PI Industries Limited (523642) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '21 Earnings Conference Call of PI Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries' Q4 and FY '21 Earnings Conference Call. Today, we are joined by senior members of the management team, including: Mr. Mayank Singhal, Executive Vice Chairman and Managing Director; Dr. Raman Ramachandran, Managing Director and CEO; Mr. Rajnish Sarna, Executive Director; and Mr. Rajiv Batra, Chief Financial Officer. We will begin the call with key perspectives for Mr. Singhal. Thereafter, we will have Mr. Batra sharing his views on the financial performance of the company. After that, the forum will be open for a question-and-answer session. Before we begin, I would like to underline that certain statements made on the conference call today may be forward-looking in nature. And the disclaimer to this effect has been included in the investor presentation shared with you earlier and also available on stock exchange website. I would now like to request Mr. Singhal to share his perspectives with you. Thank you, and over to you, sir.

Yes. Good afternoon, everyone, and thank you for joining us on the PI annual call. I hope all of you and your families are keeping safe and doing well during this pandemic. As you have seen, we are witnessing a very challenging time with the surge of the COVID-19 second wave, and our endeavor has been to maintain the momentum of the business and align with our objectives. We're doing our best to whatever measures and initiatives we can take to help those suffering and are in need. Now I take pride in sharing the company has performed and reported a robust set of numbers with consistency for 2021. During Q4, the revenue has increased by 40%, EBITDA improved by 22% and the PAT reported gain of 62%. Now speaking of the full year, our revenue has risen by 36%, EBITDA has been announced by 41% and PAT stood at 62% higher than relative to the previous year. I here must complement the entire PI team for their excellent effort and results, which achieved the performance milestones of the company despite the operational difficulties and challenges. The agrochemicals have demonstrated demand momentum throughout the past few quarters. And those were the [indiscernible] essential products the world over. The broader speciality chemical industry has also reported attractive trends as the large markets of China and the U.S. restore the scale-up of economies, activities across numerous end-use industries and [indiscernible] automobile and construction. While the global crop protection industry evolves in line with changing crop mixes, [indiscernible] upcoming and [indiscernible] regulations and expanding population, the demand [indiscernible] across the world. Evolving economical ways to up the agriculture deal will be critical. With the help of the brands, research and next-gen technologies, the global ag chem industry is gearing up for the challenge. Here, we extend the part with the commitment to put IP first. With vast experience in science and ag chem, international manufacturing and research, we deeply engage with our partners in innovation across the value chain with long-term objectives. The market for crop protection chemicals in India is also expected to expand at a compounding 8% to 10% between the years '20 to '25. And here, we continue to focus on developing products of high-potential brands in the domestic arena. With India, our brand agri-input business has benefited with consistent farm extension services in our [indiscernible] driven brands, extended the effect of value across the key crop regions. For instance, the launch of AWKIRA has fared extremely well. Further, both Shield, a fungicide, and Londax Power, a rice herbicide, that launched in '21 was successfully accepted in the market. Our very dedicated effort in training and educating the farmers in operating the right usage and techniques, the experience and expertise of [indiscernible] is employed to drive [indiscernible]. Our newly acquired Isagro, which is now called Jivagro, has also been exceeding well in the consolidated reach in horticulture segment. With a 25% growth, it contributes well in our overall growth in the domestic market. On the export front, the past year has been -- seen an accelerating development in the pipeline of molecules by us. Having announced our year-on-year rate of commercialization of the molecules, we've devoted to maintaining that momentum. In '21, we have come in with 5 new molecules for CSM export, another 5 to 6 at various stages of development to be commercialized in the coming year. We're seeing higher levels of inquiries on others, giving us a position to report having a trajectory of profit -- of performance in line with our present [indiscernible] capacities. The combined benefits of the two entities in FY '21 will become apparent during the course of the year. We expect another entity to be added in the coming year plus [indiscernible] capacities. The additional augmenting capacity utilization of the Isagro acquired facilities would allow us to pursue higher numbers of commercialization. At the same time, our run rate of shipments from the existing molecules is growing. The growth visibility remains robust. Also, we are very conscious about the ongoing COVID-19 challenges and potential risks and are a little cautious. On the domestic side, the target of rice production for this kharif has been slightly higher at 104.3 million metric tons relative to the previous year. Cotton and soya are expected to see increase in acreage and farmers benefiting from higher price over last year. We look forward, looking at a very attractive launch of [indiscernible] and the new slate of brands in the current period. We have a target of introducing 5 new products this year, strengthening rice, cotton and horticulture portfolio. In keeping our leadership in the [indiscernible] advanced solutions, many products will open [indiscernible] for productivity and higher yields. The integration and management of the specialty horticulture portfolio is well underway. In subsequent seasons, we'll see the effect of these strategies. [indiscernible] are also in place [indiscernible] technology in augmenting [indiscernible] first and managing customers. PI continues to see excellent process technology development efforts. The dedicated teams are propagating new technology such as chemistries and they are gearing up to build new platforms for growth. Given the forecast of number of monsoons [indiscernible] in the agri economy, one can expect [indiscernible] and healthy trends to continue in the coming quarter. Timetable for commercialization of new molecules [indiscernible] as well as [indiscernible] help the situation in setting the performance momentum. On our plans for diversification through inorganic approaches, [indiscernible] our progress surely got impacted over the last couple of months with the COVID-19 second wave surge, but with our process is progressing and are advancing [indiscernible] of select pharma assets. I would now like to conclude. And we'll hear from our current CFO, Mr. Rajiv Batra, who will share the perspective on the financial metrics and progress made. Thank you once again. Over to you, Rajiv. Thank you.

