Q4 23/24

May 21, 2024

Summary

FY24 revenue and profit declined amid agrochemical weakness and customer destocking, while EBITDA margins held firm. FY25 growth is expected as pharma and polymer expand, though H1 demand and elevated working capital remain challenges.

Welcome to Anupam Rasayan India Limited Q4 and FY 2024 earnings call. Please note that a copy of our disclosure is available on the investor section of our website as well as on the stock exchange. Please do note that anything said on this call which reflects our outlook towards the future or which can be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Please note that the audio of the earnings call is the copyright material of Anupam Rasayan India and cannot be copied, 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, the managing director, Mr. Gopal Agrawal, chief executive officer, Mr. Amit Khurana, chief financial officer, and Mr. Vishal Thakkar, the deputy chief financial officer. With this, I would like to now hand over the call to Mr. Anand Desai, the managing director, for his opening comments. Thank you, and over to you, sir. Thank you, Krishna. Good afternoon, everyone, and a warm welcome to our Q4 and FY 2024 earnings call. Hope you all are doing good. Let me take you through the updates for the quarter and the year gone by and how we are placed for the upcoming year. Despite short-term challenges faced by the industry, the macroeconomic landscape over the medium term looks positive. Inflation and supply chain disruptions such as the Red Sea crisis and fluctuating raw material prices due to market dynamics have caused temporary challenges. However, declining inflation, steady growth rate, and India being a preferred economic partner provides a more robust economic environment over medium to long term. On the industry front, the agrochemical and pharmaceutical industry have been facing certain headwinds pertaining to subdued demand. Our agro business faced certain challenges in the year, and we anticipate that it will continue its current trend in H1 FY 2025, after which we expect the demand to strengthen. Our past sustained efforts in expanding our pharma and polymer portfolio have started yielding results. Despite the challenges in the pharma industry, our pharma segment has robustly grown, increasing from 4% in FY 2023 to 9% in FY 2024. We expect the contribution of the pharma segment to be in double digits in FY 2025. Currently, the polymer space contributes in single digits of total revenue, which is expected to be in double digits in the upcoming fiscal year. This shift towards a more balanced portfolio with high contributions from the pharma and polymer sectors will enhance our revenue stability and growth prospects. I feel 2025 will be a year of growth for us with our major focus on polymer and pharmaceutical space. Now let me highlight our financial performance before moving on to the business highlights. Our consolidated operating revenue for the quarter stood at INR 401 crores with a YOY degrowth of 16%, whereas for the year, our consolidated operating revenue stood at INR 1,475 crores, posting YOY degrowth of 7%. The degrowth pertains to the challenging demand conditions in agrochemicals and a drop in raw material prices. The margins for the year and the quarter have been strong, and we are able to maintain the same. The EBITDA margins stood at 27%, which is equivalent to last year. For the quarter, the EBITDA margins stood at 25% on a constant basis. At Anupam Rasayan, we are committed to building a sustainable business, and over the years, we have invested in various initiatives, and now we have initiated an investment of INR 51 crores in building a hybrid power plant, combining solar and wind power with a 9.2 megawatt capacity. This initiative is expected to save approximately INR 15 crores per year in our energy cost. Coupled with our earlier initiatives, this will ensure that 65% of the company's electricity consumption comes from green energy in the coming years. With this, I would like to hand over the call to Mr. Gopal Agrawal to discuss the business updates. Over to you, Gopal bhai. Thank you, Anand bhai. Hello, and good afternoon, everyone. Welcome to our Q4 and FY 2024 earning call. Let me discuss business highlights in brief. First, which I will let Amit bhai take over to discuss the financial highlights with you. Anupam Rasayan has been continuously focused on expanding its product portfolio. During the quarter, we have added six new products to our basket, summing it up to almost 17 new products in fiscal year 2024. All these products are a combination of our fluorination series and the LOIs and contracts signed during the year. The earlier launched products have already begun ramping up, and the remaining ones scale up gradually in coming quarters, impacting our numbers positively. We have also added two new customers, totaling four new customers in this fiscal year, including two from Japan, which has helped us strengthen our polymer pipeline. Going ahead, we expect significant growth in the polymer business, achieving double-digit growth, in the next fiscal year as stated by Anand bhai. Japan will become one of the major geographies of business in next two years for us. 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. Good afternoon, everyone. Let me take you through the financial highlights for the quarter. After which I will let Vishal Thakkar to discuss the same further. Before getting into the financials, let me share an update related to preferential allotment. The amount collected from the fundraise was used to repay the long-term debt of INR 249 crores during the quarter. Coming to the CapEx incurred as of March 31, 2024, we have utilized INR 482 crores out of the INR 670 crores CapEx announced. The balance CapEx would be incurred during the first half of FY 2025. Our working capital remains stable in absolute terms, and we expect it to stabilize further by end of FY 2025, with improvement anticipated in FY 2026. The new products launch will have relatively low working capital requirements. We are also focused on cost optimization and operational efficiency. Our strategic focus, coupled with our expansion plan, position us well for long-term growth. With this, I hand over the floor to our Deputy CFO, Vishal Thakkar, who will take you through the financial in detail. Thank you, Amit Khurana. Hello, and good afternoon, everyone. Thank you for joining us here today. I would like to share some key performance highlights for the quarter, and year ended March 31, 2024. Then we'll open the floor for question and answer session. Before I proceed, I hope you all