Yasho Industries Limited (BSE: 541167) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Parag Jhaveri — Managing Director and CEO
Analysts:
Masoom Rateria — Analyst
Anirudh Shetty — Analyst
Yash Dedhia — Analyst
Manish Gupta — Analyst
Parth Agarwal — Analyst
Shubham Jhawar — Analyst
Nakul Doshi — Analyst
Sunidhi Joshi — Analyst
Sayam — Analyst
Sahil Vora — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 and Nine Months FY ’25 earnings Conference call of Yashov Industries Limited organized by Orient Capital. 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 restricted to your conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms Masum Rateria from Orient Capital. Thank you and over to you.
Masoom Rateria — Analyst
Thank you. Good evening, everyone. Thank you for coming to Industries Q3 and Nine-Month FY ’25 business call. Today, we have with us from the management, Mr Parag, the Managing Director and CEO, along with Mr Deepak Kaku, the CFO. Before we proceed with the call, I would like to give a small disclaimer that the call may contain certain forward-looking statements, which are based on the business opinions and expectations of the company as on today. A detailed disclaimer has been given in the company’s investor presentation. I hope everyone had a chance to go through it, which was uploaded on the stock exchange. Now, I would like to hand over the call to Mr Parag. Over to you, sir.
Parag Jhaveri — Managing Director and CEO
Good afternoon, ladies and gentlemen, on behalf of Yasho Industries Limited, I extend a warm welcome to all of you joining us for today’s results call. We greatly value your time and interest in our company’s performance. As we discuss our financial and operational performance for the past nine months, I would like to emphasize our commitment to maximize value for our stakeholders. Despite the ongoing volatility in-market and the slowdown in the global chemical industry, we have skillfully navigated this period of uncertainty. In the face of these challenges, we successfully maintained our revenue achieving a total of INR148 crores for the quarter, which represent a 15% year-on-year increase, driven by an 8% improvement in sales volume. Our reporting margins have been effectively protected and enhanced through a more efficient product mix resulting in an EBITDA margin of 18.4% for the quarter. Our facility is now running smoothly and we expect the plant to run at more than 50% capacity from March 2025 onwards. We believe that this expansion coupled with our proven operational resilience will lead to stronger sales and continued success for the company. On a global scale, our subsidiary in the US will serve as a key distribution hub for the American customers, landing the groundwork for future growth and natural expansion. Looking ahead, we understand that chemical prices have stabilized and expect to see consistent pricing for the next few months. We are actively working on increasing the utilization of our new facility. We recently concluded INR125 crore fundraising through a preferential allotment. Fund will help the company strengthen its balance sheet, the fund are intended to pay-off borrowings, some long-term and for the working capital of the new facility. We also intend to upgrade our R&D facility, which will be done in the next few months. Talking about financial highlights for Q3 FY ’25, our revenue from operations for the quarter reached INR148 crores, reflecting a 14.7% year-on-year increase, primarily driven by significant volume growth. Notably, export accounted for 66% of our total revenue. We successfully maintained our margins on account of improved product mix and the cost-efficiency enable us to achieve an EBITDA of INR27 crore, resulting in an EBITDA margin of 18.4% for the quarter. The segment-wise conversion stood at Industrial Chemical contributing 79% and consumer being at 21% of the total revenue. For the nine months ended December 2024, our revenue from operations totaled INR486 crore, demonstrating a 15% year-on-year increase. Our EBITDA reached INR83 crores with an EBITDA margin of 16.8%. The PAT stood at INR1 crore due to increased depreciation and finance costs resulting from the commencement of a new plant at Pakaja. In conclusion, we are optimistic about further enhancing our margin as we focus on customer engagement and maintaining stable operations while ensuring steady contribution, margin through better cost management and product mix. Our commitment to creating long-term value for our stakeholders, coupled with prudent financial management and strategic initiatives will be instrumental in sustaining our growth in coming years. So that is from my side. We will now open the floor for question-and-answer. Thank you very much.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Participants who wish to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press. Participants are request you to use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles participants who wish to ask a question, I press and one on your telephone, we have the first question from the line of Anirud Chetty from Advisors. Please go-ahead.
