Q2 24/25

Nov 15, 2024

Summary

Q2 revenue fell 25% YoY amid subdued agro demand, while pharma and polymer growth and an improving H2 outlook offer support. FY25 revenue is expected to match FY24, with 25%–27% medium-term EBITDA margin guidance.

Good afternoon, everyone. Welcome to Anupam Rasayan India Limited Q2 and H1 FY 2025 earnings call. Please note that a copy of the disclosure is available on the investor section of the website as well as on the stock exchange. Anything said on this call, which reflects the 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. Please note that the audio of the earnings call is a copyright material of Anupam Rasayan and cannot be copied or rebroadcasted, attributed in press or media without specific or written consent of the company. Today, from the management side, we have with us Mr. Anand Desai, Managing Director, Mr. Gopal Agrawal, Chief Executive Officer, Mr. Amit Khurana, the Chief Financial Officer, and Mr. Vishal Thakkar, the Deputy Chief Financial Officer. With this, I would like to hand over the call to Mr. Anand Desai for his opening comments. Thank you, and over to you, sir. Good afternoon, everyone, and a warm welcome to the Q2 FY 2025 earnings call of Anupam Rasayan. I would also like to take a moment to wish you all a very happy Diwali and a New Year. As we have indicated in our earlier calls, the demand in agrochemical business has continued to be subdued in Q2 as well. October onwards, we are seeing a good recovery in this segment, especially from Europe. Our pharma segment and polymer segment that are our new growth drivers have continued to increase its share in our revenue. For the full year, we expect both segments to contribute over 15% each to our total revenue. This trend is expected to continue through FY 2026. This move towards a more balanced portfolio with increased contributions from the pharma and polymer sectors is expected to provide stability from external impacts. Now let me highlight our financial performance for the quarter and half year under review. Our consolidated operating revenue for the quarter stood at INR 294 crores, which was 16% higher than Q1 FY 2025 and around 20% lower than Q2 FY 2024. This year-on-year growth, as you know, is on the back of the challenging demand conditions in agrochemical business. The EBITDA margin continued to be at around 28% in Q2 FY 2025, and on yearly basis, we recorded a revenue of INR 548 crores, which translated to around 30% growth which had the same period last financial year. The margins for the last one FY 2025 consolidated EBITDA margins to be at 25.5%. As we are witnessing recovery from October onwards, we expect our numbers to be better from Q3 FY 2025, with increased contribution from polymer and pharma business this year. Alongside new letters of intent and contracts, we anticipate similar revenue in FY 2025 compared to FY 2024. On the back of the momentum we are seeing on the demand pickup and forecasted offtake from our customers, we believe that in FY 2026 we should be back to our growth journey that we have seen in past during last year and this year. At Anupam Rasayan, we are committed to building a sustainable business, and over the years, we have invested in various initiatives, including our recent INR 59 crores investment in a 9.2 megawatt hybrid power plant that combines solar and wind energy. This project has been commercialized in October 2024. With the agro demand picking up, coupled with high conversion from pharma and polymer, we at Anupam Rasayan are confident to get back to our growth journey. With this, I would like to hand over the call to Mr. Gopal Agrawal, the Chief Executive Officer of our company, to discuss key business updates. Over to you, Anand Bhai. Thank you, Anand Bhai. Hello, good afternoon and wish you a very happy and prosperous Diwali to all of you. I will begin by briefly discussing the business highlights, which will be followed by financial highlights by Amit Khurana. As Anand Bhai mentioned, we are nearing the end of challenges we faced in the agro segment. While pharma and polymer segments have been experiencing strong growth, driven by the recent launch of our 17 molecules in FY 2024 and three molecules in H1 FY 2025. We anticipate increased contribution from this segment as these molecules gain traction. Additionally, a launch of three plus new molecules that are planned in coming months shall further accelerate the growth in this segment. As you know, we are seeing strong momentum in Japan, particularly in our fluoropolymer segment. Thanks to our dedicated business development team, we are effectively capitalizing on these opportunities and expanding our footprint. Also, we have already stated in our previous call that within next two to three years, around one-third of Anupam sales will come from Japan, with majority of the business secured through long-term contracts. Further, we have multiple new polymer products in R&D and pilot aimed for the U.S. market as well. Our vertical integration with Tanfac for hydrogen fluoride, which is HF, has been a key in securing this contract. Keeping the strong demand in mind, we are also glad to inform you that we have recently expanded our Tanfac plant capacity from 14,150 metric ton to 29,700 metric ton, and the plant has been commissioned from October 2024. As mentioned by Anand Bhai in this call, keeping all these activities in mind, we believe that we should start seeing strong performance going forward. With this, to take you through the financial highlights, I would like to hand over the call to our CFO. Over to you, Amit-bhai. Thank you, Gopal Agrawal, and good evening, everyone. I will begin by outlining the financial highlights for the quarter, after which I will hand over the call to Vishal Thakkar for a more detailed discussion. Starting with our CapEx update, as of September 30, 2024, we have completed CapEx of INR 601 crores. The remaining CapEx will be completed over the next two quarters in FY 2025. Our working capital has