Asahi Songwon Colors Limited (532853) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Asahi Songwon Colors Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sayam Pokharna from TIL Advisors. Thank you, and over to you, Mr. Pokharna.

Thank you, Michelle. Good morning, ladies and gentlemen. Welcome, everyone, and thank you for taking out the time to join this Q4 and FY '25 Earnings Conference Call of Asahi Songwon Colors Limited. The results and investor updates have already been e-mailed to you and are available on the stock exchange and company website. To take us through today's results for the quarter and the whole financial year and answer your questions, we have with us from the management team: Mr. Gokul Jaykrishna, Joint Managing Director and CEO; Mr. Arjun Jaykrishna, Executive Director; Mr. Mitesh Patel, Executive Director; Mr. Pratik Shah, Chief Financial Officer; and Mr. Saji Joseph, Company Secretary and Compliance Officer. We'll be starting with a brief overview of the quarter and financial year from Mr. Jaykrishna, which will be followed by a Q&A session. Before we proceed ahead, I would like to remind you all that anything and everything that is said on this call reflecting any outlook for the future, which can be construed as a forward-looking statement, must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties have been entailed in our annual reports. Thank you. Over to you, Mr. Jaykrishna.

Good morning, everyone. I'm very happy to welcome you all to Asahi's Q4 FY '25 conference call. Being a specialty chemical and API company with reasonably large overall export exposure, we are generally a proxy to the global economy. As we all know, we have witnessed and are actually witnessing very turbulent times with uncertainties and lots of volatility, from Trump tariffs and the tariff wars to currency -- huge currency fluctuations such as which we haven't witnessed in a very long time, wars across the world, including in India as well with Pakistan recently. So there is enough and a lot of volatility. I personally like volatility. Volatility, turbulence and uncertainties invariably spring up opportunities, which are unusual. Time will tell how Asahi and our team stands up to take advantage of these opportunities. But it is definitely a springboard -- a quick springboard to future growth if we play our cards right. As we navigate these uncertain times, I'm very happy to report that this year, Asahi and our team have stood up well to these challenges and turbulent times and emerged stronger than ever before. I hope that we have created a platform from which we can scale up and grow in a reasonable manner and take advantage of the changing global dynamics. With this, I would like to give you a very quick snapshot of the consolidated results. All of you -- most of you would have already looked at it, so I would not go into the details of it. Rather, I'll give a snapshot, and then, we'll move into a Q&A, where you can ask your questions. For the year, our revenues have moved from INR 429 crores in 2024 to INR 566 crores in 2025. This is a 32% increase. Our EBITDA has increased from INR 21 crores in 2024 to INR 60 crores in 2025. This is a 185% increase in EBITDA. Our EBITDA margins have doubled from 5% to 10% this year. PAT, we were negative, and now, we stand at about INR 17 crores positive. Our total debt, which stood at INR 200 crores in 2024 March stood at INR 160 crores this March. We continue to deleverage, as our cash flows show a lot of strength. Our cash flows from operations, which were INR 9 crores positive in 2024 have come out to INR 57 crores positive in 2025. This improvement is on account of 4 factors: INR 30 crores from profits and INR 25 crores a combination of improvement in payables, receivables and inventory levels. Looking forward to the coming year with these turbulent times, there is a lot of consolidation that has happened within our company. We are coming towards the end or have already come to an end of a 3-year CapEx cycle. Now, we have to, as a team at Asahi, improve our utilization levels in our new segments of businesses, which are the AZO Pigment business and the API and continue to do well with our dominating position in the pigment blue business. Going forward, we look forward to a top line growth of about 15%, EBITDA growth of about 25% and a PBT growth of about 65% for the next year. With this, I would like to open the floor for questions..

[Operator Instructions] The first question is from the line of [ Yashvi ] from Molecule Ventures.

So my first question is in the last call, you had mentioned about the delay in the capacity expansion due to shipping delays due to the Chinese New Year. What is the update on the new line for yellow pigment? What is the incremental capacity that is added or will be added? And what is the investment, which is made for the capacity expansion?

So that delay is now over. The Chinese equipment is already on its way, and it should be fully operational within about 3 to 4 months. So they should add about 40 tonnes to our existing capacity of yellow. And what was the other question you wanted to ask on this account?

What is the investment which is made?

The CapEx is about INR 5 crores, which has already been done now, INR 5 crores to INR 6 crores. I don't remember the exact number. Mitesh or Pratik bhai, can you throw light on the exact number?

