PI Industries Ltd
NSE:PIIND
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PI Industries Ltd
Earnings Call Analysis
Q2-2025 Analysis
PI Industries Ltd
PI Industries is currently navigating a challenging period within the global crop protection industry, which faces pressures such as fluctuating agriculture markets and rising inflation. Despite these challenges, the company has shown resilience and achieved substantial growth during the second quarter of FY '25. The management pointed out the erratic rainfall affecting domestic sowing measures which impacted overall demand for the Kharif season, but still, PI managed to perform strongly.
In Q2, PI Industries recorded a 10% increase in Agchem exports, driven by both volume growth and the introduction of new products, which saw a remarkable 42% year-on-year growth. This showcases the company's successful strategic initiatives despite the backdrop of a typically poor industry sentiment.
The domestic business exhibited a 7% improvement in branded products during the second quarter, with a volume increase of 12%. The biologicals portfolio particularly shone, delivering an impressive 18% growth, indicating a strong appetite for innovative agricultural solutions in the market.
PI Industries reported significant financial growth with a revenue of INR 22,210 million in Q2, marking a 5% increase year-over-year. Moreover, gross margins expanded by 519 basis points to 52%, while EBITDA increased by 14% to maintain a healthy 28% margin. The profit after tax increased 6% to INR 5,082 million, owing to EBITDA growth despite a rise in the effective tax rate to 23%.
The export revenues accounted for INR 17,610 million with an 8% growth, while the domestic segment reported a slight decline of 5% to INR 4,600 million, attributed mainly to pricing pressures in the market. Nevertheless, the overall expansion in gross margin indicates strong operational efficiency and cost management.
Looking ahead, management has adjusted its growth expectations to a high single-digit range for the entire fiscal year. They emphasized that growth for the second half would be driven predominantly by the demand for new products launched over the past three years, as well as ongoing capacity expansions. Guidance has been provided for double-digit growth in domestic revenues driven by robust performances in several crop segments.
Management indicated challenges are temporary, with industry dynamics shifting due to destocking trends observed among major global players. Although there may be a slowdown in Agchem exports, with expectations for high single-digit growth for the second half, management believes that fundamental demand drivers remain strong, including global population growth and concerns around food security.
PI Industries has recently completed the acquisition of Plant Health Care, focusing on developing existing market portfolios and advancing research and development initiatives. This acquisition is expected to significantly contribute to the company’s growth trajectory in the coming years, though management anticipates that it may take a couple of years to reach EBITDA positivity due to subsequent development expenditures.
For FY '25, the company has outlined a capital expenditure plan in the range of INR 100-125 crores for their pharmaceutical vertical, focusing on infrastructure improvements and bolstering business capabilities to support a growing market presence.
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Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '25 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.
Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries' Q2 FY '25 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. Sanjay Agarwal, Group Chief Financial Officer; Mr. Prashant Hegde, CEO, Domestic; and Dr. Ramesh Subramanian, Global CEO, PI Health Sciences.
We will begin the call with key perspectives from Mr. Singhal. Thereafter, we will have Mr. Agarwal sharing his views on the company's financial performance. After that, the forum will be open for question-and-answer session.
Before we begin, I would like to underline that certain statements made on today's conference call may be forward-looking in nature, and a disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on exchange website.
Please note that some of the management team members are traveling and hence, join on mobile connection. So please bear with us in terms of audio quality. I would now like to request Mr. Singhal to share his perspective.
Thank you, and over to you, sir.
Yes. So thank you, Nishid. Thank you, and good afternoon to all of you. Very welcome to our call to the PI's review of performance for the second quarter of the first half of FY '25. I will start by providing a perspective on the current state of the global and local industry, update of our operational progress and highlights and strategic milestones that we are working towards.
As you know, the global crop protection industry is currently navigating a challenging landscape influenced by fluctuating agriculture markets, commodity prices, destocking, general product pricing pressure, rising inflation and deferring purchase decisions and so on.
On the domestic side, delay and erratic rainfalls are impacting sowing measures of many crops, price pressures of generic channel inventories, et cetera, also impacted the overall demand scenario and sentiment for the Kharif season. PI, on the other hand, had shown resilience despite the generally poor industry sentiment. We have once again achieved a strong financial quarter and H1, consistent with our plans.
During Q2, we have delivered 10% increase in Agchem exports driven by volume growth and growth of new products. New products have shown a 42% increase year-on-year. In the domestic business, we saw a 7% improvement in branded products, where volumes have -- are sustained at 12% with an impact on pricing seen across the industry. However, given our emphasis on product mix and optimization of working capital management, the impact has been well mitigated.
