Mayank portfolio

42

My Investment rational in HIKAL:
#Rate of change moving forward looks good.
1.FY25 is mainly depended on human pharma.
2.FY26 Crop protection business start contributing.
3.FY27 Animal pharma starts contributing.
I think all the three segment are going to rampup till Fy28 where ROCE is above 20% and ebidta margin went upto 25%.

HIKAL
2021 2022 2023 2024 2025 2026 2027 2028
Revenue 1720 1943 2023 1785 1850 2127 2446 2812
Ebidta margin 19% 18% 13% 15% 16% 19% 23% 25%
Ebidta 326.8 349.74 262.99 267.75 296 404.13 562.58 703
Other income 5 5 5 2 5 5 5 5
Interest 36 31 48 56 60 60 60 60
deprecition 85 96 109 118 130 135 130 125
PBT 210.8 227.74 110.99 95.75 111 214.13 377.58 523
TAX 36 27 26 27 27 28 28 28
Net profit 133 160 78 70 75 156 272 376
CURRENT MCAP 4731
EXIT PE FY28 EX MCAP FY 28 CAGR
25 9400 26%
30 11280 33.59%
35 13160 40.64%

Dis. Invested and biased

4 Likes
43

My Investment rational in JUBILANT PHARMOVA

Their Q3 FY 25 presentation was very detailed, worth reading
As per management the are targeting 2x sale till fy30
and improvement in ebidta margin from 15-16% to 23-25%.
they are also trying to become debt free till 2030.
going through their cashflow it looks possible.
if things got in direction where management is guiding
this is what we can expect
JUBILANT PHARMOVA
2030
Revenue 13500
Ebidta margin 24%
Ebidta 3240
Other income 0
Interest 0
deprecition 430
PBT 2810
TAX 28
Net profit 2023

CURRENT MCAP 14604
EXIT PE FY30 EX MCAP FY 30 CAGR
25 50575 28%
30 60690 33.00%
35 70805 37.00%

Their are many things which can go wrong that is why I am diversified into 4 stock in pharma.

Dis. Invested and biased

1 Like
44

@mayank_raghuwanshi Thanks for sharing. One of the concerns that I have about Jubilant pharmova is their Montreal facility where they make Radiopharma products (highest contribution to their revenue at present). The relationship between US and Canada being fragile, the uncertainity quotient is a bit on higher side for Jubilant. Besides, doubling the revenue over 5 years period is rather a mediocre growth to my view.

45

Yes it can be a issue of a real but for that risk we make a portfolio.second on growth side PAT growth looks good and 15% sales growth is not bad. My expectation with portfolio is 15-20% it’s enough for me.

46

Good updates on pharma segment by aditya khemka sir

47

Krsnaa
Thesis-
Krsnaa has consistently expanded its diagnostic centers, particularly in underserved regions, through PPPs. This strategy has enabled the company to tap into a broader patient base.
Cost leadership - They have Superior cost structure enabled by PPP contracts, combined with operational efficiency, enables disruptive pricing (50-60% discount) without compromising on profitability.
Extensive Network: Wide presence in tier II and III cities, tapping into underserved markets.
This makes KDL possibly the best proxy for ‘bottom of pyramid’ healthcare growth opportunity in India.
Company is actively expanding into the retail (B2C) diagnostic segment through multiple strategic partnerships, focusing on developing end-to-end retail capabilities and not restricted to any one particular business channel.
Government initiatives promoting healthcare accessibility and increased health awareness among the population have positively influenced the diagnostic sector.
Technological Integration: Adoption of teleradiology and digital platforms enhances service delivery.
Risk-
Technological disruption.
Heavy reliance on government contracts, Changes in government policies or delays in contract renewals under PPP models could impact operations.
As payment timelines of the Government receivables tend to be high, KDL’s debtors holding period remained at ~125days as of September 30, 2024, up from 55 days and 104 days as of March 31, 2023, and March 31, 2024, respectively.
Brand Recognition: Compared to peers, Krsnaa has a relatively lower brand recall in the retail segment.
Competition from regional and established players, however, KDL’s established position in the PPP segment mitigates the competitive pressure to a certain extent.

my expectations

KRSNAA
2021 2022 2023 2024 2025 2026 2027 2028
Revenue 396 455 487 620 700 840 1008 1209
Ebidta margin 24% 29% 25% 23% 26% 26% 27% 28%
Ebidta 95.04 131.95 121.75 142.6 182 218.4 272.16 338.52
Other income 5 15 19 17 25 20 20 20
Interest 26 18 8 16 25 30 35 40
deprecition 35 41 54 75 85 90 100 105
PBT 39.04 87.95 78.75 68.6 97 118.4 157.16 213.52
TAX 37 21 23 19 24 24 24 24
Net profit 25 70 61 56 74 90 120 162
CURRENT MCAP 2586
EXIT PE FY28 EX MCAP FY 28 CAGR
25 4050 16%
30 4860 23.00%
35 5670 30.00%

Dis. Invested and biased

2 Likes
48

Laurus

THESIS
Gross block of the company is increasing at 22% cagr since 2014. They are continuously investing in high quality capacity since years.
Their ARV business which is more of commodity based, contributes revenue of about 46%, is having much lower gross margins (around 35%)
Whereas, Non- Arv business that is complex and requires major R&D and is higher gross margin business, is growing exceptionally.
In this uncertain environment globally, Innovators are looking for China alternative, and serious credible players who could match the competence of China in term of scale, technical sophistication, and policy support. That is where laurus adds value.
Laurus labs invests in products and capacities ahead of time and requirement.
Laurus is the only player in India to have indigenous enzymes technology at commercial level. ( Backward integrated).
They right now are having the unique advantage of high complexity + high volume and higher margins.
Getting encouraging RFPs and signing in early-mid-late phase projects involving complex chemistry.
They have clean records with global regulators.
Going forward, Rate of change for laurus looks very positive.
The exit barrier in cdmo business is exceptionally high.

LAURUS LAB
2028
Revenue 9331
Ebidta margin 35%
Ebidta 3265.85
Other income 20
Interest 220
deprecition 420
PBT 2645.85
TAX 28
Net profit 1905
CURRENT MCAP 35104
EXIT PE FY28 EX MCAP FY 28 CAGR
35 66675 24%
40 76200 29.50%
45 85725 34.66%

#Expecting more PE from other companies in my portfolio due to its quality and terminal value.
#Expecting 35% EBIDTA margin because non ARV business have far better gross margins.
#Not including there latest announcement of 5000cr capex in these assumption which improves their terminal value and growth after fy29.
#last if we want china plus one we needs large capacity and capability which i think laurus is showcasing.

Dis. Invested and biased

2 Likes
49

ORIENT BELL
#Management
Key Management Team (2024): Madhur Daga, Managing Director Overseeing strategic direction since 2018, Madhur Daga succeeded his father, Mahendra Kumar Daga. He has been instrumental in driving professionalization and growth, emphasizing leadership by qualified professionals.

Aditya Gupta, Chief Executive Officer With 33+ years of experience in leading companies like United Spirits (Diageo), Bharti Airtel, Reliance Communications, and the Tata Group, Aditya Gupta joined as CEO. He is an IIT Mumbai alumnus with a PGDM from IIM Bangalore, known for driving revenue growth and operational excellence.

Anil Agarwal, Chief Operations Officer Brings 37+ years of ceramics industry experience, previously with Somany Ceramics and Vrundavan Ceramics.

Himanshu Jindal, Chief Financial Officer With 22+ years in finance roles at Heidelberg Cement, Cipla, Cargill, Pfizer, and Den Networks, he has maintained strong financial discipline, ensuring a robust balance sheet and efficient cash conversion.

photo_6091322181003887068_y
photo_6091322181003887068_y1260×1239 103 KB

Companies management takes a long term approach, they are ready to take short term pain for long term gain.
today if you add back their marketing spend in profit, company is available at 10-11 PE, their cash flows are quite good and cash conversion cycle improved drastically in last five years. I am not able to do financial modeling in orient, there are lots of moving parts in it.
I am betting on valuations and management.
One more positive thing in the company we can look at is their gross margins against other large competitors.

Orient bell
THESIS-
Orient Bell Ltd has done well in keeping control over its working capital and in generating good cash flows.The strong balance sheet and healthy cash flows, limit the possibility of any mishaps.

Company has tried to focus on delivering an online sales experience to prospective customers through their website, adding features such as virtual visualisation, budget estimation, tile selection, and online ordering.