Thank you, Mayank. Good afternoon, and thank you, everyone, for joining the call today. I will share the financial performance of quarter 4 and FY '21. All comparisons are on a year-on-year basis and on a consolidated basis. For quarter 4, we reported encouraging performance with, like Mayank said, revenue growth of 40% at INR 1,197 crores, driven by 47% gains in our CSM exports at INR 1,006 crores, which has been led by handy volume increments in our key molecules. This was supported by an 11% expansion in our domestic business of INR 191 crores, which is very much in line with our business plans. Isagro demonstrated robust revenue growth of 51% in this quarter. Moving to profitability. EBITDA improved by 22% to INR 227 crores, which is in line with the higher revenue run rate, and margins grew at 19%. Moderation in EBITDA was on account of lower gross margins, primarily due to two factors. One is a changed product mix in the quarter as well as reduction in the MEIS benefit, which is the export benefits, which the policy now changed. Profit after tax came in at INR 180 crores, higher by 62%, benefiting from operationalization of the new SEZ and reduced effective tax rates. Let me also cover the annual performance for FY '21. Blended revenues enhanced by 36%, supported by 35% gains in CSM exports and 39% improvement in the domestic business. EBITDA grew 41%, offsetting the margins by 22%, higher by 90 bps. PAT is higher by 62% at INR 738 crores. Based on healthy operating performance with the year, our balance sheet has further strengthened. We witnessed significant improvement in free cash flows to the tune of INR 303 crores. Gross cash flows are in excess of INR 900 crores. And better working capital management clearly played a major role in this. Net worth almost doubled over the last year due to higher operating profits and the fund which we raised via the QIP. Inventory levels increased in line with our expected growth trends as well as some proactive safety stocks that we plan to ensure business continuity amid the COVID scenario. Total CapEx in FY '21 was INR 459 crores. Order book position continued to stay strong at $1.5 billion with high-visibility growth for the next couple of years. With milestone stellar performance during this fiscal, the Board of Directors recommended a final dividend of 200%, which is INR 2 per share. This, in addition to the interim dividend of INR 3 that was already declared in FY '21, makes a total dividend of INR 5 per share. This concludes my opening remarks. Now I request the moderator to open the forum for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec Capital.

A few things. Will it be possible to break the PI revenue between molecules, which is less than 2 years old, between 2 to 5 years and over 10 years? So the question here is that your order book that has seemed to give us clear indications on the growth trajectory. If you are able to break -- dissect the PI revenue into different buckets according to their age, it will be quite helpful.

So obviously, this won't be possible on this call. But frankly, I was also not very clear, we were [indiscernible] breaking the revenue -- current revenue as for the molecule life and linking it to the order book. So just to explain to you that this order book consists of many of the existing products but also includes some of the products which are in the launching process or which may also launch in the near future. So I'm not sure how this analysis will help in that aspect. But happy to do that -- this question offline and understand you.

Sure. Sir, the second question is that this last year, we commercialized 5 molecules. This year, we plan to commercialize 3 molecules. Both of them, put together, represents almost 30%, 35% of the molecules that are already commercialized. So as we see the ramp-up of these molecules, the revenue growth should accelerate. On the contrary, if these molecules are replacing some of the old molecules, probably that is the reason that order book hasn't changed materially. If you can shed some light in terms of your top line growth guidance of about 15% but significantly lower as compared to last year [indiscernible]. So how conservative do we built on that? And what about the molecule commercialization pipeline that I just alluded to?

