IOLCPNSEQ4 FY23March 31, 2023 IOL Chemicals and Pharmaceuticals Limited
6,342words
194turns
15analyst exchanges
2executives
Management on call
Pardeep Khanna
Chief Financial Officer, Mr. Abhay Raj
Rakesh Mahajan
Advisor (Finance & Strategy).
Key numbers — 40 extracted
6.3%
e to withstand global uncertainties. The World Bank has projected FY23-24 GDP growth for India at 6.3%. The supply chain disruption created by the resurgence of COVID cases in China during quarter t
rs,
around capacity additions by domestic players make us believe that over the next five to seven years, the country is likely to reduce dependence on China to some extent. With the company's focus on ex
Rs.596
r: The total income of the company in quarter four of financial year stood at Rs.596 Cr as against Rs. 579 Cr in the corresponding quarter of the last year and Rs. 530 Cr in the previ
Rs. 579
The total income of the company in quarter four of financial year stood at Rs.596 Cr as against Rs. 579 Cr in the corresponding quarter of the last year and Rs. 530 Cr in the previous quarter ended Dece
Rs. 530
l year stood at Rs.596 Cr as against Rs. 579 Cr in the corresponding quarter of the last year and Rs. 530 Cr in the previous quarter ended December '22. EBITDA for the quarter was Rs. 104.5 Cr as agains
Rs. 104.5
last year and Rs. 530 Cr in the previous quarter ended December '22. EBITDA for the quarter was Rs. 104.5 Cr as against Rs. 50 Cr in the corresponding quarter of the last year and Rs. 49.7 Cr in the quart
Rs. 50
in the previous quarter ended December '22. EBITDA for the quarter was Rs. 104.5 Cr as against Rs. 50 Cr in the corresponding quarter of the last year and Rs. 49.7 Cr in the quarter third of financial
Rs. 49.7
e quarter was Rs. 104.5 Cr as against Rs. 50 Cr in the corresponding quarter of the last year and Rs. 49.7 Cr in the quarter third of financial year '22-'23. The EBITDA margin for the quarter improved to 1
17.5%
Cr in the quarter third of financial year '22-'23. The EBITDA margin for the quarter improved to 17.5% as against 9.4% in the previous quarter and 8.6% on year-to- year basis. Net profit in the last
9.4%
r third of financial year '22-'23. The EBITDA margin for the quarter improved to 17.5% as against 9.4% in the previous quarter and 8.6% on year-to- year basis. Net profit in the last quarter was Rs.
8.6%
. The EBITDA margin for the quarter improved to 17.5% as against 9.4% in the previous quarter and 8.6% on year-to- year basis. Net profit in the last quarter was Rs. 65.3 Cr as against Rs. 27.7 Cr in
Rs. 65.3
9.4% in the previous quarter and 8.6% on year-to- year basis. Net profit in the last quarter was Rs. 65.3 Cr as against Rs. 27.7 Cr in the corresponding quarter of the last year and Rs. 24.2 Cr in the thi
Guidance — 20 items
“And is this sustainable in the medium term?”
“Do you believe with the new Paracetamol capacity, and new DMF filings it will be possible to maintain this kind of EBITDA margin trajectory or it will be fluctuating in nature?”
“We believe that we will be able to maintain EBITDA margin around 15% to 16%.”
“It was industry specific., Because our non-Ibuprofen segment is improving DMF filings have increased this year, there is a likelihood that this profitability will be maintained or get better in the next year.”
“We hope that from the next quarter its incremental growth will be in double digit and now after getting the European approvals for Paracetamol, we are expecting more revenue from the regulated market maybe after two quarter or three quarters.”
“We expect the gross margin will be sustainable, and we will try our best to maintain it or try to improve it.”
“What would be our CAPEX target for FY '24 and '25?”
“The first question is how much of your revenue currently will be coming from regulatory markets versus the others?”
“After getting certain efficiencies in place, we may increase the capacity and then we will be able to define the market share of the Paracetamol vis-a-vis Ibuprofen.”
“It will be used for export or it will be sold domestically also.”
Risks & concerns — 4 flagged
The API manufacturers in India faced severe margin pressure earlier with significant correction in the raw material prices.
