Hester Biosciences Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Poultry division surges 48% YoY: Institutional business, deeper market penetration, and new health products drove the jump, while the newly approved low-pathogen avian influenza vaccine added early traction.
• Animal health hit by tender timing, not demand: Government immunization programs (PPR, Lumpy Skin Disease) were delayed, compressing vaccine sales into a single quarter; management expects those tenders to land in Q2.
• Consolidated revenue fell 8% YoY as Nepal and Africa operations weakened, though a Gates Foundation loan amendment delivered an exceptional accounting gain that flattered consolidated profitability.
• Gross margin leapt from 69% to 78% YoY on favorable product mix and operational efficiencies, while standalone EBITDA nearly doubled.
• What to watch next quarter: Whether the delayed government tenders actually close, whether Africa shows any sign of the "take-off" management believes is coming, and how much of the poultry surge is repeatable versus a one-quarter pull-forward.

Poultry Healthcare: The Quarter's Engine

• 48% YoY growth was driven by higher institutional business, deeper market penetration, and stronger customer engagement across key markets.
• New product portfolio contributed: Feed supplements and disinfectant solutions, introduced in the previous financial year, added early traction and are sold through the same distribution network that carries vaccines.
• Low-pathogen avian influenza vaccine was approved in March 2026 and is already being sold; management said market response has been very good and the vaccine contributed to some of the jumps in the division.
• Revenue jump attributed to volume, not price: Management stated vaccine prices have not gone up, only marginally; the growth came from good poultry placement, more aggressive market penetration, and capturing a bigger market share.
• Cross-selling is underway: Animal health products, feed supplements, and medicines are already being sold through the existing vaccine distribution network, though management declined to break out how much revenue comes from supplements versus vaccines.
• Holistic positioning: The company is positioning vaccination not as a standalone intervention but combined with biosecurity, hygiene, and health products for holistic disease prevention, a strategy management says has contributed over the last few quarters.

Rajiv Gandhi: "Today, the world is volatile, forget about other markets. This is too precise for us to answer. We will take it as it comes. And there is a demand, we will meet the demand. Sometimes demand is ability as well as willingness. Willingness is there, ability may not be there, etc., etc., because of these geopolitical reasons. We will take it forward."

Animal Healthcare: A Timing Problem

• Government tender delays compressed the quarter: Immunization programs under the PPR eradication and Lumpy Skin Disease Control Initiative, for which Hester supplies Goat Pox vaccine, did not close as planned; management characterized this as a timing-related issue, not an underlying demand problem.
• Tenders expected in Q2: Management stated the delayed government vaccine tender business will come up into the next quarter, and asserted there is not a single year the company will go without gaining one tender.
• Market dynamics forced focus into poultry: Management acknowledged that because government vaccine tender business got delayed, animal health vaccine sales could not happen as planned, while poultry opportunities were available and the company pushed sales there.
• Dairy farm direct demand: Management is working to create demand directly with dairy farms as farms become bigger and less dependent on free government vaccines, aiming to reduce tender dependency over time.
• Core R&D pipeline aligned to government needs: Products under development are vaccines and biologicals that will be needed by the Government of India for tenders, reinforcing the strategic bet on public procurement.

Rajiv Gandhi: "You could be rest assured that there is not a single year that we will go without gaining one tender. Today if this is product, tomorrow it will another or the other, or may be all the three. But it will go on."

International Operations: Africa & Nepal

• Africa revenue declined and was the primary driver of the 8% YoY consolidated revenue drop, alongside Nepal.
• Gates Foundation loan amendment reduced Hester Africa's outstanding loan from USD 12 million to USD 5 million, waived accrued interest, and made the revised loan interest-free, reflecting the foundation's recognition of geopolitical and operating challenges in the region and continued support for Hester Africa's long-term mission.
• Management declined to give directional guidance on Africa, stating only that they see positive results, believe things will happen and take off, and are working towards a long-term strategy.
• Management described Africa as being in a "formative period," not a gestation period: a virgin continent where economies are struggling financially and politically, and where the company is trying to create demand from scratch.
• Nepal plant remains dependent on the PPR eradication program; management said the opportunity remains and they will utilize facilities outside India because India does not recognize the change that the world recognizes for PPR.
• Poultry vaccines are manufactured across all three facilities (India, Nepal, Africa) and are already being sold in those markets.
• An analyst claimed Nepal is a ₹100-crore market for poultry vaccines; management contradicted this, stating "according to us, it is not ₹100 crore" and asked the analyst to send the statistics.

Margins, Cash & Operational Discipline

• Standalone gross margin improved from 69% to 78% YoY, supported by a favorable product mix and continued efforts on operational efficiencies.
• Standalone EBITDA grew 95% YoY, reflecting stronger operating performance and disciplined execution.
• Consolidated profitability included an exceptional accounting gain from the Gates Foundation loan amendment, which flattered the bottom line and should be stripped out when assessing underlying performance.
• Receivables are elevated but management stated it is sometimes due to seasonal issues, is not a concern or a red flag, and is perfectly manageable; positive cash flow from operating activities continues.

Rajiv Gandhi: "It's a trend which goes on, but we don't see this as a concern at all. And it's not even a red flag or anything of a concern to us. It's going on perfectly, manageable."

Infrastructure & Pipeline

• BSL3 facility is operational and included in the 60–65% capacity utilization figure; management believes it is a regulated requirement for years to come for all organizations and will be fully utilized for veterinary products in the pipeline.
• Fill-and-finish facility is also operational and part of the same utilization figure.
• Management declined to disclose current BSL3 capacity utilization percentage, products under development in the facility, or their market potential, stating it would not be appropriate.
• Regulatory dossiers were submitted during the quarter in the animal health segment, reflecting continued investment in expanding the biological pipeline.
• Brucella recombinant vaccine development is progressing on proper timeline with significant progress; management will share information in the public domain when appropriate.
• Avian influenza regulatory pathway remains uncertain: an analyst asked about a recent Ministry meeting regarding high-pathogenic avian influenza and importing vaccines for testing; management declined to comment, stating it is premature until the government determines a specific regulatory pathway.

Priya Gandhi: "Yes, it is a BSL3 biosafety level 3 facility, which we are very proud of. In whichever circumstance we did build it, but we really believe that it is a requirement, a regulated requirement in years to come for all organizations. And we are just glad that we built it for something else."

Pet Care: Early, Ambitious, Undated

• Pet division is currently a small portion of the animal health division; products include antibiotics, anti-parasites, and grooming products sold under the company's own brand name and are doing very well, though not reported separately yet.
• Vaccine strategy is "make in India, produce in India and sell from India": management is reasonably clear they do not want to be dependent on foreign buying, importing, and selling; they want to sell abroad, though this approach is taking longer.
• No timeline for pet vaccine launch: management called it premature to give timelines, noting products will progress through development and regulatory stages, and regulatory timelines and demands are very stringent.
• Pet division will be reported separately once it reaches a meaningful scale; management is making quite a few investments and will take the division forward.
• Management declined to disclose the current size of the pet care distribution network in terms of veterinaries, dealers, or distributors.

Rajiv Gandhi: "While there are some opportunities to import and to sell, but we are reasonably clear, make in India, produce in India and sell from India. This is taking a little longer time, but we do not want to be dependent on foreign buying, importing and selling over here. In fact, we want to sell abroad."

Guidance & Commitments

Key Metrics