So it is around INR 4 crores 80 lakhs.

Yes. So INR 5 crores, I was right on INR 5 crores, and this is more or less completely over.

Okay. And in the commentary, you had mentioned about the tariff opening up an opportunity to scale up the AZO business. Can you please explain what sort of positive momentum you have started seeing? Are there any fresh inquiries that we are witnessing? And also, on the profitability front, we have been trying to become PAT positive in AZO business for the last few years. Do you think with these tariffs in place we will finally be able to achieve it?

So I will let Arjun answer this question in detail, [ Yashvi ]. But basically, the tariffs have certainly thrown up some opportunities. The blue business remains unaffected because there is no competition from China in the blue business. So that largely remains unaffected because India has a very dominating position in the blue business. As far as the Azo business is concerned, Arjun, would you like to take that question?

Yes. Yes. Thanks, [ Yashvi ], for the question. As our CEO said, the blue business will largely be unaffected as all the players are already Indian. So the tariff is equivalent on all competitors. So there, we hope to maintain and continue the good business we have been doing in the U.S. For the Azo, it's a pretty good opportunity. The way the Azo landscape is built, as we have said previously, and it's very well known that China dominates the global share for Azos. So even when we talk about the U.S., the large majority of imports of Azos were Chinese. That is where the opportunity for all Indian makers is thrown up. We feel that we are in a very good position to be able to take some of this opportunity because, as we know, the largest Azo player from India, Sudarshan, is very well positioned. They have a good -- they are in a good place to take up this opportunity. Barring that, we feel we are the best positioned out of the remaining Azo players from India. We feel that we are in the right position with the available capacity as well as the thirst for growth. So we have already started engaging with some people in the U.S. We are working hard to get the products there and take advantage of this tariff. We are already seeing inquiries. And what we feel is that for certain large customers, where we have discussed in the past that due to sensitive applications and several holding periods, we see that the approval period takes 6 months to a year even. But the advantage through this tariff, what I have felt is, for some of our key customers, we are going to be able to expedite that since it is in our and their interest to get approved quickly. And we are hoping that we will be able to reflect that into performance for the Azo by -- commercially by next quarter.

I just want to understand like does this development improve profile or does it just help the top line growth?

Yes. So again, a good question. I think it would very certainly and obviously help the top line, but also, we will strive for it to impact the bottom line as well. We -- in general, our exports for the Azo have been only about 10% of our business. So we will look over the next year in the U.S. as well as other opportunities to grow that and double that out for this year, which will have a positive impact on the bottom line as well.

So [ Yashvi ], quickly to sum it up, the export business out of the ATC basket, which is currently 90% domestic, 10% export, should look to about 20%, 25% coming from export for this financial year. And our top line should be growing at about 25% from INR 70 crores to roughly INR 90 crores. And the EBITDA should also be growing substantially. We have had an EBITDA positive year for the first time in the history of ATC. Since 3 years, we've been struggling a bit, but we've had an EBITDA positive year. And now, we hope to take it forward in a strong way and close -- our EBITDA should improve significantly going forward in this year.

Okay, sir. And on the Atlas business front since our acquisition, the profitability of the business has always been subdued. This year sales have even dropped to levels that are lower than when we made this acquisition. So as we are acquiring the asset, we had planned to enhance the profitability by doing the backward integration that we have done that CapEx. We still can't see any impact on the financials. Can you please explain what are the challenges...

I'll quickly answer this. So the backward integration project has gone on well. We are at about good utilization levels, and it's performing also well on margins, as well the backward integration. What has not worked in favor of Atlas' performance is the prices of the products, particularly the main product Pregabalin have really, really crashed. So the last whole year has been -- we have seen about a 15% decrease in the prices of most of the products. So despite that, we have achieved 12% growth in revenues. So our volumes have actually gone up by 25%. And the backward integration has helped us navigate through this and come out with a year, which is not too bad. Our EBITDAs have improved by -- from INR 5 crores to INR 10.5 crores this year. But it -- yes, it should have been better. It is not because of the sharp increase in competition and drop in prices, which will result in consolidation going forward, as a lot of the weak players in these products will stop making these products for sure. And the product itself has a very good future. I mean, it's not going to -- I mean, the next 5, 7 years, 10 years look quite good for the product. So we have to just sustain ourselves.

Okay. Also, sir, it would be great if you could...

