Jubilant Ingrevia Limited (JUBLINGREA) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Jubilant Ingrevia's Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pavleen Taneja, Head of Investor Relations at Jubilant Ingrevia Limited. Thank you, and over to you, Mr. Taneja.

Thank you, [indiscernible]. Good evening, everyone. Thank you for joining the quarter 1 of financial year 2026 Earnings Conference Call of Jubilant Ingrevia Limited. I would like to remind you that some of the statements made on the call today will be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release and results presentation that has been shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Deepak Jain, CEO and Managing Director; and Mr. Varun Gupta, CFO, Jubilant Ingrevia Limited. I now invite Mr. Shyam Bhartia to share his comments. Over to you, sir.

Thank you, Pavleen. A very good evening to everyone. Thank you for joining us on the quarter 1 of the financial year 2026 Earnings Conference Call of Jubilant Ingrevia Limited. We are pleased to present the financial results for the first quarter of this fiscal year. Our Specialty Chemical business has continued to perform strongly, growing in double digit year-on-year and with stable performance on quarter-on-quarter. Our Chemical Intermediates business has started to recover marginally quarter-on-quarter. Ongoing cost optimization initiatives further enhanced profitability with EBITDA for the [indiscernible] quarter rising 29% year-on-year and profit after tax increasing by an impressive 54% year-on-year. Let me share the overall market update with you all. The global chemical sector is emerging from the inventory destocking phase. Specialty Chemicals are seeing volume growth, though pricing remains stable. Commodity segments continue to face demand challenges with prices stabilizing at the lower levels. The pharmaceutical end-use market continues to show steady growth, driven by stable pricing and consistent volume growth across various derivatives as well as intermediate segment. The agrochemical sector continues its upward momentum, driven by strong volume growth, both year-on-year and quarter-on-quarter basis. Average prices have been stable for the last few quarters now. Nutrition market saw stable volumes during the quarter. Niacinamide demand remained muted as customers delayed purchases amid competitive offering, while choline demand rose notably with prices holding steady. The China +1 micro trend is creating more opportunities for us, especially in our Specialty Chemicals segment, where we are witnessing healthy funnel across subsegments. The recent imposition of antidumping duty in EU on Chinese choline products, vitamin B4 is expected to significantly enhance our competitive positioning in this choline chloride market across Europe. Now let me share a few details on our future outlook. FY '26, we anticipate continued growth and improved performance driven by advancements in our Specialty Chemicals and Nutrition businesses and expected recovery in acetyls portfolio. Alongside, we remain committed towards our Lean 2.0 cost efficiency initiatives to further improve our margins. We are on track to deliver the big CDMO order in early 2026, which should further accelerate our growth trajectory in coming quarter. With this, I now hand over to Deepak to discuss the business model in detail. Thank you.

