Punjab Chemicals and Crop Protection Limited (NSE: PUNJABCHEM) Q4 2025 Earnings Call dated May. 02, 2025
Corporate Participants:
Unidentified Speaker
Vinod Gupta — Chief Executive Officer
Vikash Khanna — Chief Financial Officer
Sanjeev Kumar — Assistant General Manager
Analysts:
Unidentified Participant
Manish Mahawar — Analyst
Jainam Ghelani — Analyst
Rohit Nagraj — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Punjab Chemicals and Crop Protection Limited Q4 and FY25 earnings conference call hosted by Antique Stock Broking Limitist. 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 Star10Zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Marwa from Antique Stockbroking Limited. Thank you. And over to you sir.
Manish Mahawar — Analyst
Thank you. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Punjab Chemical and Crop Addiction. From the management we have Mr. Sharvil Shroff, Managing Director, Mr. Vinod Gupta, CEO and Mr. Vikash Khanna, CEO on the call. Without further ado, I would like to. Hand over the call to Mr. Gupta. For opening remarks post which we will. Open the floor for Q and A. Thank you. Over to Mr. Gupta.
Vinod Gupta — Chief Executive Officer
Thanks Manish for organizing the call. Good afternoon everyone and thank you for joining us today. It is my pleasure to extend a warm welcome to all the participants in this season’s conference call. We genuinely value your time and appreciate your ongoing interest in our company’s performance. I trust you have reviewed the financial result and investor presentation that we have uploaded on stock exchanges. For today’s call I am joined by Our Managing Director Mr. Shalil Shaw and our new CFO Mr. Vikas Khan. @ the beginning I am pleased to announce appointment of Mr. Vikas Khanna as the CFO for Punjab Chemicals.
Mr. Vikas Kanna is a CA with 27 years of diverse experience across finance accounts, audit and business processes. And he has worked with the reported organizations like CESC, Indigo, IB Group, SL Group etc. So on behalf of company because I extend warm welcome to you, to the team.
Vikash Khanna — Chief Financial Officer
Thank you very much.
Vinod Gupta — Chief Executive Officer
The overall business environment continues to be challenging for agrochemicals and specialty chemicals. Business changing market dynamics. Aversion to going back to normal inventory levels thus resulting to challenges in managing supply chain requires the change in business strategy. Price of the most of the products are down from 25% to 50% from their peak levels in 2022. And accordingly as all of you know, I think we’ve been talking about for last couple of quarters, raw material also have corrected so market conditions remain volatile shaped by lower demand and intensified competition. While raw materials have largely stabilized overall, export demand continues to face headwinds.
Despite these challenges, our team has navigated this environment effectively by leveraging our core strength and focusing on our differentiated product portfolio in this challenging market situation, I’m happy to inform that in this current financial year we have successfully commercialized four new products which contributed to about 12% of our top line. These products are in specialty chemical segment focused on India, Europe and Japan markets and these are expected to grow at the rate of 15 to 20% year on year. At the same time, further product pipeline of new products is looking healthy with sample approval and trial.
Sample sample exercise is at an advanced stage of approvals. During last financial year, we have maintained our market share for most of our existing products except for some cyclical changes in the product demand. Backed by all these efforts, we are pleased to report a strong performance this quarter driven by sustained momentum across all business segments. Revenue for the quarter grew by 2.9% year on year while gross margin expanded by 500 basis points to 43.5%. For full year FY25 gross margin improved by 160 basis point year on year. This growth was supported by higher sales volume, enhanced operational efficiencies, new products and disciplined execution of our strategic initiatives.
EBITDA for the quarter registered a robust growth of 93.3% year on year with margin improvement by 590 margin improvement by 590 basis points. This strong performance was driven by a favorable product mix in the last quarter, higher operating leverage and continued focus on cost effectiveness. Meanwhile, PAT grew by 196.2% with margin expanding by 230 basis point year on year to 3.5%. In view of the new product pipeline based on R and D, Based on our R and D efforts and technical excellence and growing business interest, we have reinitiated exploring the establishment of new integrated production facility and expect to be operational by end of FY27.
We are close to finalizing the new facility in next couple of months. This expansion has potential to significantly scale up our revenue across all business divisions with the capacity to double our current contribution. In the meantime, we continue to invest in asset renewal, debottlenecking our new production block during this year to cater to and handle our complex chemistry in house. Our product pipeline remains robust with a positive market response to our recent molecule launches. We anticipate contribution from new products going up in coming years supported by investment in operational infrastructure aimed at improving raw material and utility efficiencies.
With strong, fundamental and deeply committed team, we are confident in our ability to sustain growth and create long term value for all our stakeholders. With this I conclude my remarks and I hand over our CFO Mr. Vikas Khanna who will provide detailed analysis of our financial performance to you. Thank you very much.
