Vinati Organics Limited ($524200)

Ladies and gentlemen, good day, and welcome to Vinati Organics Limited Q4 FY '26 Earnings Conference Call, hosted by Nuvama Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Archit Joshi from Nuvama Institutional Equities. Thank you, and over to you, sir.

Good afternoon, everyone. Thank you for joining the Q4 FY '26 Earnings Conference Call of Vinati Organics Limited. We have with us from the management today, the CEO and Managing Director of the company; Vinati Saraf Mutreja; CFO of the company; Mr. Gulshan Sakhuja; and AGM Corporate Finance, Mr. Adithya Churiwala. We will begin the call with opening remarks under management, followed by a Q&A session. Before beginning the call, I would like to state that the con call may contain forward-looking statements, which are subject to management's certification and judgment and may not materialize as projected, given the business risk associated. Now without further ado, I would like to hand over the call to the management. Over to you, Gulshanji. Thank you.

Good afternoon, everyone, and thank you for joining us for FY 20 fixed results conference call. I will begin with an overview of our financial performance for the quarter and the fiscal year ended 31st March 2026. On a stand-alone basis, in Q4 FY 2016, net income including other income increased by 17%, rising from INR 538 crores in Q3 FY '26 to INR 631 crores. EBITDA grew by 20% to INR 203 crores compared with INR 169 crores in the previous quarter. Profit after tax restored a strong growth of 27%, increasing from INR 108 crores to INR 137 crores. For the full year, net income including other income remained stable at INR 2,281 crores. However, EBITDA grew by 17% to INR 741 crores from INR 630 crores FY '25. while PAT increased by 18% to INR 488 crores compared to INR 415 crores in the previous year. On a consolidated basis, in Q4 FY 2026 net income, including other income increased by 16%, rising from 540 in Q3 FY '26 to INR 624 crores. EBITDA grew by 15% to INR 191 crores compared to INR 165 crores in the previous quarter. Profit after tax registered a strong growth of 23%, increasing from INR 101 crores to INR 123 crores. For the full year, net income, including other income, remained stable at INR 2,280 crores. However, EBITDA grew by 13% to INR 707 crores from INR 625 crores in FY'2025 while PAT increased by 9% to INR 444 crores compared to INR 405 crores in the previous year. Moving to operational performance. Our business segments continued to perform resiliently in the context of prevailing market conditions supported by operational improvement and a strong customer-centric approach. Our global market share in ATS remained robust, reinforcing our leadership in this segment. While demand softened from October 25, impacting our ability to meet the full year target. -- we have witnessed a recovery and expect approximately 15% to 20% volume growth in FY '27. But also segment delivered steady performance in FY 2026 sales, and we anticipate moderate growth in supported by improving demand tension. IB and HP MTBE reported a stable performance during the year, and we expect both products to achieve double-digit growth in FY 2027. IV volumes declined by approximately 20% compared to FY 2025. This is partly attributed to the unavailability of key raw materials involved in the manufacturing of IVB on account of Iran war. This content has now been allied and production and CSR back on track. Our customized products segment recorded strong growth of 10% year-on-year, driven by increased customer demand. Our antioxidant business delivered an impressive 15% revenue growth in FY 2026, despite a challenging market environment. We expect this segment to maintain strong momentum in FY 2027 supported by market expansion and ongoing product development. Overall, we are targeting approximately 15% volume growth at the company level in 2027. Turning to a caplixpenitures, our investment strategy remains closely aligned with our long-term growth objectives. In FY 2026, we [indiscernible] approximately INR 270 crores in CapEx, including investments in BOPS towards capacity expansion, new product development and operational scalability. We successfully completed our ETS capacity expansion during the year, significantly enhancing our ability to meet growing demand. Our commitment to innovation remains strong. The R&D team is currently working on new products, which upon successful trials could form the basis for the next phase of capital investment in the coming quarters. Looking ahead, we have earmarked approximately INR 200 crores to INR 250 crores of CapEx for FY 20'27 and showing continued investment in capacity expansion, innovation and operational efficiency. Under BOPS, the 100 subsidiary of OS, a few products require process reengine link, which is expected to take approximately 6 months with the revenue contribution and anticipated from Q3 of FY '27 onwards. We would like to highlight that the company has been achieving all its expansion goals through internal approvals, and it remains debt free. In addition, the company has a rise of approximately INR 190 crores as on 31st March 2026. The Board of Directors have recommended a dividend of INR [indiscernible] per equity share of INR 1 for the financial year '25, '26 subject to the approval of the shareholders at the AGM. Thank you. I now welcome your questions for the session. Over to Archit.

