Hikal Limited (NSE: HIKAL) Q3 2025 Earnings Call dated Feb. 04, 2025
Corporate Participants:
Sameer Jai Hiremath — Managing Director
Vimal Kulshrestha — President, Crop Protection Business
Anish Swadi — President, Business Development & Strategy
Kuldeep Jain — Chief Financial Officer
Analysts:
Dhaval Shah — Analyst
Amar Maurya — Analyst
Rohit Nagraj — Analyst
Ankit Gupta — Analyst
Sajal Kapoor — Analyst
Raj Desai — Analyst
Presentation:
Operator
Good day and welcome to Limited Q3 and FY ’25 Earnings Conference Call. 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 touchstone phone. Please note that this conference is being recorded. Before we move on to the presentation, a small disclaimer to all the participants. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr Sameer, Managing Director Heika Limited. Thank you and over to you, Sameer sir.
Sameer Jai Hiremath — Managing Director
Thank you. Ladies and gentlemen, good afternoon and a warm welcome to all of you. We extend our gratitude to all of you for participating in our Q3 and nine months FY ’25 results conference call. We are pleased to provide you with an update on the progress made by your company. We trust that you have had the opportunity to review our earnings release, investor presentation and the financial statements for the quarter ended 31st December 2024. These documents can be accessed on both Heikel’s website and the stock websites.
I am Sameer Hiremat, Managing Director Heikel Limited, and I will be leading the discussion and presenting the financial results. On this call with me, I have, Senior President of Business Transformation and Strategy; Jain, Chief Financial Officer; Vimal, Head of our Crop Protection Division and Strategic Growth Advisors, Investor Relations Advisors. As we move into 2025, the global chemical market is poised for stabilization and growth following a gradual recovery observed in the last year. Key trends indicate a modest increase in-demand across various sectors spurred by advances innovation, transformation, digitally and sustainability. We have a focus on key areas like demand growth, sustainability initiatives, technological advancements and operational excellence.
Despite the ongoing challenges such as pricing pressure from competitors, especially from China, the global crop protection industry is expected to stabilize in the next two to 3/4. In Q3 FY ’25, our revenue amounted to INR448 crores with an EBITDA of INR72 crores, reflecting an EBITDA growth of 11% on a Y-o-Y basis. For nine months FY ’25, revenue stood at INR1,307 crores with an EBITDA of INR205 crores, a growth of 3% and 18% respectively. Our business initiatives have resulted in increased operating cash-flow of INR102 crores on a nine-month basis Y-o-Y. The Board of Directors at the Board meeting concluded this afternoon have recommended an interim dividend of INR0.6 rupees per share, which is 30% of the face value. We have capitalized our new multipurpose facility at Panoli last month. We expect the ramp-up from this facility over the next two to three years.
As we approach the end of this financial year, we expect to deliver positive results on a full-year basis, led by stronger profit and margin growth. In the current quarter, we have enhanced our margin profile on account of operating leverage and cost-improvement initiatives as well as improvement in our product mix. For our API business, we are witnessing recovery on the back of improved volume offtakes, which is expected to remain steady in the coming quarters. We are strengthening our position in our portfolios, launching in new geographies, onboarding new registrations, which are beginning to come through. On the CDMO side, several projects are moving towards validation and commercialization after completing the development process.
We are well-positioned to capitalize on the healthy pipeline that we have during — in our development and in our validation plants and are prepared to foster long-term growth with our global innovator customers in the CDMO business. Additionally, on the Animal Health side, our project under the long-term agreement with a leading global innovator company is advancing smoothly and as per plan with validation of seven products already completed and the balance to be completed in the next few months. We are engaging with several innovator customers and experiencing significant positive traction, resulting in an increase in new product pipeline and a healthy RFP inflows. The crop protection sector is starting to exhibit signs of stabilization.
There has been a rise in domestic demand, which is supporting our own products as well as lot of innovator RFPs which are starting to come through now in our CDMO business, signaling a long-awaited uptick in the industry. Although China Plus One is expected to strengthen in the current operating environment, intense pricing pressure and dumping continues from the Chinese competitors for generics and commodity products. Heiker strategy is to work towards more on NCEs and new chemical entities and new technologies in the crop and the pharmaceutical business. For the pharma business, for the quarter ended, 31 December 2024, our pharmaceutical business reported revenues of INR293 crores and an EBIT of INR33 crores, which is a significant increase of 450 basis-points on a Y-o-Y basis based on improvement in-product mix and operating leverage.