I wish to highlight that here, our biologicals portfolio has delivered a robust 18% growth year-on-year and had seen an enhanced profitability margin in line with the product mix and contribution from Biologicals. As a leading player in the Agchem CSM sector, we are confident in our capacity to enhance engagement with innovators.
Driven by our ongoing commitment to improving key technologies and chemistries, our focus on high-end projects have led to a collaboration with top innovators on the commercialization of advanced molecules. Additionally, as previously mentioned, the pace of these commercializations have increased in line with our investments in R&D and technologies.
On the domestic front, the business model is well aligned to introducing new brands with high-value growth across segments and biologicals. During the first half, we saw four new brands launched. These were: PRESSEDO, a novel broad-spectrum insecticide; DORITO, once again, a broad spectrum insecticide for cotton and brinjal; OSHEEN ULTRA, another superior formulation for sucking pest; and SOLJU, which is a microbial biofertilizer.
H2 had seen a couple of more brands getting introduced. There is equally attractive runway of growth available in the domestic business, where we have demonstratively superior product pipeline. We are presently in high potential categories with Agchem, horticulture products and biologicals which has underwritten margins led growth in the years to come.
PI had a history of setting industry-leading outcomes. Our relationships with big global innovators is strong. Consequentially, the pace of 6 to 7 molecules getting commercialized will be maintained. Molecules which have been commercialized in the recent few years are gaining scale, driving runway of sustainable growth.
I'm confident that the next batch of molecules should maintain these levels of traction and enhance our mix in the periods to come. The pace of new inquiries are healthy with more than 50% coming from non-Agchem from innovative products. This work that has been done in advanced research, new chemistry and technologies are aiding this trend.
We have seen recovery of our domestic revenues in the second quarter. Several high-performing brands have established in each crop segments in horticultural areas. The recent initiatives on this biologicals front and from the technical foothold are upcoming growth areas for us. PI has set a sterling record of execution and with a strong of its balance sheet in place, are very comfortable to continue delivery as per plan, adjusting on such temporary industry level disturbances.
As we finalized the acquisition of Plant Health Care, following the successful completion of the legal and regulatory requirement of this plan, the business boasts top-class experts, products, intellectuals and protein and peptide platforms for agri biologicals. This has experienced considerable success in the commercialization of peptide products. Both current and pipeline offerings present similar growth potential with plans to advance development efforts to continue to introduce more innovative class of biologicals solutions at a global scale.
On the other hand, our pharma vertical is shaping as well, and upgrade is underway in infrastructure and business development capabilities. We have seen -- we see the investments in a view for having integrated CRDMO for global innovator. We are building leadership strength in the U.S., Italy and Hyderabad in both business developments and scientific areas. And I'm very happy to say it is well in place what is going to take to drive the business into the future.
During the first half, we've seen revenues remain impacted due to high inventory with innovators. We expect the order visibility to translate to healthy run rates in H2. Initiatives for upgrading the capabilities are progressing well. And in the coming years, [indiscernible] showed strong momentum in growth in PI. Our Hyderabad facilities are commencing operation whereas upgradation of Italy facility is expected to be completed by the year-end.
We have continued our efforts and initiatives to keep improving our ESG performance, which is reflected in the recent upgrade of S&P Global of CSA ranking at the 97% in reflection to our vision of reimaging healthier planet. This has put us in the Global Sustainable Yearbook of 2024 as one the only few companies from India.
Considering this global industry scenario, we are realigning outlook to high single-digit growth. Now we'll keep updating this as the industry passes through the transient phase. Growth in the second half of the year will be driven by demand scale of new products launched in the last 3 years, capacity expansion is on track and momentum for few inquiries.
I would now like to conclude my remarks and hand it over to Sanjay, our CFO, to move forward with the conversation, and thank you once again for being with us. Thank you, and over to you, Sanjay. Thank you.
Thank you, Mr. Singhal. Good afternoon, friends, who all are there on the call today. I'll summarize the company's financial highlights for the second quarter ended September 30, 2024. Please note that all the comparisons are on a year-on-year basis, and we are referring to the consolidated performance.
As Mr. Singhal has shared, our performance demonstrates a differentiated approach of doing business and a sharp focus on keeping operating parameters in line with the objectives.
To share specific highlights. During quarter 2, we reported a revenue of INR 22,210 million, a growth of 5% over the same period of last year, which also translates into a 3-year quarter 2 CAGR of 18%. Export revenues grew by 8% at INR 17,610 million and a 5% decline in domestic revenue to INR 4,600 million, while the revenue of the branded products grew by 7%, volume growth was 12%.
