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Edited Transcript of ADVENZYMES.NSE earnings conference call or presentation 2-Jun-20 10:30am GMT

Q4 2020 Advanced Enzyme Technologies Ltd Earnings Call

THANE Jun 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Advanced Enzyme Technologies Ltd earnings conference call or presentation Tuesday, June 2, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Beni Prasad Rauka

Advanced Enzyme Technologies Limited - CFO

* Mukund Madhusudan Kabra

Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director

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Conference Call Participants

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* Arushi Chaplot

* Chirag Dagli

HDFC Asset Management Company Limited - Senior Equity Analyst

* Harsh Bhatia

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Jay Arora

* Manish Poddar

Nippon Life India Asset Management Limited - Investment Analyst

* Rahul Veera

Abakkus Asset Management, LLP - Research Analyst

* Rohit Sinha

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Shikha Mehta

* Vaibhav Badjatya

Honesty and Integrity Investment - Founder

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Advanced Enzyme Technologies Limited Q4 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Mukund Kabra, Whole Time Director; and Mr. Beni Prasad Rauka, CFO from Advanced Enzyme Technologies Limited. Thank you, and over to you all.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [2]

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Good afternoon all. It is a great pleasure to address you and discuss our quarter 4 results for the financial year 2019-'20. We hope that you and your families are doing well in these difficult times. At Advanced Enzyme, we are taking all safety precautions to safeguard the health and interest of all our employees and customers during this COVID-19 crisis, as safety is our topmost priority. In the first segment of this call, we will be talking -- we will be taking you through the earnings and the business highlights and then we will open up the floor for questions and answers.

We are proud to announce that we are again positive on all the parameters of our goal for this financial year and we strongly believe in delivering long-term value to our esteemed shareholders. I'm glad to announce that we have a decent growth in profitability because of our product mix. Our business in India has also bear good results and has seen 11% growth. In past, we have explained that our annual financial results is more relevant to look our performance and also for comparative purpose. We are proud to say that for the first time our EBITDA crossed INR 200 crores and stood at INR 202 crores, 46% of sales, increased by 11% from INR 182 crores, 43% of sales in financial year '19. And our PAT increased by 15% and stood at INR 133 crores, 30% as compared to INR 116 crores, 28%. As mentioned earlier, sale to our topmost customer is on the declining scale for third consecutive year. In financial year '20, the contribution stood at 9% of our total revenue as against 18% which was last year. We have made very great progress in integrating Evoxx, which is our German subsidiary and we keep our goal intact to consolidate the integration process between AETL and Evoxx has accelerated which resulted in for Evoxx turn in fact positive on a stand-alone basis in financial year '20 and is growing steadily. This has happened for the first time since our acquisition. Financial year '20 was a challenging year for us because of the consolidation and synergizing all our different resources. We are committed to grow without sacrificing our margins and continue to create the stakeholders' value.

To end with, I would just like to say the outlook for the financial year '21 right now is difficult to predict or give any guidance. This is because the very fluid and dynamic situation with corona. In recent times, we have seen destruction of supply chain (inaudible) Our R&D units are still not functioning -- some of the -- our R&D units are still not functioning. And our offices, we are still working from home. Because of all these disturbances, the impact -- the work is lagging. And once we get the clarity, we will be able to give you more clarity how the year should pan out. But we expect -- in such a tough situation, we are here to be decent. Now let me hand over this to Raukaji, our CFO, who will walk you through the company's financials. Raukaji?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [3]

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Yes. Thank you very much, Mukund. I will just take you briefly through the company's financial and start with our annual financial performance, because that's what we have been telling from time to time that is more relevant for how to evaluate our company's performance and how to judge the performance of the company. So revenue this year, FY '20, is increased by 6% to 44 million -- from INR 4,196 million to INR 4,440 million. And our EBITDA is as Mukundji has mentioned, first time crossed INR 200 crore mark. So it is INR 2,023 million as compared to INR 1,819 million, so roughly 46% of our sales, and the increase is about 11%. Our profit before tax is increased by 11% from INR 1,620 million to INR 1,792 million. So from 39% of sales to 40%. So there's increase of 1% on our PBT. PAT is increased by INR 121 million (sic) [INR 171 million], a 15% increase from the previous year of INR 1,159 million, this was about 28% to INR 1,330 million. So roughly, it is 30% of our sales.

