HIKALNSEFebruary 10, 2025

Hikal Limited

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Management on call

Sameer Hiremath

MANAGING DIRECTOR

Kuldeep Jain

CHIEF FINANCIAL OFFICER

Anish Swadi

SENIOR PRESIDENT, BUSINESS TRANSFORMATION AND STRATEGY

Vimal Kulshrestha

HEAD, CROP PROTECTION DIVISION

Key numbers — 40 extracted

rs,

cial Officer; Vimal Kulshrestha, Head of our Crop Protection Division; and Strategic Growth Advisors, Investor Relations Advisors. As we move into 2025, the global chemical market is poised for stab

INR448 crore

ustry is expected to stabilize in the next 2 to 3 quarters. In Q3 FY25, our revenue amounted to INR448 crores with an EBITDA of INR72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis. For 9MFY '2

INR72 crore

in the next 2 to 3 quarters. In Q3 FY25, our revenue amounted to INR448 crores with an EBITDA of INR72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis. For 9MFY '25, revenue stood at INR1,307

11%

revenue amounted to INR448 crores with an EBITDA of INR72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis. For 9MFY '25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores,

INR1,307 crore

R72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis. For 9MFY '25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores, a growth of 3% and 18%, respectively. Our business initiatives

INR205 crore

growth of 11% on a Y-o-Y basis. For 9MFY '25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores, a growth of 3% and 18%, respectively. Our business initiatives have resulted in increased opera

asis. For 9MFY '25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores, a growth of 3% and 18%, respectively. Our business initiatives have resulted in increased operating cash flow of

18%

or 9MFY '25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores, a growth of 3% and 18%, respectively. Our business initiatives have resulted in increased operating cash flow of INR102

INR102 crore

and 18%, respectively. Our business initiatives have resulted in increased operating cash flow of INR102 crores on a 9- month basis Y-o-Y. Board of Directors at the Board meeting concluded this afternoon hav

INR0.6

f Directors at the Board meeting concluded this afternoon have recommended an interim dividend of INR0.6 per share, which is 30% of the face value. We have capitalized our new multi

30%

eting concluded this afternoon have recommended an interim dividend of INR0.6 per share, which is 30% of the face value. We have capitalized our new multipurpose facility at Pan

INR293 crore

siness, for the quarter ended December 31, 2024, our Pharmaceutical business reported revenues of INR293 crores and an EBIT of INR33 crores, which is a significant increase of 450 basis points on a Y-o-Y basi

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Guidance — 20 items

Sameer Hiremath

opening

“I am Sameer Hiremath, Managing Director, Hikal Limited, and I will be leading the discussion and presenting the financial results.”

Sameer Hiremath

opening

“In Q3 FY25, our revenue amounted to INR448 crores with an EBITDA of INR72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis.”

Sameer Hiremath

opening

“We expect the ramp-up from this facility over the next 2 to 3 years.”

Sameer Hiremath

opening

“As we approach the end of this financial year, we expect to deliver positive results on a full year basis, led by stronger profit and margin growth.”

Sameer Hiremath

opening

“Additionally, on the Animal Health side, our project under the long-term agreement with a leading global innovator company is advancing smoothly and as per plan with validation of seven products already completed and the balance to be completed in the next few months.”

Sameer Hiremath

opening

“Commercial supply will be initiated by the end of calendar year '26, beginning '27.”

Sameer Hiremath

opening

“This progress is anticipated to support our growth as we plan to ramp up operations in FY'26, '27.”

Sameer Hiremath

opening

“Moreover, our food ingredients projects is progressing well, and we expect it to achieve peak revenue in the next 2 to 3 years.”

Sameer Hiremath

opening

“Companies that prioritize cost efficiency, operational excellence, quality and sustainability excellence and innovation will be well equipped to enhance profitability and revenue, setting the stage for a prosperous 2025 and beyond.”

Sameer Hiremath

opening

“Collaboration within the industry and with regulatory bodies will be essential to navigate challenges and seize opportunities for growth in the evolving landscape.”

Risks & concerns — 6 flagged

Despite the ongoing challenges such as pricing pressure from competitors, especially from China, the global crop protection industry is expected to stabilize in the next 2 to 3 quarters.

— Sameer Hiremath

Although China Plus One is expected to strengthen in the current operating environment, intense pricing pressure and dumping continues from the Chinese competitors for generics and commodity products.

— Sameer Hiremath

And from the -- as a percentage of the end market revenue of that concern drug, our revenue share should be how much, around 1%, 1.5%.