There's been also a healthy expansion in the gross margin by 519 bps to 52% and EBITDA has increased by 14% and stands at 28%. Profit after tax increased by 6% to INR 5,082 million, primarily attributable to the EBITDA growth in spite of increase in our ETR to 23%.
Let me also cover the YTD performance, which is for the half year FY '25. Revenue has grown or revenue is INR 42,899 million, a growth of 7% over the same period last year, again translating into a 3-year H1 CAGR of 19%. Export revenue grew by 10% to INR 35,104 million, and 6% decline in domestic revenue to INR 7,795 million. While the branded -- revenue of the branded products grew by 3%, there is a volume increase of 9%.
So overall, the expanded gross margin and EBITDA stands at 52% and 28%, respectively. And profit after tax for the half year improved or increased by 11% to INR 9,571 million. ETR for past 6 months, YTD has been at 22.1%. We expect the ETR for the full financial year FY '25 to be in the range of 22% to 23%.
Cash flow from operating activities also increased by 20% to INR 8,006 million. This was due to higher EBITDA and efficient working capital management. The trade working capital days in terms of days of sales has improved from 84 days to 70 days. Similarly, better inventory management has led to a reduction in inventory days from 63 days to 50 days.
In terms of the balance sheet, as you would have noticed, balance sheet has been further strengthened during this quarter. Our net worth has increased to INR 95,454 million as of 30th of September and a healthy net cash balance of INR 39,227 million.
With this, I conclude my opening commentary. I now request the moderator to open the forum for Q&A. Thank you.
[Operator Instructions] We'll take our first question from the line of Ankur Periwal from Axis Capital.
First question on the pharma business here. We have been seeing pretty soft revenues. We have got the onetime expenses that we incurred in this quarter. But otherwise, also the margins have been keeping low. Just trying to understand your thoughts in terms of the volume, whether there is a volumetric decline as well or it is largely pricing and the trajectory going ahead over there?
Thanks, Ankur. So the key reason for softness is the temporary blip in terms of some of these products that we have been supplying, there is inventory at the innovators level and therefore, the inventory picking is slow. And that has also impacted overall margin profile as you see.
The other impact is also -- one of our customers also filed kind of Chapter 11 in this quarter. And because of that, some inventory, which was meant for them, is also we are holding it. We have not yet supplying, and that has also impacted this quarter's projected revenues and therefore, the margin because the development spend is continuous. I hope this answers your question.
Sure, sir. Just a follow-up there, so from a volumetric perspective, is there a as significant a decline in terms of volumes as well, what we see in the revenues? And how do you see the trajectory picking up?
Yes. So for H1, there is certainly volume reduction, but we are now seeing the volumes picking up in the third and fourth quarter.
Okay. Fair enough. Second question on our guidance, wherein now we are expecting a high single-digit number versus, let's say, a 15% sort of a growth earlier. What is driving this guidance revision? Is it the domestic Agchem business, which has declined year-on-year in H1 or the pharma or the ag CSM or all of them?
Well, it is mainly -- I mean, in any case, as you know, that pharma doesn't contribute significantly to the overall PI's revenues, et cetera, as of now. So this realignment, we are doing in view of the global industry landscape that we are seeing. We are also experiencing that at least for the short term, people are in a wait and watch kind of a situation, where they are sort of still monitoring and very critically monitoring the inventory levels.
And you must be also reading in commentaries of these global companies that everyone is monitoring their inventory levels and they are kind of in a wait and watch kind of a mode as of now, deferring their procurement decisions. So in view of this transient kind of a phase, we have also kind of realigned our growth guidance for FY '25, which we were earlier projecting in double digits. We are now seeing that we should certainly be aiming for higher single digits or early double-digit kind of a level.
So just a clarification here. So when you say deferment in the short term, essentially, we are referring to the entire H2 then, right, because this is a peak season from a business perspective for us. So any deferral here is going to -- the recovery will be further back-ended in FY '26 then. Is that the right way to look at it?
Well, I'll not, at this point, kind of comment on mid to long term because, as I said in the beginning, this is kind of a wait and watch kind of a situation at this point. But yes, we are clearly able to see next two quarters, and seeing those next 2 quarters kind of scheduling, we believe that, yes, we should be getting higher single digit or near double-digit kind of numbers.
[Operator Instructions] We'll take our next question from the line of Vivek Rajamani from Morgan Stanley.
Am I audible?
Yes.