[ Yashvi ], I'm sorry to interrupt you, Yashvi. There are others who are waiting for their turn. Can you please rejoin the queue for follow-up questions? We'll take the next question from the line of Rudraksh Raheja from ithought Financial Consulting.

Congratulations on the great set of numbers. My question pertains to the blue segment first. What is the current capacity utilization in this segment? And can we sustain 35% plus gross margin...

Rudraksh, your voice broke. Can you repeat your last line, please? The second question.

Yes. What is the current capacity utilization for blues? And can we sustain 35% gross margins in this segment?

So current capacity utilization, Rudraksh, is about 85% -- 87%. Arjun, can you take the question on the gross margins? Generally, our team has done well. So Arjun will take this question.

Yes. So to answer your question, I think, our CEO gave the general utilization. We don't want to delve too much into those details. What I can tell you is that, yes, the -- from a gross margin point of view, as we've said previously, we've had a -- last year was not like we would have wanted. We have given a stronger performance this year, and we are confident that we will be able to replicate the gross margin and overall numbers of the blue business going forward as well.

Rudraksh, to add to what Arjun said, the blue business itself remains extremely challenging. And the general environment for the Blue business isn't very robust. The demand is not that strong. But generally, we have been able to do quite well because of some engineering improvements and efficiency improvements at our end. So we should be probably likely to sustain the gross margins.

Got it, sir. Got it. And, sir, we have done exceptionally well on the power and fuel front. If I'm looking at your numbers, on a percentage basis, it is the lowest in this quarter ever. It's like 7% that we have done. I'm talking about the blue segment only. So could you help us understand this? Is it only the crude prices in the commodity market that are low or we have done some internal cost saving measures?

Can I -- dad, can I take that question?

Yes, please.

Yes. So unfortunately, we cannot delve too much into this due to revealing what we are doing even to competitors. I think you've noted it perfectly. We have consciously worked on this. We are -- as our CEO said, the industry continues to not have that robust demand or yet the kind of impress we would want, yet we have been able to, through factors like this, work internally and give the numbers that we have done. So I think we would refrain from giving exact details, and I hope you can understand because of the competitive landscape that we can't share exactly what we are doing to get the added benefits in this segment.

Yes. Just to clarify, but whatever we are doing, that is sustainable for the long term.

Yes.

Yes.

Understood, sir. Understood. And in the API segment, Q4 has seen some margin contraction versus Q3. And sir, could you guide us the sustainable level of EBIT margins that we can expect? Last quarter, I think we saw some backward integration effect, but now margins have contracted again.

So generally, Rudraksh, the EBITDA margins for the API business have improved from 5% to 10%. Q-on-Q basis, the fluctuations that you see are due to the decrease in the price of some of the products. So this is an ongoing challenge that we are facing in the industry right now. We are not very perturbed about this because our position in the industry is that we have to be efficient and sustain this downturn, automatically, the weak players, the unorganized players are going to fall out because the margins are -- for them, if we are having these low margins, they are having actually negative margins. So what I can tell you is in this segment that we operate, the APIs in which we operate, we are better than most of our competitors, if not all, in some of the products. And this gives us the sustainability for the next few months or even if it takes the full year to withstand that and see that the consolidation takes place, some of the unorganized sectors fall out. And then automatically, there should be an improvement in the segment. But going forward, the EBITDA margins we project would be in double digits, low double digits, so about 10% to 11% for the full year for the consolidated Atlas performance. And also, on the top line, we should see a reasonable improvement, about 25% on top line, for the year. So that means that the total overall EBITDA also should improve by about 25-odd percent if we are able to maintain 10%, 11% margins there. And then, we will look for opportunities to get into other products, which could give us scale in the business.

Understood. Understood, sir. Could you walk us through your plan for this year regarding new products and new markets expansion for API segment?

Arjun?

