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IOL Chemicals and Pharmaceuticals Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 Earnings Conference Call of IOL Chemicals and Pharmaceuticals Limited. From the management, we have Mr. Pardeep Khanna, Chief Financial Officer; Mr. Abhay Raj Singh, Senior VP and Company Secretary; and Mr. Rakesh Mahajan Adviser, Finance and Strategic. We also have the 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.
Thank you, Mike. Good afternoon, everyone. We welcome you to the Fourth Quarter and Financial Year '24 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 of the company.
Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected at the soonest. I hope you all have gone through the earnings presentation which are available on the stock exchange and the website. I now hand over the call to Mr. Abhay Raj Singh for his opening comments. Over to you, Abhay, sir.
Thank you, Darshanji. And good afternoon, everyone. First of all, I would like to thank you all for joining us for Q4 and FY '24 Earnings Call of IOL Chemicals and Pharmaceuticals. I hope you all have gone through the results and the investor presentation available on our website as well as the exchanges. Before we dive into the financial performance for Q4 and FY '24 and open of the floor for the Q&A session, we would like to briefly touch upon the economic and industry outlook.
The global economy is poised for a positive trajectory with major election uncertainties resolved and the likelihood of central banks in the west implementing rate cuts in the later part of 2024. As for the latest IMF projections, the world economy is anticipated to sustain a growth rate of 3.2% throughout 2024 and 2025, with advanced economies experiencing a gradual acceleration from 1.6% in 2023 to 1.8% in 2025.
Also, global inflation is forecasted to exhibit a steady decline dipping from 6.8% in 2023 to 4.5% in 2025. This advanced economy is expected to realign with their inflation targets more safely compared to emerging market and developing economies. These dynamics collectively underscore a promising outlook for global economic resurgence, though India is said to remain the fastest-growing among major economies in 2024 with growth projections of 6.8% and 6.5% for 2024 and 2025, respectively.
The nation is poised to benefit from enhanced capital flows, accumulating private investment and a resurgence in exports. Moreover, an anticipated increase in the number of middle to high-income households with augmented disposable income is anticipated to propel overall private consumer expenditure growth ahead.
In regard to medicine, global is spending on medicine using list prices grew by 35% over the past few years and is forecast to increase by 38% through 2028, while global use of medicines grew by 14% over the past few years and a further 12% increase is expected through 2028, bringing annual use to 3.8 trillion defined daily dose as per IQVIA.
In the fourth quarter of the fiscal year 2024, the Indian pharmaceutical sector experienced traction, particularly in the U.S. and the most international markets. Growth in the U.S. market was fueled by a stable pricing, lower competition and introduction of specialty and niche products that's why we strategically subdued performance in the domestic market during Q4. The growth was primarily driven by chronic therapy WTI price hike and launch of new products.
However, Q4 '24 was -- '24 business pricing pressure due to excess market capacity and elevated freight costs is stemming from the Red Sea crisis, despite demand being intact. We continue to expect tailwinds growing into Indian API players over the longer horizon through improvement in realization. In regard to Specialty Chemical, the persistent slowdown in demand seen in Q4 '24, and now it is seemed to be a bit more prolonged.
In Q4 '24, this segment showed subdued performance amidst inventory overhang and poor [ export ]. It is expected that this segment could witness a sequential and gradual recovery by end of this year, but long-term structure growth narrative remains intact for this sector. With this update, I now hand over the call to my colleague, Mr. Pardeep Khanna, who will bring you about our financial performance for the fourth quarter and full year 2024.
Thank you, Abhay. Good evening, everyone, and thank you for joining us today to discuss our performance for the fourth quarter and year ended 31st March 2024. I will take you through stand-alone financial highlights for the fourth quarter followed by the full year 2024. The total income of the company in the fourth quarter of financial year '24 stood at INR 511 crores as against INR 596 crores in the corresponding quarter of the financial year '23 and INR 529 crores in the previous quarter ended December '23.
The EBITDA for the quarter was INR 58 crores as against INR 104 crores in the corresponding quarter of financial year '23 and INR 53 crores in the previous quarter ended December '23. EBITDA margin for the quarter declined by 620 basis point to 11.3% as against 17.5% in the corresponding quarter of financial year '23. However, slightly improved by 130 basis point as compared to previous quarter ended December '23. Net profit in fourth quarter of financial year '24 was INR 28 crores as against INR 65 crores in the corresponding quarter and INR 23 crores in the previous quarter ended December '23.