risen slightly on account of launch of new molecules as well as anticipated growth in the revenue from Q3 FY 2025. Further, we anticipate the working capital would stabilize by the year-end and will have significant improvement in FY 2026 and going forward. As mentioned by Anand in his opening remarks, the new hybrid project of 9.2 megawatts has been commercialized in October 2024. This initiative is projected to save approximately INR 15 crores annually in energy cost. This, combined with our previous investment of INR 65 crores in 17.9 megawatts, would contribute to aggregate savings of INR 28 crores. Together with our earlier efforts, this will enable 65% of the company's electricity needs to be met by green energy in the future. We remain focused on cost optimization and operational efficiency. This strategic focus, along with our expansion plans, positions us well for sustained growth. With that, I will turn it over to our Deputy CFO, Vishal Thakkar, to provide further insights into the financials. Thank you, Amit. Good afternoon, everyone, and wish you a very happy Diwali and a prosperous new year. Thank you for being with us today. Thank you especially on a holiday. Again, we appreciate your participation here. I would like to share some key performance highlights for the quarter and half-year end September 30, 2024, before we open the floor for Q&A session. I hope you have had the opportunity to review the detailed presentation and the results which were submitted to the exchanges and posted on our website. Kindly note our numbers for the quarter and half year are on a consolidated basis, and they also include Kenstar numbers. Let me first discuss the consolidated financial highlights for the quarter that ended September 30, 2024. Operating revenue for Q2 FY 2025 was at INR 294 crores as compared to INR 392 crores in Q2 FY 2024, down 25% YOY. EBITDA including other income was at INR 82 crores in Q2 FY 2025 as compared to INR 111 crores in Q2 FY 2024, down 26% YOY. This would translate to an EBITDA margin of 28% in the quarter. Profit after tax was at INR 31 crores compared to INR 49 crores, a mean growth of 37%, and would contribute to around about 10% of the top line. Our top ten customers contributed 91% of our revenue in Q2 FY 2025. Talking about the half-yearly financials, our operating revenue was at INR 548 crores compared to INR 779 crores. EBITDA was at INR 142 crores as compared to INR 225 crores, which would translate to an EBITDA margin of 25% for the period. Profit after tax was at INR 43 crores compared to INR 101 crores and a mean growth of 58%. With that, we will open the floor for Q&A. 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 touchtone phone. 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. We have a question from Mr. Tushar from Kamayakya Wealth Management. Go ahead, please. Yeah, good afternoon, sir, and thank you for the opportunity. Sir, I am just new to the company, recently started tracking. I could see that you got some good orders and seeing good growth going forward. I just wanted to know the inventory levels considering the revenue. If I consider the inventory as a percentage of sales, which was in the range of fifties, if you consider the history, in middle it peaked out, but currently it is near to the 70% of your entire revenue. I just wanted to understand the business prospect why that is so, and what are the measures that you are taking in order to keep a check on the working capital. Thank you, Tushar. I will try and answer this question for you. Tushar, you are right that my inventory levels and the working capital intensity has increased, and that has been primarily due to two major reasons that I would say. One is that the revenue that we had anticipated, which we had expected to happen in this half, has not materialized in this half and has been pushed out to the next half, which has led to lower liquidation of the inventory. Along with that, there have been new molecules which have been launched, which has also added to the inventory, which would be further recovered back or revenues back once we start the ramp-up of those products. These two have led to the higher level of inventory, and with a lower revenue, this number has been accentuated further because if you look at it at a big growth of 25%, you would see that for the same inventory also my turn days would go up by 25%-30%. That is the two reasons. What we are looking at is that one, if you look at the once we start the revenue, the pickup happens. These numbers will start getting more and more in the normalization phase. If you look at over the next two years that we have been seeing, like in an 18-24 month time, we would see that those numbers are more similar to what we have been seeing in the historical ones around 2021-2023 kind of a time frame. So FY 2021-2023 kind of a time frame. We are actively working to optimize on this. I appreciate your observation on this. Fair enough, sir. I just wanted to know, I think you invested 24%-25% in the Tanfac. How do you see the growth prospect going forward in terms of your product in the fluorination chemistry going forward? There are players in the market who are into fluorination chemistry. Our product is different from those or how do you see the competition in India? Sure. Thank you for that. If you look at fluorination-based products have a vast majority. If you look at the last 20 years, the number of new molecules that have been launched across polymers, pharma, and agrochemicals, all three sectors, 40% of those new molecules have fluorine as a moiety. That means that there is a market, which is a very, very large growing market of fluorination-based products, one. When we say fluorination, we do not mean to say I am only going to do only a fluorination process. I have multiple chemistries that I am doing, and I have my value chain. In that value chain, if I add fluorination as one of the processes, my target market expands significantly. I will just give you an example, like