Acutaas Chemicals Limited (ACUTAAS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Acutaas Chemicals Limited Q3 FY '26 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krishan Parwani from JM Financial. Thank you, and over to you, sir.

Yes. Good evening, everyone, and thank you for joining us on Acutaas Chemicals Q3 FY '26 Earnings Conference Call. Today, we have with us Acutaas Chemicals management represented by Mr. Naresh Patel, Chairman and Managing Director; Mr. Abhishek Patel, Vice President, Strategy; and Mr. Bhavin Shah, Chief Financial Officer. I would now like to invite Mr. Bhavin Shah to initiate the proceedings. Over to you, sir. Thank you.

Thank you, Krishan. Good evening, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q3 FY '26 financials. Please note that a copy of our disclosure is available on the Investors section of our website as well as on the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as forward-looking statement must be viewed in conjunction with the risks that the company faces. The conference call is being recorded, and the transcript along with the audio of the same will be made available on the website of the company and exchanges. Please also note that the audio of the conference call is the copyright material of Acutaas Chemicals and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company. Now I would like to hand over the floor to our Chairman and Managing Director, Mr. Naresh Patel, for his opening statement. Over to you, sir.

Thank you, Bhavin. Good evening, everyone. I hope you are all doing well. Wishing you and your family a very happy and prosperous New Year. I will provide an overview of the strategic initiatives we are undertaking before handing over to Abhishek for detailed business updates. As you know, Acutaas is evolving into a diversified chemicals company with multiple business verticals. Allow me to walk you through each of them. Starting with our core business of pharmaceutical intermediates, our focus remains on sustaining the robust growth engine that we have built over the years. Additionally, we are actively pursuing CMO and CDMO opportunities to accelerate growth in this segment. We have developed a strong pipeline with four products already validated, and we expect some of these opportunities to begin contributing to our top line from FY '27 onwards. Moving on to battery chemicals business. I'm delighted to share that we inaugurated a new block at our Jhagadia facility dedicated exclusively to battery chemicals on 19 January 2026. While Q4 will primarily be a quarter of trial production, testing valuation and the commencement of the commercial operations, we expect this business to ramp up significantly from Q1 FY '27. Our third important vertical is semiconductor chemicals, where we are in the early stage of seeding business both in BFC and Indichem. Our South Korean joint venture to new customer in South Korea, Japan and Taiwan. We are witnessing encouraging traction from clients in both businesses. At BFC, engagement with our Japanese customer has been very promising, in other than Heraeus products. At Indichem, we have already initiated discussions with various clients regarding our product offerings. Overall, I believe that FY 2028, these three business verticals will operate as independent self-sustaining growth engines, each contributing meaningfully to our overall top line. Coming to our quarterly performance, I'm pleased to report that we continue our strong growth trajectory. Revenue from operations came in just shy of INR 400 crores this quarter, which was accompanied by our highest-ever margins, leading to our profit after tax for the quarter crossing the milestone of INR 100 crore mark. I will let Bhavin discuss financials in detail later. To conclude, based on the strength of our current order book, we are revising our revenue guidance upwards from 25% to around 30% growth for FY '26. With that, I would like to hand over to our Vice President of Strategy, Abhishek Patel, who will walk you through the detailed business update. Over to you, Abhishek.

