PI Industries Ltd
NSE:PIIND
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PI Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 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.
Good afternoon, everyone, and thank you for joining us on PI Industries Q4 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 of Exports; and Mr. Anil Jain, MD, PI Health Sciences.
We will begin the call with a few perspectives from Mr. Singhal. After that, we will have Mr. Manikantan sharing his views on the financial performance of the company. Thereafter, the forum will be open for a 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, and a 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 invite Mr. Singhal to share his perspectives with you. Thank you, and over to you, sir.
Hi. Good afternoon, and thank you for giving us your time today as we discuss the performance of PI industry during the quarter 4 and the annual year '24. I will do use remarks to share the strategic and operational updates around the business. I'm sure my voice is clear because I'm seeing an echo. Is that okay on the other end?
Sir, you can go ahead, sir.
All right. Sorry. Okay. I will share my remarks in strategic and operational update around the business. Quarter 4 for the year has been another commendable performance from PI, yet again delivering broadly as to the guidance despite industry headwinds.
Q4 revenue grew by 11% year-on-year. For the year, we had a growth of 18% of revenue. The improvement in the property stands even better at the PAT growth of quarter 4 and for the year that's coming from 32%, 37% respectively. The global industry has seen a performance pressure in the past 3 to 4 quarters, and the situation is yet to recover fully. The inventory destocking cycle is seemingly incomplete, and any material improvement in the demand and proton trends is projected to commence only in the later part of the current financial year.
These trends chiefly impact general products, is concise stood apart from its being delivering above those trends in the last several quarters. Going forward, as on the ground situation changes, we will continue to do well, benefiting from the announced and of the industry. This has been possible due to differentiated business model and for portfolio of PI. Our growth is mainly driven by commercialization of new products in the early stage of the life cycle, which showed a significantly growth potential in [indiscernible]. At as and when we know it progresses with the global execution, this gives us some future upside. The cycle continues, as you commercialize more new ag molecules from these pipelines, what continues to attract global innovators to PI is our demonstrated capability in process development and innovation efficiency scaleup.
Complex molecules, project execution capabilities and our ESG standards of a war with respect to IP. On the export front, including kind of commercialization of new molecules will only intensify. During the year, more than 70% of the growth has come from new products.
Our pipeline of new molecules also remain robust. And there, the share of non-Agchem molecules new inquiries stood at 50%. In the longer term, we anticipate an upside to 1/3 of new molecule commercialization to come from non-Agchem. As the technology of molecules mature, we see strong contribution to our growth rates.
On the domestic side, we have seen some good performance owing to erratic monsoon and the El Nino condition, which led to long spells impacting insecticide and herbicide sales in certain geographies. Our emphasis has always been and will be on driving high-quality revenue. Our domestic portfolio confidences of in-licensed and have significant growth potential.
Over the past 2 years, we have set up popular trends in the biological area. I'm very happy to share that our brand is gaining transaction with a 35% growth in Q4 during the year. [indiscernible] brand at [ Gerais ] was also ahead in selling operation in these segments. And the products has seen an enthusiastic response of herbicide buyers the first time 3 combination rights again. fungicide KADETT, for seed treatment in Soybean & Groundnut And bio fungicide PIILIN, for grapes and chillies. Also great response on CAMPANA, insecticide or right BPH and [ Rinjo ] sucking pests.
We continue [indiscernible] into India during '23, '24. We've introduced 7 new domestic brands, all of which have been received well. We have a range of brands which are always expanding and presenting the most advanced solutions in the crop protection to the farmer. The [indiscernible] to the business introduced of such new brands contribute to the upper broadening of the performance from us. The development pipeline include about 20 products, including products in development and registration and underlying the visibility of growth for the business in the forthcoming year.
