IOL Chem and Pharma Q1 FY25 earnings call
In brief
- Management's tone
- Mixed
- What was said
- Mixed
- Guidance
- Guidance cut
- Analyst pushback
- Medium
- Stock, next session
- −4.01% (Nifty 50 −0.85%)
- EBITDA margin guidance cut to 13-15% from prior 15-20%; Q1 FY25 margin at 11.4% vs 14% YoY on Paracetamol/Metformin price collapse
- Non-ibuprofen API capacity utilisation at ~59-60% (vs ~25% two years back); 50% of API revenue target over 3-4 years
- FY25 capex ~Rs 200 cr, FY26 ~Rs 150 cr; net cash Rs 190 cr — no bonus, split or buyback, organic growth is priority
- USFDA inspection pending; management says 15 filed DMFs could clear at once when they visit
- Export share targeted to rise from 30% to 45-50% in 3-4 years; SI Group reportedly closing ~4,500-5,000 tonnes US ibuprofen
An AI read of the company's transcript · the filing
The numbers
The quarter, Q1 FY25
| This quarter | A year ago | Last quarter | Margin | |
|---|---|---|---|---|
| Revenue | ₹502 cr | −10.8% | −0.3% | |
| EBITDA (excl. other income) | ₹51.1 cr | −29.5% | +3.2% | 10.2% (12.9% a year ago) |
| Net profit | ₹30 cr | −34.6% | +8.5% | 6% (8.1% a year ago) |
| EPS (₹) | ₹5.11 | −34.6% | +8.5% |
From the company's filed results for the quarter ended 30 Jun 2024 (consolidated), not from the call. EBITDA here excludes other income, so it can differ from the figure management quotes.
The numbers management led with
- Non-ibuprofen capacity utilisation: 59-60% average in Q1 FY25 (vs ~25% two years back, ~52% last year)
- Ibuprofen price evolution: From ~$12/kg four years back to $9-10/kg currently
- FY25 CAPEX: ~Rs 200 crore
- Competitor exit capacity: SI Group exiting US ibuprofen, capacity ~4,500-5,000 tonnes
Guidance
Guidance on this call
| What | For | What management said | On the Q4 FY24 call |
|---|---|---|---|
| EBITDA margin | near future (1-2 quarters) | 13-15% in the near future (lowered from prior 15-20% band) (cut) | 12-15% range for FY25; 14-15% target on a normalized basis |
| Total revenue growth | FY25 | ~10% in FY25 (more than 10% from volume + 5-10% from price) | 10-12% revenue growth for FY25; Rs. 3,000 crore revenue target by FY28 from existing products (12-13% CAGR) |
| Non-ibuprofen API share | 3-4 years | 50% of API revenue from non-ibuprofen portfolio | — |
| Export share of total revenue | 3-4 years | 45-50% (currently ~30%) | — |
| Non-ibuprofen capacity utilisation | next 2 years | Move from ~59-60% to 80-90% | — |
| CAPEX | FY25 and FY26 | ~Rs 200 cr in FY25 and ~Rs 150 cr in FY26 (infra, technology development, automation) | Rs. 150-200 crore for FY25, all from internal accruals; ~Rs. 200 crore run rate maintained |
| Raw material pricing | 1-2 quarters | Prices have bottomed out; may move north in 1-2 quarters | — |
Said on the Q4 FY24 call, not repeated on this one (5)
- PAT margin: 7-8% PAT margin for FY25 (vs ~6% in FY24)
- Gross margin: 20-25% sustainable gross margin expected for FY25
- R&D spend: Currently 7-8% of API segment revenue; expected to increase by incremental 1-2% as headcount of 125 grows
- Specialty Chemicals segment: Revenue and margins to remain in single digits in FY25; gradual recovery expected by end of year
- Non-ibuprofen export mix: Target 25-30% export mix for non-ibuprofen segment in FY25 (vs 17-18% currently)
Guided on earlier calls, and what was filed
| What | For | Guided | Filed |
|---|---|---|---|
| Company revenue growth | FY25 | 10–12% (on the Q4 FY24 call) | -2.5%, below the range |
| EBITDA margin | FY25 | 12–15% (on the Q4 FY24 call) | 9.7%, below the range |
| PAT margin | FY25 | 7–8% (on the Q4 FY24 call) | 4.9%, below the range |
Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.
