Ladies and gentlemen, good day and welcome to the Q4 FY 2023 earnings conference call of Advanced Enzyme Technologies Limited. 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.
Good evening, everyone. Welcome to the Advanced Enzyme Technologies Q4 and FY 23 earnings conference call. I am Ronak Saraf, the Manager Investor Relations here at Advanced Enzymes. We hope you all have gone through our financial press release and the presentation, which has been posted in the Investor Relations section of our website. We have with us Mr. Mukund Kabra, Whole-time Director, and Mr. Beni Prasad Rauka, Group CFO.
Today, the management will discuss the performance and business highlights, updates on strategies, and respond to any questions that you may have. As is usual for the ease of discussion, we will look at the consolidated financials. Before we proceed, I would like to draw your attention to the forward-looking statement contained in the presentation. 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. Without any further ado, we shall commence this call. Over to you, sir.
Thank you, Ronak. Good evening, everyone. I really appreciate you all for taking your time. I welcome you all to the conference call for the quarter and year-ended 31st March 2023. Starting with a quick brief on global conditions. Global conditions scenario continues to remain uncertain, with clues of recession resulting in layoffs and inflation remain elevated. The geographical political crisis remain structure.
We see a pickup in consumer demand. Hopefully it will further improve as we enter in the new financial year. The raw material prices are under control and the supply chain issues are also resolved to a great extent. We hope this scenario remains stable in the coming quarters. Despite all the uncertainties, our quarter four financial results demonstrated an improved top-line growth. The growth in the number are driven, essentially driven by animal nutrition and Bio-Processing segment.
As far as the quarterly performance, our top line stood at INR 1,387 million, grew 5% on year-on-year basis. On a sequential basis, it is declined by around 2% in quarter four. Our annual top line stood at INR 5,406 million, that is 2% growth. Our EBITDA stood at INR 441 million, grew 9% on year-on-year basis and 6% on sequential basis, which saw a decline of 22% for financial year 2023. We have experienced a significant growth of 27% in the bottom line on year-on-year basis, while on sequential basis it grew 15%. Our full-year PAT declined by 16%. On the margin side, EBITDA margin stood at 32% and PAT margin stood at 23% during the quarter four.
For financial year 2023, these margins stood at 29% and 19% respectively. This decline in our margin is due to fluctuation input material prices and elevated fuel costs which resulted in a higher operating cost for the company during the year. Talking about the segment-wise performance. Human nutrition. The human nutrition segment remains highest contributor as is usual at 63% in the revenue. It grew by 1% on year-on-year basis, while it declined by 6% on sequential basis. For financial year 2023, it is declined by 1%. Pharma API in domestic market and nutrition and nutrition in international markets primarily supported the numbers in human nutrition. There is softness in the probiotic business and demand remains subdued in the domestic as well as in the international markets. Animal nutrition.
Our animal nutrition business is performing really well and contributed 15% to the revenue in quarter four. This segment is significantly and continuously improved during consecutive quarters. It grew by 36% on year-on-year basis and 17% on sequential basis and 27% during financial year 2023. Bioprocessing. During the quarter, Bioprocessing segment contributed 14% to the revenue. It grew by 2% on year-on-year basis and declined 15% on sequential basis. For full year, this segment grew by 19%. Food and non-food business grew by 15% and 31% respectively on year-on-year basis. The Specialized Manufacturing segment contributed 8% and grew at 31% on sequential basis, while it remains flat on year-on-year basis. For financial year 2023, this segment declined by 26%. A brief on key developments during the year.
We invested INR 60 million for 50% stake in Saiganesh Enzytech Solutions and this company has further acquired a firm engaged in the similar business on a company in the lump sale basis for a consideration of INR 9 million. We have also acquired an additional stake of 4.83% in our subsidiary, JC Biotech. Our stake is 89.83%. Our two U.S. shutdown subsidiaries, AST Enzymes and Dynamic Enzymes, got approval from State of California to merge and form a single entity naming AST Enzymes. I would say we are in our constant endeavor to keep introducing newer and commercially viable products and molecules.
We will continue to focus on our priorities of customer retention, strengthening R&D, touring business operations in newer geographies, expand solution and product offerings, register more products across global regulatory bodies, and to look for strategic inorganic opportunities. We'll bring more resiliency in our business to enhance customer value proposition and deliver long-term sustainable growth going ahead. With this, I will now hand over this call to Mr. Raukarji, who will take you through the financial and key subsidiary numbers. Over to you, Raukarji. Thank you.