On quarter-to-quarter performance, this quarter, the revenue is decreased by INR 15 million. So the impact on EBITDA of about INR 43 million and on PAT about INR 19 million. On year-on-year basis, last quarter and last quarter of the previous financial year, there's a decrease of about INR 1 million in our top line, that is the revenue, this was INR 1,014 million (sic) [INR 1,104 million], so it is INR 1,103 million. And EBITDA is decreased by INR 11 million. PBT is decreased by INR 33 million, and PAT is decreased by INR 8 million. So these are like on quarter-to-quarter and year-on-year numbers and financial year complete YTD numbers, which I mentioned to you. Evoxx, our top line revenue stood at 264 million this year with a PAT, this time -- this is the first time like after the acquisition, Evoxx on stand-alone basis is earning profit after tax, this is about INR 21 million. And JC Biotech, our top line was only INR 424 million. And the largest customer, and as you know that is the one number which we always track, this year the total annual sales to the top -- one of the topmost customer is only INR 385 million as compared to INR 719 million. So this directly impacts our revenue of our U.S. based company. So in U.S. business, we have witnessed a degrowth of about 10% and that is mainly because of that customer. If we remove those numbers, then U.S. business has grown by 10%. Our top 10 customer contribute about 35% of our total revenue. Last year, we had about 44%. So there is like now more deconcentration of our sales.

So with this, now I would like to commence the question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Vaibhav Badjatya from HNI Investment.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [2]

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Just wanted to understand that while we have witnessed a sharp decline in the revenue from largest customer, in spite of that our overall revenue has not been impacted that much. So we have definitely grown, yes, through the non-top customers. So can you highlight that from -- and even if I look at your segments, different segments, there's not much change there. So can you highlight how come that we have lost the largest customer, but we have gained another customer in the similar segment. So just wanted to have an idea as to what is driving this replacement?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [3]

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Yes. I mean, this is because this particular customer is U.S.-based company, so it has directly impact on our revenue of U.S. company. But of course, we have seen a very good growth in India. So India domestic market, we have seen a very good growth, about, I think, 17%. And then from India, the export has also gone up by about 45%. So that's how -- and then another good thing is Evoxx also the top line has gone up. So these 3 things have contributed. And somehow whatever loss we had, so that has compensated. And that -- those sales are not to a particular customer, so there are like n-number of customers to whom we are exporting our product or in domestic markets, our growth is again mainly driven by nutrition and in pharma business. So I mean those growth have contributed in compensating whatever the loss on account of one particular customer.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [4]

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Yes. Actually, that's what I also noticed from the number and wanted to understand that it takes a lot of time to kind of get a product through the customer. And we have -- in the same segment, like if I say your Human HC segment is nearly as a percentage of revenue it is nearly same as compared to last year despite of the fact that the largest customer belonged to that segment and we lost that customer.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [5]

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So we have some other domestic customers, right? So there, the sale has really gone up, that has...

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [6]

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Any specific factors that are driving these...

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [7]

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It is pharma, that's what I'm saying in pharma segment, there is a good growth in that sense, right? And then export also has gone up from India. So both put together has finally given us an incremental sale of about INR 244 million.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [8]

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So in pharma, in what kind of medicines do our product go? Any particular kind of...

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [9]

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Yes, we have like anti-inflammatory enzymes, we have digestive enzymes, then we do have some probiotics, I mean those are kind of products. So there are several other products, which we supply to various pharma companies in India. And also, we do exports. When we export it is kind of human nutrition. It's not pharma in that category, that's it.

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Operator [10]

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The next question is from the line of Shikha Mehta from Equitree Capital.

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Shikha Mehta, [11]

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Sir, I had a couple of questions. Sir, on our last con call, we had suggested that we grow -- we double our revenues over the next 3 to 5 years. So are we -- after this whole COVID destruction, are we still on track for doing that? Do we maintain that guidance or...

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [12]

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I think Mukundji will answer your question. Hello?