Our API business is also experiencing volume growth due to successful global customer acquisitions. Furthermore, on the CDMO front, we are moving towards supplying validation quantities of several NC molecules in the upcoming quarters. Commercial supply will be initiated by the end of calendar year ’26 — beginning ’27. For the API business, we are exhibiting strong growth on a quarter-on-quarter basis. We remain committed to boosting volume demand by expanding our market presence and our market-share and adding onboard new customers, while also increasing the share of business for our existing clientele.
Additionally, we are leveraging our market reach through the enhancement of our product offerings. Currently, our product development pipeline includes eight to nine products and we are anticipating to launch three to four products annually. On the CDMOS front, we have seen consistently improvements in offtake from key innovators, a trend that is expected to persist and improve in the upcoming quarters. Our CDMO business experienced an uptick in inquiries, particularly with a greater focus on NCE molecules from various innovator companies. We are committed to seizing these opportunities as several promising discussions are advancing towards development and validation.
Additionally, our two projects for NCEs are making notable strides in Phase-3 clinical trials with their respective innovators and we expect it to launch very soon. This progress is anticipated to support our growth as we plan to ramp-up operations in ’26, ’27. Moreover, our food ingredients projects and our business is progressing well and we expect it to achieve peak revenue in the next two to three years. Overall, the pharmaceutical business is on a growth trajectory as it relates to changing market dynamics, regulatory environments and consumer demands.
Companies that prioritize cost-efficiency, operational excellence, quality and sustainability excellence and innovation will be well-equipped to enhance profitability and revenue, setting the stage for a prosperous 2025 and beyond. Collaboration within the industry and with regulatory bodies will be essential to navigate challenges and seize opportunities for growth in the evolving landscape. Now I’d hand over to Vimal, who will provide an overview of the Crop Protections division’s performance.
Over to you, Vimal.
Vimal Kulshrestha — President, Crop Protection Business
Thank you, Sameer. Good afternoon, ladies and gentlemen. Financials for Crop division. In Q3 FY ’25, the revenue for our Crop Protection business stood at INR154 crores with an EBIT of INR14 crores and EBIT margin of 9%. We have several projects in-progress with our current innovative clients as well as prospective new customers and we are seeing increasing momentum with several companies in CDMO sector for both development and contract manufacturing. About the business verticals we have in own products in-line with our growth plans, we are aggressively identifying and developing new product opportunities to further expand our offerings and derisk our customer and product portfolio.
For our specialty products, we are witnessing increased interaction with customers, especially in new product areas. In CDMO business, currently, it has strong pipeline of eight products from both current and prospective clients by successfully pursuing these opportunities, we expect to strengthen our position among global innovators and promote growth in CW business over medium-to-long term. Overall, crop business, we are investing in research and development, ambressing sustainable practices and adopting precision technologies, we’ll be well-equipped to capture opportunities present presented in these dynamic market. While challenges continue to arise, our focus on adaptability and innovation will be crucial in successfully navigating the ever-evolving landscape of agrochemical sector. Together, we can drive meaningful change and position ourselves for success in the future. Now I would hand over to Anish, who will provide an overview of Animal Health business and business strategy. Over to you, Anish.
Anish Swadi — President, Business Development & Strategy
Thank you, Vimal. First, I’d like to discuss a brief on the Animal Health business. The development of various APIs for an animal health innovator is moving forward successfully under our long-term agreement. We expect to complete the validation of the portfolio in the upcoming two quarters, which will assist us in securing the product registration in various countries and ultimately enable the launch of these products across several global markets. Post that, we will be in a position to commercially sell the products across the world. We are proactively engaging with several new clients in the animal health space for process development and the synthesis of several complex molecules for NCEs and the outcome so-far have been promising.
We continue to garner several new inquiries from companies across the globe. On our transformation project, Project Pinnacle, it has already been showing some positive results over the past several quarters. We have made significant process — progress in maintaining growth across our diverse operations. We have amplified our dedication to ESG initiatives, expanded our geographical reach, upgraded our technology initiatives and attracted new customers by bringing them on-board. Additionally, we are consistently investing about 4.5% to 5% of our revenue into our R&D to drive innovation in products and services that meet the changing demands of all our customers.
Our commitment to continuous improvement and innovation positions us to stay well-ahead in the market dynamics and preserve our industry leadership. As we move into the next phase of our strategic plan, we are prioritizing the front-end to seize opportunities that will strengthen our business pipeline. We have further strengthened our front-end business development teams globally, which will help us capture more opportunities as they present themselves. Overall, we remain optimistic about our future and are confident that our strategic initiatives and focus on sustainability will equip us to face challenges and achieve long-term sustainable growth.
