PI Industries Ltd
NSE:PIIND
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3 241.95
4 731.35
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
PI Industries Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the Q1 FY '24 earnings conference call of PI Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you and over to you, Mr. Solanki.
Thank you. Good evening, everyone. And thank you for joining us on PI Industries' Q1 FY '24 earnings conference call. Today we are joined by senior members of the management team, including Mr. Mayank Singhal, Executive Vice Chairman and Managing Director; Mr. Rajnish Sarna, Joint Managing Director; Mr. Manikantan Viswanathan, Chief Financial Officer; Mr. Prashant Hegde, CEO Domestic; Mr. Atul Gupta, CEO Export; Mr. Anil Jain, MD, PI Health Sciences. Will begin the call with key perspectives from the [indiscernible] thereafter we will have Mr. Manikantan, sharing his views on the financial performance of the company. And after the forum will be opened for question and answer session. Before we begin, I would like to underline that certain statements made on today's conference call maybe forward looking in nature. The disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on stock exchange website. I would now like to request Mr. Singhal to share his perspectives with you. Thank you and over to you, sir.
Good afternoon or good evening, everyone. It is my pleasure to have you with us on this call. I shall now share my perspectives on the industry landscape and the progress that we're making with our strategy. The global crop protection industry is witnessing a tough phase over the last couple of quarters with intense destocking by the distribution channel due to increased availability of certain categories of product, post the normalization of the COVID disruption and scenarios of steep price reduction of these products leading to purchase procurements faster. On the other hand, the Chinese economy is experiencing slack domestic demand and it seems to be exporting deflation through steeped up exports of goods. This is already impacting the chemicals sector across the value chain.Given that we at PI overall year-on-year basis, during Q1 we have delivered a 24% revenue growth and a 35% increase in our EBITDA and a profit after tax recorded a 46% growth year-on-year. PI has though maintained a course of healthy performance in its CSM Exports with a 33% growth year-on-year. This performance comes back with continuous strong growth and further endorsement of our approach to the business.Our domestic business performance for the quarter has been subdued due to the delayed onset of monsoons. But on the positive side, we have kept tight control on trading working capital and overall market scenario is focused more on qualitative mix of the revenue than the volumes. We are confident of getting back on the growth path with the normalization of rainfalls during the second half of the current season. We continue to maintain the momentum of new product launches, drive innovative products planned in this fiscal year. In the Q1, we have launched Eketsu. Eketsu is India's first 3-way herbicide mixture to provide maximum weed control and efficacy for total control of rice herbicides. This will further fortify our portfolio of rice crops already one of the best in the industry. The business has a long pipeline of products, yet exciting launches ahead.Our business model is aligned to commercialization of advanced molecules for innovators, thanks to our very visible track record, our engagement of scale-up as well this goes beyond active [indiscernible]. It is our intent to create a dedicated platform for the farmer CDMO; CRO CDMO play. I would like to share that this process of integration of our Pharma acquisition is underway and tracking internal milestones. Our combined R&D capabilities with the brand new integrated Pharma Research Center being developed in Hyderabad for the CRM CDMO often [indiscernible] bolts on to our business proposition.Our forte has been of a vast library of knowledge of complex chemistries with high scalability and competitive manufacturing footprints and are able to tailor our solutions with specific circumstances to meet and be customer-centric. The continued traction is delivering and driving healthy accreditations to our order book position in a virtuous cycle between innovative and PI. During the quarter under the review, we have commercialized one new molecule and remain well on track for commercializing 4 to 5 new molecules every year as guided earlier.While the industry outlook for the economy demand is soft with some forecast projected single-digit contraction in the year '22-'23. It is relative to the previous year, how at PI we have put in a focus on new chemistries and balanced portfolio of products, we give the visibility that we enjoyed and remain cautiously optimistic to achieve the even target between 80% to 20%. Revenue growth in the current fiscal despite the headwinds explained above.We should however keep a close watch on the markets in order to review our guideline after the upcoming current season. This will be supported by ramped up production, our already commercialized molecules and the introduction of new molecules. For the long-term perspective, India remains the locus of growth in chemicals. It is believed that India has achieved the ag chem. export worth $5.4 billion in '23, up by 10%, making it the second largest exporter of ag chems in the world.With policy supported by manufacturing ag chems, these exports are expected to double in the coming 3 to 4 years. India is already the fourth largest producer of ag chems now #2 in the world from the previous year. The government is considering a PLI scheme for chemicals and pet chems domestically and that can further accelerate this trend with policy activation as a catalyst [indiscernible] block the gaps in the value chain in order to offer innovators of chemistry as well as customers at the end added incentives to expand here. Therefore, the long-term prospective of the specialized chemical industry remained bright despite the current blips.PI remains dedicated to driving progress in a sustainable manner. ESG still remains center point of every initiative on a growth execution. We deem it as our responsibility to align our process, production, products for a thriving and a vibrant environment for our purpose of reimagining a healthier planet. This reflects and can be tracked through our outcomes we have scripted.I'll now close my perspectives and hand it over to our CFO, Mr. Manikantan, to take the discussions forward. Thank you once again to all of you. Over to you, Mani. Thank you.
