Jubilant Ingrevia Ltd

NSE:JUBLINGREA

Earnings Call Analysis

Jubilant Ingrevia Reports Significant EBITDA Growth

Jubilant Ingrevia reported sequential growth in Q1 FY '25, driven by improvements in Specialty Chemicals, which saw EBITDA rise by 50% YoY. The overall revenue was INR 1,024 crores, slightly down from INR 1,075 crores YoY, mainly due to a drop in Chemical Intermediates. The company’s net debt stood at INR 677 crores. The nutrition segment improved, with a 165% QoQ EBITDA growth. The firm reaffirmed its goal for 3x revenue and 4x EBITDA in five years, targeting 20%-plus EBITDA margins. They also noted the completion of their new FDA-inspected manufacturing facility with zero observations.

Q1 FY '25 Performance Overview

Jubilant Ingrevia's performance in the first quarter of FY '25 shows promising growth, largely driven by its specialty chemicals segment. The company reported steady demand trends in pharmaceuticals, notably reflecting strong volumes in pyridine and diketene derivatives. However, the acetyl segment faced challenges with lower demand linked to paracetamol, indicating a mixed response in different areas of the business.

Specialty Chemicals Traction

The core specialty chemicals business remains robust, with significant volume increases in various key products. The company has established itself as the world's leading player in pyridine and picoline while maintaining a strong market position. The EBITDA margins in this segment were around 20% during the quarter, with aspirations to reach approximately 24-25% as operational efficiencies and product mix improve.

Cost Management Initiatives

Jubilant Ingrevia has launched several cost optimization initiatives, collectively projected to save about INR 120-140 crores annually. Initiatives include digital efficiency programs and lean management practices. The CEO noted that achieving two-thirds of this target in the first quarter reflects a strong trajectory towards enhancing operational effectiveness, thereby contributing positively to the profit margins.

Agrochemical Segment Recovery

The agrochemical sector is showing early signs of recovery, with volumes beginning to stabilize after a period of inventory destocking. While pricing remains under pressure due to global supply excess, there is cautious optimism regarding future demand growth as customer engagement appears to be improving. The performance in this segment is expected to gradually recover, matching the general market trend over the coming quarters.

Nutritional Products Performance

In the nutritional segment, particularly niacinamide, demand remained stable with improving pricing trends noted towards the end of the quarter. However, pricing for choline products remains subdued, indicating room for strategic improvement. The company aims to enhance its margins in this area further as it introduces specialty products, targeting an increase to around 17-18%.

Growth Strategy and Future Guidance

Management reiterated its ambitious growth strategy, dubbed 'Pinnacle 345', aiming for a threefold increase in revenue and fourfold growth in EBITDA within five years, based on the FY '24 income levels. This translates to an expected revenue target of around INR 12,000 to 13,000 crores, with a company-wide EBITDA margin exceeding 20%. The detailed focus on specialty chemicals is poised to contribute significantly towards achieving these goals.

CDMO Business Prospects

The Contract Development and Manufacturing Organization (CDMO) segment is identified as a key growth driver, with year-over-year growth expected to be between 25-30%. Positive feedback from recent customer interactions in Japan and Europe indicates an expanding pipeline of projects and partnerships, particularly in the pharma and semiconductor sectors.

Sustainability and Efficiency Commitments

Jubilant Ingrevia is also enhancing its commitment to sustainability through initiatives aimed at sourcing renewable energy. This underscores the company’s focus on not only improving profitability but also on operational sustainability as part of its long-term vision.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Jubilant Ingrevia's Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pavleen Taneja, Head of Investor Relations, Jubilant Ingrevia Limited. Thank you, and over to you, Mr. Taneja.

[Pavleen Taneja, executive]

Thank you, Darin. Good evening, everyone. Thank you for being with us on our Quarter 1 of Financial Year 2025 Earnings Conference Call of Jubilant Ingrevia Limited.

I would like to remind you that some of the statements made on the call today could be forward-looking in nature. And a detailed disclaimer in this regard has been included in the press release and results presentation that has been shared on our website.

On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman; Mr. Deepak Jain, CEO and Managing Director; and Mr. Arvind Chokhany, Group CFO, Jubilant Bhartia Group.

I now invite Mr. Shyam Bhartia to share his comments. Over to you, sir.

[Shyam Bhartia, executive]

Thank you, Pavleen. A very good evening to everyone. Thank you for joining us on the Quarter 1 of the Financial Year 2025 Earnings Conference Call of Jubilant Ingrevia. We are pleased to announce healthy sequential performance for Q1 on the back of improving business performance of our Specialty Chemical business and positive impact coming from our cost initiatives from the last 3 quarters.

Let me share the overall market update with you. The Pharmaceutical end-use segment continues to witness rising demand trends with healthy volumes placements. We are also glad to share that we have gained significant traction in the regulated markets of North America, Europe and Japan. Visible signs of further improvement in demand of certain products are signaling near-term outlook remaining bouyant while pricing remains steady. However, we are witnessing continuous pressure on acetyl segment, owing to lower demand coming from the paracetamol segment.

