Jubilant Ingrevia Ltd
NSE:JUBLINGREA
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Jubilant Ingrevia Ltd
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Ladies and gentlemen, good day, and welcome to the Jubilant Ingrevia Limited Q4 and FY '24 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.
Thank you, Robin. Good evening, everyone. Thank you for being with us on our Quarter 4 and Financial Year 2024 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. Deepak Jain, CEO and Managing Director; Mr. Prakash Chandra Bisht, CFO, Jubilant Ingrevia; Mr. Arvind Chokhany, Group CFO, Jubilant Bhartia Group. I now invite Mr. Shyam Bhartia to share his comments. Over to you, sir.
A very good evening to everyone. Thank you for joining us on Q4 and financial year 2024 Earnings Conference Call of Jubilant Ingrevia Limited. We are pleased to announce stable business performance for Q4 amidst the continued challenging market conditions. We are also glad to share that the Board has recommended a final dividend of 250% at INR 2.5 per equity share of face value of INR 1 each for the year FY 2024.
This shall result in cash outflow of INR 39.8 crores during the year. The company has already declared an interim dividend of 250%, that is INR 2.5 per equity share of INR 1 each and the total dividend for FY '24 works out to 500%, that is INR 5 per equity share of INR 1 each amounting to INR 79.6 crores of cash outflow.
We are pleased to share that during the quarter, we have commissioned our multipurpose agro active and intermediate plant capacity at Bharuch facility. This would strengthen our capacity and capability to produce forward integrated, high potential agro actives and intermediates.
In addition to that we have also commissioned a plant for new diketene derivatives in Gajraula factory, which will further enhance our diketene product portfolio.
Commissioning of these plants is in line with our strategy to further strengthening our specialty chemicals product portfolio through long-term contractual arrangements with our customers. The agrochemical sector, which faced dual challenge of overstocking of inventories and oversupply from China during the year is yet to bounce back to normalcy.
While the excess inventory situation is expected to ease out and volumes are likely to move, the prices may still remain under pressure due to excess supply of agrochemicals globally. We expect this sector may still take 1 or 2 more quarters to recover fully and get back to normal.
In the Pharmaceutical end-use segment, we witnessed stable demand trends with healthy volumes placements during the quarter. Early signs of further improvement in demand in certain products are signaling near-term outlook remaining buoyant with significant price recovery yet to take place.
In Nutrition segment, the demand is steady. However, the prices remained under pressure on excess supplies from China. With the onset of new financial year FY '25, we expect all three segments to improve sequentially over FY '24. Our key focus in FY '25 will be on customer centricity, ramping up newly commissioned plants, remaining lean and bringing back the margins to normal levels.
We are firm on track towards investing in high potential product categories and expand our product portfolio to our ongoing modular CapEx plan of INR 2,000 crores to deliver structured growth and drive us towards our newly created vision of Pinnacle 345, that is 3x revenue, 4x EBITDA, in 5 years.
With this, I now hand over to Deepak to discuss about the business in detail.
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 Q4 and FY '24 investor call of Jubilant Ingrevia Limited. Let me now take you through the overall business and financial performance along with key highlights of the company for the fourth quarter of FY '24.
At an overall level, the previous quarter was yet again a challenging quarter for global and Indian chemical industries, primarily driven by muted demand in key and new segments such as agrochemical, along with persistent pricing pressure across the segments.
Despite the above challenges, we could keep our financial performance largely stable versus previous quarters, driven by our continuous customer engagement and multiple cost savings initiatives.
In Specialty Chemicals, we witnessed higher volumes coming from pyridine building blocks and fine chemicals, including diketene wherein CDMO remain the key driver for our future growth.
In Nutrition & Health Solutions, we witnessed higher sales volume coming from niacinamide, wherein pricing remained muted. In Chemical Intermediates business segment, acetic anhydride volume was stable, while the pricing remained soft on account of lower demand from paracetamol and agrochemical end use in both India and European markets.
During the quarter, we were also impacted due to higher freight costs led by Red Sea crisis, which correspondingly dented our overall margins. With the help of our project lean initiatives, we successfully kept our costs under control and brought our working capital down to 18% of sales through focused inventory optimization and other measures.
We have also signed an agreement with O2 Renewables for captive renewable energy sourcing for our Gajraula and Savli facilities. We expect the share of renewables to increase to 30% plus in the next 12 to 15 months.
Under our digital initiatives focused on productivity, yield and energy cost optimization through digital search program, we have completed multiple projects to bring efficiency across the manufacturing locations. Our committed CapEx plans stayed on track. During the last quarter, we commissioned our multipurpose agro active and intermediate plant at Bharuch facility.
In addition to that, we also commissioned a plant for new diketene derivatives in Gajraula facility. Our GMP compliant facility for food and cosmetic grade vitamin B3 is expected to be commissioned in Q3 FY '25.
