Ladies and gentlemen, good day and welcome to Archean Chemical Industries Limited Q2 and H1FY25 results conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your Touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ranjit Pendurthi from Archean. Please go ahead, sir.
Thank you. Good afternoon, everyone. We wish you all a very warm welcome to our Q2 and H1FY25 earnings call. Today, we are joined by Mr. Raghunathan, our CFO, Mr. Rajeev Kumar, DGM Finance, and SGA, our Investor Relations Advisor. I hope everyone had an opportunity to go through the financial results and investor presentation, which has been uploaded on the stock exchange and our company website. I will give you all a quick snapshot on the recent developments of the company. Post that, Mr. Raghunathan will walk you through the operational and financial performance of the company. Thank you. The past quarter has been quite vibrant for the leadership team, as multiple projects have witnessed healthy progress. The company has reached an inflection point, taking decisive steps to diversify and de-risk its product portfolio.
This strategy reflects extensive planning, dedication, and adaptability from the entire team of the company as we navigate evolving needs of the market. At the heart of this journey is also our R&D initiatives, a cornerstone of our efforts, working tirelessly to drive breakthroughs in chemistry and expand into new downstream markets. Archean Chemical Industries Limited stands as a prominent manufacturer of marine specialty chemicals such as elemental bromine, A-grade industrial salt, and sulfate of potash through natural sea brine, as most of you are aware. However, your company is poised for expansion by disrupting and capitalizing on synergies between its core business of marine specialty chemicals and its strategic investments in high-growth sectors such as compound semiconductors and energy storage solutions. However, the core business remains the mainstay of the company's growth strategy for the next few quarters and years.
Coming to the performance highlights and the recent developments on respective products are as follows. Firstly, elemental bromine. It has been somewhat of a mixed quarter for the company, as we have seen some broad recovery on the demand side, primarily from the domestic market, whereas demand from the export market remains a bit soft. We expect steady demand in the bromine business, with end-use applications either stable or recovering. With the recent stimulus in the Chinese market, we foresee the China economy to pick up gradually, and the demand for our key products to recover as well. We aim to produce in excess of 20,000 metric tons for the year of bromine, including requirements for our own use. Second, industrial salt.
Industrial salt faced a bit of a challenge in Q2 FY25, primarily due to the monsoon season, as you all know, which was quite extended and extensive in terms of rainfall. As you all also may be aware, the second quarter typically is a slow quarter for us, as the export business remains a bit affected by monsoon. The prolonged time required to finish product, coupled with difficult transport road conditions, made exports from a site to the ports very difficult. The company also faced a temporary challenge as Cyclone Asna dropped quite a bit of heavy rain and disrupted operations at the production site. However, due to the effort of the team, we continued to operate despite this cyclone. This, however, did lead to some inventory damage, especially on the industrial salt side.
As highlighted earlier, we have over 300 trucks involved in loading and unloading from our stockyards for export to the ports. Hence, overall volume stood at 750,000 tons for the quarter. H2 is generally better for our business, and we expect more than a 1 million-ton volume run rate in the coming quarters. Our focus will be on enhancing processes and cost efficiencies. While we have historically concentrated on exports, we have started exploring new opportunities to meet growing domestic demand in salt as well. Third, sulfate of potash. On the SOP side, we continue to see encouraging results in our trials, and we have also taken steps to produce a second grade of sulfate of potash, which we are seeing encouraging inquiries from both global and domestic markets. At present, it is a work in progress, and we expect meaningful contributions in the next year.
Coming to Archean, our subsidiary for bromine-derivative products such as Clear Brine Fluids and PTA synthesis products. Clear Brine Fluids, the initial response on CBF is encouraging, and we have already dispatched a few trials and small orders to clients. We are actively engaging with clients to conduct further trials and define their specific requirements. So we have seen some favorable progress in these products and expect a healthy contribution in the coming quarters.
