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IOL Chemicals and Pharmaceuticals Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of IOL Chemicals and Pharmaceuticals Limited. From the management, we have Mr. Pardeep Khanna, Chief Financial Officer; Mr. Abhay Raj Singh, VP and Company Secretary; and Mr. Rakesh Mahajan, Adviser, Finance and Strategy. We also have an Investor Relations team from Adfactors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Darshan Mankad from Adfactors PR for opening remarks. Thank you, and over to you, sir.
Thank you, Michelle. Good afternoon, everyone. We 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 risks 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 to soonest.
I now hand over the call to Mr. Rakesh Mahajan for opening remarks. Over to you, sir.
Thank you, Darshan. Good afternoon, everyone. Hope my voice is audible. It's a pleasure to welcome you all to the fourth quarter and full year earnings call for the financial year 2023. Thank you very much for attending this call. Hope you all have gone through our quarterly results and investor presentations, 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 for the forum for the question-and-answer session.
The FY '23 was a roller coaster 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 costs. Despite global pessimism, the Indian economy has shown resilience and a strong growth trajectory following robust retail consumption growth and private sector spending.
The focus of the government on the infrastructure development post-COVID and the revival of the service sector has put the economy in good shape to withstand global uncertainties. The World Bank has objected FY '23-'24 GDP growth for India at 6.3%. The supply chain destruction created by the resurgence of COVID cases in China during quarter 2 and quarter 3 of FY '23 has subsided and this is evident from the correction in the prices of key starting materials that India imports from China.
The API manufacturer in India faced severe margin pressure earlier with significant correction in the raw material prices, the worst seems to be over for the sector as the domestic API manufacturers resumed their investments and increased their capacity gradually to capitalize on the robust domestic demand.
There is a concerted effort by the stakeholders, including Pharma majors and government through PLA schemes to reduce the API import from China and the current sentiment around capacity additions while domestic players make us believe that over the next 5 to 7 years, the country is likely to reduce dependence on China to some extent.
With the company's focus on expanding the non- ibuprofen business intensifying and the backward integration process initiated for many days, we are confident of improvement in operational efficiencies in the time to come.
In the Specialty Chemicals space, India is a fast-growing consumption market. During our last engagement, we did mention that the chemicals' raw material prices are going to stabilize. And that the margin for this segment has bottomed out. We are happy to have positive EBIT margin for this quarter in the chemical section.
With this update, I now hand over the call to my colleague, Mr. Pardeep, who will brief you about our financial performance for the quarter. Thanks.
Thank you, Mr. Mahajan. Good afternoon, everyone, and thank you all for joining us today to discuss our performance for the fourth quarter ended 31 March '23. I will take you through financial highlights for the fourth quarter.
The total income of the company in quarter 4 of financial year stood at INR 596 cr as against INR 579 cr in the corresponding quarter of the last year and INR 530 cr in the previous quarter ended December '22. EBITDA for the quarter was INR 104.5 cr as against INR 50 cr in the corresponding quarter of the last year. And INR 49.7 cr in the quarter 3 of financial year '22-'23. EBITDA margin for the quarter improved to 17.5% as against 9.4% in the previous quarter and 8.6% on a year-to-year basis.
Net profit in the last quarter was INR 65.3 cr as against INR 27.7 cr in the corresponding quarter of the last year and INR 24.2 cr in the third quarter of financial year '22-'23. EBIT margin for the Specialty Chemicals segment was at 5% compared to minus 2.2% in the corresponding period of the last year and minus 6.5% in the previous quarter.
The EBITDA margin for the Pharmaceutical segment too improved to 21.7% from 13.5% in the corresponding period of the last year and 11.5% in the quarter 3 of financial year '23.
Also, during the last quarter, the exports were also improved. The company made exports of INR 634 cr as compared to INR 546 cr in the last year.
With this, we open the forum for a question-answer session. Thank you very much.
[Operator Instructions] The first question is from the line of Unnati Jadhav from Sharekhan.
Unnati here from Sharekhan. Just 1 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 it sustainable in the medium term?
Thank you for asking this question. Basically, you have asked 2 questions. The 1 question for the chemical sector's profit and the 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. And also the energy cost -- I mean, raw material cost also reduced to some extent. So -- and with respect to the sustainability, we assume and we consider that anything in the API business, around 15% to 17%, 18% is the very much sustainable.