Our CapEx execution track records demonstrates our commitment and strategy to structurally stand and shift our business mix towards value-added specialty intermediates. This is also visible in specialty and nutrition share of revenue continuing its upward traction at 60% in quarter 4 FY '24 compared to 54% in Q3 FY '24.
We are also under process of devising our further expansion plants for coming years in light of numerous opportunities where we are seeing increased and accelerated traction from our customers.
Now let me take you through the updates on all of our 3 business segments individually. Starting with Specialty Chemicals. During the quarter, the Specialty Chemicals segment grew by 30% quarter-on-quarter and also saw a marginal growth versus last year.
We witnessed continued improvement in demand from pharma end use segments wherein volumes remain strong and prices are yet to recover. Whereas in agriculture -- agrochemical end use segment, destocking phenomenon is expected to be at a fag-end. However, we are witnessing volumes going gradually. Agrochemical oversupply from China is still a concern, which is keeping the prices muted.
Even the fine chemicals and CDMO demand from North America and Europe region grew during the quarter, while domestic market was relatively soft. Our diketene plant is currently operating at 60% to 70% utilization, wherein we witnessed sizable volume traction during the quarter. In CDMO, we continue to have a high visibility on future growth pipeline. We are in advanced stages of discussions to close a few long-term contracts across agro and pharma sectors.
We also continue to see new inquiries in semiconductors and electronic chemicals too. Our Microbial Control solutions business is witnessing a good momentum to new products launched in pyrithiones platform. This will support accelerated growth going forward.
As mentioned earlier, during the quarter, we also commissioned our multipurpose agro active intermediate plant in Bharuch and diketene and derivatives plant in Gajraula.
Now moving on to the Nutrition & Health Solutions business segment. During the quarter, the Nutrition business grew both on quarter-on-quarter and year-on-year basis, largely driven by higher volumes. Vitamin demand remained stable though competitive pressure was witnessed across the product range. Our view is that customer seems to be in a buying mode now, but unwilling to accept higher pricing. Despite that, we could increase our global market share in vitamin B3 in FY '24.
We also launched new product range in the segment with introduction of liquid choline chloride and choline bitartrate. We also witnessed volume for food and cosmetics grade registering significant growth in Q4 FY '24 sequentially and in FY '24.
I would also like to share that our GMP compliance facility for food and cosmetic grade niacinamide is expected to be commissioned in Q3 FY '25, for which we have also started receiving good traction towards volume bookings. The decline in segmental EBITDA was warranted mainly due to benign pricing led by Chinese competition.
Now let me throw some light on our chemical intermediates business as well. Revenue for the quarter and the year were impacted on account of lower prices of acetic anhydride, which were primarily driven by lower demand from end-use industries and lower price of underlying key raw materials, that is acetic acid. During the year, continued lower utilizations in downstream industries, including agrochemicals and paracetamol constrained further volume pickup in the segment.
During the quarter, Red Sea challenges also resulted in overall increase in ocean freight, which impacted our sales and margins during the quarter. We continue to maintain our dominant market share for acetic anhydride in domestic markets, while increased our share in the European market. We also implemented world class digital initiatives at our global manufacturing facilities to improve our operational efficiencies in the business segments.
During the quarter gone by, we received 99% plus biogenic content rating for green acetic acid. This achievement would enable us to push our sales to global food giants in coming years.
Now let us discuss the overall financials of the company. The overall revenue during the quarter stood at INR 1,074 crores as against INR 966 crores in Q3 FY '24. Revenue was higher mainly due to higher volumes coming from Specialty Chemicals and Nutrition segments. The revenue for FY '24 was INR 4,136 crores against revenue of INR 4,773 crores in FY '23. The EBITDA for the quarter stood at INR 101 crores as against INR 104 crores in Q3 FY '24.
EBITDA was almost flat, mainly on account of benign pricing in Nutrition segment led by Chinese competition and also lower realization in acetic anhydride. The EBITDA for FY '24 was INR 456 crores against an EBITDA of INR 580 crores in FY '23. The capital expenditure incurred during the quarter was INR 143 crores. And for the FY 2024, it was INR 572 crores.
We expect to spend the remaining approximately 1/3 of originally announced CapEx of INR 2,000 crores in FY '25, which will mainly be incurred towards food and cosmetic grade niacinamide plant, new food grade, choline plant and expansion of GMP facility.
The net debt of the company as on 31st March 2024, was INR 653 crores, and net debt to EBITDA ratio was at 1.43x. The increase of INR 341 crores in net debt during the FY '24 is led by INR 572 crores of CapEx. Despite high CapEx we restricted borrowings and actually decreased the net debt by INR 48 crores during the second half of financial year to focused working capital optimization led by active management of inventories and other measures driven by lean initiatives.