Vikash Khanna — Chief Financial Officer
Thank you Vinodji and a warm welcome to all shareholders and investors present today. Good afternoon everyone and thank you for joining us for our Q4 and FY25 earning call. I’m pleased to provide a comprehensive summary of our financial performance for the quarter Q4, FY25 and full year FY25. First, on quarterly performance for the quarter, our revenue from operations reached 202.3 crores. Analyzing the geographical contribution, the domestic market accounted for 121 crores while the international market contributed 81 crores to our total revenue. The gross margins for the quarter improved to 43.5% as compared to 38.5% same period last year up by almost 500 basis points.
EBITDA for the quarter reached 25.5 crores, a strong growth of 93.3% year on year. EBITDA margin for the quarter stood at 12.6% compared to 6.7% in the same period last year. PAT for the quarter stood at 7.1 crores, up by 196.2%, a robust growth year on year. Back margins stood at 3.5%, an upstick of approximately 230 basis points year on year. Now moving on to the full year performance for the full year, total Revenue stood at 900.5 crores with the domestic market contributing 553 crores and exports amounting to 348 crores. Gross margin reported at 40.3%, making a year on year improvement of 160 basis points.
For the year, EBITDA stands at 99.2 crores as opposed to 113.4 in FY24, a degrowth of 12.5%. Year on year. EBITDA margins stood at 11%, PAT stood at 38.9 crores down by 27.4% year on year while PAT margins stood at 4.3%. Our total debt stood at 157 crores as on FY25 compared to 120 crores in FY24. Our average rate of interest stood at 9% in FY25 against 9.25% in FY24. Capacity utilization across all the three sites demonstrated a positive trend in this quarter. Specifically, the agrochemical division in Dhrabati achieved a utilization rate of 71%. The performance chemicals division in Lalhu reported 64% or FY25 while the industrial chemical division in Pune operated at full capacity utilization.
Gentlemen, with this I now open the forum for question and answer session. Thank you all once again.
Questions and Answers:
operator
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Jainam Gheerani from Swan Investments. Please go ahead.
Jainam Ghelani
Good afternoon, sir and thank you for the opportunity. So am I audible?
operator
Yes, you’re audible. Good afternoon.
Jainam Ghelani
Yeah, just wanted to understand, I mean after a long time we have indicated about the capacity expansion and we have seen an improvement in our gross margin after almost since 2022. So the new product that accounted for 10, 12% of the overall revenue, it doesn’t understand because last year the new product contribution stood at 7%. If you can help us understand the growth of the product that was launched in FY24, how much did they contributed in FY25 and how do we see a growth of all those products in coming two years?
Vinod Gupta
So I think the product that we introduced in FY24 that is continue to grow at around 15 to 20%. That is the guideline I think I mentioned in my opening remarks. So continues this year also and we are expecting similar growth for next two to three years because these are new launches and our fresh approvals are coming in place. So that is the kind of growth we are seeing. And then this year again we launched two more products and that’s those two new products have added another 3% of the top line in this year which again will grow at similar volumes of similar at the similar rate of 15 to 20%.
Jainam Ghelani
So that will be said to understand that the product that was launched in FY24 which was five products and four product which launched in FY25, nine products, all these products in totality contribute to around 12% of the revenue.
Vinod Gupta
Yes, at the moment. Yes. Yeah.
Jainam Ghelani
And how do we feel growth in a base? Because if you look the base product has degrees 21% on year, on year basis. Definitely one can understand that there is a pricing pressure. But you can help us in terms of the volume and pricing from current year, how do we see the growth of the base business?
Vinod Gupta
So I think I’ll split your question in two parts. First part is that whether we have maintained our market share or not because overall demand has been low in last two years. So I’m happy to say that we have actually maintained our market share for all our products. There is no loss of market share and in fact we have gained some market and some new geographies in the last two years. Now majority of the degrowth has been on account of pricing. So if I have to give a rough split, it’s not an exact split because it is product to product.
70% degrowth is because of pricing and 30% is because of the lower volume. Now this lower volume is because of overall demand being low. But we have maintained our market share. So even in tough market situation, the positive sign from our side is that we have been able to market maintain our market share including some market share equation in new markets also. So as the market is recovering, we are hopeful to regain the volumes and increase our volumes in going forward in next for the next two to three years.
Jainam Ghelani
So taking current sizing into scenario and maintaining that assume the current sizes prevail, how do we see the growth of the base business for 26, 27.
Vinod Gupta
And our assessment is we should be able to see a growth of around 20%. I think around 20% growth will be there in this, this financial year.
Jainam Ghelani
Okay, the 20% in a base business and 15 to 20% in a new product contribution.
Vinod Gupta
Right? Right.
Jainam Ghelani
Third, I mean just one was looking at your balance sheet size. I mean if you look our revenue in second half has grown by. We have reported almost 400 crores of revenue. 430 crores. But at the same time our inventory which was 160 crores in the first half has jumped to almost 220 crores. So what was the reason behind SAP increasing the inventory?