Thank you, Mr. Singhal. Good evening, everyone, and thank you for joining at the call today. I'll summarize the company's financial highlights for the fourth quarter ended 30th June 2023. Please note all these comparisons are on a year-on-year basis and refer to the consolidated performance. During Q1 FY '24, we reported a revenue of INR 19,104 million, a growth of 24% year-on-year, including newly acquired Pharma business and 21% revenue growth in ag chems. This was driven by growth in export revenue by 37% to INR 15,630 million, offset by a 13% decline in domestic revenue to INR 3,474 million. Export revenue growth in ag chem was 33%, comprising volume growth of 29% and 4% comprised currency unfavorable cost net. This quarter, total exports revenue included Pharma revenue of INR 443 million, comprising around 2-month period for Archimica from 27th April '23 onwards and 1-month period for Therachem from 2nd June onwards.Domestic revenue was contracted by 13% year-on-year due to delayed monsoon leading to volume de-growth. Gross margin increased to 47% including Pharma and 46% excluding Pharma. Gross margin including a [indiscernible] pharma jumped by 201 basis points. Pharma gross margin was 75%.EBITDA increased by 35% to INR 4,726 million for the quarter on account of favorable product mix and operating leverage. EBITDA includes former EBITDA loss of INR 54 million of one-time acquisition integration and initial business that affects the [indiscernible]. Profit after tax increased by 46% to INR 3,829 million attributable to EBITDA growth and lower [indiscernible] invested tax rate despite higher depreciation.Cash flow from operation activity during Q1 FY '24 was INR 3,028 million. Trade working capital in terms of number of days of sales, improved to 83 days of 30th June 2023 regarding 102 days as of 30th June '22.Inventory levels reduced in terms of days of sale to approximately 73 days to INR 14,049 million excluding Pharma inventory of INR 1,216 million regarding 89 days as of 30th June 2022.Our balance sheet further strengthened during the year. Network increased to INR 76,094 million as on 15th June 2023. CapEx in Q1 was INR 6,490 million, including Pharma acquired assets of INR 5,249 million through business combinations. The CapEx, excluding this addition was INR 1,241 million.During the quarter, we completed Pharma acquisition of Archimica and Therachem group amounting to INR 8,550 million. Post acquisition outcome the surplus cash net of debt is INR 28,066 million, including balance in QIP funds of INR 11,320 million.QIP funds remain invested in the deposit and debt, which were funds with SLR philosophy while on the final deployment aligned with PI's long-term growth strategy is underway.This concludes my opening commentary. I will now request the moderator to open the forum for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec.
Congrats on a strong set of numbers. My first question is on our Pharma asset. So how is the integration process progressing? And if you can give some qualitative information on the same? And how should we think about growth of this business? Do you foresee a significant increase in capacity utilization in these 2 assets versus around 50% what we saw last year?
Yes. So thanks for the question. I am Anil Jain here. So I think your first question is about the integration piece. So the integration will be 3 details. One is the Archimica which we acquired in the period. Another is the Therachem which is U.S. and India. And then our innovation center which is in -- which will built up [indiscernible]. Now currently, I think our progress on operating model, understanding IT integration of these limits. And we are also working on the global advisor for the business start ups across this area in R&D and in chemical supply chain. And right now, we are on the track and this activity would continue to go almost a quarter more during the part. The second part is that on the Pharma revenue. So I think our aim is to get the -- I mean, the INR 550 crores, which we have we've said, we are aiming in that direction. Gradually, on the quarter and quarter, this will build up. Right now in this quarter, we are only talking of one company of operating on 26 days and another on 34 days. So that's the right number, which is not very different to our plan we submitted. So gradually, it will improve. And I think we will be home what we have committed to the stream.
