Ladies and gentlemen, good day and welcome to the Aether Industries Limited Q2 FY 2026 earnings conference call hosted by HDFC 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, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nilesh Ghuge from HDFC Securities Limited. Thank you, and over to you, sir.
Thank you, Devika. Good afternoon, all. On behalf of HDFC Securities, I welcome everyone to this Aether Industries conference call to discuss the results for the quarter ended September 2025 and the first half of the financial year 2025-2026. From the Aether Industries, we have with us today Dr. Aman Desai, Promoter and Full-Time Director; Mr. Rohan Desai, Promoter and Full-Time Director; Mr. Faiz Nagariya, Chief Financial Officer; Mr. Kushal Joshi, Lead Investor Relations; and Ms. Shubhangi Desai, Executive IR. Without further ado, I will now hand over the floor to Mr. Kushal Joshi to begin with the earnings for the Q2 FY 2026. Over to you, Kushal.
Thank you, Nilesh. A warm welcome to everyone. Today, our board has approved the financial results for the second quarter and the first half of fiscal year 2026, and the same has been filed with the exchanges as well as updated over our website. Please note that this conference call is being recorded, and the transcript of the same will be made available on the website of Aether Industries Limited and the exchanges. Please also note that the audio of the conference call is the copyright material of Aether Industries Limited and cannot be copied, rebroadcast, or attributed in press or media without specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections, or other estimates about future events.
These estimates reflect management's current expectations on future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Aether Industries Limited or its officials do not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now, Mr. Rohan Desai will begin by sharing Aether's business outlook ongoing expansion. Then, Dr. Aman Desai will provide inputs on the R&D and new plant initiatives and strategy of the company going forward, and Mr. Faiz Nagariya will cover the financial highlights for the period under review. Now, I hand over the call to Mr. Rohan Desai for his opening remarks. Over to you, Rohan.
Good evening, everyone. I hope everybody is doing well, and I'm glad to connect with you all to discuss the performance of our company for quarter two of financial year 2026. I'm happy to inform you that all the three business verticals at Aether are performing well, creating a solid foundation for the second half of financial year 2026. This quarter, the sales mix was roughly 47% from Contract and Exclusive Manufacturing, 41% from Large Scale Manufacturing, and about 9% from Contract Research and Manufacturing Services. For the first time, CEM has contributed more than the LSM business vertical, and CRAMS and CEM combined have contributed more than 50% of the sales. This is in line with our vision, where CEM and CRAMS together will contribute 60%-70% of the sales in the next two-year period.
Contract E xclusive Manufacturing is set to show a good growth as the pipeline looks promising. We are ramping up volumes and sales to better use with the site four. We will start manufacturing for Milliken at Site 3+ coming quarter four of financial year 2026. And there is this new CEM contract kicking off from one of the blocks at Site 5 around the same time. I figure this site should stabilize and get to optimum output in 15-18 months or so. Sales from our subsidiary, Aether Specialty Chemicals Limited, in this quarter has increased to INR 50 crores approximately as compared to INR 41 crores in the last quarter. The current run rate is expected to continue for financial year 2026, and we see an increase in the trend in financial year 2027.
The increase in volumes is expected as we start supplying to more of the sites of Baker Hughes as well as increase the product portfolio, which is currently eight products for Baker Hughes. We have seen an increase in sales of the Converge polyol in the quarter and are on track to achieve our target for this financial year. The Converge p olyol, for which we have completed a life cycle assessment study, is now being sampled by a number of multinational companies, which are targeting to replace their current polyol with the current Converge polyol over the next couple of years. The Otsuka Chemical contract is on track, and we are expected to achieve the target of INR 35 crores-INR 40 crores of sales for the period of this financial year 2026. Shifting to LSM, the demand of our products and pricing for our products has remained stable.
As mentioned, last quarter, we will be launching three new products in the LSM block, which will be the second production block at Site 5. The products are targeted towards pharmaceutical, agrochemicals, and materials science sectors, and the average pricing of these products would be $30-$40 per kilo. The products are expected to be manufactured for the first time in India and are expected to be scaled up in financial year 2027. In the quarter, we have added four new lines to our list of market lines. For the first half, sector breakdown would be pharmaceutical and agrochemicals now contribute only 48% combined, while oil and gas and materials science contribute 19% and 18% respectively.