Now, I would like to open the floor to Q&A.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wish to ask a question may press star and one on the touchstone telephone. If you wish to draw yourself from the question queue, you may press star and two. Participants are requested to use handsets only while asking your question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles, we have our first question from the line of Shah from Girik Investments. Please go-ahead.
Dhaval Shah
Yeah, hello. Yeah. Yeah. Yeah. Hi, very encouraging to see the strong commentary on the pharma business and also the bottoming out-of-the agrochemical business. So my first question is on the pharma side. On the CDMO front, you mentioned about various molecules in three — in Phase-3 trials and plus close to commercialization. And so I would like to understand first, so what is the pipeline of molecules do we have, which are in Phase-3 and 4 trials? If you could share some number? And secondly, the commercialization expectation, should we be expecting any in the FY ’26 or everything will come in FY ’27? And also how many molecules are moving you feel are close to the commercialization and validation? And that’s my question on pharma side. Yeah.
Sameer Jai Hiremath
Yeah. So I’ll — hi,. So we have currently about 10 to 11 products — sorry, 13 to 14 products in the CDMO under various pipelines and most of them are between Phase-2 and Phase-3. Phase 4 is already getting into launch mode. Out of that two products are very close to launch, which we expect it to be launched in the — towards the end of financial year FY ’26 and the others will get launched if everything goes well in FY ’27 and beyond. Apart from this, we’re adding on every quarter new inquiries and new molecules. So the pipeline is building up.
A few years ago, this pipeline was a few products, then it became five to six products. Now we’re talking of 13 to 14 products. As we go-forward, the number of projects during — between Phase 2b and Phase-3 or will be at any given time, we’re targeting to increase this number well beyond 14. And even in these products which are apart from this, we are many — these are all NCEs, as you know, and we also have some three proprietary products, which are products which are just about going off generic, but we have a CDMO manufacturing opportunity, which would also be substantial and but that customers are looking at moving their supply-chain and those are also increasing, yes.
Dhaval Shah
Okay. So these two molecules you mentioned are going to be commercialized in end of FY ’26 and those are NCs, if I heard it correctly.
Sameer Jai Hiremath
Yeah, end of ’26, very early ’27. That’s the customer indication that we have as of now and all NC molecules, yes, NC molecules.
Dhaval Shah
So now if you see in the history of, it is the first time where NC molecule is getting commercialized for us, which was in CDMO stage.
Sameer Jai Hiremath
This is — yeah, this is — out of these, these are advanced intermediates. This is not the final API, but customers decided to do the last step in-house, the last couple of years. But yes, this is not the first time we have done in the past, but not at this scale. They were very earlier — early-on intermediates, this is advanced intermediates of significant potential going-forward, yeah.
Dhaval Shah
Okay. And then — so two molecules getting commercialized by the customer, I mean the customer being the innovator in FY ’26 end and one molecule in FY ’27 is what you are expecting.
Sameer Jai Hiremath
Yes. And that can be looking at how to accelerate. It also depends on clinical trials, right? I mean, this is the latest number this.
Dhaval Shah
Yes, yes. So all these are Phase-3 giving very, very promising results post Phase-3.
Sameer Jai Hiremath
That’s what I think.
Dhaval Shah
Okay. And so now putting this into the numbers, how will you — how do you see this — the CDMO side of the pharma business growing over the next three years for us?
Sameer Jai Hiremath
Well, I think if you look at our current portfolio today, although our CDMO business, it is — and our own product business is more or less 50-50 if you look at historically last few years, right? But some of going-forward, I think CDMO will overtake the generics business. So we may be working towards a 60-40 type of split from a revenue perspective. Yeah, because our generics business also is kicking-in, we are filing in three, four DMFs every year. Our existing products also volumes are growing. We’re entering new geographies and new approvals. But it’s not only that, there’s a step-wise growth as against you know, that’s going to happen in the business. We have a plan in-place that we have launched our clinical strategy that we started working on two years ago and we have a detailed plan for the next three to five years. Things are moving as per the plan. We have a very structured approach for customer acquisition, new product development and market penetration and market expansion.
Dhaval Shah
Got it. So this three molecules combined, which will be commercialized, could give us what sort of revenue if you can give us any direction?
Sameer Jai Hiremath
I don’t think it’s too early to give you the customer — it depends on how the NC picks up and the volumes pick-up. Customers expect them if you read market reports of the customers, they should — they are expected to be all blockbuster drugs. So I think time will tell, but they are quite promising, yeah.
