NGL Fine-Chem Limited (524774) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '22 Earnings Conference Call of NGL Fine-Chem Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishav Das from Pareto Capital. Thank you, and over to you, sir.

Good morning, everyone. This is Rishav Das from Pareto Capital, We represent Investor Relations for NGL Fine-Chem Limited. On behalf of NGL Fine-Chem, I welcome you all to our Q4 and FY '22 earnings conference call. I have with me from the management, Mr. Rahul Nachane, Managing Director; Mr. Rajesh Lawande, Whole Time Director and CFO; and Ms. Pallavi Pednekar, Company Secretary. We will have brief opening remarks from the management followed by the Q&A session. Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results or projections to differ materially from these statements. NGL Fine-Chem Limited will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. I will now hand over the call to Mr. Rahul Nachane for his opening remarks. Over to you, sir.

Thank you, Rishav. Good morning to all of you. Thank you for joining us on this call. Let me take you through the performance of our company and strategy going ahead. This year, we continued to witness steady growth while we faced several pressures on the cost front. Strong volume demand sustained throughout the year as we witnessed increasing penetration of our major products in all present markets. We recorded a consolidated revenue growth of 17% year-on-year for quarter 4 FY '22 and 23% for the year FY '22. Our Veterinary API business, which is our primary segment reported robust growth of 13% year-on-year in quarter 4 and 26% for the full year. Global macro and geopolitical factors continue to push cost to new highs, directly impacting our business in the way of raw material prices, freight and fuel, which inversely affected product supply and margins. Costs are expected to remain elevated in the near term as the situation remains uncertain. We expect price to normalize in the latter part of the year. For Q4 FY '22, consolidated EBITDA stood at INR 11 crores with a margin of 12.6%. Profit after tax for the quarter was INR 7 crores with a margin of 8%. For the full year, consolidated EBITDA stood at INR 68 crores with a margin of 21.4% and profit after tax stood at INR 50 crores with a margin of 15.7%. We continue to see good market traction for all major product categories. While we gain market share in our up-and-coming products; top 3 products contributed 44%; top 5, 50%; and top 10, 72% of our revenues for the year. We, additionally, widened our customer base this year with top 3 key customers now contributing to 13%; top 5 customers to 20% of turnover; and top 10 to 33% of turnover. We have 5 molecules in pipeline at this time. Each having more than 5 step synthesis manufacturing progress -- processes. These products are highly accretive and will help enhance margins going ahead. We aim to launch 3 or 4 new products each year. Our Poultry molecule has witnessed very strong market acceptance as we sold about 6 tons this year in FY '22. And we expect to see good volume in the next year. Lastly, coming to our growth outlook. On our ongoing initiatives, we have completed with Macrotech brownfield expansion in the last quarter. Validation batches are ongoing, and we expect to commercialize from the current quarter. On our plans to increase outsource production, we have attained about 10% outsource production as of now, and we should hit our target of 15% by the end of FY '23 (sic) [ FY '24 ]. These measures, along with continuous debottlenecking and process improvements will help drive near-term growth. Our planned greenfield expansion at Tarapur is also on course. We have started civil construction in the month of December and work is progressing well. The estimated CapEx for this project has been revised to INR 140 crores, which will bring 50% capacity addition and will be funded through a mix of debt and internal accruals. We expect to complete construction and start working in FY '24. We are well positioned today to tap into the vast opportunities in the sector with a robust balance sheet and net debt free position. We are focused to continue investing in maintaining our market position by remaining cost competitive, reliable and offer high-quality solutions for all our customers. This is from my side. We can now open the floor for discussion.

[Operator Instructions] The first question is from the line of Rahul Jain from Credence Wealth.

With regard to the margin part, 2 things what I've observed is from a base of around 48% gross margin, which were seen in December '21 quarter among the lowest in the last 5, 6 years. We have again moved up our gross margin to upwards of 50%, we are up by almost 2%.

I'm so sorry to interrupt you, Mr. Jain. Your audio is not very clear. May I request you to come on the handset mode, if you're on speaker, and come closer to the phone, please?

Just 1 second. Is this fair now. Is this okay. Is this better.

It's actually the same.

One second. Just give me 1 second. Hello.

Yes, Mr. Jain, please go ahead.

So sir, with regards to gross margins compared to the previous quarter lows of 48%, we are back around upwards of 50%. Our gross margins have actually moved up by 2%, whereas the EBITDA margins are impacted because of other expenses and employee cost being higher than the percentage of sales. So coming to the question part, sir, one is, you had mentioned in the previous call that the input prices, which has gone up and had a peak in October, November, all that they were seeing, the trend was seen to the prices were stabilizing and going outwards. So how do we look at the input prices now compared to what we have spoken in the previous call and the price in October, November? And what is the trend going ahead?

