IOLCPNSEQ1FY 2023June 30, 2022

IOL Chemicals and Pharmaceuticals Limited

6,543words
81turns
9analyst exchanges
2executives
Management on call
Sanjay Chaturvedi
Executive Director and CEO, Mr. Pardeep Khanna – Chief Financial Officer
Abhay Raj Singh
VP and Company Secretary. As a reminder, all participant lines
Key numbers — 40 extracted
25%
well. Crude price too has also seen a correction where the average import price falling by about 25% from the peak value. However, the elevated gas prices continue to be an area of concern with LNG
40%
elevated gas prices continue to be an area of concern with LNG and CNG pricing surging more than 40% over the last couple of months. The domestic economy is witnessing a strong revival in consumptio
rs,
overall and this has allayed any recession related speculation. Over the next few years, I think our focus as a company will be on diversifying into other specialty chemical products and
50%
ma division, the non- ibuprofen segment for us is growing gradually and we expect this to be about 50% of the pharma segment within the next year or so. So, to focus on the non-ibuprofen business, t
Rs. 300 crore
in the next year or so. So, to focus on the non-ibuprofen business, the plant the CAPEX of around Rs. 300 crores, this will impact both specialty chemical and some pharma intermediates. We are coming up with a
20%
ithin 18 months. We are also additionally increasing our existing ethyl acetate capacity by about 20% and from 100,000 metric tons per annum, we will go to about 120,000 metric tons per annum and thi
Rs. 570 crore
for the first quarter of financial year 2023. Total income of the company in quarter one stood at Rs. 570 crores as against Rs. 524 crores in the corresponding quarter of financial year 22 and Rs. 579 crore in
Rs. 524 crore
inancial year 2023. Total income of the company in quarter one stood at Rs. 570 crores as against Rs. 524 crores in the corresponding quarter of financial year 22 and Rs. 579 crore in previous quarter ended
Rs. 579 crore
at Rs. 570 crores as against Rs. 524 crores in the corresponding quarter of financial year 22 and Rs. 579 crore in previous quarter ended March 2022. EBITDA for the quarter was Rs. 61 Crore as against Rs. 116
Rs. 61 Crore
ancial year 22 and Rs. 579 crore in previous quarter ended March 2022. EBITDA for the quarter was Rs. 61 Crore as against Rs. 116 crore in the corresponding quarter of financial year 2022 and Rs. 50 crore in
Rs. 116 crore
79 crore in previous quarter ended March 2022. EBITDA for the quarter was Rs. 61 Crore as against Rs. 116 crore in the corresponding quarter of financial year 2022 and Rs. 50 crore in previous quarter ended
Rs. 50 crore
was Rs. 61 Crore as against Rs. 116 crore in the corresponding quarter of financial year 2022 and Rs. 50 crore in previous quarter ended March 2022. EBITDA margin for the quarter improved to 10.7% as against
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Guidance — 20 items
Dr. Sanjay Chaturvedi
opening
“Pardeep Khanna, our CFO will take you through the financials, and that will be followed up by the Q&A session.”
Dr. Sanjay Chaturvedi
opening
“Over the next few years, I think our focus as a company will be on diversifying into other specialty chemical products and increase the share of a non-ibuprofen business in pharmaceutical.”
Dr. Sanjay Chaturvedi
opening
“Within the pharma division, the non- ibuprofen segment for us is growing gradually and we expect this to be about 50% of the pharma segment within the next year or so.”
Dr. Sanjay Chaturvedi
opening
“This project is going to take shape and is expected to be complete within 18 months.”
Dr. Sanjay Chaturvedi
opening
“We are also additionally increasing our existing ethyl acetate capacity by about 20% and from 100,000 metric tons per annum, we will go to about 120,000 metric tons per annum and this will increase our market share in this product segment and we expect this capacity to be on stream by the end of the financial year.”
Dr. Sanjay Chaturvedi
qa
“So, is there any regular inspection pending for IOLCP and/ or any approval coming in next quarter for DMF or anything else?”
Dr. Sanjay Chaturvedi
qa
“So, we do believe that going forward, the profitability in the non- ibuprofen segment will actually be more sustainable than it has been in the past.”
Dr. Sanjay Chaturvedi
qa
“So, in the subsequent quarters, you will hear more about what we plan to do on IOL Life Sciences as well but clearly, we plan to have API products beyond our current portfolio, and it is more capital efficient to do that in different subsidiaries.”
