Ladies and gentlemen, good day, and welcome to the Q4 and FY 23 earnings conference call of Ami Organics Limited, hosted by Elara Securities. 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 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 Ms. Reena Shah from Elara Securities. Thank you, and over to you.
Thank you, and good afternoon, everyone. We welcome to Ami Organics Q4 and FY 23 earnings conference call. We at Elara Capital would like to thank the management for giving us the opportunity to host this call, and we would like to congratulate management for the best ever results. Today, from the management side, we have Mr. Naresh Patel, Chairman and Managing Director, and Mr. Bhavin Shah, CFO of Ami Organics. I would now like to hand over the call to Mr. Bhavin Shah for opening remarks. Thank you, and over to you, sir.
Thank you, Reena. Good afternoon, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q4 2023 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 forward-looking statement, must be reviewed in conjunction with the risk that the company faces. This 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 Ami Organics and cannot be copied, rebroadcast, or attributed in press or media without specific and written consent of the company.
With that, 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 all are doing well. A warm welcome to our Q4 FY 2023 earnings call conference call. Before we jump to an update on our performance, I would like to take a couple of minutes to reflect on how FY 2023 has fared for us. It is no secret that the year began on a very challenging note, with the ongoing war in Ukraine severely affected supply side, impacting commodity and gas prices, increasing raw material prices, among others. All these factors have added to significant cost pressure for all the companies. While supply side issues continued to pile up, we also saw muted demand environment across industries. While the start of the year was demanding, the situation has gradually improved as the year progressed, albeit at slower pace.
Moving to the current scenario, on the industry front, things are on the mix, specifically on pharmaceutical segment. Cost pressures has rationalized to a great extent. An important update closer to home is that the Chinese chemical industry is back with a strong production and competitive price, which has started hurting many industries and players. I believe we will see more of it in coming quarters. While these factors play out in the industry at Ami Organics, our business model is designed in such a way that the revival of the Chinese chemical industry has minimum to no bearing on us. To put things in perspective, we never benefited from the shutting of plants in China due to COVID or supply chain issues.
Second most important thing is that we remain a global market leader in our key products, with China and other geographies in the second and third position. So Chinese industry coming back strongly will not affect us. On the demand side, we are witnessing gradual upswing in the demand in H2 of FY 2023, and I believe the revival will continue in H1 FY 2024. At Ami Organics, we have used the challenging year to create various growth drivers for the coming year. Let me discuss these growth drivers one by one. I will start with electrolyte additives. I am happy to inform you, as of today, we have received approval from six customers worldwide. We have also received plant scale trial commercial orders of few metric tons, and we are also expecting a bigger commercial orders during the current quarter.
We believe the volume will be ramped up slowly as we progress through the year. Looking at progress on the electrolyte additives segment, we have started working on the plans of expanding our capacity for this product. I will provide update on the same once our plans are finalized. One more important update on this front is that we have developed two more products in this segment. One of them is liquid electrolyte additive to increase electrodes capacity of the lithium-ion battery, and one more additive for solid state battery. The products have been approved at the lab scale and are in advanced stage of validation. Moving on the second growth driver, we started working on initiative to get into long-term contracts with customers, which improves our future revenue visibility.
We have successfully signed some long-term LOIs and contracts with some of our big customers on this front. The Fermion deal was one of the same line of thoughts. I am delighted to say that we have been able to expand the scope of our contract with Fermion, and we have added a couple of high-value intermediates for the same. This means we will now be going, we will now be doing three advanced intermediates for the same, which increase the value of the, our contract manifold. The third growth driver for us would be new products. During the year, we had developed several niche specialty chemical products, which are at different stage of evaluations and approvals as we speak.
Some of these products are very big when you look at our current size of business, and I will update you on these products as they reach certain milestones. Last but not least, we announced the acquisition of 55% stake in Baba Fine Chemicals last month. At Ami Organics, our inorganic growth strategy is based on two elements: one, where we are either interested in buying the asset, which we can then use to expand our products, or the other, where we are able to gain access to newer products or technology, which is difficult to create organically in short term. The acquisition of Baba Fine Chemicals falls under the second strategy, where we are gaining entry into a very high entry barrier semiconductor industry. They have been in this industry since inception and were looking for an opportune partner who share their business ethic and chemistry capabilities.
I am happy and proud that they chose Ami Organics. On the financial side, they have strong balance sheet with zero debt. Overall, the acquisition fits perfectly in our strategy and chemistry capabilities. Overall, our organic pharmaceutical business will continue to grow strongly, and now we have some good growth lever lineup, which will boost the overall growth of the company. Moving on to our Q4 and yearly results. Starting with Q4 FY 2023, we delivered highest ever quarterly number in Q4 at INR 186 crore. This translates into close to 30% growth in, on year-on-year basis. The growth was by, driven by advanced pharmaceutical intermediate business. On the full year numbers, we continue our strong momentum in FY 2023, achieving total revenue of over INR 621 crore, which was higher than 19% when compared to last year.
