Anupam Rasayan India Ltd (ANURAS) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '27 Earnings Call for Anupam Rasayan India Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. From the management side, we have with us today Mr. Anand Desai, Managing Director; Mr. Gopal Agarwal, Chief Executive Officer; Mr. Amit Khurana, Chief Financial Officer; Ms. [indiscernible], Deputy Chief Financial Officer; and Mr. Vishal Takkar, Adviser. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Anand Desai from Anupam Rasayan. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us for our Q2 FY '27 earnings call. We have concluded the first half of FY '27 with the strong consolidated performance and meaningful progress across our strategic priorities, including expansion into new end markets and strengthening our Pharmaceuticals and Performance Material business. During the quarter, we completed the acquisition of Bliss GVS Pharma Limited, marking an important milestone in our journey towards building an integrated global pharmaceutical platform. This acquisition represents a significant step forward in our strategy of expanding beyond our traditional agrochemical spaces and revenue or partition across the pharmaceutical value chain. Bliss GVS brings complementarities in finished doses foundations, a portfolio of more than 150 grams established manufacturing introduction and an international distribution network. More importantly, these GVS allows us to combine our existing strength in pharmaceutical intermediates and custom synthesis which finished business capabilities. This creates opportunities for deeper customer engagement forward indication and a gradual expansion into [indiscernible] markets. Our accretion and expansion, including Tanfac Industries, Jayhawk Fine Chemicals and now GVS Pharma is helping us build a more diversified risk platform with complementary capabilities across chemistries, products and markets and geographies. On the business development front, we continue to expand in long-term customer dealerships and improve revenue annuity. Our community portfolio of alloys and long-term contracts now stands at approximately INR 17,496 crores, providing visibility over multiple years. During Q2 FY '27, we also signed a 6-year long term supply agreement with our leading U.S. global specialty metal [indiscernible]. These marks or entry into a new segment within the geological resources sector as we present an important step in diversifying our customer base and expanding our projects in specialist industrial applications. The agreement reflects the confidence of good customers in our technological and manufacturing capabilities. Under technology and innovation front, with commercialization of ETFs continuous flow chemistry remains an important milestone for the company. A [indiscernible] translate complex chemistry and advanced process [indiscernible] into commercial scale manufacturing. We continue to strengthen our capacities across [indiscernible], flow chemistry and other specialist chemistries to address increasingly sophisticated customer [indiscernible]. We also continue to see increasing traction across our volumes, electronic chemicals and other flowing product bases, supported by our technology capabilities and long-standing customer relationships. Looking ahead, our priorities remain clear. We will continue to focus on strengthening our product portfolio, accelerating the commercialization of our development pipeline, integrating our acquisitions, optimizing to utilization of capital employed and including the contribution from higher-end value businesses. We will [indiscernible] the combination of our store capacity for differentiated technology capabilities, global manufacturing footprint, strong customer leaderships and expanded pharmaceutical capacities positions Anupam Rasayan well face for its next level growth. We remain committed to disciplined execution, operational excellence and sustainable value creation for all of our stakeholders. With that, I will now hand over the call to Gopal to take you through our business performance and key strategy developments [indiscernible].

