Ladies and gentlemen, good day, and welcome to Hester Biosciences Q4 and FY '25 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Ms. Nisha Shetty from ICICI Securities Limited. Thank you, and over to you, ma'am.
Thank you, Navia. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all on Q4 and FY '25 Earnings Conference Call of Hester Biosciences, and I thank the Hester Biosciences management team for giving us this opportunity to host this call.
Today on this call, we have with us Mr. Rajiv Gandhi, the CEO and Managing Director; Ms. Priya Gandhi, Executive Director; Mr. Divyesh Maru, CFO. I will now hand over the call to the Hester management team for the opening remarks.
Thank you. Over to you, ma'am.
Hi. Good afternoon, everyone. This is Priya Gandhi, Executive Director, Hester Biosciences, and thank you for joining us today for our Q4 and FY '25 performance update.
FY '25 has been an important year for Hester. We have focused on improving our operational efficiency and strengthening profitability, helping us build a solid foundation for the company's future growth. On a stand-alone basis, our profit grew by 70% for FY '25 and 30% in Q4. If you look at our overall revenue, it appears flat compared to last year, largely because the prior year included a onetime pharmaceutical export sales to an African country. However, if we compare the performance at the pure divisional level performance, we have achieved a growth of 12%.
On a consolidated basis, our profit has gone up by 36% in FY '25, reflecting the benefits of our operational improvements and cost management initiatives. Divisional product sales have increased by 13%, again, supported by steady demand across businesses despite of some market headwinds.
Coming to divisional performances, speaking of the Animal Health, we have now combined the reporting of our Animal Health and Pet Care, reflecting the growing synergies across the Ruminants and Pet Health segment. The combined division recorded an 8% growth in Q4 and 6% in FY '25. Animal Healthcare remained the main contributor with stable demand for our Goat Pox and PPR vaccines under the National Immunization Program, in which we have been participating very actively. We also strengthened our therapeutic and biosecurity product lines through the year.
Coming to the Pet Care division, we saw a steady demand of therapeutics supported by stronger veterinarian engagement and increasing prescription-driven sales. We are also strengthening our marketing activities, focusing on targeted outreach to veterinarians and pet parents to build greater awareness and trust in our products. Additionally, we are preparing to expand into the prescription diet and supplements aimed at addressing the evolving market demand.
Coming to the Poultry Healthcare division. Our Poultry Healthcare division continued a positive momentum with our vaccine sales benefiting from higher demand and awareness around our Newcastle Disease and Marek's Disease vaccine. We also launched new feed supplement disinfectants, which are now starting to gain traction. Preparations of our Avian Influenza vaccine launch are progressing well, and we expect this to be a key growth driver in the coming years.
Coming to the operational efficiency and profitability, a key achievement this year has been in improving our overall operational efficiency, which has strengthened our profitability. Some of the steps that we took include improving production performance and reducing wastage, improving inventory control, focusing on higher-margin products, managing administrative and overhead costs carefully. These actions have directly contributed to stronger margins and profit.
Coming to the financial highlights. The stand-alone gross profit margins remained stable, supported by a better product mix and cost control. EBITDA has increased by 8%, reflecting better capacity use and expense discipline. As mentioned earlier, our PAT grew by 17% in the year and 30% in Q4, clearly showing our focus on improving the bottom line. On a consolidated level, we saw an even stronger profit growth, helped by better performance from our international business.
On the international subsidiaries, Hester Nepal has delivered stable profits with a net profit of INR 1.2 crore in the financial year. It met both domestic demand for the Poultry Health and export demand for immunization against PPR globally.
Hester Africa reduced its net loss to INR 10.2 crores compared to INR 18 crores in the last financial year, backed by strong sales and tender wins for the supply of PPR and CBPP vaccines in the African continent. We have also received the marketing authorization for a new life combination vaccine, which is the PPR plus Sheep and Goat Pox combined vaccine, which is an important development in the Ruminant health. With increasing plant utilization and growing order pipeline, the business is gaining momentum, and we are steadily expanding our supply capabilities and regional presence.
Looking ahead in the coming quarter and in the coming year, our focus will be on strengthening profitability through continued operational improvement, expanding the Animal Health, Pet Care -- and the Pet Care portfolio to deepen our market reach, supporting government efforts to tackle the antimicrobial resistance by expanding our preventive care and disinfectant products along with vaccines, growing our international presence, especially in Asia and Africa. We are confident that these priorities will help Hester continue to deliver sustainable and profitable growth.
And thank you all for your continued support. We now look forward to your questions.
