Privi Speciality Chemicals Ltd

NSE:PRIVISCL

Q4-2025 Earnings Call

[Operator]

Ladies and gentlemen, good day and welcome to Privi Specialty Chemicals Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference has been recorded.

This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the companies as on the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict.

I now hand the conference over to Mr. Shrikant Sangani. Thank you. And over to you, sir.

[Shrikant Sangani]

Thank you. This is Srikanth Sanghani from SGA. Thank you, everyone, for joining us today to discuss Privi Speciality Chemicals' Q4 and FY '25 Business and Financial Performance.

The financial results and investor presentation are available on the company's website. The recording of today's earnings call and transcript will be uploaded on the company's website under IR section.

For today's call from the Privi team, Privi team is represented by Mr. Mahesh Babani, Chairman and Managing Director; Mr. R.S. Rajan, President; Mr. Narayan S. Iyer, Chief Financial Officer; Mr. Sanjeev Patil, Senior Vice President, Strategy, and my fellow colleagues from SGA team.

Please note there may be forward-looking statement during the course of the call and must be viewed in an aggregate with the risks that company faces.

With this brief introduction, I now invite Mr. Babani for his opening remarks. Over to you, sir.

[Mahesh Babani, executive]

Thank you, Shrikant. Good evening to all of you.

And we are pleased to report the best ever quarterly and annual financial performance, marking a significant milestone in our journey. The year '24-'25 has been good for the company, with all along improvement in all areas of the company. The performance has been achieved through process intensification, leading to yield improvements, new specialty products being launched during the year. As these factors will continue in the future, we are confident of sustaining this gross margin.

Key highlights of the year gone by are; the demand for our co-products are healthy and our plants are operating at an optimum level. Of course, we are debottlenecking capacity further because of the demand. We have also developed 2 new premium products to be launched in this current financial year, where during mid-year it will be operational. A previous update is that the plant has been successfully commissioned. It would take 1 year more to breakeven. As you know, chemical plant, it's not so easy to get the practice in place so that -- because these are high value -- very high-value specialties. However, the future is very bright and certain since these are going to be sold back with the buyback arrangement to the subsidiary company. So, therefore, we are very confident that the future is very, very bright for this particular vertical in coming years as we are dealing with the market leader of entire world.

Over the decade, your company has emerged as a trusted partner to almost now all companies in our field. The compliance of our company is of a high standard, and we endeavor to be best-in-class. Our capabilities have grown significantly, both in scale and complexity, driven by deep client engagement and are relentlessly focused on innovation. We are transitioning from being a leading supplier to a collaborative partner, strengthening relationships and creating long-term and sustainable value for our customers.

Our core strength -- however, our core strength lies in our robust backward integration, particularly through CST and GTO strategy. The integration [indiscernible] consistent quality, cost efficiency and of course, long-term supply of security of critical raw material, giving Privi a distinct competitive advantage. It also enables great control over the value chain as these are raw materials, which are always in short supply, driving innovation and reliability in delivering high-performance of our aroma chemicals to global customers.

By driving growth, we remain deeply committed to sustainability. Our current Gold rating for EcoVadis further validates our proactive approach in aligning the global best practices, reducing carbon footprint and also strengthening ESG disclosures. We are now striving for a Platinum rating and we are not far from it. Additionally, by increasing our share of green power, we have also reduced energy costs, also reinforced our dedication to sustainable energy solutions. This is only the beginning of our Gold story, my friends. It is also our endeavor to be #1 aroma global chemical company. Friends, we are not far from it.

I now hand over to our CFO, Narayan Iyer, for detailing on the financials. Narayan, please?

[Narayan Iyer, executive]

Thank you, sir, and thank you very much. Good evening to all my dear investors, stakeholders and all those who believe in Privi and who are there on the call.

The year that has gone by has reaffirmed our belief in Privi's growth trajectory. With strong operational execution and a favorable product mix, we are confident that Privi is well positioned to sustain healthy growth and deliver robust profit margins going forward.

Let me share some of our recent developments. All our key products are currently operating at optimal capacity as demand for all key products are very healthy. Our units have all been operating at close to 85% to 90% of our capacities. As has been informed, we are actively working to expand our production capacities for our key products and take it up from 48,000 metric tons to 54,000 metric tons. We expect this expansion to complete by March 2026.