— Dhaval Shah

And the 15%, 20% growth, can we take INR2,000 crores as the base for that because last 2 years, we have seen decline in revenues, right, like we have.

— Ankit Gupta

So, the agrochemical space, I mean, there has been some pricing pressures and volume pressure because of the overall slowdown in the industry and also the China dumping effect.

— Sameer Hiremath

But look, it's a volatile situation, right?

— Anish Swadi

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Q&A — 9 exchanges

Very encouraging to see the strong commentary on the pharma business and also the bottoming out of the agrochemical business. So my first question is on the pharma side. On the CDMO front, you mentioned about various molecules in Phase III trials and plus close to commercialization. And so, I would like to understand, first, so what is the pipeline of molecules do we have, which are in Phase III and IV trials? If you could share some number? And secondly, the commercialization expectation, should we be expecting any in the FY '26 or everything will come in FY '27? And also, how many molecules

Sameer Hiremath

Hi Dhaval. So, we have currently about , 13 to 14 products in the CDMO under various pipelines, and most of them are between Phase II and Phase III. Phase IV is already getting into launch mode. Out of that, two products are very close to launch, which we expected to be launched in -- towards the end of financial year FY '26. And the others will get launched if everything goes well, in FY '27 and beyond. Apart from this, we're adding on every quarter new inquiries and new molecules. So the pipeline is building up. A few years ago, this pipeline was a few products, then it became 5 to 6 product

Sure.

Management

Just wanted to understand, on the pharma scale up, this quarter, the CDMO has dropped. So, any specific reason for this?

Sameer Hiremath

Pharma scaleup, CDMO was dropped? I mean CDMO percentage as of the overall Pharma revenue came down from 80% to 56% in this particular quarter, right? Crop Protection versus Pharma,you're talking about. No. Are you talking about pharma or talking about crop. Sir, in both the cases, we have some CDMO, right? Yes. So basically, in Pharma, what would be the CDMO percentage in 9-month basis? 9 months, I will tell you 1 minute. 9 months, our Pharma CDMO percentage is about 40%. Okay. Is it dropped significantly, like in the quarter? It has not dropped. It has gone up. It's gone up. Okay. And what w

Good to hear that both the segments are recovering. Animal Health is doing progress. So, first question on the Animal Health front. We have been working on the validation for the innovator. Have we also started for the validation for ex innovator customers? And if yes, then what is the timeline that we are looking at? And if not yet, then again, I mean, what could be the timeline when the validation will start, and we'll expect some commercial supplies?

Anish Swadi

Yes. So, I'll just take a step back. When we look at validation for the innovator customer, what we do is we basically are validating the product, right, for all customers. So, when the validation happens, it's not only for one customer, it's for all customers because we're scaling up the product and putting it into commercial and getting all the data for filing. So, at the same simultaneous time, we've been marketing it or sending samples to external customers as well. So, we started that phase almost 12 to 14 months ago. And as we went through the product life cycles of validating several pr

So, my first question was on the veterinary side. So, with commencement of commercial sales from FY '26 onwards, how big can this segment become for us over the next 2, 3 years, if you can highlight what is the potential for this segment to grow in the next 2 to 3 years, FY '27, '28?

Anish Swadi

Yes. So, I'll take it a little further. I mean, we were always in the Animal Health business, but one of the results of Project Pinnacle, as we talked about earlier, was to really focus on this business and become a key supplier, a niche supplier to the animal health industry. And we've done that very successfully. I think over the next 5 years, we'd like this to become an independent division by itself, stand- alone, just like we have Pharmaceuticals and we have the Crop Protection division. So, we really see a significant amount of growth in excess of INR400-plus crores of business over the

Sameer, while answering to a participant, you mentioned the keyword blockbuster. What could be the peak potential of an average NCE CDMO? I mean, can any of these molecules after, say, 3, 4 years of launch because there is always a ramp-up period, you will not get the peak sales in year 1. But let's assume we touch the peak potential of these NCE molecules that we have in late phase 3 or 4 years out. I mean, can each of them individually or can any of them fetch us INR500 crores or thereabout on an annualized run rate when they reach that peak potential? Is that -- I mean, is that what you mea

Sameer Hiremath

See, I think it all depends on the size of the molecule and the growth aspirations and depends on the dosage of the molecule. I think INR500 crores is a bit too high. It's very stretched. I mean we all aspire to get one or two those. But currently, with what we see, it could be INR50 crores in the worst case to maybe a few hundred crores per molecule in the best case, in that range. But we have multiple products that we will launch. It's not going to be focused on one or two products. The idea is to launch multiple products in any given year, increase our pipeline. So, a combination of that co

So I had a couple of questions. First being, if you could provide with the value and volume growth for Q3 and 9M on the Pharma side and on the Crop Protection side?

