Hikal Limited , a leading global fine chemical company, has released its financial results for the first quarter, ending June 30. The company faced challenges in its pharmaceutical segment, leading to a decline in overall performance compared to the same period last year.

Financial Highlights

• Consolidated revenue: Rs 380.00 crore, down 6.5% year-on-year and 31.1% quarter-on-quarter
• EBITDA: Rs 25.00 crore, with a margin of 6.5%, compared to 14.3% in the same quarter of the previous year
• Net loss: Rs 23.00 crore, versus a profit of Rs 5.00 crore in the corresponding quarter last year

Segment Performance

Pharmaceutical Segment

• Revenue: Rs 203.00 crore, contributing 53% of total revenue
• EBIT margin: -12.9%
• Performance impacted by temporary deferment of customer offtake following an Official Action Indicated (OAI) communication from the US FDA on May 22

Crop Protection Segment

• Revenue: Rs 178.00 crore
• EBIT margin: 9.7%
• Performance remained largely flat year-on-year due to global overcapacity and pricing pressure from Chinese competition

Key Developments

1. US FDA Regulatory Issue: The company received an OAI communication on May 22, following a US FDA audit conducted in February. This led to temporary deferment of offtake in the pharmaceutical division.

2. Regulatory Audits: Hikal successfully completed GMP audits at its Bangalore API facility by ANVISA Brazil and PMDA Japan, reinforcing its regulatory credentials for future growth in Japan and key LATAM markets.

3. Remediation Efforts: The company has engaged a remediation partner to address regulatory observations and is actively working with authorities to resolve the matter expeditiously.

4. Animal Health Progress: Several molecules have completed development and validation, positioning the company for global regulatory submissions and eventual commercialization in the future.

Management Commentary

Mr. Jai Hiremath, Executive Chairman of Hikal Limited, stated, "Despite the challenging start to the year in Q1, we remain confident of delivering on our guidance. We expect a more meaningful recovery in Q3 and Q4, supported by increased demand visibility, improved capacity utilization, and new product commercialization."

Outlook

Hikal Limited expects supplies to resume partly in Q2 and maintains its guidance for the full financial year. The company anticipates a meaningful recovery in Q3 and Q4, driven by:

1. Increased demand visibility
2. Improved capacity utilization
3. New product commercialization

The management remains focused on cost optimization, operational efficiency, and strengthening the company's compliance culture. Hikal continues to make progress in the Personal Care and Specialty Chemicals space, aligning with its broader diversification strategy.

As the global chemical and life sciences industry faces ongoing challenges, including trade uncertainties and supply chain volatility, Hikal Limited is working to navigate these headwinds and position itself for future growth.

Hikal Ltd. , a prominent player in the Indian chemical and pharmaceutical industry, finds itself embroiled in a boardroom tussle as it gears up for a crucial vote on the reappointment of Amit Kalyani as a non-executive director. The ongoing dispute has caught the attention of proxy advisory firms, who have issued conflicting recommendations, adding another layer of complexity to the situation.

Ownership Structure and Family Dispute

At the heart of this corporate drama lies a complex ownership structure and a long-standing family arrangement:

• The Kalyani family, represented by Baba Kalyani, holds approximately 34% stake in Hikal.
• The Hiremath family, led by Baba Kalyani's sister Sugandha Hiremath, controls around 35% of the company.
• The remaining 31% is distributed among institutional and retail investors, who are likely to play a decisive role in the upcoming vote.

The roots of the current dispute can be traced back to a family arrangement made in 1994, which has now resurfaced as a point of contention.

Proxy Advisory Firms' Divergent Views

The reappointment of Amit Kalyani has elicited contrasting opinions from prominent proxy advisory firms:

1. Stakeholder Empowerment Services (SES): Recommends voting in favor of Amit Kalyani's reappointment. SES cites Kalyani's 13-year tenure on the board and notes that his six listed directorships within the same promoter group do not raise significant concerns.

2. Institutional Investor Advisory Services (IiAS): Opposes the reappointment, expressing concerns about the potential impact on the company's functioning due to the ongoing ownership dispute.

KIL's Defense and Baba Kalyani's Previous Rejection

Kalyani Investment Limited (KIL), the Kalyani family's holding company claiming over 31% stake in Hikal, has come out in defense of Amit Kalyani's appointment. KIL emphasizes that Amit has no day-to-day role in the company's operations and does not serve on any committees.

This boardroom battle comes in the wake of a significant development in December 2023, when Baba Kalyani failed to secure reappointment to Hikal's board, bringing an end to his 31-year tenure as a director.

Implications for Hikal's Future

The outcome of this vote on Amit Kalyani's reappointment is likely to have far-reaching implications for Hikal's corporate governance and future direction. With the Kalyani and Hiremath families holding nearly equal stakes, the decision now rests in the hands of institutional and retail investors.

As Hikal navigates through this challenging period, stakeholders will be closely watching how the company balances family interests with corporate governance best practices. The resolution of this boardroom conflict could set a precedent for handling similar situations in other family-controlled businesses in India.