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Shikha Mehta, [13]

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Yes, sir.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [14]

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Mukund? I don't know, I think he is not audible or if we lost him.

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Operator [15]

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Mr. Mukund Kabra, your line is in the talk mode. Mr. Mukund Kabra, are you able to hear us?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [16]

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I think there's a loss of connection probably or he is in mute.

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Operator [17]

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Sir, I'll just get his line.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [18]

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Yes, please.

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Shikha Mehta, [19]

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All right. Sir, in the meanwhile, I can ask you my next question.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [20]

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Yes.

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Shikha Mehta, [21]

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Sir, so with this whole COVID crisis, the demand for preventive care has maybe increased because a lot of people are focusing on their immunity. So how do we see that panning out for our enzymes?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [22]

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I think this is all business related. First, I think if we are able to connect to Mukund, so I think it would be better if he answered those questions. And if we are not able to connect, then I'll definitely answer your question.

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Shikha Mehta, [23]

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All right, sir.

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Operator [24]

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We have the line for Mr. Mukund Kabra reconnected.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [25]

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Yes, please?

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Shikha Mehta, [26]

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Yes, sir. Sir, my first question was on the last call we had suggested we double our revenues over the next 3 to 5 years. So after the whole COVID disruption, does that still hold true for us? Or are we extending the guidance or...

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [27]

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Shikha, at this point of time, we still think that we can achieve those guidance, probably all the sales and other things might get delayed by 3 to 6 months, but we hope that we will cover it during the coming days.

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Shikha Mehta, [28]

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Right, sir. And my next question was about -- because of coronavirus, everyone seems to be focusing on their immunities and are looking for preventive health care. So how does that pan out for our enzymes and our products? And do we have any new products in the pipeline?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [29]

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We are working on those, Shikha. We are getting a very positive response in the U.S. market. In the Indian market, we are still not exactly into the nutritional areas because we still are getting categorized under the pharma, okay? So the situation is not really clear in the Indian market scenario as far as health is concerned, but we feel that we are getting a good response in the U.S. market.

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Shikha Mehta, [30]

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Right. Okay. And sir, we had our CapEx of around INR 100 crores for that R&D facility. So is that going to be deferred? Or is that still happening?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [31]

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Everything will be deferred by 6 to 8 months, Shikha.

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Shikha Mehta, [32]

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Okay. And sir, as on FY '20, we have around INR 200 crores in cash and cash equivalents. So do we have any specific cash management strategy? Or -- what exactly are we going to be using this for?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [33]

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Shikha, we want to use the cash for the growth, for the (inaudible) growth as well. We are actually searching for it. As of now, nothing to say that we are actually pursuing for these opportunities.

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Operator [34]

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We will move on to the next question that is from the line of Jay Arora from Birchwood Capital LLP.

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Jay Arora, [35]

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Mr. Mukund, I had 2 things in mind. Firstly, in order to boost our sales, and we -- can we think of going into supplements of prebiotics -- probiotics, because we are already the manufacturers, so. If you can -- and -- in America, there are a lot of supplement-oriented companies who sell on Amazon. So if we could think of going from B2B to B2C category as well. Can we think on those lines or we plan to remain only as a manufacturers of enzymes?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [36]

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We are promoting probiotics very aggressively. We are working on B2B and working with all the different supplement areas, on the probiotics. At the same time, we are growing also in the probiotics currently. Did I give you answer or you need like any specific one?

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Jay Arora, [37]

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(foreign language) being a manufacturer of enzyme, does it give us the edge to grow at 20% in double digits every year-on-year or (foreign language) to increase our revenue?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [38]

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So we already said that we are working on biocatalyst area and probiotic area, and also like on the food areas, particularly into the bakery area and the animal (inaudible) area. So probiotics front, when we talk about, we are talking about all the verticals including food and -- food supplement and the other companies also we are having, not only like just in the pharma or (inaudible)

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Operator [39]

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The next question is from the line of Rahul Veera from Abakkus Asset Management.

