Hikal Limited (HIKAL) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q4 and FY26 earnings conference call of IKIL Ltd. This conference call will contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations the company has on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in a 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 touchstone phone. I now hand the conference over to Mr. Samir Hiramad, Vice Chairman and Managing Director from HICL Limited. Thank you, and over to you, sir.

Thank you. Ladies and gentlemen, good evening and a warm welcome to all of you. Thank you for joining and participating in our Q4 and FY26 results conference call. I'm delighted to provide you with an update on the progress made by our company. We trust that you have had the opportunity to review our comprehensive earning release, investor presentation, and the financial statements for the quarter, and the year ended 31st March, 2026. These documents can be accessed on both HICL's website as well as the Stock Exchange's website. I am Sameer Hilemat, Vice Chairman and Managing Director, HICL Ltd., and I will be leading the discussion and presenting the financial results. On this call with me, I have Anish Swadi, Senior Vice President of Business Transformation and Head of Animal Health. Kundeep Jain, our Chief Financial Officer. Manoj Bharata, head of our pharmaceutical division, and Ravi Khadbadi, our new crop protection head, as well as strategic growth advisors, our investor relations advisors. Quarter 4, 2026 marked a significant strengthening in Haikal's operational strategic momentum as we continue transitioning from a phase of remediation and normalization towards sustainable technology-led growth. For the quarter, revenues stood at 519 crores, with EBITDA margins improving to 20.3% over the previous quarter. Over the last several quarters, the organization has undertaken extensive efforts to strengthen quality systems, enhance compliance frameworks, improve operational discipline, and invest in future-ready capabilities across both our businesses. These efforts are now beginning to reflect in our business performance, our customer engagement, onboarding of new projects, as well as medium-term growth visibility. For FY26, revenue stood at 1,713 crores, with EBITDA margins at 12.9%. In our pharmaceutical business, we witnessed improvement in demand trends across both our APIs and our CDMO segments as the year went by. Supported by normalization and customer ordering patterns, increased outsourcing opportunities that are coming our way. Capacity utilization across our pharma facilities improved quarter-on-quarter during the year, while the investments made by us from a strategic perspective over the last 12 to 18 months, including our new state-of-the-art high-potency laboratory, our expanded R&D infrastructure in Pune, and our new pilot plant in Panoli. The global pharma industry continues to witness favorable structural tangents driven by increased outsourcing opportunities and at the same time having increasing regulatory scrutiny with a growing focus on supply chain resilience. At the same time, industry investments into complex chemistries continue to accelerate. Hytel is also doing the same, and we are well positioned to benefit from these long-term trends through our strengthened CDMO technology platform, our differentiated R&D capabilities and chemistries, and our growing customer engagement across different regulated markets across the world. In the crop protection business, We delivered a recovery in the quarter four, driven by improving customer volumes of our products, with a positive traction in some of our own products, and a gradual normalization following several years of global inventory correction and pricing pressures. We believe the industry has now largely moved beyond the worst phase of the cycle. The animal health business also continues to strengthen, supported by increasing outsourcing activity, rising customer engagement, and expansion of our CDMO pipeline. We continue to build differentiated capabilities in this segment with a long-term focus on high-value specialized and innovation-driven opportunities. As we look ahead to the new year and beyond, we remain confident that the combinations of our strengthened compliance and quality systems Our future-ready technology investments in assets and technologies and chemistries, our diversified growth platforms in animal health and personal care, and our improving customer confidence positions hikers strongly for sustainable growth over the medium to long term. Our focus continues to remain on improving product mix, which is being visible despite having revenue. We have been able to maintain our margins in both our businesses and improve them wherever possible. We are diversifying and expanding our CDMO opportunities, diversifying into higher-value specialty chemicals, specialty pharma, and personal care segments. We are encouraged by the progress in commercialization of the new products that we have undertaken in the last financial year and the enhanced customer engagements in these segments. Which we believe will contribute meaningfully and significantly in the coming financial year onwards. Across both our businesses, they continue to drive operational and ESG excellence through focused initiatives like supply chain resilience, backward integration, and operational excellence on the shop floor, as well as our business excellence framework. These initiatives Along with improving operating leverage through better product mix, better utilization, have contributed to improved margins, resilience, despite ongoing raw material and geopolitical volatility. With strategic investments now, many of which are operational and are expanding customer engagements, we expect to see improved demand visibility across both our businesses. To make 2027 a stronger and a more positive year compared to 2026, which is firmly in place. Now, I would like to invite Kuldeep Jain, our CFO, to discuss the financial performance.

