Anupam Rasayan India Ltd Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ankur Periwal - Axis Capital - Analyst : First question on the margins for the quarter, and I'm referring to the standalone numbers here. So we have been maintaining that our margins will remain healthy. But any specific reason why both gross margin and EBITDA margin have contracted here?

Question: Ankur Periwal - Axis Capital - Analyst : Sure. On a volumetric basis, will we be -- where will we be in terms of growth or degrowth and by what magnitude in this financial year?

Question: Ankur Periwal - Axis Capital - Analyst : FY24. We have around 24% decline in revenues. So how much of it is pricing? How much of it is volumes?

Question: Ankur Periwal - Axis Capital - Analyst : Okay. Sure. So -- and from a utilizing perspective, we will be sub 80%, 85%-odd levels from the aggregate capacity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Ankur Periwal - Axis Capital - Analyst : Okay. And on the working capital side, we have -- we were earlier guiding for a reduction in working capital for the full financial year. I understand the revenue degrowth and the macro behind there, but the sharp jump here in working capital, if you can put some light there across inventory?

Question: Ankur Periwal - Axis Capital - Analyst : Okay. Vishal Bhai, two follow-ups. So one, you mentioned because of the receivables we have started giving longer credit to customers. So which hopefully should sort of being reverse. But on the inventory side, is there any slow-moving product which has got stuck here and due to which the overall inventory looks bloated? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call I'm looking at the absolute numbers, we were at INR860 crores in '22, and we are INR990 crores now in FY24. So even if I look at absolute numbers, the inventory number has not gone anywhere in sync with the revenue

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Sir, two main thoughts in your business. One is on this working capital, you responded to some questions earlier. But structurally, when do you think can bring down your overall blended number of days net working capital to maybe something comparable to a peer group company, so 90, 100 because you are way higher than that? And when you say the new products are going to be having lower net working capital, so what is the kind of net working capital we have for the newer products? And when do you see the current portfolio giving you some reduction in net working capital in terms of the structural direction? If you can respond to that, then I'll go to the next question.

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. Sir, can you talk about the Indian business and pharma increasing share, what is the current split between domestic and exports in fourth quarter and FY24? And where do you see these domestic exports split moving, say, in the '25, '26?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. So on the segment, pharma specialty, so can you just give us the details of the split between exports and domestic for 4Q and FY24, 4Q24, and export FY24?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : 62?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. So that means your domestic business has gone. So in the fourth quarter that.

Question: S. Ramesh - Nirmal Bang Equities - Analyst : That is fine. That is fine. So we're just trying to see how the overall portfolio is moving. How the domestic business is moving and then because of that, you are saying receivables are going up? I'm just trying to understand that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call So within this portfolio, if you can share some thoughts, like your overall, your agro is more than 90%, you have given some data on how the pharma and specialties will increase, right? So what is the current share of pharma and specialties in 4Q and FY24? And how do you see that pharma and specialties moving, say, in FY25, and '26?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : You're saying agro will be 75%.

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Yes. So 60%, 65% is agro, 9% is pharma, and specialty is 9%. That is about 74%. So balance out of the balance, 25%, how much is it now? Or where does that come from?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. So personal care is 17%, pharma is 9% and specialty is 9%. Okay. But when you see the pharma and specialty is growing faster. Understood. And if you see this kind of growth and when you see this kind of growth and you are talking about the share of fluorination increases. So what is the share of fluorination in FY24? And how does the share of fluorination move in the next two years, '25, '26?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : And this will be mostly in pharma, right?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. So just to round up the discussion --

Question: S. Ramesh - Nirmal Bang Equities - Analyst : In terms of your operating cash flows and growth from the new products, and the movement in debt, how do you see the net debt for the company, say, in the next two years, which could possibly offset this relatively higher working cap we're going to have? So can you shed some light in terms of your thought process on how you operating cash flow will help to reduce debt and manage your overall balance sheet to a reasonable size, even with the high working capital, so that your ROCE can improve?

Question: Krishan Parwani - JM Financial Ltd - Analyst : A couple of questions from my side. First is a clarification on the CapEx. Sir, did you mention INR190 crores of incremental CapEx you would incur during FY25?

Question: Krishan Parwani - JM Financial Ltd - Analyst : Yes. I meant incremental.

Question: Krishan Parwani - JM Financial Ltd - Analyst : Okay. So you would be utilizing that cash towards the capital?

Question: Krishan Parwani - JM Financial Ltd - Analyst : Okay. Secondly, the INR1,600 crore, INR1,700 revenue guidance, that is on the stand-alone capacities, correct? And that's not in FY25, but in totality, it can give you the INR1,600 crores, INR1,700 crores revenue. Is that correct? Or no? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Krishan Parwani - JM Financial Ltd - Analyst : Otherwise, I think it would have looked more like in FY25.

Question: Krishan Parwani - JM Financial Ltd - Analyst : But do you want to give any guide for FY25 in terms of range, particularly as in on a consolidated basis?