During the year, the company had launched various products like Indomerane, Florovane and Amber Woody Xtreme. These products are used in day-to-day applications like hair care, personal care and laundry care, and they have been very well received in the market. I would also like to highlight on the U.S. tariffs that's been going around. We really do not anticipate any significant impact from the ongoing U.S. tariffs as our presence in the U.S. market is limited to around 10%.

At the moment, almost all countries supplying to U.S. have to bear higher tariffs than India. Moreover, our business is widely spread across domestic market, the European markets, the Asian and the Latin American and Middle East markets. So, these were the key developments that I had to talk about.

Now, coming to the major financial highlights. Starting with Q4 for financial year '24-'25 Q4, the total income for this particular quarter was a record INR 628 crores, which is a growth of 28% on a year-to-year basis. The EBITDA came in at INR 147 crores, which is a growth of 50% on a year-on-year basis. EBITDA margins once again is at a record high of 23.5% for the quarter, and we expect to maintain similar EBITDA margins in the near future. Profit after tax for the quarter was a healthy INR 64 crores as against INR72 crores, which indicates a 100% growth over the previous year. And lastly, the exports contributed to about 72.5% for this particular quarter.

Giving highlights for the entire year, for the year '24-'25 in comparison to the earlier year. During the year, the overall income or the overall revenue stood at INR 2,122 crores, which is a growth of 19% on a year-on-year basis. Overall, EBITDA margins for the year was a very healthy INR 474 crores, which is almost a growth of about 37% on a year-on-year basis. EBITDA margins was at 22.3% as against 19.7% for financial year '23-'24. Profit after tax for the overall year was at INR 185 crores as against INR 95 crores achieved in financial year '23-'24. And exports on an overall basis was at 70% for financial year '24-'25.

My dear friends, in the overall interest of all stakeholders and investors of the company, we have restrained from publishing certain sensitive information like quantitative and segment-wise sales. I hope you all will understand this. With this as a background and on a very strong footing, I would like to conclude my address on the numbers and open the floor for questions-and-answers.

Thank you. And over to you, Shrikant.

[Operator]

[Operator Instructions] The first question is from the line of Sudhir Bheda from Bheda Family Office.

[Sudhir Bheda, analyst]

Hearty congratulations to entire Privi team for outstanding results, sir.

[Mahesh Babani, executive]

Thank you.

[Narayan Iyer, executive]

Thanks.

[Sudhir Bheda, analyst]

Sir, my first question is, you did [ 23.46% EBITDA margin ], including other income in the last quarter. So, this kind of margin 23%, 23.5% is sustainable over a period of time over this current financial year?

[Mahesh Babani, executive]

So, Mr. Bheda, I would think that north of 20% will always be our target. We'll always try to be above 20% for sure. As we grow, we may have to compromise to a certain extent by 1 or 2%, but we'll try to maintain north of 21% for sure. But this has been our endeavor to be in the specialty chemical business and we expect that these margins are good enough to sustain.

[Sudhir Bheda, analyst]

[Indiscernible]. Any [indiscernible] for what would be visible in Q4? Is it other income or just [indiscernible]?

[Narayan Iyer, executive]

Mr. Sudhir, Narayan here. It's not just the other income. It is more with regard to, as Mahesh sir addressed, with the process innovations and yield improvement that we were able to get these margins [indiscernible]. So yes, there is a little bit of other income in this quarter, which is added to it. [indiscernible].

[Mahesh Babani, executive]

Mr. Bheda, this is Sanjeev here. In fact, if you look at the last 8 quarters, we have been consistently earning above 20% EBITDA margin. And this has been result of substantially improved process, better yields [indiscernible] product mix, which has resulted into this higher margins and slightly higher [indiscernible] as I said. So that's about it.

[Sudhir Bheda, analyst]

Yes. Got it. And sir, any guidance you would like to give for current FY '26, sales growth and margin?

[Sanjeev Patil, executive]

We don't want to give a very forward-looking statement, but we will minimum try to maintain our average growth rate of 20% to 25%.

[Sudhir Bheda, analyst]

And sir, last question. Yes. Last question. In the standalone and in the consol, there is a difference of INR 33 crores of revenue. I'm talking about the revenue. So in this INR 33 crores, what is the contribution from Prigiv and when it will breakeven or it will start contributing to bottom line, this JV?

