Ladies and gentlemen, good day and welcome to Privi Speciality Chemicals Limited, Q4 FY25 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 during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. 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 guarantee of future performance and involve risk and uncertainties that are difficult to predict. I now hand the conference over to Mr. Srikant Sanghani. Thank you, and over to you, sir.
Thank you. This is Srikant Sanghani from SGA. Thank you, everyone, for joining us today to discuss Privi Speciality Chemicals Q4 and FY25 business and financial performance. The financial results and investor presentation are available on the company's website. The recording of today's earnings call and transcript will be uploaded on the company's website under IR section. For today's call from the Privi team, Privi team is represented by Mr. Mahesh Babani, Chairman and Managing Director; Mr. R. S. Rajan, President; Mr. Narayan Iyer, Chief Financial Officer; Mr. Sanjeev Patil, Senior Vice President, Strategy; and my fellow colleagues from SGA team. Please note there may be forward-looking statements during the course of the call and must be viewed in an aggregate with the risk that the company faces. With this brief introduction, I now invite Mr. Babani for his opening remarks. Over to you, sir.
Thank you, Srikant. Good evening to all of you. We are pleased to report the best-ever quarterly and annual financial performance, marking a significant milestone in our journey. The year 2024-2025 has been good for the company, with all-around improvement in all areas of the company. The performance has been achieved through process intensification, leading to yield improvements, new specialty products being launched during the year. As these factors will continue in the future, we are confident of sustaining this growth with margin. Key highlights of the year gone by are that the demand for our co-products is healthy, and our plants are operating at an optimum level. Of course, we are de-bottlenecking capacity further because of the demand. We have also developed two new premium products to be launched in this current financial year, where during mid-year, it will be operational.
A previous update is that the plant has been successfully commissioned. It will take one year more to break even. As you know, chemical plants, it's not so easy to get the practice in place so that because these are high-value, very high-value specialties. However, the future is very bright and certain since these are going to be sold back with the buyback arrangement to the subsidiary company. That is why we are very confident that the future is very, very bright for this particular vertical in particular, as we are dealing with the market leader of the entire world. Over the decades, your company has emerged as a trusted partner to almost now all companies in our field. The compliance of our company is of a high standard, and we endeavor to be best in class.
Our capabilities have grown significantly, both in scale and complexity, driven by deep client engagement and a relentless focus on innovation. We are transitioning from being a leading supplier to a collaborative partner, strengthening relationships, and creating long-term and sustainable value for our customers. Our core strength, however, lies in our robust backward integration, particularly through CST and GTO strategies. The integration ensures consistent quality, cost efficiency, and, of course, long-term security of supply of critical raw materials, giving Privi a distinct competitive advantage. It also enables great control over the value chain, as these are raw materials which are always in short supply, driving innovation and reliability in delivering high performance aroma chemicals to global customers. While driving growth, we remain deeply committed to sustainability.
Our current gold rating from EcoWare further validates our proactive approach in aligning the global best practices, reducing carbon footprint, and also extending ESG disclosure. We are now striving for a platinum rating, and we are not far from it. Additionally, by increasing our share of green power, we have also reduced energy costs, also reinforced our dedication to sustainable energy solutions. This is only the beginning of our growth story, my friend. It will also endeavor to be number one aroma global chemical company. Strength, we are not far from it. I now hand over to our CFO, Narayan Iyer, for detailing on the financials. Narayan, please.
Thank you, sir. Thank you very much. Good evening to all my dear investors, stakeholders, and all those who believe in Privi and who are there on the call. The year that has gone by has reaffirmed our belief in Privi's growth trajectory. With strong operational execution and a favorable product mix, we are confident that Privi is well-positioned to sustain healthy growth and deliver robust profit margins going forward. Let me share some of our recent developments. All our key products are currently operating at optimal capacity as demand for all key products is very healthy. Our units have all been operating at close to 85-90% of our capacity. As has been informed, we are actively working to expand our production capacities for our key products and take it up from 48,000 metric tons to 54,000 metric tons.