The agrochem sector has started to show marginal improvement. While the excess inventory situation is gradually easing out and the volumes have started to move, the prices still remain under pressure due to excess supply of agrochemicals globally. We are hopeful that recovery should continue to happen in the coming quarters.

In nutrition segment, the demand remained steady, in line with our previous 2 quarters. And the prices also moved up marginally towards the end of the quarter, except for choline where the prices remain subdued.

Now let me talk about our business updates. The volume of pyridine and diketene derivatives witnessed a rising trend, while demand for niacinamide and pyrithiones remained steady. In acetyls, we remain focused towards maintaining market share despite challenges being faced due to lower demand, higher freight cost driven by Red Sea issues and a decline in acetic acid prices.

Strong traction continued in our CDMO business, wherein we have started delivery of new orders during the quarter. We are also in advanced stage of discussion for multiple projects in pharma, agro and semiconductor end use.

We are pleased to share that our manufacturing facility at Bharuch has successfully completed its U.S. FDA inspection with zero 483 observations. This GMP-compliant facility is intended for manufacturing of nutraceuticals and dietary active ingredients for human consumption.

Now let me share a few details of our future outlook. We reaffirm our expectation of witnessing improvement in all 3 business segments in FY '25 over FY '24. Like last quarter, our key focus remains customer centricity, ramping up newly commissioned plants, remaining lean and bringing back the margins to normal levels.

We are focused towards keeping the costs in control through our Project Lean and are on track to source renewable energy for our long-term energy requirements, which also underscores our firm commitment towards sustainability and environment.

We continue to see increasing utilization of our newly created plant, and we remain on track with our CapEx plans towards investing in high-potential product categories to deliver on our bold vision of Pinnacle 345, that is, 3x revenue, 4x EBITDA in 5 years.

With this, I now hand it over to Deepak to discuss the businesses in detail.

[Deepak Jain, executive]

Thank you, Mr. Bhartia. A very good evening to all of you. At the outset, I would like to thank you all for joining us today for the Q1 of FY '25 Investor Call of Jubilant Ingrevia Limited.

Let me first take you through the overall market overview for the first quarter of FY 2025. In pharmaceuticals, during the quarter, we witnessed steady demand with good visibility on volumes across segments. Also, volume growth was seen in both pyridine and diketene derivatives. Prices were stable across segments with the uptick in prices in some areas. Paracetamol-driven demand continued to remain under pressure, with customers running their plants at suboptimal capacity.

In agrochemicals -- on the agrochemicals front, demand is gradually coming back. With issues relating to global inventory destocking waning out, complete recovery is expected to be gradual. Pricing pressure continues due to excess supplies from China. However, volumes are gradually recovering in pyridine-based products with prices remaining muted.

In nutrition, overall niacinamide volume remained stable with steady pricing during the quarter. We also witnessed marginal improvement in pricing in the last few weeks. Demand in choline was also stable, but pricing pressure was seen and continued for most part of Q1. We also observed good traction in human nutrition-grade products during the quarter.

We are -- as you know, we have rolled out several new initiatives in the last quarter, in line with our Pinnacle 345 growth road map that we announced in the last investor call. Let me share 7 key highlights to demonstrate the progress on these initiatives.

Number one, our core product platform continued to drive growth and leadership. With significant volume growth in pyridine and picoline on a year-on-year basis, we are now globally #1 player in pyridine and picoline and the only scaled non-Chinese players. Prices are also inching up sequentially in our pyridine and picoline business. In niacinamide, we maintained a leadership position being top 2 in feed grade with steady quarter-on-quarter volume growth. In acetic anhydride, volumes were low as prices were hit due to macro factors, although we maintained our market share in both India and Europe.

Number two, we have improved our revenue share of the specialty and nutrition business to 60% and EBITDA share to 75% in the overall portfolio. Our fine chemicals and microbial products are showing strong year-on-year growth. In CDMO also, inbound queries from pharma, agro and even semiconductor remains strong. Our new product lines in diketene and food-grade choline tartrate -- bitartrate are also showing strong traction.

Number three, we launched our efforts to open up new customer opportunities through road shows in Japan, Europe and the U.S., wherein we met 100-plus customers in Q1 FY '25. We have identified several new leads through these road shows, which we hope to convert into commercial opportunities in the coming quarters. Our persistent efforts on international push has started to yield results. For instance, in the North American region, our revenues doubled up in the last 1 year. And in EU and Japan, also, we steadily grew our revenue on a year-on-year basis.

Number four, we increased focus on ESG, safety and efficiency further in Q1. For instance, we are unlocking our efficiency via capital initiatives such as surge, lean and business excellence. The impact of that is visible in our P&L. During the quarter, we have increased our safety measures by focusing on the 5S culture and achieve zero-incident months. Post signing contracts for Gajraula and Savli facility for renewable energy, our captive renewable energy initiative with O2 is now being extended to our Bharuch facility as well.

Number five. Our long-term CapEx plans are on track with continued investments in new opportunities such as food and cosmetic-grade niacinamide slated for commissioning in Q3 FY '25 and other multipurpose plants in the pipeline. We are glad to share that our diketene plant is running at 80%-plus utilization for [ premium ] products and 50% to 70% utilization for newer products.