On the PTA synthesis side, polyester derived from PTA synthesis has extensive applications across various industries, particularly in textiles and packaging. As this industry grows and the economy expands and the polymer usage rises, we anticipate growing demand for the PTA synthesis products to support these industries. Oren Hydrocarbons. After receiving the NCLT order in the month of July 2024, our team has been actively working on refurbishments and renovations at various production sites of the company.
We expect two plants to be fully operational within the next few weeks, with meaningful business contributions anticipated from the Q4 of this financial year. These sites are strategic to our future growth, enabling us to expand our product offerings by adding specialty mud chemicals and CBF products to serve clients in the oil and gas and drilling industry, which, with the recent turn of events, appears to be more attractive or has a more attractive future and a more comprehensive portfolio for your company. Investments in Clas-SiC Wafer Fab Limited, U.K., a U.K.-based company specializing in silicon carbide MOSFETs and device manufacturing. Your company will be investing to the tune of GBP 15 million for a 21.33% equity share capital, with primary subscription of GBP 10 million and secondary purchase of GBP 5 million.
As a part of this diversification strategy, ACL is making strategic investments in Clas-SiC Wafer Fab Limited, a UK-based dedicated silicon carbide wafer foundry with manufacturing capability for SiC devices. This investment aligns with the company's broader semiconductor initiative through SiCSense and SiCSense's technology exclusivity in India. It is a moment of pride for your company, as we are the first Indian company to invest in a company with silicon carbide MOSFETs devices production capability and will be, in the future, serving industries like electric vehicles, renewable energy systems, industrial power electronics, data centers, etc., in both domestic and export markets. ACL's core competency in specialty chemicals creates natural synergies with its SiC semiconductor business. The roadmap from concept to commercialization will take between two to three years as a part of the first phase of this new initiative. Investment in Off-Grid Energy Labs, Inc.
Delaware, U.S., an IP-led company specializing in zinc bromide battery technology. We will invest nearly $12 million in Series A funds for the subscription of 21% stake. This investment aligns with ACL's broader strategy to enter the energy storage sector, particularly focusing on applications in renewable energy, industrial storage, etc. The company's bromine business has a direct synergy with zinc gel batteries, which use zinc bromide chemistry for the battery. Zinc gel or zinc bromide batteries offer superior cycle life, safety, and cost-effectiveness when compared to existing battery technologies in the market, making them ideal for daily discharge charge cycles in commercial and industrial solar applications, as well as utility-scale grid stability projects. We will initially support the establishment of a pilot manufacturing facility in the U.K., with an intention to establish a gigafactory in India in the near future to scale up the zinc bromide battery production.
Again, roadmap from concept to commercialization will take two years' time, and we will obviously keep our shareholders updated in due course. Update on the existing capacity expansion. Our company has built a solid foundation over the years in the marine chemicals industry, positioning us well to leverage our expertise in bromine-derivative products and new incoming products. Our primary focus continues to remain on establishing lasting collaborations with all customers across all products. We are confident and remain confident to grow gradually in the coming years and will be well equipped to utilize the opportunities that keep evolving with the market as well. That's it from my side on the update. Now I will hand over to Mr. Raghunathan, our CFO, to run through the financial performance.
Thank you, sir, and good afternoon to all the participants on the call. To give you a financial summary of Q2 of FY25 on a standalone basis, our company registered a total revenue of around INR 2,521 million, with a drop of around 17% on a one-year basis. The drop is primarily due to logistics-related challenges, which MD also has indicated in his speech. Our export market contributed around 77%, and the remaining 23% came from the domestic market. This overall revenue, bromine contributed around 38%, and the industrial salt.
Sorry for the interruption, sir. May I request you to please come closer to the mic? Your voice is a little muffled.
Sure. Sure, thank you.
Thanks, sir.
