Ladies and gentlemen, good day and welcome to Advanced Enzyme Technologies Limited Q2 FY 2025 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. I now hand the conference over to Mr. Ronak Saraf. Thank you, and over to you, sir.
Thank you. Good evening, everyone. Welcome to the Advanced Enzyme Technologies Q2 and H1 FY 2024 Earnings Conference Call. I am Ronak Saraf, the Manager of Investor Relations here at Advanced Enzymes. We sincerely hope you have gone through all our financials, press release, and the PPT, which has been posted in our Investor Relations section on our website. We have with us Mr. Mukund Kabra, Whole-Time Director, Mr. Beni Prasad Rauka, Group CFO. Today, the management will discuss the performance and business highlights, update on strategies, and respond to any questions that you may have. As is usual, for ease of discussion, we will look at the consolidated financials. So before we proceed, I would like to draw your attention to the forward-looking statement contained in the PPT. During our call, we may make forward-looking statements regarding our expectations or predictions about the future.
Because these statements are based on current assumptions and factors that may involve risk and uncertainty, our actual performance and results may differ materially from our forward-looking statements. So without any further ado, we shall commence this call. Over to you, Mukund sir.
Thank you, Ronak. Good evening, everyone. I really appreciate you all for taking out your valuable time, and I welcome you all to the conference call for the second quarter and half-year end date 30th September 2024. This quarter two turned out to be the lowest quarter in financial year 2025 for us, but I want to assure you that our long-term business potential remains robust. We are confident that the second half of the year will outperform the first half. Quarterly performance. Now, as far as the quarterly performance is concerned, we have achieved top line of INR 1,461 million, a growth of 7% on year-on-year basis and 5% on sequential basis in quarter two. Our EBITDA stood at INR 425 million, decreased by 17% on year-on-year basis as well as on sequential basis.
We have witnessed a growth of 5% in the bottom line on year-on-year basis and on sequential basis. Talking about the margin profile, EBITDA margin stood at 29%, and PAT margin stood at 23% during the quarter two. There are a few factors that had impacted our quarter two, and I will throw some light on these factors as well as we proceed in this call. During the quarter, the company had a higher revenue reversal of INR 83 million compared to the previous quarter since revenue recognition criteria was not met as per the accounting standard. The revenue and margin towards this sales deferred to quarter three. Rauka ji will elaborate this point further. A slowdown in our export sales led to a decline in international sales, excluding the U.S., and some of this is because of the sales reversal as well.
Our EBITDA margin is subdued majorly due to the lower top line, but we expect this to improve as we progress into the second half of this fiscal year. Talking about the segment-wise performance, as projected at the start of the fiscal 2025, we do not anticipate growth in domestic sales for this year. However, our U.S. business is expected to perform stronger in financial year 2025, with U.S. sales having already increased by 24% on year-to-date basis. Human Nutrition. The Human Nutrition segment declined during the quarter and contributed 68% in the revenue pie. It decreased by 6% on year-on-year basis and 2% on sequential basis. This decline in Human Nutrition is on account of low revenue realization in the pharma API business. As we mentioned in our earlier calls, as well, there is certain competition in our anti-inflammatory market.
In the international markets, probiotic and nutrition business performed well. Animal Nutrition. Our Animal Nutrition business contributed 12% to the revenue in quarter two. This segment grew by 5% on year-on-year basis, while it grew by 6% on sequential basis. Bioprocess. Our Bioprocess business contributed 12% to the revenue in quarter two. This segment underperformed during the quarter by around 31% on year-on-year basis and 33% on sequential basis. The food business decreased by 42%, while non-food business reported growth of 24% on year-on-year basis. The major food business comes from the export market, and sales reversal has impacted this. The specialized manufacturing business contributed 8% and grew by 17% on year-on-year basis and 9% on sequential basis. While the current quarter appears to be stronger, the previous quarter presented challenges based on the prevailing trends.
Consequently, the anticipated growth for financial year 2025 is expected to be in the single-digit range. Despite the influx of new competitors in our sector in recent years, we continue to observe increasing demand for our enzymes and probiotics in the U.S. market. This is largely due to the strength of our brand. At the halfway point of the year, requests to feature our formulated ingredient brand names on finished consumer products have already risen by 58% compared to last year. This indicates that our customer view of our branded ingredients as a key selling point reflecting the strength of our brand. We remain focused on our ongoing strategies and are also working on developing new biocatalyst molecules. In the last quarter, we introduced two new solutions and are collaborating with customers to finalize the offerings.
