Jubilant Ingrevia Limited analyst Q&A

Thank you very much. We will now begin the question and answer session. We take the first question from Archit Joshi from Nuvama Institutional Equities. Please go ahead.

Good evening. Thanks a lot for the opportunity. Sir, first question, I think when looking at our comments from the last maybe 2 or 3 quarters, we have been continuously highlighting pricing pressure in most of the portfolios that we operate in. So is this supposed to be seen as price decline happening quarter after quarter sequentially? How transient would it be in your opinion, if you can give your understanding on all 3 segments, specifically pyridine, B3 and in the acetyls business?

Thank you, Archit. Very relevant question. And the answer, there are nuances by business segment. So let me just cover each one of them one by one. So if you look at our specialty business, particularly on the pyridine and its derivatives, the pricing pressure has come in the last 2 quarters and particularly, let us say, second half of last calendar year. And real big impact of that has been on the last quarter results, as we just described. The outlook going forward on that segment from at least our side, we are already seeing some uptick in pricing in certain derivatives. And as you might be tracking, China has also announced some imperatives or some actions as part of their anti-involution strategy, which we are hoping will help in bringing the price back, but we can already see some uptick. So that is on specialty. Similarly, on the nutrition, particularly the vitamin B3, which is a derivative of pyridine value chain, we see the similar impact. In fact, in the last few days itself, we have seen almost a 7% to 8% increase in price of vitamin B3 feed grade and we are hoping it will sustain in coming weeks. Acetyl is a different story where obviously, it is a commodity and hence, it goes through its own cycles. The price has been deflated for last couple of years. There was pressure and it had bottomed out, as I explained in the last analyst call also in the last quarter. And since then, if I look at the last 2 months, particularly, we have seen already an uptick in acetic acid price, which we are hoping will gradually start to translate into our acetic anhydride and ethyl acetate prices as well. So the different product categories are at different stages of the cycle. But one thing we can see, we have bottomed out. In the last 6 months or so, we have not seen any significant further decline in price. In fact, in a couple of areas, we have only seen a marginal increase. So that is why we are hopeful that going forward, we should only have upside on the pricing front rather than any further decline across the segments.

Sure, sir. Sir, my second one, a slightly longer question given the data points from the presentation. So in the previous quarter, we are speaking of around INR1,200- odd crore of net realizable value from a few products that we had mentioned. I think that number has jumped to INR1,400 crore, so maybe an increase of INR200 crore. On the same lines even in the previous quarter and this quarter, we are talking about this INR3,500 crore of net realizable value from peak potential of some of these 100-plus products that we have mentioned. So in line with that, if you can throw some light as to which application areas, which products, maybe the time line in which we will be able to realize this benefit? Would this be in CDMO because these are all products that we have been talking about for quite some time and quite keen to understand how our CDMO journey is going to be through these new initiatives that we have taken?

Yes. Again, good question, Archit. So let me try to address each of your points one by one. Number one, I think from a pipeline perspective, we talked about this 100- plus opportunities with a peak potential of about INR3,500 crore. And I think in the last analyst also, I explained that generally, the peak potential takes at least 3 years, if not more, because it is linked to the pace at which the innovator are able to grow their volumes and our demand is a derivative demand of that. So we hope that for most of these, once confirmed, it will take at least 3 to 4 years to get to the peak demand. Number two, what we announced in the last quarterly investor call was about 10 or 11 molecules with a peak potential of INR1,200 crore. In last 3 months, as you would have seen in today is announcement also, we have added another 5 molecules and then the peak potential has reached almost INR1,400 crore plus. So that is a moving pipeline and we are getting the confirmation. And of course, we start counting revenues of those molecules as confirmed as soon as our samples are cleared and the customers start giving us the first commercial order of these molecules. So for all these 16 molecules largely in the last 10 or 11 months of this fiscal year, we have gotten our samples approved. The customers have given the first commercial orders, which also means even in this fiscal year, we are seeing revenue and margins accruing to our overall P&L from these molecules. And FY '27, we will see a big jump because we have a couple of contracts, which will be scaling up pretty quickly. And of course, the real peak potential of these already confirmed molecules, as I explained earlier, will take at least 3 years. Point three, there is another 80-plus -- 80, 85 molecules. We are, of course, continuously pushing. Hopefully, we will be able to expand the funnel by adding more opportunities. We will, of course, lose some as well. So it is a dynamic funnel, which we will keep working on. And we are hoping as we move along in coming quarters, we will be able to announce more wins. So I think I covered all parts of your questions, Archit.