We expect this expansion to complete by March 2026. During the year, the company had launched various products like Indomaran, Florovan, and Amber ODHP. These products are used in day-to-day applications like hair care, personal care, and laundry care, and they have been very well received in the market. I would also like to highlight on the U.S. tariffs that have been going around. We really do not anticipate any significant impact from the ongoing U.S. tariffs, as our presence in the U.S. market is limited to around 10%. At the moment, almost all countries supplying to the U.S. have to bear higher tariffs than India. Moreover, our business is widely spread across the domestic market, the European markets, the Asian, and the Latin American and Middle East markets. These were the key developments that I had to talk about.
Now coming to the major financial highlights, starting with Q4 for financial year 2024-2025 Q4. The total income for this particular quarter was a record INR 628 crore, which is a growth of 28% on a year-to-year basis. The EBITDA came in at INR 147 crore, which is a growth of 50% on a year-on-year basis. EBITDA margins, once again, are at a record high of 23.5% for the quarter, and we expect to maintain similar EBITDA margins in the near future. Profit after tax for the quarter was a healthy INR 64 crore, as against INR 32 crore, which indicates a 100% growth over the previous year. Lastly, the exports contributed to about 72.5% for this particular quarter.
Giving highlights for the entire year for the year 2024-2025 in comparison to the earlier year, during the year, the overall income or the overall revenue stood at INR 2,122 crore, which is a growth of 19% on a year-on-year basis. Overall, EBITDA for the year was a very healthy INR 474 crore, which is almost a growth of about 37% on a year-on-year basis. EBITDA margins were at 22.3%, as against 19.7% for financial year 2023-2024. Profit after tax for the overall year was at INR 185 crore, as against INR 95 crore achieved in financial year 2023-2024. Exports on an overall basis were at 70% for financial year 2024-2025. My dear friends, in the overall interest of all stakeholders and investors of the company, we have restrained from publishing certain sensitive information like quantitative and assessment-wise dates. I hope you all will understand this.
With this as a background and on a very strong footing, I would like to conclude my address on the number and open the floor for questions and answers. Thank you, and over to you, Srikant.
Thank you, sir. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sudhir Bheda from Bheda Family Office. Please go ahead.
Yeah, good afternoon, sir. Hearty congratulations to the entire Privi team for outstanding results, sir.
Thank you.
Thank you.
Thank you.
Thank you.
Sir, my first question is, you did 23.46% EBITDA margin, including other income, in the last quarter. So this kind of margin, 23-23.5%, is sustainable over a period of time over this current financial year?
Mr. Bheda, I would think that north of 20% will always be our target. We'll always try to be above 20% for sure. As we grow, we may have to compromise to a certain extent by 1% or 2%, but we'll try to maintain north of 21% for sure. This has been our endeavor to be in the specialty chemical business, and we expect that these margins are good enough to sustain.
This margin, 23.5, for what we delivered in Q4, is to do with any other income that our other income is quite high in this quarter. Can you throw light on it?
Mr. Sudhir Bheda, good evening. Narayan here. It's not just the other income. It is more with regard to, as Mahesh had addressed, with the process innovations and yield improvement that we were able to get these margins in this quarter, in fact. Yes, there is a little bit of other income in this quarter which has added to it. Overall, the margins will be sustained because of our process innovations and the bottlenecking that we are going ahead with.
In fact, Mr. Bheda, this is Sanjeev here. In fact, if you look at the last eight quarters, we have been consistently earning about 20% EBITDA margin. This has been the result of substantially improved processes, better yields, and also superior product mix. This is what has resulted in these higher margins. The quarter four is slightly higher, as Maheshbai said. That's about it.
Yeah, got it. Got it. Sir, any guidance you would like to give for current FY2026? Sales growth and margin of.
We do not want to give a very forward-looking statement, but we will minimum try to maintain our average growth rate of 20-25%.
Great. Sir, last question. In the standalone and in the console, there is a difference of INR 33 crore of revenue. I am talking about the revenue. In these INR 33 crore, what is the contribution from Privi ? When will it break even or start contributing to the bottom line, Privi ?