I expect the shares of oil and gas and materials science sectors to scale up by the end of the year as the supplies to Baker Hughes and to Milliken increases by the end of the financial year. On the CapEx front, we have deployed INR 245 crores so far in the current financial year, and all the sites are on schedule. Site 3+ , which is dedicated to Milliken , is expected to commence production in quarter four of financial year 2026. Site 5, which is based in Panoli, continues to progress smoothly, and we target to commission the first two production blocks of phase one by the start of quarter four of financial year 2026. This new site will be ramped up in financial year 2027 and help Aether in maintaining its growth momentum.
In summary, we remain extremely excited as we look to commence three new production blocks at Aether and our company becoming a preferred partner not only for R&D, CRAMS, but also for commercialization of these products. With this, I would like to conclude speaking, and I would request Dr. Aman to touch upon the R&D initiatives and new client initiatives for this period. Over to you, Aman.
Thank you, Rohan. Good evening, everybody again. I'm very happy to connect with all of you again for this quarterly update. Just to continue where Rohan left off, while the expansion on Site 3+ and Site 5 continues, as Rohan has detailed in length, which I will not go into, we are also in the process of increasing reasonably the R&D capacity at Aether, which is already world-class to begin with. We are targeting to add another two labs, including one engineering lab, which totals to 24 new fume hoods in the existing facility itself over the next couple of months, and we have also started the construction of the new R&D plant extension, which is expected to have more than 130 fume hoods.
And so that's a significant R&D expansion in the existing facility and a whole new R&D extension building that we are targeting, the first one by the next few months and the next one over the next one year or so. The number of inbound inquiries we are getting from customers across sectors on the CRAMS vertical gives us confidence in this expansion, and will also enable us to add more chemistries and technologies and core competencies to our portfolio. Currently, in R&D, in the eight research groups that we have, we have more than 55 projects ongoing, the majority of which are non-ag and non-pharma. Over the course of the quarter, we have had a number of follow-ups and site visits from senior management in the R&D and technology side of current and prospective customers.
It is clearly visible to us that the companies, the innovators, are no longer able to manufacture in the West in the current environment and have been shutting down the commercial plants in the West, in Europe and the U.S., and India is increasingly becoming a very viable and, in some cases, the only viable option. Customers are looking to partner with viable partners in India, and India is the first choice that these customers have, and they are expediting in finalizing the contracts in the current scenario where they are closing down their manufacturing assets on a fast-track basis. We believe we are at Aether. We are well-placed, considering all the relationships that we have already forged with all these customers and also the well-established infrastructure that Aether has already built and is currently building on an aggressive basis.
In the first half of fiscal 2026, we have also completed, right now, as of date, 26 customer and certification audits. With the ongoing CapEx at Site 5 , our Panoli site, we are extremely excited for this site. We have a clear line of sight for this manufacturing site five, of which the first two production blocks, which are completely fitted out with the expected products, these are expected to be completed by the end of this financial year, as Rohan has alluded to earlier. We have a number of projects in the pipeline, and we are confident of filling up this entire Site 5 with innovative and first-time made-in-India products. In summary, I've always mentioned that there will be an ocean of opportunities that are available to Indian specialty companies who have invested in infrastructure, in R&D capabilities, in core competencies.
With the assets and the infrastructure that we have, we should definitely be tapping into these opportunities significantly and look to prosper going forward. We believe Aether is one of these companies that can take advantage of this ocean of opportunities with our cutting-edge R&D, and hopefully, we'll be at the forefront to take advantage of all these opportunities that are coming to us. So again, thank you all for joining us today evening and being online with us for the call. Happy to answer questions at the end. And Faiz, our CFO, will now give you the overview of the financial highlights and the results for the Q2 and the first half of fiscal 2026. Faiz.