Number six. We are also strengthening and expanding our leadership team with the onboarding of our new CFO, Varun Gupta, who has 18-plus years of experience at Unilever. Alongside, there are several new additions in the top leadership team, which are in progress.

And number seven. Our manufacturing facility at Bharuch received U.S. FDA EIR with zero 483 observations. This will help us accelerate our growth further in regulated markets, such as the United States.

Now let me take you through the updates on all our 3 business segments individually as well. In Specialty Chemicals, during the quarter, the Specialty Chemicals segment revenue grew by 18% on a year-on-year basis on account of significant improvement in volumes of fine chemicals and pyridine products on Y-o-Y basis. EBITDA for Specialty Chemicals grew by 50% on a Y-on-Y basis and 28% sequentially on the back of healthy volume uptake and efficiency-led initiatives touching almost 20% EBITDA margins.

Our CDMO business remains on a strong growth trajectory, and our new plants are optimally utilized. Our Microbial Control Solutions business is steady, and products in pyrithiones platforms are well accepted in the market with 80%-plus capacity already booked.

Nutrition & Health Solutions business segment update. During the quarter, revenue for the nutrition business improved sequentially by 13% on account of higher volumes coming from human end use and cosmetic-grade products. EBITDA during the quarter improved 165% quarter-on-quarter and 37% year-on-year basis, mainly on the back of a favorable shift in volume towards food segment products, along with our lean initiatives, optimizing the input costs.

Overall, niacinamide demand remained stable during the quarter, though pricing remained steady. Our newly launched products, food-grade choline chloride and choline bitartrate are gaining good acceptance in the market. Our GMP-compliant facility for food and cosmetic-grade B3 is expected to be commissioned in Q3 FY '25, for which we have also started to receive good interest from customers to book advanced volumes.

In Chemical Intermediates business, revenue for the quarter was lower, driven by marginally lower volumes and muted prices. Ethyl acetate volumes improved on good demand in the export market, whereas acetic anhydride volumes were lower into key end use markets of paracetamol and agrochemicals remaining under pressure. EBITDA during the quarter was impacted on account of lower demand, higher ocean freight due to Red Sea issues and overall realizations remaining subdued. We maintained our market share of acetic anhydride in Europe, wherein we increased our market penetration by acquiring new customers. We also retained our dominant market share for the acetic anhydride in domestic market.

Now let us discuss the overall financials of the company. The overall revenue during the quarter stood at INR 1,024 crores as against INR 1,075 crores in Q1 of FY '24. The revenue was lower mainly due to lower year-on-year revenue in Chemical Intermediates segment. The EBITDA for the quarter stood at INR 119 crores. Sequentially, we improved our overall EBITDA by 18%, largely owing to margin improvement witnessed in Specialty Chemicals and nutrition business segments as well as cost improvement initiatives.

The net debt of the company as on 30th June 2024 was INR 677 crores, and net debt-to-equity ratio was 1.5x on the basis of trailing 12 months EBITDA. The capital expenditure incurred during the quarter was INR 116 crores, which was primarily funded through internal accruals. Net working capital percentage-to-turnover for Q1 FY '25 was lower at 18.6% as against 20% in Q1 FY '24. Number of days of working capital was reduced to 68 as against 73 in Q1 FY '24.

We opted to move to the new tax regime from last quarter onwards, wherein the applicable effective tax rate is now 25% as against tax rate of approximately 35% in the old tax regime. The PAT for the quarter was INR 49 crores as against INR 29 crores in Q4 FY '24.

With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have.

[Operator]

[Operator Instructions] The first question is from the line of Siddharth Gadekar from Equirus.

[Siddharth Gadekar, analyst]

First off, for Specialty Chemical EBITDA side, what has driven the sharp improvement both in terms of margin and absolute EBITDA growth on a Y-o-Y and on a sequential basis?

[Deepak Jain, executive]

Yes, Siddharth. So that's probably the main highlights of this quarter results. A couple of things. On a year-on-year basis, the volumes have increased significantly, and that is the trend which started even in the last quarter, if you look at our last quarter numbers as well, Q4 numbers as well. And even though pricing is slightly lower, but the net impact of that is that EBITDA is improving at an overall level versus last year.

The second thing which has played out here very strongly is the cost initiatives that, I think, I've been talking about for the last 2 quarters now. The full impact of all those cost initiatives is reflecting now in the bottom line quite strongly.

[Siddharth Gadekar, analyst]

Sir, can you quantify the cost impact in this quarter? So we could get a sense of how much of the actual cost savings that will be coming in, in the entire year.

[Deepak Jain, executive]

See, the -- all the initiatives that we have taken on the cost side between -- and then we have put that in our IR presentation as well, between surge, lean, business excellence initiatives and also on the energy side in last quarter, the combined impact of those initiatives on an annualized basis is INR 140 crores to INR 140 crores -- INR 120 crores to INR 140 crores. Obviously, not all of that kicks in immediately. Some of that takes its own time to ramp up. But on an annualized basis, that is the kind of impact we're talking of for all those initiatives.