A significant challenge for our U.S. customers is the lack of familiarity with enzyme and probiotic testing, compounded by a fragmented and under-educated market for third-party testing services. This often leads to wasted resources as customers struggle with basic quality control requirements, which in turn places undue pressure on sales. To address this, we are establishing a full independent laboratory for enzyme and probiotic testing. This will allow us to leverage our testing expertise to support our customers in growing their brands, ultimately benefiting our ingredient sales as well. We also recognize that certain investment, particularly in the area of R&D, is essential for long-term growth. As reflected in our financials, significant resources are being allocated to these areas, actively exploring new opportunities and developing new products and molecules for biofertilizers and biopesticides within our agriculture portfolio.
These offerings are expected to generate an additional couple of millions in revenue in the near future. With this, I conclude my remarks and now hand over the call to Rauka ji. He will walk you through the financials and key subsidiary numbers. Over to Rauka ji.
Thank you very much, Mukund. Good evening, everyone. I hope you all are in good health and wishing you all happy festivities. On the company's consolidated financials for the second quarter and half-year fiscal year 2025, on year-on-year basis, our revenue has decreased from INR 1,578 million-I NR 1,461 million, a 7% decrease. Our EBITDA has decreased from INR 513 million- INR 424 million, and it stood at 29% as compared to 33% of our revenue.
Profit before tax has decreased by INR 57 million, from INR 479 millio- INR 422 million. Profit after tax PAT has decreased by INR 18 million, from INR 352 million- INR 334 million, and this is 23% of our revenue as compared to 22% in the corresponding quarter. On Q-on-Q basis, our revenue has decreased by INR 84 million. This is about a 2% decrease from INR 1,545 million to INR.
1,461 million. EBITDA has decreased by INR 88 million from INR 512 million- INR 424 million. And this is, again, as mentioned, 33% in the previous quarter as compared to 29% this quarter. Profit before tax decreased by INR 65 million from INR 487 million- INR 422 million, and PAT has decreased by INR 16 million from INR 350 million- INR 334 million. On six-monthly, I mean, half-yearly performance of the company, the revenue has decreased by INR 45 million from INR 3,051 million- INR 3,006 million.
EBITDA decreased by INR 17 million from INR 953 million- INR 936 million. And this is 31% of our revenue as compared to 31% in the previous year, half-yearly, I mean, six-month performance. Profit before tax has increased by INR 16 million from INR 893 million- INR 909 million. PAT has increased by INR 38 million from INR.
646 million- INR 684 million. As Mukund has mentioned, our Q2 is affected because of a couple of things. One is the incremental higher revenue reversal of about INR 83 million as compared to the previous quarter. Since this is the requirement of Ind AS revenue recognition, because if the significant risk and reward has not passed on to the customer before the cut-off date, which is 30th September 2024, then to that extent, the revenue cannot be recognized during that period. And generally, we have about INR 80 million-INR 85 million of reversal, but this quarter, this reversal is higher by INR 83 million. So this has impacted, in a way, the revenue. So to that extent, if you see the revenue has decreased, otherwise, this quarter is flat as compared to the previous quarter.
If this revenue reversal would not have happened, then, of course, because of the gross contribution of about 77%-78% and gross profit margin of about 60%-61%, our profits would have been higher. As you know, the PAT is also about 23%. To that extent, the PAT would have been higher in this quarter. Yes, this is the impact, and the revenue to that extent is deferred from quarter two to quarter three. In spite of lower sales of 1% on YTD basis, if you see our profitability for the sixth month has improved, and the contribution is also on account of the higher income from other sources. Now, some of the numbers of our major subsidiaries, JC Biotech, during this quarter stood at revenue of 158 million, EBITDA of INR 20 million, and PAT of about INR 5 million as compared to Rs.
INR 174 million of revenue and INR 17 million of EBITDA and INR 3 million of PAT. So it is showing continuous improvement. And for half-yearly, JC Biotech top line is INR 317 million as compared to INR 308 million of the first half of the FY 2024, and EBITDA of INR 44 million as compared to INR 26 million, and PAT is INR 13 million as compared to INR 1 million during last year's six months. Evoxx revenue stood at INR 49 million, but still, the EBITDA is negative 12 million, and PAT, because of depreciation and amortization, is about 19 million negative. As compared to Q2 of FY 2024, top line of INR 64 million and three million of positive EBITDA and PAT of INR 3 million negative.
For six months, Evoxx top line is EUR 96 million as compared to EUR 117 million, and EBITDA of -EUR 19 million as compared to EUR 4 million last year, and PAT is EUR 35 million as compared to -EUR 16 million last year. SciTech, which is a specialty manufacturing company for us, the top line stood at INR 120 million as compared to INR 103 million last year, and EBITDA is about INR 14 million as compared to INR 18 million. PAT is INR 3 million as compared to INR 7 million last Q1.
