Regarding this i have asked AI to give me answer of the two question regarding how much percentage of the revenue come from fixed prices contract and how they are being fixed? for which i got these answers:
Privi has clearly stated in its earnings calls that the majority of its revenues are secured under fixed‐price, long‐term contracts rather than sold on the spot market. Across successive quarters in FY ’25, the company reported the following proportions of contract (i.e. “fixed”) versus spot/domestic revenues:
Q1 FY ’25: 65%–68% of revenues were contract‐based, with the remaining 32%–35% from the spot/domestic market (contracts cover fixed‐price supplies)
Q2 FY ’25: 65%–68% of revenues were contracted, 32%–35% spot/domestic.
Q3 FY ’25: Approximately 70% of revenues were contracted business, with 30% from spot/domestic sales.
Thus, roughly two-thirds of Privi’s revenues are “fixed” under longer‐term contracts, while about one-third is exposed to spot‐market pricing fluctuations.
Fixed-price contracts at Privi are negotiated once a year, on a calendar-year basis, directly with each major customer, and are structured as follows:
Annual negotiations in Q4 (typically October–December) set both selling prices and required volumes for the following calendar year under “fixed-price” contracts
Roughly 65%–70% of Privi’s volumes each year are sold under these contracts; the remaining 30%–35% is spot-market or short-term business.
Privi secures raw materials “back-to-back” for contracted volumes—i.e. it locks in feedstock costs at the same time it fixes selling prices, ensuring stability of gross margin.
Once agreed, contract prices do not change for the full year, regardless of spot-market movements, giving customers budget certainty and Privi predictable cash flow.
I am unable to understand that if raw material is back-to- back the need for 250-300 days of inventory. I thought it might be because they use waste as a rawmaterial, they need to store and use. But I am not convinced myself with this logic. Any thoughts please
GTO prices have shown a clear upward trend from early 2024 onward.
Since GTO and CST prices are negatively correlated, rising GTO prices make CST relatively cheaper, improving cost advantage for CST-heavy producers like Privi.
5. Strategic Benefit to Privi
Lower raw material cost base (CST) + higher realisation from value-added products = margin expansion.
Rising GTO prices:
Hurt GTO-dependent competitors.
Benefit CST-based producers (Privi has ~70% CST share).
Growing share of specialties & new products in revenue mix shields margins from volatility in rosin/turpentine prices.
Shift to continuous production paying off. increase in CWIP in line with capex guidance and better absorption of power costs. Very strong and above guided margins.
Q2FY2026
S H Kelkar and Privi Speciality seem to have gone on completely different trajectories.
In a rising input costs environment for aroma chemicals, Privi seems to have benefitted a lot from its backward integration for manufacturing of alpha and beta pinenes using by-products of paper industry.
They are at an advantage of 15-20% compared to players like S H Kelkar, Oriental Aromatics using GTO (gum turpentine oil).
S H Kelkar had guided earlier that their margins should improve from H2.
With due regards to Ajay’s knowledge, one observation that I have had is that his long-term view changes too often in short-term & at times by 180 degrees!
Hence needs additional due-diligence on what he says!
sbi bought the stake of around 634 crores and 79 crores by some individual Bhaumikbhai Kiritbhai Doshi,i guess this individual is not promoter and remaining 300+ crores bought by retail i guess.
EBITDA up by 37%, margins 25.83% vs 23.32% last year.
PAT after MI up by 76% YoY
ROCE 21.63%, ROE 24.35%
There was 3.5 cr. forex income on account of depreciating rupee.
2. JV - PRIGIV
The JV between Privi and Givaudan, PRIGIV was EBITDA positive in this quarter. Expected to net profitable in next FY.
Privi (51%) and Givaudan (49%) will infuse 50 cr. equity in PRIGIV to fund capex for manufacturing high value speciality molecules with a potential revenue of over 100 cr.
Givaudan has agreed to give 150 cr. non-interest bearing advance to PRIGIV, to reduce its debt burden. This 150 cr. will be adjusted from the revenues of JV over the next 10-15 years.
After this, significant contribution expected from PRIGIV in the coming years.
3. Expansion plans (all funded by internal accruals and debt)
a. Existing products Phase 1 - Capex 300 Cr.
To expand capacity for existing products by 6000 MT. Current capacity is 48000 MT.
To be commissioned by Q4FY26.
Peak revenue potential 400-450 cr.
One thing that confuses me about this company is their timelines. In Q2 PPT & Concall, they mentioned this will be completed by December 2025. Now, in Q3, mentioned it will be completed by Q4 end. In one slide of PPT, its even mentioned “Capacity augmentation project for flagship products is nearing completion by 30th June 2026. Part of project is already complete providing additional volumes for sales”. To be honest, I don’t know which date to rely upon.
b. New products Phase 2 (12000 MT) - Capex 600 cr.