Our core pharmaceutical business aided the growth for the year, with 22% growth year-on-year, whereas specialty chemical business grow slightly by 3%. Our operating margins for the year were flat due to cost pressure, which, as I discussed during the start of my speech, which impacted our margin in H1. However, our margins rebounded strongly in H2, and we ended Q4 at 21.9% operating margin. I will let Bhavin discuss financial in detail. To conclude, I believe the challenging days are behind us, and I am confident that we will continue the strong growth momentum in FY 2024 as well. With that, I request our CFO, Mr. Bhavin Shah, to discuss the financials with you. Over to you, Bhavin.
Thank you, Naresh Bhai. Good afternoon, everyone. I would like to briefly touch upon the key performance highlights for the quarter and year ended 31 March 2023, and then we will open the floor for question and answer. I will begin with quarterly updates. Revenue from operation for the quarter was at INR 186 crore, up 29.8%, compared to INR 143 crore in Q4 2022. The gross profit for the quarter was at INR 81.3 crore, up 28.3% as compared to INR 63.4 crore in Q4 2022. The gross margin for the quarter was at 43.6%. Lower gross margin was due to high cost inventory, which has been completely consumed by Q4, FY 2023.
EBITDA for the quarter was at INR 40.8 crore, up 58.3% as compared to INR 25.88 crore in Q4 2022. On a sequential basis, EBITDA for the quarter increased by 32.5%. EBITDA margins for the quarter were at 21.9%, compared to 18% in Q4 FY 2022, and 20.2% in Q3 FY 2023. We continue to improve EBITDA margin on a sequential basis as per our guidance. EBITDA margin in Q1 were 18.1%, and we have been successful in gradually improving our EBITDA margin to 21.9%, an expansion of 380 basis point.
Now, dissecting the margin further, I am happy to report that EBITDA margin for the pharma business was 23.6% in Q4 FY 2023, and our margin on the specialty chemical side were at around 11.1%, which is an improvement of 100 basis points. PAT for the quarter was at INR 22.7 crore, up 27.6% on YOY basis, and 21.9% on a sequential basis. The PAT margins for the quarter were at 14.6%, as compared to 14.8% in Q4 FY 2022, and flat as compared to Q3 FY 2023. Coming on to full year FY 2023 updates. Revenue from operation for FY 2023 grew by 18.6% YOY to INR 617 crore, compared to INR 520 crore in FY 2022.
This was driven by advanced pharma intermediate business, which grew strongly by 22% on YOY basis. Gross margins for the year were slightly below at 46.3% when compared to 47.5% in FY 2022.... EBITDA for the year came at INR 123 crore, up 16.6% YOY compared to INR 105 crore in FY 2022. EBITDA margin for the year remained flat at 19.9% as compared to 20.2% in FY 2022. If you adjust one-off items like loss on insurance claim receivable and loss on sale of assets, our EBITDA margin for the year would be around 20.5%, which is slightly higher than the last year. PAT for the year was at INR 83 crore, up 15.8% on YOY basis.
VAT margin for the year was at 13.5%. Export for the year was at 59%, whereas domestic business was at 41%. Coming to the balance sheet, we have a net debt-free balance sheet with cash and cash equivalent of around INR 59 crore. During the year, we have generated strong cash flow from operation of INR 65 crore, which was driven by better working capital management. I believe we will continue to generate robust, robust cash flow from operation in coming year as well, which will support our routine OpEx as well as CapEx. With this, I conclude my remarks and request the moderator to open the floor for a question and answer session. 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 only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Chirag Lodaya from ValueQuest. Please go ahead.
Yeah, congratulations on a good set of numbers. I have a couple of questions. First, on segmental margins, if you can help us understand what were the full year margins in, you know, specialty chemical and advanced intermediate division?
So Chirag, full year margin for pharma business is 21.57% and specialty at 10.3%.
Okay. How we see, you know, margins going ahead, segment-wise?
So, as we are guiding, that our first target is to reach to our FY 21 margin for pharma business, which we have already achieved in Q4, that is 23%. So we would like to maintain this margin and would like to go further from here. As far as our specialty business is concerned, we have improved 100 basis points in last quarter, and in coming quarters, we'll see 50-100 basis points improvement, quarter-on-quarter basis.
Right. And, if you can, you know, throw more color on specialty chemical division, you know, what kind of ramp up we are seeing next year? And you have also talked about, you know, few new products, which are under pipeline and, you know, which will help to scale up the business. So some color on specialty chemicals, you know, what to expect and what will drive the growth there.
