GODREJ AGROVET LTD (NSE: GODREJAGRO) Q4 2025 Earnings Call dated May. 05, 2025
Corporate Participants:
Unidentified Speaker
Balram Yadav — Managing Director Godrej Agrovet Limited
Arijit Mukherjee — Chief Operating Officer
S. Varadaraj — Chief Financial Officer
Burjis Nadir Godrej — Chairman of the Board
Analysts:
Unidentified Participant
Ranjit Cirumalla — Analyst
Siddharth Gardekar — Analyst
Abhijit Akella — Analyst
Aejas Lakhani — Analyst
Ankur Periwal — Analyst
Sujith Jain — Analyst
Aman Bodaf — Analyst
Presentation:
operator
Ladies and gentlemen, you are connected to the com to the Godrej aggravate queue for FY25 earnings conference call. The call will begin in a minute. Sadies and gentlemen, good day. Hello and welcome to the Godish aggravate Q4FY25 earnings conference call hosted by IIFL Capital Services Ltd. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference has been recorded.
Before we start, I would like to point out that some statements made in today’s call may be forward looking and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I now hand the conference over to Mr. Ranjit Sirumala. Thank you. And over to you sir.
Ranjit Cirumalla — Analyst
Thank you, Anushka. Good afternoon everyone and thank you for joining us on The Godrej aggravate Q4 FY25 earnings conference call from the company we have with us. Mr. Balram. Yes. Managing Director Mr. Gujis Godrej, Executive Director Mr. S. Vardaraj, Chief Financial Officer and Mr. Arjit Mukherjee, Chief Operating Officer, Aztec Life Science. We would like to begin the call with a brief opening remarks from the management following which we will have the forum Open Forum Interactive Q and A session. I would now like to invite Mr. Baldram Yadav to make his initial remarks. Thank you. And over to you Sir.
Balram Yadav — Managing Director Godrej Agrovet Limited
Good afternoon everyone. I welcome you all to the Godrej Agrovert earnings call. At the outset I am pleased to report that FY25 marks a significant milestone for standalone Goldrej Everwette Ltd. Which recorded its highest ever profitability. The primary drivers of this exceptional profitability were these outstanding performance of our domestic crop protection business and the vegetable oil business complemented by notable margin expansion in our animal feed segment on a consolidated basis. EBITDA margin excluding non recurring items improved by 110 basis points in FY25 as compared to FY24 despite revenue remaining relatively flat year on year. Beyond our financial performance in FY25 we remain deeply committed to the long term sustainability vision.
Sustainability objectives aligned with the Gorges Group’s good and green business for second year in no we have been included in ALA’s leadership band of climate disclosure projects. Climate disclosures and also for water and forest disclosures. We achieved good progress in achieving sustainability targets led by 81% of LNG consumption from clean renewable energy sources and being a water positive company already conserving 15 times more water than the consumption. The company also has been conferred with CIA’s coveted and prestigious Climate Action Program 2.0 award. Coming to the key financial and business highlights of each of our business segments in animal field While volume grew marginally in Q4FY25 segment, margins remained flat for FY25 segment margin improved sharply from 4.6% in FY24 to 6.1% in FY25 on account of favorable commodity positions and cost optimization in ECM.
Further, our EBIT per MP improved significantly by 28% from 1542 from rupees 1542 in FY24 to 1973 in FY25. Volume remained flat year on year primarily due to lower placement and lower end product prices in the first half of the year. Vegetable oil segment delivered remarkable results in FY25 followed by increase in average realization of crude palm oil and palm kernel oil prices which was fueled interabia by increasing import duty in September 24th. As a result, segment revenue and results for Q4, 25 and FY25 improved significantly while fresh food bunches arrivals for FY25 were lower by 8% year on year.
FFP arrivals for Q4 were higher by 10% year on year. Our crop protection business delivered a stellar performance throughout FY25 and Q4 FY25 for FY25 segment margin at 40% was impressive growth over FY24. This was fueled by robust volume growth across in house and traded product portfolio. FY25 was a challenging year for ASTEC lifecycles marked by lower offtake in the CDMO business coupled with sharp decline in the prices of its enterprise products. However, in Q4FY25 Astec reported a sequential improvement in performance as compared to Q3FY25 on back of improved volumes and lower export costs. Our dairy segment reported improved profitability in FY25 a direct result of our relentless focus on enhancing operational efficiency and favorable milk spread.
Furthermore, our strategic emphasis on value added products continues to gain traction, now contributing a significant 37% of our total sales. The performance of Q4 was impacted due to an increase in procurement prices in Our only business Q4, FY25 and FY25 earning and margins declined slightly because of lower volume of live birth category as we continue to focus on increasing variance of branded businesses and reduce exposure to live birth businesses while the volume of branded categories grew in FY25 by 4% year on year. Profitability was adversely impacted due to higher input costs and unfavorable channel mix in Q4 FY25 margin in the branded category improved sequentially due to higher realization and low input cost.
Javs joined Venture in Bangladesh. KPI Cordright recorded a decline in revenue of 13% year on year in FY25 due to ongoing economic challenges and political instability in Bangladesh. That concludes our business and financial performance update for the quarter. With this I close my opening remarks. We will now be happy to answer your questions. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ranjit Sirumala from IIFL Capital Services Ltd. Please go ahead.
Ranjit Cirumalla
Yeah, sir, thanks for this opportunity. My first question is on the Aztec life science front. So the business has seen a bit of a challenges in the year gone by. What are your thoughts on this particular businesses over the next couple of years? If you can just a little more light on that. Thank you.