Thank you, Mr. Bhartia. A very good evening to all of you. I would like to thank you all for joining us today for the Q1 FY '26 investor call of Jubilant Ingrevia Limited. As you know, we launched our Pinnacle 345 strategy last year with bold growth aspirations. In last 1 year, we have made significant progress across every building block of our new strategy. The early results of which are visible in our last few quarters' results with significant growth in our Specialty and Nutrition portfolio and increased EBITDA margins. In Q1 FY '26, we continued building on our Pinnacle journey and achieved several new milestones. Let me share a few highlights to demonstrate the progress. The Specialty and Nutrition segment continues to maintain a steady and dominant position, demonstrating significantly improved customer engagement that is actively fueling a strong and expanding business pipeline. This portfolio now contributes approximately 63% of the company's total revenue and an impressive 90% of its EBITDA, underscoring its strategic importance. Our core product platforms continue to drive growth and leadership in Q1 of FY '26. A few examples. Within the pyridine and picoline segment, we successfully maintained our global leadership and market share in both pyridine and beta picoline markets. Under our Fine Chemicals business, we sustained a robust growth trajectory, delivering over 15% year-on-year growth. Our leadership position across a broad portfolio of 36 pyridine derivatives remained intact, supported by strong customer engagement and operational excellence. We also witnessed an encouraging momentum in our diketene derivatives segment, characterized by high-capacity utilization levels. To support future growth and meet rising demand, we have already initiated capacity debottlenecking and expansion efforts for new product lines. Additionally, we expanded our cosmetic ingredients portfolio during the quarter, which has seen promising initial traction, particularly with key multinational customers. Under our CDMO business, the Pharma segment saw a significant expansion in its opportunity pipeline with the funnel doubling in size in the last few months. This growth has driven by strong traction with innovative pharmaceutical companies and Tier 1 CDMOs across key global markets, including the EU, U.S. and Japan. In the Agro segment, we started deliveries for first agro contract, progressed well on the plant construction for the second one and continued several other discussions with innovators. In the semiconductor segment, we now have over 12 opportunities in the pipeline, reflecting growing interest and demand. To support this momentum, we have made strategic investments in R&D and established a dedicated team focused on advancing our capabilities and offerings in this space. Under our Nutrition business, we continue to maintain our leadership position in vitamin B3, particularly in the animal feed segment. Additionally, we are actively ramping up our presence in the cosmetic and food grade segment, supported by the commissioning of our new production facility. In Animal Nutrition, we are witnessing strong traction in export markets, especially across Europe with our specialty portfolio registering double-digit growth across markets. On the Human Nutrition front, we have established a dedicated team that is now scaling up efforts in choline chloride and choline bitartrate and also developing several premix solutions for marquee customers. Furthermore, 2 to 3 new molecules are currently in the pipeline aimed at expanding our offerings and strengthening our position in the Human Nutrition segment. In the Acetyl segment, we successfully retained our market share in both domestic and EU markets for acetic anhydride, reaffirming our position as a reliable supplier in these geographies. Additionally, we achieved volume growth across other key products, including ethyl acetate and acetaldehyde, driven by consistent demand and operational efficiency. Throughout the quarter, we maintained a strong focus on cost optimization initiatives and have actively pursued capacity debottlenecking measures to support future scalability and enhance throughput across our product lines in acetyls. The key account management initiative is gaining momentum, evidenced by noticeable increase in inbound inquiries across pharma, agrochemicals, semiconductors, cosmetics and nutrition segments. Currently, there are over 70 high priority opportunities being actively pursued within the sales funnel, reflecting robust market interest and potential for future growth. To further capitalize on CAM momentum, we have strengthened our business development teams across key geographies, including the U.S., European Union and Japan, enabling deeper customer engagement and broader market coverage. As a result, we are witnessing a notable increase in revenue contribution from the U.S. and rest of the world markets with the U.S. revenue growing by 11% year-over-year and rest of the world revenue surging by an impressive 45% year-over-year. This growth has been primarily driven by strong performance of our Specialty Chemicals and Nutrition business segments. We are actively upgrading our plants through a sustained focus on safety, ESG and the disciplined implementation of [indiscernible] methodologies. As part of our Lean 2.0 cost optimization program, we have set a target of achieving annualized savings exceeding INR 100 crores in FY '26 and have progressed well in Q1. In parallel, we have initiated the integration of GenAI within our R&D functions and aimed at accelerating pipeline development and enhancing agility in product innovation and formulation processes. On the CapEx front, we continue to make strategic investments to support future growth and key capital expenditure milestones being successfully achieved. We successfully completed the plant modification for our first key CDMO order and started the deliveries with the first time right approach in Q1 FY '26. Also, CapEx execution remains on track for the $300 million big agro contract, and we expect to start the supplies in early 2026. The commissioning of the new boiler at our Bharuch facility is scheduled for Q2 of FY '26 with more than 99% work already completed. In addition, debottlenecking initiatives are actively underway to unlock additional capacity across our 4 platforms, including nicotine and pyridine. We have also commenced retail engineering work for a new multipurpose plant at Gajraula site , further reinforcing our commitment to expanding capabilities and supporting long-term demand. We expect to start the construction in the next few months for this plant. With above progress, we are confident that our top line and margins will continue to show the expected growth trajectory in the next few quarters. Now let me invite Varun to take you through the financial updates on all our 3 business segments individually and also give an overall financial update.