Yes. So for the API segment to achieve generally the numbers that our CEO mentioned, we are working -- as we have even described briefly in the past, I'll run you through what our plan is over the next 2 years. So we already -- since the last call, we have been working quite a bit with our internal R&D team, as well as closely tied with the marketing team as well on launching new products. We have made a statement. We are very much looking forward to over the next years to moving from a single product company to a multiproduct API company. So what we plan to do is that we plan to leverage the advantages of Odhav as well as Chhatral units and work as one. So when I say that, to be more specific, we are -- for one, we will be looking to add a new segment to our main product by applying for accreditations. For example, within the next year, to give you a time, we hope to achieve CEP certification. We are in line to apply for it within the next few months, and we hope within the next year, we will have got this certification, adding that new level of customers and entering slightly more developed countries by increasing our exports to them. Apart from this, and strengthening for our main product, we will also be adding new products. So within the next few months, we are already -- we have taken trials, and we are launching some new products in the market. Obviously, this comes with a slight caveat that whenever you add a new product and try to gain volumes without being backward integrated, we may not immediately see the numbers we want. But over the next year, we plan to launch these molecules. And over the next 2 years, we plan to be making them even from a stage -- a few stages backwards so that we can create a similar thing that we have created for pregabalin in the market for certain other molecules as well. So we are working on those. And at the same time, as we have described in the past, we continue to leverage our advantages at Odhav, where we have a very well-functioning unit, where we will be launching certain smaller volume molecules that will hopefully add to our bottom line in the next 2 years.

We will take the next question from the line of Dhwanil Desai from Turtle Capital.

Congratulations for a very strong set of numbers. Sir, my first question is, I think Pratik bhai, you guided that on the Azo side we will go from INR 70 crores to probably INR 90 crores kind of a number and largely export market will drive this growth. So we were working with 3 or 4 large customers for various product approvals. So is this growth contingent upon getting such approvals? Or do we already have those approvals in place and we are waiting for commercial supply? Some kind of indication as to what gives us confidence for strong growth on the Azo side.

Thank you, Dhwanil. Dhwanil, is it okay if -- because Arjun may be more appropriate to be able to answer this question.

Sir, either of you. Yes, either of you.

Yes. Arjun, can you take this?

Yes. No, thank you for the question. I think, as you rightly said, we have been working with certain customers in the export region. And to answer specifically, it is actually a mix of the 2. So there are certain global MNC customers to whom we have gotten approvals and sent trial orders as well. And for those, we would be waiting to -- for them to use the product in bulk and then move directly to commercial quantities. And at the same time, with the new opportunities, say, with the U.S. as well as that there is a few things we are working on in Europe, where we are looking to get new approvals. But we are now in a position, where we can confidently say that over the next few years, we have certain approvals in place. And hence, we are confident that the numbers our CEO gave about what we plan to achieve with the exports, we are confident of achieving that. And we have approvals -- certain approvals already in place, and we are working on a few others as well. So within the next few months, we should be having enough to back up those numbers and statements.

Sure, sure. And is it this -- this incremental growth is going to be driven by largely the scale up on the yellow side? Or you think that the red pigment also is kind of picking up and we are seeing increased capacity utilization on that side, more orders, some color on that?

Yes. So to answer that question, we have historically said, and we were faster in growth in the yellow, but the red side has definitely started to pick up. We have consciously worked on it, both from the production side as well as the marketing side. And we are confident that the red side over the next 6 months to a year will also give good growth and performance. So we feel that it will be driven by both the red and yellow side making a move. And we are hoping that since we were a little slower in the red in the past, over the next year, we can -- we are confident with approvals and things in the pipeline in place that we will work hard, and we are confident that the red will make percentage wise, even a faster growth than the yellow. So we are going to use -- leverage both the red and the yellow over the next 6 months.

Sure. Sure. Very helpful, Arjun. Second question on API side. I think, again, we are launching new products this year, next year. So again, at a strategy level, I wanted to understand that in pregabalin, essentially what we did was we did backward integration and now trying to do the cost leadership model and thereby gain higher market share. So in the incremental products that we are launching for this year and next year, are we intending to follow the same strategy? And I understand that backward integration may not happen immediately. But let's say, over a period of next 2, 3 years, do we see full backward integration? Is that a part of the product selection process? Some kind of understanding on that would be helpful, Arjun.

Yes. So to answer your question very specifically, I think you pretty much summed it up perfectly in the question itself that it cannot happen immediately. But our goal at Atlas is that we will launch molecules. And this will -- the decision of when and how to go backward will obviously depend on the scale and the vision we have for the product. Obviously, when we launch several products over a few months, we would not be backward integrating for all of them. But the idea remains, and the thought remains that for products, where we see good growth for products that we see can really add strength to our basket. Our eventual goal would certainly be to also be backward integrated. We feel that Asahi, as a company, we have successfully done it with the blue. We have successfully done it with pregabalin. And hence, we feel that to really gain market share and do well in the market, we will be backward integrated for the molecules we launch and see good scope in the market for.