Net working capital percentage to turnover for Q4 FY '24 was sequentially lower at 18%. During the quarter, we opted to move to the new tax regime from FY '24 onwards, whereby the applicable statutory tax rate shall only be 25.17% as against the statutory tax rate of 34.94% in the old tax regime. However, the tax expense for the quarter and the year includes a onetime transitional write-off of opening brought forward MAT credit amounting to INR 12.56 crores.
The expected ETR from FY '25 onwards will be in the range of 25% to 26%. The PAT for the quarter was INR 29 crores after adjusting for MAT credit write-off as against INR 39 crores in Q3 FY '24, while the PAT for FY '24 was INR 183 crores against a PAT of INR 308 crores in FY '23.
As we move forward, I would also like to share an update on a few strategic initiatives undertaken in recent times. As I mentioned in the previous quarter, the leadership team of Jubilant Ingrevia has designed a bold 5-year growth strategy. We have set out a new growth roadmap for ourselves called Pinnacle 345, that is 3x revenue growth, 4x EBITDA growth, in 5 years. Over the last few months, we did a bottom-up assessment of each of our businesses and product platforms and crafted a detailed strategy for each business.
The Pinnacle 345 growth road map is deeply rooted in our core strengths, i.e., customer centricity, world-class operations, innovation, ESG leadership and people focus. It also leverages the opportunity that is coming into Indian chemicals industry on the back of 5 megatrends, namely: Supply chain diversification, domestic demand scale up, value-added products acceleration, digitization and ESG focus.
You can find more details on Pinnacle 345 and our BU-wise priorities in our latest investor presentation. We have already started the execution of this strategy across our BUs and have also created a program management office to ensure a rigorous tracking mechanism. Over the coming quarters, we will continue to share more updates on Pinnacle 345, and hopefully, you will also start to see it's impact on various aspects of our business, including new customer partnerships, new CapEx and several other initiatives in coming quarters.
With this, I would like to conclude our opening remarks. We'll now be happy to address any questions that you may have. Thank you.
[Operator Instructions] The first question comes from the line of Jinal Sheth from Awriga Capital Advisors.
Yes. Thank you for the elaborative and detailed inputs and -- of the business. Just wanted to catch a point that obviously, the new capacity has come on stream. And what you also mentioned is that we're currently operating at 60%, 70% utilization. Just wanted your thoughts on the fact that currently, we are at -- a demand environment is a bit uncertain. So is this something that comes from our customer base that we've kind of expanded to that extent? Some thoughts out there would be useful.
Yes, Jinal, you're absolutely right. So we -- as we spoke in the previous calls as well, we have invested heavily in the last 2 years and created new capacity in our businesses such as diketene, acetic anhydride, agrochemicals, et cetera. And because these are new product lines, except for acetic anhydride, which we have been doing for almost 4 decades, in most of these situations, we have found new customers, we are selling these products to.
And across these plants, the capacity utilization is already touching almost 60% plus even in this environment. And as I mentioned in my opening remarks, as we get more volume traction, we are seeing that capacity utilization is only increasing month-on-month and quarter-on-quarter.
Okay. And secondly, is it true that the inventory correction -- are we seeing that in China as well, where capacities are probably going off? Any comments on that?
Those are two different points, Jinal, from the destocking perspective, as I mentioned in the past and even today, and we are seeing that in our business as well as hearing it from all our customers. The destocking seems to be at the fag end after last 18 months of -- or last 18 full months. From a supply perspective, China, of course, at least in agrochemicals from whatever we understand, has created a lot of capacity, and we still think there is excess capacity there.
Okay. Just lastly, a connected question to your first -- the first question that I raised was that in regards to the capacity expansion that, would that kind of lead to say suboptimal returns given the demand environment and obviously considered the way to put it is the pricing is not optimal at this stage. Is that a fair way to see that?
So I think, Jinal, for the areas where we have put up capacity, most of those are, number one, specialty areas, high-margin products. Number two, our -- these are products -- if you look at our business mix, only 20% of our business -- 20%, 25% of our business is linked to agrochemicals, remaining 70%, 75% business is in pharma, in cosmetics, in nutrition. We are getting good volume traction as the numbers also tell, if you look at our business by BUs.
That -- the volumes which are coming from there are helping us improve the capacity utilization. Of course, there is a pricing pressure in some product lines, but I don't think that will change our overall return profile, if you look at it from a multi-year perspective. Of course, a few quarters, pressure will remain. But at least from the overall recovery value as well as returns from those assets where we have invested we -- to still stay bullish, and we think the NPV or the IRR of these products on a multiyear basis will be at par with what we had projected.
The next question is from the line of Rohit Nagraj from Centrum Broking.