Thank you very much, Mukund. Good evening, everyone. I hope you all are in good health. FY 2023 remains a rollercoaster ride for the company. Subdued consumer demand across the globe, elevated input costs, coupled with lower international sales, in particular in the US market, affected our overall margin during FY 2023. On the company's consolidated financials for the fourth quarter and fiscal year 2023, let me give you year-on-year numbers. The revenue increased by INR 70 million, about 5% from INR 1,317 million to INR 1,387 million. EBITDA increased by INR 38 million, 9% from INR 403 million, which is about 31% of our top line to INR 441 million, 32% of our revenue.
Profit before tax increased by INR 81 million, which is 24% of our revenue, from INR 340 million to INR 421 million. It's about 30% of our revenue. PAT has increased by INR 68 million, about 27% of our revenue, from INR 253 million to INR 321 million, which is about 23% of our revenue. On quarter-on-quarter basis, the sequential basis, the revenue is decreased by 2% from INR 1,421 million to INR 1,387 million. EBITDA increased by INR 24 million from INR 417 million to INR 441 million, which constitutes about 32% of our top line. Profit before tax increased by about INR 17 million from INR 404 million to INR 421 million. It's about 30% of our top line.
Profit after tax is increased by INR 42 million from INR 279 million to INR 321 million. PAT is about 23% during this quarter. Let me give you the financial year numbers, annual number. For FY 2023 and FY 2022, our revenue is increased by INR 112 million, a 2% of growth in our revenue from INR 5,294 million to INR 5,406 million. EBITDA is decreased during this year. The decrease is of about INR 450 million from INR 2,014 million, which was about 38% of our revenue, to INR 1,564 million. We have an EBITDA of 29% during this year.
Profit before tax decreased by INR 307 million from INR 1,711 million to INR 1,404 million. Profit after tax has decreased by INR 199 million from INR 1,238 million to INR 1,039 million. Our PAT margin is about 19% during this financial year as compared to 23% during last year. The EBITDA is down mainly because of a couple of reasons which I would like to give you some summary or some flavor on it. During this FY 2023, the prices of various inputs have gone up substantially. That has impacted our raw materials, power and fuel, consumption of stores, spares, consumables, and of course, you know, other costs where, you know, carrying out some repairs of machinery, building.
All that costs have gone up substantially during FY 2023. This has resulted into lower gross contribution of about INR 108 million. Other expenses is comprising of stores, spares, power and fuel, repairs. This has also additional cost of about INR 234 million. In addition to that, the payroll cost has gone up mainly because of, you know, the annual increment given by the company and all its subsidiaries. Of course, there is another element of the FX fluctuation because rupee has depreciated by about 8% during this year. That also, you know, includes a element of FX fluctuation in FY 2023. In addition to that, we have fair value loss of about INR 27 million in other expenses, which is mainly because of the valuation of mark-to-market valuation of investments our...
of our U.S. subsidiary. We do have some losses on account of some of the impairment of assets which we have done during this year. That is about INR 15 million. This is, you know, the main reason during this FY 2023, our profit after tax is gone down substantially as compared to FY 2022. Our B2C segment, overall basis, if I compare the revenue for FY 2023 to FY 2022, it's gone down from INR 412 million to INR 383 million. Our top 10 customers contribute about 24% of our sales as compared to 28% during the corresponding financial year, FY 2022. JCB has reported a PAT, I mean, this is negative of course, profit after tax, which is a loss of about INR 10 million as against INR 20 million during the previous quarter.
The top line remains same in case of JCB of about INR 107 million. I mean, it's flattish. INR 107 million as compared to INR 112 million. Evoxx is EBITDA positive and also the PAT has also increased from INR 8 million to INR 11 million. For the financial year FY 2023, the revenue has increased by about 10% in Evoxx. EBITDA is increased by about 127% from INR 26 million to INR 59 million. The company has reported a positive profit after tax of INR 21 million as compared to a loss of about INR 16 million during FY 2022. Geography-wise, I mean, if I give the revenue of international sales and domestic sales, the domestic market is about 47% as compared to 44% last year.
We have spent about 9% of our standalone numbers of India on our research and development activities. On consolidated basis, our research and development expenditures are about 6% in FY 2023 as compared to 5% during FY 2022. This is all from my side. We open this call for question and answer session. Thank you.
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 your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all participants to ask a question, please press star and one. The first question is from the line of Jatinder Agarwal, an individual investor. Please go ahead.
Good evening, sir. I have one question, that is related to slide 23 of your presentation. If I look at those numbers from, your March 22 presentation also
Hello?
Yes.
Yeah. Can you hear me?
Yeah. Yeah, I can hear you. Please go ahead.
Yeah. I'm referring to slide 23 of your current year's presentation, where you give the opportunity size and what is addressable by Advanced Enzymes.
