PI Industries Limited (523642) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to PI Industries Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, Mr. Solanki.

Thank you. Good afternoon, everyone, and thank you for joining us on PI Industries' Q4 FY '25 Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Mayank Singhal, Executive Vice Chairman and Managing Director; Mr. Rajnish Sarna, Joint Managing Director; Mr. Sanjay Agarwal, Group Chief Financial Officer; Dr. Atul Gupta, CEO, Exports; Mr. Prashant Hegde, CEO, Domestic Brands; and Dr. Ramesh Subramanian, Global CEO, PI Health Sciences. We will begin the call with key perspectives from Mr. Singhal. Following that, Mr. Agarwal will share his views on the financial performance. Thereafter, the forum will be open for question-and-answer session. Before we begin, I would like to underline that certain statements that may be made on today's conference call 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. Thank you, and over to you, sir.

Yes. Thanks, and good afternoon. Thank you, everyone, and good afternoon to all present. I aim to discuss the operating environment and provide you an update on our strategic initiatives to enhance our global position as a leader in technology, research and manufacturing in the life science arena. Let me start by providing a brief perspective in the industry scenario. While the overall crop protection market continues to expand, challenging emerges in the form of extreme climate events, commodity pricing, tighter regulations, softer demand sentiments, pricing pressures which weigh on the pace of growth. The industry is steadily pivoting towards more sustainable practices with growing investments in innovations of biologicals, precision agriculture and digital farming. In the recent months, trade flows have been impacted by tariff wars. However, in the mid- to long term remains positive, driven by the rising needs of high agricultural productivity, greater resilience against climate threats and faster shift towards sustainability. Domestically, the science and the volume growth has observed driven early Kharif sowing activities and favorable monsoon indications. The adoption of biologicals gained further momentum, aligning with the broader sustainable trends. Nevertheless, price realization remained under pressure due to global oversupplies, increased generic competition and declining raw materials costs. The sector growth trajectory will increasingly influenced by innovation in differentiated solutions and shift towards sustainable crop protection and supportive policy measures. Amid the business environment, outsourcing still remains a strategic imperative for multinational companies. In the agrochemical cost competitiveness, supply chain diversification and need for stronger regulatory compliance are driving innovators to outsource manufacturing to India. While in the pharmaceutical industry, outsourcing aligns with high-value complex segments driven by end to meet regulatory and scalability. Both sectors are shifting towards deeper long-term partnerships with companies by adding resilience, operating efficiencies with a focus on technology and innovation. We are targeting growth opportunities in the CSM and expanding the addressable market of $15 billion to $20 billion in innovative products in ag. In parallel, we are actually positioning ourselves to capture across the value chain of the multibillion-dollar market of pharmaceuticals in the CRDMO and electronic and biologicals. This is well in line with the transformation from ag science company to a life science company. Once again, the PI team yet again has delivered a commendable performance in Q4 and for the year as a whole, given the environment. Our stand-alone performance for the year featured 6% growth in revenue, 17% growth in EBIT broadly in line with our guidelines, the consolidated financials were marginally lower due to development spends in the newer business areas. During '25, our AgChem exports have continued to show improvement with 5% growth, which is in line with the plan, the growth are mainly driven by our new product commercialization over the last year with a 31% growth, which we've been able to achieve year-on-year in this area. Over the past years alone, we have commercialized 15 molecules. Our pipeline remains robust with approximately 50% inquiries are also now being focused on non-AgChem molecules. Moving towards the domestic operation in Q4. Our strong domestic brands have shown a growth with 21% year-on-year growth. Our steadfast focus on product mix of innovative crop solutions to approach yields and the desired results to the farmer. Our biological range again continued to show strength on strength with a strong 20% growth from over the prior years, which has already been on a very high growth rate over the last 3 years. Domestically, we have introduced 7 new brands in this year. Further, we have a pipeline of 20-odd products at various stage of development to be introduced over the years. So while our core business mix shows a sustained traction for the coming years, the development of new verticals contribute to the future performance as we are transforming from a pure AgChem leader to a life science powerhouse and aiming to become a global technology platform leader in biological space while becoming a differentiated player in the CRDMO pharma play. While we continue to build a full integrated CRDMO platform, providing world-class solutions backed with strong knowledge and high-quality assets, across from research, commercial to manufacturing with excellent leadership now in place, we are on an accelerated path to look for growth. During this year, we have upgraded and added our asset bases across geographies in alignment to our strategy to meet our customer needs. Moving on to our biologicals. This category is offering and has experienced the fastest growth rate in the recent times, outbeating the industry. Our acquisition of Plant Health Care, which has a specialization in peptides marked a significant step towards our intent of becoming a platform technology-based product solutions and biologicals to serve the global markets. This is very much in line with our purpose of building a healthier planet. We're also making good progress on our proprietary offerings. We, as PI with our first new entry from India to the world, which is currently in the midst of Phase III trials, we are evaluating with partnerships across the world and developing regulatory data. Additionally, our R&D programs are giving us some positive progress in leads to build a pipeline with exciting outcomes. The initiatives are perfectly aligned with us strengthening our position as a technology leader and a manufacturing powerhouse to bring opportunities for partnership models across the globe. We remain the leader with the chemical industry in ESG. Having achieved the claims, we're proud to have retained our listing in the prestigious S&P Global Sustainability Yearbook for the second time in 2025, which speaks volume of our ESG journey. While the global industry navigates trajectory headwinds and general business dynamics remain uncertain, we maintain our growth outlook, expecting the broader sentiments to improve in the second half of the year. We are confident in the long-term prospects of growth outlooks. Our investments in new capabilities, capacities across the business lines at a global level remain on track, setting the stage to deliver our vision. With this, thank you to all of you to joining the call. I would now like to hand over to Sanjay, our CFO, to take this and over to you, Sanjay. Thank you.