Thanks, Amir, and good evening, everybody. I'm sure you must have an opportunity to go through the website and must have gone through our results. Our quarter 4-20-26 reported revenue stood at 519 crore with an EBITDA of 105 crore, and EBITDA margin is 20.3% and pat at 14.4 crore after providing an exceptional item of Rs. 47 crore for an implement of a certain part plant of our manufacturing plant at Panoli. For FY2026, reported revenue stood at Rs. 1,713 crore, with EBITDA of 220 crore. EBITDA margin stood at 12.9%. PVT stood at negative 79.3 crore, which is after providing Rs. 85 crore as an exceptional item for the entire year. During the year, Excel is on account of new lever codes and impairment charges. Adjusting these items, our PVT from operational would have stood at Rs. 7 crore. Depressions and charges remain broadly in range throughout the year. During the year, we have incurred capital expenditure of Rs. 149 crore for de-bottlenecking, regulatory upgrades, and expanding CDMO capacities. Our capital allocation remains highly targeted. Prioritizing high ROI projects that align with our long-term growth objectives. Our growth initiatives are financed through an appropriate mix of internal equivalents and debts. The balanced funding strategy ensures fiscal agility to execute our long-term exceptional expansion plan. We have reduced our debt-to-free ratio from 0.59 to 0.56 as on 31 March 2026. Now, I would like to introduce Mr. Manoj Mahatra, President Pharmaceutical, who will provide an overview of the Pharmaceutical Division's performance. Manoj, over to you.

Thank you, Kuldeep, and good evening, ladies and gentlemen. For FY26, pharma business reported revenue of Rs. 1021 crores and EBIT of Rs. 58 crores and EBIT margin of 5.7 percent. For Q4 FY26, farmer business reported revenue of Rs. 292 crores, EBIT of Rs. 35 crores, and EBIT margin of 12%. On a sequential basis, while revenues are flat, there is significant revival in operating profits, which is up 45%. As indicated earlier, the H1 FY26 was soft. However, we have been seeing improvements from start of H2. In the pharmaceutical business, we are witnessing recoveries in the start of S2, supported by improved demand trends across both API and CDMO segments. The business continued to witness normalization in custom ordering patterns and trade cycles, with pharma plants at Panoli and Bangalore operating at an average capacity utilization of nearly 80% to 85%. The API business environment remains encouraging, driven by steady demand across regulated and emerging markets. We continue to strengthen our portfolio in complex and niche therapeutic segments such as oncology, CNS, gastroenterology, and antidiabetics. As part of a global expansion strategy, key product launches in Japan and Brazil in plans for FY27 and FY28. Our R&D pipeline continues to strengthen with increasing focus on differentiated and specialty products. We are now targeting five to six DMX filings annually compared to two to three filings historically, reflecting the expanding depth of our development capabilities and product pipeline. On the CDMO side, we continue to see robust customer engagement supported by global China Plus One outsourcing trends, which is driving innovators to increasingly diversify supply chain towards India. We are witnessing a healthy increase in RFP activities, and several programs are now advancing from early stage development into scale-up phases, significantly improving medium-term revenue visibility. Over the last 12 to 15 months, we have made strategic investments, which are now becoming efficient, and are expected to support in our next phase of growth. Our state-of-the-art high-potency laboratory and expanded R&D center in Pune, along with the new pilot plant at our USFDA-approved Panoly facility, materially enhance our capabilities in complex chemistry and integrated development services. The expanded Kilolive in Pune will further strengthen our capability to offer end-to-end CDMO solutions, including R&D and clinical trial material supplies from a single location. We also continue to build capabilities in next-generation technologies such as HP APIs and ADC-related chemistries. While this remains a long-term opportunity and will take three to five years to scale up meaningfully, we believe this is positioned strongly in high-value, innovation-led segments. Our next milestone in this journey will be the planned HP API manufacturing facility in Pune, targeted over FY28. From a geographic expansion perspective, we continue to deepen our presence across key international markets. We already have strong engagement with leading innovator and engineering companies in Japan. In Latin America, we are strengthening our front-end presence with a dedicated leadership addition and are in the process of establishing an office in Brazil. We are also actively engaging with customers in South Korea for new business opportunities. On the regulatory front, all remediation-related CAPAs are nearing completions for U.S. FDA, and our upcoming engagement with the FDA is expected to provide further clarity on the next steps. Overall, we remain confident that the combination of improving industry demand, expanding product pipelines, strategic technology investment, and strong customer engagement We'll continue to drive sustainable growth and improve profitability in the farmer business over the medium to long term. Now, I would like to invite Mr. Samir Hiramat to provide an overview of the Crop Protection Division performance.

