Neochem targets 75% FY2028 utilisation through upgrades

Neochem Bio Solutions Limited expects roughly 75% capacity utilisation in FY2028, assuming 20% to 25% volume growth, after reaching a 62% annualised utilisation rate in H1 FY2027 at its 22,000-metric-tonne annual plant. Management said reactor upgrades and available land can support additions before a major expansion is needed.

What capacity utilisation is Neochem targeting for FY2028?

Neochem is targeting about 75% capacity utilisation in FY2028. Management gave this assumption on October 29, 2026, based on expected volume growth of approximately 25%, while qualifying that the likely range is 20% to 25% because of its broad product mix.

The target follows increased use of the existing facility. Neochem has installed capacity of 22,000 metric tonnes per annum (MTPA), and management said H1 FY2027 utilisation was running at an annualised 62%, compared with approximately 53% on an annualised basis in FY2026. It also reaffirmed its objective of approximately 65% utilisation by the end of FY2027.

The move from the H1 FY2027 run rate to the FY2028 target would add about 13 percentage points of utilisation, while the step from the FY2027 year-end target would be about 10 percentage points. Management said products range in value from Rs 40 to Rs 2,000, so the realised volume outcome depends on product marketing and customer acceptance across that portfolio.

How will Neochem add output before a major plant expansion?

Neochem said it can increase output through smaller capital expenditure projects at its existing facility rather than immediately committing to a large new plant. Management cited replacing a two-ton reactor with a six-ton reactor as an example of an upgrade that can be completed within a short period.

Management also said land adjacent to the present facility can support further capital expenditure if it has two quarters of lead time. The call did not state the additional MTPA from either reactor replacement or adjacent-land projects, nor did it disclose capital cost, approvals or commissioning dates for any expansion.

This incremental approach accompanies higher production volumes. Volumes grew 20% year on year in H1 FY2027, while revenue from operations rose 50.4% to Rs 68.9 crore from Rs 45.8 crore a year earlier. Management attributed the remaining revenue increase to richer product and customer mix, increased utilisation and input-cost pass-through, rather than price increases alone.

When would Neochem plan a larger capacity project?

Neochem said it would start planning further capital expenditure at 70% to 72% utilisation, about one year ahead of need, while it sees no immediate requirement for major capacity expansion until utilisation reaches about 85%. Management said it would be ready for medium- and long-term expenditure as the plant approaches that level.

The FY2028 target of about 75% would exceed the company’s stated 70% to 72% planning trigger but remain below the 85% threshold for an immediate major requirement. Management did not announce a new plant, a location, an investment amount, a funding plan or a commissioning date during the October 29 call.

The stated sequence is therefore modular debottlenecking and use of existing space, followed by project planning as utilisation rises. A 75% FY2028 target does not establish that Neochem has sanctioned a major project, but it places the company above the utilisation range at which management said it would begin preparing one year in advance.

What land does Neochem have for future capacity additions?

Neochem said its land allocation is broadly sufficient for the next five to seven years. This includes adjacent land at the operating facility and a large industrial land parcel held on its books that management said is planned for future capital expenditure.

The industrial parcel is undergoing a government reorganisation, according to management. Neochem did not disclose the land area, the expected resolution date, any capacity that could be installed there or a replacement expansion timetable if the process is delayed.

Management said that, if the parcel is not used as planned, it could be used for other industrial growth, and noted that its market value had increased. For the nearer term, the disclosed two-quarter timeline for adjacent-land work and short-duration reactor upgrades are separate from the unresolved status of the larger industrial parcel.

What operating conditions support Neochem’s utilisation plan?

Neochem’s utilisation objective depends on management’s stated growth outlook and on customer demand, input costs, operating conditions and the pace of commercialising products. Management said it was hopeful of more than 40% growth in the current year and over the next five to six years, while retaining guidance of 30% to 35% gross margin, 18% to 20% earnings before interest, tax, depreciation and amortisation margin, and 10% to 12% profit-after-tax margin.

In H1 FY2027, operating earnings before interest, tax, depreciation and amortisation rose 39.5% to Rs 12 crore from Rs 8.6 crore, while profit after tax increased 41.8% to Rs 7.8 crore from Rs 5.5 crore. Profit-after-tax margin, however, declined to 11.4% from 12.0%, showing that higher revenue and operating profit did not maintain the prior-year net margin percentage.

Working-capital execution is also part of the scale-up plan. Trade receivables remained Rs 48.1 crore despite the 50% H1 revenue increase, while receivable days fell to 127 days on September 30, 2026, from 161 days in March 2026. Management aims to bring receivable days below 120 and said operating cash flow had improved from negative Rs 17 crore to negative Rs 1 crore, with an expectation of a positive full-year outcome.

Conclusion

Neochem’s FY2028 utilisation target of about 75% rests on a 22,000-MTPA installed base, a 62% H1 FY2027 annualised utilisation rate and assumed volume growth of 20% to 25%. Management’s plan is to use reactor upgrades, adjacent land and other existing land resources before a major standalone expansion becomes immediately necessary near 85% utilisation.

The next measures to watch are progress toward the approximately 65% FY2027 utilisation target, the 70% to 72% planning trigger and the 20% to 25% volume-growth assumption. Management has also left unresolved the timing of the government reorganisation affecting its industrial land, while providing no project cost, added capacity or commissioning schedule for medium- or long-term expansion.