Anirudh Shetty
Thank you for the opportunity, sir. Just a few questions from my side. The fundraise that we’ve done, has that — just to clarify, has that been entirely done to pay-off debt or is there some capex component there as well? And if you could just give the split of the capex as well
Parag Jhaveri
From this INR125 crores INR50 crores we are repaying the debt and balance we are going to retain with us for the use of future expansion work
Anirudh Shetty
Okay. And this capex, is it primarily in the Industrial chemical segment or is there some new opportunity that we are looking to cater to?
Parag Jhaveri
It will be into the industrial segment only, but for the new — but for the new molecules, new product?
Anirudh Shetty
Got it. Sir, our consumer chemical business in the — in Q3 FY ’25 and nine months FY ’25 has grown very, very strongly. So just wanted to understand what has been driving that growth? And is this sustainable growth or you think that it could reverse in the future?
Parag Jhaveri
So it will be one-time. We don’t expect that to grow for that this. This is surely the — our sales into industrial segment was little subdued due to the demand and also the year end for a lot of our customers, MNCs being a December month, we did not able to push the sales. That’s why the consumer looks to be a much higher, but which will not be in reality going-forward.
Anirudh Shetty
Got it, because even in absolute terms, if I just look at the revenue, it has, you know, grown quite meaningfully, not as a percentage, but just in absolute rupees crores. So has that been more like pricing led growth or volume-led growth? Just wanted to understand what’s the pricing —
Parag Jhaveri
That was the volume and pricing both?
Anirudh Shetty
Okay. Yeah. And just one final question in this quarter ended, what would our capacity utilization in Pakajan be?
Parag Jhaveri
Well, in December, we were almost close to 30% utilization, okay, but the sales did not materialize. As I said, lot of sales happened in January, purely due to the customers closing.
Anirudh Shetty
Got it. Sorry. No, thank you for taking my questions. I’ll turn back-in the queue.
Operator
Thank you. We have the next question from the line of Yesh Dedia from Maximal Capital. Please go-ahead.
Yash Dedhia
Hello. Thanks for the opportunity, sir. Sir, I wanted to know if any other reasons were there for the lower industrial chemical volumes uptake and lower capacity utilizations, when we predicted in Q2 that our capacity utilization would be, say, about 35% to 40% for Q3 and 60% for Q4. Now we are lowering that guidance again. So what is the key reason behind it apart from seasonal impact, which has happened due to all day seasons for US and UK players, EU players. Apart from that, any other key reason?
Parag Jhaveri
No. I think the major reason in Q3 was a customer holding back the supply or accepting the deliveries. So that was one of the reasons. Yes, we are little bit lagging behind in our ramping-up of production and sales at least by two quarters. What we are — what we are expecting in month of September that is happening, going to happen in March ’25. And we can see that yes, there is a for two quarters purely because of some of the approval that the customer has and has been held up and some of the customers’ RFQs have been delayed or I won’t use over delay but they are getting due end of or mid of the next mid of ’25.
Yash Dedhia
Sorry, customer RFCs are getting — I didn’t get that part.
Parag Jhaveri
Customer RFQ coming see the customer has going major customers also on a yearly or two yearly contract and that they should raise RFQ for the new purchase. So that will be going to come somewhere in July-August.
Yash Dedhia
And that was expected to come earlier when?
Parag Jhaveri
Well, there are — there are couple of form which has got delayed and a couple where we could not call the bid because we are not fully qualified with them. And so now we got qualified.
Yash Dedhia
Now we are qualified and confident.
Parag Jhaveri
Yes.
Yash Dedhia
And going-forward, so we are expecting Q4 — so March should be 50% utilization and blended Q4 would be around
Parag Jhaveri
H2 thing, what about 35% blended Q3 will be 35%, 35% to 40%, bad debt
Yash Dedhia
25% to 40% bad debt. And in FY ’26, by when we expect see to utilize optimally which we were thinking
Parag Jhaveri
Last quarter of 26
Yash Dedhia
Last quarter of ’26. Okay. This would be the exit run-rate, correct?
Parag Jhaveri
Sorry.
