India Pesticides Limited — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

India Pesticides reported a 13% YoY revenue growth to INR175 crores in Q3 FY25, driven by a 30% increase in sales volumes and robust domestic market performance. However, EBITDA margins compressed to 16.7% due to international pricing pressures, elevated freight costs, and strategic investments in R&D and workforce. The company is focused on capacity expansion at Hamirpur, new product development, and operational efficiencies to navigate a volatile market and achieve its future growth and margin targets.

Highlights

  • Revenue of INR175 crores, up 13% YoY for Q3 FY25.

  • Sales volume increased by around 30% YoY, highlighting product demand.

  • Domestic revenue grew significantly to INR97 crores in Q3 FY25 from INR64 crores in Q3 FY24.

  • Hamirpur plant capacity expansion is on track and expected to start contributing from FY26.

  • Strong balance sheet with ability to generate good free cash flow.

Concerns

  • EBITDA margin declined to 16.7% in Q3 FY25 due to international pricing adjustments, increased freight costs, and higher R&D/employee expenses.

  • Export revenue decreased to INR75 crores in Q3 FY25 from INR87 crores in Q3 FY24, indicating subdued demand.

  • Inventory days increased to around 170 days due to building inventory for a herbicide product, impacting cash conversion cycle.

Key financials

2 periods

Q3 FY25

  • Total Revenue
    ₹175 Cr
    YoY +13%
  • EBITDA
    ₹29 Cr
  • EBITDA Margin
    16.7%
  • Net Profit
    ₹16 Cr
  • PAT Margin
    9.2%
  • Export Revenue
    ₹75 Cr
  • Domestic Revenue
    ₹97 Cr

9M FY25

  • Total Revenue
    ₹633 Cr
    YoY +12%
  • EBITDA
    ₹101 Cr
    YoY +6.3%
  • EBITDA Margin
    15.9%

What they filed

Q1 FY27: revenue down 8.4%, net profit down 34.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue229 172 207 275 290 +27%225 +31%266 +29%252 −8%
EBITDA34 27 32 45 49 +44%38 +41%42 +31%35 −22%
Net profit26 16 22 35 32 +23%23 +44%31 +41%23 −34%
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 Revenue
₹172 Cr Total
  • Technicals (Q3 FY25) ₹126 Cr 73.3%
  • Formulations (Q3 FY25) ₹46 Cr 26.7%

Capital allocation

high confidence
  • Capex ₹50 Cr More or less from internal accruals; nominal debt for 100% subsidiary in future years if needed.
    • Hamirpur plant capacity expansion (2 blocks in FY26)
    • Enhancing capacity utilization and advancing production capabilities for specialty products
    Our capex is going on track. We feel that this year, our investment in Hamirpur plant should start giving us some results. And from next year onwards, it will give full results... In the long term, we would be building at least 10 to 12 blocks. So, 2 blocks we have planned to build this year in FY '26. Yes, yes. We have not taken any term loan till date right now... More or less, it will be from internal accruals. For our 100% subsidiary, we may take nominal some debt in future years.
  • Debt Debt disclosed
    Yes, yes. We have not taken any term loan till date right now.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · coming few quarters · High confidence 16% to 18%
    We feel that our EBITDA margins should remain between 16% to 18%. That's what we are targeting to maintain.

    — D. K. Jain

Revenue

  • Revenue Growth Revenue · next year · High confidence 15% to 20%
    And revenues, we feel that we should be able to grow between 15% to 20%.

    — D. K. Jain

  • Growth from Existing Operations Revenue · High confidence around 10%
    We are expecting to grow from around 10% from our existing operations and at least 10% incremental from capex what we are investing right now.

    — S. P. Gupta

  • Incremental Growth from Capex Revenue · High confidence at least 10%

    — S. P. Gupta

  • Revenue per New Block (Hamirpur) Revenue · High confidence INR60 crores to INR70 crores
    INR60 crores to INR70 crores. Yes, sir.