Thank you, Mr. Singhal. Good afternoon, everyone, on the call today. I will summarize the company's financial highlights for the quarter ended 31st March 2025. Please note all the numbers which we are talking here are on a year-on-year basis -- comparisons are on a year-on-year basis and refer to the consolidated performance. So to share the performance highlights during quarter 4 FY '25, we reported a revenue of INR 17,871 million, a growth of 3% over the same period last year, which implies a 3-year CAGR of 9%. While there's a decline in the AgChem exports, the volume is up by 7% and new product growth is 23% year-on-year due to scale-up of products commercialized over the last 3 years. Our domestic branded revenue business grew by 21% year-on-year, supported by a strong Rabi season, marked by increased acreages in wheat, rice and pulses. Pharma business also had a strong sequential revenue growth of 33% to INR 850 million in quarter 4 of FY '25. In spite of all the development expenses we had in Pharma and our PHC business, our consolidated EBITDA grew by 3% and remained at a healthy 25.6% due to good product mix and tight overhead management. Let me now cover the performance for the full year FY '25. Revenue was INR 79,778 million, a growth of 4% over the same period last year, which implies a 3-year CAGR of 15%. New launches and biologicals remain a key feature for us in FY '25. AgChem export revenue grew by 5%. Our new product growth is 31% year-on-year and domestic branded revenue business grew by 6% and a volume of 9% up. So our momentum for launches of new innovative product has continued with 7 new products launched during this year with a crop solution approach. And similarly, our biologicals business on a yearly basis grew by 20%. On a consolidated basis, the EBITDA grew by 8% for the full year to 27.4%. On a stand-alone basis, if we look at it, our EBITDA grew much higher at 17% and PAT grew by 8%. On a consolidated basis, the profit is marginally down by 1% at INR 16,602 million, impacted slightly due to a higher ETR at 22.5% versus 11.2% in the last year. We expect ETR to be in the range of 22%, 23% for the next 2 to 3 years. The trade working capital [Technical Difficulty] number of days has increased to 73 days, while the better inventory management has led to reduction in inventory days from 62 days to 45 days. Our balance sheet further strengthened during the year. Our net worth increased to INR 1,01,570 million and with a very healthy net cash balance of INR 40,926 million. In summary, our healthy financial performance, leading to stable cash flows provide us the flexibility to continue with our growth plans. And our CapEx spends allocating additional capital towards our future growth engines in PIHS, our Pharma business and PHC, our global biologicals franchise. This gives us confidence to have a focused growth. With these friends, I'll conclude my opening remarks. I'll now request the moderator to open the forum for Q&A. Thank you.