Dhaval Shah
And the — from a — and from the — as a percentage of the end-market revenue of that consent drug, our revenue-share should be how much around 1%, 1.5%?
Sameer Jai Hiremath
Oh, I think typically depends on the product, right, API cost to the total or advanced intermediate cost depending on. It’s a few percentage of the total formulation value, 10 product value? Okay.
Dhaval Shah
And we are going to be the sole add and will we be the sole advanced intermediate supplier in all these or
Vimal Kulshrestha
Either one or one of two?
Dhaval Shah
Got it, got it. Got it. Yeah. And on the margins front, in the current quarter, our pharma business has slightly seen a drop-in the EBIT margin. What would you that — you allude that drop to change in the product mix or some CDMO revenues, what has gone from 14 to 11%.
Vimal Kulshrestha
Yeah. I think see, in our business, it’s not fair to look at a quarter-on-quarter change. You should look at a more of a Six-Month to six-month or annual — annual change because customer says moves supplies around like all of the supplies which are supposed to happen in December, customers say, can you ship it to us in January because of inventories. So it’s just a little phasing of the molecules. But if you look at annually, it’s a correct way to look at our business because on a Nine-Month basis, our pharma business has grown from 5% to 10% EBITDA that’s doubled a bit, sorry. So that is more of representative than rather than looking from a quarter-to-quarter up-and-down.
Dhaval Shah
Yeah. Got it. Got it. Got it. And from a longer-term perspective, given the couple of whatever is the growth drivers you spoke about, can we assume around — can we be moving towards 20% to 22% EBITDA margins over by FY ’27.
Sameer Jai Hiremath
In the pharma business, so
Dhaval Shah
Overall at a company-level.
Sameer Jai Hiremath
Well, our aim is to cross the 20% barrier, which we were historically doing about two, three years ago. So our target to cross that first and go beyond that also, yeah.
Dhaval Shah
Got it. Got it. Yeah. And just bookkeeping question, what will be our,
Operator
Sir? May please request you to rejoin the queue as there are.
Dhaval Shah
Sure, sure.
Operator
Thank you. We have our next question from the line of Amar Moria from Lucky Investments. Please go-ahead.
Amar Maurya
Sir, thanks a lot for the opportunity. Just wanted to understand, on the pharma scale-up. So you know, this quarter the CDMO has dropped. So any specific reason for this?
Sameer Jai Hiremath
Pharma scale CDMO has dropped.
Amar Maurya
I mean, CDMO percentage as of the overall pharma revenue has came down from 80% to 56% in this particular quarter, right?
Sameer Jai Hiremath
Crop protection, I mean just sorry, crop protection versus pharma. Yeah, you’re talking about. How you talking about your crop?
Amar Maurya
Sir, in both the — in both the cases, we have some CDMO, right?
Sameer Jai Hiremath
Yes
Amar Maurya
So basically in pharma, what would be the CDMO percentage in Nine-Month basis?
Sameer Jai Hiremath
Nine months, I will tell you one minute. Nine months our pharma CDMO percentage is about 40%.
Amar Maurya
Okay. So is it dropped is it dropped significantly like in the quarter
Sameer Jai Hiremath
Because we are — yeah. It has not dropped, it has gone up it’s gone up.
Amar Maurya
Okay. And what would be the CDMO percentage of comp chemical?
Vimal Kulshrestha
It’s about historically it’s about 70%.
Amar Maurya
Got it.
Vimal Kulshrestha
Please look at Slide 14 on the investor presentation.
Amar Maurya
I’ll look into that sir. Yeah. Perfect. T
Operator
Thank you. We have our next question from the line of Rohit Nagraj from B&K Securities. Please go-ahead.
Rohit Nagraj
Thanks for the opportunity and good to hear that both the segments are recovering. Animal Health is doing enough progress. So first question on the animal health front. We have been working on the validation for the innovator. Have we also started for the validation for ex-innovator customers? And if, yes, then what is the timeline that we are looking at? And if not yet, then again, I mean, what could be the timeline when the validation will start and we’ll expect some commercial supplies? Thank you.
Anish Swadi
Yeah. So I’ll just take a step-back. When we look at validation for the innovator customer, what we do is we basically are validating the product, right, for all customers. So when the validation happens, it’s not only for one customer, it’s for all customers because we’re scaling up the product and putting it into commercial and getting all the data for filing. So at the same simultaneous time, we’ve been marketing it or sending samples to external customers as well. So we started that phase almost 12 to 14 months ago. And as we went through the product life cycles of validating several products, we’ve been also shipping samples to customers across the globe. Overall, we expect like a lead-time of anywhere between 14 and 16 months from the time of validating the product in order to get the approvals to sell it in that particular country, depending on the geography we’re selling into.
