India Glycols Limited (500201) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to India Glycols Limited Q1 FY '26 Earnings Conference Call hosted by InCred Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Awasthi from InCred Equities. Thank you, and over to you, Mr. Awasthi.

Thank you. Good evening, everyone. Firstly, I would like to thank the management for giving us this opportunity to host the conference call today and also congratulate them on a good set of numbers. We are joined on this call with the India Glycols' management represented by Mr. Rupark Sarswat, who is the CEO; Mr. Anand Singhal, the CFO; Mr. Rajesh, the Head of Sales and Marketing of the BSPC segment; Mr. S.K. Shukla, Head of the Liquor Business; and Mr. Ankur Jain, Head, Legal and Company Secretary. I would now like to invite Mr. Rupark to initiate the proceedings with his opening remarks, post which we shall open the floor for a Q&A session. Thank you, and over to you, sir.

Yes. Good afternoon, everybody, and thank you for joining us. A small hygiene point -- can you hear me reasonably?

Yes, sir.

Okay. My legal people keep complaining that I sit away from the mic. So we have uploaded 2 versions of the presentation. So before you start getting confused about it, you can look at either. There were just 2 minor points which are in the latest version, which in terms of uploading the prior one got uploaded. So even if you have printed the earlier one or if you looked at the earlier one, there is no major change, you did not bother. But obviously, you might see 2 presentations getting uploaded. I thought I'll clarify so that there is no confusion. And so as you know, we will talk about briefly the performance of the company. So we've had a good quarter, as you know. So we've had a strong performance for the quarter with a net revenue, which is up 7%. More importantly, the EBITDA growth is very strong at 18% and PAT growth is at 21%. So you've seen a gross revenue go up from INR 2,283 crores to INR 2,500 crores, 10% up; net revenue INR 1,040 crores from INR 969 crores, 7% up. EBITDA INR 151 crores from INR 128 crores, 18% up and PAT up from -- to INR 73 crores from INR 60 crores, [ 21% ] up. From a margin perspective also, it has been good. So our EBITDA margins are up 128 basis points. PAT margins are up 80 basis points. In terms of the revenue growth, I think we are very happy to report great growth in both the Portable Spirits and the Bio-Fuel segments. It has been a weaker kind of quarter for Chemicals and Ennature Biopharma. But when you look at chemicals, while the overall margin growth is actually better than the weakness in the sales growth. And in terms of percentage margins or the mix, we've seen improvement both in portable spirits as well as BSPC. And as I will tell you a little later, the joint venture performance has also been very good, which has contributed to the overall [indiscernible]. So to summarize in terms of net revenue, our Bio-Fuel's top line is up by 45% to INR 348 crores. Our Portable Spirits revenue is up by 22% to INR 342 crores. Ennature Biopharma at INR 51 crores and Chemicals or BSPC stands at INR 300 crores. So EBITDA margins have increased to 17.7%, to be precise, to INR 151 crores from INR 128 crores. And as I mentioned, that has expanded by 128 basis points. For Portable Spirits, our EBIT margins have improved from 17.5% to 21%. For Chemicals, our EBIT margins have expanded from 9.9% to 10.9%. Of course, there are several factors, but from an operating business, the EBITDA margin improvement in chemicals has been better. Our PAT stands at INR 73 crores with margins at 7% against 6.2% last year. And we've had a very good increase in terms of the profit that we post from the joint venture, which is up 73.7% year-on-year to INR 19 crores from INR 11 crores. In terms of overall financials, I've more or less highlighted them, so I will not go through the entire sheet. Several other points with respect to financial parameters, I will ask my colleague, our CFO, Mr. Singhal, to talk to you about later. At a high level, I think we've continued to see a solid performance in Country Liquor, which is a good part of our Portable Spirits business. And we continue to be both reputed and a robust business with Bunty Bubli being recognized as the highest selling any brand of liquor in the country. Despite being a strong shareholder in Uttarakhand and UP, we have increased our shares in Uttarakhand marginally, and we've kind of maintained our close leadership position, which we've had in UP. We've talked about it before. Our Amrut partnership has been gaining momentum. I think we've settled down in terms of getting that partnership going, and we are starting to see good momentum in UP, Uttarakhand, Delhi, and