Thank you, Deepak. A very good evening to all of you. Let me start with Specialty Chemicals. During the quarter, the Specialty Chemicals segment revenue grew 11% on a year-on-year basis on account of higher sales coming from Fine Chemicals and CDMO businesses. During the quarter, Specialty Chemicals once again achieved its highest ever EBITDA of INR 130 crores and the EBITDA margin of 27%. The EBITDA for Specialty Chemicals grew by 52% on a year-on-year basis. For Nutrition & Health Solutions business segment, during the quarter, revenue marginally declined by 4% year-on-year on account of lower niacinamide prices and shipment delays as customers opted for lean inventories. The sequential drop in EBITDA was mainly driven by lower volumes and marginal drop in prices of niacinamide. Chemical Intermediates business segment. Segmental revenue and EBITDA improved sequentially during the quarter with revenue up 1.5% quarter-on-quarter, primarily driven by uptick in acetic and nitride volumes. EBITDA went up by 170 bps to 4.4% versus last quarter, driven by our focused cost initiatives in this segment. Regarding the overall financial update, the overall revenue during the quarter stood at INR 1,038 crores as against INR 1,024 crores in quarter 1 financial year '25. It is critical to note that our volumes grew by 5% in this quarter despite the macro challenges and typical muted momentum in quarter 1 in most segments. The EBITDA for the quarter was INR 153 crores, reflecting 29% rise on a year-on-year basis. The growth in EBITDA was primarily driven by margin improvements in the Specialty Chemicals and Nutrition business segment, along with various cost optimization initiatives. The net debt of the company as on 30th June was INR 700 crores, and the net debt-to-EBITDA ratio remained stable at 1.18x, calculated on the base of trailing 12 months EBITDA. The capital expenditure incurred during the quarter was around INR 54 crores, which was mainly utilized towards the upcoming CDMO agro plant at Bharuch and was primarily funded through internal accrual. In financial year '26, we plan to invest INR 600 crores in CapEx. The PAT for the quarter was INR 75 crores as against INR 49 crores in quarter 1 financial year '25, witnessing an increase of 54% on a year-on-year basis. We'll now be happy to address any questions that you have.

[Operator Instructions] First question is from Siddharth Gadekar from Equirus.

So the first question is on choline chloride. Can you give some sense on with this antidumping duty on China, what kind of opportunities this can open for us? And what kind of volumes and pricing delta that we can see in this segment?

Yes. Thank you, Siddharth. That's a good question and definitely an opportunity that we are very excited about. Choline chloride, as you may know, is a core product in our portfolio. We have been doing it for several years now, and we are the market leader in India with more than 50% share, and we have been exporting it to other markets as well. Recently, European Union has put a 125% duty on Chinese choline chloride, which opens up an opportunity for us. While we are still getting a sense of overall market, the initial numbers we have gathered from different sources run into tens of thousands of tons of market in Europe. We are already working on getting our product ready for European Union, and we are hopeful that within next couple of weeks, our first shipments will go to Europe. And once the product is accepted by the market, we are hoping we'll be able to scale it up. Like we have created a leadership position for ourselves for vitamin B3 in European market. We are hopeful that in vitamin B4, which is choline chloride also in Europe, we'll be able to build a leadership position for ourselves in coming years.

Just on the realization difference, what could be the realization difference between India and Europe because of this antidumping duty?

See, it's too early to say that Siddharth. What we do know is before the duties were put, there was already a premium that European market was paying to choline chloride versus what the prices in India are. And with the duties being put, we are hopeful that the premium will only increase. The exact quantum of that, we will know once we start sending materials to the customers. We are in touch with the customers. So I don't want to speculate the prices right now, but definitely, the realizations will be better than India.

Sir, secondly, the multipurpose plant that you spoke about, can you give some sense on what kind of CapEx that we would be doing for the new multipurpose plant? And is this for the new customer contract that we would be looking to sign up? Or this is -- we are just setting up capacities in anticipation of the demand?