[Sanjeev Patil, executive]

Yes. Prigiv has just about started its operation somewhere in February '25. So, there's hardly any contribution coming on to the revenue front, about INR 4 crores or so. And as Mr. Mahesh bhai indicated in his initial opening remarks, Prigiv will start possibly breakeven from somewhere around a year from now, maybe '26-'27. And then it will start contributing both in revenue and the margins, in fact. Margins, as indicated in the past, should be around the 20% plus range only, in fact.

[Mahesh Babani, executive]

It's an assured business and it will keep on growing. It will have -- it won't have a growth of 25%, but 10%, 15% in Prigiv will always keep on growing because the average growth rate, whatever the normal in the market is GDP growth, 7%, 8% will always -- 10% for Prigiv. It won't grow extra one day, but it can reach -- it has a potential to reach about INR 350 crores of top line in next 3 years, 4 years.

[Sanjeev Patil, executive]

And as we said earlier, this is a very strategic fit. So it has to be seen in the entirety.

[Mahesh Babani, executive]

It's like a customer service with a great market leader.

[Operator]

The next question is from the line of Bharat Shah from ASK Investment Managers Limited.

[Bharat Shah, analyst]

Good to see heartening results. But a little bit of a note of doubt from my end. This is not as much as to what has been done, but because of lack of adequate understanding at my end. You earlier mentioned that sustainable growth over 20% and margins in excess of 20%. But 2 points come to my mind. One, when I look at the nature of your clients, the consumer firms, the fragrance firms, the other household article producing firms, given the nature of your clients, it's a bit surprising that how do we expect to grow at a sustained rate of 20%.

Secondly, when I look at our own history, while our top line has grown over a period of time, but the same thing can't be said about the profits. Profits have been uneven. And actually, the profits have exceeded that of '21 -- year of 2021 for the first time in the current year. Even the top line growth over 5 years has been about 12%, 13%. So, I'm curious to understand what makes you confident of that high 20% growth rate? And also considering the little checkered past, why the confidence on the growth rate as well as on the profitability?

[Mahesh Babani, executive]

So, I appreciate your intersection on balance sheet. So the growth actually comes from -- we are at the lowest end of the prices over the last 5 years. If you see our prices of our main product was always in the region of $6, $7, which was -- it came down from $10 to $6 in the last 6 years. So only if it bounces to even INR8 crores, INR 8.5 crores, the growth comes from also there. And also the volume is increasing of these important products. You see the growth is coming from countries in Asia, India, Africa, where the usage of aroma chemicals has been very insignificant in the last 10 years. And now these people have started using like India, it never had an awareness of perfume soap. It used to have only Lifebuoy soap. Now, you see the variety of soaps that are there. All are perfumes.

You see the variety of deodorants that are there. There was no concepts of deodorant 10 years ago in India. So these new markets, the new air freshener, the hygiene conditions has improved. So the floor wash, everything is increasing in India itself. Forget also the export market or the African market and the Asian market, and also the Dubai and the other areas. The markets are improving significantly. So the awareness of cleanliness is coming. Awareness of hygiene is coming all over the world. So, this has been -- actually after COVID, this has taken a fast track to increase our share. And the demand is much higher. So the prices have also come down to -- come up to -- we are at now $7, $7.5. Moving forward, I think it could be even 5%, 10% higher, average price.

[Sanjeev Patil, executive]

And the other thing is that previous comfort with all the top customers is that we are very sustainable. And therefore, as you see, we have invested in the last five years into Camphors and into Galaxmusk as well as Prionyl. And these products are leading to a significant growth. And that is what is resulting into this 20% growth. So all along, we have been growing by introducing newer products. And we have been able to get the market share from our customers. And they're the same customers to whom we keep on selling the same products because the market -- end customers are only so many. So therefore, we are able to grow at that level. That's how we are able to beat the market consistently. Last 5 years I have been saying, but that will explain in longer details to you in one-to-one meeting, but we grow by introducing newer products.

[Bharat Shah, analyst]

But if you look at almost 2/3 of our business is coming from international markets, be it in Europe or Latin America or Asia and the other markets. Europe is hardly [indiscernible]. Seems to be frozen in time.

[Operator]

Sorry to interrupt, Mr. Bharat, could you move a bit closer to your phone?

[Bharat Shah, analyst]

Are you able to hear me clear?

[Operator]

No, I would ask you to move a bit closer to your phone. We cannot hear you well.

