PI Industries Limited (523642) Earnings Call Transcript & Summary

Yes. Good morning, and a very warm welcome to all of you for taking the time out to join us in today's conference call. I think COVID-19 today is on top of our minds these days, which is putting unprecedented challenges to all humankind. Our governments, health care, NGOs, scientists are very bravely fighting this pandemic, and I'm very confident that our country and the rest of the world will overcome this very soon. Across the world, scientists/researchers are working to come out with a sustainable treatment with a vaccine in the quickest manner possible. Taking this opportunity, I would wish you and your families a very safe, healthy transition through these difficult times and wish you all the very best. Now let us look at PI. At PI, I'm very proud to say that our response to COVID-19 was very swiftly and decisively showing organization's resilience and resolve for engagement with key stakeholders to continue with business impact assessment, necessary improvements in the way we handle our appreciation to clearly decide our priorities, et cetera. Our rapid response team involving key leaders are working relentlessly to ensure that the business impact from the global crisis is minimal and we remain in course to achieve the organizational goals. During these difficult times, we proactively worked with governments, local administrations, NGOs in different states to support their fight against this pandemic, whether it was disinfection of large public areas, distribution of PPEs, food, health check camps to the disadvantaged sections of our society or helping local health centers in putting up necessary infra to handle COVID-19. We were always trying to do our bit and our best as a responsible corporate citizen in helping community around us as a part of our sustainable philosophy. Health and safety of our employees has been the utmost importance to us, and we have implemented strict measures in providing all the needed to make all our workplaces very safe for our employees. Wherever possible, we've also mandated our employees to work from home. In fact, we are already discussing work-from-home policies with our employees to make it a permanent feature in function business successes exclusively to adopt as a new normal. One of our key achievements, which I'm very proud to state, is that we've started working in the pharma sector or pharma intermediate sometime in February, to say our teams could have successfully scaled this product in record time with all the restrictions and challenges offered during the COVID lockdown phase, were able to support the pharma customers, were timely supplied with intermediate for a potential COVID-19 drug. And I must say, one is proud about the hard work done by our teams to collectively work and have been able to commercialize the production of such product. Now coming to the performance in 2020, it has been another good year for PI, and we have maintained course for growth, sustainable profits, mainly driven by scale-up in our exports despite several disruptions caused due to COVID-19 pandemic and subsequent lockdowns. Revenue improvement stood at 19% of a blend, and EBITDA grew by 25%, while profit after tax up 11% year-on-year. Our performance could have been better, but the lockdown impacted negative to [indiscernible] revenue of Q4 resulting in partial deferment of our revenue. We commissioned 2 entities during this year. One commercialized 5 products. Inquiries are flowing. And the process scale-up of R&D is also increasing during the year. But 20% new inquiries coming from nonagro segments helping us drive our strategic initiatives. Our research teams are dedicatedly working towards developing the next-generation technologies and chemistries so we can support to build out adjacent verticals with the technological edge in our CSM approach. Our research teams are working towards creating new avenues in these areas and, as a result, will be apparent in the coming years. I'm pleased to share that we successfully developed and scaled up the advanced intermediate amidst the COVID-19. This is a breakthrough for us, and we've already tied up the business with a few large companies based out of Japan and India for supplies starting Q1. In the domestic market, we launched 3 products, including one wheat herbicide Awkira, which has got a good response for the pharma. Product portfolio for domestic market was also optimized during the year. Withdrawal of 4 to 5 EOLC products and label expansions of several existing -- of several products, farm application services were very successfully piloted with 150 spray machines, which has got good response from the farmers. Q4 also marked the formal integration of Isagro operations. At a consolidated level, and I'm glad to share, this business reached a strong growth of 10% in the very first quarter. Supporting the overall momentum, the integration exercise of Isagro was making good progress. We aim to harness existing product portfolio of branded pipeline, launch products, especially in the specialty and biological categories while developing leadership in horticulture segment, with excess specialty in marketing channel, in field forces to complement each other. We are planning to repurpose the association of manufacturing so that we can reduce molecules to our export order book, also keeping up with strategic objectives we are developing in-house capabilities for some of the outsourced intermediates. With these measures, we expect the capacity actually to go up significantly and pick up [indiscernible] robust and [indiscernible]. Merger activities will get completed by Q4 of current year. Our outlook for '21 remains robust, which is shared by new brand introduction in the domestic and expanding operations in exports, we benefit from higher capacity, scale and commercialization for existing molecules and new molecules add to our mix. We are also expecting domestic market to resume growth in the current year given the favorable outlook of agriculture and agri inputs emerging from the prediction of normal monsoon, increased crop acreages, favorable water conservations and water reservoirs, central government packages and stimulus to agriculture in these times. We also remain focused on our progress on strategic initiatives and long-term growth. We secured the approval of shareholders to raise up to INR 20 billion. Our objective remains to judiciously utilizing these funds towards supporting strategic growth opportunities and continue the growth momentum. Due to the prevailing uncertainties in the capital market, we are, therefore, [indiscernible] originally planned in April that we are currently reviewing and consulting with our bankers to decide the timing issues in the near future. This brings me to the end of my remarks, and now I hand it over to our CFO, Subhash Anand, to carry forward the discussion. And Subhash, over to you, and thank you once again to all of you for coming onto this call today.

