NATURAL CAPSULES LTD. Q4 FY25 Results

Q4FY25 was a stable period for our capsules business, characterized by steady realisations and robust demand, particularly in our export markets. Notably, towards the end of the quarter, we observed a softening of gelatin prices in international markets—our primary raw material for the capsules business. We anticipate that domestic prices will follow this trend, which should support improved profitability in the coming quarters. A significant development during the quarter was the imposition of an 88% duty by the US on Chinese HPMC capsules, compared to a 14% duty on Indian HPMC capsules. This substantial price differential has created considerable opportunities for Indian manufacturers in the US market, and we are already experiencing a marked increase in enquiries from these customers. We are reasonably confident that this will translate into a rapid scale-up of our HPMC business in the US over the current financial year. Looking ahead to FY26, we expect to see an increase in topline driven by our HPMC capsules, which not only command higher realisations but also offer superior profitability. Additionally, the softening of raw material prices should further enhance profitability in our gelatin capsules segment. We have already secured firm orders in the HPMC business, which provides us with strong visibility for an improved performance in the capsules business. The operating environment in our API segment continues to be challenging, with industry-wide pressure on product realisations due to significant excess capacity in China, leading to heightened competition and declining prices. As our API facility is part of the PLI scheme, we have brought these concerns to the attention of the relevant Indian authorities, who are currently evaluating the introduction of a minimum import price for products manufactured under the PLI. We believe this measure, if implemented, will support the domestic industry and improve operational performance. As previously guided, our focus this year remains on ramping up capacity utilisation across all products to achieve cash breakeven. During this quarter, we have capitalised the full capacity of our API facility, and expect this to begin impacting consolidated profitability from Q1 FY26, with associated expenses related to interest and depreciation. We anticipate a meaningful pickup in sales from the end of Q2, with sequential improvements throughout the year. Our priorities for the next financial year are to drive growth and restore higher profitability in the capsules business, while also ramping up capacities in the API segment, aiming for cash breakeven and securing the necessary regulatory approvals that will unlock opportunities for higher-margin business. In conclusion, while the operating environment remains challenging, we are cautiously optimistic and remain steadfast in our commitment to executing our long-term strategies and delivering robust results for all stakeholders.