Now in this quarter, there was a onetime acquisition and integration cost, if you can just call out what was the question? And how should we see the margin trajectory of the Pharma business in the remaining part of the year?
Yes. So in this quarter, in terms of financial, there were a couple of one-offs. One is, obviously, the acquisition and business setting up costs and all could be tune of more than, I think, INR 120 million. The other is the impact of the Ind AS 115 because the acquired entity, particularly the Indian acquired entity was not accounting as per Ind AS whereas PI Health Sciences we follow the Ind AS. So because of these impacts those one-off impacts have come. Going forward, as we have indicated, earlier also that there are going to be initial phases where we will be investing in the development of the development of these businesses, acquired businesses and also transformation of some of these businesses. So obviously, the EBITDA margins that we are looking at is get be on a lower side. But on maturity, we would surely expect and target 20%, 22% plus kind of 20%, 24% plus kind of margin once we get to the maturity. It will take a few quarters time or maybe more than a year's time. In the initial phase, we are expecting anywhere between 14%, 15% kind of margin that we have indicated earlier.
My final question is, sir, what would be the total CapEx guidance for FY '24? It will be great if you can give a breakup between CSM and domestic as well as the Pharma piece. The core business and the acquired assets, sir, separately.
So we had -- as you recall, we had indicated close to INR 850 crores INR 900 crores kind of CapEx for the ag chem business, okay? For Pharma, we have already also indicated close to $10 million to $12 million is what that we will be investing. So that's the current guideline on the CapEx. We maintain that guideline.
[Operator Instructions] Our next question is from the line of Rohit Nagraj from Centrum Broking.
Sir, first question is, you mentioned in the presentation that 13 top molecules identified for capacity enhancement. These are the molecules which have been launched in the recent years or these are more matured molecules and we have seen a good amount of scale up happening from the off take perspective?
Yes, these are all operating objectives that are taken by our cross functional teams on a regular basis. And these are not recently launched molecules. So over the years, we have commercialized many projects, and out of those projects for many of these products as the profit has improved year-on-year, I mean our teams have identified opportunities of throughput improvement and all that. That is pertaining to that activity of continuous improvement.
Sir, second question is in commentary as well as in the presentation, we have said, cautiously optimistic on the CSM segment. So in the last 1.5 months of the current quarter, have you seen any kind of slowdown in terms of volume off take? And a concurrent question to that, the 18% to 20% guidance, does it now include the Pharma piece as well? Or does it -- is it excluding the Pharma piece?
So as far as the trend is concerned the global scenario et cetera is concerned, it's not only last 1 month, 1.5 months, but we have been seeing this for the last few quarters that there are certainly headwinds in general in the industry, okay. And that is more particularly to certain category of products on the generics side. So far, we have not seen a dramatic change as far as the demand scenario for our products are concerned. But while we are saying cautiously optimistic because ultimately, some such longer-term trends may have some impact on overall general industry demand scenario as well, though we have not seen it so far. But as indicated, we would also like to review this overall plan and guideline maybe post-kharif season. By the time we'll have a better understanding and better visibility of that. But at this point, we do not see any dramatic change or new development.
And it can include Pharma as well? Just to clarify.
Sorry.
The 18% to 20% guidance that we have...
The idea is that Pharma, whatever contribution it comes, will be on top of it. But as I said, we will review all this post kharif season.
Our next question is from the line of Sumant Kumar from Motilal Oswal.
So sir, can you talk about the domestic business 13% de-growth? And how the things are panning out in the current season, in the coming quarter?
Yes, Prashant?
Yes. So the first quarter, you already might have seen from the industry. In fact, we anticipated it from at least last year of 12 months. So that is why we are also cautious in terms of our procurement, especially on the generic products, knowing this volatility. However, from July onwards, it is -- the positive momentum has built up. We -- having especially commercialized 7 new products last year, those are doing good. And this year also, we have a plan to launch 4 new products, in that one, we already commercialized in quarter 1. So this has definitely helped us. And this will continue to basically help us in terms of showing positive results in coming quarter.
So basically, just to add, in terms of market sentiment, market activities, there is certainly improvement compared to what we have seen in the first quarter. But yes, still there are a couple of months to be monitored and seeing that how overall kharif season has panned out.
Sir, can you talk about Pharma like-to-like growth Y-o-Y? And also, what is the quarterly run rate if you consider from the month of April, for the both perspective?
