PIINDNSEQ1 FY23June 30, 2022

PI Industries Limited

7,793words

38turns

7analyst exchanges

0executives

Key numbers — 40 extracted

3 million

solutions approach, we continue to leverage our deep market penetration and engagement with over 3 million farmers through digitization and farm application services. Our constant endeavor is to help farme

20%

apart within the industry. Our business outlook remains robust and we are confident of delivering 20% plus revenue growth in FY23 with continued improvement in margin and returns. Manufacturing activ

INR 15,432 million

n-year basis and refer to the consolidated performance. During Q1 FY23, we recorded a revenue of INR 15,432 million, a growth of 29% over the same period of last year. This was driven by growth in exports revenue

29%

solidated performance. During Q1 FY23, we recorded a revenue of INR 15,432 million, a growth of 29% over the same period of last year. This was driven by growth in exports revenue by 42% to INR 11,4

42%

growth of 29% over the same period of last year. This was driven by growth in exports revenue by 42% to INR 11,421 million and 4% increase in domestic revenue to INR 4,011 million. The exports reve

INR 11,421 million

of 29% over the same period of last year. This was driven by growth in exports revenue by 42% to INR 11,421 million and 4% increase in domestic revenue to INR 4,011 million. The exports revenues growth of 42% was

period of last year. This was driven by growth in exports revenue by 42% to INR 11,421 million and 4% increase in domestic revenue to INR 4,011 million. The exports revenues growth of 42% was driven

INR 4,011 million

by growth in exports revenue by 42% to INR 11,421 million and 4% increase in domestic revenue to INR 4,011 million. The exports revenues growth of 42% was driven by volume growth of around 30%, coupled with favo

30%

to INR 4,011 million. The exports revenues growth of 42% was driven by volume growth of around 30%, coupled with favorable price and currency of around 12%. Domestic revenue growth was mainly drive

12%

42% was driven by volume growth of around 30%, coupled with favorable price and currency of around 12%. Domestic revenue growth was mainly driven by price. The trend of elevated input cost continued

8 basis point

increasing product prices both in exports as well as in domestic. Our gross margin increased by 8 basis points in Q1 to 44%, partially due to cost pass-through and favorable product mix which negated impact o

44%

es both in exports as well as in domestic. Our gross margin increased by 8 basis points in Q1 to 44%, partially due to cost pass-through and favorable product mix which negated impact of rising inpu

Guidance — 20 items

Nishid Solanki

opening

“After that, the forum will be open for question-and-answer session.”

Mayank Singhal

opening

“We are not just deploying state-of- the-art modules of ERP and analytical tools but aiming to create a long-term sustainable digital edge.”

Rajnish Sarna

“Yes, obviously, as we work with almost all the global innovators, so there will be some business from the existing customers.”

Rajnish Sarna

“So does that mean, our earlier guidance was around 20-odd percent growth on the CSM side and given the increase in capex and your positive commentary, any revised thoughts there?”

Rohit Nagraj

“And when do we expect any commercialization of products from this particular segment?”

Rajnish Sarna

“building capacity, again, we are working on that project.”

Rajnish Sarna

“But many a times, it is very difficult to anticipate and also estimate the far- reaching impact of this.”

Bharat Shah

“So is it fair to believe that the guidance what we have given, let's say, 20%, considering the volume growth, what we have seen in the first quarter and this pricing scenario, which is likely to prevail, it is a very conservative number.”

Mayank Singhal

“And what would you think is the later part of the question, what would you think, therefore, apart from the qualitative dimension of this journey, what it would mean for in quantitative terms for PI, say, 5 years down the line, achieving which, it will be a moment of pride and not being able to fulfill that would leave a tinge of regret.”

Mayank Singhal

“If you were to make a critical evaluation as to the way that PI stands today, what will be your candid thoughts on that?”

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Risks & concerns — 15 flagged

— Mayank Singhal

Our gross margin increased by 8 basis points in Q1 to 44%, partially due to cost pass-through and favorable product mix which negated impact of rising input costs.

— Manikantan Viswanathan

So we always want to be very cautious in our commentary that while we see good opportunities of exceeding our guidelines, but we are cautious.

— Rajnish Sarna

There are indications from bigger agri players that there could be stoppage of production and all that because of the gas concern and all.

