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There’s a slowdown in agro segment but better traction in pharma, monomers & personal care: Anupam Rasayan management

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Vishal Thakkar, Deputy CFO and Gopal Agrawal, CEO, Anupam Rasayan, in conversation with ET Now. Agrawal says: “Even in FY24, our EBITDA margins have been steady and that is precisely the reason where the nature of the contract with our customers has helped. While, one could see a little bit of a pressure overall, for us as a company, given the nature of the contract which is completely a pass through with the customer, we did not see any margin compression. Going forward, the delta for us would come via increased revenue, while the margin percentage would more or less remain the same.”

You have signed a LOI with the Japanese MNC as well and of late we have heard a lot of these big announcements and the tie-ups being done with other global players as well. What is the revenue projection in terms of the contribution coming in from this deal in FY25? What are the other such discussions in the pipeline?
Vishal Thakkar: I want to take a little step back and say that over the last six-seven years, we have been investing into this geography and with that we have been able to build a relationship over a period of time. We have created enough and more pipeline in terms of products and I think that effort is really culminating into some results now. If you look at it, in the last 18 months we built a strong team there, a local team and local presence. That has also helped us to interact with the customers better capitalising on the positions that we had there. Our CEO, Mr Gopal, also going there regularly over the last 12 months on a monthly basis, has also helped us in terms of crystallizing this business better.But overall in terms of the order outlook for FY25, which segment has been showing the maximum amount of traction and which geographies are doing well because the demand was subdued for a bit of a part of last year? Is it expected to pick up from the first half of this year?
Vishal Thakkar:
See, I would not want to speak specifically about quarter to quarter because I am in a silent period, but tractionally and directionally I can say that yes, the overall market is subdued as everybody knows, but Japan is one geography that has really worked well for us and we are seeing a lot of buoyancy there. America is another one that we expect would come up further. If you look at my LOIs and contracts that we have signed over the last 12 to 18 months, you would see that being reflected there.

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Let us talk about your order book outlook for FY25. How is it looking? Also, could you highlight the current pricing trend in raw materials?
Gopal Agrawal: Two things, so as far as the trend is concerned, I would say we have seen a slowdown as far as the agro segment is concerned. But we are seeing enough and more traction on pharma, on monomers and on the personal care side. Hence, I would say it is a bit of a mixed bag.

One could see, maybe a bit of headwinds as far as agro-chem is concerned for the next couple of quarters which we were hoping to end by March. But yes, I guess it is taking a little longer than what we thought. So that is basically the overall trend.

As regards your question on pricing, if I specifically on Anupam, most of our contracts are such that we are either the sole supplier or the primary supplier to our customer. Hence for us everything is a pass through and to that extent any change in, let us say, raw material pricing or otherwise basically is a non-event because any benefit of raw material reduction will be passed on to the customers. Similarly, if there is any price rise, that will be passed on to customers too.

But now there are concerns that the dumping by China is restarting again. Is that a bit of a worry for you? Is that something that would impact the company?
Gopal Agrawal: If I was to talk about Anupam in particular, for us that is not a concern. We have basically started manufacturing what they were manufacturing in their own geography. So, for example, even some of the recent contracts, which we are signing with our Japanese customers are largely driven by some of the products there or they are innovating some of the products which are basically getting passed on to us.

It is an effort of four to six years where we have been working with them and some of these products which are coming to us are going to be the products where we will be either the only supplier or among the primary suppliers. Hence, to an extent, dumping by any country or otherwise or geography could only have a minimal impact as far as Anupam is concerned.

For us, these are basically products or contracts which would last a minimum of five to seven years and to the extent, we are isolated from some of those challenges which some of our industry peers may be facing.What about the balance sheet situation because you had raised the fund through a preferential issue. You had a lot of capex lined up but that was expected to get over in 12 to 18 months and then you were expected to become debt-free. What is the latest in terms of the strategy? Are you on track because you had backed your working capital reduction target earlier?
Vishal Thakkar: I would not get to the specific numbers of the quarter end and will talk directionally because we are in the silent period.

What we had said is that my capex plan is now going to close probably in the next quarter or so. So that way, my capex plan is smoothly completed. Coming to the debt side, we had raised the preferential issue and warrants. So, when the balance amount of warrants is expected in another three to four quarters, all the term loans will get to zero or net term loan debt will be my zero and that is the target. Today also, we have repaid enough of the money we had raised via preferential issue and from warrants to repay the debt. You will see the numbers trickling into my financial numbers which I will report in a month’s time.

How should one look at the growth that is expected from the company in the next couple of years given that previously in FY23, we have seen good growth on a year-on-year basis, FY24 was not that exciting but FY25-26 as a vision was good. What is the target that you all are keeping and what is the growth that one could expect?
Vishal Thakkar: We believe this is a hiatus year. Give us some time to really get there with specific numbers. However, if you look at it tractionally and directionally, growth should come back and especially if you see the contribution from Japan, contribution from the pharma and other segments. We believe that growth of 26-27-28% is possible. The numbers should look robust again in terms of growth.

But will this rebound also come with better margins? What kind of recovery do you envisage in FY25-26?
Gopal Agrawal: We definitely are seeing a much positive outlook from a long-term perspective and that is also visible from some of these alloys and contracts which we have signed, which will fructify, starting from next year for the next four to five years. As far as the margin is concerned, for us most of our contracts are basically a pass through.

So, even in FY24, our EBITDA margins have been steady and that is precisely the reason where the nature of the contract with our customers has helped. While, one could see a little bit of a pressure overall, for us as a company, given the nature of the contract which is completely a pass through with the customer, we did not see any margin compression. Going forward, the delta for us would come via increased revenue, while the margin percentage would more or less remain the same.

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