Ladies and gentlemen, good day and welcome to the Q1 FY 2027 earnings conference call of Clean Science and Technology Limited. We have with us on the call Siddharth Sikchi, Managing Director and Promoter, Sanjay Parnerkar, CFO, and Pratik Bora, President Commercial. As a reminder, all participant lines will be in the listen- only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Siddharth Sikchi for opening remarks. Thank you, and over to you, Mr. Siddharth Sikchi.
Thank you so much, Ikra. Good evening, everybody. Thank you so much for attending the call on a Saturday evening. Let me start by welcoming everyone and a warm welcome for the Quarter One FY 2027 earnings call of the company, and I thank you for joining the call. Let me first speak on the business environment. The quarter performance shall be viewed in backdrop of geopolitical headwinds impacting raw material supply chain and its cost. Non-availability of shipping vessels impacted timely export of goods, leading to supply side challenges. Further, the raw material costs in China were not impacted as much as they were compared to India. Despite external challenges during the quarter, Clean Science reported a steady performance during the quarter. The company was able to improve revenue, maintain operational stability, and continue progress on its value-creating initiatives.
We are also pleased to report our highest-ever consolidated sales in company history, reaching approximately INR 264 crores during the quarter. Let me speak on the standalone business performance. On sequential basis, the revenue improved by 5% to INR 203 crores, largely due to increase in realization in all the products. The EBITDA and the PAT margins are at 43% and 36%, translating into an EBITDA of INR 87 crores and PAT of INR 73 crores. The Q4 FY 2026 EBITDA and PAT after adjusting the one-off operating expense transactions is roughly INR 83 crores and INR 63 crores respectively. Thereby, the current quarter EBITDA and PAT reflected a growth of 5% and 37% respectively. The QoQ increase in revenue was primarily led by improved realization in all the segments. Speaking on YoY comparison, the sales were moderated by 6% during the quarter.
The revenue moderation was primarily led by decrease in sales volume, which was on account of supply side headwinds, as mentioned earlier. The demand environment continues to be steady. On consolidated business performance, the HALS scale-up continues to drive operating leverage and sustainable profit improvement. HALS is now 22% of our sales, and we have been able to de-risk our reliance on the top four legacy products by moderating their share from 85% in Q4 FY 2023 to 60% this quarter. Another important point was that CFCL reached an important milestone by becoming operationally self-sustaining. Having fully recovered its operating expenses, we now shift from investing phase to monetizing phase. Our first year of HALS sales were entirely domestic. In contrast, the current quarter reflects a much more diversified geographical mix, with exports contributing nearly 50% of the HALS sales.
On sequential basis, the consolidated revenues grew by 7% to INR 264 crores. EBITDA and PAT are 37% and 28% respectively, which stands at INR 96 crores and INR 73 crores respectively. On YoY basis, the revenue increased by 10% during the quarter. The increase in revenue is primarily led by consistent scale-up of our HALS business. Hence, the sales profile looks like Performance, Pharma and FMCG, respectively 83%, 10% and 7% respectively. I would like to take a minute to discuss the key business development which happened during the quarter. Point one, we entered into a strategic collaboration with our Swiss partner called Geneus Chem. This represents an important step in the next phase of our HALS journey. This will provide Clean Science an entry into differentiated advanced grade of HALS chemistry that are technology-intensive, value-added, and aligned in evolving global customer requirements.
Taken together, these developments reinforce our confidence that HALS platform can evolve into a much stronger growth driver for the company over the coming years. With expanding customer acceptance, improving export penetration, and a richer product basket, we believe that the platform is steadily moving towards more meaningful scale, stronger margins, and greater strategic importance within the company's portfolio. The stabilization of the hydroquinone/catechol plant has been largely completed. Our operations are now progressing well. We have received the necessary customer's approval and are ramping up for commercial supplies. As the production scales up, we expect a gradual increase in revenue in the coming quarters. On a CapEx subject update, the Performance Chemical 2 will get commercialized by quarter three FY 2027. During the quarter, capital infusion in the subsidiary was approximately INR 100 crores, with this total investment in the subsidiary stands at approximately INR 850 crores.
I think that is all from my side. I am open for any questions- and- answers.
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 telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Sanjesh from ICICI Securities. Please go ahead.
