India Glycols Limited — Q2 FY25 earnings call

Call held 8 Nov 2024

Management summary

India Glycols reported a strong Q2 and H1 FY25, driven by robust growth in biofuels and potable spirits segments. While overall EBITDA margins saw a slight dip, the company emphasized strategic shifts towards higher-value specialty chemicals and cost reduction initiatives. The management expressed confidence in the long-term growth trajectory, particularly in new business areas and the government's ethanol blending program, despite acknowledging some margin pressures in specific segments.

Highlights

  • Q2 FY25 Net Revenue at INR 961 crores, up 24% YoY.

  • Q2 FY25 EBITDA at INR 120 crores, up 13% YoY, with margin at 12.4% (down from 13.5%).

  • Q2 FY25 PAT at INR 50 crores, up 31% YoY (from INR 38 crores).

  • H1 FY25 Consolidated Net Sales at INR 1,930 crores, up 31.9% YoY.

  • H1 FY25 Consolidated EBITDA at INR 248 crores, up 17% YoY.

  • H1 FY25 Biofuels net revenue increased by 194% to INR 499 crores, with EBIT up 281% to INR 32 crores.

  • Potable Spirits business grew 21% to INR 551 crores in H1 FY25.

  • New biobased specialty chemicals business targeted to reach INR 100+ crores in FY25.

Key financials

2 periods

Q2 FY25

  • Net Revenue
    ₹961 Cr
    YoY +24%
  • EBITDA
    ₹120 Cr
    YoY +13%
  • EBITDA Margin
    12.4%
  • PAT
    ₹50 Cr
    YoY +31%

H1 FY25 Consolidated

  • Net Sales
    ₹1,930 Cr
    YoY +31.9%
  • PAT
    ₹110 Cr
    YoY +23%

What they filed

Q1 FY27: revenue up 8.7%, net profit up 32.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue961 975 863 1,040 1,092 +14%1,102 +13%976 +13%1,130 +9%
EBITDA116 124 146 150 158 +36%175 +41%166 +14%170 +13%
Net profit50 57 64 73 65 +30%68 +19%87 +36%97 +33%
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

  • Biofuels
    ₹499 Cr Net Revenue (H1 FY25)194% Net Revenue Growth (H1 FY25)₹32 Cr EBIT (H1 FY25)281% EBIT Growth (H1 FY25)
  • Potable Spirits
    ₹551 Cr Revenue (H1 FY25)21% Revenue Growth (H1 FY25)
  • Ennature Biopharma
    ₹118 Cr Revenue (H1 FY25)19% Revenue Growth (H1 FY25)
  • Biobased Specialty Chemicals
    ₹369 Cr Revenue (Q2 FY25)
  • Joint Venture (IGL 49% share)
    24% Sales Growth (Q2 FY25)₹10 Cr Profitability Contribution (H1 FY25)

Guidance & targets

Capacity

  • Biofuels Blending Target (India) Capacity · 2023-24 · High confidence 15%
    The Government of India blending targets, which started from something like 5% in 2019-20. And the target for 2023-24 was 15%. India is already clocking close to 14.2% in till September, and this is expected to be 14.2% in the coming quarter as well, so for the entire year.

    — Rupark Sarswat, Chief Executive Officer

  • Biofuels Blending Target (India) Capacity · 2024-2025 · High confidence 17-18%
    The target for 2024-2025 are close to 17-18% in '24 - '25 are expected to be 20% in '25 - '26.

    — Rupark Sarswat, Chief Executive Officer

  • Biofuels Blending Target (India) Capacity · 2025-2026 · High confidence 20%

    — Rupark Sarswat, Chief Executive Officer

Revenue

  • New Specialty Chemicals Business Turnover Revenue · FY25 · Medium confidence INR 100+ crores
    We expect to do a modest turnover of INR 100 crores plus in this financial year. And it is very difficult for me to give a projection, however, we are expecting and targeting significant growth, much ahead of growth in other segments in new value-added chemicals.

