Anupam Rasayan India Ltd (ANURAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Anupam Rasayan India Limited Q1 FY '27 Earnings Conference Call. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. From the management side, we have with us today Mr. Anand Desai, Managing Director; Mr. Gopal Agrawal, Chief Executive Officer; Mr. Amit Khurana, Chief Financial Officer; and Mr. Vishal Thakkar, Deputy Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. With this, I would now like to hand over the call to Mr. Anand Desai, Managing Director, for his opening comments. Thank you, and over to you, sir.

Thank you. Good afternoon, and thank you for joining us for our Q1 FY '27 earnings call. We are pleased to begin FY '27 on a strong note with consolidated total income growing by 36% year-on-year. This is a strong start to the year and reflects continued momentum across our businesses, supported by the commercialization of new products and healthy demand across our key segments. More importantly, we believe the quarter reinforces structural transformation of Anupam Rasayan. Over the last few years, we have been consciously building a more diversified and globally integrated specialty chemicals platform, moving beyond our commercial strength into pharmaceuticals, performance materials, electronics, EV and other high-value applications. A key milestone during the quarter was the commercialization of Ethyl Trifluoroacetate or ETFA using flow chemistry. We are proud to be the first company globally to commercialize ETFA through this technology. This achievement further strengthens our expertise in complex fluorination chemistry and more importantly, demonstrates our ability to develop and commercialize differentiated products using advanced process technologies. We also signed a Letter of Intent with BASQUEVOLT for the potential long-term supply of a specialty chemical product, demonstrating our ability to participate in emerging high-growth applications. This further underscores the strength of our customer relationships and our capability to develop products for the next-generation technologies. On the strategic front, our Jayhawk acquisition is already strengthening our global platform. It gives us a strategic manufacturing base in the U.S., expands our capabilities in advanced and high-purity chemistries and provides a strong platform to participate in high-value markets such as semiconductors, automotive, EV, aviation and performance materials. With only a limited period of consolidation in FY '26, we now see FY '27 as the first full year of Jayhawk's consolidation and integration. At the same time, the proposed acquisition of Bliss GVS Pharma continues to progress as planned following the signing of the definitive agreements. We see this as a transformational step in building a more complete pharmaceutical platform, taking us from key starting materials and intermediates towards formulations, regulated manufacturing and global market access. The platform also provides significant headroom for capacity utilization and a robust pipeline of 62 molecules over the next 2 years, including 48-plus molecules targeted at regulated markets. What is particularly exciting for us is that these initiatives are not stand-alone. Tanfac gives us critical raw material and fluorination integration, Anupam brings deep chemistry and custom synthesis capabilities, Jayhawk gives us a U.S. manufacturing, and Bliss adds a differentiated pharmaceutical and formulation platform. Together, these businesses gives us the ability to participate across a much broader part of the value chain across segments. With the strong pipeline, deeper customer engagements and expanded technology platform and an increasingly diversified business mix, we believe Anupam Rasayan is entering an exciting phase of growth and FY '27 is an important year in translating the investments and strategic initiatives of the last few years into sustained business growth and value creation. With that, I will now hand over the call to Gopal bhai again to take you through our business performance and key strategic developments in greater detail. Thank you.