Thank you, Dr. Aman, and good evening, everybody. I am glad to present the financial results of Aether Industries Limited for Q2 and H1 of FY 2026. The total consolidated revenue from operations of the company stood at INR 2,751 million in Q2 of financial year 2026, as against INR 1,988 million in Q2 of financial year 2025, which is a 38% increase year-on-year. This has resulted in EBITDA of INR 853 million in Q2 of financial year 2026, as against INR 503 million in Q2 of financial year 2025, which is an increase of 70% in the comparing quarters. EBITDA margin stood at 31% in Q2 of FY 2026, as against 25% in Q2 of FY 2025.
The profit after tax amounted to INR 514 million in Q2 of financial year 2026, as against INR 348 million in Q2 of financial year 2025, which is an increase of 55% year-on-year. The PAT margin stood at 19% in Q2 of financial year 2026, as against 17% in Q2 of financial year 2025. The consolidated revenue from operations of the company stood at INR 5,312 million in H1 of financial year 2026, as against INR 3,788 million in H1 of financial year 2025. It is an increase of 40% in the corresponding half- years. This has resulted in EBITDA of INR 1,634 million in H1 of FY 2026, as against INR 904 million in H1 of FY 2025, an increase of 81% in corresponding half years.
The PAT amounted to INR 1,010 million in H1 of FY 2026, as against INR 647 million in H1 of FY 2025, which is a 56% increase in the comparing half -years. During the quarter, we have received another INR 250 million from the insurance company towards the claim for fixed assets as an account payment. The remaining claim for fixed assets for the loss has been put up to the insurance surveyor along with loss of profit, and we are confident to get the same settlement by the insurance company by or before the end of Q3 of financial year 2026.
We have always been working towards working capital management since last few years, and we are happy to inform that we have been able to reduce the overall working capital cycle to 149 days as on September 30, 2025, which was 194 days as on 31st March 2025. This has been possible due to reduction in inventory cycle to 160 days as on September 30, 2025, from 173 days as on 31st March 2025, and a reduction of debtor cycle to 106 days as on September 30, 2025, from 126 days as on 31st March 2025. I would like to give a glimpse of the capacity utilization for our three sites. Site 2, the capacity utilization in six months is approximately 76%. Site 3 is 68%, and Site 4 is 46%. Things are progressing as per the strategic planning done by the company.
I once again thank you, and we look forward to better outcomes than these in future as well. Back to you, Kushal.
Thank you, Faiz. Request from Operator to open the floor for Q&A.
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 will wait for a moment while the question queue assembles. The first question comes from the line of Ravi Singh from Cosmic Horizon Capital. Please go ahead.
Hi. Thank you for this opportunity. So we are already at a PAT margin of approximately 21% prior to extraordinary items for Q2. When the ex-LSM business, which is CRAMS and CEM, is at about, say, 57% of overall revenues. Now, say, in the next two years, as you have mentioned on the call, when the CRAMS and CEM business goes to 70%-75% of revenue, is it and also, by then, most of our plants are able to ramp up. Is it possible that from this 21%, currently, the margins at that level can go up to, say, 24%-25% + levels?
Hey, hi. This is Kushal here. I'm happy that margins will go to 24%-25%. I think what we will be looking at and what the vision is to have 70% CRAMS, CEM, 30% with LSM, which will take some time. With also our ongoing CapEx, the depreciation is also expected to increase. So we will be yet in the margin front on the net profit at around 19%-20% now.
Okay. So even once the CRAMS and CEM ramps up, you'll be still at 20% level, mostly because of the depreciation.
Yeah. Because the CapEx is yet continuing at Site 5, Panoli, which is 16 production blocks. So you only have the first two production blocks which have come up, and subsequently, you'll be seeing the CapEx going through for the next second and third phase.
So I would like to add that going forward, now, we were using the QIP monies for the CapEx. Going forward, we'll be using debt funds, whether from banks or financial institutions. So they do also add to certain finance costs. Of course, that will be capitalized towards the CapEx which will be done, but still, certain working capital facilities also will increase. So that also will keep the margin set around 19%-20%.
So I'm talking once this ramps up, say, two to three years down the line, once working capital also stabilizes and your revenues also ramp up, by then, is it possible that we can touch 22%- 23%, or kind of levels?
