Brief Company Introduction
Jubilant Ingrevia is a leading global integrated pharmaceutical and life sciences company. It is a subsidiary of Jubilant Pharma Limited, formerly known as Jubilant Life Sciences Limited. Jubilant Ingrevia specializes in providing innovative solutions and services in the areas of pharmaceuticals, life sciences, performance materials, and specialty chemicals.
The company operates across the entire value chain, from research and development to manufacturing and distribution. It serves customers in various industries, including pharmaceuticals, agrochemicals, consumer goods, automotive, aerospace, and more. Jubilant Ingrevia focuses on delivering high-quality products and services while adhering to stringent regulatory standards.
The company’s product portfolio includes a wide range of specialty chemicals, such as pyridines, picolines, and their derivatives, as well as various pharmaceutical intermediates and active pharmaceutical ingredients (APIs). These products find applications in the manufacturing of drugs, crop protection agents, flavors and fragrances, and other industrial applications.
Jubilant Ingrevia operates multiple manufacturing facilities globally, equipped with state-of-the-art infrastructure and technologies.
Financial Results & Highlights
- The Specialty Chemicals business grew 29%.
- The company experienced a year-on-year sales growth decline of -11.64% in quarter 4, amounting to 1145 crores.
- The company was under the old tax regime during FY23, and the ETR is 29.6%.
- Net debt at 31st March was INR312 crore and net debt-to-EBITDA ratio was at 0.54x on the basis of trailing 12 months EBITDA.
- The net working capital percentage and number of days of working capital for Q4 FY23 on the basis of their trailing 12 months turnover were at 17% and 62 days, respectively.
- The capital expenditure during the quarter was INR146 crore and for FY23 was approximately INR481 crore.
- Board has recommended a final dividend of 250%, that is INR2.5 per equity share of the face value of INR1 each for FY23. This shall result in a cash outflow of INR 39.8 crore.
- During the year, the company has already declared an interim dividend of 250%, that is INR2.5 per equity share of INR1 each and the total dividend for FY23 works out to 500%. That is INR5 per equity share of INR1 each amounting to INR 79.6 crore of cash outflow.
- The division’s margin and EBIT run rate has decreased from INR 60 crore to INR 70 crore to around INR 40 crore.
Investor Conference Call Highlights
- The management stated that the Specialty Chemicals business recorded revenue growth mainly due to higher volume sales of both existing as well as new products.
- The management informed that EBITDA for the year was lower than last year, mainly due to higher energy costs during the year and lower demand of agrochemical customers during H2.
- Nutrition business has faced headwinds for Niacinamide, leading to lower volume as well as lower price realization.
- Overall revenue was lower due to the price of Acetic Acid leading to lower price of Acetic Anhydride and headwinds they continue to face in Niacinamide business.
- Chemical Intermediates segment EBITDA improved on a year-on-year basis due to better price realization of Acetic Anhydride.
- The company plans to reduce overall energy cost by sourcing power from the grid at Gajraula starting in Q2. It plans to source power from renewable sources in the next financial year.
- The company is investing in new cGMP-compliant facilities to produce cosmetic and food-grade Niacinamide and reduce dependency on global feed markets.
- Chemical Intermediates business has recorded lower revenue during FY23 over last year, mainly due to lower prices of Acetic Acid, leading to lower price realization of Acetic Anhydride and Ethyl Acetate.
- The management stated that the lower performance in Specialty Chemicals was not due to high inventory levels. Instead, it was a result of lower global agrochemical demand. Other suppliers may have been liquidating their material at lower prices, but the company is not carrying any extra inventory.
- In Chemical Intermediates, there has been a volume growth of 7% to 8%. However, in Specialty Chemicals, the volume has remained flat in the fourth quarter. The Nutrition business has experienced a decline in volumes compared to the previous year, but there has been sequential volume growth in Niacinamide from Q3.
- The management stated that the increase in other expenses can be attributed to higher freight expenses, warehousing charges, processing charges, and higher consumption of stores and displays.
- The agrochemical sector contributes approximately 37% to 38% of the Specialty Chemical division’s revenue.
- The management anticipates improvement in profitability with the improvement in agrochemical demand. As customer demand for their well-suited products increases, the company expects to sell more and return to a normal situation, although it may not be immediate.
- The management informed that the Specialty Chemical division operates with a combination of spot business and contractual terms.
- The revenue in Specialty Chemicals has increased by 5% year-on-year, the volume has remained flat. This discrepancy can be attributed to the product mix, as the company sells around 40 different products, and the revenue composition can vary based on the mix of products sold during the quarter.
- For FY24, the management expects a cash outflow of approximately INR 700 crore, while for FY25, it anticipates a capex of around INR 600 crore.
- There have been improvements in power costs quarter-on-quarter, primarily due to decreased coal prices. The company is also looking into renewable energy sources such as solar and wind for long-term cost reduction.
- In terms of Specialty Chemicals and CDMO (Contract Development and Manufacturing Organization) contracts, the volumes dispatched to customers may vary on a quarterly basis, but the overall contracts are being executed as planned.
- The new GMP (Good Manufacturing Practice) facility is expected to contribute to the revenue of the CDMO business, with normalization anticipated in the second half of the year. The company anticipates further growth in CDMO revenue going forward.
- The management stated that the Diketene derivatives plant is currently close to 65% utilization.
- The capacity utilization of the Acetic Anhydride segment is around 85% to 90%, and with the newly commissioned plant, the company plans to gradually increase volumes over the next 1.5 to 2 years to achieve full utilization of the capacity.
- The management believes that the poor demand is not due to China’s recovery but rather an excess production of agrochemicals in the US, Europe, and Brazil, leading to lower demand in those regions.
- The management expects the demand to normalize from H2 onwards, based on feedback from customers who anticipate utilizing their excess stock.
- Regarding pyridines, while the demand for pyridine products is growing at a rate of 3% to 4%, new uses, such as in electronic circuit boards, are emerging, which command higher value pricing.
- The new plants are not operating at 10% to 15% utilization. Most of the plants start with full operation, and volumes are expected to pick up over time.
- The impact of Avian flu on the Nutrition business has subsided, leading to improved market dynamics. Both volumes and prices are expected to increase in the coming quarters.
- The utilization of the food-grade acetic acid plant is expected to be around 50% in FY24.
Jubilant Ingrevia, a global integrated Life Science products and Innovative Solutions provider serving, Pharmaceutical, Nutrition, Agrochemical, Consumer and Industrial customers with their customised products and solutions that are innovative, cost-effective and conforming to excellent quality standards.Jubilant Ingrevia’s portfolio also extends to custom research and manufacturing for pharmaceutical and agrochemical customers on an exclusive basis.JVL has planned capex of ~Rs 2,050 crore over fiscal 2022 and 2025 towards expansion for diketene derivative products, expansion of facilities for crop protection chemicals, vitamin B3 products and acetic anhydride.
The company made a strategic decision to upgrade the capacity during the construction of their new GMP facility, which resulted in a delay but will bring long-term benefits. In the Niacinamide business and some other products in their Specialty Chemicals portfolio that cater to the agrochemical sector, they have experienced a temporary decline in volumes, revenue, and profitability. However, the management remains confident in their ability to regain momentum as the market situation improves. The Specialty Chemicals segment, particularly in the agro segment, has shown significant growth over the past two years, expanding from INR 300 crore to INR 700 crore. Unfortunately, the current quarter has been challenging due to weak demand from agrochemical customers, resulting in a performance gap.