Rohit Nagraj
Right. So effectively, what you have said in the presentation and comments that next couple of quarters, the validation will be completed
Anish Swadi
, that stays that’s correct. But we’ve also started validating some products of some of the portfolio early-on, right? So those products have been going undergoing registration and then we shortly should be able to sell it in the next quarter or so, as those product registrations come through, we’ll be able to sell those products.
Rohit Nagraj
So just one clarification here. So effectively FY ’26 will be the first year of commercialization of some of the products and revenue generation from those products.
Anish Swadi
That’s correct. In addition to what we’ve — what we’ve received in terms of validation revenue. So validation revenue will end and then commercial revenues will start sometime towards the end of FY ’26.
Rohit Nagraj
The second question is on Project. So we’ve seen improvement in both the businesses margins. Can you quantify how much of this improvement has come because of Project? And if not, then how much of incremental upside can be seen from current levels? So maybe the benefits to that even of, say, 50% 60% have been acknowledged in the current margins or maybe 30% 40% will be left over for the next foreseeable future. So just a comment from that perspective. Thank you.
Anish Swadi
Sure. So I’ll just take a step-back in terms of assessing what Project Pinnacle was all about. Project Pinnacle was a program designed to let — when we were in COVID, we decided that, look, we wanted to know where the market is going to be in the next five years and where we should position ourselves to capture those opportunities. So when we got our partners on-board, we realistically stripped down the entire company and said, look, what are the gaps in each of the operating divisions? What are the gaps in terms of how we need to be more efficient from a manufacturing perspective, from an organization perspective. It was not all only about getting an incremental cost-benefit out of it. It was also to kind of realign ourselves to take advantage of what we — what we think the next future opportunities are going to be.
So Project Pinnacle was revolved around the strategy of the business and then implementing the strategy. So as Sameer mentioned in his opening conversation, we have a three and five-year detailed strategy plan of where we are today and where we want to go in the next five years. And Project Pinnacle has laid out that strategy in detail, highlighting what the gaps are, how do we fill those gaps in and what we need to add-on in order to capture the opportunities as we go-forward.
Rohit Nagraj
So just one clarification here. So getting to about 20% plus margins is also a part of this maybe by FY ’27? Yeah.
Anish Swadi
Absolutely. I mean, not only it’s about not only increasing the revenue, but increasing the margin profile, a selection of products, which are the areas of focus in terms of business that we need to win, what are the growth drivers, what is the ESG goals, so it’s a whole round strategy exercise. It wasn’t just focusing only on the bottom-line, right? Obviously, the bottom-line is what we’re all working towards, but putting all these factors together and ensuring that we deliver a positive and sustainable bottom-line over the next several years.
Rohit Nagraj
This is helpful. Thanks a lot and all the best.
Anish Swadi
Yeah.
Operator
Thank you. We have our next question from the line of Ankit Gupta from Bamboo Capital. Please go-ahead.
Ankit Gupta
My question is. Thanks for the opportunity. So my first question was on the veterinary side. If you can talk about,
Operator
Can you please be a little louder?
Ankit Gupta
Sure. Thanks for the opportunity. So my first question was on the veterinary side. So with commencement of commercial sales from FY ’26 onwards, how big can this segment become for us over the next two, three years, if you can highlight what is the potential for this segment to grow in next two to three years, FY ’27, ’28?
Anish Swadi
So I’ll take it a little further. I mean, you know, we were always in the animal health business, but one of the results of Project Pinnacle, as we talked about earlier, was to really focus on this business and become a key supplier, a niche supplier to the animal health industry and we’ve done that very successfully. I think over the next five years, we’d like this to become an independent division by itself standalone, just like we have pharmaceuticals and we have the Crop Protection division. So we really see a significant amount of growth in excess of INR400 plus crores of business over the next five years. So that’s the long-term plan that we have and even it beyond that.
Ankit Gupta
So — and with this or the contract with the innovator that we have that also contributing in a big way. What can be the margins in this segment of what kind of margins will they generate here?.
