Privi Speciality Chemicals Ltd (NSE: PRIVISCL) Q4 2025 Earnings Call dated May. 06, 2025
Corporate Participants:
Srikan Sangani — Executive Officer
Mahesh P Babani — Chairman & Managing Director
Narayan S Iyer — Chief Financial Officer
Unidentified Speaker
Analysts:
Sudheer Peda — Analyst
Bharat Shah — Analyst
Rohit Nagraj — Analyst
Abhishek Ranavate — Analyst
Manish Otzwal — Analyst
Sajal Kapoor — Analyst
Manan Madlani — Analyst
Nikhil Porwal — Analyst
ainanam — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Privi Specialty Chemicals Limited Q4 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 than zero on a touchstone phone. Please note that this conference is being recorded . This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the companies as on the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr Srikan Sangani. Thank you, and over to you, sir.
Srikan Sangani — Executive Officer
Thank you. Thank you. MR. Srikan from HGA. Thank you everyone for joining us today to discuss Specialty Chemicals Q4 and FY ’25 business and financial performance. The financial results and investor presentation are available on the company’s website. The recording of today’s earnings call and transcript will be uploaded on the company’s website under IR section. For today’s call, from the Privi team, we — Privi team is represented by Mr Mahesh Babani, Chairman and Managing Director; Mr R.S. Rajan, President; Mr Naran S. Ayer, Chief Financial Officer; Mr Sanjiv Patel, Senior Vice-President, Strategy; and my fellow colleagues from HDA team. Please note, there may be forward-looking statement during the course of the call and must be viewed in an aggregate with the risks that company faces. With this brief introduction, I now invite Mr for his opening remarks. Over to you, sir.
Mahesh P Babani — Chairman & Managing Director
Thank you,. Good evening to all of you and we are pleased to report the best-ever quarterly and annual financial performance marking a significant in our journey. The year has been good for the company with all wrong improvement in all areas of the company. The performance has been achieved through process intensification leading to yield improvements, new specialty products being launched during this year. As these factors will continue in the future, we are confident of sustaining the gross margin. Key highlights of the year gone by are our demand for our core products are healthy and our plants are operating at an optimum level. Of course, we are debottlenecking capacity further because of the demand. We have also developed two new premium products to be launched in this current financial year where during mid-year it will be operational. Our previous update is that the plant has been successfully commissioned. It will take one year more to breakeven. A
S we know chemical plants, it’s not so easy to get the practice in-place so that because a high-value, very-high value speciality. However, the future is very bright and certain since these are going to be sold back to the buyback arrangement to the — to the subsidiary company. So therefore, we are very confident that the future is very, very bright for this particular vertical coming years and we are dealing with the market-leader of the entire world. Over a decade, your company has emerged as a partner to almost now all companies in our field. The compliance of our company is of a high standard and we endeavor to be best-in class. Our capabilities have grown significantly both in scale and complexity, driven by deep client engagement and a relentlessly focused on innovation. We are transitioning from being a leading supplier to a collaborative partner, sending relationship and creating long-term and sustainable value for our customers. Our core strength, however, our core strength lies in the robust backward integration, particularly through CST and GTO strategy.
The integration of consistent quality, cost-efficiency and of course long-term supply of security of critical raw materials, giving a distinct competitive advantage. It also enables great control over the value chain as these are raw materials which are always in a sharp supply driving innovation and reliability in delivering high-performance of our aroma semicon to global customers. While guiding growth, we remain deeply committed to sustainability. Our current gold rating will be further validates our proactive approach in aligning the global best practices, carbon footprint and also spending ESG disclosure. We announced starving for a platinum rating and we are not far from it. Additionally by increasing our share of green power we have also reduced energy costs also reinforced our dedication to sustainable energy solutions. This is only the beginning of our story my friends. It is also to be number-one aroma global chemical company. Friends we are not far from it. I now hand over to our CFO, Naren Nar, for detailing on the financial. Naren, please.
Narayan S Iyer — Chief Financial Officer
Thank you, sir. And thank you very much. Good evening to all my dear investors, stakeholders and all those who believe in Privi and who are there on the call. The year that has gone by has reaffirmed our belief in Privi’s growth trajectory. It’s strong growth and a favorable product mix, we are confident that Privi is well-positioned to sustain healthy growth and deliver robust profit margins going-forward. Let me share some of our recent developments. All our key products are currently operating at optimal capacity as demand for all key products are very healthy. Our units have all been operating at close to 85% to 90% of our capacities. As has been informed, we are actively working to expand our production capacities for our key products and take it up from 48,000 metric tons to 54,000 metric tons. We expect this expansion to complete by March 2026. During the year, the company had launched various products like Indomoran, Flora and Ambaroo D XT.