If I look at last year to this year, practically, there is zero improvement except for animal nutrition. Even to that extent, whatever that has gone up by, the rest have actually declined. What is strange is in the last year's presentation, which is the March 22 presentation, you've written that this is your target for the next 5 years. Again, this year's presentation says that this is our target for the next 5 years. Is this a rolling target, or is this something that ideally you should achieve and then report the progress as to what you have done within that segment during the current year? If you could give a sense out of that, I think that is more useful.
Karthik, do you have the slide number 23? I don't have it right now.
Yes, I have that slide. What he's talking about is human nutrition. Last year numbers were about $41 million. That is what we have reported. I think, Jatinder, this is like, you know, exact numbers. In terms of the USD, we have $40.5 million during this year.
Yes. Yes.
You, you know that we have only 2% of growth, you know?
Exactly. What I'm trying to say is, in the previous column, what you all report is that there is an addressable market which is something like $200 million, right?
Yeah. Correct.
Right. What I want to know as an investor or as an outsider is, out of this INR 200 million, how much was captured during the current year? If you can give some idea in each of those segments, because the numbers seem to remain static on a year-on-year basis. If I am as an outsider, if I look at those numbers, to me it seems that there is zero progress in terms of moving towards your addressable market. Is my assessment right or is it that there is some disclosure that you would wish to give which will help me understand this better?
Yeah. There are some components of, you know, the entire human nutrition business, frankly speaking. One has to look at the entire composition of that and then, you know, one can make out really where we have grown and where are like, you know, couple of things which need to be addressed in due course.
Out of the $200 million which was last year, how much has been mined or whatever, I'm probably using the wrong word, but how much of it has been monetized or been able to crack during the current year, if you could give that number.
The, the numbers are not there at this point of time with me, but I can say that we, this human nutrition numbers are compromising of Indian pharma market as well as the nutraceutical market from the U.S. and numbers what we are addressing more into the addressable market is on the biocatalyst side.
Thank you.
Right? And this year the number looks same because, human nutrition market business in the U.S., there is a lot of slowdown. You see that the U.S. business in terms of USD is down by 15%, while the overall when we look at it's just down by 1%. There is some impact even though like some business we could gain from the biocatalyst areas, but this is not reflected because of the because of like some business is under the under recession in the U.S. If that can give you some idea probably like, I think, this can be.
I think that exactly is what my answer to question is, sir.
I don't have exact numbers, but.
Okay.
there is in the biocatalyst area. That's what I can say. Even though like in the last year also, we said that this, the business will not come the first 2 years or one and a half years. Yes, we had certain breakthroughs in some of the biocatalyst areas. Some products are being there on the commercialized side. Really like, this year probably those numbers will be little bit more effective.
Okay. I'm not sure if this is the right way to compare, but a lot of companies in the same industry seem to suggest that there is China Plus One, which is technically a real opportunity. Are there any tailwinds that you are able to see because of that? Or is that question not relevant?
What the way I see it, like, we have basically two components of the business. One component of the business is the U.S. side, which is under really the recession side. When we compare India side, so really like India side, we have grown almost like 14% this year. The tailwind what you are saying we can see on the India side. Obviously there is a lot of pull which is coming up, which was not there earlier. The China plan is working.
Can you just repeat the last point? Sorry, sir.
The way we see that is, India business there is a lot of pull. We see that, the China Plus One statement, what we are talking about is working out for the at this point of time. U.S. business, we see that this trend will continue for another one or two quarters, and then there should be, then there should be improvement. Because we launched few of the products in the last quarter, in the last year, I guess. Now we are in the mode of, doing some long-term agreements and other things. This will take another one or two quarters to really convert. This recession will still continue for another one quarter or two quarter in the, in the U.S. business.
India, China business, with China Plus One policy, we see that again in the second half of this year, we should have a good business on the India side.
Perfect. That is helpful. Thank you, sir.
Thank you, Jatinder.
Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.
Yeah. Hi. Good evening. Am I audible?
Yes, Nikhil.
Yeah, sure. Sir, I just wanted to understand some things. I believe in the opening remarks you had mentioned that there was a lot of input cost pressure and other cost inflation issues that were faced in FY 2022. Going forward, let's say in FY 2024 and FY 2025, how do you see these costs rationalizing? When your margins were sustainably above 40%, prior to COVID. When do you see that those 40% above margins can be reached? How soon or how far are we from that kind of a normalized environment?