have had the chance to go through the detailed presentation and the results submitted to the exchanges and uploaded on our website. Kindly note, our numbers for the quarter are on consol basis, and they include Tanfac numbers as well, and the same for the year as well. Let me first discuss the consolidated financial highlights for the quarter ended March 31, 2024. Operating revenue for Q4 FY 2024 was at INR 401 crores as compared to INR 480 crores in Q4 FY 2023, down 16% YOY. EBITDA, including other income, was at INR 105 crores in Q4 FY 2024 as compared to INR 142 crores in Q4 FY 2023, down 20% YOY. This would translate into a 25% EBITDA margin in this quarter. Profit after tax was at INR 40 crores in Q4 FY 2024 as compared to INR 73 crores in Q4 FY 2023. Coming to the full year performance, operating revenue for FY 2024 was at INR 1,475 crores as compared to INR 1,602 crores in FY 2023, down 8% YOY. EBITDA, including other income, was at INR 411 crores as compared to INR 430 crores in FY 2023, down 7% YOY, and this would translate to EBITDA margin of 27%. Profit after tax was at INR 167 crores as compared to INR 217 crores in FY 2023, down 23% YOY. Top ten customers contributed 77% of our revenue, and there were 25 products that we provided to them. With that, we 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 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 our first question from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. First question on the margins for the quarter, and I am referring to the standalone numbers here. We have been maintaining that our margins will remain healthy. But any specific reason why both gross margin and EBITDA margin have contracted here? Hi, Ankur. This is Vishal. Let me take this question. Ankur, yes, our margins have been in the range of 27%, if you look at it on a standalone basis. On a standalone basis, the margins have moved a bit only because of the product allocation and nothing really anything different that we would have seen. If you look at our margin, we have been consistently healthy. Yes, it has been little lower than what we expected last year, which was 25.4% this year on a consolidated and 26.6% on a standalone. If you look at on a standalone basis, we have corrected by 1.5 percentage point, which is normal that we would have expected, when we see the kind of product mix that are there. But nothing otherwise or directionally that is material there. Sure. On volumetric basis, where will we be in terms of growth or de-growth and by what magnitude in this financial year? So we are talking about the past year, or we are talking about the future? FY 2024. We have around 12 in revenue. So how much of it is pricing, how much of it is volumes? If you see, largely, the revenue is volume is the large contributor to that. And as you can imagine, that has been the reason where our customers have taken, in few cases, a minimum volume of take only rather than the expected volume that we would have expected them to take. And that's one volumetric reason, mainly, I would say that. Okay, sure. From a utilization perspective, we will be sub 80%, 85% odd levels from the aggregate capacity? Ankur, I would say that if you look at from a revenue point of view, we should be able to do around INR 600 crores to INR 700 crores of revenue. But if you look at from a volumetric point of view, if I do not include the new CapEx because that is under execution, around 70%, 75% is the kind of a volume that we would have been using up our capacities. But as I have sold in past also, this is only a volumetric, but when my plants are running multi-purpose plants, I can do multiple products. If I look at my ideal product portfolio, eventually I can do anything between 16% to 17% of revenue from there. Okay. On the working capital side, we were earlier guiding for a reduction in working capital for the full financial year. I understand the revenue de-growth and the macro behind there, but the sharp jump here in working capital, if you can put some light there, across inventory as well. Sure. You are right that the working capital has not gone to the levels that we had expected ourselves to go, and I will put it into three buckets for that. One, if you look at it, my debtors have expanded, and that debtors has expanded because of the sluggish growth. We had to offer our customers a longer payment cycle, and that has led to increase in the debtors level, which we expect to get corrected over the next year, 12 to 18 months time, and bring it back to more normal numbers. Two, if you look at it, we had expected that we were to grow reasonably. When we started the year, we had expected a double-digit decent growth that we had expected. At that point in time, we had expected the inventories to be unwound and being utilized well enough to do that. However, because of the de-growth, you have two specific challenges that you come to. One is that my inventory velocity was lower and hence the unwinding was slower. Two, if you look at it, was also because of the numerator-denominator situation where my denominator has shrunk, and that has also led to a higher number of days. The third is I have launched 17 new molecules for which there is a part of the inventory which also gets added back to it. That is a significant number that also adds to it because when you start a new molecule, your inventories are higher and cycles when it moves in, moves in that number. I think it's a combination of these four things, debtors, slower unwinding of inventories to lower revenue, which is taking it the days and the four is the new molecules which ensures that my inventory levels are little higher on that side at that point in time. But going forward, our expectation is twofold. One, we are highly focusing on this, and we should be able to try and bring this to a more reasonable number over the next 12-24 months. This year, we will see a decent correction, and our targeted number, we should be looking at it by the FY 2026, because by that time, sufficient revenue volume would have come in and my new products would have also stabilized. At that point in time, I would not need to give extra credits, which also will solve it. If you look at all put together, I think 12-24 months is where you will see a very. This year we see improvement at the final number, probably by 2024, 2026 financial, we should be able to see the targeted numbers. Okay. Vishal, two follows there. One, you mentioned because of the receivables, we have started giving longer credit to customers. So which hopefully should sort of in reverse. But on the inventory side, is there any slow-moving product which has