Thank you, Anand bhai. Good afternoon, everyone. Q1 FY '27 has been an encouraging quarter for us, both from an operational and strategic perspective. We have started the year with strong momentum. And importantly, we are seeing increasing traction from initiatives and investment that we have been doing over the past few years. Our focus continues to remain on accelerating commercialization of molecules from our existing pipeline, increasing the contribution from high-value businesses and deepening our engagement with global customers. Let me begin with our technology and product development initiatives. The commercialization of ETFA using flow chemistry is an important milestone for Anupam. Flow chemistry enables us to effectively execute complex chemical reaction while improving process control, safety, scalability and overall cost. Our successful commercialization of this product demonstrates the strength of our R&D and process engineering capabilities and reinforces our position in the differentiated fluorination chemistry. We continue to see good momentum in our pharma and performance material pipeline. During the quarter, we commercialized 1 new product in pharma and 2 new products in performance materials, further broadening our portfolio and strengthening our presence in high-value applications. The pipeline ahead is equally encouraging. We have currently 65-plus pharma and polymer molecules in R&D and pilot and have commercialized more than 10 molecules in this segment over the last 2 years. This gives us strong pipeline of opportunity that can progressively move from development to commercialization over the coming years. The Letter of Intent with BASQUEVOLT is another important milestone. The potential long-term opportunity of approximately USD 300 million spread over a period of 10 years reflects the depth of our customer engagement and our ability to participate in emerging high-growth application. We expect commercialization to begin during FY '27 and we'll gradually scale the opportunity based on customer requirement. With this, our cumulative signed LOI and contract highlighted in the presentation represents roughly INR 18,000 crores of potential business over their respective tenures with several new products scheduled to come for commercialization in -- and from FY '27 onwards. Coming to our acquisition, Jayhawk Fine Chemicals is an important strategic addition to Anupam Rasayan platform. It provides us with a manufacturing presence in U.S. while strengthening our advanced chemistry capability and our ability to serve global customers across Life Sciences and Performance Materials. We believe the combination of Anupam Rasayan manufacturing and process chemistries of Jayhawk technology platform, customer relationship and U.S. presence creates a significant opportunity to deepen our engagement with existing customers and jointly pursue new business opportunities. On pharmaceutical side, the proposed acquisition of Bliss GVS Pharma is progressing as planned. Once completed, we intend to leverage Bliss GVS regulated manufacturing capability, pharmaceutical portfolio and market presence to create an integrated pharmaceutical platform. Looking ahead, our priorities remain clear, that is commercialize products from our existing pipeline, increase the contribution from performance material and pharmaceutical, deepen our customer relationship and continue investing in advanced technology and chemistries. With that, I will hand over the call to Amit bhai for his comments.

Thank you, Gopal bhai, and good afternoon, everyone. Our Q1 FY '27 performance reflects a healthy start to the year, supported by new product commercialization and continued demand across our businesses. Alongside growth, we continue to maintain a disciplined approach towards capital allocation and integration of our strategic investments. Let me first take you through the key financial highlights. Consolidated total income for Q1 FY '27 stood at INR 668 crores, representing a growth of 36% year-on-year. Revenue from operations was INR 655 crores. Consolidated EBITDA increased 35% year-on-year to INR 175 crores, with EBITDA margins maintained at 26%. At the same time, PAT for the quarter stood at INR 51 crores compared to INR 49 crores in Q1 FY '26, representing a 6% year-on-year growth. The movement below EBITDA largely on account of increase in depreciation expense due to increase in asset base and higher depreciation in Jayhawk. On the CapEx front, we have now completed the major CapEx cycle that we had undertaken over the last few years. All our major planned projects have been commissioned and are operational. And therefore, we do not foresee a significant CapEx requirement for the existing Anupam platform in near term. We will continue to be selective about incremental CapEx and evaluate any new investment based on customer visibility, strategic relevance and expected returns. Coming to cash generation and working capital, these remain important areas of focus for us. For Q1 FY '27, consolidated cash profit stood at INR 64 crores compared with INR 56 crores in Q1 FY '26. Working capital remained largely stable during the quarter, and we expect to see further improvement in FY '27. As we have highlighted earlier, the business is becoming increasingly diversified towards pharma and performance materials, alongside the recovery in agro business. We expect this changing mix together with tighter inventory and receivable management to support further improvement in working capital efficiency over time. With this, I will now hand over the call to Vishal bhai to take you through the financial performance in detail for the quarter.

Thank you, Amit bhai, and good evening, everyone. I will briefly take you through the consolidated financial performance of Q1 FY '27. Consolidated total income for the quarter stood at INR 667.5 crores compared to INR 490.7 crores in corresponding quarter last year, registering a strong growth of 36% year-on-year. Consolidated EBITDA for the quarter stood at INR 174.9 crores compared to INR 129.2 crores in Q1 FY '26, representing a growth of 35% year-on-year. Consolidated EBITDA margins for the quarter remained healthy at 26%, broadly stable on a year-on-year basis. Consolidated profit before tax stood at INR 69.7 crores compared to INR 62.9 crores in Q1 FY '26. Consolidated profit after tax for the quarter was at INR 51.2 crores compared to INR 48.5 crores in the corresponding quarter last year, registering a growth of 6% year-on-year. Consolidated PAT margin for the quarter stood at approximately 8%. Our performance during the quarter reflects the increasing scale of business and continued contribution from new product commercialization. Going forward, we remain focused on sustaining the growth momentum, increasing the contribution from high-value products and delivering efficiencies across the platform. Thank you. Now we are open -- we can open the floor for Q&A.