Okay. Bromine contributed around 38% of the total revenue, and the industrial salt is around 62%. EBITDA for the company stood at around INR 898 million for this quarter, Q2, with a margin of 36%. Our net profit stood at around INR 219 million. We also want to inform you that in this Q2 results, we reported an exceptional item due to the impact of Asna cyclone in Gujarat that occurred in the month of August and beginning of September. So almost it prevailed for more than a week or so, which resulted in a loss of around 472,000 metric tons of industrial salt, which amounts to around INR 40.18 crores. We have initiated a claim process with the respective insurance companies. Moving on to H1 results, total revenue for the H1 FY25 stood at around INR 4,754 million, with a drop of around 28% on a one-year basis. Export market contributed around 75%.
The remaining 25% came from the domestic market. Bromine contributed around 41% of the total revenue, and industrial salt is at around 49%. EBITDA for the company stood at around INR 1,747 million for the six-month period, with a margin at 37%. Net profit was around INR 703 million. With this, I conclude the speech and open the floor for Q&A session. Thank you.
Thank you so much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their Touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Khetan from SMIFS Limited. Please go ahead.
Yes, thank you, sir, for the opportunity. I have a couple of questions. Sir, first question is onto the salt business. Sir, in your initial commentary, you have stated that you are expecting around 10 lakh tons of salt volumes run rate quarterly. So in these assumptions, also, we are taking all the problems to be resolving, like the Red Sea crisis, which was impacting us. And secondly, so there was some one-off issue in last quarter also. In this quarter also, there is a one-off. So all these issues seem to be resolving. So from the next quarter itself?
This is Ranjit here. Thank you for your question. I think a lot of our salt business, in fact, I would say majority of it, if not all of it, is focused on the Far East and Asian exports. The Red Sea crisis as such, I don't think has too much of an impact, maybe a little bit on the freight because that's a global industry. Having said that, I think our customer demand remains intact. Our long-term contracts remain intact, and we continue shipping under those contracts. In the last quarter, there were some delays, which obviously we adjusted with the customers. As such, we don't see any impact going forward. As you rightly put, I think the last quarter was a one-off. We do have sufficient stocks, and none of our contracts have been canceled.
We've only taken some adjustment in the delivery dates in the last quarter. But now things are back on track, and the shipments are being done as per the delivery schedules committed to customers.
Got it, sir. Thank you, sir, for that. So my second question is onto the bromine part. Sir, into the domestic market, we had witnessed that some of the new players have also expanded the capacity. And so they are coming up with a big capacity in the next two to three years. And into your initial commentary, you have stated that the recovery in the domestic market is good, and the export market remains soft. So with these new capacities coming in, so don't you feel the competitive intensity would go up in domestic also?
I think I have said this on earlier occasions as well. The competition is bound to happen in any industry. It can only be a first-time entrant when you discover something new. And I think that's been our position till now. And while the local other players expand, I think part of our de-risking and diversification into further value-enhanced chemistries and products, I think this was envisaged a couple of years ago, which is what we have implemented. So I think I credit the management team and also our on-the-ground team, site team, for implementing these projects. And I think this will probably add to our strength and distinguish us or differentiate us from other players.
Okay, but the market of bromine, that still remains subdued only. For the last six to eight months, we had witnessed that the price also had been normalized, and it is trading at the lowest levels, and there is no recovery, which is seen in demand in the global markets. Sir, what is the outlook for the next two to three years? So, you see, now the pain is over, and with ramp-up of volumes, we can see some better days ahead, and what would be the guidance of volumes for FY25 and FY26?
So I personally refrain from saying the worst is behind us because I think the global market is evolving in ways that most of us have not anticipated or seen. So I think we have to be taking a step at a time. What we need to focus on is what we are doing. I think our volumes in bromine certainly need to pick up. We have the capacity. We have the customers.
These relationships are almost a decade old on the export side and the domestic side as well. So one of the, I think, encouraging things is that even the local players on the end-user industries are expanding. China is stabilizing. Are we in a comfortable position from a market growth perspective? I think we are not there yet. But at the same time, as a company, are we in a position where we believe that what we make, we can sell? I think we can, and we are doing that.
Sir, what would be the expected volumes for bromine? We can touch for 25?