got stuck here and due to which the overall inventory looks bloated? I'm looking at the absolute numbers. We were at INR 860 crores in 2022, and we are INR 990 crores now in FY 2024. Even if I look at absolute numbers, the inventory number has not gone anywhere in sync with the revenue numbers. No, you are right. I am not going to say that it is otherwise. The only thing I am saying is that is there any slow-moving or dead-moving inventory? Answer is no. Slow-moving in a sense is just that what I had expected them to move, they have not moved at the speed at which I had expected. But is there any risk from those inventories? The answer is no. We do not see any risk because these are contracted volumes for the inventory. I am not worried on that. I am worried more from the velocity of this movement, which is where I and the management of the organization is really focused on. In terms of absolute risk, I am not too worried. Looking that you saw the inventory was also because of the launches that we can make in products. 17 products would also lead to a decent size of inventory that is coming up. I think put together and that is where we are. But happy to explain further if you need. Okay, no worries. Let me get back. Thank you. Thank you. Thank you, Ankur. Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead. Good evening, and thank you very much. Two main thoughts in your business. One is on this working capital, you responded to some questions earlier, but structurally, when do you think you can bring down your overall blended number of days net working capital to maybe something comparable to a peer group company, 90, 100 days? Because you are way higher than that. When you say that new products are going to be having lower net working capital, what is the kind of net working capital you have for the newer products? When do you see the current portfolio giving you some reduction in net working capital in terms of the structural direction? If you can respond to that, then I will go to the next question. Sure. See, if you ask me when we can see a more levelized kind of numbers. Are you saying that my peers or we are talking a target of 90 or 90 days kind of a working capital? I do not see that to be happening anytime sooner. But if you are talking about, let us say, we are talking about 180, 200 days or that kind of a time frame, which is where we feel that we will have a more sustainable numbers in terms of our return ratios than otherwise. I think that is where we are targeting for that in next 18 to 24 months, we should be able to reach. I am saying it a little on the longer side is also because if you look at it, the next six months are looking not very favorable, and hence, your room for maneuverability on debt side will be limited, and hence I am saying so. Yes, newer ones will have a little lower intensity in terms of inventory. But also we will have to see how the debtor cycle plays in the Indian market, because some part of our revenue will start coming from the Indian market little higher because of the pharmaceutical, and that is where we would try to be more optimal. Hence, I would say that let us take an 18 to 24 months kind of a time period for us to achieve that. Okay. When you talk about the Indian business and pharma increase in share, what is the current split between domestic and exports in 4Q and FY 2024, and where do you see this domestic export split moving, say, in 2025, 2026? 2025, 2026, if I look at it, historically, we have been around 65% or 65%-70% as my revenue from the exports and the balance from a domestic. I believe that mix, for little or some time, it will remain in that range. The only thing is pharma's contribution is going to increase. So my domestic from agro to pharma will be a move, if I were to say, because we are moving a little bit of a demand. We can see the demand from Indian agro to move to Indian pharma side. That's where I'm trying to say that my receivable is where I am coming from. Pharma next year is looking like around about 15% plus revenue contribution coming from pharma, and that's where it will be. But mix, I would put it at 60, 40 plus or minus 5% point, depending upon how quickly each segment responds over the year. Okay. On this segment, pharma, specialty. Can you just give us the details of the split between exports and domestic for 4Q and FY 2024? FY 2024 is around 60% plus, 60/40. Q4 will be in the range of 50, 52 or some kind of a thing. Export. 62. 50. 52. 50. Okay. That means your domestic business has gone up. In the fourth quarter and- S. Ramesh, I would not want to read that 50 as a trend. I would read that as a pure product allocation. If you look at it annually, historically, we were at around 60, 65, and we will be in that range, but probably towards 60 rather than towards this. Right? No, that is fine. We are just trying to see how the overall portfolio is moving, how the domestic business is moving, and then because of that, you are saying receivables are going up. We are just trying to understand that. So within this portfolio Yeah if you can share some thoughts. Overall, your agro is more than 90%. You have given some data on how the pharma and specialties will increase. What is the current share of pharma and specialties in 4Q and FY 2024, and how do you see that pharma and specialties moving, say, in FY 2025 and 2026? Sure. If you look at my agro, it has been around 65% of my revenue, 9% coming from agro. Sorry, pharma. 9% coming from other, and 17 coming from the life science. So that is where it is for the FY 2024. I think what will happen is that the pharma will add to around 15% and other specialty, including polymer, will go to double digits. That will have a reflective on the agro and personal care, which will be in that range. The remaining will be in that. So you are saying agro will be 75%? No, agro will not be 75%. Agro is 65% this year, and it should get little lower because pharma's growth will be higher than the agro's growth, and so would the polymer's growth be higher than the agro's growth. That is where I am saying that pharma will be 15% and agro will be Sorry, other specialty polymer will be little on the double digit side. So you may see that the personal care may go down by a couple of percentage points, and agro will give up on a couple few percentage points in my portfolio, but on an absolute side, I don't think too much will be changing in terms of agro and personal care. Yeah. So 65% is agro, 9% is pharma and specialties now. That is about 74%. So out of the balance 25%, how much is it now, or where does that come from? Let me make the statement again. Agro is 65%. Yeah. Personal