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [40]

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Sir, just wanted to understand, do we capitalize some of our R&D expenses?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [41]

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No, we don't capitalize any R&D expenses except whatever is related to our regulatory filing because we need to file our dossiers for getting those products registered in the countries where like they have this kind of requirement. So we need to spend a lot of money. So those are like expenses we have capitalized. So that is about, I think, INR 57 million so far we have capitalized in last couple of years. Other than that, all R&D expenditures are like part of our P&L, except capital expenditures. Of course, if we spend some amount on equipment that is part of our asset.

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [42]

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That's right. Because there's a sharp increase in the goodwill this year, from INR 271 crores, we moved to INR 294 crores.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [43]

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Yes, that happens because of the currency difference. Because every year that has to be valued at current rate at March 31 year-end rate.

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [44]

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Right, right. Fair point. Sir, any visibility on the Q1 till now in terms of logistics or employees or -- what has been the kind of disruption for us for Q1?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [45]

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Mukundji will answer.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [46]

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We have like some disturbance in the month of April in India. In the month of April, we had certain logistical issues and certain disturbances. We are still not able to operate our R&D units in Thane, but our Evoxx operations are going on, our U.S. operations are going on. Our -- hello?

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [47]

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Yes, sir.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [48]

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Yes, Mukund, please go ahead.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [49]

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Yes. I would just say that May month, we are like at normal.

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Operator [50]

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The next question is from the line of Rohit Sinha from Emkay Global.

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Rohit Sinha, Emkay Global Financial Services Ltd., Research Division - Research Analyst [51]

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Most of my questions are already answered. Just wanted to check on this guidance for the company. As Mukund sir said that in next 3, 4 years we will look into double the revenue. Just wanted FY '21 revenue guidance and margin guidance. And then if we have -- if you look at our last 7, 8 quarters top line, it has been more or less flattish kind of number. So where would be again the visibility coming for growing at -- I mean, in 3, 4 years, we are looking to double the revenue?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [52]

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So Rohit, this year it is difficult to predict because I don't know what will happen in the next quarter, whether there will be the second wave of COVID and all the disturbance will again come back or not. So we are not at this point of time very sure how the situation will pan out, and that is why we are not giving any guidance right now for this year. We will wait for the next quarter, and then we'll come out. But I can say that we will have a decent this year if not very high, but we will have a decent this year. This is what like at this point of time I can say that. The growth in the next 3 to 5 years, we still pursue the same verticals, which we are talking again and again, the pharma areas, the food areas and the animal area. In the pharma area also like we think biocatalyst can be another one area and the probiotics. So these are the verticals and probiotics can work as a horizontal vertical, which fits into all of our these areas, pharma, animal and also like into the food area. So from these 3 verticals, we expect to grow. Also, we will have some inorganic growth in the coming year.

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Rohit Sinha, Emkay Global Financial Services Ltd., Research Division - Research Analyst [53]

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Okay. Okay. And just wanted to look if going forward, I mean, for FY '21 also, what could be -- I mean, if we are say -- we are expecting that there would be some pressure on this COVID thing and all that because of logistic issues or some other issues. So how we should be -- I mean, what kind of factors would be impacting our margins going forward? Or it will remain in this range. I mean, is it the employee cost or the other expenses which will -- might back up or it will go in line with the past numbers?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [54]

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Rohit, our expenses are more or less constant, right? So it, again, depends on the sale number. So if sale is disturbed because of like some lockdowns or some other things which may come up with the second wave. If it -- we hope it should not come up, but unfortunately, if it comes up and everything is again locked down, in those circumstances, probably we might get (inaudible) margin. Otherwise, we expect that the margins and the top line should be more or less constant.

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Operator [55]

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The next question is from the line of Shikha Mehta from Equitree Capital.

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Shikha Mehta, [56]

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Yes. Sir, I just had a couple of follow-up questions. Sir, what was our capacity utilization for the full year?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [57]

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Shikha, it is roughly the same, 45% to 50%.

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Shikha Mehta, [58]

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Okay. And sir, our R&D costs as a percentage of sales?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [59]

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Raukaji can tell that. Raukaji?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [60]

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Yes. I think R&D cost, percentage of sales, what we do is we have spent on R&D, I'll just give you the numbers, about INR 21 crores, Shikha. So that you can take out of overall basis.