Yes. And sorry, just to kind of go back to the previous question, and you've mentioned that you're facing these inventory issues. I just wanted to check if these issues are actually more focused on your legacy portfolio. And given that you were actually reporting very, very strong volume numbers for the past many quarters, I just wanted to understand if that's actually what has caused a bit of an inventory pile up. And I just wanted to get your assessment in terms of how severe you think this could be, a bit of an extension of the previous question.
Yes. So this is certainly pertaining to some of our existing products because if you see in terms of new products, we have registered an impressive growth of close to 40%, 42% in this quarter in CSM. If you also see that in last two quarters, last year as well as before last year, we have been, I mean growing at a very, very decent pace. I mean, 20% plus year before and 30% plus before that.
So yes, I mean, some of these existing products it seems that the customer level, channel level, they are kind of witnessing some sort of inventory. And therefore, given the overall industry scenario, and also general pressure on these companies to rationalize their working capital, et cetera, they are kind of rationalizing some inventory levels, et cetera.
So that is one effect. In terms of new products, new product portfolio, I think those are doing well, which is also reflecting, as I said, in terms of growth, year-on-year growth that we are witnessing.
Sure, sir, that makes sense. And the second question I have is a bit of a two-part question on the margins. Again, the margin trajectory has been very, very strong. So I just wanted to understand how much of this is actually coming from the newer products? So if could just give us some sense of how much these new products are making up of your overall export portfolio? And just how different are the margin profiles here compared to, say, your legacy portfolio?
Well, new products account for anywhere between 16% to 18%, and it depends on the quarter that we are talking. The margin profile is generally, I would say, similar, not significantly different. Yes, in case of new products, as we produce campaign after campaign, we keep improving the processes, and therefore, some margin improvement is always there, which is also shared with our customers. But yes, the profile is, I would say, broadly similar.
We'll take our next question from the line of Madhav Marda from Fidelity International.
My first question is on the margin profile. If I look at PI's longer-term history, generally, gross margins for us have been about 45%, 46%. In the last 2, 3 quarters, this number obviously has moved up to a very healthy 52%, 53%, which is helping EBITDA margins as well.
Just could you give us some sense in terms of sustainability of these gross and EBITDA margins for the company on a longer-term basis? Is it because is it a product mix thing? Or is it like domestic is a bit weaker, which is why margins are a bit better for us? Could you help us understand something there?
Yes. So this is on account of product mix mainly, because product mix -- when I'm saying product mix, this also accounts for the mix of existing and new products in our exports. This also accounts for our domestic business, where we are also commercializing a lot of new products and particularly biologicals.
So yes, I mean, the product mix has been favorable for us over the last few quarters, and that is certainly driving this margin improvement that we are witnessing both in terms of gross margin, in terms of EBITDA margin.
So is that a sustainable trend? Or once some other parts of the business probably come back, of course, there are some parts of the portfolio where maybe growth was a bit slower because of challenges which you highlighted. So once that comes back, do we see like better revenue growth, but with more normalized margins in line with historical? Or is this like a new base for margins for the company?
Yes. So we consider 26%, 27% margin to be sustainable, particularly in the core business that we are talking, which is exports and our domestic. Yes, of course, as you know, on the consolidation basis, we are also investing in some of these new businesses, whether it is health science or whether it is our biologicals, global biologicals. But yes, on core business basis, 26%, 27% margins are very much sustainable.
We'll take our next question from the line of Abhijit Akella from Kotak Securities.
Sir, if you could please just help us understand, of this high single-digit revenue growth guidance for fiscal '25, what sort of expectation do we have for the agrochemical CSM business in particular? And then maybe any of the other lines as well?
So maybe if you can please explain a little bit, Abhijit. I couldn't get your question.
So I mean, high single digits guidance, I presume is for the overall company level.
Yes.
So within that, for the Agrochem CSM business, in particular, is there some sort of range we can offer, a guidance range?
Yes, yes. So as you know that we have already done reasonably well in terms of our exports we have grown by almost 10% -- 10%, 11% in the first half. The domestic branded business was little relatively subdued. But given the positives on reservoirs and prospects of a reasonably good Rabi, we believe that we should be doing well in our domestic branded business, maybe double-digit or early double-digit kind of growth.
And on the other side, because of scheduling many of the products, we have been able to supply during the first half, on export side, it maybe higher single-digit kind of growth or single-digit kind of growth that we are seeing. So on a blended basis, that is the reason we are saying that we should be reaching close to -- I mean, higher single digits or near double-digit kind of numbers.
Just to clarify, these sort of numbers you mentioned, early double digits for domestic and high single digits for exports, this is for the second half only or for the full year?