So as I had mentioned earlier, our prices had peaked towards the latter part of last year, and they had started coming down. And Jan, Feb was actually -- January was actually a good month where prices came down. But then unfortunately, we had the war coming up, and that has -- the war between Russia and Ukraine. And that has increased prices of commodities for oil and metals in a significant way now. So oil is almost at double the price what it was 3 months ago. And this has impacted the cost of all chemicals once again. So prices have once shot up, and we don't see them coming down until this global situation settles down a little bit. So probably it might last for maybe another 2 quarters going forward.

Okay. Sure. And sir, with regards to Tarapur CapEx, in the previous quarter, you had mentioned the CapEx being INR 100 crores, and you were working on the numbers again with regards to the inflationary part. And you had mentioned that the project costs could go up by around 10%. But what we see in the current presentation, you have mentioned the Tarapur CapEx at INR 140 crores. So just to understand how much of this could be due to inflation and how much of this could be due to some new additions. And also with regards to now this INR 140 crores, what kind of asset turn should we build up for Tarapur?

The situation which existed in January and what exists today is very different. I'm sure you'll be aware that steel prices, for example, [ Mari ] steel has gone up from about INR 35 a kilo, is currently at almost about INR 75 a kilo. So it's doubled in the last -- in the last 3 months. Same is with regard to copper. And building a plant basically is we require stainless steel. We require a copper because that goes into all the motors which are bought and the condensers. So that has given a sharp increase in the CapEx for the plant which we have got right now, which is being undertaken. What impact it will have on the capital output ratio is something which I'm really uncertain about. But in the long run, it will play out. We cannot hold our plan just because of some global factors which are going wrong right now. I'm sure things will settle down as we go forward towards the end of this year, and it should be much better economically.

Sure, sure. And sir, with regards to your 5 new molecules in the pipeline, and you also mentioned in your initial remarks, some of these products have more than 5 steps synthesis. So -- and your presentation also talked about the new products being margin accretive products. So 2 parts; when do we expect the commercial supplies to start for these 5 products? Secondly, what kind of margin differentials do these products have? And what kind of size these products can be?

To launch a pharma product here, it takes close to between 1 year to 2 years for products to get properly stabilized. We have to give samples to customers. They will carry out validation batches, then they will carry out shelf-life studies. So for it to start converting into sales takes a little time. So these are products which will essentially start generating large turnover for us over a period of between 12 and 24 months. These are multi-step products, so they are with similar EBITDA margins as the products we are currently doing. Of course, there is an impact on current pricing because of high commodity prices, but as and when it corrects, it should settle down. We are focusing right now more on market acquisition. The idea being that when macroeconomic factors will improve margins, will return back to earlier levels.

The next question is from the line of Yogansh Jeswani from Mittal Analytics.

Sir, can you share the whole year volume growth? How much was that? And also, what was the volume growth in Q4?

Sure. Just give me a second. Yes, volume growth in API last year was about 6% and 23% was the growth in value.

Okay. This is last whole year.

This is for the last whole year, yes.

Okay. And sir, secondly, on the expansion, the greenfield expansion that you are doing. So after this first round of expansion with 50% capacity enhancement, what kind of scope will be left on that plant for any future people?

I did not understand the question clearly.

The greenfield expansion that we are doing. So does have 50% capacity enhancement that we'll be doing, will there be scope for us to expand more on that piece of plan or this is the maximum potential from that project?

So that particular project will be maxed out.

This will be the entire thing ? Okay.

Yes. Yes.

Okay. And sir, on the other expenses. The higher other expenses. Apart from freight and energy, is there any other part to that expense?

Yes, maintenance cost has also gone up because metal cost -- prices have gone up. So spares prices have gone up. So that's another area where our cost increase has taken place.

Okay. Sir, will you be able to quantify the one-offs that you were mentioning? How much would that be in value terms?

Our maintenance cost is up by almost 1% in the last quarter.

Sorry, 1%.

1% in the last quarter year -- sorry, it is meaning from about 2% of sales it's gone to 3% of sales.

Okay. Got it. So other than that, do you see moving forward this other expenses to normalize? Or we do see some impact in the coming quarters as well?

I think this will continue probably for at least a couple of more quarters before it starts regularizing. We have to wait for the global economic situation to settle down.

Okay. So basically, if we compare quarter-on-quarter, sir, I think last quarter, our other expenses were 20%, 21% and this time around it's 28%. And the freight and all those issues have been there for last 2, 3 quarters at least for this entire year. So that is why with this 1% -- is there anything else also that we should be looking at?

Tax has gone up. So our fuel cost which used to be only 1% of sales is now 2.5% of sales.

Okay. So I think then 27%, 28% kind of other expenses you are expecting to continue.

Yes. And this is what is driven by the high commodity prices, oil prices right now, metal prices. Earlier also when...