Vinod Gupta
So what we are doing is, you know, we are also aligning some of the product production cycle and asset utilization metrics. So say for example some products which are say in demand only up to September. What we decided strategically, okay, let’s start a production a bit early rather than starting only in April and not cater to the market requirement. Now given the overall because all the companies do not want to carry inventory on their, on their books, we decided to produce that material and take that as an inventory in our books. And now as the moment the new financial year has started we have started liquidating that inventory.
There’s a strategic call taken to build the inventory so that we can start selling the product in Q1, Q2 1 and 2 also it helps us to balance out our asset utilization throughout the year. So these were the two reasons why we took this strategic call. And that’s why you have seen inventory going up and this will gradually you’ll see inventory levels going down to normal levels by end of Q1 slowly and by end of Q2 I think we’ll be back to normal levels what we had in the past.
Jainam Ghelani
And how do you do without your.
Vinod Gupta
Saying, you know the. If you see the inventory has gone up from 132 crores to 222 crores in FY25. One of the reasons would be about 25 crores of you know, inventory which was lying in Transit as on 31, 3, 30, 25. So and as Vinodji rightly said that you know, in order to honor our order book positions we’ve created some amount of inventory which will get diluted as we move forward in Q1 and Q2. FY26.
Jainam Ghelani
Sure. So that is 25 crores is the order department probably which will be reflected. In the Q1 numbers. And, and along with it there could be some liquidation of the inventory. The coming quarters look much better as compared to the second half of FY 2025 that what we reported.
Vinod Gupta
Yes, right.
Vikash Khanna
Yes.
Jainam Ghelani
Right sir. And in terms of the new facility that probably we will be announcing in next couple of months and we are expecting the new stream to come by FY27. Right. Or FY26.
Vinod Gupta
No, it will be in line only by FY27 and. And it will be grown. It will be developed in phased manner. So this will be. We have developed a four to five year plan around the product and the kind of chemistries and the capability that we’ll have at the new facility. So we expect that to go on commercial production by by end of FY27 and then gradually add more capacities as we add more products to our portfolio.
Jainam Ghelani
And how much do we expect to spend for that?
operator
Sorry to interrupt. Mr. Jainam, can we please request you to rejoin the queue?
Jainam Ghelani
Last question.
Vinod Gupta
So I think overall capex layout for this new facility over a period of four years is going to be anywhere between 250 to 300 crores.
Jainam Ghelani
I have a follow up question. I’ll come back in a queue. Thank you.
Vinod Gupta
Okay, thank you. Thank you.
operator
We have Our next question from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Unidentified Participant
Thanks for the opportunity. So my first question is, you know, on the new CapEx that we are looking for, the new Greenfree CapEx. So you know, given how the industry has been over the past two to two and a half years, you know, tough times and most of the companies have stalled their capex plans or are not looking to go ahead with the capex and in our case also our capacity to utilization. Still some room available for capacity utilization especially on our, you know, database plant. That’s a smaller capacity but on data we do have some capacity available.
So what is that thought process behind management, you know, going ahead with this or looking for this CapEx? Do we have some farm orders in hand or we have some visibility of new products or existing products ramping up? So if you can share your thought process behind the new greenfield capacity that we are looking for.
Vinod Gupta
So I think first of all let’s look at our current capacity utilization. Now as all of you know, that agrochemical product has a cycle. The peak demand starts from somewhere in March and gets sold by September. So between March to December, Dara Busey unit utilization is more than 80% only in Q4 when the demand is low, the capacity utilization goes down and that’s why you see a lower capacity utilization for the RBC even for lalru. If you see year on year we have been able to improve the utilization and your overall yearly utilization is at 64% and Q4 utilization was up more than 70%.
So we are hitting a limit on our capacity being available for the peak demand because this is a cyclical demand. So that’s the first reason why we want to look at the capacity expansion. Second part is that we have, I mean if you have seen the last three, four years we have mainly focused on debottlenecking and small improvements to cater to any new product and new demands. Now our product pipeline is looking healthy in terms of requiring a dedicated new facility. That’s one. And also we are seeing good demand on intermediate specialty chemicals and also on phosphorus business.
So across various businesses we are seeing fresh demands coming in and we believe by the time this facility becomes commercial market would have recovered. I think pricing remains a challenge and that’s where our technical expertise and R and D capabilities is helping us to compete in the market and serve both domestic as well as exports market. So given overall these dynamics and our new product addition, we believe that investment in new capacity at this time is the right strategic step for Us to take.
Unidentified Participant
Sure. And in the phase one of this CapEx that we’re looking to complete by end of FY27 any tentative volume that we are looking to add from the phase one of the capex I think.
Vinod Gupta
Those details we’ll probably keep it for a later day. I mean we have a five year plan developed for the new site but at the moment we’ll probably not comment on this right now because once unless we have a final plan and confirmation with the customers it’s difficult for us to say. But yes, it’s going to be a significant upside is what we can see.