— Rajnish Sarna

So how should one really think that is an opportunity or is a risk for us?

— Rajnish Sarna

But many a times, it is very difficult to anticipate and also estimate the far- reaching impact of this.

— Rajnish Sarna

What kind of linkage to the downstream and upstream, material producers, raw material producers, it is very difficult to estimate.

— Rajnish Sarna

So I'll not say conservative, but yes, this is a very cautious guideline.

— Bharat Shah

Because of these opportunities, I don't see that challenge, we're looking at a 20% CAGR, we see ourselves over the next 3 years, which is visible.

— Mayank Singhal

Doubling should not be a challenge over the next 3 to 5 years.

— Mayank Singhal

This is the first quarter, difficult to adjust but this is where we are.

— Rajnish Sarna

And I think you can imagine that it is very difficult to put a time line.

— Rajnish Sarna

Just the concern is that going forward, I mean, over the next 2 to 3 years, if we are not able to seal any deal right now or there is some further delays, aren't we future ready?

— Rohan Gupta

So that was a concern that, aren't we going slow on the capex, though, you always mentioned that there is a potential improvement in asset turnover, but that can definitely have some limitations.

— S Ramesh

So that concern was definitely compared to the industry over next 3 years, can we be behind in terms of growth?

— S Ramesh

Q&A — 7 exchanges

Congrats on a great set of numbers. My first question is that, Mayank, your commentary was very upbeat on the growth prospects. So just if you can help us understand that, what are the factors that are driving this strong visibility. And what implication it has on our organic capex plans? Thanks, Aditya. The key factors driving this growth are: one is the volume scale up of some of our existing CSM exports products. The other factor is, of course, that the pace of launching these new molecules has picked up during last couple of quarters. And obviously, these new products are also scaling up a

Management

Congratulations for a good set of numbers. Continuing on the CSM side, you did allude towards elevated capex. And earlier in the call, we had mentioned the tech-led initiatives, which will increase our asset turns here. So are the full benefits behind us? Or there could be decent uptick further here over the next, let's say, 1 to 2 years? We are still, I mean, working on many of these initiatives. Some are realised, some still in the process, which we are expecting to realize in the coming years, also in the second half of current year. So yes, and there are multiple initiatives we have taken

Management

Congrats on a good set of numbers. First question is, we've been saying that we are building manufacturing capabilities for electronic chemicals. So where are we currently? And when do we expect any commercialization of products from this particular segment?

Rajnish Sarna

In fact, as we reported last time that we already commercialized a couple of products last year. This year also, we are scaling them up. In terms of building capacity, again, we are working on that project. Maybe I request Atul to briefly give some commentary on that. Yes. We are expanding the capacity for electronic chemicals, the commercial scale as well as at the pilot scale and there are good amount of molecules in pipeline. And as Mr. Sarna said that, last year we did scale up the molecules towards commercial scale. And we do have plans for a couple of molecules to scale up in this year a

So can you talk about the recently commercialized products, say, for the last 3 years, its overall revenue mix and growth of these products?

Mayank Singhal

You're looking for revenue mix in the last 3-year products? Yes, in the CSM segment. Well, we don't have the numbers upfront, but typically, a freshness index over a 3-year scenario will be about 25% to 30% of the revenue. Okay. And the growth of this product? Growth rate, I mean, I don't know the exact growth rate right now. The growth rate is usually higher than what we see with the older products because these are typically new generation products, so they double every year or two. And also, the base is small so obviously, in the initial year, their growth rate is higher. Okay. So let's say

In the past, we have spoken about the agchem CRAMS as an opportunity not being very big in terms of $8 billion to $10 billion, and there could be a time or a point where it could kind of stall. Given this backdrop, I mean, since you are also talking about a lot of new molecules that are coming in, can we double our agrochem exports or within the CRAMS subset, we think still there's a lot more scope for us to double? Is that a right understanding? Is it possible? What is the horizon that you think double or triple, I mean, the question is number one, that. And obviously, as you can see, there a

Mayank Singhal

Got it. And one final question. If you could just help us understand what percentage of our revenues would be from, say, pharma, if you can, and non-pharma, non-agrochemical, anything on the other specialty chemicals as a bucket, if you could give us that split, at least a rough sense? I would say that's negligible in terms of bigger scale right now. But as we mentioned that we are now putting this full throttle investment, and that could probably be looked at differently, and as another step to this area, we've already put a leadership in place only last month, Mr. Anil Jain has joined in as