And relating to the chemical performance. Because the chemical performance has performed better in this -- because of the better raw material cost in the Q3, the raw material cost has started softening from the Q3 and better utilizations also. So these are the major reasons for the chemical sectors to perform better this quarter.
So do you believe that -- I mean, there has been a fluctuation that could be observed in your margins in the last 2 years. So how do you believe the new paracetamol capacity and new filings -- DMF filings and the product, will it be possible for you to maintain this kind of EBITDA margin trajectory going forward? Or it will be fluctuating in nature?
So we believe that we will very much be able to maintain this EBITDA margin around 15% to 16%. And regarding the volatility, the volatility was not IOL specific. This has been the industry specific in the last year. And because we are non-ibup sectors for the company is also improving and picking up. And our filings -- DMF filing has increased in the last year. So there are more likelihood this profitability will be maintaining and better -- will be going better slightly in the next year.
The next question is from the line of Neelam Punjabi from Perpetuity Ventures.
First of all, congratulations for some good set of numbers. My first question is on the ibuprofen business. So as I see the number has -- I mean the ibuprofen revenues have been -- have grown quite significantly during the quarter at about INR 250 crores, which is -- so I just wanted to understand that how much of this growth has been volume-driven and how much is the value-driven?
As regard to this ibuprofen revenue, the prime revenue coming from the capacity utilization. The demand, which was earlier bottomed out to 60% to 70% of capacity utilization around 2, 3 quarters ago, it increased to 85% to 90% now.
Okay. So the capacity utilization is at 85% to 90% currently?
Right, yes.
And was there any improvement in the ibuprofen prices during the quarter?
It is almost stable from the last 2, you can say, 2 quarters.
Got it. Understood. Secondly, my question is on the other APIs, non-ibuprofen APIs. As I see the growth has been low -- in high single digit during the quarter Y-o-Y. So could you just let me know why is the growth slower now? And what are we anticipating in terms of other API growth over the next couple of years?
In the non-ibu section, we have added 1 product that is paracetamol, the capacity of which was increased from 1,800 TPA to 3,600 TPA. That was in the quarter ended March '23. So the full capacity was not available during that quarter. We hope that from the next quarter, incremental growth will be double digit. And now after getting the European approvals for paracetamol, we are expecting more revenue from the regulated market, maybe after 2 quarters or 3 quarters.
Okay. That was my next question. So that -- given that you got CEP approval for Europe, how much would be the realization difference in the regulated market versus our current domestic market for paracetamol?
As per industry norms, it is increased maybe by 15% to 20%, maybe.
And this is not a standard answer because this also depends from product-to-product basis, customer-to-customer basis. But on an average, we can say around 20% to 25% better realization is always there relating to the exports in the regulated market.
Understood. Okay. Lastly, on the gross margins, I see that the gross margin has gone up quite significantly on a quarter-to-quarter basis. So is this gross margin number of 35.7% sustainable now?
We are expecting that it must be sustainable, and we will try our best to maintain -- at least maintain it and try to improve it also.
Got it. Okay. Just 1 last question. What would be our CapEx target for FY '24 and '25?
It is around INR 150 cr to INR 200 cr.
Per year or both put together -- 2 years?
For the year, '23-'24.
Okay. And FY '25?
And in fact, this year, we clocked the CapEx of INR 220 crores. So our average is around INR 150 crores to INR 200 crores on a year-on-year basis. This is what we have designed and planned.
Got it. And this last year's CapEx of INR 220 crores, was it largely for the paracetamol plant upgradation? Or did we do some other investments as well?
No, this is for other investment also, including the land, warehousing and boilers and some other capital expenditures, ETP also.
The next question is from the line of Dhaval Shah from Girik Capital.
Great numbers. 2 questions from my side. First will be, how much will be your revenue currently coming from the regulatory markets versus the others? And my second question is on your -- 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 table position in the paracetamol market the way you have done in ibuprofen? Yes, these are my 2 questions.
Thank you, Dhaval. As regard to our regulated markets, as of now, out of total export, around 40% of our revenue sharing is exclusively from the regulated market. And the balance is in Southeastern Asian country, MENA country and Latin American countries.
Sorry, sir, come again.
Around 40% is from the regulated markets. And balance from the other Latin American countries, Southeastern and MENA countries.
As regards to paracetamol, we have just started our journey in the paracetamol with a small capacity of 1,800 and then increased to 3,600. But our prime focus is to going backward integration for the paracetamol. So as regard to the competition and other things, it will take some more time to how we stand ourselves.