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Operator [61]

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We will move on to the next question that is from the line of Vaibhav Badjatya from HNI Investment.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [62]

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Sir, pharma sales because currently the pharma is in focus everywhere. So what is the total sales that we have done in this year to pharmaceutical companies?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [63]

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So pharmaceutical, it is about INR 177 crore.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [64]

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Okay. And last year, what was the number?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [65]

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It was about INR 150 crores.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [66]

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INR 150 crores to INR 177 crores?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [67]

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Yes. So roughly about 10% of growth.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [68]

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Right. And correct me if I'm wrong, I read somewhere that this COVID testing, for this RC-PTR (sic) [RT-PCR] test, there is a test kit that is required. And in that test kit, there is a function of enzyme, without that enzyme the test doesn't work well. So are we any way supplying those kind of enzymes? Or we are just not in that enzymes and do no plan to -- or do not have the capability to address that problem?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [69]

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Vaibhav, we are not doing that. We are not supplying at this point of time. We do have capabilities to make any kind of enzymes, but at this point of time that is not our focus area.

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Vaibhav Badjatya, Honesty and Integrity Investment - Founder [70]

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Sorry? Hello?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [71]

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It's not our focus area as of date, Vaibhav.

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Operator [72]

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The next question is from the line of Manish Poddar from Nippon AIA (sic) [Nippon AIF].

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Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [73]

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This is Manish here from Nippon AIF. Sir, I have actually 2 -- couple of questions. So first thing was on this guidance, which you're saying that [you will] double in the next, let's say, 4 years. So but if you look at your performance, let's say, in the last 5 years, at least, if you look at revenues, our revenues have roughly grown at 10%, 11%, and last year, performance was in high single digits. So can you probably elaborate what is changing, let's say, or what has probably -- because there was a lot of share structure, which changed among the promoter groups. So what has really changed in terms of the operation or, let's say, the thought process behind running the business? So first question is that, and then I have another one.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [74]

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It's the focus which has changed. Earlier, we were like focusing on many areas, now we consolidate our focus to 3 to 4 areas, which is our strength, and we believe that, that will take us to that. Because earlier, we feel that we were missing the focus. Okay?

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Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [75]

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Yes. But -- so let's say, in terms of, let's say, if I look at -- would -- F'21, in terms of number of clients which you operate, is our objectives to function with the same number of clients and get more well entrenched with them? Or you want to increase the number of clients? Just want to understand broader...

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [76]

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Definitely, we will have to increase the number of clients.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [77]

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It happens both way. You need to focus on increasing your customer base, you need to focus on increasing your product...

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [78]

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Product base as well.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [79]

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Yes.

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Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [80]

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And second thing, sir, you mentioned that you're running at 45%, 50% utilization. And if I look at your last year, staff cost plus other expenses roughly INR 160 crores full year, which is largely similar to what was FY '19. So would it be fair that this is the cost base you really require to run the business? Or would this cost structure change, let's say, when you change in size and [space?]

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [81]

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So some of the expenses like those are variables, they change, right? Otherwise, cost of the -- most of the expenses are kind of fixed expenses. And now when you talk about employee cost, if you want to really increase your marketing reach, you want to increase your R&D effort, then definitely, you need to put more people. So there will be kind of some increase. This is always in-built in a way like you always think about 8% to 10% growth in your payroll cost, increase of payroll cost by 8% to 10%. Otherwise, expenses, as far as our operations are concerned, there are some variables, like if you utilize plants more, then there will be extra electricity charges, fuel cost, right, some repairs will be additional. And you need to hire some more laborers, if you want to really operate at 80%, 90% capacity, where you have a lot of orders. So those are kind of variable expenses. But otherwise, most of the expenses are kind of fixed in that sense.

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Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [82]

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Okay. And just 1 follow on, if I may. Is there a way to track your revenues or get a better handle on revenues. From a growth perspective, let's say, at what rate -- how should one get a better handle of the revenue front?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [83]

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I mean that's what we say, you have to judge by annual performance, not on quarter-to-quarter basis. So that's how you can track us in that sense.