I now turn my attention to the pharma side of the business. We are right now in the process of building an integrated CRDMO market, which is offering with on its way. The initial upgrades to the research facility infrastructure bridge, manufacturing facility, human-capital build-out, process is progressing well. We are also augmenting our talent base by hiring global industry experts to improve best practice in [indiscernible] in the fact of business development, R&D and pipeline inquiries have started shaping up to help us be aspirational in the long-term growth of this segment.
We are continuing to drive for the integrated research setup in the ag chem and once again, one of a kind, single-site [indiscernible]. The research center can render every technological process requirement from biological leverage to chemicals compressors put process still bio fermentation to various low-chemistry technologies.
Our R&D set-up designed to specification and world-class standards and [indiscernible] more than 700 scientists and 465 PhDs of which have delivered more than 170 odd patents so far. These teams are working to developed technology platform that gives us opportunity across the existing and new industry verticals. On the sustainability front, which is close to the heart of PI inventory styles. And PI seems to be a culture of attributes to our business.
PI has improved the S&P Global Sustainability assessments ranking to the 95th percentile as we also are well retained our gold medal in Ecovadis in sustainable achievement with 98th percentile rank. PI has also been featured in the S&P Global Sustainability Yearbook 2024. Thereby given suggestion in ranking among the top ESG-rated companies globally. There are multiple programs around the ESG outcomes aggregated with our business processes.
As we shared earlier, continuous evaluating our opportunity in line with a long-term steady direction and growth aspirations act by strong science and technological capabilities. We in our outlook for the current fiscal year to remain positive. On the domestic front, we will focus on portfolio diversification with high quality revenue from a newly introduced products as well as technology-based approaches to steer performance in the CSM business. The power performance has gradually improved. And while we will make sure that year-end will come into an implementation for integrated [indiscernible] offering to go to the global customer. With this I bring my remarks to an end, we would invite Manikantan to take us forward to discuss. Thank you once again for being a part of our group and always being there to support us. With this, over to Mani to take the financials for the company.
Thank you, Mr. Singhal. Good afternoon, everyone on the call today. I will summarize the company's financial highlights for the fourth quarter ended March 31, 2024. Please note that all comparisons are year-on-year and refer to the consolidated performance of the company.
As Mr. Singhal shared, our performance demonstrated a differentiated approach to doing business and a sharp focus on keeping operating parameters in line with our business. To share the pro forma highlights, during Q4 FY '24, we reported a revenue of INR 17,410 , a growth of 11% over the same period last year. This was driven by 15% growth in exports revenue to INR 14,701 million and around 5% decline in domestic revenues to INR 2,709 million.
Gross margin and EBITDA improved mainly due to favorable product mix and operating leverage. Profit after tax increased by 32% to INR 3,695 million. Let me also cover the performance of the full year FY '24.
Revenue was INR 76,658, a growth of 18% over the same period last year. This was driven by solid growth in export revenues by 25% to INR 62,970 million, which offset 6% decline in domestic revenues to INR 13,688 million.
Profit after tax improved by 37% to INR 16,815 million. Effective tax rate for FY '24 is 11.3% with a one-off gain around 3% in our former subsidiary via health sciences. The ETR for FY '25 is expected to be around 24% due to tax exception of our second unit at Jambusar moving from 100% to 50%.
Cash flow from operating activities increased to INR 20,359 million. This was due to higher EBITDA and efficient working capital management. The trade working capital in terms of number of days of sales reduced to 59 days, which started 79 days as on March 31, 2023.
The inventory levels also reduced in terms of days of sales to approximately 62 days to INR 13,012 million. Our balance sheet further strengthened during the year. Network increased to INR 87,310 million. CapEx stood at INR 10,823 million, including Pharma acquired asset of INR 4,972 million.
Surplus cash, net of debt, is INR 38,825 million as of 31 March, 2024. Our balance sheet and cash flows have stood robust, in line with clear financial strategy and disciplined execution, thereby enabling a superlative performance. But on 2 slides opening commentary, I will now request the moderator to open the quorum for Q&A.