Thanks, Marosh. For the crop protection business in FY26, we reported a revenue of 692 crores with an EBIT of 58 crores, which was a margin of 8.4%. For the quarter four ended FI26, the revenue was 228 crores, with an EBIT margin of 17.1%, resulting into an EBIT of 39 crores. In the business, we delivered an improvement sequentially and on a year-on-year basis, due to increased volume of take from our key products, and also gradual normalization across the global agrochemical value chain. As I mentioned earlier, we believe that the worst phase of the industry cycle is now largely behind us. We are seeing improvements in volumes, as well as driven by a combination of better product mix and sustained operative improvements initiatives across our facilities. Higher volume absorptions and improved realisation will also contribute positively to the operating leverage. We are also witnessing encouraging traction in our transition towards higher value and more resilient business models as we are actively progressing deep contract manufacturing engagements. Co-development R&D projects in crop protection, and long-term supply agreements with global innovators, of which we have onboarded a few in the last financial year. Several of these programs carry structurally better margins and improve long-term revenue visibility. As part of our business diversification strategy, we are also leveraging our existing technology and assets for adjacent high-value opportunities in the specialty chemicals and personal care segment. We expect to progress in these businesses over the coming years, which will help diversify revenue streams and improve business resilience and margins. Now, I'd like to introduce Anish Swazi, Senior President of Business Transformation and Animal Health, who will provide an overview of our business strategy and an update on our animal health business.

Thank you, Sameer. First, I'd like to talk about our animal health business, where we continue to witness sustained momentum supported by increasing global outsourcing activity and improving customer engagement across the API CDMO segment. Global innovative companies continue to focus on supply chain resilience, cost optimization, and diversification away from single-source geographies, which is creating a favorable environment and impact for manufacturers such as Eichel. Our Animal Health CDMO business is witnessing gradual but steady traction as customers increasingly look to outsource. We have so far completed the validation of all our products from our global multinational contract, and we are now progressing well into the commercial phase. We continue to receive encouraging inquiries and RFPs from several global customers, both across innovator-led as well as niche molecule opportunities, which further strengthens our development and commercial pipeline visibility. As part of our customer engagement strategy, we are building differentiated value propositions across... customer segments. Large multinational animal health companies primarily evaluate customers based on supply chain security, regulatory robustness, quality systems, and long-term manufacturing reliability. Here, we find Heikal is well-positioned, and we continue to strengthen up our positioning as a reliable global dual-source partner. Our current long-term partnerships with global innovator customers continue to gain traction. We continue to see gradual progress in customer approvals and registrations globally, and we expect volumes to now scale progressively as approvals across several other additional geographies are received over time. We are also actively progressing discussions and opportunities with several leading global animal health companies, including small biotech companies. Demand visibility remains encouraging across developed markets such as Europe, U.S., and Japan. The customer focus and supply continuity and quality compliance continues to intensify. From a portfolio perspective, we are strategically moving towards some higher complexity and differentiated customers where competitive intensity is relatively lower and margin sustainability is higher. From a growth perspective, we remain confident about the medium-term trajectory of the animal health business. We expect it to scale meaningfully over the next several years. Thank you. Strong customer relationships, improving commercial visibility. We believe the animal health business continues to be well-positioned to become an important long-term growth driver. From a supply chain perspective, we continue to proactively mitigate volatility through authoritative sourcing strategies and continue to reduce our dependence on China, continue to develop non-Chinese supply partners and selective backward integration of key starting materials. We are also optimizing plant utilization by leveraging several external partners for early-stage manufacturing while utilizing internal capacities for more complex final activities. Thank you. We expect Thank you.

Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Enel Bacaria with EquiCorp. Please go ahead.

Thank you for the opportunity, sir. I hope I'm audible. Hello.

Yes, yes.

So, starting with some of the macros, what kind of impact have we

seen on the raw metal side, especially on the BTX,

which goes into agrochem and probably some pharma, that's benzene, xylene, and tauleene, which is the basic RM. Are we seeing normalized availability versus much, and what are the prices, and is there a pass-on clause wherein we pass it to the customers in case of any TDMO, and also in the case of our own products, how does it actually work?