[Siddharth Gadekar, analyst]

Okay. Got it. And sir, secondly, our unallocated corporate overheads have increased very sharply. Is there any one-offs in that?

[Deepak Jain, executive]

Yes. From last quarter -- from Q4 of last year to Q1 of this year, there is an increase of about INR 8 crores, INR 9 crores. It is on account of some one-off expenses, which were unavoidable in Q1. But we expect our unallocated corporate expenses to stabilized at INR 16 crores to INR 17 crores every quarter from now onwards.

[Siddharth Gadekar, analyst]

Okay. So broadly, we should do anywhere around INR 65 crores, INR 70 crores on an annualized basis. That is how we should look at it, right?

[Deepak Jain, executive]

Yes, INR 60 crores around that number. You're right.

[Operator]

We have the next question from the line of [ Yash Goenka ] from [ Orica Capital Advisors ].

[Unknown Analyst]

[indiscernible]

[Deepak Jain, executive]

[ Yash ], you're not audible.

[Operator]

[ Yash Goenka ], you are audible, sir.

[Unknown Analyst]

[indiscernible]

[Operator]

Sir, since you're not audible, we will move to the next question. [Operator Instructions] We will proceed to the next question, which is from the line of Rohan Gupta from Nuvama.

[Rohan Gupta, analyst]

Sir, first of all, on the Specialty Chemicals, congratulations on a significant improvement. Sir, in your opening remarks, you gave some sense that there is a significant improvement in fine chemicals and also in pyridine. In diketene, sir, you mentioned that the old product is roughly -- utilization is 80% to 90%, and new products is roughly 50% to 70% utilization. Just wanted to get some sense that how much contribution to EBITDA improvement is actually driven by the ramp-up in diketene-based new products and overall utilization level going up?

[Deepak Jain, executive]

Yes. So Rohan, I think it's a combination of all the factors, Rohan. I think if I just talk about our key businesses within Specialty Chemicals versus last year, the pyridine business has seen significant improvement in volumes. And obviously, the cost improvements we have done, a major part of that -- or the pyridine business is a major beneficiary of that because that's one of our biggest products, as I think you know.

On the diketene portfolio, as you would remember, about 1.5 or almost now 2 years back, we had launched Phase 1 of diketene products. Those products are running at 80%-plus utilization level. And the recent products that we have commissioned in March, one of them is already running close to 70% utilization level. The other one, hopefully, will get there in next 3, 4, maximum 6 months.

So there is significant contribution coming from these products in the overall EBITDA improvement. On an incremental basis, while I don't have the number handy, what is the percentage contribution and we can't even disclose that in public domain, but there will be a significant contribution coming from incremental revenues coming from diketene portfolio, apart from what pyridine has contributed.

The third main driver, of course, is the CDMO business, where as compared to last year, particularly on the pharma side, we're getting more traction. We have more products, and obviously, those are high-margin products. So they are also contributing significantly to overall EBITDA increase.

[Rohan Gupta, analyst]

Because -- the question I was asking because of the -- you also mentioned that energy costs where we have done a big saving, and in last 2 years, our energy costs have gone up very sharply because of the unfavorable changes which has happened at the government level. So you mentioned almost at INR 120 crores to INR 125 crores annualized savings from the energy cost itself. So...

[Deepak Jain, executive]

No, no, no, sorry. I didn't say INR 120 crores to INR 125 crores from energy. Rohan, sorry, if -- I didn't mean that. What I said is we have 3, 4 different big initiatives in the company on the cost side, which have been running.

One is the digital program, which we call surge, and we have talked about it in the last 2 calls. It is focused on improving the efficiencies and productivity of our plants through digital interventions as well as improving our supply chain efficiencies, and even on the sales side, it is contributing. So that's one program. The second one is the lean program, which was focused largely on the overhead cost optimization, which we launched almost 3 quarters back. The third one is the ongoing business excellence initiatives that we take in our plants.

The combined effect of all these initiatives is about INR 120 crores to INR 140 crores of annualized savings. Energy will contribute to it, but it's not the only thing in that overall savings bucket.

[Rohan Gupta, analyst]

And out of this, how much of this has already been achieved of INR 120 crores to INR 125 crores annualized?

[Deepak Jain, executive]

I think -- see, as I said, that many of these initiatives or at least some of these initiatives will take time to ramp up. You can -- so if I said, annualized impact is INR 120 crores every quarter, it's at least INR 30 crore-plus kind of impact. I would say, at least in Q1, we hopefully have achieved at least 2/3 of that. And then as we move into the subsequent quarters, we will start to see the full potential impact of those initiatives.

[Rohan Gupta, analyst]

Okay. So at least we can assume safely that INR 20 crores from -- in this current quarter itself has been contributed by the efficiency-led benefit which we have talked?

[Deepak Jain, executive]

Significant part, I would say, right? Exact math, obviously, we should not do on this call, but it has -- as I said in the opening comments also, even Chairman said that in the very first line, the big improvement in profitability has happened on account of, one, specialty portfolio firing; and second, whatever we have done on the cost side.