Thanks, Mayank, and good morning to everyone. I'll share the financial highlights for the quarter and full year ended March 31, 2020. All comparisons are to Q4 of FY '19 and on a consolidated basis. During the quarter under review, we reported 6% growth in revenue to INR 855 crore, driven by 12% growth in export to INR 683 crore. Domestic revenue stood muted at INR 172 crore, primarily on account of deferment of product positioning to Q1 of FY '21, owing to disrupted operations and movement of goods during the lockdown. EBITDA improved by 7% to INR 187 crore, translating to EBITDA margin of 22%. EBITDA performance was a result of favorable product mix, and this was maintained despite higher input costs due to initial COVID-19 impact. Profit after tax stood at INR 111 crore, lower by 12% as compared to same period of last year. Contraction impact was mainly due to increased depreciation during the quarter. Let me also quickly run you through the FY '20 numbers for you. Revenue increased by 19% to INR 3,367 crore, while EBITDA improved by 25% to INR 718 crore. Margin enhanced by 104 basis points to 21%. PAT came in at INR 457 crore at a growth of 11%. In light of strong performance reported by the company, the Board of Directors approved payment of final dividend of 100%, that is INR 1 per equity share of the face value of INR 1 each. Solid performance during the year resulted in 30% increase in operating cash flow, which further strengthened our balance sheet position. Total debt net of cash as of March 31, 2020, stood at INR 241 crore, and debt-to-equity still remained at very low level of 0.15x. During FY '20, we entailed a CapEx of INR 635 crore towards capacity expansion activity at Jambusar SEZ and additional [indiscernible] crore required in acquisition of Isagro Asia. We are in growth phase and continue to emphasize a CapEx of INR 600 crores to fund our strategic initiative in FY '21. Overall, we remain confident of attaining 20%-plus kind of a growth in FY '21, backed by continued healthy demand and assuming that COVID-19 curve will soon normalize. That concludes my opening remarks. I will now request the moderator to open the forum for Q&A. Thank you.

[Operator Instructions] We have our first question from the line of Ritesh Gupta from AMBIT Capital.

Sir, just on the domestic side, we saw a 6% decline on a FY '20 basis and even on 4Q, there was a decline of about 12%. So could you just guide us a bit on the domestic business? What happened there? And what I see in the new verticals or what I see generally is that Osheen, which is a large production for us, also becomes generic going forward. So just on the domestic bet, I know CSM has been pretty fantastic, but I just wanted to kind of check on the domestic side as well.

Okay. Shall I take this? This is Raman. So thanks for the question. So on the domestic side, as you heard from Mayank in his opening remarks, as of -- in the last quarter, one big impact was INR 100 crore of sale, which was planned in March essentially as a preplacement strategy, which is our strategy every year, could not be executed because of the lockdown in the last 10 days. So this primarily is one big impact that you see in terms of the last quarter impact and also on the full year. The second question on Osheen and Osheen going generic, yes, I believe Mayank has a certain view on this, and I kind of reiterate that first and maybe he might chip in later. We do believe that the procedure with which this approval of generic has been granted is something that can be challenged because there have been some inconsistencies in the way this approval has come in. But having said that, we are very, very clear that in India, when we build the brand, life cycle management of the brand and the product becomes an essential part of the long-term strategy, and I'm very happy to say that we do have very, very clear life cycle management approaches and strategies in place, which gives us confidence that the impact, even if the generics do come in, would be minimal, and we have established and we have a track record of doing this. And as you may know, the Nominee also went generic maybe 4, 5 years ago, but we continued to expand the brand and growing the market.

Sure. Sure. And on Nominee Gold, the kind of pricing pressure that, let's say, at least the generics have done, that -- do you think that the pricing erosion is over and probably -- I'm not sure where -- when does the India manufacturing for Nominee Gold start, but could it mean that we could have more flexibility? Or can we be more aggressive there?

Well...

Mayank, do you want to take that...

I didn't get your question. What do you mean? I didn't get your question.

