Ladies and gentlemen, good day, and welcome to the Rossari Biotech Limited's 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.
Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech's Q4 and FY 2024 earnings conference call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman, Mr. Sunil Chari, Promoter and Managing Director, and Mr. Ketan Sablok, Group Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we'll have the forum open for a question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Edward Menezes to make his opening remarks.
Thank you, Anoop. Good evening, everyone, and thank you for joining us on our earnings conference call. It's a pleasure to have you with us as we discuss our operational and financial performance. We are pleased to report another strong quarter for the company, driven by healthy year-over-year growth in both revenues and profits. This performance was largely driven by the expansion of our HPPC business. While challenges in our TSC and AHN divisions persisted due to external industry headwinds, we remain optimistic about the recovery of these segments in the upcoming fiscal. As a company, we have always believed in the power of innovation, and accordingly, our focus on R&D has been a cornerstone of our success. This has enabled us to create unique solutions that meet the evolving demands of our customers.
Our R&D efforts are built on a deep understanding of market trends, understanding customer requirements and preferences, and then delivering quick, sustainable solutions. A key aspect of our strategy here is our commitment to green chemistry, which has been part of our DNA since our inception. This drives us to develop environmentally friendly products that deliver value to our customers and contribute to a sustainable future. Our ongoing growth strategy centers on expanding all our businesses' divisions. Over time, we have developed new verticals with our core chemistries, establishing a strong foundation for future expansion. We believe we are now well-positioned to scale up these endeavors. We are particularly focused on specialty surfactants, insecticides, institutional cleaning, and performance chemicals. Our recent expansion plan at Dahej, along with increased decolorization capacity, will allow us to meet growing demand in these key segments.
Overall, we are confident that our robust balance sheet, backed by prudent financial management, will support our long-term growth strategy. With this, I would like to conclude my address, and I now hand over to Mr. Chari for his comments.
Thank you, Mr. Edward, and a warm namaste to everyone. It's a privilege to speak with you today and share our progress in FY 2024. While it has been a challenging period for the industry, Rossari has performed quite well, delivering healthy results throughout the year. We are particularly pleased with the exceptional performance of our HPPC segment. During this year, we expanded our customer base for key HPPC products, leading to a robust 18% growth in this division. Additionally, we have achieved significant success in exports, which have grown faster than domestic markets during the year. This is due to the growth of our approach of targeting new customers in both new and existing geographies. A highlight in our international vertical was the expansion of our presence in Bangladesh by establishing a strong local business development team.
By strengthening our presence in such high-growth markets, we'll be able to tap into new customers and establish stronger relationships in the region. Our institutional cleaning segment has achieved exceptional growth during the year, serving major sectors such as airports, railways, hotels, and healthcare that rely on specialized cleaning solutions. Our initial success in this segment can be attributed to a deep understanding of cleaning chemistry, which has enabled us to develop tailored products and solutions. Additionally, we provide comprehensive support to our customers, ensuring that all their cleaning requirements are met through us. Looking back on our journey since our IPO, we take pride in our growth from INR 700 crore top line to our expected milestone of around INR 2,000 crore top line in FY 2025.
The remarkable growth, in addition to the successful execution of high-quality existing acquisitions, reflect our strong commitment to excellence, innovation, and customer satisfaction. Our commitment to maintaining a strong balance sheet and our disciplined approach to financial management has also been instrumental in our success. These principles will continue to guide us as we expand our operations and explore new opportunities. We thank you for your continued support, and I would now request, Ketan to share his perspectives.
Thank you, Chari, and good evening to everyone.
Let me provide you with a brief overview of the financial performance for the quarter and for the full year ended March 31, 2024. We are pleased to report a healthy growth in our operations, with revenues improving by 16.3% YOY to reach INR 472.7 crores in Q4 FY 2024. The strong performance of our core HPPC division played a key role in driving this growth, registering almost 18% YOY increase. While our textile division witnessed a slowdown this quarter, primarily due to subdued demand in the textile industry and the softening of prices, volumes have remained steady throughout the year. The AHN performance was lower due to external industry headwinds. We anticipate a rebound in demand, both domestically and in export markets in the near future, which should lead to a positive turnaround for both these verticals.