Company has finally started getting aggressive on brand building. the marketing cost as % of revenue for Orient Bell Ltd has spiked beyond 5% compared to 3-3.5% in the previous year.

Tile consumption per capita will go up as India’s per capita GDP keeps increasing.

ANTITHESIS -
The tiles industry is heavily commoditized, with very little to no difference in product quality between companies. India is a surplus capacity tiles market. Any slack in export demand can cause unorganised players to redirect their production towards projects in the domestic market, thus leading to pressure on tile realisations. Only strong tile brands are able to resist pricing pressure, and that too only to an extent.

Gas and power costs are more than 20% of revenue for tile companies. Thus, any large fluctuations in energy prices can have severe adverse impacts on tile margins.
The Russia-Ukraine war in 2022 and the resultant spike in natural gas prices caused tile margins to get squeezed significantly as all the price increases couldn’t be passed on to end consumers.

Due to the commoditized nature of the industry, pricing power, and sound unit economics are therefore gained via high spending on branding to gain customer share of mind and by increasing the scale of operations, respectively.

With such unfavourable price dynamics in a largely commoditized industry, scale, distribution strength, and brand power become very important for a company to succeed. Thus, brands that have already achieved scale are likely to keep getting better and deliver better unit economics, whereas smaller companies would find it very hard to achieve scale.

1 Like
50

Good video to understand industry, business and management.

51

**Privi Speciality Chemicals – Q4 FY25 Concall Summary **

1. Business Performance & Strategic Positioning

  • Operational Strengths:
    • Achieved strong performance through process intensification, yield improvements, and rollout of new specialty aroma chemicals.
    • These optimization cycles are ongoing, expected to provide sustained growth momentum.
  • Capacity Utilization:
    • Plants are running at 85–90% utilization, highlighting efficient operations and healthy demand for core products.
  • Strategic Transformation:
    • Privi is evolving from a leading supplier to a co-development partner, deepening strategic relationships with global fragrance and FMCG majors.
    • Now working closely with six key customers, including nearly all top 10 global players.

2. Capacity Expansion and Capex Plans

  • FY26 Expansion:
    • Production capacity to increase from 48,000 MT to 54,000 MT by March 2026.
    • Capex of ₹250–300 crores earmarked for FY26.
    • Focused on debottlenecking and augmentation of existing plants.
      • Techniques involve converting batch processes to continuous flow and upgrading auxiliary systems.
      • These upgrades leverage existing technical know-how and require significantly lower capex than greenfield setups.
  • Fixed Asset Efficiency:
    • Goal to improve fixed asset turnover from 1.4–1.5x to 1.6–1.7x, possibly reaching 2x for certain products.
    • Working capital cycle reduction target: 15–20 days.
    • Target ROCE in the range of 23–24%.

3. New Products and R&D Capability

  • New Launches in FY25:
    • Indomaran, Floran, and Amber DHT launched; applications include personal care, daycare, and laundry care.
    • All have been well received by clients, indicating strong market-fit.
  • FY26 Pipeline:
    • Two premium aroma chemicals under development; planned to launch by mid-FY26.
  • R&D Investments and Capability Enhancement (Response to Sajal Sir’s Question):
    • Management emphasized that significant investments in R&D infrastructure, instrumentation, and talent have already been made.
    • Privi has a robust in-house R&D team with long-serving, deeply experienced scientists.
    • These past investments are now yielding returns, allowing the company to aggressively offer R&D services as part of co-development partnerships.
    • Management sees “huge potential” in monetizing these capabilities further—without requiring large fresh investments in the near term.

4. JV Subsidiary (Privi GH) – Strategic Fit and Future Potential

  • Operations Started: February 2025
  • FY25 Revenue Contribution: ~₹4 crore (initial phase)
  • Break-even: Expected within 12 months (by FY26–27)
  • Future Potential:
    • Revenue potential of ₹300–350 crores over 3–4 years
    • Growth rate: 10–15% CAGR
    • EBITDA Margins: Projected 20%+
    • Strategic positioning as a customer service extension to a major client, aligning with Privi’s evolution into a value-added partner

5. Market and Demand Tailwinds

  • Export-Oriented Model:
    • Q4 FY25: 72% of total income from exports
    • FY25 Full Year: 70%
    • Markets served: Europe, Asia, Latin America, Middle East, and growing domestic demand
  • Global Trends as Growth Catalysts:
    • Benefiting from China+1, Europe+1, and US+1 sourcing strategies
    • Aroma chemical demand surging in India, Asia, and Africa, aided by post-COVID hygiene awareness
  • Non-linear Demand Growth (Response to Sajal Sir’s Question):
    • Management affirmed the correlation between per capita GDP growth and aroma chemical consumption.
    • Historical data suggests that a 27–28% rise in GDP/capita doubles demand—a trend they expect to continue.
    • Management views this as a key reason for long-term optimism, alongside their ability to grow their “share of value” with customers via innovation and product introductions.

6. Product Strategy and Margin Levers

  • Privi is pivoting towards:
    • High-value, low-volume niche products
    • Selling at premium price points (some over $100/kg)
    • Optimizing product mix for value-added margin expansion
  • Q4 FY25 EBITDA Margins: ~23.5%
    • Management targets to sustain margins above 21% annually
    • Acknowledges quarterly fluctuations based on product mix
    • Margin improvement driven by:
      • Better yields
      • Leveraging side-streams to create valuable byproducts
      • Improved manufacturing efficiencies

7. Financial Outlook and Confidence

  • Growth Guidance for FY26:
    • Revenue growth target: 20–25%, with potential to reach 30%
    • Driven by:
      • New product launches
      • Deeper penetration with existing clients
      • Geographic expansion
      • Improved pricing and value-added offerings
  • Capital Structure:
    • Peak debt not expected to exceed 2x Debt/EBITDA, in line with current levels
    • Balance sheet expected to remain healthy with capex funded prudently
  • Sustainability Focus:
    • Holds Gold rating from EcoVadis; aiming for Platinum
    • Actively reducing energy costs and increasing use of green power

8. Risks and Mitigation

  • US Tariffs: Minimal exposure (~10% of sales), and India remains competitively placed versus other global exporters
  • Supply Chain Security: Backward integration via CST and GTO strategies ensures raw material reliability

9. Management Confidence and Closing Remarks

  • Management is confident of sustaining high-margin growth and maintaining leadership in global aroma chemicals.
  • Believes that in the coming sustainability-focused world, “the supplier will be more important than the customer”.
  • Past investments in R&D, lab infrastructure, and people are seen as strategic assets now delivering results.
52

Sajal sir questions

1.Given Privi’s transition from a supplier to a partner and core development, particularly with the success of the JV (which is seen as a co-development and manufacturing service), what kind of fresh investments are anticipated in the current fiscal and medium-term outlook for enhancing capabilities like hardware, lab equipment, software, and scientists?

◦Answer: The management stated that Privi already possesses the necessary capabilities in terms of R&D. They have experienced scientists, many of whom have been with the company for a long time and deeply understand the nuances of the aroma chemical industry and chemistry. They also have state-of-the-art lab equipment and instrumentation. These investments were largely made in the past, and the current approach involves offering these existing services more aggressively. The management sees “huge amount of potential” in this. They noted that past investments in lab standards and people are “now paying off”.

2.History suggests that for every 27-28% growth in per capita GDP, the demand for aroma and niche chemicals doubles, representing a non-linear growth curve. Is this trend one of the reasons behind Privi’s optimism for sustaining its growth momentum?

◦Answer: The management confirmed that this trend is “one of the key reasons”. They agreed that an increase in GDP per capita leads to a “multiple effect” on aroma chemical consumption, and rising living standards also contribute to increasing demand. They added that their confidence also stems from their ability to increase their “share of value” with existing customers by introducing new products based on significant prior work.

53

DMCC – Q4 FY25 Earnings Call Summary

:date: Period Reviewed: FY25 (April 2024 – March 2025)

:test_tube: Industry: Chemicals – Bulk & Specialty

1. Financial Performance

Metric FY25 FY24
Revenue (Topline) ₹430 Cr Not specified (₹8 Cr exceptional gain in FY24)
Profit After Tax (PAT) ₹21.5 Cr Not directly comparable due to investment sale gain
Margins 12–13% Not disclosed
  • FY24 includes ₹8 Cr profit before tax from sale of investments, impacting YoY comparisons.
  • Margin compression in Q4 FY25 due to sharp spike in sulfur prices, affecting AIDA margins.