We would like to be conservative and be around 19%-20% and keep the rest in our pockets to see how we ramp up in the future with the other products which will come up. Because with the other products, also, we will receive the costings and everything, which will be good behaviors to see.
Makes sense. And then on the asset turn, the same has been subdued for the last two years, mainly because of the kind of CapEx that we have been undertaking for the last four years. So just try to understand, once the CapEx ramps up, is it fair to assume, say, 1.65x-1.75x asset turn on the gross block for the company as a whole? Is that possible, or do you feel we can do better?
So we target between 1.5x-1.75x times asset turn, so that is achievable. That is what we're going to be looking for.
Got it. And lastly, also on Site 5, just wanted to confirm, the CapEx guidance is INR 500 crores with a peak asset turn of 1.75x, which should be achieved by FY 2028. Is that right?
No. The total CapEx for Site 5 will be closer to INR 2,200 crores-INR 2,300 crores. This will go until around FY 2030. This is what we have been planned and we have said in the past. The asset turnover for this entire site, once it's fully operational and all the plants are stabilized, will be targeted at around 1.5x-1.75x .
Okay. So INR 2,000 crores will be the CapEx, which will go until FY 2030. But the one which will be operational, the phase one and phase two, which should be operational by Q4 FY 2026, what will be the CapEx for that for the first two phases?
It's not phase one and phase two. It's part of phase one, first of all. How we have broken up is that there are four phases. First phase has four production blocks along with the utilities. Because when you build up the entire site, the utilities are brought in for all the 16 production blocks. Okay? The second phase will have the next four, and subsequently, phase three and phase four will have the four production block each. So that's how it will be growing. In terms of CapEx, we will be starting off with the first two along with all the utilities for which have been built up for. So we will not be spending INR 2,200 crores or INR 2,300 crores upfront. It will be on a phased manner.
Got it. Thank you. I'm wishing you all the very best.
Thanks.
Thank you. The next question comes from the line of Kumar Saumya from Ambit Capital. Please go ahead.
Hi. Good evening, sir. A couple of questions from my side. So I think on the materials.
I'm sorry to interrupt you. I'm sorry to interrupt you, sir, but your voice sounds very disturbed. Can you please speak to your handset?
Is it better now?
Yes, sir. It's better. Thank you.
Yeah. Yeah. Sorry for that. First question is on the material science business. We have seen contributions stepping up in the last three quarters at around 18%-19%. So Kushal, can you please help me with that? Is it entirely Saudi Aramco supplies, or do we have something else over there as well?
No. There are multiple products out there which we cannot disclose because of the confidentiality, but there are multiple products out there.
Okay. And secondly, on the block one panel that you said this is a long-term contract that you're setting up, any guidance over there? What could be the product like and what is the potential over there?
It's an interesting molecule in the material science field, but we will wait for the right time to announce that.
Okay. Okay. And lastly, on the CapEx side, we were of the view that annual CapEx would be somewhere INR 350 crores-INR 400 crores, while we have already done INR 250 crores. So is there somewhat INR 200 crores? Something has already been done, right?
Yeah. So we have ramped up the CapEx at Site 3+ and Site 5 on the requirements of the customer where it's Site 3++ . So we have expedited the things. Otherwise, the guidance which we have given up around INR 350 crores is very much in line, and it would be maybe a 5%-10% increase, not more than that.
Okay. Thank you. This was very helpful, sir. Thank you. That will be all, sir. I'll come back. Thank you.
Okay. Thank you.
Thank you. The next question comes from the line of Amay Sharda from Purnartha Investment Advisors. Please go ahead.
Hi, sir. Thank you for the opportunity. Am I audible?
Yeah.
Yes.
Okay. So just wanted to understand, what is the revenue that you did from Baker Hughes site in this quarter?
INR 51 crores.
Okay. And the revenues for Saudi Aramco as well?
We cannot disclose on the open platform, sir.
Sure. Sure. So I just wanted to understand what led to this huge increase in the CEM segment? I think from INR 95 went to INR 131. So what was the reason? Any specific contract that Ambit had in view?