No, second half. Since you asked me for second half, I was trying to explain you for second half. And for full year basis, this will result into higher single digits basis our estimate.
Okay. Okay. That's helpful. And just one last thing from my side. One is the other income seems rather on the higher side. So what exactly has contributed to that? And how sustainable is that? And also just on the revenues from new products, it's 16% to 18%, that pertains only to the CSM business, right? Not -- that 16% to 18% of CSM revenues is what we are seeing. Just to clarify that.
Yes, yes, yes.
Yes, also on the other income, that's primarily gone up due to interest earned on higher cash balance. So if you see this year, we have INR 3,922 crores versus INR 2,890 crores last year. So the base of the cash balance, what we have has gone up, say, by around 25%. So that has led to higher interest income. And then there are small one-off gains primarily due to some favorable orders we have received on tax litigation, yes. So that broadly adds up to the other income increase.
So the one-off items, is it possible to just split out how much that must have been?
So that wouldn't be that significant. Primarily, as I said, it's because of the higher cash balance what we have, which is booked on a consistent basis.
We'll take our next question from the line of Rohit Nagraj from Centrum Broking.
So first question, again, delving on to the CSM part of the business. So given that probably our customers' innovators would have finalized the volumes for 2025. So how do we have a visibility on our legacy products and new products from a calendar year '25 perspective? Although you have given largely for the second half, but just to be a little bit on a broader perspective for 2025.
Well, it is a little early. And as I said that since at this point in time, people are in wait and watch kind of mode. So for many products, yes, there is a clear indication and longer-term understanding is there. But for many of the existing products, still there are assessments being done at their end. So we will be able to know of a clear picture maybe in next 1, 1.5 quarters.
Fair enough. Sir, second question is, usually, we give our order book, which is missing during this particular quarter in the presentation. So is it because that the way you answered the earlier question in terms of the visibility that we have or there is some order book which has probably got dissipated because of the impending issues? Just your thoughts on the same?
No, nothing, nothing. There was nothing significant improvement to report, and that's why it is not there figuring there in our communication. But yes, we still maintain 1.45 -- 1.425 billion kind of order book position as of now.
We'll take our next question from the line of Kalpit Narvekar from EFG Asset Management.
So my first question is on this, the growth for the Agchem exports business, right, which was about 10% for the second quarter, and you flagged that the new molecule growth was 45%. So could you elaborate a little bit as to -- I mean when I back calculate, it shows that maybe the growth in the legacy molecules is only 2%, 3%. So could you kind of elaborate...
I'm sorry to interrupt, Kalpit.
Gentleman, your audio is not at all clear.
Kalpit, may I request you to move to handset mode?
Am I audible now?
Yes, it is better.
So my question was that the new molecule growth for this quarter has been 45% on about 18% of your business, right? So that may be like contributing 8% of the total growth and the total growth was like 10%. So that kind of tells that your old legacy molecules are probably growing at like 2% to 4%. So could you just elaborate on why that legacy molecule growth has kind of slowed a little bit?
Yes. Obviously, this is the -- this is what I was saying that some of our old legacy molecules have grown slower, whereas the new introduction or newly commercialized molecules in last 2, 3 years, the pace of growth there is certainly much higher, more than 40%. Even I recall last quarter also, it was more than 20%, 24%. So yes, I mean, this is the kind of change that we are seeing.
So two things are happening. One is that we are very aggressively introducing new molecules. This year itself, we would be launching or commercializing I think 7, 8 products -- 6, 7 products, okay? We have already commercialized 4 products in the first half. And on the other hand, the growth of these newly commercialized products is also higher because they are -- obviously, they are growing on a lower base. So yes, this is what is reflecting in overall growth of exports, CSM exports.
Sure, sure. And sir, my second question was on the second half outlook that you mentioned, right, that you expect kind of high single-digit growth for the Agchem exports, but that growth was like 10%, 11% for first half. And you -- and the other way around for the domestic, right? So essentially, you're seeing some softness on the Agchem export side, right?
So what are the key reasons of that kind of slowdown from 10%, 11% to high single digit levels on Agchem export side for the second half? Is it more because of the industry that the destocking you thought was coming to an end and maybe it's not? Or is it also due to some competition? Just to get some reasons on that, right?
Yes, it is mainly because of -- as I explained earlier, it is mainly because of inventory levels and the initiatives of these global companies to kind of bring down their overall working capital investments exposures, et cetera. So that is the key reason.
And just any kind of visibility on like when it can potentially -- like when the inventory is kind of normalized and stuff? Or it's still too early to kind of call out on that?