Anish Swadi
So the margins will be — on the contribution side, I would estimate the margins to be 45% plus, right, because the portfolio in the Animal Health business is a mix. It’s a mix of what we call existing generic portfolios or existing generic products coupled with CDMO type business as well. So it will be very similar to our current businesses that we have in terms of the pharma and the crop protection business in terms of the split, right? So you — we’re starting off right now with a portfolio that’s a niche portfolio, but it’s an existing generic portfolio where we’ve refiled all the products. So they’re new products but they’re already-existing on the market.
Ankit Gupta
So — but given we’ve also be doing innovator products, shouldn’t the margins be higher here, gross margins because even at the company-level, we do higher margins than the 45% gross margin that you were indicating?
Anish Swadi
Yeah, certainly. I mean, like I said is that the NCE type or the CDMO type products will be in excess of 50% in terms of gross margins, right? But again, it’s a — I’m talking about the entire Animal Health business, right? It will be in excess of 45%. Some products will be even 55%. Some products will be 45% to 50%, right?
Ankit Gupta
Okay. Okay. And Sameer, one question on the long-term, like long-term growth prospects for the company. If you look at our history, like we had touched almost INR2,000 crore revenue in FY ’23 and last two years have been challenging because of the issues that we have seen on both the segments. So with — and we have done quite a bit of capex over the past three to four years, almost INR600 crore, INR700 crore-plus. And with this — with the kind of new products that we are seeing on both pharma and agrochem side and these are like we are looking at tie-up with innovators for CDMO CAMS products. So over the next two to three years, like how do we see the growth in the company? You know, like margins you have spoken about our aspiration to reach to 20%, let’s say, 27% ’28, what kind of revenue are we looking at the company-level with so many things happening both on pharma, agrochem as well as on the veterinary API side.
Sameer Jai Hiremath
I think we are anticipating a growth over the next three to five years of high-teens per year-on-year CAGR if you are to — if you are to project ourselves out and we feel sitting together here in FY ’28, three, four years from now, I’m here to review where the business was in FY ’24 and where we are step-wise will get there. And margins will cross — then margins will cross the 20% number. I mean our excess — our aim is to get well in excess of 20% and mid to-high teens is where we’re targeting year-on-year CAGR growth. And with that operational leverage will play-out, EBITDA margins will improve and we are working more towards the CDMO pipeline where they’re getting involved in proprietary products and NCEs. That is the strategy for the business
Ankit Gupta
And the 15% 20% growth can we take INR2,000 crore as the base for that because last two years we have seen decline in revenues, right, like we have — sir. And my last question was on the side. So here also you have spoken a bit on the opportunities on the innovator side. So if you can talk a bit about that, how many launches we are looking at on the innovator side over the next two to three years? And any other developed pipeline development on the cranched and on innovative side on agrochemical as well?
Sameer Jai Hiremath
Yeah. So the agrochemical space, I mean, there has been some pricing pressures and volume pressures because of the overall slowdown in the industry and also the China dumping effect. So we are also retooling our product offerings and we’re working more towards the NCEs and the CDMO pipeline. And we have several, as Vimal mentioned, we have more than eight active projects, which are under filing or under launch in the next two to three years. And these will drive growth FY ’27 onwards, I would say. I think there’s a few more quarters of pain left for the crop business, while things come back to growth phase, the worst is behind us and we are using this opportunity to strengthen our offerings and to onboard new contracts and new customers.
And again, like the pharma business, the number of RFPs that we have today and the number of wins that we have versus maybe two years ago have increased substantially. So it’s a little bit of a pain for the short-term, but I think medium-to-long term. The crop assets are also being repurposed into the specialty chemicals business. So they’re using the same infrastructure and the same assets to launch products in the specialty chemicals place for global innovator customers where the growth is growing is significant where we see better margin profile, where a company with our reputation and standards is preferred and where China Plus One definitely is playing out to a large extent.
Ankit Gupta
So — but the seven eight products that you are referring to, these are all innovator products, these are a mix of generic or largely generate products.
Sameer Jai Hiremath
Some are generic innovators or proprietary of patent and some are NC — on patent chemistry as well. They’re not commodity generics. Some of them are commodity products.
Ankit Gupta
Sure. Okay. Thanks, Amish. All the best
Operator
Thank you. Thank you. We have our next question from the line of Sajan Kapoor from Antifragile Thinking. Please go-ahead.