[Operator Instructions] First question is from the line of Rohit Nagraj from 361 Capital.

And congrats on good set of numbers. First question is in terms of the new products that we are planning to introduce. So these products, which particular user segment are being targeted? And when do we expect the projects to be commissioned? Because I just know beyond the current ATBS capacity expansion and few other products, we don't have any other projects which are under commissioning. So just a broader understanding on the future growth prospects from the products and CapEx perspective.

Yes. So some of the projects -- products that are under implementation, most of them are downstream processes as in downstream integration for our products, value-added products. They will be entering to segments such as the fragrance industry, such as personal care, antioxidants in the food additives business -- but most of them, I think what's important there niche chemicals. We are targeting the niche chemicals going forward. Some are also in the plastics segment.

Right. And these particular projects will come online sometime during FY '27. And slowly, we will find the revenues coming from FY '28.

In this current financial year, 26, 27, you can expect 2, 3 projects are in a pipeline, and it is expected to come in the second half of this financial year.

Yes. So revenues in '28, you're right.

Okay. Perfect. The second question is, if you can just provide us FY '20 revenue breakup across the large number of products that would be really helpful.

If I go in the breakup in the percentage terms, you can say 1/3 approximately is attributable to the EDS and you can say in that range, on 15% to 20% is in the form of antioxidants a 10% to 12% in the form of AB, 10 to 12 in IVB and test others that you can say that customize and other products.

Perfect. Just one last reason. In terms of the raw material availability and the supply chain, both in terms of imported products and our exports -- what is the current situation that we are facing over the last couple of months? Any challenges thereof? And how have we mitigated that.

At the initial state, if I talk about when this war was started in the month of Feb, we earlier thought that there would be some challenges that would come in the form of arability of raw material and logistics -- but somehow in it states, we saw some issues. But now overall, everything has been cleared and we have not been facing any sort of nonability of raw material. And as far as that logistics is concerned, it is steaming.

Yes. It's quite stable right now.

Next question is from the line of Surya Narayan Patra from Philip Capital.

So my first question is on the TBA side. We have indicated that there was some volume impact as well as price related impact that we would have seen in the current fourth quarter -- so can you give some sense that, okay? Obviously, it seems that in the U.S. market, we would have seen the benefit of the pro oil policy of the U.S. government. But it was looking like from the various data points that the volume demand in non-U.S. market, it was a bit slow or low any challenges that we are facing in terms of the ATBS volume in the non-U.S. market now? And what would be your outlook?

See ATBS remains a stable product -- of course, there are fluctuations geographically and more related to stocking, destocking. Generally, I still think given the oil prices, and I think this product is still on a growth path in the 2-digit number annually. Having said that, we have expanded our capacity. There is 1 or 2 smaller capacity that has come up -- given all of that, I think from an 80-day business purely, I would personally expect say, 15% volume growth year-on-year, at least for the next 3 years and which would take care of our expansion.

Sure. So regards ATBS, again, the second phase of the expansion whether that would be required in this current financial year or not?

Well, actually, it will come into effect by October. But yes, I think more utilization will happen next financial year. More in FY '28.

Sure. One clarification, ma'am. -- whether you mentioned that real organic would not be contributing anything in this current financial year FY '27.

As far as our 100% percent OPaL is concerned, this year means was a harder sale of around 10 in that.

In 27, you are expecting about INR 100 crores, INR 120 crores after the reengineering is done.

Quarter fourth quarter onwards. Second quarter onwards, you will see the revenue from our 100% subsidiary.

Correct. Okay. So there were 2 major project groups. It was like HQ Gil first one, which has already been commenced and whether that revenue stream would be becoming active in this current financial year man INR 400 crores kind of.

That is absolutely the main one.

Sure. And just last one. You mentioned about the CapEx of around INR 250-odd crores. If you can just elaborate what are the kind of the CapEx project that you would be considering this year?

Earlier, we will be value-added products of our existing products going into industries such as food additives, fragrance industry, plastic additives.

Okay. Which value chain basically men that I wanted to know?

I'll tell you, we will be making a derivative of NH. We will be making derivatives of trials and all -- we will be adding a couple of anti-hospital future. Now again, we have not announced part of this CapEx. But going forward, we may be looking at more monomers and polymers also, but that is not confirmed yet.