No, sir, just on Nominee Gold as well. So Nominee Gold, I'm not sure if the domestic production has started, but does it give you more flexibility in terms of margin or in terms of your pricing competitiveness of the product? This was my question.

Well, see, honestly, the domestic production has already started. And we -- it gives us flexibility. And clearly, whether that was there or not, but if you see year-on-year, strong exports and our strong marketing capabilities, the company has only increased its market share with 50-plus-odd brands. So hence, it gives us the confidence that we have the formula in place to manage generics and also continue to grow the business of generics, yes?

Sure. Subhash, can you just remind us on the new plant as well? I mean in the last 6 months, what all new CSM plants you've commissioned? And what is the status of the plant which had faced an issue? And when does the new plants come into commissioning in '22?

Well, MPP-9 has started there, and it is kind of in the -- it's now started production. MPP-11 was just started in March, but obviously due to COVID, it got impacted, and we're taking it to full capacity and start up. Really, as you know, new plant start-up takes some time. Thirdly, we were also impacted by at least 15-odd days of production shutdown. So to start a plant back up, it takes another month to really getting that going. And that production plant has now started, and we will start seeing that sometime from this month. We will be getting the capacity to a certain extent, and it will be full steam by the next quarter.

[Operator Instructions] We have next question from the line of Chetan Thacker from ASK Investment Managers.

This is Bharat Shah, not Chetan Thacker. Two questions. One, it was good to see now, finally, some success on the pharmaceutical side. And I would like to know a bit more about it in terms of how things may be expected to work over the period of time? And secondly, on the research pipeline, if some amount of light can be thrown in terms of how things may look over the next 3 to 5 years' time.

Yes, about the pharma, as you've seen that we were looking to work with some of the intermediates. We have tied up a couple of business opportunities and, obviously, the first one, which is commercializing, is going to be the intermediate, which we are working with the Japanese and certain local Indian companies for supply of an intermediate based on a unique technological platform that we've been able to deliver this capability. Obviously, drug is under evaluation and trials right now, but if it meets success, the company is ready to commercially support the demands which may come along maybe after the next couple of quarters. And at the present time, looking at the capacity and optimizing and augmenting our capacity both into commercial production to meet the requirements more for trial and approval for a large-scale manufacturing are already being done. In terms of the R&D, and I'm sure and confident that in the pharma, in the R&D, we're looking at evaluating a host of intermediates, which offer a good opportunity for the Indian market segment and the global segment, given the global opportunity arising out of the China challenge and are augmented by our technological capabilities and process capabilities that we have and be able to develop unique processes which will help us give a unique position in some of those, and those have been identified, and we'll be working on that over the next 3 to 4 years and moving ahead with our pharma strategy. Regarding the R&D, the company has been developed many opportunities. I would say that in this year, we have filed about 22-odd patents, and we'll continue to develop our R&D ability, and we do see a very positive outcome. And the outcome of R&D deliverables have been very positive and aggressive in this year, and we are confident that in the next 3 to 4 years, we'll be positioned to capitalize in a very large way of all the work which has been put in R&D over the last decade.

And will it be fair to say in the next 3 to 4 years' time, pharmaceutical side of the business would be a strong double-digit kind of percentage of the total business?

Well, the objective is to cross double digit as a part of the business. Yes.

And you believe it is likely?

Well, we are -- as you know, we've just started, and we're confident, as we've been talking about first entering it. So as you see that we've entered it. Obviously, we've made plans, which will ensure that we can get there and pretty confident of seeing how we can do it. But obviously, there are challenges when you're getting into a new play. And -- but I'm sure and confident that we have the requisite competence and capability to handle those challenges and deliver our objectives to what we plan.

We have next question from the line of Varshit Shah from Emkay Global.

Mayankji and Anandji, congratulations for a great quarter despite the challenges. My question is a sort of carryover from the previous question on the pharma side. Sir, what is the broad macro strategy in terms of winning new business because we already have existing players in some form. Competition is already more matured compared to our core business in the pharma segment. So what is our USP when we go to the client? Is it process innovation and leading to cost savings for the client? Or is it something else? I'm just trying to understand. Or is it that we are...

Let me answer this in a way that you know very well that I don't answer my strategies out very openly, which I hold very close to our chest. Clearly, we have unique capabilities in some of the areas, which we want to use and leverage to put into our competent areas of what we are challenging in the pharma space. That's really where we are going. Yes?

Sure. Sure, sir, I'll take that. And sir, secondly...

And it's more driven by our competence in process and technology.

Understood. That's helpful. Sir, secondly, on the CapEx. So can you just split that INR 600 crore CapEx into how much for Isagro and how much of PI? Is it possible?