Arijit Mukherjee
So there’s Arijit. Let me try to answer this question in two parts. First part was first the problem which we faced last year was because of high price inventory which is mostly in our enterprise section. So last year we have liquidated all the high price inventories. And then from Q4 if you see there is a little bit, there is an improvement in terms of the volume uptake and with the fresh arrival of the raw material intermediate and the volume increasing we think that more or less the back phase of enterprise business is over. So now we will see a positive contribution from that business and hopefully by Q2 the volume should be normal in terms of the increasing demand from U.S.
and other geographies in terms of commodities. As you know, the second half of the year generally goes more for contract manufacturing. So whichever contract manufacturing is between the H1, so most of the contract manufacturing POs and negotiation has been over. So this gives us a confidence that almost most of the contract manufacturing will be coming back to the normal demand. Contribution for contract manufacturing does not vary too much. It has been consistent over the last two, three years. So we see that more or less the business is moving towards a positive phase in terms of contribution and volume demand.
And any long term Long term. But we are now currently working because today we are almost 60% of the business comes from contract manufacturing. By end of the year we think we should build up to 70, 75%. Already there are a number of projects which we are working in R and D And I think by Q3 there will be new molecules which will be commercialized. Some will be in the backward phase which adds up to the margin and some will be the new molecules. But overall the focus is more towards next two, three years will be more into contract manufacturing and it will be mostly in the innovator space.
So that is our first preference to go with the innovators to get new molecules.
Ranjit Cirumalla
Right. Sir, thank you. Could you just share a guidance on the growth numbers for the contract manufacturing business? We were earlier confident of more than 30, 40% kind of a growth to have ended a figure.
Arijit Mukherjee
More or less. It will be around 35% year on year. The growth will be 35% for the.
Ranjit Cirumalla
Next couple of years.
Arijit Mukherjee
Couple of years.
Balram Yadav
Yes.
Ranjit Cirumalla
Yep. Thank you. And how soon can we get back to our previous size in the enterprise sales?
Arijit Mukherjee
It is very difficult to predict after. But Q2 is the time when the demand heavily. Most of the geographies, India as well as US and other geographies, it picks up. I think we have to wait for a month or so to see how the demand just translates to actual orders and how we compete with China and everything. But we are very near to the start of the season.
Balram Yadav
So I must also tell you that all our buyers particularly in us are closely watching the tariff situation. And I think the story will be clearer in a foresight or so. By that time we have to start placing the orders. And considering the kind of differential we have with China in different molecules we believe that the margin expansion will happen because of the tariff regime also. Right, sir.
Ranjit Cirumalla
Thank you. I will come back in queue.
operator
Thank you. Ladies and gentlemen, I would like to remind that you may press Star and one to ask a question. Ladies and gentlemen, I would like to remind participants that you may press Star and one to ask a question.
Arijit Mukherjee
Hello, Anushka.
operator
Yeah. Sir.
Balram Yadav
Yeah.
S. Varadaraj
People are unable to ask questions. There seems to be some technical issue. Can you please check?
operator
Yeah. Yeah. Sir, give me a moment, I’ll check.
S. Varadaraj
Yeah. Yeah, you’re getting.
operator
Ladies and gentlemen, I would like to remind that you may just want to ask questions. The first question is from the line of Sidharth Gadekar from Equals. Please proceed.
Siddharth Gardekar
Hi, sir. Good afternoon. The first question is on the Aztec Enterprise business. So now going into FY26 with our high cost inventory liquidated, how should we think about gross margins in these businesses.
Arijit Mukherjee
Now within enterprise also there will be few molecules which will be showing a relative good growth of growth percentages. Right. So it should be around say 15, 20% of growth volume we can expect for. But there will be still there will be say 20, 30% of the molecules which is under stress. That might be because of IMM increase. It might be because of margin.
Balram Yadav
Of the enterprise.
Arijit Mukherjee
The gross margin will again be around 612 to 14% should be the gross.
Balram Yadav
Margin contribution margin will be 12 14% gross margin will be close to about.
Arijit Mukherjee
20% 20, 23% of the gross.
Siddharth Gardekar
Okay, so secondly in the CDMO business and we are guiding for a 35% growth, how much of this would be coming from new molecules and how much of this would be coming from the existing business from FY245 I think this.
Arijit Mukherjee
Year majority of the growth will come from the old molecules where the volume because last two years the volume did not pick the did not reach the peak. So 90% of the growth will come from the old molecules. Few new molecules will come up. But this will be in the initial phase. So it will be very small volumes.
Balram Yadav
Which will come 35% number looks big. But I must also tell you that last year was a very subdued year for ctmo. Not on a low base. Correct.
Siddharth Gardekar
So lastly in terms of Capex is are we planning any Capexes on the asterisk side?
Balram Yadav
No Capex in assets in gavl. We are only putting Capex in high margin businesses now. Particularly oil palm plantation is it? Oil palm plantation business is the recipient of most Capex. They’re coming up with refineries in palm card alloy etc. Apart from that they’ll get into further value added products also. So the capex is being done for that.
Burjis Nadir Godrej
Also lastly on the domain for next year, so very minor, just maintenance things. Nothing is planned for further capex until we get more visibility into the business and until EBITDA and overall profitability improves.
Siddharth Gardekar
So lastly on the domestic side, how should we look at a placement for the carrier season?