Well, the solvent prices have really shot up in the last three months, since March, and they have normalized but at a much higher level. Availability is not an issue. We are getting raw materials. Although there were some availability issues in March, in April and May, we don't see any availability problems, but their prices are at significantly elevated levels on the basic solvents, which is tolvine, methanol, acetone, benzene, etc. For the CDMO products, we do have a pass-through mechanism, but there's always a lag effect. You know, so it takes about a quarter or so to, you know, reconcile the numbers with your customers and come back. So, we're in the middle of the discussion. Some of those discussions have progressed well and have concluded some other active stages of negotiation as we speak because everybody thought the war will end very fast and things will normalize by April, but it doesn't seem to end, right? So, we are currently in discussion and we're getting path-throughs wherever possible. And while in the old product, it's a competitive market in the old product. And we are trying to get increases. We will succeed in most cases. And in some cases, there's a lag effect. So net-net, we will end up ensuring that there's no significant impact on the bottom line. Although for one or two quarters, especially quarter one, there could be some marginal impact because by the time the pass-through happens and the negotiations end, there's a lag effect.

Okay. So, coming to the crop protection side, there are very good numbers in Q4. So, if we actually see the products and if we actually also see what's happening in China, I think in China, the Ministry of Agriculture has rained down on a lot of old plants and asking them to shut down the old and toxic chemical production that they've been doing. And even the Ministry of Petrochemicals there have been asking to shut down the old petrochemicals by 2029. So, are you seeing any pricing effect because of high pricing, because the capacity might go, and also in the current situation where there is raw material aberration, where the raw milk price has short, and China has put in export quotas for a lot of agrochemical products too? So, are you seeing any order conversion on a significant level, wherein customers are coming to you for, I mean, decent term contracts, and also better pricing situation, and also probably the inventory angle should also have been reduced to a large extent?

Yes, sir. Volumes are definitely improving compared to the last years. That's for sure. The demand, true demand has come back because inventory correction is more or less done. It's behind us. But pricing pressure still remains. China has not increased prices on the agrochemical side. We haven't seen that. And even on the RMs, the solvent that you've spoken about, right, China doesn't seem to be having those increases when we speak to local Chinese manufacturers. And our suppliers. So they are not seeing the elevation. The government is seeing to be absorbing a lot of the increases, at least in what we heard last. While our input prices in India have gone up, Chinese manufacturers have been able to not increase prices for their raw materials. And the government is helping them through, I don't know, subsidies or whatever. And, you know, Chinese are not increasing prices. They are not seeing any significant increase in any prices coming out of China of any KSM. Right now. There is some in a few products, but not overall. I think it's quite stable.

Okay. So, coming to our existing products, some of our products also have got the NC from the principal who have developed the product because it got the resistant to pest or fungus. So, are we seeing any contracts on the principal because there are products like Triflox, Stobin, which has got an NC successor also, and even the Proteo, Panazon has got a better successor, which is still on patent. So, are we able to get contracts on the NCE side, which is still on patent or still some time until we get this order?

No, no. Already our current portfolio of crop division has a few NCE products that we already commercialized right now. And the new RFPs that we have, which we are validating and we have won in the last year, out of that we have a few which are already NCEs. But they will be launched in the next financial year. But currently, piloting is going on, the pilot crowds are going on of this project.

Okay. So, SEC, in Europe, there is more move that is actually coming towards SDHI and biologicals. Do we have capability in-house to serve these kind of contracts? Because these are very specialized orders and I think there are different formulations also.

So, we are not into biologists, but from a chemistry perspective and small molecule perspective. We can service almost all the chemistries, yeah? Except for Bada Chippens, we don't have the capabilities.

Okay. So, also on the new facility that we had commissioned last year, there were some retro fittings we had to actually do. So, seeing the pharma side, since the capacity utilization levels are upwards of 80, is the new unit on screen? And how do you see the production levels going higher if the demand situation stays consistent?

Sorry, is that pharma or transportation? What's the question?

So this was for farmers, so there was a crop protection plant which we were actually, we retrofitted with some new reactors and different equipment so that it could be used for farmers.

Yes, so that is exactly the same plant which we have taken an impairment for. If you notice exceptional item charge for this quarter, we have taken an impairment for a multi-purpose agrochemical facility which we have decided to impair and retool.

Thank you, sir. Mr. Hanil, I would request you to please come back in the queue for more other questions. Thank you. The next question comes from the line of Amman Mura with Premium Capital. Please go ahead.

Hello. Have I audible?

Yes, yes.

Yeah, thanks for the opportunity. I just wanted to understand, so in the month of February, when we spoke about the full year guidance, we spoke about a 10% growth in the farm business and flat revenues per crop. This is just one and a half years before you were closing your numbers and you had a fair bit of visibility. So why have we fallen short and pharma specifically has been quite weak on a YY basis? Could you highlight why we've fallen short versus our guidance?