2. Business Segment Analysis

:small_blue_diamond: Specialty Chemicals

  • Contribution:
    • ₹215 Cr
    • 42% of revenue in Q4 FY25
  • Capacity Utilization: 50–60%
  • Growth:
    • Volume growth: 15–20%
    • Topline aided by volume & price realization
  • Pricing:
    • Ability to pass on raw material changes, especially in large contracts
    • Sulfur price hike in Q4 FY25 to reflect in Q1 FY26 pricing
  • Expansion Potential:
    • Existing infrastructure can double specialty revenues to ~₹430 Cr without new capex
  • Margin Profile:
    • Higher than bulk chemicals
    • Focused on expanding specialty share to enhance overall margins

:small_blue_diamond: Bulk Chemicals

  • Contribution: 58% of Q4 FY25 revenue
  • Capacity Utilization: ~90–95%
  • Growth Outlook: No major volume growth expected; mostly stable
  • Location: Primarily domestic, with facilities across both plant sites
  • Limitation: Nearly maxed out; no significant headroom without capex

:small_blue_diamond: Boron Business

  • Revenue: ₹100 Cr in FY25
  • Product Mix:
    • ~70% commodity products
    • ~30% higher-margin specialty products
  • Expansion Outlook:
    • Headroom for 20–30% growth before needing expansion
    • Focus moving to value-added boron specialties

3. R&D and New Product Development

  • Current Focus Areas: Niche products in sulfur and boron chemistries
  • Pipeline Stages:
    • R&D → Test Marketing → Commercialization
  • New Launches:
    • Three new products reached commercial scale
    • Not yet mature; produced in multi-purpose plants
    • Full market acceptance expected in FY26
  • FY26–FY27 Plan:
    • More product development in FY26
    • Commercialization in FY27
  • Market Potential:
    • Some molecules could individually scale to ₹30–50 Cr, though timeline uncertain

4. Markets & Geography

:globe_showing_europe_africa: Domestic Market

  • Positive signs of demand recovery and consumption growth

:european_union: Europe

  • Facing structural headwinds:
    • High energy costs
    • Reduced production and expansion by local players
  • Impact:
    • Loss in exports not due to competition, but demand drop
    • Largest historical export market; not yet offset by other regions

:globe_showing_americas: Emerging Markets

  • Latin America: Steady growth, increasingly important
  • China: Newly entered market, showing promise
  • US:
    • Smaller export share
    • US tariffs expected to be manageable; company confident in passing them on due to limited US competition

5. Operations & Plants

:factory: Facilities:

  • Bahad, Gujarat and Roha, Maharashtra
  • Anchor units: Sulfuric acid plants at both sites

:wrench: Shutdowns:

  • Q3–Q4 FY25: Minor shutdown at Bahad (~10–15 days lost)
  • Q1 FY26: Planned 20–25 day shutdown at Roha expected to impact production/sales

:receipt: Tax Regime:

  • Currently under old tax regime
  • Will transition to new regime (~25–26%) in FY26/FY27

6. Capex & Investment Plans

  • Completed: All major projects are already done
  • FY26 Plan:
    • Minor capex of ₹10–15 Cr (maintenance + small improvements)
    • No large expansions like Bahad in the pipeline
  • Future Strategy:
    • As new products mature, they may shift from multi-purpose to dedicated plants
    • Will require board/shareholder approval if capex is significant
    • Debottlenecking likely in boron segment
  • Maintenance Capex:
    • ₹1.5–2 Cr every 1–2 years (shutdown maintenance for sulfuric acid plants)

7. Risk Factors & Market Challenges

:warning: Europe Market Conditions:

  • Demand collapse due to energy costs; loss of export business
  • No current signs of European government support for chemicals sector

:warning: Copper Smelter Commissioning (Kutch, FY26):

  • Expected to release large quantities of sulfuric acid
  • Could depress sulfuric acid prices, especially on western coast
  • Impact remains unquantified, but is being closely monitored

:warning: Sulfur Price Volatility:

  • Q4 FY25 saw sharp sulfur price spike
  • Margin impact in short term; mostly passed on in specialty, but with a lag

:warning: Boron Raw Material Supply Chain:

  • India has no local boron source
  • Global logistics issues (Suez Canal, shipping, strikes) can disrupt availability

:warning: US Trade Tariffs:

  • Tariffs may apply, but DMCC confident they can pass on cost
  • Limited local competition for their products

:warning: Geopolitical Risks:

  • Middle East instability (e.g., Palestine conflict) being monitored
  • No direct exposure mentioned, but global impacts considered

8. Strategic Position & Competitiveness

  • Focused Chemistry: Specialization in sulfur and boron chemistry
  • End Uses: Paints, coatings, pigments, dyes, agrochemicals, pharma
    • E.g., Sudarshan Chemicals, Swinsho (Solvay) are customers
  • Global Standing:
    • In some products (e.g., sodium vinyl sulfonate), DMCC is top 3 globally
  • Competitiveness:
    • For some molecules, more competitive than Chinese peers

9. Management Commentary & Outlook

  • No formal forward guidance due to commodity-linked volatility
  • Management remains committed to improving topline and bottom line
  • Acknowledges investor trust, especially through industry challenges
  • Medium-term strategy focused on:
    • Expanding specialty chemicals
    • Operational efficiency
    • Market diversification (beyond Europe)
    • Selective product innovation
3 Likes
54

:chart_increasing: Apollo Pipes Limited – Q4 FY2025 Earnings Call Summary

:building_construction: Business Overview

FY2025 Performance Context:

  • PVC pipe industry declined ~5% YoY due to:
    • Private real estate and infrastructure slowdown.
    • Volatility in PVC resin prices.
  • Despite headwinds, Apollo Pipes, the 7th largest player, achieved 23% volume growth.

:1234: Key Financial & Operational Metrics (FY2025)

  • Volume Growth: +23% YoY.
  • EBITDA: Flat at ₹95 crores.
  • Q4 FY25 Revenue: ₹315 crores (highest ever quarter).
    • Margins were impacted due to:
      • Aggressive sales strategy.
      • Slower ramp-up at the western plant.
      • Weak infrastructure and real estate demand.

:bar_chart: Capacity & Capex:

  • FY2025 Capex: ₹166 crores (₹250 crores in FY24).
  • Capacity increased to 232,000 tons.
  • FY2026 Target: 260,000 tons (₹100 crores capex planned).
  • Capex to be funded via internal cash flows.

:money_bag: Financial Position

  • Net Cash Position: ₹46 crores despite elevated capex.
  • Working Capital Cycle: 36 days (remains prudent).
  • Operating Cash Flow to EBITDA: 65%; expected to improve.

:money_with_wings: Preferential Issue:

  • Total Equity Infusion Expected: ₹110 crores from an Omani fund.
  • Credited So Far: ₹28 crores in April.
  • Remaining Balance: Expected within the next 17 months.
  • Use of Proceeds:
    • Investment into greenfield plant in South India.
    • Other corporate and operational requirements.

:puzzle_piece: Strategic Acquisition – Kisan Mouldings

  • Purpose:
    • Entry into Western India.
    • Turnaround opportunity.
  • Post-acquisition performance:
    • EBITDA margin turned positive to ~3–4%.
    • Focus on:
      • Plant issue resolution.
      • Quality improvement.
      • Distribution network strengthening.
  • Growth Plan:
    • Ramp volume to 35,000 tons by FY2027.
    • Gradual EBITDA margin improvement to 8–9%.

:globe_showing_europe_africa: Geographic Expansion Strategy

  • North India: Focus on new products and plumbing trade channel.
  • Central & East India: Leveraging Varanasi plant.
  • West India: Through Kisan Mouldings.
  • South India:
    • Greenfield plant planned (details in 6–9 months).
    • Bangalore plant currently being expanded.

:rocket: FY2026 Growth Outlook & New Revenue Drivers

Growth Guidance:

  • Overall: 20–25% volume growth.
    • Apollo standalone: ~20%
    • Kisan: Higher growth due to low base

Key Growth Levers:

  1. oPVC segment – Higher-margin infrastructure product.
  2. Window profiles – New product (launch: June 2025).
  3. Varanasi plant – Enables East/Central India penetration.

These three levers expected to drive 20–25% of incremental volume growth in FY2026.

:chart_increasing_with_yen: Profitability & Return Targets

EBITDA Margins:

  • Apollo Pipes: 8–8.5% currently, guided to reach 10–12% in 2–3 years.
  • Kisan:
    • FY26: ~5%
    • FY27: 8–9% expected.
  • oPVC: Superior margin product.