Balram Yadav
In the crop protection business placement is very good on the back of expectation of normal monsoon. So I think we are fully geared up. I think dispatches are happening. Placement is happening at the retail level. So we are expecting a good season and we are also expecting very good volumes.
Siddharth Gardekar
Okay sir, thank you so much.
operator
Thank you. The next question is from the line of Abhijit Akela from Kotak Securities. Please proceed.
Abhijit Akella
Good Afternoon and thank you so much for taking my questions. I’ll just start with a slightly broad question sir, if I may. But it would be great to get your perspective on the outlook for the various business segments for the upcoming financial year in terms of growth and profitability. It would be great to hear your overall broader perspective on that.
Balram Yadav
I think I must also say that last five, six quarter have been very, very important for us in connecting lot of our margin structure, lot of our distribution model, the portfolio also in terms of products within a business. So we believe that. I think we should get back to growth. Some of the green shoots we have seen in the last two quarters. Overall we are expecting between 16 to 18% growth, top line growth in GAVL backed only by volume growth. They are not taking too much of inflationary growth next year. And I think the main businesses where growth is likely to happen is crop protection business in the animal feed business and in the Aztec life sciences business.
As Mr. Said, expecting a pickup in the volumes so that we can get back to earlier levels. And that is why we have budgeted higher growth in asset life centers, crop protection. They will be launching one molecule which will account for some growth and rest of the growth will come from earlier products. And in the animal feed business, last year was a washout in aqua feed, particularly fish feed. We believe that this year because of very good field prices, the volumes are coming back. So we are expecting very good growth in the aqua feed segment in animal feeds as far as profitability is concerned, again we have taken a growth of 16 to 18% profit.
I must also tell you that in animal feed, in crop protection business, in oil palm plantation business, the profit percentage and profit as a percentage of sales already very high. So we have not taken any growth in profit per tonne. But we have whatever growth is there will come from volume but big profit improvement will come from reduction of losses in asset life sciences. This year we say, we are saying that on a conservative basis our loss should come down to less than half of last year and that will definitely drive profitability of good aggregate and take US to a 16 to 18% growth overall at consolidated basis.
Abhijit Akella
Okay, so 16 to 18% on the top line front and also on the bottom line. Sir, that how we should think about.
Balram Yadav
It, 16 to 18% on bottom line. But most of it is going to come from loss reduction in Aztec lifecycle.
Abhijit Akella
Sorry, just wondering, shouldn’t the bottom line growth be higher so than the top line growth if you know the losses are reducing.
Balram Yadav
So I’m saying that According to me, we can be 1 or 2% higher, but I don’t see any significant. And you must also remember that we are already at 30% EBIT level in what would be the EBIT level in crop protection? 40% EBIT level in crop protection. Plus the oil prices are extremely high in oil palm plantation business and animal feed business. Also. There has been significant improvement in margin, as I’ve already talked about that. We have seen a significant improvement in margin in our feed business. So I feel that I think whatever growth and profitability in these businesses will come from is going to come from volume.
But I also feel that there’ll be a drop in profitability from 40% EBIT level in agrochemicals because all of us know that it is not sustainable.
Abhijit Akella
Understood, sir, that makes sense. That’s helpful. Color. If I may just take a couple of questions to dig a little bit deeper into some of the segments. So the dairy and Goodrich food segments seem to have seen some margin compression in the maybe fourth quarter particularly. So what’s the reason for that and how do we expect that to go going forward? And in animal feed, you know, cattle is the largest segment and we kind of struggled in the first half last year I believe because of lower milk prices. Are we seeing a recovery in that segment given the fact that procurement costs seem to be moving up?
Balram Yadav
Yeah. So you’re talking about in both our food businesses we had an extreme challenge in Q4 also and which continues in Q1 also is the high prices of input, which is the chicken prices have gone up as well as costs have gone up and milk procurement costs have gone up and the prices have not kept pace in chicken. They have not kept pace because of the bird flu situation in west and South India. For some time the industry has gone through a lot of pain and now the prices have started recovering. So we may see marginal improvement in this quarter, but more improvement in the next quarter.
In milk. There is a lag between increase in procurement prices and increase in consumer prices. So that is what we are seeing. Also one reason for margin compression in dairy business was that we accelerated our marketing initiative for our value added products. And you’ll be glad to know that we spent almost six crore rupees in quarter four of last year and we have taken Ranav Dububasti, the superstar of Southern cinema, as our brand ambassador. So all those spends have been made. We believe that these results will start coming in, in, in this year. And I’ve already explained why the margins are compressed.
I think that rebound is Happening.
Balram Yadav
So you will see. Yeah, but cattle feed is 50% of overall market and because wheat prices have started to go up, usually farmers alternate between.
S. Varadaraj
Is there a question? I think. Sorry, we are hearing your internal conversation. Volumes are expected. So this year volume growth was minus 2% but margins improved because normally at that. If you can see this is.
Burjis Nadir Godrej
I think we can move to the next question. Abhijit, if you are.
operator
Thank you. Please proceed.
Balram Yadav
Yeah. Good afternoon team. So my first question is that animal feeds had a benign raw material environment. So how is the situation right now and the EBIT margins that you have.
Balram Yadav
Reported for the full year?
Balram Yadav
Do you expect margins to remain at the same levels?
operator
Sorry to interrupt. It seems like that the management line has been disconnected. I’ll rejoin. Please wait for a moment.