These products are used in day-to-day applications like day care, personal care and laundry care and they have been very well-received in the market. I would also like to highlight on the US tariffs that’s been going around. We really do not anticipate any insignificant impact from the ongoing US tariffs as our presence in the US market is limited to around 10%. At the moment, almost all countries supplying to US have to bear higher tariffs than India. Moreover, our business is widely spread across domestic market, the European markets, the Asian and the Latin-American and Middle-East markets. So these were the key developments that I had to talk about. Now coming to the major financial highlights, starting with Q4 for financial year ’24, ’25 Q4. The total income for this particular quarter was a record INR628 crores, which is a growth of 28% on a year-to-year basis.
The EBITDA mark came in at INR147 crores, which is a growth of 50% on a year-on-year basis. EBITDA margins once again is at a record-high of 23.5% for the quarter and we expect to maintain similar EBITDA margins in the near-future. Profit-after-tax for the quarter was a healthy INR64 crores as against indicates a 100% growth over the previous year. And lastly, the exports contributed to about 72.5% for this particular quarter. Giving highlights for the entire year — for the year ’24-’25 in comparison to the earlier year, during the year, the overall income or the overall revenue stood at INR2,22 crores, which is a growth of 19% on a year-on-year basis. Overall, EBITDA margins for the year was a very healthy INR474 crores, which is almost a growth of about 37% on a year-on-year basis. EBITDA margins was at 22.3% as against 19.7% for financial year ’23-’24. Profit-after-tax for the overall year was at INR185 crores as against INR95 crores achieved in financial year ’23-’24. And exports on an overall basis was at 70% for financial year ’24-’25. My dear friends, in the overall interest of all stakeholders and investors of the company, we have restrained from publishing certain sensitive information like quantitative and segment-wise sales. I hope you all will understand this. With this, this as a background and on a very strong footing, I would like to conclude my address on the numbers and open the floor for questions-and-answers. Thank you, and over to you, you, sir.
Srikan Sangani — Executive Officer
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press char and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press char 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
Questions and Answers:
Srikan Sangani
The first question is from the line of Peda from Beda Family Office. Please go-ahead.
Sudheer Peda
Yeah, good afternoon, sir. And, congratulation to entire PV team for outstanding results,
Srikan Sangani
Sir. Thank you.
Mahesh P Babani
Thank you.
Narayan S Iyer
Thank you.
Sudheer Peda
TSir, my first question is, you did 23.46% EBITDA margin, including other income in the first — in the last quarter. So this kind of margin ’23, 73.5% is sustainable over a period of time over this current financial year. So Mr Beira, I would think that north of 20% will always be our target. We’ll always try to be above 20% for sure. As we grow, we may have to
Mahesh P Babani
Compromise to a certain extent by 1% or 2%, but we’ll try to maintain north of 21% for sure. But this has been our endeavor to be in the specialty Chemicals business and we expect that these margins are enough to what we delivered in Q4 is to do with any other income that our income this quarter. So moment. This is pretty decline here, but it’s not just the other income, it is more with regard to as address with the process innovations and yield improvement that we were able to get these margins in this quarter now. So yes, there is a little bit of other income in this quarter we have added to it. But overall, the margins will be sustained because of our process innovation and the bottlenecking that we have going ahead. In fact, this is a bit of you here.
In fact, if you look at the last 3/4, we have been consistently earning about 20% EBITDA margin and this has been result of substantially improved processes, better yields and also superior product mix. So this is what has resulted into this higher margins and the quarter-four is slightly higher as said. So that’s all.
Sudheer Peda
Yeah, got it. Got it. And sir, any guidance we would like to give for current FY ’26? Look, sales growth and marginality. We don’t want to give a very forward-looking statement, but we will minimum try to maintain our average growth rate of 20% to 25%. Great. And sir, last question, lastly, sir. In the standalone and in the console, there is a difference of INR33 crore of revenue. I’m talking about the revenue. So in this INR33 crores, what is the contribution from 3G then it will breakeven or will start contributing to bottom-line in JV. Yeah, Prijiv has just about started its operation somewhere in February ’25.
