Rossari Biotech Q1FY25 Concall Summary
Business Updates
- The development of the simple component emulsifier for the agrochemical industry especially for herbicides helps in better absorption of the products by the crops
- The focus is to develop advance environment friendly products for the industry
- Q1FY25 was the best quarter in terms of revenue and profitability
- The management is witnessing faster growth in exports markets than the domestic markets
- The expansion at Dahej is expected to be completed by end of current year
Participants
Axis Capital
Nirmal Bang
ICICI Securities
Ambit Asset Management
HDFC AMC
ASK Investment Managers
Incred
Centrum Broking
Yogya Capital
Anand Rathi Share
QnA
- Prices are mostly stable now and growth is being witnessed from increase in volumes
- The current EBITDA margins are the new normal and on the standalone business and also on the subsidiary this is the EBITDA that will be seen going forward
- There was a product reclassification in the textile chemical business, which led to the base being lower in the textile chemical business. This was only in one quarter
- The cosmetics business has grown well and the particular surfactant which is used in personal care for both domestic and global market is giving good business
- In the last few quarters most of the growth is being driven by exports and this has happened in both HPPC and textile chemical as well
- Usually exports have been 20% of total revenues and that has gone up to now 24% of revenues and between 25-30% is something what the management is looking for in the next two years
- The textile market in Bangladesh is bigger than the Indian market and barring forex issues the size of opportunity is larger and that should lead to better traction in revenues
- The outflow for capex in FY25 will be Rs 100 crores
- The pricing for a lot of chemicals in India is getting much better competitively compared to many of the import prices and hence these are now being sourced from Indian companies
- For the new facilities the optimum utilization should be achieved by FY27
- The subsidiary in Dubai has been incorporated for global expansions that might come up in future instead of setting this up through the Indian company
- Post acquisitions done in the past the product portfolio has changed and the working capital intensity seen in recent times which has increased from earlier should be considered as the new norm
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Basis some scuttlebutt - I can assure you that the container freight rates are going to normalize sooner than expected. However unless the traffic resumes through the Suez canal, they are not going back to the 2023 levels
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Q2 FY25 breakdown of Rossariās segment-wise performance:
Quarter-on-Quarter Divisional Performance
| Division |
Q2 FY25 Revenue (Rs. cr) |
Q1 FY25 Revenue (Rs. cr) |
Q2 FY24 Revenue (Rs. cr) |
Q-o-Q Shift (%) |
Y-o-Y Shift (%) |
| HPPC |
390 |
365 |
367 |
7% |
6% |
| TSC |
84 |
98 |
96 |
-14% |
-13% |
| AHN |
24 |
27 |
20 |
-11% |
20% |
| TOTAL |
498 |
490 |
483 |
2% |
3% |
Home and Personal Care Products (HPPC)
- Revenues: This segment experienced 6% YoY growth in Q2 FY25, with revenues reaching 390 crores, up from 367 crores in the previous year.
- Challenges: This segment faced challenges related to softening prices in response to lower raw material costs and limited ethylene oxide (EO) availability and ethoxylation capacity.
- Strategies: Rosarri has prioritized sending products to the export market, where they are able to attain better pricing. They are also investing in increasing EO and ethoxylation capacity.
Key Takeaway: The HPPC segment is experiencing strong growth. However, there are some headwinds related to raw material costs and capacity constraints. Rosarri is actively taking steps to address these challenges.
Textile Specialty Chemicals
- Revenues: Revenues for this segment reached 84 crores, down from 96 crores last year. This was due to a combination of factors, including pricing pressures and geopolitical events impacting exports to Bangladesh and Egypt.
- Challenges: This segment is experiencing pricing pressure due to lower raw material costs. Additionally, exports to Bangladesh and Egypt have been negatively impacted by geopolitical issues, specifically the war in Ukraine and banking instability in Bangladesh.
- Strategies: Rosarri is focused on expanding its footprint in new geographies and adding sustainable products to its overseas offerings to grow this segment in 2025. They are also closely monitoring the situation in Bangladesh and Egypt.
Key Takeaway: The Textile Specialty Chemicals segment is facing challenges related to pricing and exports. Rosarri is working on new products and expanding its geographic reach to mitigate these challenges.
Animal Health and Nutrition (AHN)
- Revenues: This segment remained stable during the quarter, with revenues of 24 crores compared to 20 crores in the corresponding period last year.
- Challenges: Rosarri had anticipated higher growth in this segment. A revised strategy to focus more on specialty additives rather than feed components has impacted the pace of growth. Q2 is traditionally the weakest quarter for this segment due to the festive season in India.
- Strategies: Rosarri is taking steps to improve its infrastructure, including setting up a premix plant. They are also planning to launch new products in the therapeutic category and gut health improvers. They anticipate stronger growth in Q3 and Q4, which are traditionally the strongest quarters for AHN.
Key Takeaway: The AHN segment has not grown as fast as expected. Rosarri is making changes to its product strategy and anticipates stronger growth in the second half of the year.
Exports
- Overall Growth: Rosarriās exports outperformed domestic sales in Q2 FY25, growing 21% YoY. For the first half of the year, exports grew 32% YoY, now making up 25% of overall sales.
- Geographic Focus: Key geographies for export growth include Europe, South America, Turkey, Vietnam, Egypt, North Africa, Bangladesh, Nepal, Sri Lanka, and the Philippines.
- Product Focus: Key sectors for export growth include home care, personal care, cosmetics, and agrochemicals.
- Challenges: One of the challenges the company is experiencing with its export business is related to higher freight costs, which they are not always able to pass on to customers.
- Strategies: Rosarri is working to negotiate better freight rates with existing customers and to build freight costs into pricing for new customers. They are also establishing a new trading entity in the UAE, Rosari Biotech Trading FZ, to expand their international presence and streamline export operations.
Key Takeaway: Exports represent a significant growth opportunity for Rosarri. They are experiencing success in several key markets and are taking steps to further expand their export operations and manage associated costs.
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Fineotex chemical is one of the peer company of the Rossari biotech. Can anyone tell why the margins and ROE differ hugely for both the companies?