In terms of revenue contribution for the quarter, HPPC led with 73%, followed by Textile Specialty 20%, and Animal Health with 7%. Consolidated EBITDA amounted to INR 63.6 crores compared to INR 54.6 crores in Q4 FY 2023, marking an increase of 16.5% YOY and remaining consistent quarter-on- quarter. Meanwhile, the PAT stood at INR 34.1 crores, up from INR 28.9 crore in Q4 FY 2023, reflecting a growth of 17.8% YOY and a steady QoQ number. For the full fiscal year, FY 2024, our consolidated total revenue from operations reached INR 1,830.6 crores, reflecting a 10.5% YOY increase.
HPPC revenue amounted to INR 1,369 crores, contributing 75% of the total revenue, followed by Textile Specialty business, INR 354 crore, contributing 19%, and AHN at INR 108 crores, contributing 6%. EBITDA for the year stood at INR 249.8 crores compared to INR 223 crores in FY 2023, marking the highest annual EBITDA, with EBITDA margins of 13.6%. PAT for the year amounted to INR 130.7 crores compared to INR 107.3 crores in FY 2023, achieving the highest annual PAT. On the gross margin front, we are about 2% lower in Q4, while on the full year basis, we are steady at 29%. Some moderation on the selling prices during the quarter impacted this fall in the gross margin.
Also, in the last quarter, as well as in the last year, similar quarter, we had some high-margin tender business which were missing in the current quarter, Q4. Gross margin improvement remains our key goal, and strategically, we are aligned to keep improving our gross margins going forward. On the working capital front, we are a little stressed on the outstanding days. Our inventories and receivables have increased during the year. On the inventory front, we had planned increase of inventories during March 2024 in view of the upcoming agro season, where we had suffered last year due to lack of availability of material. Also, during April, one of our key suppliers was going into a planned shutdown, hence we had to build up stocks at our end.
On receivables, we have a stretch on the agro side and some of our government tender businesses, where the cycle periods are long, have impacted the increase in the receivable days. We are taking steps to streamline our working capital across businesses, and we will continue to monitor this. Looking ahead, our expansion projects at Dahej are progressing as planned and are expected to be completed during FY 2025. These expansions will enable us to meet growing demand in key sectors and further strengthen our position in the market. We remain excited about the opportunities in our business verticals and believe that our robust R&D framework, strong financial base, and diverse product portfolio will continue to drive our success going forward.
On this note, I would conclude my opening remarks and request the moderator to open the forum for any questions that the participants may have. 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 their 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 a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Aditya Chheda from InCred Asset Management. Please go ahead.
Yeah. Good evening. First question is, on the gross margin. In your view, what would be the key triggers for implementing gross margins going forward?
So as I said in my opening remarks, there was a little change in the product mix during the quarter, which impacted the gross margin. Also, there was some moderation on the selling prices, which has also impacted the gross margin. Our strategy on this front is to keep improving on the R&D side, lowering the costs and keeping the selling prices intact, and if or increase, depending on what the raw material prices behave. But given that now, some of the raw material prices are looking to be a little steady, I think going forward, we should see some improvement coming on the gross margin side.
Right. My next question is on the revenue run rate. We have some of the capacity coming up in phases. Are you expecting the revenue run rate to bump up in the second half? Or, if you want to sort of quantify, how are you thinking about top line growth for FY 25? And what, where, which are the quarters where you will start seeing that uptick in the revenue run rate, which we are currently at INR 474 at ticker zone console?
The CapEx will come on stream in a phased manner, so probably some of the CapEx will come towards the end of quarter two and or beginning of quarter three. So we should see some increase in the revenues. Currently, the way the projects are progressing, I would say by quarter four, we should see some revenue bump up, and the major bump up coming in the next year, FY 2026.
Right. Last question from my end. Would you want to give any guidance on the revenue front for FY 2025?
No, it could be a little difficult now at this stage, you know, given the, what's happening globally. But, I think we would, we've talked about this earlier also, and where we said that, we would be working towards, mid, low double-digit kind of growth. That's what we are seeing now, and that's what we delivered this year. So currently, we would not hide it again, but we should be able to do what we've done this year, at least, as of now. Maybe a couple of quarters down the line, we would be in a better position to tell you where the business is going to grow.
Great. Thanks, I'll join back in the queue.