I think, as I mentioned in my commentary, I think we're aiming at an excess of 20,000 tons per year. So hopefully, I think we are working diligently towards crossing that figure comfortably.
Got it. Got it. Sir, my third question is onto the CBF and onto the PTA Industries business. How is the ramp-up, sir, over there? And is it possible to share the volume figure for these two businesses?
So I'll speak about the ramp-up. I think the ramp-up has been satisfactory. Obviously, we can always do a better job than we have done in the last couple of quarters. But it's taking a bit of time because the oil and gas industry, drilling industry, is also subject to a lot of global factors. But at the same time, I think the industry on the oil and gas drilling side, I think, remains healthy. And with recent events in the U.S., etc., we think this will continue to be a good area. I think markets like the U.S., probably given their re-emphasis on more drilling, I think will be good for the company in terms of the product portfolio that we are building. So I believe that I think we're in a good position.
Like I said, the trials I think we have conducted with certain customers for end-user industries have been encouraging. Most of them have passed. We're adding more products, even with the Oren Hydrocarbons acquisition. Those plants are getting refurbished or renovated. I think those products also will add to a bigger basket to cater to the oil and gas drilling industry. On the other derivative side, I think we're making progress on oil and gas, like PTA synthesis products, etc. I think we've started shipping out and exporting some volumes. Overall, the trend is, I think, encouraging, but we have to keep at it. I don't think we can take it easy. We need to keep pushing, and that's what we are doing.
And sir, so the expansion which we were planning earlier.
Mr. Ketan, may we request you to answer the question queue for follow-up questions?
Sure.
I've set up several participants waiting for their turn.
Sure.
Thank you so much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Rushabh from RBSA Investment Managers. Please go ahead.
Hey, hi, sir. Thank you. So we are planning to start manufacturing all these high-quality SiC powered devices in the next two to three years. Can you just give a sense of what is the domestic market size of these products and what is the targeted return capital that you're targeting, including the incentives that we may get from the government? I think the subject is quite large to take on a short earnings call. But I will probably defer it to Rajeev, and maybe Rajeev can answer this question as best as he can. Thank you, sir.
Thanks, Rushabh, for the question. The first part of the question was the domestic market size. So SiC devices or compound semiconductor devices, the market is growing. Right now, overall global market size would be around $2-$3 billion. And we expect this to grow at a very good CAGR of more than 25% till 2030. So we do expect that in the next five to six years, the market will increase from the current size of $2 billion to more than $10 billion. The second part of your question, did you ask the government support for this? If I'm... How can we target the return on capital around this manufacturing venture?
So Rushabh, I think we will wait to answer this, maybe a couple of months, because while we have stitched together the project plan, we have submitted it to government and waiting for the necessary approvals. So a lot of that will depend on what quantum of the government incentives, etc., we get, which will have an impact on the return ratio. So we will definitely answer the return ratio once we get the clarity on the approval process.
And the second question, just on the broad semiconductor initiative, where are the companies also in talks to acquire stake in these Clas-SiC wafer fabs? Why did the company choose us, and why did we choose them? I just want to understand the thought process here. So the thought process is we have seen, and we have been at this Clas-SiC initiative, investment initiative for a few months now.
Right now, we have the exclusivity of the technology agreement in India, which will continue to be so. Okay. And so just regarding investment in these off-grid ventures, we have invested capital. So did we give it to existing investors? I believe there are already existing set of investors there. Or this was just a fresh capital infusion? No, this is just primary infusion, Rushabh.
Okay. And just last question, if I can want to ask, you had Mr. Kannan as a senior leadership team some time back. Just for an addition, what is the mandate given to him? Is it for the bromine derivatives or the marine chemicals or new product development?
Sorry, if I can take that question. So Mr. Kannan has joined us as Executive Director in Archean Chemical Industries, which is the parent company for all the subsidiaries that we have talked about today. So the broad mandate for him is leading and being responsible for all these initiatives, including the primary company, Archean Chemical Industries.