So, hi, Chirag, this is Naresh Patel. Specialty is our more focus area currently in Ami Organics, and we have a robust plan for growth in the specialty chemicals and also phase out the old product of Gujarat Organics. In that line, we have developed around 20 molecules in specialty chemical segment in Gujarat Organics, and some of our already LOI signed and started qualification at the end of the customer. These are all in a versatile application, including electronic donor polymer industry, as well as some paint industry additive, UVC bulbs, as well as some electronic industry. So it's cumulatively that once it will be coming inside, it will be bringing lot of large volume and large value.
We are targeting this year the specialty chemical segment will be grow around 25%-30% against our normal growth of 20%-25% of 22%-25% of our pharma industry.
Right. And coming to this new acquisition, which, you know, which is undergoing of Baba Fine Chemicals, if you can just help us understand what is the, you know, overall opportunity size for this company? Because, you know, current revenue is, you know, quite small. It is a niche business, it looks like. So some color there, you know, what kind of scale we can create, maybe, you know, three, four years down the line.
Thanks. That is a very, very right and very wise question you had asked this, because currently the size of the company is small, because it is running by the three scientists, and these, they all are market scientists in the semiconductor industries, having holdings several patents in their name. And now, out of the two one is already got passed away in COVID, and one is age out, so he wants to exit, and that opportunity we got to get the major stake in the Baba Fine Chem. Baba Fine Chem has a main application in the photoresist chemical in semiconductor industry, and they are making very high pure chemicals, parts per trillion kind of purity, PPT.
Normally, we talk in PPM, but this is part per trillion purity, so that is a very unique technology and capability of Baba Fine Chemicals. And outward going, the world market is more than $2 billion in photoresist chemical, and so is a huge potential available. So, by Ami Organics introducing with them, we can able to give them the operational leverages that will help them to grow the business.
... But, any ballpark number what to expect over say three, four years?
It will be definitely it will be growth more than 3, 3 times, 3 to 4 times in upcoming year.
Okay, that is helpful. Lastly, bookkeeping question: What would be the CapEx for FY 2023, 2024?
So currently the CapEx for FY 2024 is just a CapEx, which is ongoing, and whereas once these electrolyte orders are start flooding, we will, we will do some CapEx plan, some extra additional capacity for that, and that CapEx will be in second half of FY 2024. We will announce the value, value of the CapEx once we are ready for that.
Ex of electrolyte, the overall number would be?
So, electrolyte, we are having INR 35 crore of maintenance CapEx. There will be additional CapEx for solar we are planning, so that when we'll announce that, so there will be a additional CapEx for that also. So this is the CapEx plan for the year.
Greenfield facility will have around INR 160 crore-INR 170 crore balance CapEx?
Yes. Greenfield capacity will have around INR 160 crore-INR 170 crore CapEx pending to be done in the year.
Put together INR 200 crore plus next year, right?
Yes.
Okay. Thank you, and all the best.
Thank you. We'll have our next question from the line of Mitul Mehta from Lucky Investment Managers. Please go ahead.
Good afternoon, sir. Congratulations on a very good pharma operating numbers. Sir, you know, from the day we acquired Gujarat Organics till today, our numbers have not been up to the expectations. So can you, you know, help us to understand, what sort of product portfolio are you building there? You think you can scale up the pharma business in, I'm sorry, the specialty chemical business in next two, three years? Because the current investment, I mean, the current investment that we did when we acquired Gujarat Organics and working capital, the current ROC looks very, very suboptimal. So just wanted to get some color on that. My second question is on the Fermion contract. If you can help us to understand, you know, when does the delivery commence for Fermion?
Can we get some more color on this contract? I mean, this is going to be over, let's say, 10 years or even further on. So can you help us to understand both these questions?
The number one question is related to specialty chemicals portfolio related to Gujarat Organics. Let me tell you one thing, we acquired Gujarat Organics in April 2021. Since then, 2-3 years is just passed for the takeover and taking the management and all. Then we, 3 months we work on what are the areas need to be focused, and we make a robust plan for that. And that, that is, that is how we shifted all the manufacturing sites from Ankleshwar to Jhagadia, and we make the free land for pharma expansion, and that is without losing any single kg order. But the last year was mainly for the consolidation in terms of the product sustainability, technology upgrade. We had done a technology upgrade for Methyl Salicylate.
We had done technology upgradation for parabens, as well as we had done four or five new molecules which are commercialized in FY 2024, which are in the application in UV absorbers and application in agrochemicals as well as in application in petrochemical industries. So these are the molecules we developed and started commercial orders in FY 2024. So our target is to first sustain the business without losing the money and volume, and then make sure that now this business will be replaced as well as grow with the new product. And the margin and operating margin from zero to we bring to 10, and that we sustained for last eight quarters. And now we are increasing.