we are increasing our focus on premium brands. And one of the important objectives for us this year is also to enter the CSD, which is the canteen services department. Within the Chemical space, I will talk a little bit about the businesses. But from a highlight perspective, we have a new value-added Performance Chemicals business, which is still small. But just to let you know that, that is growing very well, and we are quite confident of the business pipeline that we have put in place. In fact, in select areas, we are doing incremental capacity expansions. And I think the indicators from our perspective are that this will continue to drive growth in the quarters and years to come. For the joint venture also, there was very strong sales growth, excellent growth numbers. I think several factors have helped. One is that there has been a reduction in the EO price gap vis-a-vis reliance, and we have seen much higher gap numbers earlier. And the JV obviously also has been focusing on what products they can bring from Clariant worldwide to position them in the Indian market, which is the imported products. That portfolio has increased and also increased -- helped to increase margins. In general, manufacturing in Kashipur also continues to focus on more innovation, more formulations, more value-added products. And I think that strategy is more or less in terms of the plan. And I think we've come back from a tough situations over the last -- a few years -- a couple of years ago to the JV starting to look neat and tidy and doing well. And so from a sales perspective, I think daily sales are also up in double digits. EBITDA is up in high double digits or well in excess of that. And as you know, 12th August 2025 has been fixed as a record date for determining the entitlements of eligible equity shareholders for the purpose of subdivision split of equity shares of the company. And I think these are areas which we will talk about later. Let me give you a high-level input on our segmental performance for our Chemicals business, our Performance Chemicals business. Our top line has not done so well. It has been a weak quarter, and I will talk about it a little later. So our turnover is down to about INR 300 crores, whereas for the Bio-Fuels business, it is up from INR 239 crores to INR 348 crores with EBIT margins of 6.5%. The Chemicals business has EBIT margins of 10.9%. For the Portable Spirits business, top line up to INR 342 crores from INR 280 crores and EBIT margin is up from 17.5% to 21.1%. For Ennature Biopharma, margins have been under pressure and sales have been weak and so have been the margins for this business. So we have some amount of portfolio shift that has been happening. So you see that compared to other segments, the Portable Spirits business and the Bio-Fuels business have taken a larger share, both in terms of revenue or EBIT in this year, which is more or less in line with our expectations. But we do think we have a strategy in place, which is working for the Chemicals business as well as the Ennature Biopharma business. So let me start by talking about the Chemicals business. So we achieved a INR 300 crore top line with an EBIT of INR 33 crores, margin expanded 100 basis points to 10.9%. I mentioned to you about Performance Chemicals and the strong growth by the joint venture. We sell ethylene oxide into the joint venture. Some of the areas in the Chemical segment have been under pressure. While we continue to sell glycol in niche markets, the gap with respect to crude-based MEG has increased, which means while there is still interest for green MEG, but if the gap continues to be high, there is increased pressure. Crude prices have been lower, which means crude-based MEG prices have been lower. The demand for PET, PET resin, et cetera, has been softer. Having said that, I think we -- at a more longer-term level, we continue to believe that MEG will continue to see steady growth. More importantly, greener MEG of which plant-based MEG is one part is expected to see double-digit growth over the period of time. In the Portable Spirits business, our revenue is up to INR 342 crores, up 22.4%. EBIT at INR 72 crores is up 47.4% and margins are up at 21.1%. We have been focusing since last year on the partnership with Amrut because that gives us an opportunity to look at premium brands and acquire some brands which Amrut had not been focusing on as they focus more on their single malts and it allows us to move up the value chain. Our focus so far has been UP, Uttarakhand and Delhi. And we have now included Amrut's Prestige Whiskey, which also in addition to others, we shall be adding to manufacturing, bottling and marketing that IGL shall be doing for these brands on a royalty basis. I