With easing of input costs on a year-to-year basis, EBIT margin for the Pharmaceutical segment was at 13.22% in quarter 4 financial year '24. While EBIT margin for the Specialty Chemical segment was 0.48% in quarter 4 of financial year '24. For the full year -- financial year '24, total income stood at INR 2,163 crores as against INR 2,243 crores in financial year '23. EBITDA for the financial year '24 stands at INR 262 crores as against INR 252 crores in financial year '23. EBITDA margin improved marginally by 90 basis points to 12.1% as against 11.2% in financial year '23.
And the net profit for the financial year '24 stood at INR 135 crores as against INR 140 crores in financial year '23. However, the net profit margin improved slightly by 10 basis points. The export for the financial year '24 grew by 7% to INR 679 crores as compared to INR 634 crores in financial year '23. The CapEx for the financial year '24 was INR 246 crores as against INR 239 crores in financial year '23. So with this, we open the floor for a question-answer session. Thank you very much.
[Operator Instructions] We have the first question from the line of [ Divya Agarwal from Vicon Family Office ].
Hello? Am I audible?
Yes. You are.
So just wanted to know about the ibuprofen prices and the trends in the ibuprofen. So in terms of demand, supply and the capacity in the international as well as the domestic market?
As regarding ibuprofen prices, it has remained stable as per -- as the last quarter and last to last quarter also. It has remained stable, and demand is also at optimum level. And our capacity for that ibuprofen is running at 85% to 90%. In the global, the demand is also optimum.
So maybe in terms of the prices of ibuprofen, can you help me with that?
The prices have remained stable as compared to this quarter, previous quarter and last quarter also.
The prices raises definite $10 to $11.
We have the next question from the line of Aman Jain from Arihant Capital.
So I had a couple of questions. So first one was, what is the volume growth that we have seen in the non-ibuprofen segment for the full year?
Yes. Thank you, Mr. Jain. In our non-ibuprofen, our volume has been increased in terms of capacity from 10% to 15% for most of the products, including paracetamol and metformin and clopidogrel also.
Okay, sure. And sir, second one was, what was the export mix in the year as compared to FY '23 in the non-ibuprofen segment only?
Mr. Aman Jain, can you hear us?
Yes. Hello? Should I repeat my questions?
Is the management able to hear us?
Yes, yes. Now we can. There was certain [Technical Difficulty]. Now we can.
Mr. Jain, if you could repeat your question once more?
Yes, sir. Sir, I just wanted to understand what was the export mix in the non-ibuprofen segment in the year, when compared to FY '23?
You must know that we have got some approvals in the European market and other regulatory market starting from the last April 2023. And our export for metformin were substantially increased by around 30 to around 60% from the last years. Similarly, ibupara has been increased around 10% from the last year, increased by 10%.
Okay, sir. And just also wanted to understand, so there has been a major decline on year-on-year basis in the EBIT margin in the Specialty and API segment. So can you just throw some light on that? And what was the major reason behind that?
There were very mismatch of import prices with the final prices of chemicals, especially ethyl acetate. The volatility wise the Chinese player in raw material also, this alcohol and acetic acid was very much during the year, which impacted mismatch -- impacted and mismatching the delta also. But from the last 1 quarter, 1.5 quarters, the prices have now remained stable, and we hope that this sector will remain pulpy for the company in upcoming 2, 3 quarters.
We have the next question from the line of Chirag [indiscernible]
[Foreign Language] gabapentin [Foreign Language]
Thank you, Mr. Chirag. As regard to gabapentin, in that we have already informed to the stock changes and I think that management has decided to change that project into the multiproject plant. And for gabapentin, we will produce only for the [ template ] base, not for a dedicated plant. And already we have converted that plant into the multiproject plant.
We have the next question from the line of Jainam Ghelani from Svan Investments.
So I can see that on quarter-on-quarter basis and year-on-year basis, our other expenses have increased considerably. So sir, could you give some color on this, please?