Yeah. So we have multiple contracts which we cannot disclose, which are being ramped up because of the client's interest of moving faster since the last. If you have heard the transcript of the last two earnings calls, we have always mentioned that there are a lot of inquiries which are converting into opportunities at Aether, and so we are ramping them up in the existing facilities and making use of it.
Sure. Sure. And sir, regarding the margins that you have, I think since last two, three quarters, we are reporting 30% less margin. So is this sustainable going forward as well on the EBITDA level?
Yes. Yes. Definitely, this is sustainable because we are entering into more and more Contract Manufacturing, and CRAMS, which is increasing, so 30% margin is surely sustainable, and we will be sustaining that.
And even the Baker Hughes contract is at the same level of margin, so is it slightly lower margin contract?
We usually don't discuss CEM contracts on margin basis, but on the overall company-level basis, we continue to maintain between 29%- 30% EBITDA margins.
Sure. Sure. Okay. Thank you so much, sir. That's it from my side.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Agam from Agam Investments. Please go ahead.
Yeah. Thank you. Thanks for the question. I want to say in terms of the CapEx, one thing to talk to you. Aether is ancillary CapEx, except the Site 5 CapEx. So first thing is, how much revenue can we expect in this financial year? And I know you don't give us that. [audio distortion] . What will we end the year with? And once Site 3, Site 5 is operational, what is FY 2027, FY 2028 looking like? Whatever color we can give through, maybe not quantitatively or qualitatively, how is it? How are we looking? So let's say we did around INR 850 crores last year. So how is the number looking like three years down the line? If you can talk on this. Thanks.
Agam, thank you for the question. So for this financial year, Site 5 is not expected to generate any revenue because the plants will be getting operationalized by the first week of Q4, end of Q3, first week Q4. So they will be just getting stabilized. We do not expect any much revenue coming from the first two production blocks, which will be commencing. What we have always mentioned is that CapEx for the first two sites is around INR 160 crores each, where we have targeted close to around 1.5x-1.75x asset turn when they're fully operational and stabilized, which takes between 15 to 18 months. In the first financial year, we expect these units to work at capacity utilizations of around 40%-50% and then steadily ramp up.
So that's giving a broad guidance and color of the first two production blocks, which helps you get a sense of the revenues for the first two production blocks over the next two years.
Yeah. How is all the current year looking like? Setting up?
It's looking strong. The first half has laid a solid foundation, as mentioned by Rohan. We have had all the three business verticals performing very well. As both Rohan and Dr. Aman mentioned, the number of inquiries which we are seeing from different customers and prospective customers continues to increase. There's been a ramp-up also in the R&D site, as mentioned by Dr. Aman. We have 55 projects going on. 70% of them are non-agro, non-pharma. So clearly, it's looking good. We are also seeing good trajectory in terms of our demand for our products at Baker Hughes. So we expect that trajectory to continue. Good trajectory. Secondly, I think the more important part is that we have three production blocks starting off. One is Milliken, which is Site 3 +, and the two production on Site 5.
Once these three start ramping up in FY 2027, the growth momentum is expected to continue.
So second half being better than first half?
Historically, it has always been like that for us at Aether. The first half has the second half always sees a much faster growth compared to the first half, so we expect that trend to continue.
Okay. And also on the segment, you should mention that it's like CapEx at INR 200 crores, so with maybe INR 180 crores-INR 200 crores which you are spending currently. So would we look like fundraising in the future, or will it be entirely internal accruals?
It will be a mixture of internal accruals and debt as of now. There's no plan to raise any further equity going forward as we see right now for the next five to seven years.
Okay. So currently, we are in the range of 20%-25%. So once these capacities come in, should I assume we should grow northwards of 25%? A ballpark number just for my understanding purpose.
Yes. We should be growing at around 25% going forward.
Okay. Okay. Thanks. That's it. I'll get back in the team.
Sure.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Abhijit Akella from Kotak Institutional Equities. Please go ahead.