[Operator Instructions] The first question comes from the line of [ Sujal from Growmore PMS ].

First of all, congratulations on the good set of numbers. My first question is regarding like in the last call, management has guided that we may acquire an API plant. So I want to know what is the status of that?

So we continue to explore that. And right now, there is nothing specifically that is there that we need to share, but we continue to explore. And once the Bliss acquisition is also consummated, we will be working with the Bliss management to explore any acquisitions together. So right now, it's just on the exploratory stage for now.

Okay. And on the follow-up on your answer, sir. So basically, I want to know that will the management of Bliss remain independent like Tanfac and others or will appoint our own team?

So Anupam's approach towards any acquisition that we have done till date will be that we will continue to keep them as independent as they can be. The whole approach will be that the team has -- the investment that we have done is primarily with a view that they have a strong management team and an existing business and relationships, which we would like to be benefiting out of. Further, like Tanfac, we will also continue to support them in terms of product development, market exposure or any other support that we can give -- they would need and we can offer. So yes, it will be independent to that extent of running the business as they plan for and with the support from Anupam as we have been offering in Tanfac and also in Jayhawk.

The next question is from the line of Tanya Chowdhary from Investec.

Sir, could you provide an update on the Bliss GVS acquisition time line and the key approvals that are still pending?

So if you see the Bliss has been going as -- Bliss acquisition has been going in the manner it was -- we had anticipated. We've got the SEBI approval, also the open offer that was to be coming in has come in, and we have -- August 10 was the last date to -- for any shareholder to offer their shares, which has been successfully concluded. And now we are in the process of closing where we'll have to do a few procedural steps to comply and deliver the process. We expect that by the first half of September, we should be able to conclude this transaction fully.

All right. All right, sir. Also, what was the contribution from Jayhawk this quarter and the EBITDA margin that it has posted?

Jayhawk has been contributing around about 20% to 22% of our revenue for this quarter, and the margins have been very robust at around about 19 to 20 percentage points.

All right. All right. And sir, the share of polymers have gone up significantly this quarter. So is this sustainable?

So see, there has been a little lesser contribution from the agrochemical because of the way the demand cycle is over the year. But we believe that on a stand-alone, we should be able to get a polymer business to be in the range of 20% to 25%. And on a consolidated basis, it should be in the range of 30% to 35%.

Understood. Understood. And I think the consolidated EBITDA margins have remained flat at around 26% despite a much higher share of performance materials. So how should we look at EBITDA margins over the next 2 to 3 years?

So typically, as I have been always guiding that on a stand-alone, we should be looking at anything between 26% to -- 24% to 26% on a stand-alone basis. And on a consol basis, we should be looking at anything between 20% to -- 22% to 24% EBITDA margin is what I would really guide at because there are multiple companies, multiple segments, multiple end markets. So all in all, I would really suggest to guide at that kind of numbers.

The next question is from the line of Meet Vora from JM Financial.

The first question was on commercializing ETFA in flow chemistry. Can you throw some light what other players are using and how significant is this achievement for us? And if we compare other players, what are the applications this ETFA is being used and how big can this business be for us?

So see, as you can -- and then Meet, you are also very expert on this. So I'll just share it for everyone also that flow chemistry in per se is a very, very cutting-edge technology, which very limited number of people across the globe would have been using it on a commercial basis, a. B, what it does as we can say is that it improves the safety, it improves the product quality because there is no back reaction. It is a very small reaction, small volume that gets reacted every time. So safety is high. There is a very, very high quality improvement. There is lesser environmental footprint because there are lesser number of solvents that are used or side reactions happening. And hence, that also improves the environmental footprint, lowers environmental footprint. And you are able to do at a higher scale with a lesser land requirement or a plant requirement because these reactors are classically a tabletop reactors, kind of a size of reactors. So to that extent, this is a very, very unique that is there and especially ETFA is one of the products which gets application across pharma, agro and electronics and semiconductor industry. I think we have been very, very -- it demonstrates a very strong technical capability of a player like us to deliver a product of such wide application in flow. And to our knowledge, we are the only ones in the -- who are able to do it in flow today. As you said, in terms of size of the market, we estimate that it should be in the $0.5 billion kind of revenue that these 2 molecules will have. So that's the large volume market that we can go after and look at. So a, it improves our right to win in this market. Also, it demonstrates the technical capabilities to my existing and new customers also that we are able to demonstrate that we are able to do a lot of new products in a very new age technologies. So that's what I would say, say, Meet.