Thank you. Next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah, good afternoon, team, and thank you for the opportunity. Sir, you mentioned in your opening remarks that there was volume growth in the textile business. If you can quantify, what has been the volume growth in FY 2024?
So, the textile business has registered about 5% kind of volume growth on an annualized basis. On this quarter, the growth in volumes has been about 10%, quarter-on-quarter.
Okay. And what is the plan ahead, given that you are now investing in Bangladesh as well, to grow your textile business?
Yeah, so we've, you know, set up a new office, et cetera, in the last year in Bangladesh. And we've, you know, set up the entire sales network, dealers, et cetera. We should start seeing some traction in the textile business, probably in another couple of months. So probably Q2 onwards, we will see some good ramp up in the Bangladesh business coming through.
Okay. In terms of your institutional cleaning business, is it possible to briefly elaborate what's the plan for the next 2-3 years?
Institutional cleaning business, I think we are quite bullish about that. The business, which is currently on a growth phase, we've almost doubled the turnover in the institutional business in this year and in FY 2024. Our target is to double this in FY 2025. This business is slightly a cash consuming business in terms of cost, as well as in terms of the working capital.
But till it reaches a certain, you know, size and capacity, it will be a slight push on our working capital position, but that's something we are willingly doing it, because we are quite bullish that the business, once it reaches a certain volume of, you know, INR 800 crore+, that's when the actual returns we'll be able to see. And yeah, so that's the plan. I think we should we are aiming to double it again this year. Next year also, we are, you know, quite bullish. We've set up a large team now in the business of institutional chemical. We've brought in a new head. The entire org structure has been done.
So over the next 2-5 years, I think we are very, very confident of this business reaching much larger milestones.
For FY 2024, though, what is the revenue and maybe loss in this business?
The FY 2024 revenues have been about INR 159 crore. It currently is giving about 4% kind of an EBITDA.
Okay. Okay. And the working capital cycle would be how much in terms of number of days for this business?
So working capital is in a little stretch in the business. It could be upwards of about 85-90 days.
Okay, okay. And great, sir. Thank you very much, and all the very best.
Thank you.
Thank you. Next question is from the line of Sanjay Jain from ICICI Securities. Please proceed.
Yeah, good afternoon, sir. Thanks for taking my questions. I got few of them. First, starting with the gross profit margin, with the fall in raw material prices, I thought the percentage margin should look better, because mathematically, our gross profit per kg remains flattish, which makes margin look better. In a standalone business, the margin has actually fallen by 300-400 basis point, and on a consolidated basis, it is down by 200 basis point. I know you mentioned that there's a change in the product mix, but I thought institutional, which has the highest, gross profit margin business within our portfolio, there the revenues have doubled, which should have further aided the margin.
So which are the other product line where you think the margins were higher and those have not been accounted in Q4 or the sales are lower in Q4?
So, Sanjay, as I said, in the last quarter, we had a higher revenue coming from our tender business, the government tender business, where we supply cleaning chemicals to schools and institutions. So this is a very high margin business for us, which comes in certain quarters. This business was there in Q3, so Q4, this business was well. So that has impacted significantly to gross margins.
Okay, that's again a part of institutional only.
Yeah, that is, it's done in through Rossari. It is not done through the JV.
That should be done through Rossari. That means margin.
It's done through Rossari, definitely. So that was there in.
But the 400 looks excessive, right, for one small business where.
So almost INR 25 crore business for us in the last quarter. So almost the entire year supply happened in Q3. So that has impacted. And of course, as I said, some selling prices there was a moderation. We have not passed on some of the price increases which were there. That has also impacted. It's going to take some time for us to push these prices into the market.
Ketan, can you just help us understand how is the competitive intensity in the industry? Because we have seen our margin getting compressed when the raw material prices go up, our margin getting compressed when the raw material prices are falling. Either way, our margins look like the volatile or vulnerable for the volatility in the raw material prices. How should we see the competitive intensity of the business model which we can make more robust to keep the margins more stable?
Yeah. So if you see, Sanjay, we have generally been in the last couple of years, we've been able to maintain our margins, the gross margins, I'd say, at about 30% plus minus. They keep changing quarter to quarter, again, depending on, you know, which vertical does well, which vertical does not do well. So for me, currently, the way the business is structured and the way the market is behaving, I think we, we should look at an annualized number of closer to 30% gross margin. That's what I can say as of now.