    — Rupark Sarswat, Chief Executive Officer

Debt

  • Long Term Debt Closing Balance Debt · March 31st (this year) · High confidence INR 1,200 crores
    Long term debt, in this year, as on 31st March, will be around INR 1,200 crores.

    — Anand Singhal, Chief Financial Officer

  • Long Term Debt Payment Debt · next year · High confidence INR 200 crores
    The payment is INR 200 crores. So, if I can say then yes, I will target only INR 200 crores.

    — Anand Singhal, Chief Financial Officer

Cost of Fund

  • Cost of Fund Cost of Fund · current · High confidence 9.8%
    Our cost of fund is slightly on the higher side. It is around 9.8%. We are working on that how to reduce it.

    — Anand Singhal, Chief Financial Officer

Capex

  • Total Capex for Biofuels Plants Capex · completed · High confidence INR 260-270 crores
    So, the total cost of both the projects will be about INR 260 crores to INR 270 crores.

    — Anand Singhal, Chief Financial Officer

  • Gorakhpur Plant Completion Capex · FY25 · High confidence fully by 31st March
    while the Gorakhpur plant will be completed fully by 31st March, although their grain distillery will start working in this quarter, the Q3.

    — Anand Singhal, Chief Financial Officer

Cost Reduction

  • Energy Savings Cost Reduction · per year · High confidence INR 25 crores
    And off the order of savings that we are starting to realize is well in excess of INR 25 crores per year.

    — Rupark Sarswat, Chief Executive Officer

Market context

  • Net Working Capital Status Working Capital · next 6 months · High confidence positive
    We expect that the net working capital will become positive in the next 6 months and the current ratio will improve.

    — Anand Singhal, Chief Financial Officer

Risks & concerns

  • Biofuels segment cyclicality and feedstock dependence

    medium

    Overlap with food segment (grain/sugarcane use) and potential impact of droughts, though government support is strong.

    Management acknowledged

  • Ennature Biopharma margin pressure

    medium

    Continuous price pressures on key products like Thiocolchicoside and nicotine, leading to margin distress.

    Management acknowledged

  • Specialty Chemicals business build-up time

    low

    Specialty chemicals business takes time to build (sometimes 3-4 years) and is contingent on project approvals and customer trials.

    Management acknowledged

  • Competition in Glycol Ethers and Acetates

    low

    Challenges from lower cost alternatives and imports, particularly from China and Russia.

    Management acknowledged

  • Higher cost of funds

    low

    Current cost of fund is slightly higher at 9.8%, with efforts underway to reduce it.

    Management acknowledged

Areas of evasion (3)

  • Amrut royalty terms
  • Detailed long-term strategy for spirits subsidiary
  • Specific pricing comparisons for Tetra Pack

Q&A highlights

0 direct, 1 evasive
Specialty Chemicals opportunity size and growth potential Partial
I think the size of the opportunity is many times the numbers that you are talking about for this year. So, in a matter of years, it can be 5 times, it can be 7 times, it can be 10 times. As I said, this is size of opportunity, not a projection from my side.

Management indicated massive long-term potential (5-10x) for specialty chemicals but refrained from giving specific projections or timelines, making it difficult for investors to model.

Asked by Aporva Mehta

Spirits business subsidiary strategy and Amrut royalty Evasive
For obvious reasons, this is not in the public domain because these are 2 separate companies. And I can only say that it's a long-term arrangement. And IGL is known for quality of ENA and packaging standards, while Amrut being a non-listed company is a privately held company. So, they are concentrating on premium products like single malt. So, we synergize very well. And long term, we will grow. We are not mandated to talk about royalty because it's a partnership between us.

Management explicitly declined to disclose royalty terms or detailed strategic plans for the new spirits subsidiary, limiting investor insight into a key growth area.