Subhash, can you go for that, please?

Okay. In fact, majority of the CapEx is for PI. Yes, there is some CapEx which we are putting on Isagro to refurbish and revamp Isagro plants to our level. But most of that CapEx is a growth CapEx and the kind of the growth we are looking. So this is the CapEx which we have planned for that.

Sure. Sure, sir. And if I could squeeze in that last one. So in the domestic business, I think you have done some product rationalization and some tail cutting. So is that also one of the reasons for improvement in margins, the overall EBITDA level? Is that the right way to read it? Or is it coming from the core CSM business?

Yes, your reading is correct. In fact, some of these end-of-life cycle products have been withdrawn, which were having a lower margin. So therefore, this has also helped improve the overall margins of domestic segment. So yes, you are right in your reading.

So our core ROCs actually would have improved. Although your revenue might look slightly lower, but comfortably it has improved actually.

Yes. Yes, you are right.

We have next question from the line of Kunal Mehta from Vallum Capital.

My question is for Subhash sir. Sir, when we look at your business on a macro level, should we see our sector and PI, especially CSM manufacturers in India, where -- of which PI is a very important component, as a derivative of the global agro cycle? I mean -- or should we -- or would you say that after having this huge order book and enormous components built into ourselves, we would be able to delink from the cyclicality of the agro cycle? So how should we see? So what I mean is that -- so are we looking at -- are we at the growth phase of the cycle and then for a few years, we may -- the volumes may limit themselves? So how should we see this from a 5-year perspective?

I didn't get the question very clearly. If we just -- no, what are you exactly looking at? Just let me get that question clearly.

Sure, sir. So my -- the question I wanted to understand was that given the way -- given the place where the global agro cycle is, we are at the absolute trough of the global agro cycle, and we are going to see a few years of very good growth across the industry for the next few years. But after that, as we have seen in the past, after 3, 4 years of good growth, we see a phase where volumes are fairly stagnant for the next 2 or 3, 4 years, considering the cyclicality. So -- but when you look at your PI, would you say that now we have become fairly diverse enough to delink ourselves from the cyclicality and have a consistent growth across the years?

Absolutely. See, we've been demonstrating that in the CSM business over the years, correct, and we will continue to do that and, therefore, diversification -- while capturing growth and diversification into other areas and also ensuring that we capture the right products in the value chain. We've continued to demonstrate, and we'll continue to demonstrate the growth rate because our objective is very clear to grow. The growth is life as we've identified as a part of the CSM business. Yes.

Sure, sir. And sir, second question I have is that when you typically commercialize a molecule, for how many years have you been working with a partner to get to that stage?

Well, typically, it is 2 to 3 years before you get to the stage. In certain cases, it can mean 4 to 5 years. I mean, it gets commercialized, but obviously, it takes time to scale up, specifically when you're dealing with a cycle. But once you get it, the consistency of growth is something which you experience.

And sir, just a follow-up on that. The set of intermediates which you manufacture for our partners, those are used in the new-generation products which they launch, which are patented, am I correct?

Which segment are you talking about here, in agri?

I'm sorry, sir, can you repeat it?

Are you asking this for the agri segment?

Yes, agri segment, the export segment, CSM business.

The agri segment -- no -- obviously, in the agri export segment, we are doing both intermediates and AIs, and both of them are, yes, as a part of the new innovative molecule pipeline.

We have next question from the line of Surya Patra from PhillipCapital.

Just 2 questions. One is that, sir, did you see any kind of incremental export opportunity in the post-COVID scenario either for your agri or other areas?

No, sure, there is a potential, which we do see is going to come. But I think right now, the world is settling and dealing with the present short-term challenges and making sure they have enough capacities and making the supply chains are met out. But looking at the way the strategic directions are going, very clearly, I do see new opportunities would emerge, specifically for the Indian market.

Okay. So while continuing on the same question, sir, you mentioned that, okay, while pharma is a kind of a potential opportunity, now you are clearly seeing that, so can you just elaborate a bit on the -- see, there are molecules which are in the developmental stage that you are working with few of the partners. Also, simultaneously, you have mentioned that you are working on a few of the intermediates for the local manufacturers. So are you open for generic intermediate manufacturing as well? Hello?

Hello?

Hello? Can you hear me, sir?

Yes. So again, if we were to look at the generic or nongeneric, again, it will depend on the value offer that we can bring to our customer. And if we have something unique in terms of processor capabilities, why not. As far as it is not -- it is a -- as you would appreciate our business model is that of a noncompete to support and work with our -- and we work in a partnership model with our global innovators. So we will obviously keep that in mind before we look at any of these strategies.