But our focus is to first, backwardly integrated -- fully backwardly integrated to the paracetamol. And then we will -- after getting certain efficiencies, we may increase the capacity. And then we will be able to define the market share of the paracetamol as compared to the ibuprofen.
So by backward integration, you mean manufacturing PAP, which you've already developed successfully.
Yes. We have already developed Para Amino Phenol in-house and consuming for production of paracetamol regularly.
Okay. So sir, for this 3,600, how much PAP is required? What is the ratio?
That is internal, you can say, but it is fully -- we are not buying from outside.
Okay, okay. And sir, who are the other paracetamol players in India?
There are quite a lot of players like Thomson, Meghmani and lots of players are there in the paracetamol industry.
Got it. Got it. And this will be completely export -- It will be used for export, the entire paracetamol, it will be sold domestically also?
We have just started getting the approvals, like around 2 to 3 days back we got the approval from Europe. Initially, primarily we are selling in domestically. But after getting the regulatory approval from other regulatory markets, we will be able to export them.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Just again on paracetamol, how much will be the -- let's say global requirement in terms of tonnes?
The global requirement, actually, we have not mapped so far. So in fact, this number is not readily available with us. But I think we guess it must be something around 6 lakhs MTP annually -- 6 lakhs to 7 lakhs MTPA.
Okay. So we are still a very small player in terms...
Yes. So that just was in the response to the earlier question, Rakeshji told we had just started our journey in the paracetamol. And considering the responses from the market and the backward integration, so our focus will be on the backward integrating the paracetamol to the 2, 3 level back. And after that, we will be increasing -- considering to increase this paracetamol to a sizable number. But there is a huge potential considering the overall global requirement.
With this backward integration, just to get a perspective, like incremental EBITDA per tonne or gross contribution per tonne, how much would that increase for paracetamol?
It will be better than other peers, but it is not a forum to disclose these numbers.
See, we will be coming out with the appropriate disclosures at the appropriate time. But over the call, it is very difficult to discuss all these internal things. But our efficiency must be increasing in all aspects.
Fair point. And on ibuprofen side, how has been the inventory in the channel, not specific for IOL, but at the industry level?
As IOL specific, we can talk about -- we don't keep inventories too long, hardly 15 days must be there.
15 days to 30 days.
15 days to 30 days inventory, we like to keep. But industry-specific, this is company-specific policy, so we can't comment on it.
The next question is from the line of Sanjay Gupta, an Individual Investor.
Hello sir. First of all, congratulations for the good numbers posted by the company. My simple question is, can you just give me an idea of the projections for the next year in terms of turnover and PBT?
Sanjayji, actually, as in terms of the guidance for the coming year, 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 31 March '23.
Yes. Correct.
And your last quarter seems to be a 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?
We hope so, and we will definitely try for maintaining this or even improvising the same -- the performance of the last quarter in the next quarters also.
Okay. Okay. Any headwinds which you like, the challenges which the company may face in the coming financial year?
Sanjayji, we don't foresee any, but -- I mean, there can be the geopolitical situations we don't know and we can't comment on those -- emergence of geopolitical situations. But with regards to the product we are, with regard to the market we are, we don't foresee any specified headwinds.
Okay. I was following -- I have been following your company for the last 3, 4 years. I remember 2 years back, there was a plant in Germany, which started -- and the production of that plant affected the performance of our company also, IOL. Can you please highlight the -- now what is the scenario there, what about that German plant? Is it in operations now? Or what is the status now?
The BASF has announced in 2019 that they are going to set up 1 plant for ibuprofen -- their plant in Germany. After 2019, they have not announced any official announcement that any plant has been started or operationalized so far. So we don't know about the exact position because they have not officially announced anything about that plant after 2019.
Okay. Any more capacity or any such capacity which you can foresee to be coming up in China?
No, no, China is not coming with any fresh capacity as far as our knowledge because they acquired our Iso Butyl Benzene, which is -- India is the only supplier. They are not able to produce Iso Butyl Benzene there.
The next question is from the line of Sheikh Mohammad Ayaz, an Individual Investor.
Congratulations for the excellent results. I have a few questions. Like -- we have got approval Sartan drugs screen type of manufacturing process. So any update on that process, Sartan drugs?