I would say your voice was breaking in the last part of your question. So frankly, I'm not very clear on your question. So if you can please repeat the last part of your question.

So just as we're adding almost 35% of existing molecules getting commercialized and then in last year, we added and something we add in '22, but eventually means that revenue momentum and the order book accretion should be meaningfully better unless and until we are replacing a large part of the new molecules and the existing molecule are getting replaced. So can you can help us understand this?

Yes, yes, yes. I understood. So there are 2, 3 parts to this question. One is that you're right that we have commercialized 4, 5 products last year. This year also, we are targeting to commercialize 4, 5 products. Now the first thing is that not necessary -- that not necessarily that all products, we have created an asset or a new plant and therefore we have a long-term, 5-, 7-, 10-year contracts for each one of them. No, it is not right because some of these products are sitting in our existing plants, okay, white spaces. And there, the approach -- obviously, the desire is to have a longer-term contract, but then you need to make a tradeoff between long-term contracts and your flexibility on commercial terms and all. And therefore, the approach from our side always is that if you are putting steel on ground, certainly we would like to have a long-term contract, 5-, 7-, 10-year contracts. But when we are not putting steel on ground and we are sitting some of these products in our existing plants in white spaces, there -- again, there is no general formula, but we generally want to keep flexibility -- commercial flexibility, pricing flexibility with us so that we can try and fit those molecules according to our wish, depending on what is coming out of pipeline next and whether and how those molecules may be much more beneficial in long term and therefore not ending up committing our capacity for long term, okay? So in short, these 5, 7, 10 molecules in 2 to 3 years doesn't mean that we have ended up in -- or we have entered into 10 contracts for 5, 7 years, and therefore that should add to the order book position. That is not the right assumption at our end. There are a couple of products there, certainly we have gotten to long-term contracts. But since we are also on the other side, continuing more than 30%, 35% growth and the order book is depleting with that growth, the addition of these 2 products and their contracts has not reflected that much increase in order book. But yes, there are additional contracts, which are getting entered. But obviously, it has not reflected as such in the increase in order book. I hope this answers your question.

Yes. Yes, absolutely, sir Rajnish. Sir, the next question is, on the margin front, we understand that the MEIS had a -- possibly an impact of about, say, 200 basis points on a Y-o-Y gross margin contraction. But you alluded to one point of unfavorable product mix. If you can help us understand what this unfavorable mix is about? And is it -- will the mix remain the way it is going ahead or you expect it to reverse?

Okay, okay. No, this is a valid question and, in fact, I'm sure that many of my friends will have this question. So I'm trying to kind of give a comprehensive response and then also I'll request Rajiv to add if I miss something, okay? Now on gross margin front, fourth quarter, if we are talking, there is some 4.7%, 4.8% reduction. And it is primarily coming -- we have done this. You can imagine, we have done this detailed assessment internally during our internal review and meeting. So primarily, this is coming from these 3, 4 reasons. One primary reason is the product mix because, as you can imagine, that every quarter and this being a seasonal -- particularly the domestic business is a seasonal business, every quarter or every season has its own product profile or product portfolio requirement. And therefore, close to 1.25% or 1.3% is coming from product mix, where the product mix, given the current cost and season and other dynamics is, in fact -- I'll request others to please go on mute so that -- because there is a lot of disturbance in that. So 1.25%, 1.3% is coming from the change in product mix. And you will also appreciate that with the consolidation of now Isagro business with PI, with Isagro -- with Isagro product portfolio relatively lower margin because of their nature, this also is part of this impact that I'm talking. The second impact has come from MEIS, which has been explained. And yes, the MEIS in our industry is close to 2%. But there was a translated impact, given the production, nature of product. So I think close to 1.5%, 1.6% is coming from there, okay? Now the MEIS is something that everyone knows is government policy change. I understand that they are working on finding or working out some other kind of benefits for the exporters. But having said so, long-term perspective on this from our side is that, obviously, as we will negotiate the new year contracts and new terms in pricing and everything, we would certainly want to pass on the -- whatever impact on this account is there to our customers. But yes, this is what the current situation is for this quarter. The third thing -- again, may I request participants to please go on mute because there is a lot of disturbance. The other major impact is on account of this quarter, we have commercialized a couple of new products. We have also -- recently, we had commissioned, not in this quarter, but earlier this year but yes, throughout the -- this quarter, there was the impact of lower yields on this commissioning of new plant in the [indiscernible] area, which we had done. So basically, the third reason is that initial hiccups and yields and lower yields and the commercialization of new products, whatever [indiscernible] levels that we place in initial couple of months or quarter, that has also contributed to this higher cost and therefore, lower gross margin. But this particular aspect has since been addressed, particularly this new submission in yield because now, sitting in April and May, we are seeing what is the new plant commissioning status and yield and with the efforts of our team, plant site and other operation leaders, we have achieved our targeted yield. So that impact is not there now or will not be [indiscernible] in the quarter 1. And then on the commercialization of new molecules, again, those processes and new processes and new products have now been streamlined, and we do not expect them to contribute to higher cost in the next quarter. I hope this answers your question.