One question in terms of the different segments and product lines that we have. So what has been the competitive scenario from China? Because as you had also mentioned in your opening remarks that there has been a competition. So which are all areas where we are seeing that the competition is coming. And which and all area where we will have -- still have a pricing par once the normalcy returns from the inventory destocking and the other global phenomena, which are affecting the business?
Yes, Rohit, I'll just add to what I said in response to Jinal's question, most of the pressure is in the agrochemical segment. Obviously, there is competition in nutrition and pharma segments as well from China, but the level of pressure there is not as acute as it is in agrochemicals. Just as an example, in some of the agrochemical product lines, not just for us, but if you track the import data, the broader decline in pricing has been up to the 30%, 40%, 50% also.
While if I take example of vitamin B3, which is one of our core products in the nutrition segment, the pricing has been flat for the last 5 or 6 months and there is only a marginal decline versus what it was previous to that. So the amount of pressure vary significantly by segment, as you rightly pointed out. It's more acute in agrochemical. Nutrition and pharma are largely stable.
Having said that, China plus 1 strategy with large [indiscernible] still valid. And we are seeing a lot of inquiries in the -- some inquiries in the agrochemical intermediates, which are China plus 1 strategy. And as Deepak said that in the coming quarter, we are going to conclude a large contract for agrochemical intermediates. This is just related to China plus 1 strategy.
And a lot of inquiries still coming in. But since the China prices are so low, so people are trying to defer the inquiries, but this inquiry is very strong, and we are able to conclude this business, which is a large business.
And secondly, we are receiving inquiries from -- for agrochemical sector, but we are still -- people are trying to defer those -- but the strategy after discussing with large agrochemical company still remains still very active, that China plus 1. But China being at such low prices, this is a wrong time to shift from China to India. But of course, that strategy as in the next 3, 4 quarters, the China prices are going to go up, then definitely, this strategy will come back to -- in access again.
Yes. And just to add to Chairman, I think as for everyone is satisfied, because I'm sure that question will come. Most of the discussions we are having with our customers, be it agro, pharma or even let's say, cosmetic space, particularly for the CDMO business, the customers are speaking to us despite whatever is happening to pricing and competition from China with a long-term view.
And in many cases, they are helping us working with our R&D team to optimize the cost structure to ensure that we collectively are able to take on the competition on pricing and then optimize our cost accordingly. So couple of contracts that Chairman talked about are in line and with that kind of arrangement with the customers.
Sure. That's helpful in terms of collaborate answer. Just to put it slightly differently. Out of the entire business, how much of the business is probably -- I mean how much of businesses prices are governed by China or dictated by China, given that there are incremental capacities which have come up or which are coming up in China, will still have pricing pressure on those set of products or segments that we have.
So Rohit, I don't have the precise number, but what I can say is like -- again, I will go back to what I was saying earlier and talk sector by sector, and then we publish that information in our investor presentation also. Agrochemicals is roughly 20%, 25% of our business. Obviously, there is a huge pressure there from China. Pharma is roughly 30% of our business. The relative impact of China pricing is less there. And especially in our chemistries, be diketene, pyridine or some of the other products, we are able to command pricing.
If I take nutrition, as an example, vitamin B3, we are world #2, and we and China are more or less at par. So any one of us can disturb the price or any one of us can command premium as well. Right now, it's a deadlock where we are at a flat price, as I said, for the last 6 months or so. So the answer very significantly, it's not a 0, 1 game that these are the products where China price does not impact, these are the prices where it can impact. It varies significantly. There is obviously some impact when there is a competition from China, but the level of impact and implication of that are very different [indiscernible].
In niacinamide also, having said that, there is more competition in the animal sector. Whereas in human and food sector, there is less competition, and we still get a price premium in that sector. And as you -- as Deepak mentioned about it that we have -- that is why we are -- we have set up this new plant where we can supply for cosmetic and for food and for sectors where the people are skeptical of importing products from China and China does it offer such high-quality material. So therefore, we command a premium there.
Recently, also, our -- in the food sector where we are catering our -- from our existing niacinamide plant, we get a premium from the -- what we supply to animal sectors. The main competition is in the animal sector, at which -- of course, our -- we being the lowest cost producer, we have an advantage. Of course, we cannot charge the premium pricing, only thing in the animal sector, but the food sector is still we get a premium price.
Sure, sure. That's really helpful. And thanks for the reliable description. Sir, second question is, given the current environment and overall scenario, are we planning to defer any of our CapExs? Or we will still continue to be doing the CapExs or probably we will try to optimize certain CapExs. Any views on that?
