Sudeep Pharma Ltd (SUDEEPPHRM) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Sudeep Pharma Limited Q2 and H1 FY '27 Earnings Conference Call hosted by 360 ONE Capital Market Private Limited. 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 the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note this conference is being recorded. I now hand the conference over to Mr. Rohit. Thank you, and over to you, sir.
Rohit (360 ONE Capital Market Private Limited): Thanks, Nagmin. We thank Sudeep Pharma management for providing us the opportunity to host their 2Q FY '27 conference call. We have with us, Mr. Shanil Bayani, Whole-Time Director, and Mr. Ketan Vyas, Chief Financial Officer from Sudeep Pharma. I would like to hand over the call now to Shanil, sir, for his opening remarks, post which we will have Q&A session. Thanks, and over to you, sir.
Shanil Bhayani (Sudeep Pharma Ltd): Thank you, Rohit. And thank you to the 360 ONE team for hosting today's call. A warm welcome to everyone joining Sudeep Pharma's Q2 and H1 FY '27 earnings conference call. I trust you had the opportunity to review our results and investor presentation. I will begin with our operating performance, followed by updates on specialty ingredients, pharma food nutrition, and our battery materials business. We are pleased with our performance this quarter. Q2 marked our highest-ever quarterly revenue and EBITDA supported by strong growth in our core business and improvements in both gross margin and EBITDA margin. Revenue from operations reached 196 crores, growing 21% year-on-year and 24% sequentially. EBITDA stood at 73 crores, up 32% year-on-year. Gross margin improved to 64.7% compared to compared with 62.5% a year ago, while EBITDA margin increased to 37.2%, an improvement of over 300 basis points. PAT PAT stood at 51 crores, growing 11%, reflecting a higher effective blended tax rate together with lower other income. Ketan will explain this in more detail. These results reflect healthy customer demand and improving contribution from higher-value products and continued progress in manufacturing efficiencies. The principal operating challenge during the quarter was logistics, particularly elevated seafreight costs. Our selling and distribution expenditure was approximately 8 crores above the normal quarterly average, largely because of freight. We absorbed these costs without passing them on to our customers to honor our commitments and ensure on-time deliveries. Despite this additional expenditure, we were able to improve our operating margins. Let me now turn to specialty ingredients where accelerating growth is a key priority for us. Revenue stood at 54 crores, up 9% sequentially, although 25% lower year-on-year. Accelerating growth in this segment is a key priority, and our focus is on translating recent customer approvals and contracts into revenue and profitability. Two factors affected the segment's performance this quarter. First, the Government of India's fortified rice program, which is a significant contributor to this segment, has temporarily been paused. Procurement typically begins in August or September and contributed to Q2 revenue last year. That contrib- that contribution was absent this quarter, and we currently do not have visibility on whether the program will restart during this financial year. Second, NSS had a softer quarter with lower revenue and earnings. Despite these factors, we have good visibility into Q3 and Q4 through customer contracts and new approvals. During Q2, we received approvals from large customers across infant nutrition, dietary supplements, and human nutrition with commercial revenues expected to begin in Q3. These approvals expand our presence with large
Shanil Bhayani (Sudeep Pharma Ltd): and provide opportunities to build recurring volumes across multiple applications. As these contracts begin contributing, we expect Specialty Ingredients to return to positive year-on-year growth in Q3 and Q4, and make a stronger contribution to overall profitability. Importantly, this expectation is based on customer contracts and new business alone, and does not assume a restart of the fortified rice program. At NSS, we continue to strengthen the project pipeline. NSS has secured five customer approvals, and has approximately 12 customer projects at different stages of evaluation and development. We are we are broadening its customer reach beyond Ireland, and increasing sourcing from India, where it improves competitiveness and operating flexibility. Our focus is on converting these projects into regular commercial business, and the pro- and the progress so far gives us confidence in a stronger FY28 for NSS. Across Specialty Ingredients, the priority is clear: execute the contracts already secured, build the volumes with newly approved customers, and improve the contribution of the business to consolidated growth and profitability. Turning to Pharma, Food, Nutrition, the business delivered an excellent quarter, and demand continues to strengthen. Revenue grew 57% year-on-year to 142 crore, contributing approximately 72% of consolidated revenue. Segment segment EBITDA margin increased to approximately 41%, from 33% a year ago, while segment EBITDA nearly doubled. Growth was broad-based across India, Africa, APAC, and Europe, supported by our phosphate portfolio, new customer