Yash Dedhia
This would be the exit run-rate. By the last quarter, we will be exiting with 5% to
Parag Jhaveri
90%.
Yash Dedhia
Okay, understood. Understood.
Parag Jhaveri
Thank you.
Operator
Thank you. Participants who wish to ask a question may press star and one on your telephone. We have the next question from the line of Manish Gupta from Solidarity. Please go-ahead.
Manish Gupta
I have two questions. The first one is, can you provide some color on your conversations with customers in the light of all this we are hearing about tariff wars. How are your customers in the US thinking about their supply-chain sourcing requirements in the light of the new administration’s desire for higher tariffs? Can you give us some color on how your customers are reacting to that?
Parag Jhaveri
Well, everybody is cautious. I think it’s too premature to make a comment. Only one-side, they are certain that the 10% tariff which has come on China will remain. Rest of the tariff, they are not sure how far that will be or what is the reason that those tariffs are coming. We are into chemical. In chemical side, we see that there is a coming on a product coming from China. There is not a clarity that certain products which were exempted are part of this or not, we are waiting for that clarification from our customers. But we may see a higher traction going-forward in coming weeks. I think this just happened before a few days, so it’s too early to talk about it or impact on the business
Manish Gupta
Specifically product by, if for example there are higher tariffs on our products say for the US market. As of now, I don’t think we serve the US market very, very extensively. So if there are higher tariffs on our products, how does our strategy get impacted
Parag Jhaveri
I –, we are not anticipating that there will be a higher tariff on an Indian product getting into USA. That’s — we are quite a bit certain. If there’ll be any tariff, it will be across-the-board, not only on a product originated from India. As of today, what we have a conversation with our friends,. So if this is a — if this come really as a higher type on product, that’s going to start as everybody, okay. But looking at the pretext what’s in media and what we are hearing from the people India is not going to be going to be punished badly on a tariff side. That’s what that is what in our assumption
Manish Gupta
Okay. Next question Pragby, is that when are both our plants, Dahej and Pakajan, when both our plants are optimally utilized, now I think you have a better sense of pricing in the market and what gross margin we could do from the plants when we — whenever we reach optimal utilization. What will be the approximate aggregate EBITDA run-rate of the company at that point in time..
Parag Jhaveri
First of all, our plants not in the region, Pakajan — and Rathi. Yeah, that’s my correction. Yeah. We are expecting a revenue in the range of about INR950 crores to INR1,000 crores for 20 — FY ’26. At the minimum EBITDA range between 17% to 19%, we are confident on that on that part of it. So in our FY ‘26,000 in FY ’27, which we assume that we will be running both the plant right from day-one on a full capacity should be in the range of about INR1,250 crores to INR1,300 crores with again EBITDA margin in the range of about 18% plus-minus 1%.
Manish Gupta
Okay. So roughly, say, INR220 crores INR240 crore is at peak utilization, what the EBITDA capacity of the plant?
Parag Jhaveri
Yes, sir.
Manish Gupta
Okay. Last question,, that that you know the ramp-up now that you are guiding to have you got all the approvals that you need on the product side? Now is it just a question of sales execution? Or is it also delays in-product approvals?
Parag Jhaveri
If I say all approvals, answer could be yes and no, if I have 10 customers, six from six, we have got all the approvals, four are still under evolution level. So I won’t say 100% approval, that cannot be ever happened. So it’s an ongoing process, approval, new customer will come on-board and approval will continue. But yes, some couple of key major customers whom we have identified as a business for future as we have received it. And from them, we have received some part of the business also for some part of the world.
Manish Gupta
Okay. Excellent. Thank you so much.
Parag Jhaveri
Thank you.
Operator
Thank you. We have the next question from the line of Parth Agarwal from Bastian Research. Please go-ahead.
Parth Agarwal
Hi, thank you for the opportunity. Sir, I have just one question. So since our facility, we are expecting our asset turn to be around 1.5 to 210, right?
Parag Jhaveri
Yes.
Parth Agarwal
So can you just give me a sense on, let’s say both the facility, Rapi facility, I think it’s anyways optimally utilized right now. And if Pakajan facility were to be optimally utilized, what would be the EBITDA margin that would be generating from that facility.