[Rohan Gupta, analyst]

Sir, on this CDMO, if you can share -- you also mentioned in your opening remarks, almost you have -- in the quarter itself, have met almost 100-plus customers in Japan and other countries as well. The kind of feedback if you can share with us that these are in the CDMO-specific categories or Specialty Chemicals. Or how soon do you think that some of these conversations can get converted into the top line addition?

[Deepak Jain, executive]

Yes. No, so the 100-plus customers that I talked about is not just CDMO, to be very transparent. It's across Japan, U.S. and Europe. We obviously did these road shows and met all our existing key customers of some of our catalog products as well. But at the same time, there are at least, I would say, 1/3 of these customers whom we are calling our key customers. And there, we see opportunities of -- or CDMO kind of opportunities existing.

In fact, in many of those conversations when we met the CXOs or senior executives of these companies, the discussion has been at a fairly strategic level, and we discussed where we can become a long-term partner to them. And obviously, CDMO is one key lever to create that long-term strategic partnership.

We -- and I think I explained in the last quarterly call also, we look at our CDMO business in 3 parts. There is a agro part of it where we are in discussions with all 4 or 5 major innovators and we have specific opportunities we are discussing with them, and one of them is in very advanced stage of negotiations. Hopefully, we should be able to announce it very soon.

But there are at least half a dozen more of such opportunities, which are in various stages. And as you probably would know, these agrochemical opportunities are -- they take time to brew up. But when they happen, they happen as a step function. So that's what we expect.

But in agro, I would say, hopefully, that at least one we should announce soon, and there is another half a dozen, which will hopefully materialize over the course of next year, 1.5 years.

The -- on the pharma side, obviously, it is a lot more segmented versus agrochemicals. There, we start with small volumes in early stages, and then gradually, they ramp up. So it's more steady growth that we are expecting there, and that is an ongoing process. Our CDMO pharma business has grown quite well in the last 3 years also, and we are hoping to accelerate that growth with the wider funnel that we have created, not just through these road shows, but otherwise, also, we have intensified our efforts to engage with pharma customers.

The third part of CDMO business is the semiconductors-related opportunity. I had mentioned in the last quarterly call that we had 4 or 5 opportunities. The good thing is on the back of these road shows, those leads have now become at least 2.5x. We have at least 10 to 12 real leads, which have come up. We have already supplied samples for at least a couple of them. And we are working with our customers to see how to move to the commercial stage of production sooner there.

So that's the -- hopefully, that answers your question, Rohan, but CDMO opportunities do take their time to materialize, but we are, right now, building up the funnel, which will hopefully at least get the ball rolling for next couple of years. And as we move along, we'll continue to build up more opportunities in that funnel.

[Rohan Gupta, analyst]

Okay. And sir, just last bit from my side is the confirmation on the EBITDA margins in Specialty Chemicals, which is roughly 20% in the current quarter. So you were still talking about some more efficiency-led benefits to kick in and the product mix will keep on improving in favor of diketene. So some guidance ballpark number on EBITDA margin for the current year on specialty?

[Deepak Jain, executive]

No. So I think I've been saying it consistently that our Specialty Chemicals business should be at least 20%-plus EBITDA margins in steady state. And as we scale up and as we add more products, not just in diketene but also in other parts of that portfolio, including CDMO opportunities, we hope to take that 20% to closer to 24%, 25%.

Now whether that happens this year or not, that's -- it depends on a lot of factors. The market has to recover fully. Some of the opportunities we are working on, they have to materialize. It's very difficult to ascertain the timing of that right now, whether that will happen in a single year or not. But our aspiration is to keep our Specialty Chemical business at 20%-plus from here onwards.

[Rohan Gupta, analyst]

Okay. And sir, just if I'm allowed just on last remark on your agrochemicals, which you mentioned, the inventory destocking situation seems to be almost in the last stage. How much confidence you have because we're still getting mixed views there on the global agrochemical inventory? So you see that the customers are coming back, or it was just only temporary things, which have just led to some kind of volume recovery and [ it will be ] down further?

[Deepak Jain, executive]

That's a valid question, Rohan. I would say the hope is it's in the last leg because of the reasons you said, at least in our -- some of our product categories, we have seen volumes coming back and customers coming back. And obviously, pyridine is our -- one of our biggest products, as you know. As soon as the volumes come back there, that gives a sense of where the agro market is moving.

Having said that, what we are hearing from our customers and even in these discussions during the road shows, what they are saying is, from a demand perspective, the volumes will continue to come but not as fast and as steeply as everyone was expecting them to be 6 months back. The recovery on the demand side will be gradual and steady is what the anticipation is. Obviously, the challenges now are more acute on the supply side, which are leading to lower prices. And hence, in many of our products also, we had talked about it in the last quarter also, the prices have been muted.

But there, the good news is in the last few months, the prices have not declined further. They have been holding up steady at a lower level versus what they were last year, but they're holding up in the last few months where they are. They're not going any further down.

[Operator]

The next question is from the line of [ Divya Sethi ] from Electrum Portfolio Managers.