Yes. I just want to...

And I think you also had a question -- so, you also were asking about whether these are CDMO molecules. So like I explained in last call also, these are most of the molecules that belong to CDMO and fine chemical part of our businesses. And in most of those situations, we will have exclusive or semi-exclusive kind of arrangement with the customers with Specialty Chemical kind of margins. And you know the EBITDA margins that we have in our Specialty Chemical business.

Sure. Understood. Just one more. If I just look at the total global landscape or rather the Indian landscape of the CDMO players that we have in India, I think there will be about 2 or 3 of them who are able to garner a critical scale and mass with regards to one product. So maybe crossing more than $50 million of revenues per year. And I think there will be only about 2 or 3 products which might be able to do that in the current scheme of things. And the potential that we are talking about is with 100 products for INR3,500 crore. So if I take a simple average, each product does about INR35 crore. So would our approach be as dilute as this much that a product can do maybe somewhere between INR50 crore to INR100 crore tops at peak sales? Or do you think that there will be opportunities for us available in the agri space or the agri CDMO space for us to garner similar kind of contracts that we have had, the one that we are going to commission in Q4, which is about $60 million or so. So sir, your thoughts on this to understand the ramp-up in CDMO business for us in the next 3 to 5 years?

Yes. Again, a very good question, Archit. I think what you talked about, $50 million kind of opportunities, as you rightly said towards the end of your question, those kind of opportunities largely exist in agrochemical segment. And there have been handful of such contracts in the Indian CDMO industry in the last few years and we are lucky to have one of them. Having said that, if you just step back and look at our portfolio and our capabilities, our business mix is roughly 30% pharma -- at an overall level, I am saying, not just specialty or CDMO. 30% is pharma, about 20%, 25% agro, 15% to 20% nutrition, now increasingly consumer, about 10% and some industrial. So by nature, our portfolio or at a fundamental level, our portfolio is well diversified. What it means is we have access to customers across all these segments. And invariably, in each of these segments, we will be working with most of the top 10 or top 20 customers because some of our products are going there. Moreover, we have 35-plus chemistries, which cover a vast space of the products that -- new products that most of these customers will be working on. And hence, when we are going and speaking to them and then talking about -- first, we have the relationship with them. And second, when we present our capabilities to them, we are getting traction from them across these verticals. And with that, now if you look at those 100-plus opportunities and while we have not disclosed the breakup of that publicly, the mix of opportunities in terms of numbers pretty much reflect the mix of our overall portfolio, which means we have opportunities from agro, from industrials, from cosmetics, from nutrition and from pharma. And that is why when you do the average math, while the average is coming out to be INR30 crore, INR35 crore, there are opportunities which are worth INR100 crore within that. And there are opportunities which could be even INR5 crore, INR10 crore because if you look at the pharma opportunities or cosmetics opportunities, some of them will run into just INR5 crore, INR10 crore, INR15 crore while the agro could run into INR100 crore, INR200 crore INR500 crore as we have in our portfolio. So it is a spectrum. Given our strength, given our relationship with customers across these 5 key segments where we operate, we are able to get traction with the customers across the board and create the funnel. We have internally aligned ourselves to focus on each of these verticals. There are separate teams with the right kind of expertise and depth, not just from a BD perspective, but from R&D and technical capabilities perspective so that we are able to provide the right kind of support and respond to these inquiries and which is reflected in the first 16 wins that we have announced so far.

I understand, sir. That is quite elaborate. Thank you, sir, and all the best. Thank you, Deepak ji.

Thank you. Next question is from Abhijit Akella from Kotak Institutional Equities. Please go ahead.