Parag Jhaveri
I will not going to have us plant-wise EBITDA, but I can tell you on the company-level, EBITDA will be plus-minus 1% of 18%, 18%. That’s what I can give you. We will not be able to share with a plant-wise EBITDA. I’m sorry.
Parth Agarwal
That’s right. Okay. So what I’m trying to understand is, since our Wapi facility almost has an asset turn of close to 3 times and this new facility will do an asset turn of around 1.5 to 2 times, still to generate sufficient margin — incremental margin to compensate for the ROC that is that might get depressed, right? So I’m just trying to understand whether this Pakajan facility is ROC accretive or not?
Parag Jhaveri
Well, Pakajan facil is not fully monetized. It will take at least to monetize the full assets of, we will need a three years minimum, three to four years purely because we have spent about INR250 crores on a peripheral infrastructure creation.
Parth Agarwal
So let’s remove the common facility that is the
Parag Jhaveri
Two megre. So unless until the second phase of expansion and whatever not kicked-in, which will help us to utilize those assets till then you will not see the return more than three times. So that will take a while for two years more from here.
Parth Agarwal
Okay, got it. Thank you so much. That’s all from me.
Parag Jhaveri
Thank you.
Operator
Thank you. Participants who wish to ask a question may press star and one on your touchstone telephone. We have the next question from the line of Jawar from Dexter Capital. Please go-ahead.
Shubham Jhawar
Yeah. Am I audible?
Parag Jhaveri
Yes.
Shubham Jhawar
Yeah. Hi, hi, sir. Thank you for the opportunity. I had couple of questions. So the first question was our industrial Chemicals contribution this quarter was 79% compared to 87% in last year same quarter, right? Hence with the higher-margin industrials contribution lower this quarter, what exactly led to our gross margin being expanded so much?
Parag Jhaveri
Okay, that’s purely because of some of the product mix, what happened at our end, which has helped us to increase the margins on the product
Shubham Jhawar
Sir, but my understanding is that industrial chemicals was the higher-margin product, right?
Parag Jhaveri
Yes.
Shubham Jhawar
So when Industrial Chemicals is itself down to 79% compared to 87% last year same quarter, so then, sir, what exactly is leading to such high gross margins when the higher-margin in Industrial Chemical is down itself.
Parag Jhaveri
As I said, I cannot pinpoint which product-line which gives us a margin, but there are certain new products which is — I won’t say new, but the product which was been sold low quantity, but high margins in industrial segment has been sold-in a larger volume than what is? That is helping us to achieve a better margin. That.
Shubham Jhawar
And sir, what is our — what — would this margin be sustainable this gross margins?
Parag Jhaveri
I think gross margin of about 38% to 39% is a sustainable margin.
Shubham Jhawar
All right. All right. Okay. Also, sir, the second question was, if I heard it correctly, out of INR125 preferential round that INR125 crores referential round that we did, right? We are — we would be using INR50 crores, around INR50 crores for the debt repayment and remaining we would be earmarking for future capex. Is that understanding correct?
Parag Jhaveri
Yes. Right now we can be used for the routing working, but that money will be eventually used for future expansion in ’25, ’26.
Shubham Jhawar
From ’25, ’26 onwards itself, we would be using that for expansion, right?
Parag Jhaveri
Yes.
Shubham Jhawar
All right. Okay, sir. And sir, if I may ask what was the — what is the current inventory this quarter, if that is available?
Parag Jhaveri
I think current inventory was higher, much higher. Purely, as I said that a couple of order were put on-hold. So current inventory was in the range of about INR460 crore, much higher than what we expect or what we generally believe. And I think we will be bring it down back to normal by March the way what we see the traction of new orders that will be coming up?
Shubham Jhawar
All right. And sir, how — what is the pricing trend that we are currently observing this quarter and how confident are we that this may not slip again in coming quarters? Like what is the general understanding there?