No, Rohit, discussion had come up in the last 2 calls also, the answer remains the same. We are on track to do the CapExs that we planned. Just as a reminder, 2, 2.5 years back, we had announced a INR 2,000 crores CapEx. Of that INR 1,400 crores has already been committed in the last 2 or 3 fiscal years. And remaining INR 600 crores of the original plan will happen in this fiscal year. In fact, on the back of some of the long-term arrangements that we are seeking to a few big customers, we may even need to up that number once we have signed a contract with them.
The next question comes from the line of Rohan Gupta from Nuvama.
Sir, first question is on your newly coined vision on Pinnace 345. If you can sort of elaborate a little bit more on that making an initial target of 4x EBITDA. Just wanted to get some more clarity how we plan to achieve that? Which is the segment you're going to drive? And more importantly, this 4x EBITDA, we are talking about on a FY '24 base of EBITDA. Correct me if I'm wrong on that or -- and further elaboration on that.
Yes. So Rohan, we have given at least some details in the results presentation also. I will -- I can keep talking about Pinnace 345 because that's what we have been living and breathing over the last several months. But just a few things, top of mind, I would say, number one, this is a bold vision and ambitious vision as you rightly called it. That has been co-created by the whole leadership team of Jubilant Ingrevia over the last -- we created in December.
I think I had briefly talked about it in January call as well. It was originally created in a top-down manner, but subsequent to that, in the month of December and January, the whole leadership team spent a lot of time in working out the bottom of plants by the use for each element of Pinnacle 345, which you could hopefully see in one of the slides we have put in our results presentation.
Obviously, that slide also is a 30,000 feet level. There are a net level of details in terms of what products, what market share, what cost structure against which competition, which geographies, which customers and how. So all of that has been worked out BU by BU, which we discussed, debated that there in January and closed in February with our final presentation to the board.
So that strategy we firmly believe in, we think it is achievable. It is bold, but I don't think it is super gold because if you look at history, there are several companies within chemical sectors also who have been able to achieve those kind of targets within a 5-year time frame.
Secondly, we have some fundamental strengths in our business in terms of the 35-plus chemistries we do, the 7 or 8 product platforms we have, starting from, let's say, our traditional platforms like pyridine but also newer ones like diketenes, pyrithiones, piroctones and many others.
So we have mapped out the specific opportunities, customers, geographies, which fall at the intersection of these product platforms and chemistries. And in a bottom-up manner, we have created this strategy. So the level of confidence in achieving it is very high.
Number three, a lot of CapEx investments related to these products and chemistries has already happened as I was just explaining response to Rohit's questions. We have created capacity worth INR 1,400 crores of CapEx. That capacity now is coming on stream as I just said, it's getting filled very quickly. So many of the product lines, which are part of our strategy can be produced in this capacity. So we have ready capacity, and that's why many of the customers are switching to us for long-term contractual arrangements across agro, pharma, nutrition and cosmetic sector.
So -- and fourth and last thing I would say is there's a detailed initiatives plan that has been created behind this strategy. There are 50-plus initiatives falling across different BUs and different functions. Each BU [indiscernible] -- is driving that initiative with his or her team. And I am directly championing it and my office is doing the program management of that.
So we are taking a very rigorous approach to managing that whole process as well so that we stay on track. Obviously, the only unknown factor is how quickly the markets turn around, which is where as Chairman was also saying the hope is in the next 1 or 2 quarters, things will start to come back. From a demand perspective, we are already seeing volumes going up.
If you look at our Specialty Chemical business and Nutrition business, the volumes have come back quite handsomely. Specialty Chemical, in fact, 30% up. Nutrition 10% up versus the previous quarter. The price is what we are hopeful that in next 1 or 2 quarters once China becomes less desperate, we will also start to see some uptick there. And hence, we will be on track to deliver on this bold strategy.
Hopefully, I -- there's a lot more we can talk about Pinnacle 345. Rohan, I am just restricting to 3, 4 main highlights right now. Let me know if you have any other questions.
No, that's helpful. Sir, in the current quarter on a SpecChem business, we see growth -- the business has witnessed growth on Q-on-Q basis. This is something like EBITDA margins, which is still quite low at roughly 14% despite such a strong growth on Q-on-Q basis by roughly 30%.
If you can -- on a full year basis, if you can give some broader number of getting into granularity, but roughly out of close to INR 1,600 crores kind of specialty chemical revenues. If you can break it down a little bit in the CDMO and how much comes from the diketene -- and in next year, what kind of revenue target -- we are targeting from the diketene and CDMO?
So since we don't disclose numbers at individual product platforms or growth units level, I wouldn't be able to give that Rohan but what I can tell you is, number one, obviously, the volumes have grown at 30%. The pricing, of course, there is pressure even versus the last quarter, the prices came down for some of the product lines. And hence, the margins have not seen an uptick. It is hovering at 14%, 15% level.
