P I Industries Ltd:Annual Report 2023-24 Analysis

PI Industries Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: PI Industries Ltd. was established in 1947 by P.P. Singhal. Initially named Mewar Oil & General Mills Ltd., it primarily focused on edible oil extraction. The company gradually transitioned to agrochemical formulations and contract manufacturing.

Headquarters Location and Global Presence: The company’s headquarters are located in Gurugram, Haryana, India. PI Industries has a global presence, serving customers in various countries, including Asia, Europe, and the Americas.

Company Vision and Mission: While the specific, publicly stated vision and mission may vary, PI Industries generally focuses on providing innovative solutions in the agricultural sector, aiming to improve crop productivity and sustainability.

Key Milestones in Their Growth Journey:

• Early Years: Focus on edible oils.
• Transition to Agrochemicals: Shift to manufacturing and marketing agrochemical formulations.
• Contract Manufacturing: Significant growth in contract manufacturing for global agrochemical companies.
• Expansion and Diversification: Expansion into new product categories and geographies.
• Strategic Acquisitions: Acquisitions to strengthen product portfolio and market presence.

Stock Exchange Listing Details and Market Capitalization: PI Industries Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Market capitalization information can be found on financial websites like Google Finance, Yahoo Finance, and Bloomberg.

Recent Financial Performance Highlights: Refer to PI Industries’ official financial reports, investor presentations, and reputable financial news sources for up-to-date information.

Management Team and Leadership Structure: The company has a board of directors and a senior management team overseeing different functions, including finance, marketing, operations, and research and development.

Their Products #

Complete Product Portfolio with Categories: PI Industries’ product portfolio can be broadly categorized into:

• Agrochemicals: Insecticides, herbicides, fungicides, and plant growth regulators.
• Specialty Plant Nutrients: Products designed to enhance crop nutrition.
• Contract Manufacturing: Manufacturing services for global agrochemical companies.

Flagship or Signature Product Lines: The company has several well-known product lines within its agrochemical segment. Specific examples depend on market dynamics and can be found on PI Industries’ website and product brochures.

Key Technological Innovations or Patents: PI Industries focuses on innovation in formulation technology, delivery systems, and new molecule development.

Manufacturing Facilities and Production Capacity: PI Industries has multiple manufacturing facilities in India, with significant production capacity for both agrochemical formulations and active ingredients. Specific capacity numbers are usually not publicly disclosed.

Quality Certifications and Standards: PI Industries maintains various quality certifications and standards, including ISO certifications for quality management and environmental management systems.

Recent Product Launches or R&D Initiatives: Refer to PI Industries’ press releases, investor presentations, and annual reports for information on recent product launches and ongoing R&D efforts.

Primary Customers #

Target Industries and Sectors: Agriculture is the primary target sector, with farmers and agricultural businesses as the main customers.

Geographic Markets (Domestic vs. International): PI Industries serves both domestic and international markets.

Major Client Segments (Agricultural, Industrial, Residential, etc.): The primary client segment is agricultural.

Distribution Network and Sales Channels: PI Industries utilizes a wide distribution network involving distributors, retailers, and direct sales to reach farmers across various regions.

Major Competitors #

Direct Competitors in India and Globally: Major competitors include other agrochemical companies operating in India and globally.

How they differentiate from competitors: PI Industries differentiates itself through its focus on innovation, strong R&D capabilities, contract manufacturing expertise, and a wide distribution network.

Future Outlook #

Expansion Plans or Growth Strategy: PI Industries typically focuses on expanding its product portfolio, geographical reach, and contract manufacturing business.

Sustainability Initiatives or ESG Commitments: The company emphasizes sustainability in its operations and product development, focusing on environmentally friendly products and responsible agricultural practices.

Industry Trends Affecting Their Business: Trends affecting PI Industries include increasing demand for food, climate change impacts on agriculture, the adoption of precision agriculture technologies, and the regulatory environment for agrochemicals.

Financial Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from operations (Consolidated) increased from ₹64,920 million in FY2022-23 to ₹76,658 million in FY2023-24, registering a growth of 18%. Over the period from FY20-FY24, the revenue grew by a CAGR of 23%.
• EBITDA (Consolidated) increased to ₹20,252 million in FY2023-24 from ₹15,200 million on standalone basis in FY 2022-23, showing a growth of 31%.
• Profit After Tax (PAT) on a consolidated basis grew by 37% year-on-year, reaching ₹16,815 million in FY2023-24. On standalonne basis, PAT increased from 12,114 mn. in FY 2022-23 to 17,307 in FY 2023-24, registering growth of 42.87%
• Net Worth (Consolidated) increased from ₹71,985 million in FY2022-23 to ₹87,310 million in FY2023-24. The CAGR of net worth from FY20-FY24 was 35%.
• Return on Capital Employed (RoCE) (Consolidated) was 35% in FY2023-24.
• Earnings Per Share (EPS) (Consolidated) increased from ₹81.06 in FY2022-23 to ₹110.85 in FY2023-24 and reflected a CAGR of 35% over five-year period.

