PIINDNSEQ1 FY24June 30, 2023

PI Industries Limited

7,461words
92turns
13analyst exchanges
6executives
Management on call
Mayank Singhal
Vice Chairman and Managing Director
Rajnish Sarna
Joint Managing Director
Manikantan Viswanathan
Chief Financial Officer
Prashant Hegde
CEO (Domestic)
Atul Gupta
CEO (Exports), and
Anil Jain
Managing Director, PI Health Sciences
Key numbers — 40 extracted
24%
s the value chain. Given that we at PI overall year-on-year basis during Q1, we have delivered a 24% revenue growth and a 35% increase in EBITDA and a profit after tax recorded a 46% growth year-on-
35%
n that we at PI overall year-on-year basis during Q1, we have delivered a 24% revenue growth and a 35% increase in EBITDA and a profit after tax recorded a 46% growth year-on-year. PI has though mainta
46%
have delivered a 24% revenue growth and a 35% increase in EBITDA and a profit after tax recorded a 46% growth year-on-year. PI has though maintained course of healthy performance in its CSM exports wi
33%
wth year-on-year. PI has though maintained course of healthy performance in its CSM exports with a 33% growth year-on-year. This performance comes back with continued strong growth in further endorseme
rs,
ches ahead. Our business model is aligned to commercialization of advanced molecules for innovators, thanks to a very visible track record, our engagement of scale up as well. This goes beyond Agchem.
18%
e visibility that we enjoy, we remain cautiously optimistic to achieve the given target of between 18% to 20% revenue growth in the current fiscal despite the headwinds explained above. PI E
20%
ility that we enjoy, we remain cautiously optimistic to achieve the given target of between 18% to 20% revenue growth in the current fiscal despite the headwinds explained above. PI External
5.4 billion
locus of growth for chemicals. It is believed that India has achieved the AgChem exports worth USD 5.4 billion in 23, up by 10%, making it the second largest exporter of AgChem in the world. With policy suppo
10%
als. It is believed that India has achieved the AgChem exports worth USD 5.4 billion in 23, up by 10%, making it the second largest exporter of AgChem in the world. With policy supported by manufactur
19,104 million
n-year basis and refer to the consolidated performance. During Q1 FY24, we reported a revenue of 19,104 million, a growth of 24% year-on- year including newly acquired pharma business and 21% revenue growth with
21%
venue of 19,104 million, a growth of 24% year-on- year including newly acquired pharma business and 21% revenue growth without it. This was driven by growth in exports revenue by 37% to Rs. 15,630 milli
37%
pharma business and 21% revenue growth without it. This was driven by growth in exports revenue by 37% to Rs. 15,630 million, offset by a 13% decline in domestic revenue to 3,474 million. The export re
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Guidance — 20 items
Nishid Solanki
opening
“Thereafter, the forum will be open for question-and-answer session.”
Mayank Singhal
opening
“However, at PI, we especially focus on new chemistries and with our advanced portfolio of products and given the visibility that we enjoy, we remain cautiously optimistic to achieve the given target of between 18% to 20% revenue growth in the current fiscal despite the headwinds explained above.”
Mayank Singhal
opening
“This will be supported by ramping up the production of already commercialized molecules and the introduction of new molecules.”
Anil Jain
qa
“We are aiming to achieve what we have committed.”
Rajnish Sarna
qa
“Going forward, as we indicated earlier, there are going to be initial phases where we will be investing in the development of these acquired businesses and also the transformation of some of these businesses.”
Rajnish Sarna
qa
“But on maturity, we would surely expect and target 20%- 24% plus kind of margin once we get to the maturity which will take more than a year’s time.”
Aditya Jhawar
qa
“My final question is, sir, what would be the total CAPEX guidance for FY24?”
Aditya Jhawar
qa
“It will be great if you can give a breakup between CSM and domestic as well as the pharma piece?”
Rajnish Sarna
qa
“For pharma, we have close to $10 million-$12 million is what we will be investing.”
Rajnish Sarna
qa
“So, in the last 1.5 months of the current quarter, have we seen any kind of slowdown in terms of volume offtake and a concurrent question to that, the 18% to 20% guidance, does it now include the pharma piece as well or is it excluding the pharma, please?”
Risks & concerns — 13 flagged
The global crop protection industry is witnessing a tough phase over the last couple of quarters with intense destocking by the distribution channel due to increased availability of certain categories of product post the normalization of the COVID disruption and scenarios of steep price reduction of these products leading to cautious procurement by the channel.