[Operator Instructions] The first question comes from Gunit Singh from Counter Cyclical PMS.
So I have 3 questions. First is when will the Capital Work in Progress of INR 136 crores get commissioned? Second question is why Hester Nepal revenues declined by 85% in Q4 if you compare year-on-year? And the third question will be when will the Hester Africa business breakeven? When do we expect it to break even?
So first question is regarding the fill-finish and BSL-3 facility that is lying under CWIP, capital work in progress. So in case of BSL-3 facility, we are awaiting some administrative approval from the BIRAC, which is authority for that. And for fill-finish activity, the expected timeline to have a capitalization is by Q2 this year, considering the remaining batches to be commercialized and the regulatory approvals in the place.
Now, the second question, can you repeat the second question?
So why has Hester Nepal revenues, why have they fallen by 85% year-on-year in Q4?
You see, as you are aware, Nepal plant objective was tender business, and there is a reasonable amount of there is -- sorry, I would not say a reasonable amount. There is no pattern. The pattern, there is nothing like pattern. The order comes, it's a surge, it's a fall, it's a surge, it's trade. These are all mixed type of situations at our Nepal plant. So therefore, any fall at one point of time or any fall which you are correlating with the previous year may not be an accurate way of assessing the progress of our Nepal plant.
Third question.
Okay. So sir, by when will -- do we expect Hester Africa business to break even? And what is the capacity utilization there?
We hope that not this year, the next year, we hope 2 years we should take to break even at Hester Africa because the African market, as you understand, is a very different market. We are one of the first, rather the first to produce most of the vaccines, veterinary vaccines in the continent. While there are innumerable disease outbreaks, it is still a matter of educating the people, which we are doing reasonably well at this point of time. And at the same time, the tender businesses which were to come nearly 2 years ago, but due to various slowdown activities, mainly due to the geopolitical reasons, these things have slowed down. Having said that, we are already having the tender for Tanzanian government business. We see other 1 or 2 countries also tenders coming up. So to be on the safe side, we would like to say 2 years.
All right. Sir, with the new capacity, the new capacity coming in, when do we expect it to reach optimal utilization?
You are talking in India?
Yes. The Capital Work in Progress of INR 136 crores, you mentioned it will -- some part of it will be commissioned in Q2. So by when can we expect it to reach optimal utilization?
No. You see, basically, we have done it to increase the capacity. It is an extension of this. So when you say optimal, we are not able to understand. Slowly it will grow utilization from 10% to 30% to 60% to 70%. So it's a progression through which we are going. We are reasonably sure that by the time it is 3 years' time, we should be reaching a good level of production from the new plant⦠Now you see your word optimal, I'm not able to answer that. I have quantified it.
[Operator Instructions] We take the next question from the line of Rishabh Shah from BugleRock PMS.
Sir, I have a few questions. One is that why did you choose Africa as a country for expansion purposes? What was the thought process behind it? And what are your thoughts on Latin America?
Yes. So Africa is a continent where we see that the opportunities are big. It's the next growing market. Therefore, we have chosen Africa. The animal population in the continent is reasonably large. And when I say animal population, I don't mean the wildlife. We are mainly targeting the production animals, Poultry, cattle, sheep, goat and swine. Wildlife is again another issue altogether and pet is another.
These production animals are growing at a reasonable fast rate. And more than the growth of the production animals, it is the awareness that is slowly coming in into the African continent. And therefore, that is why we have chosen Africa as a continent. Latin America, we have not put any thoughts in that continent at this point of time.
One, its far away in terms of distance. 2, in terms of very different from it's -- in every way than what it would be. And secondly, there is a bandwidth that every company has. We don't see our capability in terms of bandwidth to reach out to 2 big continents simultaneously. We are more than happy and we feel -- I mean, we had never even thought of South America. You have mentioned that we hope that in years to come, we even try to address that market.
Just a follow-up on this one. When you apply for registration, how much time and money does it take money does it take -- for the process and you're getting the final approval in Africa?
Now Africa, please understand it is a continent. People mistake Africa as a country, but it is a continent of 52 countries. So every country has a regime for registration and every country has a cost for registration. So it's very different country to country. Though in Africa, there like the Gates Foundation as well as the countries together, they are trying to come to a common registration process, but it's not yet been applied. So -- 2 years per product.
My next question is in this kind of business, we receive a lot of grant from government and also from other -- lots of other organizations. So how much do we depend on these types of grants? And how important is that -- are these grants to support our business?
You are talking about the tender business. Am I right?
Yes, sir.
Africa --see, when markets are primitive, the government in each of the countries try to push the business. And as time goes by, that government-aided business gets converted into private business.