Srikan Sangani
So there’s hardly any contribution coming on to the revenue front about INR4 crores or so. And as Mr indicated in his initial opening remarks, you know, will start possibly a breakeven from somewhere around a year from now, maybe, 26% ’27 and then it will start contributing both in revenue and the margins in fact. Margins, as indicated in the past, should be around the 20 plus 20% plus range only in fact. It’s an assured business and we’ll keep on growing. It will have a — it won’t have a growth of 25%, but 10% 15% in PG will always keep on growing because you know the average growth rate, whatever the normal in the market is in GDP growth, 7%, 8% will always 10% for. It won’t grow externally, but it can reach — it has a potential to reach about INR300 crores INR350 crores of topline in next three, four years.
Sudheer Peda
Yeah. And as we have said it earlier, this is a very strategic fit. So it has to be seen in that for entirety.
Srikan Sangani
So it’s like a customer service to the main market-leader.
Sudheer Peda
Yes, sir. Thanks for the opportunity and all the best.
Srikan Sangani
Yeah. Thank you. Thank you. Thank you. The next question is from the line of Bharat Shah from ASK Investment Managers Limited. Please go-ahead
Bharat Shah
To see heartening results but a little bit of a note of doubt from my end and this is not as much as to what is being done but because of of Idequate understanding at mine you earlier mentioned that sustainable growth over 20% and margins in excess of 20%. But two points come to my mind. One, when I look at the nature of your clients, consumer farms, the fragrance firms, the other househological producing firms. Given the nature of your clients it’s a bit surprising that how do we expect to grow at a sustained rate of 20%. And secondly, when I look at our own history, while top-line has grown over a period of time, but the same thing can’t be said about the profits.
Profits may be none even and actually the profits have exceeded that of 21 year of 2021 for the first time in the current year. Even the top-line growth over five years has been about, 12% 13%. So I’m curious to understand what makes you confident of that high 20% growth rate and also considering the little checkered path, why the confidence on the growth rate is it based on the profitability?
Mahesh P Babani
So I appreciate your intersection on the balance sheet. So the growth actually comes from — we are at the lowest end-of-the prices over the last five years. If you see our prices of our main product was always in the region of $6, $7, which was it came down from $10 to $6 in the last six years. So only if it to even 8, 8.5%, so the growth comes from also there and also the volume is increasing of these important products. You see, the growth is coming from countries in Asia, India, Africa where the usage of aroma chemicals has been pretty significant in the last 10 years and now these people have started using like India has never had a, you know, awareness of used to have only like oil. Now you see the variety of folks that are there, all are perfum. You see the variety of that are there. There were no concept of beer in 10 years ago in India.
So these new markets, the new, the hygiene conditions have improved. So the flow was — everything is increasing in the India against also the export market or the premium market and the Asian markets and also the and the other areas, the markets are improving significantly. So the awareness of is coming, awareness of hygiene is coming all over the world. So this has been — actually after COVID, this has taken a fast-track to increase our shares and the demand is much higher. So today, the prices have also come down to come up to, we are at now $7, $7.5 going-forward, I think it could be even 5%, 10% higher average price. And the other thing is — other thing is that previous comfort with all the — all the top customers, right now we are very sustainable and therefore, as you see, we have invested in the last five years into, then into as well as. And these products are leading to a significant growth, you know, and that is what is resulting into this 20% growth. So all along, we have been growing by introducing newer products and we have been able to get the market-share from our customers and that the same customers to whom we keep on selling the same products because the market — the same customers are only so many. So therefore, therefore, we are able to grow at that level. That’s why that’s how we are able to the market consistently. Last five years I’ve been in longer detail to you in what was in your products.
Bharat Shah
Thank you for both of those but if you look at almost two-thirds of our business is coming from international markets, be it in Europe or related American could you move a bit closer to your phone?
Narayan S Iyer
No, I would ask you to move a bit closer to your phone.
Bharat Shah
I cannot hear you well I’m inside my phone. I can get more closer to my phone than this.
Narayan S Iyer
Yeah, it’s audible, sir.
