Viyash Scientific Q1 FY27 earnings call

Viyash Scientific Limited reported a strong Q1 FY27, with revenue from operations growing 20% year-on-year to ₹946 crores and 2.9% sequentially. Adjusted EBITDA increased by 59% year-on-year to ₹205 crores, leading to a significant EBITDA margin expansion of 530 basis points to 21.6%. Profit after tax more than doubled, growing 115% year-on-year to ₹79 crores, demonstrating improved profitability and operational efficiency.

The company's balance sheet showed remarkable improvement, with net debt reducing to ₹86 crores. The net debt to EBITDA ratio now stands at 0.1x, down from 0.24x last quarter and nearly 1x a year ago, effectively making the company virtually debt-free. This strong financial position provides substantial flexibility for future organic and inorganic growth initiatives. Finance costs also declined to ₹12.5 crores from ₹20.4 crores in Q1 FY26, reflecting ongoing efforts in debt reduction and restructuring, including past efforts on Sequent India debt and current work on Ireland interest restructuring.

The Animal Health Formulation business continued its strong growth across all regions, with the domestic market growing 60% year-on-year, driven by new product launches and R&D expansion. The US Human Formulation business also saw a 60% year-on-year growth, benefiting from a strategic shift towards backward-integrated, more complex products, which has improved profitability. Management expects these segments to continue their strong growth trajectory.

API revenue remained broadly flat quarter-on-quarter due to timing issues, primarily stemming from raw material price volatility and a 'wait-and-watch' approach by customers amidst ongoing geopolitical uncertainties. However, management noted a recent good traction and an increase in orders, expressing strong confidence that the current quarter (Q2 FY27) will be the 'best quarter for API' for the company, indicating an anticipated rebound.

Viyash Scientific signed a Share Purchase Agreement (SPA) for the acquisition of Bio For Life in Italy, a strategic move expected to close in the next few months^⏳. This acquisition will provide direct market access in Italy, a large companion animal market, and a portfolio of 85 products, serving as a launchpad for global expansion. The company is also investing in R&D and manufacturing for companion animal products, with a new plant targeted for completion by January-February, aiming for a $150-200 million companion animal platform by 2032.

The company granted ₹1.3 crores in employee stock options during the quarter, resulting in an incremental expense of ₹19 crores for Q1 FY27, which was factored into the reported PAT. The total ESOP cost for FY27 is projected to be ₹150 crores, which is expected to reduce significantly to ₹25-30 crores in FY28. Management provided guidance for overall revenue growth of 13-15% for FY27, with Animal Health API expected to grow 20%+ and Human API 13-14% for the next two years, while maintaining EBITDA margins in the 20-22% range.