In India, earlier tender for Poultry vaccines were also that today, there is hardly any tender that comes out for Poultry vaccines because it's completely shifted on to the private sector, while the cattle sheep, goats, swine is still a fragmented market and the government tries to prop up, intervene and try to make sure that, that industry grows.
Likewise, in Africa, that is the situation. It's, in fact, a little lower than what it is in India. And we are also ourselves along with partners like the Gates Foundation, GALVmed, trying to create a network for creating demand in the private sector.
We are also succeeded in that. As you are aware, we have got a joint venture, a partnership wherein we have an investment in the company's name is Thrishool Exim, which is solely into distribution and supply of Animal Health products as well as animal feed products. And there, there is 0 tender business. Everything is going into the private sector.
So the direct question was we are in a way dependent on these grants, right, from the government?
We are not -- there are no grants. We are dependent on tenders. And at the same time, we are trying to create the market through the private sector efforts. There is no grant that we are looking for.
We will take the next question from the line of Utsav Adani from Oaklane Capital.
I wanted to understand the tenders and the African tenders. These are from the government agencies or non-government agencies?
They are country-specific government tenders.
Understood. And Nepal, I believe, is an export tender, right? So that would be for which country you would be exporting it, sir?
Mainly, it is to FAO, Food and Agriculture Organizations. So our supplies would be directed to the places for which they are being tendered for.
Understood. Sir, previously, in the con call, you had mentioned that Avian Influenza vaccine will be launched by Q1 FY '26. So are we on track for it? Or are we expecting some delays for it?
We have always maintained Q2. If I have mentioned Q1, I probably don't recollect. But yes, it would be the beginning of Q2 for sure.
Understood. Also, as to bookkeeping, could you inform us the capacity utilization across all 3 geographies that you are present in?
We would not have that data ready with us while we are sitting on the capacity utilization exact figures. So, it would be inappropriate to give you any approximate figures.
We will take the next question from the line of Madhur Rathi from Counter Cyclical Investments. Since the participant has disconnected, we will take the question from the line of Manish Jain.
It's good to see that you have reduced your debt by INR 32 crores in March '25 on a consolidated basis compared to March '24. So, from Divyesh, keen to understand what is the CapEx plan for the current financial year? What's the likely absolute increase in working capital? And what's the debt repayment plan?
Yes, Mr. Manish, this is Priya, I'll take up. For the CapEx, right now, there is not much plan on it. As mentioned earlier, our fill-finish is going to get commercially used now by Q2, latest Q3. And apart from that, we are just planning on our CapEx plans. It's right now mostly to do with maintenance, et cetera. But new CapEx, right now, there is not a concrete plan that we can really give.
And what about the need for absolute increase in working capital and debt repayment?
So, if you see our cash flow for the year ended March '25, I think the cash generated from the operations are roughly around INR 70 crores. So, I think we are able to manage right now the repayment, which is for the current debt from our operations only. I do not envisage, frankly speaking, any new working capital add-on looking at the current situation.
And in terms of -- when I look at Africa, Rajiv was mentioning that you are looking to breakeven in conservative side in 2 years. So, what's the total accumulated losses for Africa right now?
Divyesh.
Yes. So as of now, total accumulated losses at Africa is roughly around INR 45 crores. That is accumulation. But as we mentioned that in 2 years, we'll be -- we'll be at a breakeven. And for accumulations to be recouped, I think we'll be needing 1 or 2 more years more than the 2 years. That is the projection.
No, that's perfectly fine because what we have seen last year is just by INR 11 crore increase in your sales in Africa, your loss has gone down by INR 8 crores in Africa. So, if you continue the same trajectory, hopefully, breakeven could come sooner than 2 years, but.
No. Sorry, sorry to interrupt. Yes, I think we do anticipate the breakeven, as mentioned earlier, 1 or 2 years, we factored that calculation. Also, while developing the products, right now, the ones that are commercially being sold, PPR, CBPP, LSD is also commercialized. We are very -- we are maintaining our margins very well. So, I mean, to be honest, I think the breakeven will come quite soon.
And one more question before I join back the queue. Traditionally, 6, 7 years back, we used to be at a 25% net margin level. Do you think Hester can reach that level in the next whatever time frame?
No, definitely, and that is our endeavor. This year, as you can see, has been a strong base in wanting to reach that level. Even in our corporate presentations, if you see, we always mention our last 10 years trajectory, and we are very mindful of the good years that we had with very good profits, and that's what this year has been about, as you can see, and we are wanting to reach that level.