Yeah, sure. Manoj, why don't you take this?

Yes, we did give a guidance of growth in February, no doubt about it. But what we have seen that because of this FDA warning letter what we have in a Bangalore site, we have been advised by our GNP consultants to pressure test the system a little more and go slow some of the production activities. Although we have not lost any customers, but batch releases and shipments have been slowed down in the last quarter, and we'll recover in the next two quarters, I'd say.

Yeah. No, sir, why I ask that is that while you're saying that you've not lost a customer, but those shipments would have been picked up by the customer from somewhere else. So that is a loss.

That phenomenon did happen in first half of the year. Second half, by and large, we are protected. It's only a kind of, their thing, smaller shipment takes a little longer to clear.

But I think, for the quarter four, that is gone. But there is annual, there is continuous demand on a quarter on quarter. Order book is still there. The order book is inside. But for the quarter four, they have, we have lost the business. They will, but it will come back in the next few quarters, as Maraud said. This is from the old product. EDMO is, you know, long term, that is, that continues, yeah.

Got it. And so when we talk about 80-85% utilization, while our revenues for pharma division are down, so while last year, if I remember from the call, our utilization level is at 75%. So how should I understand this utilization that you mentioned?

Because now that we're slowing down production a bit, we're taking a little longer, our batch cycle times have also increased in the plant. So capacity utilization levels have gone up. This is mostly FDA-compliant-CAPA implementation.

Okay.

We had additional checks and done additional tests. That's why there's a bit slowdown. Yeah.

Okay. Got it. And, sir, now if I see F26 on a console Heikel level, we've degrown. F25, we were flat. F24, if I see our three-year CAGR, it's lower than mid-single digit in terms of top line. So there's a lot of catching up that Heikel has to do in terms of top line ramp up. It's just three years have been completely washed out in terms of financial performance. So as long term shareholders, how do you give us confidence? What is your expectations for F27? How do we make up for the time lost over the last three years?

Well, see, I mean, if it wasn't for the U.S. FDA issue in the last year, we would have definitely shown growth in the pharma business. There was a lot of depressed offtake in the first six months of the year and pastoral recovery in the last H2 of the year. So the pharma business would have grown. I mean, the crop business had its own structural issues from the industry perspective, which was more or less flattish compared to the previous year. Going forward, we're confident that once the FDA matter gets resolved, which we hope to get done by the end of this year, we will start seeing growth coming back to the historical FI24, FI23 type of levels, till which program we grow here. You're right, last three years have been flattish, if not some years have even degrown, but we think the worst is behind us. We have institutionalized a lot of additional checks and controls on the compliance side, which will stand us in good stead. There's been significant investment made in the last year, and even this year we'll be making investments in upgrading our quality systems and, you know, the implementation of the CAPAs that Manu spoke about. So we are able to now convince customers that we are far more stronger from a manufacturing perspective. The USFDA is looking at companies with a far tougher length than what they were a year or two years ago. You must have seen many inspections having very different outcomes than what they were a few years ago. So we are now getting future-proofing our system. We are going through this bit of an aberration, a dip. I think now it is getting behind us. In the next few quarters, we'll be out of it. And the visibility for long-term, medium to long-term revenue growth still stands. Yes, we've lost a year and a half in between, maybe two years, but it will come back and we'll get back to these levels. And we're confident that we have customers, we have NCE customers that are still talking to us, that are still willing to stand by us in spite of the MTA issues. I've come and checked all our facilities in the last one year and they've approved us and re-inspected us and re-approved us. So they believe that we are a good, long-term, sustainable partner. This has been an aberration in our 25-year journey in Sama, and we are confident that we will come out of it from a stronger perspective.

Right. So lastly, just for me, Samir, so I understand all that you mentioned, but given that we've lost three years from F24 to F26 with almost no growth, while we've almost had a thousand crore capex between F22 and F26, Just to catch back, earlier guidance used to be 15% to 20% top-line growth. Margins used to be 18%, 19%. We said we'll improve 100 bips on that, reach 20% ROC. All of that has actually gone for a toss in the last three years. But if I think of next three years, can we grow 25% and cover back some of the lost ground over the last three years? Can we up the ante on growth a bit from our historical levels to cover some of the lost time of the last three years? And on margins also. How do you look at next three years, F27 and margins?