For six months, SciTech has posted a growth of 16% in the top line from INR 200 million to INR 232 million, and EBITDA has increased from INR 22 million- INR 36 million, and PAT has increased from INR 8 million- INR 13 million. So this is also continuously showing the upward trend. Sale of our largest product, which is anti-inflammatory enzyme, stood at INR.
275 million, and I think last quarter it was same to INR 75 million. And for six months, the product sold is of about INR 555 million as compared to INR 716 million last year's first half. So it is a decrease significant, and the revenue is about 18% of total as compared to 23% last year, six months. Top customer contributed about 25% in Q2, and if we see six months, the contribution of top 10 customers is about 22% as compared to 27% last year.
B2C segment has contributed about $1.14 million as compared to $1.1 million in the previous quarter. And healthcare breakups, Pharma India is about INR 366 million as compared to INR 375 million in the last quarter. Probiotics and biocatalysts together constitute about INR 52 million as compared to INR 113 million. So India sales from INR 488 million- INR 419 million during this quarter.
International sales in human healthcare is up from INR 466 million in Q2 of last year to, if we compare with the Q1 of this year, it was INR 523 million. Now, during this Q2, the revenue from the international market is up to INR 573 million. So this is continuously showing an upward trend. In international business, the major contribution, as you all are aware, is from our U.SA company. So there we see continuously an upward trend. In Q2 of last year, it was INR 403 million. In Q1 of this year, it was INR 494 million. Q2 of current year, it stood at INR 532 million. Just a moment. So I think our R&D expenditure, as we generally mention about our spending on R&D during Q2, we have spent about INR 72 million as compared to INR 62 million last year.
Our CapEx is about INR 13 million as compared to INR 2 million last year. So total R&D expenditure in six months is INR 161 million as compared to INR 126 million last year. The R&D constitutes about 6% of our top line as compared to the 4% in Q2 of last year. This is without considering the intercompany elimination. If we eliminate our Evoxx spending, then the R&D expenditure is about 5% in Q2 as compared to 3% in Q2. That was all from my side. Now, we shall open the floor for question and answer session. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question.
Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Harini Dedhia from Tamohara Investment Managers. Please go ahead.
Hi. My question was on Serra, but today we had called that out specifically as a reason for degrowth in India in Q1, and we had said that there's some inventory that's not being run down at the customer end, which is taking longer than expected. Is this still the problem in India, or is the problem a little more structural in nature, or is it a temporary issue? Just wanted to understand that.
So sorry, I didn't get your name, but
Harini.
Harini.
Harini.
Harini.
Harini, Serra sales is down, but it is not down to the extent what these numbers are showing. Last year, the Serra sales was there in the first half, and it was down into the next half. So on overall basis, if you ask me, it is down somewhere around 7%-8%. We expect that will be down by 7%-8% on the volume basis.
Got it. And so are we expecting then some sort of normalization in the sales in Q3, Q4, or in general in the second half, or this will just continue? The runway has come off.
So we were already saying that there is going to be some competition, which we do expect in the Serra area and this area particularly. And that is where we are coming at it. We forecasted this year as well. Our sales in this area will be down somewhere around 7%-8%.
Got it. But given that in H1, we're down much more, we are expecting that H2, we won't be down double digits in Serra.
That is correct.
Okay. And my second question was, at the start of the year, we were very clear in our communication in stating that India is unlikely to grow this year. I'm guessing because of Serra predominantly. And then U.S., we were confident would grow ahead of the rest of the geographies. And we are still confident of a double-digit growth playing out for the whole year. So what has not panned out according to our plan? So is it that India degrowth is steeper than our expectations, or is it that something has gone off in the rest of the world that is really hurting us?
Harini, let me correct you. Earlier, we were expecting a double-digit growth, but this time, we feel that we will have a single-digit growth. And that is what I made it clear in my initial remark. Now, what we were thinking was some of the sales from the other areas which we were expecting to come out, they are slightly delayed. And that is where we see that this year, probably on the Indian front, probably we will not have any growth, right? And that will impact on our, and that is where it's difficult for us to get into the double-digit growth now. We do feel that the next half will be better, but at the same time, we may not be able to achieve double-digit growth.
Got it. But even to achieve a single-digit growth number, next two quarters, we would have to do about 350 crores or, right, 170?