Sure. And last question is, Gokul bhai, you gave a very strong guidance, and we all know that the operating environment overall in the industry is quite challenging. There are too many things going on in the geopolitical side, but still, we are giving a very strong guidance. So at a broader level, what gives us confidence to do such strong numbers, if you can expand on that?

Very good question, Dhwanil. Thanks. So 2 things; one, as I said earlier, and most of you know that we are coming towards the end of a CapEx cycle, so our -- the requirement of capital over the next 2 years is likely to not be -- at least for the next 1 year is not going to be there at all almost. And at the same time, since we have just finished the CapEx cycle, we are just coming off the peak of the debt deleveraging. So we have started the deleveraging process. It's going on faster than even we had estimated. And hopefully, if we are able to do well and generate good free cash and deleverage, of course, our bottom line will be impacted more than the top line. So that is one simple matter. The second thing is, as we have already finished the CapExs on 2 of the new business segments, the Azo and the APIs, now the challenge over the next 2 years is going to be utilization first. So as the utilization improves, it will automatically add to the EBITDAs and also decrease our overhead costs. And then we could probably, after that 1 or 2 years, start concentrating more on the EBITDA margins per se. So right now, if we do well over the next year or 2 years, for utilizing our capacities and creating new customers and geographic markets for the Azo business and the API business, we -- even without dramatic improvement in the EBITDA margins, we should be able to see good improvement in the bottom line because the overheads will be coming down and also the leverage will be coming down. So that was the reason why we are thinking that the top line growth will be decent at about 15%, but EBITDA and the PBT growth would probably be much faster. I hope I am able to -- I hope I was answering your question, Dhwanil.

Yes, yes. Makes total sense. Wish you all the best.

The next question is from the line of Nikhil from SiMPL.

Congratulations on good improvement and very strong expectations for the next year. 2, 3 questions, sir. I heard you like our capacity is -- we have the capacity, so in a way, we are ready to meet whatever demand comes. My question is more on the demand side. When you are discussing with your customers, what is the sense you are getting on how is the demand shaping up considering all these volatilities? And secondly, if we look at our incremental share of whatever demand is getting generated, are we taking more share from and this increase in share is because of capacities which shut down in last 1, 1.5 years? Just some sense on how the industry is moving at the pigment side.

So the general demand scenario in the pigments business is not very robust. It's improved a bit. But again, now with this certain -- the uncertainties and the tariffs and all, of course, there may be some inflationary impacts, and hence, there could be slightly tepid demand going forward as well. It may be remaining similar to what it is. We had a terrible year or 2 in '23 and half of '24 in terms of demand. From there, we have come a long way, and the demand has improved about 20-odd percent, but it is not back to normal demand levels. Now, given the uncertainties of the tariffs and possible increases in inflation, there would be probably not a huge expectation this year that demand will suddenly come back to normal. Eventually, at some point, it should because global consumption patterns should revert to its normal mean at some point of time. But I don't see it happening this year. So then it comes to us internally what you asked the second part of it. So it is coming more from what we are able to gain in terms of market share. And that we do by better utilization and maintaining better efficiencies. If the demand comes through, then it is a bonus. But we are not going to sit and wait for that to happen because it's not happened. I mean, it's improved a bit. Of course, inventory levels have come off a lot, so the pricing has -- the pressure has come off a bit. But still that demand environment, we estimate will remain tepid.

Okay. And if we look at our pigment numbers for this quarter, would you give a sense of how is the breakup between volume growth and price growth? Like what would be the split? Is it 50-50? Or is it more tilted towards volume? Some sense if you can give.

Yes, yes. I would say there is a 50-50 divide between volume and price or maybe 65-35 because it depends on product to product. But generally, I would say in that basket, about 65%, 60% coming from volumes and about 35% from that.

Which is a good indication on the price because I think barring last 3 -- 2, 3 quarters, price was actually very bad. If we are getting price increase, so what is supporting this price increase? Is it RM inflation? Or is it because you said demand has come up by 20%, 25%? And parallelly, what we have seen is that some level of further consolidation happened at the industry. So is it like supplies have gone down, like the capacities have gone down that is giving better realization? Or is it RM inflation is just getting added with the -- getting reflected in better realization?

I understood your question. So it is a factor of 2 things. Demand is not a key driver for this yet. As I said, it remains tepid. The environment is not that sexy for the business yet. So it's not so much coming from demand. So it is coming from, one, the consolidation because we as well as many others -- everyone, not many other, everyone was operating below cost actually, to be honest. So now that scenario -- because of the inventory destocking in the global pipeline, that scenario is gone. At least we don't have to operate at those levels. And then the second one is that partially due to the raw material input cost increase and partially due to some demand improvement, we have seen some improvement in the prices as well.