We believe that our Specialty Chemical business even today, based on the today's product mix, is a business that should give at least 17%, 18% EBITDA margin in steady state. So there's a erosion of 3, 4 percentage points versus what the steady margin in today's mix should be largely driven by the fact that prices are subdued or muted.
Now if I fast forward into future strategy, then we are going to have higher share of some of the high product lines we have added, the diketene derivatives, some of the pyridine derivatives, some intermediates on the agrochemical side, the new products from CDMO, et cetera, et cetera. That 18% plus steady-state margin will surely be north of 20% plus margin in the next couple of years. And that's how we have created all our business cases for the new CapEx we have made.
So that's our aspiration. Within that, the INR 1,600 crores revenue number that you made -- you talked about, I think we expect our Specialty Chemical business as part of this Pinnacle 345 strategy also. Our Specialty Chemical business should become at least 3, 3.5x in next 3 years. At an overall portfolio level, it should be at least 60% of the overall business. And within that, bulk of the growth will come from CDMO, from our fine chemical business, which is where we have our pyridine and diketene derivatives and from our Microbial Solutions business.
And just one more addition, the CDMO business that I'm talking about, as we discussed in the previous calls also, I'm talking about CDMO related to agrochemicals, pharmaceuticals and hopefully, semiconductors as well where we have started to see some initial traction in the last few months.
The next question is from the line of Gokul Maheshwari from Awriga Capital Advisors.
I just wanted to know, in terms of your CapEx plan of INR 2,000 crores, you mentioned about INR 600 crores, INR 700 crores to be spent in FY '25. Could you sort of give a broader indication of what beyond that in terms of the -- I'm not talking of numbers, but more in terms of the projects, which you would want to take once this CapEx [indiscernible].
Gokul, your voice was slightly muffled, but if I understood the question correctly you're saying beyond this INR 2,000 crores, what -- you're talking about the FY '25 INR 600 crores, what kind of CapExs you are taking? Is that the question?
Yes. So your INR 2,000 crores of CapEx plan from FY '22 to '25, I believe INR 600 crores, INR 700 crores would be spent in FY '25, but what would be the spends of -- or projects which you would take beyond FY '25, if you could give some color on it and if you could even quantify, that would to be great.
Yes. So first, in this INR 600 crores, INR 700 crores that we plan to do in this fiscal year, as I mentioned in my opening remarks, there are a few opportunities which we have more or less decided but we are yet to do the CapEx approval, let's say, I talked about the CC/CBT, the food grade human nutrition product. We have the niacinamide product, which is coming up in September. There will be some CapEx related to that. We have a plan for GMP-3 for our CDMO business.
So those are some of the areas that we are planning for this year. And yes -- and beyond that, there are certain opportunities in horizon. Obviously, the concrete plans have to be created. For instance, this long-term contract we are negotiating with our agrochemical customers we will need expansion of current capacity.
There will be some CapEx going there. We have plans for our diketene next phase of derivatives. We have a -- we have done 2 phases. We have Phase 3 and Phase 4. We have a couple of products in Microbial segments where we are evaluating GMP grade plants.
Then on the microbial side, also, we have a new platform coming up for which -- sorry, for the human nutrition also, we have some premixes for which we are expanding the capacity or we are planning to expand the capacity. So just stepping back, if you look at the priorities for our different BUs in the investor presentation, all the new CapEx, be it in 2025 -- FY 2025 or beyond will be aligned to that strategy and those priorities.
Given the number of initiatives, so beyond '25 also your CapEx range could be around INR 400 crores, INR 500 crores per annum?
Yes. So obviously, this original INR 2,000 crores announced takes us to, let's say, the end of FY '25 in terms of CapEx deployment. And we feel the full potential coming from that INR 2,000 crores of investment plus our business -- existing business is, let's say, taking us close to INR 8,000 crores odd in terms of top line.
For the 3x growth in revenue from today's baseline, we will obviously need more CapEx, at least another INR 1,500 crores to INR 2,000 crores based on some broad estimates. Of course, the details have to be worked out and that will translate to at least INR 500 crores, INR 600 crores every year from now onwards.
And lastly, on the margins front, you are investing more on the specialty and you've mentioned in the past that the mix of this specialty would be becoming 60%, 70% versus the current 40%, 50% or so. With that mix coming in, what would be your steady-state margins? I'm not talking for the next 12 months, but more from a 3- to 4-year perspective.
Yes. So we have worked that out. So first -- one correction it's not mainly, it's only. So whatever investments we are making, we are going to make only in specialty chemicals or specialty nutrition products like CC/CBT. For each of those CapExs, our internal criteria is at least 20% plus of EBITDA margin and 20% plus of ROCE. So -- otherwise, we are not approving those CapEx. In fact, we are not even recommending that to the Board.