Now we have got patent for that process from Indian patent. And we are working on -- after getting the approval, we are working internally in the R&D and other systems. And then the appropriate time, we will come out with decisions when we are going to start or not going to start, but we got the patent approvals from Indian patents.
Okay. So you told you got such margins by better utilization of capacity. But when I see the Chemicals segment, there is 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?
So Sheikh, as we said that we got the better utilization that was specifically for the API. Relating to the Chemicals segment, the performance has got better because of softening in the prices of the raw material and the better management of the raw material. So that was the major criteria for the Chemicals sector to become more profitable.
Also 6 months, what we have got REACH certificate for export in the European market.
Yes. So our export also increased with the better realizations.
Okay. Okay. Sir, you already talked about the export, when I see the investor presentations, there was no data of domestic and export business of Q4 FY '23 quarter. So can you provide that data, particularly for -- actual data of Q4 FY '23?
We will try to incorporate that figures in the next presentation also.
Okay. Okay. Sir, another question is -- and when I see the result year-on-year, I see that Pharma segment has improved very good. But when I see the Chemical business, it is the only business, which we are little worried, because the previous year, FY '22, the profit was INR 59 crores. And this quarter, the profit is only INR 19 crores. So what are the future of the Chemical segment, which is I'm worried about?
We have done well in fourth quarter in Chemicals. The high cost inventory we had cleared in the third quarter. The prices of both Ethyl as well as acetic acid is important in the chemical business. Now prices of acetic acid are stable and Ethyl Acetate prices are also stable. And this gives us comfort and profitability will improve.
Also, I will -- earlier I have mentioned that we have REACH certificate for export of Ethyl Acetate to Europe. So now we are sending shipment to Europe also. It will also add contribution in the Ethyl margin.
Okay, sir. So we can expect good margins from -- good profit and margin from the Chemicals segment. Am I right?
Yes. Yes.
Last question from my side. I heard many times the incidence of fire occurring in different companies' plants. So what are -- how are we safe in terms of fire safety?
We have done everything related to the safety of our plant, our manpower, our material and everything. And regularly, we got inspected from the third parties on a voluntary basis. And every time we get the good report from the inspecting authorities. And we are also ISO approval for that factor also. Even our insurance people also regularly inspecting the sites. And we incorporate everything available for the safety of our plant in this manpower.
All the facilities are 100% insured.
So basically, this is the question can be answered in another way that the prevention is the only way out to remove this -- to prevent this sort of situations, emergencies. For that, we are having very strict norms and we are following that.
Also, we have safety department. We have also a fire tender in the plant.
Sir sorry for asking another, only last question. Any regulatory authority of inspection in the near term for Pharma?
Around 3 months back.
I'm asking nearby in future.
It's a regular practice. And maybe in June or July, we may again go for the inspection of our plant.
The next question is from the line of [indiscernible] from Niveshaay.
My first question is, how is the demand for ibuprofen, paracetamol and metformin?
Paracetamol, metformin and ibuprofen. See, 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 3 products.
Okay. And my second question is -- so we are seeing good demand. So is it sustainable or onetime demand all over Pharma segment?
This is normal and sustainable demand.
There is a follow-up question from the line of Neelam Punjabi from Perpetuity Ventures.
Could you give an update on the acetic anhydride plant, which we were setting up for backward integration?
Yes. Neelamji, that plant is -- we are working on that. And I think within this quarter, we will commercialize the same.
Got it. Okay. 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 the price -- the PLI scheme was open, then at that time, we had not any plan to set up the PAP [indiscernible] in-house. The scheme was already closed. We are trying with the Ministry to get it registered in that scheme. But till date, we have not got the approvals from them.
Got it. Okay. My next question is on USFDA inspection on our other API unit. So when are we expecting the same?
We have already filed a DMF for all the non-ibu products to the U.S. authorities. But we can't fix any date when they will -- going to visit us. But already 3 years hasn't passed -- in October '22, they can inspect our facility at any time.
But we don't have any official information in this regard.
And because they are inspecting only now those units which have life threatening risk.
Okay. Sir, as I understand correctly, if we are waiting for this USFDA inspection to start exporting our other APIs in terms of paracetamol, metformin sector to the U.S. market. Is my understanding correct?
See, only for the U.S. and directly exporting the API, but otherwise, all these products are -- we have approval for the Europe and other countries too. And Moreover, our API are being used by the formulations company and that the formulating doses are being exported to the U.S. also.
