S H Kelkar and Company Limited (SHK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SH Kelkar & Company Limited's Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.

Thank you. Good afternoon, everyone, and thank you for joining us on SH Kelkar & Company Limited's Q4 and FY '25 Earnings Conference Call. We have with us Mr. Kedar Vaze, Whole-Time Director and Group CEO; and Mr. Rohit Saraogi, EVP and Group CFO of the company. We will begin the call with opening remarks from the management, following which we'll have the forum open for a question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Kedar to make his opening remarks.

Good morning, everyone, and thank you for joining our FY 2025 earnings call. We appreciate your interest and trust that you have a chance to review the results documents. We are pleased to report a strong 15% revenue growth for the fiscal year. This performance was driven by sustained demand across all our segment and especially healthy traction in the domestic market. Our Fragrance division grew by 19%, while the Flavor division recorded a robust 43% growth on a subdued base in the previous year. While large FMCG companies faced constraint in expanding volumes, our growth was supported by increased engagement from small and mid-clients, resulting in improved wallet share and deeper account penetration. Additionally, contribution from global MNC accounts further supported the overall results. Our European operations also delivered strong growth during the year. As previously communicated, gross margins were impacted in the second half of the year by supply-side constraints. However, we are now seeing signs of improving raw material availability. To mitigate the impact of elevated input cost, we have already implemented price increase measures and the benefits of which are expected to gradually reflect in our margins in the coming quarters. Notably, the incremental cost associated with our strategic growth initiatives have stabilized, positioning us favorably for margin recovery and operating leverage in the second half of '26 and onwards. Our Ingredients segment continues to make steady progress during the year. We are seeing -- at this point, we are seeing good emerging opportunities driven by the tariff and China Plus One shift as well as rising demand traction in the European markets. These trends, coupled with a favorable global export environment, are expected to help the segment's growth outlook going forward. Coming to our ongoing projects, the reestablishment of the Vashivali fragrance facility is progressing well and is expected to be commissioned within the current financial year. This facility was fully insured, and the rebuilding is supported under the terms of the insurance coverage. Separately, we have received an interim payment of INR 95 crores from our insurer as part of the fire-related claim settlement, while the balance claim continues to be processed. Our upcoming greenfield facility at Wanavate is also advancing as planned and is slated for commissioning later this calendar year. Given the proximity of both these sites, we are building operational synergies and systems as part of our broader DCP framework. This will also enable better inventory management and support our objective of reducing inventory days of sales going forward. In addition, while the year began with operational challenges from the ground, we have since stabilized our business and are pleased to share that in line with the dividend policy and continued commitment to shareholder value creation, the Board has recommended a final dividend of INR 1 per equity share of face value INR 10 each. Looking ahead, we remain focused on leveraging multiple growth drivers. In addition to ramping up our CDC in Germany and U.K., we are advancing strategic partnerships, driving product innovation across segments, capitalizing on favorable global market dynamics. As the macroeconomic pressures ease, we are confident in our ability to sustain, capture emerging opportunities across both domestic and international market and deliver sustainable growth for all stakeholders. With that, I now invite the moderator to open the floor for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Madhav from Fidelity.

Sir, you spoke about having good multiple growth drivers lined up, and you also mentioned something about favorable market dynamics. Could you give some more color in terms of these comments? And also, if you could maybe give us some sort of guidance for FY '26 sales growth, that would be really helpful. That's my first question.

So, as you know, we have invested in our CDC in Germany. We are upcoming investments in Manchester plus New Jersey. So all these are new geographic -- geography investments. So they will result in more business in newer geographies for future sustainable growth. In addition, we also see favorable market dynamics vis-a-vis ingredient business and Global Ingredients business, which has turned around in the last 2 years. We see good tailwinds from China, I think China Plus One strategy or alternate to China strategy, especially in the chemical and ingredient business, India has a very strong position vis-a-vis other countries in the world. So that should benefit the industry as a whole. And for us, it's a good opportunity for future growth on the Global Ingredients business. To give a color on the revenue, whilst the opportunities are quite high and different, these are more midterm opportunities as we are just entering these markets. Our current existing markets in Europe and domestic market in Southeast Asia, we continue to see healthy traction. I continue to I would say, forecast or predict a 12% plus CAGR growth year on, as we have always alluded on the midterm, I think there is no reason to believe there will be any slowdown in this coming year. So, we are still guiding 12% plus CAGR year-on-year despite a strong growth year last year. Given that our factory production facility is basically getting on stream later part of this year. We will look at also margin improvement and look at -- so we had very strong growth this year, we may look at a more moderate growth and focus on the margin management to improve our margins from the 43% average we had for this year to slightly better for next year. So, I'm very confident that we have good leverage to both grow at 12% plus and maintain or improve our gross margins.

