Hikal Ltd (HIKAL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Good evening ladies and gentlemen, you are connected to the Hikal Limited earnings conference call. Please stay connected, this conference will begin shortly. We thank you for your patience. Participants, good evening, you are connected to the Hikal Limited conference call. Please stay connected, this conference will begin shortly. We thank you for your patience.
Moderator: Ladies and gentlemen, good day and welcome to the Q2 and H1 FY '27 earnings conference call of Hikal 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 the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Hiremath, Chairman and Managing Director from Hikal Limited. Thank you and over to you, sir.
Sameer Hiremath (Hikal Limited): Thank you. Ladies and gentlemen, a very good evening and a warm welcome to all of you. We extend our gratitude to all of you for your participation in our Q2 FY '27 results conference call. We are delighted to provide you with an update on the progress made by our company. We trust that you have had the opportunity to review our comprehensive earnings release, investor presentation, and the financial statements for the quarter ended 30th September 2026. These documents can be accessed on both Hikal's website and the stock exchanges' websites. I am Sameer Hiremath, Chairman and Managing Director, Hikal Limited, and I'll be leading the discussion and presenting the financial results. On this call with me, I have Anish Swadi, CEO of Animal Health and Specialty Ingredients, Kuldeep Jain, our Chief Financial Officer, Manoj Mehrotra, Head of our Pharma business, Ravi Kapoor, Head of our Crop Protection business, and Strategic Growth Advisors, our Investor Relations advisors. I'm pleased to report our performance for Q2 and H1 FY '27 with the Q2 revenue standing at 434 crores, an EBITDA of 5 45 crores and a margin of 10.3%. For H1 FY '27, revenues stood at 837 crores with an EBITDA of 82 crores and a margin of 9.8%. Our revenues, volume and EBITDA have grown compared to last year. However, profitability was impacted to some extent in the due to higher raw material prices, especially in our crop protection business. Our pharmaceutical business continued to progress supported by the recovery in our established API portfolio and sustained execution by increasing volumes in our CDMO business. In our own product portfolio, the legacy portfolio improved both sequentially and year-on-year. New products continue to advance with higher sales expected in H2 as production ramps up. Customer traction also strengthened across Latin America, Japan and Korea. In addition, regulatory approvals were secured in China
Sameer Hiremath (Hikal Limited): and Brazil for two products, widening market access and supporting future demand. In the CDMO pharma business, growth continued through contributions from our new product development pipeline for APIs and intermediates supported by strong customer relationships. I am pleased to share that our quality remediation program in our pharma business is well on track and we have received a certificate of GMP compliance from the Swissmedic Agency for our Bengaluru facility recently. This certification reinforces the strength of the quality systems and the remediation programs at our Bengaluru facility. It is an important step in expanding the global reach of our pharma business and creating opportunities with customers in Europe and other regulated markets. Compliance, quality, and manufacturing excellence remains central to our longer term customer partnerships. On the crop protection business, it continued to navigate a challenging operating environment impacted by elevated raw material and energy prices, as well as pricing pressure from Chinese competition. Our own product portfolio delivered a year-on-year growth supported by some of our legacy molecules. The CDMO business continued to focus on strengthening customer relationships and we're pursuing longer term programs beginning right from process development to commercial scale manufacturing in custom synthesis and commercial manufacturing. For that, I am pleased to share which I have shared with you at stalkers release made yesterday, that we have signed a multi-year contract with a European-based global agrochemical company to supply a specialized product to markets worldwide. Commercial launch is expected towards the end of this financial year with volumes anticipated to grow progressively as regulatory approvals are secured across global markets. This CDMO contract reflects our ability to combine technical expertise, process development and manufacturing capabilities to address complex customer product requirements and support the transition from lab to commercial scale. Our animal health business delivered year-on-year growth with contribution margin improved quarter-on-quarter. Our business, our current product was supported by higher volumes while the new product under the CDMO pipeline progressed from lab to validation and some into the lab as well. In the specialty ingredients portfolio, we achieved an important milestone in the commencement of, recently commenced commencement of commercial production of our new multi-purpose facility at Panoli. Our priorities are to progress customer validation approvals, which are well underway, and convert the ongoing engagements into commercial sales across key markets. With demand progressively shifting towards next generation UV filters and other complex skincare products, we believe this can become a meaningful growth contributor over the medium term. We continue to work towards a targeted US FDA re-inspection of our Bengaluru facility and are hopeful it happens towards the end of this current financial year. Successful completion of the regulatory process is expected to support recovery in our pharma business in the regulated markets and accelerate the current new CDMO pipeline. Looking ahead, we remain confident in our growth outlook in H2 versus last year. We reiterate our full-year guidance given in the last quarter for a mid-teens growth in revenue and a substantial improvement in profitability. Now, I'd like to invite Kuldeep Jain, CFO, to discuss the financial performance.