Yeah, good afternoon. Thanks, Siddharth. Got a couple of questions. First, on the HALS, what was the volume this quarter? Because for consolidated minus subsidiary, it shows we have grown close to 170%. What was the mix of volume and pricing, and how much was the contribution of the products beyond 701 and 770?
In terms of price realization, Sanjesh, the product mix has improved. From 770622, we have now moved to the higher grades. I think the average prices have moved from INR 440 odd to INR 550. This is in terms of price realization. In terms of volume, Sanjesh, volumes are in the range of 1,000 ton, and the product mix has significantly improved to the higher grades of HALS. I mean, last quarter where almost 50% of contribution came in from HALS 770. This quarter, it has come down to 35-odd percent, hence the gross margins have improved on the subsidiary level.
Got it. Siddharth, we were looking at what's close to 3,000 metric ton for HALS this year. You think you can do much better than that? We have started with 1,000 metric ton in Q1.
Yes. My HALS guy says yes, they can do it.
What are we looking at now? Even the export has picked up. You mentioned that 50% of the revenue now HALS is coming from the export market. What is the realistic number we are looking at in HALS for FY 2027?
Annualized this quarter is INR 253. If you just annualize this also, this will reach to INR 250 crore, INR 300 crore of annual revenue.
That we are very comfortable, correct?
Yes. That should be comfortable.
Second question on the gross profit margin. Last year we were hovering under 40%, this year, consistently above 40%. Was there any benefit of low-cost acetone we were carrying, and price increase helpers and lower raw material cost is benefiting on gross profit margin? Or you think this 43%-45% of gross profit margin in this segment is sustainable?
I think it should be sustainable, and we had no real advantage of cheap raw material. In fact, we since moving to higher grades, and of course, improving our operational efficiencies has helped us to get to these margins.
Got it. One last question on HALS. Can you give us more detail on Geneus? Are we also trying to acquire 25% in the distribution company? It's more like a distribution company, right? They're not really a technology company.
How did you get that?
I thought I read that in the press release, I was little confused. What is the transaction between us and Geneus?
The deal is, if you go through their website, the founders are highly technical people, and-
Okay
they have come up with advanced HALS technologies. They have developed and patented products in Europe, U.S., Japan, and I think also China. I'm unsure of China. These are far advanced level of NOR- HALS, which is oil. These products will now be made at Clean Fino-Chem and supplied globally. With this we will get entry into some of the very advanced level of customers who would also buy these advanced grades that also help us in our other portfolio of HALS.
And the tech-
IP-driven company.
The tech transfer is happening from them to us, or how is it?
Yes. They have developed this very interesting technology and this patented product. The tech transfer is happening. The plant will start in quarter three this year.
What is Clean Science paying for all this?
Sorry?
The tech transfer and all is for the production. We will be official contract manufacturer for the Swiss company. Is that the way to think of it?
No.
We are a contract manufacturing with the tech belonging to the customer.
No, we are also doing joint marketing.
Okay.
Yeah.
And-
Also doing joint marketing of this product.
The product will be exclusively supplied to them, or we are free to supply to anybody?
No, we have some geographies defined between us so that we don't want clash. Everything will be like a co-branding. Yes, it will be like a co-branded product where their name and our name will appear on the packaging and in all the documents.
Got it. What is the revenue potential we are looking for from this partnership, say in 2029? 2028, sorry.
In overall three to four-year period, we are looking at INR 300 crore to INR 350 crore of revenue. Additional revenue.
From this partnership?
Absolutely.
Got it. That's pretty clear. Last, on the legacy business, the decline on a YoY basis was largely because the non-availability of the raw material?
Yes.
Or there was-
Absolutely.
It's only because of raw material-
The main stock available. Yes. The main primary supplier in India had to shut down the facility due to non-availability of their key raw material, propylene. We had those, I think, about two weeks of our shutdown which led to this. The demand is absolutely steady.
Starting Q2, we should see all those recouping and all the volume, we should be to the normal levels.
Volumes should come back.
There is still challenge?
Volumes is not an issue. No. Volumes is not an issue. Raw material pricing is an issue and availability of shipping vessels. I'm sure this is across the industry.
Got it. One last question. What is the now economical difference between Anisole- to- MEHQ versus HQ- to- MEHQ? Are we still competitive, or you see Chinese competition still being intense in the MEHQ and the value chain?
See, so far we are not seeing, otherwise you would not see these numbers, right?
We believe that HQ is still not as competitive for us to threaten the market share.
I think so.
Clear. Thanks, Siddharth, for all those answers.