And sir, anything on the EBITDA margin as well? I think we finished at about 15%, right, for this year. We know there was some pressure on gross margin and some fixed costs, which we spent ahead of time, but anything on the EBITDA margin recovery for this year?

So, I think we had some additional cost this year. Revenues will ramp up, so those cost in relative terms will come down. I am just mindful that our loss or profit policy will get over this year. We have some additional operating costs to the tune of maybe INR 15 crores to INR 20 crores annualized basis. These are costs which we will incur for, I think, 2 to 3 quarters of this year as the new factory gets ramped up, so maybe for the full year. So, I don't see much leverage in this year for a big jump on the EBITDA margin. There will be continued to be 1 year of additional cost till the new factory operations resumes end of the year. So, this will again be a transient hit. We expect it to be at least 2 quarters, maybe 3 quarters of subdued margin. So, 15% remains, and it may get a little bit better as we grow. But the real jump will come in the next financial year when the new factory setup or the revised factory setup comes back into operations.

So, this -- sorry, just to understand, INR 15 crores to INR 20 crores of additional cost will be spent in fiscal year '26 for the new factory commissioning. Is that right? And then that will be spent over the next 2 years?

Not for the new factory commissioning, we are incurring this cost in this year as well for our operations. So, this is the additional cost because the factory is not in operations today. We are hiring different locations and kind of rent cost, transport costs, a lot of miscellaneous cost, all adding up to roughly INR 20 crore in total. This INR 20 crore for this year is covered under loss of profit insurance policy. Next year, we will not have that coverage. And as soon as the new factory is ready and we move back into our own operations, these rental costs and miscellaneous costs related to BCP operations will go down or reduce substantially in the year after.

Maybe I'll just clarify it offline again, but so you think sir, this year, you're saying EBITDA margins could stay in the 15% range only, and then next year, it should start to come in. That's the way we should look at it?

Yes, 15% will start to improve, but it will not be in line with the long-term EBITDA expectation. That will happen in the year after because our own factory will come on stream.

Which is the 18% to 20% range, right, the longer term, which we...?

Correct. I think 15% will start to improve in this year. We may not reach the 18% to 20% additional operational cost. And then the year after, we should hit that target.

Our next question comes from the line of Mahesh Bendre from LIC Mutual Fund.

Just on the margin front, I think this year, we reported EBITDA margin of 14%. So, is it that this year could be 15% and maybe FY '27 will be the year when margins could be 17%? Am I right understanding, sir?

So, we have around 15%. I mean, somewhere I don't know you're saying 14%, maybe it's somewhere around 14 point something. So, I see it as 15% this year. We will improve from that in the coming financial, and on a longer term, the year after and thereafter, we are looking to be between 18% to 20% EBITDA as a business.

So, FY '27 could be like 18% to 20%, right?

That's right.

And sir, any CapEx plan for next 2 years?

Yes, we have almost INR 200 crores this year itself. Some of it, obviously, financially will spill over in terms of actual cash flows for next year financial as well. So, in the next 2 years, we are looking at something like INR 200 crores of CapEx.

And sir, what will be the closing date probably this year, next year? I mean, given the CapEx plan?

I couldn't hear the...

In terms of debt...

Net debt.

Rohit, you may want to answer that one.

Yes. So, our net debt today is at INR 658 crores with the INR 200 crores of CapEx planned for next 2 years, and the insurance money funding for part of it, plus the cash flow. FY'26, we believe, would be somewhere in the range of INR 550-odd crores, plus/minus INR 20 crores, depending on how much we receive from insurance. And from FY'27, there will be a substantial reduction.

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

First of all, on the price increases that we've been trying to institute in India, could you help us understand what the status on that is and how much of a contribution to revenue growth that might make in fiscal '26, just the price increase component?

I think the price increase in average is roughly 3%, 3.5% in term of the overall business. So that is the expected price increase effect.

Okay. So this is across the consolidated company, right, including India as well as Europe, all put together?

Yes, yes.