Well, we get different kind of -- I would say we get different kind of indication. So yes, some indications suggest that maybe 2, 3 quarters more before this whole thing is normalized. We also, by the way, very interestingly, get certain scenarios where we were indicated that there is a slowdown and then that specific product requirement. And then suddenly, 1 month later, 2 months later, we are shipping products by plane, by aircraft.
So you can imagine, there are different kinds of scenarios here. And this is the reason -- I believe this is more a wait and watch kind of a situation, a transient situation, a very temporary kind of a situation because if you ask me in terms of fundamentals of this business, so given the growing population, given this increasing climate change concern and food security concerns and all those aspects, we are not seeing acreages going down by the way, okay?
So demand in mid- to long term has to be there, will be there. It is only these temporary phenomena that because of the -- some of the generic pricing pressure, some of these commodity pricing scenarios, destocking in some of these markets that it is reflecting on overall behavior at this point. But we believe that in next few quarters, these things should streamline to a great extent.
[Operator Instructions] Next question is from the line of Aditya Jhawar from Investec.
Sir, just one question. What has been the pricing trend for some of our key older products? Are we seeing any change in that?
Well, those have been, I would say, reasonably stable pricing. Of course, wherever there is some softening of raw materials, I mean those impacts are obviously reflecting in the selling prices. But if your question was more about our exports of existing molecules, yes, it was reasonably stable, I would say.
Okay, okay. That's good to know. And you explained well about the inventory buildup. But sorry to harp on the same topic. So clearly, any -- since you cater to the innovators, the supply is fairly curtailed in that sense.
Now are we seeing a situation on the ground where some of the products are seeing increase in competition? Are we seeing a shift towards generic maybe down-trading because generic companies have -- some of the generic companies have reported a strong volume growth? Any specific thing that you would like to call out on product-specific issues?
Well, to be honest, we have not seen -- so far seen that sort of scenario that some of these products volumes are getting curtailed or some genericization impact is coming in. At least as of now, we do not see that sort of a situation. In fact, we have also not seen a significantly great performance coming from some of these generic companies as well. So I don't know what kind of generic movement that you are indicating towards. But yes, we...
Also, I want to highlight -- I mean, I want to highlight that we may also need to look at the base from last year while they're showing the growth of -- whatever the growth, please look at the drop in the base of volumes last year, and then you can probably get a better sense.
Sure, sure. That's helpful. Final question on the CapEx...
This is what, Aditya, I was also explaining that if you see kind of buildup of this growth. So for example, for last year, same quarter, we grew by 24%; before last year, 29%; even first half, if you see, last year, we grew by 22%. And before last year, almost 30%. So point being made is that this buildup is over a period of time.
And because of some of these -- not specifically for our product, but in general, some sort of challenges in the industry. And whenever you have these sort of challenges, I mean, obviously, rationalization, optimization, all those things come in. And yes, those will have their own impact.
Yes. Sir, final question. So could you please remind us which are the key markets for our main products where registration process is still ongoing, we are yet to launch, in some of the major markets?
For what -- for which product you're referring?
So one of our biggest product, pyroxasulfone, which is -- which are the key markets where the registration process is still...
We would not be in a position to comment.
Because this is -- registrations are generally taken up by the innovator, not by us. Our product...
There is geo-tagging also for a location. So we might have -- I mean, last time, I think I remember you indicated about 12 markets. And just wanted to get an update on that. Okay, fair enough. I'll take it offline.
And final question, sir, any change in CapEx outlook considering the changed situation?
No, we are going with the same plan, INR 800 crores, INR 900 crores this year. That is the plan.
We'll take our next question from the line of Nitin Agarwal from DAM Capital.
Sir, on the pharma business, sir, what is the outlook for the business from hereon? And sir, if I can, from the time you acquired business, what has not really played out to plan?
So outlook, I already explained to the earlier participants, that we are seeing volume uptick from second half. This is what the current assessment is. In terms of your second question that what has not ticked, so I will say, I mean, I do not see anything that has not ticked because we always maintain that we are acquiring these companies to build this platform.
A lot of development effort will be there and which is what we are currently doing, whether it is upgradation of the facilities that we have got with these acquired entities or whether building leadership teams, both on the research side as well as on business development side, building new clients, pipeline. So a lot of development spend is happening.
I would also request maybe Ramesh, who is there, my colleague, to put some light on this. Ramesh, you're there?