Balram Yadav
It.
operator
Thank you for waiting patiently. We have connected the management to the line.
Burjis Nadir Godrej
Can we go to the next question please?
operator
Yes. The next question is from the line of Aegis Lakhani.
Aejas Lakhani
Hi there. Give me a moment, sir.
Arijit Mukherjee
Yeah, please check whether.
operator
Yeah, please connect.
Aejas Lakhani
So my first question is on animal feed. You know, this year we’ve had a benign raw material environment which has led to a higher segment margin. How do we expect FY26 to shape up from a margin perspective as well as a growth perspective?
Balram Yadav
So one of the other reasons for very good margin expansion was very good raw material falls we took last year. But you’re absolutely right that we are not seeing the kind of inflation we would see in off season in the animal feed business. So that is, that is still continuing. So one thing I must tell you about this industry, I think this industry has benefited the most as far as profitability is concerned from the government’s ethanol policy. Because while government corn became expensive, but all the protein sources, particularly soya meal and all kinds of meal, including cotton seed meal, rapeseed meal, etc.
All of them became cheaper because of the DDGs which got produced from making ethanol. So I think the industry has benefited from that. The second benefit came from ban of DORD exports to Bangladesh because that was one area where they would take away almost half a million tonnes to 0.7 million tons every year from us. And that would result in some inflation in our de oil brand prices. All these things are likely to continue. So we are very sure that either we will build on our margins or we will maintain the margin. My expectation is that our EBIT per ton will remain between 1900 to 2000 rupees on an average some quarter which may go up some quarters, it may come down, but I’M talking about the annual number.
Got it.
Aejas Lakhani
So my second question is on vegetable oil. Could you speak about the outlook for the segment? That’s point number one. Within that the benefits of forward integration that you have been doing. Could you specifically call out that the margin expansion that we have seen this year from 15 to 17%. How much was it on account of the palm oil prices being higher? How much was it on account of the productivity benefits of forward integration? And what has been the FFB arrival, you know, FY24 and FY25 and how we should think about it in 26?
Balram Yadav
Okay, so I will start answering from price outlook. The prices have definitely started correcting today. The exit is close to 115 to 118,000 rupees per metric ton of CPU. Odin is also at similar prices. So I think they have come down from the peak of 131, 132and the forward prices for say August, September are showing at about 107 to 110 rupees. We do not know what will happen but definitely the prices are softening. Where we are extremely happy is because palm kernel oil which competes with coconut oil. The prices are still holding at close to 215 to 220,000 rupees per tonne.
I think that will definitely is likely to continue because the demand for palm control oil is very strong. On the second question is our journey. Our first investment in that journey was the refinery for crude palm oil and I can say that it has added like to like basis almost 1.25% to our overall profitability. The second investment in the journey is under progress which is a refinery from palm girdle oil. All the palm kernel oil will also be refined and sold as value added products. But that is likely to happen only towards the end of this season and definitely in the next year.
That will add another 1 to 1.2% depending on prices to our overall profitability. So these two investments will add close to anything between 2 to 2.5% to our overall profit depending on the price of the product. The third investment which is under discussion is about hydration, hydrogenation and interstellification plants which will help us to manufacture shortenings, bakery fats, cocoa butter substitutes, non dairy milk, etc. Which will add close to 1 to 2% to our overall profitability once we start doing that. However, having said that, the third phase which launches us into this B2B food product will require a lot of development of these products along with the partner clients.
I think for that we have set up a R and D center in Rabalay. In the agrochemical R and D center we had one floor which was available and that has been converted into R and D center for oil and fat. So this is the way forward. The best thing about this journey is that I think CPU prices will still be relevant but will not be. That will not add to volatility of profits to a large extent in another two years time. So the journey is already started, investments are already underway and more investments will be made.
But we believe in FY27 you should get a glimpse of what a value added oil business would look like. So please tell what is the so.
Burjis Nadir Godrej
In terms of the fresh fruit bunch arrivals? Fresh fruit bunch arrivals for the year. Was lower on account of the several factors including the water availability and the spatial distribution of monsoon. But for Q4 the fresh food bunch arrival grew by almost 11% in Q4. Also FY26 is expected to be a good year from a fresh fruit bunch arrival perspective and we expect close to 18% growth in fresh fruit bunch arrival in the financial year 2026.
Balram Yadav
And April has been stunning. Yeah, April has been stunning.
Aejas Lakhani
So just to follow on this, the pkos and CPO realizations erstwhile used to be in the range of 20 to maybe 35 40% what the number you called out which was 215 versus 115, it shows a far starker jump. So do you see this as a secular trend or is this a one off that will revert back to the 40% spread level.
Balram Yadav
So according to me it is also season to season. I think there is a big jump in the demand of palm kernel oil for food as well as for industrial purposes and we believe that. I think nobody can predict what will happen say four quarters later. But I am very sure the kind of trends I see I think first and the second quarter definitely this kind of gap will prevail. My sense is that PQ will be 1.8 1.9 times of CPO price.
Aejas Lakhani
Understood? Perfect sir. My next question is on the live birth segment on poultry specifically. So your aspirations in this segment are pretty clear to us in terms of what you’ve communicated. But today could you just give a breakup of FY25 what has been the proportion of live birth after you have taken over incompleteness? What is that segment revenue as a percentage of the overall what is RGC and Yammy’s just directionally so we know.
