IOL Chemicals and Pharmaceuticals Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from IOL Chemicals and Pharmaceuticals Limited (IOLCP) Q4 FY22 Earnings Concall

 

Management Update:

• IOLCP is optimistic on its pharma segment as capacity for other potentially large projects are ready. Gross margin in this segment is expected to improve with improved business mix.

 

Q&A Highlights:

Dhaval Shah – Svan Investment – Analyst

• Reason for chemical business reporting loss at the EBIT level and outlook going forward?

Sanjay Chaturvedi – Chief Executive Officer

• Primary product ethyl acetate depends on acetic acid that comes all from exports.
  • Had a lot of volatility in acetic acid pricing.
• The numbers should be seen from a quarterly or yearly perspective since the time of placing the order, to utilization of RM takes at least two months.
• On an annual basis, IOLCP will continue to make 6-8% EBITDA in this business.

 

Dhaval Shah – Svan Investment – Analyst

• Change in capacity in the chemical business today vs. the next three years?

Sanjay Chaturvedi – Chief Executive Officer

• Existing capacity is about 1 lakh tons from Ethyl Acetate.
  • Over the next couple of years, will have marginal expansion of about 20%, 25%.
  • This will be through minor modification of plants.
• In the process of identifying new products for which capacities will be added.
  • Should come on line around next year.
• Most of chemicals business growth will come from non-ethyl acetate products.

 

Dhaval Shah – Svan Investment – Analyst

• Reason for Ibuprofen volumes being less in 4Q22?

Sanjay Chaturvedi – Chief Executive Officer

• The overstocking from previous year from some key accounts has still not been eliminated.

 

Rohit Suresh – Samatva Investments – Analyst

• Demand in the regulated market for Ibu?

Sanjay Chaturvedi – Chief Executive Officer

• Assets are running at 70% or so utilization.
  • Should add a few percentage points to this in coming quarters.
• IOLCP might not sell at full capacity, but at a higher capacity than the previous year.

 

Rohit Suresh – Samatva Investments – Analyst

• Would Ibu prices increase in FY23, once the overstocking issue gets solved.

Sanjay Chaturvedi – Chief Executive Officer

• It should probably go up.
  • Input cost of all RMs are going up, energy costs doubling, Russia-Ukraine war etc.
  • Once input costs go up, the price of final product also goes up, probably in a phased lag.

 

Ranvir Singh – Sunidhi Securities – Analyst

• Ethyl Acetate business split geographically; India vs. export.

Sanjay Chaturvedi – Chief Executive Officer

• Ethyl Acetate business primarily is still domestic for IOLCP.

 

Chirag Fialoke – Ratna Traya Capital – Analyst

• Ibuprofen volume for FY22 vs. FY21?

Sanjay Chaturvedi – Chief Executive Officer

• IOLCP declined by almost a 1000 tons for the year.
• Volumes were closer to the range of 8,000 tons, 8,300 tons.

 

Anupam Agarwal – Lucky Investment Managers – Analyst

• Paracetamol capacity and volume for IOLCP?

Sanjay Chaturvedi – Chief Executive Officer

• Currently having a capacity of 1,800 tons a year.
• Expect this to be about 3,600 tons by the end of FY23.

 

Anupam Agarwal – Lucky Investment Managers – Analyst

• Reason for the jump of INR185 crore in other non-current assets in consolidated balance sheet?

Sanjay Chaturvedi – Chief Executive Officer

• The FD that was in the short-term has been moved into long-term, which is sitting in other non-current assets.

   

Aditya Shah – Individual Investor – Analyst

• Expected margins on the API non-ibuprofen business?

Sanjay Chaturvedi – Chief Executive Officer

• Current margins are in the single digits.
  • Asset utilization still continues to be low in the range of 50%, 60%.
• Expects to take it to 75%, 80% level in the next 12-18 months.