Return on Capital Employed (ROCE):

  • Target: 25% ROCE in 2 years.
    • ₹850 crores capital employed → ₹2,500 crores revenue.
    • Expected: ₹250–300 crores EBITDA, ₹200–225 crores EBIT.

:test_tube: Segment Strategies

:hammer_and_wrench: oPVC:

  • 15% of gross block invested.
  • Cost-effective vs DI pipes (30–40% cheaper).
  • Approved in 4–5 states; wider adoption expected in 1–2 years.
  • Capacity: 9,000 MTPA.
  • TAM: ₹7,000–8,000 crores.
  • Expected 5% revenue share, higher profitability share.

:window: Window Profiles:

  • Launch: June 2025.
  • Capex: ₹60 crores (85% spent).
  • Targeting replacement of wood, steel, aluminum in construction.

:megaphone: Marketing & Distribution

  • Ad spend: ~1% of revenue (focused on BTL marketing).
  • Initiatives:
    • Plumber incentive program.
    • Tech app for engagement.
  • Regional distribution focus:
    • East & Central: Via Varanasi plant.
    • West: Strengthen Kisan presence.
    • South: Build awareness.
  • Channel Financing: In talks with banks to support Kisan dealers by FY27.

:brick: Kisan Operational Focus

  • Fixing fundamentals:
    • Plant operations.
    • Product quality.
    • Distribution logistics.
  • Focus on top 100 distributors.
  • No immediate branding capex needed; brand equity is strong.

:warning: Risks & Challenges

Category Risk Description
Macro Weak real estate & infra; uncertain recovery in H2 FY26.
PVC Prices Volatile prices hurt channel stocking and margins.
EBITDA Margins Margin pressure in commoditized uPVC segment; ongoing price war.
Return Metrics ROCE/ROE currently low due to capex and underutilization.
JJM Segment Volumes fell ~60–65% YoY. FY26 plan excludes recovery.
New Product Adoption oPVC, window profiles depend on approvals & education.
Capacity Constraint oPVC machine supplier bottleneck possible; tied to demand visibility.
Kisan Integration Lower margin base, working capital pressure, ongoing stabilization.
1 Like
55

:date: Praj Ind: Q4 & FY25 (Ended March 31, 2025)

1. Business Performance Highlights

Bio-Energy

  • Ethanol Blending:
    • India met its 20% ethanol blending (EBP20) target ahead of schedule, with Praj playing a pivotal role.
    • Future ethanol demand expected from flexifuel vehicles, 100% ethanol vehicles, and diesel blending. Emerging use cases include Sustainable Aviation Fuel (SAF) requiring low-carbon ethanol.
  • Technology Differentiation:
    • Focus on margin improvement through co-products such as distillers corn oil, rice protein, and high-protein DDGS. These patented solutions offer financial viability and differentiation.
    • Debottlenecking solutions and efficiency upgrades are gaining traction.
  • Feedstock Diversification:
    • Increased push towards starchy feedstocks like corn; future use of regional alternatives is anticipated.
  • International Momentum:
    • Active inquiries from Americas, Brazil, Argentina, and Paraguay.
    • Major ethanol plant order won in Paraguay.
    • 45Z rule (expected in Oct 2025) in the US will unlock a pipeline for low-carbon ethanol projects.

Compressed Biogas (CBG)

  • Signed agreement for 36 TPD CBG project in South India — one of the largest single-location plants in the country.
  • Joint Venture with BPCL:
    • Term sheet signed to develop 10 CBG plants. Awaiting regulatory approvals.
  • Technology Advancements:
    • Promoting biometan modules to enhance viability.
    • Launched biobutamin, a co-product, with a national highway stretch already using it. Specification process ongoing with CRRI.
  • Policy Tailwinds:
    • 5% mandatory blending from Jan 2026, and OMC involvement in offtake.
    • Pricing mechanism tied to 80% of CG price offers a baseline, though industry discussions are continuing.

Engineering & GenX

  • Mangalore GenX Facility:
    • Commissioned in Mar 2024; audited and approved by 8 clients.
    • Three long-term framework agreements (8-year horizon) signed.
    • Kandla facility is fully booked for 18 months; new orders to be routed through Mangalore.
    • Revenue contributions from GenX expected from H2 FY26, with PBT contribution starting FY25-26.
  • Brewery Business:
    • Revival after three-year lull with new greenfield order.

Pharma & Healthcare Solutions (PHS)

  • Continued momentum in:
    • High-capacity fermentors
    • Injectables
    • Blood plasma storage
  • Entering new tech areas: EVs, batteries, solar, semiconductors
  • International orders have been consistent over two years.

Services Business

  • Robust growth in order book and revenue.
  • FY25 order book doubled YoY.
  • Demand rising for:
    • Biogenic CO2 capture
    • Fermentation optimization
    • O&M services

Internationalization Strategy

  • FY25 export revenue: 24% (vs 18% in FY24)
  • Goal: Move to a 50:50 domestic-international revenue mix
  • Tripling sales target with international growing faster

Bioplastics (PLA)

  • Collaboration with UD Inventa Fischer (Thyssenkrupp subsidiary).
    • Praj manages fermentation & engineering, UIF handles polymerization.
    • Customer interest building; joint pitching underway.
    • Aimed as a cost-competitive, domestically developed alternative.

2. Financial Highlights (Consolidated)

Metric Q4 FY25 Q4 FY24 FY25 FY24
Income from Operations ₹8,000 Mn ₹10,000 Mn ₹32,280 Mn ₹34,662 Mn
PBT ₹582.51 Mn ₹1,000 Mn ₹2,703 Mn ₹3,774 Mn
PAT ₹398.16 Mn ₹919.36 Mn ₹2,189 Mn ₹2,833 Mn
  • Margins: Improved 2.3% QoQ (Q3 to Q4), post material & direct costs.
  • Order Inflow (Q4): ₹10,320 Mn
    • 61% Domestic, 39% International
  • Order Backlog (as of Mar 31, 2025): ₹42,930 Mn
    • 63% Domestic, 37% International
  • Cash Balance: ₹6,000 Mn
  • Proposed Final Dividend: ₹6 per share

3. Risk Factors & Operational Challenges

Execution Delays

  • Project cycle extended from 9–12 months to 12–15 months.
  • Caused by client-side liquidity issues and stricter financing norms.
  • Revenue recognition policy ensures work begins only when clients are ready — resulting in spillover into FY26.

US Tariffs

  • Current duty: 5–7%
  • Proposed hike: 26% (temporarily reduced to 10% for 90 days)
  • Exposure to US projects is limited (~3–4% of revenue). Tariffs borne by customers, but final impact remains uncertain.

GenX Scale-up Costs

  • FY25 PBT includes ₹76 crore in startup and scale-up costs (net of initial project contribution).

CBG Industry Maturity

  • Regulatory frameworks are improving, but offtake clarity and developer ecosystem still evolving.

Working Capital & Receivables

  • Increase in contract work-in-progress due to execution delays.
  • Higher provision for doubtful debts due to more aggressive policy (not due to bad debt write-offs).

Fire Incident

  • Fire at Praj Matrix (R&D center) in March 2025.
    • No casualties or material R&D disruption.
    • Facility insured; refurbishment underway.

4. Management Commentary & Strategic Direction

Strategic Themes

  • Moving beyond EBP20 into new value chains (SAF, diesel blending, co-products).
  • International markets and technology-led diversification are central to future growth.
  • Aim to triple sales and achieve 50:50 revenue mix over medium term.

Technology Focus

  • Emphasis on proprietary, differentiated tech:
    • High-margin co-products
    • Biobutamin for road construction
    • Low-carbon intensity ethanol (SAF)
    • Debottlenecking and efficiency tools
    • Bioplastics (PLA)

Governance & Leadership

  • Appointment of Dr. Pramod Chaudhari as Founder Chairman & Group Mentor (ED role, effective July 1, 2025).
  • Appointment of Mr. Pralhad Chaudhari as Non-Executive, Non-Independent Director (from next AGM).