Ketan, but actually, the margins at the time of IPO were like 37%-38%, and, the moderation, what we thought was largely because of the raw material pressure. But when raw material have normalized, our margins are still not normalized. So, is it fair to assume that this is a new normal and the 38% what we did at the time of IPO were, at least in the foreseeable future, it doesn't appear that we will again, climb to that kind of a margin profile?
Yes, I think because at the time of IPO and in the time at the current scenario, the entire product basket of the company has changed significantly. So, we didn't have Tristar at that time. We didn't have Unitop at that time. And then we have also got into some other verticals like paints, paper, and oil and gas. So there, and at that time, we had a big account, which you know where the margins were significantly higher, which we don't have anymore. So the impact of all of this, as you rightly suggested, currently, the way we look at it is, this business is going to be around the 30% kind of margin.
Fair enough. Fair. That's very clear. Ketan, but just second on the growth side. Now HPPC growing at 30% looks phenomenally healthy. Can you help us understand how we plan to sustain this growth for next 2-3 years? Or how should we think about this portfolio growing at say 20%-30% even for next 2-3 years?
So, some of the key, sub-segments in HPPC, I think which will keep pushing the growth here would be, one, would be the new CapEx, which is coming in. So, that and the CapEx, largely the bigger one, is coming up in, in Unitop.
Yes.
That's going to help us keep up the growth momentum in HPPC. Secondly, so that has a portion of business which is into the perfume and ethoxylates, and there is also a product which is going to go to the oil and gas industry. So both these will help us maintain this growth in HPPC. Secondly, the business of institutional chemical, which I talked about, that also we expect that at least for the next foreseeable two years to see a significant growth. Given the current base is small, we've almost doubled it this year, as we have shown in our presentation. We expect to be at least closer to doubling this year also. So till.
So, couple of these factors will help us keep this momentum of growth in HPPC.
So that's fair to say that within HPPC, the contribution of agrochemical, oil and gas is going to go up materially with new ethoxylation capacity coming in, right? So.
No, no, not necessarily, because if you see in the last year, specifically FY 2024, where the agro season was not great and the agro overall agro was not doing quite great. We actually pushed our capacities in the non-agro side, and it's the non-agro business of Unitop that has helped us sustain, even though the agro has not grown. While volumes we've been able to maintain in agro, but the real growth has come from the non-agro business in FY 2024. Roughly, if I could tell you, in FY 2023, the mix was, you know, about 65% agro and 35% non-agro. This mix now is roughly about 50/50%.
Oh, so we have changed materially. In non-agro, what is growing in the Unitop?
Sanjay, this is Sunil Chari here.
Hi.
So home, personal and performance chemicals, home personal care is doing, you know, extremely well. In HPPC, the Tristar business has done very well in the last year. But the Unitop business also has done very, very well. So the non-agro part of the business has done quite well, and this is here looking at-
What is non-agro? When you say non-agro, what does it mean?
So non-agro means home care, personal care, and then, the paints and coatings. These are three areas which are, major contributors to non-agro.
Okay, okay. Home care, personal care, and paints. These are three, one growing faster for us.
Yes, Sanjay ji.
Have you done any tie-up with the new paint company, which is now planning to become very big? Do we have any relationship there? Can that be any trigger, or are we looking at that being a new opportunity for us?
So we are in talks with all these new paint companies which are coming up and also with the existing paint companies. We are hopeful of business in these companies.
Got it, got it. One, one last question on the working capital side. What should be the new normal? Because this company used to have a working capital of less than 50 days. This year, we are closing with 97 days of working capital, which is almost doubling of the working capital for us. Ketan, what should be the steady state working capital with once we should understand? Because tender business is always going to be a lumpy business. So how should we factor the working capital days?
So, Sanjay, if you see now with Unitop, et cetera, coming in, see, and the strength that we are seeing in the agro business, the receivable cycle, because if you see our standalone, we are still at about, you know, 67-70. So we are, we, we hover around 65-70 days in the standalone. In the consolidated where the numbers have gone up significantly. So one of the main issues is in the agro business, where the payment cycle is as it is was stretched, but given the current situation, that stretch has gone a little longer. So that is impacting this.