    — S. P. Gupta

Capacity

  • Hamirpur Plant Contribution Capacity · FY26 onwards · High confidence start contributing
    Our capex is going on track. We feel that this year, our investment in Hamirpur plant should start giving us some results. And from next year onwards, it will give full results...

    — D. K. Jain

  • Existing Capacity Utilization Capacity · Medium confidence 85%
    Actually, our current capacity utilization is around 60% and demand, if it improves, we can easily go to 85%, if good demand comes from international market.

    — S. P. Gupta

Capex

  • New Blocks in Hamirpur Capex · FY26 · High confidence 2 blocks
    In the long term, we would be building at least 10 to 12 blocks. So, 2 blocks we have planned to build this year in FY '26.

    — D. K. Jain

Other

  • Working Capital Cycle Other · from March quarter onwards · High confidence decline by 20 days to 25 days
    It will decline by 20 days to 25 days from March quarter onwards.

    — S. P. Gupta

Market Share

  • Export to US Market (share of export turnover) Market Share · High confidence around 15%
    Exports to U.S. market has grown, but it will be around, say, 15% of our export turnover.

    — S. P. Gupta

What to watch in Q4 FY25

Hamirpur Plant Commercialization

FY26 onwards
Current Under construction, expected to start giving some results
Target Start contributing revenue

Why it matters

Key driver for future revenue growth and product diversification, indicating successful capex execution.

Our capex is going on track. We feel that this year, our investment in Hamirpur plant should start giving us some results. And from next year onwards, it will give full results...

Risks & concerns

  • Export Market Volatility & Price Pressure

    high

    Export demand remains constrained due to persistent price volatility, market oversupply, and margin pressures, leading to a 15% YoY price decline in Q3 FY25.

    Management acknowledged

  • Increased Freight Costs

    medium

    Freight costs rose due to logistical challenges in the Red Sea region, contributing to margin compression.

    Management acknowledged

  • Higher Operating Expenses (R&D, Employee)

    medium

    Investment in strengthening R&D capabilities and workforce (new personnel) added to the cost base, impacting EBITDA margins.

    Management acknowledged

  • Global Geopolitical/Trade Tensions

    medium

    Threats of tariffs from the U.S. President are complicating the global situation and impacting confidence in pricing.

    Both acknowledged

  • Short-Term Customer Commitments

    medium

    Market volatility leads large customers to commit for only 1-2 months rather than 6-12 months, requiring adaptive planning.

    Management acknowledged

Q&A highlights

8 direct
Export Market Demand and Pricing Direct
The export market demand is more or less stable. We are getting demand inquiries, but the prices are slightly subdued. That is the situation now. And we are trying to increase our efficiency to meet those prices.

Clarifies the ongoing pricing pressure in export markets and the slight stabilization QoQ, with management focusing on efficiency.

Asked by Ankit Gupta

Pricing vs Pre-COVID Levels Direct
Sir, the prices now have settled at much below the 2019 level. They have not reached the 2019 level at all. All the products we have in the market, not only we, the overall complete agrochemical industry, the prices have declined tremendously for all the major technical products.

Highlights the significant and sustained price correction in the agrochemical industry, indicating a new, lower pricing baseline compared to pre-COVID levels.

Asked by Ankit Gupta

EBITDA Margin Sustainability Direct
Actually, the export market has still not recovered as far as pricing is concerned because of excess supply from some countries. So, we are getting impacted on export sales front, and domestic market demand is good.

Explains the structural shift in margin expectations (16-18% vs prior 25%+) due to global competitive pressures and oversupply.

Asked by Yogansh Jeswani

Cash Conversion Cycle and Inventory Direct
Inventory number of days is slightly higher. They will be around 170 days, since we have started building up inventory for one of the herbicide to be sold in next Kharif season... It will decline by 20 days to 25 days from March quarter onwards.

Addresses working capital efficiency, explaining the inventory buildup as strategic for a seasonal product, and provides a forward-looking target for improvement.

Asked by Aryan Oswal

Chinese Competition and Pricing Outlook Direct
You are right. You are right, sir, because some of the prices have gone down more than 60%, 70%, 80%... I think some units will really get closed. That's what we feel. Yes, yes continue.