Vikash Khanna
And to what Vinod said, you know when you asked regarding the new site as you know that there are a lot of products which are going off patent and Punjab has a very strong position with many companies abroad and as in his statement he did mention that we are working on certain projects where there are certain approvals happening. So that business plan is very robustic and we to cater to that demand because there will be huge capacities where we will require this new site to acquire to get these capacities fulfilled as per the customer requirement.
Unidentified Participant
Sure. On the growth for next year and the margins, you know as you have indicated in the previous callers question that you know the base business you are looking at you know 20% kind of growth and the new products also will grow at 15, 20% next year. So overall on a company level we should expect at least 18, 20% kind of growth even. We’ll also be launching some new products in FY26 as well and any indication how much. So first question on that and what kind of margins can we look for next year?
Vinod Gupta
So our margins profile will continue to improve in the next year mainly because of this new product addition and even for existing products we expect the margins to go up because of our in house initiatives on tightening raw material procurement, the ability to and in some cases backward integration. So our margin profile will improve in the coming years. We’ll not give any specific guidance but overall we are seeing, we are seeing a positive upside uptrend on this.
Unidentified Participant
Sure. And growth is 18 to 20% with just a follow up. We did not realize. Yeah. On the growth front, on revenue growth front if you can, you know you were saying something
Vinod Gupta
I just said Mr. Ankit, I think you’ve done your match very well. So we, I think your numbers, you are right on the ballpark side. I think the numbers are correct what you said.
Unidentified Participant
Sure, sure. Okay. Thank you.
operator
Thank you ladies and gentlemen. In order to ensure that the management is able to take questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow up question, we request you to rejoin the queue. I’ll repeat, please restrict yourself to two questions per participant. We have our next question from the line of Pritesh Chera from Lucky Investments. Please go ahead.
Unidentified Participant
Sir, I couldn’t catch the bridge that you gave. So when we see for the last four years from the peak of 22 or 23, the volumes are largely flat. So. And the revenue was down 5%. So what happened to the base business volumes and how much these new nine products added to the volume? I didn’t catch that number. So.
Vinod Gupta
So I think what we. Okay, let me see the. On the, on the new product side, I think it has now reached to around 12% of the top line. Okay. And for our existing products as I mentioned, I think we have maintained our market share.
Unidentified Participant
Now depending on some places. Sir, is a very simple question. In a 25000 ton volume that is there in the four year so one is relative to the market. We understood that. But in the 25,000 ton volume how much did the base business volume decline and how much did the new nine products volumes was the contribution? We get some understanding on what happened to your base business and how much did come from your new products.
Vinod Gupta
So I think these products because there are significant value differences, the tonnages generally don’t make so much of a difference as against the top line and the bottom line.
Unidentified Participant
So then at the revenue front is it fair to assume that if 12% contributions came from your new product and you have a 5% decline overall in the company, so the base business declined by 20% and correspondingly your revenue was flat. Is that a proper assessment?
Vinod Gupta
So I think last year also we had about 7% from the new products this year which has grown to 12% so the growth is not that high. Regrowth will be around 12 to 12% or so mainly partly by volume and majorly by price.
Unidentified Participant
Partly by volume. Majorly by price, yes. Okay, now from here on, so what happened in the last four years is a erosion in your pricing which impacted you EBITDA. I’m also surprised that a 12 to 15% volume contribution coming from new business wasn’t it at a much higher margin that you’re existing because it was cramps. So it should have contributed to your margin. So is there any other play to the margin other than this whole transition whereby the margins came down?
Vinod Gupta
So I think the current products as we sort of mentored the market in some cases we took a strategic call, I think we made this in earlier, earlier calls also that we took a strategic call to make sure that we maintain market share because once we allow competition to enter the market, especially if it’s a competition from China then it becomes very difficult to enter again. So we have actually discussed with our customers where even in the contract manufacturing arrangement and have decided to split take a hit on the margin on our existing products. Now in going forward from this year onwards we see that cycle coming back to normal where we’ll be able to restore our margin.
So gradually we expect our existing product margins to go back to normal levels. Also we have put a lot of aggressive efforts on RD for our efficiency improvement. So that is also helping will help us to improve our margins for existing products. So as a, as an overall basket our margins will improve going forward.
Unidentified Participant
Just a clarification last thing. So margins will improve for the pricing correction that we have taken or margins will improve for the cost correction that you’re taking.
Vinod Gupta
I think cost correction is definitely helping us to stay put in the market and we expect now price increase to start in this year and since the product we are already seeing some price correction. I mean it’s a mixed bag because you know it’s a product very product specific market. I mean if I say that, okay, chemical industry market prices are correcting. That is not the case but we are seeing for our product prices have stabilized and are seeing some improvement now. Okay, understood.
operator
Thank you. Reminder to all participants please restrict yourself to only two questions per participant. Should you have a follow up question we request you to rejoin the queue. We have a next question from the line of Viraj Mehta from Enigma Capital. Please go ahead.