Thank you.
Best of luck for the coming quarter. Thank you.
Thank you. Next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah. Hi, Siddharth. Thanks for the opportunity and congratulations for a good ramp-up in HALS. First, a clarification on this strategic collaboration. You said the product will be jointly marketed by you and the partner here.
Yes.
The global markets are divided that, this X countries go to Clean Science and the balance go to you? Or how is it? INR 3.5 billion, INR 4 billion-
Yeah. More or less.
Yes.
See, let me answer one thing at a time. See, they are based in Europe. They are present there, and they have already conducted a lot of trials over the last couple of years and have established a solid customer network. Okay. There is no point in us duplicating those efforts. Hence, there has been a clear geographical differentiation. Wherever they have done enough work, they will market it. Wherever they are not present and we are present, we will be doing it. It's a very collaborative partnership where we have very open discussions to understand who is where and wherever strengths to be needed, we will do the need first. It is all going under co-branding.
Sure. This 3.5 billion, INR 350 crore revenue that you're talking of, this is as a product of, as a sort of output of this collaboration. Is it the case that you are manufacturing from them on their behalf as well? For whatever they sell, you will be manufacturing here in India? Or this INR 350 sale is only from your fresh sale as a B2C or B2B to B2C?
No, it is only from us. Their sale is over and above.
Okay.
Say I am selling them, I'm just giving you a hypothetical example. If I am selling them at, say, EUR 30.
Sure
That is my revenue.
Correct.
If they sell at EUR 40, that EUR 10 is their revenue.
Which is fair, your direct sale is this INR 300 crore target that you're talking of. If you are manufacturing anything on the partner's behalf, that's a top-up. Everything is inclusive of this INR 300, INR 350?
Direct sales to the market is incremental to this INR 300. No, INR 300 crore is only with them because they have prescribed volume, which they have some understanding on.
Commitment
Commitments on over and above whatever we develop. Say, if we sell 100 tons in India, that is over and above this.
Okay. Got it. Fair to say that given that you are saying that this is further differentiating and more advanced versions of HALS grades. We were not supposed to manufacture these ones or there is some overlap, and this will be having much higher realization here.
No. This is a further better product and one of its kind. Hence these are all patented products by them.
Sure. Whatever we are making on HALS on using our tech, that continues as it is, which is the ramp up that.
That continues. One of our raw materials, 2020, which we will be making will be a key starting material for this chemistry. This is an additional market for our own 2020.
Okay. That's clear. Sorry. Yeah. Okay. On the Kemin agreement, wherein we are supplying the key ingredient for food and feed, if you can put some light there.
The light is that we have very close relationship with the customer over the last decade. I think they are increasing their demand. We are fulfilling them. Because we would be making additional CapEx on some of these products, both of us decided to enter into a longer-term contract for a minimum period of five years where we will be supplying their needs of these products. That is where it is. It's a very interesting collaboration for us because this gives us an assured volumes from the largest customer in the world. They currently buy BHA, BHT, TBHQ, and AP. These are all our product portfolio which we supply to them, and we are now an exclusive. More or less, we will be their supplier for all these products.
Sure. A few clarifications. One, Kemin must be getting this sourced from somewhere, or was it captive for them? Whom are we replacing?
No. Kemin is an end customer. They make formulation for pet food industry. They are a manufacturing company with global locations, we will be supplying these three ingredients to all their global locations.
Okay. The customer continues just that the size and scale is much higher now and you are getting a five-year commitment.
Correct. This is not a new customer. He continues to be our existing customer for 10 years. We just increase the wallet share with that customer.
Sure. Will this commitment go ahead.
Will this commitment?
Sorry. Will this commitment require you for another incremental capacity addition or the existing capacities are suffice to fund this?
No. We will need additional capacities and we have already started the process of that.
Sorry, there will be requirement of additional capacity, you said.
Yes.
Okay. Thank you. Third bit on the margin profile on the standalone side. While revenues have been, you highlighted in your initial comments as well, the Q1, Q2 increase is largely led by pricing. Volumes are flat. The margin slight dip that we are seeing here, even on a Q1 run year-on-year basis, is largely because of the pricing volatility, RM volatility, or there is a further pressure on the end product pricing also?
No, I think that the major factor is the raw material pricing because of this Middle East crisis. You can see there has been decline, I mean, increase in our RM prices.