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Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [84]

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No, I agree, annual is the right number, but I'm just trying to understand, let's say, would 10% be the right number to -- for the industry or for the company to grow or would 15% or 5% be the number. How should one decipher that. That is what I'm trying to gauge.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [85]

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So if you look at the Novozymes or the other big players, you will see that they are growing 3% to 4%.

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Operator [86]

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The next question is from the line of [Ramesh Sabbani] an investor.

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Unidentified Participant, [87]

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Yes. I have 2 questions. First thing is about the current COVID situation. I mean, whether it is a positive thing or a negative thing or just neutral thing for the company, for business in the mid to long term?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [88]

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There are certain positive developments, there are certain negatives, we don't know what it will pan out.

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Unidentified Participant, [89]

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Okay. I mean, like in the broader sense, like it is a positive for pharma, that's what we are hearing. So can we classify Advanced Enzyme also will be -- get some benefits in the mid to long term from this COVID situation?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [90]

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At this point of time, we think that, yes, there will be some more positives than some negatives. Positives will be ahead of negatives. That's what I think at this point of time. The situation is very dynamic and fluid, and that is why it is like little difficult to predict.

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Unidentified Participant, [91]

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Okay. Yes. And second question is based on your commentary, like whether our business is -- comes under essential category or not because you were saying like if there is a second wave and another lockdown and of course -- and it will be impact to the business. But if it comes under essential category, I mean, there should not be any major impact. Am I correct?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [92]

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We are under essential categories. So we just had a lockdown for 2, 3 days in the beginning because the situation was not very clear. So we are working the whole time. It's not like that we are not working. But what we have faced is like sometimes the transporter is not taking the material or we are not getting the transports kind of all of those sort of issues. Or even we are working, our customers are not working. Some of them are closed. Some of their R&D units are still not working. So the product has to be approved in the R&D and then only it can move forward. But all the R&D work is being stalled because at the customer end also like they are not working, their R&Ds are not working. So these are the certain -- few difficulties what we have faced. Certainly, like as I mentioned, like in the month of May we are back to the normal, but yes, we faced some problems in the month of April. And we don't know like how it will pan out in the whole year, so. Okay?

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Unidentified Participant, [93]

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Yes. I have 1 final question if I can ask. It is about 1 consumer probiotics drink, which is available in most of the supermarkets and online marketplaces in India. And it is called Yakult. Have you heard of that name?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [94]

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Yes.

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Unidentified Participant, [95]

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Yes. So my question is that what -- I mean, do we do anything on that context like do we supply any enzymes to such businesses or are we having any plan to introduce such consumer probiotics drink in India or elsewhere?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [96]

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So we generally work with the company who supplies that and we supply the probiotics to that. We are working on those sort of areas. But as of now, nothing is concrete, but yes we are working with a lot of different customers. We don't plan to go directly from B2C -- from B2B.

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Unidentified Participant, [97]

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Okay. I had one final question. It is about the competition, Novozymes. So are we gaining market share from them? Or as they are the leader in the industry, they are gaining from us? Because you said we lost 1 customer. Like coming to that big customer, did that customer go to our competition or...

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [98]

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We are not very clear, some of the business we lost, probably, we are still not sure. Like it was more like (inaudible) customers. Raukaji, what you call it?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [99]

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So I mean, as such these companies are not exactly in the space where we are. Like we are in the nutrition business. Novozymes is not in that business in that sense. So that is -- as such, we don't have hands on competition as such with them. So our major business...

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [100]

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So Novozymes has a different area. We do have our niche areas. So we directly don't compete with Novozymes.

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Unidentified Participant, [101]

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Okay. Then in that case there is 1 more question. If you want to -- so if you want to name 1 competitor for our business, who would be that one be? India (inaudible) India.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [102]

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So there is no one competitor, let me tell you, because we operate in human nutrition. So human nutrition is one area where, like, we don't see any competitor as such. Because we operate in different verticals in that sense. So human nutrition, animal nutrition, we have bioprocessing where we supply our enzymes to -- for food processing. Then there is industrial enzyme. So industrial enzyme maybe the biggest contributor (inaudible) and they are operating in detergent segment where we don't have any presence. So there is no apple-to-apple comparison with any competitor who is kind of in the business in which we are. We are fully integrated in the sense and we operate on different technology. This is (inaudible) technology, solid technology, and we cater to most of the industry in that sense. So I mean there is no other competitor per se where we can compare. Like earlier, Biocon used to be there, but then they sold their industrial enzymes to Novozymes and they have some kind of pharma enzymes. So to some extent -- our business, to some extent, is comparable with the business in which they also operate. So Novozymes, maybe we compete for a couple of, I can say, category of products, which may be going for animal nutrition, but it's not exactly -- apple-to-apple comparison is not possible as far as competition is concerned.

