Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin realization improved to 38.7% from 36.8% last year, indicating better efficiency and product mix management.
- Domestic revenue increased from INR425 crores to INR450 crores, showing growth in the local market.
- New products contributed 7% to the top line, with a robust pipeline expected to add more molecules annually.
- The company maintained EBITDA margins despite increased freight costs and one-off expenses.
- The company is actively upgrading infrastructure, enhancing technical manpower, and improving technologies to boost future performance.
Negative Points
- Revenue for the financial year declined by 7.2% to INR934 crores due to lower product prices and muted demand.
- Exports were impacted by lower prices and muted demand, with significant competition from China.
- EBITDA for Q4 FY24 decreased to INR13.2 crores from INR21.2 crores in the same period last year, with EBITDA margin dropping to 6.7%.
- PAT margin for the quarter stood at a low 1.2%, indicating reduced profitability.
- Receivables increased from INR143 crores to INR197 crores, indicating stretched payment terms and potential cash flow issues.
Q & A Highlights
Q: As per the presentation, we have commercialized two new products, one in AI and one in specialty. How big would be the market for these products, and would we be selling them through contracts? What kind of growth can we expect with the commercialization of these three new products?
A: These products have huge growth potential running into millions of dollars. Specifically, one product has a global market size of over $100 million, and the other is about $20 million to $25 million. These are based on contract manufacturing and are exclusive items. (Vinod Gupta, CEO)
Q: We had mentioned that we should be starting sales to Australia from quarter four. Has that commenced, or would it be seen in the upcoming quarter?
A: Sales to Australia will happen in the upcoming quarter. Inventory issues in Australia are still weak, and the season seems to be not favorable. We expect another quarter or two for the inventory to get corrected and the prices to stabilize. (Vinod Gupta, CEO)
Q: Have we received registration for our products from the EU and US?
A: For one of the products, we have received registration; for other products, we have filed our details and are awaiting approval. (Vinod Gupta, CEO)
Q: Can you help us understand the volume in FY24 and the drop in realization that we have witnessed during the year?
A: There is a marginal decline in volumes for Dera Bassi and Lalru. The blended realization has dropped by almost 8% to 10% for the full year. (Ashish Nayak, CFO)
Q: How sustainable are the gross margins given the current market conditions and new product introductions?
A: Despite tough market conditions, we have maintained our gross margins due to efforts by our R&D and operations teams. As market conditions stabilize, we expect gross margins to recover and potentially exceed previous levels. (Vinod Gupta, CEO)
Q: Can you provide details on the new products introduced in the last six months and those expected in the next six months?
A: We have introduced two to three new products every six months, with significant potential. We are on track to achieve substantial numbers from our new product portfolio. (Vinod Gupta, CEO)
Q: What is the expected CapEx for the new site and the timeline for its execution?
A: The total CapEx outlay for FY25 is around INR50 crores for our existing site, primarily for capacity enhancement and efficiency improvements. We are scouting for a new site and aim to time it with the revival of the industry. (Ashish Nayak, CFO)
Q: Can you explain the CRAMS agreements and their nature?
A: CRAMS agreements typically involve technology transfer from the customer, are exclusive, and have a take-or-pay clause with a minimum volume guarantee. Raw materials are auto-checked quarterly, and margins are reviewed annually. (Shalil Shroff, Managing Director)
Q: What is the volume growth in FY24 and the pricing decline?
A: The volume for Dera Bassi declined from 24,338 metric tons to 22,414 metric tons, and for Lalru from 1,143 metric tons to 1,018 metric tons. The major impact on revenue is due to price reduction. (Ashish Nayak, CFO)
Q: How do you see the pricing scenario moving forward?
A: Prices have bottomed out and are expected to remain stable for a quarter or so before recovering gradually as inventory liquidation happens and fresh demand kicks in. (Vinod Gupta, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