Yeah. So if you really look at it, as Rauka ji also explained to you, we had some sales reversal, which is already. If it wouldn't have been there, probably would have been flat. And these are the accounting practices. Even though the invoices are there, the material has not reached the customer. Some of the delays are because of the shipping delays and all the other airlines' delays or whatever we can call it. But that is not in our hands, right? So those sales will be. Those sales will be realized in the next quarter.
Got it. So that will naturally add to the growth number in Q3 then.
Yeah.
Got it. So this is one sort of feedback from our end. If this could have been cited in the presentation or we could have done the call on Saturday or Monday itself, that might have just helped calm some nerves around here. But otherwise, thank you so much for answering my questions. Thank you.
Thank you.
Thank you. The next question is from the line of Sandeep Dixit from Arjav Partners. Please go ahead.
Hi. So earlier, you had guided that your EBITDA growth will be 2x in revenue growth. Does that equation still hold given the revision in the guidance?
Can you repeat, Dixit? I didn't get your question.
Yeah. In last quarter call, you said that the EBITDA growth will be 2x-3x of revenue growth.
Right.
So does that equation hold even now? So if you are saying that revenue growth for full year FY 2025 will be single digit, will the EBITDA growth still be 2x that?
So if you really look at, let me answer your question. If you really look at the degrowth, so if the equation, if you are talking about the sale is, say, down by 5% on Q1Q, the EBITDA is down by 17%. So that's how you can see the equation in that sense. On YTD basis, if you really see the sale number is down, say, about 1%, but EBITDA is down by 2%. The equation is, in that sense, when you have the incremental sales, your EBITDA always keeps on increasing at least two to 2.5 or 3 times. That's how it is. So you can see the impact in that sense.
Okay. Thank you. Thank you for that.
Thank you. The next question is from the line of Umang Shah from Banyan Tree Advisors. Please go ahead.
Hi, sir. Am I audible?
Sir, I request you to come a bit close to your handset.
Yeah. Better now?
Yes, sir. Go ahead.
Yeah. Thank you. Sir, first question was, what is the reason for the higher competition in our Serra peptase portfolio? Is it on account of new product which is coming in the market or something else? Because we tend to have a very high market share in that product anyway. So what was the reason for higher competition?
So when you have a very high percentage of market shares, always you are bound to lose some of it because whatever you try to do, at some point, some people will come up with the same product, right? So the competition is for the same product and not with the other molecules. So the molecule is still intact.
Sure. Sure, sir. Sir, that is one question. Second is, sir, every quarter, you break down the human nutrition revenues between India and international. Can you give that number, please?
ji, can you give those numbers? So human nutrition pharma sales has been INR 419 million in current quarter as compared to INR 593 million in the quarter two last year. Our international sales has been INR 573 million in the current quarter compared to INR 466 million in last year, September quarter.
Sure. Sure. Thank you for this. And Rauka ji, what would be the revenue R&D expenditure for the six months as compared to last half?
But I will give you the number.
Yes. Yes, sir.
So in these six months, we have spent INR 143 million in revenue expenditure in R&D compared to INR 121 million in last year's six months.
Okay. Sure.
Okay. We have already explained CapEx, right? INR 18 million and INR 5 million. Last year, it was 18. This year, it is INR 18 million. Last year, it was INR 5 million.
Got it. Sure, sir. And sir, any news on how the new launches are doing in the current year, both in pharma and nutraceuticals in the U.S.?
New launches nutraceuticals . So in biocatalyst areas, we have just come out with a couple of solutions, as I mentioned. In U.S., there are no new launches. It's the same products what we are focusing on right now.
Sure. Okay. And any traction on the launches that you had made last year?
So those areas we were talking about on the pet food, and I think we were talking about the sugar one, right? So those areas are growing, and probably those are the ones which are driving the sales at this point of time. We expect it to grow further as we move on.
Sure, sir, and the biocatalyst segment, pharma-driven, we were thinking that this year would be the year where the segment sales ramp up significantly. Can we expect a positive surprise in the second half?
We're expecting in third and fourth quarter, but probably what we feel is it is a little bit delayed. We do have the molecules ready, but commercializing it to take to the sales on a higher level, probably this may not happen in this year, but maybe the next year. But yeah, the fourth quarter will be a little better than what we had on all the two or three quarters, what we can say.
Got it. Got it. Sure. Thank you so much.
Thank you.
Thank you. The next question is from the line of Sagar Tanna from Alchemy Ventures. Please go ahead.