Okay. End product prices here remain stable. From a competitive intensity perspective, no changes at the global level.
Not at the moment.
Okay. Fair enough. Just on the standalone side, what could be the domestic export mix for the quarter? If you may help with that number, please.
65/35.
65/35. Okay. Lastly, if you can guide on the CapEx, what should we take as an annual run rate going ahead, given there could be some capacity expansion plans there?
Actually, we have not worked out in that detail, but it's not going to be too much. We are still working on it, and I'll be able to let you know in due course.
Okay. No worries. Thank you and all the best. Thank you.
Thank you.
Thank you. Next question is from the line of Abhijit Akella from KIE. Please go ahead.
Good afternoon. Thank you so much for taking my questions. First one, just on the supply chain disruptions that impacted volumes in the quarter. I was just wondering if that be possible to share some color on how much better the earnings would have been. I know the quarter's already significantly improved, so my compliments on that. Could it have been somewhat significantly better had it not been for these issues?
Yes. Of course, we lost couple of weeks. I think to be precise, about two weeks or so in production. Of course, if we would have been able to produce, we would have got higher revenues. That is number one. Number two was also with these labor issues we faced because of these gas issues and all. That was another challenging time. If these issues weren't there, then I think you would have seen a better quarter.
Things are looking much smoother now in the second quarter, is it?
Yes. The issue which I mentioned with availability of the prices are volatile, that is still an issue, but the availability is there, which was not the case in Q1. Yes. I think all those issues are now behind us, except the RM volatility.
Understood. On the price hike side, were you able to fully pass along all the input cost increases that happened last quarter, or are there still some further increases that you're taking?
No. Wherever we had long-term contracts, we are respecting most of them. In that cases, we are not able to pass on, and also it is not like We were not able to pass on 100%. In some cases, we were able to pass a percentage of the price increase.
Okay, fair enough. Compared to the June quarter results, which we have just seen, we should not expect any significant price increases benefit next quarter, right?
Yes, price increase might be a big question.
Understood. On this INR 300 odd crore revenue number that you quoted for the Geneus tie-up, just wanted to clarify that this was a cumulative number.
Of course, it's a cumulative number over the next four years.
Yes, understood. The peak number in year four might be, say, some INR 100 crore ± , somewhere in that range. Is that correct?
Possible. Yes. That understanding is right.
Okay, great. Thank you. On the Performance Chemical 1 and 2, I know you made some comments, but if it's possible to just share your thoughts on how both those projects are going.
The hydroquinone catechol I mentioned, we started the line somewhere in Q3, between October, November, December, the trials. The product trial started in first couple of months. Of course, when we had these crisis, raw material shortages. We were not dedicating too much raw material to that facility, but running our regular businesses. Again, we restarted the operations in April, around Q1. Now the plants are more or less stabilized. In the meantime, we took this period to sample with our all international existing customers. Most of these sampling processes are almost over. We've got some approvals. Now I think starting August, September, the revenue should also start coming in. Plus, there will be operational efficiencies, improvements will also keep happening as we ramp up the capacities.
Great. Thank you so much.
One more.
Yeah, sorry. Please go on.
Okay. Performance Chemical 2, the plant we expect to start in Q3, which would be November, December starts.
Yeah. In terms of the ramp up for Performance Chemical II, any thoughts on that aspect?
Thoughts in the sense?
Just with regard to timelines. Should we expect a fairly-
Let's say Q3 and Q4 will majorly go into setting up the lines and getting the right product quality. We expect the major revenue should only come from Q1 next year.
Okay, great. Just one last thing from my side. On the Kemin agreement, congratulations on that, by the way.
Thank you.
How large is this customer as maybe a share of the overall world market for these relevant products? That was really the question. I guess this agreement now basically preempts any other possible new entrant into these products from getting into a tie-up with this company, right? Yeah. Please.
Absolutely. He's the largest buyer of some of these ingredients, and the relationship now gives both of us, both Kemin and us, the strategic alliance where we make sure that there is no shortages. In all these difficult times, we have been able to supply without any price hikes, which has given them that confidence over the last several years. Hence we have entered into this definitive five-year of contract. Yes, you are right that I do not see any scope for any other entrant or new entrant or any competitor from India or globally to get into this alliance.
Got it. Thank you so much, Siddharth, for all the questions. Wish you all the best.
Thank you.
Thank you. Next question is from the line of Saurabh Banik from Divas Consultants. Please go ahead.