Secondly, as our, I said, as our institutional chemicals business keeps growing, there are cycles in that business also where the, the working capital days are slightly stretched compared to what, you know, we generally have in the standalone. So that, too, is at about 85-90 days. Secondly, in March, as I said, there were certain actions we took on the inventory side, wherein if you see the inventory levels have significantly gone up, almost to INR 90 crore plus. So that, that has also impacted. So a fair assumption, on year-end, I think we will be following this kind of cycle. We should be at about 90-90 days kind of number.
So, 90 days now stabilize.
Sanjay, to add to what, Ketan said, regarding standalone, we are, practically at par as, as per last year. It was 67 days, and it is 69 days. And, these 2, 2 days also, I think it was little because, goods in transit were little higher than, last quarter.
It used to be 45 days when we were at the IPO.
But now this is the new normal because, you know, our customer mix of product mix has changed substantially as we have informed you.
So now say standalone 65 and consolidated 90 is what?
Standalone, 70.
Okay, 70. So that should be a new normal, right? So that from here onwards, there won't be a significant because this year there is lower cash conversion because of the working capital.
Yeah.
From next year onwards, that should not be any more the case, correct?
No. Our endeavor, Sanjay, internally, is to bring it down to below 85 days. And hopefully on a realistic, I'm giving you a realistic number, but currently, given the situation, I think we have to first bring it down to 90 days from where we are. So it would be prudent now to take a 90-day kind of a cycle.
Got it. Got it. One last... Sorry, I'm stretching a bit, but one last question from my side. We anticipated to double the AHN revenue this year. I don't think that's been possible. Any particular reason what we saw the opportunity at the start of the year and what transpired across the year, and finally, we ended up with not much different than what we were last year?
Last year, we were not prepared for the agro season, and then as well, we had ethylene oxide shortage. This year, I think close to INR 20 crore of stock is for agro, which we have kept now.
No, no, sir, I am talking in AHN.
AHN. Sanjay Ji.
Sir, last year call me, fourth year call me, you expect the AHN revenue to double?
Yes.
Okay. I don't think we were able to do that. What changed over the year for us being not able to do that? Because I think we were very confident of doing that.
The last few quarters in animals and nutrition industry, especially the integrated and the feed mills, have gone through a lot of pains. They have had lot of pressure on their margins, and our outstandings, you know, were going up. And then prudently, we decided that we are not going to give, you know, extended credit in the market for animals and nutrition.
Okay. You're telling the industry itself struggled, and we were more careful not to increase the exposure in the industry?
Yeah.
Presumption?
Yes, sir.
Yes, that's what it was, Sanjay. But if you see in the last two quarters, we've slightly bettered on the AHN front.
Right.
We are also now putting up a small CapEx in AHN, so premix.
Yeah.
Which will help us.
The premix plant.
Yeah.
We are putting up a premix plant, and we are putting up a granulation facility. These two pieces of equipment will, I mean, increase our production capacity as well as the quality of our product. So we currently... I mean, standalone mixers, but this will be a completely automated mixing technology from a multinational company. So with investment, we see that this year we should bounce back, although this machinery takes anywhere between four and six months for delivery and installation. So we are very hopeful that with these two pieces of equipment in place, we will do better there. And as well as, Aqua is also being cleared, so with their Aqua is in the process as well.
Thank you, sir. Thank you. That's, that's fairly detailed. Appreciate all the answers and, best of luck for coming quarters.
Thank you.
Thank you. Next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, good evening, and thanks for the opportunity. So first question is, we have recently commercialized some oil field chemicals. If you can just give us a broader understanding of where these are used, which geographies, whether it's a tender business or, you know, it's a normal business, and how are we going to tap this particular opportunity in terms of opportunity size and maybe a growth plan for a three- to five-year perspective? Thank you.
Yeah. So the oil field chemicals, we are targeting both India market and also especially the Gulf market. There's also some market in Africa and Malaysia, which we are trying to target. And oil and gas has a long gestation for approval from the big companies. So we, this year, we're mostly going to seeding. The chemistry where we are focusing is mostly the demulsifier, the pour point depressant, the biocides, the defoamers. These are chemistries where we have some small sales from Unitop. So we would, this year, would be more approval and seeding stage, and hopefully in the years to come, we should get good business from these chemistries and these focus areas.