spoke to you about strong performance in Country Liquor with our flagship brand, Bunty Bubli, continuing to be the highest selling any liquor brand in India for 3 consecutive years. In a newer segment that we had entered last year, we've seen strong growth, which is the Paramilitary segment, where we've strengthened our sales position and where IGL now supplies 5 brands and is amongst top 4 suppliers out of the 66 companies that had participated. We have also introduced some of our brands, in-house brands like Zumba Lemoni, Amazing Vodka in Kerala, which we consider a high potential market and also a market where we would like to increase sales for some of these relatively premium brands. We continue to hold leadership position, as I mentioned, in Country Liquor and IMFL, I mentioned that before. We've spoken about the Bio-Fuel strategy before. I think it is something that we take some satisfaction in. Many of you have been attending our calls for the last 3-plus years when we've been speaking about the Bio-Fuel segment. So by and large, I think the government's strategy to blend Bio-Fuels starting from whenever 2017 onwards has been very robust. It has more or less gone as per plan. In fact, the initial plan of blending 20% is now -- was to be there by 2030. That was preponed to 2025. And as far as I know, we are well on track to deliver in '25. Now when we say 20% blending, it does not mean that 20% is happening throughout the country. There are some portions, for example, in Northeast where blending is over, but it means that in several big states, up to 20% blending has been achieved. An empowered set of personnel from ministry, along with [indiscernible], we're looking at enhancing the blending to anywhere between 25% to 30% by 2030. There are signs that, to some extent, government is likely to move that forward. But I think we'll wait for the final call and which essentially means that the Bio-Fuels business is expected to continue to grow, one, because of increased consumption; second, because of increased penetration across the country; and thirdly, if there is an increased blending mandate and the more India looks at energy independence, I think there is -- that is one more adding factor to continue to drive this forward, looking also at ForEx outputs. The Ennature Biopharma segment broadly has 2 big molecules, thiocolchicoside and nicotine and various derivatives of them. Two of them have been facing some challenges primarily because of slowing demand in terms of the developed country markets. Thiocolchicoside particularly goes via Turkey to EU. Nicotine demand is there, but there's also capacity and there are a number of new entrants that is putting some margin pressure. But broadly, the strategy of the company has been to continue to come with differentiated products on purity profiling, continue to get regulatory approvals to participate in developed markets like U.S., Europe, Japan. We made good progress in that area. Continue to look at our formulations and the branded portfolio. So whilst the business -- this particular business has been under pressure, but I think the broad strategy has been very clear. We will continue to maintain the market but look at differentiation, registrations and regulatory qualifications, branded and formulated products to drive this business forward. You've all heard about restructuring. I'll just talk about the rationale. You are aware of it. And I think greater details, if you have any questions on it, my colleague [indiscernible] will take it broadly. The idea has been to look at our businesses to enhance value. The idea is to put together Portable Spirits business and the ethanol or the Bio-Fuel business together into one business, which will be called IGL Spirits. To put the Chemicals business, value-added Chemicals business and the Clariant JV into one cluster. Clariant JV, I think because that sells chemicals and the profit from the joint ventures come into that entity and to put Ennature Biopharma along with the biopolymers business into another business. The idea is that different investors have different appetite for different kind of businesses. So that gives us an opportunity to write these businesses with different strategies satisfying how different investors may have interest in different businesses. Whilst we will continue to build on some synergies that we have because of the proximity of our plants and the integration of our business models that exist. There are some numbers to share, which have already been shared. I will take a pause here and see that I may have missed out, particularly on the financial front because I've just given a very high-level overview. I will request Anandji to give some more details and take your questions.