Bharat Shah
So my question was that more than two-thirds of our business is coming from international markets. When we look at the composition of markets like Europe where there is hardly any economic growth. Yeah, the — some of the other markets are in a better shape, but not at the level of 20% kind of potential. So given all of that, what makes you confident? I’m not really — as I mentioned, this is more to educate myself. So please pardon my ignorance, but I’m not able to grasp or given the more checkered history over the last five, six years and given the fact of the client base and the geographies as well as the nature of the client industry, consumer segment, these are mature of industry. So while the hygiene has improved after COVID, but in the three years after the COVID we had degrown in our profits. You know while fragrance contain would have included soaps and shampoos and all of that, but it’s not exactly a novelty. And therefore, it still beats me as to why would you believe that the high 20% kind of growth will prevail going-forward.
Mahesh P Babani
Well, we are — we are confident of our growth as we see our order book position and we also are working closely with clients. We have much more clients right now, customers who are given commitments. Earlier we had only three key customers. Now we have six key customers or probably all the top-10 companies are our customers. And. And also let me tell you that hardly 7% of our market-share is in the US and these products are now being produced in the US. So that won’t make any significant difference. And the growth of our products also comes from new — new arts from Africa. There are seven companies in Africa having who want these products made in India or made in Dubai. So our growth in this area is also increasing and we are at least five new customers who are good-sized to support this. So we are confident with our order book position, we will be able to maintain our share of our business, our 20% 25%, 30% growth. But it is honor that person of US teacher is asking us these questions and we would definitely like to talk to you offline also.
Bharat Shah
Sure. Sure. No, I appreciate. And last thing, while return on capital employed and return-on-equity have improved in the current year. And of course, earlier our profit suffered. So I understand capital efficiency would have declined in that three-year period. But when do you think, given the fact that our market some of the international, therefore working capital structurally I suppose would remain high and I don’t know what kind of fixed effect terms optimally can be expected. But given the nature of high working average fixed asset turns, when do you think we can see more healthy, say, 23% 24% kind of return on capital employed at what state do you think it is possible? If at all, it is likely to be the case good evening. As far as the fixed asset turnover that you talked about, it should be in the range of around 1.4 and we are moving towards
Srikan Sangani
Going to 1.6, 1.7 as in the coming few years. Working capital cycle, definitely, we have been striving hard and we have been successful enough in bringing it down. And you would have seen that over the last two years, our working capital overall cycle has come down and we still expect there is scope and room for improvement at least by another 15, 20 odd days we can bring down the overall working capital cycle to it.
Bharat Shah
Sorry, I’m missing. Would you continue your and I thought that someone was interrupting the investment.
Srikan Sangani
So no working capital cycle to improve. That’s how will help and enable our ROE, ROCE to further grow above. And the levels that you have spoken is our — also explanation and we feel that we are striving towards it and we should be able to reach that shortly in the upcoming few years in fact, okay. Thank you. I’ll tell you, today the market scenario where specialty chemicals are panned out, you know, sustainability is a key word and supplier in coming times, I can tell you, will be more important for a customer than the — than his customer.
Today’s suppliers will be more important than his customers. That’s what I see times coming. This is — I’m sorry, but this is my honest observation.
Bharat Shah
No, thank you for that. If you allow me one last thing, if the asset turn is say 1.4, maybe it will improve to 1.5, 1.6, but let us say it is 1.4. Therefore, INR100 of assets will produce a turnout of INR140. Given the kind of working capital, on that INR140 rupees, we will need to invest about INR35 INR40 minimums, if not more in working capital. That means INR140, INR150 of total capital will generate a turnover of about INR140 140. Therefore, one is to one. If we take our EBIT margin at about — if I say EBITDA margin at about 23% 24%, EBIT margins would be about, 17% 18%. Therefore, capital efficiency at this can be around 17% 18% unless margins improve materially from here or fixed asset turns improve significantly from the year or working capital can come down Dramatically. None of these in the foreseeable future can change dramatically is my impression. Therefore, I’m not clear why, 23% 24% of return on capital employed and how in — when it can be achieved.
Srikan Sangani
Okay., specifically to answer, as I said, we are in the process of deploying and adding some capacities. These capacities are more with regard to debottlenecking and augmentation. So the capex required for such expansion is not on the same lines as we had to do when we initially set-up the our existing plant. So that’s how I also happened to tell you that from 1.4, 1.5 currently, it is going to move towards the 1.7, 1.8 and in some products, it may even weak the two. So we definitely are going to improve upon our asset turnover. Second, I also happen to mention that we are in the process of further reduction or further improvement of our working capital days
. So that will also add. So your equation about being one is to one may not be so true. And last but not the least, the entire world is looking at India enough because we all would love to see someone other than China really taking the battle away. I do believe and we foresighted this that has a great chance to achieve those numbers what you happen to mention. Thank you so much. All the very best and I will look-forward to detailed and personal introduction
Bharat Shah
To understand better. But thank you very much for all the way all we only elaborate discussion in details. Thank you, sir.