Now if you take all of that into account plus whatever we have invested in the last 2 years, our view is at the overall portfolio level, our margin, as I was saying in the beginning, steady-state margin should surely be north of 20% plus. Specialty will be higher. Obviously, we have a acetal business, which remains volatile. Nutrition should be at least 15% plus. So at the overall company level, we are quite confident that if we execute this strategy successfully, we should be north of 20%.
The next question is from the line of Pranav Tendulkar from Aware Investments.
Sir, in terms of the semiconductor product that you are planning to manufacture, is it for export or Indian, that is one? And is it for that wafer manufacturing level? Or is it related to cleaning and blasting, et cetera? And what is the market opportunity in similar products?
So Pranav, these are -- as I think I mentioned on the previous investor call also, most of these inquiries are coming to our CDMO business, which means by nature of our CDMO business, these are initial leads where customers are testing waters and giving us volumes in kg to see whether the product quality is in line with their expectations.
Most of these are international customers. I had mentioned, I think, in the January call that till that time, we had gotten 3, 4 leads. Now we have another half a dozen. We are evaluating internally, which ones are aligned with our chemistry strength, which ones are not. But most of these are coming to CDMO business.
And right now, the focus is to make the product in line with customers' expectations and then send the samples. And once the samples are approved then we get initial volumes with them. And obviously, given that semiconductor segment globally is growing very fast, the hope is once we are in, then the volumes will grow very fast.
Yes. But having said that, I would like to further add that any large contract on CDMO and specific investments if we have to make, we'll be doing basically on the basis of take-or-pay. Otherwise, we will not be investing.
All volume business on our existing multipurpose facility that's a separate thing. But any specific investment if you make, any specific large investment which Deepak was talking about, if the contract materializes, then we will be doing on the basis of take-or-pay because that we'd not like to risk our investments on the basis of any contracts which are not take-or-pay.
And on the semiconductor side, which is where your question specifically was, Pranav, there, obviously, the volumes are small currently. So we have multipurpose plants, whatever inquiries we have gotten so far and which we are responding to, we feel comfortable and confident that we can do those products in our multipurpose facilities, which we have in the CDMO business.
Obviously, the big contracts on the agro side and some of them may be on the pharma side also. There the arrangement is very different which is, in some cases, we may need new facilities which are dedicated and hence, the Chairman's point that it would be take-or-pay contracts.
Right. Also, you commissioned 2 plants, one is that diketene derivatives and I think the cosmetic grade chemical product and you were also going to commission one more plant in [indiscernible]. Can you just elaborate what is that.
Pranav, your voice was breaking, but let me -- I think just factually correct you. We have commissioned 3 plants in last 4 months. In December, we commissioned a small agro intermediates plant in Bharuch. In January, we commissioned a bigger agro intermediates and access plant again in Bharuch. And in February, March, we commissioned a diketene derivative plant, which can do 2 products. So these are the 3 plants, which have come up in the last 4 months, all aligned with our long-term strategy.
The agro intermediates plants are -- both the plants are targeted towards doing CDMO/CMO arrangements with our innovator customers globally in agrochemicals. In fact, from the bigger plant, we shipped first CMO contractual order in the month of February already. And we are currently -- as Chairman also said in the beginning -- we are in discussions with several agrochemical customers to commit that capacity to a couple of them.
The diketene plant, the products coming out of that are advanced intermediates high-margin products, which go into pharma, paints and cosmetics segments. And there, we are already getting a lot of traction, and that capacity, we are already getting good traction to fill up that capacity hopefully in the next couple of quarters itself. In fact, we are already thinking about how to debottleneck or expand that capacity.
The plant, which is going to come up in the next few months is the niacinamide food -- cosmetic grade niacinamide and food grade niacinamide plant, which is attractive to get commissioned in the month of September this year and that will be targeting the high-grade, high-margin vitamin B3 segments in the cosmetics and food applications.
Got it. Sir, last question on my side. So with current added capacity in last 12 months, what is the revenue potential at current prices of product. So we are operating at 60%, but obviously, the products that will come in the new plants are much better. So what is the revenue potential with the current remaining prices?
I think I already gave the answer Pranav, earlier. We are at INR 4,000 crores, INR 4,500 crores today. And I said on the back of the capacity that we have put up in the last 2 years and what we'll be putting up in this year, we have full potential road map or visibility to exit INR 8,000 crores.
The next question comes from the line of Nirav J from Anvil Research.
I have two questions. So one is on the diketene part. Sir, since you have commissioned the derivatives plant and plant is getting ramped up, what sort of value addition in terms of per kg or percentage realizations we can see over and above the base diketene. And along with if you can just quantify the market of diketene and diketene derivatives in India.
So I can't answer with precise numbers on the first one, but Nirav as you might already know from our previous calls, diketene is an unstable molecule, so it cannot be sold as a stand-alone molecule. So whatever value addition -- whatever you sell in the market is on the back of value addition.