— Rakesh Mahajan
Abhay Raj Singh See, we will be coming out with the appropriate disclosures at the appropriate time, but right now, l it is very difficult to disclose these numbers.
— Rakesh Mahajan
Sanjay ji, actually, as in terms of the guidance for the coming years, this is very difficult to talk about the absolute number, but we can say well comfortably on a conservative side, 10% to 15% is a very achievable growth for the coming year, for the next year, in fact.
— Abhay Raj Singh
Because they are inspecting only now those units which have life threatening risk.
— Rakesh Mahajan
Q&A — 15 exchanges
Q
Good evening. Unnati here from Sharekhan. Just one question I have. What is the major reason for the EBIT in Specialty Chemicals to turn positive to 5% in Q4? And the 22.1% margin that you mentioned about the Pharma segment, what is the driver for the same? And is this sustainable in the medium term?
Abhay Raj Singh
Thank you for asking this question. Basically, you have asked two questions. The one question's for the chemical sector's profit and another is the better performance in the API. So, let us take the better performance in the API. This better performance has been due to increase in the demand coupled with the better capacity utilization that resulted into the operational efficiency. Raw material costs also reduced to the some extent. And with respect to sustainability, we assume and we consider that anything in the API business around 15% to 17%, 18% is very much sustainable. The chemical has p
Q
First of all, congratulations for good set of numbers. My first question is on the Ibuprofen business. So, as I see the Ibuprofen revenue has grown significantly during the quarter at about 250 crore. So, I just wanted to understand how much of this growth has been volume driven, and how much of it is value driven?
Rakesh Mahajan
As regard to this Ibuprofen Revenue, the revenue increase has come from the capacity utilization. The capacity utilization, which was 60%-70% around two, three quarters ago, has increased to 85% to 90% now. So, the capacity utilization is at 85% to 90% currently. Right. And was there any improvement in the Ibuprofen prices during the quarter? It is almost stable from the last you can say two quarters. Secondly, my question is on the other APIs, non-Ibuprofen APIs. As I see it the growth has been in high single digit during the quarter Y-o-Y. So, could you just let me know why is the growth slo
Q
Two questions from my side. The first question is how much of your revenue currently will be coming from regulatory markets versus the others? And my second question is if you can share some data on the Paracetamol market, like the capacity in India versus the other major markets globally which compete for market share in your end markets? So, how are you looking at creating a global position in the Paracetamol market the way you have done in Ibuprofen? These are my two questions.
Rakesh Mahajan
Thank you, Dhaval. As regard to exports to our regulated markets, as of now out of total exports, around 40% of our revenue share in export is from the regulated market. And the rest is to South East Asian countries, MENA and Latin American countries. Latin American, Southeastern Asian, and MENA. Understood, sir. With regard to Paracetamol, we have just started our journey in the Paracetamol with the small capacity of 1800 MTPA and then increased to 3600 MTPA. Our prime focus is backward integration for the Paracetamol. As regard to the competition and other things, it will take some time befo
Q
Just again on Paracetamol, how much would be the global requirement in terms of tons?
Abhay Raj Singh
We have not mapped global requirement so far. But we think it must be something around 6 lakh -7 lakh MTP annually So, we are still a very small player in Paracetamol. Yes. Rakesh ji said same thing in last question that we have just started our journey in the Paracetamol. Considering the responses from the market, our focus will be on the backward integration in the Paracetamol up to the two, three levels back, and after that we will consider increase in production of Paracetamol to a sizable number. But there is a huge potential considering the overall global requirement. With this backward
Q
My simple question is, can you just give me an idea of the projections for the next year in terms of turnover and PBT?
Abhay Raj Singh
Sanjay ji, actually, as in terms of the guidance for the coming years, this is very difficult to talk about the absolute number, but we can say well comfortably on a conservative side, 10% to 15% is a very achievable growth for the coming year, for the next year, in fact. So, that growth will be from what you have achieved in the previous financial year. That is for the 31st March '23. Yes. Correct. And your last quarter seems to be very good one. Can we expect that the performance which you have made in the last quarter will be maintained for the coming quarters also? Yes. We hope so, and we
Q
I have a few questions, like we have got the approval, patent approval for Sartan drugs, green type of manufacturing process. Any update on that process, Sartan drugs?
