Ladies and Gentlemen, Good day and Welcome To The Acutaas Chemicals Limited Q2 and H1 FY26 Earnings Conference Call, Hosted by JM Financial Institutional Securities Limited. 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Krishan Parwani from JM Financial Institutional Securities Limited. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining us on Acutaas Chemicals Q2 and H1 FY26 earnings conference call. Today, we have with us Acutaas Chemicals Management, represented by Mr. Naresh Patel, Chairman and Managing Director, Mr. Abhishek Patel, Vice President Strategy, and Mr. Bhavin Shah, Chief Financial Officer. I would now like to invite Mr. Bhavin Shah to initiate the proceedings. Over to you, sir. Thank you.
Thank you, Krishan. Good afternoon, everyone. Happy Diwali to you all. We are pleased to welcome you all to our earnings conference call to discuss Q2 FY26 financials. Please note that a copy of our disclosure is available on the investor section of our website, as well as on the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risk that the company faces. The conference call is being recorded, and the transcript, along with the audio of the same, will be made available on the website of the company and exchanges.
Please also note that the audio of the conference call is the copyright material of Acutaas Chemicals and cannot be copied, rebroadcast, or attributed in press or media without specific and written consent of the company. Now, I would like to hand over the floor to our CMD, Mr. Naresh Patel, for his opening statement. Over to you, sir.
Thank you, Bhavin. Good afternoon, everyone. I hope you are all doing well. Wishing you and your families a very happy Diwali. May this festival season bring happiness, health, and prosperity to all of you. The global geopolitical and economic landscape continues to remain uncertain. However, our focus has consistently been on building a long-term sustainable business rather than chasing short-term opportunities, and that disciplined approach is now beginning to yield tangible results. Over the last couple of years, despite facing a few challenging phases, we have remained committed to strengthening our partnerships with multiple global clients. We have continued to grow our existing business steadily while simultaneously laying the foundation for new business verticals that will power our growth in the coming years. In our battery chemical business, we have successfully secured multiple customers across diverse geographies.
Production is expected to commence in Q4 FY26 once our ongoing CapEx is completed. We are confident this segment will emerge as a key growth driver going forward. For Semiconductor Chemicals, our engagement with new customers in Korea, Japan, and Taiwan through Baba Fine Chemicals continues to progress for newer products. While there are some products which will start in the near term, they are small in size, and we anticipate that it will take some time before we see meaningful contributions. A new joint venture in Korea, IndiGem, also marks a major milestone in our international expansion journey. The groundbreaking ceremony took place last month, and CapEx activities are now underway. This venture is expected to start contributing to revenues from H2 FY27.
Together, these two verticals, battery chemicals and semiconductors, will serve as important growth pillars for us, alongside our CDMO business, where we are witnessing a healthy increase in customer inquiries and new molecular additions to our CDMO pipeline. This has significantly enhanced our future revenue visibility. Overall, we are steadily moving towards our vision of becoming a global chemical company with diversified business verticals catering to multiple industries, including pharmaceutical, battery chemicals, semiconductors, semiconductor chemicals, cosmetics, and other specialty chemicals.
Now, turning to our performance for the quarter, our Q2 FY26 revenue grew by 24.1% year-on-year to 306.2 crores. This strong growth was primarily driven by our advanced pharmaceutical intermediate segment, while the specialty chemical business continued to demonstrate stable performance. To conclude, our business continues to stand on a strong and resilient foundation, well-positioned to deliver around 25% revenue growth for the year.
With that, I now like to hand over to our Vice President Strategy, Abhishek Patel, who will walk you through the detailed business update. Over to you, Abhishek.
Thank you, Naresh Bhai. Good afternoon, everyone, and very happy Diwali to all of you. Let me take this opportunity to share further insight into our business performance for the quarter, starting with the pharmaceutical intermediate segment. This segment delivered a robust performance with a revenue of INR 262.6 crore in Q2 FY26, reflecting a strong year-on-year growth of 27.1%.
The growth was primarily driven by CDMO business, supported by healthy contributions from the core advanced pharmaceutical intermediate segment. Moving on to the specialty chemical segment, revenue of this segment stood at INR 43.6 crore during the quarter, a steady growth of 7.3% year-on-year. Our commodity chemical subsegment recorded a strong growth both on year-on-year and sequential basis, led by higher volume as well as stable pricing. However, this was partly offset by softer performance in Baba Fine Chemicals business.
