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Hikal Ltd
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Ladies and gentlemen, good day, and welcome to Hikal Limited Q4 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of the future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sameer Hiremath, Managing Director. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen, and a warm welcome to all of you. We extend our gratitude to all of you for participating in our Q4 and FY '24 results conference call. We are pleased to provide you with an update on the progress made by our company. We trust that you have had the opportunity to review our comprehensive earnings release, investor presentation and the financial statements for the quarter and financial year ended...
[Technical Difficulty]
Ladies and gentlemen, we have the management back with us. I now hand the conference over to Mr. Sameer Hiremath, Managing Director. Thank you, and over to you, sir.
Thank you. And sorry about that. So good afternoon, again, ladies and gentlemen, and welcome to Hikal's Q4 and FY '24 Results Conference Call. We are pleased to provide you with an update on the progress made by our company. We trust that you have had the opportunity to review our comprehensive earnings release, financial statements and the investor presentation for the quarter and financial year ended 24 March '24. These documents can be accessed on Hikal's website and the stock exchange's website. I am Sameer Hiremath, Managing Director, Hikal Limited, and I will be leading the discussion for this call. On this call, I have with me Anish Swadi, our Senior President and Head of Business Transformation [indiscernible]; Kuldeep Jain, our Chief Financial Officer; Manoj Mehrotra, our Head of our Pharmaceutical business; and Strategic Growth Advisors, our Investor Relations advisers.
The current operating environment was marked by inventory backlog, oversupply and heightened price competition in the crop protection industry. We expect this to start normalizing towards the end of FY '25.
The pharmaceutical sector, on the other hand, is displaying signs of improvement with a better demand profile supported by stabilized raw material prices. Amid these dynamics, our strategic focus remains on gaining new customers, bolstering artificial efficiencies and optimizing costs through various business excellence initiatives. This quarter, on a sequential basis, our revenues increased by 15% to INR 514 crores; EBITDA increased by 45% to INR 94 crores, on a Y-o-Y basis EBITDA increased by 7% and EBITDA margin stood at 18.4%, an increase of 220 basis points.
For the full year, FY '24, revenue stood at INR 1,785 crores, EBITDA stood at INR 267 crores, with EBITDA margins at 15%, which is an increase of 230 basis points compared to the previous year.
Our Board of Directors have recommended a final dividend of 30%, along with an interim dividend 30% declared in February 2024, in which case, the total dividend for FY '24 stands at 60% of face value, which is INR 1.2 per share.
For the year FY '24, our API facility in Panoli, Gujarat underwent an FDA audit, which concluded with zero 483 observations, showcasing our unwavering dedication to stringent regulatory compliance standards amidst the backdrop of increased market penetration, stabilized raw material prices and an increase in the number of inquiries in our CDMO segment.
FY '24 also marked commissioning of our animal health multipurpose plant at Paloni and validation of a few products in this plant have been completed with several more currently underway.
In our Pharmaceuticals business, we've observed enhancement in both margin profile and volume, reflecting the positive outcomes of our strategic efforts over the last few years. This progress is evident to the [indiscernible] of regulatory approvals from several customers and regulatory authorities, strengthening of our customer base across 3 geographies, such as Japan, Latin America and Middle East within the API segment.
In the craft protection business, the global crop protection industry continues to face significant headwinds, including subdued global demand and intense price competition. While the [indiscernible] near-term industry-wide challenges, we expect the market trajectory to improve in the crop protection business towards the end of this financial year. We are well positioned across our business -- both our businesses for long-term profitable and sustainable growth.
For the Crop Protection business, we reported revenue of INR 177 crores for the quarter with an EBIT of INR 14 crores and EBIT margin of 7.7%. For the year ended March 31 FY '24, revenue for the crop business stood at INR 684 crores, EBIT of INR 74 crores and EBIT margin of close [indiscernible]. The Crop Protection industry continues to be affected by the destocking situation along with overcapacity and intense price competition from China. Numerous projects are in the advanced stages of discussion with both existing innovator customers and new customers, which are expected to come on stream in the next few years and drive mid- to long-term growth.
Our cost improvement initiatives have begun to yield results, which are playing a pivotal role in maintaining our margin profile. The construction of our new multipurpose subsidiary at Panoli has been completed with the plan currently undergoing manufacturing qualifications. From our own product, destocking continues to impact demand globally, and we expect improvements towards the end of FY '25. In line with our gold strategy of [ commencing ] a new multipurpose facility in Panoli, we are additionally actively working on new product opportunities to further improve and expand our business.
