PI Industries Limited analyst Q&A

Thank you. We will now begin the question-and-answer session. The first question comes from the line of Rohit Nagaraj with B&K Securities. Please go ahead.

Thanks for the opportunity and glad to hear that the NCE has moved to Phase-3. Just one question on the NCE PIOXANILIPROLE in terms of what is the time to commercialize that we are looking at and how much have we already invested in terms of R&D and how much incremental R&D investments are likely to undergo for this NCE? Thank you.

Maybe I will take that. So as we explained, we are right now in the process of regulatory data development, evaluation, and also application preparation. We expect to commercialize in the very first country in the next couple of years. As regards to the second part of your question about the investment, etc., this is not in front of us. And also it is very confidential data. So I hope this information helps you.

Thanks. The second question in terms of what is the composition of the new high growth molecules in Ag-Chem CSM by the end of FY25? And similarly, a composition of biologicals in our domestic branded business at the end of FY25. Thank you.

When we are talking about new product launches and their contribution to our Ag- Chem export business is around 15% to 18%. And similarly, the biologicals business to our Ag-Chem brands business accounts for around 18% to 20%.

Thank you. The next question comes from the line of Vivek Rajamani with Morgan Stanley. Please go ahead.

Hi, sir. Thank you so much for the presentation. Just continuing with the question on the new products i n your portfolio. For FY25, they have grown at about 30% plus. How should we be thinking about the growth of these new molecules in FY26 or even FY27? And sir related question, these new molecules grew about +40% into 2Q and 3Q and about +20% odd in the remaining two quarters. So any thoughts with respect to if there is the functionality element here would also be super helpful. Thank you.

Yes, for the next Financial Year also, we can have a similar new product pipeline of molecules getting commercialized, 15 products got commercialized in the last 3 years and will continue with the same momentum of new products adding to the topline growth and giving us stable margins on that.

Sure sir, that is helpful. And anything with respect to seasonality or it would just be equally spaced.

Well, this is a seasonal industry and as you will see over the years, quarter to quarter variation always happens. It depends on demand, supply, market situation, positioning. So yes, that will continue to happen. That's the DNA of this business.

Sure, sir. And just a clarification, if you are going to continue the same momentum on these new molecules, would it be fair to say that the 15 % to 18% of contribution that we have as of this year, that number could probably be maybe north of 20 %- 25% by the end of next year? Would that be a fair assumption?

Well, I would not put it as a mathematical computation, but yes, because there's a variation volume wise and multiple things come together. But our objective is to continue to increase this portfolio because some products come in and some drop out. That's way it works.

Thank you. Next question comes from the line of Abhijit Akella with Kotak Securities. Please go ahead.

Yes, thank you so much and good afternoon. The gross margins this quarter seem to be really strong, almost at record levels, despite the fact that there has been some price cuts in the CSM business as we alluded to in the presentation. So just sort of wondering what's behind the really strong gross margins. And with regard to the EBITDA margin outlook for FY26, what's the range we should work with ? I mean, this quarter we reported 26%, but the full year was 27%. So what's the right number to work with for next year?

So if you were to look at it, again, quarter -to-quarter would not be the right way to look at numbers. But yes, the margins vary based on product mix. As we indicated earlier, we continue to keep those guidelines around 25% as our EBITDA margins on a long-term sustainable basis. As we have indicated clearly, product mix, strong growth in domestic business and continuing to look at the margin improving going forward as indicated

Okay, thank you. And the other thing was just on the couple of data points, if I may, for Mr. Agarwal. One was what was the pharma EBITDA loss for FY25? We've given the PBT loss, but it will be possible to just share the number at the EBITDA level. And the presentation states that there's this target of aspirational target of increasing the biological revenues 5x in 5 years. So where those revenues stand at present and therefore, where do they go in the next 5 years? Thank you so much.

EBITDA loss for the full year for pharma business has been in the range of around Rs. 180 - Rs. 190 crore.

The biologic revenues, what is the amount right now at present?

We spoke about it, that the biological India business contributes around 18% - 20% of our India agri-brands business.

Yes. But the presentation says we want to increase it 5x in the next 5 years.

Yes, so it is clearly what we are looking at, you asked two questions, I think the biologicals. One is what is that you are looking at, it's already stated as 5X. Clearly, today we are at something around Rs. 250 crore right now. This would probably move up to 5x, it will be Rs. 1,000 to Rs. 1,200 crore in the next 5 years.