Narayan S Iyer
Thank you.
Operator
Thank you. The next question is from the line of Rohit Nagraj from B&K Securities. Please go-ahead
Rohit Nagraj
Thanks for the opportunity and congrats on a very good set of numbers. Sir, first question is in terms of the growth for FY ’26. Given that all our capacities are operating at optimal level, how do we foresee volume growth coming in for FY ’26, given that the debottlenecking exercise will only be completed by the end of March ’26 and it will be applicable — the new capacities will be applicable. So that’s your view on this. Thank you.
Narayan S Iyer
Rohit, good evening and thank you for appreciating our performance. We are having some certain capacities yet to achieve through our optimal capacities that we have. And we hope to grow the balance 15-odd percent that we have. And meanwhile, we are also debottlenecking some of our major products and that’s how the growth will come for the year ’25, ’26. But we are very, very optimistic of the 20% plus growth in this year, exactly.
Rohit Nagraj
Sure. And the second question in terms of growth that we are seeing from the volume side, new product side, just slight understanding as Bharada was also asking, globally, are, are there other players who are not expanding capacity and because of which we have a better chance to play into it or is it that generally the growth itself is higher for these products and that’s why we are seeing even after some competitors are putting up the capacity, we still have a chance based on our interactions with our customers. Thank you.
Narayan S Iyer
Yeah. So the answer to this question is, you know, yes, others can also expand, but the speed at which Privi, you know puts up capacity is something very, very important. And also the fact that when we put up the capacity, the kind of plants and kind of assets that we built-in terms of sustainability, in some zero liquid discharge. That is what gives ash to Privi as compared to many others in the play. And overall dependability that Privi has developed over the last two decades, wherein we are — you can see that in the three products that we introduced, we have fully sold and expanding further already. So that is the level of comfort that most of our customers have. And the new products that we bring in are always bought in close connect with our customers so that we are aware of what are the products on which our customers are demanding new products and that’s how we get more wallet share of this — I mean we get share of the — more share of the wallet on the same customers.
And also it is not only China plus one, but also Europe plus one, US plus one as a strategy because you know whatever is happening on the tariff side and all that, but most companies, okay, leading companies are looking at buy versus — buy versus make decisions, most multinationals. So therefore, if since we are competitive and we have reached a particular facial level of growth, therefore we are able to attract and convert many of the existing products where for a customer, if you are making it himself, then he is deciding to outsource that from us because we are able to provide it competitively. And also the China plus one factor which all of us know very well, which is also helping us.
Rohit Nagraj
Sure. Just one last small suggestion. I know from comparative purposes, we don’t want to give of volumes. If you can share just the overall aggregate volumes on a quarterly basis? It will be helpful just to understand in terms of the growth path on volume terms, where are we currently? That’s it from my side. Thanks a lot and all the best, sir.
Narayan S Iyer
Thank you hello. T
Srikan Sangani
Hank you. Then next, ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Abhishek from Capital. Please go-ahead.
Abhishek Ranavate
Hello. Yes. First of all, congratulations, sir, for such a solid result. Thank you. So my question was, could you please share your speak by-product category along with the corresponding margin for each category? And is there any shift happening from — towards the value-added since last year.
Mahesh P Babani
So giving information between the category of products and the margin is really sensitive and we would not like to put that up in a public domain. So please respect that. And this is in the best interest of all the stakeholders, including all the shareholders and others. So therefore, we will rather different from giving that information. In terms of changes in-product mix, there is no drastic change. What you have to understand is there is a steady change and that is an evolving process. So existing products also are doing well and the new products also are doing well. So overall, overall, it has been good time and it will continue to be a good time to come in okay so can you tell me like for the current existing product, hello for the existing product category, so this — the EBITDA margin expansion, so is there any contribution due to the shift is happening or yeah.