Okay. So going forward, when we mentioned -- when you gave the guidance that for FY '26, our sales growth would be good and EBITDA growth would actually be much better. If -- there are 2 ways to look at it, one is an year-on-year improvement in EBITDA margin or -- and second way is sustainance of the EBITDA margins at the Q4 level. So because in many quarters, Q4 has -- we've now come to almost 13%, 14% margin, which was our historic margin level. So do you think we can improve from this 13%, 14% to 15%, 16%? Or is it like we believe that we will sustain at this level and look at more volumes?

So I'll tell you, basically, what I think the reason why we are expecting internally that the EBITDA margin should grow a little faster than the top line is because the EBITDA margins in the API as well as the Azo business, which are -- which have improved from last year, definitely, significant improvement, but they are far from what we desire. So we expect that the EBITDAs there will increase faster than the top line. Hence, the overall consol EBITDA will be better than the topline growth.

Okay. And just last question. In the initial discussion, you mentioned that gabapentin, the prices had cashed and many of the players, who were not able to operate, are actually making losses. And following, you mentioned that this product is still really attractive over a longer term. So you won't like to discontinue it, but probably just wait through and let this period go off. So what attracts you to this product? And how do you see capacity consolidation happening in this?

So attractive is a relative term. I mean, is this product going to be very attractive in that sense that it will be very -- what I meant is that the demand for the product is not going to disappear. It's not got -- I mean, it's not going to see obsolescence for the next year. I didn't mean that it's going to be very attractive. So the consolidation itself, because right now, the prices have gone down and a lot of the players, I'm sure, are operating below cost, we have an advantage because of backward integration. And we want to play upon this advantage to sustain the business and see when the opportunity strikes how to take it forward. At the same time, we will continue to keep an eye out, as Arjun has mentioned very clearly earlier, that we would be looking at getting into -- over the next -- this is not going to happen in a quarter or 2 quarters, but over the next 2 years, getting into more molecules. So our dependence on pregabalin will decrease because it's not a very sexy molecule that it's going to suddenly become major -- we are not expecting that it is going to improve margins by itself or we are going to triple our sales there. That's not the case. So to utilize our capacities, we will look at other molecules. While here, we will consolidate and utilize our backward integration to create advantage in the space, which makes the business sustainable. That is the best we can guide right now because, yes, it's not a very high-margin business right now at all. And it doesn't just look like that's going to change over the next couple of years. So we don't see any new money or CapEx being spent behind this. Even we won't spend any further CapEx behind pregabalin, and we would rather do that by finding other molecules, which could, over the next 3 to 4 years, help us scale and achieve better EBITDA margins.

The next question is from the line of Sai Ganesh from Square 64 Capital Advisors LLP.

I just wanted to know about the antidumping duty rate imposed on Azo pigments as of March 29, 2025. What is the percentage?

So the Azo business has seen this antidumping on China. Miteshji, what is the percentage currently?

Sure. It vary from 20% to 30%.

20% to 30%. Are we seeing any volume uptick after that duty imposed -- our volume uptick?

Yes. I mean, it's just happened now. So we haven't seen any immediate uptick in our volumes. But will we see some opportunities and uptick in the volumes? Yes, for sure. We are exploring these opportunities. It takes a little time when they want to do the switch because these products are specialty products and very difficult for any user to switch immediately. But as you mentioned, the antidumping duty is a reality and a 20% to 30% duty on China clearly means that they are not going to be able to -- they're eventually going to lose the business in India for these volumes, whatever they had. So we will hope to get part of that volume for sure.

Okay. And my another question is regarding the CEP filing that you are planning. It is for the Pregabalin molecule or there are other APIs included as well.

Arjun?

Yes. So the CEP would be per molecule, and that is how the system works. So we will be applying for pregabalin at the moment. And this is what -- to also allude a little bit to your previous question stuff, we will be doing internally what is in our hand to get our product more globally approved and try and increase our market share through that fashion. And that is the path we vision out for pregabalin. So it would be per molecule. The application would be for pregabalin only.

The next question is from the line of [ Vipulkumar Shah ] from Sumangal Investments.

Congratulations, sir, for very good numbers. Sir, if I heard you correctly, you said you gave a guidance of 15% sales growth, 25% EBITDA growth and 65% PBT growth. Is that correct, sir?