fluoropolymer market today would be around about $8 billion is the fluoropolymer market. Of which, if I were to look at what my peers are doing, they are largely into the segments which are into PTFE, PVDFs, and other kind of applications. If I take that off, I would be ending up with around about $3 billion market, which is the fluoroelastomer, fluorosurfactants, and other kind of things. I am just talking right now polymer. There, if you see, if I convert it into the intermediates that we play in, like we are not into polymerization. We do not do polymerization. We do only monomers. In that also, if I look at it, I am talking about a $600 million worth of market. Now, that is a large market for me to address, where I am not having any competition. I am not trying to compete with my peers here. The products that we are trying to focus are these products where we have our own niche, where I am working on my own value chain. So there are products that have my value chain, in which if I add this chemistry, I get into product application, which goes into this application. Similarly, if you look at the same approach happens in pharma side, and same approach happens in the agro side, where I am leveraging on my current supply chain, current value chain, and adding this offering to give this new product application to my customers. So we do not see any major competitive intensity on this side. Two, fluorination is something that we have been doing for the last five, seven years. It is not that we are doing fluorination now. Even before acquisition of Tanfac, around 10% of my revenue used to be or had been fluorinated products. Now, with Tanfac coming in, what happens is that I am able to demonstrate to my customers that I have a supply chain assurance, and my supply chain has been very well taken care of, especially when it comes to the HF which Gopal Agrawal had mentioned in his opening remarks. That HF availability is very essential because in the country, there are only four manufacturers of HF, and Tanfac is one of them. So having access to that ensures that I am able to capitalize on that supply chain, and which is the reason you are seeing lot of traction that we have been able to demonstrate in terms of my product inquiries and product conversions in terms of LOIs and all. If you look at the last four, five LOI, four LOIs have fluorination as one of the processing this offering. Yeah, exactly. I hope I have. Yes. Yes, sir. I just wanted to know, apart from the contracts, what would be the revenue? You have mentioned in your PPT the number of contracts. If we consider for next three years, how much would be the contracts and how much would be the other revenues? Are we only talking about LOIs, or are we talking about contracted revenues? LOIs, sir. LOIs, if you look at it, if you look at my LOIs, the total LOIs that I have signed is around about INR 9,000 crores worth of, approximately INR 9,000 crores of LOIs. If I were to divide it by 5 or 6 years on an average, which is the average time of the contract period, we are talking about INR 1,400-INR 1,500 crores of revenue from there. What we anticipate is that, typically it takes you around about 2 odd years to really commercialize. From LOI to commercialization is 2 years on an average, plus or minus 6 months. And then there are another 2 to 3 years for a ramp-up. So we believe that over next medium term, we should be able to get INR 1,200-INR 1,400 crores of revenue on an annualized basis from these products. Got it, sir. I just wanted to know for the midterm, what are our EBITDA margin target and what are our ROCE target, internal targets. Just wanted to know your take on that. Historically, if you see, we have been always been in the range of 25%-28% EBITDA margin, and we believe that we should be in the range of that numbers. Maybe a percentage point plus or minus may be the case, but that is the range that we believe that EBITDA we should be able to associate. Today in this market, I would say 25%-27% is EBITDA margin that I would be comfortable with guiding. Though we have delivered little better, but on a consolidated, that is kind of a number I would go by. In terms of ROCE, historically, once if you look at it, we have been able to do a high teens to the 20s ROCE. Which means that 2 major events has led to a lower number. A, higher CapEx and lower asset utilization, which is now ramping up. And two is also my working capital intensity, which has expanded, which we expect to get more into my normalcy. These two will ensure that with the kind of EBITDA margins that we have and an asset turn of, let's say, more than 1.5 times, we should be coming back to the kind of ROCE that are more meaningful to us. Sir, just pause this fluorination contract. Do you see that adding to your ROCE going forward? Absolutely. If you look at it, we have done CapEx where fluorination process will also be included and the new molecules of fluorination will also be processed. This will always add to the performance of the company in terms of revenue and in terms of margins and translating into the return ratios. Okay. Sir, you guided for a good H2 earlier. Just wanted to know your view in terms of volumes going forward. Yes. See, if you look at it, the last half, the lower volume has been the reason for the lower revenue. We believe that what our understanding with our customers has been and the communication from them has been also is that the volumes here are going to pick up for the next half, and hence you would see a decent volume uptick in this next half. Fair answer. That was really helpful. Thank you, and all the best. Thank you. Thank you very much. We have a question from S. Ramesh from Nirmal Bang Equities. Please go ahead. Thank you and good afternoon and the best of seasonal greetings. If you were to look at the second quarter numbers and how to read the prospects for the second half, how much was the decline in volume in second quarter? Secondly, was there again additional sales to domestic