Some part of your [indiscernible].

That's probably predominant that's up between 6 to 9 months. So I think we can be optimistic that it will start settling around mid of this year.

The next question is from the line of Rushabh Sharedalal from Equirus.

The first question is for the brownfield expansion that we have almost completed in Macrotech. So it's a INR 26 crore kind of a brownfield expansion that we did. So what sort of revenue and margin do we expect from this brownfield expansion? That would be my first question.

Yes. Typically, in this industry, we have a capital output ratio of about -- it used to be about 2, but with the increased costs which are triggering now, it should be in the range of 1.5 to 1.75. So we expect this to give us an additional manufacturing capacity equivalent to roughly about INR 40 crores to INR 50 crores worth of sales.

Okay. And what sort of a margin do we expect?

Margin comes from our standard products. So it is not -- it's the same margin which will continue for the company on the whole.

And would we kind of see the impact in quarter 2 or quarter 3 of this year itself in terms of revenue or...

Yes. Yes, we should see, start seeing the impact within this year.

Okay. And one more question on the greenfield CapEx of -- so now it is INR 140 crores. But assuming that there was no war and no elevated costs on a CapEx of INR 100 crores, what kind of asset turn were you expecting, assuming that the macro situation is normalized?

On INR 100 crores, we would have expected about INR 200 crores worth of sales.

Okay. And just a small question, if I can squeeze in. So we are doing this outsourcing, and we are almost done 10% and we are moving towards 15% kind of a number. So any cost savings that if you can quantify for us?

Any cost what?

Any cost savings that you can quantify for us if we are moving towards this outsourcing of production?

No. Outsourcing actually is a more expensive way of doing things. So there is no cost saving over there. It just becomes that you can -- we can generate more sales being asset-light. So today, we have been able to double our sales. If you come see in about 2 years' time, we were at in FY '20, we were at about INR 250 crores. Today, we are at INR 300-plus crores. And there really has not been such a big investment in plant and machinery which has taken place. So it is just an asset-light model of ensuring that we are able to grow sales.

Okay. Okay. And I actually wanted to understand, so the largest product that we produce, even companies like Sequent Scientific are also there in the product. It is just that they are selling it in the regulated market. So what kind of risks do you see if those companies start entering unregulated market also where we are serving?

It is difficult for a company which is doing reg work to come into the unreg markets. The cost structures will not permit it.

The next question is from the line of Ayush [ Agarwal ] from Mittal Analytics.

So sir, are we -- I just want to understand on the input price rise that is happening. So have we been taking price increase? Or are we sticking with our old strategy of gaining market share while taking short-term pain?

No, we have to pass on price increases to customers. We cannot just sit on this because it would obviously be very detrimental to business. But there is a time lag of almost 1.5 quarters by the time we can start passing on because normally, we have orders. For example, currently, we are holding orders which are valid a till July. So it's probably from the bookings which we started doing last month, we have started passing on the price increases. But there is a lot of resistance in the market. We are selling to pharma companies. The pharma companies are in the end selling to farmers. And the farmer has to make -- his enterprise has to be profitable for him otherwise, it does not work out. And unless we can translate it into higher product prices for his product in the market, he will resist. So there is a pushback which comes. So it doesn't -- price increases are not so easily passed on.

Right, right. All right. Also, sir, given our capabilities and our high market share in few products, is there a CDMO kind of an opportunity that lies ahead for our company which has seen a massive rise in top line, and we have proven sort of production capability. I mean there are players like Sequent out there who are doing CDMO kind of business. So is there an opportunity for NGL going ahead in the veterinary?

It's not something which we have explored. So I'm not able to comment on that.

All right. All right. No worries, sir. And my last question is on volume growth that you are looking at in FY '23 and how is the demand looking for our products.

Difficult to expect what volume growth will be because there is a pushback with regard to pricing going on right now. We are trying to pass on the increased price levels. So customers are holding back a little bit of their demand. So it's still too early for us to judge what will happen in the current year.

But are we sure that there is no inventory buildup that is happening in the channel?

So our inventory buildup is normally in terms of work in process. There is good inventory, we cannot afford to let it build up because our products have a finite shelf life. And we commit to our customers that we will ship our products which are not more than 3 months old. So our inventory is always in the N minus 1, N minus 2 stage.

Thank you. I would request Mr. Agarwal to rejoin the queue for follow-up questions. We would also request participants to limit your questions to 2 at a time. Should you have a follow-up question please rejoin the queue. The next question is from the line of Anand Jain, an individual investor.

One question that I have is that in the call before this one, we had spoken of that the logistics costs, which have gone up should be more like a pass-through from here on. So has that kind of have you implemented that part of...

I did not understand what the question was.