Thank you, Naresh bhai. Good evening, everyone. Let me take this opportunity to share further insight into our business performance for the quarter. Starting with Advanced Pharmaceutical Intermediates segment. This segment delivered a robust performance with revenue of INR 351.1 crores in Q3 FY '26, reflecting a strong year-on-year growth of 46.8%. The growth was primarily driven by our CDMO business, complemented by steady contribution from our core Advanced Pharmaceutical Intermediates segment. Moving on to the Specialty Chemicals segment. Revenue for this segment stood at INR 42.1 crores during this quarter, registering a strong year-on-year growth of 17.2%. Our commodity chemical subsegment recorded consistent growth driven by high volume stable pricing, which was supported by a recovery in BFC business. Now turning to the capital expenditure. CapEx for 9-month period stood at INR 143 crores, primarily directed towards Jhagadia site for battery chemical project and pilot plant project at Sachin site. Let me provide some additional updates on our key projects. Regarding electrolyte additive CapEx at Jhagadia, as Naresh bhai mentioned, first phase of electrolyte block is inaugurated on 19 January 2026. The second phase of CapEx is currently ongoing and is expected to be completed within next 6 months. Pilot plant CapEx is slightly delayed due to delay in equipment arrival. It is now expected to be completed by Q1 FY '27. Due to spillover of second phase of battery chemical CapEx as well as the pilot plant CapEx, total CapEx for the FY '26 is expected to be around INR 220 crores versus INR 250 crores, which we guided in our previous call. Apart from this, another major cash outlay during the year will be our investment in South Korea joint venture, Indichem. Till now, we have invested close to INR 130 crores in this joint venture. The total investment we announced for this joint venture was around INR 200 crores. We have sufficient cash on hand as well as strong cash flow generation to fund this cash outlay. Now coming back to the business update. Starting with Pharmaceutical Intermediates segment. For ex-CDMO business, we have a couple of new products that have already started ramping up, and we believe they will continue to drive the growth. For some of our top products, we have been able to deliver high single growth -- high single-digit growth. Now you might look at the numbers and observe that this business is not growing as strongly as it used to. This is because we have carefully taken strategic decision to review our product portfolio and let go low-margin products. That's why you see now quality growth is coming. Coming to CDMO business, as Naresh bhai mentioned, four products which have been validated in the current financial year should start contributing to the top line from FY '27. Additionally, we are expected to complete sampling and validation batches for some more products in coming quarters. This shows our CDMO pipeline continued to grow strongly, which will take us swiftly to our CDMO guidance of INR 1,000 crores by FY '28. On battery chemical side, we already have order in hand with a good revenue visibility for FY '27 for VC and FEC. As mentioned in earlier calls, we have added two more products to this business, and these products are expected to start contributing to top line from mid-FY '27. On semiconductor business side, Naresh bhai covered most of the important update in his remarks. The only thing I would like to add is the CapEx for the Indichem JV is progressing as per the plan. Finally, on a note of corporate excellence, we are proud to share that our Founder and CMD, Mr. Naresh Patel, has been recognized amongst the IDFC FIRST Private and Hurun India's Top 200 Self-made Entrepreneurs for the Millennia 2025. This prestigious ranking celebrates the visionary behind the most valuable companies founded in India since 2000. Our stakeholders, this recognition is powerful validation of the entrepreneurial grit and the leadership that has shaped our company's trajectory. As we continue to redefine our place in India's economic future, we remain committed to the same spirit of innovation and value creation that is awarded honors. To conclude, as Naresh bhai guided, we expect revenue from operations to grow by 30% in FY '26. We also upgraded our EBITDA margin guidance from 28% to 30%, to 32% to 35% range for our full year. With that, I will now hand over our floor to Chief Financial Officer, Bhavin Shah, who will walk you through the financial update. Over to you, Bhavin bhai.

Thank you, Abhishek bhai. I would like to briefly highlight the key performance metrics for the quarter and 9 months of FY '26 before we open the floor for questions. Let me start with the quarterly performance. Revenue from operations for the quarter reached INR 393.2 crores, representing 43% growth Y-o-Y. Gross profit for the quarter was INR 224 crores, reflecting a 76.1% increase compared to the same period last year. The gross margin expanded by 1,073 basis points Y-o-Y to 57%. Gross margin was driven by improved product mix. EBITDA for the quarter was INR 150.7 crores, which represents more than twofold increase compared to the EBITDA of the same period last year. EBITDA margin were at 38.3%, up 1,335 basis points Y-o-Y. EBITDA margin was driven by expansion in gross margin as well as operating leverage. PAT for the year -- PAT for the quarter was INR 106.2 crores, up 133.7% Y-o-Y. PAT margin for the quarter was 27%, which show an expansion of 1,049 basis points Y-o-Y. Moving on the 9-month FY '26 performance. Revenue from operations for the 9 months of the year reached INR 906.6 crores, representing 29.8% increase year-over-year. EBITDA for the 9 months '26 was INR 296.9 crores, which was 2x compared to the same period last year. PAT for 9 months FY '26 was at INR 222.1 crores, which more than doubled compared to the same period last year. Moving on to the balance sheet items. Net cash and cash equivalents were at INR 129.5 crores as on 31st December 2025. Our working capital for the quarter improved to 111 days. This is mainly on account of higher debtor days, whereas inventory and creditors remained stable. With that, I request the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question comes from the line of Rikin Shah with Boring AMC.