Thank you, sir, for giving me the opportunity. Sir, we've been in existence for such a long time, more than 15 years. Even today, we are at 600 crore company in terms of top line. What do you think will it take for us to grow at 25% consistently, considering the size of the market and the addressable time that we have? Do you think we are lacking on products, R&D, or is it our sales engine?
It takes time. Even though I feel like 25% growth is a little impossible or a little difficult to do it. Not impossible, but difficult to do it. But what we need is more R&D support and more products to come out as we move on, and we are focusing on many of these areas, particularly into the R&D areas. We are trying to increase our R&D capacity. Probably it will take some more time. Till that time, probably we will not see the 25% kind of growth, which is a little difficult to achieve.
Sir, which are the Indian companies who are our competitors, both in India and overseas, and what would be their size?
In India, I won't say there is much of a competition, but a lot of the competition comes from the global players where their R&Ds are much stronger, and probably it will take some more time for us to reach to those levels.
Got it. Thank you.
Thank you. The next question is from the line of Navya Gautam from Sipto Advisors. Please go ahead. The line for the current participant has been disconnected. Moving on to the next question. The next question is from the line of Lakshmi Narayan KG from Tunga Investments. Please go ahead.
One question. Sir, if you look at our August meeting, where we actually mentioned that we scheduled.
Sir, could you come a bit closer to your handset?
Is it better?
Yes, sir. Go ahead.
So in the August conference call, you had mentioned that you would actually grow somewhere between 12% to 15%, and start of the year, you mentioned that you would actually grow in a particular range. Now, were you surprised in terms of the difficulties which you are facing now, and how do you think you will end the year at, and what actually changed in the last seven to eight weeks?
Lakshmi Narayan ji? Lakshmi Narayan ji, what we see is some of the sales which we are expecting from the biocatalyst area to come into the next one or two quarters, those are going to be different, right? From the very beginning, we were anticipating that the Indian sales will be more or less muted this year, and we were anticipating the growth to come from the U.S. For India side, we were expecting the growth to come from the biocatalyst and other areas, which is deferred, and that is where we feel that double-digit growth is a little difficult, but we will be having single-digit growth at this point of time. That is what we feel. That is what we are communicating.
That's for India, right, or for the entire company?
Entire company.
Okay. Okay. So in terms of within India, last year, I think Serra was almost like 131 crores or so. So this year, at this rate, what will we end at for Serra?
Abhijit, may I ask? Abhijit, may I ask? We will be expecting about 115-120s here.
Got it. And the SciTech business, right, where I mean, have we seen growth in SciTech? Because I think in FY24, we are growing pretty heavily there. So how do you anticipate growth in that part of the India business?
This year, we expect a good growth to come from the SciTech.
Okay. And overall, India would grow at what rate, sir, this year?
Single digit, probably, if you consolidate everything.
Okay. Okay. And how is Europe shaping up? Because we see a decline in the first, I mean, in this quarter, but how do you think about Europe?
Europe's revenue is on the lower side in the first half, but we expect that it should give some growth in the latter half at the end of the year because, as we were talking, and I think we might have talked last time, probably we were expecting some of the contracts in the Evoxx, which has been signed. So we expect a positive this year, particularly at the end of the year. So next year will be better from the Evoxx side.
Yeah. I mean, I believe we had some approvals in the food side in Europe, and I think not recently, but even several quarters back, you had mentioned that we are getting some approvals, and that would actually open up a lot of opportunities in Europe. So on the food part in Europe, what are we tracking? Is the gestation period longer? Can you just help me understand that part?
Yes. There is a gestation period which is a little bit longer. At the same time, there are certain issues, like some of the issues are coming with the freight and all of those areas. The freight cost is also on the higher side. Some of the other areas are also affecting some credits and some other areas, and we are working on how do we solve those problems.
Got it. I think one last question is related to the rest of the world. If you look at the rest of the world in animal feed and non-animal feed, where do you see growth? Is the growth coming from animal feed business or the non-animal feed business?
Animal food. Animal feed, we will be expanding into some other areas particularly, and we are working on those. At this point of time, this year, I don't see much of a growth to come from the animal feed, but we are trying to explore some other areas, like the ruminant areas and solutions for culture and all of those other areas we are trying to explore at this point of time. Non-animal or non-food bioprocessing area is looking very decent for this year particularly.
Got it. And in terms of our profitability, when compared to last year, this year, would we end at a better picture than last year in terms of our operating profit or the net profit?
I think we should look at the kind of numbers we had last year. At least we are likely to outperform once we get a single-digit growth.
Got it. Got it. Is there any surprise that actually came in the last few months? It actually changed?