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Operator [103]

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The next question is from the line of Arushi Chaplot from First Water Advisors.

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Arushi Chaplot, [104]

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So my question was on the U.S. business. We do see a clear drop in quarter 4 on Y-o-Y basis. It has come down from 46% to 38%. So any particular reason behind that?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [105]

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So are you talking about our U.S. business?

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Arushi Chaplot, [106]

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Yes, the U.S. business.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [107]

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So last quarter, we did not have any sales from one of our topmost customers. So that is only the reason in the drop. Otherwise, U.S. business has grown by about 10%.

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Arushi Chaplot, [108]

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Okay. So the geography split, that shows it was at 38% for quarter 4 as compared to 46% in FY '19 quarter 4. So that is the one question...

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [109]

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Yes. So that is the drop basically, no?

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Arushi Chaplot, [110]

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Okay. Yes.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [111]

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Both the effect, like India has gone up and U.S. has gone down because of the top customer. So the overall mix has changed.

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Operator [112]

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The next question is from the line of Rahul Veera from Abakkus Asset Management.

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [113]

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Sir, you recently commented something around inorganic growth? Are we looking at buying out some companies, like some M&A opportunity?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [114]

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Yes, if there is some possibility, then definitely -- we will definitely evaluate such options.

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Rahul Veera, Abakkus Asset Management, LLP - Research Analyst [115]

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Okay. Okay. Okay. But there's nothing on the radar right now. Is that correct?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [116]

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Yes.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [117]

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We've actually searched, but nothing is there. Yes.

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Operator [118]

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(Operator Instructions) The next question is from the line of Harsh Bhatia from Emkay Global.

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Harsh Bhatia, Emkay Global Financial Services Ltd., Research Division - Research Analyst [119]

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I joined the call a bit late. Sir, if you could just reprovide the top product and top client contribution versus last year?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [120]

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So top product and top is -- last year, we had about INR 721 million and this year, it is about INR 388 million. But if you're talking about the product -- sorry, I'm sorry, I missed this point, let me again rephrase this. You're talking about the topmost product, correct?

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Harsh Bhatia, Emkay Global Financial Services Ltd., Research Division - Research Analyst [121]

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Yes. Top product as well as top client contribution.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [122]

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Top client is that I think I explained you. As far as top -- topmost product is concerned, that let me give you the numbers. So it is about INR 1,035 million. And I think there is a growth of about 8% on FY '19 numbers. So this INR 1,035 million is about 108% in that sense.

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Operator [123]

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The next question is from the line of [Gopinath Reddy], an investor.

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Unidentified Participant, [124]

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Sir, this is related to the loss of the big customer from U.S. Is it something that we got -- orders that got deferred or we lost the order? And is the loss of order something related to COVID or nothing related to this?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [125]

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Gopinathji, there is no clarity. But at this point of time, we don't hold any order in hand.

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Unidentified Participant, [126]

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Is it better now, sir?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [127]

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Sorry?

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Unidentified Participant, [128]

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Am I audible?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [129]

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Yes. Yes.

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Unidentified Participant, [130]

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My question is, is the loss of the customer, the big customer from U.S., is it because of corona? Or is it something completely unrelated and it's a loss of business are a deferment of an order?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [131]

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So Gopinathji, we don't have much of clarity at this point of time, is it because of corona or is it due to lockdown where their business is lost or what has happened.

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Operator [132]

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(Operator Instructions) The next question is from the line of [Vineet Shah] from Motilal Oswal.

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Unidentified Analyst, [133]

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What is the product launch plan for FY '21?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [134]

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So, Raukaji, will you answer or...