Good afternoon, sir. Congratulations on a mixed set of numbers. I just would like to know from you, in FY 2027, FY 2028, how actually you plan for that HALS will constitute around which percentage of sales for our company? If you just give us few colors on it.
Basically, I told you in terms of revenue this year, the target is between INR 250 crore to INR 300 crore.
Okay.
That could be around 30%-35% of overall revenue growth. For the next financial year, let us work out and we will come back to you.
Okay, sir. Thank you so much for the information. Second part on HALS. On HALS, I just would like to know from you, in domestic and export, both markets, who are the core competitors for this product as you have mapped out? If you give us the information about this.
We have two major competitors in Europe. They are namely BASF and SABO, and we have couple of them in China. Major is Rianlon and Suqian, who is also called as Unitechem.
Okay, sir. Lastly, on the financials front, in this quarter, on a consolidated basis, I have seen that other expenses, it is surged by around 13%. Any primary reason for this?
Yes. Okay. Other expenses. You're referring to other expenses, right?
Yeah. In other expenses, I've seen that in consolidated level, it rises around 13%.
Sequentially, there is a CSR impact. In quarter four, there was a high expenditure towards CSR compared to quarter one, and there was a provisioning towards some other expenses which was done in quarter four, which was not required in quarter one. This has led to also other expenses.
Okay. Can we assume is it one-off kind of things, right?
quarter 1, you can assume be a sustainable number.
Okay. Thank you so much for the clarifications. Okay. Wish you all the best for the FY 2027 and FY 2028 as well, sir.
Thank you so much.
Thank you. Next question is from the line of Nilesh Ghuge from HDFC Securities. Please go ahead.
Hi, Siddharth. Siddharth, my question regarding this new HALS that you will be manufacturing through the collaboration. What differentiates these HALS from the HALS that currently Clean Science is manufacturing?
See, this is a very technical question, I will still try and answer in the most simplest form I can. All the HALS we make are called as alkoxy HALS. I don't know, the two zero two zeros. It's not alkoxy. The NOR is alkoxy. Oh, sorry. We make the three-hydroxy. With this company, we will be making the alkoxy HALS, which are called as the NOR. These are higher grade of HALS because their performance is far higher and superior compared to the conventional HALS which are made. However, these advanced levels of HALS are also far more expensive compared to the traditional HALS. That is why the applications are also niche compared to the traditional HALS.
Okay. What about the end user? The industry will remain more or less same, or it will be very specific to-
As I tell you, because of these higher grade, these are more applicable to agricultural film businesses.
Okay.
Where higher and harsher environment is there, where these products are used. These NOR will be used in such applications where tougher environment is there in terms of agro films. With this collaboration, what we get is these existing customer also use regular grade of HALS where we anyways are present completely. It will help us in cross-selling to the same customer.
Okay. Do you see that these new HALS will replace the overall HALS that is being used or consumed by the end user, or will it be the totally new market creation?
For us, it will be a totally new market in terms of this particular segment of product. If a customer is using NOR, he will not replace it with the regular HALS. He cannot.
Okay. For you
Yeah.
Sorry. Go ahead.
Yeah. Of course, this will be a new segment of customers which will come up to us.
Okay. As far as the global HALS market is concerned, will these replace the existing ones, or it's a completely new market?
Completely new market, which we were not catering at all today. The NOR HALS market is different, which we were not catering. Now we will start catering.
Okay. Thanks a lot. Thanks, Siddharth.
The NOR HALS market is currently dominated by only BASF.
Okay. Yeah. Thanks, Siddharth. All the best.
Thank you so much.
Yeah.
Thank you. Next question is from the line of Sanjesh from ICICI Securities. Please go ahead.
Thanks, Siddharth, for taking my questions again. I got two question, one on the contract with the Kemin. Now that they are signing a five-year, are we giving any volume-based discount? What is an advantage from a Kemin perspective for locking in the contract?
Sir, it is a supply security.
It's a supply security. There is no additional commercial benefit we are transferring to them.
I think these are very finer details, I think you can consider supply security as a major outcome of this contract for both of them, for them as well as for us, for the complete volume offtake. I mean, the offtake which they will take from us
Got it. Second question on the Geneus one. Are these same product goes as a UV stabilizer or the application is entirely different?
The application goes into agricultural films, which is a very large market globally, and currently only, I think, more or less covered majorly by BASF.
It goes as an additive, right? The use case remains the same.