[Operator Instructions] We have the first question from the line of Abhijit Akella from Kotak Securities.
Just a couple from my side. One is on -- just to clarify the tax rate guidance. So you're not talking about 24% tax rate from fiscal '25 onwards, right? So that would be a continuing tax rate beyond that. Is that correct?
Yes, that will be the continuing income tax rate for the FY '25 and also FY '26. As long as we see deductions are available in the inventory.
Right. And Mani sir, this will be for 5 years now, right? And after 5 years, probably the entire tax holiday at Jambusar goes away. Is that how it should be?
Yes. Currently, it looks like that, yes.
Okay. Got it. And the other one I just had, sir. Okay. Is this better?
Yes, a little better. Please go ahead.
Yes. Okay. Just the other question I had was on the new product launches. So you mentioned that about 1/3 of the new products are going to come from non-agro segments. If you could please just shed some color on what end-use industry, these might be because it's electronic chemicals, semiconductors, et cetera? And then just 1 add on to this. what percentage of sales come from biologics in the domestic business? And if you could also possibly share the breakdown of the pharma sales between Archimica and Therachem if possible?
Thank you, Abhijit, for your 10 questions in 2 questions, very smart. But let me try and answer some of them, as I remember. So your first question was regarding biological. Biological, we don't have breakup right away. But what we have kind of also communicated is that there is substantial growth in this quarter, the tune of 35-odd percent, and also if you look at our financial year numbers. So there is a significant growth of 27% kind of growth over last year in biological [indiscernible]. The other question was about -- can you repeat your question, please?
Yes, yes. The non-Agchem sector, sir, which one would be the prominent ones we are looking at?
So new molecules that we were talking that 1/3 of the growth -- sorry, 1/3 of the new molecule products are coming from non-Agchem space, yes. So this is about the kind of new inquiries, R&D pipeline progressing, et cetera. So if we look at that pipeline, quite a significant number of products are from non-Agchem area, some of the segments are, like you mentioned. These are electronic tankers, semiconductors. Maybe Atul you can pitch in and if we explain which are the other areas that we have.
Yes. There are other areas [indiscernible] 2, as for chemical advanced polymers, which are used for the various applications apart from electronics and semiconductors.
Got it, sir. Yes, the last question I just had was whether it's possible to get a breakdown of pharma between Archimica and the rest?
That may not be right way here, but we can provide you, Abhijit, from the sideline.
The next question is from the line of Rohit Nagraj from Centrum Broking.
Congrats on good set of numbers. So first question is on pharma business. So the entire development spend, has it been completed in FY '24. And given that we have done CapEx of INR 132-odd crores, whether -- what is the kind of growth that we are looking in FY '25? And what kind of margins are we looking? And what could be the levers for the growth?
Well, this development process, it's still continuing maybe for the next 1 year, 1.5 years, this cycle will continue. But yes, we will certainly be growing more than 25% in the next financial year, which is the current fiscal.
In terms of margins, as I said, there'll be time we complete this cycle, development cycle. It is difficult to kind of clearly indicate the kind of margins. But yes, once we complete this development cycle maybe in next 1.5 years or so, then we will be getting to the normalized margins.
Sure. And second question is on our overall consolidated business. So we have seen that there is a strong almost 450 basis point expansion in gross margins during FY '24, and that has led to further EBITDA margin expansion. So how are we looking at it when we move to FY '25? What kind of EBITDA margins that are sustainable in FY '25 and onwards given that there could be some benefit from gross margins, which may taper down in FY '25?
We are renting around the similar kind of margins, gross margins around 49%, 50% in FY '25, because EBITDA margins will also kind of normalize at this level as we are also kind of making a lot of development and in some of the [indiscernible].
The next question is from the line of Ankur Periwal from Axis Capital.