Nikhil, the cost pressures and the fuel pressures, those were there in the last year. Currently, we see that some of the commodities are coming back to the normal. Examples are like soya oil, soya flour, they are getting back to the normal. When we talk about the fuel, coal and other things, those are still like on a higher side from what it used to be. It used to be say around INR 5. Currently it's running at around INR 12- INR 13. It went up to INR 17. Okay. On the fuel side, yes, there is that. The margins, I think that the margins will come back once our U.S. business start growing or it will come to the at least on par.
What is happening right now is like all the fixed expenses are at the same side, are on the fixed side. When there is a degrowth of 15%, kind of like remaining in U.S. because of the recession, that just impacts on the margins. Currently, the way we look at it is maybe like in the, as we move on after the second quarter of this year, we should start improving on the margin fronts.
Okay. If I break down the costs, different costs, input costs, your energy costs, your freight costs. Raw material costs is what we are seeing has kind of normalized or is close to getting normalized. The energy costs are still on the higher side and freight costs would have normalized. Am I right in assuming these three things?
You are right to a certain extent. Yes. I can say that you are right.
Okay. Okay. Understood. 40% and such margins are doable again at some point in time.
Yeah. We are waiting for the U.S. business to get normalized.
Okay, understood. My second question is slightly larger picture question. If I look at the global enzymes market, Novozymes is the global leader with I think 50% market share, and please correct me if I'm wrong in reading this. Essentially, if Advanced Enzymes were to grow more than the industry, and I think industry growth is not more than 6%-7% at a global level, you essentially have to take away market share from a player like Novozymes. When I look at their disclosures and your disclosures, there seems to be a pretty stark difference in how the R&D pipeline is for that company, which is obviously a global pioneer versus what for Advanced Enzymes. Only for the disclosures.
What I'm not able to read, I can't kind of assume that you don't have anything in the pipeline. Am I again right in assuming that in order to grow in double digits, 12%, 13% or 10%, whatever, you have to question or take up a market from Novozymes?
To a certain extent, yes. There are a lot of areas which are still there. Right. What is happening is the Novozymes is also there. There's a cost issue. In Novozymes, if you really go through that, there's a lot of, like, cost. They have passed on the cost to the customer, right? That is one area where you can do it, but we are not competing with Novozymes in all the areas. The real competition with Novozymes is only in the food area. That is the area where we are really competing with Novozymes. Rest of the areas we do our own niche markets. I don't see, like, you just need to take the Novozymes share to grow. You are, like, very small compared to Novozymes.
Novozymes sale is more than $1 billion, $2 billion, your sale is, like, hardly $60 million-$70 million. There is a lot of opportunity and a lot of gray areas are there which you can take.
Okay. I have looked at the numbers of that company. The company's margins are fairly healthy for a Europe-focused business model. Even the return on capital for that company is more than 20%. For a global company, despite in such an environment where they're able to do decent margins and their ROC is also, of course, pretty good, is it really the cost which can drive the market share movement towards your company? It doesn't seem to be the case, right? I mean, those margins are reasonable enough. Those ROCs are reasonable enough for them to keep on operating and keep on growing. What is it that you will bring to the table which will help you to gain market share?
There are a lot of other factors which are there and which is right now in play. What has happened in this war area or this, whatever is happening in Ukraine war or other areas, people are looking for the alternatives. There is only one supplier in the global area for most of the products like Novozymes, as you are mentioning. People were happy in the earlier stage. Now, Novozymes has suddenly, like, increased the prices 10%, 20% some of the products. Because the energy cost in Europe has gone up. This has forced people to look for the alternatives, the sustainability. We see a lot of traction which is coming out during the last quarter as well as this quarter.
What we are seeing is, like, some of the people started looking for the alternative supplier. They want to go with the second supplier as well. This is where, like, our strength is, and this is where we can grab some of the market share from the Novozymes, the area where we are competing with.
Understood. Given this is a B2B business model, now we have closed FY 2023 with a 5% growth in 4Q and 2% in full year FY 2023. I mean, it's very difficult for us to kind of build out aggressive growth numbers given what has happened in FY 2019, 2020, 2021, 2022. Any guidance you might want to share for FY 2024, 2025?
In year FY 2024, 2025, I mean, 2023, 2024, right? Or 2024, 20-
Yeah. Next year and the subsequent years, what kind of growth profile should we expect?
Next year we can say is like a double-digit growth, mid-level of double-digit growth. coming after like, most of the growth will come in the second half of this year.
You mean it is the second half of FY 2024?
Yeah.
level double digits mean mid, somewhere around mid-teens, right? That you're alluding to.
Somewhere around, 15% plus.
15% plus?
Yeah.
Okay. Sir, I mean, what's the visibility on this number? I mean, are there orders that you already have in the bag which have to be executed or, you are expecting that given the activity has been so thin in last few months, last few quarters, that natural courses that this activity will come back?