[Unknown Analyst]

Yes. Sir, a couple of questions here. Firstly, I wanted to understand in Specialty Chemicals, you mentioned the margin might go up to 24%. So I'm just [indiscernible].

[Operator]

I'm sorry to interrupt, [ Divya ], but the line for you is not very clear. It keeps breaking up in between.

[Unknown Analyst]

Is it better now?

[Operator]

It's slightly better.

[Unknown Analyst]

Yes, I just wanted to understand in the Specialty Chemicals, prices have gone up to 20%. Nutrition has gone up to 12%. So first, [indiscernible] will be 20%-plus forward. Any [indiscernible] nutrition business, how sustainable are these coming 2, 3 years in revenue mix that the company is targeting for this...

[Operator]

I'm sorry to interrupt, [ Divya ], but your line is not clear. I request you to please move to an area with better network.

[Unknown Analyst]

Is it better now?

[Operator]

No, there are a lot words that are going missing, or the audio is not coming through.

[Unknown Analyst]

So can you hear me now?

[Operator]

Yes.

[Unknown Analyst]

Yes. So I wanted to understand, how sustainable our margin in Specialty Chemicals and nutrition business as well. Also any revenue the company is targeting in next 2, 3 in these 2 segments?

[Deepak Jain, executive]

Sorry, [ Divya ], it was very difficult to understand your question because you're going in and out. Can you repeat the question once again, and hopefully, we'll be able to hear you better?

[Unknown Analyst]

Yes. So I just want to understand for Specialty Chemicals and nutrition business, this quarter we did 20%, 12% respectively. So how sustainable are these in the coming 2, 3 years? And revenue mix that the company is targeting in these segments?

[Deepak Jain, executive]

So if I understood your question correctly, you're saying how sustainable are 20% and 12% margins in specialty and nutrition business. Is that the question, [ Divya ]?

[Unknown Analyst]

Yes, yes.

[Deepak Jain, executive]

Okay. No, as I was saying in response to the previous question from Rohan, if markets continue to recover in the agrochemical side and if prices remain stable going forward, we are hoping we'll be able to sustain these margins. In fact, while specialty, as I said, in response to Rohan's question, over the course of next couple of years, we hope specialty margins to move up at least to 23% to 25% of the asset. In -- similarly, in nutrition, particularly with our new plant coming in later this year on cosmetic and food-grade vitamin B3, the margin should move up more sharply, at least on a steady state basis.

Now having said that, as I think you guys -- those of you who have been tracking us in the past as well, at least on the feed side, vitamin B3 side, there is some volatility which exists in the market as and when the bird flu happens. So if you discount for that impact and take this steady state, our vitamin B3 or the general feed segment margin should be at least at 12% to 13%. And with new high-grade products from cosmetic and food grade coming up, the margin should move up from here.

[Unknown Analyst]

Okay. So -- and revenue mix for the...

[Operator]

Sorry to interrupt, ma'am. We request you to please rejoin the queue for further questions. The next question is from the line of Gokul Maheshwari from Awriga Capital Advisors.

[Gokul Maheshwari, analyst]

Yes. So given the logistical challenges which we are facing in terms of exchange rates, et cetera, are you seeing any import substitution benefits, which for our products where imports are reducing and are being preferred by domestic producers, consumers?

[Deepak Jain, executive]

Yes, so Gokul, that's a good question. And I'm hoping we will see those benefits because this whole issue of logistics, while Red Sea has been existing for almost 7, 8 months, the crunch from in terms of materials coming in from China has started to impact everyone only in the last few weeks, at least our business -- in our business.

So we are hoping as -- if that situation doesn't normalize soon, then it will start helping us. And in some case or some products of ours, we have seen advantage of that, where, let's say, Chinese material is taking far longer to reach India, and we have been able to bridge that gap. And in some areas, we have been even able to command some premium on the product because the logistics cost of bringing the products from China has increased, and hence, we had that opportunity to increase the prices.

So we have seen a couple of such examples playing out. Whether that is sustainable or not will depend on how quickly this whole logistics issue gets resolved in terms of container availabilities and the lead time of material coming in from China.

[Gokul Maheshwari, analyst]

Okay. And could you comment on the Chinese competition itself in terms of when they've been very aggressive in the last 12, 18 months? Has that receded? Or that price competition still continues? Or there is some respite coming over there?

[Deepak Jain, executive]

I won't use the word respite, but what I would say is there is more stability in terms of the behavior. As I was saying, the prices on the agrochemical side have been stable for the last few months. So they're not increasing the prices, but at the same time, they're not dropping them as well, so which just makes things slightly, slightly steady, relatively speaking.

On the nutrition business, which I mentioned in my opening remarks as well, we have seen some openness from Chinese players to even increase the prices in the last couple of weeks. Whether that sustains or not, again, we will have to see.

So I'm hoping those are just early signs. And then I think I made this comment in the last quarterly call. If you pull up the financials of some of the listed companies in China, they have been bleeding for a while now. So hopefully, there is an end to it and which is close by.