The next question is from the line of Vishnu Kumar from Spark Capital.

Thanks for the detailed answer of the [indiscernible]. Wanted an update on the inorganic acquisitions, likely when we are expected to do something, first half, second half, any color on it?

Sure, thanks, Vishnu. Well, honestly, on an inorganic front, things have been -- certainly, the pace has certainly been impacted with this second wave and upsurge of COVID because of -- which, you can imagine, the overall logistics, travel, evaluation, discussions, negotiations. I mean, all this was impacted. We were expecting to move to a definitive stage in the -- by the end of March as well. But yes, because of this last couple of months situation, things got delayed a bit. But yes, we are at a pretty advanced stage, I would say, in some of these evaluations. And again, I mean, hoping that everything streamlines on the COVID front, and we have more flexibility in maybe in a month or so. I hope we could be able to do our progress on this concretely within this quarter or early next quarter.

So would this be part of the investment? Or just trying to ask whether this entire couple of acquisitions, which you're talking about, what would be the outer time line to do 1, 2 or 3? When would we be completing all of them? Any outer time line?

Outer time line, we've already indicated almost 6 quarters that we had indicated. So in that sense, I would say by -- within this year, we should be completing them.

Got it, sir. And just on the guidance of 15%, generally, we talk about 20%, 25%. Wanted to understand, is it partly because of the -- when we're finding that the global agrochemical market is very buoyant now given the sound economics and also the massive trade that has been happening, slightly, there are some things with disconnect from [indiscernible] and where we are lowering guidance when many companies are highlighting strong growth. So if you could just address that part.

Sure. So 2, 3 points I'll mention, and then I'll also request Mayank to add something on this. So first of all, as you can imagine that we have grown very, very aggressively in last year FY '21. We have been, for the last couple of years, we have been saying 20%-plus kind of growth, but we have grown much faster, okay? Secondly, even at this point in time, given the kind of product pipeline that we are seeing in R&D and also the kind of outlook that we are hearing from our customers, the visibility is pretty strong, okay? Growth projections are pretty strong, even in domestic area, which I was talking about exports, but even in domestic, given our product pipeline that we are aiming to register in this year and next year. It is quite a number of products that we are kind of targeting to register. The only point that we are a little cautious around this is the current COVID situation. For example, for last 3 months, we have seen a significantly serious situation in Gujarat, more than 200 to 250 people even in PI was infected by COVID. And I must complement our teams, our site teams, our leadership teams and operations, who could -- can still manage with so many proactive actions to deliver what we had aimed for FY '21 and even continuing to aim for current year. So the only -- I mean, we are very conscious of the current situation and the uncertainties related to it and potential risks related to it. There is certainly some impact while we have been able to manage our deliveries, we are able to manage our manufacturing and operations. But on development side, we are seeing some impact with these lockdowns and close downs in Rajasthan, in our R&D, in many other marketing areas where we have to launch products and some sort of delays are happening there. So while there is -- I can say, there is upside, but we are really conscious about the current situation and as has been effective, we are a very conservative in our guideline in that sense. Mayank, maybe you may want to add something?

Yes. So I think Rajnish have said most of that. But I think, obviously, we'd like to take this view looking at the COVID-19 scenario and it's a global scenario, which we have seen. And there are certain overflows over the past few years, even for the large companies. So taking all into that, we've taken a little -- calibrated ourselves to look at this kind of an outlook we would like to stick to for now, yes?

The next question is from the line of Probal Sen from Centrum Broking.