Our CDMO business maintains a healthy pipeline of inquiries from both current and prospective clients. Our focus on this opportunity to work on these molecules with better margin profile, we are expected to strengthen our position among global innovators, driving growth in this segment in the medium term. Now I would like to hand over to -- I hand over to Manoj Mehrotra, president of our Pharmaceutical division who will provide an overview of the Pharmaceutical division performance. Over to you, Manoj.
Thank you, Sameer, and good afternoon, ladies and gentlemen. On the financials for the pharma business for Q4 FY '24, Pharma business reported revenue of INR 338 crores, EBITDA of INR 54 crores and EBIT margin of 15.9%. For the full fiscal year '24, Pharma business reported revenue of INR [indiscernible] crores, EBITDA of INR 93 crores and EBIT margin of 8.5%.
Operating profits have increased sequentially reported by better product mix. On a year-on-year basis, the stabilization of raw material prices combined with the diverse set of initiatives aimed at improving cost efficiency and optimizing operational costs have resulted in enhanced margins.
On our business verticals for the API business, our API business is showing promising traction both Q-o-Q and Y-o-Y basis. Regulatory filing for our business expansion projects in multiple regions have commenced promising to fuel our growth in the future. We maintain a strong pipeline with 8 to 9 products in development, and we are progressing according to plan to launch 2 to 3 quarters annually.
Our market share in the legacy product portfolio is steadily increasing. In the CDMO vertical, in quarter 4 FY '24, the destocking situation continues to impact our CDMO business with an expectation for industry normalization towards the end of H1 FY '25. Continuous discussion with our existing innovator customers and a healthy flow of inquiries indicate an increasing interest in expanding their business with us.
Our CDMO business has exhibited a positive trend in the food ingredient segment with 2 products currently in production, which will reach their full potential in the next 2 years. Two of our [ KSMs ] in Phase III of clinical trials with innovators is progressing well and will reach full potential in 2026 or 2027.
On the overall pharma business, our API business demonstrates promising traction, expanding its presence across geographies with anticipated regulatory approvals for new products [indiscernible] to drive growth. We maintain a robust pipeline of projects within the CDMO space and actively pursuing additional opportunities that has surfaced in recent quarters. Several customer audits have been lined in the rest of 2024. Enhanced operating leverage within this segment is forecasted to lead to improved profitability. Now I would hand over to Mr. Anish Swadi, who will provide an overview of our business strategy.
Thank you, Manoj, and good afternoon, everyone. First, I'd like to discuss a few points on the Animal Health business. The development of multiple APIs for an animal health innovator company is progressing well under the long-term agreement that we signed. Our new multipurpose plant for the Animal Health business is operational. We have completed 4 product validations with several products undergoing validation for registrations and eventual commercialization in the quarters to come. .
Our extensive networks and strong relationships with global innovators position us as the preferred partner in this industry, and we are gaining traction with them. Providing comprehensive support and process development and complex molecule synthesis has established us as a reliable and competitive player in the Animal Health business.
Despite some of the short-term challenges overall, we anticipate the long term to be fruitful. Our company's transformation project, Project [indiscernible] is beginning to yield results propelling us closer to our goals towards prospering sustainable growth across all our businesses. Encouraging momentum is evident in the supply chain derisking strategy developing differentiated competency, the acquisition of new customers globally and the building of a distinctive technology platform.
As we navigate through the next stage of our strategic evolution, notable advancements have been realized to the incorporation of sustainable practices in our defined ESG framework.
Looking ahead, we are executing our clear future strategy and road map aimed at making a positive environmental impact to our operations. Staying true to our values and embracing innovation, we are poised not only to thrive in the marketplace, but also contribute meaningfully to a sustainable and profitable future for all. Now I would like to open the floor for Q&A.
[Operator Instructions] We have our first question from the line of Payal Shah from [indiscernible] Securities.
I have a few questions. Firstly, what is your view on U.S. Biosecure Act and how it will benefit our business?
Yes. I think the U.S. Biosecure Act is being tabled in the U.S. Senate. And the initial signs are very promising. It will take some time, but we're seeing a nice number of inquiries from U.S. pharmaceutical companies, and I think it's going to benefit companies like Hikal in the medium to long term. It is a very positive for companies like us.