So logistics costs have gone up. Logistics costs have gone up significantly is what you have mentioned. My only question is that we decided that we would -- logistics would from here on, it'll be an FOB basis of sales. So -- and the customer would be paying for the logistics. There will be a complete pass-through. Are we not there yet? Have we not implemented that as policy as of now?

Yes. So some part has been converted into FOB business. There's still a large part, which goes on CIF. And as I said, this increased price has to be passed on to customers. So we'll pass it on. So we tell them -- to the customers that the FOB prices and so whatever be the logistical cost will be passed on to them completely. So yes, we are able to pass it on for quite a few customers now.

So let's say, like for 80% of the sales, you are able to pass on any increase or decrease in logistics?

I am not able to give you a percentage off hand. But yes, for some part of our sales, we have been able to pass it on.

So the other question that I have is that, of course, with this kind of price increases and the customers would be pushing us back on the price. But at the same time, if you look at competitiveness, that should not have -- it's an increase that happens for almost all our competitors too, right?

Yes, it does.

So at some point of time, despite the increase in prices, there would -- there should be a normalization of everything, like margins going back to the previous level.

Yes. What you're saying is right. Yes.

And should we expect that like in a quarter or 2 to happen?

That is precisely the problem right now. We are unable to gauge because just when prices were stabilizing and normalizing, we have seen, again, things go up with the Russia-Ukraine war. So oil has gone up, when oil goes up, transportation cost goes up. So whatever normalization we had seen has just been -- there's been an upheaval in that and it is being disturbed. So I'm unable to tell you or even guess when this would normalize. But cycles work in price cycles are more like a 6- to 9-month cycle. So hopefully, towards the end of this month, we should see it settling down.

That sounds good. Last question from my end...

Mr. Jain, may I request you to come back in queue for follow-up questions. There are several others waiting for their turn as well.

Sure, I understand.

The next question is from the line of [ Sandeep from West Company ].

Sir, how you see the company's balance situation, I mean to say we are going under CapEx and the company's receivables are at all-time high. Inventories at all-time high and RM cost, so we won't see any kind of, I mean to say, relief in RM prices in short to medium term. So how you see the company's present situation?

Overall, the situation is actually very promising. We see that our presence in the market is going up. We are gaining market share very well in the market. Products are now well accepted. Sales growth is strong. Margins in the short term have been impacted. No question about it. And will continue to be impacted because of what we see happening around us. But there is no change in the long-term situation. We're very optimistic about where we're going from here right now.

Analyze the company's last 10 years. So there is the only one problem we can find that this is the pricing power. And I can't recall it correctly. But in 1 conf call, I can't recall it in second quarter last year or in second last year I don't recall it correctly. But in some conf call you said that if prices of raw material has risen by 50% to 60%, then we can still can't pass on the prices to the customers. So is it so -- at present, is it so?

There is a resistance in the market. We are in a B2B business. We are not in a B2C business, where it's relatively easier to pass on price increases. So there is a pushback. It is not so easy to pass on price increases.

Okay. So this thing will remain intact in future also?

Yes, it's the nature of the industry.

Okay. Okay.

The next question is from the line of Dhaval Shah from Svan Investments.

Hello Sir.

I'm sorry, Mr. Shah we cannot hear you clearly. Please come on the handset mode and ask your question.

I am I clear now?

You will have to speak a bit louder, but it's better.

Sir, my question is with regards to the numbers over the last 2, 3 quarters, if we compare, now we did roughly the same top line in the March quarter versus the September quarter. While the gross profit has been down by 3% compared to September, there is a sharp increase in the other expenses, which is impacting our EBITDA margin. So could you quantify the other expenses increase in more detail like you mentioned your fuel cost has gone from 2% to 3%, maintenance cost from 1% to 2%. So which are the other costs, which is giving us such a sharp spike and impacting the EBITDA margin? That's my first question. Yes. So just to add with it. So is there a simultaneous fall in -- a sharp fall in the realization as well? Yes.

Just earlier in the call, I did give the numbers for fuel, transport, which is freight, repair cost and employee costs. So these are the 4 items which are the main cost drivers.

So employee cost has broadly remained same at 11.5% of sales. But is it freight which has gone up like the biggest component of your other expense increase? So trying to understand that once the thing normalizes, would we see an additional 3% to 4% on the EBITDA basically?

Definitely.

That's the bare minimum you see.

Yes. Yes -- no. And mainly, it is the material cost. I mean we should see if the prices -- chemical prices start coming down, we should see that coming down quite a bit. Right now, we're paying crazy prices for chemicals.

Okay. Okay.

The INR 28 or INR 30 a kilo is right now at INR 65 a kilo. So it's really terrible, crazy prices going on.

Correct. And sir, secondly, as we see in other companies, similar to your business, not exactly the same, but like somewhat similar, they are doing a lot of backward integration. All fueled by these volatility in the sourcing, volume, plus the price increase and et cetera. So at your side, is it feasible to do backward integration? Or would you wait for a larger volume offtake, larger volume size of your company and then do it?