[Bharat Shah, analyst]

I'm inside my phone. I can't get more closer to my phone than this.

[Operator]

Yes, it's audible, sir.

[Bharat Shah, analyst]

Okay. So, my question was that more than 2/3 of our business is coming from international markets. When we look at the composition of markets like Europe, where there is hardly any economic growth. Some of the other markets are in a better shape, but not at the level of 20% kind of potential. So given all of that, what makes you confident? I'm not very -- as I mentioned, this is more to educate myself. So, please pardon my ignorance, but I'm not able to grasp given the more checkered history over last 5 years, 6 years, then given the fact of the client base and the geographies as well as the nature of the client industry, consumer, fragrance, these are mature industries. So while hygiene has improved after COVID, but in the 3 years after the COVID, we have degrown in our profits. While fragrance content would have improved in soaps and shampoos and all of that, but it's not exactly a novelty. And therefore, it still beats me as to why would you believe that high 20% kind of growth will prevail going forward?

[Mahesh Babani, executive]

Well, we are confident of our growth as we see our order book position and we also are working closely with clients. We have much more clients right now, customers who are given commitments. Earlier, we had only 3 key customers. Now, we have 6 key customers. Probably all the top 10 companies are our customers. And also, let me tell you that hardly 7% of our market share is in the U.S. And these products are now being produced in the U.S. So that won't make any significant difference. And the growth of our products also comes from new arts from Africa.

There are 7 companies in Africa having -- who want these products Made in India or Made in Dubai. So, our growth in this area is also increasing. And we have at least 5 new customers who are good size to support this. So, we are confident with our order book position. We will be able to maintain our share of our business, about 20%, 25%, 30% growth. Bharat bhai, it is an honor that person of your stature is asking us these questions, and we would definitely like to talk to you offline also.

[Bharat Shah, analyst]

Sure. No, I appreciate. One last thing. While return on capital employed and return on equity has improved in the current year and, of course, earlier, our profit suffered. So, I understand capital efficiency would have declined in that 3-year period. But when do you think, given the fact that our markets are more international, therefore, working capital structurally, I suppose, would remain high. And I don't know what kind of fixed asset turns optimally can be expected. But given the nature of high working [indiscernible] average fixed asset turn, do you think we can see more healthy, say, 23%, 24% kind of return on capital employed? At what stage do you think it is possible, if at all, it is likely to be the case?

[Narayan Iyer, executive]

Bharat bhai, as far as the fixed asset turnover that we talked about, it should be in the range of around 1.4 and we are moving towards, going to 1.6, 1.7 in the coming few years. Working capital cycle, definitely, we have been striving hard and we have been successful enough in bringing it down. And you would have seen that over the last 2 years, our working capital overall cycle has come down, and we still expect there is scope and room for improvement. At least by another 15, 20-odd days, we can bring down the overall working capital cycle.

Yes, Bharat bhai?

[Bharat Shah, analyst]

Sorry, I'm listening. Would you continue or your...

[Narayan Iyer, executive]

I thought that someone was interrupting me in between. So, we expect working capital cycle to improve as well as help and enable our ROE, ROC to further grow above. And the levels that you have spoken is also an explanation and we feel that we are striving towards it, and we should be able to meet there shortly in the coming few years.

[Mahesh Babani, executive]

I want to tell you today, the market scenario, the way specialty chemicals have panned out, sustainability is a key word and supplier in coming times, I can tell you, will be more important for a customer than his customer. Today, suppliers will be more important than customers. That's what I see in times coming. I'm sorry, but this is my honest observation.

[Bharat Shah, analyst]

If you allow me one last thing. If the asset turn is, say, 1.4, maybe it will improve to 1.5, 1.6, but let us say it is 1.4. Therefore, INR 100 of assets will produce a turnover of INR 140. Given the kind of working capital, on that INR 140, we will need to invest about INR 35, INR 40 minimum, if not more, in working capital. That means INR 140, INR 150 of total capital will generate a turnover of about INR 140, therefore 1:1. If we take our EBIT margin about -- if I say EBITDA margin at about 23%, 24%, EBIT margins would be about 17%, 18%. Therefore, capital efficiency at least can be around 17%, 18% unless margins improve materially from here or fixed asset turns improve significantly from here or working capital can come down dramatically. None of these in the foreseeable future can change dramatically is my impression. Therefore, I'm not clear why 23%, 24% of return on capital employed, how and when it can be achieved?