additions, and a growing contribution from higher value ingredients. In India, demand from pharmaceutical customers remained healthy across our core minerals ingredients across our core mineral ingredients. Africa and APAC benefited from new customers and opportunities across pharmaceutical applications and food fortification. In Europe, our direct commercial presence is helping convert customer approvals into regular orders, and deepen relationships with existing accounts. With our current facilities operating close to optimal utilization, additional capacity is an important next step. It gives us the ability to respond to demand, increase volumes with existing customers, and participate in larger supply opportunities. This is where our greenfield facility at Nandesari becomes particularly important. During the quarter, the facility received FDA approval, marking a significant milestone. With annual capacity of 51,000 tons, it provides substantial headroom across our existing PFN portfolio, and newer product categories, including glycinates, gluconates, citrates, and phosphates. The approval strengthens our ability to pursue a larger share of business from major customers who already know our products and capabilities. For these customers, having additional approved capacity gives us the opportunity to bid for larger volumes, and take take a greater share of their requirements. Customer qualifications are underway, and we expect commercial supplies to begin in H2 FY27, with utilization building as these qualifications convert into orders. Within PFN, magnesium bisglycinate is a product category we are particularly encouraged by. Our Absorbis range continues to grow strongly. As we mentioned on the previous call, Q1 sales had already exceeded sales for the whole of FY26, and the momentum continued in Q2. We see scope for significant sequential growth as customer additions and approvals translate into commercial volumes. Magnesium bisglycinate builds directly on our expertise in mineral chemistry, and our relationships with pharmaceutical, dietary supplement, and nutrition customers. It also supports a higher value product mix, with average realization more than three times the average of our PFN portfolio. We plan to introduce a dedicated brand, Magzobis, to strengthen the product visibility with supplement and nutrition customers. The greenfield facility includes dedicated glycinate capacity, giving us the manufacturing base to support this opportunity. With growing customer
Shanil Bhayani (Sudeep Pharma Ltd): With progress in approvals and additional capacity becoming available, we are optimistic that magnesium bisglycinate can become one of the top three revenue contributors within PFN over the next 2 to 3 years. Our focus will be on building that position through consistent quality, customer relationships, and reliable supply. Finally, let me turn to Sudeep Advance Materials, our battery materials business. The Dahej project continues to progress and we remain confident of commencing commercial operations in April 2027. Phase 1 will have an annual capacity of 25,000 tons of battery-grade iron phosphate, a key precursor in the LFP battery value chain. Our immediate focus remains on project execution, product qualification, and customer readiness so that commissioning is followed by a steady build-up of commercial supply. Customer engagements and contract discussions continue to advance. We see strong demand to support the first 100,000-ton annual capacity, and we expect to provide a more concrete update on firm, binding offtake contracts in Q4. In parallel, customer discussions for the next phase are progressing faster than expected, giving us increasing confidence in our planned expansion towards 200,000 tons of annual capacity. The pace of investment will remain aligned with firm customer commitments and progress in the initial phase. We are developing these relationships across U-- across the US, Korea, Europe, and India. A customer base across multiple geographies is an important part of our approach as we build long-term partnerships and establish the business. Disciplined capital allocation remains central to this project. We will assess each stage of investment against demand visibility, execution requirements, and the returns we expect to generate. Our objective is to build a business that uses capital efficiently and delivers attractive returns as it scales. We will keep all our stakeholders updated as commissioning progresses and customers agree-- and customer agreements reach firm milestones. To conclude, this has been a strong quarter for Sudeep Pharma with record revenue and EBITDA and improved margins. PFN continues to see strengthening demand. New customer contracts give us visibility for a better second half in Specialty Ingredients. The Nandesari facility provides capacity to deepen customer relationships and scale high-value products, while our Battery Materials project continues to move towards commercial operations. We remain confident in our business plan and focused on delivering against these opportunities with discipline. Thank you for your continued trust and support. We look forward to sustaining growth and creating long-term value for our shareholders. With that, I will hand over to our CFO, Mr. Ketan Vyas, to take you through the financial performance in more detail.