[Gokul Maheshwari, analyst]

And lastly, just on the CDMO business. I believe it is approximately around INR 200 crores last year. What kind of number you're expecting for the CDMO business in FY '25 and FY '26?

[Deepak Jain, executive]

So Gokul, we never announced the numbers at subsegment level. But as I have been saying, that's a meaningfully large part of our business. The pharma side of it should grow at steady growth rate of at least 20%, 25% every year, if not more. The agro side of it, as I was explaining earlier, is a more lumpy growth because as and when any molecule comes, it comes with big volumes and big revenues. But -- and then obviously, semiconductor is very tiny or not even existing right now in the P&L. But with the opportunities we are getting, those will start to pick up. So it may not contribute too significantly to revenue, but will start building up our pipeline for future years.

So overall, our aspiration is to grow our CDMO business at least at 25% to 30% year-on-year. And then with the kind of opportunities we are seeing in the market for future years, we are hoping that agro and pharma will be able to do that. And as and when semiconductor kicks in, in a bigger way, hopefully, we should be -- top it up with further growth.

[Operator]

The next question is from the line of [ Jatin Damania ] from Svan Investments.

[Unknown Analyst]

Sir, continuing on the Specialty Chemicals front. Now when we are seeing that there is an improvement in the volume, both on the fine chemical as well on the diketene, which are the high-margin business, but when you compare our revenue on the sequential basis, we have seen an almost 9% decline in the revenue. So is it due to pricing, or we are seeing some pressure on the other segment of the volume as well?

[Deepak Jain, executive]

No, [ Jatin ], so that's a good observation. So one, the pricing for most of our specialty segments on a quarter-on-quarter basis have only improved. So it's not driven by the pricing. But having said that, as you can imagine, our Specialty Chemical segment has several products, and just a couple of products volume getting pushed out by a quarter or 2 due to the campaigns of the customers can impact volumes.

So I would say the volume decline or reduction that you are seeing that we're talking about in specialty, it's just a seasonality thing from Q4 to Q1 because traditionally, Q1 has been a lower volume quarter for us vis-à-vis Q4 of previous year. But if I look at from a secular trend perspective, our -- the volumes in most of our segments of Specialty Chemicals have grown in the last 6 months versus what it was, let's say, the previous 6 months or last few quarters.

[Unknown Analyst]

So sir, is it right to assume that definitely because of the couple of campaigning that has been done by the customers, there was a big decline in the volume sequentially, but we'll be able to offset with the offtake by the customers in the subsequent quarter?

[Deepak Jain, executive]

Yes. So that is the hope. Obviously, whether it happens within a single quarter or over the course of the year, that we'll have to see depending on what customers say particularly on the CDMO side. The campaigns are quite lumpy in nature. But at this stage, we are hoping that at an overall level, our Specialty Chemicals segment will see significant volume growth in FY '25 vis-à-vis FY '24.

[Unknown Analyst]

So in terms of the utilization, I mean, did we operate on about 65%, 70% utilization? Or we operated at much higher level?

[Deepak Jain, executive]

See, the utilization levels varied for our older assets versus newer assets. For our older assets, we are operating at probably close to 75% utilization level. The newer assets, obviously, depending on when they came up and which sector we are serving from them, will be at different utilization levels. Like diketene, one of the plants which was created in February-March, is already closing 70%. Another product is also on fast ramp-up and should get there in another 4 to 6 months, as I was saying earlier. The agrochemical plant that we created in January, given the state of agro industry, may take slightly longer to reach higher level of utilization.

So the newer plants will have their ramp. Typically, our experience even in steady state, it takes at least 12 months, if not 18 months to take a plant to 70%-plus utilization levels. In agro, depending on how the market plays out over the next 3 quarters, we'll have to see what the ramp looks like.

[Unknown Analyst]

So sir, the last question is on the nutrition front. Now in this quarter, we clocked an EBITDA of near about 12%. So is it fair to assume that sequential improvement or the year-on-year improvement is largely because of a cost structure and improvement in the product mix because if you look on the volume front and the pricing, it has remained steady across all the vitamin, choline and the food and cosmetics?

[Deepak Jain, executive]

No, so quarter-on-quarter, our nutrition business volumes have increased by almost 14%, 15%. So we are seeing higher volumes as well there. But the bigger impact in that business is happening on account of mix change because traditionally, that business has been dominated by feed-grade products, and gradually, the share of food grade and cosmetic grade is increasing. And as our plant gets commissioned in Q3 on food-grade and cosmetic-grade vitamin B3, as I was explaining earlier, we will see a big impact coming on, on the overall revenue through pricing and EBITDA.

The second impact is what you said is the cost impact. We have been focusing on costs, and as I think -- I don't know whether you know the vitamin B3 is a derivative of pyridine value chain, so like I was explaining, the biggest beneficiary of cost initiatives has been our pyridine business. And as a result, anything downstream coming from that also get benefited through those cost initiatives.

[Operator]

The next question is from the line of [ Ravi Singh ] from [ Cosmic Horizon Capital ].

[Unknown Analyst]

So with the huge shortage of containers globally with the Red Sea crisis and also the inclement weather around South Africa, do you feel that it could lead to a major spike in commodity prices for chemicals like acetic acid, et cetera, something on the lines that we saw during COVID?