Okay. Just last one clarification from my side. You possibly somewhere mentioned that the butalfinol capacity is like fully utilized currently. So -- are we thinking of expanding that further from the current 50,000-odd tonnes capacity? Or we are thinking of reducing the external sale and using captively more so that our growth plans would be achieved?

It all capacity currently is around 70%, 75% utilization. And honestly, I don't have space for increasing there. So if the demand goes up, it will be first used for captive it means that cost of external fees and then we will see.

Next question is from the line of Dian Gupta from Geojit BMS.

So just first clarification was I wanted to know what is the use case of like EOR and water treatment and other users?

You know the users already. You are telling me.

No, I mean the percentage-wise?

See, it depends on the polymer TBS the polymers, -- as can be combined with -- it can be combined with accurate acid with other more and more. So it can go up to 10% to 33% of these polymers can have TBS or AMS component. And those polymers like in oil recovery, they are used for oil drilling. But it has these polymers have other users such as in super-boring or personal care industry or detergents or the mining industry or water treatment also.

And do you see any big opportunity in LNG extraction since a lot of share is probably expected to shift to U.S. in that?

Are you talking about shale gas?

Yes, yes.

It is used in tracking of it is us in tracking also, but see, we don't apply to these lines directly. We supply ATBS to the polymer manufacturers. And those polymer manufacturers would be combining it with other monomer making up polymer and then supplying to, say, ONGC or Hampton Schlumberger.

Okay. And have you seen any price changes in ATBS and IHB compared to the last year?

It remains stable. We follow our formula-based pricing mechanism, and that's where it is at.

Next question is from the line of Abhijit Akella from Kotak Institutional Equities.

Just to clarify, this capital work in progress of INR 210 crores approximately at the end of the year. Which specific projects would that pertain to right now? And one extension is -- of the INR 250 crore CapEx we are projecting for next year, FY '27, how much of that would come in VOP and the subsidiary?

If we biforcate this INR 250 crores that we have projected for FY '26, '27, in vehicle, it will go around 40 to 50, not more than that. And INR 200 would be under when is the organic or main holding company. And if I talk about the CWIP of INR 200 crores out of that INR 60 crores to INR 70 crores is yet to be CapEx under the subsidiary 100% subsidiary, that is OPL -- and the rest, there are certain products which are means under the implementation stage and under the CWI that what has been shown under the CWIP. So this INR 120 crores, INR 25 crores of CWIP in VP, this will get capitalized in this financial year.

Okay. And ATBS capacity right now is 50,000 tonnes, is it after the Phase 1 commissioning.

Yes. See, again, it depends on which molecular we are talking about. It used to be the lower molecular wafer is 50,000. Today, the demand is more for the high purity. So the 40,000, but yes, each pass 10,000.

Got it. And would it be possible to just sum up how much the 2 phases together are costing in terms of CapEx? I know we have given some number previously, but just to get an update on that number.

It's from INR 250 crores. You can say that. INR 300 crores including second phase.

Around INR 300 crores. Got it. Yes. Just 1 last thing from my side. With regard to the process reengineering at OPL, any further color you might be able to share which products specifically and what exactly is required there in terms of taking it forward.

We went for a new process. And we faced some leasing troubles there, and then we went to the main consultant and realizing some reengineering is required. So the plant is presently under reengineering. And hence, it should be done by September, and we expect production from October and sales and so on and so forth.

Okay. And so we are proposing to produce in-house or sourcing from outside.

And all we will be producing in-house.

Next question is from the line of Archit Joshi from Nuvama Institutional Equities. I have 2 quick questions. in VOPL, in the line of products that we are planning earlier within which, I believe, MAP is facing certain challenges due to backward integration done by a few customers. That's what we heard. Have you made any plans to discontinue that? Or should we -- would we be still going ahead with the same line of products? And if yes, and where are we in commissioning for MAP and ISO million derivatives?

So ISO my derivatives have been dropped. As of now, we are not pursuing -- we are making a couple of actual I'm in a couple of TA isoamyl has been dropped tertiary a mile alcohol as well as TAP. For MAP also, we will produce -- I have not heard of any customer backward integrating. In fact, we may make something from that product. So none of this has dropped, plans remain the same.

Sure, ma'am. SP1 I'm also for the same kind of gross block addition that we were envisaging earlier, roughly INR 500-odd crores, if I recall correctly. -- the asset turn you were planning earlier was around 1x. Should that be the same in projections for us?

Yes, it will remain one to one.