Some of the sales as Mukund had mentioned is not picked up. So customers, they are taking their own time. They are initially, as you mentioned, in the month of August, where we could see some kind of visibility, but then there are several things which I think customers are also looking at it. And therefore, the Indian sales is not picking up. And in U.SA, if you really see, the growth is there, and now they are working that most of the nutraceutical customers. So they use our branded formulated product name in their product. So instead of using any kind of a specific ingredient, now we are trying to convince our customers that, "Look, this is our brand name, and this we are supplying.
So you use on your nutraceutical the name of our product." So it becomes, in that sense, customer-centric as well as the kind of brand visibility we create over a period of time. So a couple of such issues are there which I think are taking some time to shape up.
Got it. Thank you. I'll get back to you.
Yeah.
Thank you. The next question is from the line of Nikhil from SIMPL. Please go ahead.
Yeah. Hi. Good evening. I hope I'm audible.
Yes.
Yeah. Just continuing with the question Lakshmi asked, see, how does because and sorry to harp on this, but just to understand your business better, when you say we have some visibility, but that so that visibility in most companies we see is based on the POs which they get from the customers, and this is the schedule with which they will supply the product. So how does your business work here?
Sometimes trials are going on various biocatalysts, and customers also taking trials. So getting an order for a big, you can say, commercial order takes time. So initially, you get it. Yes, I think a couple of trials are going successful. Hopefully, now next quarter, we shall be getting a big order, but then customers, they may take their time because they have to also reschedule internally various many processes also. So for that, sometimes it takes time.
But Nikhil, just to answer your question, our business doesn't go with the PO basis. We hardly always have any POs. The number of POs at any given time is not more than 10-12 here.
Okay. So, sir, just two questions here, two follow-ups. One is when you say the customer is undergoing trials or validations, in that sense, and it could be naive to say, but does it mean that the business which we were expecting gets deferred over time, or do you think that the business is lost completely? Because if he's taking some time and validations and that timeline has shifted, then probably it will come in FY 2026, what we were thinking of growth in this year. Would that be right assumption, or is it like the project gets scrapped completely?
No. Most of the time, this is a novel solution to what you come up with, and basically, it takes time because a lot of time, they need to file the DMF, they need to file many other areas, and there can be multiple possibilities which are not in your hand how long it can take. You can only always estimate based on the feedback in other areas, but sometimes it always differs, and this is what the case is. Sometimes we are optimistic. We were a little bit more optimistic that this should come up as early as possible, but we realized that it will take some more time.
Okay. And secondly, now coming to your near-term guidance on second half, you said for the full year, we should grow at single digit. Even if I adjust for this eight crores, it seems we have to grow in second half by at least 15%-20% on a year-on-year basis to get that number of 6%-7%. Now, considering the lack of visibility which you also have, how do you build confidence that this kind of a growth is achievable in the near term?
The way I can look at it is basically whatever the numbers I can see forecast at this point of time, I can see that we are not going to degrow. We are going to grow. What will be that number that still we need to really work out, which will be the really realistic numbers?
Okay. But you don't have any direct communication from the clients in terms of so between the time you get an order and your delivery, what would be that time period generally? Is it a one-month kind of a time period when you have to supply from the day you get the order?
It differs from product to product. Sometimes it's six, seven days. Sometimes it's a month.
Okay. Okay. Fine. I'll come back in a bit. Thanks.
Thank you, Nikhil.
Thank you. The next question is from the line of Shreyansh Gattani from SG Securities. Please go ahead.
Hi. I had a couple of questions. So the first one was on the Europe business. We see a very sharp decline. So does that indicate we've lost any customers or lost market share over there? And even the rest of the world, we see a sharp decline. Even if we adjust for the deferred revenue, even then, just trying to understand that 35% drop.
I don't think there is any customer loss as of now. Yes, there is a small one which was $1 million which we realized last year, which we are knowing that this year will not be coming up because of some other reasons because they changed the process in other areas. Besides that, there is no customer loss what we can expect this year in the European business. We expect that this should pick up.
Okay. Okay. And a second question. So basically, are we lacking on the product innovation side? So if I look at Novozymes' Chr. Hansen, the combined entity commentary and their guidance, they just upped their guidance, and they are even more positive versus we are losing sales. They're actually increasing guidance, and we are losing. So are we falling behind on the R&D front compared to them in terms of product or just trying to understand that?
If you ask about Novozymes and these people, they are much ahead in some areas. That is where we have our own niche areas and other areas. We are really focusing on the R&D areas. We are developing our R&D capabilities. We have a plan to increase it by threefold, and this is what our all focuses are. We will need some more time to really go on and take on the Novozymes and other people in all the different segments. At the same time, we are working really hard to go to that level.