We are fairly backward integrated because we do almost 5 to 7 steps for most of our products. So that's a fair amount of backward integration at our end.

Okay. So it is the feedstock, which is impacting feedstock and solvent like the very base chemicals, which is impacting you a lot, right now?

Yes. Yes. And Macrotech -- the entire Macrotech expansion is to backward integrate increasing the intermediate capacity within the group.

Correct. Correct. Correct, sir. So what sort of volume growth would you see for the next 3-year period.

For which period.

Over the next 3-year period, so what sort of volume growth -- so FY '20 were at 100, what sort of volume growth would you see over the next 3-year period?

Normally, we don't give forward-looking numbers, so I would like to refrain from answering that question.

But would you maintain your historical average?

Yes. We are fairly confident about that here. Meaning 1, 2 quarters here and there, it might go up and down because of these price increases and this and that. But the long-term story is very intact and still very strong.

The next question is from the line of Alisha Mahawla from Envision Capital.

Sir, I just wanted to understand you mentioned earlier in the call that for full year FY '20, we have a value growth or rather realization growth of almost 23%. Just wanted to understand if you can give us a corresponding number of what has been the increase in cost or how much is the unabsorbed cost right now? That we've not been able to pass on?

I have not really understood the question, I'm sorry.

I'm saying, if we've increased our prices by about 23% which is what you said has been the realization growth for FY '22. Just wanted to understand the corresponding increase in costs during the year. Raw material costs have gone up, and how much we have not been able to pass on?

Well, the amount, we have not been able to pass on is a net decrease in the margins, so roughly about 10%.

Okay. Sure. And the Tarapur CapEx will come on stream by H1 of '24, or are we seeing a delay there?

No, that is scheduled for completion around September '24 -- sorry September '23.

September '23. Okay. And the raw material, the feedstocks, solvents, cetera, are, where are they sourced from domestically, China, somewhere else?

Raw materials, our import component is roughly 15%. The rest is all domestic.

Sure. And just one last question. Since we supply largely to unregulated markets, do we have supplies going to Russia, Ukraine, which may currently be impacted?

No, we don't have any significant sales to Russia. But we are selling to some European companies who are in turn selling to Russia. So their demand has been impacted.

Would it be...

Little biased. There is a little bit of indirect impact here.

Okay, which would be a couple of 2%, 3%, 4%-ish.

I'm unable to determine because I don't know exactly which kind of customers are selling into Russia-Ukraine or what their quantum is, that it's something which they don't disclose to us. So we are unable to find out what impact it will have on us. But we really don't think it's going to be significant. And anyway, the sales in the rest of the markets are growing very well right now.

The next question is from the line of Aejas Lakhani from Unifi Capital.

Sir, there are 2 questions. The first thing that when we spoke last year around the same time, you mentioned the margin guidance between 18% to 25% and the aspiration was to be in the higher end of the band. Of course, given the year we've closed at 21%, 22%, I've heard you through the call speak about the conversation where the prices move in the 6- to 9-month range. Given where we are sitting today, and you have the Macrotech expansion also, which will start to aid margins, do you think we will be able to be in the same band with the aspiration to be the higher end? Or given where the input prices are -- you think will be, again, somewhere where we ended this full year in that range?

No. I expect another 2 quarters to be challenging in terms of both of margins because of the prices which we are looking at and also in terms of pushing sales because of the kind of resistance we are getting in the market right now for increased prices. So everybody is playing a little wait and watch. So having said that, but it's just going to be temporary because customers, even when they adjust their demand. They adjust it for a short period, and then they need to come back because we need to put product in the market. So there is a time lag which -- for this when it happens, which is anything from something like 2 to 6 months. But having said that, once things start settling down a little bit more, we should see strong growth coming back.

Noted, sir. And sir, you mentioned on call that your acceptance in the market is growing and clearly even in a tough environment, you are able to grow volumes. So could you speak about what is aiding the shift -- where are you taking market share from? What is aiding your customers to move to you? If you could expand a little bit on that?

Well, number one is that now a lot of our smaller products are doing well. We see dependence on the top 3 products has been significantly coming down. And there were a time when top 3 products were almost 50%. Today, they are just about 30% of sales. So there is a very wide growth in the number of products which we are doing. So overall, yes, meaning that -- and as we are putting more products into the market, growth is also coming from there. So it's an all-around growth rates from acquiring more customers and it's also from putting in more products.

Got it, sir. And you're able to sell, sorry.

Yes. I'd just like to add one thing to what Rahul is saying, is that it's not just taking market share from someone, so that the market -- the pie is increasing. So -- it is not so much of a zero-sum game, but the market in totality is increasing. So as a result, top line is also increasing.