Obviously, Saudi, you know, UAE, Oman, Kuwait, Qatar, Nigeria, and India, and also Russia. These would be focus areas for us.
Sure. That's helpful. The second question is in terms of our, you know, overseas market. So how are we tapping the exports market? You talked about textile chemicals in terms of our Bangladesh initiative. Apart from that, you know, Unitop has been pretty concentrated on the LatAm market. You know, Tristar has been on North American market. So where are we in terms of cross-selling opportunities and dealer distribution network? And how are we expecting the exports to grow in FY 2025, 2026? What could be the proportion that we are looking at, maybe over a three- to five-year period of time? Thank you.
Yeah. So, Rohitji, the focus would be the Americas, which includes Latin and South and North America. This is one of our focus areas for growth. The second area, of course, would be Asia. And, you know, Asia will include the MENA region, which we consider still in Asia, and also the Far East region, which is there. And the third geography, which we will look in exports, remains the European geography. So Latin America is part of the Americas, which we already done. The home personal care segment, the agro segment, would be, this year, the focus areas, mostly. The.
If you see, in the last financial year, Rossari, Unitop and Tristar, we were practically, you know, together, the three companies, we are at zero debt level. We net zero the investments and the bank loans in these three companies were matching, so there is practically no debt in these three companies. And Tristar and Unitop both have achieved 100% capacity. So this has mostly come from also the export market, but also seeding into the local market, where we have cross-sold, did the cross-selling into our existing customers with new chemistries. In terms of specific products, phenoxyethanol would be something which could grow.
But also we see a lot of alcohol ethoxylates and other kind of ethoxylates going into not only home personal care, but also food processing. And we are starting to build, you know, our capabilities for the pharma surfactants, which again will come under; it should be the segment of performance chemicals.
Right. Got it. Just one last, if I can squeeze in. From the agrochemical exposure, it's 50% only in Unitop, and there is no other exposure that we currently have, right?
No, no, it's all, all at Unitop.
Right. And, how has been the performance in the recent quarter? And given that this is the primary season from agrochemical perspective, what is your expecting that whether we will, we'll be able to maintain the volumes during this year as well, or there could be some setback? Thank you.
I didn't get your question clearly, Rohit. Can you just repeat, please?
Yeah. So, given that last year we were able to maintain the volumes on the agrochemical, obviously there was some impact, probably because of the pricing. How do we are seeing, in current environment, where last year the inventories were higher generally across the board. So from a FY 2025 perspective, whether we have a visibility that agrochem part, the volumes will be maintained or, there could be a smaller setback.
No, the kind of order book that we are seeing now, I think we should be able to maintain our volumes in FY 25. We have at least now a good bit of inquiry coming in from our customers, so we don't expect the volumes to drop significantly. We would be happy if we can maintain, you know, the volume levels that we've achieved in FY 22. We should be around that number itself.
Yeah. That's helpful. Thank you. I understand, sir.
Thank you.
Thank you. Before we move to the next question, a reminder to the participants, anyone who wishes to ask a question, may press star and one. Next question is from the line of Mihir Damania from Ambit Asset Management. Please go ahead.
Yeah, hi. I just have one question. What was the volume growth for the full year for the company? And, do we have sufficient capacities to increase the volumes for FY 25 in a similar range what we did this year?
So we generally don't give a volume growth number. But given that the current pressure on the prices and some of the selling prices have been softened, most of the growth which you have seen that has come has majorly come out of volume itself.
... on your question on the availability of capacities, I think on the standalone front, we have enough headroom to, you know, fill up volumes. The ethoxylation capacity that Tristar and Unitop are fully utilized, so that's where we are, you know, adding capacities. We should have some capacities on stream, as I said, by end of H1.
Got it. Thank you.
Thank you. Next question is from the line of Rohan Gupta from Nuvama Institutional Equities. Please proceed.
Yeah, hi, sir. Good evening, and thanks for the opportunity. I just wanted to understand that you mentioned that definitely last year, agri has been made up, how the growth was given by HPC and other personal care category. How do you see that over next one years to two years, where the focus on HPC has been there, and it will be remain the growth driver or the industry revival in agri business will drive the agri part of the portfolio of the company more?