Use case remains the same.
just the application is agriculture film, which are spread across the field, right? That's the one you are talking about.
Higher grade of agricultural films. Sometimes even the normal, some of the grades are also used, these are for more harsher environment conditions, where more pesticides, sulfur, chlorine is present in the environment.
Got it. Are we putting up any fresh capacity because of the two contracts, or this can be catered with the existing capacity?
No. Both are additional investments.
What kind of number are we looking at here for the CapEx?
Basically, we are still working on it, but in terms of Geneus Chem, I think the plant will start. Where we are expecting for that particular product, we will be putting about INR 25 million.
Got it. Good. That's clear. Cambrian contract, what is the volume increase are we expecting from what they are buying as we? What could be the quantum increase because of the contract and higher market share?
Sir, it is not Cambrian, it is Kemin.
Kemin. Sorry, my bad. Yeah.
Kemin is American. I mean that.
Yeah
is your emphasis. Kemin, probably our offtake will increase by 20%-40%.
20%-40% over five years.
Yeah.
You will start seeing immediately?
Start immediately, probably in the next two, three months' time.
That's clear. Thanks, Siddharth, for answering all those questions.
Thank you.
Thank you. Next question is from the line of Saurabh Banik from Divas Consultants. Please go ahead.
Thank you so much for giving me again another opportunity, sir. I would like to know from you that in this quarter you have done INR 100 crore of CapEx in Clean Fino-Chem Limited. Sir, if you please share us the long-term structural plan that you have built for this wholly owned subsidiary. That would be highly helpful.
All the products now in future in the company will only happen in this subsidiary, which is Clean Fino-Chem. All the businesses, all the new products, all the new lines will all happen in Clean Fino-Chem only as a company.
Okay. Thank you so much for the clarification. Finally, sir, as we all know, the geopolitical issues are actually continuing and all that. This is unpredictable and uncertain, we all know it, but sir, how Clean Science is actually planning out or mapping out for going ahead for the rest of the three quarters. If you please put some color on it, so that would be, again, very much helpful for us.
Basically, sir, it is all about supply chain-
Okay
We are trying our best to have all supply chain, all raw materials to be delivered and to be present so that there is no delay in any of our productions. That we have planned quite well, and hopefully we should not see any stoppages in any of our facilities in the next coming quarters.
Okay. That is what, I mean, fully confident you are that stoppage will not even there. It's just casually I'm just asking you. If you just give us few information regarding it. I mean, it is 100% confirmed from your end, right?
Sorry, what is confirmed?
I mean that supply No, that supply chain that you said, it will not stop. That you are planning on mapping out, that you said. I mean, it is from your end totally, you are confident on it? That's I'm just asking. That is uncertain, and nobody can confirm.
Yeah. Exactly your point. That nobody can confirm. Even I cannot confirm that, okay?
Yes. Exactly. Sir, as you said, just for that particular reason, I just asked you. If that happens, so that will definitely, better for you and for everybody as well. That is what I'm just asking.
Yes.
Okay. We will take that update on Q2 as well, sir.
Sure.
Okay.
Thank you. Next question is from the line of Rohit Nagraj from 360 ONE Capital. Please go ahead.
Thanks for the opportunity, good sequential performance plus the two new collaborations. First question, again on the Geneus Chem. In terms of tech transfer, is there any transfer fees or royalties that are attached to it or it is just
No
CapEx. It's purely CapEx and then revenues will start flowing in.
Absolutely.
In terms of, since these NOR- HALS are probably a new set of products, the margins will be higher than the current margins on our entire basket?
Yes. Technically, it should be.
Perfect. Second question, in terms of HALS, you mentioned that this quarter, there was almost 50% exports and 50% domestic, and the component of exports has increased tremendously. Is it because of the high-grade HALS that we are manufacturing, where we've been able to sell into the exports market and where now we are seeing a good amount of traction?
See, the point is, over the last one year, the sampling paperwork, all this is happening. See, these are very large accounts which do not come very quickly. There has been a lot of back and forth, which was happening to get approvals to these accounts. We have now started seeing these approvals coming in, trial businesses happening, and now commercial shipments have started. This also gives the confidence that all the grades of HALS which we are producing today, which are the higher grade as well as our commodity grades, are now completely approved and at par quality with other competitors in line. This gives that confidence, and now you can see these ramp-ups are happening in advanced levels of HALS also. With this collaboration with GC, these further higher grade of advanced HALS will open doors to further more customers globally for us.