Last quarter, we increased by 100 basis points, and now we are targeting to increase and bring it to 18%-19% of margin in specialty chemicals in this year. So this is what we are doing in specialty chemical segment. And revenue size will be 2.5 times in next 2-3 years, which is our targeting. This is just a projection. It is a best for plan. And in terms of Fermion, Fermion contract, that is a long-term contract, and it will be start supplying from Q3 of FY 2024. And that will be somewhere around, I can't say the value because it's a very big, big value, and it will be matured fully.
Full capacity supply will be start in FY 2025 because it is a pharma and it takes some time to registration in 180 countries worldwide. So in FY Q3 and Q4, it will be giving us a substantial revenue, but from FY 2025 it will be giving us a full revenue. So this is how we are targeting Fermion. And in that contract only, we have 3 more products in that, and that all 3 products is additional to the contract, so that will also help us to grow more numbers in the upcoming years.
The three products that you mentioned are other than the product that we have with Fermion, right?
... So basically, we are going to supply very well advanced intermediate, in that the three raw materials which we are supposed to import from China, but that we made in-house, and now we are consuming in-house. So that is an additional advantage for us to have the, not only the, our top line increase, but also the revenue and profitability also can be increased in that.
Sir, you know, if, if I was just looking at some of the primary data releasing by Bayer on their presentation, it's public information. So their current run rate is about EUR 180 million for the Nubeqa sales. And, so if I annualize, that comes to roughly about EUR 800 million. Currently, our supply, let's say, if were to begin in Q3 and will scale up in Q, FY 2025, so at present, is it possible for you to reveal from whom they are currently sourcing the intermediate?
Yeah. If you've done such a good research, then this product is growing unexpectedly 200-300 times a year. So it will be... Their expectation was, whatever they expected in 2026, they're already closing 2023. So it's growing very fast. And the basic API manufacturing plant in Fermion is fully utilized, and the intermediate which they are trying to source from us, they are currently making in-house. They don't have yet to source other than us. So that is how they are increasing their capacity, and we are going to make their intermediate in Ami Organics, and they will make the final API.
So the growth rate of this product is so high, they want to move faster, and we have all the capacity and all the technology, everything is available with us. So that is the adding advantage to them.
Sir, is there a technology barrier in this particular product? I mean, can they develop an alternative supplier? I mean, is there any alternative supplier who has-
They don't have currently any alternative supplier, and this is a CDMO kind of work, where we do the development and then manufacturing of the product. So it's, it's, it's falling to CDMO, CRMO, CDMO, segment of Fermion.
Okay. And, sir, your thought on Apixaban, I mean, the anticoagulant, family that we are currently supplying, how is the growth rate there? And, do you also foresee that, this particular segment can be a very big growth driver for us in the next two to three years?
Yes, definitely. Our anticoagulant is always a key basket for Ami Organics, and that is the reason why we have developed all the anticoagulant basket, which is currently launched or going to be launched, which include Apixaban, Rivaroxaban, Edoxaban, Betrixaban, all kind of, which are expiry up to 2035. We have full basket is ready. Apixaban and Rivaroxaban is a growth driver for us for next two years because it's going to be launched. And, our generic player worldwide, more than 26 customer in Apixaban, they are the, they are all, ready to launch, and also they want some litigation in, the UK against the originator, so that will allow us to start business very faster. In Rivaroxaban, now originator has qualified us, and they started placing order in Q4 to us, Q4 FY 2023.
So now we are supplying to originator as well, the Rivaroxaban. So it's a very good growth driver for us for the anticoagulant segment.
Sir, as far as a Edoxaban is concerned, you know, that seemed to be a very promising product. It's a new generation anticoagulant, so, which currently is selling very well in Japan. So, are we going to play a significant role there also?
We have already three customers in Japan who had qualified us.
Daiichi has already qualified us?
Daiichi, not because they are making all the chemicals themselves there, but rest of the all generic player have qualified us.
But the product-
Mr. Mehta, I request you to come back in the queue, sir.
Thank you very much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, kindly restrict your questions to two at a time. We have our next question from the line of Sudarshan Padmanabhan from JM Financial PMS. Please go ahead.
Yeah, thank you for taking my questions, and congrats on great set of numbers. So my question is, you know, also taking forward from the previous participant, you know, when I'm looking at the next 18 months, we have multiple triggers. One, the Fermion contract, then we have the new generation, you know, coagulant, anticoagulant drugs that is going to drive growth. And the third one is the electrolyte side, which can actually become fairly big, you know, for us.
In the context of the fact that we are operating the facility at around 65%, you know, on the pharma side, and volumes obviously will drive operating leverage, I mean, do you think that, you know, this 20%-25% kind of growth that you have given on, pharma and the 30% guidance, I mean, could basically be a little bit more on the conservative side? And could you also talk a little bit more, you know, beyond FY 2024, because some of these contracts are going to be, you know, more visible in FY 2025. So what is the kind of scale in terms of top line and margin that one can realistically expect?