Yes. So first of all, it is not possible for us on Y-to-Y, like-to-like because, as Anil explained earlier, I mean one business, we have the revenues of maybe 30 days or less than 30 days. The other business, we have revenues of maybe I think 50 days or something. So we certainly do not have quarter data of these companies' businesses for the previous year. So that is the reason we do not have that like-to-like comparison. And why this business or I mean our current quarter performance, I think Anil has already explained. Maybe you want to add something?
So it's only 1 month performance right now, and the CRO and CDMO business is driven, they are all customer delivery driven they are not driven by these months. So that we sometimes is concerned with, but then they are confident, as we said in the coming quarters, we would be able to meet our expectation of the number as well an the margins also.
So I'm asking whatever the number we have published in the acquisition note for the FY '22-'23 or say CY '23 -- there will be any growth on that?
Yes. So those numbers to Q3, those numbers were, first of all, calendar year, if I'm not wrong. I mean one business is calendar year, the other businesses also calendar year, part of it is financial year. So we will have to see. But that on annual basis, what is that we will be finally seeing the number. But yes, in certain business, we are expecting growth. In some other business, it is as per the current rate. But on like-to-like on a quarterly basis, it is -- the data is not there for us to give you the straight answer.
Our next question is from the line of Vishnu Kumar from Avendus Spark.
Congrats for rock star numbers reported this quarter. I wanted to understand on Pharma. I mean, just some continuation would -- noted all the plants would be running fully. Is it like INR 150 crores to INR 170 crores, at least would be your current run rate that we'll achieve from 2Q onwards? If I just do some approximation on the pro forma numbers.
That is on our guidance page, what number we give. We are hopeful of going in this direction in the coming quarters.
And also on the CSM side, we see that 29% volume and pricing continues to be positive. But with across raw material deflation, I wanted to understand how long this pricing will continue. And generally, when we talk to the customers, when does this price negotiations happen like because there's a deflation should we continue to believe that this will help us on the margins? Or at some point, we'll see some pricing cut?
So first of all, with deflation, raw material deflation, not all across the products. And obviously, that varies from product to product, that scenario also the raw material price trend varies accordingly. But yes, wherever there is substantial improvement in raw material prices or reduction in lateral prices, obviously, going by our business model, I mean, those prices are factored in the next supply, next contracts, or purchase orders and all. So yes, that always takes place.
So this 25% margin would be a new normal to be considered or any guidance on the margins, if you could help us understand.
So we have, as in the past also, we have explained that this 24%, 25% margin, obviously, is coming from 2, 3 sectors. One is obviously the operating leverage. The other is the product and business mix and all. And yes, I mean, we are relatively confident that we don't the kind of visibility of plant -- business plant volume values that we have, we should be able to maintain sustain the growth model.
And one final, if I may. Sir, we've done almost 30% growth plus in the CSM and you also mentioned that our growth is not impacted. But if I take 18%, 20% guidance, it looks like, given if you do 10%, 12% or 12% to 14% growth is enough to achieve the guidance. Is this like we are taking a conservative approach or you have some indications that your delivery schedules in second half will be slightly lower? Just some sense here.
We are cautious. It is not conservative or optimistic, but we are fortunately optimist that yet -- and in any case, as indicated, we will review this overall situation maybe 3, 4 months down.
Our next question is from the line of Abhijit Akella from Kotak Securities.
Just 2 from my side, one is on the CapEx for the quarter. It seems to be about INR 120-odd crores, excluding the Pharma acquisitions. You've guided to almost I think INR 850 crores, INR 900 crores for the full year. So should we expect a big acceleration in the remaining part of the year?
Yes. So this is as per the plan only. The major part will be coming in subsequent quarters as the execution happens. But yes, the overall year's plan remains what I indicated around INR 850-odd crores.
And the second thing is just that on the guidance, 18%, 20% growth. Earlier, I believe it included the domestic business also. So in light of this quarter's challenging performance there, do we sort of stick with that expectation? Or should we assume the 18%, 20% is only for the CSM piece for now?
Yes, you are right. And that's the reason at this point, we are saying we are optimistic, cautiously that if things pan out well for the remaining period of kharif we should be able to get there. But if not, then we will surely come back with our revised estimate.
Our next question is from the line of Vivek Rajamani from Morgan Stanley.