Just staying on the question of margins. Thank you for the detailed explanation of how the margin has actually come off. But just wanted one idea in terms of -- you said that obviously, you've recovered the kind of problems that were related to the low yield for the -- related to the new products and the new capacities. But barring the removal of MEIS incentives, is it fair to say that the rest of the impact would get alleviated over the rest of -- over the next couple of quarters and you will get back to something like what we've achieved before? Again, taking out the 150, 160 basis point impact of the export incentives. The rest of it, can it come back over the next 6 months in your opinion?

Yes, you're right. You're absolutely right. You're absolutely right. And we've always guided to kind of maintain and manage that kind of margin profile. Even in MEIS, as I was trying to explain that while on one side, we are hopeful of given the ambitious targets that this country has for growing exports, that the commerce ministry will come up with some alternative benefits to the exporters. We will certainly, as the new content and new year contracts are -- all these are kind of discussed and negotiated, we would certainly want to kind of maintain our margin profile and pass on these things to the other side.

So going forward, sir, assuming, of course, as of now, if there is an alternative scheme announced and some sort of alleviation happens on the government side. But barring that, if I look at FY '21 as a whole and then look at FY '22, we should be working with maybe 120, 150, 30 basis points lower EBITDA margin just as a benchmark. Is that a fair way to look at it right now?

Well, my sense is that we would still want to guide for the similar kind of EBITDA margins that we have achieved in this year. But I would request Rajiv to give a perspective on this. Rajiv?

Yes, Rajnish. I think very much, we stated it absolutely, the attempt will be between the new scheme that the government announcement, which I believe is only 2 years away. And the fact that we would like to pass on, and to the extent possible, even the differential back to our customer. The mix issue, again, there will be some ups and downs, but the point is that, so far, we've been on a path, and we should be towards our guided margins. The [indiscernible] we talked about, we've already made the investment. And therefore, the efficiencies have now been achieved. So I don't see a concern there. So basically, what we just stated is what I would reaffirm, that we would plan to come back to a margin at some point in the year.

Right. And sir, the second question was with respect to the CapEx, leaving aside the QIP's proceed deployment. This year, would you say that the CapEx was perhaps lower than what you would have wanted because of COVID-related disruptions and [indiscernible] FY '22 as well.

No, I really want -- our guidance would be that our main CapEx cycles, the investments, will not be at that pace that you've seen in the past. Over the last 2 to 3 years, we've been through a heavy CapEx cycle as we created our capacities in newer facilities. That part is done. And even on the last call, we said we would like to, in fact, move our [ fixed ] assets to revenue ratio, the turnover up, which you may see, we have made a little start in the journey this quarter. And through a newer application of techniques, we would continue on that journey. So the biggest CapEx we'll see will be on the inorganic acquisitions, which we've talked about. Here, we would like to impact, not sweat our assets.

The next question is from the line of Ritesh Gupta from Kotak Securities.

So just one question on the pharma side. You've been talking about an acquisition, but could you just highlight a bit on the organic [indiscernible] has done that side? And what do you really intend to do with the acquisition? I mean, is it like a full blown acquisition where already there would be clients, et cetera, and it will just feel like a plug and play and you'll kind of [indiscernible] to it? So can we just lay upon what are [indiscernible] on the pharma side, what are you intending to do given that you already identified the target? The -- I think on the noncore side as well, if you could just update us on the progress. And I mean, I think a few quarters back, you had highlighted that you would like to have 20% of the revenues coming in for pharma in the next 3 years or so, if I remember correctly. So I just want to peek an update on that, do you think it's still possible?

Well, I must [indiscernible] also repeat your question because your voice is not very clear. There's a lot of buzz around and it's not clear. So maybe if you try -- if you were talking from headphone, please try it. Yes, this is now sharp and better.

Yes. No, sir, I just wanted to check on the non-agro fees, the revenue growth , I appreciate [indiscernible]. So I think 2, 3 quarters back or when you did the IPO, you had said that, I think you're looking at 20% sort of revenues to come from non-agro business in -- from pharma in the next 3 years. So, a, is that guidance still intact; b, I think when you've identified the target and you're probably closer to the project? I just want to check what kind of strategy you will have with this kind of acquisition in terms of what -- is it -- will it be like more like a plug-and-play? Or would it be complementary to your existing organic efforts? And third, on the non-agro and non-pharma side. Any progress there? I could see some talk about fermentation technology, et cetera, also over the annual report and also could you just talk about some of the other initiatives there?