So on manufacturing cost parameters, we would be lower than the comparable chemistries. And particularly then we would be making similar kind of margins as we are making in the overall business or the margins would be slightly better than the existing business margins? And secondly, of this $0.5 billion, any broad ballpark idea how much we can cater to?

So see, I would love to look at least -- to start with at least it is 5% to 10% and going up to 15% to 30% is what I would say. I don't want to guide a particular number right now. But yes, that's the kind of a market that we would want to look for and what we are right now working on. That's one. Two, you're right that the cost parameters will be better for us and hence, the margin profile should be better. As you know that we are a CDMO guys, we have a CSM play. We would share our value creation with our customers. However, yes, it would have an upward bias in terms of our margin profile for these products where you are actually creating value for our customers.

Understood, sir. And just secondly, on this Jayhawk, what is the CapEx that we plan to do for FY '27 and '28? And will Anupam need to fund any part of this CapEx?

So I think today, there is a reasonable level of capacity that Jayhawk also has, and they will continue to grow their portfolio there and continue to expand their business. There may be some requirements of CapEx that may be there for repurposing or for replacement or for some additional new products that are introduced. But they are fairly well capitalized in terms of cash and in terms of -- they are completely unlevered. We don't see that we would have any requirement that we will need to support Jayhawk for their any CapEx going forward for now, at least, we can see that.

Okay. So for now, our annual CapEx will be largely for the stand-alone business only? Any number that you guide for '27, '28?

Today also, if you see now, as Amit bhai also mentioned in his opening remarks that large part of our CapEx program has been completed. And there will be very little number -- very little CapEx that will be required going forward, maybe it is -- it'll be for our raw material purchase -- sorry, repair and maintenance side or it may be for a little bit of repurposing. And to my mind, in the range of 70% to 80% will be -- INR 70 crores to INR 80 crores may be the number that I would look at from a CapEx point of view, for now.

The next question is from the line of Hardik from ICICI Securities.

Sir, just want to check on the Jayhawk you mentioned that in the percentage of revenue, is it correct because the differential is coming around INR 139 crores for revenue and EBITDA is around INR 24.4 crores. Is that the correct number for Jayhawk for the quarter?

So Jayhawk revenue will be around about INR 145-odd crores. And from a revenue point of view -- sorry, EBITDA point of view, as I said, it will be 19% to 20% will be the -- will be the EBITDA for Jayhawk. So it should be in the range of INR 30-odd crores.

And what about PAT, sir?

See, PAT, as I think Amit sir, also mentioned, there is a large part of depreciation in there. So the PAT will be in the range of around INR 10 crores -- INR 9-odd crores.

Okay. And sir, as you mentioned on the Bliss acquisition as it's progressing well. Sir, on the open offer, are we able to get any -- are you able to get any share in this open offer because the prices are [indiscernible] way lower than the current market price. So the investment would be the one which we committed during the open offer. Is it or it's going to increase?

No. So you are right. The numbers that we have got an update for is a very, very small number. It is to that extent of insignificant number that we have -- that has been provided or offered to us to buy under the open offer. We saw a similar experience in the Tanfac open offer also. Probably at least as a management, I would love to read that the shareholders have a fairly high confidence on us in terms of our ability to take the company forward. And yes, there is limited that is left out here.

Got it. Sir, if I may squeeze in one more question. Sir, in stand-alone, if you look at, our gross margin is broadly 58% for the quarter. And I think it has increased drastically as compared on a year-on-year basis as well. So just want to understand is majorly driven by the performance material where the share is higher? Or is there any other component as well in this?