Congratulations on a very strong result. Two questions from my side. Firstly, on agrochemicals. If it's possible to give some color on what is the kind of inventory situation that you're seeing for your specific products? We've obviously been hearing that there's a lot of inventory across the system. But if you can provide any kind of color with respect to what you've been hearing from customers that would be really helpful. And the second question I had was on margins. Again, very, very strong margins that we've seen this quarter. Just wanted to get a sense if there was any specific factor that you would like to call out which was driving this sequential jump? And just going forward, should we be aware of any seasonality in the upcoming quarters.
Well, in terms of inventory, in general, we do not see a significant challenge stocking in the kind of products that we are dealing. But yes, I mean there are maybe a few products where we may have some sort of indication. But in general, there are no such big stopping issues, okay? The kind of products that we are dealing in our exports. In terms of domestic, maybe Prashant, you want to kind of highlight?
Yes. So thank you. Yes, overall, we know the price has been volatile, but that is why we were cautious even in Q1 in terms of our placement as well. Now with the demand picking up, we don't see any major concern so far. So the overall domestic side, demand is now from July onwards, we are seeing that it is coming out stronger. However, again, if the last 1.5 months only, we are cautious. We have to wait and see how these things progress for remainder of the kharif season.
And your second question in terms of margins. I already explained to the earlier participants that last year, from 22% to 22.5%, 23% currently we are a few hundred basis points, that improvement is there is mainly on account of the operating leverage and kind of product mix this kind of revenue policy, particularly in the domestic business, where the volumes were becoming challenged given the overall market scenario, long term situation, we have very clearly focused on the quality of revenue and margins. And that is obviously clearly reflecting here.
Our next question is from the line of Ankur Periwal from Axis Capital.
My first question on the R&D side. Looking at your annual report, we have seen a sharp increase in the R&D manpower as well as spend. So just your thoughts there, is it largely related to the ag chem side or the new chemistry side? Or it is also focusing on the Pharma and probably one can expect a larger number of new product launches there?
So clearly in March 31, we did not have Pharma in this one. We are clearly focusing the ag chem. side and the process of search and developing side and also to give the biotransformation site that we put in [indiscernible].
So the incremental addition that we have seen now, will this also be including the allocation for the Pharma R&D.
No. That is going to come now, as I said, because the Pharma season will come up later, right?
So looking at the last 3 years' numbers, there is an almost doubling of the manpower there. Anything you'd like to share on the other performance chemicals or the electronic chemicals that we have talked about earlier?
Yes. So clearly, we have taken some of those areas to work. I think it's a good part of it we definitely going to update about where we are in the commercialization of the fine chemical and even what we're seeing there.
Yes. So there has been a good amount of traction around the chemical segment. And there are a good amount of enquiry in the pipeline and advance development is good. We would be commercializing 4, 5 molecules in the electronic chemical. And as Mr. Mayank said that there are other adjacencies where we are starting to build the platform for the biotechnology fermentation and the other new technology and where the additional resources have been funded.
And secondly, we also talk about re-jigging our product portfolio, focusing more upon the ESG angle or the environment part of it. Is this comment largely focused on the crop protection of the domestic business or you are including CSM also here?
No. If you look at PI, it's a part of the PI strategy in every facet of our products, just not in one business area or 2. I mean we definitely look at this, whether it's ag chem. brands, whether it's manufacturing, CSM, automotive [indiscernible] automotive electronics, we are going to keep that anchor as a key driver.
Our next question is from the line of Rohan Gupta from Nuvama.
Congratulations on such a strong set of numbers despite the industry scenario. First question is on further clarification on that, while we are seeing that the entire industry is suffering from the inventory destocking, especially in the global market, we still have been managed to grow 29% in terms of volume growth. Sir, if you can explain a little bit more, is it some because of the nature of our product or the product basket, which we have that continuously seeing the higher volume growth and there was no inventory buildup has happened in last 1 year at all. And that is driving the growth or it is just only that customers keep on buying from you without any pushing or without any delays or still over -- that is still driving the growth for you and may impact our growth going forward if they are consuming or if they are sitting on the inventory on our behalf?
No. The earlier is the reason. It is all about quality of product portfolio, okay, which is it is driving this growth for us. These are early stage molecules. They are growing in different markets. And so far, our customers have also -- and these are basically -- these are not matured products per se compared to some of these generics, which are getting beating in the market, global market. So as a result, and our customers are also not facing some significant challenges or concerns around inventory pile ups and other things. And that is the reason that we continue the growth is there in these kind of products.