Okay, sir. Sir, my next question is how aggressive is China with relation to crop protection business and does the same [indiscernible] for our pharma business?
Well, I tell aggressive on the crop protection side where there's a lot of overcapacity in the crop side, and there is very low prices being offered. So there is severe competition coming out of China. While we don't have the same impact on the pharma side, because pharma, you are bound by regulatory authorities like the FDA and [indiscernible]. So the barriers still exists. So we don't foresee the same level of competition in China and the over capacity exists in the crop business, not as much on the pharma side.
Okay. And my last question is, where do we see both our businesses in the next 3 years?
I mean we expect them to both grow, I think the medium- to long-term forecast are both very promising. Not only the 2 business, even the Animal Health business will come to a [indiscernible] side in the next 2, 3 years. and we expect these businesses to all start growing and coming back to [indiscernible] levels in the next 2 to 3 years.
[Operator Instructions] We have our next question from the line of Sajal Kapur, an Individual Investor.
I have a couple of questions. Some companies in your peer group have seen molecules migrate from China to India. So [indiscernible] started demonstrating their commitment in special cases. Have you witnessed the shifting of any molecules or at least the clinical stage projects from China? Or -- are we still in the RFQ and discussion stage?
Inquiry has come, and they're very serious about moving. Some have started to move. More on the [indiscernible], you're right, on the clinical chain, I think they are moving supply chains away from China and we are benefiting from that. Some are resulting into projects and they are the R&D stage already, and even more [indiscernible] are moving in. It's taking time, but it's happening.
Sure. That's helpful. And Sameer, you [indiscernible] guided for 15% compounded growth over the medium term. But if I look at Slide 15, that confirms the reality, right? I mean our sales grown below 5%. And more importantly, our [indiscernible] share in pharma, the percentage mix has actually gone worse over the 4 years. So that's Slide 16, by the way. So how do you read -- how should 1 read into this?
No, I think that's because actually, our API business has grown faster than our CDMO business, because there are many projects in the CDMO side, which are on the NCE level. But once they can launch that percentage will go up. If you look at FY '20 versus FY '24, yes, as the percentage has come down. But overall, it will go up. It will come back -- once they ramp up these molecules get launched, as Manoj mentioned, we have a couple of products in Phase III, and they get launched up that the percentage of the CDMO will increase. And we will come back to that 50-50 type of mix where we were historically 3, 4 years ago.
Right, right. And then -- and an average investor reading Slide 6 and 7 will get the impression that the worst is over and the recovery has started sequentially as we are comparing Q3 and Q4 data there, right? However, our H2 is always better than H1. And within H2, -- the Q4 is typically better. Likewise, then Q1 FY '25 numbers will be published, we'll find that the sequential recovery is not happening because our Q1 is always lower than Q4, right? So I think the whole point I'm trying to make here is that is it even worth sequentially comparing our lumpy business. So Slide 6 and 7, I think it may be misleading.
[indiscernible] quarter margins always a lower quarter because we take our annual shutdown [indiscernible] during the quarter. [indiscernible]. So I think you should start comparing from Q2 onwards, yes, when the full production is back on stream. So from Q2 to Q4, if we noted, our business continuously improves. And -- it is [indiscernible] . I mean historically, from Q2 to Q4, we are growing H2 bigger than H1. And that's how our business has been driven.
Yes. So we don't expect to...
Just to add, Sameer, because many of our all our innovator customers or multinationals have a fiscal year January to December -- so they kind of minimize inventory in December. And so Jan to March, they are for more quantities. So because of our nature of our B2B business, Q4 for both pharma crops, [indiscernible] or ACI will always be higher. -- will be the highest quarter.
Yes. And Manoj, in the pharma, the business has done well in Q4. Actually, if you look at just Q4 Y-o-Y data for pharma vertical, -- the sales have grown at 10% from 300 or to 338, right, around about 10% growth in sales. But our margins have improved and our profitability has almost jumped by 50%. And I'm comparing Y-o-Y, right? So there is no sequential element here. Is this -- is this a sustainable trend going forward? Can we expect the Animal and the Human Pharma to drive the business. And as long as the agro is not kind of in a trust reversal mode and overall top line should grow by 15%. Is that a reasonable assessment? Maybe for next year, but on a 3- to 5-year horizon?