care is 17%, pharma is 9%, and other specialty, including polymer, is 9% today. Okay. Personal care is 17%, pharma is 9%, and specialty is 9%. You see the pharma and specialty growing faster. You see this kind of growth, and you are talking about the share of fluorination increasing. What is the share of fluorination in FY 2024, and how does the share of fluorination move in the next two years, 2025, 2026? Fluorination is around 20% in FY 2024. That would grow further. I do not want to guide today in terms of absolute number, but it will grow by at least 5-10 percentage points, is where I am looking at. This will be mostly in pharma, right? No, it will be across polymers, across pharma, and also agrochem, because fluorination is used. I will tell you what. We try to look at it from a segment to segment point of view, Ramesh. If you really look at it, what am I doing? I am doing a very simple thing. I have a value chain. I work on that value chain with my chemistries. Then it goes into the end markets like agro. Lastly, it has been historically agro. I am now moving into. If I do couple of more steps, I get into pharma. If I do couple of more steps on the side, I get to polymer. With fluorination coming in, my repertoire has expanded. That is where it is coming to. It is a single differentiation that we are talking, but if you really look at it is purely a whole value chain that is playing out. That is where we would have to see for ourselves, because my fluorination goes in all the three applications. Okay. Just to round up this discussion in terms- Sorry to interrupt, sir. May I request you to rejoin with you as there are several parties- No, it is okay. Let him ask this question, and then we can discuss. One last thought. Please go ahead, sir. In terms of your operating cash flows and growth from the new products and the moment in debt, how do you see the net debt for the company, say, in the next two years, which can possibly offset this relatively higher working capital you are going to have? Can you shed some light in terms of your thought process on how your operating cash flows help you reduce debt and manage your overall balance sheet to a reasonable size, even with a high working capital, so that your ROCE can improve? Sure. Ramesh, it's a fair question, and I think let me answer it in a different way, because I don't want to guide to a specific number because that may not be the right way of doing it. Let me give you directionally and a thought that the management has in terms of it. One, whatever working capital we have today, we should be able to do at least a reasonably higher number of revenues from the same working capital. In fact, on the receivable side, we may be able to improve a better here. If you look at it, the simple thing that can happen is that do I need any more. CapEx, I'm practically done. I don't need any investment in CapEx for next 2 years. That is one thing which is solved for. Second, if you look at, I have invested significant amount in working capital, which will be utilized for my next 2 years' growth. If you look at it, next 2 years' revenue of EBITDA should be practically getting free cash flow in that sense. That EBITDA less the tax and interest would be a free cash flow for me. That will be used to just reduce the balance sheet size in that sense by reducing the debt. Also, please be mindful that I have the pref and warrants money which will come in next 12 to 14 months time, which will be also used to pay the debt, especially long-term debt. Thank you. I'll join back with you. Wish you all the best. Thank you. Thank you. We have our next question from line of Krishnan Purwani from JM Financial. Please go ahead. Yeah. Hi, Vishal. Thank you for the opportunity. A couple of questions from my side. First is a clarification on the CapEx. Sir, did you mention INR 190 crore of incremental CapEx you would incur during FY 2025? I am saying that no incremental CapEx in terms of anything new that we are going to do. I am saying that whatever was committed, which was INR 670 crore of CapEx, part of that which is left out for the completion is going to be used to pay out, to be executed. That's all. Nothing like any additional new CapEx we are announcing. Yeah. I meant incremental. Yes. It is INR 180 then. 180. Which is sitting in my cash today. Okay. So you would be utilizing that cash towards the CapEx, I mean- Exactly. CapEx, correct? Exactly. Thank you. If the question is, do I need any external financing for that? Answer is no. Okay. Secondly, the INR 1,600 crore-INR 1,700 crore revenue guidance, that is on the standalone capacities, correct? That's not in FY 2025, but in totality it can give you the INR 1,600 crore-INR 1,700 crore revenue. Is that correct or no? Yes, you're right. That's exactly what I was saying. The capacity that I have today can support a revenue of INR 1,600 crore to INR 1,700 crore. Not that I'm guiding you for that. Absolutely right. Thank you for helping me clarify that. Yeah. Otherwise, I think it would have looked more like an FY 2025 guidance. I would love to have that number, but I would not guide for that now. Do you want to give any guidance for FY 2025 in terms of a range, particular as in on a consol basis? Okay, let me answer it in this manner. Will this be a year of growth? I believe the answer is yes. But what is that number? Give me a quarter or so to do that because we believe that the first two quarters are looking. We look at a headwind for that and the second to third and the fourth quarter is where we see a decent growth. Especially if you look at it, agro chem is one that there is a headwind coming in. My polymer and pharma will contribute, and that will contribute to the growth. But the net effect is something that I want to see for a quarter or two before I guide that. I hope you will be patient with me on that. Sure, sir. No worries. One, two small clarifications, if I may. On this working capital front, ideally we should be looking at the standalone inventories, which has gone up to INR 990 crores or in days of sales, 321 days. Just, can you please give breakup of that raw material WIP and finished goods inventories for the standalone business for this financial year? Sure. If you have it handy. Raw material is around about 30-odd percent of my product. My WIP and FG will be the balance. We can answer that offline because I don't have it ready right now to answer that, but I can get to you that offline on this. Sure, no problem. Or let me check if I can get you during the call. Sure. Lastly, if I look at the standalone receivables, which has increased by almost 170 crores, while our standalone