Outlook

  • Optimistic across all verticals despite cautiousness in CBG.
  • Expect multiple growth levers:
    • Co-products in bioenergy
    • GenX contribution from FY26
    • Services and international revenue
  • Near-term financial goal: achieve sustainable double-digit EBITDA margin
56

**Laurus Labs Q4 FY25 Earnings Call **

Business Overview

1. Strategic Shift Toward Diversified CDMO/CMO Model: FY25 was a year of strategic acceleration and diversification. Laurus Labs continued its evolution toward becoming a fully integrated and diversified CDMO/CMO company, focusing on strengthening its commercial execution and reducing volatility from early-stage programs. The company is doubling down on high-value opportunities and long-term partnerships, particularly with Big Pharma.

2. Technology Edge: Laurus Labs has developed deep capabilities in biocatalysis, continuous flow chemistry, high-energy chemistry, and cryogenic reactions. It is also investing in enzyme development, often integrating multiple steps using biocatalysis in customer projects. The chemistry-biology overlap is becoming a defining capability, helping Laurus offer differentiated solutions in complex projects.

3. Segment Highlights:

A. CDMO Business:

  • Small Molecule CDMO:
    • Q4 revenue: ₹461 crore, FY25 growth of ~56%.
    • Robust pipeline: 110+ active projects (90 in human health, 20 in animal health/crop sciences).
    • Pipeline skewed toward Phase 2 and 3 projects, indicating maturing revenue potential.
    • High-value partnerships with Big Pharma reduce project volatility.
    • 15% enhancement in API reaction volume in FY25.
    • Multi-site capacity expansion is underway.
  • Large Molecule CDMO (Laurus Bio):
    • Q4 revenue: ₹20 crore.
    • Continued demand in animal health.
    • New fermentation facility in Vizag (~₹250 crore investment) to double capacity by 2027.
  • Animal Health and Crop Sciences:
    • Animal health: Validations to complete by end-FY26, expected revenue jump.
    • Crop sciences: Facility commercialized in Q4, delivery started; further traction expected in FY26-FY27.

B. Generics Business:

  • Q4 generic revenue: ₹1230 crore.
  • API sales: ₹800 crore.
  • ARV segment stable at ₹2550 crore annually, not expected to decline in the next 2-3 years.
  • Formulations (FBF) up 23% YoY in Q4 and 12% for FY25.
  • Non-ARV formulation growth expected to accelerate from Q3 FY26, driven by US/Canada approvals and expansion with a CMO partner.

C. Specialty Initiatives:

  • Gene Therapy (Karti/NexCAR19):
    • Treated ~300 patients, good survival rates.
    • New facility (capacity for 2,500 patients/year) to be ready by Sep 2025.
    • BCMA program and pediatric NexCAR19 entered Phase 1.
  • Antibody Drug Conjugates (ADC):
    • Existing capabilities: Payloads and linkers.
    • New GMP facility (₹>$15M) for ADC conjugation, plasmids, and vectors.
    • Will not manufacture monoclonal antibodies.

Financial Highlights (FY25):

  • Revenue: ₹5554 crore (10% YoY growth).
  • Q4 Revenue: ₹1720 crore (19% YoY growth).
  • Gross Margin: ~55% (Q4: 54.5%).
  • EBITDA Margin: 20% (Q4: 27.7%).
  • PAT: ₹234 crore in Q4; ₹358 crore in FY25 (122% YoY growth).
  • ROI improved from 6.4% to 9.7%.

Capex & Leverage:

  • FY25 Capex: ₹659 crore (majority for CDMO).
  • FY26 Capex guidance: ~₹1000 crore (includes Vizag expansion, ADC/Gene Therapy).
  • Net debt: ₹2594 crore; Net Debt/EBITDA down to 2.3x from 3.1x.
  • Capex to be funded from internal accruals; debt expected to remain stable.

Management Commentary

1. Leadership and Culture:

  • Dr. Satyanarayana Chava (CEO) and Ravi Kumar (CFO) emphasized team contribution.
  • Strong internal talent pipeline, especially in R&D and quality.

2. Execution Focus:

  • Emphasis on strengthening the project funnel, commercial delivery, and strategic capital allocation.
  • No external guidance, but internal confidence remains high.

3. Capital Allocation Philosophy:

  • Focus remains on deploying capital toward high-margin, high-visibility businesses like CDMO and emerging areas like ADC and gene therapy.

4. Talent Management:

  • About 40% of the workforce in R&D and quality.
  • Recruitment strategy includes campus, lateral, and internal development.

Risks & Challenges

1. Working Capital Intensity:

  • Higher WC due to longer CDMO project cycles and increased exports to the US/Canada.

2. Exposure to US-Funded ARV Programs:

  • ~$250 crore in formulation revenues tied to US-supported HIV programs. No short-term risks seen, but funding shifts toward prevention (PrEP) need monitoring.

3. Asset Turnover Concerns:

  • Current asset turnover ~0.83x vs historical 1.1x, due to scaling new verticals like animal health, crop sciences.

4. China Dependency:

  • Not entirely eliminated; sourcing adjusted per customer needs. Full China-free supply chains are not feasible at this stage.

5. Tariff Uncertainty:

  • Management is monitoring but not factoring in major impacts yet.

Good Q&A from the Call

Q: Can you link Laurus’s increased usage of continuous flow/biocatalysis with project wins?

  • A: Yes. Several projects use multi-step biocatalysis with internally developed enzymes. Chemistry-biology convergence is core to our integrated CDMO offering.

Q: How can Laurus leverage its platforms for China-free CDMO partnerships?

  • A: While full de-risking from China is not yet possible, we customize sourcing based on client requirements and are increasingly seen as a reliable alternative.

Q: What is the status of animal health and crop science CDMO?

  • A: Animal health validations will complete by FY26-end, leading to meaningful revenue. Crop sciences commercialized last quarter; one more year to scale partner programs.

Q: What is the revenue source from Karti (NexCAR19) and its future potential?

  • A: Revenue comes from sales to hospitals. New facility by Sep 2025 will scale capacity 8x.

Q: What’s the rationale behind $15M ADC investment given balance sheet constraints?

  • A: We already supply payloads and linkers. This investment allows us to expand into conjugation—based on partner demand—not into mAb manufacturing.

Q: How mature is the CDMO pipeline?

  • A: 110+ active projects, mainly in Phase 2/3. These are higher probability, long-duration programs, largely from Big Pharma.
1 Like
57

**Krsnaa Diagnostics Ltd. – Q4 FY2025 Earnings Conference Call **

This note is based on the Q4 FY2025 earnings call transcript for Krsnaa Diagnostics Ltd., covering business model, performance, strategic direction, risks, and key management commentary.

1. Business Model & Differentiation

Krsnaa Diagnostics stands apart from traditional diagnostic players. Unlike others focused on dense urban retail markets with premium pricing, Krsnaa follows a Public-Private Partnership (PPP) model with deep penetration into underserved areas, targeting “Bharat” beyond urban India.

  • Offers integrated radiology, pathology, and teleology services.
  • Pricing is 60–70% lower than the market, with sustainable EBITDA margins (25–27%) and profitability (11–15%).
  • Emphasizes affordability and quality as co-existing priorities.
  • Acts as a market maker, not just a follower.

Krsnaa has emerged as a PPP leader:

  • Maintains a 75% win-to-bid ratio, reflecting strong trust from the public health ecosystem.

2. FY2025 Performance & Management Perspective

Management was satisfied with FY2025, emphasizing the strength of its model and operational discipline.

Key Metrics:

  • Revenue: INR 7,172 million, up 16%.
  • EBITDA: INR 1,958 million, up 34%, with a margin expansion of 370 bps to 27%.
  • Net Profit: INR 776 million, up 37%, margin at 11%.
  • Volume: Over 19 million patients and 61 million tests conducted, driven by maturity of network and teleology.

3. Challenges in FY2025

Despite strong results, revenue growth fell short of the 20–25% target, due to:

  • Delays in Maharashtra CT/MRI project (site handovers).
  • Premature end to BMC project (budget exhausted).
  • Avoided new BMC tender due to revised, less-profitable conditions (e.g., 4-hour turnaround cap).
  • Receivables-driven exposure rationalization in certain geographies, prioritizing cash flow quality over volume.

These led to a 4–5% impact on growth, but helped improve margin profile and revenue quality.

4. Risk Factors

a. Receivables

  • As of March 2025, receivables stood at 128 days, mainly due to:
    • Delays in Himachal Pradesh and Karnataka (₹140–₹150 crore outstanding).
    • Linked to National Health Mission (NHM) payment delays and implementation of digitized payment systems.
  • Other states remain below 90 days receivable cycle.
  • No historical bad debt. Auditors have reviewed and are confident of full recovery.
  • Management expects normalization to 90–100 days by FY2026.

b. Income Tax Order

  • Historic tax demand received; management believes claims are defensible and an appeal is filed.

c. Rajasthan Dispute

  • A state-level dispute is in court; update expected soon.

