Ladies and gentlemen, good day and welcome to the Q2 FY 2027 earnings conference call of Clean Science and Technology Limited. We have with us on the call Mr. Siddharth Sikchi, Managing Director and Promoter, Mr. Sanjay Parnerkar, CFO, and Mr. 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 the 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, sir.
Thank you so much. Good afternoon, all of you, for taking time out to listen to our earnings call on Saturday. Let me present to you the Q2 FY 2027 earnings. Let me first speak about the basics, the business performance. The quarter marked yet another consecutive quarter of being the highest ever revenue in the history of the company, highlighting our continued effort to translate from investment phase to asset monetization phase in the new HALS segment, wherein base business, we continue to increase our volumes in our flagship products, depicting a robust cost competitiveness.
On the base business of Clean Science, the base business saw resilient volume-led growth across performance and pharma segments. Export sales increased to 73% of the standalone business, against 64% during the previous quarter. Otherwise, this base business showed a steady performance. On the HALS segment, on YoY basis, the HALS segment grew 2x in revenue during the quarter. It was achieved on back of robust HALS volume growth.
To give a little perspective, in H1 FY 2027, we achieved aggregated volumes of 67% of the total volumes achieved during entire previous financial year. This growth means more to us than just numbers show. It reflects a fundamental shift in how our customers see us. We started as a new entrant providing our quality, and today we are one of the trusted strategic partners with the customer. This trust is very difficult to win, and we are very proud to have won this. Further, as we speak, we continue to add new customers and increase the wallet share from existing customers every quarter.
On cost improvement fronts, during the quarter and also in the subsequent quarters, we will be starting some of the key starting materials for some of these HALS products, which eventually will result in improvement in our gross margin. Put all together, healthy volumes, continuous process improvement, and benefits of operational leverage have resulted in EBITDA margin of 12% in the first half of FY 2027. And during this quarter, we reached a PAT positive. CFCL has conducted and completed trials for the advanced grade of HALS product.
This marks a significant milestone towards the commercial launch of the new product expected to commence in H2 of FY 2027. Turning on the input costs, input costs had remained high during the quarter as the Middle East crisis conflict kept the crude-linked feedstock prices high. Key raw materials such as phenol, acetone, and methanol were 50%- 100% higher year-on-year, alongside an increase in toll and freight costs. With Chinese prices yet to move up, the pass-through to the customers was difficult. Consequently, the raw material cost rose to 43% versus 39.7% on consolidated basis.
However, the customer demand remained resilient. Now let me touch upon the financial performance for the period September 30th, 2026, standalone. Starting with quarter-on-quarter comparison. On sequential basis, revenues improved by 11% to INR 226 crore, largely due to higher volume across performance, pharma, and FMCG. EBITDA and PAT margins are at 36% and 24%, translating into EBITDA of INR 82 crore and PAT of INR 55 crore. Margin moderation was primarily due to high raw material costs, which rose to 41% from 35% in Q1 FY 2027. On YoY comparison, sales grew by 10% during the quarter.
The revenue growth was primarily led by improved realization, while volumes were broadly stable. The demand environment continues to be steady. On conso basis, company delivered a healthy volume-led growth of 12%, resulting in revenues of INR 295 crore on consolidated basis, with EBITDA and PAT margins of INR 92 crore and INR 56 crore respectively. On YoY comparison, the sales grew 23% during the quarter. The revenue growth was primarily led by improved volume growth, approximately 10%, and realization by 13%.
The increase in revenue is primarily led by consistent sales of HALS business, and consolidated EBITDA grew by 6%, supported by turnaround in CFCL. On year-to-date basis, consolidated sales grew by 17% to INR 559 crore, with EBITDA of INR 188 crore and PAT of INR 129 crore. The split was 77% performance, 14% pharma intermediates, and FMCG was 7%.
A review on the capex. Performance Chemical 2 will get commercialized by quarter three to quarter four FY 2027. During the quarter, capital infusion in subsidiary was approximately INR 50 crore and INR 150 crore in H1 FY 2027. With this, the total investment in subsidiary company stands at INR 900 crore. With this, I conclude my opening remarks and take this opportunity to also wish you all a very happy Diwali, and looking forward to the Q&A session. Thank you.
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question- and- answer session. Anyone who wishes to ask questions may please press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and one to ask questions. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah, hi. Good afternoon, Siddharth. A couple of questions from my side. First, purely on the margin, just to clarify, the percentage margin in this quarter does not make sense, right? There is a very sharp inflation in the raw material, which mathematically compresses the margin. We are holding on to the existing run rate of 92%. That means, we have retained EBITDA per kg despite all the headwinds and inflation. Will that be a fair statement to make?
No, but, Sanjesh, I think, see, we were not able to pass through the price increase to the customer. So, of course, the percentage-wise came down, but on absolute, because of the volume growth, we were still able to maintain the absolute number.
What was the volume growth for this quarter?
Sequentially, the entire growth was volume-led, and annually, the growth largely is realization-led. So, what Siddharth is also trying to arrive this at is that during this quarter, the entire raw material cost increase on account of the inflationary pressure was not translated to the sales growth. Sequentially, the sales growth is largely volume-led, and hence the margins have taken that impact.
So, this is purely on the standalone basis we are discussing, right?
Yes, standalone basis.
So, you are telling that this 12.5% growth is entirely the volume-led in the standalone business. What is the anticipated price hike required for us to retain the EBITDA per kg kind of a run rate?
