Hester Biosciences Limited Earnings Call Transcript, Nov 5, 2026

Ladies and gentlemen, good day, and welcome to the Hester Biosciences Q2 and H1 FY27 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note this conference is being recorded. I now hand the conference over to Ms. Nisha. Thank you, and over to you, ma'am.

Nisha:

Thank you, Nazni. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all on Q2 and H1 FY27 Earnings Conference Call of Hester Biosciences Limited, and I thank the Hester Biosciences management team for giving us the opportunity to host this call. Today, on this call, we have with us Mr. Rajiv Gandhi, CEO and Managing Director; Ms. Priya Gandhi, Executive Director; and Mr. Ashish Desai, Chief Financial Officer. I will now hand over the call to the Hester management team for their opening remarks. Thank you, and over to you.

Priya Gandhi:

Good afternoon, everyone. This is Priya Gandhi. As always, it's a pleasure to connect with you all. Thank you for joining us today as I take you through Hester Biosciences performance for the second quarter and first half of financial year '27. We appreciate your continued interest and support. In our last earnings call, we spoke about how our efforts on product mix, manufacturing efficiency and operational discipline were beginning to translate into stronger performance. We are encouraged to see this improvement continue into the second quarter. Our detailed results are available in the press release, so I will briefly touch on the financial highlights, and we'll be talking about the different segments, businesses and our priorities. Coming to the financial performance. The

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standalone revenue increased by 28% in Q2 and 21% in H1 over the corresponding period of the previous year. We are particularly pleased to report a strong growth in PAT, which more than doubled, increasing by 131% during the quarter, and 108% in the first half. Gross profit margin stood at 78% in both Q2 and H1, supported by a favorable product mix and our focus on operational efficiency. EBITDA margin stood at 35% across both periods, reflecting higher sales and disciplined cost management. It is encouraging that the improvement seen in Q1 has continued into Q2. While margins will vary depending on the product mix in each period, our focus remains on sustaining the operational improvements and profitability. Profitability improved despite higher depreciation following the capitalization of the BSL-3 laboratory and fill/finish facility. At a consolidated level, revenue grew by 38% in Q2 and 13% in H1, primarily driven by the India business. PAT increased by 44% in Q2 and to 71% in H1. As explained in our previous call, H1 consolidated profitability includes an exceptional accounting gain recognized in Q1 following the amendment of Hester Africa's loan agreement with the Gates Foundation. This contributed significantly to the reported H1 profit growth and should be viewed separately from the performance of the business. We are grateful to the Gates Foundation for their continued support. Coming to the division-wise performance from Hester India. Poultry Healthcare maintained its growth momentum with revenue increasing by 27% during the quarter and 37% for the first -- for the half year. Our focus on institutional business, deeper market penetration and customer engagement continues to support the division. The performance reflects efforts undertaken over successive quarters to strengthen our presence and relationships across key markets. Along with vaccines, our health products portfolio includes feed supplements and disinfectant solutions addressing broader disease prevention and farm health management needs. We continue to develop these offerings supported by scientific engagement with customers. Going ahead, while quarterly growth

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rates can vary depending on the seasonality, but our priority is to strengthen the underlying business through relevant products, wider market reach and consistent execution. We received a question ahead of this call on the response of our low pathogenic Avian Influenza or the H9N2 vaccine and the prospects for exports, which I would like to address here. As we shared in our previous call, the initial response in India was encouraging and the vaccine contributed to the poultry health care growth. We continue to focus on scientific engagement and market development. Exports will depend on registrations and approvals in specific markets, along with commercial readiness. Coming on to the Animal Healthcare division. Animal Healthcare recorded a revenue growth of 34% in Q2, supported primarily by increased tender execution. H1 revenue remained 14% below the corresponding period of the previous year, reflecting lower sales in Q1. Government-led immunization programs form an important part of this business. Supplies follow program implementation schedules, which naturally lead to variations in sales across reporting periods. We, therefore, assess the business over a broader period rather than drawing conclusions from a single quarter. Along with these immunization programs, we continue to enhance our biologicals portfolio and explore opportunities to serve institutions directly through closer engagement and better understanding of the health care requirements. Moving beyond the division-wise performance, I'd like to give you a broader perspective on our product development work and evolving regulatory requirements. We continue to advance our biological pipeline across poultry and animal health care through regulatory dossier submissions and approvals for further development and field trials. Our development program includes products suited to our recently capitalized infrastructure, particularly the BSL-3 laboratory. I would just like to mention here that regulatory requirements in animal health care are becoming increasingly rigorous, particularly around documentation, compliance and trial requirements. Meeting these evolving requirements can

