Dear Stakeholders,
Amidst the global economic uncertainties during the financial year
2023-24, our commitment to resilience remains steadfast. We recognise the challenges posed
by over-capacity and intense price competition from China in the chemicals sector. While
we anticipate inventory stabilisation by year-end, seizing this moment is crucial to
expanding our customer base, bolstering execution, and optimising operational efficiency
as a unified force. On a positive note, our pharmaceutical division continues to thrive,
demonstrating robust growth, which positions us favourably in the market and contributes
significantly to our overall success.
Financial Performance
For the financial year 2023-24, we achieved revenues of INR 17,870
Million and a net profit of INR 695 Million. Despite global macroeconomic pressures and a
challenging market environment, including inventory buildup and intense price competition
from China in the crop protection market, our EBITDA increased to INR 2,694 Million in
2023-24 from INR 2,625 Million in 2022-23.
In light of our performance, our Board of Directors has recommended a
final dividend of 30%. Along with an interim dividend of 30% declared in February 2024,
the total dividend for 2023-24 stands at 60% of face value (INR 1.2 per share).
Pharmaceutical Division
In the Pharmaceutical division revenue remained at INR 11,002 Million
in 2023-24, compared to INR 11,152 Million last year. However, EBIT improved significantly
to INR 935 Million in 2023-24 from INR 650 Million in 2022-23.
Under our Active Pharmaceutical Ingredient (API) we have focused on
aggressive business development that aims at boosting our sales in the next two years.
This segment saw increased volume off-take due to higher demand from existing customers
and expansion into new geographies. This coupled with stabilised raw material prices,
enhanced our margin profile.
The Contract Development and Manufacturing Organisation (CDMO) segment
received numerous Request for Proposals (RFPs) from global innovators and emerging
pharmaceuticals, with multiple products in the advance stages of discussion. We have a
robust pipeline of early to mid-phase projects showing promising prospects with two novel
chemical entities (NCEs) in phase 3 clinical trials and two products at the production
stage in the food ingredient segment.
We have achieved a 20% cost improvement across three generic APIs. Our
API facility in Panoli, Gujarat, successfully passed a US FDA audit in 2023-24 with
‘No Action Indicated' (NAI), also known as ‘Zero 483' observations.
This result highlights our commitment to regulatory compliance. These achievements
highlight our strategic focus and resilience in a competitive market.
Crop Protection Division
Our Crop Protection division revenue stood at INR 6,844 Million and
EBIT stood at INR 743 Million in 2023-24. The global crop protection industry faced
significant challenges, including subdued demand due to inventory buildup and intense
price competition due to over capacities. We remain optimistic about market stabilisation
towards the end of the calendar year 2024, with recovery expected to begin thereafter.
We are committed to seizing new opportunities and reinforcing our
position with global innovator companies. Through de-risking and optimising our supply
chain, we are enhancing operational efficiencies. These efforts guarantee a reliable
supply of essential raw materials and help maintain stable pricing.
By implementing comprehensive HIKAL business excellence (HIBEX)
initiatives, we are fortifying our operations, reducing costs, and improving our capacity
to meet customer demands efficiently and consistently.
Project Pinnacle 1.0 unlocked momentum in the supply chain, de-risking
strategy, developing differentiated competencies, the acquisition of new customers
globally and the building of a distinctive technology platform. ?
Animal Health Division
In our Animal Health business, progress continues in developing a
portfolio of products under a long-term agreement with an innovator animal health company.
During the third quarter, commissioning of our new multipurpose animal health facility in
Panoli, Gujarat was completed.
Validation of four products has been successfully carried out, as per
schedule, with validation of several other products currently underway and scheduled for
completion in the upcoming few quarters. These validation batches are the initial step
toward product registration and subsequent commercialisation. This progress solidifies our
positioning in meeting the growing demands of the market.
Business Transformation - Project Pinnacle
Under our strategic transformation initiative, Project Pinnacle, we
have made significant strides in sustaining growth across our diverse businesses. Building
on the success of Project Pinnacle 1.0 in 2022-23, we have re-aligned our business
segments as growth pillars for Project Pinnacle 2.0, laying the foundation for longterm
value creation.
We are taking strides towards a leadership position in ESG, evidenced
by our EcoVadis bronze rating, under Project Pinnacle 1.0. We also published our first
Sustainability Report along with BRSR release. Implementing a product-specific cost
improvement programme,
we have secured a best-in-class cost position, and our de-risking
strategy led to the development of alternate suppliers across our product portfolio,
significantly reducing our dependence on China.
Project Pinnacle 1.0 unlocked momentum in the supply chain, derisking
strategy, developing differentiated competencies, the acquisition of new customers
globally and the building of a distinctive technology platform. Moving forward, our focus
shifts to capitalising on front-end opportunities and building a robust pipeline for
continued success.