— Mayank Singhal
15,630 million, offset by a 13% decline in domestic revenue to 3,474 million.
— M. Viswanathan
The other is the impact of the IndAS-115 because the acquired entity, particularly the Indian acquired entity was not accounting as per the IndAS, whereas in PI Health Science we follow the IndAS.
— Rajnish Sarna
So, in the last 1.5 months of the current quarter, have we seen any kind of slowdown in terms of volume offtake and a concurrent question to that, the 18% to 20% guidance, does it now include the pharma piece as well or is it excluding the pharma, please?
— Rajnish Sarna
So, that is why we were also cautious in terms of our procurement, especially on the generic products knowing this volatility; however, from July onwards, the positive momentum has built up.
— Prashant Hegde
Well, in terms of inventory in general, we do not see a significant challenge or stocking in the product that we are dealing with/exporting.
— Rajnish Sarna
Yes, overall, we know the price has been volatile.
— Rajnish Sarna
So, that is why we were cautious even in Q1 in terms of our placement as well.
— Rajnish Sarna
However, again it is last 1.5 months only we are cautious.
— Rajnish Sarna
Congratulations on such a strong set of numbers despite the weak industry scenario.
— Rajnish Sarna
The challenge is coming because of high inventory in the channel.
— Rajnish Sarna
You can’t say that it doesn’t has any impact, so those are the things we are cautious about.
— Rajnish Sarna
You see this is not a very advanced industry per se from the agriculture and rural fields or even in the global arena, collecting updated inventory data from the rural markets is not easy and there is always a lead and lag, so we have to be a little cautious and careful in even reading these data points.
— Rajnish Sarna
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Q&A — 13 exchanges
Q
My first question is on our pharma asset. So, how is the integration process progressing and if you can give some qualitative information on the same and how should we think about the growth of this business? Do you foresee a significant increase in capacity utilization in these two assets versus around 50% of what we saw last year? I am Anil Jain here. Your first question is about the integration piece. Basically, three pieces namely Archimica which we acquired and it is in Italy, TRM in US, India & Hyderabad Research Center, which is newly built up and it’s also in process of getting fully r
Aditya Jhawar
That is quite helpful. Now in this quarter, there was this one-time acquisition and integration cost. If you can just call out what was the cost and how should we see the margin trajectory of the pharma business in the remaining part of the year? So, in this quarter in terms of financials, there were couple of one-offs. One is obviously the acquisition and business setting up costs and all to the tune of more than Rs. 100 to 120 million. The other is the impact of the IndAS-115 because the acquired entity, particularly the Indian acquired entity was not accounting as per the IndAS, whereas in
Q
First question is you have mentioned in the presentation that 13 top molecules identified for capacity enhancement. These are the molecules which have been launched in the recent years or these are more matured molecules and we have seen good amount of scale up happening from the off-tech perspective? Thank you. So, these are all operating objectives that are taken by our cross functional teams on a regular basis, and these are not recently launched molecules. Over the years we have commercialized many projects and out of those projects, as the processes improve year-on-year, our teams have id
Rohit Nagraj
And does it include pharma as well? Just to clarify. The 18% to 20% guidance that we have… Well, our idea is that pharma, whatever contribution it comes will be on top of it. But as I said, we will review all this post kharif season.
Q
Can you talk about the domestic business 13% degrowth and how things are panning out in the current season, in the coming quarter?
Prashant Hegde
So, the first quarter, you already might have seen from the industry, in fact, we anticipated it from at least last three or four months. So, that is why we were also cautious in terms of our procurement, especially on the generic products knowing this volatility; however, from July onwards, the positive momentum has built up. We PI External are having especially commercialized seven new products last year, those are doing good and this year also we have a plan to launch four new products, in that one we already commercialized in quarter one. So, this has definitely helped us, and this will co
Q
I wanted to understand on pharma, just on continuation, now that all the plants would be running fully, is it like Rs. 150 crore to Rs. 170 crore at least would be a current run rate that we’ll achieve from 2Q onwards? If I just do some approximation on the pro forma numbers.
Mayank Singhal
That is based on our acquisition stage, what number we give. We are hopeful of going in this direction in the coming quarters. And also, on the on the CSM side, we see that 29% volume and pricing continues to be positive, but with across raw material deflation, I wanted to understand how long this pricing will continue and generally when we talk to the customers, when does this price negotiations happen? Like because there’s a deflation, should we continue to believe that this will help us on the margins or at some point we’ll see some pricing cut? First of all this raw material deflation is n
Q
Just two from my side. One is on the CAPEX for the quarter, it is about Rs. 120 odd crore excluding the pharma acquisitions. We’ve guided to almost hitting Rs. 850 crore-Rs. 900 crore for the full year. So, should we expect a big acceleration in the remaining part of the year?