Got it. So by when do we expect the R&D to pick up to three, four times that you are mentioning?
We are building up our new R&D center right now in Vashi. Probably we should be fully operational by the end of next year. Then we will have a slowly, slowly we'll really ramp up on the R&D front.
Got it. Okay. All right. That's all from my end. Thank you.
Thank you. The next question is from the line of Anuj Gaggar, who is an Individual Investor. Please go ahead.
Hi. Good evening, everyone. Am I audible?
Yes, Anuj ji.
Yes. Yeah. Thank you so much. Although most of the things that have been discussed is something that was on top of my head also. I'm not too much knowledgeable on accounting and other things, but I'll ask very basic questions which investors would like to know. I'm invested in a company for about two years or something. You can clearly see a panic in the share price in the last two days. I think it dropped 25% after the results were released. You have explained the sales were down because of some accounting or some booking of the sales changes that have happened, which I understand. But right now, we are already one and a half months into quarter three. So you would have some kind of visibility in terms of how the sales look like in quarter three in which we are currently.
If you do a 2x of what we are as of late, so do you see we are growing from the quarter two results that we have already declared? That is.
Anuj, it's a forward kind of a guidance, but I can see that probably we should do better than quarter two. That's all what I can see.
Okay. Thank you. And the other one is I can see that looking at the balance sheet that we are constantly going on the reserves part of it. So is there any plan of any kind of reward to the shareholders in terms of buyback or bonus in the future?
Those decisions have to be taken by the board. If you really look at it, we increase the dividend, and we continue our dividend policy. That's all what I can say. Probably buyback is not a one size. Now, but Rauka, you can give more clarity on that. Rauka ji?
Yeah. Hopefully, I think buyback is not an efficient because it is also taxable again in the hands of the recipient. So for shareholders, there will be cash outflow. So as you rightly mentioned, I think dividend is what every year we have been increasing. So that is what is the way forward.
Sure. One small last question. I was listening on the news that there might have been some impact to this quarter because of Red Sea-related issues in terms of the deliveries and all that. Was there any impact of the Red Sea concerns?
The freight cost is on the higher side, Anuj. We have an impact of about INR 1.5 crores in this quarter, particularly because of the freight cost.
Okay. And is that because of the operating profit?
It stays in the region for itself.
So the operating profit margin, that's the reason why it came down from the range of 32%-35% to now 29% in this quarter. Is that the reason, or is there something else contributed, like a product mix or something else?
It's also likely to grow because when you talk about the profit and other things, your expenses are more or less fixed. And if your revenue growth is on a downside, then probably you will see that the percentage has to go down, right?
So it was purely because of the.
That is a major impact. As Mukund rightly mentioned, that is a major impact. If the sales is down because of your higher gross margin, gross contribution, and fixed expenses remaining at the same level, the impact is major on EBITDA as well as on PAT.
Okay. So if we use that 77-80 CR, which was not booked, then we will be at the same level, around 33 or 39.
It's not 77 CR. It is, I think, 83 million. That is what we have explained to you.
Okay, so if we account for that, then we'll be around the same margin, like 33%?
Yes. Yes. Yes. Yes.
Okay. Thank you so much. That's all. Thank you so much for answering and giving me the opportunity.
Thank you. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Vivek, who is an individual investor. Please go ahead.
Hi. Good evening. Is it audible, sir?
Yes, Vivek.
Sir, I have two questions, sir. How many R&D scientists do we have as of date, sir? This is my first question, and I would like to ask another question. Sir, at what EBITDA margin we are expected to close this financial year 25, sir?
I don't have an exact number, Vivek ji, but probably we have more than 150 scientists at this point of time. Together, maybe more, but I don't have an exact number as of now. But it should be more than 150 plus. That's what I can say.
Okay. Okay.
Your second question is how.
How much EBITDA margin we can expect for this financial year, sir?
It's a difficult question. Rauka ji, you can answer that. The thing is that we are on the declining trend as of right now.
I mean, once the revenue increases, I think the improvement will definitely be there. So we expect that EBITDA margin should be in the range of anywhere more than 30%. So it will be in the range of 30%-33%.
Okay, sir. Okay, sir. Thank you, sir. It is good to have sir. I'll just fall back in the queue, sir, if I have another question, sir. Thank you. Thank you.
Thank you. The next question is from the line of Harini Dedhia from Tamohara Investment Managers. Please go ahead.