For us, home personal care and performance chemicals would be the growth driver, definitely in the next two years. Agro, we see still, you know, if we're able to maintain the volumes over last year, like last year, we will be happy. There is no El Niño effect on the monsoon; monsoon is expected to be normal. So we see a normal, you know, agro season like last year. But the focus would be on all the ethoxylate business, basically, and the phenoxyethanol business.
Sir, if you can just, just share some CapEx numbers that over the next 1 year to 2 year, how much money you plan to invest and, a broader outlook that how much of that will go in agro and how much of that in non-agro HPC?
So we've learned just in Q2, we had planned for some CapEx. It was about INR 128 crore for the ethoxylation capacity expansion and for a new molecule for the oil and gas business. So part of it, of that 128, is for the oil and gas molecule, so that's the non-agro part. And within the ethoxylation, the capacity will be a mix. The utilization will be a mix of both agro and non-agro, depending on, you know, how the market moves. If the agro season in the next couple of years, the agro doesn't really grow, then we have enough headroom to keep growing our non-agro.
So ethoxylates are actually fungible, depending on, you know, what, how the markets are, the, the agro as well as non-agro.
So apart from that, this CapEx, do you have any, any further plan on the CapEx side, apart from... I think that this is going to commission FY 2025 itself, right?
Yeah. So by end of FY 2025, this CapEx will be done. Then probably we'll see how, you know, the markets are looking, and post that, we'll probably think of the next round of investments. But currently, the major investments are the ones which we've announced.
Just last question from my side, sir. In last two years of the company, two to three years of the company history, we have seen a couple of acquisitions done by the company, probably. At that time, I think the industry dynamics was quite rosy and, I mean, in terms of the valuations also, probably the market dynamics was quite favorable for the company in terms of the valuation, which they had paid high multiple maybe. Do you think that in the current scenario, the things have changed and even the acquisitions which we have done are, I mean, not contributing to the profitability the way you would have expected? And how much time do you think that they may take to, to drive the profitability at the level which we had expected earlier?
No, I think on the contrary, the, all the acquisitions that we've done have fared much better than what we had planned. So whatever, financials we had prepared at the time of acquisition, I think both these have really done much better than that. Today, if you see in the last three years, Unitop has had a growth of almost, I guess, 20%. Tristar has had a growth of 24% CAGR. So I think we are very happy with the way both these acquisitions have have performed, and, they, they are going to pay back much earlier than what we had internally targeted.
Okay, sir. That's it from my side. Thank you, sir.
Thank you. Next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. My apologies, I joined the call a bit late. So if there is any repetition, my apologies there. First question, you know, on the overall growth outlook. Now, if I look at on a consolidated basis, we have grown at a high, sorry, low double-digit numbers over the last two years. Obviously, there was a realization-led, you know, issue here as well, so large part of this growth was volume-led. But how are your thoughts, in terms of, you know, the revenue ramp-up here over the next two to three years?
This is Sunil Chari here. Because of the uncertain, you know, volatile market conditions across the globe, we are not sure and do not want to hazard any guess for the next two quarters. So, we would wait and see, and then, you know, guide you on-
Sorry, my question was not on 2 quarters, but more from the next 2-3 years.
Yeah, yeah. So, we are expanding, you know, we are investing money into, you know, growing the ethoxylate business, the ethanol business, the MEO business, and also the polymers business. So definitely, we are bullish on our future, but this first two quarters will determine, you know, our outlook for the currently, current financial year.
So just to add to that, Ankur, the capacity that we are putting in will probably come towards the end of this calendar year. So we would have about 3-4 months of revenues coming in, in this year, and probably a larger piece of the revenues coming in FY 2026. So currently, as Chari sir said, let us wait and watch how these 2 quarters go. These are key quarters for us for our agro business. While we are seeing the demand being quite stable, but on a full annualized basis, we would probably be able to give a better idea of how this year is going to pan out.
But currently, the way we look, FY 2025, we should be a little similar or slightly higher than what we've done in the last year. But in FY 2026, I think the ramp-up for the capacity is coming in. We should see a mid- to slightly higher growth in 2026 and onwards.
Sure. Sure, Ketan bhai. You did mention in your earlier comments that, you know, on the standalone side, we have ample capacity to scale up. How about the capacity at Tristar or, you know, Unitop? Will we be needing-- Will we have to spend more there to enhance capacity, or they are optimally utilized now?