So if you see the presentation that we have put up, you know earlier, in terms of — in terms of products that we — value-added products that we make, those are contributing the better and that is what is adding to the value, okay. And we also now have products which are in that whole product basket range. We have products which are both expensive over $100 products, which is adding value to — even if the quantity is small, the value as well as the contribution is significant. So in coming years, can we expect that this shift will be faster or is there any trend going on? Yes, that’s what we are working.
Narayan S Iyer
Certainly. Certainly, yes, we are working on that.
Abhishek Ranavate
And sir, so as you said that input cost for the — for you this full-year was lower. So what was the reason behind it?
Mahesh P Babani
So that is input costs as and you have to see it in terms of improved yields. It is not that the cost of raw-material has substantially gone down, it is because it is improved yields, which is resulting into lower material cost.
Abhishek Ranavate
Okay.
Mahesh P Babani
It’s a function of improved yields as well as the value-added products that we talked about. So we are able to manufacture products for more site streams. And in fact, that has been the journey of for the last about seven years, wherein from many side steams, we have developed products which Add significant value. So instead of disposing the site steams as a normal chemical or a solvent or a fuel, we are able to add value and that is what has led to significant improvement in the margins and that’s how the costs have come down.
Abhishek Ranavate
Okay. Okay thank you. Thank you.
Srikan Sangani
The next question is from the line of Manish Otzwal from Nirmal Bang Securities Private Limited. Please go-ahead.
Manish Otzwal
Yes, sir. Thank you for the opportunity. I have a question on the full-year performance. So we have shown 19% growth in revenue. So my question is, sir, given the key markets, so it is a function of we added a lot of client customers in last one year or because market growth rate is much lower than this growth rate. So what is the function, whether we added more products last one year, which helping us which are helping us to deliver 19% growth. We added customers, we added geography. So can you explain the 19% growth and what is the volume growth in our business in F ’25. So as we have stated enough, I
Mahesh P Babani
Would once again like to repeat that we are getting more share of the wallet of the customer. So with the same customer, let us say I have introduced most range of products. Now it’s the same customers to whom I’ll go to sell. And because of our reputation, we are able to get a better share of that value as well as we have also got some new customers and new geographies also. So it’s a combination of all the factors which is resulting into higher-growth rate and it will continue to grow.
Manish Otzwal
Okay. And second, I want to understand this expansion in the gross margin in — on the full-year. So can you explain the factors which contributed to this expansion and in the gross margin for the year?
Mahesh P Babani
So as I already explained, you know it is the products that we — that product mix that we have now — that we now have, which includes products which are high-value products costing — I mean selling over $100 per kilogram as well as the products that we make from the site steams. So from the site steams, we make products which are — which give higher contribution and that’s how our overall gross margin improves. Am I able to answer your question?
Manish Otzwal
I mean, is there any supply cut in our chemicals in our product segment where the prices shoot up because of that?
Mahesh P Babani
No, no, no, no,
Manish Otzwal
No. Okay. Thank you, sir.
Srikan Sangani
Thank you. The next question is from the line of Sajal Kapoor from Tinking. Please go-ahead.
Sajal Kapoor
Yeah, hi. Thank you for taking my question. And given that Privi is transitioning from supplier to partner in terms of co-development, this will probably require fresh investments in, you know things like enhancing the capabilities in terms of hardware, lab equipment, software as well as scientists. So what kind of investments do you anticipate in the current fiscal? And if you can give us a sense on the medium-term outlook? Thank you.
Narayan S Iyer
So we are confident that we will be able to keep our growth rate at about 25%, 30% for sure and we will come back to — we are planning and working out the growth potential for several products which are in-demand from our customers. We are working out the you know the project cost, there will be a capex plan in coming years in coming year where we are confident that we will be able to multiply and keep a continued growth for the company.
Sajal Kapoor
No, no, I completely — that is happening. Sure, sure. China Plus one, I’m completely also optimistic that given you have been a leading industry player over several decades, you know your went from your vantage point, you see better than any one of us. But I mean, given the fact that we all know that future is unpredictable, I mean, no one knows — so no one saw this US trade and US-China and trade tariff coming at this kind of intensity, right? So future again is unpredictable. My question is more broad in the sense that given PV was always a catalog or a product company and we were not offering our capabilities scientific capabilities as a service until we stuck this JV with Jivan. Now given the success of this JV, which is a more of a service manufacturing co-development and manufacturing services, clearly, I think Privi sees this as an additional growth revenue stream, but that will also bring its own set of challenges and investments. So my question was more broader in that context.