Congrats for a good set of numbers. First question, on the working capital side. Commendable job in terms of reduction in inventory driving the working capital lower. How do you read this number going ahead, given where I'm coming from this domestic business had been through in this year as well? And going ahead, hopefully, FY '25 onwards, things should improve. So will we see some increase in working capital led by inventory going ahead or these numbers should sustain?
So we will sustain these current levels. While there are some improvement opportunities, but we also believe that in some other areas, there are going to be continuous challenges. So more or less, we believe that we'll be able to sustain the current levels that we are operating.
Great, sir. Secondly, on the overall revenue growth guidance that you have mentioned 15%. Is this at the company level? And how do you see the Agchem CSM part going here?
Yes. So this is at the company level. Of course, the domestic, as you all know, that loss will depend on how the overall [indiscernible]. Yes. Let me again repeat.
Yes, this 15% guidance is at the company level. That We all know that on domestic side, a lot depends on how the overall season will pan out. But going by the positive commentary as of now that [indiscernible] about monsoon and onset of monsoon, et cetera. We believe that we'll be able to kind of achieve this kind of growth on all businesses, domestic side, export side as well as on pharma side.
Sure, sir. And lastly, if I may, just on the cash that we are sitting on, plus the incremental operating cash flow generation. Will, for the pharma business scale up, are we still looking at the inorganic part or probably organic CapEx can see a significant uptick?
Right now, particularly in pharma, we are focusing on settling this current cycle, development cycle, investment cycle, okay? But yes, we are also looking at several other opportunities and all winning opportunities, actively evaluating them.
But in pharma, particularly as your question is, we are more focusing on completing the current development sector.
The next question is from the line of Vivek Rajamani from Morgan Stanley.
Two questions. You mentioned in the presentation that about 70% of the export growth has come from the new products. Would it be possible to share some color in terms of what is the absolute share of these new products in your CSM portfolio today? And where do you see the scaling up, say, in the next couple of years?
These percentages or absolute numbers won't be in front of us. But suffice to say that basically, we are diversifying this whole portfolio of CSM, which is also kind of reflecting in the growth numbers that we are seeing that's significant. Some percentage of growth is coming from new molecules that we have commercialized in the last 3 years.
And secondly, even the pipeline and the commercialization, more than 35%, 30% of the molecules are from CSM, basically diversifying the overall portfolio.
Sure, sir. And the second question was you've obviously mentioned that 1/3 of the new molecules will be non-Agchem and they will also ramp-up. Just wondering if these products will still be operated out of your existing speed of facilities? And at what point in time do you think you'll have to invest in new or dedicated capacities to cater to these new non-Agchem activities?
Currently, these are being managed from our existing site as well as existing multi-purpose plants, white spaces. But as the volumes will grow, we can certainly look at dedicated multiple plant. By the way, 1 of the plant that which is in process, is a kind of a dedicated plant for some of these products.
The next question from the line of Rohan Gupta from Nuvama Institutional Equities.
First question is on the single line that on the new products you have mentioned in the presentation, roughly 6 new products and a large part of the growth in exports have come from, 70% has come from the new products. I mean not immediately in the near term, I mean, not FY '25, but I'm looking at over the next 3 years, how do you see that the revenue contribution coming in our export market will be from the new products in overall exposure and give some broader color on that?
It would be quite significant contribution. And if we see the next 3 years, considering the kind of level that we have already achieved, I think more than 35% -- 30%, 35% of the contribution would be from these products. It would have been commercialized in last maybe 5 years or so.
So yes, going forward, there is a lot of focus in commercializing new products, intensifying this whole development phase of many of these projects, which are in the R&D phase today. And they were in R&D phase in the last couple of years. But yes, I mean, many of these products are very commercialized and scaling up.
Okay. Sir, if you can give some sense on the this pharma piece and where the margin profile is still, I mean, gross margin [indiscernible] is pretty decent at 65%. But at EBITDA level because the overheads are down, so if you can give some sense of how the revenue ramp up will be on the pharma part of the business. And if we can expand that because you have initially guided that your EBITDA margin in the pharma business also be aligned with the PI margin over the next 3 years.