Parag Jhaveri
Well, I don’t have, so I can’t talk about what will happen. We have seen some price improve — price improvement come starting from mid of January. And we have not seen any further deep into the raw-material prices, but we have seen somewhere the prices started moving up. Not only the one field, but across-the-board, we have seen that prices are started rising. People are that we are not able to maintain such a low-price and that’s kind of are happening. So under whatever new prices we are getting or we are seeing for Q2, sometime we start negotiating at this level. So we see the same price increase.
Shubham Jhawar
All right. Okay. That was it. Thank you so much.
Parag Jhaveri
Thank you.
Operator
Thank you. We have the next question from the line of Nakul Doshi from MS Associates. Please go-ahead.
Nakul Doshi
Thank you for the opportunity. I had a couple of questions. Starting with considering the current market dynamics, including customer demand, pricing trends, industry conditions, what are your projected volume growth for — for the current quarter, that is Q4?
Parag Jhaveri
We should be having a volume growth aggregate growth of about 30% 35% by end-of-the year as an aggregate growth.
Nakul Doshi
Okay. And annualized basis, what would be our FY ’25 figures? FY ’25 expectation.
Parag Jhaveri
INR650 crore INR670 crores, somewhere in that range we will be ending up.
Nakul Doshi
Okay. And on how is the new subsidiary contributing to our — to enhancing our market position and expanding our distribution network in the American market?
Parag Jhaveri
That subsidiary will start operating — selling the product from the next month because we start — we just have complete all the disorders, we will start moving the product to our warehouse in Houston. So actual revenue will start generating from March.
Nakul Doshi
Okay. And have you said any key milestones for the particular subsidiary like in mid-term, do we have any target set for the same?
Parag Jhaveri
I think let us start walking, then we’ll talk about the targets by. It’s too early to talk about the target for the new setup altogether with a different geography.
Nakul Doshi
And additionally, are there any plans to set-up warehouses or establish any new subsidiaries in other regions to further strengthen our global footprint?
Parag Jhaveri
No, right now only the two Europe and USA, it could happen in the multiple locations going-forward, how we see the business growth depend on that, we’ll take a call.
Nakul Doshi
Sure, that’s it from my side.
Parag Jhaveri
Thank you.
Operator
Thank you. Participants who wish to ask a question may press star and one on your telephone. We have the next question from the line of Sunidi Joshi from NM Financial. Please go-ahead.
Sunidhi Joshi
Hello. Am I audible?
Parag Jhaveri
Yes.
Sunidhi Joshi
Okay, sir, to begin with raw-material, can you provide more details on the impact of raw-material pricing that you see going-forward? Also, if you can help us understand how do you manage the fluctuations in raw-material costs to maintain profitability.
Parag Jhaveri
In past also, we have said that we work wherever we work on a long-term relationship with the customer. Our pricings are on a quarterly basis. And so the — anything happened during the quarter, we don’t. Either we absorb or we — we gain or we lose. But end-of-the quarter, we renegotiate the price depending on the situation. And I think over a period of time, we have demonstrated that we have been able to maintain our margins. So we don’t see a challenge at. On your questions of raw-material price, yes, we are seeing some price increase and we have also seen some price — higher price acceptive acceptance for our finished goods in the market.
Sunidhi Joshi
Okay. And so how much of your raw-material do you export? And if you could — if you can brief on what are the key raw materials that are used in the production process?
Parag Jhaveri
We have a multiple raw materials as our process. We use hydrophenon, we use that we use the and a lot of different amines we use. We also use the different and alcohols. So they are multiver raw materials, but couple of things and the chlorine, so which are high high-value product.
Sunidhi Joshi
Okay. And another thing, if I may know the current cost of debt for the company. Additionally, do you still maintain your guidance of 3x debt-to-EBITDA ratio for FY ’26 or are there any updates or adjustments to that target based on current market conditions?
Parag Jhaveri
Our current cost of the debt is 8.6 to 8.8 in-between that, it depend on how much we use as a packing, which are little cheaper than our working capital. Number two, what we are giving in guidance to bring down our debt-to-EBITDA by FY ’26 to those to 3.5 is very much in-place and we are confident we’ll be able to achieve that.
Sunidhi Joshi
That was helpful. Thank you.