Dr. Sanjay Chaturvedi
qa
“So, we do feel confident that by the end of the year, we will be back to between 15 and 20%.”
Dr. Sanjay Chaturvedi
qa
“Needless to say, the real message I want to give you is that we are no longer a single product company and we are moving a portfolio of products in a way that ibuprofen in the next year or so will be about 50% of the total API business.”
Risks & concerns — 4 flagged
However, the elevated gas prices continue to be an area of concern with LNG and CNG pricing surging more than 40% over the last couple of months.
— Dr. Sanjay Chaturvedi
Over the course of the next few quarters, the company plans to explore new geographies and de-risk the business with continuous backward integration model, and this will play out to improve both our top line as well as profitability.
— Dr. Sanjay Chaturvedi
The reason I am hedging my answer is, this mix depends a lot on the pricing of the product and the pricing in Pharma is going to be a lot less volatile than what it is going to be on the chemical side.
— Dr. Sanjay Chaturvedi
So, in order to maintain a level of profitability, what you need to do is be very smart about your supply chain, de-risk yourself in terms of having multiple sources of raw materials, and multiple sources are not multiple suppliers, but multiple geographies.
— Dr. Sanjay Chaturvedi
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Q&A — 9 exchanges
Q
So, Mohammed the land has not been bought, we are considering two or three different options and very shortly, we will finalize that and move ahead. Shaikh Mohammed Ayaz: Okay sir, the next question is, there are lots of regulatory inspections are going on like US FDA and all those things in different areas of India. So, is there any regular inspection pending for IOLCP and/ or any approval coming in next quarter for DMF or anything else?
Dr. Sanjay Chaturvedi
So, we had our last US FDA audit in October of 2019. So, and you know, the CPs are ongoing. We got our Russian approval and the Korean approval last year. So, at this point, nothing is pending, but even if there are audits, we are absolutely geared in terms of infrastructure and documentation to pass these audits. Shaikh Mohammed Ayaz: Okay any DMF approvals coming in upcoming quarters. So, we have filed three DMFs in the last quarter, and, you know, a couple of DMFs in the quarter previous as well and our plan is to file about five to six DMFs every year. So, as these DMFs gets filed naturall
Q
Hi Sir. My question is on the future on the CAPEX that we are going to spend about 300 crores so how are we going to finance it?
Dr. Sanjay Chaturvedi
So, we have to finance that through a combination of internal accruals and if required we will take a small level of debt as well. So, could you throw some light on the percentage? I mean, what percentage would be finance and what percentage would be internal? Zain that's, hard to do right now, because see this is not the only investment that we plan. I think in future we want to keep from dry gunpowder aside for more investment that we have been wanting to do in other parts of the businesses and so, depending on that scale, we will decide how to fund this but clearly, given you know, the fund
Q
Yes, thank you sir. Just a couple of questions. Sir when you mentioned right now that, your focus is also on the pharma business. Just wanted to get an understanding is how are we looking at the mix going forward in terms of specialty chemicals and Pharma in the next three years? What is our target revenue mix?
Dr. Sanjay Chaturvedi
I would say that today, Pharma is slightly more than chemical and going forward, with the new CAPEX that we planned chemicals will perhaps outstrip Pharma. But if I go, three, four, couple of years out, I think we will all be in the 40 to 60 envelope and what I mean by that is, pharma could be anything between 40 and 60% and I'm not trying to be cagey about an answer. The reason I am hedging my answer is, this mix depends a lot on the pricing of the product and the pricing in Pharma is going to be a lot less volatile than what it is going to be on the chemical side. So, if you look at ethyl ac
Q
Good afternoon sir. What is our market share in ibuprofen in India?
Dr. Sanjay Chaturvedi
In terms of capacity market share is in the range of 33% to 35% and I would say in terms of sales wise market share it could be in the 30% range. Thank you.
Q
Hi, thank you for taking my question. Sir I have a question on the ibuprofen side. Currently, our market share will be around 33 to 35%. What will be the capacity utilization for the quarter? Dr. Sanjay Chaturvedi: Our capacity utilization is in the range of 70% to 75% range.