Sure. Sure. Sure. So on pharma side, yes, you're absolutely right. We are -- as part of our long-term strategy, we are looking at something which can help us speed up the scale of pharma vertical led that we are wanting to build. We have already, over the last few years, we have already now developed certain technologies. We've already kind of built some type of, I would say, intermediates and therefore, some type of customers. Already working on certain additional employees, product pipeline in-house, okay? But in order to scale up this whole thing, much faster than what we did in CSM space in agri, AgChem, we are looking at this inorganic opportunity, and we are looking at something with a plug and play, which is also complementary to what we are building out and the kind of technologies, which we believe will help us kind of create a differentiated position for ourselves. And these technologies -- unique technologies are, I may not speak too much about this on the call, but we believe that we have certain technologies, whereby by combining those technologies and the product portfolio and the access to the customers that we are expecting to get with the inorganic opportunity, we will be able to create a differentiated solution. And we'll be able to grow that business much faster than what it is doing today, okay? So that is on one side. Yes, we -- our objective remains that in next 3 years -- 3, 4 years time, it should be a sizable business for us, 20%, 25% of overall company. That's the objective that we are working with, and that remains intact. On the other nonfarmer side, your question. So yes, we have -- we are also -- even today, we are actively evaluating a few opportunities where, again, these are complementary technology, and we believe that we'll be able to leverage both on agri side as well as on pharma side, if we combine these opportunities or technologies with what we have in-house. I hope this answers your question.

Yes. I mean, just some clarification there. I mean, when you talk about technologies and like it's been there and the [indiscernible] over the last 1 or 2 years, I mean, how long it may be in terms of monetizing it? Because once you have the technology, we'll have to go to the clients while you [ deliver ] the proof of concept and get it, let's say, get orders on the top of it and then [indiscernible].

Sure. So this is where -- this is -- yes, so this is where the inorganic option is [indiscernible] because with this inorganic option, you certainly get set of products, set of customers, which are already there, okay? Now you go to the customer and put a completely different proposition on favor by combining the existing products and the technology that we are working. You put up a completely different proposition to the existing customers and also you go to the new customer. So what I'm saying that this inorganic option certainly, helps us speed up the whole process. And with the existing products and customers, we believe that we can significantly speed up this process. But yes, the opportunity with new customers, which takes the normal regulatory time, which we will require.

The next question is from the line of Pratik Rangnekar from Credit Suisse.

My first question is on the CapEx part. So in the previous -- in the earlier call, you had guided for -- we have hinted at one plant we commissioned before. And in -- and in this quarter, we are highlighting that there is one more [ delivery ] in 1H. So how has the [indiscernible] plant commissioning happen? And if you can just indicate what is the total CapEx on both of these plants?

Rajiv?

Yes, I think we capitalized that long budget [indiscernible]. That will become fully effective sometimes in the second quarter. So that is the NPV that we referred to. The capitalization for that has taken place this year. [ Do you ] see that capitalization as you've already told, roughly about INR 400-odd crores, which includes this CapEx.

Okay. My next question is on the [indiscernible] in your presentation. When you talk about technology scale-up on between chemistry and new catalysts and [indiscernible] so can you kindly provide some color on this? Is this going towards lower business lines? Or is it more towards increasing your margins? And is this on the agrochem side or on pharma? If you could just provide some more color on that.

I mean, we're looking at these technologies as a part of our sustainability to improve the efficiency by focusing more on the greenest side of the chemistries that we do, of the existing products by focusing on their environment and waste loads and find safer ways of draining it. That is one. Obviously, this has to result in economic benefit. So that's the way we look at that. And we're also looking at automated process technologies, which could be -- again, aligned to the same point [indiscernible] made earlier to make it more efficient and greener. That's really the platform that we're working on. And this will run across the verticals, not just into one vertical.

And if I could just squeeze in one more. On the first question in the call today, you mentioned that not all of your newer commercialized products resulting to long-term contracts. A couple of years ago, you used to provide that ratio for the breakup of revenue between long-term contracts and otherwise, and that used to be, I think, 70-30 split. Is that proportion similar? Or how has that changed now?

Yes, broadly same, broadly. I mean, the 70 maybe 65, 68 or something, but yes, broadly the same percentage.

The next question is from the line of Rohit Nagraj from Sunidhi Securities.

Sir, the first question is on the technology scale up. So just you mentioned in terms of the sustainability initiative, are we looking at these technologies just for internal consumption or captive convention? Or these can be scalable and commercialized over a period of time?