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extend the development and approval time lines, but we welcome these changes as they further strengthen quality standards, confidence in the industry and reinforces our own commitment to quality. Along with product development, we continue to focus on manufacturing efficiency and better utilization of our existing facilities. We continue to focus on manufacturing efficiency and better utilization of our plants. As discussed in the previous call, utilization varies across products and manufacturing processes. Our emphasis is on increasing commercial use of the facilities as products progress through development and regulatory requirements and the demand grows -- and as demand grows. We also signed a power purchase agreement for a 3-megawatt group captive solar project to improve energy cost efficiency and increase renewable energy use. Our focus remains on improving returns from our manufacturing investments while maintaining quality and compliance. Along with profitability, working capital discipline and cash conversion remain management priorities. Coming on to the international business. International operations remained broadly stable with supplies during the quarter catering to tender requirements and other institutional and export orders across markets in Asia and Africa. In Nepal, the anticipated procurement under international PPR eradication programs has not materialized at the scale originally envisaged. We are evaluating on how best to adapt the business to the environment, and we shall share further developments as this assessment progresses. For Hester Africa, our priority is to build a more consistent business and improve financial sustainability through focused market development and institutional opportunities. The loan amendment has provided financial support, while the work of strengthening operating performances -- operating performance continues. Across these international businesses, we remain focused on converting product registrations and market access into commercial orders. Looking ahead for the remainder of FY27, our priorities are to sustain poultry health care growth, strengthen biologicals business across poultry and Animal Health. We will continue advancing product development and regulatory submissions,

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expanding business opportunities and improving manufacturing efficiency and capacity utilization. We will also work towards commercially viable path for Nepal and improved financial sustainability for Africa. The first half has demonstrated sustained improvement in standalone growth and profitability. We are pleased with this progress and remain focused on building on it while continuing to strengthen the areas of the business that need further attention. Building with intent, growing with science is our tagline for the year, and it continues to guide our approach as we strengthen Hester's capabilities for sustainable and profitable growth. Thank you once again for your continued trust and support, and we now look forward to taking your questions. Moderator:

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Ankit from Zen Nivesh Advisors Private Limited.

Ankit:

Congrats on good set of numbers. And thank you so much for the detailed press release as always. My couple of questions are related to the press release only. So in the press release, in our last section, which is way forward, the fifth point is about developing export opportunities. And in our FY26 annual report, we mentioned about 9% of our sales being export. Any broad percentage you would like to share how it is in -- after H1 of FY27? What is it today for this year? That is my first question.

Priya Gandhi:

Ankit, thank you for your question. Yes, export from India in the last financial year was around 10%. And clearly, there is a lot of scope to increase the share of export. And in this financial year, the ratio would have increased because we have embarked on quite a few export opportunities. So the ratio that you see would have definitely improved in this financial year.

Ankit:

Sure. My next question is related to the intercompany loan, which Hester Bioscience is providing to Hester Africa of $1 million. And there is also a fixed time line mentioned in the press release where it should be done before 16th of November, in fact, 15th of November. So is that an indication that we are

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getting more orders and about to roll out more products in Africa business? Is that a fair assumption to make for H2 FY27? Priya Gandhi:

Yes. So the loan security from Hester India is one topic. And yes, to address on how we foresee Hester Africa and what indication does this have on that? Yes, Hester Africa, we are extremely bullish on the Africa operation. We have entered into quite a few export markets within the continent of Africa as well as Middle East and Asia by registering products that are only manufactured in our Africa plant. So yes, going forward, I think it will be reflecting overall in our performance and in the way we enter more markets. Yes. And Mr. Ashish Desai also wants to add on to what I said on the loan, so I'll hand it over to him.

Ashish Desai:

Yes. Ankit, this is Ashish speaking. So regarding the loan, it is for the requirement with the Africa entity. And the date what you are relating is with the agreement signing date. It's not any due date from that repayment or any from that extent.