As Anand bhai mentioned, the first half of FY '27 has been an important period for Anupam Rasayan, with meaningful progress across our business segments, customer engagements and strategic initiatives. Let me elaborate on some of the key developments during the period. I would first like to touch upon our recent acquisition and the opportunities they create for the group. Completion of Bliss GVS Pharma acquisition as on September 28th, 2026 marks an important milestone in our journey towards building an integrated pharmaceutical platform. Anupam Rasayan now holds approximately 50.07 percentage of the equity capital of Bliss GVS Pharma. The GVS brings an established pharmaceutical formulation business, manufacturing capabilities and the presence across several international markets. We believe this acquisition will complement our existing pharmaceutical intermediates and custom [indiscernible] capability at Anupam and allow us to participate across our part of pharmaceutical value chain as a good. Our immediate focus is on strengthening operational alignment and identifying opportunities across product development, manufacturing efficiencies, customer relationship and expansion into regulated market to leverage the combined capabilities of both the organization. Moving to Jayhawk Fine Chemical, we believe we will continue to focus on creating Jayhawk Fine Chemicals into our global platform. and further improving its EBIT target through cost optimization initiatives. Jayhawk provides us with a manufacturing presence in the United States and strengthens our capability across advanced custom [indiscernible], Life Sciences and Performance Material. The combination of Jayhawk technology platform and customer relationship with Anupam Rasayan manufacturing process chemistry capabilities creates opportunity to deepen our engagement with multinational customers. On the business development front, our engagement with global customer continues to remain encouraging. The long-term agreement and strategic partnership secured by the company reflects the confidence customer places in our manufacturing capability, quality standards and ability to develop complex molecules. We have received a strong fill ESG rating of 62 and a strong CRISIL core ESG rating of 63, compared with an adequate rating of 54 in the previous year. Looking ahead, our priorities remain focused on accelerating commercialization of our line, increasing contribution from Performance Material and Pharmaceutical, integrating our acquisition and strengthening our global customer relationships. With that, I now hand over the call to Amit bhai for his comments.

Thank you, Gopal bhai, and good evening, everyone. The first half of FY '27 has been an important period for Anupam Rasayan, marked by a significant strategic development with the completion of acquisition of Bliss GVS Pharma, alongside our continued focus on strengthening our existing businesses and expanding our presence across high-value segments. From a funding perspective, the Bliss GVS Pharma acquisition was captured through a combination of debt and a noncontrolling nonvoting instrument. The transaction was funded to a INR 300 crore term loan and up INR 1,450 crores raised through our noncontrolling and nonvoting instruments from a group of financial investors led by Bain Capital including Trust Group and invested. This financing structure abled us to fund the acquisition while preserving balance sheet for future growth and expansion. Our focus remains on ensuring that the investments generate sustainable returns and contribute positively to the over financial performance of the group. Another important priority is ensuring that our recent acquisitions are integrated effectively from a financial and operational reporting perspective. We are working towards strengthening financial controls, improving reporting processes and establishing consistent performance monitoring mechanisms across our businesses. As the overall contribution from Pharma and Performance Material increases and become a larger share of the group's revenue mix, we expect revenue cyclicality to reduce over the next 4 to 8 quarters. On the operating front, we have witnessed a meaningful improvement in our profitability margins. Our consolidated EBITDA margin improved to 25% in Q2 FY '27 compared to 19% in the correspond quarter last year, while H1 margins improved from 26% from 22%. This improvement was primarily driven by a higher contribution from Performance Materials segment and a favorable product mix. On working capital, I would like to highlight important aspect of our consolidated financials. Following completion of the Bliss GVS acquisition, its balance sheet has been consolidated with the group as of September 2026. However, Bliss GVS revenue and operating performance have been consolidated only from the acquisition date of 28th September 2026. Consequently, its contribution to the consolidated results for the quarter ended 30th September 2026 is limited to 3 days. Therefore, while the balance sheet reflects the acquired news, the revenue contribution is recognized only for the relevant post-acquisition period. If we exclude this GVS balance sheet, we have seen a slight improvement in our overall working capital cycle, which has reduced from 276 days to 271 days. We remain focused on further improving inventory management receivables collection and overall working capital efficiency as we integrate our businesses and expand our operations. Our objective is to improve capital efficiency and ensure that business growth translates into stronger cash flow generation. Compared with the previous full year's operating cash flow of INR 334 crores, the operating cash flow generated in H1 FY '27 was INR 358 crores, driven by stronger profitability and a greater focus on working capital optimization. Going forward, our approach will remain focused on balancing growth investments with financial discipline. We will continue to evaluate capital allocation opportunities carefully with an emphasis on strengthening our business capabilities, improving operating efficiencies and creating long-term shareholder value. I will now hand over the call to our Deputy CFO [indiscernible], to take you through the financial performance for the quarter and half year.