So the gross margin, as I always try and say that, yes, it is largely based on the Performance Materials, but I would always guide to see us more on the EBITDA level as I have always been suggesting because gross margins move across depending upon the product portfolio, product -- which product grows in which quarter and also in terms of what segment is contributing, how much more there. But if you look at from an EBITDA point of view is where I would really try and see -- and there, I think we've been fairly stable in terms of our numbers.

The next question is from the line of Harsh Shah from Axis Capital.

Sir, my first question was on the BASQUEVOLT LoI. So just wanted to understand where are we -- so how is the ramp-up of the product? And in terms of the tech, so do we already have the tech for the product development? Or is it to be jointly developed with the customer?

So this technology is fairly with us. We have also done it in the plant in terms of lab and other -- lab and pilot plant as well. And so to that extent, it is fairly well developed for us. We'll be working with our customers in terms of what they need, in terms of their security and others. And that is why we have said that we have been able to get to a very strong level and hence, the LoI. Otherwise, we would have not gone to the LoI stage as well. And we expect it to be commercialized by the second half of the year or the later half of the year. So to that extent, that capacity and capability is very much there.

Okay. And how should we see the ramp-up? So when do we see meaningful revenue start kicking in from this contract?

So as we say, it will be another -- in 2 to 3 years, you will see a larger revenue ramping up as we go because that's how any new product will take, and that's what you will see. So in 2 to 3 years, you should see a fairly robust stable revenue coming from this.

Okay. And sir, for the balance…

[indiscernible] next year as well. It will be, but it will keep ramping up as I said.

Okay. Okay. And sir, for the balance order book, so where are we in terms of execution? How much -- what portion of the order book has been executed? And what portion you're expecting in the next couple of years?

So see, in the order book, as I said earlier also, that we have been continuously growing our revenue, roughly around about INR 400-odd crores plus was the revenue for the last year. This year, we are expecting it to be significantly higher, contributing around about 25% of our revenue. And going forward, it should contribute around 30-odd percent of our revenue with the higher base volume that we have. So this is a very strong ramp-up that is happening. And if you see, most of our products have been commercialized or should be commercialized by next year -- this year or next year.

Okay. And sir, my last question was on the stand-alone working capital side. So where are we in terms of working capital improvement? And where do you think we should end by this year-end and then next year as well?

So on the working capital side, our working capital has been remaining stable, as Amit also mentioned in his opening remarks, that working capital has been stable and we are on the trajectory that we have been guiding there. And there is improvement that we see coming in the next coming quarters. So by the year-end, we should be in the range that we have been guiding in the past as well.

The next question is from the line of Probal Sen from ICICI Securities.

On the capitalization rate, you obviously mentioned that most of the CapEx has already been completed. Just wanted to understand because if I look at EBITDA growth of 30-plus percent, what has flowed through to the profit level is about 6% growth, presumably because obviously, depreciation and interest costs have gone up. So is this the kind of run rate we should be building in for the rest of the year? Or is there some more capitalization that is remaining, in which case, obviously, interest cost, of course, is a function of how much cash flow will be there, but can depreciation increase in terms of run rate over the next few quarters?

So there is no major capitalization that we are seeing going forward. And largely, the depreciation was largely on account of Jayhawk coming into our portfolio. And that is -- Jayhawk has taken -- historically, Jayhawk, under the old management, had a different depreciation period that they had, and we are reviewing it and seeing that. But principally, it is not because of the additional CapEx that is coming into the -- or capitalization that is happening to the balance sheet.

Got it. And in terms of interest costs, how should we be looking at this number?

I think the interest cost, I think this should -- my sense is that this interest cost should be in the similar numbers. I don't see it to be going anything further than this. This is a fairly representative run rate for the interest cost.

And the second question I had, sir, was with respect to the Agri business. Obviously, we are focusing on performance materials and those newer blocks that we've added. But in terms of Agri, how are we looking at it in terms of outlook? How does the environment look? And what are the prospects that we see for the next 9 to 12 months...

Probal, I think your line was weak or somehow my line was weak. I don't know, but I couldn't hear your question. If you can repeat it, it will be very helpful, please.

Am I audible right now? Is this better?