Okay. So thank you. All the best.
Thank you very much. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead.
Hi. Good afternoon, sir, and thanks for the opportunity. So my first one on the silicon carbide investment, we've also had some research funding that we gave to IIT Bhubaneswar, I think a quarter ago, where it stated about that. Now, with these two investments in place, what are the synergies we are trying to derive? Because I think the technology has already been established in the U.K., where we have invested around 21%. So is there a plan to bring that technology to India? And how would the research funding that we have given help us in any way? And if you could slightly elaborate a bit more on maybe the three-to-five-year outlook on this particular venture, how will it shape up if you can answer those? Thank you.
Sure. So I think, as you know, the semiconductor industry is a large industry, right? So choosing technologies, finding partnerships, and getting someone to share the technology is not a very straightforward or easy process. However, the company that we've tied up with in the U.K. and have taken the equity stake is precisely to do that. Now we have access to not just the current generation technology, but we also have access to ongoing future improvements and future technology as well. So that's the most fundamental thing that you need to look at when you look at investing in something like this in this industry, right? This is not about today, but it's about years down the line. The capability to deliver on changing technology, updated technology, and having access to it is most important. So we have been able to secure that.
The second thing is, in terms of the synergy with IIT Bhubaneswar initiative, so we have taken a bit of a different approach. We are working with IIT Bhubaneswar on the research part of actually making silicon carbide crystal, right? And this, I think, has been pioneered within India, and no one has done it. And very few, I think, have done this globally as a comprehensive combined effort within the semiconductor industry in terms of a company doing silicon carbide as well, crystal growth. So we are trying to marry the research initiative with the commercial aspects of developing the silicon carbide wafer fab. So the synergy will come from having our own silicon carbide crystal growth as well as being able to deliver on the wafer fab with the Clas-SiC investment and tie-up on technology for India.
Sure, sir. Sir, this 21% stake that we have done in the U.K., does that give enough access from a pure percentage perspective that, or maybe there would be further investments required to kind of take much better control of those assets or that particular venture so as to have a better synergy in and around the semiconductor industry in India?
So I think at the moment, our focus is on access. As I mentioned, it's not about control. We have a very good relationship with the UK company, and I think our tie-up provides for current and future access to technology. And we don't foresee any more investments into the equity side. I think we have got what we wanted in the first phase, but I can't comment about what the future holds. Things may change. Things may develop. We probably will be the first in line to see if any other productive relationship will happen. But at the moment, I think we are restricting ourselves to what we have done already.
Sure, sir. So just coming back to the base business, I think we definitely had some ambitions to have flame retardants in our bromine derivatives portfolio. Has that been derailed for the nearer term, or have we had any closure on that account, any expectations that we can build in for our numbers?
I think it's a commercial call. It's not derailed for sure. I think it's delayed, as I mentioned, I think, on the previous calls as well. It's easy to always put capital, but I think we want to take a measured approach. As someone else asked earlier on the call, it's about return on capital invested. So we only have a couple of initiatives going on. We'd like to first deliver on these. And then I think the access to flame retardant and the technology and the market will always be available to us. So we always have a continuous dialogue with the partners on this because having our own bromine is our strength. Even if not now, we can always look at doing the flame retardants in the near future. But it is definitely not derailed. I would say that it's delayed.
Sure, sir. One last on the base business before I come back in the queue. Sir, if you can share your opinion.
Please, may I request you to return the question queue for follow-up questions as well as to the other participants waiting for their turn?
Thank you.
Thank you so much. Thank you very much. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the opportunity, sir. So first question, again, on the silicon wafer initiative. So we have mentioned that we are targeting to manufacture these devices over the next 24-36 months. So is this going to be an exclusive manufacturing by us only for any requirement of the entire company, despite we are having maybe 21% stake as of now? Thank you.