Well, I think the growth will come back. I think currently, I don't want to give any forward-looking guidance. This quarter, I would be in a better position to do it after quarter one results. There's a lot of uncertainty because of war situation. Today, raw materials, logistics shipments. Let things stabilize. You're right, we did invest about 900-odd crores in the last four years in CapEx. This question has been asked before by the investors. Out of that, about 600-odd crores was in growth CapEx and about 300-odd crores was in infra-regulatory and maintenance CapEx. Out of the 600 crores, we had a 300-odd crore investment in this multipurpose asset that we're impairing right now. So, you know, actually... Part of which we are impairing. We are impairing 47 crores and the balance 250 crores we are retooling to build in new lines for our pharma and animal health business. So that will start generating significant revenues in the year to come. The balance 300 crores of growth capital generated investment has already grown. Out of that, the pharma and the animal health multipurpose plant in Panoly that we signed with a multinational company has yielded results. That is growing our animal health business. That being said, we are focusing on improving our return on capital employed. You are right, we need to get to this 18 to 20% if not plus level. We were historically working at 15, 16%, 18%. We have depressed our return on capital employed in the last 3-4 years. We will start seeing growth year on year. And this year will be a transition year with significant growth coming back, returning back from next year onwards. That's how we see the business. And then we get back into FI 28, 29, 30 to show meaningful growth.

Okay, thank you. I just hope this situation improves for us. Thank you.

The next question comes from the line of Anurad Krishna with Aventus Vealth. Please go ahead.

Sir, am I audible, sir? Yes, sir. Thanks for the opportunity. So, my question is regarding this, following the same, like, earlier participant, because if you see our 25-year history, we are still around 15 to 1700 growth top line, and given the compliance issues, like we had a pollution control issue, now we had a USFDA, and you started investing in CDMO around 18-19, don't you think our CDMO-NCE is much more, like, you really need to be at the top notch to really grow and scale that business, and how confident are you that we will solve our USFDA? We will be back on our growth path because almost there's no wealth created if you think in terms of your 25 year event for all the promoters and investors together. I'm not saying just for me or somebody. So because the complaint is very important if you're doing CDMO entry and we had recurrent issues regarding pollution control and now USFDA and how should we think because we are outside, we do not understand the degree of this. As investors, how should we think that because we never had and we suddenly have these issues in the last two, three years.

Yeah, the pollution control board was finally settled in the courts and not being an issue related to Hytel. So that issue is now behind us. So that issue was sorted out in the courts. So that is also related to one specific site. It was a specific issue with one transporter, as everybody knows, and nothing to do with the Hytel internal manufacturing issue. It was an external issue. The FDA was there, right, was a setback for us in the last year in our pharma site. And that was the first incident that we've had in the 25-year history. That being said, we have taken a lot of measures in the last 12 months to improve our systems, and we are focusing on compliance with a lot of capital that we've done in FDA to come out stronger out of this. We believe that we are relatively confident and pretty confident that we will be able to come out of this very shortly by this year.

So, we can say that in this year, we will be out of this issue by the end of this year.

I mean, that's the whole idea. It's been a year now since the warning letter came about nine months ago. So, we expect to come out of this in the next few quarters.

How to think about it, sir? Because how many years normally it takes for a company? Because like you, you're an API player to come out of these things now. Because how to think about this as an investor?

It takes about 18 to 24 months, depending on, you know, whether.

But it will definitely come out. It's not a prolonged independent issue kind of thing.

No, we don't hope. We don't think so. We will come out.

And so from FY27, we can assume at least double-digit growth, sir, from FY27?

FY27 onwards, I would say. FY27, I don't want to give any guidance, as I mentioned. There's a lot of uncertainty. I will be in a better position to give guidance in the next call, in the Q1 numbers. But if we will have growth in FY27, the guidance will be given in the next call.

Thank you, sir. Thank you and all the best.

Thank you. The next question comes from the line of Gashant Singh with MB Securities. Please go ahead.

Hello, am I audible? Yeah, thanks for the opportunity, sir. I would like to ask a few questions. First was, how do you see the volume growth in the crop business and the farmer business? And second was, I know you already talked about that, but can you give a number or how the next quarter is going to be on a Q&Q basis?

Well, volume growth for pharma business from the annual perspective, we expect to have, as you know, the first six months of this year was pretty low. So for pharma, so we expect to see volume growth in pharma business. I'm not willing to give any guidance, as I mentioned, because I'm just waiting. But we expect quarter-on-quarter improvement. As you know, our historically high-class Q1 is our lowest quarter. Because we take annual maintenance shutdowns, which we have done as well, and Q2 is better, and Q4 is always our strongest quarter. Between Q3 and Q4, depending on the business. Crop is mostly Q4, and pharma is sometimes Q3 and sometimes Q4. So we will see volume growth in both the businesses, but we don't be able to give any guidance right now, but we have positive volume growth in both the businesses.