Thank you. Next question comes from the line of Ankur Periwal with Axis Capital. Please go ahead.

Hi sir, thanks for the opportunity. First question on the margin outlook for us. Now as I understand pharma losses are expected to go down as we look to ramp up t his business over the coming FY 26 or 2 -3 years. At the same time the Ag-Chem business is going to see more launch of new products, which presumably will be a better margin and still we are maintaining our overall guidance at the same level as FY25. Is it that there is some bit of pricing pass through or maybe some pressure that we are seeing in the older products or if you can help your thoughts over there?

To be very honest, the investments and overheads which are being built up, so ratios are different, but on a global blended basis, we've indicated where we are looking in terms of margins. And that's what the company will continue to maintain.

Okay, fair enough.

At the same time, I think just to appreciate that the company is investing hugely to build a global footpr int in biologicals and in pharma and cost of running global organizations from a different cost structure. So taking all those blends and building up to create the next place, to be in the Life science place, there are investments both in human capital and other areas.

Sure sir. Secondly, on the pharma business, while we are targeting a much sharper sort of revenue growth going ahead, will we need an incremental FD A approved or maybe a bigger production facility for this business to ramp up? Or that is still some time away and probably nominal CAPEX will do here?

Clearly, I think is a step by step approach. We have assets which have been upgraded with investments.. And as you see things turn their shape, we'll definitely be looking to scale up as we have ambitions to put a huge number in scale to go to this business.

Sure, sir. Just one last bit, a bookkeeping one. So in the balance sheet, we have contract assets of around Rs. 430 odd crore, which was around Rs. 150 - Rs. 160 crore last year. If you can just highlight what exactly is that for?

Yes, so these are standard industry practice of having any contracts where the goods have not been delivered before the cutoff date. So these are specific contracts where the goods are produced for a particular customer, and which are subsequently been shipped out in the next subsequent months.

Sure. Agarwalji, is this for pharma or for the Ag-Chem export bit?

It will be in both the businesses.

Thank you. Next question comes from the line of S . Ramesh with Nirmal Bang Equities. Please go ahead.

Thank you and good evening. In the pharma business, when you are looking at improvement in margins, is it possible to share what is the kind of improvement in gross margin you can expect from the 52% in FY25? And in terms of the run rate for the overheads at Rs. 306 crore in FY25, do you see this stabilizing at these le vels with marginal inflation rate increase, or would you see further increase in overheads?

In this particular Financial Year we had unfortunately some one -offs which we had to take care of it. Going forward, what I can say at this point in time, the business is built with gross margins of around 60%-65%. And with the scale up of the revenue, the operating leverage will start kicking in and we should have better profitability at the bottom-line too.

So can you share what is the one-off impact of the old inventory write-off, which has increased overheads?

So It will be difficult for me to give you the exact numbers, but the current overheads have development spends, also as we spoke in th e Q2, we had one particular customer where we had to take a doubtful debt provision and some other one -off costs, which impacted this year, which led to a higher overhead s in this Financial Year, which we do not think would be there in the times to come.

Okay, so on the domestic business with the current run rate of around Rs. 1400 crore, what is the kind of potential you see or when do you think you can say go to over Rs. 2000 crore because a lot of small peers are already at Rs. 1,700 - Rs. 2,000 crore and you have so many new products being launched. So what is the kind of direction you are seeing this business heading towards over the next 2-3 years?

Domestic business is about Rs. 1,500 crore to Rs. 1,600 crore but it's pure brand business whereas when you are comparing to other smaller players, they also have technical and B2B business and exports. we are looking at a 15%-20% growth which is 2x of the industry average growth.

Thank you. The next question come s from the line of Saurabh Jain with HSBC. Please go ahead.

Thank you so much for the opportunity. If you can give some more insights into your guidance. When you say a single digit growth guidance, so that kind of implies a broad range from 1% to 9%. Is there a possibility you can give a sense on whether it's going to be a mid-single digit or high single digit kind of guidance? That's my first question.

We are looking for mid single digit level growth this year given the industry headwinds and the uncertainties of the climatic situation. As we said, we would definitely see some positive trends coming in H2, but that's where we stand for now, and we will keep that outlook for the present.

And when you say H2, do you mean by calendar year or it's going to be the Financial Year?