The business
The industry, as management sees it
Management sees the Indian pharma sector with steady US demand and strong domestic growth (chronic therapies continuing traction, acute in recovery); API firms face near-term price realisations headwind but long-term tailwinds from China+1 and Europe+1. Specialty Chemicals still under pressure from high channel inventory, destocking and Chinese dumping; agrochem benefiting from timely monsoon with good volume growth.
Risks management named
- Paracetamol prices fell >40% and Metformin fell 15-20% over the past year — could fall further
- Specialty Chemicals segment still structurally weak at ~1% EBIT margin in Q1 FY25
- USFDA inspection timing entirely in regulator's hands — no visibility on date
Q&A
Q&A was dominated by margin guidance reset, USFDA inspection timing, capacity utilisation in non-ibuprofen, CAPEX and capital return policy. The strongest analyst pushback came on the repeated failure to deliver the 15-20% EBITDA margin band, and on the no-buyback decision despite Rs 190 cr cash — management was visibly defensive on both, ultimately resetting guidance to 13-15% and reiterating organic growth as priority. The most constructive disclosures were non-ibuprofen utilisation at 59-60% (up from 25% two years back), SI Group's reported exit from US ibuprofen (~4,500-5,000 tonnes), and a 3-4 year target to lift exports to 45-50% of revenue.
Not answered directly
- Product-wise margin disclosure (declined, said internal policy)
- Buyback / split / bonus decision (no decision taken, deferred to board)
- Specific CAPEX deployment (vague: 'infra, tech development, automation')
- Exact timing of USFDA inspection (regulator-controlled, no visibility)
Every question, with its answer
1. USFDA inspection
Sheikh Mohammed, Individual Investor
Question. We are getting so many approvals from China and Europe, but not from USFDA — what is the reason, any inspection update?
Answer, Abhay Raj Singh, Sr. VP & Company Secretary, IOL. USFDA inspection is due since long; the regulator typically informs only 2-3 days before visiting. Post-COVID, USFDA appears to be prioritising non-lifestyle drugs, so they have not visited IOL yet. Once they inspect, management believes most of the 15 filed DMFs could be considered approved at one go.
Partly answered.
2. EBITDA margin guidance reset
Sheikh Mohammed, Individual Investor
Question. Management has been repeating 15-20% EBITDA margin for 4-5 quarters but not achieving it. Why?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Margins were affected by volatility in raw material prices and a substantial decrease in Paracetamol (>40% drop) and Metformin (15-20% drop) prices over the past year. Management could not deliver the originally envisaged ~15% EBITDA margin.
Follow-up. What is the outlook for next few quarters — any tailwinds?
Answer. Management believes prices have bottomed out and may not fall below current levels; within 1-2 quarters they expect them to move north. CFO Pardeep Khanna stated expected EBITDA margin of 13-15% in the near future.
3. Capital return policy
Sheikh Mohammed, Individual Investor
Question. Since the company has cash, why no bonus, stock split or buyback?
Answer, Abhay Raj Singh, Sr. VP & Company Secretary, IOL. Bonus/split can be discussed in a board meeting but no decision has been taken; cash is being preserved to enhance business, expand capacities and grab any good inorganic opportunity. Management's priority is to grow the business before considering buyback.
Not answered directly.
4. Segment margins disclosure
Pradeep Rawat, Yogya Capital
Question. What is the margin for chemicals and other API division vs ibuprofen division?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Management declined to share product-wise margins, citing internal policy. Suggested the analyst take it in a separate call.
Not answered directly.