[Narayan Iyer, executive]

Bharat bhai, specifically to answer, as I said, we are in the process of deploying and adding some capacities. These capacities are more with regard to debottlenecking and augmentation. So the CapEx required for such expansion is not on the same lines as we had to do when we initially set up our existing plant. So, that's how I also happen to tell you that from 1.4, 1.5 currently, it is going to move towards the 1.7, 1.8. And in some products, it may even be [ compared to the 2 ]. So, we definitely are going to improve upon our asset turnover.

Second, I also happen to mention that we are in the process of further reduction or further improvement of our working capital days. So, that will also add. So, your equation about being 1:1 may not be so true. And last but not least, the entire world is looking at India because we all would love to see someone other than China really taking the baton again. We do believe that the foresightedness that Privi has a great chance to achieve those numbers what you happen to mention.

[Bharat Shah, analyst]

And I will look forward to detailed personal interaction to understand better.

[Operator]

The next question is from the line of Rohit Nagraj from B&K Securities.

[Rohit Nagraj, analyst]

Congrats on a very good set of numbers. Sir, first question is in terms of the growth for FY '26. Given that all our capacities are operating at optimal level, how do we foresee volume growth coming in for FY '26, given that the debottleneck exercise will only be completed by the end of March '26 and it will be applicable -- the new capacity will be applicable in '27. So, just your view on this?

[Narayan Iyer, executive]

Rohit, thank you for appreciating our performance. We are having some certain capacities yet to achieve to our optimal capacities that we have and we hope to grow the balance 15-odd [indiscernible].

[Rohit Nagraj, analyst]

Question in terms of the growth that we are seeing from the volume side, new product side, just slight understanding as Bharat bhai was also asking, is that -- globally, are there other players who are not expanding capacity because of which we have a better chance to play into it? Or is it that generally, the growth itself is higher for these products? That's why we are seeing even after some competitors are putting up the capacity, we still have a chance based on our interactions with our customers.

[Mahesh Babani, executive]

Yes. So the answer to this question is, yes, others can also expand. But the speed at which Privi puts up capacity is something very, very important. And also the fact that when we put up the capacity, the kind of plants and kind of assets that we build in terms of sustainability, in terms of liquid discharge, that is what gives edge to Privi as compared to many others in the play. And overall dependability that Privi has developed over the last 2 decades, you can see that in the 3 products that we introduced, we are fully sold and expanding further already. So, that is the level of comfort that most of our customers have. And the new products that we bring in are always bought in close connect with our customers so that we are aware of what are the products on which our customers are demanding new products. That's how we get more wallet share -- more share of the wallet from the same customers.

And also it is not only China Plus One, but also Europe Plus One, U.S. Plus One as a strategy because whatever is happening on the tariff side on that. But most companies, okay, leading companies are looking at buy versus make decisions, most multinationals. So therefore, since we are competitive and we have reached a particular threshold level of growth, therefore, we are able to attract and convert many of the existing products for a customer. If you are making it himself, then he is deciding to outsource that from us because we are able to provide it competitively. And also the China Plus One factor, which all of us know very well, which is also helping us.

[Rohit Nagraj, analyst]

Sure. Just one last small suggestion. I know from competitive purposes, you don't want to give split up of volumes. If you can share just the overall aggregate volumes on a quarterly basis, it will be helpful just to understand in terms of the growth volume terms, where are we currently? That's it from my side.

[Mahesh Babani, executive]

Yes. We will do that.

[Operator]

[Operator Instructions] The next question is from the line of Abhishek Ranawade from Oaklane Capital.

[Abhishek Ranawade, analyst]

First of all, congratulations, sir, for such a solid result.

[Mahesh Babani, executive]

Thank you.

[Abhishek Ranawade, analyst]

My question was, could you please share your revenue by product category along with the corresponding margin for each category? And is there any shift happening towards value-added since last [indiscernible].

[Narayan Iyer, executive]

So, giving information between the category of products and their margin is really sensitive, and we would not like to put that up in the public domain. So, please respect that. And this is in the best interest of all the stakeholders, including all the shareholders and others. So therefore, we will rather refrain from giving that information. In terms of changes in product mix, there is no drastic change. What you have to understand is there is a steady change and that is an evolving process. So, existing products also are doing well and the new products also are doing well. So overall, it has been good time, and it will continue to be good time to come in.