customers where we had to give them the credit like in one of the earlier quarters? So, one, thank you for the wishes and same to you, Ramesh Ji. If you were to ask in terms of volumes, Q1 to Q2, if you see, there has been a growth. We are seeing that there is an uptick happening. Yes, on a year-over-year basis, the numbers have been lower on account of the lower volumes compared to the last year. So that is there. Yes, there has been some bit of a compensation coming from the domestic market, especially from the pharmaceutical industry, which has typically a longer working capital cycle, both in terms of as a geography and as an industry, both is the case. So there has been an expansion that has happened. However, what we are now seeing is that the agrochemical business and my international business is expected to pick up in the second half, which will have a better impact in terms of volume, revenue, and working capital. Okay. To put things in perspective, if you look at the statement Anand Bhai made about you achieving FY 2025 revenue close to FY 2024, that means you are talking about a run rate of around INR 750 crores in the second half. That is about INR 375 crores. That is a very high growth compared to the base of the second half of FY 2024. What are the levers that will drive this sort of growth in the second half? Is it just the existing business increasing volumes, or are you also seeing some of the new LOIs and new molecules kicking in terms of growth with higher realizations? Can you explain how you expect the second half growth? Ramesh Ji, one, I will not comment on the deduction that you have made in terms of the number for the H2. But directionally, let me answer the question on the directional point, and that is where it's a fair ask. I will put it in three or four buckets. That's where we see the traction coming from. If you looked at my H2 2023, and if you look at the run rate of the H2 2023, I would have done a similar kind of a number as what would be there. But let's forget about that and let's talk about the trends from now on. Where are the three or four big trends that are coming from? One, that my lower demand from the agrochem cycle is now looking better for us. We are seeing now the offtake requests coming from my existing customers, and my volumes are going to pick from their side. Second, what you rightly identified that my molecules that we had launched last year are now picking up and it is gaining momentum. That is the second part of the demand that we feel that will be there. Along with that, if you look at it Price, I don't see too much of a price movement coming in here. I think price, we feel that it will be in the stable range. This is our estimate. As per my understanding, that numbers will be in the similar range. But volume offtake is where the revenue is going to be coming from. That's my understanding on the projections. Yeah. Just a couple of thoughts more. One is when you talk about these agrochem customers giving you confidence in terms of buying more volumes from your company in the second half. This is something which is totally different from what international companies are saying and other domestic peers are saying in terms of customers actually deferring orders both in agrochem and pharma, and they are also laden with excess inventory. What is exceptional in terms of your set of customers? Are they not having this inventory situation and are they building up for new launches? What gives you the kind of confidence that they will actually give you the kind of volume growth you are talking about? Because it is totally contrary to what we are hearing from the market from other companies. Sure. Ramesh, just to draw a backdrop, if you look at my last four quarters, my last four quarters has been where I have had a very, I would say that one of the lowest demands from the agrochemical sector, if you look at in the recent time. When we look at that and when I contrast it from there is volume offtake that we can see from our customers. Okay. Also please appreciate that on an annual basis, my demand is there of the total volume. Let's say it was 100, it has dropped by some number. But these two quarters, if you see, that number has been even lower than that. On an average, if you look at it, we see that the customers are looking at picking up. At least there is demand. That is exactly what you said, the demand is picking up. Are we coming back to the normal growth rate? That is what we are saying, it is 2026, right? This is where the LOI also will kick in, right? So the H2 is where the LOI kicks in. Also please appreciate that H2 is a very classic half because Q3 of mine is Q2 of my customer, but Q4 of mine is Q1 of theirs, which where the year changes and the budget changes as well for them. So they have a very comfortable situation in that sense to accommodate a level of volume that are meaningful to both of us, right? That is where we are coming and seeing that numbers. Are we saying that are we out of the woods fully? Answer is no. That I think will be in 2026. But 2025 ending, I think should give us a bit of a reason to feel confident about the future, is what I am saying. If I was to just add to what Vishal Bhai said, Ramesh. Yeah. I think as he is narrated, our H2 growth, let us say the higher growth is basically based on two, let us say, kind of segment one, is that we are seeing a decent amount of growth in pharma and polymer, which roughly will be really like 15% plus each of my revenue. So that segment is contributing and is growing at a higher pace. So that is one leg. The second leg, as Vishal Bhai said, is that on the agrochem side, I may not be basically able to comment on some of my peers in terms of what they are saying. But as we said, we are getting some more, I would say comfort, some of them even in terms of future purchase orders to say that the customer is basically asking for higher volume than what they asked me in, let us say, last two or three quarters. Our, I would say, what we call