Business Segment Performance #

• AgChem exports grew by 19% year-on-year, driven mainly by volume increases from the scale-up of existing products and the introduction of six new export products.
• Domestic revenues saw a 5% decline due to a 6% volume drop caused by delayed and erratic monsoon patterns, mitigated by a favorable product mix and improved working capital management.
• The newly acquired Pharma segment contributed ₹3,149 million, approximately 6% of total export revenue growth.
• Biologicals product revenue increased by approximately 35% year-on-year.

Major Strategic Initiatives #

• The company successfully commercialized four new products.
• PI Industries is building a differentiated Pharma CDMO through its subsidiary, PI Health Sciences Ltd, and its units, Therachem Research Medilab (TRM) LLC and Archimica SpA.
• Commissioning of a new R&D center in Hyderabad and a Kilolab build-up in Lodi, Italy, to enhance CRDMO capabilities.
• Strategic collaborations with academic institutions and corporate partners to enhance capabilities.
• Continued to focus on driving higher capacity utilization by improving throughput.

Risk Landscape Changes #

• Increased exposure to geopolitical risks due to conflicts like the Russia-Ukraine war, unrest in the Middle East, and the Red Sea crisis.
• Supply chain disruptions and higher costs due to increased tariffs, trade restrictions, and higher insurance.
• Climate-related risks, including extreme weather events and resource scarcity, affecting operations and supply chains.
• Cybersecurity risks are being addressed by enhanced measures, maintaining an ISO 27001:2013 certification.

ESG Initiatives and Metrics #

• Featured in the S&P Sustainability Yearbook with a ranking improvement to the 95th percentile.
• Retained the EcoVadis Gold medal with a ranking of 98th percentile.
• Renewable energy usage increased to 5.35% of total electricity.
• Specific CO2 emissions reduced by 3.71% from the base year (FY2020-21).
• Landfill waste reduced by 37% from the base year.
• Specific freshwater consumption reduced by 36.3% from the base year.
• Lost-time injury frequency rate (LTIFR) for permanent employees was 0 and 0.09 for contractual workers.
• Increased employees’ average training hours per FTE by 86.52% from the base year.
• Increased women’s participation in leadership positions by 50%.
• Implementation of a comprehensive ESG program for suppliers, with 78% of suppliers engaged.

Management Outlook #

• Positive outlook for the agrochemical sector despite recent challenges, with expectations of improvements in agricultural conditions, reduced channel inventories, and declining raw material prices.
• Targeting 15% revenue growth for FY2024-25.
• Aggressive commercialization of 8-10 new products is planned for FY25.
• Capacity expansion is on track, with a robust order book position of approximately USD 1.75 billion.
• Up to one-third of new molecule commercialization is expected from non-agchem areas, with a strong pipeline of biologicals under development.
• Active evaluation of inorganic growth opportunities, with ongoing discussions for development partnerships and potential bolt-on acquisitions.
• Continued focus on digital integration, innovation, and sustainability to reduce the environmental footprint and enhance ethical business practices.
• ETR for FY25 is expected to increase to 24%.

Detailed Analysis #

Financial Position Analysis of PI Industries Limited #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (Consolidated, in ₹ Million) #

Significant Changes in Major Line Items (>10% YoY) #

• Non-Current Assets: Increased by 45.05% in FY24, primarily due to increase in property, plant & equipment, and capital work in progress, alongwith additions in Goodwill and other intangible assets.
• Current Assets: Increased by 17.94% in FY24, due to increases in inventory, financial assets.
• Total Equity: Increased by 21.29% in FY24, primarily due to increase in retained earnings.
• Non-Current Liabilities: Increased significantly by 224.34% in FY24, primarily due to increase in other financial liabilities.
• Current Liabilities: Increased by 44.79%, due to combined effect of increase in almost all the heads.

Working Capital Trends #

• Working Capital: Increased, mainly due to increase in the inventories and financials assets.

Debt Structure and Maturity Profile #

Debt Structure: #

• Term loans were taken from Banks, at a rate of interest that is linked to EURIBOR of 3 Months and that spreads from 0.7% to 1.75%.
• The Company’s debt to equity ratio was 0.01.