Vikash Khanna
Just a moment. I think Mr. Shelley instruct lines got dropped. Can you check that he’s connected with us now? He’s connected. Okay, okay. He’s connected. My line.
Unidentified Participant
Yeah, yeah, sorry I was. I don’t know what happened, it just disappeared. I’m back.
operator
Yeah.
Vinod Gupta
Okay. Right.
Unidentified Participant
Yeah. Hi. Can I go ahead?
Vinod Gupta
Yes.
Unidentified Participant
Yeah. So my first question is regarding the capex you arranged 250 crore capex in terms of. When you think about the ROC or the asset turnover of this entire capex, what’s the kind of asset turnover with the reduced prices that you think we can do on the whole your entire cpx.
Vinod Gupta
So I think your question is a very valid question because I think if we had talked about the same question three years back you were talking about another turnover about three times but given the current market situation we believe and we believe that this will turn in by the time we go on shape. But still we can consider about 2 to 2.2 times of asset turnover from these new assets.
Vikash Khanna
Ideally, you know, two and a half to three times is what is ideal. But we are on a constant watch and we’ll keep a very close eye as to, you know, proper utilization of our assets.
Unidentified Participant
Right. And so given that we can probably do two times and the margins as the way they are and I’m sure you expect them to, you expect these margins to improve. But like when you took a strategic call or when you take think about investing so much capital for a company of our size, what’s the kind of IRR the management and the board thinks about before approving such a large capex?
Vinod Gupta
I think general threshold that we have kept is more than 20% for IRR and I think most of our products this threshold crosses then only we sort of decide to go ahead for our any further investments. Also some of these new assets will have much more complex conditions and, and multi step processes. So that’s where it’s not going to be simple, one step, two step kind of a product for, for the new investment. Most of these will be difficult to replace replicate kind of thing and, and product which will be scaled up for our in house R and D efforts.
And that’s where we see the IRR probably will be minimum 20% or higher.
Vikash Khanna
Just to add to what Vinodi is saying, you know, ideally, you know, situation would be anywhere between 18 to 20% IRR that we’re looking at. But you know, as you know that this entire industry is so dynamic and especially with the current geopolitical scenario, we will be keeping a very close watch as to where we are heading and corrective actions would be taken as and when required. But yeah, as a ballpark figure we would look at anywhere between 18 to 20% IRR from our new investment.
Unidentified Participant
Right sir. And my last question is sir, you alluded to in one of the answers to an earlier participant saying that we will look at our customers when they give them, when they give us the approval. So are we kind of looking at some kind of approvals from customers? I mean are we putting up this facility designed for a customer or they’re putting product and then we’ll have to go out and sell in the market?
Vinod Gupta
I think this facility will have a combination for some of our existing products. We are already seeing increased demand and we don’t have capacities if I make a forecast of 10 years. So that will be the first part which will get covered by this project. At the same time, some products that we have developed and which I think Shalil said, which have gone off patent and we have developed the process, we have talked to our customers and samples have gone and it is under approval. The samples are under approval. So we need capacities for that also.
So some products which are going off patent and we believe we found a good competitive solution, those will be the second part and third part, obviously we are talking to our existing customer base and new customer base for fresh CDMO contracts which are under discussion. And obviously the geopolitical situation is changing continuously. Based on that, we believe there will be some opportunity coming our way for this new facility.
Unidentified Participant
Thank you so much, sir.
Vinod Gupta
Thank you, Mr. Raj. Thank you.
operator
Thank you. We have our next question from the line of Rohan Patel from Turtle Capital. Please go ahead.
Unidentified Participant
Hello. Yeah, am I audible?
Vinod Gupta
Yes, Mr. Ron, you’re audible.
Unidentified Participant
Yeah, yeah. Most of my questions are already asked. I just have one question. Seeing that we have managed the wall on volumes level and most of the fall is due to the pricing, but still we have managed the margins really well at around 13%. So can we take this as a base margin level and see improvement from here on or you are still like. Expecting margins to fall down from here?
Vinod Gupta
I think we’ll evaluate that. Yeah. So you know, as we did tell you that, you know, with the new product mix especially and with the new chemistries which we are looking on, so it’s definitely going to be more than what we are at the present. And as on many calls we have did mention that we are also targeting that 18% where we need to be and the product mix and the chemistries which we are looking at, we believe in the next two years we will be there. So there’s not going to be a fall, there is going to be a rise.
Unidentified Participant
Okay. So we can take this Q4 margin as a base for next year as. Well and improvements from there on.
Vinod Gupta
Yeah, so you will see that as we lock on. I mean, don’t want to talk too much on this call, but as you see our Q1, Q2, you yourself will understand better.
Unidentified Participant
Okay. And sir, when you say that we have managed our sharing products and the reason behind the fall in revenue was. Due to the subdued demand. But still we are telling giving guidance regarding growth of 20% in base business. So will that growth come due to. Increase in market share for us or you see the market going from like going 20% over next year and we. Maintaining that market share?