Understood. Understood. And from the new -- 3 new centers that we have set up overseas, the ones you alluded to, any visibility we have regarding any traction in business that we are starting to see in the upcoming financial year?

So the first center in Germany, we just completed 1 year from the first, let's say, the first nuts and bolts starting in the -- working in the center. It's taken us 6 to 7 months to hire, put all the people and teams and get fully ready. We just completed 1 year from the actual first date of starting our work in the center. So we are now fully ready. It is operational. We have already projects and project wins, which have started from Germany and which is going to various companies. So there is -- it's now in a full swing operation that will help us to generate good traction on business. Manchester and New Jersey are just starting. So it will take at least another year before New Jersey is fully up and running and maybe Manchester center takes even 18 months from now before it's starting to deliver in terms of project and business in that sense. We have enough projects, enough visibility for these centers to come up and so that continued growth momentum is sustained.

Got it. Maybe just to understand, upon peak utilization from all of these centers, which I presume would take maybe 3 to 4 years, what might be the revenue potential that one could target given we're spending INR 50 crores, INR 60 crores per year out there. So what could it be potentially?

So the INR 50 crores, INR 60 crores will give us INR 50 crores, INR 60 crores of new business every year. And so it is cumulative. And we are also looking for, let's say, a INR 60 crores to INR 80 crores single businesses with the global accounts. So that may not happen every year, maybe happen every alternate year. It could happen every year. So the potential is there. But the INR 60 crores to INR 70 crores of new business in addition to our standard INR 30 crores, INR 40 crores. I see that the growth momentum as an absolute number will almost double -- but denominator also as we have grown substantially, we see that denominator also will grow. So to sustain 12% growth year-on-year on a bigger denominator, we need more new wins and more new business per year. So that's what will happen. I think next year, we will start Germany coming on stream the year after U.S.A. and then U.K. So in 3 years, we will keep building momentum of new wins and growth. I think at its peak, probably INR 100 crores of new business we will generate from these centers per year.

Understood. So just to clarify, over the next 3 to 4 years, these 3 centers could potentially be contributing somewhere in the range of INR 250 crores, INR 300 crores of revenue for us, right?

Next 3 years, yes, I would take that number.

Got it. And just on the 12% guidance that we are offering for the upcoming year, is there an order book visibility we already have like in terms of maybe certain amount already tied up that gives us confidence that this is very much doable?

So we don't have many long-term contracts, but we have very good data from how the client behavior and business has been growing in the last years. So we are very confident of this number. We will need to do 7% to 8% of new business wins, which I believe we have consistently done in the last few years. So I'm not -- faced with the 12% number for this year. The momentum is already there. New win pipeline is there, things are in place. I think the challenge will start after a couple of years when we have a bigger denominator. So we need to do the 12% in absolute terms, a bigger and bigger number. So that's how we see it.

I get the picture. And one last thing before I get back in the queue, if you don't mind. Just on the Global Ingredients business, where you mentioned that the China Plus One tailwinds are creating new opportunities. I was just sort of hoping to understand, we've always been a fragrance company rather than a chemical company. So how do you see Kelkar's right to win in that market given that there are already quite a few chemical producers in India as well. So how do we sort of position ourselves to benefit from these opportunities?

So our position vis-a-vis other producers in India is very nice. We don't largely compete with them. We have a lot of niche -- I mean, our capability in terms of the chemistry and what we can do is much broader than almost all the other players in the country. So we have niches where there are no or very few or very small competitors within India. What we have not been aggressively pursuing is to compete with the largely the Chinese chemical companies, and it ends up being a low-margin business and a lot of CapEx. So we have not been competing with them accepting 1 or 2 large ingredients. But given the current geopolitical and the tariff scenario, there is demand from the client side to have alternate vendors. So when you have -- getting business by competing on price is different from getting business of 20%, 30% market share because they want alternate suppliers. So that business we are keen to enter into, which is not margin dilutive. The business where there are 5 producers and we will be the sixth is not something which we want to get into.

Understood. And are we planning to make this in-house or we rely on toll manufacturers for this?

I think it's very early because we are also still not wanting to put any CapEx till there is clarity on the tariffs and sort of global order of how supply chains will work. So we are not proposing to do any substantial CapEx at this point. So most of it will be toll manufactured with 1 or 2 steps internally done and the rest done from outside. There is more than adequate chemical production capacities in the country. So we can use our IP and know-how and get it produced from others.