Okay. And on the CapEx front, as you guided, about INR 650-odd crore kind of CapEx for the current year. So -- or even following year, let's say, similar CapEx, even if it continues, for the -- how much would be for agri-related activities? And what would be the amount that would go for our new initiatives? That, and simultaneously, sir, if you can talk about something on the inorganic growth aspect that you have mentioned in your presentation?

Subhash, do you want to take that?

Rajnish...

Yes. So these INR 600-odd crore CapEx that we are guiding, this is mainly for our organic growth wherein we have clearly identified the capacity increase opportunities, and we have to increase or expand capacity. We have to also spend in, as Subhash was earlier explaining, repurposing some of these existing facilities in Isagro. So INR 600-odd crore is basically towards organic growth opportunities where we have a significant amount of visibility. On the other hand, we are also evaluating certain inorganic growth opportunities. As you would know before COVID disruption, we were already evaluating these opportunities, and we were also working on equity raise through QIP. But then, yes, of course, this whole process got disrupted due to COVID-19 situation. We are currently reviewing this whole process. Obviously, there were different priorities at our end and at other companies' end. But now as the things are normalizing, travel restrictions are also being taken out, we are again reviewing, and this whole process is again restarting. We have internal discussions planned later this week, early next week on the timing of this equity raise and alongside, we will also decide on some of these inorganic opportunities that we are evaluating. But all this is in process as of now.

Okay. This inorganic would be in the agri side or nonagri, sir, if you just last...

This would be broadly in the adjacencies, not so much so in agri side. Part of it could be in enhancement of technologies or derisking some of these operations, which are concentrated right now in India and apart from this also into adjacencies like into pharma or other specialty chemical areas.

We have next question from the line of Abhijit Akella from IIFL.

First one is for Subhashji. If it's -- it seems like the Isagro revenue contribution for the quarter is about INR 60 crores, if I'm not mistaken. Is it possible to just give us a breakdown of how much of that is in the domestic business and how much is exports?

Yes. Just a minute, I'll just give you that number. That INR 60 crore breakup, INR 33 crore come from domestic business and rest from export business -- or from export. Hello?

Got it, sir. Yes. Got it. And second was regarding your 20% growth guidance for FY '21, is this inclusive of the revenue from Isagro? Or is this purely organic growth we are talking about and Isagro is over and above on top of this?

Rajnish?

All this is inclusive of Isagro and, obviously, while we see a lot of growth opportunities both at Isagro side and also the other export and domestic side, but given the current uncertainties around COVID-19, we are a little cautious in guiding. But yes, I mean, we are confident that there should be certainly 20%-plus kind of growth that we should be achieving in this year.

Okay. Understood, sir. And just one last quick thing, and I'll come back in the queue. The presentation does talk about certain mark-to-market losses on the balance sheet because of INR depreciation. So if you could just quantify that and tell us how exactly these have been treated on the balance sheet?

Abhijit, basically, since we do hedge our FX for the next couple of years, you would have read in our balance sheet also, so every quarter and -- or actually, every month end we need to do a mark-to-market to our forward contract. And since dollar depreciated in the last few months pretty rapidly, so we do have this mark-to-market losses, which go and get captured in OCI, which is a part of balance sheet and net worth, but it's only a notional loss. Over a period of time, it comes back and becomes a normal part of revenue. Because at that -- over a period of time, dollar do appreciate again, and it gets neutralized. And what we have booked forward for 1 year, 2 years, finally, sales or revenue gets booked into the same rate. So it's a temporary difference, which comes and sit in balance sheet, gets phased out over a period of time.

We have next question from the line of Probal Sen from Centrum Broking.

Sir, on the pharma intermediate that you spoke about, which you have just started work on with the Japanese company, is it too early to sort of get a sense that if the clearances come through -- as you said, you're already rapidly preparing for even commercialization over the next couple of quarters, is it possible to get a sense of what revenue potential or what is the size of this opportunity as of now? Or is it too early days as of now, sir?

So one, it's too early to respond on this. Obviously, this is a standard start up. You know when I've made sizable opportunities. As the things convert, they could become of a decent size, given the context, the size [indiscernible] business is not going to be a very large portfolio of that.

Okay, okay, okay. And sir, the other question was, in terms of the CSM order book today, forgive me if you've answered this before, is it possible to get a sense of which geography or which area the order book is sort of dominating? Is it possible to get a little bit more detail of the $1.5 billion book that you have, just a composition of that, if you can share any details?

Well, I don't have the details on the hand and, frankly, we don't share those details, which reveal our strategies and nature of the discussion resulting with our customer.