[Abhishek Ranawade, analyst]

Okay. Okay. So can you tell me like for the current existing products -- for the existing product category, so the EBITDA margin expansion, so is there any contribution due to the shift is happening or...

[Narayan Iyer, executive]

Yes. So if you see the presentation that we have put up earlier in terms of products that we -- value-added products that we make, those are contributing better and that is what is adding to the value, okay? And we also now have products, which are in that whole product basket range. We have products, which are expensive over $100 products, which is adding value to -- even if the quantity is small, the value as well as the contribution is significant.

[Abhishek Ranawade, analyst]

So in coming years, can we expect that this shift will be faster? Or is there any trends going on?

[Narayan Iyer, executive]

Yes, that's what we are working.

[Mahesh Babani, executive]

Certainly. Certainly. Yes, we are working on that.

[Abhishek Ranawade, analyst]

And sir, so as you said that the input cost for you this year was lower. So, what was the reason behind it?

[Narayan Iyer, executive]

So that is input costs that we have seen in terms of improved yields. It is not that the cost of raw material has substantially gone down. It is because it is improved yields, which is building into lower material cost. It's a function of improved yields as well as the value-added products that we talked about. So, we are able to manufacture products from our side streams. And in fact, that has been the journey of Privi for the last about 7 years, wherein from many side streams, we have developed products which add significant value. So instead of disposing the sides stream as a normal chemical or a solvent or fuel, we are able to add value and that is what has led to significant improvement in margins. That's how the costs have come down.

[Operator]

The next question is from the line of Manish Ostwal from Nirmal Bang Securities Private Limited.

[Manish Ostwal, analyst]

I had a question on the full-year performance. So, we have shown 19% growth in our revenue. So question is, given our key markets, so it is a function of -- we added a lot of customers in last 1 year or -- because market growth rate is much lower than this growth rate. So, what is the function, whether we added more products last 1 year, which are helping us [indiscernible] improve [indiscernible]?

[Mahesh Babani, executive]

[Indiscernible] Same customers to whom I will go to sell. And because of our reputation, we are able to get [indiscernible]. And with that, we also got some new customers and new geographies. So it's a combination of all the factors, which is resulting into higher growth rate and it will continue to grow.

[Manish Ostwal, analyst]

Okay. And second, I want to understand this expansion in the gross margin in -- on a full year. So, can you explain the factors which contributed to this expansion in the gross margin for the year?

[Sanjeev Patil, executive]

So as I already explained, it is the products that we -- that product mix that we now have, which includes products which are high-value products costing over -- I mean, selling over $100 per kilogram as well as the products that we make from the side streams. So from the side streams, we make products which are -- which give higher contribution, and that's how our overall gross margin improves. Am I able to answer your question?

[Manish Ostwal, analyst]

I mean, is there any supply cut in our chemicals -- in our product segment where the prices shot up because of that?

[Sanjeev Patil, executive]

No, no, no.

[Operator]

The next question is from the line of Sajal Kapoor from Antifragile Thinking.

[Sajal Kapoor, analyst]

Given that Privi is transitioning from supplier to partner in terms of co-development, this will probably require fresh investments in things like enhancing the capabilities in terms of hardware, lab equipment, software, as well as scientists. So, what kind of investments do you anticipate in the current fiscal? And if you can give us a sense on the medium-term outlook?

[Mahesh Babani, executive]

So, we are confident that we will be able to keep our growth rate at about 25%, 30% for sure. And we will come back to -- we are planning and working out the growth potential for several products, which are in demand from our customers. We are working out the project cost. There will be a CapEx plan in coming years where we are confident that we will be able to multiply and keep a continued growth for the company.

[Sajal Kapoor, analyst]

Sure, sure. China Plus One, I'm completely also optimistic that given you have been a leading industry player over several decades, you know from your vantage point, you see better than any one of us. But, I mean, given the fact that we all know that future is unpredictable, I mean, no one knows -- so no one saw this U.S. trade -- U.S.-China and trade tariff coming at this kind of intensity, right? So, future again is unpredictable.

My question is more broad in the sense that given Privi was always a catalog or a product company and we were not offering our capabilities or scientific capabilities as a service until we start this JV with Givaudan. Now given the success of this JV, which is more of a service, manufacturing -- co-development and manufacturing services, clearly, I think Privi sees this as an additional growth revenue stream, but that will also bring its own set of challenges and investments. So, my question was more broader in that context.