[Operator Instructions] The first question comes from the line of Rohit Nagraj with B&K Securities.

Glad to hear that the MC has moved to Phase III. Just one question on the MC pioxaniliprole. In terms of what is the time to commercialize that we are looking at? And how much have we already invested in terms of R&D? And how much incremental R&D investments are likely to undergo for this MC?

Maybe I'll take that.

Yes.

Yes. Okay. So we are expecting -- as we explained, we are right now in the process of regulatory data development, evaluation and also application preparation. We expect to commercialize in the very first country in the next couple of years. As regards to the second part of your question about the investment, et cetera, this is not in front of us. And also, it's very confidential data. So I hope this helps you all. This information helps you in your question.

Sure. Sir, second question in terms of what is the composition of the new high-growth molecules in AgChem CSM by the end of FY '25? And similarly, the composition of biologicals in our domestic branded business at the end of FY '25?

Maybe I can help you on that. Biologicals business would be around 18% to 20% of our total agri business, AgChem business in India. And similarly, the new products are broadly 15% to 18% of...

Ladies and gentlemen, the management line has been disconnected. Please be on hold while we get them reconnected. Ladies and gentlemen, the management line has been reconnected. Please go ahead.

Should I repeat the answer to the earlier question? Or did we move on to the next one?

Sir, if you could repeat, I think the line got lost in between.

Okay. So I'll just repeat when we are talking about new product launches and their contribution to our AgChem export business is around 15% to 18%. And similarly, the biologicals business for our AgChem brands business accounts for around 18% to 20%. The biologicals business is the last question what you asked.

The next question comes from the line of Vivek Rajamani with Morgan Stanley.

Just continuing with the question on the new products in your portfolio. For fiscal '25, they've grown at about 30% plus. How should we be thinking about the growth of these new molecules in fiscal '26 or even fiscal '27? And as a related question, these new molecules grew about 40% plus in 2Q and 3Q and about 20-odd percent plus in the remaining 2 quarters. So any thoughts with respect to is there a seasonality element here would also be super helpful.

Yes. So I think for the next financial year also, we can have a similar new products. As you know, the new molecules are getting commercialized, 15 got commercialized in the last 3 years. So we'll continue with the same momentum of new products adding to the top line growth and giving us stable margins on that.

Sure, sir. That's helpful. And anything with respect to seasonality or it would just be equally spaced across the...

Well, let me be very straight seasonality, as you have seen over the years, quarter-to-quarter variation always happen. It depends on demand, supply, market situation positioning. So yes, that will continue to happen. That is the DNA of this business.

Sure, sir. And just a clarification, if you're going to continue the same momentum on these new molecules, would it be fair to say that the 15% to 18% of contribution that we have as of this year, that number could probably be maybe north of 20%, 25% by the end of next year? Would that be a fair assumption?

I would not put a mathematical computation. But yes, because there's a variation volume wise, multiple things come together. But our objective is to continue to increase this portfolio because some come in and some go out, right? That's the strategic way it works, but that's the band which we work in.

Next question comes from the line of Abhijit Akella with Kotak Securities.

Sir, the gross margins this quarter seem to be really strong, almost at record levels despite the fact that there has been some price cuts in the CSM business, as we've alluded to in the presentation. So just sort of wondering what's behind the really strong gross margins. And with regard to the EBITDA margin outlook for fiscal '26, what's the range we should work with? Is it -- I mean, this quarter, we reported 26%, but the full year was 27%. So what's the right number to work with for next year?

So if we were to look at it, again, [indiscernible] said, quarter-to-quarter would not be the right way to look at numbers. But yes, the margins are based on clearly product mix, good aggressive growth in the domestic business, follows with, we look forward, as we indicated earlier, we continue to keep those guidelines between 25-plus percent of our EBITDA margins continue to go up.