Sameer Hiremath

Yes. Kuldeep. Why don't CFO take this numbers? Kuldeep? Yes. Thanks, Sameer. For the 9-month basis, our volume in crop protection growth was 41%. And in Pharma, just 3.7%. And on value terms? In value terms, our crop growth was -- degrowth was 3.3%, while the Pharma growth was 7.1%. So technically, we have not grown in value, we have grown in volume. Okay. And sir, I have one more question. What are your views on the latest tariffs from the U.S.? And do you believe that it will provide an opportunity for India? Anish, why don't you take that? So, look, of course, we've heard the news this morn

What will be our gross debt number as of 9 months? And what will be our operating cash flow for the 9 months?

Kuldeep Jain

See, our debt was INR731 crores. It was December 2024. And as far as the positive cash flow is concerned, we have INR102 crores positive cash flow, operating cash flow. INR102 crores. Yes, positive cash flow. INR102 crores. That's your operating cash flow, right? Yes. Yes. And the capex for the current year, are we doing around INR140 crores, which was guided last quarter on the call. Is it the same number? Absolutely. We are sticking to what we have said earlier. It will be INR140 crores to INR150 crores. Okay. And for FY '26, how much are we planning? As you mentioned earlier, typically, we

Thank you everyone, for joining our quarterly earnings call and for your continued interest in our company. We appreciate your support as we navigate through the challenges of the global business environment. I wish to reiterate that our quarter-on-quarter performance will continue to yield positive growth and profitability through the end of this financial year. As we conclude this call, we want to assure you that we are here to address any further questions and concerns. Please feel free to reach out to us, our Investor Relations partners, Strategic Growth Advisors, as well. Once again, than

Management

Speaking time

Sameer Hiremath

Dhaval Shah

Moderator

Anish Swadi

Kuldeep Jain

Amar Maurya

Ankit Gupta

Rohit Nagraj

Sajal Kapoor

Raj Desai

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Opening remarks

Sameer Hiremath

Thank you. Ladies and gentlemen, good afternoon, and a warm welcome to all of you. We extend our gratitude to all of you for participating in our Q3 and 9MFY25 results conference call. We are pleased to provide you with an update on the progress made by your company. We trust that you have had the opportunity to review our earnings release, investor presentation and the financial statements for the quarter ended 31st December 2024. These documents can be accessed on both Hikal's website and the stock exchange's website. I am Sameer Hiremath, Managing Director, Hikal Limited, and I will be leading the discussion and presenting the financial results. On this call with me, I have Anish Swadi, Senior President of Business Transformation and Strategy; Kuldeep Jain, Chief Financial Officer; Vimal Kulshrestha, Head of our Crop Protection Division; and Strategic Growth Advisors, Investor Relations Advisors. As we move into 2025, the global chemical market is poised for stabilization and growth

Vimal Kulshrestha

Thank you, Sameer. Good afternoon, ladies and gentlemen. Financials for Crop Protection division. In Q3 FY '25, the revenue for our Crop Protection business stood at INR154 crores with an EBIT of INR14 crores and EBIT margin of 9%. We have several projects in progress with our current innovative clients as well as prospective new customers, and we are seeing encouraging momentum with several companies in CDMO sector for both development and contract manufacturing. About the business verticals we have in own products in line with our growth plans, we are aggressively identifying and developing new product opportunities to further expand our offering and derisk our customer and product portfolio. For our specialty products, we are witnessing increase in traction with customers, especially in new product areas. In CDMO business, currently, it has a strong pipeline of eight products from both current and prospective clients. By successfully pursuing these opportunities, we expect to streng

Anish Swadi

Thank you, Vimal. First, I'd like to discuss a brief on the Animal Health business. The development of various APIs for an animal health innovator is moving forward successfully under our long-term agreement. We expect to complete the validation of the portfolio in the upcoming 2 quarters, which will assist us in securing the product registration in various countries and ultimately enable the launch of these products across several global markets. Post that, we will be in a position to commercially sell the products across the world. We are proactively engaging with several new clients in the animal health space for process development and the synthesis of several complex molecules for NCEs, and the outcomes so far have been promising. We continue to garner several new inquiries from companies across the globe. On our transformation project, Project Pinnacle, it has already been showing some positive results over the past several quarters. We have made significant progress in maintaini

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