H2 assumptions are basically based on these two legs, wherein we are seeing some bit of a recovery from our agrochemical customers who are basically placing higher volumes and orders with me. The second is the increased growth on polymer and pharma side of it. That's useful. Just to get a perspective on 2026 and 2027 growth. If you see your order book, some of them have been commercialized, and then there are some which are being commercialized in 2026. If you take these two buckets, LOIs already commercialized, how do you see that ramp-up in percentage terms on the value of the order book? Even if you divide it by, say, five or six years, say, it's about INR 4,800 crores. If you see the value of the LOIs already commercialized. If you take it over six years, about INR 800 crores. How much of that would you expect to book, say, over FY 2026, 2027 in terms of actual deliverable? Similarly, whatever you are talking about commercializing in 2026, if you take a value of about another INR 2,000 crores. On that, when it starts picking up, how much of that would you be able to actually monetize, say, from FY 2027 and over 2028 in terms of ballpark numbers you can give that will be useful for us to recheck our assumptions on this LOI monetization. Ramesh, sure. I think on the LOIs, I would put it very simply, and that's where I would put it for now. You are right, the large commercialization that has happened is on the FY 2022 LOIs that we had signed, which were around about INR 2,600 crores worth of LOIs, right? Those INR 2,600 crores would mean that INR 450-500 crores is the revenue coming from that. We believe that of that we are doing around about 200, 250 kind of a number. That should ramp up and should be peaking out by 2026, 2027. That's the number that we can see. You have to look at it in three different buckets. The second bucket is the one that we have signed in 2023, principally, which would be in the range of total, if I were to add the total, it is around INR 1,000 odd crores more. So 1,000 if I divide it by six, you would be doing around about INR 150 crores a month, which should start in 2026 and ramp up by 2027, 2028, and that is how you should look at it. And that is where I would put it. Then the balance, we should be starting to see the commercialization in 2026 and 2027. Then you see two years of ramp-up from then on. I would put it very simply, two plus two plus two. Two years for getting into LOI, two years from LOI to commercialization, another two years from LOI to commercialization to ramp up. Now, give an allowance of six months on either side, which happens because of either of the validation, a little about the environment, all that plays out, and maybe six months of average give or take on that. Okay. Thank you very much, and wish you all the best. Thank you, Ramesh. Thank you. Participants, if you have a question, please press star and one at this time. We have a question from Pradeep Rawat from Last House. Please go ahead. Yeah. Good afternoon, and thank you for the opportunity. Sir, we are doing CapEx of close to INR 800 crore. I just wanted to know when this CapEx is going to complete, and can you also highlight on the ramp-up of this particular facility? Thank you. See, we have done a large part of the CapEx. The balance, whatever is left out, we should be able to do it in next two quarters. This year, we should be able to finish the CapEx on it. Of that, couple of the plants, we have started doing the trial runs. Typically, once the plant is constructed, you have your trial run, then you have a customer validation, and then your commercialization happens. Typically, it is anything between six to nine months that you will see that kind of a timeframe on this. That's what I would put it on. Six to nine months from the commercialization of the plant. From completion to commercialization, because you have your trial runs, you will have your validation, and then the plant starts for the large operations. Okay. What kind of peak revenue can we expect from this facility? Total, if you look at my total CapEx that I have done till date, and if I look at the whole asset, I think I should be able to do a 1.5 to 1.7 times the asset block, which will be around about INR 3,000 odd crores kind of a number is what I can say based on the current product portfolio. As I evolve the product portfolio, the numbers changes because the plant volume remains the same, but the revenue changes on the per ton basis as well. So that value engineering and the revenue optimization can happen. Today, when you look at the portfolio and the plant portfolio, we can go up to that level is what I would suggest. Yes, sir. What is the peak revenue of our current facility? That's what, if you look at it today, it is around about INR 1,200 to INR 1,300 crores of my block. You can add a 1.5 times to that, because this is where I have lot of other CapEx also, like extra land and my R&D facility and my other utilities. So the asset, then I would put it at 1.5 and not higher. For the new ones, the asset will be higher. Okay, that was helpful. How much revenue are we envisaging from pharma and polymer segment going forward, given our existing commitments? Pharma and polymers as today also, if you are saying they are contributing meaningful in double digit for me in terms of teens. I think pharma and polymer should contribute more than a quarter to one-third of my revenue, at least going forward. Probably pharma will be first, which will contribute in twenties in medium term, and polymer should follow on that. Okay, understood. That is all from my side. Thank you. Thank you. Thank you very much. Next question we have is from Krishan Parwani from JM Financial. Go ahead, please. Yeah, sir. Season's greeting, and thanks for taking my question. If I just look at the standalone numbers, your actual inventories are somewhere about INR 1,185 crores. And if I calculate the inventory days in the standalone business has jumped to more than 550, 600 days. Can you elaborate