Congratulations on a blockbuster performance. First, I wanted to ask the overall direction of the semiconductor chemicals, both the verticals. So in the last call, we have mentioned about some new product launches and trial batches for Baba. And also, if you can shed in, the same question, but shed some light on the -- would you say, the guidance of the facility in Korea, coming up?

On Baba Fine Chem business side, as we discussed last time also, as our endeavor is to promote our products ex of Heraeus business, which we were not marketing earlier at the time of acquisition that we have started marketing in a newer geography, and that has shown a very good result. And you can see the Baba Fine Chem business has started turning around in terms of revenue. I think the last quarter was more of a kind of bottom point for us from where we have started positively from this quarter onwards. And going forward, we are expecting some more traction coming in business. It will be a slow process, but we are already on that good part of growth. So it's an encouraging result for us. For Indichem side, the CapEx has started almost 4 months back, and it is progressing well as per the plan. We have already invested INR 130 crores towards the CapEx. And hopefully, by end of this calendar, we should be able to complete the CapEx and start the business.

Got it, sir. All right. So -- okay. Sir, last quarter also, we had mentioned in non-CDMO business, and you've also mentioned again, a change in the product mix. Also, you've mentioned there is some conversion to flow technology. So my question is that some of the legacy molecules, they could have been transferred to flow tech much, much earlier. So what has essentially changed? And why has this increased this much right now? Just trying to reason with what is happening.

So when we talk about the changing to the flow chemistry and all those things, that is not related to the CDMO business. CDMO business is a completely with close connection with the customer. We cannot right away change to any of those...

Right, sir. I mean, the non-CDMO products only, sir.

Yes, sorry. For ex-CDMO business, this is a very standard process for us to look at every product on a monthly and a quarterly basis. If there is any threat related to margin or any cost pressure, we do the cost improvement, margin improvement measure for this. So this is how we keep on upgrading our product -- upgrading our -- working on our cost on a regular basis. And those are the permanent kind of things which get -- which is the margin improvement. More of a margin improvement for this quarter is again for the -- because of the product mix only. If you look at the gross or material margin level, it is an improvement of 1.2%, which is where you see the product mix shifting. And rest of the margin is coming from the operational efficiency.

Got it, sir. Sir, what utilization would we be in Ankleshwar? And along the same line, sir, what is the plan for incremental pharma intermediate CapEx post-Ankleshwar is at peak capacity utilization?

At Ankleshwar plant, the utilization has been 40% for the quarter. And slowly -- because see, once the plant gets ready, which was completed last quarter only, so it's a time for products to get validated from the newer site. And slowly, we will start ramping up from that side. So newer products which are coming into the basket from our product portfolio and R&D line, that now we have started a shift -- we are doing with the Ankleshwar site as well as some of the existing product, which we are just slowly transferring to the newer site. In terms of CapEx for this site, it is still premature to announce anything. But as we mentioned, this largely covers our growth requirement till FY '28. So before 1.5 years, we may come up with some CapEx plan based on the market condition and future growth requirement.

Got it, sir. So you've been 40% for Block 3 or for the entire site?

For entire site, covering now all blocks, are available -- for availability of all block whatever time it was.

Got it. So -- and you have mentioned three new CDMO manufacture projects in H1 FY '26. And you had also guided that they will ramp up in H2 FY '26. So how has been the movement of these new CDMO projects, ex of our core CDMO molecules?