And geographical breakup is also not very relevant because what happens that the product is supplied to certain countries, and these countries are selling -- supplying these products across the world. So frankly speaking, geographical breakup is also not very relevant or meaningful in that sense.

Got it, sir. One last question, if I may. In terms of the overall revenue guidance, is it possible to get what your assessment is in terms of the domestic business picking up in terms of growth? Will it be more than 20% or slightly lower, which will be end up by CSM? Would it be possible for you to share your assessment today of the domestic business?

The current assessment is certainly, yes, I mean, we see equally good opportunities of growing at this pace, 20% plus in both the areas, in domestic as well as export. Even in domestic, as you would also be reading, there is a very positive commentary around the monsoon, around the acreages and around the water reservoir. So we see good opportunity to kind of, again, bounce back to this kind of growth in domestic as well.

We have next question from the line of Vishnu Agarwal from Spark Capital.

This is Vishnu Kumar from Spark Capital. It's heartening to know that multiple levers we have for a growth over the next couple of years. Specifically on pharma, at what point in time will we be deploying a large capital, let's say, INR 300 to INR 500 crore range? Would it be like 2 years from now, 3 years from now? Any color on that?

Well, we are already working on this. So there are 2 levers. One is our organic lever where, as Mayank explained earlier, we are already working in piloted scale heading towards commercialization of some of these technology-driven intermediates for COVID and some other important drugs. So this is all driven in-house, okay? And we have been working on some of these things for the last few years and now these things are fructifying. On the other hand, we are also evaluating currently very actively some of these inorganic opportunities so that we can short-path this whole process and get to the next level sooner. So yes, I mean, we are working on both these levers and both these opportunities, organic and inorganic, to kind of speed up and expedite this whole process in this particular segment.

Is it fair to say that at least in the next couple of years, our pharma piece would at least contribute something like 15%, 20%, say, 3 years out or probably would be expected to be slightly more?

Yes, it should be -- I mean we are confident that it should be in double digits now, whether it is 11%, 12% or 15%, 20% is everyone's guess, but yes, our objective -- internal objective is to make it meaningful in the next few years.

Got it, sir. And on the fundraise, you just mentioned that you're working with the bankers, but rough time lines and roughly if you could tell us what is the outer bound that you are probably thinking that you will get things completed by and probably including the acquisitions you're looking at?

Well, acquisition, obviously, will depend on the -- I mean how much we can expedite this whole evaluation process because that is not entirely in our hands because a lot of things are involved there. And current situation is also not greatly helping. But as far as fundraise is concerned, we are -- as I said earlier, we are internally discussing and also consulting bankers. And I hope in the next 1, 1.5 months, we should be coming out with a clear answer on that.

Got it, sir. One final question, in terms of your order book that you're currently having, any conversations that you're having on the agro side any slowdown? In the next 6 months, are customers very -- are customers asking for more? Or is there any slight delay in the schedule?

Well, we have so far got very positive commentary on demand side from our global customers. And that is something that we had assessed immediately post COVID or start of COVID scenario. So far, I mean, the commentary is quite positive. And we have not heard of any postponement and deferment on some of these orders that we already have in hand.

We have next question from the line of Andrey P from Cogito Advisors.

Yes, I wanted to ask 2 related questions. In your presentation, you have said that you will explore adjacencies as far as your export market was concerned. Could you just tell us about what these adjacencies could mean apart from the pharma opportunity? That was one. And the second is that given your growth in the exports business, at what stage are we in the sense that are we mainly growing by increasing orders from our existing customers? Or is it a significant growth from new customers? And which of these 2 areas of growth are more profitable to us? So if you could look a little forward, how should we look at our export growth, both in terms of the nature of growth and the profitability of this growth?

Well, when you look at the nature of the growth, it's coming from a mixed bag, yes, which is based of, obviously, new and existing customers, as you will know. The customer base is very small in the agri business. So obviously, NPI is working with most of the customers. It's coming from a portfolio of new products and a mix of the existing products. And I mean, as we said, we're indicatively continuing to grow, and growth will give us some operating margins. And I would say, profitability would continue to be at the level that we are looking at.

Okay. And about these adjacencies that we spoke about?

Pardon?

The adjacencies. You've mentioned that you will...

It's a different segment with a different customer base, yes? And obviously, the target is to look at this within that -- within or above that value chain, yes?

So what kind of adjacencies are we talking about?

So these are in various specialty chemical segments like personal care, imaging chemicals, electronic chemicals, and pharma we have already discussed. So there are different segments where we can replicate this custom synthesis manufacturing model driven by our technologies.

We have next question from the line of Rohan Gupta from Edelweiss.