Yeah. Good evening. Thank you so much for taking my question. It would just be great to get your updated perspective, maybe, on some of the newer growth projects we have in the pipeline, so maybe particularly on Converge and maybe on Novoloop as well. I know it's been a little bit of maybe slower going early on in terms of adoption of the product, but are you seeing sort of improving traction in terms of how customers are pursuing the end product and how so you guys are progressing there?
Let me take Converge first, Abhijit, and Aman will add on to other projects afterwards. Converge is shipping up well. We were delayed after the launch of the product because the life cycle assessment study was not completed on that product. So we completed that. And at the parallel time, we had sent out a lot of samples which were turned into qualification quantities which we were able to sell in the previous three, four quarters. And now we are seeing a lot of inbound business inquiries coming in on this product where people want to shift from the traditional polyol to this wonderful Converge polyol. Aman, can you add more on to interesting opportunities out there?
I'm sorry. I missed this question. Is this about the large-scale manufacturing business model?
Everything.
Oh, PEM business.
Okay. Yeah. Actually, I was asking about Converge and Novoloop and maybe some of the other interesting smaller businesses that we have in the portfolio, whether we are seeing improving traction in those.
Yeah. So Converge, as Rohan mentioned, Novoloop is also progressing well in the work that we are doing. And then there's a whole bunch of other contracts and customers that we have which we haven't been able to disclose externally yet, which we hope to be doing over the next few months and within the next year. And there are at least four or five different projects going on with specific customers at that scale, which are very promising and have the potential of growing up rapidly. And just to give you an example, Milliken started about four or five years ago as a small research project. And then today, we are dedicating a whole site to that project with a 10-year supply agreement. We have at least four or five such very promising contracts ongoing and shaping up towards that kind of scale currently.
As I mentioned, we have 55+ projects going on in R&D today. Maybe 20% of those go through to commercialization, which is a conservative estimate. It's very promising next few years ahead. We are very excited about that.
Abhijit, just to add to what Dr. Aman mentioned, what we have seen is that once we are able to break into a client, whether it be Baker or a Milliken, what has resulted is in also opening up a library of projects which they have internally, and with the way the development is happening at the R&D site, we clearly see a number of these new projects also being expedited within Europe, shutting down a lot of their plants, so this is resulting in many more opportunities on the CEM side going forward.
Yeah. Thank you. Thanks for that. So just to clarify these 55+ projects that we have right now in the CRAMS model, what would this number have been, say, a year back or two years back, just for reference? That would be helpful. And maybe similarly on the CEM side as well, how many projects do we have at this point versus what the number was a year or two ago?
55 is the total number of projects. For example, out of that, 70% would be CRAMS/CEM, and 30% would be internal molecules in the LSM model. So 70% of 55 is about 38 or 40, say, 40 CRAMS/CEM projects and 15 large-scale manufacturing projects. This number, two years ago, would have been 66% of this. Two-thirds of what we are doing right now would have been two years ago. We've been steadily growing since the last expansion that we did in R&D. We have jumped reasonably in the number of projects that are going on.
And now, with the expansion that is planned for the next two months, as I've mentioned in my script, and especially with the new R&D extension next year, which will give us a 2x expansion, double expansion over the current capacity, we're looking at going over easily 120 projects by the next one and a half years ongoing in the R&D. And that's the line of sight that we kind of envision for the expansion that we're doing.
Okay. So 55 going to 120+ in the next couple of years? Just to clarify.
Hopefully.
Okay. And just on the mix between LSM and CEM/CRAMS within this, as well as in the revenue. So this quarter, we've seen a big shift away from LSM towards CEM. Number one, is that entirely discretionary? In other words, are you dedicating more of your available capacity towards CEM and away from LSM? And is it a similar kind of trend playing out on the R&D side as well? It's more of your fume hood capacity being dedicated towards CEM.
Yeah. So we continue to focus on LSM. We continue to nurture and build molecules in the LSM business model. But what happens is in the CEM and CRAMS business model, the customer drives it as much as we are driving. And we've always maintained that as time goes on, as we spread out more, as customers get more confidence in us, we become the preferred partner for everything to do from research to scale up to supply. And right now, for a lot of these partners that we have that are already out in the public domain and more than three times that that are not in the public domain, we are being considered the preferred go-to partner for all of their needs in research and scale-up and supply. And so those opportunities and projects that are incoming actually multiply as the years go on.