sales have declined. If that wasn't for the higher receivable, the actual top line would have declined by a much higher number. Is that understanding correct? It's how you see it, right? See, my customer also has some obligations to take off a particular level of volume from me, right? I have a choice to incur higher pain to them or a lower pain to them. Okay? Because they are also in a difficult situation as of now, right? So one way is to say that I want this volume and in these terms only that we have agreed upon. Or to say, "Okay, fine, I'll also take a bit of a pain for you as you are also taking a pain." That's where we have a compromise. We are saying that, yes, we will take the volume. They will take the volume pain, and I'll take the receivable pain. So it's a business decision. Is it a one-to-one relationship or not? I don't think so it is about one-to-one relationship. It is purely and truly how you work with your customers, especially high-quality customers who are really working with you for so many years. You would tend to do that for them, and that's what we have done. Understood. Thank you, Vishal, for patiently answering my questions and wish you all the best for FY 2025. Thank you. Thank you. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yes. Thanks for the opportunity. My first question is on the standalone. Sequentially, we have done pretty well. There could be a seasonality impact as well. But given that it is a start of calendar year for most of our exports customers, and they will be starting the year afresh, given that last year we had inventory issues, et cetera. What is the kind of dialogue that we are having? Whether they are relatively confident in terms of lifting up the volumes, given that last year those volumes were impacted because of inventory drawdown, and they were taking only the minimum quantity. What has been the dialogue, particularly from the agro perspective, given that the other segment we have already mentioned that there is a strong growth expected going ahead. Thank you. Rohit, let me answer this. You are right that the Q4 has a reflection of the seasonality also, and bit of a little strengthening than the last quarter. Yes, there is a bit. Are we saying that we are out of woods and agro chemical cycle has now started picking up? I would put it that I would be having a very cautious view on that the first two quarters yet looks little not very buoyant. I would be far more comfortable and confident to say that their CY and my FY 2025. So their CY 2025 looks more. I am more confident on that than the CY 2024 of the international players. However, it is little early in the day for me to really comment on the full year for there. I would say that I will be cautious for the first two quarters before I really say that the demand has come back strongly. Is there a strength? Maybe there is a bit of a strengthening, but I would wait for two quarters, honestly. Fair enough. Second question is in terms of the LOIs. Out of that INR 9,000 crores of LOIs, how much was the contribution in FY 2024? If I am not wrong, earlier for FY 2025, we expected close to about INR 300 crores-INR 400 crores. Does that guidance remain? Thank you. Perfect. Let me divide this LOI piece into two different parts, and then we can talk about it, and I will answer that fully for you. LOI to get commercialized, we will take 18-24 months kind of a time period. Two is, typically, once you commercialize it takes you another 18-24 months or 24 plus or minus 6 months kind of a time period for a full ramp-up in that sense. Because the volumes take its time to ramp up fully. If you look at my FY, the LOIs and contracts that are signed in 2022, they have started yielding revenue. This year, we should have done little less than INR 200 from the LOIs and contracts. Next year, it should do reasonably well. It should be in the range of INR 326, plus or minus 25%, after all, is what I would look at for those numbers. Sure. Just one last clarification. We've been. I understand you don't want to give a guidance on the top-line front as of now. But given that the raw material prices have alleviated stabilized, would our margins be in the range of 26%-28% as we had guided earlier from channel inventory? Margins, I think we should be looking at around 26% or 26% plus kind of a thing. Right. Working capital, I think it's 26%, something which we should be looking at. So, any guidance on FY 2025. Just using some humor here. Sorry. No worries. Just any guidance on FY 2025 and working capital days that we want to put up as of now? Give me 2 quarters. It will recover this for sure, I assure you of that. Give me 2 quarters to answer that. At least a quarter or 2 to see how it is moving on. Because I will tell you why I am saying though. Because my revenue mix is changing significantly. And the velocity that I am expecting from the H1 cycle to come back is something that I want to see before I really commit on that. Fair enough. Thanks a lot and that's all. Thank you. Thank you. We have our next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead. Yeah, just a couple of follow-up questions. One is in terms of the number of shares you reported in the filing, does that include the number of shares equivalent to the warrants or for dilution should we take the entire conversion of warrants at 39 million? Number of shares does not include the warrant share, so you should count for the dilution in that. Okay. Second thing is now somebody asked this question on the share of revenue from the LOI. How do we look at the impact of the bunching of some of these orders getting accelerated, maybe 3 years down the road, say 2027 to 2030, so take a 3-year view beyond 2026. What would be the kind of run rate in terms of revenue addition from the order book you have as of date? Ramesh, let me put it this way. I would not want to say that. Let me tell you that, let's say we have little less than INR 9,000 crores of order book, right? If I just divide it by even 6 as an average, because there are some at 7 years and some at 5 years. INR 9,000 divided by 6 would be in the range of INR 1,300-INR 1,400 crores of number. That's the kind of a number that you should see. But also you have to be mindful that there are some which would have started in 2023, 2024, and they would be tapering it off at that point in time. But as of now, I would say that that should have contributed INR 1,300-INR 1,400 crores of revenue from there. Okay. That's the delta from the new orders, right? Yeah. From the day it started. Some of it has been reflected in this year's number also, and I am talking about FY like that. Yeah. Plus what you will get the revenue from the current portfolio, which will continue to run in and out, whatever is happening. Exactly. True. Yeah. Current portfolio will expand, there are LOIs which will expand, and then, also, my pharma and polymers will also have their contribution. Yes, true. But this is not the only delta revenue that we would expect. But pharma and polymers will be part of these LOIs, right? Some of them, not all of them. Okay, that means you are saying there will be sales outside the LOIs. It is an annual business. Yes, it would. Okay. Yes, it would. Okay, fair enough. Thanks a lot. Wish you all the best. Thank you, Ramesh. Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Madhav from Fidelity. Please go ahead. Yeah, hi, good evening. I just had one question on the working capital side. I remember the last couple of years, we've been highlighting that we want to change the pricing contracts for many of our customers. I think it used to be a yearly contract for six months or lower. Could you help us understand from the IPO time three years back to now, what percent of our customers or revenues have shifted to a lower sort of pricing duration? If you can help us with that. Also just curious, if we have 320 days odd inventory in the standalone and 70% is finished goods, so we're carrying like 200 days of finished goods inventory on the balance sheet. Just wanted to understand why are we carrying more than six, seven months of inventory of finished goods on the balance sheet? Just trying to understand the sort of Okay. Madhav, around 60% is coming from the six months kind of a contract, six months pricing kind of a thing. When I said 60%-70% of it is not only finished goods, it is finished goods and WIP. I was talking about 30%-plus from the raw material and balance is WIP and finished goods. That's put together, it is that. Just to give a little flavor on that, there are products where we have multiple steps that we do around goods, anything between 8 to 12 steps or more. There, each of the steps, you will have a particular level of inventory, which is in the WIP that will be counted there. That is the reason it is there. The exact details I can share. I do not have it handy, but I can share it. The 60% revenue, which is from the six months pricing contract, how much was this during the IPO time, a few years back? What was this number then? At IPO time, if I remember, the number was 15%-20%, which we have now gone up to 60%. Mind you, what has happened is that another thing is that because of the kind of volatility that has been there, they have been insisting on holding higher, and that is what I am saying. As we go, we want to go back to the numbers that we have agreed with them, which is where we hold lesser inventory and lesser working capital. All the new contracts that we are signing, we are conscious of keeping it at a six months kind of a pricing rather than a 12 months kind of a thing. Sir, just one thing, sir, given that Sorry, go ahead. Yeah, please go ahead. No, I was just saying that. My question basically was that, given that the customers have been de-stocking globally, this is like a phenomena across the agro value chain. Given that customers are de-stocking, why do we need to keep higher inventory on our balance sheet? I think, Madhav, the only thing I can say is two, three points, and let me put it in this way. One is earlier, we all were keeping it on the whole value chain. Now they have started de-stocking, but we have been keeping it and we expect that this de-stocking for us will also happen in next few months. Because customers will drive the first leg of the de-stocking and second will come from us. So we are insisting or we are keen on doing it. It's only that two things are happening. A, the slower growth means that slower de-stocking happening. And two is when your customer is de-stocking, your leverage to de-stock will be that much limited. But as we go, that number, we'll have a better line of sight on that. A better ability to read that. Okay. Sir, the pharma business, which is expected to go up, what is the working capital cycle there for that part of the revenue? There, the inventory levels will be lower, but there will be a little bit of a higher receivable cycle because that revenue will come from India and the India debtor cycle is a little longer than what you see in the international market. You will see a little higher bias towards debtor, but on the inventory side, you will have a correction. Net-net, I think we should be on the positive side rather than other. How different is it, sir? Probably agro, let's say our target is to be 200 days by FY 2026. Pharma is at what level? See pharma, I would put it, let's say there is a 120 days of receivable, let's say on a— Though they may write 90, but they may end up doing it, let's say 120. And I will have our 60 to 75 days in terms of payables. And then inventory will be, let's say, 90 to 120 days. I should end up around 150 or little less than 150 is where I would target for now. Initially, when I'm starting my business, little bit of aggression, and then we will try and work on that. Okay. Margin profile is probably similar for pharma versus agro revenue for us? Typically, margins will be in the range of 25%-26% kind of a thing. That is what we are looking at. It will be slightly a percentage point little lower, but today we are on the KSM side. KSM, we have a decent strength there. In terms of pharma, maybe a percentage point, we may want to keep it little lower than the agro side. Okay. Got it. Thanks a lot, sir. The only thing I want to add is polymer may have an interesting play, but I do not want to opine on that for now. Understood. Thank you. Okay. Thank you. We have our next question from the line of Yash Shah from Investec. Please go ahead. Hi, sir. Thank you for the opportunity. Sir, my first question was regarding the current LOI which we have. The LOI which we have of nearly INR 9,000 crores. Have we basically witnessed any kind of dialogues with the customer wherein the customer has asked to wherein there have been pricing renegotiations due to the overall decrease in the prices throughout the value chain? Yes, you see our model on pricing is very simple. We build it from a raw material to all inputs and then say, "I want a particular level of margins." That's where it is. It's very fluid. It's a very transparent pass-through kind of an approach. For me, the key important number is EBITDA rather than my revenue. In terms of the contract, I'm saying. Right? Volume is assured, margins are assured. Now the volume, our revenue is the pass-through in that sense for me. If the raw