Our next question comes from the line of Bharat Gupta from Fair Value Capital.

I hope I'm audible. A couple of questions from my side. So first, when we look at the European fragrance market, so that remained on a flattish note in quarter 4. Any particular reason for it? And how do you see the growth momentum out there for FY '26?

I So I think in the European context on the capacity, we are reaching a level where we are now starting to be, let's say, our growth being affected by our capacity. We are putting a new facility in this year as well in Europe. So that problem will get solved by midyear, maybe last quarter of this calendar. So we -- to kind of look at the growth, we have enough growth opportunities. We have not capitalized on everything in Europe in the last quarter, and we will see some level of, I would say, flattish growth. We're doing double-digit growth, we probably do 2% lesser than that. but with better margins. So our focus will be on margin improvement to optimize our capacity in Europe at the moment till the new capacities come on board at the end of the year.

And what would be the CapEx number…

It would be EUR 6 million to EUR 7 million, so about INR 60 crores to INR 70 crores.

Second question, in terms of the RFQs, so what would have been the contribution during FY '25? And how do you see FY '26 panning out for us? And any further update in terms of further award wins or cutoffs are there in place with respect to different products out there from the same as well as for other MNCs as well?

Yes. So we have been pitching. There are some small wins and small indications where things are gone from development to commercial discussions. Nothing is concrete yet, but it is the global MNC consumer Fragrance business is quite robust. We've done roughly 10 million last year, and we see there is a good traction across the board.

And last question...

It's a new business for us, the global MNC relatively only we have been operating last 2, 3 years. So it's difficult to judge how fast it will ramp up, but we are going slow and steady, and I appreciate the team and the way we are headed is in a very steady growth pattern.

So currently, we are working along with the same MNC from like -- and with respect to the further like are we in discussions with other MNCs as well or...

Yes, we are in discussions with other MNCs, U.S.-based MNCs, European-based MNCs, other regional large players. So it has opened doors for other engagements, and we are continuing to do that.

Right. And just on it, like in terms of creating subsidiaries across the Middle East and the U.S., so is that has to do in relation with the RFQs only or like any contract manufacturing opportunities?

No we already have business in the Middle East. We are setting up our own office to better closer contact with our clients and further develop that business. So business in Middle East already exists by supply from both Europe and India. So it will be largely a sales and marketing office where we increase our customer penetration.

And just last question, like in terms of any signs of domestic recovery from the Tier 1 clients, like with respect to the tax relaxation, which has been brought in the budget. So any color like which you can provide with respect to increase in the order inquiries from the Tier 1 clients business?

No, we are not seeing substantial either increase, but we also did not see substantial decrease in the last year. We've seen steady growth, 5%, 6%. It has been quite a normal year for our set of products last year. We are not seeing any signs of any kind of degrowth or substantial upgrowth or faster growth in this quarter either. So it is steady state for us. It has not degrown last year as what was mostly reported by all the -- at least the listed entities and what we know in the market. So the industry as a whole, the larger corporates have not grown as fast as the previous years. But we haven't seen that in the portfolio of products they've been buying from us. And we have neither seen any fast growth subsequently. So it's very steady state. It's quite different from the overall business industry view that we have.

Sure. So for the FY '26, we are expecting a higher double digit coming out from the domestic space because I think in the European context, we will be confined to a single-digit growth.

That's correct.

Our next question comes from the line of Shiwani from Monarch Networth Capital.

Congratulations on good revenue numbers for this quarter. A couple of questions. One, I wanted to know the revenue mix between small, medium and large customers, if you can give me that split?

I don't have that split. I will come back to you on that. I just want to say that the small and medium have been growing double-digit plus and the large have been growing at roughly 7% to 8%, somewhere between 7% and 8% for the year.

Secondly, on raw material, although I understand that you guys have restrategized it and trying to improve the supply chain. But could you suggest like what's the local -- what is the mix between local procurement versus what we are sourcing from international market?

So I don't again have an exact number, but it's about 60% to 65% is local procurement now.

Next on the Flavor segment, we saw a soft Q4. Any specific reason for that? And also, are we in talks with any large account, especially from the MNC side for the Flavor segment?