Yeah. Privi has just about started its operation somewhere in February 2025. There is hardly any contribution coming onto the revenue front, about INR 40,000,000 or so. As Mr. Mahesh Babani indicated in his initial opening remarks, Privi will start possibly break even from somewhere around a year from now, maybe 2026, 2027. It will start contributing both in revenue and the margins, in fact. Margins, as indicated in the past, should be around the 20% plus range only, in fact.
It's an assured business, and it will keep on growing.
It will not have a growth of 25%, but 10-15% in Privi will always keep on growing because the average growth rate, whatever the normal in the market is, GDP growth, 7-8% will always 10% for Privi. It will not grow exponentially, but it has a potential to reach about INR 300-350 crore of top line in the next three-four years.
As we have said it earlier, this is a very strategic fit. It has to be seen in that entirety.
It's like a customer service to the great market leader.
Yes, yes. Thanks for the opportunity and all the best.
Yeah. Thank you.
Thank you.
Thank you. The next question is from the line of Bharath Shah from ASK Investment Managers Limited. Please go ahead.
Yeah, hi. Good to see heartening results. A little bit of a note of doubt from my end. This is not as much as to what has been done, but because of lack of adequate understanding at my end. You earlier mentioned that sustainable growth over 20% and margins in excess of 20%. Two points come to my mind. One, when I look at the nature of your clients, the consumer firms, the fragrance firms, the other household article producing firms, given the nature of your clients, it's a bit surprising that how do we expect to grow at a sustained rate of 20%? Secondly, when I look at our own history, while top line has grown over a period of time, the same thing can't be said about the profits. Profits have been uneven.
Actually, the profits here exceeded that of 2021, year of 2021, for the first time in the current year. Even the top line growth over five years has been about 12-13%. I am curious to understand what makes you confident of that high 20% growth rate. Also, considering a little checkered past, why that confidence on the growth rate is not as on the profitability?
I appreciate your introspection on the balance sheet. The growth actually comes from we are at the lowest end of the prices over the last five years. If you see our prices of our main product, it was always in the region of $6, $7, which was it came down from $10 to $6 in the last six years. Only if it bounces back to even $8, $8.5, the growth comes from also there. Also, the volume is increasing of these important products. You see, the growth is coming from countries in Asia, India, Africa, where the usage of aroma chemicals has been very insignificant in the last 10 years. Now these people have started using, like India, it never had an awareness of a perfume soap. It used to have only light boiled soap.
Now, you see the variety of soaps that are there, all are perfumes. You see the variety of deodorants that are there. There was no concept of deodorant 10 years ago in India. These new markets, the new air fresheners, the hygiene conditions have improved. The floor wash, everything is increasing in India itself. Forget also the export market or the African market and the Asian market, and also Dubai and the other areas. The markets are improving significantly. The awareness of cleanliness is coming. Awareness of hygiene is coming all over the world. This has been actually, after COVID, this has taken a fast track to increase our shares. The demand is much higher. Today, the prices have also come down to come up to we are at now $7-$7.5.
Going forward, I think it could be even 15% higher. Average price. The other thing is that previous comfort with all the top customers is that we are very sustainable. Therefore, as you see, we have invested in the last five years into Camphor, then into Cadinol, as well as Farnesol. These products are leading to a significant growth. That is what is resulting into this 20% growth. All along, we have been growing by introducing newer products. We have been able to get the market share from our customers. They are the same customers to whom we keep on selling the same products because the market end customers are only so many. Therefore, we are able to grow at that level. That is why we are able to beat the market consistently.
Last five years have been the same, but that I will explain in longer detail to you in one-to-one meeting perhaps. We grow by introducing newer products.
No, thank you for both of those. If you look at almost two-thirds of our business, it is coming from international markets, be it in Europe or Latin America or Asia and the other markets. Now, Europe is hardly growing in most of the areas. Most of Europe seems to be frozen in time.
Sorry to interrupt, Mr. Bharath. Could you move a bit closer to your phone?