5. Long-Term Strategy

Krsnaa is focused on five strategic priorities:

  1. Expand PPP leadership in new underserved states.
  2. Strengthen integrated services across radiology, pathology, and teleology.
  3. Sustain profitability via cost and quality leadership.
  4. Accelerate retail expansion using its PPP infrastructure as a springboard.
  5. Lead in quality – 51 NABL/NABH accredited labs, the highest in its segment.

Retail Strategy

  • Strong momentum across Maharashtra, Punjab, Assam, Odisha.
  • Retail touchpoints grew 4x in one year.
  • Retail is asset-light, scaling fast with higher margins.
  • Focuses on B2B + B2C, with home collections, preventive care, and digital diagnostics.
  • Retail contributed 3.5% of Q4 FY25 revenue; projected to reach 5–8% in FY2026.
  • Long-term mix goal: 70% B2C / 30% B2B.

Krsnaa aims to become India’s most trusted diagnostics brand, investing in tele-visit capabilities, digital infrastructure, and logistics.

6. Outlook & Capex

  • Confident about FY2026 growth >16%, with margin improvements.
  • Capex: ₹100–₹150 crore in FY2026:
    • For new radiology centers (Maharashtra, MP, Delhi) and pathology collection points (Assam, Odisha).
    • Asset-light approach ensures lower actual cash outflow.
  • ROE/ROCE may appear temporarily suppressed due to recent investments but improving steadily.

7. Key Q&A Highlights

  • Q: Radiology growth lagging?
    • A: Pathology outperformed; radiology delays due to site issues. Some new centers ramping up faster now.
  • Q: Market slowing for new centers?
    • A: No; pipeline strong. Govt. aims for 2,000+ radiology centers (vs. few hundred today). Krsnaa is well-positioned.
  • Q: ‘Center’ vs. ‘Touch point’?
    • A: Centers are exclusive. Touch points are non-exclusive for now, but expected to transition.
  • Q: Interest rate for deferred equipment payments?
    • A: 7% annually with Medica Bazar and United Imaging.
  • Q: FY2026 volume and margin guidance?
    • A: Confident of surpassing FY2025. Margins to improve; receivables expected to normalize.
  • Q: Retail revenue contribution and FY2026 target?
    • A: 3.5% in Q4 FY2025; targeting 5–8% for FY2026.
  • Q: Radiology focus ahead?
    • A: Many new radiology tenders expected. Strategy driven by opportunity pipeline.
  • Q: Value of lab accreditations?
    • A: Enhances trust, boosts private walk-ins, and helps win PPP bids at better terms.
  • Q: Cash vs. Credit business?
    • A: 20% cash, 80% credit (government reimbursements).
  • Q: Any center closures?
    • A: Yes, a few in MP and TN post-tender completion; linked to fixed asset disposal.
  • Q: Risk of provisioning from HP/Karnataka receivables?
    • A: No. Strong confidence in recovery. Auditors also satisfied.
  • Q: Is retail margin-accretive?
    • A: Yes. Despite lower pricing (30–35% discount to peers), it offers better margins than PPP.
  • Q: Target B2C vs. B2B retail mix?
    • A: Long-term aspiration is 70% B2C / 30% B2B.

8. Conclusion

Krsnaa Diagnostics is executing a well-defined strategy with dual engines: a deep-rooted PPP model and a fast-scaling, margin-rich retail expansion. Despite short-term hurdles in FY2025 (receivable delays, project timelines), the company is poised for stronger growth in FY2026. With disciplined execution, focus on quality, and an evolving healthcare ecosystem..

58

**HIKAL Q4 FY25 **

Hikal Ltd. is a fine chemical company serving the Pharmaceutical, Crop Protection, and Specialty Chemical industries. With operations across these segments and a strong financial foundation, Hikal has positioned itself as a key player in both domestic and international markets.

The company operates through two main segments:

  1. Pharmaceuticals:
  • Active Pharmaceutical Ingredients (API)
  • Contract Development and Manufacturing Organization (CDMO)
  • Animal Health
  1. Crop Protection:
  • Specialty Chemicals
  • CDMO
  • Own Products

Financial Performance (FY25)

  • Revenue: ₹1,860 Cr
  • EBITDA: ₹328 Cr
  • EBITDA Margin: 17.7% (up 270 bps from FY24’s 15.0%)
  • Net Profit: ₹91 Cr (up 31% YoY from ₹70 Cr in FY24)

Q4 FY25 Highlights:

  • Revenue: ₹552 Cr
  • EBITDA: ₹123 Cr (EBITDA Margin: 22.4%)
  • EBITDA growth: +71% QoQ, +31% YoY
  • Net Profit: ₹50 Cr (up 49% YoY, 192% QoQ)

Balance Sheet:

  • Net Debt/Equity improved from 0.67 (Mar 2024) to 0.59 (Mar 2025)
  • Operating Cash Flow: ₹310 Cr
  • Net Cash Inflow from Operations: ₹280 Cr
  • Total Assets: ₹2,529 Cr (as of March 2025)

Operational Highlights (Q4 FY25)

  • Improved product mix and business excellence initiatives drove margin gains.
  • Pharmaceuticals:
    • CDMO pipeline remains strong with new inquiries.
    • API portfolio registrations progressing.
    • 8 Animal Health products completed validation.
  • Crop Protection:
    • Focused on capacity utilization and operational efficiency.
    • Completed 12 customer audits.

Global Presence and Capabilities

  • Offices: USA, Europe, India, Japan
  • Manufacturing: Navi Mumbai, Taloja, Pune, Mahad, Bengaluru, Panoli
  • Market Reach: Americas, Europe, MEA, Asia (incl. Japan), Australia
  • Facilities:
    • Pharmaceuticals: 67 active DMFs, 27 commercial APIs, 1,600 m³ capacity
    • Crop Protection: 22 commercial products, 2,500 m³ capacity
  • R&D: State-of-the-art facility with specialized laboratories

Management Outlook

FY25 was a strategic recalibration year amid global headwinds. The management remains optimistic about the Pharmaceutical sector’s momentum, despite continued pressure in Crop Protection.

FY26 Outlook:

  • Overall Growth: Muted
  • Pharma: Expected revenue growth of 12–15%, with margin expansion
  • Crop Protection: Revenue and margins expected to remain flat

FY27 Outlook:

  • Crop Protection expected to resume growth
  • Anticipated improvement in overall business metrics

Strategic Growth Drivers:

  • Alignment with global trends: innovation-led outsourcing, regulatory compliance, sustainable and niche solutions
  • Investments in:
    • Differentiated capabilities
    • Global expansion
    • Operational excellence

Segment-wise Strategic Direction

Pharmaceuticals:

  • API: Growth driven by expanded geographies and customer base
  • CDMO: Healthy pipeline from global innovators
  • Animal Health:
    • Transition from validation to commercialization underway
    • Attracting new customers, positioned as a future growth pillar
    • Target: Commercialize 2–3 new APIs annually
    • Two key NCE starting material projects in Phase 3, one nearing commercial scale in FY26–27
    • Food ingredient project expected to reach peak revenue in 2–3 years

Crop Protection:

  • Volume improving despite global pricing pressure
  • Engagements with global innovators offer long-term opportunities
  • Special Chemicals portfolio to launch in H2 FY26
  • CDMO engagements in advanced stages; project launches expected from FY27

Animal Health:

  • 8 validated products for global supply
  • Long-term innovator agreement progressing
  • Healthy pipeline from multiple innovators
  • Commercialization expected in the coming quarters

Strategic Initiatives

  • Project Pinnacle: Transformation initiative
  • Global Expansion: New offices in North America, Europe, Japan
  • ESG Commitment: Ongoing integration
  • R&D Investment: 4–5% of revenue; new high-potency lab (operational by Q3 FY26)
  • Innovation: Strengthening front-end, collaboration, talent development
  • Target Projects:
    • Minimum peak revenue: $5M (~₹50 Cr)
    • Some potential: $20–25M+
    • Probability of success: >75% in agrochemicals, >50% in pharma (Phase 2/3)

Capex Plan: ₹200 Cr per annum for FY26 and FY27

Risks & Challenges

  • Macroeconomic/Geopolitical Tensions: Impacting costs and supply chains
  • Trade Disruptions: Tariffs in U.S./EU pose uncertainty
  • Competition: Especially in Crop Protection due to China pricing
  • Seasonality: Heavy reliance on Q4; efforts underway to normalize
  • Financial Ratios:
    • FY25 ROE: 7.3%, ROCE: 9.9%
    • ROE may dip slightly in FY26 due to depreciation; expected improvement by FY27
    • PAT recovery to FY22 peak (₹160 Cr) expected over 2–3 years
  • Regulatory Approvals:
    • Responded to USFDA observations (Feb); no data integrity issues cited
    • Awaiting further feedback

Safe Harbor Statement

The company’s disclosures include forward-looking statements that involve assumptions and risks. Actual outcomes may differ due to economic, regulatory, competitive, and market factors. The company is not obligated to update such statements.