So I think the results are already with all the investors. And just to read out the brief. So on the consolidated basis, I think, the CEO sir has already briefed. The EBITDA vis-a-vis Q1 in the current quarter is almost about 19% up, amounting to INR 151 crores vis-a-vis INR 128 crores in Q1 last year. The PAT is INR 73 crores vis-a-vis INR 60 crores in Q1 in the last year, which is up by 21%. And the EPS for the current quarter is INR 23.66, which is again up by 21% in the last quarter -- last year for Q1. So this is very brief I am giving and ready to take the question and answer because I'm not taking much time, I will request to start the question-answer session.

[Operator Instructions] The first question is from the line of Balasubramanian from Arihant Capital Markets Limited.

Congratulations for a good set of numbers. Sir, my first question in the Portable Spirits side, I think we have seen highest selling brand of Bunty Bubli, I just want to understand how this dominance is sustainable. And secondly, we are focusing on especially in Delhi, Haryana and targeting Paramilitary in CSD channels and how these channels are picking up? And thirdly, in the Amrut side, we're targeting INR 850 to INR 1,100 in that range for our brands. And how these things are getting adaptable in the market? And finally, if you could share what is the breakup between IMFL and Country Liquor, approximately that would be.

So Bala, thank you. You've given us a question paper. I have my colleague, Rajuji here, but I'll try and answer just the first one, which is strong Bunty Bubli, and I will request -- Shuklaji is there? Shuklaji, are you there?

Yes, sir. I am here.

So their question was how have you managed to be #1 in Bunty Bubli? And how do you think that will be sustained? So I would request you to respond that. I was not sure if you are there. So yes, please. And then I think you and Rajuji can take the remaining.

Okay. Okay. Thank you. So Bunty Bubli is the brand which came in the picture in 2006. And after 2006, because we are growing this brand approximately 15% to 20% every year. And the peculiar character of this brand is made from the rose and lime, which be more comfortable to the drinkers. So that's why we have the -- in the Country Liquor segment, the liquor is in 3 categories, 25 degree, 36 degree and 42.8 volume by volume strength. And in all strength, this brand is the most favorable brand because customers liking growing day by day. And our size is currently approximately we are holding more than the 24% to 25% the share and [indiscernible] brand is around 16%. So this is the undoubtedly most favored brand in the Country Liquor segment, especially in UP. Rajuji, over to you.

Hello. I'm Raju Vaziraney speaking. The next question -- I'll come to the point straight away. The next question was on Delhi and Paramilitary and other segments, how are we growing? See, Delhi is a very safe market as far as payments are concerned. It's well known. And Delhi, we -- I take satisfaction in mentioning that we are in 3 segments in particular. One is the regular segment where our Soulmate Blue is among the top 3 brands in the state of Delhi, and we command that position for the last so many years. We have a license in Delhi for the last 25 years. So in other words, IGL is a prominent player in Delhi market. Second is the segment of Vodka. Again, we are among the top 3 brands. There are more than 35 brands in Delhi of vodka, but we are among the top 3 brands of vodka in the state of Delhi. This is because of the fact that we use imported enhancers, which cost a little bit more, but the consumer shifts from other regular vodkas to our vodka. And once he or she shifts from the regular vodkas, he or she stays with us. We are increasing at an increasing rate in terms of market share. So this is the Vodka segment. The third segment, in fact, you clubbed it well with the third question, if I may say, that INR 850 and INR 1,000 segment. See, these are the 2 segments which are galloping. Galloping in the sense, the consumer is, all the time, very aspirational and all the time moving upwards and going up -- trading up the price ladder. So we -- it is very difficult to establish a whiskey brand in this premium price point. This is with reference to Delhi. As you rightly said, these are the price points of Delhi market. So this segment is growing in high double digits, and there was every reason for us to address this because of 2 reasons. One is our extra neutral alcohol, which goes to Diageo, Pernod, Radico, name the top big, big companies world over. It is used by all of them. So there was every reason for us to use it for our captive consumption. And we have -- as our CEO rightly said, we have, in conjunction with Amrut, taken certain brands on royalty. So we have made 2 brands. One is Maqintosh White Label, which is at INR 850 and one is Maqintosh Black Label, which is at INR 1,100. These 2 segments are growing, and we are able to capitalize on the growth, and we are able to get more than 10% market share. We have not even completed 1 year of its launch. And it is quite satisfying that we have more than 10% market share. Now as far as your third question or partially third question was Paramilitary. As our CEO rightly mentioned, there were 66 -- this is an annual contract for -- just to elucidate for the benefit of everyone, Paramilitary means ITBP, BSF, CRPF and SSB. So these are the 4 arms of the defense forces, which are paramilitary, which complement -- they defend the internal that is India operation. Army defends the borders. That is the difference. So they are under Ministry of Home Affairs, and they do an annual contract, which is generally extended for 1 more year. So effectively, it is 2-year contract. It is noteworthy that out of 66 companies who tendered, less than half of them got approval, including IGL. And we are among -- we are the #4 company already in India. And just to mention that this is all India supplies so it has a snowballing effect on the civil sales as well. So this keeps us in good stead as far as our long-term pursuit of going national is concerned because we are able to feed as many as, as our CEO rightly mentioned, 5 brands across our price spectrum that we have got into the entire country. I can talk more about it. I'll be very glad to field any other question.