Yes, I am. Yes. So as Rajnish pointed out, what we focus on is to add the right people to the team. We've now almost fully staffed based on the business side and on the scientific side. And the second part we're focused on is operationally to get the right cadence and so we focused on the sites that we acquired to make sure that any customer that comes in is able to scale it up, right, so the people who come want to stay with you for a long time, and that's how you built a sustainable business.
So to that extent, we have sort of back integrated one of the sites that we got in Italy by putting a kilolab in that should be operational -- we're almost there and that should be operational in Q1 FY '26, so that we can begin projects there. And the R&D center in Hyderabad and Jaipur facilities are also are now operational.
So we've got the operations thing almost done and we finished the key hires. And we've had some headwinds in terms of the generic market also in the pharmaceutical business. And we see that also sort of fading off and green shoots happening in terms of the future. So starting from H2 this year and for the future, we expect to provide you with a lot more detailed answer on both the pipeline build up and future growth.
And Ramesh, do you expect the business to be EBITDA positive? When do you expect the business to become EBITDA positive, from which period of time?
We certainly hope that the trend will begin even in H2, but I'll be able to give you a lot more clarity as we go into Q4 next year. So if you can just hold that part as I push through.
Okay. And if I could have a last one, what is the pipeline like on the CDMO side in your business right now? How many products do we supply commercially? And how many more do you expect to go commercial?
So the pipeline buildup, in general, I can comment saying that we are engaged with several customers both on the early development side, on the late development side, right? On the commercial side, although we are talking to customers -- with multiple customers, commercial projects are not easy to come by. So typically, we try to get into the late phase and then go into commercial. That's what we are trying to do.
We'll take our next question from the line of S. Ramesh from Nirmal Bang Equities.
In the pharma business, you have mentioned on Slide 13 some new addition to your business like new CDMO order and three new projects. So is it possible to quantify this in terms of what will be the impact on revenue and by when? And some color on exit revenue for FY '25 if I may ask?
Sorry, come again, what was your second question?
The second question was the -- what do you hope to achieve as revenue by the end of March '25 or exit revenue for the base for FY '26?
Yes. So we are targeting to achieve INR 250 crores to INR 275 crores in the -- by the end of this year. But yes, we are also monitoring the inventory situation and talking to these large customers that are there currently. So yes, this is more of the current assessment that we can share.
In terms of your other question, projects identified for near, long term. So again, I think it will be too early for us to kind of quantify these numbers. But yes, the key point here is that there is a significant pace that these new customer interaction, engagement and development is happening with the strengthening of our team both in U.S., Europe and, of course, in India.
And by the way, this is only the second year of this business. So as we have indicated in the past, that it will take for us a couple of years' time to kind of bring this to a faster pace from the levels that we have acquired it. And we are still very, very confident that in the next 3, 4 years' time, we'll be taking this to a completely different level, making a meaningful contribution to the overall PI's business.
Okay. That's useful. And secondly, if you look at the domestic business, I think the revenue of INR 460 crores is very heartening, possibly is one of the highest. So in the context of the growth in new products you talked about and the pricing pressure, can you highlight what is the kind of timeline you see for the pricing pressure to abate? And any key segments or crops where you saw the growth? And how do you see the second half based on the strength in Rabi fundamentals helping you in terms of the second half performance in the domestic business?
So there were too many questions. So let me try and respond one by one. So I think I already explained to the earlier participants about our current outlook for the second half. We expect to do better in terms of our domestic revenues, distribution business. We expect Rabi to be going well.
We already have launched a host of new products. There are already very, very interesting products which were introduced in last 2, 3 years. So we have a very decent portfolio where a lot of effort is going on. And we expect that we should be growing in double-digit terms in our -- at least in our domestic distribution business in second half.
As far as our exports are concerned, second half, as I said, we will be in the higher single-digit kind of level given the overall industry scenario, global industry situation that we are seeing. And then for pharma, I think we have separately explained to you. So probably this answers your question.
Okay. So on pharma, one last thought, you've given some CapEx details. So can you give us some sense of how much you plan to spend for the full year in CapEx in pharma for FY '25 and for the next couple of years?
So for this year, I think we already indicated the CapEx is to the tune of some INR 100 crores, INR 125 crores for FY '25. And for next year, it will be half of it because a lot of spend is already done this year in pharma at least.
We'll take our next question from the line of Siddharth Gadekar from Equirus.
Sir, given that we have completed the Plant Health Care acquisition, can you give us some color in terms of how are we planning to scale up this business in terms of both domestic and global launches?
Mayank, you may want to add something?
Sir, I'm sorry, Mayank-sir is not there on the call.