Okay. Sir, my next question is on -- it's a bookkeeping question. I see that the intangible assets under development in our balance sheet has increased from INR 3 crores last year to INR 8 crores this year. What is the reason behind it?
That is -- we are -- the company is implementing SAP in the company and that amount is representing the amount -- intangible assets -- to the licensing and other things.
Okay. And secondly, this -- our finance cost for the year was INR 16 crores. However, our borrowings are very less about -- it was about INR 80 crores, INR 85 crores, right? So what was the reason for this high finance cost?
That is the use of working capital facilities.
Also due to a nonfund-based working capital facilities, the charges are included in the financial costs.
Okay. Got it. And last year, receivable days have gone up to about 83 days in FY '23. And this used to be at about 50, 55 days during FY '20, '21. So what was the reason behind it? And are we expecting normalization of this number going forward?
Yes, it is due to our new products, which we are going to stabilize in the market. So more credit to be given to establish these products in the market. Now it is normalized. And I think onwards, it will remain the same.
Okay. So if this remain at this 80, 85 days or 50, 55 days is the normal level? I mean, what's the normal level for receivables for us?
I think a normal level of our company is 80 days.
Got it. Okay. Understood. Just 1 last question on metformin. So how is the pricing scenario currently? And was the pricing of -- pricing trend of BCDA input prices, has the profitability for our metformin business improved?
Profitability in case for metformin has been improved in the fourth quarter. The prices of metformin in the market is stable, and raw material cost is also softening. So we are doing well in the metformin.
The next question is from the line of Vijay, an individual investor.
[Foreign Language]
[Foreign Language]
The next question is from the line of Vignesh Iyer from Sequent Investments.
Congratulations sir on good set of numbers. I've got 2 questions from my side. First one, can you sir guide us on a sustainable segmental EBITDA margin or EBITDA per kg as in case for paracetamol, if you have any internal working for the year FY '24? And second question is what on CapEx are we expecting to commission in FY '24?
So Vigneshji, sustainable sector-wise, you are talking about the EBITDA margin?
Segmental EBITDA.
As a sustainable base, we understand something around 15% -- 12% to 15%, 15%, 16%, 17% is the higher side for the API. And anything between the single digit is good for the Chemical sector.
And relating to the CapEx for the coming year, we have targeted -- or we have the plan for around INR 200 crores for the CapEx in FY '23 and '24.
And any of this CapEx commissioning? And I mean any CapEx done earlier good commission in this year? Any facility?
So acetic anhydride will come up in this financial year, which was done for the last year. Mostly CapEx was incurred during the last year -- most of the part of the CapEx.
The next question is from the line of Niharika from Equitas Investments.
I want to understand the demand scenario for Ethyl Acetate as of now. How is the demand for that?
The demand of Ethyl Acetate is you can say stable from the last 2, 3 quarters, and it is sustainable demand.
And how are the prices for Ethyl Acetate and acetic acid?
I think it is ranging between INR 80 to INR 85.
For Ethyl Acetate and INR 40 -- around INR 40 in acetic acid.
Okay. And for the backward integration, which we talked about paracetamol. So once we crack that, will we 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 best -- only company in the world, which is backwardly integrated.
Okay. And are we planning to sell PAP and all the other backward integrated chemicals to the outside parties also? Or will it only be for captive consumption?
As of now, whatever the PAP is being manufactured by us is fully utilized for captive purposes as of now. But ongoing basis, if we will be having any surplus, then definitely we can consider.
Okay. But why aren't we focusing on increasing the capacity of PAP if we are able to kind of...
We are not focusing on increasing the PAP capacity. The PAP capacity will be increased -- will be synchronized with the overall capacity of the paracetamol.
There is a follow-up question from the line of Dhaval Shah from Girik Capital.
Sir, this -- you mentioned about raw material price softening for metformin. So that will be -- you referred to DCDA, am I correct?
Yes.
Okay. And is China still the only source for DCDA?
Mostly yes.
Okay. So is anyone domestically trying to make it? Or you see there is some other geographies from where...
I think our major window has started acting the plant for DCDA, which may become after 2 or 3 years.
Okay. So still we are dependent on China?
Yes.
Understood. Okay. Okay. And sir, on the -- what guidance would you give for the key APIs on the volume growth. Because, so if I understand correctly, FY '23, the entire growth was volume driven for your key APIs. Am I correct?
Yes.
Okay. Okay. And going forward, over next 1 year, how do you see that market growing for you?