Balram Yadav
Where we are headed before that let me tell you Mr. Will answer the other Question. But I must tell you that could we reduce the live birth variance in the business and brought it to very low level? Otherwise the kind of we have seen in this market because of bird flu incidences in west and south, we would have really suffered heavy losses in this segment.
S. Varadaraj
So in terms of volume, the saliency of live birth for FY25 is close to 32% while that of Yemis was around Yemis and real good chicken put together was around 68%. That is what in terms of volume saliency was. While in terms of revenue, if we had to look at the saliency of livebird was close to 23% and as against 39% in the previous year. Yes.
Aejas Lakhani
Wonderful. So, sir, is it fair to assume that given that the business is now tilted more towards RGC and Yummy, which have a significantly better margin profile as compared to lifebirds, we should start to see the benefits of that in FY26?
Balram Yadav
That is the expectation.
S. Varadaraj
Also, more importantly, the volatility will come. For instance, let’s take Q4 itself. Q4 of FY24 had a very high live bird price. But was it sustainable? The answer was no. And that’s why when you Compare it with Q4 of FY25, we see a dip in the live bird contributions and live bird margins. So this kind of volatility will also go down.
Balram Yadav
Another thing which I want to add is that in both our food businesses we have doubled our ad spend over FY25.
Aejas Lakhani
Understood. And so when will this segment start to see reasonable healthy return ratios? The live birth segment especially. Sorry, the poultry segment especially.
Balram Yadav
We are expecting things to change in a quarter or two. But I’m saying that I would hold this question for one full quarter because there’s so much we have done in dairy as well as chicken and the results are yet to be seen. So probably we’ll wait and watch for three more months if we have to pivot something or focus something else. And one thing which we are also seeing is subdued consumer demand. So we believe that sentiment is also likely to pick up and improve in time to come. But definitely the direction is right.
Aejas Lakhani
Noted, sir. On the dairy side. Now we have spoken about the significant improvements we have done and you’ve called out the higher AMP spends for the quarter. But if I were to take FY26, how should we expect growth to be? How should we directionally think about the value added portion which, which has been about 36% of revenues or 37%? How should we incrementally see that going up. Where are we on the direct procurement model today? And directionally, given that milk procurement prices are going up, have we taken an increase in our products so as to pass on the increased cost of materials?
Balram Yadav
So overall growth in volume in all blended all products is taken at about 10% in our daily segment. And we have not been very, very aggressive in growth because we are having problem in top line growth for last two years. The salience of value added products, it.
S. Varadaraj
Will go up to almost 40% plus in the next year. The saliency of value added products and also in terms of margin, the EBITDA margins, we expect that to expand from the current 5% in the current financial year to almost 6 to 7% in the next financial year.
Balram Yadav
I must also say that regarding price increases in some of the value added products, where we could we have taken the price increase. Can you hear me?
Aejas Lakhani
Yes. What percentage of the portfolio would you have taken? Price increase almost 20.
Siddharth Gardekar
No.
Balram Yadav
Okay, let me just. Let me just complete what I’m saying. So there is a price increase which happens which the industry takes along with everybody else which is part of the cost of increased cost of milk. I think those two pricing periods have happened in last four months. Apart from that, in certain value added products we have taken a price increase of about 4 to 5% to 10% in certain areas. But that constitute only 10 to 12% of our total portfolio. As and when we get an opportunity, when we start advertising in that segment, we definitely are planning to take a price increase even if the market does not take a price increase along with us.
So I think that journey has started of premiumizing and other things which is going to be backed by ad spend. So I think we will see margin improvement all across in the dairy segment. But in pure plain milk we will have to be with the market.
Aejas Lakhani
Okay. And sir, where are we on direct procurement with farmers? What percentage of the milk is now being directly procured?
Balram Yadav
I think we can give. It has already crossed 60% but I would request my colleagues to get to the thing. And I think our plan is to cross 75% BPM. That is the target. Because that is the only big initiative which is ongoing in the procurement because it gives a lot of benefit. I must say that we have just because of direct procurement we have half the number of are killing centers. So it is becoming very. I would say the depth is increasing and the cost is decreasing. The rate of decreasing cost is slower. But definitely it is becoming more and more efficient.
Aejas Lakhani
Sure, sir. And sir, on crop Protection. You know, you mentioned in your opening remarks that the 40% margins are, you know, at the higher end of the threshold. So how should we think about margins for FY26? And also could you comment about how the in license portfolio is doing and what is the outlook there?
Balram Yadav
Let me just start that. Definitely why we have taken a drop in margin because we have taken a 30% plus increase in top line. We believe that we need to expand geographically because we should not be dependent on only two molecules, few crops and few geographies. So the kind of debacle we had in Chile should not happen next year. So we have expanded into several other vegetable crops and several other geographies. And all this is going to cost. So this margin drop is coupled with the kind of top line growth we have envisaged because we are going to launch another product in corn which is another in licensing product which will also add to our growth numbers this year on in licensing.
I think the efforts have been. I would say there is a multifold increase in our efforts. Last year we set up FY24. We set up a Japanese desk to connect with Japanese companies. And we are extremely happy to say that we are working with few Japanese companies for few molecules which will be launched in FY27, FY28. Apart from that, we have started the Chinese desk also last year. And in both these countries we have appointed people to further our interests. And I’m extremely glad to say that the China desk is also likely to deliver good, good results.