Good afternoon. Yes. Thank you so much for taking my questions. First, just on the agrochemical intermediate project, which you have stated in your presentation is to be -- start deliveries in March. Is there some meaningful amount of business that we could expect this year itself in fiscal '26? And then do you expect it to scale up to full potential in '27 itself? Or will it take a little bit longer? And if I may just add on one related kind of extension to that question. Deepak, would appreciate your outlook for how this year is going to end up overall in terms of maybe EBITDA or something and then what you are expecting for next year as well?

On the first question, we remain pretty much on track. As we had announced at the time of signing this contract that by this quarter, the plant will be ready. The good news is the plant is ready. We had the whole Board visiting the Bharuch site yesterday. We had our Board meeting there. So we showcased not just that plant, but the other infrastructure and plants that we have developed in Bharuch. And I am happy to share that with all the investors and analysts that the Board came back very happy with the progress we have made, not just on that plant, but overall. And the plant is already charged with the batch a few weeks back and we are hoping that the first output, a lot of output will come within this quarter. Quantum-wise, we will have to see because, obviously, it is a complex molecule with multiple stages. We are trying our best to maximize the production within this quarter and we already have confirmation from the customer to start dispatching as soon as we are ready. So that remains on track. The contract, and I think this question was asked a couple of analyst call back, we get to full potential of the production as soon as we start. That is the understanding with the customer. So far, they have given us visibility for the first few months, which is what we are gearing towards and planning to start supplies of that hopefully by mid and late March this year. So as of now everything remains on track. The second part of the question, Abhijit, I think as you can see, we have given a consistent EBITDA growth. Our business mix has been changing. Obviously, last quarter, there was some impact coming on the business because of pricing, which I have explained in response to Archit's question, the pricing gradually seems to be coming back. So we are hoping that if you take the average performance for this year, we will maintain that kind of run rate and we will continue to give the volume growth. The pricing as of now looks like we have hit the bottom and we will see some recovery. So definitely, this quarter should be better than the previous one in terms of both plan as well as whatever visibility we have right now.

Just to add to it, Deepak, Varun here, Abhijit, if you see our 9 months, we have delivered an 8% increase in the EBITDA overall. And as Deepak mentioned, for the full year, we expect it to be higher than that, yes. So if that gives you a certain outlook for the quarter 4.

No. That is really helpful. And any thoughts, preliminary thoughts for fiscal '27 as well at this point? Or is it too early?

It is too early.

Too early, but I think we have given a multiyear guidance anyway in last year also that we hope to continue to grow -- if you take a multiyear average, our EBITDA at least at 20% CAGR. So that is the trajectory. Now one particular year, there is so many factors, Abhijit, but that is the aspiration and that is what all of us are working towards.

So Abhijit, maybe in the next week, once we conclude, we will be able to throw more light on the year, after we have presented it to the Board, yes.

Our portfolio is so wide and diversified. There are always some orders which move up and down based on the customers' requirement and sometimes even, let us say, the availability of ships. But there was no major change. But at the same time, because there were some uncertainty, particularly in this FTA that was to be signed with the U.S., which now is signed, a couple of customers had slowed down the booking of our new orders, which now obviously, now that the FTA is signed and that uncertainty is gone, we are hoping those customers will go ahead and confirm the orders, which anyway they had given the visibility of. So no major movement. But at the same time, I am hoping that the pace of booking and the quantum of booking from some of the customers on the back of the 2 FTAs which have been signed in the last couple of weeks will help us accelerate the momentum.

Thank you so much and wish you all the best.

Thank you. The next question is from Nitesh Dhoot from Anand Rathi Institutional Equity. Please go ahead.

Yes, good evening, team. Thank you for this opportunity. So my first question is on the CDMO part. So our CDMO customer has guided for continued pressures in its EPC diamide portfolio and modest volumes for CY '26. So how does that translate into the minimum offtake commitments or the volume visibility for Jubilant under this CDMO arrangement?