please what is going there? First, thank you, Krishan, and wish you also Happy Diwali. In terms of simple, I would say you are right, my inventory has expanded. I am not saying that it has not expanded. Now what we are seeing is only from the— You would have done it from a TTM basis. And TTM, if you look at these are the four quarters which are my least quarters, and if you use that as a base, yes, these numbers will be in that range. Now, we can look at this. But to my mind, two things will happen from here on. There is an additional inventory which you are seeing, which will get liquidated over the next two to four quarters, which is the volume that I have manufactured but not sold. That will happen. And two is the same when I sell it out, that converts into revenue and gets into my denominator also. So when you do numerator reduction and denominator addition, you will see that the numbers will start getting more representative with them in terms of what we have seen in FY 2024. At the end of FY 2025 and at FY 2026 is where you will start seeing the reduction from the FY 2024 numbers further significantly because I am expecting a decent growth in FY 2026 which will further allow me to liquidate the inventory and also become the base for my days calculation. Both will happen. But today, you are right, it has expanded and there is a very sharp focus from the management side to ensure that gets liquidated sooner. Understood. If I just look at the second half of last year to second half of, let's say, FY 2025, do you expect a growth in top line? Second half to second half, just a minute. It would have a growth. The second half of last year was a weak half, and from that perspective, yes, I would expect a growth from there. Yes. Okay. Even if you assume a growth of 20% over the second half of FY 2024, then also your top line, just the standalone top line could be anywhere in the range of INR 950, INR 960 odd crores. Let's say you've liquidated, let's say more like INR 100, INR 120 odd crores of inventory. Even then, it's the standalone inventory days, it's going to be much higher than 360 days. How do you propose to reduce the net debt, which has ballooned to almost like INR 1,200 odd crores in September 2024? Sure. Krishan, let's answer it in two parts. One is the inventory, you rightly highlighted that. When I do that, what we are doing is we are approximating the lower revenue that I have in Q1, Q2, H1 also into this calculation. When I'm running the business and if I'm doing, let's say INR 350 as a revenue on a quarter, let's say, because with the numbers that you're speaking, if I add that as in my EBITDA, I'm not guiding for that, but just for the reason of mathematics I'm saying. That number, if you look at it from that perspective itself. That is a kind of an annualized revenue that I am seeing going forward, right? When I am seeing that, then that inventory has to be. Because see, unfortunately, we take the historicals of the financial, and we take the cross-section of the balance sheet to do it, and that is how we all have been doing it. That is all the most scientific way of doing it. But when you look at it from a business point of view, then this distortion, like I would look at the going forward revenue and accordingly I will have my balance sheet. But let us take that apart. So that is one part I would want to take. And second, when you come back to, let us say, the net debt part of it, I believe the net debt I would be far more comfortable as we go. Because see, the second half, if I were to do whatever number you are saying, and if I make a 25% EBITDA margin, let us not even talk about a 28% or 29% that I am doing on a standalone basis also. We are talking about a sizable contribution that is coming from there, right? Okay. That itself is enough and more to take care of it and if I am saying that I am going to reduce the working capital intensity and not increase, then there is no absorption of working capital, right? Absorption of cash in the working capital, one. Two, my CapEx was done and CapEx is perfectly okay. So that is the second part of it, right? There is no cash usage that is there over and above servicing of the debt, which is largely a working capital and not a CapEx loan. To that extent, I have enough and more comfort there. Then Q1 FY 2025, till 2026, is when my preferential shares of INR 270 also comes in. That will further ensure that I am reducing the loan much, much. If I even take that off, I am very comfortable from the quarter performance itself. Sorry, half performance itself. Mm-hmm. Got it. That is how I see it, and that is how the internal management plan is that we do not need any further external debt to really finance my growth for at least a near term. Okay, got it. Just the last bit for me, it is like on your guidance that you mentioned, the long-term guidance of 5R, INR 3,000 crores, with whatever capacity that you have with your current product profile. Does that include the Tanfac revenues or it does- No, I am talking standalone. That is the reason I was saying 1.5, 1.7 times is what I was saying. You are right. No, this is not including Tanfac. If you add Tanfac, whatever their revenue will be over that period will be added on top of it. Okay. This is the guidance you are giving, like in the moment, right? I mean, or is it FY 2028, 2029? Krishan? Sorry. No, no. Sorry, I could not hear you well. If you can just repeat that. This guidance FY 2028, 2029, or how is it? I would put it in the medium term, which is three to four years, and I will leave it there, Krishan. As we get there, I can really come and comment better on this. Okay. But, sorry, just a clarification there. Your current asset base in the standalone business is what, INR 1,700 crores, right? Then 1.5 times, it turns to INR 2,500 crores odd. Is there incremental CapEx that you are envisaging in the standalone business now? It is INR 1,900 crores, my block will be once I commercialize everything. There will be some in this period, that is