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [135]

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No, I think you please take this. Product launch, he is talking about probably.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [136]

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So generally, we don't to launch a single product. The products are more or less mixed because we operate more on the solution side rather than just the product. As you know, like we have a basket of more than 65 enzymes and more of the probiotics. So most of the products have been mixed. We constantly develop new enzymes. Every year, we add 3 to 4 different enzymes in our portfolio, in our armory, I can say that. But it's more to do with the application base. So we are working on to the more like biocatalyst areas, as I mentioned earlier too, right? And the probiotics areas, these are our like main focus areas. At the same time, we are going with lot of like registration in the animal [food] areas. In the bakery areas, we do have some new good products, which we were like about to launch or like start the sales, but unfortunately because of the COVID everything got delayed. So we expect a 6-month delay into those areas.

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Operator [137]

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The next question is from the line of Chirag Dagli from HDFC Mutual Fund.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [138]

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Sir, it seems that you've booked 0 revenues for this top product in the fourth quarter? Is that a fair understanding?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [139]

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Yes, from that particular customer.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [140]

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The top products which -- whose sales we are reporting as INR 388 million in FY '20, this is essentially just 3 quarters?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [141]

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Yes, right.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [142]

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Understood. And is there an impact analysis that you've done on the demand environment in the U.S. of whatever is happening right now? Like in one of the comments, Mukundji mentioned that it is more positive in the COVID crisis for us. If you can just elaborate a little bit on the demand environment for human nutrition in the U.S.?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [143]

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So on the human nutrition side, we are getting good orders, but at this point of time, it is not very clear whether the customers are building their inventory because of like uncertainties or it's the real demand. So we can't comment at this point of time on that front, but I can feel like some of the pharma companies are giving orders to the Indian pharma companies, and we are getting like some orders because of that. So I think those are certain positive areas, which we can see. But we don't know how the situation will pan out, if there will be more orders to the pharma companies or the orders will get reduced or how it will work out.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [144]

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Understood. And this industrial processing, the fourth quarter has seen a sharp improvement in the run rate. Is this run rate sustainable of INR 19 crores a quarter, or is there some bunching up there and we shouldn't look at the quarterly number?

Or is this because of some new products?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [145]

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Can you please repeat?

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [146]

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Sir, this industrial processing, this number that you shared with us of enzymes used in industrial processing, it has seen a sharp jump in the fourth quarter. In this INR 19 crore number that you reported for the fourth quarter, is there any one-off in this? Or is this run rate -- quarterly run rate sort of sustainable for us?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [147]

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Raukaji, is it industrial INR 19 crores for the quarter?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [148]

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So he's talking about that bioprocessing food and nonfood both, right?

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [149]

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Yes, sir, total.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [150]

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Those numbers are -- yes, so it's not a 1 run rate. We have good growth in those areas. So we think that it can be sustainable.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [151]

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Okay, this number is sustainable, sir, this absolute number?

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [152]

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Yes.

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Operator [153]

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(Operator Instructions) The next question is from the line of [Ramesh Sabbani] an investor.

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Unidentified Participant, [154]

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I have one question about this foreign portfolio (inaudible) more than 10% holding in our business, right, and they also have a portfolio for different health care companies under, say, umbrella. So are they like getting in with the management very frequently and guiding or getting to know about the business, something like that, and in the future they may ask for any Board seat, anything like that?

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [155]

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Yes. Their representative, Dr. Sunny, is on our Board. So he is definitely contributing a lot.

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Operator [156]

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Ladies and gentlemen, that's the last question. I now hand the conference over to Mr. Mukund Kabra for his closing comments.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [157]

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Thanks. Thank you so much for your participation and asking some very good questions. And we appreciate your support and cooperation throughout and look forward to working with you. Thank you all the shareholders. We really appreciate you. Thank you very much.

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Beni Prasad Rauka, Advanced Enzyme Technologies Limited - CFO [158]

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Thank you so much.

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Mukund Madhusudan Kabra, Advanced Enzyme Technologies Limited - Director of Operations & Whole Time Director [159]

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Thank you.

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Operator [160]

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Thank you. Ladies and gentlemen, on behalf of Advanced Enzyme Technologies Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.