Sajal Kapoor
Yeah, hi. Thanks for taking my questions. Sameer, while answering to a participant, you mentioned the keyword blockbuster. And what could be the peak potential and of an average NCE CDMO? And I mean, can any of these molecules after, say, three, four years of launch because there is always a ramp-up period, you will not get the peak sales on — in year-one, but let’s assume we touch the peak potential of these NCE molecules that we have in late phase and three or four years out. I mean, can each of them individually or can any of them fetch us INR500 crore or thereabout on an annualized run-rate when they reach that peak potential? Is that — I mean, is that what you mean by blockbuster or is it a — I’m not getting the right end of this stake here?
Sameer Jai Hiremath
See, I think it all depends on the size of the molecule and the growth aspirations and depends on the dosage of the molecule. I think INR500 crores is a bit too high. It’s very stretched. I mean, you all aspire to get one or two of those, but currently with what we see, it could be INR50 crores in the worst-case to maybe a few hundred crores per molecule in the best-case in that range. But we’ll have multiple of that we will launch. It’s not going to be focus on one or two products. The idea is to launch multiple products any given year, increase our pipeline. So a combination of that could generate INR00 crore INR500 crores every year going-forward, yeah.
Sajal Kapoor
Yeah. No, understood. And Samit, there are no less than 20 high-quality small-molecule CDMO companies in India. And what I mean by high-quality is they’ve got immaculate regulatory compliance track-record. They have the depths in the scientific research. So in that kind of cohort, there are no less than 20 high-quality small-molecule CDMO companies in India. Why — why do you think innovators come to Heikal? I mean, what is so unique about Heikal that they are not getting elsewhere.
Sameer Jai Hiremath
I think the answer is right to some extent and I like to defer to some extent as well. While there are several players in the CDMO space, it’s a very vast service offering. You can do R&D services, you can do clinical trade trials, you can do manufacturing, you can do formulation development. So the CDMO space is a very wide segment. What we participate in the segments and we participate, I would say there are probably five or six of companies of our repute and our credibility. And the reason I’m saying that is when we get customers to visit us, which were increasing the presence of our customers, even today, we have a very large customer on one of our sites, we typically come to India for a week to 10 days and they visit four or five companies during their visit.
They spend one or two days and we are on that list. So we are in the top-five, I would say, in the country and we offer also a very strong pipeline, our capability from the R&D side as well as the manufacturing expertise. That’s what differentiates us. The 20 companies that you mentioned about maybe being very long — very big in R&D, but they have less expertise in manufacturing. We also add the angle of being able to do cost improvements when the product goes off-patent lifecycle management. Because of our specialty chemicals and the prop protection history of 36 years, they have a lot of differentiated technology that we offer and that can be leveraged and the know-how is available in our pharma business as well. As well as our ESG track-record, our sustainability initiatives and our quality compliance track-record, we’re able to distinguish ourselves differentiate ourselves and participate in a smaller pool of competitors rather than 20. We do have competition, but it is a smaller pool where we participate and where we project our capabilities in.
Sajal Kapoor
Sure. And this movement of innovators trying to diversify away from China. Is this predominantly seen in US innovators and Japanese innovators or you think some of the European innovators are also thinking that perhaps it’s time they should also diversify?
Sameer Jai Hiremath
Think it’s happening in all innovators. It’s not only US or Japan, more pronounced in US and Japan, but Europeans also willing to — beginning to look at this very seriously now.
Sajal Kapoor
Sure. And one last question, Sameer. And in recent times, the innovators are getting very active around small molecules. And previously, there was a chatter around that biologics will rule the world ultimately and there will not be a place for small molecules. I mean based on whatever research that I have done and interacted with the industry, there seems to be some shift happening there that innovators are now coming back and they are hugging the small molecules which they once kind of started vacating. What could possibly explain this shift in the behavior? Is it something like the small molecules, GLPs, they are you giving some ray of hope to these innovators? I mean, why would they come back to small molecules and kind of making a U-turn, if you like.
Sameer Jai Hiremath
Yeah. But I don’t — I’m an expert on that to answer that, but my — and probably it is nothing to do with the drug delivery mechanism because the biologics are all mostly injectables and also the affordability. Small molecules are far more affordable than the biosimilars or bio biologics. I think and this is an incredible innovation in the small-molecule space, which is happening. Even the largest GLP-1 drugs that are moving from injectables and moving to oral solid now because of affordability and widespread acceptance.
Sajal Kapoor
Yeah. Yeah. No, understood. I think that’s exactly where I was also thinking along the lines that small-molecule GLPs are much more affordable versus a large molecule say or even a peptide GLP for that matter. The cost of — the cost of manufacturing I think is also lower and therefore the affordability angle is also better in small molecules GLP. So yeah, I think, yeah, understood. Thank you so much. All the very best. Look-forward to 4th-quarter and future years. Thank you.