Narayan S Iyer
So you hit the nil on this head as I say, but you know, previous capability in terms of R&D, we already have 90 scientists who have — and most of these guys have been with us for a very long-time, including the team leaders. So they understand the nuances of Auroma Chemical industry very well and aroma chemistry also very well from pioneer chemistry to chemistry, what have you so all of that they understand very well. So — and in terms of laboratory equipment, in terms of capabilities at the lab, instrumentation and all of that, we are in a state-of-the art. We have all of that with us. It’s only that we are now offering the services more aggressively and we see huge amount of potential in this team, you know. And many of these investments have been done in the past. That’s how our issues have been. But all that is now paying-off in terms of our sustainability, in terms of our labs and in terms of the people that we employed.
So all of that is now paying-off.
Sajal Kapoor
No, absolutely. And I think Mr Babani in his opening remarks spoke about yield improvement. And again, these yield improvements, they are not lucky. I mean these things happen after a very long period of what’s called the learning curve or the experience curve where scientists try multiple iterations over a very long period of time before you get a breakthrough like a yield improvement, right, on a sustainable basis. Yeah, absolutely. My question — my second question is, so that was just a broad comment. I completely agree with your views there. My second question is, history tells us that for every 27% 28% growth in per-capita GDP, the demand for aroma and niche chemicals doubles. So 30% give or take GDP per-capita growth is — so it’s a very non-linear growth curve. If you see, a small change, which is just 25% give or take happening on the per-capita consumption is doubling the market for niche aroma specialty fragrance chemicals. Is that where you are — so is this the reason where — why you are optimistic in terms of sustaining a growth momentum?
I mean, whether it comes out to be 15% or 25%, that’s anybody’s guess.
Mahesh P Babani
Yeah. That is also one of the key reasons you very rightly pointed out in terms of trends that every increase in GDP leads to multiple effect on the chemical consumption and as the living are increased, which Mr referred to, you know that those demands also are increasing. So we are therefore feeling and also always remember our increasing share of wallet of the customers because when we introduce a new product, it is done with huge amount of history. I mean, as you said that the yield improvement is not a moment is not a luck by chance. But similarly, when we introduce products, they are also based on lot of home book that we do and therefore, we feel very, very that we will be able to get this kind of growth, including the reasons that you have pointed out.
Sajal Kapoor
Yes. Absolutely. Thank you so much for answering all my questions and wish you guys all the very best. Thank you.
Mahesh P Babani
Thank you. Thank you. Thank you.
Srikan Sangani
Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Manan Madlani from Kamaya Wealth Management. Please go-ahead.
Manan Madlani
Yeah, hi, sir. Thanks for the opportunity and congratulations on a good set of numbers. Sir, my first question is regarding the capex. You mentioned in the PPDs for FY ’26, the number is INR250 crore to INR300 crores. So is it entirely for debottlenecking or any other plants with this?
Narayan S Iyer
Yes, it is basically for debottlenecking, for expanding on our major products and sir,
Manan Madlani
A follow-up on the same. So after spending crores, we’ll get 6,000 metric tons additional capacity , right? That’s correct. So if I do the number, our revenue from what — from what we are getting currently, it will be somewhere in the range of INR30 crore INR300 crores only like from this capacity. So while the asset ton is such low on the debottlenecking, so see, I’m not going to talk exact numbers, but our asset turnover will definitely improve with this debottlenecking also happening because the numbers are much lower than what we are projecting. Okay. Okay. And sir, on the gross margin side, so last quarter our gross margins were highest-ever, if I recollect it correctly, 51.5%. And even last year now that is Q3 FY ’24, it was highest. So in Q3, is there any seasonality effect or was that just a one-offs? That’s my first question. It could have been affected because of certain product mix, you know,
Narayan S Iyer
Especially there could have been a little bit higher movement on the specialty — high-ended specialty. But I would like to reply to all the investors that you need to look on an annual basis rather than more of a quarter-to-quarter take because in 1/4, you may have 0.5 percentage plus or minus. That’s not really enough to be how what we need to be looked at. As a few of your — yourself indicated that whatever PB is achieving is on account of a long-term strategy where it takes years and years of chemistry and improvements to showcase and get the results. So my sincere and simple honest request to all of you to look at on a yearly basis rather than just compare 1% going up one from 1/4 to the other.