Ex of first CDMO of which we are talking about, we have validated in total -- four number of projects have already been validated, for which we are expecting meaningful. These are already commercial products, but meaningful revenue we are expecting from next financial year onwards. Meanwhile, there are many other products which are going for validation on a continuous basis expected from -- in this quarter also.

Got it, sir. And just the last question from my side. In terms of sustainability of margins, gross margins, what would be your outlook for that for at least if you can't say for a few years, then maybe for FY '27?

Actually, we are not guiding for any of a margin, but we can discuss at a relevant time for FY '27.

The next question comes from the line of Sudarshan Padmanabhan with ASK.

Actually, taking forward from the previous participant, I mean, now two things. One is we know that the oncology product itself is doing well. If we go by Orion's commentary this year and also there is a lot of product life cycle extension happening. So if I look at 3 years when you're talking about the INR 1,000 crores target, how is the contribution from non-oncology products going to be? So if you can give some color on the dependency of oncology and how are the other products in the pipeline?

So as we mentioned, we have already validated four more products. And during my commentary, I mentioned, this gives us the confidence that we'll be able to cross INR 1,000 crore mark for the CDMO business by FY '28. So apart from that already going oncology product, we have a very good pipeline of CDMO products in our product basket. In fact, that has been very encouraging seeing the kind of growth we are seeing for all those product development happening at our end.

Sure. And sir, then coming to the electrolyte business that is on the battery chemical side. Now we are looking at vinyl carbonate and fluoroethylene carbonate, a couple of products. But if I take 2, 3 years down the line, are we looking to expand this basket? I mean, what is the strategy here in terms of growing the booking of product?

Yes, of course. This has been two pioneer or stepping stone kind of product for us through which we get into this business. But as we discussed last quarter also, we have already commercialized two more products in this space. CapEx Phase 2 has already been announced, which is already under implementation and expected to get completed by Q3 FY -- Q1 FY '27. And there are additional further more products which are already under development and for which business development is also going on, for which we -- you can find our list of products at our website also.

And this will largely be towards the OEMs, right? I mean the battery cell OEM partner?

Yes.

The next question comes from the line of Krishan Parwani with JM Financial.

Congratulations once again on very strong results. Just a couple of questions from my side. First, have you signed or are looking to sign any new CDMO contract for the four products that have been validated you mentioned?

Yes, of course. Those are with the originators and relevant contract will be signed as a relevant time.

Okay. And would you be, let's say, I know you will not be giving out the names of the products, but would you be, let's say, signing the contract or no?

Sorry, I didn't get you.

I'm saying, as and when you sign the contract, would you be announcing the...

We will update as and when some material update is to be provided as per the regulatory requirement.

Sure, sure, sir. And just one clarification. On Indichem investment, you said INR 150 crores will be in F '26. So basically INR 370 crores cash outflow in FY '26, correct? INR 220 crores, the CapEx and INR 150 crores investment.

We have invested INR 140 crores by this year. With the combination of CapEx electrolyte, it should be INR 220 crores. And Indichem investment is INR 130 crores for the full year.

Okay. So basically, INR 350 crores to INR 370 crores cash outflow in F '26, correct?

Yes. And next round of CapEx that can -- next round of investment for Indichem, part may come in this quarter also.

Okay. And did you mention the battery chemicals incremental CapEx for the two new products that you have added? What would be...

That is what the second phase is.

Okay. Okay. And revenue contribution you said will begin in the mid of FY '27 from these two new products?

Yes.

Okay. And VC/FECs already begin, I think Naresh bhai mentioned from 17th January, also.

No, let me clarify on this. On the 19th of January, plant inauguration was done. Then now we are in the process of for validation, trial basis and then commercialization will happen probably by end of this quarter.

Understood. So basically, 1Q FY '27 is we can assume the contribution from VC and FEC?

Yes. Yes, you rightly said, as you would know that we have already orders in place. So by quarter end, we should be able to hopefully start commercial supply.