Maturity profile: #

Off-Balance Sheet Items #

• Contingent Liabilities: ₹1,609 Million (FY23: ₹1,348 Million), including claims against the company not acknowledged as debt relating to sales tax, excise duty, income tax, customs, and other matters.
• Export Commitment: Nil.

FY24 Financial Performance Analysis #

Revenue Breakdown #

• Agro Chemicals: FY24 revenue was ₹73,509 million.
• Pharma: FY24 revenue was ₹3,149 million.
• Overall Revenue Growth (Consolidated): 18% year-over-year, with total revenue reaching ₹76,658 million in FY24.
• Agchem Exports Growth: Grew by 19 percent, year-on-year.
• Domestic Revenue: Declined by 6% year-over-year due to delayed and erratic monsoon patterns.

Geographical Breakdown (FY24) #

• India: ₹13,688 million.
• Asia (excluding India): ₹17,713 million.
• North America: ₹33,588 million.
• Europe: ₹9,317 million.
• Rest of World: ₹2,352 million.

Cost Structure Analysis #

• Cost of materials consumed: ₹35,787 million in FY24, increased from FY23’s ₹34,343 million.
• Purchase of Stock in Trade: ₹2,629 million in FY24, increased from FY23’s ₹1,881 million.
• Employee benefit expense: ₹7,013 million in FY24, increased from FY23’s ₹5,266 million.
• Other expenses: ₹10,954 million in FY24, increased from FY23’s ₹8,577 million.
• Finance costs: ₹300 million, a decrease from ₹371 million in FY23.

Margin Analysis #

• EBITDA Margin: Improved by 256 bps, reaching 26% in FY24.
• Net Profit Margin: Reached 22%.

Non-Recurring Items #

• There’s mention of a one-off gain impacting the effective tax rate in the Pharma subsidiary, PI Health Sciences, contributing around 3% to a lower effective tax rate of 11.3% for FY24.

EPS Analysis #

• Basic EPS: ₹110.85 in FY24, increased from ₹81.06 in FY23.
• Diluted EPS: ₹110.83 in FY24, increased from ₹81.04 in FY23.

Cash Management: Financial Year 2024 Analysis #

Cash Flow and Liquidity Analysis #

OCF, ICF, FCF Components (Consolidated) #

• OCF: Increased to ₹20,359 million in FY24 from ₹15,021 million in FY23.
• ICF: Outflow increased to ₹18,005 million in FY24 from ₹4,962 million in FY23, due to increased purchasing on the subsidiary Archimica, and a scale-up of current investments.
• FCF: Increased by 20 percent to ₹14,155 million (FY23: ₹11,751 million).

Working Capital Management Efficiency #

• Inventory holding period reduced from 79 days (March 31, 2023) to 62 days (March 31, 2024).
• Trade working capital reduced from 79 to 59 days.

Capex Analysis #

• Total capex for FY24 was ₹10,823 million, including Pharma acquired assets of ₹4,972 million and ₹5,851 million excluding pharma acquisitions.
• Information of capex by segment provided for “PI Health Sciences Ltd.”

Dividend and Share Buyback #

• Total dividend distributed in FY24: ₹1,744 million, a 53% YoY increase, with a CAGR of nearly 33 percent.
• The Board has proposed a final dividend of ₹9 per share for FY24, subject to shareholder’s approval.
• No share buyback mentioned in provided data.

Debt Service Coverage #

• Debt to Equity Ratio of 0.01 for PI Industries.

Liquidity Position and Cash Conversion Cycle #

• Surplus cash of ₹38,825 million (net of borrowings)
• Net Cash Inflow reduced to ₹138 million due to increased investing activities offsetting increased cash from operations.

Financial Analysis of PI Industries Ltd. #

Profitability Ratios (Consolidated, 3-Year Trends) #

• Return on Equity (ROE): FY24: 21%, FY23: 18.44%, FY22: Not directly provided, but calculable as lower than FY23. The ROE improved, signaling increased profitability relative to shareholders’ equity.
• Return on Capital Employed (ROCE): FY24: 35.1%, FY23: Not Provided, FY22: Not Provided. There is a reduction due to a change in the base of calculation and the nature of components of capital.
• EBITDA Margin: FY24: 26%, FY23: 23.9%, FY22: Not directly provided. Shows consistent improvement in operating profitability.
• Net Profit Margin: FY24: 21.9%, FY23: 18.9%, FY22: Not directly provided. Demonstrates a growing trend in the proportion of revenue retained as profit.
• PAT Margin CAGR (FY20-FY24): 39%
• EBITDA Margin CAGR (FY20-FY24): 30%

Liquidity Metrics (Consolidated) #

• Current Ratio: FY24: 3.90, FY23: 4.79. The current ratio has decreased, but is high, suggesting a strong ability to meet short-term obligations.