Demand is sustainable, but our focus is now to from domestic to export, where our revenue and [indiscernible].
Moreover, we are also trying to increase our non-ibu business. Because the non-ibu business, we are getting the CEP in the export also. So with getting more and more CEP, we will be more able to export the non-ibu products.
Correct. And this has been our long-term strategy as well to increase the non-ibu. Correct. yes. So on the [indiscernible], like in ibu and non-ibu, what sort of volume growth would you see for FY '24?
In the ibu or non-ibu or cummulatively?
Both the businesses, ibu and non-ibu.
In the non-ibu, we are considering around 15% growth for this year.
Okay. And ibu?
Ibu, actually we are -- demand is sustainable, and we are utilizing around 85% to 90% of our capacity.
The next question is from the line of Rakesh, an individual investor.
Sir, my -- I have my question in 2 parts. If I look at our company's growth over last decade or so, we have grown about on an average, 16%, 17% every year. Now going ahead, we are adding more CapEx as you indicated in the range of INR 200 crores. Last year, we did INR 200 crores plus. We are also sort of backward integrating more. We are also focusing on selling in developed markets where the realizations are higher.
So I have 2 questions. If you look out 3 to 5 years, what's the aspiration in terms of -- would we be able to get closer to what we have done in the past? That's number one. And number two, over last quarter, our operating margin was about 16%. I'm taking out other income. So if we are backward integrating, we are exporting more. Why do you still think that our normalized margin would only remain in that 15%, 16% range? Would you not expect it to go higher? Those are 2 questions from me.
So thank you, Rakesh, for asking this question. On being a conservative side, we answered -- we've given this guidance because this is not a forward-looking statement also. So we don't want to be very aggressive on this number. But there are many reasons, they are of very much likelihood that we can perform better than what we are seeing -- what we are projecting.
Ladies and gentlemen, this would be the last question for today, which is from the line of Vidhi Shah, an individual investor.
So my question is regarding the CapEx, the INR 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 2 years, like I think in FY '23, it has been INR 200 crores. The previous year, it was INR 100 crores and then next year, you're also stating INR 200 crores. So just trying to understand.
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 CapEx.
Okay. So the franchises have gone up from -- gone up by INR 200 crores has been, I think, commercialized? So the entire is growth CapEx.
There is a small amount, around INR 50 crores, you can consider against the maintenance.
Okay. And out of that, the rest INR 150 crores, some of it would be for backward integration also?
Backward integration, procuring the land, also improving the ETP, all these things.
Enhancing the capacities.
Okay. And this capital work in progress, which shows INR 80 crores, so what would be the break up of that?
Primarily is acetic anhydride.
It is?
Acetic anhydride plant.
Okay. Okay. So that is the raw material that is backward integration for our Chemicals business?
Paracetamol.
Okay, for paracetamol.
Paracetamol and acetyl chloride that ultimately consume for the ibuprofen. So acetic anhydride is the raw material for paracetamol as well as ibuprofen.
Okay. Okay. So the Pharma side. Okay. And INR 200 crores, which you're planning for the CapEx, that would be for what?
It will be mix of chemicals and pharma. also for backward integration of some non-ibu products.
Okay. Okay. So roughly, in your industry, how long does it take for the CapEx to commercialize?
In API, it took 2 to -- more than 2 years. But in chemical, after rushing the plant, it can start immediately.
Okay. Okay. And for Ethyl Acetate, so that forms the major chunk of your chemical business, right?
Yes.
Primarily, it is Ethyl Acetate only in the revenue.
Okay. Okay. So can we assume that the cycle has now like hit the bottom and now it is going to go up? like considering raw material...
I think it was already bottomed out in the last quarter, maybe in December quarter.
Yes. Okay. So now you don't see it -- don't see any threats in that.
Nothing as of.
Sorry?
We are hoping for that.
You are correct, Vidhi. Your understanding is correct.
Thank you. Ladies and gentlemen, as that was the last question for today. I would now like to hand the conference over to Mr. Abhay Raj Singh, VP and Company Secretary, for closing comments. Over to you, sir.
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 [indiscernible]. However, the underperformance of the sector and the volatility was shortly with improved domestic demand in both the sectors and better managed raw material prices, we hope that the next financial year will bring more value additions for the investors and shareholders alike.
Thank you so much once again for attending this call. Have a nice day.
Thank you, sir. On behalf of IOL Chemicals and Pharmaceuticals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.