Are you able to hear me clearly?
No, I would ask you to move a bit closer to your phone. We cannot hear you well.
I'm inside my phone. I can't get more closer to my phone than this.
Yeah, it's audible, sir. Please go ahead.
Okay. My question was that more than two-thirds of our business is coming from international markets. When we look at the composition of markets like Europe, where there is hardly any economic growth, some of the other markets are in a better shape, but not at the level of 20% kind of potential. Given all of that, what makes you confident? I'm not really, as I mentioned, this is more to educate myself. Please pardon my ignorance, but I'm not able to grasp, given the more checkered history over the last five, six years, and given the fact of the client base, the geographies, as well as the nature of the client industry, consumers, fragrance. We are a mature industry. While the hygiene has improved after COVID, in the three years after the COVID, we have regrown in our profits.
While fragrance would have improved in soaps and shampoos and all of that, but it is not exactly a novelty. Therefore, it still beats me as to why would you believe that a high 20% kind of growth will prevail going forward?
We are confident of our growth as we see our order book position. We also are working closely with clients. We have much more clients right now, customers who are given commitment. Earlier, we had only three key customers. Now, we have six key customers. Probably all the top 10 companies are our customers. Also, let me tell you that hardly 7% of our market share is in the U.S. These products are not being produced in the U.S., so that will not make any significant difference. The growth of our products also comes from new art from Africa. There are several companies in Africa who want these products made in India or made in Dubai. Our growth in this area is also increasing. We have at least five new customers who are good size to support this.
We are confident with our order book position. We will be able to maintain our share of our business, our 20%, 25%, 30% growth.
Bharatbhai, it is an honor that a person of your stature is asking us these questions. We would definitely like to talk to you offline also.
Sure. Sure. No, I appreciate it. One last thing. While return on capital employed and return on equity have improved in the current year, and of course, earlier, our profit suffered, so I understand capital efficiency would have declined in that three-year period. When do you think, given the fact that our markets are more international, therefore, working capital structurally, I suppose, would remain high? I do not know what kind of fixed asset terms optimally can be expected. Given the nature of high working average fixed asset terms, when do you think we can see more healthy, say, 23-24% kind of return on capital employed? At what state do you think it is possible? If at all, it is likely to be the case.
Bharatbhai, good evening. As far as the fixed asset turnover that we talked about, it should be in the range of around 1.4, and we are moving towards going to 1.6-1.7 in the coming few years. Working capital cycle, definitely, we have been striving hard, and we have been successful enough in bringing it down. You would have seen that over the last two years, our working capital overall cycle has come down. We still expect there is scope and room for improvement, at least by another 15-20 odd days, we can bring down the overall working capital cycle. That is.
Yeah, Bharatbhai?
Yeah. Sorry, I'm listening. Would you continue or you are?
I thought that someone was interrupting me in that. We expect our working capital cycle to improve. That is how we will help and enable our ROE, ROCE to further grow above. The levels that you have spoken is our also aspiration. We feel that we are striving towards it, and we should be able to reach there shortly in the coming few years, in fact.
Okay. Thank you.
I also want to tell you, today, the market scenario, where specialty chemicals are fanned out, sustainability is a key word. A supplier in coming times, I can tell you, will be more important for a customer than his customer. Today, suppliers will be more important than his customers. That's what I see times coming. I'm sorry, but this is my honest observation.
No, thank you for that. If you allow me one last thing, if the asset turn is to 1.4, maybe it will improve to 1.5-1.6, but let us say it is 1.4. Therefore, INR 100 of assets will produce a turnover of INR 140. Given the kind of working capital, on that INR 140, we will need to invest about INR 35-INR 40 minimum, if not more, in working capital. That means INR 140-INR 150 of total capital will generate a turnover of about INR 140. Therefore, one is to one. If we take our EBIT margin at about, if I say EBITDA margin at about 23%-24%, EBIT margin should be about 17%-18%. Therefore, capital efficiency at best can be around 17%-18%, unless margins improve materially from here or fixed asset turns improve significantly from here, or working capital can come down dramatically.