So sir, if I extrapolate this thing and if -- since we have not stuck with the higher inventory in the system, and there is no Chinese dumping probably in our case because we are early stage of products. So end customer demand and especially for the new molecules for products like us, which is still so solid that we have been able to deliver a 29% kind of volume growth. Have you -- I mean if the industry would not have stabilized right now with the high inventory, which is the case for most of the products in the market, do you see that the farmer maybe demand is still so strong as what is in case of your products, definitely your products are in early stage molecule, but still at a farmer level demand is very strong.
Well, why my personal view is that farmer level demand is strong even for generics by the way, where there is a beating, currently. The challenge is coming because of high inventory in the channel. So the inventory destocking is happening at the channel level. But that doesn't mean that the consumptions have gone down or the [ equities ] have gone down. That is not the case. So yes, I mean, even in the generic products, it is more about the channel destocking than the significant reductions announced. You take any global scenario and also local scenario in terms of acreages. Prashant you might then add in terms of acreages, crop acreages. We have not seen any significant reduction or reduction in any products, any significant reduction.
Yes, so...
The other impact -- before you sum up. The other impact is of price that some of the generic products the price impact has come product prices have gone down, and therefore, the values have gone down, which is not a major issue in case of products that we are dealing. Yes, Prashant.
Overall, in terms of acres, there was a delay in terms of sowing. So end of June, we have seen somewhere around 16% to 20% reduction especially in rice. But if I look at just to the impact, overall, it is more or less similar to last year, if I look at all the costs, yes, rice is up. That is a positive news. However, cotton is down by around 2%, rice is up by around 3% and pulses are down by 9%, but all other crops, more or less similar to last year. And overall cross-crop area is 0.2% down compared to last year.
So this is nothing.
So it's more or less the demand is definitely looks like coming up. But as I said, till we are early into kharif and we have to wait and watch.
Sir, just on the extrapolation on the same thing. Since you are saying that we are not set with high inventories in the market and demand from the farmer level remains strong. So when other companies are giving the commentary, they are not sure about how much inventory is there in the market and what is going to come up from China. But in our case, we should be fairly confident about it if the farmer level demand is strong. I still didn't get the reason that we are still making a statement like cautiously optimistic while we are seeing that the farmer level demand is coming and it is still strong. I understand that the domestic market may have volatility with the kharif crop volatility. But as far as the global markets are concerned, we should be fairly confident about our volume growth in the current scenario, isn’t it so?
Well, that is the very optimistic way of looking at it. But if you look at a product these are high in the inventory and the price points go below a certain point, it does have a temporary glitch, right? We can't say that it doesn't have any impact. So those are the big things we are cautious about. We are watching. Yes, the buffer is there, but that obviously becomes a little impactful, but you don't go out and say okay because of that, I'm going to start doing erosions, which are short term in order to meet that because that is not going to help it not going to change the scenario. So I think this is -- the balance of economy, which we need to keep to look at demand scenario, component of price product availability and how the balance between availability and value creation. Secondly just to add one more point. There is always a lead and lag even in getting the information on the ground. You see this is not a very advanced industry per se, from the agricultural and rural field or in the global arena, the inventory data coming from the rural market, it's not done. There is always a lead and lag. So we have to be a little cautious in case in all these, even reading these data points.
I need one more clarification if I'm allowed, otherwise, I can come back in queue. Sir, looking at the control and stand-alone numbers, your implied cost seems to be significantly higher on control that talks about the subsidiary, which I mean, Pharma, we acquired roughly INR 23 crores is the difference. While I understand that the one-off items which you have mentioned will be in other expenses. So INR 23 crores probably for 1 month where we had accounted so it seems fairly high. I just wanted to understand any particular adjustment there.
Can you repeat your question? I missed your earlier part of the question.
Employee cost on control is INR 170 crores and stand-alone is INR 150. That means that subsidiaries -- I mean Pharma assets, which we have acquired roughly INR 23 crores, that is a fairly high number. And I believe that the one-off which you have mentioned will be adjusted in other expenses.
Yes, yes, yes. So there are both the aspects, I don't know how you have come to this comparison that, that number is high or that number is low. So first of all -- and how you are relating this to, is also not very clear to me. But yes, I mean, if you look at the acquired business, the overall revenues and et cetera, are for a very, very small period. We are also setting up expenses that are happening. For example, we are setting up still setting up -- we are still setting up our Hyderabad lab. We are still setting up -- we are also hiring, acquiring many of these top leadership players in the Pharma space to -- overall -- unleash the overall value out of these acquired assets. So yes, I mean, in the initial phases, as indicated earlier, we are certainly going to see some of these development spend, including the manpower spend.