I think that almost 1.5 years already completed. So are we looking at that margin profile of pharm realigning with the PIs and in what timeframe?
Yes. we have just completed 1 year of these acquisitions, as I was telling to the earlier participant that the development cycle as we see today, will continue, the investment development cycle will continue for next at least next 1.5 years or so. And we will surely see the normalized EBITDA margins for that.
So we are still looking at in next 2 years, EBITDA margins in Pharma business is aligned to 22%, 24% kind of numbers with the PI number. Is that fair assumption?
Yes, it will surely be 20%-plus kind of level post 3 years development.
And sir, after 1 year of acquisition of Pharma. So once again, going back to the H2, when we were looking at that the Pharma piece should contribute roughly INR 1,500 crores kind of revenue over the next 3 years. So are we still looking at those numbers intact from the Pharma part?
No, I don't know INR 1,500 crores, but we're seeing clients here is that in the next 3 years time, 2, 3 years' time, we would surely complete this investment and development cycle, number one. Number two, the growth in revenue, as I was telling to the earlier participant will certainly continue during this period also in the development and investment scale. And our outlook for next 3 to 5 years kind of more than doubling these revenues of what we have acquired is certainly there that will continue.
Okay. Sir, largely from my side and I'll come back in queue. In terms of the growth guidance, in terms of revenue, you are seeing roughly 15%. How are the new molecules like [indiscernible] domestic? So -- and in that, we are still looking 15% growth, it is because on the other BS molecule, are we expecting some kind of deceleration there in growth or the revenue from those products will start declining? Are we expecting any of that growth at all while giving the revenue guidance of 15%?
Can you again please repeat? We were not able to clearly hear your question. The line is not very clear.
Sorry, sir. I was saying that we are still giving a 16% revenue growth guidance. However, the 6 new products launched in export market, where you see the significant ramp up along with the biological. So in our view, the growth guidance should be higher unless we are expecting our contributing product pilots. So is seeing some degrowth. Are we reflecting any such possibility in -- while you are giving the guidance of 15%?
No, it's not the degrowth or the growth prospects of a particular product. You see, it is product mix, product portfolio, there are products which are quite stable, there are products which are over periods are degrowing, and there are products which are being launched, which are early in their life cycle, and they are growing.
So this is the kind of portfolio. And if you also look at our business model, the business model is also that every year, you keep continuously commercializing these new products, which takes care of some of the products, old products, which are kind of where the growth remains.
So the simple point is that on balance base, if we look at overall, we are confident that we will be in this kind of growth momentum, 15%, around 15% kind of growth momentum. And mind you, the overall industry sentiment is not very positive. So keeping that in mind, I think this is quite reasonable.
Last bit from my side, if I'm allowed. On the CapEx front, you mentioned that actually INR 1,100 crores kind of CapEx this year then for the current year and having for the acquisition. So INR 600 crores kind of investment in existing business.
However, I think you're guiding for roughly INR 800 crores investment for the current year. So if you can share the CapEx number for next year? And is there any lower CapEx we'll be able to go to looking next year in the current year?
So we are looking at close to INR 800 crores to INR 900 crores kind of CapEx in the current fiscal.
Okay. So there is no spillover impact like because I think that -- last year, we were still short of close to INR 200 crores in terms of CapEx. So INR 800 crores is a maintained number for this year also in terms of CapEx. We are increasing the CapEx guidance to INR 1,000 crores.
I mean, there is -- obviously, there is a little higher plan, but when you end up with your actual spend and capitalization, et cetera, there is always a lead and lag. Keeping that in mind is what we are indicating INR 800 crores, INR 900 crores kind of number.
The next question is from the line of Sumant Kumar from Motilal Oswal.
So you see around 37% kind of degrowth for FY '24 in Pharma business. Sir, can you talk about what is the key factor and how things is going to shape up in FY '25, that should be the fact.