I'm going to answer this question in a manner that I've understood it, so please correct me if I'm wrong in my understanding. It's going to be a commercial enterprise that's going to manufacture for India and for the global market, India first, of course, because our need within our country is already there. And this is going to be sold, manufactured by our subsidiary, fully owned, and commercially sold to the market. There's nothing captive about this industry. But as you're also aware, a lot of this depends on what kind of, as Rajeev, my colleague, mentioned on government incentive and support, which we are hopeful of getting because that is also critical.
All right. Just a clarification. So we will be having the exclusive manufacturing rights in India and then distribution across India as well as other markets. Is that a correct understanding?
Yeah. So the agreement is only on the exclusivity of the technology tie-up for India. In terms of manufacturing and sale, it's not bound by any agreement. That's clearly our company's prerogative.
Okay. Fair enough. That's helpful. So again, on the second acquisition, the Off-Grid Energy Labs, here too, we have a similar kind of arrangement that we will be doing the manufacturing on an exclusive basis as far as the Indian market is concerned?
The investment in Off-Grid is a bit different. It's about pure ownership into the company because, as you said, the synergy between Zinc Bromide and our bromine business. So here, I think we are taking a different position. We will have the opportunity and access to the technology to manufacture or set up giga battery facilities. And alternatively, as shareholders or investors, as you can call it, we are free to also license the technology to others in other countries to set up similar giga factories. We will be getting probably a royalty from this initiative wherever we are selling or distributing technology to other players? I would largely think so. I think I would maybe call it a licensing royalty fee.
Right, and just one last.
I think it's a bit premature to structure that. I'm just broadly saying because there could be various combinations of how we benefit with somebody setting up the factory. It could be licensing royalty. It could be also on sales. So I think that structure will evolve as and when we finish our pilot plant and we get to demonstrate the commercial scale, which we're on track to do.
Fair enough. That's understandable. I just have a small suggestion. We've had this exceptional item during this after the Q2 numbers where it occurred sometime in the month of August and September. So just a suggestion if we can give it as a good corporate governance practice to share this particular detail so that it doesn't become a surprise element only during the results. So just a suggestion from my side. Thanks a lot for answering all the questions and all the best.
I think absolutely noted. I think the difficulty with something like salt is it dissolves in water, and it takes us some time to precisely understand the extent of the loss. So we got around to being able to only quantify this, I think, during the audit time for the Q2 numbers. So we've taken the necessary steps accordingly in terms of information, but point noted.
Fair enough, sir. Thank you so much.
Thank you.
Thank you very much. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Firstly, can you please give the sales volume breakup of bromine, salt, and SOP for this quarter?
Yeah. For this quarter, Q2, the sale of salt is around 792,000 versus 976 in the previous year's quarter. With respect to bromine, it's around 4,800 plus.
4,800. Okay. SOP is mill?
SOP is at around 27 tons.
Okay. And just to follow up on that, I think in the initial remarks, Ranjit mentioned that bromine production of 20,000 tons is planned for this fiscal. And I think you've already sold close to 9,500. That means very limited divergence toward derivatives. So when do you expect to pick up? And what is your size bromine production for next fiscal?
So I think the 20,000 will include some part of our captive production as well. So I've not differentiated between captive and third-party sale, which also is the reason why I said we are trying to push to volume beyond 20,000 for the year. I think for next year, Raghunathan, do you have a projection?
The next year is likely to be at around 20,000-25,000 tons.
Okay. Got it. And secondly, so I think with the new investments that you have done, so can you please highlight the CapEx for, let's say, various ongoing projects, including the new investment for this and the next year? The total outflow, I mean, if you can highlight the investment in the CapEx.
I think our initial year, after this outflow of investment on the equity side, for the next six months, we don't see too much of CapEx apart from what we're doing with Oren. I think maybe I would probably put with existing initiatives, we would probably be within INR 50-75 crores over the next six months at the very most. The newer initiatives, I think, will probably extend beyond that, beyond the six-month time frame. In the next six months, we don't anticipate any large CapEx.
Okay. So for this fiscal, probably whatever that investment that you have done and INR 60-70 crores for the Oren Hydrocarbons, that's it, or is there anything else that you've missed?