Yes. So this is -- as I mentioned in my opening remarks, this is a multipurpose plant. And that, by definition, will be serving several product categories in our fine chemicals as well as CDMO portfolio, very much similar to the way our 7 existing multipurpose plants serve our CDMO and Fine Chemicals business from Gajraula today. So no, it is not a dedicated plant for any particular contract, but it is in anticipation of the products and the volumes we are expecting in some of our core as well as new product categories in the next year or so. And for most of them, we are already in advanced stages of discussions with the customers. And we are building the -- or at least conceptualizing right now the plant in a way that there is enough fungibility in the plant to fit in multiple products as per the need. And linking it back to the other comment I made in my opening remarks, we are in discussion with our key accounts for almost 70-plus different opportunities, and we are hopeful many of them will start materializing in coming quarters. So we want to be ready with capacity as we get confirmations from our customers.

The next question is from Pradeep Thakur from Edelweiss Mutual Fund.

My question is, sir, during the recent investor meet, the company had guided that the additional INR 2,000 crore investment that you would have done, you would reach a peak revenue of INR 8,000 crores by FY '27. Does the management still maintain this outlook, sir?

So Pradeep, you're right, we have invested INR 2,000 crores. And with the dedicated plant that we are building in Bharuch for the big agro contract, that INR 2,000 crores will get completed later this year. But the peak potential of that, I think even in the Investor Day was not INR 8,000 crores, but we had said around INR 6,500 crores depending on the pricing. And we maintain that view that from today, once all of this CapEx gets fully utilized and hopefully in FY '27, we will get closer to that number. But as I mentioned in the Investor Day also, a lot depends on pricing as well because in certain segments, pricing are still volatile and have not come back completely. So let's see how prices come back. But we do hope to utilize the capacity built through this INR 2,000 crores to be almost 70%, 80% utilized by end of FY '27.

All right, sir. Sir, my second question is regarding the agro CDMO discussions that the company is engaged in. When can we expect a few other agro CDMO contracts to be awarded to us, sir?

Yes. So that we are working on them. And obviously, we announced 2 last year in October. There are at least 5 to 6 more as I've been updating all of you in these quarterly calls. A couple of them are in advanced stages. It also depends on the global macro environment, which has just started to turn around. So we are hopeful in coming months or a couple of quarters, we'll get more confirmations. But we are in constant touch with the customers. We are -- we have sent samples also in a couple of them. So all of that is on track. It's hopefully just a matter of time.

Sir, last question is, now that you are seeing demand coming back, in most of your segments, how confident are you that this demand won't fade away and there would be a meaningful recovery?

So Pradeep, obviously, like chemicals business goes through cycles, and we are coming out of a very deep negative cycle. And if you look at segment by segment, agrochemical volumes, you look at the results of the MNCs as well as our Indian peers, we are seeing improvement in volumes. In pharma also, there is stability in volumes and prices are holding up. Nutrition is also, by and large, holding up the volumes. So given that it's been almost 7, 8 quarters of low volumes, acetyls also, by the way, as Varun mentioned in his notes, there is some increase in volumes in the last quarter. So we are hopeful that we are coming out of the deep trough we were in. Obviously, if some other external global event happens or if the tariff situation moves against us, not just as a country, but as an industry, then anything can happen. But at least at this stage, based on the indications we have from our customers, based on the results we are seeing of our peers as well as customers and our own volumes in different segments, we are hopeful that this will be a more sustained recovery, the pace of which, of course, varies depending on which segment you are talking about.

The next question is from Rohit Nagraj from B&K Securities.

Sir, first question is the 70 molecules pipeline that you talked about. So 2 parts. One is what is the kind of addressable market for these molecules? And second, is there any particular geography that we are concentrating either in terms of import substitution or maybe certain markets like Europe or so? So just a little clarity on this would be helpful.

Yes. So I think while I won't give specific numbers, but what I can say, given that these 70 opportunities we have kind of created by engaging deeply with our key accounts, 30-plus key accounts over the last 2 years. These are reasonably scaled opportunities. And at an overall level, the overall addressable market will run into thousands of crores. Now of course, -- they are at different stages of maturity in our sales funnel. I'm hopeful that over a period of time, 70%, 80% of that will materialize, but we'll see. As I said earlier, it also depends on a lot of external factors, customers' own plans. But at this stage, we are quite well poised and we are doing everything from our side to give comfort and confidence to our customers that we are the right partner for these opportunities. To your second question, the opportunities are spread across the 3 geographies, which I mentioned in my opening comments, which are EU, which has been a traditionally strong market for us, U.S., where we are focusing very heavily, and we have doubled our business in FY '25 versus FY '24; and Japan, where we are relatively new, but we have gotten very good traction in the last 1 year there, and we are getting new opportunities from there as well.