Now, turning to capital expenditure, CapEx for H1 stood at INR 141 crore, primarily diverted towards Jhagadia site, focusing on electrolyte additive project and the pilot plant at Sachin site. To provide some additional update, the electrolyte additive CapEx at Jhagadia is progressing well and is expected to be completed by Q4 FY26. There has been a minor delay due to extended rainy season. However, progress from our side remains on track. The pilot plant CapEx is proceeding as planned and is expected to be completed by Q3 FY26. As shared in our previous call, the total CapEx for FY26 is expected to be around INR 250 crore, and we have sufficient cash reserves to comfortably fund these investments.
Coming to the business update, starting with pharmaceutical intermediate segment, our ongoing CDMO projects are progressing in line with expectations and are expected to start contributing by the end of FY26, subject to regulatory approvals. As Naresh Bhai highlighted, our CDMO pipeline continues to expand, and during the last quarter, we dispatched a couple of validation batches for new products, which mark important progress in scaling this vertical.
As Naresh Bhai mentioned earlier, we remain focused on building long-term sustainable business relationships rather than choosing short-term opportunities. Over the past two years, the industry has navigated through volatile raw material prices and global geopolitical uncertainties, which affected many chemical players worldwide. Despite these challenges, we continue to work on strengthening our existing product portfolio and developing new products to prepare for the future. These sustained efforts are now yielding results.
With pricing stability returning, we are witnessing notable margin improvements in our core advanced pharmaceutical intermediate business, leading to overall margin expansion across the company. One of the reasons for the improvement in the margin is that we started restructuring our existing core pharma intermediate portfolio by churning out low-margin products at the same time, maintaining our growth guidance of 25% for overall business. This has resulted in a better product mix, leading to better margins. On semiconductor chemicals, adding to what Naresh Bhai mentioned, we have a couple of products that are expected to move into commercial scale production through Baba Fine Chemicals. While these products are still small in terms of overall revenue contribution, they represent an important milestone, a clear sign that our earlier efforts in this space are beginning to materialize.
We believe that in the medium term, our semiconductor portfolio will broaden further to become a meaningful growth driver for the company. To conclude, we are on track to achieve around 25% revenue growth, with EBITDA margin expectation to be in the range of 28% to 30% in FY26. The change in the margin guidance is primarily driven by a higher contribution from CDMO business, product mix, and improved profitability in the pharmaceutical intermediate segment and operational efficiency. With that, I will now hand over the floor to our Chief Financial Officer, Mr. Bhavin Shah, who will walk you through the detailed financial updates. Over to you, Bhavin Bhai.
Thank you, Abhishek Bhai. I would like to briefly highlight the key performance metrics for the quarter and first half of FY26 before we open the floor for questions. Let me start with quarterly performance. Revenue from operations for the quarter reached INR 306.2 crore, representing 34.1% growth YOY. Gross profit for the quarter was INR 170.7 crore, reflecting a 59.3% increase compared to the same period last year. The gross margin expanded by 1,232 basis points YOY to 55.8%. Gross margin was driven by improved product mix and operational efficiency. EBITDA for the quarter was INR 95.3 crore, which grew almost 2X compared to the EBITDA of the same period last year. EBITDA margins were at 31.1%, up 1,130 basis points YOY. EBITDA margin was driven by expansion in gross margin as well as operating leverage. PAT for the quarter was INR 71.9 crore, up 91.3% YOY.
PAT margins for the quarter were 23.5%, which showed an expansion of 824 basis points YOY. Moving on to the H1 FY26 performance, revenue from operations for the first half of the year reached INR 513.4 crore, representing a 21.3% increase year-on-year. EBITDA for the H1 FY26 was INR 146.2 crore, up 86.4% YOY. PAT for H1 FY26 was at INR 115.9 crore, which more than doubled compared to the same period last year. Moving on to the balance sheet item, net cash and cash equivalent were at INR 240.6 crore as of 30 September 2025. Our working capital for the quarter improved to 100 days, which is a 28-day improvement compared to Q1 FY26. This is mainly on account of improved inventory days as well as debtor days. For the full year, we believe working capital would be around anything between 95 to 105 days.
Improved working capital with robust business performance led to a strong generation of cash from operations of INR 136.5 crore during H1 FY26. With that, I request the moderator to open the floor for questions. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have the first question from the line of Mr. Krishna Chandran from JM Financial. Please go ahead.
Yeah, hi sir. Congrats on a very strong set of numbers. Three questions from my side. First, on the new CDMO contracts, I think Abhishek Bhai mentioned that validation batches have already been sent. Just wanted to understand, when do you expect to meet these new CDMO products?
As we mentioned, we have sent the validation batches during this quarter for a couple of our new CDMOs. Again, those are subject to regulatory approval. We estimate this to start by the end of FY26, which is the last quarter. Again, it depends on the regulatory approval.
Okay. Got it. Secondly, on the margin, given you have revised your EBITDA margin estimate for the FY26 of 28% to 30%, do you see this closer to 30% kind of an EBITDA margin as sustainable for the coming years?
Yes, we feel so. That's the reason we first revised our margin guidance for FY26 between 28% to 30%. And as I mentioned, this margin again is a function of the product mix. And we have slowly started redefining our product portfolio in such a way that we churn out some of the low-margin products and focus on something which is more sustainable and with sustainable revenue growth. And so this is how we are structuring our whole business so that it will again have a sustainable growth of 25% with a good margin improvement. That will, I think, result in a better margin for the next coming years also.
Understood. And lastly, on the new business segments, such as electrolyte additives or semiconductor JV, so all these are expected to contribute meaningfully in FY27. Is that understanding correct?
First, electrolyte additive segment, we have now full visibility for all the CapEx plans, which is expected to get completed by Q4 FY26. Once that plan gets commissioned, because we have full visibility for the products, it will immediately start contributing. Maybe not much in the Q4 FY26, but full year for the FY27. Now, for the second vertical, which is for the JV in South Korea, we are expecting this to get completed in the next calendar year, and H2 FY27 should be the time when it should start the commercial production.
Understood. And despite this new product addition, your margin guidance stays around 28% to 30%, right?
Yes. Yes.
Okay. That's great to hear. Congratulations once again, and I wish you a very happy holiday. Thank you.
Thanks.
Thank you. We have the next question from the line of Abhijit Akella from KIE. Please go ahead.
Yeah, good afternoon. Thank you so much for taking my questions. First, on the gross margin expansion, so is this entirely because of the shift in product mix within the pharma catalog business, or have there been improvements in process efficiencies, etc., also in that business?
Yes, it's a function of both. The overall product basket, as well as the we have because it's our core competency to improve our margin through process improvement, through supply chain improvement, as well as the operational efficiency. So at the gross margin, it's both a function of product mix as well as the margin improvement in some of our top revenue-contributing products. Apart from that, we have also improved our margins at the operational level by more than 2.5%, and that is because of operational efficiency and the contribution from our solar power plant project, which is now commissioned.
Okay. So the solar contribution is now fully in the base, is it, or was it only partial for the quarter, and we see the full impact in subsequent quarters?
It's completely on stream. Because the five MW project was commissioned in this quarter, it was partly accounted in this quarter for five MW out of the total 16 MW.
Got it. Just one further clarification on that margin topic. So Abhishek Bhai, we have seen in the past that we used to enjoy 20% plus margins on the pharma side a few years back. And then there was some erosion that happened because of maybe Chinese competition and increasing raw material prices, etc. Now we have managed to claw it back. But just sort of wondering what gives us the confidence that the erosion that happened two to three years back is not a risk factor to sort of be concerned about any further?
So, it was a learning for us in 2022. And then, how we navigated through this process, that learning we convert into our SOPs to develop our business going forward. And as we mentioned, we have taken several steps during that time and thereafter. But now, because the pricing scenario got stable, it has now started showing in our bottom line from Q4 FY24 onward only. And those are the learnings which will definitely help us in the future to have and maintain or thrive the margin in the future also.
Okay. Thank you for that. Just one last thing for me before I get back in the queue. We are guiding to 25% revenue growth for this full year. In the first half, I believe we've done about 21%. So should we expect that the second half will be significantly better from a growth standpoint? And then also on the CDMO front, how much of the first-half growth came from CDMO, or what was its contribution, and where do you see it going in the second half? Will it be a very much heavier contribution in the second half from CDMO?
First of all, related to our revenue guidance for the full year, we are still very confident that we will deliver 25% growth rate for the full year after 21% growth in H1, considering whatever the pipeline we have in terms of our CDMO, our other pharma intermediate business, as well as the newer verticals in the medical segment. Related to your question of pharma business split between CDMO and a non-CDMO, we are not actually giving the bifurcation. But in terms of growth, the higher growth is coming from the CDMO segment as it was earlier expected than the traditional business. And in going forward also, that CDMO business will definitely have a better growth than the traditional pharma intermediate business.
Okay. Understood. Thank you so much, and I'll come back in the queue for any more.
Thanks.
Thank you. We have the next question from the line of Nilesh Ghuge from HDFC Securities. Please go ahead.
Yeah. Good afternoon, sir. My question is particularly on the balance sheet side. If I look at trade receivables after March 25, trade receivables are on the higher side. Before that, if I look at FY24, FY23 numbers, the trade receivables were quite significantly lower. But since March 25, the receivables are on the higher side. If you look at.
Sorry to interrupt, Mr. Nilesh, request you to come closer to the microphone as we are unable to hear you very clearly.
Sure. Sure. So this is regarding with the receivables. So receivables in March 2025 also were in the range of INR 29,000 lakh. And now this September 30, also number is in the same range. So what has led to this? If I compare this number with the FY24 number, it is significantly higher.
So, see, when we say for export market, our receivable is always on a 90-day side, and domestic is on 120 days. And we always said that it will be average 105 to 110 days. With improved collection and our effort, we are able to bring it to 87 days for this quarter. So adding to this, when we talk, you talk about the absolute number, and when we are into 25% growth territory, I think you should look at the debtor days rather than the absolute number. Because if you see our quarterly sales against the debtor outstanding, you will find that it is always near to the 90 days because the revenue is increasing every quarter.
Okay. And secondly, on this, our JV with JN Materials, you talk about last year in the month of June, you formed the planning to produce electrolyte. So any update on that?
That remains still status quo only, and it has not moved further from that level.
Okay. Yeah, that's all from my side. Thanks a lot and wish you a happy Diwali.
Thank you. Same to you.
Thank you. We have the next question from the line of Prerak Gandhi from Lucky Investment Managers. Please go ahead.
Hello. Good afternoon, sir, and thank you for giving me this opportunity. I just wanted to know with respect to the IndiGem project, sir, can you just reiterate exactly when will we start to commercialize the entire project?
So as we mentioned during our commentary, the groundbreaking for this project was done in last month, and the project is expected to start in H2 FY27. So from there onwards, commercial revenue should start.
Okay. And, sir, going forward, we do expect a lot of chemical companies are slowly shifting to CDMO space as well. What do you see the growth prospects over here as well? Because there will be eventually other countries will also come into the picture. So where do we see the growth prospects for the next three to five years?
See, CDMO business, when we talk in CDMO business in pharma segment, is not a business which can come to anyone overnight. Of course, there is a lot of work available in the market, and a lot of players are there in the market to grab those businesses. But that business is always a function of how you are complied with the quality system. Because originator or someone who is giving you the business for the outsourcing or the manufacturing of outsourcing in this industry, they would like to see the level of compliance related to QA, your consistency relationship with that customer over the years. Because consistent supply, quality supply, as well as the QA system in place. And lastly, and not the least, the environment and the EHS compliance.
These are all the factors which contribute or which gives us the confidence that we are one of the very good players to secure that business. And I would like to share one more insight that we now are platinum certified. EcoVadis is platinum certified company, which is only 1% of the companies over the world are into this territory. So this gives us the confidence that because of this, we are able to sustain the market, in fact, get a good share of this business in the market.
Thank you. Thank you so much, sir, and a happy Diwali.
Thank you.
Thank you. We have the next question from the line of Ajay from Niveshaay. Please go ahead.
Congratulations on a great set of numbers. Sir, my question is one on the electrolyte side and another on semiconductor. So I'd like to take the semiconductor. So given our JV with JN Materials to produce advanced photoacid generators for semiconductor photolithography process.
Sorry, it's not working, but your audio is not very clear. Could you come closer to the microphone?
Is it better now?
Yes. This is much better. Yes.
So given our JV with JN Materials for the PAG Photoacid Generators for semiconductor photolithography process, so if you can provide what type of specific products which will be produced by the JV, and how do they differ from existing products which were being made in Baba Fine Chemicals and even the existing offering in the market? And how will these products be maybe applied in the semiconductor? Because there are base chemicals which are used for cleaning purposes, and then there are advanced chemicals. So if you can maybe give more details on the products, particularly on the photolithography. And if anything on the customer side, maybe because Baba Fine Chemicals was previously driven by just one major customer, and have we started to get more traction from newer customers? So if you can highlight that.
First of all, I would like to make one thing very clear that both the business of semiconductor in India through Baba Fine Chemicals and in Korea through IndiGem are completely different business verticals. No kind of connection. That is one thing. Related to products which are going to get developed or manufactured in IndiGem, actually, we already mentioned that those are more value-added products than those traditional products in Baba Fine Chemicals. But over and above that, we will not be able to share much detail on these products which are going to manufacture there. And our one customer which is Heraeus in Baba Fine Chemicals, we are committed to that customer fully to their product and the confidentiality of the product. And we are never going to get into their product line ever in that customer's business. It will be completely different business in Korea.
Okay, sir. Got it. Sir, another on the electrolyte side, because we have mentioned the capacity of the two electrolyte additives which we are going to manufacture. And correct me if my understanding is incorrect, but maybe there are 20 to30 other electrolyte additives in the market. So maybe in the overall scheme of things, how big will be both electrolyte VC and FEC in the additives market? Because these additives will again go into electrolyte, which will further go into making cells. So if you can give maybe some color on the size of these two electrolyte additives and the overall scheme of things. And also, sir, just a follow-up on this. Because there are different technological advancements going on, and which type of cell is going to emerge, maybe from LFP to NMC, and now even sodium or zinc kind of batteries are getting traction.
So my question is, are these additives which we are going to manufacture? So when the type of cell changes, is it like the electrolyte additives also need to change, or the existing one would be capable enough to provide the stability between the transfer of ions from cathode to anode? If you can maybe give some color on that?
First thing, let me give you the understanding that VC and FEC are two initial products which we developed, marketed, and already commercialized. Apart from those two additive products, we have several other additives already developed and commercialized, and full list of those chemicals are already available on our website, so those are based on our changing needs of the market and cater towards the newer requirement of the customer. Related to your question related to sodium batteries, all our additives are for lithium-ion batteries, and related to your question of the size of this business, we have planned capacity of 2,000 metric ton VC and 2,000 metric ton FEC based on our signed contract with the customer and some demand, so we have full visibility of all the products, all the capacity which we have planned. So based on that capacity requirement, you can estimate the size of this product.
No, sir. My question is again on the market. The global electrolyte additives market would be how big? And in that market, VC and FEC would be how much proportion? Because VC as an additive for anode is 30% to 40%. So I just wanted to know the size.
Sorry to interrupt you here. Sir, here I'm saying about Acutaas, not with the global. And whatever we have done in installation of the capacity, we have supported with the agreement for long-term agreement for supply of VC and FEC. So that is what we have secured for us. For further, if you can come to offline or you can do the research on that later on. Let's focus on the current Acutaas-related affairs. Thank you very much for this today.
Thank you.
Thank you. Participants, I request you to kindly restrict your questions to two per participant. We have the next question from the line of Abhigyan Srivastava from Marcellus Investment Managers. Please go ahead.
Hello. Yes, sir. Am I audible?
Yes.
Okay. Sir, a few questions. So why is the goodwill rising in the first half of the year balance sheet versus FY25? Have we made any acquisition?
Yes. So if you see the consolidated balance sheet, we have invested in IndiGem in Korea with some premium. So non-controlling stake, we paid some premium towards non-controlling stake. That is showing as a goodwill. So goodwill of around INR 16 crore has been generated for this quarter for investment we have done in IndiGem.
Got it. Okay. Then could you explain what the driver of the unrealized gains and losses in the cash flow statement are? So INR 19 crore and H1. And where is it included in the P&L?
If you see the INR 19 crore, we have shown that in the other income. That is exchange fluctuation, and that is from part of other income in P&L.
Got it. And lastly, could you please explain the incidental charges that are paid towards investment which are shown in the cash flow statement? So do these pertain to the financial investments or fixed assets?
This is towards incidental charges we have incurred and bank charges and other things towards the investment for IndiGem.
Got it. Thank you, sir. Thank you. Congratulations on the success.
Thanks.
Thank you. We have the next question from the line of Rohit Nagraj from BNK Securities. Please go ahead.
Thanks for the opportunity and congratulations for a very strong set of numbers, and Shubh Deepavali to the entire team and their families. So first question is on the CapEx front. So this year we have spelled out INR 250 crores. What is the number for FY26? And out of this INR 250 crores, how much is the growth CapEx and how much is maintenance? The other part is out of the growth CapEx, generally, what is the kind of asset terms that we look at and the peak potential revenue, how it is looked at? I mean, whether we look at two years, three years, or four years. So if you could provide some details on this. Thank you.
Out of INR 250 crore CapEx planned for FY26, INR 40 crore we are expecting towards maintenance CapEx, and rest is from the growth for the growth CapEx only. Out of which, around INR 180 crore for the full year was planned for electrolyte additive CapEx, and INR 30 crore was planned for pilot plant CapEx. In terms of asset turn, we see generally around 2.5x is the asset turn we expect generally from all our CapEx going forward. This is what we expect from that. Around three years' time should be the good time by which it should scale up the CapEx, whatever we do.
Sure. And FY27, any number as of now?
FY27 for the growth expectation of till FY28, we are already done with all our CapEx requirement, whatever the projection we have done. And it will be more of a maintenance CapEx only.
Sure. Thank you. Second question is on the upcoming additive capacity. So once the capacity is commercialized, what will be the time taken to validate the products? Since these are already being validated, we do not have to wait for the same. Yeah.
No, it is already being validated from that side, and we will be able to quickly dispatch our material once it gets CapEx set completed.
Sure. Just one clarification on the same. What is the kind of volume that we are looking from supplying in the domestic market and in the export market for the additives?
It's completely for export market only. No domestic supply from this plant.
Got it. That's all from my side. Thanks a lot, and all the best.
Thanks.
Thank you. We have the next question from the line of Rajiv Anand from Narnolia Financial Services. Please go ahead.
Hello. Thanks for the opportunity. My question is related to CDMO business. So I just want to ask that why there is a lumpiness in the CDMO business? Because Q1, it was very low, and it ramped up sharply in Q2. And secondly, I just want to know that what would be trend in third and as well as Q4? Thank you.
If you see our past financial also, our Q1 was always low out of all four quarters, and sequentially, it grows every quarter on quarter till Q4 of every year, and if we do not see any lumpiness in the business, it is CDMO business is based on the customer requirement, and we have a full visibility for this CDMO business for the full year as well as the projection for next years.
Okay. Thank you.
Thanks.
Thank you. We have the next question from the line of Akshay from AK Investment. Please go ahead.
Hello, sir. Am I audible?
Yes, we can hear you.
Yeah. First of all, congratulations for the great set of numbers. My first question is, in the opening remark, you said that semiconductor chemicals revenue starts flowing in, and it will be a significant growth driver in the coming years. So what percentage of revenue might be there from the semiconductor segment over the next two, three years?
No, that we are actually not disclosing anywhere for the future businesses.
Okay. Fair enough. And specialty chemical segment just grown by 7% year-on-year in first half. Sorry, in quarter two. So can we expect higher year-on-year growth in up to FY26?
We are guiding that these are traditional spec chem business will remain in the territory of around 10% to 15% as a growth for the business, and we feel that it will remain in that territory only by the end of this financial year.
Okay. And lastly, sir, on the US tariff impacts, so what percentage of revenue is coming from US, and are there any impact of US tariff in that?
In US market, we have very minimal direct sale in the US market, which is even less than 1%. So we do not see any direct impact in our business from US market.
Okay, sir. Thank you so much, and happy Diwali to you, sir.
Thanks.
Thank you. We have the next question from the line of Shreya Bantia from Oaklane Capital Management. Please go ahead.
Yeah. Thank you for the opportunity. I just wanted to ask one question. So you said that you have the full visibility for the segment. So without disclosing any detail, are there any domestic battery manufacturers who have committed to this contract?
I think I missed your voice in between, but what I understand is you are asking about our electrolyte additive segment visibility. So for this.
Yeah. Do we have any visibility from the domestic battery manufacturers?
Let me just give you the background. This plant, what we have set up for 2,000 metric ton VC and FEC, that is based on the customer requirement, which is export customer. We have not planned any capacity for domestic market, I think.
Okay. Okay. Understood. Thanks for clarifying.
Thanks.
Thank you.
Thank you. We have the next question from the line of Karan Gupta from ACMIL. Please go ahead.
Yeah. Hi. Now audible?
Yes.
Yes, you're audible sir, but I believe you're on speakerphone. There's a lot of background sound that is coming to your call. If you could go off speakerphone, please.
Right now?
Yes, Karan, you can. Yes.
Yeah. So my question is regarding the CDMO side. You can see that API, basically, announced on the US side, is going faster than we expect to connect.
I'm sorry to interrupt you, Karan, but your audio is not clear. There's a lot of background disturbance that is coming in. If you could move to a place with less commotion, that would help.
Just a second.
Requested to come back in the queue till you sort the audio challenge. In the meanwhile, we move to the next question from Mr. Bir Damania. Please go ahead.
Yeah. I hope I'm audible. Nareshbhai, I have just one fundamental question. So a few years ago, you were purely an advanced intermediate company. Now that you have multiple segments, CDMO, battery chemicals, semiconductor chemicals, each of them, all of them, would have a different set of challenges and very, very diverse. So I would like to understand a bit more on how the bandwidth for top management is placed, how we have hired, basically, if we've hired some KMPs, manpower to run each of these businesses, or anything else which you've done so that all the subsegments are on the right path. How do you see that kind of change over the last couple of years, and how will it change in the next couple of years?
Okay. First of all, as you're tracking us since five, six, five years, when we started electrolyte business, we entered into the electrolyte business only because we want to expand our chemistry. We have very strong chemistry during company. So basically, chemistry don't have an application only in pharma. So we want to expand our chemistry based out of Pharma, and that's why we started acquiring Gujarat Organics, and then later on, we entered into battery, and then later on, we acquired BABA, and now we entered into Semicon. So this is all to expand our strength into the production side and as well as the chemistry application. And if you see the last five years, management has introduced a lot of systems, digitalizations, KMPs are introduced time to time required for each segment.
So this is a part of the business cycle, and this is part of the business to grow from one state to another state. So when and when needed, we introduce the people as well as the system as well as the equipment to make sure that that segment will grow. And in the last four years, starting from zero to now electrolyte, we are investing more than INR 200 crore to make sure that we will start supplying in electrolyte commercially. We have already done Baba Fine Chemicals, and then now we are doing a JV in Korea where we are putting a new manufacturing site. The KMP is coming from so my Korean partner is himself. They are all our good technical background, commercial background in that segment. So automatically, by partnership, we got the KMP in Baba Fine Chemicals as well as in IndiGem. So, this is how either partnership or by recruiting, we got our KMP in the system. I hope I have delivered you your expected answer.
Yeah. Yeah. Thank you and all the best.
Thank you.
Thank you. We have the next question from the line of Raj from Arjav Partners. Please go ahead.
Hello. I'm audible?
Yes.
Sir, for the battery chemical segment, I wanted to understand how are we going to compete from the Chinese companies? Like in the earlier call, you said the EBITDA is quite higher. But if you look at China, the electrolyte additive companies, if you look at their EBITDA and their GP, they would be in single.
Sorry. We will not be able to comment on how Chinese or what should be their EBITDA in this business. But at least what we know from since the development of this product from 2010 to 2012, we made this product so robust with process. And at the current prevailing market price also, we are able to sustain the market and with the expected EBITDA margin.
All right, and sir, what would be our payback period?
For any of the projects, we expect payback to be around three to three and a half years kind of payback.
Three to three and a half years kind of payback. All right. Yeah. And sir, on the South Korea JV, we are setting up a plant in Korea, right? So what exactly is our part in that JV?
In South Korean JV, we are the investment partner with 75% investment, and 25% is with our Korean partner who will bring their technology, their market, as well as the production capability. Supplier of starting material.
Supplier of starting material. All right. And how much sale are we expecting from that Korean JV in FY27?
The Korean JV is expected to start production in H2 FY27.
Yeah. And how much sales are we expecting on an average?
That we are not disclosing.
All right. And, sir, the. The electrolyte additive plant, are we expected to run at 100% capacity in FY27 itself?
No, no. It cannot go 100% in one year. It will take around three years' time to reach an optimum level of capacity.
Are we planning to invest more in that electrolyte additives going ahead?
As of now, we have not announced any CapEx around this business as of now. But as we mentioned, we have full visibility of this whole plant we are setting up for this business. And more business is expected considering the kind of business development going on. So we may announce the additional capacity planning in future if needed.
Understood. And sir, in the CDMO part.
Sorry to interrupt you, Mr. Raaj. Sorry to interrupt you, Mr. Raaj. Requested to kindly come back in the queue for follow-up questions.
Okay. Thank you.
Thank you. We have the next question from the line of Ankit Mittal, an Individual Investor. Please go ahead.
Thank you for the opportunity and congratulations for a great set of results. I wanted to understand more about the EBITDA margins from a more medium-term point of view for FY 2027, 2028. Do you think we can maintain this 28% to 30% kind of EBITDA margins? As you mentioned, now we have full visibility on the CDMO as well as the electrolyte additives business. So internally, do you have the confidence in maintaining, let's say, this 30% kind of margins for the next two, three years?
As I mentioned, we have visibility. We have guided for this financial year, and all the margin improvement, whatever are done, these are more of kind of permanent in the nature and as well as the function of the product mix, so based on that, we are confident that we will be able to sustain this margin profile in future also.
For the electrolyte additives business, do you think that business can have a 30% plus kind of EBITDA margin?
Which business? Sorry.
Electrolyte.
No, no. Electrolyte additives. Electrolyte additives.
Business definitely will not have such a high margins.
Okay. So it will be in the range of 15% to 20% then?
That we cannot disclose.
Okay. Thank you.
Thank you. We have the next question from the line of Vivek Gautam GS Investmentss. please go ahead.
Sir, congratulations on an excellent set of numbers. A few questions about number one was about the product. Any risk due to the product concentration and the client concentration in our case, which you have thought, and competition intensity which we face, and opportunity size and expected growth path for us. And lastly, sir, a small complaint. Yours is the only company which is a touch devoid of Company Secretary who's refusing to share the shareholder list. I've been writing many mails, but unfortunately, out of my portfolio of 40 companies, yours is the only company who are saying, "You come to Surat and have a look at the shareholder list." That's very, very unfortunate and gives a very wrong message. Thank you.