So this Q4 definitely has seen a strong recovery because of our product mix and stabilization of raw material prices. Going forward for the full year, we may not see as strong a recovery quarter-by-quarter. But the trend is definitely positive. And I think you also mentioned the [indiscernible], that the worst is over. And again, you see H2 will better than H1 because the nature of our business and a contract it will be a little slow in H1, but H2 will definitely come back much stronger in my opinion.
No. So I was not comparing Q-on-Q. I was saying that year-over-year over the next 3 to 5 years, can we drive our [indiscernible]?
At 15% top line and margin -- top line growth, [indiscernible].
We have our next question from the line of Rishab [indiscernible], an individual investor, please go ahead.
I wanted to understand more about the CapEx guidance and the asset turns guidance for FY '25 and coming 2 to 3 years. And also, how do we plan to fund this CapEx? And what could be the incremental ROI of this CapEx?
Yes. So it is set from FY '23-FY '24-point of view, we have done the CapEx of almost INR 200 crores and equally capitalized. As far as this -- out of this, almost 55% to 60% was for the growth CapEx, the ROI, the commertial supply will start from the second half of the next last year, '25, '26.
CapEx for this year is concerned, we are estimating INR 100 crores, INR 120 crores, which is primarily the debottleneck and some CapEx.
And FY '26 and '27, any CapEx guidance for that?
We are really -- as we have mentioned earlier, we are not really able to invest for the CapEx unless we have a really good strong case to invest.
Also just 1 thing. On the debottlenecking side, the -- like do you have a lot of [indiscernible] like low-hanging foods in front of you, which would give very high ROI in the short term?
There are a few on -- Manoj spoke about some food ingredient products and some pharma products, which are in the NCE mode. And those [indiscernible]. A little bit on the crop side also, where we're winning some new inquiries on the CDMO side. So there's no major new CapEx that we expect for the next year, unless there's a big new contract [indiscernible] business requirement that comes from a customer, they may not shine investing. [indiscernible] CapEx is never looking at right now, for 1 year.
Okay. And the asset turn, sir, just for FY '25 and coming year, asset turns?
Full utilization because it takes time to ramp up. I mean, if you look at full utilization back by 1.1% to 1.3% of the growth CapEx. That's we are looking at .
Blended basis for FY '25 kind of asset then?
It depends on the ramp-up. It will be in that range. I mean [indiscernible].
We have our next question from the line of Deepak Kumar, a shareholder.
So in the last -- last quarter con call, there was a mention about some growth in the Animal Health business and some INR 200 crores to INR 300 crores odd revenue potential coming out of that -- so like out of this, how much potential do you see actually fiscal '24, '25?
I'm sorry, could you just repeat the question, [indiscernible] .
So yes. So this is the reference to the last quarter con call, like there was some mention about the -- [indiscernible] you are making in the Animal Health business -- and there was some extra revenue potential being talked about -- of about INR 200 crores, INR 300 crores. Like how much of that is you expected to flow in this fiscal?
Yes. So we don't get any specifics. But as we have said in the past before, Animal Health has been about 8% to 10% in historic times in the last 3 years of the pharma business. So Animal Health is still a small part of the pharma business. We've signed a new contract, which we talked about, the current products are going through validation. [indiscernible] full commercialization and peak capacity probably in the next 2 years, 2 to 2.5 years. Once they go through the validation process, they get registered and commercial quantities will start.
So when I mentioned last call, I said about the next 4 to 5 years, we're looking at a revenue potential of about maybe INR 300 crore to INR 400-odd crores depending on how the products pan out.
Okay. And 1 more thing. Like can you just -- can you share some outlook on what were in the food ingredient premium pipeline for the company -- like a broad outlook?
Manoj, go ahead.
Yes. So currently, we have 2 food ingredients with the originator customer and 1 in the U.S. and 1 in Europe. And both of them are commercial now -- and because the approval process is much faster in food ingredients. And we expect that in the year 2026 will reach their peak revenue. .
We have our next question from the line of Dhwanil Desai from Turtle Capital.
Sir, my first question is, if I look at our company last 5-year numbers, our top line has gone from INR 1,600 crores to INR 2,000 crores. And in the same time frame, we have spent around INR 1,000 crores on CapEx. So our asset intensity of the business has gone up. So can you throw a bit light on that? And I understand that some of the CapEx is just capitalized and it's going to generate revenue going forward. But earlier, we used to do [indiscernible] turns of 1.5 to 1.7x. And now we are guiding for 1.1 to 1.3. So if you can help us understand what is [indiscernible] in the last 4, 5 years?