Speaker, this is the operator. Can you come a little closer to the mic while you answer?

Yes. So as we've indicated clearly, product mix with the growth -- strong growth seen in the domestic business and continuing to look at the margin going forward. As indicated, we continue to maintain our guidelines on the same.

Okay. And the other thing was just on the -- a couple of data points, if I may, for Mr. Agarwal. One was what was the Pharma EBITDA loss for fiscal '25? We've given the PBT loss, but would it be possible to just share the number at the EBITDA level. And the presentation states that there's this target of -- aspirational target of increasing the biologics revenues 5x in 5 years. So where do those revenues stand at present? And therefore, where do they go in the next 5 years?

EBITDA loss for the full year has been in the range of around INR 180 crores, INR 190 crores.

Yes, yes. And the biologics revenue, what is it exactly right now in absolute rupees?

Sorry?

The biologics revenues, what is the amount right now at present?

No, we spoke about it that the biologicals business contributes around 18% to 20% of our India Agri brands business.

Yes. But the presentation says we want to increase it 5x in the next 5 years.

Yes. So I think this is clearly we are looking at -- you asked 2 questions. I think the biologicals. One is what is that we are looking at. It's always stated is 5x, clearly. Today, we are at something around...

INR 35 million to INR 40 million. We are at INR 35 million.

Looking at [indiscernible] INR 280 crores right now, which would probably move up to 5x. So we look at INR 1,000 crores target in the next 5 years. Yes. INR 1,000 crores, INR 1,200 crores.

Next question comes from the line of Ankur Periwal with Axis Capital.

First question on the margin outlook for us. Now as I understand, pharma losses are expected to go down as we look to ramp up this business over the coming FY '27 -- FY '26 or 2 to 3 years. At the same time, the AgChem business is going to see more launch of new products, which presumably will be better margin. And still we are maintaining our overall guidance at the same level as FY '25. Is it that there is some bit of pricing pass-through or maybe some pressure that we are seeing in the older products? Or if you can help your thoughts over there?

Well, I think one, I think you should look at the business is not by path [indiscernible] don't run like a clearcut cookie cut, but to be very honest, there are investments and overheads, which are being built up. So ratios are different. But on an overall blended basis, we've indicated where we are looking in terms of margins, and that's what the company will continue to maintain and grow with.

Okay. Fair enough. Second...

At the same time, I think just to appreciate that the company is investing hugely to build a global footprint in biologicals and in pharma and cost of running global organizations come at a different cost structure. So taking all those brands and building up to create the next place to be in the life science place need investment both human capital and other areas.

Sure, sir. Secondly, on the Pharma business, while we are targeting a much sharper sort of revenue growth going ahead, will we need an incremental FDA approved or maybe a bigger production facility for this business to ramp up? Or that is still some time away and probably nominal CapEx will do here?

So clearly, I think this is a step-by-step approach. We have present assets, which have been upgraded with investments. Clearly, as we see things turn around the corner and you very well would understand this asset comes, it's an asset-led business. And as we see things turn the shape to our rates, we'll definitely be looking to scale up as we have ambitions to put a huge number and scale to grow this business.

Sure, sir. Just one last bit, a bookkeeping one. So in the balance sheet, we have a contract assets of around INR 430-odd crores, which was around INR 150 crores, INR 160 crores last year. If you can just highlight what exactly is that for?

Yes. So these are standard industry practice of having any business -- any contracts where the goods have not been delivered before the cutoff date. So these get -- these are specific contracts wherein the goods are produced for a particular customer and which have now been subsequently been built, shipped out in the next subsequent months.

Sure. Agarwal ji, if just -- is this for Pharma or for the AgChem export bit?

It will be in both of the businesses.

Next question comes from the line of S. Ramesh with Nirmal Bang Equities.

See, in the Pharma business, when you're looking at improvement in margins, is it possible to share what is the kind of improvement in gross margin you can expect from this 52% in FY '25? And in terms of the run rate for the overheads at the INR 306 crores in FY '25, do you see this stabilizing at these levels with marginal inflation-related increase? Or would you see further increase in overheads?