Manan Madlani
Yeah. So that was my question actually. So on a yearly basis, if I look at our three-year number, it’s been continuously growing. Now should we expect for FY ’26, the gross margin should be at least 45% plus.
Narayan S Iyer
So we indicated in our opening address both by and ourself, you can expect margins to be at these levels going-forward?
Manan Madlani
Okay. And our utilization currently is 90% you mentioned by Manan. MR. Manan, may we request that you return.
Srikan Sangani
Thank you for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Nikhil Porwal from Perpetual Capital. Please go-ahead.
Nikhil Porwal
Hi, thank you so much for the opportunity and congrats to the team on a strong performance. Continuing on one of the previous participants question, so see broadly if you are running at 85%, 90% utilization now and the capacity addition is around 12.5% over the existing capacity and this goes live in FY ’27. And if you plan to plan to deliver more than 20% growth consistently. So can we expect, is it broadly the basis improved pricing of existing products along with higher share from high-value, low-volume, higher-margin products?
Mahesh P Babani
So it is combination of these two, but there is one more factor that I would like to emphasize is that our flagship products, we have been making these products for a long-time, almost 20 years. We are number-one globally. So there, by hindsight of this, 15 20 years of learning curve, we have been able to debottleneck those capacities and increase capacities there significantly with minimal capex. So that is also going to play a role going-forward in terms of achieving the growth. So that’s a very crucial thing we have. For example, if you are doing something as a batch process, we are converting that into a continuous process or you know, a process was done which could give you, let’s say, 10 tonnes per day and you debottleneck some of the auxiliary equipment and you get a higher 15% 20% capacity. So this is what is happening because of all these years of experience of running these plants and the strong technical services team that we have.
That is also leading to this growth. Apart from new products as well as slightly improved prices. Right. So sir, ideally on higher volumes and higher share of these products that can expand margins, we are still guiding for margins to stay around current level or
Nikhil Porwal
Maybe even contract by 100 basis-points. Is that being conservative or how do we look at that?
Mahesh P Babani
So didn’t somebody just a few minutes back mentioned that we live in a world which will look a world an uncertain level. Therefore, we are — in terms of committing to you, we are being slightly conservative. But obviously, internally we are looking at the numbers that you will also love to hear in times to come. Right. Sorry. One last question from me is in this quarter there was a other income was slightly higher than
Nikhil Porwal
The general. Is it related to from the government that you had just released, there was a press release about last few weeks ago?
Narayan S Iyer
No,. The other income has nothing to do with the state incentives, which will come going-forward in fact.
Nikhil Porwal
Okay. So is this sustainable or is this one-time in neutral?
Narayan S Iyer
Other income is sustainable, we will keep getting an impact.
Nikhil Porwal
Okay. Okay. Thank you so much.
Srikan Sangani
Thank you. The next question is from the line of Jainanam from Swan Investments. Please go-ahead.
ainanam
Hi, sir. Congratulations for a great quarter and a full-year. Yeah. So basically our gross debt stands around INR1,100 crores and we have multiple capexes coming over the years, which we might be able to meet through cash flows. But sir, then what is our plans like what could be the peak debt levels and what is our plan for debt reduction from current levels?
Narayan S Iyer
Thanks,. Of the set INR1,100 odd crores, there is a capex, there is a loan of about INR232 crores applying in one of my JV subsidiary. So as such, overall the standalone basis, our debt has come down. And to answer you specifically what the debt levels will be at peak level requirement, our overall debt will not be exchanging a debt-EBITDA of free. Currently, it is at two odd on debt-to-EBITDA in fact, that’s it from my side.
ainanam
Thank you and all the best.
Narayan S Iyer
Thank you.
Srikan Sangani
Thank you. This was the last question for the day. I would now like to hand the conference over to the SGA team for closing comments.
Unidentified Speaker
Thank you. Thank you. Thank you. Thank you everyone for joining us in this earnings call. We appreciate your time and showing interest in the company. Also, I would like to thank the management team for their precious time. In case of any queries, you can get-in touch with us or the Privi team. We look-forward to meeting all of you over the next call. Thank you.
Mahesh P Babani
Thank you. Thank you, everybody.
Srikan Sangani
Thank you. On behalf of Privi Specialty Chemicals, that concludes this conference. Thank you for joining us and you may now disconnect your lines