Nitesh, we never disclose the names of our CDMO molecules or customers publicly. So I will not be able to answer this question in the specific context of what you referred to. But as I mentioned in response to Abhijit's question, our CDMO contracts and the delivery against what we have agreed with the customer stays on track and we do not see any lack of visibility there. At least for the first few months, even for the big contract, we have already gotten visibility from the customer, and we are planning to start dispatching late March.

Sure. So in case of any resistance or any regulatory tightening in certain geographies, we are insulated contractually or does any of the volume risk sit partially with us?

See, as you would be aware, the typical construct in CDMO industry is to have commitment from both sides for some minimum volume offtake. So we have covered our risk by having similar arrangements with wherever we have invested heavily. And of course, that is a typical nature of the CDMO industry, particularly on the agro side, as you know. So we have followed a similar norm and we are well covered there.

Sure. So just one last on the FTA, on the India EU FTA. So as I understand, I mean, on the U.S. part, I believe there will not be too much of an incremental benefit from this reduction because we are not any which way impacted significantly. But on the EU trade deal, I mean, which are the products or the areas where we expect significant gains coming through in terms of market share?

Yes. So Nitesh, I think there is, of course – I will answer the direct impact of it. But as I was mentioning, because of the uncertainty created by, let us say, delay in particularly the U.S. FTA, some customers had become tentative even on the products which were not coming under any duty regime or tariff regime because there is a long exemption list, as you know, in Annexure 3. But the indirect impact and that is true for both U.S. and European FTAs is that we are hoping now for customers that tentativeness will go and the pace and the quantum of order booking will increase. In terms of direct impact, I think you are right on the U.S. In a call a couple of quarters back, I clarified only 2% of the overall portfolio was getting directly impacted. Now that is gone and we are hoping that with increased competitiveness, we will be able to increase volumes there. On the EU side also, right now, there is duty or tariff of about 6% to 7% for a bunch of our products like it is for China as well. As those duties go away next year, hopefully, our level of competitiveness will increase, which we are hoping to leverage to get some volume and hopefully even price upside starting next year. The exact quantum will depend on a case-to-case basis, of course, because in many of the customer or product categories, we already have a very high share in those products. And one example, by the way, is the choline where as soon as we had a favorable tariff structure vis-a-vis the Chinese competition, our share has already started to increase and we have started to book volumes in European market. So we are hoping a similar kind of upside will start to come once the EU FTA is executed hopefully early next year.

Thank you, Nitesh.

Thank you. The next question is from Siddharth Gadekar from Equirus. Please go ahead.

Hi, first, coming to the Specialty Chemical business, if we look at our EBITDA for the last five quarters, it has largely been range bound at INR115 crore to INR130 crore. Now can you just quantify how much of this would be -- we had a positive volume gain and how much would be the negative pricing impact over the last five quarters?

Yes, Siddharth, you are right. I think as I was explaining in response to the first set of questions, the price, of course, has taken off or offset some of the volume growth that we have seen. At an overall, if you take the last 2 years rather than just quarter, I think our Specialty Chemical volumes have grown at least at 10%, 12% every year. But what is also true is in the last 6, 7 months, particularly, the pricing has come down, which, as I was explaining, in our view, has bottomed out and we have seen already some uptick in price in some of the product categories. So on the back of that, we should hopefully be able to increase the absolute value as well. What you should also see is that our margin has remained at 25%, 26% despite all the pressure which is coming from pricing, which has happened because of 2 reasons. One is, as we have been publicly announcing from time to time, we have taken a cost program a couple of years back and that remains on track and we are actually still working on it. And even next year -- for next year also, we are putting together a similar program, which we should be able to announce by next quarter. At the same time, the mix of our Specialty Chemical business is also improving because the share of fine chemicals and CDMO in specialty is increasing and those are high-margin growth driver segments for us, as we explained in last year investor call as well. So the hope is as soon as the pricing starts to come back, you will see a meaningful jump in the absolute margins as well, while we still maintain the percentage EBITDA at least at 25%, like we have done in the last five or six quarters.

Sir, basically, I wanted to understand that because given we would have some cost savings also in this, so the pricing decline would have been much higher than the volume growth. Is that a fair understanding?