Perfect. And last bit, so which cost overheads, let's say, that contribute to reduction in other expenses this quarter? Because other expenses declined quite a lot in this quarter. So just wanted to understand the reason there. I mean it's only a INR 3 crore reduction.

So Krishan, it was largely on account of savings on energy cost, then there are a few consumable and repair items. And we have improved many of our internal processes. And -- so those all things has helped us to reduce on other overheads for this quarter.

Understood. And the energy savings is from the solar plant that we had installed, correct?

Largely from that.

The next question comes from the line of Abhijit Akella with Kotak Securities.

First, on the battery chemicals piece, if you could please just remind me what the new capacity addition is from the two new products coming up by 1H, I guess? And what is the CapEx that's being invested into those?

So actually, we have not given any -- announced any capacity number for this CapEx. The CapEx plan is INR 40 crores.

Okay. Okay. Got it. And with regard to Baba, given that the business has started to turn around, is there a revenue sort of guidance that we could look at for FY '26 as a whole?

So as of now, we have not given any guidance on this. Obviously, this is a season for budget also, we may give the guidance at relevant time.

All right. And just one last one from my side. With regard to the product concentration, it does seem like maybe the top CDMO product is driving a lot of the growth for the company over the last year or so. We have a lot of other growth projects coming up in the next year to 2 years. So if we look out maybe 3 to 5 years, what sort of product concentration would you expect to see from the top product just over that time frame? I mean, how significantly can we derisk ourselves from that concentration risk?

So as we already discussed, we are working and as we mentioned, four products are already validated and there are many more products in pipeline for CDMO business apart from the traditional business. And then another growth engine of electrolyte and semiconductor is coming up. So obviously, the idea is to derisk product concentration going forward. But I will not able to give you any guidance on the product mix in next 3 years' time. But on the generic side also, the products like apixaban, rivaroxaban are already progressing well. So those are also kind of engine for -- apart from this, the CDMO space.

The next question comes from the line of Pratik with Union Mutual Funds.

Many congratulations, Abhishek bhai, Naresh bhai, for great set of numbers. A couple of questions from my side. On your onco CDMO, how is the outlook looking in terms of new indication, new geography additions? What sort of outlook are you envisaging based on your interaction with the customers for your onco CDMO?

See, for this business, as you know, this is a CDMO business, we are completely driven by the whatever projection has been given by our end customer. So obviously, as you read in the market and related to product and market expansion, but we are giving the INR 1,000 crore guidance based on whatever the customer expectation is there for till FY '28.

Got it. And in terms of this recent EU FTA, will we benefit in any ways?

So let's say, for EU FTA deal, obviously, it will be a welcome deal not only for us, it's for the whole industry. So we are -- we may also be the beneficiary of whole as an industry cycle.

Are any of our products under tariffs?

So it's -- we are supplying on a product on a CIF basis, and it's a customer's requirement to get it custom clear at their end. But for us, it has not been any time matter of concern earlier also.

The next question comes from the line of Rohit Nagraj with 360 One Capital.

Congrats on very strong set of numbers. Sir, first question on CDMO front. So during the first 9 months, how many total commercial products that we are servicing on the CDMO? And what could be the mix between pharma and agro? And an allied question to that, when we see FY '28, INR 1,000 crores, what is the kind of mix that we are looking at from pharma and agro?

No, no. When we talk about INR 1,000 crore revenue, it is for the CDMO business only. So it's not -- when we talk about -- it's not about split between pharma and agro.

There is no agro business in CDMO. All the CDMO is only from pharma. Rest, Abhishek will give the answer.

Okay. So all CDMO business is to pharma only, no agro business is there. And in terms of product mix or that we are not guiding or that we have not disclosed anywhere because of the confidentiality nature of the CDMO contracts.

Sure, sure. I'll just rephrase the question. How many molecules are currently being commercialized? And when we'll reach, say, INR 1,000 crores, what is the number of molecules that will be commercialized and those will be serviced?