Hey, thanks, and very logical questions you had asked. So normally, Ami Organics is always proactive in terms of product pipeline as well as the capability and productivity. So our Ankleshwar facility is upcoming facility, which will be ready by December 2023-2024 for operational. So that will come with a very huge volume, four times volume than our unit one in Surat. So that will be definitely help us to next FY 2024, FY 2025, and FY 2026 growth of the pharma. And also not only that, to make a risk de-risk ourselves, if there is any delay in that, we had already started shifting our several chemistries, like chlorination, nitration, diazotization, and esterification. In the currently, we are making in a flow at a very high volume, so that has free up our capacity also in unit one as well.
So that is how we can have a buffer of at least one to one and a half quarters for us to sustain our growth rate in pharmaceutical intermediate segment. In specialty chemicals, we have Unit 3, which is in Jhagadia, is running currently at 35%-40% capacity, and it has a capability to handle up to 80% in next two years. Not only that, in Unit 3 also, we had shifted at least one unit of blocks there, which will helping us another 15% capacity, which is currently under installation, finishing of the installation. So that will also add another 15% capacity in specialty segment. So ongoing FY 2025, 2026, we have several contracts which are in line.
Few are in UV absorbers areas, few are in petrochemicals area, which are LOI already signed. But we are not declaring the LOI because it's, I mean, once it will be materialized and convert into MOU, then we will disclose about the growth plan and value of these LOI in FY 2024 and 2025.
Yeah. On the margin side, sir, because we are talking about 150 bits or so, but, you know, even if you, you know, assuming that the, you know, contracts not, it doesn't come with high margin, the operating leverage itself should take care of the 100, 150 bits. So are we, you know, looking for a surprise on this side?
We are conservative in terms of our comments, and that's why we are saying that 100-150 basis points. Whereas once these all high value contracts will be in place, the margin definitely go up, in that sense as well.
It will basically be 150 basis points again for FY 2025, right? Because you'll see again a volume growth as well as better mix. It should be, you know, you'll see margin expansion again and then a strong top line in FY 2025 as well, over FY 2024. So we are looking at multiple years, not just one year.
So margin expansion is a continuous process. So as we grow, our revenue will grow, our system process will be more mature. So currently, we are running at 23%, and we are looking at a sustained margin improvement quarter-on-quarter and year-on-year basis. It is premature to speak anything about 25 currently.
Sure, sir. Sir, on, you know, just a small bookkeeping question. One, on the current, you know, quarter's gross margin, I mean, we've seen some kind of a decrease because of high-cost inventory or just the mix. But on a longer term, the positive side is we've seen a great, you know, reduction on the working capital. I mean, we have been able to release about INR 40-45 crores of cash on the inventory side. So can you talk a little bit more about the kind of work you've done on the working capital? And should this, you know, improvement continue, what's our target in terms of working capital days?
See, so currently, on an average basis, considering sales as a base, our working capital cycle is 108 days, and I try to bring this at 100 days. So we are continuously working on it. We have improved our inventory days. We are trying to get more credit from our supplier, and our endeavor will be to reduce our receivable days by another 10 days.
Sure. On the near term-
Padmanabhan, I request you to come back in the queue, sir, as there are other participants waiting.
Sure, sir. Thank you.
Thank you. We have our next question from the line of Rikin Shah from Omkara Capital. Please go ahead.
Hi, am I audible?
Yes, sir.
All right. So just expanding on to what's discussed earlier. So in Darolutamide, Nubeqa, which is the FDF, in FY 2021, we saw EUR 220 million sales. So FY 2022, we've seen EUR 466 million, and now we've already reached EUR 180 million target, and Bayer's aspiration is around EUR 3 billion in two years or three years. So considering that materializes, that could—could that result in an intermediate market, which was perhaps INR 500-600 crores?
Your calculation, based on the calculation, it may be. I'm not claiming all these things because I'm not supposed to, but, whatever you calculate, I hope it will be okay for you.
All right. And, in this, you mentioned there is no other supplier, so, you know, would we be the ones taking majority of the business?
This will be 100% with us. We and Fermion, only two guys, will manufacture this intermediate.
All right. All right. In terms of our anticoagulants portfolio, you know, we have seen genericization of Apixaban in many geographies, and many API players in India also commenting for better growth on that end. So, you know, how would the entire portfolio be managed? Because in India, perhaps, the treatment is at Rivaroxaban level, right? And there could be a shift in treatment as well. So globally and in India, per se, how would our anticoagulants portfolio be shaping up going forward?