So I think the asset turns -- have -- things have become far more expensive, I think, from a CapEx perspective, and there is competition in the market. So that's number one.
Number two, 1.5 for 1.7 was on [indiscernible] because at that point, it was most of the growth CapEx. What happened in the last 2 years is because we've done a lot of infrastructure upgradation also, the blended asset turn has come down. And so yes, we have built and we have done maybe INR 100 crores of CapEx in 5 years, but almost 30%, 40% of that is on infrastructure and maintenance CapEx. So 60% is only gone into the gross CapEx on that. And it takes a gestation period of 2, 3 years to ramp up the volumes. And the major CapEx has only happened in the last 2 years out of that INR 1,000 crores that we spoke about. So more than 15% has happened over in the last 2 years.
So that will start kicking in for next financial year, some impact this year, but mostly for next year and the years to come. And this is -- it has been due very positively by our customers, and this CapEx will get [indiscernible] because customers are looking for high [indiscernible] capacity as they move our supply chains away from China and they want you to have some readymade capacity available, which we are looking at our offer. So the charges of winning new contracts is increasing quite substantially with this.
Okay. Okay. Understood. So then coming back to last 5 years numbers, and I understand we are looking at trough in terms of the cycle. But still, our revenue has not grown at a very decent rate, while we have done a lot of CapEx. So given that we have good customer base, we have already have capacity, you are [indiscernible] from China. So shouldn't we inspire more to grow at 20% plus Q1 where we are positioned today because we are guiding for 15% growth, but ingredients for higher growth seems to be in place or am I missing something?
No, the right ingredient for higher growth is there, but selling prices have also come down the crop space because of intense competition. So there is a selling price impact, and volumes have also declined compared to where we were last year. There's been a significant volume drop now in the competition business. So there is free capacity. And once we start operating at higher capacity and utilization, I think there's a big ramp-up possible in the business, which should significantly improve the margin of the crop business. .
[indiscernible] the capacity, which you can deploy a short note, which we have winning contracts. So we will be able to fill it very soon.
On the agrochem side, I think last couple of calls, if I remember correctly, you were expecting recovery to start from H2, I think in this commentary you are now saying that towards the end of the financial year. So -- is it just the [indiscernible] we are thinking that the recovery will be slightly more delayed than what we thought earlier?
[indiscernible] to each and every 1 of my customers in the world. I asked them this question, they said [indiscernible] mine. It's just an expectation that H2 is early part of it or end of H2. It's all everybody is giving down assumptions, but we're trying to be a little conservative and say towards the end of H2. It happened earlier. It's great. But I think the other thing is going to happen due to see before something of H2, not early end of H2, yes, because the situation in China is very good, but it is likely to change as you [indiscernible] expecting this. But as you noticed, all [indiscernible] global innovator majors have reported negative numbers and negative growth for Q1. And the commentary also talked on the same line.
We have our next question from the line of Rohit Nagraj from Centrum Broking.
And good to see the pharma pick up during Q4. First question is, again, on the Animal Health. So your comments, Anish has said that we have sample few products, and there have been validations which are [indiscernible] so is there any possibility of commercial supply starting maybe towards the back end of FY '25?
Yes. No. So right now we -- right now, we are under the validation phase. Once validate the product. It goes to the customer, it is anywhere between 14 to 18 months for the customer to register it and then start placing commercial supplies. So I don't think it's going to happen at the end of FY '25, but we do expect shortly thereafter that commercial quantity or commercial orders will come in. .
The idea is that we validate all the products concurrently, supply them to the customer, and we're supplying them in such a way that when the last validation is done, we're hopeful for the first validation that had been done to come through on the commercial side. So the plant idle time is kept to a minimum.
Sure. That's helpful. Second question is, again, on the [indiscernible]. So I just wanted a little perspective from your end in terms of the domestic environment from inventory perspective, given that there have been talks that the monsoon will be normal and hopefully, things will turn positive for the sector and similar conditions from a global perspective, and a concurrent question to that, in terms of the pricing environment, whether it is bottomed out -- and obviously, once the inventories get normalized only then the pricing will improve. Just your thoughts from talking to your customers or so?