We are very sure rather, and we are determined in this case. We are very conscious of what question you asked. That's a question which we ourselves have in our minds to be very honest.
Next question is from the line of Madhur Rathi from Counter Cyclical Investments.
I wanted to understand regarding the nontender business in both Poultry and Animal Health segment. So, can we become a feed supplement supplier or Animal Health product supplier to either export market or how can we increase our share in the domestic market? Because when I look at our competitor, Venkys India, they have been -- their revenue has been very constant and their margins have been constant as well. So, what are we trying to do on that front to make our business less lumpy or less tender driven?
Our Poultry business is not dependent on the tender at all. So whatever numbers that we have shown are purely, we call it institute or trade business because there is no government intervention as such. With respect to the Animal Health division, I think it's approximately 50-50, wherein also the nature of the industry is such that the government intervention is required in order to immunize the dairy animals, production animals. And health products are something which gets sold to the trade market, and that is our focus is in this year.
And we are not an exact comparison to Venkys because Venkys is a Poultry Vaccine company, while our endeavor is to be like a complete holistic Animal Health Care company wherein we have various divisions. We don't want to completely be dependent on one division. So, we have different species we address towards Poultry, animal and Pet Care and hopefully, even more species that we can add soon.
Are we facing an issue because I think the 2, 3 big Poultry players, Venkys India, IBS Exports, as well as Suguna Foods, all these guys have in-house vaccine production? So are we losing market share to these guys in-house production? Is that the scenario currently?
There is nothing like that we are losing market share. Point number one, Venkys was even before us in business, so there is no question of that risk. And they are today the biggest in India -- in Poultry. Therefore, they have a reasonable -- good in-house -- in-house consumption. Are you able to hear me because there are lot of noise. Somebody is not on mute or something. I don't know.
Yes. Suguna had an animal vaccine plant, which they have sold it to another company. So now it is no more an in-house Poultry consumption manufacturing unit. IB Poultry does not have any vaccine plant, and they are more into exports of other products, definitely not Poultry vaccines for sure. So, I hope that answers your question.
And as far as we are concerned, we are ourselves as a pure Animal Health company and a company which has no other affiliation to any producer or any production of Poultry meat or milk or beef or -- sorry, not beef or meat or any of these things. We don't have that. We are a stand-alone Animal Health company, and we are trying to progress. And we do feel that we should be putting in more efforts on the health products side as well to increase our top line with the health products.
Sir, so how are we trying to leverage our distribution network in the private market to increase our health products as well as our Pet Care prescription kind of products?
It is -- that's the main business model that we are -- the whole network is created to actually create demand and supply, and that is what our team has been doing. And we are just building that business.
I've not understood your question actually.
Sir, I'm just trying to understand, so I agree with you 100% that we have created this network where we can try to introduce new products so that we can increase our sales. But sir, that hasn't happened or it's happening very slowly in our either Animal Health products or Feed supplement kind of a product or the pet prescription kind of a product. So sir, I'm trying to understand when can we see a big jump or when can we see this offtake increasing at a fast.
I think we've historically been a Poultry vaccine manufacturing company. This is our 38th year annual year now, and our health products segment is only 10 years old. So I think in the last 1 decade, we have been trying very hard to make reasonable product introductions, trying to have our unique formulations at the same time, look at what the demand is and also introduce some me-too products in which the demand is higher than the supply. So I think in years to come, as mentioned earlier, our focus remains on growing the health product segment so that we equalize -- there is no single dependency on just vaccine heavy product range and grow our Pet Care as well as Animal Health care product segment.
Sorry to interrupt. May we request that you return to the question queue for follow-up questions as there are several other participants waiting. Next question is from the line of Rishabh Shah from BugleRock PMS.
Our collaboration in Egypt with Nova Pharma, can you tell what has been happening in that phase? And how are we expanding in these markets as well?
The collaboration activity with Nova Pharma in Egypt, there is a status quo at this point of time because of Egypt having its own reasons as a country in terms of foreign exchange availability, et cetera, et cetera. And that was a collaborative wherein we have agreed to give technology or some issues technologies. But we also have a distributor, an exclusive distributor, specifically in Egypt to whom we are supplying our vaccines, and we have our brand name already present in the Egyptian market.
Likewise, in many of these countries, African countries, Middle Eastern countries, we have our distributors through whom we do an exclusive -- we have an exclusive distribution arrangement and who sell as well as create demand. What we have done now, we have also started appointing our own marketing people in a few countries in Africa. We have started off by appointing 2 managers in 2 of the countries, and that's how -- that is another step that we have recently taken, and this is the way we are trying to create demand and then do the supplies.