Ankit:

Okay, okay. So that is my bad. Thank you so much for clarifying. My follow-up to that was that how this fund is getting utilized for our African operation? Where it will go in terms of working capital or some sort of government guarantees or anything if you can give more color, that would be very helpful?

Rajiv Gandhi:

Yes. This is Rajiv Gandhi here. It is a 100% owned subsidiary of Hester India. And looking into the business prospects, we just need to fortify the operations over there and fortification consists of good administration backed by the required finances to take the business forward. So it is an overall requirement which we are fortifying by Hester India.

Ankit:

One last question, if I may. Again, the point which we mentioned in our press release regarding developing more vaccines, more biological portfolio. And I see that also reducing sequentially over the last 4 to 6 quarters and asset -fixed asset has gone up a fair bit in this period. And we are constantly into strengthening our product portfolio, do we foresee any large capex or do we think our current capacity is good enough to handle the new products which we will be launching in the forthcoming quarters?

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Priya Gandhi:

Yes. So as mentioned earlier, even in the last call, we had given a very ballpark figure in terms of our capacity utilization, and we still maintain that percent, which is approximately 65% of the utilization. This is -- this can be a little inaccurate, but I'm speaking very broadly. Speaking of capex, as I mentioned in my opening notes that the annual health regulatory requirements, development requirements are also getting very rigorous. It is -- we can say that it is almost at par with the requirements of human health. And in order to that, going forward, yes, there may be chances for us to do a little bit more investment, tweak our technologies, which can require some capex. We are still planning and still in the process of planning all of that. At this point in time, I don't really have a concrete answer for that. But going forward, we will be relooking at our infrastructure from a technology and a compliance point of view.

Moderator:

Next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Madhur Rathi:

So Priya, firstly, many congratulations for excellent numbers and excellent deleveraging. So Priya, there is some intangible asset under development worth INR10 crores or so. So what is this pertaining to? And why aren't we debit it from the P&L?

Priya Gandhi:

Just give us a minute. Mr. Ashish Desai will be taking on this.

Ashish Desai:

Can you specify what number exactly you are referring to?

Madhur Rathi:

Okay. I'll just come back to this. Meanwhile, Priya, what was the loss in the BS-4 facility that was recently commissioned?

Priya Gandhi:

There is no loss and the BSL-3 facility, which we recently capitalized. So we've capitalized the facility, and we are in process of utilizing it as well. I'm not sure what loss you're mentioning.

Madhur Rathi:

Loss means since the ramp-up happens, there would be some fixed assets, right?

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Rajiv Gandhi:

But that's covered in the balance sheet and that's the depreciation and the usage, everything is part of the balance sheet. So there is -- it is not -- yes, it cannot be a separate thing for BSL-3. It's all part...

Ashish Desai:

It is at a company level. It cannot be a facility level.

Madhur Rathi:

Right. So now if you see our standalone balance sheet, it is under noncurrent assets, intangible assets under development worth INR10 crores?

Ashish Desai:

Yes. So those are all R&D and other licensing and all expenses which are there. That is still it is at the stage of development. This pertain to that.

Madhur Rathi:

So basically -- so these are licenses?

Ashish Desai:

No. Licenses are basically R&D expenses related to product development for intangible assets. They cannot be capitalized.

Rajiv Gandhi:

They cannot be capitalized till commercialization.

Ashish Desai:

Till it is commercialized.

Madhur Rathi:

Understood. Sir, can we expect the second half to be in line with the first half or especially in the Animal Health segment, are there any big orders in the pipeline?

Priya Gandhi:

A very simple answer to that is yes, that is what we would want. We've been able to maintain the momentum from Q1 into Q2. Of course, in Animal Health and poultry, just for context, both segments work very differently. Seasonalities are different. There is a different requirement in terms of the product mix. But yes, I think there is a very strong base, which has been set amongst us and our team, and we want to maintain this anyhow.

Madhur Rathi:

Right. So now Priya, is there any foreign entity subsidiary, which is still making losses?

Priya Gandhi:

We have given our consolidated result in the P&L. It does give you a breakup. And I think the growth that the consol profit is by 40%. So there is no specific separate entity which is making any loss, yes, the simple answer.