Financial year.

Okay, understood. Is it possible to also give a sense on how do you see the exports v/s domestic in terms of your guidance, both business scoring by single digit or I presume domestic would be higher?

Yes, we would see a good growth in the domestic business. As you are very well aware, the global headwinds, that's the areas are still u nder challenges from the export front. But we believe that from H2, the export business would start picking up well with the launch of our new products and the growth in those areas.

Okay, thank you. My second question is related to CAPEX. The Rs. 925 crore of CAPEX, this includes the amount that we paid for PHC acquisition, right?

No, this is only the fixed asset addition. So there is a small minor amount which has been added to the consol level arising from the PHC acquisition, but primary relates to the CAPEX what we have done at PI and PIHS.

Understood. And one final bit, on the acquisition side, can you give us a direction in terms of how much of the CAPEX you are directing towards your legacy Ag -Chem portfolio? Does it share a major part of the CAPEX or it has moderated? Any insights would be very useful?

No, I am not very clear of the question, what do you mean by legacy Ag -Chem portfolio CAPEX?

The key products in th e portfolio which you export for the last few years which are some sort of headwinds now, most products are you committing more CAPEX incrementally or is slowing down. Any sense on that side, please?

No, I think the company looks at CAPEX based on what are the requirements of the business, business plans or the commitment , partners outlook in the product and value efficiency drivers and typically the existing products and all the assets which need constant upgradation, improvements in all th ose areas. So that is mixed bag, and that is typically the CAPEX, but when we build the assets, we are both strategically investing for building our new offerings and our new product solutions.

Thank you. Next question comes from the line of Madhav Marda with Fidelity. Please go ahead.

Hi, good afternoon. Thank you so much for your time. Sir, one question, I think we have NCE which you said has reached Phase -3 trials. Just wanted to understand that if you will be launching our own branded product in the market, does that create like a longer-term conflict of interest with our existing model which has been a more contract manufacturing CSM model and we partner with?

I am not certain how do you look at this as conflict of interest because we are, in any case, at PI doing branded sales , contract manufacturing, innovation. The unique point of our capability at the global level is partnerships across the value chain. Actually, this gives us the tota l sum of the business partners strengthening our relationships from being innovator to the market as a co -creator to develop this business, so I don't really see that as a challenge.

I just asked because our branded business is more focused than India, whereas our exports used to be more contract manufacturing driven, so that is why the question got it?

The same way for these products we will work with partners for global markets and handle local market ourselves, so that is all the same approach.

Thank you. Next question comes from the line of Krishan Parwani with JM Financial. Please go ahead.

Thank you for the opportunity. Couple from my side, with strong 75% growth in the pharma business, do you expect pharma business will turn EBITDA positive in FY26 or if not in FY26, then when?

Yes. So, this one will take time. It is not easy to give you a number. Definitely, it will take time over next few years because as we are scaling up , the developmental spend will also go up. So while EBITDA breakeven is on the horizon, but it will definitely take more time, not in FY26.

Yes, very clearly over the next FY26, FY27, FY28, we should see the positive trends of this business very clearly.

Got it. And on PIOXANILIPROLE, the new NCE, just wanted to understand which major crop would this insecticide be used on and which is the first country you intend to commercialize it?

Well, this is diamide chemistry, so we will be looking at the multi-crop application and obviously the objective would be to see if we can get India first, but while we are working with 2 or 3 countries with partner’s application. So it depends on how the regulatory framework works.

Noted. And one final bit on the CAPEX, how much CAPEX will you be incurring in FY26, it could get done like breakdown of agro and pharma, please?

Well, there is no breakdown we would have, but CAPEX in the manufacturing would be around that same area, right now about Rs. 800 - Rs. 900 crore in the similar ratio that we had last year.

Thank you. Next question comes from the line of Sumant Kumar from Motilal Oswal Financial Services Limited. Please go ahead.

Hi, sir. Sir, can you comment on EBITDA margin guidance for FY26?

We would be looking at in the range of around 25%.

So now compared to FY25, do we have any expansion from here?

see When we are looking at the next 12 months down the line, there are investments, in new businesses which are going to be a growth engine.So I think for now it is better to take around 25%. .

Our guided line and we continue with that.

And any CAPEX for FY26 - FY27 and tax rate guidance?

Thank you so much.