[Deepak Jain, executive]

[ Ravi ], very hard to answer that question, and I'm not an expert on that, the correlation between the logistics and commodity prices. But what I can tell you is that Red Sea issue has been happening for almost now 8 months since December last year. You look at the acetic acid price, it has only come down from $430 to $408. So if something like that had to happen, it should have started by now.

[Unknown Analyst]

Right. Makes sense. And finally, sir, you've given this guidance of 3x revenue and 4x EBITDA in 5 years on the FY '24 base. So that kind of gives us a target EBITDA margin of about 13.6-odd percent. But now given the fact that you just mentioned the spec chem, you're expecting to do about 23% to 25% EBITDA margins, and that should be a significant chunk of our business going ahead. So just trying to understand the disconnect here as to why the EBITDA margin guidance for FY '29 is coming to just about 13.6%. Shouldn't it be much higher?

[Deepak Jain, executive]

13.6%, I don't know how you calculated that, [ Ravi ].

[Unknown Analyst]

On the FY '24 base, if I just do a 3x revenue and a 4x EBITDA.

[Deepak Jain, executive]

No, I think -- so yes -- no, EBITDA, he's right, 4x. But [ Ravi ], I think somebody else also had asked a similar question in the last quarterly call. It depends on what the starting EBITDA we are talking about. We had -- when we set up this vision for ourselves, Pinnacle 345, we had a certain view of our steady state EBITDA on a revenue of about INR 4,500 crores at that time that was visible.

Now obviously, FY '24 numbers, because of the markets, turned out to be what they are, and the EBITDA also took a hit more than what we had anticipated at the time of 345. But without getting into the nitty-gritties of what 3x and 4x and 5x mean, what our aspiration is, from a steady-state INR 4,500 crore top line company to at least INR 13,000 crores -- INR 12,000 crores to INR 13,000 crores-plus of revenue and 20%-plus EBITDA margin on the overall company level.

And that 20%-plus EBITDA margin, as I was explaining earlier, we hope or/and aspire, and we also have a bottom-up plan, as I explained in the last call when I talked about Pinnacle 345. Within that, the Specialty Chemical business, we can see that to reach 23% to 25%. The nutrition business, which like somebody was asking, currently at 12%, 13%, but with specialty products added to it, hopefully getting to 17%, 18%-plus margin profile.

And our acetyl business, the long-term average should be 10% to 12%. So if you take a weighted average of that, you will get to that 20% kind of company-level EBITDA margin, which is what we aspire to get to.

[Operator]

The next question is from the line of Siddharth Gadekar from Equirus.

[Siddharth Gadekar, analyst]

Sir, you had mentioned in one of your previous comments that we are in advanced stage with -- advanced stages in talks to the agrochemical customer. Broadly for that CapEx, is that CapEx already done or we will have to do incremental CapEx for that project that we are looking to tie up?

[Deepak Jain, executive]

Sorry, can you repeat the question? Which project you're talking about?

[Siddharth Gadekar, analyst]

Sir, you have just mentioned in one of the comments that we are in advanced stages with the agrochemical customer for the contract. Just wanted to understand, is that from an existing [ group of plants ] or we will have to do a new CapEx for that?

[Deepak Jain, executive]

No. So the one which I mentioned, we -- as I -- I think in the last quarter also, I said that we commissioned a plant in January this year, agrochemical plant. They can do both intermediates and actives. At this stage, we are still evaluating it, and we have invested significantly in that plant. Our plan right now is to do the modifications in that plant and take some incremental CapEx to be able to serve that demand. Having said that, we are still going through the valuation process. And obviously, first objective is to first sign that contract and then work out the remaining details in terms of how and where we will service from.

[Siddharth Gadekar, analyst]

Okay. Secondly, sir, in UP, if we look at the presentation, we have mentioned we have around 483 acres (sic) [ 463 acres ] of land. How much of that is highly utilized? And how much of that is unutilized?

[Deepak Jain, executive]

Sorry, which plant are you talking about?

[Siddharth Gadekar, analyst]

Sir, the Gajraula land, we have around 483 acres (sic) [ 463 acres ] in Gajraula. So how much of that land is currently utilized? And how much is lying idle currently?

[Deepak Jain, executive]

No, so I think it's a big plant. And I think we have significant proportion of that, which is still available for us to do future expansion. So particularly on the fine chemical front, our multipurpose plants, we have plans to expand there. At this stage, I think I can safely say whatever expansion plans we have thought about so far for next 5 years can be served from our Gajraula and Bharuch facilities together.

[Operator]

Ladies and gentlemen, that would be our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen. Members of the management, if you have any closing comments?

[Deepak Jain, executive]

Thank you, everyone.

[Pavleen Taneja, executive]

Yes. We thank you all for joining on this call today. We hope we have been able to answer your questions. For further clarification, we would request you to contact me. And thank you once again for your interest in Jubilant Ingrevia Limited.

[Operator]

Thank you. On behalf of Jubilant Ingrevia Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.