Sir, first question is on -- since we have seen the delays in our QIP money raise and before the COVID environment, it was anyhow that you were in an urgent need of probably fund to grow the business, and I think that you were anyhow having something ready in organic and inorganic growth plan. So I just want to understand that almost 6 months likely to be delayed and we don't know how the environment will pan out, as you also mentioned. Do you see that it has derailed some way the growth strategy, which we were working almost 6 to 8 months back? And now -- and are there any major changes in the growth strategy because of the COVID environment? That's what I want to understand.

Yes. So certainly, there is no derailment. We are very much on course on our strategic path that we had laid for ourselves 6 months back, okay? Yes, there is some delay -- deferment because of this COVID disruption both on evaluation process of these inorganics because of different priorities on the part of all these companies and also travel restrictions. And therefore, obviously, the progress what should have happened in the last couple of months has not happened. And now again, things are resuming, the process is resuming. And at the same time, on equity raise point also, I mean, we were not kind of that much in hurry. Yes, we had an original plan to do that somewhere in April, but because of capital market uncertainties and other things, we decided to kind of postpone this. And as I said earlier, we are again reviewing this in next couple of weeks, and we'll come out with clear plan on timing aspect of it. But we are very much on course to our strategic path. There is no change.

Okay. Sir, second question is on -- are there any low-hanging fruits on which we want to take the benefit because of the China problem? Or do you see that any consumer behavior changes happening after COVID event has happened and how the world is showing anger towards China? Many companies still have a sourcing partner from China. So do you see that there are any near-term low-hanging opportunities which you are experiencing or customers' inquiries are showing that they are in desperate need to shift their sourcing base from China or increase the sourcing base from you or any other country? Are you seeing any change in customer behavior?

Yes. So certainly, I mean, not only, I would say, COVID-19 impact, but otherwise also for the last -- I would say, for the last 1, 1.5 years, there is some sort of reshoring happening from China. Most of these global companies are very keen to kind of build their alternatives in other Asian or American companies in order to get over these uncertainties which are prevailing in Chinese chemical markets. So yes, as we have also guided in the past that the inquiry flow has significantly improved, increased in our case as well, but as you know, we have our own principles of getting into certain set of products only, not getting into generics or commodities or these kind of products. So given that, still, we have got a decent number of inquiries in the last 1, 1.5 years. The pipeline in R&D has also increased quite substantially. But this process of custom synthesis manufacturing is such that there is nothing short term here. You will have to spend good enough time and process, scale-ups and then commercialization. And in any case, in our business model, we do not sit on idle capacities. We kind of assure the business first and then invest in capacities. So in that sense, yes, we have got quite uptick in our inquiries and R&D pipeline. And I'm sure this is going to significantly help in further strengthening our visibility for the next 3, 5 years and building a good business pipeline order book for these years. But yes, certainly, there is a change because of whether you call it tariff war, uncertainties in China, environment, safety incidences and then on top of it now COVID. So there is certainly reshoring happening.

We have next question from the line of Aditya Jhawar from Investec.

Sir, I just wanted to understand in the domestic business, what is the kind of product concentration that we've had, in the sense what could be the contribution of the top 5 molecules in our revenue and how that change over a period of time? The question is because even in the past also we have seen that certain products like Nominee Gold impacted our overall performance in Osheen. Earlier Corteva was still in competition with Osheen, then -- now Osheen is becoming generic. So what could be -- if you do the benchmarking versus peers, how do you see PI stack up in terms of concentration?

Well, your voice was absolutely unclear. I don't know whether...

So let me see if I understood your question. Your question is, what is our portfolio strategy, if I were to rephrase it, to make sure that we are not betting on a few big brands, and if they come under generic, then we are under pressure. Is that the question?

Yes. So -- yes, actually the question was that what could be the contribution of the top 5 molecules in the domestic business? Because in the past, we have seen lumpiness in sales because of few molecules. Earlier it was Nominee Gold, now it is Osheen. So Osheen saw a significant increase in competition from Corteva in 2018 and now that is also scaling up. Now we're talking about Osheen becoming generic. So if you do a benchmarking of concentration with peers...

So any crop protection business that you take, there are about 5 or 6 brands, which would contribute to upwards of 50% to 60% of the sale and I think ours is no different. But what is important is, do we have a very clear portfolio of freshness -- yes, so the question really for us is, do we have a portfolio of freshness strategy? And to that, I think we are consistently launching new products. Last year, we launched Awkira, the wheat herbicide, which we expect in the next 3, 4 years to be another leading brand. And every year for the next 2, 3 years, we have at least 2 or 3 new products that are being launched, and we are at this time tracking about portfolio freshness around 30%, 35%, which means products launched in the last 3, 4 years are contributing upwards of 30%, 35% of our sales.