Yes. There were other expenses include selling and distribution expenses also. And we showed this also. Due to the Red Sea crisis, the prices of [indiscernible] has been increased substantially along with the insurance cost also for our export purpose, export and import both. That increase -- that got increased expenses [Technical Difficulty] ultimately resulted in our combined other expenses.
Okay. And sir, could you mention the volume and value growth for APIs year-on-year basis, please?
Yes. Last year, our ibuprofen was around 75% capacity. But this financial year, which has just concluded, we have increased the capacity 10% to 85%. For paracetamol, which we were running at 80%, 81% last year, but this year, we have achieved around 95% capacity. And for metformin, the capacity is running at 95%, again, for metformin also. And even for fenofibrate, our capacity was earlier around 20%, 25%. Now it is running at 45% to 50%.
Okay. But sir, what I wanted to understand was that what was our volume growth during the year overall? And what was the pricing decline for the whole year?
Yes. The volume growth I just explained to you for product wise -- in product wise also. But the prices, especially paracetamol prices were reduced by more than 35% to 40% during the year. Similarly prices of metformin also reduced by 20%, 22% during this financial year. Even ethyl acetate prices were also down by around 10%. But all these are correspondent with the reduction in [ raw material ] prices also.
We have the next question from the line of Rohan from Turtle Capital.
Hello, am I audible?
Rohan, your voice is not very clearly audible. If you could go off the speaker phone and go on the handset mode ones.
Sure. Now am I audible?
Not very clear. Could you speak a little more louder?
Yes, yes. Surely. Am I audible right now?
Yes, you are a bit. Is the management able to hear you?
Yes, a little bit.
Yes. So my question is, if we can see that our balance sheet size has increased and that is due to the investment in [indiscernible] and fixed asset. So with the current capacity and CapEx, what can be the scenario 3 years out with the sales turn the top line. Where can we see the top line in 3 years? And what could be the margin scenario?
As you know that we are on an average increase near about INR 200 crores on CapEx from the last 2 years. And in this last FY '24, we have incurred huge amount on the infrastructure automatization and even land also. But our growth CapEx will remain around more than 40%, 45%. And we hope that this will get resulted into the increase in the top line also. And with automatization, infrastructure improvement, environmental system installation, our bottom line will be also increased in upcoming 2, 3 years essentially.
So can you give me a ballpark figure about what could our top line look like in FY '28 or '29, 4, 5 years out there?
Maybe from the existing products, it may be around increase by 12% to 13% and I'm not sure, but maybe more than INR 3,000 crores.
Okay. More than INR 3,000 crores. And what could be the margins?
We are expecting- our target is around 14% to 15% minimum margin for EBITDA margins.
We have the next question from the line of [ Tara Kaur from Funstar Capital ].
Hello?
Ms. Kaur, your audio is a bit low. If you could go off the speaker phone and come closer to the microphone?
Yes. Am I now audible?
It's much better.
Okay. Sir, I have a question related to the guidance for FY '25, like what is your guidance for EBITDA?
Ma'am, as you know that last year, this FY '24, we were able to touch at 12% EBITDA margins, which was -- maybe exceptional deal in terms of mismatch of input and output prices. But we are internally expecting again around 14% to 15%.
In current market situation, we expect a slight increase in the top and bottom line. And we hope EBITDA should increase and it should be between 12% to 15% in the financial year '25.
Okay. And what will be your guidance for sustainable like gross margin you can expect for FY '25?
Ma'am, it may be around 20%, 25%.
Okay. And for CapEx, sir?
CapEx on an average of around INR 150 crores to INR 200 crores, all from the internal accruals.
And can you also give guidance for R&D for FY '25?
R&D?
Yes, sir.
We believe our R&D expenses is around 7% to 8% of API segment. And it will be increased to -- maybe increase by 1% or 2% because we recently hired many skilled persons also. And as of now, number of R&D people work out around 125 persons.
We have the next question from the line of Mandira from [indiscernible] Investor.
Hello? Am I audible?
Yes, Mandira. Your audio is a little low, though, if you could come -- go off the speaker phone and come closer to the microphone.
Now?
This is much better. Yes, please go ahead.
Sir, I believe that you were planning to launch sitagliptin. And by when do you plan to launch it?