Anil, maybe you can briefly explain. Okay. It seems his line is not clear. So this is mainly because of development of some of the products that innovative our products that we have been supplying. That is the key reason for this.
Okay. So is there any realizing decline for the existing portfolio also?
Your line is not very clear.
So is there any realizing decline, I'm talking about?
No, no realization decline. There's no price utilization perspective.
The next question is from the line of S. Ramesh from Nirmal Bang Equities.
So in the Pharma business, the development expenditure, which you're talking about right now is routed through P&L. So can you give us some indication of what is the kind of development expenditure would incur, say, over FY '25, '26? And will it continue through the P&L or will you capitalize it after some time?
No, it will continue through P&L, and that is the reason we have explained this in our communication. However, we don't have that in front of us, the development plan for the next couple of years. But yes, as I said earlier, this cycle will continue for the next at least 1.5 years.
In terms of ramp-up in revenue from the post-Ind AS INR 300 crores. Can we expect, say, INR 500 crores by '26 and this pro forma EBITDA margin after -- before development spend of 12%? Can that go to about 14%, 15% in the next 2 years?
Yes, that's what we are expecting.
And in terms of the order book execution that you have right now, that is presumably the CSM exports excluding Pharma, $1.75 billion.
Yes.
Okay. And so in terms of monetizing that, what will be the run rate over the next 2, 3 years on that order book, given that you are talking about 15% growth? So will that be evenly spread out, I mean, plus or minus the new molecules? How do you see that run rate going?
To be honest, I'm not very clear about your question, if you can rephrase it?
So basically, you have the order book of $1.75 billion, assuming that it doesn't include any Pharma order and that's pretty much in CSM. So when you look at unwinding this order book in terms of your future revenue in CSM, would that be evenly spread out in terms of execution, say, over the next 3, 4 years? Or will it be front-end loaded or back-end loaded?
Yes. I mean, typically, this order book will have -- it is spread over next 3 to 5 years, some products for a couple of years, some products for 4 years, some products for 5 years. They are on an average, we can say 4 to 5 years.
And in addition to this -- in addition to the order book where we have long-term agreements or contracts, there are a significant number of products where we have annual purchase orders, et cetera. So the annual revenue or the growth number that we see basically comes from not only from order book, but also from our annual contract or purchase order. I hope this answers your question.
Understood. So just one last thought. If you look at the Chinese price index, there is a report which says pyroxasulfone prices have declined to about $75, which is a steep decline. So how does it impact your current CSM arrangements for supply of this molecule?
Well, I do not have this information that Chinese suppliers that price. Because currently, I don't think any supply happening from China for this molecule.
We have the next question from the line of Yash Master from Unifi Capital.
Sir, my first question is, this year, we are targeting around 15% revenue growth. Previously, you were targeting 18% to 20% growth. So I just wanted to understand that this reduction in guidance, is it just for like short term because this year our main product will face some pricing pressure. And in the short term, it may impact our revenue. But as you are scaling up new products and diversifying into Pharma and also we have heavy cash on balance sheet.
So -- and we have been looking for Pharma acquisition for some time, and that can bring in significant growth. So can we expect the long term that we can go back to achieving our 20%-plus revenue growth?
Well, there were several questions in your one question. So let me try and answer one by one. As far as your question around why 15% versus last year, 18%, 20%. So a few aspects.
One is that, of course, this has gone up. Now we have a new business as well, okay? Secondly, as we were discussing earlier, the overall business industry sentiment demand scenario, although we are not into so many generic products, but still the overall sentiment is not great. And considering all these aspects is what we are very cautiously guiding for the growth, okay.
The third aspect is that there is, as we have seen in the past also, that there is lot in the domestic area, depends on how the monsoon onset is taking place, how the rainfall distribution is. So keeping in mind those kind of contingencies and situations is what we are very cautiously guiding for this growth.