Well, I think the overheads have been -- I mean, this particular financial year, we had unfortunately some one-offs, which we had to take care of it. Going forward, what I can say at this point of time, the business is built with a gross margins of around 60%, 65% and with the scale up of the revenue, the operating leverage will start kicking in, and we should have a better profitability at the bottom line as well.

So can you share what is the one-off impact on the old inventory write-off, which has increased overheads?

So I mean, as you know, I mean, any business, currently, the overhead, what we have has been much higher versus the revenue what we have. But difficult for me to give you the exact numbers. But the current overheads have these development spends, they have been -- as we spoke in the Q2, we had one particular customer where we had to take a doubtful debt provision and some other one-off costs, which impacted this year -- I mean which led to a higher overhead in this financial year, which we do not think would be there in the times to come.

Okay. So on the domestic business, with the current run rate of around INR 1,400 crores, what is the kind of potential you see or when do you think you can say, go to over INR 2,000 crores? Because a lot of small peers are already at INR 1,700 crores, INR 2,000 crores, and you have so many new products being launched. So what is the kind of direction you are seeing this business heading towards over the next 2, 3 years?

Domestic business is about INR 1,500 crores, INR 1,600 crores, but it's pure brand business, whereas when you're comparing to other smaller players, they also have technical and B2B business and exports. So just look at a pure business brand play just for one clarification. Clearly, as you indicated, this is -- we are looking at a 15%, 20% growth over and above the average industry -- 2x of the industry growth.

Next question comes from the line of Saurabh Jain with HSBC.

If you can give some more insights into your guidance. When you say a single-digit growth guidance, so that kind of implies a broad range from 1% to 9%. Is there a possibility you can give a sense on whether it's going to be a mid-single digit or high single-digit kind of guidance? That's my first question, please.

Quite very clearly, a bit early, but we have looked at the median level growth level this year, given the industry headwind, the uncertainties of climatical situations and policies across the globe. As we said, we would definitely see some positive trends coming in H2, but that's where we stand for now, and we would keep that outlook for the present.

And when you say H2, do you mean by calendar year or it's going to be the financial year?

Financial year plus.

Okay. Understood. Possible to also give a sense on how do you see the exports versus domestic in terms of your guidance, both business growing by single digit or I presume domestic would be higher?

Yes. Obviously, given our hopefully keeping the climatical situation the positive trend, we would see a good growth in the domestic business. As you are very well aware, the global headwinds, that's where the areas are still under challenges on the export front. But that's what we -- but we believe that from H2, the export business should start well with the launch of our new products and the growth in those areas, yes.

Okay. My second question is relating to CapEx. The INR 925 crores of CapEx, this includes the amount that you paid for PHC acquisition, right?

No. This is only the fixed asset addition. So there is a small minor amount, which has been added at the consol level arising from the PHC acquisition. But primarily it relates to the CapEx spend what we have done at PI and at PIHS.

Okay. Understood. And one final bit on the acquisition side, can you give us a direction in terms of how much of the CapEx you are directing towards your legacy AgChem portfolio? Does it share a major part of your CapEx or it has moderated? Any insights would be very useful.

No, I'm not very clear of the question what do you mean by legacy AgChem portfolio CapEx.

So the key products in the portfolio, which you export for the last few years, which are some sort of headwinds now, those products, are you committing more CapEx incrementally or is slowing down? Any sense on that side, please?

No, I think the company looks at CapEx based on what is the requirements of the business plan, all the commitment from partners in a product and value efficiency drivers. And typically, the existing products already have assets, which need constant upgradation improvements in all those areas. So that's a mixed bag, and that's typically how they look. But when we build assets, we are more strategically investing majority of that for building for our new offerings and our new products.

Next question comes from the line of Madhav with Fidelity.

I had one question. I think we have one MC, which you said has reached Phase III trials. Just wanted to understand that if we will be launching our own branded product in the market, does that create like a longer-term conflict of interest with our existing model, which has been a more contract manufacturing CSM model and we partner with it.