On track. To expand portfolio of Musk with Musk T (Ethylene Brassylate, used as a fragrance in soaps etc. for a woody aroma) and
Enter into Flavour segment (Maltol and Ethyl Maltol, these are aroma chemicals used in foods for caramel scent) as well as multi speciality products.
To be commissioned by Q1FY28.
Peak revenue potential 1100-1200 cr.
Currently no company is manufacturing these products in India yet, and that too first time from a renewable source (bio-mass, bio-waste).
c. High end speciality products - Capex 300 cr.
To strengthen presence in niche speciality markets (enter into Cyclopentanone, thats used as an intermediate to sythesise rubber chemicals, and some pharma compounds, used as a speciality solvent in paint and varnish removers etc.)
Expected to be commissioned by Q3FY28.
Peak revenue potential 500-600 cr.
Globally, they will be the first to offer Cyclopentanone from a renewable source.
What I am noticing is the capex for new products they are doing, has better asset turns than the existing products.
4. Other Highlights & Future Outlook
Privi technology has made significant progress in converting bio-waste to value added products and is working on creating I.P. rights for the same. Chance of future franchisee.
The U.S. tariff cut to 18% will strongly benefit Privi.
Volume growth guidance of 11-15%.
When the capacities come live, value growth will outpace volume growth, as the new products are higher value.
EBITDA Margins guided to be between 20-27%. And clearly mentioned that they can sustain current margins of around 25%.
Debt to EBITDA is 1.63x. It will be maintained below 2.5x despite significant upcoming capex.
The merger with Privi Fine Science is expected take a year or so. Once merger is complete, it would have a revenue potential of 400 cr.
Although, management didn’t take the question regarding pricing pressure. But given they are optimistic about sustaining the margins, I think it’s alright.
The CBAM norms from Europe will benefit Privi, as they are platinum rated by EcoVadis. It will help them gain market share in next 2-3 years, once the global uncertainty settles.
There is a raw material called Furfural, that is a key feedstock in production of Ethyl Malton, Cyclopentanone and various other products. The company has developed another product using this same raw material. Once the current expansion is complete, they are planning to make Furfuro in-house. Currently they are buying it for ₹100. If they can manufacture it in-house, their cost will be ₹50. This backward integration is in planning for the coming years and could result in some improvement in gross margins.
Current capacity utilisation is 90% (48000 MTPA) and expected to be same 90% even after increased capacity to 54000 MTPA, for FY27.
Management re-iterated guidance of 5000 cr. revenue and 1000 cr. EBITDA in 3-4 years. And the revenues from PRIGIV are not included in this guidance. Meaning the company can grow at ~20% for multiple years.
Gross margins to improve by 100-200 bps over the next few years as a result of better operational efficiency and use of more solar power.
Too farfetched, but mentioning this as a note, Management said FY28 will be a transition year due to upcoming new capacities, FY29 is where material scale-up will happen in terms of growth.
An interesting video with Gilles Andrier, CEO of Givaudan. Here he goes about how fragrances are made.
Summary:
Gilles Andrier provides an in-depth look at how the company operates as the unseen force behind the world’s most recognised scents and flavours. Givaudan’s fragrances are found in products ranging from perfumes to household cleaners, while its flavours enhance everything from beverages to plant-based proteins.
The creative process begins with a client “brief,” leading to a competitive phase where Givaudan’s perfumers and flavourists develop proprietary formulas at their own expense. If selected, the company retains the intellectual property as trade secrets and profits from the long-term manufacturing and supply of that specific creation. With fragrances representing only 4-5% of a client’s cost of goods but being a primary driver of consumer liking, Givaudan holds significant leverage. The company is also expanding into adjacent spaces like active beauty and natural colours.
Andrier highlights that while consumer testing is a tool to filter out failures, it cannot reliably predict blockbuster successes, which often require conviction-led risks (citing Mugler’s “Angel” and Red Bull as examples). The company’s renowned perfumery school prioritises hiring for passion and resilience over innate talent, as perfumers must endure the rejection of 8 out of 10 briefs. This principle of resilience extends to the corporate culture, which Andrier describes as a balance between being “performance-driven”, with ambitious targets and “caring”, emphasising humility and how people are treated.
To stay agile despite its size, Givaudan centralises transactional processes into shared service centres, allowing creative teams to remain close to clients and resist bureaucracy.
Sudden Change in Margin from sep 23, since then maintained 20+ - (concall Q2 Fy24) And most important, as was appraised by me in my last call, most of our high value inventory that we were carrying over the last eight to 12 months or so, we have been able to consume, liquidate, prima facie and the results that you see a better improvement as compared to the raw material consumption on the sales that has led to the impetus on the margins. So, the margins have improved significantly on account of the low value of raw material being consumed in the major part of this quarter. We feel that going forward also the lower raw material will help us sustain our profit that we have been able to achieve in this quarter..
I assumed they were carrying high cost GTO (>$2000) and since then the prices never touched that level till Cy25. Am i missing something??