5. Competitor capacity additions in ibuprofen
Pradeep Rawat, Yogya Capital
Question. A competitor is doing a 12,000 tonnes/annum CAPEX for ibuprofen — how do you see industry dynamics?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. IOL has been the largest ibuprofen player for over a decade; policy is not to comment on competitor CAPEX. IOL has its own strategy — it is the only backward-integrated ibuprofen player. When asked about price/margin risk from overcapacity, Rakesh Mahajan said ibuprofen prices are already bottomed out and IOL is getting regular orders at those prices — no further reduction feared.
Follow-up. What revenue contribution do you expect from non-ibuprofen in the future?
Answer. In 3-4 years, target is 50% of API revenue from non-ibuprofen (currently ~20% of overall revenue).
6. Export / domestic mix
Priya Shah, Individual Shareholder
Question. Export breakup FY24 vs this quarter?
Answer, Pardeep Khanna, Chief Financial Officer, IOL. Export share ~30% and domestic ~70% in Q1 FY25, similar to last year's mix.
7. Ibuprofen vs non-ibuprofen trajectory
Priya Shah, Individual Shareholder
Question. Ibuprofen has seen a lower revenue decline than non-ibuprofen Y-o-Y — why?
Answer, Pardeep Khanna, Chief Financial Officer, IOL. IOL is focused on growing the non-ibuprofen basket. Ibuprofen is stable; new APIs added to the basket, so ibuprofen share is decreasing while non-ibuprofen is increasing.
Follow-up. Why did other expenses decline this quarter — is it sustainable?
Answer. Power and fuel expenses (coal) were higher last year and have stabilised/declined; freight costs have decreased. Chairman view was: yes, the lower run-rate should be maintained.
8. M&A pipeline and other expenses
Sheikh Mohammed, Individual Investor
Question. Is IOL planning any acquisition with the cash it is sitting on?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. If a value-accretive acquisition comes up, IOL will consider it, but the first priority is organic growth. Asked about last quarter's higher other expenses (boiler, repairs), CFO confirmed higher repair/maintenance and power/fuel cost; expects normalisation going forward.
Partly answered.
9. Capacity utilisation
Vishal, Systematix
Question. What is the capacity utilisation of ibuprofen and the non-ibuprofen basket?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Ibuprofen utilisation ~80% (slightly down from 85% in Q4 FY24). Non-ibuprofen minimum 52% on average ~59-60% (vs ~25% two years back, ~52% last year). Two years back non-ibuprofen utilisation was not more than 25% on average.
Follow-up. Gross block has nearly doubled in 4 years but top line is barely 5-10% higher — what has gone wrong?
Answer. Nothing has gone wrong — CAPEX was partly on non-revenue projects: ESG, ETP plant, boiler revamp, turbine upgrades, land acquisition and large warehouses. CFO Pardeep Khanna added that paracetamol and acetic anhydride manufacturing were added in the last 2 years.
10. Utilisation ramp and ibuprofen price outlook
Vishal, Systematix
Question. How long for non-ibuprofen utilisation to reach 80-90% at current prices? And can ibuprofen prices start rising again?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. With regulatory approvals coming in (CEP from Europe etc.), management expects an uplift to optimum utilisation within next 2 years. On ibuprofen prices, management believes prices will not go down from present levels; one US player (SI Group) is reportedly planning to close their US facility.
Partly answered.
11. Ibuprofen pricing
Neelam Punjabi, Perpetuity Investments
Question. Ibuprofen utilisation is 80% vs 85% last quarter but revenue is flat QoQ — have prices gone up?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Prices almost remain the same; channel stock was reduced during the quarter, not price increase. Prices are at similar levels since the last quarter.
Follow-up. Other API business has been ~Rs 95-100 cr per quarter for 3 quarters — what's the growth target for this and next year?
Answer. Management had earlier (1.5 years back) targeted Rs 500 cr FY24 for non-ibuprofen at the then-prevailing rates; price cuts in Paracetamol/Metformin meant the target was missed. At today's volumes but old prices, the segment would have crossed Rs 600 cr in FY24 — so growth is happening in volume but suppressed in realisation.