Efficiency Ratios (Consolidated) #

• Inventory Turnover: FY24: 2.84, FY23: 2.52. Inventory turnover has increased, implying that a higher volume of inventory is being used, and therefore, managed efficiently.
• Receivables Turnover: FY24: 7.95, FY23: 7.06. Receivable turnover has increased indicating more efficient collection of payments.

Leverage Metrics (Consolidated) #

• Debt/Equity Ratio: FY24: 0.01, FY23: Nil. The extremely low Debt/Equity ratio, and having zero debt previously, indicates a virtually debt-free capital structure.
• Interest Coverage Ratio: FY24: 73.06, FY23: Not Provided. The very high-interest coverage ratio signifies a robust ability to cover interest expenses with operating income.

Working Capital Ratios #

• Inventory holding period has reduced from 79 days as of March 31, 2023, to 62 days.
• Trade working capital reduced from 79 to 59 days.
  • Trade Working Capital = (Trade Receivables + Inventories - Trade payables)
  • Net Working Capital = (Current assets - Current Liabilities)

Business Segments Performance Analysis of PI Industries Ltd. #

Revenue and Profitability #

• Agro Chemicals: FY24 revenue was ₹73,509 million.
• Pharma: FY24 revenue was ₹3,149 million.
• Overall:
  • Revenue from operations grew 18% year-over-year (Consolidated).
  • EBITDA grew by 31%, reaching ₹20,252 million (Consolidated).
  • EBITDA margin improved by 256 bps.
  • Profit After Tax (PAT) increased by 37% year-over-year (Consolidated).
  • Agchem exports grew 19% year-on-year.
  • Domestic revenues declined by 5% year on year, with an impact of 6 percent volume drop.
  • Revenue from patented products constitutes over 70% of the total.
  • Revenues from biologicals increased by nearly 35 percent from FY2022-23.
  • New product commercialization contributes more than 70% of overall growth.
  • New product commercialization in the export market contributed more than 70% of that segment growth.

Market Share and Competitive Position #

• PI is a Leading player in the Indian Agri-sciences industry.
• One of the Few notable Asian companies encompassing, discovery, manufacturing, distribution, scale-up.
• The company is expanding into the pharma, CDMO space.

Key Products/Services Performance #

• AgChem Exports: Driven by volume growth from scaling up existing products and commercializing six new products.
• Domestic Agri Brands: Seven new brands were launched, including one biological product. The horticulture specialist brand, Jivagro, strengthened PI’s position.
• PIOXANILIPROLE Insecticide received ISO approval.

Geographic Distribution and Market Penetration #

• Domestic: Operates across 25 stock points, with more than 15,000 channel partners and over 1,00,000 retailers.
• Exports: Products are available in over 60 countries, with significant exports growth (19% increase) and operations in key global markets.
• Ongoing relationships with over 20 global innovators in 2023-24, with exports to North America, Europe, and Asia.

CAPEX and ROIC #

• Total capex invested for FY24: ₹5,851 million (excluding Pharma acquired assets).
• Return on Capital Employed (RoCE): 35.1% (Consolidated).
• Total capex for FY24 stood at ₹10,823 million, including Pharma acquired assets of ₹4,972 million.

Operational Efficiency Metrics #

• Inventory Holding Period: Reduced from 79 days (March 31, 2023) to 62 days.
• Trade Working Capital: Reduced from 79 to 59 days.
• E-factor calculation: implemented to track waste generated.
• Water Savings: 113.23 ML water recycled, an 87% increase from FY23.
• Renewable Energy Usage 5.35% as share of total electricity.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Commercialization of 4 new products, with ongoing projects in R&D.
  • Capacity expansion aligned with strategic plans.
  • Inorganic growth opportunities through acquisitions in pharma (Therachem Research Medilab LLC and Archimica SpA).
  • Strategic alliance with Koppert for agricultural biologicals.
  • Focus on process innovations in complex chemistry
  • Digital integration and cloud adoption, Adaptive controls, sensor-based data capture to improve operational efficiency, yield.
  • Commissioning of a new R&D center in Hyderabad.
  • Expansion of manufacturing with 15 multipurpose plants.
  • Launched a sustainable procurement policy.
• Challenges:
  • Global economic slowdown and market volatility.
  • Delayed and erratic monsoon patterns impacting domestic insecticide and herbicide sales.
  • Commodity price spikes, geopolitical shocks, and supply disruptions (as mentioned in the future outlook).
  • Inventory destocking cycle impacting generic products.