may not be that high. At the formulation side, we might require some CapEx for developing more and more developing and registering more and more oncology products. So, we'll be keeping budget for that as well. Apart from that, on the second side also, we have one or two products which we want to launch. So, right now, those projects are on paper. So, once it is finalized and we decide to go ahead with the CapEx, then we will announce the CapEx plan very soon.
Okay. Otherwise, it will be more or less in the range of INR 150 crore-INR 200 crore, right?
Y eah. Correct.
Okay. Another question is on your working capital cycle. Your receivable base has actually come down in FY 2024 versus FY23. Which will be more or less similar for the future also, or do you feel that it will pick up with the sales also picking up?
So, the receivable base slightly might get impacted on the opposite because I will tell you the reason. The reason why this operating cash flow is suddenly released for March 2024 is because there was a tremendous price reduction. So, for similar kind of growth, now the working capital required is much lesser. And that was the main reason why there was no doubt, overall, the receivables are good. Fortunately, there are no bad debts as such. But then we feel that the release in the operating cash flow has come mainly because of the lower selling prices and the lower requirement of working capital. Thank you.
Okay. Thank you, [inaudible] .
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Reshma Jain from DSP Asset Managers. Please go ahead.
Yeah. Reshma here from DSP. So, one question on the overall.
Sir, you're not audible.
Audible, yeah. Am I audible? Hello?
Yes, sir. Better.
Yeah. Okay. So, just one question on the overall CapEx which you have incurred. Let's say three years out, what kind of EBITDA trajectory you're looking at given that, let's say, last four years, if I take 2021 as a year when you had kind of very good benefits because of COVID and all, but 3%-4% kind of CAGR growth at EBITDA level. So, let's say three years out, what kind of EBITDA growth you're looking at at the company level, consolidated?
The thing is, I don't have a number already right now. But then the thing is, we are hoping that we'll be reaching the INR 4,000 crore turnover soon. And the steady state, if everything goes well, should be in the range of 15.5%-15% at a turnover of INR 4,000 crore.
Okay. So, basically, doubling of EBITDA in next three years.
Yes.
Okay. Perfect. Thank you.
Okay. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Next question is from the line of Pramod Dangi from Unifi Investment Management. Please go ahead.
Yeah. Thanks again. Hello?
Yes.
Yes. Thanks again. You just said in an earlier question that the price variance which we are looking at for this year is around 5%-8% negative given the higher base of 2024. How did it pan out in the June quarter and September quarter? Should it be higher in the June quarter, and then it will go down as the higher base goes away? And by December, we will see the positive price variance. Is it how it should look?
Y eah. I understand the question. But yeah, so last, that is FY 2024, the prices have been falling slowly. Every quarter, there was a decline. So, if I compare year-on-year, just the March quarters, March 2023 and March 2024 quarters, so in domestic market, there is almost a decline of 15%. And in the export market, there is a decline of almost 10%-11% in terms of rates. I'm talking just about rates. So now, the March 2024 selling prices, we are expecting them to continue for the FY 2025.
So, the initial half, the first half of FY 2025, the negative rate variance would be relatively more. It won't be to the tune of this, what I just told you, that is 15% and 11% because in June quarter itself, there was some negative price variation as compared with the March quarter. That is, I'm talking about June 2023. Yeah. So, for the first half, there's a relatively more negative price variance. But then the second half, it will be quite reasonable.
Okay. We are looking at least, you said, 7%-8% volume growth for full year, right, including the new capacity, or it will be like 10% plus?
Okay. So, for the last year, FY2024, we did 7% volume growth. But for the coming year, we will definitely target around 15% sort of volume. Internally, we should target around 15% sort of volume growth even the addition of new capacity.
For 15% volume growth, 7%-8% negative price variance. Top line will be like high single-digit top line growth we would have for the full financial year.
Yeah.
Okay. Good. Thanks.