Basically, for us, anticoagulant segment is completely a bundle of the products, and this is the reason why we file patent for both the product in Apixaban and Rivaroxaban, and we are holding process patent for both the intermediate. And we have a sizable customers also worldwide and all geography, and these all are ready for launching. Some have already started, launching product and all. So that for a-- it is immaterial for us whether Rivaroxaban goes in the market or Apixaban goes in the market. For us, is like, is a bundle, and we have capability to produce. In all the products, we are doing up to N minus one. So we have a good advantage of, selling the product in a large volume.
All right. And, on the Edoxaban end, you touched upon a few things. So Daiichi is selling, I think, JPY 97 billion worth of Lixiana, right? So, considering the generic market of Edoxaban in Japan, you know, how big of an opportunity can the intermediate side be here?
Same, same answer. I have to be say that it is a... See, basically, an anticoagulant is a lifestyle disease, and that is like an anti-cardiovascular disease, similar kind of this. Day by day, the people are having a lot of problem of this, which we sense very early during our inception. So that's how we put our portfolio in this segment. So we are ready with all N minus one in that as well, and we have a very good number of customers worldwide, and these are all big pharmas, including Teva, and they are a large, large manufacturer worldwide. They all are our customers and qualified us as their own, as their, own suppliers. So we are also expecting the revenue coming in, upcoming years from this side.
All right, sir, last one from my end. In on the electrolyte end, we have mentioned, you know, developing two new molecules. So you had mentioned in the earlier con call that we had Vinylene and Fluoroethylene. So would it be possible to give some more color here, what, what's in the pipeline?
So, these two molecule is we got from the customer, and it is under NDA, CDA agreement, exclusively manufacturing kind of things. And these are molecules is, used to, for high voltage batteries and for increasing the electro capacity of the battery, lithium battery, as well as one is for the solid state battery. So this is what we have developed. And, both the molecules are in, outside China, and, they are qualified, and now we are in process of, larger scale manufacturing compliances with them.
Thank you.
All right.
We have our next question from the line of Tarun Shetty from Haitong Securities. Please go ahead.
Hi, am I audible?
Yes.
Yes, sir.
Yeah, thank you for the opportunity, and congratulations on the good set of numbers. Sir, on the Baba acquisition, I just want one clarification. 45% of your PAT will be booked under minority interest. Is that understanding correct?
Yeah, the 45% is one of the minority, third partner, which is a key partner of the Baba Fine Chemicals, will be remain as a partner.
Okay. In one of your recent interviews, you did claim to, even on this call, you just said that the revenue would grow around 3 to 4-fold, in the near term. Could you give any rationale on this? Because I believe the Baba currently has only one customer that it is servicing. Does they have any exclusivity contract there or, any kind of, you know, restriction on sales? Anything that you can give color on?
Yeah, the product which is Baba Fine Chemicals currently manufacturing and delivering to one customer is exclusively for them. But there are more than 40 products, which is in already developed and commercialized on sample, that can go to the world. Apart from U.S., other segments like Japan, Korea, and other countries. So there we started promoting this product in those countries also.
Okay. Okay, so basically, your trajectory of fourfold growth on top line of Baba will still stand?
Yes.
Right. Okay. And, just on the margins, I believe currently it is 60% plus, and you did give, recently, again, in the same interview, that margins would be around 40%. Anything, any good reason for this?
See, when we see, margin is a part of when the number and volume will grow also, there is a... Then, when you go from one layer to another segment of that, there will be some change in the margin side because of some operational and other compliances and other, not compliances, I can say, but other involvement, a new product capacity involvement and all that will increase the energy consumption and everything. So that will... So we are conservative in terms of 10% reduction in the margin, but definitely it will not like that. But this is, conservative is better than bullish.
Okay, just one final from my side. Can you give us an understanding of vinylene carbonate pricing right now? I believe it was trading around $40-odd per kilo. Is it increased or decreased, could you-
Which one?
Vinyl ethylene.
Vinylene Carbonate is now almost at $10-$11. Fluoroethylene Carbonate is $12. But we have a process where we can, with these also we can do good margin.
Okay. I have a few more questions, but I'll come back on with you. Thank you.
Thank you. We have our next question from the line of Dhawal from Girik Capital. Please go ahead.
Yeah, yeah. Hello, Naresh bhai. Only one question on the electrolyte additives. So over next, what time frame should we assume, you know, some revenue to start, you know, coming for us?
We will be expecting by H1 FY 2024 revenue will be start. So maybe in this quarter or latest by next quarter, the invoicing will start to the customer. We already have some orders in our hand, but we are expecting some big orders from some customers, so we want to plan clubbing the production together.
Okay. How will this revenue... What will be the size of revenue over two years period, it look like?