Yes, that is right for part of the portfolio -- for Specialty, yes.

Okay. Sir, secondly.

For the first 9 months of the year, our -- if I take it together to give you a more broader view, we have grown more than double digit in volume and mix for the Specialty, yes. And the pricing has gone back in the high single digits. That is why our Specialty has grown on a year-to-date basis, which we have mentioned in our notes also. So answer to your question is pricing has come down, but not ahead of the volume and mix.

Okay. Secondly, in terms of capacity utilization now from here on beyond the CDMO, can you give some color in terms of capacity utilization or what kind of volume growth can we see going ahead also?

So if you just see, Siddharth, we announced a INR2,000 crore capex program 3 years back and all of that capex with this new CDMO plant that we are constructing in Bharuch coming in would be deployed. On the back of that INR2,000 crore, we had expected about, let us say, INR3,000 crore of additional revenue on the base of INR3,000 crore, INR3,500 crore we had a few years back. So of course, there is some price deflation which has happened versus the projection we had at that time. So if you take that lens, I think we are pretty much on track. And most of the new capacity we have created, including the one which we just are commissioning for the new agro project, we run at around 50-odd percent capacity utilization. So we have enough growth room with the already invested assets, which we are hoping a significant portion of that will get capitalized in FY '27 because from the overall growth journey perspective, which we shared with the market also, FY '27 is like a pivotal year in which a lot of that capacity we are hoping to fill on the back of both confirmed orders, which we have announced as part of our pipeline, but also some of the new areas that we are working on.

Okay. Got it. Thank you so much.

Thank you. The next question is from Avnish Burman from Vaikarya. Please go ahead.

Hi, good evening. Thanks for taking my question. Deepak, this large agrochemical order that you have, I just wanted some color on the profitability. If I am not mistaken, in the last call, you mentioned this is coming at about 20%, 25% EBITDA margin. I just wanted some understanding on typically when CDMO players are working with innovators, the margins are typically higher. So why in this contract are the margins lower than what we typically see with some of the other players who are working with innovators?

So Avnish, the first part of your question, as we have been consistently saying, every new project, every new capex that we take in our company, we keep at least a threshold margin of 20% EBITDA and ROCE of 20% plus. So the same is true for this project also. I would not be able to give the specific margins, but that will be north of that threshold for sure. To your second question, we need to just appreciate that this product is a generic product. And obviously, we have to -- ultimately, the key principle behind a CDMO business is also to support the customer to be competitive in the market. So obviously, we worked together on it and got to a point where it felt like a win-win and hence, we have the margin. More broadly also, if you look at the agro segment within CDMO, margin for most players will be between 20% and 25%. Of course, pharma operates closer to the 30% -- 25% to 30% mark. But in agro CDMO segment, 20% to 25% margins are not bad, especially when the products are much bigger and give a step change kind of growth to you.

Understood. The second question is more of a directional thing. I mean, I am referring to the presentation that you made last year. Your FY '30 guidance for Spec Chem also kind of indicated a 25% margin, which you have been maintaining in the last three quarters. The business seems to be stable at that margin. The growth from here on to FY '30 seems to be driven more by fine chemicals and CDMO. And like you said, I mean, that improves the business mix. Then why is the guidance for FY '30 not higher than 25% and the same as the current business mix right now, which has a larger proportion.

No. So I think in terms of mix, you are right, Avnish. Of course, we made certain assumptions at that time. I do feel if we continue growing our fine chemicals and CDMO business at the pace that what we see with the pipeline building up and particularly all the cost initiatives which we have taken, which, by the way, were not built into the 5-year projection when we shared those numbers last year, I think we should hopefully be able to do better than 25% in Specialty Chemical. But at the same time, right, FY '30 is far away. There are so many factors which will have to -- positive and negative, which we may need to navigate through over the years. But I think I would put it more like an aspiration that we need at least 25% EBITDA in Specialty Chemicals, which is what we have been maintaining. And from whatever we can see, we should hopefully be able to do that quarter-on-quarter and year-on-year. We will, of course, try to do better than that with all the cost-saving initiatives as well as some of the new projects that we are working on.