Provides insight into the competitive landscape, suggesting potential market rationalization as unsustainable pricing forces some Chinese players out, which could lead to price stabilization.

Asked by Manish Shah

Capex Funding Strategy Direct
Yes, yes. We have not taken any term loan till date right now... More or less, it will be from internal accruals. For our 100% subsidiary, we may take nominal some debt in future years.

Confirms a conservative funding approach for capex, indicating financial strength and reduced reliance on external debt for current expansion plans.

Asked by Manish Shah

Hamirpur Plant Asset Turn Direct
Initially, the asset turn would be slightly less, sir, because initially, we have to spend lot of money on infrastructure because it is a Greenfield plant... So the first block, the asset turn will be less. I think it should be around 1.

Provides realistic expectations for initial capital efficiency of new greenfield projects, acknowledging higher upfront infrastructure costs.

Asked by Raaj

New Products at Hamirpur Site Direct
Our Hamirpur site, we will be adding new products only. We will not repeat the products what we are manufacturing already in our existing site at Sandila... It will be one intermediate and it will be one insecticide and one herbicide block is under construction.

Clarifies the strategic focus on expanding the product portfolio with new molecules and intermediates at the new facility, indicating diversification efforts.

Asked by Harsh Beria

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance and 9M Overview

India Pesticides reported a 13% year-on-year revenue growth in Q3 FY25, achieving a total income of INR175 crores, driven by a 30% increase in sales volumes. Domestic revenue significantly increased to INR97 crores from INR64 crores in Q3 FY24, while export revenue saw a decline to INR75 crores from INR87 crores. For the nine months of FY25, total revenue reached INR633 crores, marking a 12% increase, with EBITDA growing by 6.3% to INR101 crores, resulting in an EBITDA margin of 15.9%.

Margin Compression and Cost Factors

Despite revenue growth, the EBITDA margin for Q3 FY25 stood at 16.7%, impacted by several factors. Pricing adjustments in the international market, increased freight costs due to logistical challenges in the Red Sea region, and higher employee expenses for R&D and workforce strengthening contributed to the margin decline. The company noted that while gross margins remained stable, these operational and strategic investments added to the overall cost base.

Market Dynamics and Pricing Environment

The agrochemical industry continues to navigate a dynamic environment, with export demand constrained by persistent price volatility and market oversupply, particularly from China. Management indicated that prices are subdued, with a 15% YoY decline in Q3 FY25, following a 20% decline in the previous quarter. Current prices are significantly below 2019 pre-COVID levels, with some products experiencing declines of over 50%, prompting the company to focus on efficiency to meet these price points.

Strategic Capacity Expansion and New Product Focus

India Pesticides is progressing with its capacity expansion plans, especially at its Hamirpur facility, which is expected to start contributing revenue from FY26. An annual capex of around INR50 crores is planned for Hamirpur, with 2 new blocks scheduled for construction in FY26 as part of a larger plan for 10-12 blocks. These new facilities will focus on adding new products and intermediates, including one insecticide and one herbicide, to diversify the product portfolio and avoid duplicating existing Sandila offerings. Registration work for these new molecules is actively underway.

Working Capital and Inventory Management

The company's cash conversion cycle has extended, with inventory days increasing to approximately 170 days. This rise is attributed to a strategic decision to build inventory for a high-selling herbicide product in preparation for the upcoming Kharif season. Management anticipates an improvement in the working capital cycle, projecting a reduction of 20-25 days from the March quarter onwards as the accumulated inventory is sold in Q4.

Outlook and Future Growth Targets

India Pesticides aims to maintain its EBITDA margins within the range of 16% to 18% in the coming quarters and targets a revenue growth of 15% to 20% for the next year. This growth is expected to be driven by a combination of approximately 10% from existing operations and at least 10% incremental growth from the ongoing capex projects. The company also expects to improve its current capacity utilization from 60% to 85% if international market demand shows signs of recovery.

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