Natural Capsules Limited

Natural Capsules reported Q4 FY25 revenue from operations at ₹44.97 crores, marking a 2.61% QoQ and 11.81% YoY growth. EBITDA for the quarter was ₹4.38 crores, up 2.71% QoQ and 6.55% YoY, with an EBITDA margin of 9.74%. However, PAT stood at ₹0.52 crores, a significant 392.62% QoQ jump but a 46.32% YoY decline. For the full year FY25, revenue reached ₹169.21 crores (up 8.87% YoY), but EBITDA declined 12.01% to ₹17.52 crores, and PAT plummeted 88.88% to ₹0.62 crores, reflecting a challenging year.

A significant development is the 88% anti-dumping duty imposed by the US on Chinese HPMC capsules, compared to 14% on Indian HPMC capsules. This creates a substantial opportunity for Natural Capsules in the US market, which currently imports 90% of its 110 billion capsule demand from China. The company expects its HPMC business revenue to grow from ₹9 crores in FY25 to ₹27 crores in FY26, with US exports alone increasing from ₹5 crores to ₹20-22 crores. Two new HPMC production lines are being expedited to meet this demand.

The API segment faces headwinds from industry-wide pricing pressure due to excess capacity in China, causing prices to slide 12-15%. The API facility's CAPEX increased from an initial ₹100 crores to an actual outlay of ₹167 crores (totaling ₹200 crores with capitalized expenses) to expand capacity from 17 to 37 metric tons. Management expects the API business to generate ₹65 crores in revenue and ₹9 crores in PLI benefits in its first year, with a modest 7% EBITDA margin. Optimum utilization (60-70% occupancy) is targeted by FY28, aiming for ₹240-250 crores in revenue.

The company is actively pursuing regulatory approvals for its API products. WHO GMP approval is expected by the end of the current year (FY25). European CEP filing is also planned by year-end, with CEP approvals anticipated by Q3 FY26. DMF review and approval by customers and regulatory authorities are projected to be completed by Q3 FY28. These approvals are crucial for accessing regulated markets in Europe and the US.

Management anticipates an improvement in overall margins, with the capsule business standalone margin expected to rise from 10.5% to 14-14.5% in the current year. Incremental revenue from HPMC is projected to have a higher margin of 18-19%. The softening of gelatin prices, a primary raw material, is expected to further enhance margins in the gelatin capsule segment. The company's strategy includes focusing on regulated markets and large volume, high-profitability customers.

The API facility's CAPEX increased to ₹167 crores (actual outlay) to expand capacity, with total CAPEX block at ₹200 crores including capitalized expenses. The total consolidated debt is around ₹102 crores, which the company aims to maintain at similar levels by FY26. Debt repayment obligations for the current year are approximately ₹10 crores (₹5.5-6 crores for subsidiary API, ₹4 crores for parent). Working capital requirements are currently well-financed, with incremental needs to be met by internal accruals.