[Sanjeev Patil, executive]

So, you hit the nail on the head as we say, but previous capability in terms of R&D, we already have 90 scientists who have -- and most of these guys have been with us for a very long time, including the team leaders. So, they understand the nuances of aroma chemical industry very well and aroma chemistry also very well from Prionyl chemistry to musk chemistry, what have you. So all of that, they understand very well. And in terms of laboratory equipment, in terms of capabilities at the lab, instrumentation and all of that, we are state-of-the-art. We have all of that with us. It's only that we are now offering the services more aggressively, and we see a huge amount of potential in this thing. And many of these investments have been done in the past. That's how our ratios have been tight. But all that is now paying off in terms of our sustainability, in terms of our lab standards, in terms of the people that we employ. So, all of that is now paying off.

[Sajal Kapoor, analyst]

No, absolutely. And I think Mr. Babani in his opening remarks spoke about yield improvement. And again, these yield improvements, they are not lucky breaks. I mean, these things happen after a very long period of what's called the learning curve or the experience curve where scientists try multiple iterations over a very long period of time before you get a breakthrough like a yield improvement, right, on a sustainable basis. Yes, absolutely.

My question -- my second question is -- so that was just a broad comment. I completely agree with your views there. My second question is history tells us that for every 27%, 28% growth in per capita GDP, the demand for aroma and niche chemicals doubles. So 30%, give or take, GDP per capita growth, so it's a very nonlinear growth curve, if you see, a small change, which is just 25%, give or take, happening on the per capita consumption is doubling the market for niche aroma, specialty fragrance chemicals. Is that where you are -- so is this the reason where -- why you are optimistic in terms of sustaining a growth momentum? I mean, whether it comes out to be 15% or 25%, that's anybody's guess.

[Sanjeev Patil, executive]

Yes. That is also one of the key reasons you have very rightly pointed out in terms of trends that every -- any increase in GDP leads to multiple effect on the aroma chemical consumption. And as the living standards have improved, which Mr. Babani referred to, those demands also are increasing. So we are, therefore, filling and also always remember our increasing share of wallet of the customers because when we introduce a new product, it is done with huge amount of history, as much as you said that the yield improvement is not a moment -- is not a luck by chance. But similarly, when we introduce products, they are also based on a lot of homework that we do. And therefore, we feel very, very sanguine that we will be able to get this kind of growth, including the reasons that you have pointed out, yes.

[Operator]

[Operator Instructions] The next question is from the line of Manan Madlani from KamayaKya Wealth Management.

[Manan Madlani, analyst]

Congratulations on a good set of numbers. So, my first question is regarding the CapEx you mentioned in the PPT for FY '26, the number is INR 250 crores to INR 300 crores. So is it entirely for debottlenecking or any other plans with this?

[Narayan Iyer, executive]

Yes, it is basically for debottlenecking for expanding on our major products in that.

[Manan Madlani, analyst]

So a follow up on the same. So after spending INR 250 crores, INR 300 crores, we'll get 6,000 metric tons additional capacity, right?

[Narayan Iyer, executive]

That's correct.

[Manan Madlani, analyst]

So if I do the number, our revenue from what we are getting currently, it will be somewhere in the range of INR 300 crores only from this capacity. So, why the asset turn is such low on the debottlenecking?

[Narayan Iyer, executive]

See, I'm not going to talk exact numbers, but our asset turnover will definitely improve with this debottlenecking also happening because your numbers are much lower than what we are projecting.

[Manan Madlani, analyst]

Okay. And sir, on the gross margin side, so last quarter, our gross margins were highest ever, if I recollect correctly, 51.5%. And even last year, that is Q3 FY '24, it was highest. So in Q3, is there any seasonality effect? Or was that just a one-off? That's my first question.

[Narayan Iyer, executive]

It could have been affected because of certain product mix, especially there could have been a little bit higher movement on the specialty -- high-ended specialty. But I would like to reply to all the investors that you need to look Privi on an annual basis rather than more of a quarter-to-quarter thing. Because in one quarter, you may have 0.5% plus or minus. That's not really to be how -- what we need to be looked at as a few of yourselves indicated that whatever Privi is achieving is on account of a long-term strategy where it takes years and years of chemistry and improvements to showcase and get the results. So, my sincere and simple honest request to all of you to look at on a yearly basis rather than just compare one person going up from one quarter to the other.