Rajnish Sarna
This is as per the plan only. The major part will be coming in subsequent quarters as the execution progresses. But yes, the annual plan remains what I indicated around Rs. 850 odd crore. And the second thing is just that on the guidance 18%-20% growth, earlier it included the domestic business also. So, in light of this quarter’s challenging performance there, do we sort of stick with that expectation, or should we assume that 18-20% is only for the CSM piece for now? You’re right and that’s the reason at this point we are saying we are optimistic cautiously that if things pan out well for th
Q
Sir, two questions from my side. Firstly, on agrochemicals, if it’s possible to give some color on what is the kind of inventory situation that you’re seeing for your specific products? We’ve obviously been hearing that there’s a lot of inventory across the system, but if you can provide any kind of color with respect to what you’ve been hearing from customers, which would be really helpful. And the second question I had was on margins, again, very strong margins that we have seen in this quarter. I just wanted to get a sense if there was any specific factor that you would like to call out whi
Rajnish Sarna
Well, in terms of inventory in general, we do not see a significant challenge or stocking in the product that we are dealing with/exporting. In domestic, Prashant, you may kind of highlight. Yes, overall, we know the price has been volatile. So, that is why we were cautious even in Q1 in terms of our placement as well. Now with the demand picking up, we don’t see any major concerns so far. Overall, domestic side demand is now from July onwards. We are seeing that it is coming out stronger. However, again it is last 1.5 months only we are cautious. We have to wait and see how these things progr
Q
My first question on the R&D side. Looking at the annual report, we have seen a sharp increase in the R&D manpower as well as spends. So, just your thoughts there, is it related to the Agchem side or the new chemistry side or it is also focusing on the pharma and one can expect a larger number of new product launches there?
Mayank Singhal
Till March 23, we did not have the pharma in this zone. This increase is coming from Agchem side and the process research and development side and also the biotechnology fermentation that we put in there. So, the incremental addition that we have seen now, will this also be including the allocation for the pharma R&D? No, that is going to Agchem now as I said because the pharma piece has come up later, right? Looking at the last three years number, there is almost doubling of the manpower there. Anything you’d like to share on the other performance chemicals or the electronic chemicals that we
Q
Congratulations on such a strong set of numbers despite the weak industry scenario. Sir, the first question is on further clarification on that. While we are seeing that the entire industry is suffering from the inventory destocking, especially in a global market, we still have been managed to grow 29% in terms of volume growth. Sir, if you can explain a little bit more, is it some because of the nature of our product or the product basket which we have that continuously seeing the higher volume growth and there was no inventory buildup has happened in last one year at all and that is driving
Prashant Hegde
Overall, in terms of acre, there was a delay in terms of sowing, so at the end of June we have seen somewhere around 16% to 20% reduction, especially in rice. But if I look at just few days back, overall, it is more or less similar to last year if I look at all PI External the crops, yes, rice is up. That is positive news. However, cotton is down by around 2%, rice is up by around 3% and pulses are down by 9%. But all other crops are more or less similar to last year and overall gross crop area is 0.2% down compared to last year. So, this is nothing. So, it’s more or less, the demand definitel
Q
Well, let me answer that. The electronic chemical business is just an entry point right now. There is not going to be a significant number in the PI, but in the next five years, we do believe in the growth potential of the specialty chemical, and also the fine chemical area, but electronics or semiconductors, specialized polymers which all going in the same application. So, we could see a few percentage points in that there. Naushad Chaudhary: So, in five years can it be in terms of capital deployment, can it be as big as we currently have the CSM Agri and the plan which we have in pharma? Can
Rajnish Sarna
Certainly not the same size as Agchem that we have because you will appreciate that our position in Agchem today is the work of last more than 25 years and investments made over this period. So, what is being said is that with our efforts in the last 3-4 years, we have already now got to a stage where we are commercializing several of these products, non Agchem products including electronic chemicals, specialty polymers etc. And this would surely become a reasonable percentage of our overall revenue, but this cannot be the same or it would be speculative to think that it will become of similar
Q
So, if you were to look at the Pharma Capital employed, is it possible to share what is the working capital in that piece and any accumulated losses? And secondly once you reach that normalized revenue of Rs. 515 crore, which is the kind of investments will require on both gross block and working capital and how do you see the growth in the revenues over the next 2 to 3 years and is there any clarity on the order size you can share with us now? There are several questions in your question, but let me try and answer them one by one. So, yes, we indicated earlier that in the next 3-4 years we wo
S Ramesh
And the second thing is on the domestic market, there is a mention about 9% of your revenue coming from biological products. So, how do you see the domestic business performing and the normalized demand based on the new launches and what is the kind of aspiration for the share of biological products in your domestic portfolio? Yes, Prashant, you can explain that. Biological products, as I said earlier as well, we have the plan to launch two products this year, one which we are launching in this month and one in quarter three. Definitely, there is good traction even though there are many produc
Q
Just two small clarification from my side. First is, has there been any purchase order deferment in the ongoing quarter?