Partly answered.
12. Non-ibuprofen product mix
Neelam Punjabi, Perpetuity Investments
Question. Out of the ~Rs 95 cr non-ibuprofen revenue, what is contribution of Paracetamol and Metformin?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Paracetamol is not more than 10-12% of non-ibuprofen segment — its prices cracked so much that IOL intentionally reduced some Paracetamol capacity. Metformin contribution is around 30-35%.
Follow-up. Have CEP approvals started lifting exports? And CAPEX guidance for FY25 and FY26?
Answer. Yes — queries from clients of competitors with quality issues are rising, trial orders/samples coming in, and improvement is expected within 3-4 quarters. CAPEX: FY25 ~Rs 200 cr, FY26 ~Rs 150 cr; mix of infra, technology development and automation; no new molecule capacity addition planned, focus is on stabilising utilisation.
13. Net cash position
Neelam Punjabi, Perpetuity Investments
Question. What is the net cash on the balance sheet as of 30 June 2024?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Net cash position around Rs 190 crore in the bank.
14. Non-ibuprofen target clarification
Pradeep Rawat, Yogya Capital
Question. You have targeted 50% revenue from API segment — do you have products developed for that ramp-up?
Answer, Abhay Raj Singh, Sr. VP & Company Secretary, IOL. Management clarified the target is 50% of API revenue from non-ibuprofen (not 50% of total revenue).
Follow-up. Inventory days have increased significantly FY23 to FY24 — why?
Answer. Inventory increased because of new products (Paracetamol, acetic anhydride) and a large alcohol order for raw material.
15. FY25 top line guidance
Pradeep Rawat, Yogya Capital
Question. Top line guidance for the year — and split between volume and price?
Answer, Pardeep Khanna, Chief Financial Officer, IOL. CFO guided ~10% increase in current year top line; split is more than 10% from volume and 5-10% from price.
16. New product pipeline & Europe export pricing
Preeti Sharma, Invest First Advisors
Question. Any new products planned in non-ibuprofen space this year? And geographical expansion target / margin difference Europe vs other geographies?
Answer, Abhay Raj Singh, Sr. VP & Company Secretary, IOL. Various products in R&D pipeline; no finalised launch announcement yet. Geographic expansion will come from European regulated market and Latin America. On an average, exports realise 20-25% better pricing than domestic market.
Not answered directly.
17. Raw material cost inflation
Tara Kaur, Individual Investor
Question. Raw material cost as % of revenue has gone up YoY and QoQ — why?
Answer, Rakesh Mahajan and Pardeep Khanna, Adviser, Finance and Strategic, IOL; Chief Financial Officer, IOL. The raw material was bought earlier (2-3 quarters back) at higher prices before the recent declines; the high-cost inventory flowed through Q1 FY25 P&L — a timing lag between purchase and sale of raw material.
Follow-up. How will margins improve in Specialty Chemicals going ahead? Any capacity expansion plans?
Answer. Specialty Chemicals has moved from negative bottom-line to positive EBIT over last 2-3 quarters. Acetic anhydride launch last year is adding value; REACH certification received for ethyl acetate — focus is on growing chemical exports. No immediate capacity expansion in chemicals; new launches possible in time to come.
Partly answered.
18. Ibuprofen price decline quantification
Vishal, Systematix
Question. Quantify the ibuprofen revenue decline over the last 4 years from price correction — what was ibuprofen 4 years back vs today?
Answer, Rakesh Mahajan, Adviser, Finance and Strategic, IOL. Four years back ibuprofen prices ranged around $12/kg; today average realisation is $9-10/kg. Capacity utilisation was around 65% in 2022 but has recovered to 75-85% in FY24.
Follow-up. Are there 2 US players exiting ibuprofen — is SI Group backward integrated?
Answer. Management referred to newspaper reports that SI Group is planning to exit. SI Group is backward integrated.