All in all, I think we are in. I think this is a crunch year for us. We will definitely try to get 30% plus margins and more than 30% plus growth over last year in top line. And having said that, at 30% EBITDA level, we will still be higher than RPM. Hello? Hello? Hello, can you hear us? Can you hear us? We seem to be having some issues with chorus call today, so just check in.
operator
Hello?
Balram Yadav
Yes, can you hear us?
operator
He’s on talk only.
Arijit Mukherjee
Okay, but we are not able to hear anything.
operator
Give me a moment. Sir.
Balram Yadav
Yeah.
S. Varadaraj
Can we move to the next question please?
Arijit Mukherjee
Anushka, we can move to the next question please.
Balram Yadav
Yeah, sure.
operator
The next question is from the line of Uncle Perival from Access Capital. Please proceed.
Ankur Periwal
Yeah, hi sir. Thanks for the opportunity. I hope I am audible.
Balram Yadav
Yes, yes.
Ankur Periwal
Yeah, great. So sir, two questions. First, you know, since you’re discussing on the crop protection side, you did highlight that, you know, we are going to launch one more in license product this year. But just trying to get Your thoughts from a two to three year perspective and since you know you’re already in talks with Japanese as well as Chinese players there, what are our thoughts in terms of one number of new product launches as well as you know, the overall portfolio growth for us given there is a geographic expansion as well that we are working on.
Balram Yadav
So I can definitely talk about one which is already going commercial. The only thing I can definitely tell you is that at least five molecules, one or two mixtures are already in the different stages of registration. So I think we can give some color on that in another six months time. But definitely the pipeline is healthy and all these molecules have at least 10 to 20 million top line opportunity in the second or the third year of the launch if you ask me. Yes, there are, there are, there are two products which are going to come from in house which are mixtures and there are five products which are already in different phases of registration.
They’re all in licensing and all from Japan.
Ankur Periwal
Sure sir. And these five will be launched over the next three years which is FY26, 27 and 28.
Balram Yadav
Definitely everything will be over by FY28. Most of it is 46 and 20.
Ankur Periwal
Great sir, that’s helpful. And just you know a follow up here you mentioned on 30%.
Balram Yadav
Registration can go, go by 1/4 or here and there it can happen but point is that so it may not fall in the, in the financial year but definitely will happen in next eight to 10 quarters. Everything will be in the market.
Ankur Periwal
Yeah, yeah, should be good. Just on the margin front, you did mention that we look to maintain 30% plus you know, EBIT margin in the standalone crop protection side. Was that a guidance only for FY26 or even let’s say two years out when these products get launched. Okay, and so let’s say three years out, will that number be similar or will be probably drifting down a bit, maybe more closer to 25, 20, 25% or your thoughts?
Balram Yadav
Depends on the kind of margin we get in, in licensing product because as these variants of our own molecules come down, definitely you don’t get this kind of EBIT margins on in licensing but my sense is that between 25 to 30% is something which we try to maintain three years out. Also
Burjis Nadir Godrej
the key point would be that you’ll still be higher than peers in those time frame. So that’s something that you should know.
Ankur Periwal
Sure noted sir. Secondly, on aspect side you did mention, you know, on the strong revenue ramp up that we see. So two parts, one pricing led pain in enterprise Segment you mentioned is largely over. Are we starting to see some volume led uptake here?
Balram Yadav
Yeah.
Arijit Mukherjee
So the growth will be volume led this year and price will be a little bit of correction but the growth will come only from the volume. Okay.
Ankur Periwal
A large part of this 30% odd growth will be led by the CDMO business. And what timelines are we looking for a peak utilization of? You know that contract, that product generally.
Arijit Mukherjee
The product which will be launching this year generally takes three years to reach the peak volume.
Ankur Periwal
Okay, sure. Just second bit on the margin front in Aztec here. While there is a strong ramp up we are looking to witness in this year, the margin guidance still is slightly subdued in terms of halving the losses. Any specific reason why we are still expecting the losses to continue? My sense was probably the turnaround in over here could be much quicker.
Balram Yadav
I’m telling you we have had egg on our face for last four or five quarters. How horribly can we go wrong that we budgeted a break even in Aztec Life sciences and lost 140 crores. So I’m saying we are being conservative and the budgeting is done by just taking whatever confirmed orders we had and whatever the margin which we have already logged in in terms of price expectation and raw material cost expectations. So this margin we are 90% plus short that we will deliver. However, there are upsides also. One upside can be general improvement in the market.
Second upside can be some tariff differential from China for the American market if it can give us a few percentage points more. I think these are something which have not been factored in the current margin expectation.
Burjis Nadir Godrej
This is. I just want to add that we are expecting EBITDA positivity for this year. But given the situation on interest cost, depreciation, those are significant. There were significant investments made in R and D center, new herbicide plant. So that’s why the outlook for overall profitability is still looking like it’s loss making.
Ankur Periwal
Sure sir. And just last bit, let’s say two years out given term, near term there are still challenges but let’s say two, three years out. One aspect is growing that 25 30% CADR here which you suggested for what sort of stable EBITDA margins are we looking at for ASTEC three years out?
Balram Yadav
So I think these businesses have to cross 20 plus EBITDA margins to be able to be sustainable and worth their while. So that is what the expectation is. Lot of things are there but I would not hazard a guess right right now. But I can tell you the kind of amount of work we have done. We have appointed consultants outside the country. We are working with a lot of people in trying to turn around this business. So I can definitely see that lot of activity is there. But if you have to rectify it to business results, it will take another 2, 3/4 for us to give you full glimpse of how next two, three years will look.