I frankly didn't get the question. What you -- internal consumption of scalable and commercialize over time. I'm not [indiscernible].

So something like novel catalysts or green chemistry. These are relatively newer technologies as far as our business is concerned. So is it like we'll be using these technologies to enhance our own the productivity efficiency? And are these applicable across the product segments or categories that we are working in? So that's what I've meant by terms of scalable [indiscernible].

Sure. So I mean, each technology is on different capabilities. Some could go across vertical, some would stay within the product range. So obviously, the ideas keep creating those capabilities to create more business opportunity, not just commercialized technology, yes? So commercialized internally to scale up.

Fair enough. Sir, the second question is in terms of customer profile. So if we look back maybe 5 years ago and we might have 15 plus/minus kind of molecules, what are the number of customers? And then currently, we have maybe 26, 27 number of molecules, what is the number of customers? Is it a change in terms of your customer additions, some of the customers taking the back seat?

No, but the beauty that PI has been able to enjoy the credibility, not until today since building the business, we've not lost a single customer. We only added on to the customer base and has expanded over year-on-year. So I'm sure we are plus [indiscernible] today in the commercial phase. Beyond the AgChem space, they're also working with other new customers.

The next question is from the line of Deepak Chitroda from PhillipCapital.

So my first question is again, on the inorganic growth opportunities, which we discussed. So I just wanted to get some more clarity. Are we sort of looking for -- as we are saying about the pharma, are we looking for a large asset on the domestic side of India or maybe internationally also? And are we also planning to take additional debt in order to finance the assets?

Not really. We are -- at this point in time, we are not planning to raise debt, okay? So that is one part of your question. The second part of your question, so yes, we are looking at currently evaluating few select options, whereby we did asset based in India. But doing quite a significant part of their business is all exports of supporting their global customers. So I hope this answers your question.

Sure, sir, sure. And my second question regarding the outlook for FY '22, if we talk about on the domestic side, we are planning to launch almost [ 5 ] molecules. So all these products are, I understand, if you can try and give a breakup of like [indiscernible] or in the [indiscernible] products? And what is the size of the opportunities, which we are launching for the new products? And what is a growth prospect on the domestic side itself for FY '22, you're looking at?

Raman, maybe you can take this?

Yes. Thank you, Rajnish. Yes. Thanks for that question. I hope you can hear me. So we are, at this stage, going to launch -- or planning to launch 5 [indiscernible] ...

Raman, your voice is breaking, Raman. Hello?

Yes?

Mr. Raman Ramachandran?

Raman, your voice is breaking.

Can you hear me now?

Yes, sir.

No, it's still -- it's kind of off and on. Are you on headphone? Maybe you can change or you can remove your headphone and try.

No, sir, we still cannot hear you. May we request you to move to a better reception area, please?

Can you hear me now?

Yes, it is much better, yes.

Okay. Okay. So I was saying that we are launching 5 new products, 3 of them are insecticides. One of them is -- it's new molecule, 93 molecule, the 2 others are mixtures, one for cotton and the other for rice. And we expect 2 of these to come in toward the Q3, Q4 time frame. In addition, we also have 2 fungicides that will be launched. And one fungicide, which we have already got the registration is probably one of the newest in its [indiscernible], It's a biofungicide, which really fits with the requirements of farmers like [indiscernible] and export markets. So that's the portfolio that we have. I mean, in terms of what is the growth opportunity. I mean, I can just put a number to it. And as you have heard, the crop segments and the category that we are launching are high-growth segments. What I can tell you is that in the domestic business, we are always targeting about 30% to 40% of our sales coming from products that have been launched in the last 3 to 4 years. So we expect this to be -- these products will be a very significant growth driver over the next 2 to 3 years.

The next question is from the line of Madhav Marda from Fidelity Investment.

I just had one question. I think during those QIP, one of the sort of target with the QIP funding was you wanted to acquire assets outside of India to diversify or sort of -- so either hedge against like geography risk, is my word sort of like [indiscernible]. Is that something that still remains on the table to acquire like a strand asset outside India to sort of hedge on it?

You're absolutely right. This was also one of the longer-term strategic intent that we have. But unfortunately, given this COVID situation and the logistical restrictions and challenges that we have faced over last, I would say, over last -- more than a year now, this is certainly not a priority for us. And right now, we are focusing on the objective of diversification into pharma and for that purpose, we are currently focusing on evaluation of those opportunities in India. But at an appropriate time, certainly, we will once again, take up that objective and focus on that.