Got it. And just, sir, a follow-up that the newer products are being sold to the same customers or we have to expand the base of selling the new products to different customers.

Well, some customers use our new products. So yes, there is a definite overlap but not all of them. And we have also need to reach out to new. So it's a sort of a mixed bag over there.

Got it, sir. Got it. And sir, lastly, the greenfield INR 140 crores, could you just quantify if you have a number about how much is going to be the debt and how much is going to be through internal accruals and...

Well, right now, we have a financial closure for INR 120 crores, on which we have planned INR 80 crores is debt and INR 40 crores internal accruals. We have already spent close to about INR 8 crores on the project as of now, and that's completely from internal accruals.

Thank you. Next question is from the line of Shivan MS from JHP Securities.

Sir, just one question. I was referring to Slide 8. And I was just seeing our revenue-based regional distribution. So there has been significant growth in India and rest of the world for FY '22. So could you give some more granular details on just where is this growth coming from? I mean are these new accounts that we've got is or is deeper penetration with existing accounts? And would this be mostly a value-led growth or there is a significant volume net growth here?

Yes. The total sales in India have remained at above 25% actually. Last year was also 25%. In the current year also, it's 25%. So growth is actually very similar across different markets. But yes, significant growth has taken place for us basically in the rest of the world markets, where we have seen over 60% growth basically coming from Latin America. That being the area where we have had seen a very large amount of growth.

Okay. And this -- so the Latin American growth was mostly volume driven?

Volume driven, yes.

Okay. Okay. And in totality, from India and ROW, is this volume-driven or value-driven sir?

It's a combination of both. Volumes have gone up by about 7%, and the rest is basically higher pricing.

The next question is from the line of Aman Vij from Astute Investment Management.

Sir, my first question is on the veterinary API volume growth. So if you can talk about the same for the last 3 and 5 years. So we have tripled our sales from INR 80 crores to almost INR 250 crores, INR 260 crores in the last 5 years, and we have doubled in the last 2 years. What was the volume growth over these 2 periods, 3 years and 5 years?

I'm afraid I don't have that number ready at hand.

Okay. Maybe if next time, you can share that, what is the mix.

Yes.

On the 6%, 7% volume growth for this year, do you have this number for FY '21 last year? What was the volume growth?

Last year almost everything was volume growth because there weren't hardly any price increase. Prices were very stable last year in '21.

Sure, sir. So then that means, say almost, what, 60%, 70% was the volume growth last year because that was the sales growth for us?

Yes.

So just to understand this point -- part more. So this year, you said, obviously, with price increasing, there will be reluctance among the customers. But normally, what kind of volume growth do the industry see? Or if not for the price growth this year, like 15%, 20%, will -- would have our volume growth being much higher?

Yes, we aim for about 20%, 25% volume growth every year.

Sure, sir. That helps. The second question is on the Poultry side. So you talked about we have done like 6 tons this year. If you can talk about of the respective whatever products we are in, what is the roughly tonnage of the market just to understand where we are and where we can be?

It's close to about a 300-ton market worldwide.

Of the products we are already in?

Yes, yes.

So there is a big growth opportunity.

There's a big opportunity there yes.

The next question is from the line of Ayush [ Mittal ] from Mittal Analytics.

First of all, congratulations on the good presentation. It's good to see all the details that has been put up very clearly. It's very helpful. And a couple of questions, sir. One, on the Macrotech side, given that we had commercialized the capacity in December itself and this was more of the intermediate that we'll be doing. Do we need approvals of the customer for this also by will it be taking 6 months to ramp up?

Yes. Number one is when it comes to approval of customers, where there is a quality agreement in place. If we have changed the manufacturing process or the site where we are manufacturing it. We have to intimate the customer and obtain their prior approval before we can make the shift. So -- and that is with most of the European companies we have quality agreements. So I think that is with regard to your first part. And to the second part, why it takes time is because any product which we want to do, we have to first carry out trial batches. Then we have to -- so first, we'll be sort of a pilot batch which will be carried out. Then we'll do something like 5 batches to see that whether the yield and quality is coming out well. Then, the product which is made from that will be subjected to stability test. And only after that, can we make the complete shift. So that whole process takes anything from 6 months to a year actually.

Okay. So by when do we expect a reasonable utilization from this capacity?

We expect it to start using reasonably well, probably around Q2, Q3 this year.

Okay. Okay. Got it. Sir, on the geographical breakup of our revenue, we see that there's nil revenue from U.S. that we have started getting in recent quarters. Any specific reason for this? Is this temporary?

What was that? U.S.?

From U.S.A. we had started getting some revenues in this quarter, it is nil.

Yes, because the customer buys only twice a year.

Okay. Okay. So the annual numbers s something that is maintainable, but it is seasonality that has happened in this quarter.

So for example, its next demand is going to be only in July. So, yes, it'll be late that way.