Thank you. A reminder to all the participants, you may press star and 1 to ask a question. Next question is from the line of Yug Mehta from AP Capital. Please go ahead. Yug Mehta? The participant got disconnected. Ladies and gentlemen, you may press star and 1 to ask a question. Next question is from the line of Nikhil Upadhyay from SIMPL. Please go ahead.
Yeah. Hi. Good morning. Adhish, just one question on the previous participant. You were explaining the pricing. If you can just help me understand again, I missed some part of it. If we consider first half of 2024 versus second half of 2024, why or why, how the prices trend would have played out? And secondly, at the end, you said that in first half of 2025, there will be some minimal price impact, but second half pricing should be better. So, if you can just explain that bit again. Sorry for that.
Yeah. So, what I was explaining was that over the period of last 12 months, if we are talking about March 2024 quarter, I think, so over the period of last 12 months, the domestic market, there was negative price variance of almost around 15% one side. And for export market, it was around 10.5%-11% negative price variance. Now, this negative variation, that happened month-on-month in the last financial year. And in fact, in December and March quarter, it was very minimal. The movement was very minimal. So, that was the reason I was talking that because FY 2025 selling prices will be more or less similar to that of March 2024 quarter. March 2024 quarter selling prices will be similar to FY 2025 selling prices.
That is why I was saying that the first half of FY 2025, you can see a little bit of negative price variation. But for the second half of FY 2025, the negative price variation would be very minimal as compared to the previous year, year on year, I'm talking about.
Okay. Thanks for that explanation. And just one last question. See, what we had also seen is that many of these molecules because post-COVID, there were a lot of capacities which had come up both in the domestic and in China market and other competitive markets. Now, in last one and a half years, how is the situation on the capacity side, both at the intermediate and among our top 10 molecules? Are you seeing rationalization or some idea there?
So, as far as our API molecules are concerned, let's say the top 15 molecules, the APIs which we manufacture in the stand-alone country, over there, apart from Metformin, Metformin product, there has not been any capacity increase because most of those top 15 molecules are mature molecules. So, there was not much capacity enhancement observed in the market for those molecules except for Metformin, which is a growing product. So, apart from Metformin, we haven't seen any sharp increase in capacity. Not even forget sharp, but we haven't seen any significant increase in capacities for the top 15 molecules of ours.
Okay. So, which means that all this pressure was mainly because of this inventory destocking, which.
Mainly, yeah, for our molecules, mainly because of that. But if we talk about the tail molecules , let's say 16th to the 40th molecules which we are manufacturing, in that space, definitely, even we have added the capacity. So, in that space, there will be capacity enhancement. But for the existing molecules, there is not much.
So, among our top 15 molecules, we've not seen any major capacity addition except for Metformin. So, there, it's largely that inventory destocking which impacted.
Yeah. Correct.
Lower-end molecules, the capacities would have come. Even we have added capacities.
Correct.
Okay. So, on the inventory destocking side, based on what you are talking or your customer feedback, what are you hearing? Are there any sense? So, on the volume side, you said we are now seeing volume growth, and even next year, you said volume growth should improve. But then, shouldn't it translate into a better pricing also if there is no more capacities which have come up?
Right. The thing is, people are having that much capacity already. Last year, the exports were quite down, frankly speaking. So, the increasing demand may not lead for existing top 15 molecules I'm talking about unless, see, overall, the pricing levels will go up. That is purely because the export selling prices are higher than the domestic selling prices. So, purely because of the increase in the proportion of exports, our composite selling price should go up. That is one thing. But within the export market itself, the pricing impact means it will be stable. I won't say it would be better, but it should be stable for increase or decrease.
Okay. Sure. Thanks a lot. I'll come back.
Okay.
Thank you. As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Okay. Thank you, everyone, for joining us today on this earnings call. We appreciate your interest in Aarti Drugs Limited and the questions you asked. If you have any further queries, please contact SGA, our investor relations advisor, or you can directly reach back to us at them. Okay. Have a nice day.