This is like, depending on whatever has been there in the pipeline, whatever the sale positions what we have based on the customers, whatever the mapping what we have done for this year.
Okay. Understood. Sir, how many launches are planned for next 12 months, next 24 months? Can you give some idea on that as well?
I can't comment on that, but honestly speaking, there are more than 25 engines which are under the pipeline at this point in time.
Sorry, there are more than 25 products which are in the pipeline?
Yeah, those are under the pipeline, but it always takes some time for the commercialization, right? There might be two, three, four enzymes might be under the commercial at this point in time.
Got it. Sir, can you share the R&D numbers for FY 2024? What do you classify as R&D and what is that number for FY 2023, 2022? Last two years.
You mean the spending on the R&D?
Yeah. I mean, what is the R&D spend?
Rauka has already mentioned. I think that it's 9% on the AETL's number, 6% on the total revenue.
Yes. 6% of total revenue. Okay.
That is including the Evoxx.
Understood. Okay. What should this number look like going forward for R&D to sales?
The numbers are going to be more or less same. Probably like we might spend 1% extra. We are like, we are developing our new R&D centers, right? As we mentioned last two, three times. That is still under progress. Probably, the new building will be finished by next year, maybe April, May of next year. Yes, the numbers will remain in the same range till that time.
Okay.
Sir, let me give one clarification regarding the research and development expenditure. What expenditure we are talking about 6% on consolidated numbers for during FY 2023 and 5% during FY 2022. Evoxx, this is one of our, you know, subsidiary. This is basically into research and development. Whatever, you know, the receipts of this Evoxx is there from the research and development activities which they carry out. When we float our R&D expenditure, we include those expenditure as well. That's how, you know, we are talking about the 6% and 5%.
Understood.
Yeah.
Okay. Just one clarification here. When we are talking about margin expansion going back to over 40%, that includes this 6% plus 1% extra R&D spend.
Yes.
that you are budgeting, right?
No, out of that, there are some kind of, you know, capital expenditure as well. That of course, you know, depends upon every year how much, you know, capital expenditure are done. That we need to definitely, you know, exclude from that. Overall, you know, 9% or 6%, whatever we are saying.
Okay.
CapEx keeps on ten-changing, you know. Recurring expenses more or less, you know, we see the growing trend, like last year we have spent about INR 303 million on our... I'm sorry, INR 245 million on our recurring expenses as compared to INR 216 million on recurring expenditure during FY 2022. CapEx was about INR 50 million during this year as compared to about INR 16 million during the previous year. Those are kind of, you know, expenditures on standalone basis, which we have done from India.
Right. Right. Sir, one final question, again, going back to the larger picture. Enzymes, I mean, when we read them theoretically, they tend to offer a lot of benefits. One of the key benefits being that in various applications, enzymes lead to better ESG compliance of your end customers. But somehow this trend doesn't seem to be getting reflected in the growth numbers for your company. Is the industry really that attractive or is it a steady industry where 6%-8% growth is what the broader growth is without much pricing power?
Well, most of our focus area is like a food area, human nutraceutical or the human nutraceutical area and the animal food area. We are not really focusing on the industrial side of the enzymes, like where we can say that you go on an environmental benefits or those areas. Those areas are not our focus area at this point of time.
Got it, sir. Thank you so much for taking my question.
Thank you, Nikhil.
Thank you. The next question is from the line of Girish Shetty from Banyan Tree Advisors. Please go ahead.
Hello. Yes. Sir, am I audible?
Yes, Girish.
Hello.
Yeah, we can hear you loud and clear.
First question is on your subsidiaries. If I see JC Biotech, your Netherlands subsidiary and SciTech, while they've been contributing in terms of sales, the contribution to PAT has been negligible as in net profit. How do we look at these three subsidiaries of yours, going forward as in over the next two, three years? Like if you see sales as well of these three subsidiaries, they've been kind of flat over the last three, four years. Has it been, I mean, because these have been acquired just before prior to the COVID period, or what has been the issue with these subsidiaries in terms of sales growth as well as negligible PAT contribution? That is my first question.
You talked about JC Biotech, SciTech, and which one was the third?
Netherlands subsidiary, as in which includes Evoxx as well.
JC Biotech is more like supplying all the materials to Advanced. I think we have increased the capacity in JC Biotech, and probably this year we will have more sale from JC Biotech to Advanced. There is not a real sale which is going directly to the customer side.
Okay.