And so it's an inherent feature of this business model that we have consciously built is that this will multiply significantly in years to come. This is what we are seeing in the numbers that you have seen, and that we expect to continue to go forward. And so the CEM and CRAMS will go and grow faster as compared to the LSM model, although we consciously make sure that every one of the eight research groups that are operating in the R&D department have a significant portion, at least 25%-30% of the projects that they are doing, should be focusing on LSM and our own model so that we are not dependent on any one business model.
All right. So just to clarify on that, so the decline in LSM that we see this quarter in revenue terms is nothing to do with demand. It's purely capacity reallocation. Is that correct?
It's not reallocation.
Yes.
It's just, sorry, go ahead, Kushal.
Aman, that's—yes.
Okay. Okay.
That's it. Thank you.
Sure. I guess one last thing from my side.
You can go to the next one, maybe.
Yeah. Yeah, so just one last thing from my side on the financials before I get back in the queue, so just on the insurance front, this exceptional item still continues here, which I believe is the insurance charge that we are paying. What's the outlook for this? How long does this continue? Is there some visibility by when it can go down, and what is the total amount for which we've lost or claimed? How much has been received so far, and sort of where exactly does it show up on the balance sheet on the asset side?
First of all, about the extraordinary items, this will continue till financial year 2027 end. The amount will be reduced. You can see that it's already reduced from the last year. Because there is a third renewal which is coming up in December, there will be some markup of a premium in this. This will continue till 31st March 2027. After that, this will not be there. Then coming to your question for the total claim which we have lost, these are approximately INR 100 crores. We have received INR 60 crores already, and INR 3.5 crores are marked to be given to us by the insurance company for the fire loss which they have been giving us with the entire claim which will be settled now. We expect that the entire claim will be settled by the end of December.
In the balance sheet, the claim for stock was already put up in the P&L account in the last quarter of the financial year 2025, which was already informed to everybody. The claim for assets which is issued is pending in the balance sheet and in the liability side. Once the entire claim is settled, the surplus or deficit will be put up to the P&L account.
Okay. Got it. So the exceptional items line will—we had high confidence that it sort of goes down to zero, basically, from maybe fiscal year—
I'll just give you a ballpark figure that after the fire, the insurance premium which was increased was approximately INR 10 crores. In the next year, we had to pay approximately INR 6 crores more. Now, maybe in this year, it will be INR 3 crores or INR 2 crores more, not more than that.
Got it. Thank you so much for all the clarifications and all the best.
Thank you. Thank you.
Thank you. The next question comes from the line of Krishan Parwani from JM Financial. Please go ahead.
Yes. Hi, sir. Congrats on good numbers. A few questions from my side. Firstly, can you please highlight price and volume growth during the quarter on a QoQ and YoY basis?
Krishan, I think so we'll have to connect separately. We will not be giving that info publicly.
Okay. No problem. And so for FY 2027, will Milliken be the major growth driver? And secondly, what sort of revenues are you, let's say, targeting from Site 5 in FY 2027? Yeah. So go ahead.
So in terms of growth, it will not only be Milliken. There will be a ramp-up in Baker Hughes contract as well as Milliken. Also, in terms of Site 5, as I mentioned to you earlier in the call, was that we spent around INR 160 crores per production block for phase one. That's primarily because the utilities have been built up. These will be all expected to work at capacity utilization levels between 30% and 50%. And that's how we'll be seeing our revenues ramp up for FY 2027 from Site 5.
Got it. And lastly, it's great to see the reduction in working capital cycle. I've really appreciated it. So what's your target for working capital days for FY 2027?
Krishan, we are at around 160. We would be willing to go more down, but I think so 140 should be a good number to go down. And then gradually, as contract manufacturing keeps in more and more, we will be able to bring it down. But 140 is, you can see.
Understood. Understood. That's great to hear. Congrats once again, and thank you. Wish you all the best.
Thank you.