Research and Technology
In our efforts to create just the right chemistry, we invested 4.5% of
our sales in Research and Technology during 2023-24.
During the financial year, we achieved significant milestones in the
development and validation of Animal Health APIs, conducted at our state-of-the-art
manufacturing facility in Panoli.
Additionally, we have expanded our regulatory footprint with multiple
DMFs filed across different regions, further solidifying our presence in the
pharmaceutical market. Furthermore, our ongoing investment in infrastructure, such as
enhancing process safety capabilities and implementing Zero Liquid Discharge (ZLD)
systems, demonstrates our commitment to innovation and environmental responsibility.
I am delighted to announce that our strategic focus centres on the
backward integration of key raw materials and the development of sustainable processes,
reflecting our dedication to environmental responsibility and operational efficiency. We
have inaugurated an enhanced process safety lab and implemented Self-Managed Teams (SMTs)
across our business verticals. This strategic move strengthens our supply chain resilience
and enhances our competitiveness in the market, positioning us for sustained success in
the evolving business landscape.
Creating Shared Value
We are collectively committed to excellence and the relentless pursuit
of growth and innovation that serves as the cornerstone of our recent endeavours.
Initiatives like ‘Quality Week' and ‘Safety Month' underscore our
unwavering dedication to excellence across all operations, reflecting our organisational
ethos. We believe that excellence is an ongoing journey of improvement ingrained in our
culture, driving us to uphold the highest standards in product quality, workplace safety,
and process refinement. As we strive to achieve our Pinnacle goals, excellence remains
fundamental to our success, inspiring us to surpass expectations and set industry
benchmarks.
Our identity as Hikalites is defined by our diligence on excellence,
exemplified by our participation in prestigious global exhibitions. Moving into the second
phase of the ‘HIBEX Productivity Challenge', a Hikal Business Excellence
initiative, I extend gratitude to all teams for their dedicated efforts and contributions
to our Company.
Through our CSR initiatives under ‘Srijan,' we strengthen our
connection with the communities we serve and foster social development. We launched an
‘Integrated Watershed Development' project in Mahad to eradicate water scarcity
for 5,000 residents in the local village. We also initiated a ‘Bicycle Library'
project for the New English School in Taluka, Mahad, to address the commute challenges
faced by students from tribal families and donated 59 bicycles to the school.
Progressing towards Sustainability
We regard ESG as a powerful differentiator for us. By prioritising our
environmental responsibilities, we have set ambitious sustainability goals based on
material issues and are progressing toward achieving them. We have identified critical ESG
issues and implemented an ESG platform with clearly defined GHG reduction targets aligned
with the Science-based Targets initiative (SBTi). Additionally, we continuously assess our
ESG readiness and performance against industry standards to ensure we remain on track.
Our commitment to reducing emissions is evident in our targets: we aim
to reduce Scope 1 and 2 emissions by 30% by 2027-28 compared to 2022-23 levels, with a
strategy for Scope 3 emissions currently under development with a global energy management
company. Moreover, we plan to increase our share of renewable energy to 80% by 2027-28, a
significant rise from 56.4% in 2022-23. These efforts are complemented by our goal to
reduce total waste disposal by 30% and the water consumption rate by 15% by 2027-28.
Diversity and inclusion are integral to our ESG strategy. Women
represent 21% of our corporate office, and we have plans to significantly increase this
number, over the next five years. Our dedication to a sustainable future has been
recognised with a bronze rating from EcoVadis, and we are committed to further
improvement, aiming to achieve a gold rating by 2025. We also became a United Nations
Global Compact (UNGC) signatory during 2023-24 which reiterates our commitment towards
ESG.
By focusing on these strategic ESG initiatives, we are not only
enhancing our sustainability performance but also setting a benchmark in the industry.
Our holistic approach ensures we contribute positively to the
environment while driving long-term value for our stakeholders.
: Future Ahead
We aspire to establish ourselves as a sustainable company driven by 5
technology and focused execution, with a paramount commitment to P customer satisfaction.
Strategically positioned to leverage the global shift in supply chain to India, we are
confident in our ability to ascend to new heights in the upcoming years.
As we look ahead to 2024-25, we aim to strengthen our foundation P for
accelerated future growth. Despite persistent market challenges, we are confident that our
robust measures will navigate us through uncertainties, ensuring sustained long-term
growth and profitability.
In conclusion, I extend sincere appreciation to our stakeholders for
their valuable support and heartfelt gratitude to our dedicated employees, valued o
customers, trusted bankers, and loyal shareholders for their commitment and solidarity
during challenging times. Let us persevere in our pursuit of excellence and continue to
achieve new milestones on our journey of growth and success.
Warm regards,
| Jai Hiremath |
| Executive Chairman |