Just a couple of clarifications, minor ones. One is on the tax rate. I'm sorry, I couldn't quite understand the guidance for FY23. Also I just wanted to check that in the past few quarters, the tax rate has been rather on the lower side, 17% to 18% or so. So what is driving this? And sort of what do we see as a more sustainable number over the medium term? On the tax side, this is driven by the eligibility and the revenues are growing, which you might have seen and our exports are growing. This is where the trigger for getting an efficient or better tax rate. As we look at the other things, we

Management

A couple of questions. First is on our gross block to asset turnover. You have mentioned that the endeavor of the Company will be to achieve close to 2.2x plus in future. What we want to understand, definitely it must have some lag of close to 2 years to 2.5 years to fully utilize that potential. With your current run rate and you have committed roughly INR 600 crore to INR 650 crore kind of capex for the current year, it means that even at the full potential, it can add close to INR 1,200 crore to INR 1,300 crore in terms of revenues. Just the concern is that going forward, I mean, over the n

Rajnish Sarna

Yes. So good question, Rohan. But we need to actually combine a few answers to get the complete answer, and we are also talking about improving the throughput and efficiencies of our existing plants, as we discussed earlier with the earlier participant. And there are good opportunities there and good scope there that we are working towards. The second is this investment that we are talking, which we have decided around, say, INR 650-odd crore of investment in capacities and expansions. And if you look at the previous 2 years, we’ve done very aggressive investments, which is also available to p

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Speaking time

Rajnish Sarna

Moderator

Mayank Singhal

Sumant Kumar

Manikantan Viswanathan

Nishid Solanki

Rohit Nagraj

Bharat Shah

Prashant Hegde

Rohan Gupta

Opening remarks

Nishid Solanki

Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries’ Q1 FY23 earnings conference call. Today, we are joined by senior members of the management team, including:  Mr. Mayank Singhal, Executive Vice Chairman and Managing Director  Mr. Rajnish Sarna, Joint Managing Director  Mr. Manikantan Viswanathan, Chief Financial Officer  Mr. Prashant Hegde, CEO (Domestic) and  Mr. Atul Gupta, CEO (Exports) We will begin the call with key perspectives from Mr. Singhal. Thereafter, we will have Mr. Manikantan sharing his views on the financial performance of the Company. After that, the forum will be open for question-and-answer session. Before we begin, I would like to underline, certain statements that may be made on today's conference call could be forward-looking in nature, and a disclaimer to this effect has been included in the investor presentation, which has been shared with you earlier and also available on stock exchange websites. I would now like to invit

Mayank Singhal

The food security for a growing global population at affordable price continues to be under threat owing to climate change, impact of the ongoing war, particularly, when the arable land is also shrinking. Therefore, the need for assured yields and higher farm productivity per acre is only growing, making the role of agri-inputs and crop- protection very critical. Against this backdrop of the operating environment, I'm happy to report that we have delivered yet another strong performance in Q1 FY23. The expansion came in despite the challenging environment and high base of last year in CSM exports. While the overall growth was mainly led by volume scale-up, the price correction on account of increased costs and favorable product mix, currencies, etc., have also contributed to the growth. I once again thank all the PI team members for their customer centricity and our business partners’ continued support and trust in our relationships. Traction in new inquiries in CSM exports continued w

Manikantan Viswanathan

Diversification into adjacencies through an inorganic route remain our top agenda apart from technology scale-ups. We are actively evaluating various opportunities both in India and globally to zero down on a few that could meet the objective to create sustainable and differentiated value proposition. We are proud of our industry and customer accolades. As announced earlier, PI was conferred Corporate Award 2022 for outstanding performance by Dun & Bradstreet. We also won the Golden Peacock Quality Award showing a commitment to excellence and high quality. Let me now thank all the stakeholders for their contribution, and I would like to hand over to Manikantan to take you over the financial performance, and we look forward to a good year ahead. Thank you. Thank you, Mr. Singhal. Good afternoon, everyone, and thank you all for joining us on the call today. I'll be summarizing the financial highlights for the Company for the first quarter ended 30 June, 2022. Please note that all these c

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