19. SI Group exit & peak revenue potential
Pradeep Rawat, Yogya Capital
Question. What is SI Group's exiting capacity, and what is IOL's peak revenue potential at current rates?
Answer, Rakesh Mahajan and Abhay Raj Singh, Adviser, Finance and Strategic, IOL; Sr. VP & Company Secretary, IOL. Per internal sources, SI Group's exiting capacity is around 4,500-5,000 tonnes. Peak revenue potential at current rates/products/mix is ~Rs 2,400-2,500 cr (Abhay noted this is purely on existing rates and domestic-export mix assumptions; pivot to more regulated exports could lift it to Rs 3,000 cr+).
Follow-up. How much export revenue do you currently have and what's the target?
Answer. Currently exports ~30% of total revenue; target 45-50% in 3-4 years, with focus specifically on regulated markets.
What was said
Topic by topic, in the order it was spoken
Q1 FY25 Welcome & Safe Harbor · Darshan Mankad (Adfactors PR)
- Moderator (Manav) opens the Q1 FY25 earnings call and introduces management: Pardeep Khanna (CFO), Abhay Raj Singh (SVP & CS) and Rakesh Mahajan (Adviser, Finance & Strategic).
- Darshan Mankad (Adfactors PR) reads the standard forward-looking statement safe-harbor disclaimer before handing over to management.
Global Macro & Sector Context · Abhay Raj Singh (SVP & Company Secretary)
- Global growth pegged at 3.2% in CY24 and 3.3% in CY25 per IMF; inflation cooling slowly; US Fed rate cuts likely slower, weighing on global financial conditions.
- India averaged 8.3% annual growth; US drug market steady with chronic therapies traction and acute therapies rebounding; API firms see realisation decline but long-term tailwinds from China+1 and Europe+1.
- Specialty Chemicals under pressure from high channel inventory, destocking and Chinese dumping; agrochem benefits from timely monsoon with good volume growth.
- Pharma sector outlook: US demand steady, strong domestic growth; chronic traction continuing, acute in recovery mode.
Q1 FY25 Standalone Financial Performance · Pardeep Khanna (CFO)
- Total income Rs 510 cr vs Rs 570 cr YoY and Rs 511 cr QoQ; sequential revenue flat.
- EBITDA Rs 58 cr at 11.4% margin (vs 14% YoY, 11.3% QoQ) — 260 bps YoY decline; net profit Rs 30 cr vs Rs 46 cr YoY, Rs 28 cr QoQ.
- Pharma segment EBIT margin maintained at 11.8% in Q1 FY25; Specialty Chemicals EBIT margin at just 1%.
- Exports Rs 150 cr vs Rs 149 cr YoY (Rs 159 cr QoQ); R&D spend Rs 4.66 cr vs Rs 5.07 cr YoY.
Closing of Prepared Remarks · Pardeep Khanna (CFO)
- CFO formally opens the floor for Q&A after the prepared financial walkthrough; investors proceed to ask questions on margins, USFDA, capacity and capex.
In their words
most of the filed DMF's for 15 drugs may be considered as US FDA approved at one go
We expect 13% to 15% EBITDA margin in the near future.
if any good opportunity, which is beneficial for the company's shareholder or any business comes in the market with a proper valuation, we may consider that, but as of now, our first priority is to go organically
Transcript
No transcript is filed yet. Companies usually file one within a week of the call.
The stock after the call
| After the call | Close | Stock | Nifty 50 |
|---|---|---|---|
| Next session Tue 13 Aug 2024 | ₹77.75 | −4.01% | −0.85% |
| 5 sessions Tue 20 Aug 2024 | ₹86.70 | +7.04% | +1.45% |
| 20 sessions Tue 10 Sept 2024 | ₹96.75 | +19.44% | +2.85% |
From the close of Mon 12 Aug 2024, ₹81.00: the close before the call day (the call's time is not on file). Adjusted daily closes; the move includes everything else that happened in those sessions.