Ma'am, we have developed sitagliptin in our R&D. It is validated and approved by Indian patent also. But as of now, we have not planned for exact date. It maybe -- it may not be in this coming -- current financial year, but just not able to freeze for this financial year, maybe from next year or sometime or more than that. But we are not just able to freeze it.
And I have a couple of questions. How much is the increase in exports you are expecting for non-ibuprofen product in FY '25?
As of now, the export portion depend on the different products and different other things. And it contributes around 17% to 18% of our existing non-ibu segment. We hope with our recent approvals and various client visits to our plant and various approvals which we have got recently, it may be 25% to 30% of non-ibu segment.
Okay. And what is the revenue and margin guidance for Specialty Chemical segment for this year?
It will remain the single digit. Not -- you can say, not in double digit, but it will remain in the single digit.
We have the next question from the line of Manish Maheshwari from Work Family Office.
Sir, this Barnala unit that we have got an approval for, what is the kind of revenue that we are envisaging for this -- I mean, for the same unit that we have got an approval for? And when is it that the revenue will start flowing in the income statement in our books?
Approval for which product?
For Barnala -- recent approval that came in for Barnala unit from Brazil ?
All our plants and all units are located at Barnala itself since very beginning. We are not getting the exact question which you want to clarify?
So Mr. Manish, we are having 10 manufacturing facilities, all are located at the same locations. But because we are having the multiple plants for different, different products, so all these put together are the 10, but are situated at the single complex and the campus. So I think you are talking about the ANVISA announcement we provided just recently.
Correct, right, right, yes.
ANVISA approved all our 10 plants, though all are located in the single location. So existing revenue is coming from the same. The difference is that -- and these are -- all these products also got approved from the ANVISA, Brazil. So we are now able to sell through and explore the Brazilian market for these non-ibuprofen market -- products as well, okay?
Okay. So that's already flowing in the business, right?
Current balance sheet, yes. That's correct. But this is approval for the Brazilian -- this approval comes from Brazilian market for the non-ibuprofen products.
Can you help us with some guidance for FY '25 in terms of revenue, profitability, EBITDA, et cetera? So what is it that we are envisaging in terms of...
Considering the current market situation, what we can get the guidance for the next financial year in regard to the top line, is around something 10% to 12% upside. And EBITDA, we are expecting...
10% to 12% revenue?
Yes, revenue around 10% to 12% growth from this '24 revenue. And EBITDA, we are hopeful that we can perform at 12% to 15% EBITDA number.
Okay. And how about profit?
This is I'm talking about the company as a whole.
Yes. So you have given revenue and EBITDA. I'm talking of PAT as well. You have a guidance -- can you also guide for PAT?
You must study our balance sheet, we have not any debt in the books of -- our books.
No, no, sir. PAT, I'm saying PAT, profit after tax.
Yes, yes, I'm coming there -- I'm coming there. And it is after EBITDA, only the depreciation and tax, which is tax at the rate of 25%, and depreciation. There is no other obligation, and it will be our PAT, which will remain around 7% to 8%. Last year, it is around 6%.
And sir, what is there is -- what will be the contribution of non-ibuprofen?
So non-ibuprofen is for this financial year, this is around something 20% of the API portfolio.
20% of the API portfolio.
20% of the API portfolio.
And sir, as far as ibuprofen market is concerned, I mean, as -- for H1 FY '25 things are going to be a little bit subdued and lackluster, right? But by and large, what is it that -- I mean, how do we -- how are we navigating through the current time? And how are we --- I mean, how confident are we that this ibuprofen market will eventually catch up?
Manish, can you repeat your question? There was some disturbance in the voice.
Sir, what is the outlook? So let me rephrase my question. What is the outlook on the ibuprofen business?
Ibuprofen has a stable demand also with 3% to 4% global growth rate. And as we are running at 85% domestic utilization earlier and our revenue will somehow remain 85% to 95% capacity or maybe 92% or 93% for IOL. And globally, it is growth rate of 3% to 4% per annum.
[Operator Instructions] We have the next question from on the line of [ Deep Chitalia from 9 Rays Equisearch ].
Yes, sir. Sir, the guidance which you have given of 10% to 12% in FY '25, sir, what will be the contribution from ibu business? And what will be the contribution from non-ibu business? That's A. And sir, since the paracetamol capacity is operating at 95% utilization, so sir, will it create any hindrance for volume growth next year?