So my next question is in one of the calls, you mentioned that H9N2 vaccine, not all countries are manufacturing. So there could be a big potential in that. So could you please let me know which countries you will be exporting and what is the potential?
It would be inappropriate for me to really give you names of countries where we would be exporting because that's our business, and we are in a competitive environment, and I would not really like to specify country-wise things. But for sure, once H9N2 is commercially available over here, we will be able to register in quite a few countries where we will be able to supply the H9N2 vaccine.
So what is the potential in that? How big could be the market? And what do you see?
In India, worldwide, what are you asking?
Both sir.
In India, I think the H9N2 market, I'm not sure totally, but it would definitely be approximately, say, INR 100 crores -- around INR 80 crores to INR 100 crore market and world market is much bigger than that.
Next question is from the line of Manish Jain from Gormal One.
Yes. Rajiv, just wanted to know in the Avian influenza, are we also covering HPAI, H5N1?
No. H5N1 is not covered with H9N2 technically, not with us, not with anybody.
Because there is a shortage in U.S. on HPAI, H5N1.
No, it is not covered in our vaccine. And no H9N2 vaccine can give protection against H5N1. And India does not allow H5N1 at this point of time.
Should opportunity arise, can that be done out of our Africa plant?
It can be done even from our BSL-3 facility, but I do not see that opportunity arising. There have been many discussions, and I don't see any opportunity -- immediate opportunity arising out of that.
Next question is from the line of Madhur Rathi from Counter Cyclical Investments.
Sir, I wanted to understand, have we decided what are we going to manufacture from our BSL-3 facility? Or are you planning to go through the contract manufacturing route for this plant to just get the operating levels to a decent level?
We would want to manufacture our own animal vaccine itself, which with now a few vaccines might require in the BSL-3, it is in discussion, and we are planning to develop those and manufacture those in our BSL-3, our own vaccines.
So are we looking to supply these to other countries other than Africa as well as Nepal? Or have we gone for some audits with foreign regulatory bodies or this is still in the stage that over the next 1.5 years when it commercializes, it will happen?
Right now, our focus continues to be in Africa and parts of Middle East. And of course, Central Asia, which -- I mean, Nepal, India and Middle East and Africa continue to be our focus territory.
So -- and my final question would be what would be the revenue potential from this facility like over the next 2 to 3 years kind of? What kind of revenues can you generate?
We are working on what vaccine to make, et cetera. So it would be very inappropriate to give any figure at this point of time. And I think this -- we should get clarity within this quarter or the next quarter, and that is the time when we will probably give our plan as even accepted by the government because BSL-3 facility was created under the COVID Suraksha program. So there are many agencies involved, et cetera. So I think it would be more appropriate once we get a clearance, then we talk on this -- on a common platform.
Sir, there was a news regarding a startup semen factory getting opened in Gujarat that will reduce the semen cost for a dairy or a cattle farmer to much lower than what it was earlier. So can this help arise in increasing the vaccine demand as well as revenue for us or this shouldn't have any much impact for us?
If this dairy and all, if it grows, it can help in marginally increase because 4 week -- I mean, even if they get into how many cows or buffaloes will they keep. They are not going to go up by some 2,000, 5,000, 10,000. Even if they go up by 10,000, it is 10,000 doses. We are talking of doses in millions and billions. So we are happy that if there are such opportunities that come up in our own state, but it's the total country that we are looking at.
So nothing from the cost perspective because for a farmer, I think it was earlier $100 -- INR 100 a dose that has been reduced to INR 50 a dose. So that shouldn't have any much impact on our demand for our product.
In the sense, sales will go up. But --what is your figure INR 100 to INR 250, I mean. From where and what is the source of that amount?
So this -- I'm speaking about so there is a semen production plant that has been set up in Banas Dairy, Dama Village [Technical Difficulty] semen for the dairy farmer would reduce from INR 100 a dose to INR 50.
Yes. But that is semen. We are talking of vaccine. They are 2 different products.
[Technical Difficulty]
If demand grows, we are happy, we will supply. But we can't base our projections based on that anticipated increase in cattle population in a particular state.
As there are no further questions, I would now like to hand the conference over to the management.
Yes. Thank you all for joining our Q4 quarterly call updates. As mentioned, FY '25 has been an interesting year. We have focused on mostly our -- improving our operational efficiency and strengthening our profitability. And going forward, we will have the same endeavor, along with that also focus on growing our divisions and demand and the territories, specifically in the continent of Africa. And I would like to thank you all for your continued support and trust, and see you all in the coming quarter. Thank you all.
On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.