I [ can't ] say more on the global environment because they're not much present in the domestic environment, but whatever I've heard on the domestic side is that there is an inventory in the system, but they expect it to again to -- there's a lot of inventory. It will come -- the [indiscernible] is expected to be good, but I don't have much to say about the domestic market.
On the global side, I think inventories, as I mentioned, is inventory huge amount of inventory being carried in the market. Consumption has picked up, but it will still take a few more quarters with inventory to come down to acceptable levels. And we expect that once that is happening, then orders will start picking up.
On the pricing side, prices I think are not going down any further. They've already long bottom, this is what I've heard from all my customers, and we expect to see a marginal improvement in pricing in the quarters to come. But that will only happen once [indiscernible] orders start coming in once the inventory gets liquidated. [indiscernible] 6 to 9 months away from that scenario right now.
We have our next question from the line of Viraj Mehta from DVD Capital.
Finally, on the first question in terms of gross margin. We have seen significant improvement in gross margin at more than 54%. A, can you make us understand if this is due to lower pricing and your cost of conversion remains the same. Is this due to that or better product mix? Or has the pricing of the product gone up? What is leading to this such a very nice 54% gross margin?
So, I think we have gross margin is 45%. I just want to ...
Yes, sorry. RM cost is what I meant 54% which was much higher earlier.
Right. So we have been able to -- I mean, raw material such has come down, and we've improved operational efficiencies and product mix. It's a combination -- and prices are -- selling prices have also have not come down [indiscernible] faster than selling prices and [indiscernible] as well on the pharma side. [indiscernible] of raw material .
Okay. My second question is regarding when you say asset turns of 1.1 to 1.2x is this as a percentage of growth CapEx, which you said is 55%, 60% of the total CapEx? Or is this as a percentage of total CapEx. So if it's a INR 1,000 crore CapEx, would you do [indiscernible]?
So it's the total CapEx.
Right. Now even if I assume 17%, 18% or normalized margins for over a longer term that we do, the ROC, if you take like 2, 3, 4 years to ramp up, is very low single or mid-teens, right, or [indiscernible]. So how you do a company of our stature justify that kind of low ROCE for such large CapEx over a longer period of time, Sameer that will be my last question.
If you look at our ROCE in FY '21 and '22, we were like [indiscernible] 16%, right? It has dropped off post that in the last 2, 3 years. Once this full capacity gets utilized and comes on stream in the next couple of years, we can see our ROCE will go up and closer to the high teens -- and margins will go, which is the most important metric and EBITDA margins will go in excess of 20%. But today, we ended quarter 4 over 18%. Historically, we [indiscernible] we will come back to that plus 20% number in the next couple of years once all these capacities start getting utilized.
Sure. So 20% of the overall company, not on the new CapEx -- so new CapEx will be much higher.
That's true.
We have our next question from the line of Ravi Agarwal from Agarwal Investments. .
Sir, my question is in quarter 1 FY '24, Mr. Kuldeep Jain told that we have to invest INR 200 crores in FY -- in this financial year. So how much we have covered, whether we have covered this INR 200 crores. And in which area, we have put this money?
Yes, yes. We have definitely, as we mentioned earlier, INR 200 crores, we have invested almost INR 230 crores this year. Out of this, INR 145 crores we invested in Animal Health business. The balance in [indiscernible] other side CapEx's. .
Okay. So what is the utilization level in this financial year and particularly second half of this financial year, utilization level?
No. See, as I mentioned, this [indiscernible], which is really an ongoing month. But the biggest growth CapEx, which we invest in Animal Health has start giving us revenue in time to [indiscernible]. Sameer has already mentioned, we have started the validation quantities which will take 14 to 18 months commercial .
Overall utilization for pharma business is about [indiscernible] and crop protection business is currently below 70%.
And sir, after FY '24 result at what -- at what time you are hoping that we can achieve up to INR 3,000 crores type of revenue? And whether we can achieve INR 6,000 crores revenue till FY '30?
Yes. Hopefully, before that, I mean target [indiscernible] to do it before. I think next few years we should be going -- coming back to that [indiscernible] 15% run rate. So we should be -- if you can do that in demand. So -- we'll come back in the next 3 to 4 years yes.