Hi. Thank you for allowing the follow-up. Just one question on when we say R&D is where we would like to invest more, and that's one piece that sort of we feel that we can do better on. If you can help us understand what are the kind of things that we want to do, would it be more on hiring of new scientists, or would it be some infrastructure or some equipment or some segment? If you can just help us understand what do we want to add on that side right now?
It's a combination of all. If you really look at it, we don't have a space as of now. Because of the space, we cannot hire the people, and there are a lot of new equipment which we will have to do that. We need to increase the number of products as well. Yeah, so it's a combination of all. We are working on all the different technologies as well at this point of time. We have some breakthroughs, but we will have to scale it up, basically.
Okay. Would it be possible to just share the kind of things that if you can just help us understand, maybe at a later stage, if you could put out something along the lines of the kind of breakthroughs we have or what are the new things that we're working on, just helps us understand better.
In terms of R&D, what you're talking about?
Yeah. Because I remember in the February call, when Mr. Rathi was also on call, he had specifically called out that he was very proud of the work that they've done in the R&D team for the last two, three years. So just wanted to know what was being done and where is it that we want to go.
See, there are a lot of biosolutions which are specific, and you need to do a lot of protein engineering on that, right? And we are now getting our hands on that. We are doing and we are developing a lot of molecules. We understand how to develop it now, but we really need to scale it up. If you talk about all these biocatalysts and other areas, probably those are the outcome of our protein engineering, basically. It's difficult science, but at the same time, it's possible. You need to do many other areas, particularly not only development of the strain, but applications, fermentation R&D, formulation R&Ds, and all of these we are trying to work at this point of time, and we would like to expand those.
I won't be able to give you more specific because those are going to be some of the IP kind of properties, and I don't want to talk on those in the public domain.
Okay. Fair enough. Got it. Thank you so much.
Thank you. The next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Thank you. Sir, two questions from my side. First one being, with the changes in the U.S. market as well as the political scenario over there, do you think it is a boon or is it a bane for AETL?
I don't know, honestly. Time will tell, but what I can say is we have a strong base in the U.S., and particularly, it should help. But you never know what kind of import duties and other things Trump will come up and what will be the impact.
Sir, because his focus was to make America great once again, and we do have quite a lot of cash and other equivalents in the U.S. So would you be looking at some acquisitions over there to boost the sales from the U.S. market?
I can't comment at this point of time. We would like to see how the things pan out, Anuj.
Sir, any rough work that you have done or anything that we should anticipate over the next one, one and a half, or two years, or something like that?
No. In the next one year, I don't expect any acquisition, at least in the U.S., particularly.
Okay. Sir, my second question is related to Evoxx. In the previous quarter, you did mention that you were looking for some sales that were supposed to come through from there, somewhere around EUR 1.4 million-EUR 1.5 million kind of euro sales that were supposed to come from there. Has that passed through, or are there some difficulties over there as well?
No. What I said was that it's fine. That is what we were expecting. We do have a PO of that, but it just pan out for a whole year, and that is where we expect that the next half year will be better for the U.S., and probably we will have higher sales than the last year, particularly in the U.S.
Sir, many of these customers, clients from the international market, they must be trying to make their own budget as the year is coming to an end. So what sort of outlook exactly are they sharing with you in terms of sales as well as the margin profile for us?
Are you talking on Evoxx?
On Evoxx and other customers as well, other European, Latin American, or maybe North American customers that we have.
Can you please repeat your question, Rohit ji? I'm not really clear.
Sir, many of these customers, they must be making their budgets, right, for the next year since their financial year comes to an end very soon. So what is their outlook, and what sort of conversations are you having with them in terms of the growth for AETL?
No. I won't be able to give you that number because a lot of times these customers won't come out with their numbers or the expectations of what they do have. Because our business doesn't run on the PO basis. It runs on the PO basis, but there are not anything which is a long-term contract. So it's very difficult to tell me how that will really come out. But what generally we anticipate is how many customers, new customers may be added or what business they can give. So that is how generally we work rather than taking the POs for the whole years. But it's an ongoing process. So at this point of time, I don't have an exact number, honestly.
Okay. Okay, sir. Thank you for answering my question. Thanks a lot.
Thank you, Rohit ji.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Ronak Saraf for closing comments.
Thank you, everyone, for taking your valuable time for attending our earnings conference call. We will keep you posted for any further updates. I request you all to send in your questions that may remain unanswered. An audio recording and the transcript of this call will be uploaded on our website in due course. Looking forward to hosting you all in the next quarter. Till then, stay healthy, stay safe. Thank you.
Thank you.
Thank you. Thank you, everyone.
Thank you. On behalf of Advanced Enzyme Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.