Rakesh Mahajan
Now we have got the patent for that process from Indian Patent, and after getting the approval, we are working internally in the R&D and other systems, and at the appropriate time, we will come out with the decisions when we are going to start or not going to start. But we got the patent approval from Indian Patent. Sir, you told you got such margin by better utilization of capacity, but when I see the Chemical segment, there is a less revenue from the last quarter, but the profit is good. So, how can you say that there is better utilization in terms of only margins or in terms of revenue also
Q
My first question is how is the demand for Ibuprofen, Paracetamol and Metformin?
Abhay Raj Singh
Paracetamol, Metformin, and Ibuprofen demand is good. Our capacity, our assets are being utilized at about 80%, 85% capacity, and the demand is stable and growing gradually also for all these three products. And my second question is we are seeing good demand. So, is it sustainable or one time demand in the pharma segment? This is normal and sustainable demand.
Q
Thanks for the follow-up. Sir, could you give an update on the acetic anhydride plant which we were setting up for backward integration?
Abhay Raj Singh
Yes, Neelam ji, we are working on that and I think within this quarter we will commercialize the same. Secondly, sir, what was the reason of us not participating in the PLI scheme for PAP? We have set up our PAP facility. Any reason why we didn't participate in the PLI? When this PLI scheme was open, then at that time we had no plan to set up the facility in- house. Now the scheme is closed. We are trying with the Ministry to get it listed in that scheme, but till date we have not got the approval from them. My next question is on USFDA inspection on our other API unit. So, when are we expecti
Q
Sir, my question is that we have got the clearance from Brazil and Russia so can we export there?
Rakesh Mahajan
We can do in Russia but we are working on the payment system and in Brazil we already selling our material there so there is no problem.
Q
I have got two questions from my side. First one, can you guide us on a sustainable segmental EBITDA margin or EBITDA per Kg as in case for maybe Paracetamol, if you have any internal working for the year FY '24? And the second question is what all CAPEX are we expecting to commission in FY '24?
Abhay Raj Singh
So, Vignesh, sustainable sector-wise you are talking about the EBITDA margin. Yes, segmental EBIT. On a sustainable basis, we understand the range if 12% to 15% for the API segment. 16%-17% is on higher side. Higher single digits is good for the chemical sector. Relating to the CAPEX for the coming year, we have target of around Rs. 200 crore in FY '23 and '24. And any of this CAPEX commissioning in, I mean, any CAPEX done earlier would commission in this year? Any facility? So, the acetic anhydride will come up in this financial year which was done in the last year. Mostly CAPEX was incurred
Q
I want to understand the demand scenario for ethyl acetate as of now. How is the demand for that?
Rakesh Mahajan
The demand of ethyl acetate is you can say stable from the last two, three quarters, and it is sustainable demand. And how the prices for ethyl acetate and acetic acid? I think it is ranging between the Rs. 80 to Rs. 85. For ethyl acetate and around Rs. 40 in acetic acid. And for the backward integration which we talked about Paracetamol, so once we crack that, will be the only company who would be able to achieve that kind of backward integration in India? As of our information, we will be the first company in the world which is backward integrated. And are we planning to sell PAP and all the
Q
Sir, this you mentioned about raw material price softening for Metformin. So, that will be you referred to DCDA. Am I correct?
Pardeep Khanna
Yes. And is China still the only source for DCDA? Yes. Mostly yes. So, is anyone in domestically trying to make it or is there is some other geographies from where we can? Aurobindo has, I think, as per our information, Aurobindo has started setting-up the plant for DCDA, which maybe come after two or three years. So, still we are only depending on China. Yes. What guidance would you give for the key APIs on the volume growth? Because if I understand correctly, FY '23, the entire growth was volume driven for your key APIs. Am I correct? Yes. And going forward, over the next year, how do you se
Q
Sir, I have questions in two parts. If I look at our the complete growth over the last decade or so, we have grown about, you know, on an average 16%, 17% every year. Now, you know, going ahead, we are adding more CAPEX. You indicated in the range of 200 crore. Last year we did 200 crore plus. We are also sort of backward integrating more. We are also focusing on selling in developed markets where the realizations are higher. If you look out three to five years, what's the aspiration in terms of would we be able to get closer to the growth we have in the past? That's number one. And number two
Abhay Raj Singh
Thank you, Rakesh, for asking this question. On a being a conservative side, we answered, we given this guidance because this is what our forward-looking statement also. So, we don't want to be very aggressive on this number, but there are many reasons, there is a likelihood that we can perform better than what we are saying, what we are projecting.