Vikash Khanna
Okay, I Think what has happened Mr. Rohan that in last two, three years we have maintained market share but the inventory levels were high at the moment. Now inventory for the. For all our products is now taken care of. So there is no inventory in the channel. In fact in some cases the inventory is completely dried up. Even the customer has not stopped even the minimum inventory required. So there are our hope around growing the volumes is mainly because people will have to buy, build some inventories and that’s where we’ll see growth in the volumes then coming year.
Unidentified Participant
Okay, so in this business is due. To the low base effect.
Vinod Gupta
Yes sir.
Unidentified Participant
Okay. And considering that your guidance is a bit more optimistic. So can we see our working capital improvement improving and coming back to lower than 70 days or around 70 days because we might be needing this like freed up cash to fund our capex.
Vinod Gupta
I think this is a continuous exercise because I think you were saying something. Yeah.
Vikash Khanna
So our working capital cycle anyways in the region of about 70 to 85 days currently for the domestic and with the kind of expansion that we are looking at and the kind of inventory that we’ve created, we are very hopeful that you know, going forward we would have a better working cycle looking forward. And in terms of, you know, even our export market we’ve got a very good working capital cycle which is restricted within 60 days and are mostly secured by LPs. So I don’t see any challenge in terms of our working capital cycle going forward.
If that answers no.
Unidentified Participant
Okay, it does. And just.
operator
Sorry to interrupt. Mr. Owen, may you please request we rejoin the queue?
Unidentified Participant
Sure. Yeah.
operator
Thank you. We have our next question from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Unidentified Participant
Hi team. Two questions. First one on the industrial chemical side. We’ve seen that CCB has transferred or they have given the projects to some independent bottlers like kgbpl. So do you think that these new guys will also continue the business which we have for high grade phosphoric acid?
Vinod Gupta
I didn’t get your question. Can you repeat? Because I think. Can you repeat please?
Unidentified Participant
HCCB has transferred some of the bottling business to intermittent bottlers like kgbpl. So.
Vikash Khanna
Answered this. So I think that business because finally we have an approval at a corporate level so that approval continue. In fact they basically have announced moving some of the facilities to Gujarat. And that’s where we’ve already got an interest from them. Whether we can look at setting up something in Gujarat. And this we are considering as a part of our integrated new production facility that we are planning to put up so that business of high grade phosphoric acid will continue. And also because I think there is a general direction taken by both the multinationals to reduce dependence on China.
So we continue to get approvals for new, new geographies also for this high grade phosphorica.
Unidentified Participant
So from this 125, 130.
Vinod Gupta
Sorry, just to add that the phosphoric acid which we make is of a very high grade. So it also goes into the soft drink market. But also very good for the pharmaceutical. They use it as a catalyst. So there also we see an upswing in the market.
Unidentified Participant
Sanjeeva, you think that this 125, 130 crore kind of business you can take. It or scale it will be 300. Crores or something over the next two years or so.
Sanjeev Kumar
Yeah, that is where we. I think in one of the calls I think somebody had asked me the question. And today as Vinod just mentioned that reliability on China. And now as you know that the markets are opening up in Europe, us especially in US with this big antidumping. So the phosphorus chemistry has a fantastic scope. The products which we are in have a very robustic market in that geography. And we are very confident to achieve because our quality, our, our product everything was approved but was the pricing. But as we have said that we have also gone back to the drawing board.
We have done our homework and tried to see to get the best efficiency with the best cost and the best quality.
Unidentified Participant
So in the phase one of the total expansion CapEx which you mentioned, 250 to 300 crores, how much would you allocate for the phosphoric plant?
Sanjeev Kumar
So I think you know at the moment the phosphorus business is around close to around 120 crores. I think with the existing facility we can go buy another 50 to 60 cr. We are pretty confident that during this financial year we should be at least to that 60 to 70%. And when the new capacity which will come in that’s where we will have a similar line of revenue to work on. And as we get more into the different phosphorus not only on the acid but the other phosphorous derivatives we believe the ball mark between that 120 to 140 we can easily take it to 280 to 300 plus in the next two and a half years.
Unidentified Participant
The second last question is.
operator
Few questions are up. Can you please rejoin the queue? Thank you. We have our next question from the line of Rohit Nagaraj from PNK Securities. Please go ahead.
Rohit Nagraj
Thanks for the opportunity. So the first question is in terms of raw material or some of the technical sourcing from outside and predominantly from China. So currently what percentage of sourcing is from outside and are there any plans for and possibilities of any backward integration of some of those raw materials?