Okay, thank you. That was a bachelor of law.

The next question comes from the line of Raghuram, with Baishpal Research. Please go ahead.

Hello, sir, am I audible?

Yes, yes, hi.

Hello. Yes, yes, hello. Sir, My questions are related to the earlier participants' questions as well, like when I'm looking at the growth of the company, like how should I, like for the F530, because in the earlier calls when you had mentioned like we would touch somewhere around 3,500 or 4,000 by, and it was the medium target and 6,000 was the F530 target for the company as a whole. So now, how should we look at the growth in the company? Like, what would be the growth drivers in order to achieve at least somewhere around 3,500 or 4,000 crores? How should we look at the growth for the company? Like, which divisions would show growth? If you can just talk about that, it would be helpful, sir.

Well, we have a FI30 plan which still stands, but as you know, it has got delayed by the last two years, which has been very challenging for us, FI25 and FI26. FI27 onwards, we expect to see some growth coming back, and we have plans. I think we'll be able to come. The plans have got delayed by about two to three years, because of this aberration in the last two years. But the strategic, the overall plans are not changing, and the focus is going to be on CDMO, and on pharma, animal health, and on the specialty chemicals business. And crop business will show some growth, but I think the growth will come from the other divisions.

Okay. Is it an achievable target by F530, or is it far off?

I don't want to give any guidance, but I think they are going to be growing every year, I think.

Okay. Okay. And, sir, on the USFDA issue, have they come up for reinspection, or when do you see that happening next? How should we understand that U.S. FDA can serve?

We are meeting with the FDA. There is a continuous dialogue which we are having with the FDA on a frequent basis, and we have a meeting planned in the next few months with them as well, which they will be meeting us as we complete all the KAPAs. We have certain milestones to complete with them, and we should be completing everything now for the next few months. After that, we will be meeting them, and then they will be prepared for an inspection. They will come for an inspection towards the end of this year, we expect.

Sir, do they tell us that they are happy with the progress or we do not get any such communication from them?

No, there is no communication. If they feel that you are ready, then they will just show up.

Okay, okay. And sir, so this USFB issue, it's impacting the CDMO growth. Is that the right understanding?

Yes, mostly the CDMO business. So a new product. I'm taking a new product. Existing business is quite intact.

Okay, so on the CDMO part, when you're doing it for the MCE, are we able to grow in that existing MCE thing? Because of the CSFD, I think we are able to supply them, but we can't see any growth.

MCEs are developed. Some MCEs are growing, but some MCEs have multiple source options. So, the volumes are being split between different suppliers. So, until the FDA comes out, the new NC growth will be muted.

Just to add, Samit, that from CDMO, we have PANOLI site also to offer, and that is clear of any FDA issue. We are approved in May 2023. Yeah.

Thank you, sir. Mr. Laguna, I would request you to please join back the queue for further questions. The next question comes from the line of Mankaj, an individual investor.

Please go ahead. Apankaj, your line has been unmuted. Please go ahead with the question.

As there is a response, we'll move on to the next question. It's from the line of Anil Bagadia with EquiCorp. Please go ahead.

So thank you for the opportunity again. So coming to the pharma division, in case of, so is that the reason why we have guided for five to six new products because last year was an aberration because of the US FDA or are we or because of the commercialization of the new HP API lab, we have also seen more molecules from the HP API as well as our existing R&D center. And the five to six molecules, is this just pharma or does it also include molecules in the animal health also?

No, this 526, we've also commercialized a new pilot plant in Panoli last year, which was part of the capital expenditure, which was spent last year. We had de-risked our banknote side by building a new facility in Panoli. So now the new findings that we started doing from last, towards the end of Q3, Q4, are being done from our Panoli side. So we want to de-risk away from the banknote side, and so that's why we'll be able to do 526 DMF findings from the Panoli side. Assuming that this year we will still take time to come out of the FDA, we don't expect new approvals from Bangalore this year, but we expect approvals to come through from the Panoli side, which is also FDA approved, which has no FDA warning issue right now here.

Okay, so the 526 includes just the pharma or does it also include animal health? No, it is only pharma. Animal health is on top of that. Okay. Coming to the animal side, sir, there is a Zoetis and BI on their quarterly calls have indicated about some degrowth. Are we also going to phase the degrowth in our already anti-tech commercialized molecule?

No, at this point in time, we haven't received any indications from our customers about degrowth of any products that we have currently in our portfolio.

Okay, and when we move from active intermediaries to APIs, which is actually in the pipeline for animal health, do you see the margin significantly improving out there?