Right. Just one last clarification. Compared to last quarter, in terms of the supply chains, things have been better during the month of July?
The supply issues have come down, definitely, because now I'm sure all other companies have also started importing and keeping those safety stocks. The basic concern remaining is because of these volatility in these discussions between these particular countries. The prices of crude oil keeps moving, which impacts the prices of basic raw materials, which impacts our pricing. There will be issues in profitability, but not with respect to supply position, is what my understanding is.
Perfect. Thanks a lot, and all the best, sir.
Thank you so much.
Thank you. Next question is from the line of Shreyans Khatani from SG Securities. Please go ahead.
Hi. Good afternoon, sir. I have one question on the HALS business. We have around 10,000 ton capacity. Just trying to understand how much of that would be the higher grade, whereas like HALS 702 LS 2020.
We are not getting into these subdivisions, but on more or less basis, to just give you a thumb rule, we would be probably 30%-40% lower grade, and balance would be higher grade. Which are these higher grades, I think is too much detailing. Yeah. This is the split, 40/60 is what you can assume.
Got it. Sir, are we currently in a position to produce NOR- HALS, or that would require some plant and machineries?
I think this is a completely new setup, new technology which we have acquired from this partner. Yes, we've made it a CapEx, and hopefully we'll start the production in Q3.
Okay. Got it. Sir, second question. I joined a little late, maybe might be a repeated question. On the Performance Chemical 2 plant, are we on track for September production beginning?
I think there will be delay because of all these labor issues we had over the last couple of months. Yeah, I think there would be a delay, and we expect the plant to start in November-ish.
Okay. That'll be commercial production or trials in November?
Commercialization.
Okay.
I think in between November and March will be stabilization phase, and you can expect any revenue from quarter one.
Okay. I see. Got it. All right. That's all from me. Thank you.
Thank you so much.
Thank you. Next question is from the line of Manish, an individual investor. Please go ahead.
Hi, sir. Am I audible?
Yes, sir.
Hi, sir. Thank you for the opportunity, sir. I've been with you guys since the IPO days. As a layman term, I had few queries. The first query was regarding the HALS exports, since you're exporting more HALS now. Do we see the EBITDA margin or profit increase for two, three quarters in two, three years down the line?
Will we see-
Second query is regarding.
Yes. EBITDA margins will keep improving because as we get into sales of more and more higher grade, the EBITDA margins will keep improving. Plus, running the plant over the last couple of years, the operation efficiencies also kicks in. We are very confident that the EBITDA margins will keep improving.
Okay, sir. Second query is regarding the last two, three con calls you had, which is because of the Chinese competitors that are affecting the business and also because of the tariffs. Now we have a sort of idea about what tariffs will impact on India, will put on India. Do we see any orders coming from the U.S. or any inquiries from the U.S.? Or is it good as of now? Has the China competition reduced?
Our exports to U.S. have been very steady.
Okay, sir. The third thing is regarding the magnesium prices. There are two parts to it. One part is the prices of the raw material, and the second price is the shipment cost. Now both are high, that will impact our profitability maybe for some time till the
Yes
issue gets resolved. Is my understanding correct?
Absolutely correct.
Okay. Sir, the fourth part is, we had the Europe deal signed. It will be active, I think, next year. We have a subsidiary in Netherlands. That subsidiary is for future planning, where we will cater for all the plants for Europe. Is my understanding correct there as well?
No, we will be starting the subsidiary in mid-September, and it will be operational starting then.
That will cater the Europe demands.
Of course.
Okay, sir. All the best.
Thank you, sir. Thank you so much, sir.
Just waiting to deal with you guys there. Sir, one more thing. Sir, from the last two calls I was not able to ask any questions. Can you allocate 10 minutes of the call to retail investors at the end so that if the retail investors have some queries, they can ask you? Because we have only one medium to contact you, sir.
No, sir. Absolutely. I mean, if we are, there are no issues. Absolutely there.
Yes, sir. Sir, thank you very much, sir.
Thank you so much, sir.
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Siddharth Sikchi for closing comments. Over to you, sir.
Thank you all for attending the company's quarterly performance. I really appreciate all of you taking your time out. If there is still more clarity, you can reach out to us. Thank you so much. Have a good one, and have a great weekend.
Thank you, sir. On behalf of Clean Science and Technology Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.