Vinod Gupta
Thank you Mr. Gohit. I think we have been continuously putting efforts in this direction over the last few years and we have reduced our dependence specifically from one country. Most of our products tomorrow comes from multiple geographies but we have reduced our dependency from China over the last three years from about 2025 to 28% to right now about 18 to 19%. Now this includes two to three different initiatives. One is in some cases we have one done backward integration ourselves and in some cases we have worked with Indian companies and given them support in terms of initial sample trials and scale up.
And I’m happy to say that whatever, wherever we have worked in most cases we have been able to successfully develop local supplier and they are giving us competitive prices. Visa is China also. So this is a continuous journey that we are taking so that we reduce dependence on single country. Another initiative that we have taken is wherever we were suppose dependent only on China and if India nobody can develop then we have gone to other markets like Korea or Europe and we have found some very interesting sources from there also who supply us raw material.
So that’s the kind of diversion we have done on the raw material supply chain risk side.
Rohit Nagraj
This is helpful. The second question is on the export side. So given that China is also equally active in the exports market, how has been our interaction with our clients or new prospects and the feedback from them given that they also might be approached by some of the Chinese players. So just a broader perspective would help to understand how our export strategy is. Likely to shape up. Thank you.
Vinod Gupta
I think broadly because most of the, I mean as you know that most of our products are under exclusive or see brands kind of approach. So the customers have remained are with us. Obviously Chinese suppliers are approaching them. So I think because it’s an open market and everybody knows has all the information but our customers have remained with us. Yes, they keep on coming back to us with the offer or price being offered by China market and that’s where it’s a dynamic strategy. That is, I think I sort of mentioned earlier that we have taken to make sure that Punjab Chemical as a producer and our customer as a supplier in the market does not lose market share.
So yes, I think this is an ongoing exercise and I mean it’s a continuous exercise that we are trying to make sure that the customer remains with us and it has been a reasonably successful exercise where we have maintained our market share.
Sanjeev Kumar
And also just to add that maybe some of the products where there is a contract in which they have dual supplies that is one is India and one is China and that market share from China they want to increase with India. Punjab Chemical to an extent because of the problematic situation in China basically with the tariffs and other parameters. So you will see in the next two years people already are looking are already knocking our door not only on the agro side but also on the specialty and intermediate side.
Rohit Nagraj
Sure. Thanks a lot and all the. Sir.
operator
Thank you. We have our next question from the line of Agaste DAV from CAO Capital. Please go ahead.
Unidentified Participant
Hi, am I audible?
operator
Yes you are audible.
Unidentified Participant
Thank you very much for the opportunity sir and thank you very much for all the explanations that you have given. It has made everything much clearer still sir, most of my questions have been answered but I do have some clarifications. Sir, you gave us a very nice commentary on why the inventory levels have gone gone up and you mentioned that they will be tapering down till by the end of Q2. So if I were to look at it from a capital deployed angle throughout the year what is the number that we should take? You mentioned 75 to 85 days but that’s what the reported number is I’m assuming.
But in the business inherently what kind of working capital do you actually need adjusted for the seasonal variation, variations.
Vikash Khanna
On. The fee ratios I believe on top of you know our debt equity currently we are at a very comfortable position of about 0.4 visa with what it was in FY24. So you know just to answer your question on working capital requirement I think we very comfortably placed both in terms of our borrowings which is, which is not on a very very high you know platform. We are very comfortable with our borrowing which is currently at only at about you know about 153cr out of which also you know we are looking at incre our CAPEX contribution going forward as Dinoji said, you know we’ll be putting in about 250 crores for our capex so we don’t see any major threat in terms of our working capital cycle.
Sanjeev Kumar
Okay, just to add, Sorry, just to add what Vikas said that you know we are a supply strategy for our agrochemical technicals. So these are all which are under especially for the export market is 60 days which are backed with LC or non recourse discounting and the domestic also the customers who we work where they are anywhere at around 90 days which we may get it between 85 to 95 days. These are also very reputed companies and with whom we are dealing for several years. So there is no any such problematic for us in terms of our working capital and the turnaround in terms of manufacturing and getting back the revenue.
Unidentified Participant
Understood? Okay. Okay. Sir, you gave a range for what used to be the asset turnover ratio once upon a time during the heydays. So that you said was around three times and then you gave a number and then it became a range. So can you give a more like. Can you repeat that answer again? What exactly would be for considering all. The new launches that you are doing. And the fresh capacity. For the fresh capacity, what kind of asset turnover are you expecting at the current prices?
Vinod Gupta
I think what we said is for the fresh capacity asset turnover will be anywhere between 2 to 2.2 times is what we are expecting this thing facility. I think, I mean partly we have depreciated asset but anyway we are investing a lot on so. But I think our asset turnover is anyway reasonably high.
Unidentified Participant
Yes sir. And final question sir, you. You seem it. It seemed to me that you mentioned that the number 18% with respect to the margins. Did I get it right? Sir, just this. I’m then done. These are just follow ups. So did I hear that right? Sir, did you see 18%? Yeah.