No, so currently on the ethoxylation side, we are optimally utilized. That's why we are adding these capacities on the ethoxylation front. So our CapEx, which is ongoing, is going to add these capacities. And apart from the ethoxylation, we are also doing another product for the oils & fats business. So these are the two main expansions that are happening.
Sure. Secondly, on the margin front, now, if I, if I dissect our consolidated performance between standalone and subsidiary, there is an improvement in subsidiary and, to an extent, deterioration in the gross margins or even EBITDA margins at the standalone side. Is large part of this pain largely over, or the FY 2024 numbers on an average is the new base and one should look at these numbers? May not be the 14%-15% EBITDA margin that we were doing earlier.
So currently, yes, Ankur, I had spoken about this earlier also. We would, the current, base what we are seeing for this, for the FY 2024, at least for the next year, we should take those numbers itself and weigh it.
Okay. But incrementally, let's say 26 and beyond, you will expect things to improve, or it should be gradual and not going back to the older run rates?
In terms of the gross margin?
Gross or EBITDA margin, either ways.
Yeah, yeah. It is going to be a gradual uptick, but on an annualized basis, I think if you see, currently we are seeing, the way the business, and the outlook that we are getting from the market and from the business side, this 13.5%-14% EBITDA margin is what, I can tell you is, something we are looking at, at least currently sitting today.
Sure. And lastly, on the balance sheet, working capital. If I look at over the last three years, you know, there is a decline in overall the core working capital, largely because of the payable days being lower. So probably we are doing more spot purchases now versus the credit that we were enjoying earlier. And FY 2024, specifically, inventory and receivables are also slightly higher. So, how do you look at this number on a steady-state basis going ahead?
Yeah. So, if you see a, if you... You know, the way that our business has grown in the last 2, 3 years, with major growth coming in, you know, our subsidiaries, Unitop, Tristar, you know, almost closely doubling from what we had pur- that we had purchased. So that's what has changed the working capital position, because there, if you see, the major raw materials that we are purchasing is all on advanced terms. While if you see supplies to agro and also in the non-agro, especially in the agro, are usually stretched, especially given the current scenario. So that's what is impacting the working capital cycle in the overall consolidated balance sheet. As I said, our endeavor is to, you know, start streamlining this number. We are working towards that.
In March 2024, it was a financial call to build up some stocks. Seeing the agro season coming in, we had lost out on a lot of agro.
Orders last year because of non-availability of material. Also, the supplier of EO had planned to get into an annual shutdown during the month of April, hence, we had willingly stocked up raw materials and also produced a lot of semi-finished goods and kept. So that's why you'll see the inventories have also gone up significantly in end of March. So that's what has impacted the overall material package.
Sure. Sure, Ketan, that's helpful. Thank you, and all the best.
Thank you.
Thank you. We have our next follow-up question from the line of Rohit Nagaraj from Centrum Broking. Please go ahead.
Yeah. So just one clarification. We have seen that there has been some issue in terms of ethylene oxide availability. So your comments on the same. And second thing, in terms of the newer capacity, how are we placed in terms of the supplies of ethylene oxide?
For April and May, Reliance has given us a forecast that they will be giving us about 60% of what we normally buy. So, that will mean we should have. Of course, our capacity will be unutilized to that extent. And we are expecting to add some production propylene oxide to tide over the ethylene oxide shortage. We are also trying to make some raw materials, which we are buying from outside, in-house to fill up the capacity which is vacant. In April and May, luckily, we have built up some stocks in March for the agro. I think our sales should be in line and stable, should not be affected much.
That is what our outlook is, Rohit, on ethylene oxide.
Yeah, and for the new capacity, I mean, are we comfortable that, for the expanded capacity, we'll be able to get additional requirements from Reliance?
Yes. We have been assured by Reliance that, you know, for our expanded capacity, they are going in for an expansion also for ethylene oxide, so we should have adequate availability of ethylene oxide for our expansion once it goes online in the last quarter of this financial year.
Sure, sir. Thanks. That's it from my side, and all the best.
Thank you, Rohit.
Thank you. Ladies and gentlemen, to ask a question, you may press star and one. As there are no further questions, I would now like to hand the conference over to the management for the closing comments.
Yeah. Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call. Have a good day.
Thank you. On behalf of Rossari Biotech Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.