material prices increase, my revenue may increase a fair bit, and to that extent, the percentage of my revenue will be equal to my EBITDA, and same other way around. We don't have that conversation of what is going to be the price. Do we renegotiate the price? Because that anyway is readjusted every six months going forward. Okay, sir. Got it. My second question was regarding, again, you actually guided that the revenue from LOIs for FY 2025 should be in the range of somewhere between INR 320 crore to INR 370 crore. So far, as of FY 2025, we have commercialized contracts worth INR 2,700 crore, and for FY 2025, we had guided to basically except for the INR 2,200 crore contracts from Japanese customers. We will be basically commercializing INR 4,200 worth of contract in FY 2025. Will you be able to provide a broad breakup as of the contracts which have been commercialized before this year and the ones which are going to commercialize in FY 2025? Of how are we basically expecting INR 350 crore? I will tell you. You can take that the FY 2022 contracts have been commercialized, and the latest one that we have signed is what we have commercialized. These are the ones that we have commercialized. Now next year, we may commercialize the other few of them which are coming. Other three, which are the ones that we have signed in FY 2023, later part of 2024. Okay, sir. That helps. Thank you. Okay. Thank you. Thank you. We have our next question from the line of Siddharth Gadikar from Equirus. Please go ahead. Hi, sir. I just have one basic question. When we look at our contracts which are annual, given that in CY 2023, if a customer had indicated they would be picking up X quantity, by year-end, how much lower was that offtake from those customers? If you could give a fair sense in any ways. If you look at it, typically there is an MOQ and there is a forecasted volume. Typically forecasted is, let's say, 100, then the MOQ will be in the range of roughly around 70% to 80% of that number is an MOQ. And typically that's where we are talking about. Okay. So basically, it would be fair that the offtake was 20% lower than what the customers had indicated in CY 2023. Would that be a fair understanding? Yeah, you can say around 20 odd percent. Yeah, you can say that. How has that number shapen up, like in terms of the customers, how have they indicated for CY 2024? Is it too early to give any indication? Even they have put that on hold. See, that's what I'm saying, what I had mentioned, I don't want to get deeper onto this because there are a lot of moving parts here. But as I said, first two quarters look a little tepid, and the next two quarters will be better. Overall, we expect that there should be growth. I think that would really indicate to you the kind of conversation that we have had with our customers. Okay. And suppose CY 2025 also, have we received any indicative orders from the customers or that will happen once we are closer to the end of CY 2024 or CY 2025 looks a year where we will see a very healthy growth? That I can tell you that, yes, that's where people have been. Our customers have been saying that CY 2025 looks far better than CY 2024, for sure. And that CY 2024 looks better than CY 2023, also is a statement I can say. Yes, the buoyancy on 2025 is far more than the buoyancy on 2024 compared to the previous years. Okay. Sir, just one last thing on this. Is CY 2025 volumes higher than CY 2023, or it will be in that same ballpark range on the existing orders, not on the new orders? Just to get a fair sense of how our customers are thinking. It should. It should be higher. It should be better. We should have caught up, if that is the question. Okay. Secondly, in terms of margin growth- But please, see, because I am recorded and I want to make it clear that these are our estimation expectations. Please be mindful of that. Yes. Secondly, like in your previous comment, you had mentioned that we work on a percentage margins. Do we work on a per kg margins or a percentage margins because this revenue- Percentage. In an environment where raw material prices are moving up, our absolute EBITDA is technically much higher than what it should have been. Is that a fair understanding? You are right. But see, you have to always understand that if you look at my raw material cost is what? 35%-40% of my revenue. Right? Correct. That population is limited and you will see over a period of long-term, over 5-7 years time period, that everything levels out. Yes, quarter to quarter, you may see a bit of a up and down, but on a long-term basis, you will see that everything levels out for that. That is the business that we would want to talk about. That is the business that we want to build as over the next 5 years, 7 years, 10 years, how does it look like. Okay, got it. Thank you. That is it. Thank you. We have our next question from the line of Rohan Gupta from Nuvama. Please go ahead. Hi, sir. Good evening, and thanks for the opportunity. Sir, a couple of questions. First is on this, if a contract and our fluorination business, if you can give some sense. What is the current capacity utilization? And in FY 2025, FY 2026, looking at the current product pipeline, what kind of utilization level you are looking at? So one, Tanfac, if you see, they had a capacity in the HF site, which was 20%-80% utilized, but they have gone up and they are under the expansion phase right now, and the HF capacity will double by next year. Hence, if you see, there is enough and more capacity available for us and also for Tanfac to supply to the market. To that extent, the availability of HF and KF would not be a challenge to manage. No, sir. My question was other way around that in HF, we still have some surplus availability, and are we able to sell in the market? What are the capacity utilization level for HF we have seen at Tanfac? I mean, is there market in HF right now? Because earlier Tanfac used to sell significant amount of HF to outside. How is the market now? And once we are moving up in the value chain, then what are the expected utilization levels for Tanfac next year? I think for Tanfac, if you see the volumes as per the plan has been achieved in terms of volume, if we have to talk about. Yes, there has been a little bit of a price movement here. But typically, the volume side, they have been able to do decent enough there. Do we see that there is overcapacity? Answer, today doesn't look like, because this year, as we have started, the numbers look decent for that. But let's see how the demand pans out later in the year. Right. Because today also the capacity is limited for HF in the country, and the utilization is only increasing of HF. Also, sir, second question around about agrochemicals. 