You don't see too much of a difference in the JC Biotech number. Similarly, this Netherlands subsidiary is more like a research facility or research subsidiary, and we don't see the numbers are going to grow substantially. It gives us an added advantage on the research front and particularly on the protein engineering front. The third one is this SciTech. We had a degrowth this year and quite a substantial degrowth. In the about INR 13 crore we lost on the sales front this year. Going forward next year, probably like, we see a good growth not coming to the original level, but at least. At least around INR 45 crore, from INR 35 crore, what is present level. We see the business should grow.
We also like launched the B2C product this year in Indian market. The, our brand is Wellfa, and we will see how we can take the SciTech sales with the Wellfa as we move forward. In SciTech there was another one incident this year, this quarter, and that was like there was a fire. Fire in their R&D facility. Because of that, we had to book around INR 4 crore loss on our balance sheet because even though that material, that money is recoverable from the insurance, but still, we haven't got a letter from the insurance company. That's the overall picture, Girish.
Okay. Sir, one more thing you mentioned about kind of 14%-15% kind of growth for the coming year. You also mentioned that a lot of your costs have been fixed, and because you did not get that growth this year, the margins are impacted. Suppose, in a scenario where we are able to do this 14%-15% kind of a growth, how do we look at as in growth in your other expenses and eventually how will your margins improve in that case if you do that kind of a growth?
The manpower cost has to go up. The first target is go back to our original level, Girish. That is our first target. Of course, on the fixed side of the cost, manpower cost will go up every month and years. Most of the other expenses will remain flat.
Okay, will remain flat as in the other expenses that you, like INR 108 crores, you can expect it to stay in that range for the coming year as well.
Raukaji, do you have view on that, other expenses? Raukaji. Girish Shetty, the way I look at it, those numbers should remain flat. They will grow with some percentage, but not to the, not to those levels.
Okay. Okay. Like 15% growth and in terms of margins you are saying like we made around 28%-25% EBITDA margins, right, this year? Your normal margins you're saying should be around 38%-40%. That is a fair assumption for your EBITDA margin?
Those are the first steps. As we move on quarter and quarter, we want to go back to those levels, then we can see where do we stand.
Okay. Okay. Understood. Sir, any update as in on the U.S. business I wanted to know. We were growing quite well. As in if I exclude the loss of the top customer you had, you were still excluding that you were growing at a 14%-15% rate apart excluding this FY 2023. What should be the expected growth from this business? We had this flat year, right? Like I can see 9% degrowth in the U.S. business. How much can be attributed to currency fluctuation? If I see like to like how much has the business grown or degrown for FY 2023?
I think as I already mentioned, we degrowed by 15% in terms of dollars and 9% in terms of rupees because of whatever the currency intercash in U.S. Going forward this year we see about 10% of growth in the, in the, because of the second half numbers what is going to come up. Probably like, the next one or two quarter will remain flat.
Okay. This 15% decline has been the market rate of decline as well as in overall market has declined at that rate, you think?
I'm not tracking the overall market, Girish. I can't comment on that. That is what we can say on the recession front.
Okay. Okay. Sir, your India business has done decently, like 9% growth, for the full year. What has contributed to this growth as in which segments specifically has done well in the India geography?
In India geography like we have grown by 14% on year-on-year basis, roughly. All of the segments has contributed. Yeah, I think like all of the segments have contributed. The major contribution is came from the animal feed as well as like, food business and, Bio-Processing business I guess.
Okay. Sure. Thanks. Thanks [inaudible] .
Thank you. The next question is from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead.
Hi. Thanks for the opportunity. I had two questions. One was on, as a business when we see, you know, that Novozymes is there and we also are kind of, you know, our product is very niche with lot of customer stickiness. How does the pricing, you know, power plays in this industry? As you know, rightly mentioned that Novozymes took some 10%, 15% hike in some of the products. What is our ability to take price hike with our customers when, you know, in times when we are seeing, you know, significant volatility in the raw material freight and, you know, other stuff that you mentioned. Like, how does one look at, you know, pricing power for us?
The way we look at it is this is the opportunity when no other time or other people goes on and, like, increase the prices. What we need to give the message to our customers or the future customers that we are there. We are there to support you at this given time. Honestly, we haven't, like, really gone to increase the prices. We kept the prices stable.
Sure. Then does it mean that our margins would always be, you know, kind of cyclical depending upon our raw material prices?
No. Honestly, the raw material prices really don't make too much of a difference in the margin. They will hammer you a couple of percent here or there. You can always compensate that with the increase in the sales. That is where our philosophy is.
Sure. It's, like, more of, you know, volume over, value approach that we have.
Yes.
Sure.
We need to increase the volume. At this point of time, what we need to have is the more business rather than really looking for the increasing the percentage of margins. That is where we need to differentiate, give the message to the consumers that we are there.