So I'm not certain about how do you look at this conflict of interest because we are, in any case, is also being branded sales. It's also being contract manufacturing, is also being innovation. The unique point of our capability at a global level is partnerships across the value chain. Actually, this gives some of the business, partners are strengthening our relationships from being an innovator to a marketer or as a co-creator to develop this business. So I don't really see that as a challenge.

Okay. The reason I ask is because our branded business is more focused in India, whereas our exports used to be more contract manufacturing driven. So -- that's why those questions. Got it.

The same way the products will work. So they will work on the same ground, partners globally, locally, partner and sell with ourselves. So that's how the same business and same capabilities.

Next question comes from the line of Krishan Parwani with JM Financial.

A couple from my side. With strong 65% growth in the Pharma business, do you expect Pharma business to turn EBITDA positive in F '26 or if not in F '26, then when?

Sorry? Your question is not clear.

Yes. So I was asking since you expect 75% revenue growth in the Pharma business, when do you expect the Pharma business to turn EBITDA positive?

Yes. So this one will take time. So it's not easy to give you a number that will be -- definitely, it will take time over the next few years. Because once we are scaling up, we'll also be doing further more whatever people expenses and all will also go up. So EBITDA breakeven, yes, that will be on the horizon, but it will definitely take some more time, not in FY '27.

Yes, very clearly, over the next '26, '27, '28, we should see the positive trends of this business very clearly.

Okay. Got it. And on the pioxaniliprole, the new MC, I just wanted to understand which major crop would this insecticide be used on? And which is the first country you intend to commercialize?

Well, this is a diamide chemistry. So we will be looking at it as a multi-crop application. And obviously, the price would be to see if we can get India first in the fourth, but while we're working with 2 or 3 countries with partners for application. So depending on how the regulatory work.

Okay. Noted. And one final bit on the CapEx. How much CapEx will you be incurring in FY '26? If you could get the breakdown of agro and pharma, please?

Well, there's no breakdown you would have, but CapEx in the manufacturing will be around that same area, right now about INR 800 crores to INR 900 crores in the similar ratio that we had last year.

Next question comes from the line of Sumant Kumar with Motilal Oswal Financial Services Limited.

So can you comment on EBITDA margin guidance for FY '26?

Yes. So we spoke about it. We would be looking at around 25% in the range of around 25%.

Compared to FY '25, do we have any expansion from here?

Expansion as of now, we see when we are looking at the next 12 months down the line, there are investments what we are doing in the other businesses, which are going to be a growth engine. So I think for now, it is better to take around...

That's our guided line and we continue with that to be very straight.

Okay. And any sir, CapEx for FY '26-'27 and tax rate guidance?

In '25-'26 CapEx should be in the range of around INR 800 crores to INR 900 crores, and the effective tax rate should be around 23%.

Next question comes from the line of Riju with Antique Stockbroking.

So my question is regarding -- in terms of the guidance that you have provided. So the growth that you are expecting, so it is mainly driven by the volume or kind of a price increase you are expecting?

So if you see the performance of last year, 9% volume growth, 6% on value growth, the prices are looking to stabilize, we should be looking -- volume will definitely grow, and that volume and that balance should remain dependent on how the market react. This is not a straight line walk. But as you know, sometimes prices go down, volumes pick up, prices go up, volumes go down, but that's usually the balance if you look at our companies and segment play.

Okay. Understood that. And in terms of your -- the growth in the Q4 and as you reported in the presentation, so what I believe is that there was a strong growth in volumes and which was partially offset by the realization growth. So like how are the paint product prices currently? And how do you see going forward those prices?

Sorry, which segment?

In terms of AgChem exports?

Well, the segments, I think as you would appreciate that the AgChem, we have continued to grow our new product pipeline at 30-odd percent. And if you look at the products in the individual areas, which areas, which segments those are with the customers. So broadly, that's a strategic move continues to grow the existing product portfolio in the same ratio, while the other products continue at a steady-state growth rate.

That I understood. But like what I wanted to understand is that like during the quarter, Q4 FY '25, our agri exports volume growth was roughly 7%. Correct me if I'm wrong. So vis-a-vis like one can expect that there was a sharp decline in the prices. So how do you see these prices going forward?

Let me take this. So yes, I mean, there is obviously some price softening, and that is on the basis of input cost, which is also softening. So over the last 1 year, 1.5 years post COVID, input prices have come down, okay? And given our business model of CSM exports, where these input cost improvements are also passed on or passed through. And therefore, the pricing of some of these products -- existing products have also come down, which is also reflecting in the growth numbers that you were explaining.

Understood. And one last thing, kind of a bookkeeping. So if you could tell the order book size that we have currently as on Q4 FY '25?

Yes, this is also INR 1.3 billion plus, but we don't have exact number in front.

Next question comes from the line of Keyur Pandya with ICICI Prudential Life Insurance Company Limited.

Question on the CapEx. So FY '25, we have spent around INR 800 crores on the organic CapEx and guidance also remains similar number for FY '26. I mean on the current gross block that suggests that over 2 years, the average expansion in the gross block would be upwards of 15%, 17%, whereas our revenue growth is relatively lower. So anything has changed in terms of asset turn or eventually, the asset turn has to catch up by higher revenues. So if you can just throw some light on this and the breakup of the CapEx on domestic exports and pharma or any color on CapEx?

As you would understand that we are building a new vertical called pharma, obviously, the CapEx turns will be lower to get to a certain scale and size. On the other hand, capital -- if you look, these are cyclical in nature. In the past, they've always at capacity-led demand and therefore, building capacities based on certain demands and understandings from our customers of products which are in the pipeline. So we do believe that overall, on an average basis, in 3 years, we should be able to continue to manage our asset turns better than that.

So just one follow-up. So sustainably, what kind of asset turn at a company level or segment-wise, we should think of and breakup of CapEx in these 3 key subcategories?

The asset turn continue to be at a similar range. I think today, we have one of the benchmark asset turns in the industry, and we'll continue -- try and continue at the same level.

Yes. So anything between 2.2 to 2.5 is what we will consider a sustainable number of CapEx turn.

And sir, breakup of CapEx.

Maybe Sanjay, you can take this. Major CapEx of this is for our CSM exports. And some bit of it will also in coming year will be for pharma, of course. But Sanjay, maybe you can share the breakup, if you have?

Yes -- so broadly in the INR 800 crores, INR 900 crores when you look at it around INR 100-odd crores could be in the PI Health pharma business and the balance will be in our -- the manufacturing business in the AgChem business.

Next question comes from the line of Himanshu Binani with Anand Rathi.

So sir, again, on the guidance side, basically, so we have been guiding for a 75% plus sort of like growth in the Pharma business. And on a consol level, we have been looking for a single-digit sort of growth. So just wanted to have a sense in terms of how one should actually look into the CSM exports business growth. So that -- so how one should actually work with the CSM exports business growth for FY '26?

So when you look at pharma, I mean, it's only 5% of our total business. So that will not move the needle for the whole organization. And the whole organization, as you already mentioned that it should be in the mid-single-digit growth plans for this financial year.

Got it, sir. And sir, any sense on the gross margin guidance?

Which is -- we always give a -- because it's a function of product mix. Rajnish, you're saying something?

Yes. So I was saying that which will remain around 50% to 52%, depending on the final product mix that we are able to achieve. And for CSM, we have to also keep in mind that in last 3 to 4 years, we have been growing at 20% to 25%. So obviously, the base is pretty high. And as we have guided that for next couple of quarters, while the industry -- global industry is navigating through this headwind, but we certainly believe that in the -- from the second half of FY '26 we should be able to again catching up the growth momentum, and that's how it will function.

Next question comes from the line of Somaiah V. With Avendus Spark.

Sir, first question is on margins. So in the domestic side, biologicals seems to be the next growth engine. And then also on the CSM side, your new products is like roughly around 30%, as you mentioned. If you could just give some color on margins in both these businesses directionally compared to biologicals versus existing branded in domestic and a new product versus the rest of the other portfolio in CSM, that should be helpful.

So we don't do individual level, but I think broadly, as you would know, biologicals have a better margin. And the ratio improves, that gives a better play. And for new products, again, it's a bag of mixed bag. That's how it works.

Got it, sir. Sir, also, when we are giving this FY '26 guidance, so we have given it for broadly in pharma and then we have broken it down. So what is the thought process for the 70% of the CSM business, which is the -- not the new products one. What is the volume versus pricing thought there? I mean, would it be a volume that will kind of overtake pricing and then that's how we are looking at it, what broad thoughts there?

Well, that's not the right way -- as I said, it's a balance between volume and price. But obviously, that's going to remain in mind. with the industry as we -- those are mature products and some are new products, so they will work with the market dynamics. And that's typically, as I said, in this industry, that the generics of this industry, that volume price continue to play a different role.

Okay. And just to add to this, so obviously, again, there is a portfolio of products. There are legacy products. There are new products, as we are saying, a significant percentage of new products are getting added, and they are contributing in the growth. So in fact, pricing also works like that, that in terms of old products where the input cost is improving, obviously, those improvements are passed through and the price reduction happens and all that. But as far as the new products, innovative products that are being launched where the input costs are kind of sort of stable, there the pricing trend is different. So on a blended basis, it is not so simple to tell you that pricing will be 5%, 10% down and volume will be 15% up or something. So it's a blended situation here.

Sir, also the AgChem CapEx that you are referring to, any multipurpose plants that are expected to come this year and next year? Or is it more of existing facilities we are putting in CapEx? So how does it work?

As we have said in the past, we are doing a CapEx, we have 2 multipurpose plants, which are under construction. We expect to commission one this year, maybe the next at the ending of next year.

Speakers, can you please come a little more closer to the mic and speak? I'm promoting the next that is [ Shivansh Dubey ] with [indiscernible] Investment.

Congratulations for a great result. Actually, I wanted to understand the working capital cycle. Would we expect it to remain in the same number of days?

Go ahead. Go ahead, Sanjay.

So we have seen a slight reduction in our net working capital in this particular financial year, but inventory days have come down. So for the year, you may consider the range what we have. So we are at around 73-odd days. The same thing could we take around 65 to 70 days. Yes.

Sure, sure. And can you also tell us about the new product development that is happening in the AgChem export with pyroxasulfone going off patent in, I think, mid of 2026 in U.S.A.

So what is that you're looking to? Because, yes, as we said, the new products over the last 3 years have been growing at a CAGR of 30%, and that's really where we are on that product portfolio.

Next question comes from the line of S. Ramesh with Nirmal Bang Equities.

So when you talk about the target for the bio business, would it all be focused on the domestic market? Or does it also include some growth from the Plant Health investment in the subsidiary?

Yes. So we're looking at biologicals as a play primarily driven by domestics right now. But for the next 5 years, it will become a global play.

Okay. And in the pharma business in your Slide 17, you mentioned about improving order book visibility. So is it possible to share the line of sight there in terms of discussions or inquiries? What is the thought process there?

So let me put it this way. Yes, we can give it a high level. Obviously, you would understand the confidentiality both from a customer name and products and areas that we're working. So Ramesh, maybe you would like to give some insights that yes, we've then looked at what you're looking at broad line of development. Ramesh, over to you.

Yes, sure. So we continue to build the pipeline. We have, over the course of the last year, added early development pipeline, meaning new projects and high single digits on the new -- on early development and high single digits also on late development. That's the pipeline moving forward. We also onboarded 2 new big pharma customers. And the goal in FY '26 is to add another 2 or 3 so that we can have a sound base of big pharma that gives consistent revenue on biotechs that [indiscernible] they can give you better margins. That's sort of the play that we are progressing with.

Ramesh, are you done with the question?

Yes.

Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

So once again, thank you to all of you for participating in the PI investor call. We look forward to positive times going forward and continued support. Thank you.

Thank you. On behalf of PI Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.