Got it. Okay. And sir, some thoughts, if you can share on the 5 new products that we have talked about. Is this additional to what we were already doing for the pipeline like you had talked about some Poultry products that we had in pipeline? Can you tell something more about these?

Yes. On the 2 products which we have done in Poultry, one did not really work out well in the commercial part because there was not much traction which we could get. The Chinese were far better at. So that product has been [ . The second product is doing pretty well. So we expect that business to grow by at least something like 100%, 125% in the current year.

And this 5 molecule in pipeline is additional to these 2 Poultry products that we already had in pipeline?

Yes. Yes.

The next question is from the line of Anand S from AS Capital.

My questions have been answered.

The next question is from the line of Richa Agarwal from Equitymaster.

Sir, if you could give some color on the new molecules that we are getting into 5-year molecules, what kind of market size or revenue potential is there? And what kind of market share do we aim to capture in these products?

Two of the products which we are getting into now are basically large volume products. So they are commodities. China is the single largest producer for those. We will probably be the first to start manufacturing from -- of those products from India. Those have got a potential of probably around INR 300 crores worldwide market. We will probably start with our aim of doing about INR 10 crores, INR 15 crores on that product in the first year, and then gradually growing from there.

And finally, do you think -- do you 50% market share...

Sorry to interrupt you, Ms. Agarwal, your voice is not clear right now.

Sir, we'll be starting at INR 15 crores, but do you, what kind of market share, let's say, over 2 -- 2, 3 years, do you expect to command in these products.

We hope to get at least about 10% to 15% market share over a 3-year period, 3- to 4-year period.

The next question is from the line of Anand Jain, an individual investor.

Sir. Just one broader question. In the last year or 2, how do you, how have you seen the competitive landscape change? Do you see more -- I mean we always keep on hearing it's China plus one thing. Do you see that playing out for us? How has the competitive intensity been? If you can share a few anecdotes or a few examples of how for different products things have changed, that would be very helpful ?

Yes. China is, by far, the single largest producer of veterinary medicines all over the world. They will be outstripping India probably 8 is to 1 or 10 is to 1. And having said that -- but there is definitely an interest now where customers are looking at having a sort of a business continuity plan. Where they look earlier -- they were looking at having 2 to 3 suppliers for any particular product. Now they have brought in requirement -- some of them have started around thinking that they should have not just 2 or 3 suppliers, but at least one should be from different country so that they are not dependent completely on just one. So there is definitely an opportunity which is coming up because of that. And it's something which we are trying to prove -- opportunity which we are trying to use.

That's fine. The other question on a similar line is how do you see the competitive intensity change in last 1 or 2 years? Do you see competitors coming up with more and more aggressive pricing behavior? Or how is that pricing behavior from different competitors change, if there's anything that you can share?

Yes. See, we are in the industrial B2B business. So there is no product where we have a monopoly. There will always be competition all around us. So yes, there is always competition. But having said that, we want to put ourselves as a preferred supplier for our customers so that the top of mind, recall is for NGL rather than somebody else. And that's something which we have been pretty successful in doing and which is how we have been able to increase sales.

Okay. Sir, last question, if I may just squeeze one final one. So we have the strategy of going for outsource sale, which is essentially, we are outsourcing some amount of our manufacturing and then you are selling it. So my question is on how do we select these products, and be, when more capacities come in, are we going to bring this production in-house? Is that the strategy that for the time being, until we have capacities we outsource and once capacity come in, we kind of bring in these products in-house for better margins? Or how does the selection?

We actually move products which are matured into outsourcing because any company, which is going to do the outsourcing, is looking at regulating business and more stable work. If they are unable to get that regulating business, it doesn't work. Plus, there is a lot of time and effort, which is the investor in terms of ensuring that the plant is capable of doing those kind of reactions, which we want. So it's -- if we take a short-term view, then it's not something which can work out. So we don't look at in-sourcing products which are already outsourced.

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

Sir, in our top 5 molecules, which constitute 50% of the revenue, what would be our average market share?

In most of them, we are at over a 50% market share.

Okay, now where I'm trying...

All the 5 we are in 50%.

Now what I'm trying to understand, just, I think we have already explained it, but just to understand a little bit better. When we say the cost inflation on freight and power, fuel and others, this cost inflation would be similar to our competitors as well, including those in China? Or is it like being in India, you are seeing a much higher inflation versus some of the others outside India?

I am unable to see what the price structure for the Chinese companies are. But yes, it is the same inflation which all other Indian companies are facing. I guess, Chinese also should be having this more or less the same, but I cannot say with authority because I really don't know their cost structures.