Parag Jhaveri
Thank you.
Operator
Thank you. We have the next question from the line of Sayam from Invert Capital. Please go-ahead.
Sayam
Thanks for the opportunity. Perhaps my first question is like I’m relatively new to the company. So the new plant that we have set-up in terms of the tonnage volumes, it is 20,000 tons, which is significantly higher than our current capacity. But in terms of revenue addition, we are just guiding for doubling the revenue. So is it that fundamentally the products that we are pursuing at the new plant are lower-value per kg or is it like some larger product categories, which earlier we were not doing at the Wapi site. If you can just help me understand this a little bit, it could be really great.
Parag Jhaveri
It’s totally a different product product which we’re making has moved to the new facility, but they all are of the lower-price band, not the higher management of product. So that’s why we — our guidance for the new facility is only up to INR500 for a full capacity level.
Sayam
So when they are lower-price per kg, are they also lower GP or the GP is sort of similar to what we have been doing in the market?
Parag Jhaveri
I think is what somewhat similar or slightly better than what we’re doing.
Sayam
Understood. Understood. Secondly, to my understanding like last quarter you had mentioned this is as of November, I think that any fundraise plans seem to like a bit premature to comment on, but then in December, we have actually done fundraise. So are we looking at a slightly elongated capacity utilization or ramp-up as compared to our original expectation or this is more from a point-of-view that you know, that there are multiple opportunities beyond what we have done currently. So because I thought that we were quite comfortable with the debt levels that we were operating at earlier.
Parag Jhaveri
I think there are multiple factors, which I’ve already said. Number-one, we have certain new products which we want to start manufacturing and we need to capex there, okay. So that will happen the way which will give that will happen in FY ’26. And number two, yes, there was a slight delay in of the facility, two quarters, that is not a pressure kind of it. But we thought that let’s deliver a little bit, we need to also make some capex into the new chemistry. So better to raise a fund rather than just stressing for the balance sheet.
Sayam
Understood. And going by our earlier guidance, so let’s say this Q4 FY ’26, we do reach 85%, 90% of the utilization. So are we going to trigger further investment in the — like the new product that you have talked about once we surpass that 70% mark?
Parag Jhaveri
Absolutely.
Sayam
And that would be executed faster, right, because now it would be bring — brownfield capex. So you’ll be just adding the plant and machinery and not building the entire block.
Parag Jhaveri
I can’t comment on that how we — what plant we come up, everything depends on that and it’s premature for me to talk on that since we are not ready
Sayam
Okay
Parag Jhaveri
Thank you
Operator
Thank in the interest of time, we will take the last question from Mr Sahil Vora from A&G Partners. Please go-ahead.
Sahil Vora
Hi, sir, good evening. Thank you for the opportunity. Am I audible?
Parag Jhaveri
Yes.
Sahil Vora
Just I had a couple of questions. Sir, firstly, can you elaborate on the reasons behind the delay in the ramp-up at the Pathajen plant? What factors have contributed to the lower-than-expected capital — capacity utilization at this stage?
Parag Jhaveri
I have already mentioned by dear friend that some of the places, the full approval was not in-place and some of the places customer RFP or not — their customer was not ready to reordering or for the long-term contract. So those were the thing so that’s the reason and the third will be due to the March, December ending a lot of customers were not willing to accept the material because of their closing so the ramp-up has been slow?
Sahil Vora
Okay, sir. My next question is can you following the recent capital raise of INR125 crores, can you like outline how you plan to allocate these funds? Specifically what are you?
Parag Jhaveri
You just joined the call. This question will be repeated three times. I don’t give also but this question is okay. We are going to repay INR50 crores as a little debt and the balance INR75 crores we are going to retain with us, which will be used in — currently for — within for the working capital need and next year when we have planned for expansion, we’ll use the phone for that.
Sahil Vora
Okay, sir. Thank you.
Parag Jhaveri
Thank you.
Operator
Thank you. I would like to hand the conference over to the management for closing comments.
Parag Jhaveri
Thank you very much everyone for your time. I appreciate. Have a good day. Bye-bye.
Operator
Thank you. On behalf of Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.