Sanjeev Kumar
So as I. I think somebody asked that you know when we see 13% for this Q4. So I said definitely as you see Q1, Q2 coming in for the next year you see that thing going and our aim is that between the next two to three years our target is with the product mix with the new products which are high value with a better contribution will be at around 18%.
Unidentified Participant
Great. Sir, thank you very much for giving me the opportunity and hosting the call. Sir, all the best.
Vinod Gupta
Thank you.
Vikash Khanna
Thank you.
operator
Thank you. We have our next question from the line of Shauri Panyani from Urge of Partners. Please go ahead.
Unidentified Participant
Hi, am I audible?
Vinod Gupta
Yes. Shaurya.
Unidentified Participant
Yeah. Sir, could you give a revenue breakup of the three divisions like adult, amica. Specialty and industrial, how much they contribute?
Vinod Gupta
I think that revenue breakup generally is. We don’t give because I think these are all moving dynamics from quarter to quarter. But at an overall business level what we can say is that all the three business verticals are seeing a turnaround and are seeing better prospectus in coming quarters and coming years.
Unidentified Participant
So the 250300 crore capex you are Having So this is for just eight one or an entire five year plan and how it is going to be financed.
Vinod Gupta
It is basically this project will be obviously project timeline will be around two to three years for us to complete and project financing will be a mix of internal approvals and some external financing because maybe you can respond.
Vikash Khanna
Yeah, so sorry, I mean as it is very common with most of the organizations when we’re going for such kind of capex obviously you know with the kind of current ecosystem that we have in the social political scenario that we’re going through, it would be funded by external borrowing. Now we are very, very closely monitoring our as we said, you know we brought down our cost of borrowing in the current year and going forward too we are looking at the best case scenario where we could bring down our cost of borrowing. But yes, to answer your question straight away it is going to be through an external borrowing.
Now we yet to decide whether it’s going to be a domestic or a forex currency loan. But yeah, it is going to be a loan on our debt, on our books for the new expansion this is.
Unidentified Participant
Just a phase one, right? For further payments you will income more capex.
Vikash Khanna
So the capex that we are saying is as we said it is going to be spread over the period of next two to three years. Yes.
Unidentified Participant
Okay. Okay, thank you.
Sanjeev Kumar
As and when our expansion happens because you know business talks, business discussion always happen on a year to year basis with the customers and new customers. So as and when it comes in we will see best possibility to see what type of debt, what type of things we are looking into to ensure that our debt level does not increase and we are at what at the present we are working on to take it forward.
Unidentified Participant
Okay, thank you, thank you, thank you,
Vikash Khanna
thank you. I think we can take last one or two more questions.
operator
Okay sir, so we have a follow up question from the line of Jam Ginani from Swan Investments. Please go ahead.
Jainam Ghelani
Hi sir, you mentioned that we are expanding our R and D team from 30 to almost double. So what was our R and D expense for FY25 and how do you see that going forward?
Vikash Khanna
You see our R and D expenditure has been almost. We’ve kind of, you know, done reasonable amount of expenditure there and it’s been in the range of about 2 to 3% of our total cost has not been very high in terms of our total expenditure. But as we move forward, as we find new chemistries being rolled in, as we find new molecules being developed, of course we will try and maintain the same levels of our R and D.
Sanjeev Kumar
And just to add, please understand that R and D is the backbone of any organization. And for us to, you know, with the way the world is moving and you know, with China, people are looking more and more into India where we need to invest a lot into R and D into people. So that will be always a continuous process. And if you see our investor presentation, you can, you know, see I think one of the slides which you know talks a little bit bit more about our R and D and what is the manpower and how we are looking at it.
Jainam Ghelani
Okay. And sir, at current pricing what is the peak revenue that we can expect from our current facilities.
Sanjeev Kumar
At the moment? You know, our turnover. Because also please understand in the last two years in terms of revenue the price has also gone down. But having said that, where Punjab turned 1000 crores I think around three years back. And then we went to 936 and we are at 900. And with product pricing which Vinod did mention in his opening remarks and also I think during some people who spoke about it. So you should appreciate that the team has done a fantastic job in adding new products, maintaining that margin and answering your question. The way we are looking at this, the two facilities including Pune, if everything goes well with the revenues, what we are looking at should be around 1500 plus.
Jainam Ghelani
Okay sir, that’s it for my sir. Thank you.
operator
Thank you ladies and gentlemen. That would be the last question for today. And I now hand the conference over to the management for closing comments. Over to you sir.
Sanjeev Kumar
So thank you very much everybody and I hope me, Vinod and Vikas were good enough to answer your questions. Please do understand there are certain confidentiality where I with folded hands say sorry, we are not certain product name, certain distribution among the products. We are not very clear. But as and when there is something we can meet and satisfy all your questions. And once again, thank you so much for all your time. Have a good afternoon and a good weekend ahead. Thank you Antique for hosting this call. Thank you once again guys. Cheers.
operator
Thank you on behalf of Antique Stock Broking Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.