And typically, now we have at least 5 products in our portfolio, which are derivatives of diketene. These are at least one or two steps ahead of diketene and now we are gradually adding more advanced stage derivatives in the diketene portfolio, which will come up in Phase 3 and Phase 4, as I mentioned earlier. Sorry, what was your second question?
The markets for diketene and derivatives in India?
Yes. So I think overall, if you remember, [indiscernible] -- yes, the total market in India at least is 30,000 tonnes of diketene derivatives. One of our competitors is already active there with about 40%, 50% share of that. Rest was enforced until a couple of years back. We have already taken significant share of rest of the market. And the bigger opportunity, by the way, in diketene derivatives is the exports.
Because like our other core products, be it pyridine, anhydride or B3, we are probably #1 or #2 and the lowest cost producer. Our aspiration in diketene derivatives is also to be among the top 3 global players having a very competitive cost structure on the back of the plant that we have created, which has happened on the back of our own process engineering. So we are very confident that as we scale up our diketene capability -- sorry, capacity and add more derivatives in Phase 3 and Phase 4 of diketene, we will not be able to take significant share of Indian market, but also of the global market.
Just to understand in slightly qualitatively, let's say, every step of value addition of derivatives -- let's say, you mentioned that we are now at 1 or 2 steps further, would be further value additions will happen in Phase 2, Phase 3. What sort of percentage benefits we start getting on over and above the base Diketene. Could it be 10%, 15%? Some understanding of some ranging that would be helpful.
So I wish Nirav the world of chemicals was working that simply. Obviously, depending on how complex the reaction is -- what are the other chemicals which are getting added in each reaction, the quantum of value addition on each step will vary significantly.
In fact, oftentimes, we -- in recent years, we have encountered situations where we -- if we go too far out in the value chain, the margin profile actually drops because then you are sourcing something which is cheaply available from China or elsewhere and hence, you get margin only for that one step, even if you are fully integrated. So all kinds of permutations and combinations are feasible here.
And hence even though diketene has, let's say, at least 30, 40 different derivatives, which we have mapped out. We are not trying to make each and every one of them. For every derivative, we have done so far, we have picked up and what we have planned for Phase 3 and Phase 4, we are doing a thorough assessment of what is the product, which applications it is going into, what is the level of complexity and value addition. And hence, what kind of margin profile we can get, and if it is not giving us at least 20% EBITDA margins, then we are not prioritizing it.
So if there was value addition on every chemical, then we would have added like 50 derivatives by now, but that's not the case. So you have to pick and choose based on several factors, which is what we are doing as we pick up next phase of diketene derivative. And the same principle that applies for any value chain, I just took example of diketene because we were talking about it.
Got it. The second question is on the MPP part. So one we commissioned last quarter, the bigger one, which is like 4x of the size, we commissioned in this quarter. So let's say, once the MPP starts ramping up, what sort of asset turnover we should work with once it is fully ramped up? And generally, how much time it takes to ramp it up fully to realize its full potential?
So typically, for our Specialty Chemical business and MPPs fall in Specialty Chemicals, the asset turnover is about 1.5 to 1.6. And then that -- where I think most of the CapEx projects we have taken, we built out the peak revenue potential of those product lines, which we plan to do in MPPs, all that adds up to 1.5 plus.
Secondly, our experience has been in normal markets after the plant has been commissioned it takes at least 12 if not 18 months to get to 70%, 80% utilization level, which is what has happened with our Phase 1 diketene products, which, as I said, are running at 70%. It's, in fact, slightly delayed, I would say because of the soft market. But the Phase 2 products which have come up in February, for instance, we are hoping in the next 12 months, it will hit 70%, 80%.
Got it, sir. And just a last clarification. So does this MPPs used our pyridine chemistry as a starting material, which gives us a first more advantage in terms of the other suppliers with the same product to the same set of customers. How do you justify that?
So Nirav, by definition, MPP can do multiple products. It doesn't have to be of redeem based chemistry products. In fact, most of our MPPs will be doing pyridine derivatives, diketene derivatives and even products outside of these 2 product platforms.
Got it. Sir, in and all, how many MPPs do we have now after the commissioning of the last one?
We have 7 fine chemical plants, MPPs. We have 2 GMPs in Bharuch. And we are in the process of putting up more MPPs, as I mentioned earlier. And in agrochemicals, sorry, I forgot to mention the 2 plants, agrochemical plants we have set up recently are MPPs as well.
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, sir.
Thank you all for joining on this call today. We hope we have been able to answer your queries. For further clarification, I would request you to contact me. And thank you, once again, for your interest in Jubilant Ingrevia Limited.
Thank you very much.
Thank you. On behalf of Jubilant Ingrevia Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.