And sir, in your consolidated reporting, when you have started getting segmented financials, we also have some part of business coming from Pharma, but that is not clubbed in a Pharma segmentation. Any particular reason for that?
Yes.
In the segmental thing, what is coming under Pharma is already stated in Pharma that is --
That is the cost.
[indiscernible] coming from Pharma.
Yes. So INR 443 crores is coming from a Pharma.
That's right. INR 44 crores, right?
Yes, yes.
But that is only from the subsidiaries which you have acquired, right?
Yes, yes. Subsidiary, PI Health Sciences, which is comprising of the entity that we have acquired in Europe, that entity we have acquired in India and also --
But PI stand-alone basis, also had some Pharma business. We understand 5% to 10% of the revenue used to come from Pharma buyback.
No, no. I don't think. I don’t know where you have got this number, 10% from Pharma that [indiscernible] not at all.
Our next question is from the line of [ Vishal Bera ] from Bandhan AMC.
The question is [indiscernible].
You are not audible, sir, could you please use your handset?
The question is on the future growth for the CSM business for the next few years [indiscernible] your guidance for [indiscernible] so what would be the growth [indiscernible]
You are not audible. Gentleman, you are not audible, if you can please change your mike.
Our next question is from the line of Naushad Chaudhary from Aditya Birla.
Firstly, a follow-up on the electronic chemical piece, which you indicated 4 or 5 molecules we are planning to commercial. So just wanted to understand in terms of the size of opportunity you see here in this piece of business? And how big can it be for you in the next 3 to 4 years?
Let me answer that to settle the debate, electronic chemical business is just an entry point right now. This is not going to be significant number in the P&L but in the next 5 years, we do believe we'll be specialty chemical and we will not call it specialty but fine chemical area, you would see some decent numbers. This is not just electronic, or semiconductor or specialized polymers, which are all going to be the same application. So we could see a 2 percentage points in that part.
So in 5 years, can it be -- in terms of capital deployment, can it be as big as we currently have the CSM Agri and other plant which we have in Pharma? Can it consume...
Certainly not the same size as ag chem. that we have because you'll appreciate that where are we in ag chem. today is the work of last 25 years, okay, and investments made over this period. So what has been said is that -- with our efforts in last 3, 4 years, we have already now worked to extend where we are commercializing several of these products non exim products, including electronic chemicals, specialty polymers, et cetera. And this would surely become a reasonable percentage of our overall revenue. But this cannot be the same or -- I mean, it would be speculative to think that it will become a similar size as our exim business today, no, it won't.
And secondly, on the Pharma side, so INR 900 crores we have deployed on the remaining INR 1,100 crores. Any development on that side?
So again, I mean, your question was not clear.
So the capital deployment piece on the Pharma business side, we had around INR 2,000 crores of plan. We have deployed around INR 1,000 crores so pending INR 1,000 crores any...
Yes, let me clarify here. First of all, the QIP, the INR 2000 crores that was raised was not only for Pharma acquisition, okay, that was for several of our strategic long-term initiative products, including Pharma, of course, for diversification into existence in Pharma. For Pharma, we have already kind of allocated close to INR 900 crores, as we mentioned, for the remaining, we are also looking at several opportunities, including some of the bolt-on opportunities in pharma. We are also looking at other avenues opportunity in the space of ag chem. domestically also and also from outside India. We are also looking at opportunities inorganic opportunities in other technological areas like biochemicals, biosolutions and then several other such opportunities, maybe including brands, distribution, et cetera, beyond the Pharma. I hope that clarifies.
[Operator Instructions] Our next question is from the line of S. Ramesh from Nirmal Bang Equities.
Congratulations on the Pharma acquisition. So if you were to look at the Pharma capital employed, is it possible to share what is the working capital in that piece and any accumulated losses? And secondly, once you reach that normalized revenue of INR 515 crores, what are the kind of investment you'll require on both gross block and working capital? And how do you see the growth in the revenues over the next 2 to 3 years? And is there any clarity on the order size you can share with us?
Yes. So there are several questions in your question, but let me try and answer them one by one. So yes, and I think we indicated earlier that, yes, next 3, 4 years, we would surely want to more than double this business, the kind of business that we acquired. That is one. The investment details are already there in our presentation also and also earlier release. And going forward, as we are scouting for more business and particularly of better quality business. Of course, we'll be making better investment. We already indicated close to $10 million, $12 million investment in the current financial year. Likewise, depending on the business opportunities that we are able to scout, we will be deciding on further investment. But in a nutshell, the overall idea is that we would surely want to and we are internally committed to kind of build a scalable differentiated business over next 3, 4 years time by making further investments.