Understood. And the pharma acquisitions that we are targeting, just wanted to check once again, will it be one asset, which will take up most or all of the M&A? Or would it be divested across maybe 2 or 3 sort of targets?

Yes. So we are looking at, at this point in time -- idea is to look at a reasonable-sized assets so that -- which can meet our overall objective of product portfolio, customer's portfolio, which also has potential to scale up and kind of put in our scheme of things -- PI scheme of things and plans that we have from our organic side for pharma, okay? So the objective is to look for and analyze with one such option. But apart from this, we are also in at some other interesting technological opportunities whereby, as I was explaining earlier to the other participant, whereby, we can combine them with these technologies that we have and leverage them both on AgChem side as well as on pharma. So yes, in total, there may be more than one opportunities that we will look for. But yes, on pharma side, the idea would be to look at one opportunity, which can meet our objective.

The next question is from the line of Rohan Gupta from Edelweiss.

Sir, just an extension on the previous question and answer. So sir, can we read this in a current scenario underpinning it? Are we going to have a lot opportunities like some time than -- like time back arrangement where we are looking at smaller assets in India while our [indiscernible] my target was [indiscernible] ...

Rohan, your voice is breaking there. I'm not able to hear you clear.

I hope it will be better now. Sir, I was asking that...

Not clear. Not clear.

Mr. Rohan, if you can just repeat your question maybe a bit slowly as your voice is breaking up a bit, sir?

So I hope it's better now. Sir, I was -- sir, can you hear me now?

Yes, sir, please proceed.

Okay. Sir, I was asking in the extension of the last question only. So now this acquisition, which we are looking in India, should we consider it as a time gap arrangement to fulfill our requirement for near-term growth, while our earlier ambition was to find some global good assets in pharma, is it so? And if that, then are we looking a smaller size of this CapEx or acquisition opportunities in pharma? If you can just elaborate a little bit more on that.

Yes, go ahead, Rajnish.

Yes. So certainly not. In fact, we strongly believe that the opportunity in pharma -- in fact, as we have also explained in earlier calls that we want to kind of take this sweet spot, which is there in the domestic, intermediate and [ API ] manufacturing because most of these products are currently being imported in India. And we want to kind of basically get into this space. And with these technologies that I was explaining to the earlier participant, we want to create a differentiated position for ourselves or differentiated next position for ourselves. So that's the objective. And therefore, the opportunity in India or manufacturing setup in India will certainly fulfill our long-term objective of creating a global position or a leading position in this particular space. So this is one part of the answer. The second part, the opportunities that we were looking at outside India. If you recall, the key drivers were kind of to derisk our concentration of operations in Gujarat, particularly in active manufacturing or CSM space. Secondly, get near to the customer. Now these customers, when I'm talking, I'm talking more about the agrochemical customers and their geography. So get near them and that strategic advantage of in their vicinity and all. So in a nutshell, these are 2 different objectives. And then yes, while we can get some pharma fees in some of those overseas of possibilities, but all said and done, the manufacturing setup and opportunity in India will certainly give much better advantage to us, particularly in pharma this year. Does that answer your question?

Hello, Rohan?

But valuations have gone up for all the pharma company. So initially, as you have always mentioned that the company will be looking at the EPA [indiscernible]? Or similar kind of valuation written, which the company has always been in line. But would it be possible in the current inflated scenario that we will be able to buy the asset and we'll be able to enjoy the similar return ratios, which we have in line? That's it, sir.

Yes. I missed [indiscernible], I think a part of your question because you were not audible, okay? But anyway, I understood the question. And the short answer is that, yes, we still remain confident. While, yes, we have seen the valuations getting inflated over the last 6 months, 1 year or so. But the -- I mean, the opportunities that we are evaluating, we have been able to kind of look at a reasonable business case. We have been able to kind of look at opportunities, whereby we can create value by combining our technologies and therefore, we see a good value proposition for us getting into those opportunities. So as I explained earlier, I mean, we're not so much so concerned about this outside in valuation. We are more concerned about that -- what we can create from these inorganic opportunity, what kind of value that we can create and then what is the resultant multiples, that is more important for us. And we are absolutely on track on that.

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

Yes. So thank you, everybody, for coming on this call today. And we look forward to your support and wishing you all a very healthy and a safe time going ahead in these challenging times. So thank you from the PI management. Thank you. Thank you.

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