No.
The derivatives?
Finishing and derivatives, yes. I would say until March, I think that's a very generous number to take.
So for derivatives, how much should we take? Should we take INR 70 crore, INR 80 crore or should we take more like INR 120 crore? I think.
No, no, no. No, I would say no. Derivatives are almost finished with the CapEx. There's not much else left. So that's why I said it's a very generous number, I would say, between 50 and 75 to March, definitely not more than that.
Got it. Thank you for patiently answering my questions, and wish you all the best for the coming quarters.
Thank you.
Thank you very much. The next question is from the line of Sunaina Chhabria from Chola Securities. Please go ahead.
Yeah. Thank you so much. So I have a couple of questions first relating to the new ventures that are there. So with Off-Grid Energy Labs, what is the estimated market size that is there globally and in India? And the clients that you all are wishing to service, are these in collaboration with Off-Grid Energy Labs, or would this be separate? And are you also planning to further invest in the company? And the further question is, what would be the profit sharing over here or some kind of return on investment, if you could guide?
Maybe, Rajeev, you can take the question and also mention the existing investors in Off-Grid.
Yeah. Yeah. Certainly. So the first part of your question, Sunaina, was on the market size.
Yeah.
The current market size for this energy storage is quite huge. It is estimated around $25 billion globally and expected to grow over the year. Also, the stationary energy storage market is growing at a great pace in India. Just to give you a reference, last year alone in FY24, 7 gigawatt-hour of storage were awarded, which is roughly around $1 billion. Our investment in Off-Grid is strategic in the sense right now, and this was answered by our MD previously also, that the return ratio or expectation of the mechanics in which we will get the return is still not something which has been finalized. Right now, the aim is to enable Off-Grid to make the pilot plant, which will help them create a blueprint for a Gigafactory.
Okay. Got it. Now, next question.
So also, Sunaina, to add, in off-grid, like we mentioned, the infusion is primary in nature. We are not taking out any current investors. And currently, in off-grid, you have Shell Ventures as an investor. You also have Ankur Capital, which is a deep tech investment firm. So these two companies are already invested there, and they are also participating in the current round, current series.
Okay. Great. Thank you so much. My next question is relating to the sulfate of potash vertical. So the revenue contribution from SOP has been on a declining trend. And as previously mentioned, this was due to production being impacted by a high level of sodium chloride in the raw material. So is this a problem that you foresee going on in the future where either the production would sort of stabilize or decrease even more?
I think if I can take this question, so the SOP, I think you said before, it's a chemistry problem. I think we have solved for it. We are working with our German partners as well as an Australian consultancy now. So they've already done the trial tests at the lab in Germany. We are going to be visiting them in the next couple of months for doing a single pilot test also. And we will, before the next monsoon, run these tests at a plant scale at our plant in Gujarat. And we believe that whatever modifications and rectifications have to be made will be made. And we continue to remain very bullish on SOP because the product demand remains firm. And there are very few producers to be able to produce this grade.
What I would probably venture to also risk to say is green grade of SOP, the natural sea brine. So I think you will definitely hear encouraging news over the next year or so.
Okay. And for the CapEx that was also mentioned of about INR 50-INR 75 crores, there is no further CapEx being done in the main three verticals that would be there of bromine, industrial salt, and SOP, right? It would only be in the.
Not before much.
Not before much. And beyond that, is the company looking into further expanding the capacities?
I think at the moment, we've already put in money into both the derivatives as well as the Oren Hydrocarbons acquisition and our main plant in Rann of Kutch. I think we don't anticipate too much CapEx in these businesses even after March 25.
All right, and my last question is relating to March.
Sunaina, may we request that you return to the question queue for follow-up questions as there are several other participants waiting for their turn?
Okay. Thank you so much. I'll do that.
Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Tushar Raghatate from Kamakhya Wealth Management. Please go ahead. Mr. Tushar, your line has been unmuted. Please go ahead.