Earnings Call: Key Q&A

  1. Muted FY26 Growth Clarified:
    Crop Protection to be flattish; Pharma expected to grow 12–15%.
  2. Seasonality Strategy:
    Working to reduce Q4 dependency; streamlined shipments post product validation.
  3. Tariff Impact & China+1:
    Monitoring HSN code-based implications. Trend towards diversification (US+1, EU+1) continues.
  4. Animal Health Product Use:
    8 validated products can be supplied globally but require customer-specific formulation validation.
  5. Crop Protection Margin Outlook:
    FY26 margins to remain flattish; recovery expected in FY27.
  6. ROE/ROCE Outlook:
    Slight dip in FY26 due to depreciation; improvement expected from FY27 onward.
  7. New Chemistry Capabilities:
    Launching high-potency chemistry (anti-cancer drugs) lab by Q3 FY26. Enables participation in new RFPs.
  8. Revenue Potential per Molecule:
    Targeting $5M+ per molecule; some can reach $20–25M.
  9. USFDA Observation Status:
    Responses submitted; no data integrity issues reported; awaiting feedback.
59

EDELWEISS Q4 FY25 CONCALL

Business Overview

EFSL operates seven high-quality, independent businesses:

  • Edelweiss Alternative Asset Advisors Ltd (EAAA)
  • Edelweiss Asset Management Ltd (EAML - Mutual Fund)
  • Edelweiss Asset Reconstruction Company Ltd (EARC)
  • ECL Finance Ltd (ECLF) & Edelweiss Retail Finance Ltd (ERFL) – NBFC
  • Nido Home Finance Ltd (NHFL)
  • Zuno General Insurance Ltd (ZGIL)
  • Edelweiss Life Insurance Company Ltd (ELI)

Over the last three years, EFSL’s strategy has focused on growth and value creation across businesses, while significantly reducing net debt and the wholesale loan book.

FY25 Performance Highlights

  • Consolidated PBT up 83% YoY
  • Ex-Insurance PAT (post-MI): ₹545 Cr
  • Consolidated PAT (post-MI): ₹399 Cr
  • Customer base: 10 Mn (↑36% YoY); 3 Mn added during the year
  • Customer assets: ₹2.2 Tn

Business Segment Performance

1. Edelweiss Alternative Asset Advisors (EAAA)

  • AUM: ₹59,640 Cr (↑9% YoY); ARR AUM: ₹45,310 Cr (↑6% YoY)
  • Deployments: ₹9,410 Cr (↑43% YoY); Realizations: ₹8,795 Cr (↑19% YoY)
  • PAT: ₹230 Cr (↑31% YoY)
  • First alternative asset manager in India to file DRHP (Dec 2024); SEBI observations received, re-submission expected by June-end

2. Mutual Fund (EAML)

  • Total AUM: ₹1,41,800 Cr (↑12% YoY); Equity AUM: ₹62,500 Cr (↑43% YoY)
  • SIP Book: ₹395 Cr (↑69% YoY); Retail folios: 26 lakh (↑64%)
  • PAT: ₹53 Cr (↑40% YoY); 10 new fund launches

3. Asset Reconstruction (EARC)

  • Cumulative recoveries: ₹57,500 Cr
  • FY25 recoveries: ₹5,730 Cr; Q4 recovery: ₹1,427 Cr
  • PAT: ₹385 Cr (↑8% YoY)
  • Retail share in capital employed: 18%

4. NBFC – ECLF & ERFL

  • AUM: ₹3,576 Cr
  • Wholesale book: ↓40% YoY to ₹2,500 Cr
  • Retail disbursements: ₹350 Cr (78% via Co-Lending Model - CLM)
  • PAT: ₹55 Cr (↓ from ₹150 Cr YoY)

5. Nido Home Finance (NHFL)

  • AUM: ₹4,235 Cr
  • Disbursals: ₹1,703 Cr (↑29% YoY); 29% via CLM
  • PAT: ₹19 Cr (flat YoY)
  • Transitioning toward affordable housing via CLM

6. Zuno General Insurance (ZGIL)

  • GWP: ₹1,012 Cr (↑19% YoY)
  • Losses: ₹(48) Cr (↓61% YoY)
  • Among the fastest growing insurers in India

7. Life Insurance (ELI)

  • Gross premium: ₹2,086 Cr (↑8% YoY)
  • APE: ₹575 Cr (↑12% YoY); AUM: ₹9,372 Cr (↑17% YoY)
  • Losses: ₹(127) Cr (↓~20% YoY); Q4 PAT: ₹23 Cr

3-Year CAGR Growth (FY22–FY25)

  • EAAA PAT: 67% | ARR AUM: 19%
  • MF Equity AUM: 34% | PAT: 38%
  • EARC PAT: 15%
  • Zuno GWP: 41%
  • Life Insurance Premium: 13% | Loss reduction: 40%

Risk & Balance Sheet Management

A core pillar of EFSL’s transformation has been reducing wholesale book exposure and strengthening the balance sheet.

Debt Reduction

  • Consolidated net debt ↓ ₹7,200 Cr over 3 years
  • FY25 reduction: ₹4,170 Cr (to ₹11,170 Cr)
  • NBFC net debt ↓ ₹6,200 Cr over 3 years

Wholesale Book Wind-Down

  • Reduced by 76% (₹8,000 Cr) over 3 years
  • Wind-down is nearly complete

Strategic One-Time Markdown – ₹1,140 Cr

  • Taken on ECLF’s Security Receipts (SR) book
  • Purpose: Accelerate SME pivot and wind-down of wholesale book
  • Balance sheet strengthened in FY25:
    • Capital Adequacy in ECLF: ↑ from 40% to 50%
    • ₹1,040 Cr debentures converted to equity
    • Debt ↓ by ₹1,200 Cr; Leverage ↓ to 1.7
    • ERFL merger adds ₹500 Cr equity

Impact of Markdown

  • Wholesale book ↓ ₹1,140 Cr
  • ECLF net worth ↓ ₹1,140 Cr; consolidated net worth also impacted
  • Capital Adequacy (post-markdown): 32.6%
  • No deterioration in asset quality or cash flows
  • Markdown based on conservative criteria: NPV / NAV / IRAC loan norms

Asset Quality Metrics

  • NBFC: GNPA: 2.66% | Collection Efficiency: 95%
  • NHFL: GNPA: 2.17% | NNPA: 1.76% | Collection Efficiency: 99%

Capital Adequacy / Solvency Ratios

  • NBFC: 32.9%
  • NHFL: 33.6%
  • EARC: 90.5%
  • ZGIL Solvency: 158%
  • Life Insurance Solvency: 181%

Liquidity

  • Tenor-based asset coverage in place
  • Cash flow plan for Apr '25–Mar '26 shows sufficient liquidity for all repayments/disbursements

Management & Governance

  • 7-member Board: 4 Independent Directors (ex-bureaucrats, economists, and bankers)
  • Promoter & employee ownership: ~36%
  • Institutional shareholders: TIAA CREF (7.2%), CLSA (5.7%), LIC (2.6%)

Leadership Updates

  • Ajay Khurana appointed MD of ECLF (ex-ED, Bank of Baroda) to lead SME focus

Corporate Responsibility

  • EdelGive Foundation leads ESG and CSR initiatives in education, livelihoods, and women empowerment

Key Management Commentary (Earnings Call Q&A)

  • EAAA IPO stake sale: ~15% dilution via pre-IPO + IPO; valuation expected to be strong, based on ₹230 Cr PAT and ₹45,000+ Cr ARR AUM
  • Consolidated net worth drop: Due to ₹1,140 Cr markdown in ECLF; backed by capital adequacy at 32%, strong balance sheet
  • EAAA Revenue vs. ARR AUM: Revenue ↑34% while ARR AUM ↑6% due to significant realizations and deployment timing; 80% of revenue = management fees
  • MF AUM growth → Revenue: Equity AUM CAGR: 55%, revenue CAGR: 40%. Distribution: 75% via MFDs, 10-12% banks, rest direct; targeting 20-25% growth
  • Life Insurance breakeven: Q4 was profitable (seasonal), but annual breakeven expected only by FY27
  • Zuno GI strategy: Innovation-led product expansion, better customer service, and cost control; combined ratio improving (targeting ~105% for profitability)
60

Sheela Foam Ltd. – Detailed Note (Q4 FY25)

Business Overview

Sheela Foam Ltd. (SFL) is a leading comfort science company with operations across India, Australia, and Spain. It is the largest PU Foam manufacturer in India and operates through a B2C (mattress, furniture, comfort foam) and B2B (technical foam) structure, along with IT and rental segments.