Okay. That's very helpful. Just -- the next question is just a clarification. The pharma -- the shipment that you talked about in the presentation, both for Japan and India, both are subject to approval, the trial getting tested. Then it might commercialize in Q2 and Q3. Is that correct?

No. These are not subject to approval, but these businesses are already tied up at a relatively lower scale. And what we are saying that once these products are also commercially launched in other countries because right now, they have been launched in only a few countries. But once they are launched in some other countries as well, which is what is very much expected, then these volumes will significantly increase.

Okay. Okay. That's very helpful, Sarnaji. And congrats [indiscernible] pharma. All the best.

Thank you.

We have next question from the line of Chintan Modi from Haitong Securities.

On the domestic agrichem business side, have you taken any price hikes for the upcoming Kharif season?

Yes. Yes.

How much would that be if you put on an average portfolio level?

I mean, Subhash, do we discuss that at this point?

No. In fact, we have taken price increase. It depends product to product. Yes, it's not universal across all the products we have taken. So we'll not quantify at this point of time being competitive, but yes, price increase has been taken, I call it.

Okay. Sure. And sir, last 2, 3 years, we have seen huge raw material price increases and volatility on the import side. Do you think that this volatility is -- has kind of stabilized now and we could see margin expansion environment instead?

I don't believe there is, at least from a domestic business perspective, the volatility and supply-demand gaps aren't fully stabilized. We will come to know more in the next 4 to 6 weeks about that.

We have next question from the line of Chirag Dagli from HDFC Mutual Funds.

Sir, versus, say, 5 years back, on a similar India sales, what -- how would our margins for the India business have behaved? Just some broad direction would help, sir.

Rajnish?

We have sustained, maintained, in fact, we have only marginally improved the margin by rationalizing end-of-life cycle products and all.

Understood, sir. So margins would have improved marginally. All right. And sir, this pharma intermediate that you're supplying, did it go through any regulatory inspection by the authorities? Did our plans go through any regulatory...

Since we are making only intermediate, so our manufacturing sites have not undergone any government inspections or anything.

Okay, sir. That is helpful. And just a last clarification, sir. This 20% sales growth that we have, this is in INR terms, sir?

Yes, obviously. Because we report our revenues in INR, so it's certainly in INR.

Sir, because there is a significant tailwind in the currency depreciation, right? So are you building in some buffer given the uncertainties, maybe it could be higher?

Well, that is anybody's guess, whether we have reached to the bottom or not. So we do not speculate on that at all, frankly. And if that -- suppose if that happens, this will only help us improve on these numbers. But when we make these kind of assessment and guide, we consider the normal current situation on currency and all other things.

We have next question from the line of [ Ashish Thakkar ] from Motilal Oswal AMC.

Sir, given the trend -- given the business mix, where we are going -- heading towards, like more of CSM, and within CSM also more of -- and within advance CMA, is there a...

Your voice is absolutely unclear.

Sir, I'm sorry to interrupt, your voice is not very clear. Please use the handset.

Am I audible now?

Yes, very much.

Yes. So given the inherent change in the business mix going ahead, so more towards CSM, pharma, all those things, is there a case wherein there could be gross margin expansion, and we can eventually see -- even on the EBITDA margin side, we can see expansion in the coming years?

Well, there would certainly be opportunities, but at the same time, you'll also appreciate that we'll be making new investments, new plant commissioning, and all these factors, at least in the initial phase, have not so positive impact on the margins and all. So therefore, I mean, to be on a safer side, we will say that we will be able to sustain these current margins. However, there would certainly be opportunities to improve them further by changing the product mix or favorably changing the product mix.

Okay. Fair enough. That's helpful. Sir, like apart from, like, on the chemistry side, so we are there in bromine already. And of lately, we were also wanting to work on fluorine side of the chemistry. So if you could help us understand how far we are from starting our first commercial fluorine contract or -- if you could help us understand.

Well, we are not working on building blocks like fluorine or some other building blocks that you mentioned here. Our more focus is towards process technologies and high value add into these processes and some of these technologies and value-add opportunities. Obviously, we'll not be able to share and talk too much about it on these calls. But our more focus is on value-added process technologies and not so much on building blocks.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you.

Yes. So thank you, everybody. We really appreciate you coming on this call. And once again, from the PI management, Mayank Singhal and team, we wish you guys a happy and safe year, days ahead in these very challenging times. And all the very best. Thank you, once again.

Thank you.

Thank you. Bye-bye.

Thank you, gentlemen. Thank you, sir. Ladies and gentlemen, on behalf of PI Industries Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.