Sir, in 2014, we wanted to know the guidance that you gave on the bromine of near to 22,000 metric tons and on the salts of 4.5 million tons. Do you hold that guidance for FY25?
Sorry, we're not very clear. Can you repeat that question?
The guidance of the bromine and the salt business was near to 22-25,000 metric tons for the bromine, and for the salt was 4.5 million tons, if I'm not mistaken. Do you hold that guidance for the current financial year?
I think, give or take, I think there would be a 10% variance, to be honest, simply because of the cyclone, etc., but I believe that we will continue to push for whatever we've guided.
Okay, sir. And, sir, in the salt business, what percentage of logistics is FOB and CIF? What is the mix?
Yeah. Mr. Tushar, so CIF is around 5%-8%, and almost 92% will be on FOBs.
Got it, sir. And sir, in your new energy business, battery storage, so bromide would be what percentage of the total cost in zinc bromide battery?
So this is something which depends on the various industries and also the composition of electrolyte in the battery. So this answer is not currently available.
Fair enough, sir. Okay, sir. I'll get back in the queue. Thank you.
Thank you very much. The next question is from the line of Dipak Saha from KRChoksey Shares and Securities Private Limited. Please go ahead.
Hi, sir. Good afternoon. Am I audible?
Yes, Mr. Dipak. Please proceed with your question.
Sir, on the off-grid side, the investment that we have done. Just one question. It's a pre-revenue company, as I understand it. So do they have any in this particular space, do they have any solution already available, or the solution is under discovery currently, which is where we are trying to launch this pilot project?
Yes. Are you talking about the battery project?
Yes. Yes. Only that is correct.
The investment we have done in Off-Grid. Okay. Again, I don't know if I understood your question correctly, but I'll answer it to the best of my ability. I think zinc bromide technology is not new in that context, but I think what Off-Grid has done and with their technical capabilities is found ways to make it, one, as we said, in terms of stability, in terms of cost, and in terms of reliability. I think they have discovered something that is unique and possibly the only ones in the world who have done what they've done. Now, I think the idea is to move it to commercial scale demonstration, and I think that's what the pilot plant is meant to do.
Okay. And at the time, so because of this limitation of questions, just one more question. I'll get back on the queue. From the Chinese side, I mean, we are dealing with a lot of Chinese players. So now recently, I've seen a lot of recovery-related stimulus being given on the Chinese front. So any kind of commentary if you can give, what are the early indications we are picking from? I think you have two of the large players in China who are delivering some of your specialty chemicals. So if you can just kind of highlight that, what is the incremental commentary on trend we are picking from the China front?
I think you asked me a very global question. I don't know how many experts there are out there who are trying to still figure out what goes on in China. So I won't claim to be one of them. I think from our own little exposure to the Chinese market in terms of what we do, I think the companies we deal with are large, very stable, and they're fundamentally sound, and I think from what our demand is looking like, I think we are continuing to see a stable demand from our customers.
Yes, I think prices across all industries, not just chemicals, but I think across all industries, I think it's a bit of a challenge and a bit of a struggle in China, and we will not be any exception to that. But I think, as I mentioned in my earlier commentary, that as the market evolves, suppliers, we also have to evolve. But I think we have to keep an eye on the longer-term benefits of these relationships.
Okay. Thank you, and all the best.
Thank you.
Thank you very much. We will take that as the last question. I now hand the conference over to the management for closing comments.
Sure. Thank you, everyone, for joining us today. We appreciate your support and your patience as our company continues to perform and deliver on its various strategic initiatives, and we continue to be encouraged by your faith in the company and in what we do and showing interest and taking the efforts to reach out to us. In case of any queries, please feel free to get in touch with us or SGA, our investor relations advisors, and we look forward to meeting all of you shortly over the next call over the next few quarters. Thank you, and wish you all a very happy and prosperous New Year and Merry Christmas as well, as we will probably be talking after that in the New Year. Thank you once again.
Thank you very much. On behalf of Archean Chemical Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.