Thank you, Amit bhia and good evening, everyone. I will really take you through the consolidated financials and segment-wide sales performance for quarter 2 and H1 FY '27. Total income for the quarter stood at INR 821 crores compared to INR 739 crores in the corresponding quarter last year, registering a strong growth of 11% year-on-year. EBITDA for the quarter stood at INR 202 crores compared to INR 144 crores in quarter 2 FY '26, representing a growth of 41% year-on-year. EBITDA margin for the quarter came in at close to 25% as against 19% in quarter 2 of FY '26. Profit after tax for the quarter was INR 65 crores compared to INR 57 crores in the corresponding quarter last year, registering a growth of 14% year-on-year. Profit after tax margin for the quarter stood at approximately 8%. The revenue breakup for quarter 2 of FY '27 was as follows: Life Science-related Specialty Chemicals contributed 42%. Performance Materials contributed 28%. Other [indiscernible] Products contributed 29%. Moving to H1 FY '27 performance. The consolidated total income for H1 stood at INR 1,489 crores compared to INR 1,230 crores in the corresponding period last year, registering a strong growth of 21% year-on-year. EBITDA for H1 stood at INR 377 crores compared to INR 273 crores in H1 FY '26, representing a growth of 38% year-on-year. EBITDA margin for the half year increased to 25.5% as against 22.2% in H1 FY '26. Profit after tax came in at INR 116 crores compared to INR 106 crores in the corresponding period last year, registering a growth of 10% year-on-year. Profit after tax margin for the quarter stood at approximately 7.9%. The revenue breakup for H1 FY '27 was as follows: Life Science related Specialty Chemical contributed 41%. Performance Materials contributed 29%. Other Fluorinated Products contributed 28%. The decline in the stand-alone revenue for quarter 2 of FY '27 compared to quarter 2 of FY '26, is primarily attributable to onetime sale of approximately INR 180 crores in quarter 2 of FY '26. Excluding this onetime sale, the underlying performance should be viewed in context of a normalized business run rate. The completion of Bliss GVS Pharma acquisition during the quarter is an important development for the group. The financial contribution of list is reflected in consolidated results for this quarter from the date of acquisition, which is 28th of September 2026 in accordance with the applicable accounting standards. Thank you. And with this, we can now open our floor for question and answer.

[Operator Instructions] We have the first question from the line of [indiscernible] from Chris Capital.

My question is about Bliss. So Bliss being the [indiscernible] player mainly and has been on the intermediate side on the pharma side, and we had highlighted previously that we are looking to acquire assets from the API side. So is there any development on that front? Do we have any targets identified? Or are we still on the exploring phase?

Yes. So we have been evaluating our opportunities, and we continue to have conversations. Right now, we have not anything to really share to the public right now. But as and when we have it, we will definitely announce it for now. But yes, we are actively looking for it. Yes, we are.

Okay. And secondly, on the CDMO business, how do we see that scaling up because now we will leverage Anupam's larger [indiscernible] marketing teams like -- would you guide something on growth on the CDMO [indiscernible].

Yes. So there, there has been a lot of active discussions happening with the -- so I can say this way that Bliss themselves were having active conversations with their own customers where they had an [indiscernible] and we were also doing so. With this transaction consummated, now this composition has become more with higher agility and higher force and urgency. And the customers are seeing value of an integrated platform where Anupam can support Bliss' business Bliss offering and vice versa. So to that extent, yes, the momentum has picked up here. I can say that for now. And we see a very strong growth potential going forward.

Sir, anything you can quantify?

Right now, there is a very -- I can say very active advanced discussions, but get not at a level where we would be able to share it with the public for now.

Got it, sir. Just last 1 on my side as the steady state margin for Bliss, we've seen good margin expansion, [indiscernible] 26%, 22% operating EBITDA. What would be the steady state EBITDA margin for this business?

Yes. So I think what we can say is that the active -- so Bliss, yes, we believe that 22% to 24% EBITDA margin, which we have said is an average consolidated EBITDA margin for Anupam as well on a consolidated basis. I think that's the number that we we've been looking for. And that's where we feel we're comfortable with it as we go for that. No doubt, they've done a far better job and I think we will endeavor to do better. I would guide at that number.

So what would be the reason for them for the Bliss management much better than what we are guiding of 25% margin?

So see, there have been a portfolio, there have been sales of products which are of a higher margin also. And also, there has been -- they've been able to pass on the price rises and all, on a sustained basis, we would want to be cautious in terms of what we guide to the market, and that's where we are coming with the number that we are seeing.