And second thing is on the domestic market. There's a mention about 9% of your revenue coming from [indiscernible] products. And so how do you see the domestic business performing and the normalized demand based on the new launches? And what is the kind of aspiration for the share of biological products in your domestic portfolio?
Yes, Prashant, maybe you can explain that?
Yes. So our biological products, as I said earlier as well, we have a planned launch of 2 products in this year, one which we are launching in this month and one in quarter 3. Definitely, there is a good traction even though there are many products, especially generic side, which we have seen some challenges, biological products are growing in double digits, and that will continue to grow. So that is what we are clear basically estimating at this point of time.
Our next question is from the line of Krishan Parwani from JM Financial.
Just 2 small clarification from my side. The first is, has there been any purchase order deferment in the ongoing quarter?
Not really.
And then the second is, since second half is usually strong for us. Do you see that trend changing in any sort in this fiscal?
No. As I explained earlier, I mean, so far, we have not seen any dramatic change in the scenario, demand product scenario, the kind of products that we are dealing in. But on the overall industry situation, we are also very cautiously monitoring the situation. And in the next 3, 4 months' time, we will have certainly much better understanding visibility, which will certainly consider where we are coming off with our guidelines post the second quarter.
Our next question is from the line of Rohan Vora from Purnartha Investment Advisers Private Limited.
Congratulations under strong site numbers. So first question was on the operating cash flow side. So as we see that this floating efficiency...
You are not clear now.
We are losing your audio please?
But my first question is on working capital base. We have seen efficiencies in working capital in this quarter. So can we treat this as a norm? Is there a scope of still better working capital day or the day will go up from here on?
No, we see -- we certainly see some more opportunities of improving working capital in some of the business areas, which will -- obviously the turn up will happen. But yes, in short, yes, we see some more opportunities of further improvement.
And sir, my second question was on the horticulture business. So just to get an idea about what would be the size of our market in that particular segment? How big a the products that we deal in?
Which segment you said?
Horticulture.
Prashant?
Overall, in terms of ag chem revenue if I see what is contributing from horticulture is roughly around 30%.
And what would be the size of the pie, just the market as a whole for the products that we deal in?
Yes. So the revenue, which basically what -- the horticulture products which are contributing to our domestic revenue is around 30%.
Sir, I wanted an idea on the market, if you can -- just a ballpark number would be fine.
So overall, if I look at what is contributing horticulture roughly in the industry is somewhere around 25% to 30%. If you look at what is the actual market in India, around 25% is contributed by horticulture.
Ladies and gentlemen, our last question for the question-and-answer session is from the line of Yash Mehta from Steinberg Asset Management.
My one question is that after the acquisition of the 2 entities and now that you are currently in middle of the integration. How has your view evolved on how you think about this business from a longer-term standpoint in terms of you always maintained you wanted a differentiated model, but incrementally, as you see more and more businesses they are becoming similar to each other operating in the CDMO space so. Actually some --
If I may interrupt. You are absolutely not audible, not audible at all. So if you can please repeat your question.
Now that you've acquired and are currently in the middle of the integration, how has your thoughts evolved on the Pharma piece. You've always maintained you wanted a differentiated model. But as we analyze the different businesses that are operating in the space, they seem to be getting more and more similar to each other. So I would like -- would you be able to kind of share some light on this?
Anil.
Anil here. I think if you see the entire value proposition right now, we have many CRO, CDMO players in the market, and they are offering being sensitive, which includes discovery businesses and manufacturing. But in the PI we are also offering the end-to-end pipeline like starting from starting material to be the API, that's what the mission look to the PI. We will be taking the -- our obviously a install a foot hold in the basic chemical manufacturing, discover a lot of [indiscernible] pharma reaction come across fluorination, chlorination, [ purgination ]. You name any identification they are already presented as part of the PI legacy. Like this, we have become much more stronger than the market. We are offering the entire value provision starting from [ RSM to KSM ] to discovery, development, manufacturing and API that is how the unit proposition we have and different tips on the markets.
Ladies and gentlemen, that brings us to the end of our question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you gentlemen and ladies for joining this call and your continued interest in PI. Thank you so much. Have a good day.
Thank you. On behalf of PI Industries Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.