Sure. Makes sense. Now the second question is related to it. If I look at the U.S. business this year, it has kind of, you know, came down and you rightly mentioned about, you know, the currency. Can you help me understand how the volumes have played out in the U.S. business, and what were the key reasons why, you know, we saw this kind of decline? Like, did we kind of lose traction in a particular product or a set of products? Because in your opening remarks you had mentioned that you have launched few of new products which are expected to get exhibited in the second half of this year. If you can, you know, give more color on the volume degrowth in the U.S. market, key reasons for it.
When you say, like, this year we'll see, you know, comeback of the U.S. market, what would be the levers for the same?
As I mentioned that, like, there is a, like, a recessionary trend and there is a degrowth in the volume as well. When we talk about the 15% degrowth in the U.S. market. What I said is, like, we did launch, like, the few of the segments in the U.S. markets. The few of the segments are like, in the break area. The another area is like in sugar management and weight loss area. In these two products, sugar management, weight loss products are really looking. It really, we see a lot of, like, traction in this market. We are getting some long-term orders also. We see that these new launched products should take us back onto the track as we move on.
When we say 15% growth, you know, that of course means the U.S. market will slightly grow at a faster rate. With these new products, you know, contributing the growth in the U.S. market from the existing products also coming back could be higher, like, because, then why should we not grow at a faster rate? Because, you know, the degrowth in the existing products should also at some point of time come back and then, you know, there are these new products that you're talking about. How does, you know, one kind of.
What we can map is just for a year or a near future, right? We cannot map for a longer period. Longer period there are always going to be the fluctuations.
Sure.
At this point of time, what we can map is, like, for a year, and that is what the mapping is being done. The way we say is at this point of time, probably like U.S. market should do 9% to 10% of the growth this year on the last year's number. Taking those numbers forward, we come up with, like, about 15% of the growth this year.
Sure, sure. Another question that I had was on, you know, human nutrition as a business. Like, if you see that segment as a whole has been kind of flattish this year. This is largely to do with the U.S. market slowdown or the Indian business also had, you know, some headwinds in this segment?
Indian business has grown up. Like, as I mentioned, like, all the areas has grown up in India side, right? When we talk about, like, a major portion of the human nutrition business is coming from the U.S., and U.S. we said that 13% in terms of dollar or 9% in terms of even though the flattish number in the human nutrition side, okay. That just contributes because of the Indian number.
Sure. Got it. when we, you know, talk about, large number of products in the pipeline, you mentioned some 25 products. Which are the segments that we are trying to focus more? Is it the animal nutrition or human nutrition? The recent growth that we are seeing in animal nutrition, is it driven by newer products or it is, you know, existing products getting more volumes?
The growth, what we see is the new products which we launched. And in the human nutraceutical side, like, we are working on these two areas. In this area, sugar management, weight loss areas. We are also, like, working in the R&D for a new products. How do we improve our products going forward? Currently, like, product number one, going forward, how do we make product plus? Going forward again, how do we make product plus plus? Those are the focus areas for us on the human nutraceutical side, on the R&D. We are working on lot of enzymes on the food areas. Like, we are working lot of enzymes on the biopharmaceutical area. There are some different products and different way, how do we launch into the annual period.
Major focus which is going on on the new product side is on the human nutraceutical and food ingredients.
Okay, got it.
Beverages.
Okay, got it. My final question was on, you know, the margins. Like, while we have already touched upon margins couple of times in this call, you know, just to clarify, you mentioned that, you know, this year we should be doing around 15%, 16% kind of growth. Large part of that would come in the second half of the year, given, you know, the product launches, the long-term contracts that you see. You also mentioned that the margins we kind of want to go back to the historical, you know, number. Is it fair to assume that we aspire to close this year with 40% margin or operating margin at
At this point of time, you know, but that should be our target in the long term to go back to the, those levels. Yeah, we should see some improvement from where we are at this point of time.
Sure. Well, thank you so much, and all the very best.
Thank you, Kunal.
Thank you. The next question is from the line of Shreyans Gathani from SG Securities. Please go ahead.
Hi, am I audible?
Yes.
Yes.
Hi. I just had one question, which was around Wellfa. I see that the products are launched on Amazon and the whole website on your own website too. I wanted to know what is the strategy, in terms of, you know, growing sales around that. If I see certain competitors who are selling on Amazon and look at their financials, like revenues are pretty high, but since it's a B2C model, they're spending heavily on advertisements, you know, probably loss-making on that. I just wanted to know what is the strategy on that and what kind of margins are we looking at because of ad spends on growth. How do we balance growth and margins? Just one question on that.