None of these in the foreseeable future can change dramatically, is my impression. Therefore, I'm not clear why 23-24% of return on capital employed, how and when it can be achieved.
Bharatbhai, specifically to answer, as I said, we are in the process of deploying and adding some capacities. These capacities are more with regard to de-bottlenecking and augmentation. The CapEx required for such expansion is not on the same line as we had to do when we initially set up our existing plant. That is how I also happen to tell you that from 1.4, 1.5 currently, it is going to move towards the 1.7-1.8. In some products, it may even be closer to 2. We definitely are going to improve upon our asset turnover. Second, I also happen to mention that we are in the process of further reduction or further improvement of our working capital gain. That will also add. Your equation about being one is to one may not be so true.
Last but not the least, the entire world is looking at India because they all would love to see someone other than China really taking the battle ahead. I do believe and be foresighted that PB has a great chance to achieve those numbers, what you happen to mention.
Thank you so much. All the very best. I will look forward to detailed personal introduction to understand better. Thank you very much for all the elaborate discussion and details.
Thank you, sir. Thank you.
Thank you. The next question is from the line of Rohit Nagraj from B & K Securities. Please go ahead.
Thanks for the opportunity and congrats on a very good set of numbers. First question is in terms of the growth for FY26. Given that all our capacities are operating at optimal level, how do we foresee volume growth coming in for FY26, given that the de-bottlenecking exercise will only be completed by the end of March 2026, and it will be applicable, the new capacities will be applicable for FY26? What's your view on this? Thank you.
Rohit, good evening, and thank you for appreciating our performance. We are having some certain capacities yet to achieve to our optimal capacities that we have. We hope to grow the balance 15% that we have. Meanwhile, we are also debottlenecking some of our major products. That is how the growth will come for the year 2025, 2026. We are very, very optimistic of the 20% plus growth in this year, in fact.
Sure. The second question in terms of growth that we are seeing from the volume side, new product side, just slight understanding as Bharatbhai was also asking, is that globally, are there other players who are not expanding capacity and because of which we have a better chance to play into it? Is it that generally the growth itself is higher for these products? That is why we are seeing even after some competitors are putting up the capacity, we still have a chance based on our interactions with our customers. Thank you.
Yeah. The answer to this question is, yes, others can also expand, but the speed at which PB puts up capacity is something very, very important. Also, the fact that when we put up the capacity, the kind of plants and kind of assets that we build in terms of sustainability, in terms of zero liquid discharge, that is what gives edge to PB as compared to many others in the play. Overall, dependability that PB has developed over the last two decades, wherein you can see that in the three products that we have introduced, we have fully sold and expanding further already. That is the level of comfort that most of our customers have.
The new products that we bring in are always brought in close connect with our customers so that we are aware of what are the products on which our customers are demanding new products. That is how we get more share of the value from the same customers. It is not only China plus one, but also Europe plus one, U.S. plus one as a strategy. Because whatever is happening on the tariff side and all that, most companies, leading companies, are looking at buy versus make decisions, most multinationals. Therefore, since we are competitive and we have reached a particular threshold level of growth, we are able to attract and convert many of the existing products for a customer.
If you are making it himself, then he is deciding to outsource that from us because we are able to provide it competitively. Also, the China plus one factor, which all of us know very well, which is also helping us.
Sure. Just one last small suggestion. I know from comparative purposes, we do not want to give a setup of volumes. If you can share just the overall aggregate volumes on a quarterly basis, it will be helpful just to understand in terms of the growth path on volume terms, where are we currently? That is it from my side. Thanks a lot and all the best.
Thank you.
Thank you. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Abhishek Ranawade from Oak Lane & Capital. Please go ahead.
Hello.
Yes.
First of all, congratulations, sir, for such a solid result.
Thank you.
Thank you.
My question was, could you please share your product category along with the corresponding margin for each category? Is there any shift happening towards the value added since last?