Okay. So on Plant Health Care, we completed -- as you know, we completed our acquisition this quarter, completed quarter. Now our objective is basically to make investments in development of their -- market development of their existing portfolio, and also research development of their pipeline because it's a cutting edge kind of platform, the tech platform that is there.
And they have three products, which are already commercialized in major markets like U.S., Brazil, Europe. We would also be commercializing some of these products in India for which initial effort is already started. And in other markets, a lot of development work because these biologicals need a lot of initial development for market development.
So those efforts will be made and because all these three products have a significant growth potential across these major markets that I explained. The other market I forgot to mention was Mexico, okay? So Brazil, Mexico, U.S., Europe, and of course, India.
We are also kind of very actively currently working with the research team of Plant Health Care and looking at opportunities of working on joint development, along with our research setups, agri research setups in PI. And also both from biological side, on chemical side, how we can kind of work on these two different teams and come out with some very, very interesting solutions for the regenerative and sustainable farming, this is the next goal for us in this business.
But yes, I mean, it is suffice to say that we have a very interesting technology platform in front of us, an interesting portfolio in front of us. And now the whole effort is to do the development work and take these products and businesses and pipelines to their potential. That's the idea.
And secondly, in terms of manufacturing these products, would we be looking to also manufacture these products in-house or we would continue with the existing vendors from Europe? How would we think about that?
Well, we are evaluating various options. So for now, we are continuing with the existing sources. But yes, I mean, for future, we will be -- we are already evaluating several opportunities.
Sir, just one last question. Plant Health Care had spoken about $100 million plus revenue by '28, '29. Do we think that we could get to that number now that -- given that we have a strong balance sheet size as well?
Yes, that is very much possible given the significant potential those products have.
We'll take our last question from the line of Sumant Kumar from Motilal Oswal.
So for domestic business, in the last 2 quarters, and we have seen a 6% degrowth. When we see the industry growth is in higher single digit or double digit and other agrochemical companies are performing. So is there any issue with our any products which -- were the price is declining apart from what institutional sales degrowth you are talking about?
Yes. So domestic -- as far as our domestic brand business is concerned, there's no degrowth and that is the reason we try to also explain in our investor communication that there is volume uptick that we are seeing. For example, for the first half, we have seen close to 9% kind of volume growth.
Yes, we have seen some price reduction or price pressure in some of these old molecules of ours. But yes, overall, there is 3% growth. In the second half, as I mentioned earlier, yes, we are expecting double-digit kind of growth and which is mainly driven by many of these new introductions that we have done over the last 2, 3 years. Maybe Prashant, if you are there, you want to give some color on domestic brand business? Prashant?
Yes, domestic brand business has registered a growth of -- volume growth of 12% and overall growth of 7% in quarter 2. And in H1, volume growth of around 9% and overall growth of 3% because there is a price correction.
Second half is looking good. Water in the reservoirs are better. Hopefully, adverse weather-related events, what we have seen in the first half, are behind us. Hence, we are seeing a good momentum, especially in crops like chili, rice, pulses, fruits and vegetables, plus the three new products which we have launched in first half, and another three more products which are scheduled for launch in the second half, these things should help us to register a good growth in second half.
We'll take one more last question from the line of Krishan Parwani from JM Financial.
By when do you think our recently acquired Plant Health Care business could turn EBITDA positive? And does this quarter contain any one-off expenses from the acquisition?
Yes. I mean there were some one-offs, not in front of me, but yes, there were some small one-offs in this quarter. But yes, it will take, I would say, a couple of years' time, 2, 3 years' time for this new business to come up and mainly because, a lot of development spend would be needed.
Because there are products, there are existing products and pipeline, as I was explaining, and a lot of development spend would be needed to kind of grow these markets, the large markets that are there from U.S. to Brazil to South America to Asia to Europe, and also a lot of research work which will happen. So yes, maybe in couple of years' time, we would expect this business to contributing in terms of profitability.
Noted. And lastly, if I may. So let's say, despite a negative contribution from PHC and also our health sciences business, you expect this 26%, 27% margin. So you are expecting a decent performance in the Agchem CSM business. Is it correct?
Yes. So this is what -- when we share our outlook on margins, we account for these development spends that are happening. So yes, we will continue. I mean, the strength of our portfolio, both in our exports as well as in our domestic, so strength of our product portfolio, the technologies that are helping us keep on improving processes and margin profile of these products basically differentiates us in the industry and that strength will continue.
So thank you so much. Thank you all for your continued interest in PI. We really appreciate your time and effort in joining this call. Thank you so much.
Thank you, members of the management team. On behalf of PI Industries Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.