The revenue guideline is, I can say it's a very huge number, more than $2 billion-$3 billion industry, where we are not expecting full, full. The advantage for Ami Organics, or say for Indian manufacturer, is that the, US and other coun- European countries has, stopped buying, any battery cells or anything which is generating from China. So that is an added advantage, that any manufacturer based in outside China need to have a raw material from outside China. So that is helping us to, push ourself in a faster mode of getting the orders and all.
Okay, fine. So, and then just little bit more understanding on this electrolyte additives. So there is this electrolyte salts, and then there is additives, and then there is electrolyte formulation. So, and you must be aware, there are many companies who are working on this product chain. So we are only into additives and the salt are also, is the backward integration, we are going to make it or we buy it from outside? So just help me understand this.
See, normally, Ami Organics never go for the competition to the customer, right, either it is in formulation, in API or in specialty chemicals. And these electrolyte also, we make the additives, which is one of the component of the formulation of electrolyte. And so we will be remain making additives or other chemicals which are used in the formulation. Salts are active part, which is manufactured by a few of the companies coming in India, as well as several companies in the world who are making the salts. But these all things is used to make the formulation.
Okay, so that salt, so you will be selling it to other electrolytes, the formulation maker, the additives?
Yeah. The formulation maker is buying salt and additives and solvents, and then they make the formulation. So we, Ami Organics, is focusing only on additives segment.
Okay, so over a-
Mr. Dhawal, I request you to come back in the queue, sir.
Sure.
Thank you. We have our next question from the line of Amar Maurya from Alf Accurate Advisors. Please go ahead.
Yeah. So thanks a lot for the opportunity. Most of my questions have been answered. Only two, three questions. First, sir, you are guiding for like, you know, the profitability improvement in the specialty chemicals, something around 200 basis point margin improvement, let's say, in the coming year for the specialty part, EBITDA margin?
Yes, definitely it will become 200 basis points. It is more than that, but yes, definitely 200 basis points is there.
Okay, okay. This is led by the flow chemistry, which we had done. Is that because of that?
It's a mixture of technology, volume, and the new product.
Got that. Got that. And secondly, sir, you are guiding for 25%+ growth in specialty and 20%-22% growth in the, basically your core pharma business, right?
This is based on the current projections we received from our customers.
Okay, okay. When you say 150 basis point improvement in the margin, that is also in the pharma as well, right?
Pharma, we are targeting to go to FY 2021, and then, from then onward, it will be a top job for us. So that will be the, our second part of our, planning.
Got that. Got that. And third, sir, this Baba Fine Chemicals, I mean, if we see the growth rate, it has grown at the rate of 30% kind of growth. So going back, let's say, in 2024, again, it will see the similar kind of trajectory?
Based on the current order in hand, yes, it will be look like similar kind of that.
Okay. And sir, you talked about that, you know, you have a similarity in the chemistry of the Baba Fine Chemicals versus your existing chemistry. So if you can give us some understanding, you know, how it is basically related to your existing chemistry in specialty business?
I think this is little bit confidential question. I cannot able to answer on that.
Okay, fine, sir. Fine, fine, sir. Fine. Thank you, sir. Thanks a lot.
Bye.
Thank you. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, thanks for the opportunity. Just one question. In our presentation on slide number 24, we have talked about Continuous Flow Reactors ... So just wanted to understand, currently, how much of our revenues are we generating from the, CFR process, and are these, developed by us, or are we buying it from third party? And incrementally going forward after, say, 3-4 years, what is the based on our current, reactions and capability, what kind of revenue generation can be done from, the CFR? Thank you.
See, basically, we don't make the dedicated product flow reactors. We make the chemistry driven flow reactors. It means that in nitrations, diazotizations, esterification, these are the flow reactors where we do n number of products. In diazotization, we are doing 11 products, in nitration we do 9 products, in esterification we do 20 products. So it's a chemistry-driven flow reactors, design multipurpose flow reactor for which will help us to switch over from one product to another product in an easy manner, and we do this kind of. So and our single product is containing more than 3, 4, 5 reactions, so it is difficult to bifurcate how much revenue is coming to a flow reactor.
It is important that the flow reactor will help us to improve our operating efficiency as well as the effluent generation minimization and energy consumption minimization. So that is achieved by this flow reactor. In upcoming years, we are going to do several two or three reactions, like n-butyllithium and Grignard in a flow, which is our pipeline right now.
Sure. Thank you so much, and best of luck, sir. Bye.
Thank you. We have our next question from the line of Aman Vij from Astute Investment Management. Please go ahead.
Good evening, sir. My first question is, if you can talk about as a basket, how much does anticoagulant contribute to our revenues? And given the strong growth, where can we see this number in the next 2-3 years?
See, normally, our product basket is well distributed, and none of the basket is more than 15%. So either it is antipsychotic, anticoagulant, or anticancer, so it's a very well wide distributed, so that if any basket will not perform, it will not impact badly on our performance. So currently, anticoagulant basket is contributing 12% of the total revenue.