60%-65% of our business is still coming from agrochemicals. There we have been seeing that very less or poor visibility as of now, which even you are also agreeing that maybe first half may be slightly uncertain, and things should pick up in second half. That is the expectation across the industry right now. Sir, with that, keeping in that mind though, we have been signing multiple LOIs, and a lot of LOIs were supposed to go on stream from, I mean, in this year in first half also. Do you see that from the client interaction right now which you are seeing, there can be further push-up, further delays? How the contracts, I mean, have been chalked out that in case of any significant delays, are we covered because the capacities have been invested. Are we covered in terms of client compensation, any of such things? Because our business over the next two years is a lot of dependent on LOIs. I'm just worrying and I'm trying to understand the risk associated with that. If any delays, how it will be planned out in terms of the compensation to our profitability. Rohan, let me answer it in two or three parts. First part is that if you look at it, I do not have any dedicated plant for any product or any customer. Each plant has multiple usage and it may have multiple purpose. If you look at the product portfolio, I have a decently large and a spread out product portfolio. To that extent, any one product really impacting my utilization or my revenue is limited to that extent, their impact of that is limited. If you look at this year itself, I have launched 17 new products. Next year, I am looking at another six odd plus products, six to eight odd products. If you look at it, total portfolio, if you look at it, I am talking about 70 to 80 products that is there now. Yes, there may be some plus or minuses on any one or two products that can happen. That may happen. I am not saying that it will not happen. But that is also budgeted in and planned out. Two is also that the ability to impact my total capacity utilization or my revenue or my numbers is that much more limited. That is all I am trying to say. The third part is that are we expecting it to be inordinately delayed? Right now, we do not see any. A quarter or two really does not swing into the game if you look at from a complete, a broader perspective. That is where I would put it. I was trying to understand more from the contractual perspective from the customers. I mean, if there is further delays, customer does not give the material maybe for another six months, one year. Are we protected? Is it a take or pay kind of contract? That is what I wanted to understand, how the contracts are laid out with them. Contracts are take or pay. Contracts has a minimum offtake agreement. That anyways kicks in. That always kicks in, but how you solve it is you have multiple ways of solving it. I can ask for a compensation. I can ask for a bit of a price adjustment. I can ask for a different product. I can ask for a higher volume to compensate for it in the next quarter. There are various ways to solve it because these are all long-term customers who are saying, "I will honor what I have said, but let us find a win-win solution." That is what we will always do that. But the question if you are asking is that, am I getting compensated? Yes, one or the other way, I will get compensated. And contractually, I have a compensation clause that is there, and that I use it to get what I want. In fact, when I give one, I get two many a times. Sir, that's it from my side. Thank you, sir. Thank you, Rohan. Thank you. We have our next question from line of Mithura from Emkay Global. Please go ahead. Vishay. Thanks for taking my question. We mentioned that the peak revenue potential from current gross block will be around INR 1,600-INR 1,700 crores. Including the fluorination block that we are putting in, what would be the total peak revenue potential that we are envisaging? Yes. All put together, I think we should be in the range of plus 3,000. Sorry, I did not get your question. Can you ask me again, sorry. I was saying that currently we mentioned that the peak revenue potential from current gross block will be somewhere around INR 1,600-INR 1,700 crores. Including the fluorination block that we are putting at the INR 670 crore CapEx, what would be the peak revenue potential from the combined gross block? Okay. First let me clarify on one thing, and that is the reason I asked you a thing, is that the new CapEx I am putting is not only fluorination, it is fluorination plus other products also. Put together, INR 670 crores is three plants, of which two are more supporting the fluorination and one is supporting LOIs and other products. When you add all put together, the revenue potential that I can generate from data, I am not guiding for the revenue, but I am guiding for the capacity that it can generate revenue. We should be looking at around about INR 3,000 crores of revenue. Assume with the current kind of revenue mix that we are seeing. And this would include all the LOIs that we have signed? Yes. I am saying that all the products that I have today that I am thinking about, one, will be catered from these plants. Correct. Say if at peak we reach somewhere around INR 3,000 crores, around, say, INR 1,300, INR 1,400 crores would also be from LOIs? Yes, you are right. Correct. Sure. Also in terms of the LOIs that we have signed, do we need to incur any new CapEx or largely everything is done with this CapEx? No. With this CapEx, we are practically done with this plan. Sure. Also just one last bit. Our CapEx guidance for FY 2025 will be the balance CapEx that we have guided around INR 180 crores and like FY 2026, 20- Plus some maintenance CapEx, please. Plus some maintenance. Okay. What would be that number for FY 2026? It should be more on the maintenance side. I would put it at that number. Okay. Because I have right now no plan on the CapEx. Sure. Understood, sir. Thank you, Vishal. That's all from my side. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Vishal Thakkar for closing comments. Thank you everyone for your active participation and your questions. We hope we have been able to answer all your queries. If there are any that are missed out, please reach out to EY, our IR partner, who will be able to help you, and we are happy to connect with you offline as well if there are any questions that you have. Thank you very much for joining and taking time out for us. Thank you. Thank you. On behalf of Anupam Rasayan India Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.