India Business (Core Focus)

India remains the strategic growth priority, contributing the largest share of revenue and growth opportunities. FY25 saw significant operational expansion and brand integration.

Key Segments – FY25 Performance

  • Mattress (Sleepwell + Kurlon):
    • Revenue: ₹1,377 Cr | Volume: 33.08 lakh units
    • High YoY volume growth, muted revenue due to lower ASP in small-town & e-commerce channels
    • Premiumization focus in EBOs; mass market focus via Aram/Tarang in STI and e-commerce
    • Management targets >15% growth p.a. from this segment, above company average
  • Furniture Cushioning:
    • Revenue: ₹215 Cr | Volume: 5,697 Tn
    • Strategic focus on Kurlon brand expansion in North & West India
  • Comfort Foam:
    • Revenue: ₹470 Cr | Volume: 22,793 Tn
    • Strong growth across both volume and value metrics
  • Technical Foam:
    • Revenue: ₹494 Cr | Volume: 17,498 Tn
    • Flat volumes; continues to serve auto lamination and explores aviation, filters, acoustics, and footwear
  • Others: ₹122 Cr

Distribution Expansion

  • 400 exclusive showrooms and 1,700 new dealers added in FY25
  • Total network: ~3,000 showrooms (2,500 Sleepwell + 500 Kurlon) | ~11,000 dealers
  • Targeting 1,000+ new retail touchpoints in FY26
  • Small Town Initiative (STI): Active in 4,000+ towns; nearing ₹100 Cr run rate
  • EBOs account for ~70% of business

Digital & Online (D2C) Focus

  • Online sales run rate: ₹175–200 Cr (up from ₹100–110 Cr historically)
  • Active development of online/D2C and STI channel integration to counter rising competition
  • No plans for new acquisitions; focus remains on strengthening core brands via organic growth

Other Businesses

  • Furlenco: Achieved first year of profitability
    • ARR: ₹300 Cr | High ASB (~₹1 lakh+)
  • Staqo (IT arm):
    • Revenue up 61% YoY | EBITDA Margin: ~28%
  • International (Australia + Spain):
    • Australia: Margins improved through price hikes and vendor diversification
    • Spain: Capacity-led volume growth, but lower raw material prices and increased overheads limited profitability
    • Management expects contribution from international markets to diminish over time

Management Commentary

Leadership

  • Key Speakers:
    • Rahul Gautam (Executive Chairman)
    • Tushar Gautam (MD)
    • Amit Kumar Gupta (Group CFO)
    • Rakesh Shah (Director)

Strategic Themes

  • India & Mattress business to drive future growth
    • Expected to contribute a larger share of revenue in the coming years
  • Integration of Kurlon (acquired FY23):
    • Front-end integration (distribution, branding) was more complex than back-end
    • Integration challenges are largely behind; cost synergies now flowing through

Cost & Synergy Initiatives

  • ₹120 Cr synergy reflected in FY25 gross margins
  • Additional ₹130 Cr savings in execution stage to reflect in FY26
    • Includes plant rationalization (from 18 to 12), freight optimization, admin savings, and technical upgrades
    • Timeline: Majority of benefits in H1 FY26; some in H2

Margins & Profitability

  • FY25 Gross Margin (standalone): 42.5%
  • Overhead costs higher due to Kurlon consolidation
  • EBITDA Margin Target:
    • 13–14% in 3 years (internally aiming for 15%)
    • Key driver: Top-line growth with optimized cost base

Debt & Deleveraging

  • Debt: ₹750 Cr (India) | Cash: ₹450 Cr
  • Annual internal accruals: ₹100–150 Cr
  • Real estate monetization target: ₹200 Cr in FY26
  • Goal: Fully deleverage Indian balance sheet in 2–3 years, reducing interest cost materially

CEO Transition

  • Prior CEO exit due to complexity from acquisition; back to internal leadership for stability
  • Focus remains on business continuity and integration
  • No immediate CEO hire; priority is stabilization over disruption

Risks & Challenges

  • Integration Complexity: Kurlon acquisition required deep restructuring on front-end operations
  • Macroeconomic Headwinds: Impacted mattress demand and margin achievement
  • Raw Material Price Deflation: Lower prices affected revenue growth in B2B despite volume growth
  • High Overheads: Full-year consolidation of Kurlon raised expenses; now being addressed
  • Debt Load: Elevated finance costs due to Kurlon acquisition debt
  • Rising Competition: Online/D2C players offering discount-driven models; SFL counters via distribution reach and premium brand strategy
  • Stagnant International Business: Australia and Spain businesses seeing limited growth; likely to be de-emphasized

Outlook & Targets

  • India business growth target: 15% CAGR for next 2–3 years
  • EBITDA margin: 13–14% by FY28, potentially 15%
  • Capitalize on:
    • Premiumization in urban channels
    • Mass market access via Aram/Tarang in STI
    • Online channel expansion
    • Cost optimization through tech and scale
  • International ops: Role likely to shrink to local markets in medium term
  • No new acquisitions planned – focus remains on consolidation and core growth

Analyst Q&A – Highlights

  1. Post-merger Profitability Concerns
  • Not structural; front-end integration took time
  • ₹120 Cr synergy reflected; more to come
  • Target margins achievable with topline growth
  1. Shareholder Concerns
  • Management acknowledges underperformance
  • Optimistic as integration stabilizes and cost savings kick in
  1. 3-Year Outlook
  • More efficient cost structure in place
  • Growth levers: online expansion, STI penetration
  • Top-line growth to drive margin expansion
  1. Debt-Free Timeline
  • Expect deleveraging over 2–3 years via accruals + real estate sales
  1. On Future Acquisitions
  • No new acquisitions planned
  • D2C threat countered by retail network expansion & online/STI strategy
  1. Cost Synergy Timeline
  • Plant closures, freight savings, and tech upgrades phased through FY26
  • Largest benefits expected in Q1–Q2
  1. Expense Ratios & Margin Path
  • Expense as % of revenue up due to Kurlon
  • Further savings planned; growth to absorb fixed costs
  1. Role of Global Businesses
  • Australia: possibly ripe for review
  • Spain: Hold for now due to European market turmoil
  • Long term: contribution to reduce in favor of India
61
COMPANY ALLOCATION
APOLLOPIPE 5.87%
AWFIS 7.05%
DMCC 2.38%
EDELWEISS 4.93%
HIKAL 7.75%
JUBLPHARMA 6.20%
KRSNAA 4.94%
LAURUSLABS 8.11%
ORIENTBELL 3.88%
PRAJIND 3.24%
PRIVISCL 9.51%
RATEGAIN 2.40%
SAMHI 6.21%
SENCO 4.68%
SFL 5.20%
SHIVALIK 5.47%
SOLARA 3.76%
THYROCARE 8.40%
TOTAL 100.00%
I Didn’t SOLD or BOUGHT any new stock.
results are on expected lines, recent averaged my overall portfolio, make new portfolio averaging criteria which is some how remove my biased.
In it I made a table having 4 criteria technical strength ,valuation, forward rate of change and management where all other then management have 10 points. Took 15 points for management ,where I divided management in three parts capabilities, trust and energy. Each having 5 points , Then according to overall points and current portfolio allocation I decide to average.
this is a table which I made. In it I use marketsmith for technical and give other point on my understanding of business.
https://docs.google.com/spreadsheets/d/1Rm8spsplh8Zg8-QDKuYTBCTCVADLtHqIxlixRPq_bc4/edit?usp=sharing

please don’t use my table as these are my expectations and I reserve all the rights to go wrong.

Dis. Invested and biased