One great thing about CDMO and why I love it is that suppose you nail something, you nail something for long term.
Burjis Nadir Godrej
And looking into specialty molecules will also be very important. Those contribution margins, gross margins are much more significant than enterprise molecules. And we have discussions underway for contract manufacturing for those. And around the time of Q3, Q4, you’ll see some of those efforts beginning to be commercialized.
Ankur Periwal
Great sir, thanks for the detailed answers there and all the best. Thank you.
operator
Thank you. The next question is from the line of Sujith Jain from Bajaj Alliance Life. Please proceed.
Sujith Jain
Yeah, I hope I’m audible quite some candid observations. Mr. Adav, you made. I have some questions on the dairy business. In the dairy business you still given your aspiration of going from 5 to 6 to 7% margin, here is a business which if you compare with the listed dairy peers, it’s subscale A and B. Even in aspiration our margins are still 6 to 7%. People have reached double digit margins and they have also reduced the volatility of margins in dairy business and kind of given commentaries of keeping it in a narrow band even when prices of raw materials are to go up materially.
So is there an issue in terms of our aspiration falling short? That’s my question. 1.
Balram Yadav
Okay, so definitely what we inherited and what we went through in this business I think is known to everybody through our numbers. I can definitely say that in last two years a lot of correction has been made and you would have seen that correction has been made first in. Hello? Hello.
operator
Hello.
Sujith Jain
Yeah, I lost.
Balram Yadav
I think.
operator
So. Sorry, I’ll rejoin the management. Please wait for a moment. Thank you for waiting patiently. We have connected the management slide.
Balram Yadav
So Sujeet, where did I lose you?
Sujith Jain
No, you kind of started answering and then at least I lost you.
Balram Yadav
Okay, so what we are saying is that a lot of correction has been made in the back end. So that has brought us to the GM margins which is comparable to our peers. We are between 26 to 29% GM margin for last several quarters. Our big problem of lower EBITDA is also because of our top line growth. Now that is one thing which we are trying to address by branding and by distribution reboot. My sense is that it will take time, but we will get this also in order. I must say that the team has been revamped.
We have got very good marketing talent in that team. And I think in a few quarters from now you will start seeing uptick in our value added sales.
Sujith Jain
And when I look at, you know, you got benefited this year because of higher palm oil prices. You already discussed in this call, we have started coming down then. If I were to kind of do my math for FY26, there’ll still not be much of growth if that business were not to support us. This company was supposed to be a good double digit compounder company. And here we have a situation where because of various reasons we have not been able to achieve that is one. And secondly, could there be a reorganization of all these seemingly different businesses into you know, let’s say at least one more entity where some businesses can be housed.
So for example, a dairy business can be spun out separately or could this conglomerate structure be continued?
Balram Yadav
The first answer is for palm oil. I must tell you that we are very, very confident that this year we have watched this plantation business. We have learned so much from Malaysia and Indonesia. Trees are trees. They have their own behavior. You must have heard about mangoes also. Some years there is you have excessive crops, some years you have shortage. And I think the similar trend is in all orchard or say horticultural crops. We believe this year is a year of volume growth. And if April is a sample then we are very confident that we will be able to maintain similar profitability also because of volume growth in FFD arrivals.
On your second question, I must tell you and I must disclose this that we have talked about the portfolio being one of the focus. We have tried to clean up the portfolio. We have bought 49% stake in Godrek Tyson Foods and we are also in the process of buying the stake with minority stakeholders and try and own 100% of state UPL in a month’s time. Apart from one of the one reason is to have a real good look at this. These businesses grow them. The other advantage of owning 100% is also that in joint ventures the restructurings are not very easy.
I think this gives us a lot of flexibility and freedom to restructure the way we want. I fully agree with you that I think portfolio play has to portfolio consolidation or reorganization has to play out in this company. And by buying these stakes we have given ourselves that freedom to do that. So my sense is that we are going to see what each business can do. We are working with some Consultants also to make future plans. And I am sure that in time to come you will see management action on the questions you have asked.
Sujith Jain
One last question is on Aztec. If you could just summarize what went wrong. Is it Chinese flooding? And we had our business more tilted towards catalog business earlier and in future how we can be more agile rather than reacting to circumstances. We proactive to actually take some actions ahead of the time.
Balram Yadav
I’ll simplify the whole thing. I’m telling you that in enterprise business we lost heavily because the price is just half. And we were left with lot of finished product and lot of high cost raw material. At one time our cost of raw material was higher than the finished product. So we sold a lot of material on negative contribution which accounts for almost 50 to 55% of our losses. And the second thing was that EDMO which was supposed to pick up also did not pick up. These were customers who were with us for a long time, but they just reduced their quantities or postponed their quantities.
So this was the problem of last year. Now the first problem of high raw material cost has been sorted out. All the products are and positive contribution which is increasing with each consignment. So that is there to make this business more sustainable and less volatile. I think we need to track PDMO big time. And that is where our efforts are on. And I think if we are talking about 30, 35% growth this year, in case that happens for one or two years, and we would say that we are on the right track, we believe that we are doing everything, whatever is required to become a good and a favored CTMO player.
Let us see how it plays out. My sense is that we will be successful.
Sujith Jain
Okay, sure. All the best. Thank you.
operator
Thank you. The next question is from the line of Aman Boda, an individual investor. Please proceed.