Giving information between the category of products and their margin is really sensitive. We would not like to put that up in a public domain. Please respect that. This is in the best interest of all the stakeholders, including all the shareholders and others. Therefore, we will rather defer from giving that information. In terms of changes in product mix, there is no drastic change. What you have to understand is there is a steady change, and that is an evolving process. Existing products also are doing well, and the new products also are doing well. Overall, it has been a good time, and it will continue to be a good time to come in.
Okay. Okay. So can you tell me for the current existing product? Hello?
Mm-hmm.
For the existing product category, so the EBITDA margin expansion, is there any contribution due to the shift is happening or?
Yeah. If you see the presentation that we have put up earlier, in terms of product, that value-added product that we make, those are contributing better, and that is what is adding to the value. Okay. We also now have products which are in that whole product basket range. We have products which are expensive, over $100 products, which is adding value to, even if the quantity is small, the value as well as the contribution is significant.
In coming years, can we expect that this shift will be faster, or is there any trend going on?
Yes. Yes. That is what we are working on.
Certainly. Certainly.
Yes, we are working on that.
Sir, as you said, that input cost for you this full year was lower. What was the reason behind it?
That is input cost as in you have to see it in terms of improved yields. It is not that the cost of raw material has substantially gone down. It is because it is improved yields, which is resulting into lower material cost.
Okay.
It is a function of improved yields as well as the value added products that we talked about. We are able to manufacture products from our side streams. In fact, that has been the journey of Privi for the last about seven years, wherein from many side streams, we have developed products which add significant value. Instead of disposing the side streams as a normal chemical or a solvent or a fuel, we are able to add value. That is what has led to significant improvement in the margins. That is how the costs have come down.
Okay. Okay, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Manish Otswal from Nirmal Bang Securities Private Limited. Please go ahead.
Yes, sir. Thank you for the opportunity. I have a question on the full year performance. We have shown 19% growth in our revenue. My question is, given our key markets, is it a function of we added a lot of customers in the last one year or because market growth rate is much lower than this growth rate? What is the function, whether we added more products last one year, which are helping us to deliver 19% growth? We added customers. We added geography. Can you explain the 19% growth? What is the volume growth in our business in FY25?
As we have stated, I would once again like to repeat that we are getting more share of the value of the customer. It is the same customer. Let us say I have introduced Musk range of products. Now, it is the same customers to whom I go to sell. Because of our reputation, we are able to get a better share of that value. We have also got some new customers and new geographies also. It is a combination of all the factors which is resulting into higher growth rate, and it will continue to grow.
Okay. Second, I want to understand this expansion in the gross margin on the full year. Can you explain the factors which contributed to the expansion in the gross margin for the year?
As I already explained, it is the product mix that we now have, which includes products which are high-value products selling over $100 per kilogram, as well as the products that we make from the side streams. From the side streams, we make products which give higher contribution, and that's how our overall gross margin improves. Am I able to answer your question?
I mean, is there any supply cut in our chemical, in our product segment, where the prices shoot up because of that?
No.
No. Okay. Thank you, sir.
Thank you. The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah. Thank you for taking my question. Given that PB is transitioning from supplier to partner in terms of co-development, this will probably require fresh investments in things like enhancing the capabilities in terms of hardware, lab equipment, software, as well as scientists. What kind of investments do you anticipate in the current fiscal? If you can give us a sense on the medium-term outlook. Thank you.
We are confident that we will be able to keep our growth rate at about 25%-30% for sure. We will come back to we are planning and working out the growth potential for several products which are in demand from our customers. We are working out the project cost. There will be a CapEx plan in the coming year where we are confident that we will be able to multiply and keep a continued growth for the company.
I completely understand the strategy.
Sure, sure. China plus one, I'm completely also optimistic that given you have been a leading industry player over several decades, you know your vantage point, you see better than any one of us. I mean, given the fact that we all know that future is unpredictable, I mean, no one knows. No one saw this U.S. trade, U.S.-China and trade tariffs coming at this kind of intensity, right? Future again is unpredictable. My question is more broad in the sense that given PB was always a catalog or a product company, and we were not offering our capabilities or scientific capabilities as a service until we start this JV with Givaudan.
Now, given the success of this JV, which is more of a service manufacturing development and manufacturing services, clearly, I think PB sees this as an additional growth revenue stream, but that will also bring its own set of challenges and investments. My question was more broader in that context.
You hit the nail on the tread as you say, but PB's capability in terms of R&D, we already have 90 scientists who have, and most of these guys have been with us for a very long time, including the team leaders. They understand the nuances of aroma chemicals industry very well and aroma chemistry also very well. From pioneer chemistry to musk chemistry, what have you. All of that they understand very well. In terms of laboratory equipment, in terms of capabilities at the lab, instrumentation, and all of that, we are state of the art. We have all of that with us. It's only that we are now offering the services more aggressively, and we see huge amounts of potential in this thing. Many of these investments have been done in the past. That's how our issues have been trying to work.
All that is now paying off in terms of our sustainability, in terms of our lab standards, in terms of the people that we employed. All of that is now paying off.
No, absolutely. I think Mr. Babani in his opening remarks spoke about yield improvement. Again, these yield improvements, they are not lucky breaks. I mean, these things happen after a very long period of what is called the learning curve or the experience curve where scientists try multiple iterations over a very long period of time before you get a breakthrough like a yield improvement, right? On a sustainable basis.
Yes.
Yeah, absolutely. My question, my second question is, so that was just a broad comment. I completely agree with your views there. My second question is, history tells us that for every 27-28% growth in per capita GDP, the demand for aroma and niche chemicals doubles. So 30% give or take GDP per capita growth. It's a very non-linear growth curve, if you see. A small change, which is just 25% give or take, happening on the per capita consumption is doubling the market for niche, aroma, specialty, fragrance, chemicals. Is that where you are? Is this the reason why you are optimistic in terms of sustaining a growth momentum? I mean, whether it comes out to be 15% or 25%, that's anybody's guess.
Yeah. That is also one of the key reasons you have very rightly pointed out in terms of trends that every increase in GDP leads to multiple effects on the aroma chemical consumption. As the living standards are improving, which Mr. Babani referred to, those demands also are increasing. We are therefore feeling and also always remember our increasing share of value of the customers. Because when we introduce a new product, it is done with huge amounts of history. As much as you said that the yield improvement is not a moment, is not a luck by chance. Similarly, when we introduce products, they are also based on a lot of homework that we do. Therefore, we feel very, very time doing that we will be able to get this kind of growth, including the reasons that you have pointed out. Yes.
Absolutely. No, thank you so much for answering all my questions and wish you guys all the very best. Thank you.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Manan Madlani from Kamayakya Wealth Management. Please go ahead.
Yeah, thanks for the opportunity and congratulations on the discussion of the number. My first question is regarding the CapEx you mentioned in the PPT for FY2026, the number is INR 250-300 crores. Is it entirely for de-bottlenecking or any other plans with this?
Yes, it is basically for de-bottlenecking for expanding on our major products and that.
To follow up on the same, after spending INR 250 crore-INR 300 crore, we'll get 6,000 metric tons additional capacity, right?
That's correct.
If I do the number, our revenue from what we are getting currently, it will be somewhere in the range of INR 300 crore only from this capacity. Why is the effect on such low on the de-bottlenecking?
See, I'm not going to talk exact numbers, but our effect on our will definitely improve with this de-bottlenecking also happening because your numbers are much lower than what we are projecting.
Okay. Okay. And sir, on the gross margin side, last quarter, our gross margins were highest ever, if I recollect it correctly, 51.5%. And even last year, that is Q3, FY2024, it was highest. In Q3, is there any seasonality effect or was that just one of? That is my first question.
It could have been affected because of certain product mix. Especially, there could have been a little bit higher movement on the specialty, high-ended specialty. I would like to reply to all my investors that you need to look PB on an annual basis rather than more of a quarter-to-quarter thing. In one quarter, you may have half a percentage plus or minus. That is not really to be how what we need to be looked at. As a few of y'all yourself indicated that whatever PB is achieving is on account of a long-term strategy where it takes years and years of chemistry and improvements to showcase and get the results. My sincere and simple honest request to all of you to look at on a yearly basis rather than just compare one person going up from one quarter to the other.
Yeah. So that was my question actually. On a yearly basis, if I look at our three-year number, it's been continuously growing. Now, should we expect for FY2026, the gross margin should be at least 45% plus?
We indicated in our opening address both by Mahesh Babani and myself, you can expect margins to be at these levels going forward.
Okay. Very nice. Our utilization currently is 90%, you mentioned, right?
Mr. Manan, maybe request that you return to the mic for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Nikhil Porwal from Perpetual Capital. Please go ahead.
Yeah, hi. Thank you so much for the opportunity and congrats to the team on a strong performance. Continuing on one of the previous participants' questions. See, broadly, if you are running at 85-90% utilization now and the capacity addition is around 12.5% over the existing capacity, and this goes live in FY2027, and if you plan to deliver more than 20% growth consistently, can we expect, is it broadly, this is improved pricing of existing products along with higher share from high value, low volume, high margin products?
It is a combination of these two, but there is one more factor that I would like to emphasize is that our flagship products, we have been making these products for a long time, almost 20 years. We are number one globally. There, by hindsight of this 15-20 years of learning curve, we have been able to de-bottleneck those capacities and increase capacities there significantly with minimal CapEx. That is also going to play a role going forward in terms of achieving the growth. That is a very crucial thing we have. For example, if you are doing something as a batch process, we are converting that into a continuous process. Or a process was done which could give you, let's say, 10 tons per day, or you de-bottleneck some of the auxiliary equipment and you get a higher 15-20% capacity.
This is what is happening because of all these years of experience of running these plants and the strong technical services team that we have. That is also leading to this growth. Apart from new products as well as slightly improved prices.
Right. So ideally, on higher volumes and higher share of these products that can expand margins, you are still guiding for margins to stay around current level or maybe even contract by 100 basis points. Is that being conservative or how do we look at that?
I think somebody just a few minutes back mentioned that we live in a world which is VUCA world and uncertain. Therefore, in terms of committing to you, we are being slightly conservative. Obviously, interval, we are working at the numbers that you will also love to hear in times to come.
Right. Sorry, one last question from me is, so this quarter, there was an other income was slightly higher than general. Is it related to stocks from the government that you all have just released? There was a press release about last few weeks ago.
No, Nikhil. The other income has nothing to do with the state incentives which will come going forward as well.
Okay. So is this sustainable or is this one-time in nature?
Other income. Other income is sustainable. We will keep getting on impact.
Okay. Okay. Thank you so much.
Thank you. The next question is from the line of Jainam Ghelani from Svan Investments. Please go ahead.
Hi sir. Congratulations for a great quarter. I'm a colleague.
Thank you.
Basically, our gross debt stands around INR 1,100 crore, and we have multiple CapExes coming over the years, which we might be able to meet through cash flows. So then, what is our plan? What could be the peak debt levels, and what is our plan for debt reduction from current levels?
Thanks, Jainam. Of the said INR 1,100 crore, there is a CapEx, there is a loan of about INR 232 crore lying in one of my JV subsidi. As such, overall, the standalone basis of our debt has come down. To answer you specifically, what the debt levels will be at peak level requirement, our overall debt will not be exceeding a debt EBITDA of 3. Currently, it is at 2 on debt to EBITDA insights.
Okay, sir. That's it from my side. Thank you and all the best.
Thank you. Yes.
Thank you. This was the last question for the day. I would now like to hand the conference over to the SGA team for closing comments.
Thank you. Thank you, everyone, for joining us in this earnings call. We appreciate your time and showing interest in the company. Also, I would like to thank the management team for their precious time. In case of any queries, you can get in touch with us or the PB team. We look forward to meeting all of you over the next call. Thank you.
Thank you.
Thank you.
Thank you, everybody.
Thank you. On behalf of Privi Speciality Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the line.