Wellfa we did launch, but we are not taking the any revenue number when we are talking about like overall projections what we have. We are conservative in terms of like in terms of going into the B2C also. Currently we'll be spending about three years this year on the Wellfa brand to develop, and we will see what progress we make. Most of the strategy is based on the on the internet based marketing as well as like some store marketing. We are not going very aggressively on spending the money.
Okay. Okay. Because, lot of these other competitors has like a lot of private equity backed dry powder to just spend on, just wanted to understand. That's why I have put.
Like, as we get the sales and as we move on. This is the initial numbers, like what I was talking about this year. It will be every quarter and if we see that there is no progress, we may release those numbers.
Okay. Okay. Okay. Thank you. That's all. My other questions were answered. Thank you.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Jana, an individual investor. Please go ahead.
I think my question already someone asked. I got the answer. Thank you very much.
Thank you.
Thank you.
The next question is from the line of Gaurav Nigam from Tunga Investments. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question. Sir, first two bookkeeping question. What is the revenue share of top 10 clients in FY23? What is the contribution of top product in the overall sales in FY23?
Raukaji can answer that first question. Raukaji already said it's 24% for the last financial.
Yes.
Okay.
Top 10 customer is about 24% in FY 2023.
Top product, sir?
That is also 24%.
Oh, that is also 24. Okay. Okay. Sir, just one more question. You alluded to India Pharma sales in your statement. Hello? Yeah, could you please help, sir, understand how much was the India Pharma sales in FY 2023?
Yeah, India Pharma sales.
Yes.
For financial year 2023, you are asking, right?
Yes.
I mean, you know, I'm giving you the complete breakup, that will be very helpful when we talk about human nutrition. Pharma is one of the, like, you know, area. It is INR 1,475. This is about 27% of my top line, as compared to 23% in FY 2022.
Got it, sir. Very well. Thank you, sir. Yeah. That's all from my side. Thank you, sir. Bye-bye.
Thank you. Ladies and gentlemen, to ask a question, you may press star and one.
I think one question that was regarding, you know, our fixed expenses and variable expenses, if we grow, say for 15%, then how, you know, our expenses are going to go up. I mean, the fixed expenses are generally, you know, about 45%-50%, and variables are between, you know, 50%-55%. As we grow, you know, our top line, the variable expenses could be, you know, in the same kind of, you know, increase in expenses. Yes, the fixed expenses will not at all grow.
There will be some component which may grow, like as Mukund has already mentioned about it, which is, you know, the payroll costs which may go up because, you know, that is generally, you know, every year there's increment and where increment is given, so that could be an increase in overall expenses when we talk about the fixed expenses side. Other than that, I mean, you know, we are kind of a FY 2023 at the highest level of expenses in that sense, because, you know, all related costs is already been absorbed. Going forward, we don't see any this kind of, you know, unprecedented inflation and increase in the expenses. Power and fuel cost is a kind of, you know, cost which is semi-variable.
Some component is kind of a fix, and there are some expenses which every year keeps on increasing irrespective of you know, like, Mukund has shared about it, the phone cost, but now phone cost is kind of, you know, stabilized. Yes, the power tariff is most likely to be increased because of, you know, the impact of the prices of the fuels. I hope I answered that question regarding the fixed expenses and variable expenses. As we grow, if the increase in the sale number is, say, 1%, the likely impact on our profits will be, you know, very positive. That's what, you know, I can say about it.
Thank you, sir. We have the next question from Shreyans Gathani from SG Securities. Please go ahead.
Hi. Thanks for the follow-up. Just one more question. I want to understand what is the product differentiation that you'll have, like, in Europe and the Americas. I see that, you know, like, this witness a very different level of growth and in Europe, and there's, you know, America is like a strong growth. Whereas like overall markets are pretty similar in terms of, you know, recessionary pressures. Just wanted to understand, like, you know, if your products are mutually exclusive or how are you selling in those two different markets.
America is, like, more focused on the nutraceutical area, right? It's more on the human area, where like Europe, we don't sell much of a product in the human nutraceutical area. Our major sales is coming from the food area. As I mentioned, like about the gas prices and other things and the cost impact what these people are facing, and that is where, like, they started looking for the alternatives and that is where the growth started coming in.
Okay. Are we looking at selling food related products in the American market, or are we gonna stick to the same product profile that we currently have?
We started working on it. We started, like, building a team in U.S. market at this point of time, but it will take some more time.
Okay. Got it. Okay. Thank you.
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 the valuable time for attending our earnings con call. We will keep you all posted for any further updates. I request you all to kindly 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 host you all in the next quarter. Till then, stay healthy, stay safe.
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.