In that Bio-Fuel segment, what is the capacity utilization at this point of time? And we have seen the revenue growth is much, much better, but we have seen some margin contractions. Are we facing on that raw material side, any issues, how are we dependent on domestic line supply? And is there any risk on the gross margin side if corn adoption faces any regular hurdles?

So Bala, let me try and take that. And then if there is something else, then Shuklaji may add. So your question was with respect to the Bio-Fuel segment and whether there is a margin squeeze there or whether there is raw material issue. The short answer is there is no raw material issue. There were some hiccups last year, more to do with internal arrangements. There are multiple sources which the government has allowed, which includes sugarcane juice, C-heavy molasses, B-heavy molasses, rice, which is DFG, damaged food grain rice, surplus food grain as well as corn. And it is not a completely free market kind of system because the government has come up with very well thought through administrative price mechanism. They recognize what the various feedstocks costs are. And accordingly, if you see, different prices are given for ethanol, which is produced for using different feedstocks to make sure that there is balanced growth, there are many factors to be balanced. There is agricultural factors, there are climatic factors, there is factors to do with MSP, factors to do with excess food and storage, et cetera. And in terms of gross margins, as you know, there are 3 factors which lead to the money that we made in the Bio-Fuel space. One is the administrative price. Second is the cost of the grain which is used, which is, for our case, either damaged food grain, DFG or surplus food grain. And the fourth factor is at what price are we able to sell DDGS, which is the byproduct consuming protein. So like we continue to look at the overall profitability that we get, the government also continues to look at that. It is a flagship program for the government. So it's very important that people who have invested continue to support this program. So what we have seen ever since we have participated in the market, there have been times when margins go up, margins come down a little bit. But the regulatory bodies play a significant role in making sure with respect to availability of feedstock, with respect to adjustment of prices, which they have done from time to time. But by and large, a steady decent margin, not necessarily steady in the shorter term is made. And I have no reasons to believe that, that will go away. Now we also keep track of overall capacities that the country has. So the country has put up capacity, but we don't have much excess capacity compared to the total [Technical Difficulty] will continue to grow and people will continue to add steady capacity, but there is no huge excess capacity which will impact. So to answer your question, we are not in a situation where suddenly you'll see a glut because of either raw materials are not available or suddenly because of market factors, prices collapse. Prices are determined by the government. The government takes several supporting actions to make sure feedstocks are available. So whilst there is some level of uncertainty on all businesses, so while -- and to some extent, you may say that at times, we may think that we could make more money, but this is a more steady, reasonably supported business backed by a national ethanol blending program. And at least I don't have undue concerns, and I have definitely spoken to you about this for the last 3.5 years. And at times, I was a little conservative, which also some people did not like. But at the same time, I was reasonably confident that this is not just a splash in the band. This is a well thought through agenda, which the government has executed quite well, and I think industry players have come up to support that and deliver it throughout the country quite well. And if you look at how the blending has gone up in the country from something like 5% in '19, '20, to 10% in 2021, to 10% in '21, '22, there was a hiccup, to 12% in '22-'23, to 15% in '23-'24, to 19% in '24, '25, and we are expecting to do 20% in '25, '26, which, mind you, is ahead of the original plan of delivering this by 2030. So I would not be overly concerned, and I would request you not to be overly concerned.

Sir, Balasubramanian, we will request you to join the question queue again as there are other several participants. The next question is from the line of Saket Kapoor from Kapoor & Company.

So firstly, sir, with now Q1 through and we have the remaining 3 quarters. So as an organization, what are our key operational and financial agendas or the thought process of the management for this current year? Because I think so finance cost is the area that needs attention. And what steps are we taking to reduce the impact of the same? My first question. Secondly, on the CapEx part, last year, we did around INR 750 crores, INR 700 crores-odd number. What has been envisaged for the current year? And what are the current maturities which are payable for the current financial year?

So Saket, after we answer your question, hopefully, you'll buy some more IGL shares. No, that was on a lighter note. ahead.