Sir, second question, in terms of pyridine picoline, where we have a global leadership position. So in terms of the pricing, do we not have any material advantage given that we are the largest producer and we can dictate the prices to some extent, similar to what Chinese players usually do. So do we not have that kind of an advantage here? And if not, what beers us in terms of the pricing volatility? Is it predominantly demand led? Or are there any other factors to it?

Yes. So we are the leader. As you rightly said, we run our plants at 80% capacity utilization in pyridine and picoline. We do have some price advantage, particularly in the U.S. market where we are sweetly pleased vis-a-vis Chinese. We do get some price premium sometimes in European market also for specific segments, particularly for picoline. But I think that segment is driven more by our scale and cost because we continuously keep working on the cost structure and keep optimizing it. And hence, our imperative as well as intent there is always to ensure we protect our market share and run our plants at 80% plus utilization. So while we do have some power to command premium, particularly in markets like U.S. and for certain specific applications in that segment, our focus is always to get -- maximize our volumes and keep our cost structure the leanest.

Next question is from Rohan Mehta from Ficom Family Office.

So I wanted to understand what percentage of ethyl acetate in terms of -- is part of your Chemical Intermediates revenue? That's the first question. And secondly, on the entire Chemical Intermediates space, I think we saw a bounce back in terms of EBITDA margins. Last quarter, you reported at about 2.5% to 3% margins. And this quarter, it's been better. So do you feel that, that bottom now has been made and prices can at least stabilize in the interim at these levels?

Yes. So to the first question, Rohan, unfortunately, I won't be able to give you specific numbers, but all I would say because we never disclose at product level numbers externally. But what I can say is ethyl acetate is a key product in our portfolio along with acetic anhydride. The 2 products together form bulk of our acetyl segments, and we are pushing hard on both, and we have a significant share of the market in -- particularly in the domestic market for both the products, and we intend to protect that position, and we have been growing volumes in both in the last few quarters, as I said in my opening remarks. To the second question, yes, we are all hopeful acetyls has gone through a long low cycle now almost 6 to 8 quarters. And we have seen some upticks in volumes, particularly end applications in agrochemicals for acetic anhydride and some of the industrial segments for ethyl acetate. So, we are hopeful that volumes will hold up now. And as that happens and with all the cost initiatives, we have taken to optimize our cost structure for both the products, we hope to continue to be competitive in the market and maintain our share, if not grow it further. And with that, we are hopeful that margins should improve. Now of course, that market is volatile, so anything can happen within a week's time. But looking at the fundamentals, the growth coming back in the key segments of agrochem, as I was saying, as well as pharma and some of the consumer segments where these 2 chemicals go, we are hopeful that we have seen the worst and we are coming out of it. The pace of recovery could be slower than what we have seen in the past for this product, at least based on the initial indication that I have heard from our customers. But let's see. I think we'll have to see for another quarter or two how this pans out and whether the volumes hold up or not to be able to draw any meaningful conclusion on the long-term trajectory.

Okay. And my second question is, so I think one of your domestic competitors in the acetyl space, we actually reported worsening EBITDA on this front. So I'm just trying to understand, was it purely the acetic acid prices which helped you, or apart from your lean initiatives, was there something more to the margins jumping?

See, I won't be able to comment on any other players' performance. But regarding our business, it's a combination. Like I said, our volumes have grown. So that has clearly given us the scale. Our cost initiatives, we have been continuously working on, so that are helping us as well. Pricing has been muted. In fact, sometimes or most times, it has acted negatively, especially versus last year. On a quarter-to-quarter basis, I think it's been pretty stable, if I remember correctly. So it's largely driven by the volume increase as well as the cost initiatives.

Next question is from Jun Shek from Awriga Capital.