Madhur Rathi:

Great. Many congratulations once again.

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Moderator:

Next question is from the line of Saurab from Paul Asset.

Saurab:

First of all, congratulations for a great set of number. I have couple of questions. So first of all, I'll start with poultry health care. In this, you delivered approximately 30% H1 FY27 growth and 30% growth in Q2. So could you explain how much of this growth came from core vaccines H9N2 and nonvaccines health products, such as supplements and disinfectants? And was the growth primarily volume or market share driven or did pricing or product mix also contribute?

Priya Gandhi:

Sorry. Your voice is breaking but I think as I understand you're asking how the poultry health care has grown. I'm not wrong, right?

Saurab:

Yes, yes, yes.

Priya Gandhi:

So in poultry health care, the poultry biologicals is our strength. That is -- I mean, poultry vaccines is what Hester started and got established as a manufacturer of poultry vaccine, and that continues to be our strength. And as mentioned in my talk as well as in the previous quarter call, our focus has been on further penetrating into institutional business, further deeper market penetration into areas that we didn't exist and technical customer engagement, etcetera. So there are many such efforts that have gone into this growth. It's not specifically any one event or any one product introduction. Of course, H9N2 has contributed, but these -- all these efforts together have led into this sustained growth.

Saurab:

And ma'am, in August '26, on con call, you mentioned that H9N2 has received a very good market response and commercial sales have also commenced. So could you please share the extra sales volumes or doses dispatch during Q1 and Q2 and the number of active commercial customers and whether the repeat orders have started or not?

Priya Gandhi:

I think rather than just looking at H9N2 as one factor in the overall sales, we should look at the overall growth that the poultry health care division is registering. It's a 37% growth in H1. I will not be in a position really to give you any detailed volume led or any revenue indication on just H9N2.

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As mentioned, the response has been good. And that has contributed in the growth. And along with that, there are many other products and offerings and brands that we have within the division. We won't be able to really talk about any one individual product performance. Saurab:

Okay. All the best for the H2 FY27 as well.

Moderator:

Next question is from the line of Manish Jain from GormalOne LLC.

Manish Jain:

Congratulations on great numbers. So Priya, I just wanted to know, if you look at the consolidated profit, which you have given as a breakup for 6 months, in that poultry segmental results is contributing to INR45 crores out of the INR51 crores. Now there, there is zero institutional -- when I say tender-related kind of business. So can we say that the base that you have achieved in first half more than first half of this year, can we take this current 6 months base to be comfortably something on which you can aspire to grow on this?

Priya Gandhi:

Yes, definitely. So from Africa, at the moment, I mean, if we look at dividing our -- into our segments, which we don't really give it out in our press note, but at the moment, our focus is on the large animal ruminant vaccines, which we are primarily producing in Africa, vaccines which cannot be manufactured in India even or export or anything. So our focus right now is on the ruminant vaccines and development of that.

Rajiv Gandhi:

So yes, Rajiv here. So overall, you can take it as a basket. We foresee that poultry will continue at the worst at this base, cannot go down, and it can only improve, and we will add on ruminant vaccine.

Manish Jain:

Beautiful, beautiful. And one housekeeping question for Ashish is that you all had given consolidated debt of around INR103 crores for the June quarter. That we see is INR102 crores, but cash is there of INR23 crores. So can we take net debt as INR80 crores, Ashish?

Ashish Desai:

You can view it like that because, of course, there was a cash balance for various activities. And of course, the debt has been given. But yes, you can review it like that.

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Manish Jain:

Perfect. And second housekeeping question is that even though we have divested Texas Life Insurance, why is the other investment still gone up? Have you increased your investment in Thrishool Exim?

Ashish Desai:

Actually, what you, if there is an increase, it is mainly because of the increase in the Hester share in the profit in the JV for the current period. There is no addition to -- there is no investment addition as well.

Moderator:

That was the last question for today. I now hand the conference over to the management for closing comments.

Priya Gandhi:

Thank you, everyone, for patiently hearing, and it is -- we are very encouraged by the progress that we have made, as mentioned by us. And we will continue working hard to sustain this momentum. And thank you all for your continued trust and support. It means a great deal to all of us at Hester.

Moderator:

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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