So -- yes, we are hoping to have a 15% topline growth, a 25% EBITDA growth and about a 50% to 65% PBT growth.

That is for '25-'26, right?

Yes. Yes.

Yes. And for that -- so what you build in that guidance, what type of capacity utilization you build in that guidance for your Azo segment? And what was the capacity utilization last year?

So, Vipul bhai, basically, capacity utilization on the Azo was about 64% for last year for the yellows and red put together, and we are hoping to improve that to about 85% -- 80% to 85% this year. That is not a huge topline growth. That will improve the top line from INR 70 crores to INR 90 crores, which is about a 26%, 27% growth in the topline of the Azos. And the EBITDA, of course, should improve significantly.

So would you like to share the Azo EBITDA? What was that last year? And what you're expecting this year?

The last year EBITDA is there. It is -- it was -- we have moved from a negative EBITDA in '24 to a positive. It's marginally positive at about INR 1 crores, INR 1.5 crores of EBITDA. And we would, of course, on INR 90 crores, we are looking to have EBITDA of 8% to 10%. So we should be getting about INR 8 crores of EBITDA. So in percentage terms, it's a large percentage, but that we can't -- that's nothing great because our EBITDA this year were low. So that is where the -- on a consol basis, the EBITDA number is better than the top line.

And lastly, sir, if you achieve the numbers which you are hoping for, then the increased cash flow, would it be used to retire the debt? Or what will be the use of the increased cash generation?

Good question, Vipul bhai. Very good question. So currently, our cash generation is quite strong. And the way we are thinking right now short term, we are looking to still continuing to deleverage. Longer term, we would definitely want to grow. Does it make sense? I mean, am I answering that question for you? For this year, I would say that because we have already guided that we are not going to do any major CapEx's, so the cash generation would go into retiring some debt further. So our total debt equity has dropped from -- it was 0.75 total debt to equity, not long term. I mean, long and short combined was 0.75 to debt to equity, which is currently standing at 0.55. So this -- we are looking to see that it drops below 0.5. And our EBITDA to debt, which was very high last year, has dropped to 2.5x this year and likely to be dropping below 2x in the coming year. Then, of course, if you look at it from a 3-year perspective, of course, once we get utilization levels over the year, we will look to put the free cash to work and do some CapExs to generate scale.

The next question is from the line of Vignesh Iyer from Sequent Investments.

Two questions from my side. So firstly, if I see your operating cash flow, I see that in last 5 years, I mean, this is the highest operating cash flow we have managed to make, okay? So just to understand, what was our net working capital days as on end of this year versus what it was in FY '24?

Pratik bhai, our CFO, will take the question on the net working days. I will again -- I said it in my opening commentary, but I'll just quickly touch upon it. Yes, we've had a very strong year in terms of cash flow. INR 30 crores has come from profits, and INR 25-odd crores has come from a combination of improved payables, improved receivables and improved inventory levels, and we hope to maintain these efficiencies. Pratik bhai, can you take Mr. Iyer's question on the exact number of days?

Sure. So the exact days for '24 or the working capital turn was 2.8 at the end of '24, which stands at 3.65 at the end of March '25.

Sorry. Sorry, I didn't get that.

And as of March '25, it is 3.65.

The working capital turn.

Okay. I mean, in terms of days, you're talking about the ratio 2.8 from -- from 2.8 to 3.65.

Sorry. Yes. So in terms of days, if you work out roughly, it was around 130 days, and currently, it is around 102 days.

Okay. So -- I mean I got the number. And secondly, more on the consolidated levels, if I see for the entire year, our taxation stands at 33% roughly. Can you tell me if we're going to opt for the 25% tax bracket in the coming year?

Yes. So it is 25% only. But because of the entity, we have 4 entities in the group for the consolidated numbers, and the tax treatment is different as compared to the book's consolidation, and therefore, you are seeing a higher rate of taxation.

So for modeling going ahead, we consider for 30 days only, right?

I'll add to this answer. So see, generally, from the taxation point of view, the lower tax entities currently are not PAT positive, which is why overall tax rate seems to be higher. Once the 2 entities, which are PAT positive kick in, then the impact on PAT will be higher than the increase in EBITDA.

The next question is from the line of Rajat Setiya from ithoughtpms.

First of all, congratulations on great set of numbers. First question about the CPC Blue segment. What is the maximum achievable capacity utilization in the segment?