Got it. One last final one on antioxidants. I believe that the plan that we had was obviously to consume telcos internally, and that would have drop the potential of tall external sales, and in turn, we would have had a bit more extra antioxidants, let's say, around INR 700 crores, INR 800 crores kind of revenue [indiscernible] just wanted to clarify if that also is on track and if it's INR 700 crores, INR 800-odd crores, when do you plan to achieve that scale in revenues? That would be the last one.

It's on track, both the AO and telenor means it will in the range of 800 to 900 CR. You will see that in the next 2 years.

Next question is from the line of Nihar Kamani from Capgrow Capital.

So my first question is on the ATBS capacity utilization from capacity utilization? And do we have any quarter backlog till now? And my second question is more on the industry level. So like the sector had as many [indiscernible] in terms of telestocking, pricing pressure and demand softness.

Sorry to interrupt area, your voice is breaking. It is not very clear.

Can you hear me now Yes, -- so my first question was on the ATBS capacity utilization. And is there any order backlog for ATS -- and my second question is more on the industry level. So the second phase many headwinds, such as channel destocking, pricing pressure times over capacity or demand softness, so where is the industry headed now? And where does Vineti organic stand among these parameters.

ATBS is presently we are running at, I would say, about 80% capacity utilization, 75% even after the expansion. So it's we're doing pretty good in that regard. What was your second question? The industry growth, I mentioned earlier, ATP does see a double-digit industry growth year-on-year. given its varied applications as well as use in oil and gas.

Yes. So my second question was more in terms of sectoral headwinds that the company has been facing for the last couple of years. So what are your how long will these headwinds continue? And are we on the recovery part, say, in terms of channel destocking, pricing pressure down in China? And what's your take on ADD on antioxidants, like is the matter still pending? Are we positive on it?

Sure, sure, sure. So first of all, we did not hear back for the ADD on antioxidants, which means it was rejected. We have reapplied again for it because we have a strong case. I believe in the period, about 80% or 90% applications of ADD were rejected and the Ministries of Commerce have been talks with the Ministry of Finance, an estimation. Nevertheless, we have reapplied -- and if it is to come to it will still take another 6 to 8 months or 9 months for us to hear anything. Talking about the headwinds, yes, the sector has seen a lot of cyclicality in the last few years. cycles have shortened people over act demand supply suddenly customers panic and they want to buy a lot. And if suddenly they realize to have overstock the same with raw material pricing, the fluctuations are cheaper than it used to be earlier as well as with logistics. But I think on the whole, our company has managed the fluctuations quite well -- and given that the products that we are in, we still have strong positions, and we are able to maintain our margins. We are able to pass on the price decreases and increases same for logistics costs. And that puts us in a reasonably good position constantly kept adding products, and we continue to do so without debt, and that will remain the policy going forward as well.

Next follow-up question is from the line of Abhijit Killa from Kotak Institutional Equities.

Just 1 clarification on the margin trajectory. So we saw a sharp expansion in margins through most of last year. How are we seeing the environment this year, the outlook for margins for the upcoming year?

I think we have maintained an EBITDA margin of 26% to 27% because given expansion, new products, raw material fluctuations, I think that we reasonably achievable EBITDA margin on a long-term basis.

Next question is from the line of [indiscernible] Dam Capital Advisors.

Congratulations on a good set of numbers. I mentioned that the cyclicality that we're seeing in the past couple of years, -- from a longer-term perspective, if we were to look at the business in the next say next 2 to 5 years, are we looking to diversify and other sort of chemicals or any inorganic expansion by taking on more debt? Or are we not looking to go a little bit aggressive?

We are looking at organic expansion. We have a good pipeline of products -- products under commissioning as well as products in the R&D phase -- we do feel every year, we should be investing around INR 250 crores or INR 300 for the next 3 to 5 years. And that's the growth trajectory that we are looking at.

Okay. Just one more question. What is your current capacity utilization or the EO plant, I believe it was 50% when we posted a 70% revenue growth in FY '25.

Yes. So FY '26 has been similar to FY '25, maybe 5% growth or something.

So after missing all on something. I mean, why have you not been able to see the amount of growth that you were anticipating in [indiscernible].

[indiscernible] from China in antioxidants and hence, the application for the ADD and that situation hasn't changed. They are undercutting and selling quite aggressively.

Ladies and gentlemen, we'll take this as the last question for the day. I now hand the conference over to the management for the closing comments.

Yes. Thank you. Thank you for taking the interest and asking [indiscernible] questions. We look forward to hosting you again. Thank you. Thank you.

Thank you.

Thank you so much sir. On behalf of Nuvama Institutional Equities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.