We have the next question from the line of Tanya Chowdhary from Investec.

Sir, firstly, a stand-alone EBITDA margin is currently running at 34%. This is well above your earlier guidance of 24% to 26%. So how much of this improvement is structural versus your product mix? And would you revise your stand-alone or consol margin guidance following this list acquisition?

So Tanya, just we have done better on the margins. but it's also to do with the product portfolio and the products that we have sold in this quarter versus the other quarters. I would urge to the caution and continue to guide at the numbers that we have been guiding. If we do better, yes, that will be good and that [indiscernible] we have always been. But for now, I wouldn't really guide the numbers that we have been guiding for now at least.

Sure, sure. And sir, on Bliss, you highlighted 62 molecules, including 48 plus in regulated markets. So, how many of these are filed, approved or commercially launched today? And what milestones are needed before these translate into meaningful revenues?

So there is -- so see, there have been -- if you look at the recently they've announced one more approval from the European regulator as well of a product. So they continue to build the portfolio. But I would refrain from making too many comments on behalf of the management at Bliss because they also have a listed entity. They are also listed. And I would really refrain for now to make any more guidance on their behalf, I would say, if you pardon me for that.

Sure, sure. And sir, when do we expect to start seeing synergies from the Bliss acquisition? And what was the capacity utilization for Bliss plants this quarter?

See, if you look at it, they have grown significantly. Their utilizations will be in the 40s because if you see, they have a very meaningful growth from the last year. So that is [indiscernible] their CapEx utilization continues to grow, and we believe that will continue. One, two, in terms of synergies, as I was mentioning earlier, that like on the CDMO side, the conversations have started and getting active very actively. Also, if you look at it from a supply side because we come from the KSM and from a chemical -- a strong Specialty Chemical background that will help them in their own sourcing as well. So there are also from a from an end market point of view where we have been very active in U.S. and Europe in other regulated markets. So we will be able to support them there as well. So synergies are -- so right now, we are working with the management to focus on which are the ones that we want to start immediately and which are the ones that we will have a more planned way, and where we are right now in the discussion. But we can see that there are levers that we can see across supply across our CDMO across end markets that we will be able to support. But let's see, and we believe that in 3 to 4 quarters, we should start seeing some benefit out of that or at least some momentum getting [indiscernible] from that. It could take a little time for us also to synergize with them.

Understood. Got it, sir. And lastly, over the past 3 quarters, Anupam has completed two significant acquisitions. So just wanted to get your view on your thinking behind this aggressive inorganic expansion. Do we expect more acquisitions going forward or more of organic growth?