Question: Krishan Parwani - JM Financial Ltd - Analyst : Sure, sure, sir. No worries on that. And one, two small clarifications, if I may. So on this working capital front, so if ideally, we should be looking at the stand-alone inventories, I think, which has gone up to INR990 crores or in days of sales 321 days. So just can you please give a breakup of that raw material, WIP and finished goods inventories for stand-alone business for this financial year?

Question: Krishan Parwani - JM Financial Ltd - Analyst : Sure. And lastly, if I look at the stand-alone receivables, which has increased by almost INR170 crores. And while our standalone sales have declined, so if that wasn't for the higher receivables, the actual top line would have declined by a much higher number. Is that understanding correct? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Rohit Nagraj - Centrum Broking Ltd. - Analyst : Sir, first question is on the stand-alone. So sequentially, we have done pretty well. There could be a seasonality impact as well. But given that it's the start of calendar year for most of our export customers and they will be starting the year off is given that last year, we had inventory issues, et cetera. what is the kind of dialogue that we are having? So whether they are relatively confident in terms of lifting up the volumes given that last year, those volumes were impacted because of inventory drawdown, and they were taking only minimum quantity. So what has been the dialogue, particularly from the agro perspective, given that the other segments we have already mentioned that there is a strong growth expected going ahead?

Question: Rohit Nagraj - Centrum Broking Ltd. - Analyst : Fair enough. Fair enough. Second question is in terms of the LOIs. Sir, out of that INR9,000 crores of LOI, how much has the condition in FY24? And if I'm not wrong, earlier for FY25, we expected close to about INR400 crores -- INR300 crores, INR400 crores. So does that guidance remain? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Rohit Nagraj - Centrum Broking Ltd. - Analyst : Sure. And just one last clarification. So we've been -- when I understand you don't want to give a guidance on the top line front as is now. But given that the raw material prices have alleviated stabilized, so would our margins be in the range of 26% to 28% as we have guided earlier from stand-alone basis?

Question: Rohit Nagraj - Centrum Broking Ltd. - Analyst : No worries. Sir, any guidance outside --

Question: Rohit Nagraj - Centrum Broking Ltd. - Analyst : Just any guidance on FY25 and working capital days that we want to put up assets now?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Yes. Just a couple of follow-up questions. One is in terms of the number of shares you reported in the filing, does that include the number of shares equivalent to the warrants or for dilution, should we take the entire conversion of warrant, that 39 million?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. Second thing is now somebody asked this question on the share of revenue from the LOI. So how do we look at the impact of the bunching of some of these orders getting so maybe three years down the line, say '27 to '30 to take a three-year view beyond '26, what would be the kind of run rate in terms of revenue addition from the order book you have as of date?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. That's a delta from the new orders, right?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Yes. Plus what you will get the revenue from the current portfolio, which will continue to run and then they've dealt whatever --

Question: S. Ramesh - Nirmal Bang Equities - Analyst : So but pharma and polymer will be part of the LOIs, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Okay. That means there will be -- you're saying, there will be sales outside the LOIs? It's an annual business.

Question: Madhav Marda - Fidelity International - Analyst : I just had one question on the working capital side. So I remember the last couple of years, we've been highlighting that we want to change the pricing contracts for many of our customers. I think it's usually a yearly contract or six months or lower. Could you help us understand like from the IPO time three years back to now, what percent of our customers or revenues have shifted to a lower sort of pricing duration, if you can help us with that? And also just curious, if we have 320 days odd inventory in the stand-alone and 70% is finished goods, so we're carrying like 200 days of finished goods inventory on the balance sheet. Just wanted to understand, why are we carrying more than six, seven months of inventory of finished goods in the balance sheet. Just trying to understand the sort of --

Question: Madhav Marda - Fidelity International - Analyst : Sorry, the 60% revenue, which is from the six-month pricing contract, how much was this like during the IPO time like three years back, how much -- what is this number then? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Madhav Marda - Fidelity International - Analyst : So my question was that, given that the customers have been destocking globally, we see like a phenomenon across the agro value chain, given the customers are destocking, why do we need to keep higher inventory on our balance sheet?

Question: Madhav Marda - Fidelity International - Analyst : Okay. And sir, the pharma business, which is expected to go up. What is the working capital cycle there for that part of the sort of revenue?

Question: Madhav Marda - Fidelity International - Analyst : How different is it, sir, broadly agro, let's say, our target is to be 200 days by FY26, pharma is at what level?

Question: Madhav Marda - Fidelity International - Analyst : Okay. And margin profile is probably similar for pharma versus agro revenue for?

Question: Yash Shah - Investec India - Analyst : Sir, my first question was regarding the current LOI, which we have, the LOI which we have of nearly INR9,000 crores. Have we basically witnessed any kind of dialogues with the customer wherein the customer has asked to wherein there has been pricing renegotiations due to the overall decrease in the prices throughout the value chain?