Okay. And sir, while -- I have seen that many agro players like [indiscernible] also, they are moving towards pharma side. So whether our approach is also toward -- more towards pharma side than agro side, because -- because in [indiscernible] competition, we are seeing that much opportunity there in the pharma side. And the second thing I have read somewhere else in the financial time that Chinese new [indiscernible] rule will create some type of reluctancy for the U.S. FDA also type of regulated to go over China. So whether we get some type of benefit, I mean Indian industry will get some time of benefit in pharma side?
No, it's a very good question. And actually, it is true. I've heard about the German authorities not wanting to go to China to inspect because of the issue that you mentioned, and it is actually [indiscernible] to other regulatory authorities. Customers and regulatory authorities of the pharmas had a reluctant to go into China. And we're seeing in companies in India, like Hikal will benefit from increased action.
So from the immediate short term, I think the number of inquiries on the Pharma side are increasing rapidly. Crop also, there's a reluctance to move to China for new chemistries and new technologies. They go to China more for generic products and old chemistries. So we will -- we are getting inquiries for new technologies and on package stuff on the crop side. And in the pharma on both API and on CDMO, we are seeing increased traction. And we have a capability for new technologies in the company. So we are sector at [indiscernible], we have 2 verticals as a third vertical in the Animal Health is being built up.
So we have a pretty diversified portfolio. And so when both [indiscernible] start firing on all cylinders, the operating leverage and the margin profile of company will tremendously improve, [indiscernible] which we expect from next year onwards.
Okay. Sir, on the pharma side, are you making API, then are we making intermediate also or directly, we are purchasing intermediate from outside and we are manufacturing API?
No, we mostly -- we make APIs, but we backward integrated many steps inhouse. So what we buy is pretty early on in the raw material space. .
We have our next question from the line of [indiscernible] Management.
Any one-offs we have in the pharma business in this quarter?
No.
Then why are we so not confident of sustaining because we've done these margins consistently from 2015, '16 to 2020, 5 years -- so when some participant had asked that are you confident of sustaining these margins, you are not very confident. So what is the reason for that, sir?
Margins [indiscernible] about the revenue as Manoj mentioned, our quarter 4 is always the strongest quarter, [indiscernible]. So the plant or run at full utilization in quarter 1. So quarter 1, we shut our plants for almost 3 to 4 weeks for annual maintenance in the year, right? [indiscernible] on quarter 2 onwards.
Okay. But these depressed margins that were there in pharma, they have normalized now; agrochemicals, we don't know; but pharma is on track now, right?
That's correct. That you're correct in that.
[Operator Instructions] We have our next question from the line of Sajal Kapoor, shareholder.
A quick question on the validation batches for Annual Health. Would you mind sharing the average ticket size for the shipment of these validation batches and -- and if you could also share the low and the high range, I mean, are we talking about INR 1 crore, INR 2 crore kind of shipments for validation? Or is it kind of in the ballpark of INR 5 crores per validation batch?
Yes. So we don't get into details in terms of each shipment batch values. But each batch, I can tell you, varies depending on the size of the molecule and the size of the ultimate commercial quantities that the customers going to take. So they're -- they're quite -- they're not in a specific range, right? But we don't disclose that.
Right. And the number of products, is it 15%, Anish? Or is it more than 15%? Would you be able to disclose the total number of validation batches across all products that you'll be undertaking over the next 2 years?
It is less than 15%, it's in double digits, but less than 15.
[Operator Instructions] We have our next question from the line of Rohit Nagraj from Centrum Broking.
Just 1 more point I wanted to clarify in terms of CapEx. So you mentioned that this year, we did INR 230 crores of CapEx. I met the number how much was for Animal Health -- and in terms of total CapEx, how much have we invested in the Animal Health? And is there any CapEx which is remaining for the project?
I think we spent about INR 230 crores in CapEx last year, almost INR 140 crores out of that was for the Animal Health, and that is all being spent already. And this balance was for debottlenecking and maintenance CapEx.
Yes. My question is, is there any additional CapEx, which is supposed to be spent on animal health? Or is it completely over now?
Not from a perspective of -- the plant has already started operations. So not from that. But if we need to add at any future point, the [indiscernible] or some new bottlenecking needs to be done at some future date, and we'll invest. But as of now, no.
Right, I mean, so this particular facility is up and running for the commercial production whenever our validation happens.
That's correct.
[Operator Instructions] We have our next question from the line of Yug Mehta from AB Capital.