Yeah, it depends on which APIs they are, but, I mean, there is sometimes an increase in terms of margin, but what happens is that the volumes go less, right, because you usually use more intermediates for that, so what happens is your absolute margin as a percentage may increase, but your absolute contribution may come down at certain stages.

Okay. Sir, on the under-commercialized molecules, we have about three under-commercialized molecules. Are we seeing ramp-up of utilization and, I mean, sending commercial patches this year, probably from H2, or do you see it start from the H1 itself? On which, I'm sorry, I didn't understand your question. On the under-commercialized molecules in the animal health space, we've got thea, benda-zol, we've got rutracanol, tartate, and dopamic acid.

No, I don't think those are the ones. Those have been commercialized for a very long time. Okay.

So, Dupa, are we also supplying the products in the reproduction steroids for animal health or is it still under commercial runs? No, we don't have it. We don't have it. I think so. We had plans to get into three products in this particular segment, and it's a very niche market out here.

Which segment is that?

The steroids for reproductive hormones in animals, that's testosterone, propionate, treblone, acetate, and your estradiol salts.

No, I think maybe some other company is probably...

No, no, it's for hyperlite, actually. It's actually on your website itself.

This was considered a few years back, but steroids require different facilities. So, maybe there's some outdated information. So, we are not into steroids or hormones currently.

Okay. Sir, and lastly, in the pharma side, sir, in case of oncology that we do plan to enter, do we have any commercialized molecules right now and the principles for which we would be doing CDMO? Are they the ones who would be also giving us orders regarding the ADCs?

Right now, we have just come into HP API, and we have just started the lab work. Going forward, as I mentioned in our opening presentation, that we will set up a manufacturing facility for HP API. But this is a long-term game, actually, three to five years for some revenues to start coming in.

But are they the same set of customers that we actually plan to target in the Onco products?

Yes, same, same. See, for CDM, we're the same big farmer who look into HBFDAs and ADCs, and what they were looking at that HICEL is into only traditional OEB2, OEB3 kind of molecules, which are mature now. But many of the new OEB4, OEB5 kind of molecules are hypotendent for anti-cancer drugs. So those, and if you really see the new approvals coming from FDA and other global regulatory agencies, the share of oncologic drugs is increasing, and we would like to catch on to that.

Okay, and just another one, in the ADCs, we just plan to be in the payload and the linkers, since that's a space, right?

Yeah, payload and linkers. The biologic molecule will not be there, that will be an order, but payload and linkers, yes.

Okay, okay. Thanks a lot for the opportunity, sir, and wish you best of luck. Thank you.

Thank you. The next question comes from the line of Aman Hura with Premier Capital. Please go ahead.

Yeah, thanks for the opportunity for the follow up. I just wanted to just continue our conversation that we spoke about earlier. So it's, if I see over, I just did the numbers for even a five year period. We've actually underperformed the wider pharma CDMO players in India by a large margin. So is there any issue with management bandwidth or capabilities that we are not able to build, which is causing this stark underperformance, more specifically in the pharma business? Agrochemical has been more an external issue, but more specifically in the pharma business, are we lacking on the management capabilities side?

No, I don't think it's anything to do with the management capabilities. We've had some setbacks in the last couple of years. We were growing till about three or four years ago, year on year. We've grown from zero to well over a thousand crores in the pharma business because we were zero about 15 years ago. So we have grown the business quite substantially. But now, yeah, we are looking at new technologies and our portfolio refresh has been done. So that will start improving our margins and showing the growth going forward. Some of our products became old and became commoditized, and there was intense competition. Volume growth did take place, but value growth did not take place to the same extent in the last five years.

Okay. And just for animal health, I think in the September call, we had highlighted that over a five-year period, we expect this business to be around a 500 crore top-line business, and starting with about 100-250 crore revenue for F27, if I'm not mistaken. So are we looking at that kind of a revenue ramp up for animal health? And what would be the revenue as of now? And what are our expectations for F27?

Yeah, again, from an FY27, I mean, first to confirm, yes, we're still on track with the guidance that we gave you in September to build a 500 crore plus business. The most important thing is we're on track. We have a healthy pipeline.

Okay. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question for today. I now have the conscience to go to the management for closing comments.

Thank you, everyone, for joining our quarterly earnings call and for your continued interest in our company. We appreciate your support as we navigate through the challenges of the global business environment. As we conclude this call, I want to assure you that we are here to address any further questions or concerns. Please feel free to reach out to our investor relations partner, Strategic Growth Advisors. Once again, thank you for your participation.

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