Aman Bodaf
Hi, thanks for the opportunity. First of all, one feedback my side. One of the participants, Mr. Ages for last two quarters has 20 minutes on the call which leaves very less time for us because we get to talk to the management only once in a quarter. So if we could limit the time given to each participant so that more participation can happen in the call. That is my first request to the management.
Balram Yadav
Thank you. Thank you for pointing out.
Burjis Nadir Godrej
Please do reach out to us offline and we’re happy to answer any queries that were unaddressed.
Aman Bodaf
Thank you, sir. So that was just one. I just have two small questions. One is on Aztec. So if I talk about say 2/4 back, our guidance for F25 was that we’ll do about 400 to 450 crores of top line on the CMO side. While we’ve achieved almost half of that in terms of 225 crores which is down versus what we did in F24. So if F26 we are saying that the business volume returning back to normal. Can we now for the full year. F26 do a CDMO business number of that 400450 crores which was expected for F25.
Arijit Mukherjee
So let us say this way last quarter which has happened is that some of the orders which generally the CDM orders which comes in Q4 was in the last moment being cancelled. That is why if you see there is a decrease in terms of the overall projections which we have given but for this year this is too early to say because this CDMO takes first portion of the CDMO which is 30% of the businesses happens in H1. Actual 70% of the CDMO businesses also happens in H2 as a negotiation. And the discussion will start in Q2 it is too early to say about the actual projections part but then the way it is moving it seems that the volumes are coming back which we lost in last two years.
And if that that proves right. So we should be there somewhere between 30 to 35% of the growth we can achieve.
Aman Bodaf
Got it, Got it. So that is point number one, point number two to I think what Mr. Godrej also highlighted we as a say for F26 the guidance for ASTERC is that we’ll half our losses. But if I not if I if I just leave aside the pat losses because I understand the depreciation and interest cost at the EBITDA level. What is the broad margin guidance range that the company can share with us? Because sorry to ping ask specific questions but why I ask is that as outsiders or as minority investors in the business these broad ranges help us think about the business better also and you would appreciate that as you we would not have the clarity as what you would have while running the business.
So a broad range on the EBITDA margin if you can share for F26.
Arijit Mukherjee
EBITDA margin historically if you see has been driven by CDMO. Now CDMO is more or less towards the H2 quarter is where the CDMO generally picks up. So guidance currently is that we will be positive EBITDA but in terms of percentage we’ll take some time, at least a quarter time to give you the exact numbers in terms of what will be the percentage share in EBITDA level.
Aman Bodaf
Second, my just One final question is on Godrej aggravate. So for F26 we’ve discussed about 15 to 80% top line growth. But. And that’s heartening to hear and large partly driven by volumes. But I would just second the previous participants point that we’ve been share owners in this business for last eight years. The problem is that the predictability of business goes so low because in each quarter there would be a business that would. Well while there would be something that acts as a negative hedge. So this portfolio construct, I would still humbly request the management to look at what best we can do to unlock shareholder value.
Especially for people who’ve been invested in this company since IPO or for last seven, eight years. That’s just my humble.
Balram Yadav
That is top of agenda for the management also. And we are taking outside help from top consultants to think through all this. The project is underway and I think management action very important.
Aman Bodaf
Okay, sir, thank you so much. All the best.
operator
Thank you. The last question for the day is from the line of Abhijit Akela from Kotak Securities. Please proceed.
Abhijit Akella
Yeah, thank you so much for taking my follow up. So just on the working capital fund. It seems like there’s been a significant. Increase in payables in the year end numbers. Also a reduction in inventories. So if you could please just help us understand what happened there and what we should expect going forward.
S. Varadaraj
Thanks Abdji. So as you may recollect Abhijit, some time back, you know, we had moved away from supplier financing arrangements which were there because the spread was quite high. Now this spread has come down significantly between supplier financing facilities which are available and our borrowing cost. Consequently the sales of supply financing has gone up. And that is the reason why you see that towards the end we have seen more of lower capital employed. Also as you rightly pointed out, our inventory also has been coming down. Both these things have helped us in unlocking value, unlocking our working capital.
Abhijit Akella
Okay, so these levels are sustainable right over here.
Balram Yadav
Okay, great overboard also. So we will keep it at.
Abhijit Akella
Yeah. And just the other thing on the crop protection side, you know, very aggressive growth plans that we have driven by geographical expansion, I guess new products as well. So I mean from being primarily maybe a south based company, you know, which regions are we targeting? If you could please elaborate a bit on that. And then this lower prices of chili which impacted the in licensed products last year. I guess that situation perhaps continues. So how do we expect. How do we sort of plan to tackle that scenario?
Balram Yadav
I think we are focusing on West Central big tagging vegetable crops and for our products we have taken labels for different vegetable crops also. So that is the diversification we feel. Crops vegetables is a very big crop throughout the country so that will help us expand or improve our footprint in different geographies. But this year west and Central will be the focus apart from South.
Abhijit Akella
Just one last thing on the animal feed side, is it fair to expect maybe double digit volume growth in cattle feeds for the upcoming year?
Balram Yadav
Too early to say Category definitely we are expecting higher growth but a blended growth of 7 to 8% is something that we are expecting in which we have seen in last few months. There have been good signs of improvement in the whole category so we believe 7 to 8% of volume growth will happen. Margin expansion will also continue. So my sense is that I don’t see I see a good year for animal feeders.
Abhijit Akella
Thank you so much sir. Wish you all the best.
operator
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Balram Yadav
Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we would be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.
operator
On behalf of IIFL Capital Services Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines.