Hikal Limited — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

Hikal reported a strong Q4 FY25 performance driven by operational leverage and cost initiatives, with significant EBITDA growth and margin expansion. The Pharma business is poised for continued growth in FY26, while the Crop Protection segment is expected to remain flat before resuming growth in FY27 due to ongoing market headwinds. The company is investing in new capabilities, R&D, and expanding its CDMO pipeline.

Highlights

  • Q4 FY25 Revenue amounted to ₹552 crores.

  • Q4 FY25 EBITDA was ₹123 crores, reflecting a 71% sequential growth and 31% Y-o-Y growth.

  • Q4 FY25 EBITDA margins improved by 410 basis points to 22.4%.

  • Full Year FY25 Revenue stood at ₹1,860 crores, with EBITDA at ₹328 crores, a margin of 17.7% (up 270 basis points YoY).

  • Pharma business is projected to grow 12-15% in FY26 with a corresponding increase in EBIT margins.

  • Crop Protection business is expected to have muted/flattish growth in FY26, with growth resuming in FY27.

  • The Board recommended a final dividend of ₹0.80 per share, bringing the total FY25 dividend to ₹1.40 per share (70% of face value).

  • The company consistently allocates 4-5% of its revenue towards R&D and plans ₹200 crores in capex each year for FY26 and FY27.

Concerns

  • Competitive pricing, especially from China, in the Crop Protection sector.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹552 Cr
  • EBITDA
    ₹123 Cr
    YoY +31% QoQ +71%
  • EBITDA Margin
    22.4%

FY25

  • Revenue
    ₹1,860 Cr
  • EBITDA
    ₹328 Cr
  • EBITDA Margin
    17.7%
  • PAT
    ₹91 Cr
  • ROE
    7.3%
  • ROCE
    9.9%

What they filed

Q1 FY27: revenue up 5.9%, net profit up 67.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue453 448 552 380 319 −30%494 +10%519 −6%403 +6%
EBITDA75 72 123 25 7 −90%83 +15%105 −15%37 +47%
Net profit18 17 50 -22 -35 −291%-6 −134%14 −71%-7 +67%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Q4 FY25 Revenue
₹552 Cr Total
  • Pharmaceutical Business ₹351 Cr 63.6%
  • Crop Protection Business ₹201 Cr 36.4%

Guidance & targets

Revenue

  • Pharma Business Revenue Growth Revenue · FY26 · Medium confidence 12-15%
    The Pharma business is showing growth momentum and our expectation for FY '26 is a revenue growth of about 15% and a corresponding increase in EBIT margins.

    — Sameer Hiremath, Managing Director

  • Crop Protection Business Revenue Growth Revenue · FY26 · High confidence Muted/Flattish
    Based on the above strategic initiatives, although we expect muted growth in FY 2026, we expect growth to resume in FY 2027.

    — Sameer Hiremath, Managing Director

  • Crop Protection Business Revenue Growth Resumption Revenue · FY27 · High confidence Growth to resume

    — Sameer Hiremath, Managing Director

  • Pharma Business Long-term Revenue Growth Revenue · Consistently year-on-year · High confidence 12-15%
    So I think it's a good number to have 12% to 15% growth consistently year-on-year.

    — Manoj Mehrotra, President, Pharma Business

  • Food Ingredient Project Peak Revenue Revenue · Next 2 to 3 years · Medium confidence Peak revenue
    Meanwhile, our food ingredient project remains on track and is expected to reach peak revenue within the next 2 to 3 years.

    — Manoj Mehrotra, President, Pharma Business

Profitability

  • Pharma Business EBIT Margins Profitability · FY26 · Medium confidence Increase
    The Pharma business is showing growth momentum and our expectation for FY '26 is a revenue growth of about 15% and a corresponding increase in EBIT margins.

    — Sameer Hiremath, Managing Director

  • PAT Profitability · Next 2 to 3 years · Medium confidence ₹160 crores
    No, in the next 2 years, for sure, 2 to 3 years, we'll get there, but it will take at least 2 years. Yes.

    — Sameer Hiremath, Managing Director

R&D

  • R&D Spend as % of Revenue R&D · Ongoing · High confidence 4-5%
    We consistently are allocating 4% to 5% of our revenue towards R&D as we continue to develop innovative products and services that address the evolving needs of our clients and end markets.

    — Anish Swadi, Senior President, Business Transformation and Animal Health

Capex

  • Annual Capex Capex · Each year (FY26 and FY27) · High confidence ₹200 crores
    Yes. Like we have mentioned earlier also, we have a plan for almost INR200 crores kind of capex each year.

    — Sameer Hiremath, Managing Director

Capacity

  • High-Potency Chemistry Lab Operational Capacity · Q3 FY26 · High confidence Operational
    It will be done from this laboratory, which will be operational by Q3 of this year.

    — Sameer Hiremath, Managing Director

Product Launch

  • CDMO Phase III Project Commercialization Product Launch · 2026-27 · High confidence Commercial scale
    These programs are expected to transition to commercial scale in 2026-27, supporting long-term growth.

    — Manoj Mehrotra, President, Pharma Business

  • CDMO Phase III Project Launch Product Launch · 2027 (one in FY26) · High confidence Launched
    So one of them is definitely moving faster, and we may get some revenues in FY '26 in the coming year. But by and large, it will be launched in 2027. So you will see a good launch ramp-up in '27.

    — Manoj Mehrotra, President, Pharma Business

Risks & concerns

  • Competitive pricing, especially from China, in the Crop Protection sector.

    high

    This is a significant headwind, but the sector is undergoing a strategic shift expected to stabilize by FY26-27.

    Management acknowledged

  • Geopolitical uncertainty, supply chain recalibration, and persistent cost pressures.

    medium

    The company acknowledges a complex backdrop but is taking decisive steps to strengthen core businesses.

    Management acknowledged

  • Potential impact of US tariffs on Indian companies.

    medium

    Management notes the complexity and uncertainty of tariffs but has not seen direct customer indications of price changes yet; outsourcing trends continue.

    Analyst acknowledged

  • US FDA observations received in February.

    medium

    The company has responded to all observations and is awaiting the FDA's response, stating there was no data integrity issue.

    Analyst acknowledged

  • Seasonality leading to heavy Q4 performance and dependency.

    low

    Management is working to streamline operations and reduce Q4 dependency as products launch and validate.

    Analyst acknowledged

Q&A highlights

2 direct
Clarification on FY26 growth outlook, specifically for Crop Protection vs. Pharma. Direct
Yes, I think there's no change. We spoke about 2 different segments. We expect healthy growth in the Pharma business, which is on track. In fact, it may even be more accelerated than what we spoke earlier. The Crop business is where we expect flattish numbers for next year and it to resume in FY '27.

This question clarified the segment-specific growth expectations, confirming Pharma's strong outlook and Crop Protection's temporary stagnation before recovery.

Asked by Dhaval Shah from Girik Capital

Impact of US tariffs on business and the continued momentum of RFQs (Requests for Quotation). Direct
Yes, that continues because right now, that's not really subject to tariff, the volume, the values are not as high as when you talk about multi-scale or multiproduct commercial scale products. So those continue to happen because the fact is that everybody is looking at outsourcing and everybody is looking at I think the world is moving more towards protecting their own countries or their own areas.

Addresses a significant geopolitical risk, indicating that despite tariff complexities, the underlying trend of outsourcing and diversification away from single regions (China Plus One, etc.) continues to drive inquiries.

Asked by Dhaval Shah from Girik Capital

Outlook on ROE/ROCE improvement for FY26 and the timeline to reach peak PAT levels (INR 160 crores from 2022). Partial
Well, at the Pharma Division, definitely, there will be improvement. But the Crop Division, there will be a kind of a drag on that because depreciation charge will come in significantly... So there will be a drag for next year because the Crop business, but it will get depressed next year actually. There will be a reduction next year.

Provides insight into the factors affecting profitability metrics, specifically highlighting that increased depreciation from capitalized assets in the Crop Protection segment will temporarily depress ROE/ROCE in FY26.

Asked by Pranay Dhelia from Panchatantra Advisors LLP

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Financial Performance Highlights

Hikal reported a robust Q4 FY25 with revenue of ₹552 crores and EBITDA of ₹123 crores, marking a 71% sequential growth and 31% Y-o-Y growth in EBITDA. EBITDA margins significantly improved by 410 basis points to 22.4%. For the full year FY25, revenue stood at ₹1,860 crores, with EBITDA at ₹328 crores, translating to a 17.7% margin, an increase of 270 basis points from the previous year. The company also reported a PAT of ₹91 crores for FY25, with ROE at 7.3% and ROCE at 9.9%.

Pharma Business: Strong Growth Trajectory

The Pharmaceutical business demonstrated strong momentum, reporting Q4 FY25 revenue of ₹351 crores and EBIT of ₹55 crores. For the full year, Pharma revenue was ₹1,168 crores with EBIT of ₹137 crores, an impressive 47% Y-o-Y growth in EBIT, expanding margins by 327 basis points. Management expects the Pharma business to achieve 12-15% revenue growth in FY26, accompanied by a corresponding increase in EBIT margins, driven by an uptick in volumes, new molecules, and a healthy CDMO pipeline.

Crop Protection: Navigating Headwinds and Strategic Shift

The Crop Protection business recorded Q4 FY25 revenue of ₹201 crores with an EBIT of ₹36 crores (18% margin). For the full year, revenue was ₹692 crores and EBIT ₹79 crores (11.4% margin). This segment continues to face headwinds, particularly competitive pricing from China. Management anticipates muted or flattish growth for Crop Protection in FY26, but expects growth to resume in FY27, supported by strategic initiatives like establishing a Specialty Chemicals portfolio and advancing CDMO projects.

Animal Health Division Progress

The Animal Health Division is making steady progress, with validation of eight products completed successfully under a long-term agreement with an innovator customer. These products are slated for commercial launches across key global markets in the upcoming quarters. The company is also actively engaging with multiple new innovator customers, observing significant positive momentum and building a healthy pipeline in this high-growth segment.

Investments in R&D and New Capabilities

Hikal is committed to innovation, consistently allocating 4-5% of its revenue towards R&D. The company plans a capex of approximately ₹200 crores each for FY26 and FY27 to enhance capabilities and capacity. A new high-potency chemistry laboratory is being set up, expected to be operational by Q3 FY26, which will enable participation in more RFPs for NCEs and clinical stage materials, particularly for anticancer drugs.

CDMO Pipeline and Commercialization Outlook

The CDMO segment continues to be a key strategic driver with a healthy pipeline of development programs. Two key starting material projects for new chemical entities are progressing well in Phase III trials and are expected to transition to commercial scale in 2026-27. One of these molecules may generate revenues in FY26, with a full launch ramp-up in 2027. The company is also working on 12-15 additional new opportunities, and its food ingredient project is on track to reach peak revenue within the next 2-3 years.

Regulatory and Market Dynamics

The company acknowledged the complex global backdrop, including geopolitical uncertainty and supply chain recalibration. Regarding US tariffs, management stated the situation is complicated and they are monitoring it, but the underlying trend of outsourcing (China Plus One, Europe Plus One, US Plus One) continues to drive inquiries. Hikal has also responded to US FDA observations received in February, confirming no data integrity issues, and is awaiting the FDA's response.

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