Asked by Balasubramanian Ayyanu

Biofuels segment margins trajectory Partial
Yes, your points are right. As I mentioned, the broad strategy in Biofuels, you see, every business has these challenges. So, the challenges of the Biofuels business are there. The challenge is that there is an overlap that it has with the food segment because it uses grain, it uses sugarcane. And if, for example, they were to be, I hope there is not, a drought, sometimes the focus for the country will obviously be food.

Analyst questioned the dip in biofuels margins, but management largely focused on the macro picture and government support rather than providing a clear outlook or strategy for margin recovery.

Asked by Saket Kapoor

3 min read 7 chapters

Detailed narrative

Q2 & H1 FY25 Performance Overview

India Glycols reported a strong financial performance for Q2 and H1 FY25. In Q2 FY25, Net Revenue grew 24% YoY to INR 961 crores, and PAT increased 31% YoY to INR 50 crores. H1 FY25 consolidated Net Sales were up 31.9% to INR 1,930 crores, with consolidated EBITDA growing 17% to INR 248 crores. The company's overall EBITDA margin for Q2 FY25 was 12.4%, a slight dip from 13.5% in the prior year, attributed to various segment dynamics.

Biofuels Segment Drives Top-line Growth

The biofuels segment was a significant growth driver, with net revenue increasing by 194% to INR 499 crores in H1 FY25, and EBIT soaring 281% to INR 32 crores. India's ethanol blending program is progressing well, with targets of 15% for 2023-24 (currently at 14.2%), 17-18% for 2024-25, and 20% for 2025-26. The company has an installed biofuels manufacturing capacity of 450 KLPD in Kashipur and expects continued demand growth, supported by government policies.

Potable Spirits Business Expansion and Amrut Partnership

The Potable Spirits business recorded a 21% growth in H1 FY25, reaching INR 551 crores. This growth was fueled by strong performance in Branded Country Liquor in Uttarakhand and IMFL in Delhi & UP, and paramilitary segments. The company has introduced Amrut brands, manufacturing and marketing them in select regions, which is seen as a significant milestone. India Glycols is the sole producer of Tetra Pack country liquor in Uttarakhand, holding an 80% market share in this format.

Specialty Chemicals & Green Chemistry Initiatives

The biobased specialty chemicals business achieved INR 369 crores in Q2 FY25. New products from the specialty chemicals plant are expected to generate over INR 100 crores in FY25, with management envisioning a potential for 5x to 10x growth in a few years. The company is focusing on sustainable and value-added products, including bio-based amines and carbon smart products, and collaborating with global partners like Stepan, Neuron, and Lanza. Despite the time required to build these businesses, the pipeline is strong.

Ennature Biopharma: Margin Pressures and Strategic Response

Ennature Biopharma's revenue grew 19% to INR 118 crores in H1 FY25, marking its best-ever quarter in terms of sales. However, the segment faces continuous price pressures on key products like Thiocolchicoside and nicotine, leading to margin distress. Management's strategy involves growing volumes, reducing costs, and focusing on higher-value derivatives and branded nutraceuticals. Efforts are also underway to meet international regulatory specifications for market access in the U.S. and Europe.

Capital Expenditure and Debt Management

The company's capital expenditure for the 100 KLPD Kashipur and 180 KLPD Gorakhpur biofuels plants totals INR 260-270 crores. The Kashipur plant is complete, and the Gorakhpur plant is expected to be fully completed by March 31st, 2025, with its grain distillery starting in Q3 FY25. Long-term debt is projected to be around INR 1,200 crores by March 31st, with a target payment of INR 200 crores next year. The cost of funds is currently around 9.8%, and the company aims to reduce it.

Cost Reduction and Sustainability Efforts

India Glycols is actively pursuing strategic cost reduction projects, with identified energy savings exceeding INR 25 crores per year. These initiatives include technological advancements, operational efficiency improvements, and exploring green energy sources like wind, solar, and hybrid solutions. The company is also evaluating various feedstocks for alcohol technology, including corn, to optimize costs and improve margins, alongside premiumization efforts in its liquor segment.

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