the reason you might not be seeing it. Oh, yeah. The total I think INR 183 crore. Yeah. So 190 into whatever that multiple you will take it at, we will be in the range of 3,000. That is what I was saying. Okay. Fair enough, sir. Thank you for patiently answering my question. Wish you all the best, sir. Absolutely welcome, Krishan. Thank you very much. Participants, before we proceed with next question, we would like to remind you that you may press star and one to ask a question. We have a question from Rohit Nagaraji from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. So in our slide number 12, we have given the business vertical wise split up. Pharma 20% and other specialty 10% during the first half of FY 2025. So other specialty is only polymers or excluding polymers. And a live question to that is, from the total LOIs that we have, how many of them, or if you can just quantify how much of that is from agro, how much of that is from pharma, and how much of that is from, say, polymers, out of that $9,000? Thank you. So let’s go with the first question that you asked. Others is practically polymers. For practical purposes, you can use polymer as a reference on the other products. Okay? That’s one clarification. Second, if you look at the first one, two, three, four, five, and six, the six LOIs that I signed in 2022, they all are agro-based product. Okay? Right. Then the 2023 LOI, that is also an agro one. Then the balance, if you look at it, the one, two, three, and four, the four next are polymers and engineering fluids kind of application, and one of them has also pharma applications also. Then the last but one is agro, and the last one is a polymer again. Maybe I believe that next time, whenever we are putting up the slide, if you add it’ll be more comfortable for us to understand. Thank you, Rohit. Definitely, we’ll do that. No problem. We’ll do that. So just one question on the other. Okay. I think we. See, the problem, we will do that because today we report into two segments only, life sciences and other specialty, and hence you are not seeing it. So other specialty, whatever are you seeing, are all polymers. Right. That is why you will be able to answer it simply. And the life sciences practically are all agro because pharma, very limited, have a long-term LOI kind of a contract. They are more domestic market where typically you have a long-term relationship but not a contractual relationship to a large institute. Perfect. So now other question which comes into mind is that, during the first half, whatever growth we have seen in pharma and other specialty, which is nothing but polymers, this is predominantly from the legacy products and non-LOI products. Is that assumption right? I would think there is some bit on the polymer side you would have seen, but it is not legacy. There are new products which have been launched in pharma, which has really. Last year I launched 17 new products. That 17 products is giving me the revenue as well, right? It is a combination of two. Right. Sorry, my mistake in that. Legacy in the sense, I just wanted to bisect it between the products launched and- LOI and non-LOI. LOI and non-LOI. Okay. I am saying that this year also, my LOI revenue should be in the range of 20%, 20% plus of my revenue. I will speak in annual. Because quarter to quarter, when we see it, there is always a scheduling. There is always a lot of other parts here. But if you look at on an annual basis, I should be there. FY 2025 will be about 20% plus or minus from the LOI. Plus. From LOI, yes. Another question in terms of the outlook or probably visibility from the FMC customers, given that most of the scheduling for 2025 calendar year is already done. What is the visibility that currently we have from the legacy portfolio and the ramp-up of the new products which are being launched for the LOI purpose? Thank you. What has happened, if you look at my legacy products in the last four quarters have been pretty low compared to what average should have been, even in a tepid environment. Combination of the one is we are seeing a little bit of buoyancy coming up. That buoyancy is Q3, Q4, or Q1 that we can debate about. Second is there is a bit of a pendency on the demand, which is also looking to pick up. From that side, we see that Q3, Q4, so the H2, we have a reasonable confidence in terms of the volume off take. Right? When I am saying quarterly, you have to also appreciate that for us, the business is in continuum. We review ourselves on a cross-section of a time. On a continuum basis, when I see, I can see that there is a buoyancy in the conversation, buoyancy in terms of forecasts given by the customer, and there is a buoyancy in terms of now the off take that they are doing. Sure. That is helpful. Just one last clarification. When we are talking about the LOIs in terms of repeat contracts, however, given that there has been pricing pressure in most of the products currently. Next year, when we are talking about, is there compensation on the pricing part or in terms of volumes to attain that particular contract value over a period of time? Please appreciate that, as we said in the past, the input raw material cost is the pass through. You are right that pricing vary across various countries. There have been up and down. You have to also appreciate in 2022, the pricing of 2022, which will be the pricing reference of 2021, which were signed in 2022. There are contracts which are signed in 2024, which will be pricing reference of 2023 or early part of 2024. There is a whole cycle in it. Also, please appreciate, this is a five-year contract or a seven-year contract. Today prices may be lower, tomorrow there will be higher price. We believe that there is an averaging that happens across the timeframe in terms of revenue per ton. Is that how we do it? The answer is no. The way we do it is very simple, that the costs are passed through. When I say that in seven years or eight years, I will do so much of a revenue from this contract, it