So we are in dialogue with a lot of large and small companies, both global MNC brands and large food brands in India as well. So that dialogue and continuing project discussions are on. To your question on softer quarter 4, it's actually in relation to quite a strong quarter 4 last year, which we had a bit of, let's say, backloading in the year. The first couple of quarters, the demand was slow and then it picked up in the second half last year. This year, we have seen more even demand. So when you see the fourth quarter versus fourth quarter comparison, you see subdued growth. But quarter-on-quarter, we are growing. We continue to see that growth. And we are expecting strong, robust 15% plus growth in the Flavor segment as well as we move along.

Just one last question, if I may. I wanted to understand more on Global Ingredients business. So today, it's around INR 70 crores in FY '25. So, how to expect Global Ingredients business in the coming years, more from the growth perspective and margin perspective?

So we are looking at growing this business. It is not going to be 70 growing at 10% kind of business. We either look to invest and grow it by kind of magnitude that we add another INR 70 crores or INR 100 crores business in next couple of years, or we just keep the same. But I mentioned, there are large opportunities which are coming this way. And we will be selective. We will do our strategy in the next couple of months and then put out to the shareholders and to the strategy what is the net outcome. All I would say is that there are good opportunities in the global ingredient space. And we will not want to get into crowded spaces where there are 5 or 6 competitors, but there are good niche businesses, which we can build on top of the INR 75 crores to further increase our global ingredient...

Our next question comes from the line of Prakash Kapadia from Spark PMS.

2 or 3 questions from my end. If you could help us understand the balance sheet improvement, given that we were operating with multiple plants because of the fire incident. So, any impact on the inventories and at the balance sheet level, would it be possible in FY '26 or no? That's the first question. Secondly, in our operating sales, we have a INR 70 crore contract manufacturing income. So is that for a specific client? Is it multiple clients? Is there a scalability in that side of the business? And on the global MNC, any further insights you could share from a scale or a cross-sell perspective? I think we were looking at $10 million sales for this year. Has that been achieved? So those were my questions.

So in terms of the working capital inventory, obviously, operating in 4, 5 locations as we are doing today, the levels are higher than the average where we should be. So surely, there will be a balance sheet benefit in the kind of capital deployed as we move back to one location, and it is much more efficient from a stock and inventory point of view. The second question was on contract manufacturing. Yes, we have a strong contract manufacturing tie-up with another global MNC in Europe. We continue to do that business. That's about EUR 7 million, EUR 8 million business. So it's a continuing business. It's not our strong focus area for growth. Let's say, it was very important in the past when we had this base volume for our operations. Now we have enough growth in our operations to kind of keep it at steady state, and we are not looking to grow this contract manufacturing part of the business. So we grow the business where we have better gross margin and net margin. There was a third question.

The global MNC scale or [indiscernible]

So as I already answered, we have reached around 10 million, and we have good traction with that company and with other companies in sort of other global MNC FMCG companies.

And Kedar, any quantification for the balance sheet improvement in terms of number of days or an absolute amount, if you could quantify, which would be possible at the balance sheet level?

So, as Rohit had said earlier, we would be broadly at INR 650 crores debt. End of the year, we expect next year '26 to be around INR 550 crores of debt. And then, after I think there will be substantial improvement in the balance sheet in total, basically as the CapEx cycle is over.

Our next question comes from the line of Rohit Nagraj from B&K Securities.

[indiscernible]

Before you go ahead, sorry to interrupt you, sir. May I request you to use your handset, sir. The audio is not coming clear, sir.

[indiscernible]

Not yet, using a Bluetooth device, I would request you to...

Is it better?

Yes, sir, please go ahead...

Sir, first question, again, on the balance sheet front. So we have currently debt about INR 660 crores, and this is as at March end. And after we have received about INR 95 crores. So, is it safe to assume that we will be repaying the short-term debt that CapEx as well as inventories. Effectively, our debt will be closer to maybe INR 560 crores, INR 570 crores. And just allied question 2 years, we are targeting about INR 200 crores of CapEx, which probably would be funded through internal accruals given the healthy cash generation that we are looking and growth that we are looking. So I'm just trying to reconcile why the FY '26 year-end debt still will be at INR 550 crores, given that there will be additional settlement even from the insurance to the tune of maybe INR 50 crores, INR 60 crores, INR 70 crores. So, just trying to reconcile these numbers. I think somewhere the math is not right.

Yes, the insurance bit, we are taking quite a conservative number because we don't know how much they will pay out within the year. Of course, we have got the first tranche, so there is no question of admissibility or anything will pay. We have taken, let's say, a very conservative plan of cash flow from the insurance. So if the insurance does pay up everything before end of March, the INR 550 crores number could be lower. But this is the number which we want to put out and go after based on conservative insurance payout.