Rajnish Sarna
Not really. And then the second is since second half is usually strong for us, do you see that trend changing in any sort in this fiscal? No. As explained earlier, so far, we have not seen any dramatic change in the demand scenario of the kind of products we are dealing in. But given the overall industry situation, we are also very cautiously monitoring the situation and in the next 3-4 months’ time, we will have certainly much better visibility and we shall review our guideline post the second quarter.
Q
My first question is on working capital days. We have seen efficiencies in working capital days in this quarter. So, can we treat this as a norm? Is there a scope of still better working capital days or the days will go up from here on?
Rajnish Sarna
No, we certainly see some more opportunities for improving working capital in some of the business areas. And sir my second question was on the horticulture business. So, just to get an idea about what would be the size of our market in that particular segment horticulture, the product that we are dealing? Which segment you said? Horticulture. Overall in terms of Agchem revenue, if I see what is contributing from horticulture, it is around 30%. And what would be the size of the pie, just the market as a whole for the products that we are deal-in? So, it is the revenue which what the horticultu
Q
Thank you, gentlemen, and ladies for joining this call and your continued interest in PI. Thank you so much. Have a good day.
Management
Speaking time
Rajnish Sarna
28
Moderator
15
Mayank Singhal
6
Prashant Hegde
6
Rohan Vora
5
Vishnu Kumar
4
Ankur Periwal
4
Rohan Gupta
4
Anil Jain
3
Sumant Kumar
3
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Opening remarks
Nishid Solanki
Thank you. Good evening, everyone and thank you for joining us on PI Industries’ Q1 FY24 Earnings Conference Call. Today, we are joined by senior members of the management team, including: • Mr. Mayank Singhal – Vice Chairman and Managing Director • Mr. Rajnish Sarna – Joint Managing Director • Mr. Manikantan Viswanathan – Chief Financial Officer • Mr. Prashant Hegde – CEO (Domestic) • Mr. Atul Gupta - CEO (Exports), and • Mr. Anil Jain – Managing Director, PI Health Sciences 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. Thereafter, the forum will be open for question-and-answer session. Before we begin, I would like to underline that certain statements made on today's conference call may be forward-looking in nature and the disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on Stock Exchange websites. I
Mayank Singhal
Good evening, everyone. It is my pleasure to have you with us on this call. I shall now share my perspectives on the industry landscape and the progress that we are making with our strategy. The global crop protection industry is witnessing a tough phase over the last couple of quarters with intense destocking by the distribution channel due to increased availability of certain categories of product post the normalization of the COVID disruption and scenarios of steep price reduction of these products leading to cautious procurement by the channel. On the other hand, the Chinese economy is experiencing slack domestic demand, and it is exporting deflation through stepped up exports of goods. It is already impacting the chemical sector across the value chain. Given that we at PI overall year-on-year basis during Q1, we have delivered a 24% revenue growth and a 35% increase in EBITDA and a profit after tax recorded a 46% growth year-on-year. PI has though maintained course of healthy perf
M. Viswanathan
Thank you, Mr. Singhal. Good evening, everyone and thank you for joining us on the call today. I’ll summarize the company’s financial highlights for the fourth quarter ended 30th June 2023. Please note all these comparisons are on a year-on-year basis and refer to the consolidated performance. During Q1 FY24, we reported a revenue of 19,104 million, a growth of 24% year-on- year including newly acquired pharma business and 21% revenue growth without it. This was driven by growth in exports revenue by 37% to Rs. 15,630 million, offset by a 13% decline in domestic revenue to 3,474 million. The export revenue growth in CSM was 33%, comprising volume growth of 29% and 4% from price, currency, and favorable product mix. This quarter, total exports revenue included pharma revenue of Rs. 443 million comprising around 2 months period for Archimica from 27th April 2023 onwards and one month period for Therachem from 2nd June 2023 onwards. Domestic revenue was contracted by 13% year-on-year due
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