Your second question was, if you can repeat, please. Can you please repeat your second question?
Sir, the current participant seems to have dropped from the queue.
Maybe we can take up another question.
Yes, we will proceed to the next question. We have the next question from the line of Krishan Parwani from JM Financial.
Firstly, on this [pyroxasulfone]. So when can we expect first launch? Will it be 3, 4 years down the line? And also any number on peak sales from this product, if you can give.
Well, yes, it typically should start 3, 4 years plus ahead, given these numbers will be too early to comment. The product is under valuation development.
Okay. And secondly, on this rest of the QIP money. Do you have any more inorganic acquisition plans?
Yes. We are very actively evaluating a few options.
Understood. And lastly, if I may, just some small clarification. On this INR 800 crores, INR 900 crores CapEx that you're going to do in the current fiscal, so like could you give a breakup in terms of what could be the non-ag chem CapEx?
Well, that would be very difficult. Atul, maybe you can come in if you have any such breakup. We don't have that.
Not really, sir.
Yes, we don't have this breakup. So this is -- as you may know that these are multiproduct plants. These are generally not for a very specific molecule. So when we build these plants, they are for several products.
Understood, sir. I mean, I was just more of asking because other than -- I mean, in the ag chem, since you have the technical, so those would be different than the entity. But in any case, no worries. I wish you all the best for the coming year, sir.
The next question is from the line of Yash Master from Unifi Capital.
Sorry, sir, I disconnected from the line. I'll refer to the transcript for the answers. I just had one more question. So I wanted to understand on the pyroxasulfone side, the technical that we are supplying to the innovator is going off patent this year in U.S. So -- and -- but the formulation is still patented for some years. So the final product could see less price erosion, but our technical is going generic. So other suppliers could make it. So how much price erosion are we expecting on the technical side?
Well, we don't really expect any impact of this product going patent in U.S. in current fiscal because it will take 2 years for registration for another player to come in.
The second point is, which you also kind of mentioned that the formulation, the products, which are being marketed combinations. They have pretty longer exclusivity of patent. So, therefore, we don't expect in the developed market, any significant impact.
Okay. Okay. And can you just provide something on domestic outlook, like how is it looking right now? And when can we expect growth to pick up in that segment?
Prashant, you may comment.
Yes, last 1 year, we all know has been a challenging year for domestic because of extreme weather condition. However, given the IMD forecast and climate forecast on rains, so we are definitely optimistic for the first quarter.
Okay. So we can see -- maybe see growth from first quarter itself?
The first quarter is more of a placement quarter. Otherwise, if you look at the consumption starts by second half of June and basically second quarter is at the major consumption. Having said that, the industry has a higher inventory in the marketplace. So we also need to have a close watch in case there is a little bit of delay in rain that may have impact. Otherwise, as of now, going by the forecast, we are positive.
On a quarter-on-quarter basis, it may defer, but on an annual basis, there will be a growth in domestic revenue. Am I right?
Yes, definitely. Yes.
The next question is from the line of Lavanya Tottala from UBS.
One question from my side is new product contribution in CSM. I think earlier last year, you have mentioned something around 17%, 18% of revenue comes to this, 15%, 17% growth in the new products, is it price as we would have been somewhere around 23% to 25%?
The line is not very clear. May we request you to please use the handset mode?
Is it any better now?
No, it is not clear.
Sorry. If it's not clear, I will join the queue. Is it clear now? Or should I come back?
This is better, yes.
Yes. So I'm just asking on the new product revenue share. So last year, our revenue share was somewhere around 17%, 18%. 15%, 17% of growth in this segment, our revenue share from new products should have been somewhere around 23% to 25% in FY '24. Is that the right understanding?
Yes, you're right.
Okay. So this, we are expecting to grow to about 30%, 35% the next 3 years?
Yes, at least 30%.