Yeah. I think it touched you. So it has to abide by all the rules and regulations. And she's, I think, working within the purview or the boundary of the legal framework only. So maybe it was because of her those.
Yeah. Agreed, sir. But point is, out of one company, out of 40 to 50 companies, it's all request, it's all complaint only because everyone else is sharing. Then why is our company so hesitant to share it, sir? We are doing very good. We are having long-term perspective. We have seen the progress you have made. No harm in sharing this information also, sir.
Actually, I am not aware of what was conversation going on, but at least I can assure you that whatever possible is there within the legal framework.
It's all legal, sir. 99 companies are sharing it on the mail. Ours is the only company which is sort of asking us to come to Surat and do it, sir. Very strange. Anyway, sir, that's your prerogative and your right, sir. If you want to share the information with your shareholders, well and good. Otherwise, we can't do anything. Anyway, second thing, sir, about the other of the questions which were asked, sir, concentration risk, product risk, and opportunity size and expected growth rate, sir.
So we always believe in multiple products. We do not have any single product going to a single customer. We have more than one customer for every product, and for every customer, we have multiple products. That is how we have built our whole business over the years.
Fantastic, sir. That is really visible from the numbers also, sir.
And for CDMO business, obviously, it has to be a one-on-one business based on the contract. So we have multiple products as well as the multiple customers as well as the multiple industry and a good amount of diversification.
And sir, what are our differentiators versus competition, and which is helping us out, sir? And we started out as two chemical engineers and have really evolved over the place, sir, and it's really great progress we have seen. We are very satisfied and happy and want to keep up with the good work. But just you can highlight for the benefit of your investors, the differentiators which we have and which can withstand the risk from China and other places also, sir.
So as you know, for most of our top product, we have more than 50% to 80% kind of market share as against any of the customers. That is how it shows our track record that we have been competing in the market for a long time.
Last word about the opportunity size.
Sorry to interrupt you, Mr. Gautam. Requested to come back in the queue for follow-up questions.
Okay. Thank you.
Thank you. We have the next question from the line of Tejas Arjun Sonawane from Asian Markets Securities. Please go ahead.
Yeah. Good afternoon. Thank you so much for the opportunity. I have just one question. Last quarter, we had indicated about commencing of our third block at Ankleshwar site. Just wanted to understand how has been the capacity ramp-up of our Block 3 and whether this has also contributed significantly to the margin expansion we have seen during this quarter. That's it from my side. Thank you.
So all the CapEx at Unit 2, Ankleshwar, has been completed with commissioning of last block. But the capacity utilization will take its own time, and in the next two years, it should reach to an optimum level. Margin expansion is not because of this commissioning of a new block. As I mentioned, the margin expansion is a function of product mix as well as the operational efficiency as well as the cost improvement measure, what we have done over the year.
Okay. Understood. So I believe that the Block 3 is largely towards our dedicated contract. So just wanted to understand since our commissioning in Q1, how has been the overall performance of this Block 3 in our quarter two numbers?
Sorry, I didn't get you. Block 3 is for our dedicated contract, and which has been commissioned last year, last quarter of FY24. Since then onward, this block is operational and catering to whatever the customer requirement is there, and that is sufficient to the projected customer's requirement.
Okay. Understood. Yeah. Thank you so much.
Thank you. We have the next question from the line of Nilesh G from HDFC Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity. My question is on specialty chemicals. So what is the capacity utilization of our specialty chemical block in Jhagadia?
52%.
Okay, and then what kind of growth do you envisage over, let's say, two, three years of the utilization to take to, let's say, optimum level?
So at the.
But since last one, two, three years, it has been around 40% to 50%.
So in this business, we are expecting growth in between 10% to 15% only going forward also.
Okay. And then secondly, on this Block 3 of our CDMO plant, so what kind of capacity utilization currently?
It's 38% at Unit 2.
38% in last quarter, right?
Yes.
What it was in FY25 on an average utilization?
Actually, I'm not on top of this number. I can get back to you on this.
Sure. Thanks a lot. That's all from my side. Thanks.
Thank you. Ladies and gentlemen, that was the last question. I will now hand the conference over to the management for closing comments.
Thank you to the JM Financial team for hosting our conference call. We appreciate everyone's questions and hope we have addressed most of your queries. If we miss any of your questions, please reach out to our investor relations team, and we will get back to you promptly. Once again, thank you very much. We wish you a happy Diwali and happy New Year to you all. Thank you.
Thank you. On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.