Q
So, my question is regarding the CAPEX, the 200 crore CAPEX. How would you divide that between growth CAPEX or for backward integration or its maintenance CAPEX? So, can you help me with that? And over these two years, like, I think, in FY '23, it has been 200 crore. Previous year it was 100, and then next year you are also stating 200 crore. So, just trying to understand.
Abhay Raj Singh
Most of the part is going towards the growth CAPEX. Maintenance is not very much. So, we don't have any overall the exact breakup as of now, but most of this CAPEX is going towards the growth capacity. So, the entire is growth CAPEX. There has been a small amount around 50 crore you can consider against the maintenance. And out of that the rest 150, some of it would be for backward integration also. Backward integration, procuring the land, also improving the ETT, all these things. And this capital work in progress, which was 80 crore, so what would be the break of that? Primary is acetic anhy
Q
Thank you very much for joining us today and discussing our quarterly and full-year performance. The last financial year was rather turbulent for the world economy as well as for the sectors. However, the underperformance of this sector and the volatility was short lived. With improved domestic demand in both these sectors and better managed raw material prices, we hope that the next financial year will bring more value additions for investors and shareholders alike. Thank you so much once again for attending this call. Have a nice day.
Opening remarks
Darshan Mankad
Thank you, Michelle. Good afternoon everyone. I welcome you to the fourth quarter and full year ended March 31, 2023, Earnings Call of IOL Chemicals and Pharmaceuticals Limited. Before we begin the earnings call, I would like to mention that some of the statements made during today's call might be forward-looking in nature, and hence, it may involve risk and uncertainties including those related to the future financial and operating performance. Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected the soonest. I now hand over the call to Mr. Rakesh Mahajan for opening remarks. Over to you, sir.
Rakesh Mahajan
Thank you, Darshan. Good afternoon everyone. Hope my voice is audible. We are pleased to welcome you all to the fourth quarter and full year Earning Call for the financial year '23. Thank you very much for attending this call. Hope you all have gone through our quarterly results and investor presentation, which are available on our website as well as exchanges. Before we discuss the company's quarterly and full year performance, we would like to share some insights into the emerging trends. My colleague Mr. Pardeep Khanna, who is the CFO, will then take you through the performance post which we will open the forum for the question-and-answer session. The FY '23 was a rollercoaster ride for the businesses as tightening money policy by major developed and developing economies dictated the investment sentiment globally in addition to the increased energy cost. Despite global pessimism, the Indian economy has shown resilience and strong growth trajectory following robust retail consumption
Pardeep Khanna
Thank you, Mr. Mahajan. Good afternoon everyone and thank you all for joining us today to discuss our performance for the fourth quarter ended 31st March '23. I will take you through the financial highlights for the fourth quarter: The total income of the company in quarter four of financial year stood at Rs.596 Cr as against Rs. 579 Cr in the corresponding quarter of the last year and Rs. 530 Cr in the previous quarter ended December '22. EBITDA for the quarter was Rs. 104.5 Cr as against Rs. 50 Cr in the corresponding quarter of the last year and Rs. 49.7 Cr in the quarter third of financial year '22-'23. The EBITDA margin for the quarter improved to 17.5% as against 9.4% in the previous quarter and 8.6% on year-to- year basis. Net profit in the last quarter was Rs. 65.3 Cr as against Rs. 27.7 Cr in the corresponding quarter of the last year and Rs. 24.2 Cr in the third quarter of financial year 22-23. EBIT margin for the specialty chemical segment was at 5% compared to -2.2% in the