Gautam Gosar
Okay, and what will be the pricing? So, like as the pricing improved. So, the pricing continues to be the $11 to $12 range per kilo. Okay, so like, it was around Rs. 800 to 850 is it that or around Rs. 700 to 750. I like to think in terms of dollars, since we export a fair amount. So, $11 to $12, is what I remember, and you can multiply that by whatever the exchange rate is. Okay, so are we sell it on semi-regulated markets or in the regulated markets as well Dr. Sanjay Chaturvedi: No we sell it all three markets, which is India, Rest of the World less regulated market, as well as regulated ma
Q
Yeah. Good evening sir. First is how do we see a revenue share from ibuprofen stabilizing and second is which are the high margin products that we are getting into and when can we see this showing in our blends margin? Dr. Sanjay Chaturvedi: Okay, so there are two questions that you have asked Jinal first is your question was around how do we see the contribution of ibuprofen stabilizing? I would actually say that going forward you should see the contribution of sales coming from ibuprofen actually going down. Because as the size of our business goes up I will not increase ibuprofen business i
Jinal Fofalia
Okay, fine sir. Thank you.
Q
Okay, for mine is a follow up question. So, regarding this capacity utilization of 70 to 75% demand the bottleneck for us and is the capacity fungible? Like if I need some other product to be made, so is the capacity fungible?
Dr. Sanjay Chaturvedi
So, let me answer your second question first Niharika the capacity for ibuprofen is not fungible these. We have two ibuprofen plants and they are dedicated for making ibuprofen. The only fungible side here is I can make all different grades of ibuprofen in both plants. But I cannot make some other products in the ibuprofen plant. And the first part of your question was at what point I see asset utilization going beyond 75%. Correct? I see that happening in the coming few quarters itself. Okay, fine and my other question is on the line of ethyl acetate for which you are taking an expansion, so,
Q
Thank you for taking my question again. My last question was the export contributions, right now to our overall sales has gone down from 38-39%, to currently 25%. So, can we expect this contribution to improve going ahead, since we know the China Plus One strategy is currently at play?
Dr. Sanjay Chaturvedi
Yeah, so Preeti there are two segments that contribute to our exports, both pharmaceutical as well as the chemical segment. The drop in exports that you see is primarily on account of the chemical segment where we have a strange situation that the international prices of ethyl acetate are actually lower than the domestic prices. So, at this point, we choose not to export, and we choose to serve the domestic market, there is really no drop in the export for our pharmaceutical business. Okay, sir and you have mentioned about ethyl acetate, what is the current contribution and you see any kind of
Q
So, I would say that demand is now showing, some green shoots in terms of orders picking up for over a year, the demand was very-very soft and that was really a result of overstocking during COVID, but now that demand is coming back and we are back to going at customer visits, conferences, engaging with customers overseas, so all the signs are very positive. Shaikh Mohammed Ayaz: Okay, sir, thank you very much. All the very best.
Management
Speaking time
Dr. Sanjay Chaturvedi
29
Moderator
12
Zain Banihali
12
Preeti Sharma
9
Gautam Gosar
8
Niharika
6
Shanti Patel
2
Jinal Fofalia
2
Pradeep Khanna
1
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Opening remarks
Dr. Sanjay Chaturvedi
Thank you very much. Very good afternoon to everyone and thank you for joining today's call wherein we are going to look at our operational and financial performance during the first quarter that ended on June 30, 2022. I trust you have all gone through our financials and investor presentation that has been made available on the exchanges. I would like to share some insight into overall economy performance, and the trend in sectors that we are all a part of and then my colleague, Mr. Pardeep Khanna, our CFO will take you through the financials, and that will be followed up by the Q&A session. So, I would say that, you know, after a subdued last quarter of the previous financial year, the sentiments in global markets have turned a little positive, with overall commodity prices softening. We have seen volatility, and other central banks are taking measures to tackle inflation as well. Crude price too has also seen a correction where the average import price falling by about 25% from the
Pradeep Khanna
Thank you, Dr. Sanjay. Good afternoon, everyone and thank you for joining us today to discuss our performance for the first quarter ended 30th June 2022. I will take you through financial highlights for the first quarter of financial year 2023. Total income of the company in quarter one stood at Rs. 570 crores as against Rs. 524 crores in the corresponding quarter of financial year 22 and Rs. 579 crore in previous quarter ended March 2022. EBITDA for the quarter was Rs. 61 Crore as against Rs. 116 crore in the corresponding quarter of financial year 2022 and Rs. 50 crore in previous quarter ended March 2022. EBITDA margin for the quarter improved to 10.7% as against 8.6% in the previous quarter. Net profit in quarter one of financial year 2023 was Rs. 34.9 crore as against Rs. 67 crore in the corresponding quarter of financial year 2022 and Rs. 27.8 crore in the previous quarter ended March 2022. With price volatility in the chemicals business normalizing over last few months, the EBIT
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