Okay, and say, for next FY 2024 and FY 2025, which basket do you think will be the growth drivers in this segment?
All are growing in their space and manner, so it's a... What can I say that? Because all the products are performing well, and they are giving us a good drive for that. That is the reason we could able to give the guidance of next 2, 3, 2 years.
Sure, sir. And, second question is on the electrolyte segment. So, so you've talked about one product in the normal batteries and one for solid state. So I thought we are doing two, VCB and FEC. So, if you can correct my understanding on that part, as well as in terms of timeline, you've talked about you are expecting order this year, but this electrolyte business scaling will it happen in the second half, or do you think it will happen in next year only? And is it initially driven by domestic customers or international customers? If you can talk about that also.
So, we have 4 products now in electrolytes. 2 is VCB and FEC is our 2, is already matured, and now in commercializing stage, and 2 more is developed. 1 is in liquid and 1 is in a solid state battery. So these are the 2 new one, so total 4 products now we have. So I hope this is clarified to you. VCB and FEC, we already have some order in hand, so this year only it will be quality commercialized and go to the market. And the customers are based in outside India. In India, there are 2 manufacturers that have taken a sample from us, and they... Some has also ordered some few kgs, but they are still under evaluation of themselves.
In India, we don't have currently two, more than two customers, and for the rest of the world, we have nine customers out there.
Are there any non-Chinese customers as well, or is it mostly Chinese?
I'll ask you to come back in the queue, sir.
Yes. Sure, sure. Thank you.
Thank you. We have our next question from the line of Ridhima Goyal from Acquaint Bee Ventures. Please go ahead.
Hi, Mr. Naresh. Most of my questions are answered. There's just one question which is left. I just wanted to know what is the bifurcation between volume growth and price growth?
This time I can say only volume growth, because price is already depressed, suppressed, I can say. This is also one of the reasons that we could not reach to our top line. The top line is compromised by 2%-3% because of the price reduction because raw material goes down. So this fully is a volume growth.
Okay. Okay. Second question which I had was, I just wanted to know what is the revenue potential we have for the Fermion contract, like on a year-on-year basis, as it is a longer term contract, so,
We are not allowed to say that, because our other party is also public company.
Mm-hmm.
Top line, we will not announce.
... Okay, okay. And, just one clarification. You said that, the Ankleshwar unit, the new CapEx greenfield, CapEx which you are doing on the Ankleshwar unit, when will it get completed? Like, what is the timeline?
December twenty-four.
December 24, and what is the-
Sorry, 23. Sorry. This is 23. December 2023, FY 2024.
Okay, okay. So December 2023. And what is the asset turn we can expect from it?
Normally, we do 3, 3, and 3x is our normal asset turnover. Our asset turnover is high because we have very high-value products. Our products are ranging from INR 2,000 to INR 100,000. So it's because of that, asset turnover is very high.
Okay. Okay. So, yeah, okay. Yeah, that's it. Thank you.
Thank you. We have our next question from the line of Rikin Shah from Omkara Capital. Please go ahead.
Hi. Thanks for taking my question again. Just wanted to ask, in this presentation, I could observe that we have added Lianhetech as a client. So Lianhetech is a very big player in the global custom, custom synthesis market from China. So anything that has materialized here significantly?
Last 31 years, we are supplying to Liany. Yeah, our China export is mainly to Liany.
Okay. Okay. That's it. That's all.
Thank you. We have our next question from the line of Tarun Shetty from Haitong Securities. Please go ahead.
Yeah, just a couple of follow-ups. Just to understand the Baba deal structure again, you will not be raising any debt, and you'll be giving up certain amount of preferred shares. Could we see what will be the amount of outstanding shares increased in for this deal?
The deal value we already declared INR 68 crore. So, according to INR 68 crore, we will give the preferences there accordingly.
So there will be no cash involved in this deal?
There is a very minimal cash.
Okay, okay. On the balance sheet, I see there's some sharp improvement in current provisions. So could you help me understand why this is there?
So, current provision is mainly, it is in line with the increase in turnover. And, sometimes what happens that few invoices are pending for booking, so that will go under provision for expenses.
Okay. And the last question, I just missed the CapEx guidance for this year. Could you just repeat that?
For current year, CapEx outlay will be ranging between INR 200 crores-INR 220 crores, including the brownfield project for Ankleshwar.
Okay. Okay. Yeah, that's it from my end. Thank you.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir.
Thank you. Thank you, Elara team, for hosting our conference call. Thank you, everyone, for your questions, and we hope we have been able to answer most of your queries. If we have missed out on any of your questions, kindly reach out to our IR advisor, ENY, and we will get back to you offline. Thank you very much, and have a great day to you. Thank you, everyone.
Thank you. On behalf of Elara Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.