Ketan Vyas (Sudeep Pharma Ltd): Thank you, Shanil. And good afternoon to everyone. Sudeep Pharma delivered a strong performance in Q2 FY '27 with our highest ever quarterly revenue and EBITDA. For, let me start with Q2 FY '27 highlights. Revenue from operations grew 21% year-on-year to ₹196.7 crores, compared with INR 162.7 crore in Q2 FY '26. Sequentially, revenue grew 24% from INR 158.3 crore in Q1 FY '27. EBITDA grew 32% year-on-year to INR 73.2 crore, compared with INR 55.5 crore in Q2 FY '26, and 33% sequentially from INR 54.9 crore in Q1 FY '27. EBITDA margin was 37.2%, compared with 34 1-- 34.1% in Q2 FY '26 and 34.7% in Q1 FY '27. The supply chain cost, as Shanil mentioned, remains elevated in Q2 FY '27, above the normal levels. Our new greenfield plant is capitalized in the current quarter and put to use. With that being operative, expenses related to plant are now getting charged to the P&L. Similarly, certain expenditures on SAM are also part of the P&L. Profit after tax was 51.8 crores, compared with INR 46.8 crore in Q2 FY '26 and up 28% sequentially from INR 40.6 crore in Q1 FY '27. PAT margin was 26.3%. Year-on-year, PAT growth was lower than EBITDA growth mainly because of other income which was lower by
Ketan Vyas (Sudeep Pharma Ltd): and, against 10.2 crore in Q2 FY 26. And our effective tax rate was at 27% compared to about 21% last year. This was mainly due to depreciation increased because of the new asset getting capitalized and the revenue mix contributing from PFN, which has a higher tax rate of 28%. On an average of 28%. By geography, export accounted for about 65% of revenue and domestic sales as, for about 35%. Export grew 24% year-on-year. Moving on to the half-yearly financial performance, revenue from operations for H1 FY 27 grew 23% year-on-year to INR355 crore compared with INR287.6 crore in H1 FY 26. EBITDA grew 29% year-on-year to INR128.1 crore compared with INR99.3 crore in H1 FY 26 with an EBITDA margin of 36.1%, compared with 34.5% in H1 FY 26. PAT grew 18% year-on-year to INR92.4 crore compared with INR78 crore in H1 FY 26. H1 FY 27 delivered PAT margin of 25.22%. At the end of H1 FY 27, at consol level, cash flow from operation was 43.5 crore, up by 26 crore on year-on-year basis, driven by higher profitability and stable working capital. On the balance, we remained focused on the working capital discipline, and net working capital days remained at 214 days as on 30th September 2026, similar to the level of March 26, 25, 26. Considering the geopolitical situation, we strategically stocked up the raw materials of few key raw material, like purified phosphoric acid, to ensure our finished good demand are met to enough supply of raw material. The inventory also includes a bit of inventory built up on the battery project materials. We remain committed to bringing down our working capital cycle down to about 170 to 180 days, excluding the battery material inventory, and to about 150 days over a longer period of time. Capital expenditure in HY 27 was about 77 crore, mainly towards the battery material project at Dahej and the completion of the greenfield facility. Net debt was 72.5 crore as as of 30th September 2026, with net debt to net debt to equity ratio of about 0.07x compared with 33.6 crore and 0.04 04x as of 31st March 26. Even as we invest in our growth project, our balance sheet remains conservatively leveraged and gives us flexibility to fund the next phase of growth. Our returns on annualized basis ROCE for H1 FY 27 was 22.4% and and ROE on annualized basis was 19%. This returns are this returns are because are the numbers are because we have deployed the capacity, our capital to the greenfield facility and SAM, which are not yet which will start generating revenues in the coming period of time. As this project commence operations and scale up, we expect ROC to move, to improve. To conclude, we have delivered a strong half-first half with healthy growth in revenue and EBITDA. Our focus on high-value product, pricing discipline, and operational efficiency positions us well to meet our growth objective for FY 27. With this, I would like to conclude the presentation and open the floor for questions. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press "*" and "1" on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press "*" and "2". Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Sanjesh Jain (ICICI Securities): Yeah, good afternoon, thanks for the opportunity. I got few questions. First on the specialty chemical apart from fortified, how was the like-to-like growth if we if we adjust for the fortified rice program, which got paused, if we remove that, what was the underlying growth? And number two now that we don't have a visibility for even next couple of quarter for this to come back, what was the contribution of this segment in the second half, and and how much of it will be be able to compensate from the new order? So, what is the growth we are looking in the specialty for the
Sanjesh Jain (ICICI Securities): second half. That's the first portion. Second question on the margin. Now again, specialty the overall margin looks very, very strong and healthy. But if I look at segmental margins, the specialty margin was 28%, which is significantly lower than last year. The margin in the PFN has gone up very sharply. So, why was there so much of divergence in the margin in the two segments? These were my first set of questions. Thank you.
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