Kuldeep Jain (Hikal Limited): Thanks, Sameer, and good evening, everybody. For Q2 FY 2027, our re- revenue reported at Rs. 434 crore, EBITDA at Rs. 45 crore with the margin of 10.3%, and PAT at rupees 6 crore. For H1 2027, our revenue stood at Rs. 837 crore, EBITDA at rupees 82 crore with a margin of 9.8%, and PAT at rupees -14 crore. Depreciation charge remain same broadly during the last last year. Capital expenditure stood at Rs. 81 crore incurred towards de-bottlenecking, inventory, regulatory upgrades, and selective capacity creations. Our capital allocation remains targeted with priority given to high-returns project aligned with our long-term growth objectives. Elevated raw material prices have impacted, as Sameer had mentioned, our margins this year with key solvents and certain commodity prices increasing sharply
Kuldeep Jain (Hikal Limited): continue to be financed through a combination of internal accruals and external debts. As of 30th September 2026, our debt-to-equity ratio stood at 0.52. Now, I would like to hand over this call to Mr. Manoj Mehrotra, who is our President, Pharmaceutical, who will provide an overview on the pharmaceutical division's performance. Over to you, Manoj.
Manoj Mehrotra (Hikal Limited): Thank you, Kuldeep, and good evening, ladies and gentlemen. For Q2 FY27, the pharma business reported revenue of Rs. 278 crores, EBIT of Rs. 13 crores, and an EBIT margin of 4.6%. For H1 FY27, the pharmaceutical business reported revenue of Rs. 511 crores, EBIT of Rs. 20 crores, and an EBIT margin of 4%. The improvement over Q1 was led primarily by the established API portfolio with legacy portfolio recovering sequentially. New products continue to progress, and we expect higher sales in H2. Customer traction strengthened across Latin America, Japan, and Korea. During the quarter, we also secured regulatory approvals in China and Brazil for two established products, expanding market access and supporting future demand. Capacity utilization during the quarter ranged from 60% to 70% at our pharma manufacturing facilities, as we consciously slowed down production to comply with stringent quality standards. This was a strong quarter in compliance, the Swissmedic certification was received. We have completed 28 customer audits successfully. Our remediation program with the US FDA is on track, and we expect the reinspection by end of the current financial year. Our CDMO business continued to grow, supported by contributions from new products and intermediates and through deeper engagement with customers. Retentions remain strong across key accounts. The customer base includes a balanced mix of innovator companies and emerging biopharma customers across the US, Europe, and Japan, supporting both pipeline diversification and future growth. Opportunities span process development, intermediates, custom synthesis, FT models, and high potency chemistry, with several programs at proposal or RFP stages. To conclude, we are confident that our H2 performance will be significantly better than H1. Now, I would like to invite Mr. Ravi Kharbanda to provide an overview of Crop Protection division's performance.
Ravi Kapoor (Hikal Limited): Thank you, Manoj. And good evening, ladies and gentlemen. For Q2 FY27, the crop protection business reported revenue of Rs. 156 crores, EBIT of negative Rs. 2 crores, and an EBIT margin of negative 1.5%. For H1 FY27, the crop protection business reported revenue of Rs. 326 crores and an EBIT of Rs. negative 8 crores and an EBIT margin of negative 2.5%. Q2 was a challenging quarter. Elevated RM prices impacted our margins. Chinese competition kept global prices under severe pressure with customers buying only for immediate requirements. Our legacy portfolio remained the main growth driver with increasing volumes. In CDMO, demand was deferred to H2 and margins stayed under pressure. We are passing on majority of the price increases to the customers. On a positive note, as Sameer mentioned, we have signed a multi-year contract with a Europe-based global agrochemical company to supply a specialized product to markets worldwide. Commercial launch is expected towards the end of FY27 with volumes anticipated to grow progressively as regulatory approvals are secured across global markets. Customer engagement in Japan has increased, including alternate supplier opportunities for existing products. Now, I would like to introduce Mr. Anish Swadi, CEO, Animal Health and Specialty Ingredients, who will provide an overview of our emerging businesses. Thank you.
Anish Swadi (Hikal Limited): Thanks, Ravi. Good evening, everyone. Our animal health business continued to grow in revenue this quarter. Our existing product portfolio saw an increase in volumes
Anish Swadi (Hikal Limited): new CDMO projects are progressing well. Currently, we have three new KSMs under validation for an innovator customer and we are hopeful to commercialize this in the near future and the upcoming quarters. The business remains an important growth platform and we continue to work towards our overall ambition of growing the business to about 400 crores by FY '30. We currently have six products under development under the CDMO pipeline and over the next 12 months, we do expect to commercialize several of these. Regulatory progress is on track and a new filing completed during the quarter. We have nine process patents that have been filed from R&D over the last 12 months. Our long-term contracts with global innovators continues to be an anchor for this business. Under our specialty ingredients business, we have moved from plan to production this year with a commercial manufacturing commencing at our multi-purpose Panoli facility. We are now focused on stabilizing the production production, progressing customer validations and approvals, converting engagements into commercial deals across key markets. This opportunity is supported by market trends including the rising demand for functional specialty ingredients and the transition towards next-generation UV filters which is part of our portfolio. With this, I'd like to open up the floor to Q&A.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets when asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Aman Vora with Premier Capital. Please go ahead.
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