Thank you. Next question comes from the line of Riju Dalui with Antique Stock Broking. Please go ahead.

Hi sir, thanks for the opportunity. So my question regarding in terms of the guidance that you have provided, so the growth that you were expecting, so it is mainly driven by the volume or kind of price increase you are expecting.

If you see the Domestic branded revenue performance of last year up - 9% volume growth, 6% on value growth . As the prices are looking to stabilize, volume will definitely grow and that balance should remain dependent on how the market reacts, this is more of like a straight -line walk. But as you know, as sometimes prices go down, volumes pick up, prices go up, volume go down.

Understood that. And in terms of your degrowth in Q4 and as you reported in the presentation, so what I believe is that there was a strong growth in volumes and which was partially offset by the realization growth, so like how are they paying product prices currently and how do you see going forward those prices?

Sorry, in which segment?

In terms of Ag-Chem exports?

Well, the segments, I think as you would appreciate that the Ag -Chem, we are continuing to grow, our new product pipeline growth is at 30% odd. And if you look at the products in the individual areas, which areas, which segments, those are with the customers, so broadly that strategic move continues to grow, the existing product profile in the same ratio while the other products continued steady state growth rate, yes.

That I understood, but like what I wanted to understand is that like during the quarter, Q4 FY25, our AG exports, volume growth was roughly 7%. Correct me if I am wrong. So vis-a-vis like want to expect that there was a sharp decline in the prices. So how do you see the prices going forward?

Yes, there is obviously some price softening and that is on the basis of input cost softening. So over last 1 to 1.5 year, post COVID, input prices have come down and given our business model of CSM Exports, where these input cost improvements are also passed through and therefore the pricing of some of these existing products have also come down, which is also reflecting in the revenue growth numbers that you were explaining.

Understood. Thanks for the clarification. And one last thing, kind of bookkeeping. So if you could tell the order book size that we have currently as on Q4 FY25?

Est around 1.3 billion USD plus, but we don't have exact number in front.

Thank you. Next question comes from the line of Keyur Pandya with ICICI Prudential Life Insurance Company Limited. Please go ahead.

Thank you for the opportunity. Question on the CAPEX for FY25, we hav e spent around Rs. 800 crore on the organic CAPEX and guidance also remains similar number for FY26 and on the current gross block that suggests that over 2 years, the average expansion, the gross block would be upwards of 15% -17%, whereas our revenue growth is relatively lower. So anything has changed in terms of asset turn or eventually the asset turn has to catch up by higher revenues. So if you can just throw some light on this and the breakup of the CAPEX on domestic, exports and pharma or any colour on CAPEX? Thank you.

As you would understand that we are building a new vertical called pharma, obviously, the CAPEX turns will be lower if we get to a certain scale and size. On the other hand, CAPEX is if you look, these are tactical in nature. In the past, they have always as capacity linked demand and therefore the building capacity is based on certain demands and understanding from our customers of products which are in the pipeline. So we do believe that overall on an average basis of 3 years, we should be able to manage our asset turns in better.

Sir, just one follow up, so sustainably what kind of asset turn at a company level or as a segment wise we should think of and break up of CAPEX in these 3 key subcategories? Thank you and all the best.

The asset turn continues to be at the similar range. I think today we have one of the benchmark asset turns in the industry and we try and continue to manage.

Yes. anything between 2.2x - 2.5x is what we will consider a sustainable number of asset turn.

And sir, breakup of CAPEX?

Maybe Sanjay, you can take this. Major CAPEX of this is for our CSM exports and some bit of it will also be for pharma of course. But Sanjay, maybe you can share the breakup, if you have.

Yes. So broadly in the Rs. 800 - Rs. 900, when you look at it to around Rs. 100 crore would be in the PI HS, the pharma business and the balance will be in the manufacturing in the Ag-Chem business.

Thank you. Next question comes from the line of Himanshu Binani with Anand Rathi. Please go ahead.

Sir, thank you for taking my question. Sir, again on the guidance side basically, so we have been like guiding for a 75% plus sort of like growth in the pharma business and on a consol level, we have been guiding for a single digit sort of growth. We just wanted to have a sense in terms of how one should actually look into the CSM Exports business growth, so how one should actually w ork with the CSM Exports business growth for FY26?

When we look at pharma, it is only 5% of our total business. So that will not move the needle for the whole organization and the whole organization as you already mentioned that it should b e in the mid -single digit growth plans for this Financial Year.