Question: Yash Shah - Investec India - Analyst : Okay, sir. Got it. Sir, my second question was regarding, again, you actually guided that the revenue from LOIs for FY20 should be in the range of somewhere between INR320 crores, INR370 crores. So far, as of FY24, these commercialized contracts were INR2,700 crores. And for FY25, we had guided to basically, except for the INR2,200 crore contracts from Japanese customers. So we'll be basically commercializing INR4,200 worth of contracts in FY25. Will you be able to provide a broad breakup as of the contracts, which have been commercialized before this year and the ones which are going to commercialize in FY25 of how are we basically expecting INR350 crores? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Siddharth Gadekar - Equirus - Analyst : I just have one basic question. When we look at our contracts, which are annual, given that in [CY23] if a customer had indicated, they would be picking up x quantity by year-end, how much lower was that uptake from those customers? If you would give a fair sense in any way?

Question: Siddharth Gadekar - Equirus - Analyst : Okay. So basically, it would be fair that the offtake was 20% lower than what the customers have indicated in CY23. Would that be a fair understanding?

Question: Siddharth Gadekar - Equirus - Analyst : And for the -- for CY24, how has that number shaping up like in terms of the customers, how have they indicated for CY24? Is it to worry to give any indications so even there put that on hold?

Question: Siddharth Gadekar - Equirus - Analyst : Okay. And sir, for CY25 also, have we received any indicative orders from the customers or that will happen once we are closer to the end of CY24 or CY25 looks a year, where we will see a very healthy growth. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Siddharth Gadekar - Equirus - Analyst : Just one last thing on this. So if CY25 volumes higher than CY23 or it will be in that same ballpark range. On the existing orders, not on the new orders? Just to get a fair sense of way as to how our customers are thinking?

Question: Siddharth Gadekar - Equirus - Analyst : Okay. Sir, secondly, in terms of margin --

Question: Siddharth Gadekar - Equirus - Analyst : Yes, it is. Secondly, like in the previous comment, you had mentioned that we work on a percentage margins. So do we work on a per kg margins or a percentage margin because we have in?

Question: Siddharth Gadekar - Equirus - Analyst : In an environment where raw material prices are moving up, our absolute EBITDA is technically much higher than what it should have been. Is that a fair understanding?

Question: Rohan Gupta - Nuvama Institutional Equities - Analyst : Sir, a couple of questions. First is on is if a Tanfac and other fluorination businesses, if you can give some what is the current capacity utilization? And in FY25, FY26 looking at the current product pipeline, what kind of utilization level you are looking at?

Question: Rohan Gupta - Nuvama Institutional Equities - Analyst : No, sir, my question was other way around that in HF, we still have some surplus availability and are we able to sell in the market, what are the capacity utilization we win for HF we have seen at Tanfac? I mean is there a market in HF right now because earlier, the Tanfac used to sell significant amount of HF to outside? How is the market now? And once we are moving up in the value chain, then what are the expected utilization level for Tanfac next year?

Question: Rohan Gupta - Nuvama Institutional Equities - Analyst : And sir, second question on about agrochemicals. 60%, 65% of our business is still coming from agrochemicals there. We have been seeing that very poor visibility as of now, whichever you are also agreeing that maybe first half may be slightly uncertain and things should pick up in the second half. That is an expectation across the industry right now. Sir, with that, keeping in the mind though, do we have been signing multiple LOIs and a lot of LOIs were supposed to go on stream from -- I mean, in this first half also. Do you see that from the client interaction right now, which you are seeing, there can be further push of, further delays, how the contracts are -- I mean, have been chalked out that in case of any significant delays are we covered because the capacities have been invested? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call So are we covered in terms of client compensation, any of such thing because our business over the next two years is a lot of dependent on LOIs? I'm just worrying and I'm trying to understand the risk associated with that? If any delays, how it will be panned out in terms of the compensation to our profitability?

Question: Rohan Gupta - Nuvama Institutional Equities - Analyst : Sir, I was trying to understand more from the contractual perspective from the customers. I mean, if there are further delays customers don't give the material, maybe for another six months, one year. Are we protected? Is there a take-or-pay kind of contract? That's what I wanted to understand how the contracts are laid or retained.

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : We mentioned that the peak revenue potential from current gross block will be around INR1,600 crores, INR1,700 crores. Now including the fluorination block that we are putting in, what would be the total peak revenue potential that we are envisaging? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 21, 2024 / 10:00AM, ANUY.NS - Q4 2024 Anupam Rasayan India Ltd Earnings Call

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : So I was saying that currently, we mentioned that the revenue potential from current gross block will be somewhere around INR1,600 crores, INR1,700 crores. Now including the fluorination block that we are putting either INR670 crores CapEx, what would be the peak revenue potential from the combined gross block?

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : And this would include the LOIs, all the LOIs that we have signed?

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : Correct. So at peak, we read somewhere around INR3,000 crores, around, say, INR1,300 crores to INR1,500 crores would also be from LOIs.

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : Sure. And also in terms of the LOIs that we have signed, do we need to incur any new CapEx or largely everything is done with this CapEx?

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : Sure. And also just one last bit. What would be our -- so our CapEx guidance for FY25 will be the balance CapEx that we have guided around INR180 crores. And like FY26 --

Question: Meet Vora - Emkay Global Financial Services Ltd - Analyst : Plus a maintenance CapEx. And what would be that number for FY26?