is an assumption of an average price that I would have seen over a period of time. Hence, we are not trying to say that if I would so I am not doing mark to market, if I want to use the word. Mark to market, it will be there, but every quarter the mark to market number will change then, right? It doesn't help in terms of understanding how the business is going then. Sure. This is helpful. Thanks a lot for answering all the questions, and all the best. Absolutely. Please. Thank you for the questions. Thank you very much. We have a follow-up question from Mr. S. Ramesh from Nirmal Bang Equities. Go ahead, please. Yeah. Thank you for the follow-up. So when you discuss the growth for the existing molecules and the new molecules in the LOIs, incrementally, what are the working capital terms in terms of inventory days and receivable days for the new LOIs and the new molecules? To what extent will that help you reduce your working capital cycle? If you look at it, my current working capital is out of ordinary than my normal business working capital should be. The new LOIs are also the LOIs where I tend to have a control on the working capital side. On the new demand from a pharma side, if you look at Indian pharma side tends to have a little higher working capital, especially on the better side. But maybe on the inventory side, I will have a lower number because I do not need to stock because the pricing is more live in that condition. To my mind, the new contract should be in the range of historical, not the recent one, but the historical working capital cycles of 2020, 2021 kind of a timeframe. That on a blended basis also will be helping. Also when I start liquidating my working capital, I would have a double effect on this. How much of debt can you expect to repay, say, over the next 2 years from the current debt level? First, anyways, I will be repaying around INR 200 plus of debt in the H1 of 2026 because I will have my back tax and warrants money coming in, and I have announced to repay that. That anyways I will do. My term debt will be largely done except for a little bit if that is left out. But then on a net cash basis, it will be practically in the zero scenario, which I had mentioned earlier also. On the working capital side, basically I do not have a CapEx going forward, any significant CapEx except maintenance CapEx. I do not have a more absorption of working capital because there is enough and more working capital, which will ensure that the current working capital is sufficient to take care of the growth. Which if you look at it, had happened in 2022 versus 2023. If you look at it, my working capital, even after a growth of 25%, my working capital was same, and hence my whole growth was funded by the same working capital. I believe that kind of a similar effect will happen going forward as well. One, that is there, and there will be free cash flow which comes in, that will help me lower my debt. But from INR 1,200, the debt would be in the three digits by the middle of the next year. That is useful. Then one last thought. On the HF expansion done by Tanfac, what will be your average sourcing of HF from them, say, per annum the next 2 to 3 years based on the expanded capacity? Even if you look at it, I am not the largest consumer of them because my input into them is my absorption of them is limited. If you really ask me, I will be in the top 5 to 6, but there will be many other players also who would be consuming this product. Today, whatever is the demand, that is whatever they are supplying to their customers, they will continue to. On the additional volume, I will be able to absorb it, but that is okay. Yeah. Okay. Thanks a lot. I appreciate that. Thank you very much, and wish you all the best. Thank you very much. We have a question from Siddharth Jarekar from Equirus. Go ahead please. Hi. Good afternoon. In one of our slides, slide number 14, we have highlighted new chemistry. We have highlighted pyridine chemistry. What are we exactly doing in that chemistry? Just a minute. I will go to that slide and then we can talk about it. Yeah. We are saying we have highlighted pyridine chemistry. Yeah. We are using this pyridine chemistry for manufacturing of couple of our products, which will be going into the pharma application. Right. We will be manufacturing the pyridine or we will be sourcing pyridine from outside? No, we are not manufacturing pyridine, right? We will be- We will be doing the derivatives. Other processes on pyridine. Okay, got it. Secondly, in terms of the photochemistry, how many molecules are we doing in that technology as of now? There are 3 to 4 molecules which are in the pipeline, where we are doing it in the photochemistry type. Lastly, just on the working capital, if I want to look at it from FY 2026 perspective, where should we look at the working capital days, given that we have been guiding to lower our working capital for the last 2 and a half, 3 years, but we haven't seen that playing out. On the working capital side, again, I'm saying that I would say this year will be similar to last year. 2026 will be a significant improvement. I'm not wanting to hazard a guess right now, but I would try and recommend, guide that probably in the next coming 2 quarters, because I want to look at the volume of take and the revenue of take ramp up before I guide on that. Thank you, sir. Thank you very much. That was the last question for the day. I now hand the conference over to management for closing comments. Thank you everyone for your active participation and for your questions. We hope we have been able to answer most of your queries. In case we have missed any questions or we have not addressed it sufficiently, please reach out to our IR partners, EY, and we will be happy to get them answered to you. Once again, thank you very much for participating. Thank you for coming on our holiday and wish you a happy Diwali. Thank you. On behalf of EY and Anupam Rasayan India Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.