Sameer Jai Hiremath
Thank you.
Operator
Thank you. The next question is from the line of Raj Desai from RD Securities. Please go-ahead.
Raj Desai
Hello, am I audible?
Sameer Jai Hiremath
Yes. Yeah.
Raj Desai
Thank you, sir for taking my question. So I had a couple of questions. First being if you could provide with the volume growth for quarter three and nine months on the pharma side and on the crop protection side?
Sameer Jai Hiremath
Yeah., CFO take these numbers, yeah.
Kuldeep Jain
Yeah. Sure. Thanks, Amit. For the nine-month basis, our volume in crop production growth was 41%, okay. And in pharma, just at 3.7%
Raj Desai
And on value terms.
Kuldeep Jain
In value terms, our crop growth was — de-growth was 3.3%, while the pharma growth was 7.1%. So technically, we have not grown in value, we have grown in volumes for the okay.
Raj Desai
And sir, I have one more question. What are your vision latest tariffs from the US and do you believe that it will provide an opportunity for India?
Sameer Jai Hiremath
, want to take that?
Anish Swadi
So, look, of course, we’ve heard the news this morning about 10% tariffs on chemical companies in China. We’re obviously looking at that, those are in addition to supposedly 25% already-existing tariffs that they have in-place. But look, it’s a volatile situation, right? We don’t know-how it’s going to pan-out, whether it’s a negotiating tactic with the new administration. But overall, I think fundamentally, we do see a good opportunity for us in particular and for India as a country because the shift in terms of moving from China, particularly has been increasing over the past not just few months, but I would say probably the 12 to 18 months, right? So almost a year, a year and a half. So I think overall, the shift is happening and we do see opportunities presenting themselves. I think the tariffs, we’ll have to wait-and-watch to see what the impact is. It’s not just easy to bring back manufacturing to a particular country, to the US or to any other country overnight. So I think it will be a quick. We’ll have to give up something in order to get something, but it’s more about us waiting and watching to see how things plan out.
Raj Desai
Yeah. Okay. That was very helpful, sir. Thank you so much.
Operator
Thank you. Thank you. Thank you. We have our next question from the line of Shah from Giri Capital. Please go-ahead you.
Dhaval Shah
Yeah, thank you for the opportunity once again. What will be our gross debt number as of nine months and what will be our operating cash-flow for the nine months?
Kuldeep Jain
See, our debt was 731 as on 31st December 2024. And as far as the positive cash-flow is concerned, we have 102 crore positive cash-flow?
Dhaval Shah
Sorry, INR102 crores.
Kuldeep Jain
Yeah, positive cash-flow.
Dhaval Shah
INR102 crores, that’s your operating cash-flow, right?
Kuldeep Jain
Yeah.
Dhaval Shah
Yeah. And the capex for the current year, are we doing around INR140 crores, which was guided last quarter on the call? Is it the same number?
Kuldeep Jain
Absolutely. We are looking to what we have said earlier, it will be INR140 crores to INR150 crore.
Dhaval Shah
Okay. And for FY ’26, how much are we planning? As you mentioned earlier, typically we have a plan of almost INR150 crores to INR200 croress each year. Okay. Okay. And in terms of — so we capitalized the plant last month as you mentioned. So how much would that amount be the capitalized amount?
Kuldeep Jain
It’s a INR340 crore, 340 crores.
Dhaval Shah
Okay. Okay. Got it. And so now INR150 crores INR200 crore capex what we’ll be doing. So a large will be our replacement and maintenance capex or some other expansion also be part of it?
Kuldeep Jain
See, 40 30% to 40% will be replacement capex, the balance will be a debottleneck growth capex.
Dhaval Shah
Okay. Fine. Thank you.
Kuldeep Jain
Thank you.
Operator
Ladies and gentlemen, that was the last question for today. And I now hand the conference over to Mr Sameer for closing comments.
Sameer Jai Hiremath
Over to you, sir. Thank you. Thank you, everyone, for joining our quarterly earnings call and for your continued interest in our company. We appreciate your support as we navigate through the challenges of the global business environment. I wish to reiterate that our quarter-on-quarter performance will continue to yield positive growth and profitability through the end of this financial year. As we conclude this call, we want to assure you that we are here to address any further questions and concerns. Please feel free-to reach-out to us, our Investor Relations partners, strategic Goat Advisors as well. Once again, thank you for your participation. Goodbye and have a very good evening. Thank you.
Operator
Thank you. On behalf of Heikal Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.