Sure. Second bit, again, on the CapEx front. So I think a year -- a couple of years back, we were saying that for the next maybe 3 to 5 years, we don't need any material CapEx. And again, now we are saying that for the next couple of years, a couple of hundred crores CapEx. I understand partly it would be for the Vashivali reconstruction. And just allied question to that. In terms of the reconstruction, are we looking at expanding the capacity from whatever it was earlier and to what extent?

So in general, when the CapEx discussion because of the incident and the fact that we need to rebuild the factory, we have undertaken to rebuild and build the future CapEx in sort of a little bit earlier because the CapEx -- running the CapEx in simultaneously helps us from managing the CapEx point of view. In normal course, we would have not needed to do this CapEx for another 2, 3 years. But given the magnitude of the incident and the overall CapEx plan, we have decided to put additional factory in parallel with the rebuilding of the Vashivali factory. And we will look at sort of closing down the Mulund operations in a faster than originally planned way. And some part of the OpEx cost that we incur there will reduce and offset this CapEx.

Right. And just one clarification. So effectively, after this capacity expansion, what is the kind of incremental CapEx that we'll be running? Is it only to the extent of maintenance CapEx for the next 3, 4 years once this...

From the India perspective, we have no growth CapEx planned for creation and development that is not sort of fully laid out. We have -- with these new -- 2 new factories on the fragrance, largely, we will not require any CapEx. On the Flavors, it depends on the growth rate. If we do higher than 15% growth for 3, 4 years, we may need some incremental investment in Flavor capacity. But as a general basis, I think our fragrance requirement for CapEx is -- will be these 2 plants and then we don't need much CapEx for the next 10 years.

Our next question comes from the line of Yash Sinha from MIPL Office. Please go ahead.

Hi. Most of my questions are already answered, but I had a couple more. First, from a bookkeeping perspective, I noticed that you guys collected about INR 90 crores out of the insurance payment this quarter. The total claim from my understanding is around INR 160 crores, right? What's the time line to kind of recoup the balance amount?

It's not clear. Technically, we have made the claim. So any time it can come in. But practically, I think we need only 6 to 9 months of further follow-up to look at the balance amount to come in. It will happen in -- so the total insured amount, let's say, it's ballpark INR 300 crores with all loss of profit and so on and so forth. So it will happen roughly INR 100 crores a year. Firstly, the inventory, second is the CapEx replacement and the third is loss of profit. So this is our expectation in how the insurance monies will come in.

Thank you. So this 2 year or 3 year process?

Yes. So INR 95 crores, which is inventory, we get some additional monies on inventory this year for the CapEx probably early next year financial. Loss of profit, we will push, but these are kind of long processes. So I think 2 years is a fair time to receive all the balance insurance monies.

Got it. Got it. My last question is, from my understanding, you are making inroads with a fairly large FMCG player in India for your Flavors division. Are we expecting any material increases in the Flavors business in India this year? Or is that something that will take slightly longer to really materialize?

Yes. So the typical plant audit on the Flavors are more strict because of the final food and infant and pharma sort of applications. So plant audits, et cetera, have been completed. We are sort of approved vendors. We are submitting different Flavor ideas. So it's a process. Now part of it is already in the 15% CAGR growth that we indicate. If there is something specific large contract over and above this, then we will communicate to the Street.

Got it. And that ties into my third question, which is this 15% guidance that you've given for FY '26, that includes any expected revenues from existing clientele only or you've also factored in any additional client wins for the year?

Yes. So existing and new clients, new geographies, Flavors as well, we are expanding to Middle East, Southeast Asia, some of the markets. So yes, it is an ongoing process, the creation development and market development, ongoing process.

So the thing I was trying to arrive was that in a base case scenario, this 15% includes some growth expected from your European and Middle Eastern markets. But if you were to assume only growth from your existing clientele, what number would that be exactly?

So on the Flavors, we have a very small market share in India. So this 15% is basically our current clients in India and Middle East, Southeast Asia, where we already have connections and business is growing. We are also talking to other clients in different newer geographies that's an add-on. We are not considering that in the 15%. So 15% is the base case with the existing clients in existing geographies.

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

Thank you. I hope we have been able to answer all your questions satisfactorily. Should you feel any further clarification or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call.

Thank you. On behalf of SH Kelkar & Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.