Okay. Got it. Also, just I wanted to understand a bit more on the deferment of innovative products, which you mentioned. I just missed a bit there. Is it on the Pharma space which you are speaking about?
No. Come again, your question.
So earlier -- in the earlier question, you mentioned about deployment of some innovative products in terms of our supply. Is it in the Pharma space or in the CSM, I just missed that part.
Yes, that was for Pharma because the question was for Pharma.
Okay. Do we expect these orders to come back this year or it will take longer?
Yes, and those discussions are still on. And these are, in any case, biotech, small biotech company. Yes, we'll have to assess that whether this will come in the coming financial year or maybe a little later.
We have the next question from the line of Naushad Chaudhary from Aditya Birla Sun Life Asset Management.
Congrats on a decent set of numbers, sir. A follow-up on our participant question. We appreciate your guidance of 15% growth despite global headwind. But post FY '25, do you see we have product sets ready that can help us to go back to our 18%, 20% kind of growth for 2 to 3 years post FY '25?
Yes, of course, I mean as the overall industry cycle comes back to the normal kind of situation. There are all opportunities to kind of -- for us to go back to our 18% to 20% kind of levels.
Without compromising on the margin?
Yes, of course. That option. By the way, that option always remains. That option is for current year as well. But as you may know, as our philosophy on the business, we have always managed business in a sustainable manner. So yes, and a differentiated manner. So keeping those principles in mind is what we always guide and we always do the business.
We appreciate it, sir. Lastly, on the U.S. market. Not from your product point of view, but in general, if product goes off patent, how much time does it take for a generic player to register in that market and to have a real impact on the patented product, once it goes off patent?
Well, it varies from product to product, so difficult to generalize. But yes, it takes anywhere between 1.5 to 2 years. But it is the -- as we were discussing earlier, if the exclusivities there on the formulation, then it's a completely different scenario.
The next question is from the line of Meet Vora from Emkay Global.
So my question was regarding the CapEx that we have done over the last 2 years, so roughly INR 900 crores, INR 800 crores, INR 900 crores last year, and we are planning to do this year. So can you just give a broad sense of what is the CapEx that we have done? We have installed 1 dedicated plant is what you mentioned and others will be all MPPs. As in how many plants we have put up?
Atul, maybe you can come in and briefly explain.
Yes. So this -- the CapEx, what we are talking about is for a dedicated plant, one dedicated plant and also a multiproduct plant in further new molecules, one which we have been working. And this continues for this year as well, it's in the '25 forecast what we have given.
So in total, we'll be putting up 2 dedicated and 2 MPPs?
Yes. Yes.
Sir, second question was on margin front. So while we are mentioning that our gross margin has improved because of that overall favorable product mix, is it because that contribution from a higher-margin product is more? Or is it because that new products that we have commissioned are having higher margins?
I'm not sure what you meant. But let me clarify that this gross margin improvement is on account of several factors. Product mix is one aspect. But also business mix. So if you appreciate that there is no Pharma business part of this overall business where the gross margins are higher. If you also consider that the exports revenues are more compared to the domestic one, where also the gross margins are higher because of the nature of the business. So these are some of the reasons. And then, of course, within the segment, whether Pharma or whether CSM exports, the product mix has also been stable.
Understood, sir. And just 1 last bit, if I may. Sorry for harping on this again. If I look at the U.S. geography, I just wanted to understand that even if pyroxasulfone, for example, is painted, can someone import pyroxasulfone from some other country or some other supplier and sell it in U.S.? or whether there is an application patented or there is only a process or a technical patent.
But anyone importing pyroxasulfone will not be selling pyroxasulfone technically in U.S. now. He'll have to be selling some final products, finished product. And if that product base patented, then that is the issue we will need to consider.
Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yes. Once again, thank you for being a part of this conference today. And I wish PI team all the very best and we will look forward to seeing you soon.
Thank you. Thank you so much, gentlemen.
On behalf of PI Industries Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.