Just to add to it, Avnish, what Deepak just mentioned, we are also reinvesting for growth. Growing Specialty Chemicals remains the key focus area. And there is a reinvestment of incremental margin that will go in building the capability, both in R&D and in our technical teams.

That makes sense. Thank you so much.

Thank you. The next question is from Gokul Maheshwari from Awriga Capital. Please go ahead.

Thank you for the opportunity. My first question is on the Nutrition and the Health business. When do you start seeing the benefit of improving margins with the mix improving towards cosmetics and food moving away from the animal feed?

Yes. So Gokul, actually, that has already started to happen implicitly. Of course, that is not visible to you based on the public number, but because the impact of price decline in feed segment, which, as you might know, if you are tracking us for a few years, is a very volatile market or cyclical market. The price decline in feed has kind of offset the positive impact coming from cosmetic and food segment growth, which we are hoping that as we grow -- continue to grow the volumes of cosmetic and food relative to feed, will become more and more prominent. And like I was explaining in the last few days itself, we have seen price uptick in feed as well, which we are hoping will help us anyway counter the negative impact. So the combined impact of both of these should hopefully start reflecting in this quarter and definitely next quarter onwards. And just to give you a sense versus the peak volume we expected to get from the new plant that we commissioned last year, already we have reached almost 30%, 35% of those volumes within the first year despite the fact that it takes some time for the customers to approve the product. So we are hoping in FY '27, we will scale up the utilization and the volumes coming out of that plant even further, which will accelerate or help us in taking the margins up further.

See, we are making an intermediate and we will be sending it to the innovator. They will convert it into the final molecule. And obviously, they can send in any part of the world, that is their prerogative. But they have told us where we need to send the molecule, where they will convert it into the final. Yes.

Okay. So it is largely an export order?

Our intermediate, yes, is an export order.

Yes. Okay. Great. And lastly, just on the INR depreciation which has happened, does this really help us for where we have import substitution for certain products, which helps in us getting better pricing versus pricing which was benchmarked to import pricing?

Yes, it does, Gokul. Obviously, there is been a lot of volatility in rupee. So whenever rupee depreciates in the segments where we export a lot of products to outside markets and in import substitution segment, it does help us increasing the price and we have marginally increased the price there as well. But our overall portfolio, if you look at we are naturally hedged because we also import a lot of raw materials, particularly on our acetyls business and even in Specialty. So we have a natural hedge within the P&L. So at the overall company level, we are by and large agnostic to the rupee movement.

Okay. Great. Thank you so much and all the best.

Thank you.

Thank you. The next question is from Atishray Malhan from Abakkus Mutual Fund. Please go ahead.

Hi, good evening. My question pertains to the Agrochemical CDMO contract. So I believe in the last concall, you had mentioned that the contract should start from about January onwards, which has now been moved to March. Now I appreciate that it is a very slight delay. But if you could just help me understand the reasons behind it or is it just to do with the delivery schedule of the innovator?

Atishray, this -- I think we always maintained we will start the production process, the plant in January, so which is what we did. 5th of January, we did the puja at the plant and commissioned the first batch. It is a complex multistage product. So the whole cycle of producing even the first kg of final product is at least a six to eight weeks process because it goes through the different stages. So there is no delay or delay of production or even on placement of the order from the customer. It is just a process. And that is why I said by mid-March, we are hoping we will get the first kg out and we will start shipments in March itself. So a couple of weeks here and there, but by and large, it is on track.

Okay. Understood. Thanks. That was very clear. Thank you and good luck for the fourth coming quarters.

Thank you.

Thank you very much. We will take that as the last question. I would now like to hand the conference back to the management team for closing comments.

On behalf of the entire management team, we would like to thank you for joining the call today. We hope we have been able to answer your queries. For further clarification, I would request you to get in touch with me. Thank you once again for your interest in Jubilant Ingrevia Limited.

Thank you very much. On behalf of Jubilant Ingrevia Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.

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