Rajat bhai, with the blue, we are already at pretty much maximum. So I would not expect too much more in terms of utilization out of -- on a sustainable basis out of that.

So the growth in this segment will largely be driven by pricing growth or there are, I mean, debottlenecking opportunities that exist, some other way of growing the budgets.

So we are not focusing too much growth coming out of this segment, honestly. As I said, it's not -- I mean, we are doing well. But generally, the industry is very challenging times, and there is a significant capacity in the industry. So we would continue to do what we are doing, but I would not see any -- to be very frank and honest, I would not see great growth or anything coming out of it.

On the API side, about this pregabalin being categorized as an narcotic drug, do you see the major impact of the business because of that particular development or not really?

I don't think we are having any impact due to that as of now. Mitesh, would you want to throw some light on this?

See, basically, we are selling only to regulated customers. So we hope we don't have any impact.

So -- I mean, although we are selling to regulated customers, but ultimately demand may get impacted -- I mean, you don't feel that.

No, we don't think we have any impact.

And sir, finally, if you can comment on the pricing outlook for different segments for the whole year, that would be great.

Going forward, to comment on a futuristic pricing outlook would be very treacherous. The volatilities are very high. And it would -- what I would say is generally -- across all 3 segments, generally, we should be in a position to pass on any increases if we see them. But conversely, if there is a decrease in the input costs, also, we would have to probably pass that on as well. So I would say, it's very difficult to kind of forecast whether the prices are likely to go up or go down. We -- at Asahi, we don't actually pay too much attention to trying to forecast that. What our job is that whatever the environment is, in that environment, we should be able to maximize the opportunity. So even if the raw material prices were to go up, we would not be concerned. If they go down, we would not be too excited.

The next question is from the line of Ankur Agrawal from RC Business House Private Limited.

What is currently ROCE for this year?

This year, ROCE stands at about -- ROCE is about 10% to 11% on a consolidated basis, which was much lower last year, of course.

Okay. And what will be your internal estimate for the next 1, 2-year ROCE?

So this is a very good question, difficult to kind of put a number on it, but we would be targeting 15% ROCE over the next couple of years.

And what is the maximum topline from current capacity what you assess?

The maximum topline from current capacity should take us to about INR 750 crores.

And after that, you have to make some CapEx to add to that.

Absolutely. Yes.

And next 1, 2 years that will be attainable.

Sorry, I didn't hear you.

Next 1, 2 years, you can do that capacity utilization 100%. Is it possible, INR 750 crores?

Yes. So that would be the idea. Over the next 2 years, we should be getting to that number.

Okay. And what will be the possible EBITDA number for next 1, 2 years, 14%, 15%?

Again, I couldn't hear you. Can you repeat, please?

What will be the EBITDA number?

EBITDA number over the next couple of years. EBITDA, you mean in percentage terms or...

Percentage. Yes. Percentage, consolidated basis.

Consolidated percentage EBITDA, we are targeting at about 12%.

Ladies and gentlemen, this will be the last question for today, which is from the line of Rudraksh Raheja from ithought Financial Consulting.

Just one quick question on Azo. I think in our top line, it doesn't include any of our bigger export clients, which was our initial thesis when we expanded into this. Could you clarify where are we on that stage, like approval stage? Can we get a big order in this year?

Arjun?

Yes. So I briefly answered before. To be more specific, we have got approval from a few of those. And we will hope -- to answer your question specifically, yes, we do hope that certainly in this year, not only one, but we are able to execute at least 2 large customers. And while it will be a step-by-step process in the sense that once we are even commercially approved, no company can just directly hand over the full capacity to us. So through the year, through the next few quarters itself, we will look to start moving commercial. And by the end of the year, yes, we should have commercial large quantity orders from 1 or 2 customers at least.

This is going to be the work in process, and it is going to be gradual. It is not going to be very sudden, but it will be continuously gradual.

Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to Mr. Gokul Jaykrishna for closing comments. Thank you, and over to you, sir.

Thank you, everyone, for attending this call. It has been a pleasure for me and my team to be having interacted with you. We had some very, very interesting and very solid questions. I hope I've been able to answer them all. But more importantly, we at Asahi remain optimistic about taking opportunity from the current volatile global scenario and hope that we are able to fulfill some of the promises or outlooks that we have been able to share with you today. With that, I thank you and wish you all the best. Have a good day.

Thank you, members of the management. On behalf of Asahi Songwon Colors Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.