Two questions. How is the destocking situation on the crop protection business? And what kind of opportunities do we see with global [indiscernible]?
If it is specific to crop protection [indiscernible]? Well, I just had a road show [indiscernible] customers is 2 weeks ago in Europe and U.S. And there's a lot of interest to move a lot of supply chain out of China. It's taking time because these companies are doing a massive restructuring, as you know, -- but there is -- I think a lot of projects will come to India for new chemistries and new technologies. And the future seems quite right for the crop business.
[indiscernible] short-term [indiscernible] in the medium to long term is positive, very positive.
We have our next question from the line of Ravi Shah from Opal Securities.
Sir, I have 3 questions. Sir, the first question is on the Animal Health business. So you had mentioned 4 products. And as for the [indiscernible] are elevated as per as planned right now. So like are the undervaluation [indiscernible] can you guys give some clarity there?
Sorry, you asked -- are we on track for validation? Is that your question -- yes by and large on track, yes, we are.
Okay, sir. And sir, when can you expect to see value [indiscernible] coming from the segment?
Well, I would also consider validation to be value addition. But if you're talking about commercial quantities, as I mentioned earlier that we expect commercial quantities to happen about anywhere between 14 to 18 months post validation. So I would say in the next I would -- in the next 2 years, you'll see the commercial quantities starting to move the needle on this business.
Understood. Sir, 1 more question on the pharma industry. So how is your current industry scenario dynamics look like? And what are you expecting to bring forward to this?
The generic business continues to grow. And yes, the pricing pressure up and down continues and that's the ratio of the business. But the volume growth remains -- and our strategy is to focus on a few APIs and make sure that we are a global cost leader that is constant. But overall, I'll say the traction is good. As someone pointed out earlier that -- and growth in the generic segment, if you see it on a stand-alone basis is healthy. .
Sir, on the price -- last question was on the pharma sale prices. Do you expect the RM prices are here to stay on the RM side?
Currently, they have stabilized. Last 2 quarters, they have stabilized, at least we have visibility for another 1 quarter, they are stable. We are not seeing any increase in raw material prices for pharma. .
[Operator Instructions] We have our next question from the line of Tushar Vasuja from Yogi Capital.
My first question was, how much total CapEx has be done for Animal Health segment?
So we just answered that question, but just to reiterate, we've done about INR 140-odd crores of CapEx.
And another question is how much of our revenue is from repeat customers?
I'm sorry, how much of our revenue is from?
Repeat customers?
In which business?
Overall.
I mean it depends on which segment. If you look at the CDMO business, I mean it's almost 100% is repeat because new [indiscernible] every year. So of close 85%, 90% is repeat. Genetics to keep adding customers on the API still. But again, repeat customers probably [indiscernible] in that range? .
Yes. I'll say more in the region of 75% because the customer is not you have the regulatory approval, they stay with you [indiscernible] new geographies. So 75% is a good number.
We have our next question from the line of Rohit Nagraj from Centrum Broking.
Apologies and hopping on the Animal Health business. So just 1 thing, in terms of any key starting material do we have any dependency from China, particularly on the products which are manufactured in the Animal Health Nutrition Business?
So BC Chemicals, of course, China is there. But what we have done is we have derisked China in terms of developing our own suppliers here from the starting material perspective. So whatever dependence we have on China on raw materials, we always have a dual raw material source. So that's outside of the geographic region of China. So we have diversified that.
And beyond Animal Health nutrition for the Pharma and crop protection, any mall dependency in terms of KSM from China?
So I think on the crop side, we don't buy [indiscernible] materials because that, that were integrated. Even on the pharma side, our strategy in the last few years is the back integrated. So what we buy out of China has come down significantly. And even what we buy out of China, we have multiple sources in China to buy from. So our risk is [indiscernible] and we continue to monitor this on a continuous basis, we use a dependency on China and [indiscernible].
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Sameer Hiremath for closing comments.
Thank you, and thank you, everyone, for joining our quarterly earnings call and for our continued interest in our company. We appreciate your support as we navigate through the challenges of the global business environment.
As we conclude this call, we want to assure you that we are here to address any further questions or concerns. Please feel free to reach out to us or to our Investor Relations partners, strategic growth advisers.
Once again, thank you for your participation, and have a very good evening. Goodbye.
Thank you. On behalf of Hikal Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.