Got it, sir. And sir, any sense on the gross margin guidance?

Yes, this will remain around 50% - 52% depending on the final product mix that we are able to achieve.

Got it, sir. Thank you.

And for CSM, we have to also keep in mind that for the last 3-4 years, we have been growing at 20% - 25%. So obviously, the base is pretty high. And as we have guided that for next couple of quarters, while the global industry is navigating through this headwind, we certainly believe that from the second-half of FY26, we should be able to again be catching up the growth momentum and that is how it will function.

Hello, thanks for the opportunity, sir. Sir, first question is on margins. So in the domestic side, biological seems to be the next growth engine and then also on the CSM side, your new products is like roughly around 30% as you mentioned. If you could just give some colo ur on margins in both these businesses, directionally compared to biological v/s existing branded and domestic and new product versus the rest of the other portfolio with CSM that should be helpful?

We don't do individual numbers, but I think broadly as you would know biological products give better margin and for new products, again it is a mixed bag. So that is how it works.

Got it, sir. Sir also, when we are giving this FY26 guidance, so we have given it for broadly pharma and th en we have broken it down. So , what is the thought process for the 70% of the CSM business, which is the not the new products one, what is the volume v/s pricing thought there, you would be, volume that will kind of overtake pricing and then that is how we are looking at, what broad thoughts there?

Well, that is not the right way. As I said, it is a balance between volume and price, but obviously that is going to remain in mind with the industry as we have those mature products and some of n ew products, so they will work with the market dynamics and that is typically, as I said in this industry, that is the genetics of this industry, that volume or price continue to play differentiator.

And just to add to this. So obviously, th ere is portfolio of products, with legacy products, there are new products as we are saying, significant percentage of new products are getting added and they are contributing in the growth. So in fact, pricing also works like that in terms of old products where the input cost is improving, those improvements are passed through, and price reduction happens. But as far as the new products that are being launched where the input costs are sort of stable. There, the pricing trend is different. So, on a blended basis it is not so simple to tell you that pricing will be 5%-10% down and volume will be 15% up or something.

Sir, also the Ag-Chem CAPEX that you are referring to, any multi-purpose plans that are expected to come this year, next year or is it more of existing facilities we are putting in CAPEX or how does it work?

As we had said in the past, we are doing our CAPEX with two multi -products plants which are under construction. We expect to commission one this year, maybe the next in the beginning of March next year.

Thank you. I am promoting the next that is Shivanshu Dubey with Dhruv Investment. Please go ahead.

Yes. Congratulations for our great results. Sir, actually I wanted to understand the working capital cycle. Would we expect it to remain in the same number of days?

Yes. We have seen a slight increase in our Networking capital in this particular financial year, but inventory days have come down. For the next year, you may consider the range, what we have, so we are at around 73 odd days, the same could be taken around 65-70 days.

Sure. And can you also tell us about the new products development that is happening in the Ag-Chem Export with Pyroxasulfone going off patent in, I think mid of 2026 in USA?

Thank you. Next question comes from the line of S Ramesh with Nirmal Bang Equities. Please go ahead.

Hello. Thank you for the follow up. So when you talk about the target for the bio business, would it all be focused on the domestic market or does it also include some growth from the plant health investment in the subsidiary?

Yes. We have been so far looking at biological play at domestics level but for the next 5 years, it will become a global play.

And in the pharma business, in your slide 17, you mentioned about improving order book visibility. Is it possible to share the line of sight there in terms of discussions or inquiries, what is the thought process there?

Let me put it this way. Yes, we can give the high level, obviously, you would understand the confidentiality both from a customer name and products from areas that we are working. Ramesh, maybe you would like to give some insights that yes, you have been lo oked at what you are looking at, but broad line of development. Ramesh, over to you.

Yes, sure. We continue to build the pipeline we have over the course of the last year added the early development pipeline, meaning new projects and high s ingle digits and the new on early development and high single digits also on late development that is the pipeline moving forward. We also have on-boarded 2 new big pharma customers and the goal in FY26 is to add another 2 or 3, so that we can have a sound base of big pharma that gives consistent revenue and the biotech give you better margins. That sort of the play that we are progressing with.

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Once again, thank you to all of you for participating in the PI Investor Call. We look forward to a positive time going forward and continued support. Thank you.

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