Your first question, our revenue growth of 10% to 12% contribute as a company as a whole, both pharma and chemical also. As we have -- recent last year, we have added 1 product in chemical sector that is acetic anhydride. It will also contribute to some share in our revenue. But as percentage-wise, we think around 10% to 12% growth in ibuprofen, around 40% to 45% in this API non-ibuprofen business, and balance will be in chemical also.
Okay, sir. Understood. And second question. Shall I repeat?
Can you repeat? Yes.
Sir, the paracetamol capacity is operating at 95% utilization, as you said. So sir, do we have enough capacity for additional volume growth this year? Or will it create any hindrance?
No, we are already running at 95% capacity. And we are thinking about extending of this paracetamol also in the financial year.
Okay, sir. So what will be the capacity increase in paracetamol segment in terms of percentage?
It will be around 5 digits -- it will be in 5 digits.
We have the next question from the line of [ Tara Kaur from Funstar Capital ].
Sir, my question is what is your current export and domestic mix for non-ibu products for this quarter?
Your voice is not clear. Please repeat again.
Ms. Kaur, if you can kindly go off the speaker phone and speak through the microphone.
Am I now audible?
It's still a bit hazy. If you could come closer to the microphone?
Yes. Am I now audible?
Yes, you are now. Please go ahead.
Okay. So what is the current export and domestic mix for non-ibu products for this quarter?
I think, Ma'am, we have already discussed. It is around 80% domestic and 20% in export in non-ibu segment, which we are expecting to increase in this financial year by maybe more than 30%, 40%.
All right. And how much is the effect on margin due to increase in logistic costs from Red Sea crisis?
Our export in the regulatory market will give us some edge on the profitability also.
Okay. Sir, as we are half way through Q1 FY '25, is there any improvement which we have observed in API and Specialty Chemical segment until now, to which you would like to highlight?
Chemical is working as a stable business as of now in this period. And we are getting good queries and number of queries and visits from domestic and export for non-ibu segment also.
We have the next question from the line of Amit Mehendale from RoboCapital.
Am I audible?
Yes, you are. Please go ahead.
Okay. Sir, I was looking at operating cash flow for the year, which is quite healthy. And -- so I guess I had some questions around how do we plan to use -- I mean, if I look at current average, there is about INR 250 crores cash flow prior to working capital. And if I look out 2, 3 years out, that will be about INR 700 crores, INR 750 crores, INR 800 crores type of a number or even more. So what is the plan to use that cash? I mean some color on CapEx and whether -- how does that tie up with the INR 3,000 crore aspiration that we have. The revenue aspiration?
As regard to the cash balance, you may go through them while you go through the cash flow. We have incurred some money on the CapEx. And out of that, some CapEx was incurred on the land also. And the land for our future extension at some new locations around -- in the Punjab itself. And we are in the process of acquiring more land in the same location in -- which is around 30 kilometers from our existing location. After getting a whole land, which we have thinking about, there may be increase in the revenue by setting up new plants and that money will be used for increasing CapEx at new location.
And that's factored when we consider the INR 3,000 crores aspiration, right? I mean that CapEx, which is instrumental in nurturing that business?
No, INR 3,000 crores in 2028 is from the existing products only.
[indiscernible] new CapEx and new plants that will essentially be over and above INR 3,000 crores.
Absolutely. Those are INR 3,000 crores what we are looking for from the existing facilities at the current location for the existing products.
That was the last question. I now hand the conference over to Mr. Abhay for closing comments. Please go ahead.
This is Rakesh Mahajan. Thank you very much for joining us today. It was pleasure discussing our fourth quarter and full year FY 2024 performance. The company continue its focus to diversify revenue and geographical base. Going ahead, our pharma non-ibu segment will embark on export to various countries post recent approvals and certifications in key regulated markets, which will further boost our revenue and profitability.
Moreover, we are optimistic of recovery in the Specialty Chemical segment this year also. Thank you once again for attending the call. Look forward to keep interacting with you all in time to come. Thank you very much. Have a nice day. Thank you.
Thank you. On behalf of IOL Chemicals and Pharmaceuticals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.