Thank you. The next question comes from the line of Nilesh Ghuge from HDFC Securities. Please go ahead.
Yeah. Hi. The question is to Dr. Aman. Aman, in your remark, you mentioned that you are expanding your R&D lab, and you are expecting that the number of projects from 55 to about 120. So in that, also, you mentioned that individual lab. Can you elaborate on that? And secondly, the kind of customer base or end-user industry you are targeting with the number of projects going up from 55 to 120?
Yeah. Great question, Nilesh. And I understand that comes from your chemical engineering background, and I'm not going to talk about this for two hours, I think. But the engineering lab is a very key lab that so in the current expansion in the existing facility, we are doing one engineering lab. I'll try and keep this short, as tempting as it is to go into details. But in the current expansion, we'll have one engineering lab. And in the R&D extension, we are going to have up to four engineering labs. And this is very unique in the perspective of India, and the global companies do have this. But it's very unique in Indian perspective. These engineering labs focus on chemical engineering, chemical technology, scale-up. So we'll be focusing on unit operations and not the chemistry. And so the technology competencies will be focused on.
And so things like high vacuum distillations, continuous vacuum distillations, continuous mixing operations, continuous reactor skids, small custom-built modular skids that go into fume hoods at the lab level, process intensification, process safety, reactive chemicals, and testing and hazard analysis. And so a lot of chemical engineering will go on in the R&D level, which will make the implementation and scale-up much more easier and faster and economical. And this is a very nice aspect of R&D that most companies in India will miss out on now, the engineering labs that will be focusing on in the expansions. And this will help us get into which I'll answer your second question is that this will help us get into much more in the R&D pipeline of the non-pharma and non-agro sectors that we are targeting so hard.
And so these sectors, for example, oil and gas, petrochemicals, material sciences, they're much more their molecules, their projects are much more chemical engineering than chemistry. And these engineering labs will help us deliver success on these very difficult chemical engineering problems that these companies throw at us. And so the focus of these expansions, and especially these engineering labs, will be these petrochemical and oil and gas and oilfield services and material science sectors that we are consciously targeting. So great question. I hope I answered both your questions.
Yeah. Thanks, Aman, for answering my question. And second question is to Rohan. Sir, if I compare the pricing trend compared to, let's say, one, one and a half years back, the prices of our LSM with any of the other products, and how is the current pricing? And have you seen any update in the pricing? And how do you see it going ahead?
Sorry to interrupt you, Nilesh. There seems to be a background noise from your line. Can you please move to a quieter area?
Sure. Sure. Hello. Are you there?
Yes, sir. You're on.
Yeah. The question is to Rohan. Sir, if I compare one and a half years back, the prices of all of our LSM and other products were at a rock bottom. So how is the current pricing scenario? And how do you see the prices of the LSM product in, let's say, second half of 2026 and 2027?
So Nilesh, the pricing is stable at the moment. We see certain fluctuations here and there on the price going and trying to go up upwards. But then, because of the demand-supply situation, where the supply is more, the prices come back again to the original bottom, which is there. So I think in the second half of this financial year, I don't see a price uptrend happening, at least in any of our products at this moment, unless something extraordinary happens in the world, which I am not aware of at the moment. I don't think anything will lead to a price increase on our products.
Okay. Thanks, sir. And just one clarification. In the opening remark, I had mentioned that capacity utilization of our Site 4, which is back-up group, is about 46%. But there is still an expansion scope. The land parcel is available at Site 4. Is your understanding correct?
Correct. Correct. Yes. I have given you the indication for the current CapEx or the assets which are put up on ground for that. I have given you that.
Okay. And that current land parcel is just 50% roughly of the total site?
Yes. Yes. Approximately 50%-60%. Yeah.
Okay. Okay. Yeah. Thanks. Thanks. That's all from my side.
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference over to management for closing comments.
We thank everyone for attending the Q&A as well as the conference call of Aether Industries Limited for second quarter. If there are any further questions, please do reach out to us. We'll be happy to answer them. Thank you, and looking forward to meeting you all in Q3. Thank you.
On behalf of HDFC Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.