Okay. So where I'm coming from in -- in terms of the passing of this cost to the end customer. So there are 2 scenarios, which I'm just trying to understand. One is either the competitors are not facing similar cost pressure or as you mentioned that the customer is not -- is deferring these sales and probably whenever the new sales happen, this new price will have to be absorbed by the customer. So just trying to understand, is it like the second one is which you are thinking is a larger scenario that because it's been -- sales has been deferred, that's why the new prices are not being absorbed or is it the competitive intensity has increased from probably because of lower cost inflation for the competitor? As a result, we are not able to pass on the prices.

We see more resistance on the customers because they are also unable to pass on price increases to their customers who are essentially farmers. So it's a cycle which there is a lot of pushback which takes place. We don't really see it because of increased competition in the market.

Okay. Okay. Fine. My question is answered.

The next question is from the line of Aman Vij from Astute Investment Management.

Sir, my next question is on the -- if you look at geography-wise. So Europe, my understanding is, there wasn't much volume growth this year. If you can talk about the reasons for the same, as well as if you can talk about for next 2, 3 years, do you think India and say LatAm will be the main growth driver?

See, when we sell to Europe, we are selling to companies which are re-exporting from Europe because our molecules are not really registered in Europe. So business for them is more or less flat. For us, major growth is coming from -- more of the developing markets. So West Asia, Latin America and East Asia, these are the ones which are really growing for us.

And you see the same trend for the next 1, 2 years?

Yes.

Sure, sir. My second question is on the product basket which we have. So among the top 10 products, how many of the products do you consider as mature?

Of the top 10. All of them are mature because we have been making them for over 5, 6 years now or even more. Some of the products we are doing for the last 20 years. So almost all of them, I'm sure.

Sure. So my question was sir, so what kind of volume growth do the industry see in these mature products or is it for our company?

Penetration of veterinary health is still very shallow all over the world. So if you look at places like Latin America or Africa or even large parts of Asia, there is still a huge amount of penetration required in terms of primary health available being provided to farm animals. So there's -- we would look at, at least a 20% sort of volume growth every year for our products.

Even for the mature products, obviously, we'll keep introducing new products and the smaller products, the 10 to 20 products will become bigger. But even the base products, you think we can grow like 15% plus?

Last 2 years, we have almost doubled our base products, yes. So they are doing well.

Sure, sir. Final question on the top products competitors. So we know we are like greater than 50% in most of these products. If you can talk about the second or third biggest players, will it be like 10%, 20% kind of market share? Or there are some players who will be like bigger than you?

No, no. For some, there are just 2 or 3 producers. So if we are at 50%, the second one will probably be at about 30%. So the top 3 ones, which you are doing, there are just 3 producers in the market. All 3 Indian companies. There is us, there is Sequent, and there is one more company.

Sure. And because we are backward integrated -- and because if the market is growing, any reason the other companies are not looking at it or say, China is not -- Chinese companies are not looking to enter these products?

I have no clue about whether Chinese are -- they are not there in those that kind of chemistry. So we don't see them with similar products in those. And as to why more companies not coming in, meaning it's an ever-changing landscape. So we can have competition coming up at any point of time.

The next question is from the line of Anupam Agarwal from Lucky Investment Managers.

Yes. Sir, just 2 questions from my side. So I just want to understand in terms of pricing are we -- with respect to China or our local competition, how are we pricing our products to be competitive in the market? I understand we are cost efficient versus the others. But in terms of pricing, how are we placed in the market?

In this market, price product is very open for all buyers because when the buyer sits down, he is going to take offers from all the vendors which he's got. We have to be price competitive at every point of time. And given what prices are prevailing in the market. So it's a price-sensitive market completely, $0.5 and customers can move from one to another.

Right. So let's say, we priced by 5% to 10% discount to the other guys. So we are able to be selling our volumes.

No, no, there is -- prices are normally in the range of 2%, 3%, not 10%. At 10%, we will make money there.

Understood. Understood. Sir, secondly, I just want to understand with respect to global competition. Any sort of duties that China exports are facing in European or U.S. markets or Latin American markets that we are able to gain market share.

I did not understand. What was -- you said China and then you said Latin America. So what was the question?

Any duties on Chinese exports to other countries with respect to any products that we are also present in?

So whether there is a higher duty on Chinese products or lower duty.

Correct.

No, it's, there is no differential duties for China or India.

Got it. Got it, sir. Sir, I just wanted to understand the peak debt that we be confirm with respect to our balance sheet structure right now? Debt to EBITDA or debt equity, if you can give some color there.

Our net worth is now over INR 200 crores. So we can definitely take on a debt of about INR 200 crores.

Thank you. As there no further questions from the participants, I now hand the conference over to Mr. Rishav Das for closing comments.

Yes. Thank you all for joining the Q4 FY '22 earnings call. For any further queries, please get in touch with us at Pareto Capital. Thank you.

Thank you. Please have a great day ahead. Thank you all.

Thank you. On behalf of NGL Fine-Chem Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.