Okay. I'll take a step back, and I'll indulge me for a couple of minutes here, but I'll tell you the rationale and the logic behind this. And then I'll answer the second question about what more we may think let's first. So if you see the whole approach that we have been taking is that we wanted to diversify further from the only the agrochemical market into pharma and polymer and Speciality Market, Specialty Chemical side, Performance Material side which we have been consistently doing for a period of time, organically as well. And -- but what we also believe is that the world is moving towards a full value chain and a supply chain rather than a product or a chemistry offering. And in that sense, we have built a very strong value chain and our supply chain offering to our customers in the Agrochem side. If you look at the acquisition of Tanfac was in the [indiscernible], the same approach, same objective that we secure the supply sources for the fluorination chemistry, which is HF&KF, and that's what we've been building, the value chain. But if you look at from a polymer side, we have built a good portfolio today, 20%, 25% of our revenue comes from that end market. However, the acquisition of Jayhawk, what we've been able to do is we have been able to offer a full value chain, right, from an FTF straight up to a polymer completely across India and U.S. manufacturing base. So that really gives a very strong offering to our customers, which also -- what it also does is it gives me 3 or 4 variables -- 3 or 4 levers here. One is the chemistry. There are complementary chemistries and there are very strong chemistries that they have in terms of high temperature oxidation, [indiscernible] reaction and Anupam offers multiple other complementary chemistries, which really gives us a larger key services and chemistries and manufacturing capabilities. to our end customers, which is very, very essential in the current environment that we live in. Second, as I said, manufacturing versus manufacturing in U.S. and India, which is onshore, offshore and nearshore offshore structure really becomes a very compelling offering to our customers in U.S. and Europe and more regulated markets. Three, if you look at it from a full chain point of view, again, as I was saying, that right from a key building block like HFKF, if you are able to offer a traveler the whole value chain across up to, like, say, polymer or a monopolymer in U.S., it really, really helps. Third, the validations that Jayhawk has, which is in terms of semiconductor industry in terms of defense and others, which really gives us a short-term time to market for us. And we can really -- today, when we go to our customers, we are seeing very, very excited conversation with our customers where they're looking at saying that can you do this for me? And like I'll tell you one -- a simple example, one of our Japanese customers was looking at doing, let's say, 1,000 tonnes with us. But the moment we offered that moment we had a Jayhawk announcement, they said if you can give us material out of Jayhawk, probably we can triple it to the volumes. So that's the kind of a demand that we can see. Also, if we can offer it from U.S., then they are also happy to give us a one step forward, which is practically a polymer output. So in there, you can see that there is a complete offering that you are able to offer. It's a platform play that there. So as I said, Agro we it, same as we have done it with polymers. And that is the same approach that we are looking at it with Bliss acquisition that we are able to offer pharma platform because if you see and fact gives us, again, fluorination because a lot of pharma products today has [indiscernible] as a moiety in their formulation. So that's one. Two, Anupam today has around about 20%, 25% of our revenue coming from KSMs of pharma industry and Bliss is on the formulation side. Yes, there is a missing piece from a valuation on the [indiscernible] side, which again, we have said that we will be actively looking at plugging that play -- plugging that part of the valuation. But again, you are really making a very compelling, very, very attractive alternate supply chain solution on a full platform business to our customers. And that's something which is there. And if you look at it from a -- across -- so if you look at the whole strategy here, across chemistries, across geographies like U.S. lobe, Japan, India and Africa, across end markets, like Pharma, Polymer, Agro and Performance Materials like your products going into EV and semiconductor industry, across right from a very basic raw material like HFKF for a [indiscernible] to AI or an API or a formulation or a polymer is something which is very unique that that we are building. Let's see, over the next 2 to 3 years, you will see a very strong reflection of what we are right now sowing the seeds for -- but let's see. That's how -- and that's the approach for this M&A, and we got a few very attractive opportunities, which we thought that it is worthwhile pursuing and we did so. On the -- are we looking at anything more right now? There's nothing much to say. Yes, we continue to evaluate. We continue to evaluate multiple opportunities, but right now, nothing more to say on this. I hope -- Sorry, it was very very was on a very long answer to your question, but I hope that gives you a context of how we are thinking here.

We have the next question from the line of Meet Vora from JM Financials.

The first one was, how to look at the overall revenue growth in the second half of fiscal '27, probably on console as well as tendon, on consol, we have seen roughly flat Y-o-Y numbers. So how should one think about the second half?

So first, console, you would also reflect like what [indiscernible] in your opening speech as well, that you have to see that there was a base effect of INR 180 crores more of additional revenue coming from the last year. Last also, you need to see for that -- but if you look at it other than that, I think what we can expect over the second half, which typically has been a stronger second half, half, typically. We should be looking at the consol revenue from INR 2,400 crores to INR 2,500 crores in the ballpark of that number on a consolidated basis. because all Anupam, Jayhawk, Tanfac and Bliss, all we will be able to consolidate today, there has been a couple of companies which have been consolidating, whereas Bliss we have not been able to consolidate except the 3 days. Jayhawk, we have been able to do it only for 4 months. So over a period of time, now we'll be able to see it better. And that would translate to an annualized run rate of around about INR 4,800 crores [indiscernible] and that's our target, please, pardon, there is some different guidance here, but that's what we think which we're able to look at here.

Okay. So this INR 2,500 crore revenues you're saying is for H2?

H2, yes.

Okay. That's great. And -- the second one was if I look at our first half balance sheet, there's close to INR 750 crores out of cash and cash equivalents. And now since I think on the stand-alone side, we had not much CapEx to be incurred. Where are we planning to utilize this cash on a consol level?