So regarding the finance cost, Saket, as such, as of now, we are not planning to raise equity or something. That is always in the pipeline, always from last 7, 8 years. But since inception 1989, the company has not done any public issuance. So yes, that finance cost is in our also mind that, that is increasing, and we will certainly check that. But number two, regarding the CapEx, we are not planning to do any huge CapEx in the current year. So hopefully, the current year CapEx will be the rollover CapEx, which are coming from the last year or maybe maintenance CapEx, which will be about INR 40 crores to INR 50 crores per year. So we are not targeting any big size CapEx in this year, and we will like to consolidate. And after the demerger, the separate companies will think over the CapEx. And regarding the financial performance, what you said, so I think the Q1 number is already indicating about the financials of the company when the company has already achieved INR 23.66 EPS. So rest, you can think of on your own. I cannot give you the numbers and the projections because that is not allowed. But you yourself can rather guess what will be the financial numbers of the company.

Sir, my question was really towards the trajectory part since a lot of CapEx has gone through. So as you mentioned that our key agenda should be how to sweat those assets and create value out of it. So that was the premise of the question. And for the current year, sir, what are the current maturities? How much is payable? And are we going to pay through the internal accruals?

Whatever CapEx is going on, that has already been funded. So we are not targeting any fresh loan. And whatever the maintenance CapEx will be there, that will be from the internal accruals.

Okay. Current maturity, sir, how much of the loan is due for repayment for this...

Current year, the repayment will be about INR 300 crores.

Okay. And this will be through the cash accruals only. We will be lowering the debt by that tune for this year?

Hardly any debt will be there, maybe INR 100 crores, INR 150 crores. But yes, INR 325 crores is the figure, which is payable, which will be paid out of the cash accruals.

Right, sir. And sir, now coming to the JV performance, I think so the JV performance has been very good if you take the Q-on-Q number. And last year, the contribution was closer to INR 47 crores. And this -- the first quarter itself it is now INR 19 crores. So what factors that -- actually, Rupark sir did mention, but if you could allude more -- describe more on to the same and the continuity of the same, what should be factored in?

Okay. So Saket, I mentioned a couple of points. One is that we had faced a challenge where the cost differential between Reliances and IGL EO had gone up to as high as 42% in around mid of '23, July, August. Now that really came down to close to 12% to 14% in the quarter. And that was the highest that we have seen, which was 42%. In fact, if you go back prior to mid of '22, or before that, for 5, 10, 15 years, never had been seen something like this, which was pre-COVID times. Manish, is that reasonable? In fact, if at all, IGL EO cost was slightly lower than Reliances' EO sales rise. So the good thing is that we have tided over the biggest obstacle of as high as a 42% differential, and we are down to operating in the 12% to 15% range. We have no reasons to believe that it's going up to fundamentally to those high levels. That is one. So that has contributed in improving margins, getting more sales, and I think we've been able to not only sustain but drive our sales growth. That has contributed. The second thing, as I mentioned, it also improved trading. So when we formed the joint venture, Clariant had a trading business in India. When I say trading business in India, they don't buy products from everybody and sell it. I mean products that are manufactured in Clariant and sold in India through the Indian entity, and that business was put into the joint venture that the joint venture will do that part, which means that we have access to several technologies manufactured products throughout the Clariant world, which are sold into India, which also improved both the percentage margin as the absolute margin. This was the second factor. The third factor has been the enhancement of the product mix within what is manufactured in Kashipur, some actions taken from here, some are also taken because there is greater access to Clariant's application know-how, the product chemistry on the table, bouquet, so to say. So these are factors. Given that these are factors and given the end markets that the joint venture services, which you know, right, from personal care, pharma, crop care, textiles, lubricants, coatings, et cetera, which are also growing. There are reasons for us to believe that there were fundamental reasons for the JV to start doing well. The challenges which pose squeezed profits a couple of years ago. And as I said, whilst nobody can give you an exact number on how business is going to perform, but going by the fundamentals of what the markets are doing, what the JV is doing in terms of drive the business growth, we believe that, again, this is not a one-off. I think the JV will steadily -- in my opinion, you should expect JV to continue to steadily deliver good performance.