[Manan Madlani, analyst]

Yes. So, that was my question actually. So on a yearly basis if I look at our 3-year number, it's been continuously growing. Now, should we expect for FY '26, the gross margin should be at least 45% plus.

[Narayan Iyer, executive]

We indicated in our opening address, both by Mahesh bhai and myself, you can expect margins to be at these levels going forward.

[Manan Madlani, analyst]

Okay. And our utilization currently....

[Operator]

Mr. Manan, may we request that you return to the queue for follow-up questions as there are several participants waiting for return.

The next question is from the line of Nikhil Porwal from Perpetual Capital.

[Nikhil Porwal, analyst]

Congrats to the team on a strong performance. Continuing on one of the previous participant's question. So, see, broadly, if you are running at 85%, 90% utilization now and the capacity addition is around 12.5% over the existing capacity and this goes live in FY '27. And if you plan to deliver more than 20% growth consistently, so can we expect -- is this broadly basis improved pricing of existing products along with higher share from high-value, low-volume, high-margin products?

[Narayan Iyer, executive]

So it is a combination of these 2, but there is one more factor that I would like to emphasize is that our flagship products. We have been making these products for a long time, almost 20 years. We are #1 globally. So there, by hindsight of this 15 years, 20 years of learning curve, we have been able to debottleneck those capacities and increase capacities there significantly with minimal CapEx. So, that is also going to play a role going forward in terms of achieving the growth. So, that's a very crucial thing we have. For example, if you are doing something as a batch process, we are converting that into a continuous process or a process was done, which would give you, let's say, 10 tons per day or you debottleneck some of the auxiliary equipment and you get a higher 15%, 20% capacity. So, this is what is happening because of all these years of experience of running these plants and a strong technical services team that we have. That is also leading to this growth apart from new products as well as slightly improved prices.

[Nikhil Porwal, analyst]

Right. So sir, ideally, on higher volumes and higher share of these products that can expand margins, you are still guiding for margins to stay around current level or maybe even contract by 100 basis points. Is that being conservative? Or how do we look at that?

[Narayan Iyer, executive]

So didn't somebody just a few minutes back mentioned that we live in a world which is VUCA world and uncertain. Therefore, we are -- in terms of committing to you, we are being slightly conservative. But obviously, internally, we are working at the numbers that you will also love to hear in times to come.

[Nikhil Porwal, analyst]

Right. Sorry, one last question from me is, this quarter, there was a -- other income was slightly higher than the general. Is it related to thoughts from the government that you all have just released? There was a press release about last few weeks ago?

[Narayan Iyer, executive]

No, Nikhil. The other income has nothing to do with the state incentives, which will come going forward.

[Nikhil Porwal, analyst]

Okay. So is this sustainable or is this one-time in nature?

[Mahesh Babani, executive]

Other income.

[Narayan Iyer, executive]

Other income is sustainable. We will keep getting one impact.

[Operator]

The next question is from the line of Jainam Ghelani from Svan Investments.

[Jainam Ghelani, analyst]

Congratulations for a great quarter and a full year. Sir, basically, our gross debt stands around INR 1,100 crores, and we have multiple CapExes coming over the years, which we might be able to meet through cash flows. But sir, what is our plan? Like what could be the peak levels? And what is our plan for debt reduction from current levels?

[Narayan Iyer, executive]

Jainam, of the said INR 1,100-odd crores, there is a CapEx -- there is a loan of about INR 232 crores lying in one of my JV subsidiary. So as such, overall, the standalone basis, our debt has come down. To answer you specifically what the debt levels will be, at peak level requirement, our overall debt will not be exceeding our debt EBITDA of 3. Currently, it is at 2 odd on debt to EBITDA as such.

[Operator]

This was the last question for the day. I would now like to hand the conference over to the SGA team for closing comments.

[Shrikant Sangani]

Thank you. Thank you, everyone, for joining us in this earnings call. We appreciate your time and showing interest in the company.

Also, I would like to thank the management team for their precious time. In case of any queries, you can get in touch with us or Privi team. We look forward to meeting all of you over the next call. Thank you.

[Narayan Iyer, executive]

Thank you.

[Sanjeev Patil, executive]

Thank you, everybody.

[Operator]

Thank you. On behalf of Privi Speciality Chemicals, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.