So, we will have to really calculate because—
31%.
Yeah, actually, see, the point is it's market-driven, and the prices in China have not risen to the point that we can pass any cost increase to the customer. Apparently, the commodity prices which we see in China are far lower than the prices which we are buying in India.
You mean phenol, acetone prices? The differential are—
Yes, at least 10%-15%, the prices are lower in China.
Okay. I got the point. But how is the economics between HQ route and the anisole route? Because we thought Chinese are largely on a HQ route, which they were disadvantaged at some point of time. This phenol acetone difference is making all that we are now competitively at a stage that Chinese are holding up on the price increase for us?
Basically, the reason is, I think, the crude oil prices, I mean, the phenol spread, if China price of phenol is about INR 1,300, whereas India prices of phenol is over INR 1,550.
Okay.
That delta is big enough delta that they are not increasing the prices. They are holding on to all the prices, be it hydroquinone, be it MEHQ. Hence, we have to also maintain the prices and absorb all these raw material prices ourselves to keep the market share in China or in other parts of the world.
I am very clear. Super clear, Siddharth. Second on the new product HQ, which we started now a quarter back, we said this quarter we will do commercial. Where are we there in terms of performance product one?
In hydroquinone catechol, Sanjesh, right now we are at about 30%-35% capacity utilization. Fortunately, all these capacities are currently used for our own captive consumption. Small sales have picked up in Europe and I think also something in India.
Got it. My next question on the HALS, Siddharth, good to see volume picking up very sharply for us. You also mentioned in your opening remark that we are looking at more backward integrating or some of our backward integration projects are in the process of getting commissioned. What are these products and is this for the contract we have done with Geneus or this is a different bit of it?
No, no. See, these some base products which we manufacture, to make it more cost-effective, we have identified some of the intermediates. If we are able to make it in-house, it further improves our cost competitiveness in these products. So we have already started one product where we have put an epoxidation facility. So that product is started, which is a precursor for one of the HALS. And in the next quarter, we will be starting another intermediate, which we were currently buying from China, which we will be making in-house to make these HALS more cost-effective.
Okay. These are solvents or the building blocks we are talking about?
No, no. These are building blocks. These are raw materials. These are not solvents.
Got it. Got it. You mentioned that we have successfully tested the products for the contract. When should we start seeing them flowing into revenue? Will it be more like FY 2028 or something? Next quarter. This quarter. Running quarter.
Yeah, yeah. November or December, we will start shipping this material to Europe.
Got it. Got it. One last from my side, Siddharth, before I get back into the queue. We were expecting to produce barbituric acid. Haven't heard about that for a while now. Any update you want to share there?
See, basically, we realized that currently the prices which Chinese are offering, we are not able to offer those prices. So we have kept this product on hold for the moment.
Okay. Okay. We haven't proceeded. We didn't make any changes in the plant we were planning to, right?
No, no, we did that, but we want. The major raw material is imported from China, but the Chinese producers are not increasing the prices, but the other raw materials which you are buying from India have become almost 3x. It is not making any sense for us to produce at the moment.
Got it. Got it. Post this Performance Chemical 2, which we are very close to commissioning, what is the product pipeline looks like for FY 2028 and 2029?
I think we are very bullish on this whole HALS segment. We are going to debottleneck and we are going to add increased capacities in some of these products, and also trying to get in allied or adjacencies, which will be catering to the same customers. You will see all these products coming up in the next few quarters.
No, I missed which product, sorry, I missed the product.
Light stabilizers adjacencies.
Okay, light stabilizers, HALS.
HALS adjacencies.
Correct.
Is something which we will start producing in the next few quarters.
Okay. Okay. Nothing in the HALS segment apart from the HALS adjacencies right now we are looking at, right?
Right now, no. Not at the moment.
Got it. Got it. Thanks, Siddharth, answering all those questions patiently. Best of luck for the coming quarters and happy Diwali.
Wishing you the same.
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Good evening, everyone. Thanks for the opportunity. Siddharth, I understood why we have not able to take the price hike. My question is, what will push us and which will eventually make us take the price hike? What is the breaking point? What should we monitor from our side which will indicate that we will be taking the price hike?
See, we are continuously trying to increase the prices. When we get a severe pushback, we know the prices are where they are currently. Our point is very simple. We don't want to lose our market share because gaining these market share again becomes a big problem. By retaining the market share, if we are able to increase the price, we are more than happy to do so.
Right. But for that, the demand of the core products should be higher than the discretionary capacity of the Chinese. Do you see that gap narrowing down any point of time? Because given the current acetone trends, it does not look like the prices is going to correct unless crude takes a major hit.
No, but I think, see, eventually, even the Chinese or even the competition has to raise price at some point in time. I mean, but it depends on when are they raising, because I do not want to be the first one to raise and lose market share.
Got it. Understood. Second, on HALS, you said that eventually we will be allocating more of our capital into these. So, in terms of product portfolio, anything else we are missing before we getting into the venture into the same debottlenecking of the existing products?
Sorry, I did not get your question.
Okay.
The incremental investment is not too heavy, because, see, ultimately, earlier it was a greenfield project. Now it is more of adding lines. The capexes are not very heavy. These are particular products which we believe now we are ready to start offering to the market. Say, for instance, a product like 2020. We did a lot of trials. We did some commercial trials on plant, and now we believe we have to put up a 1,000 ton line, and we will do so, and the plant should start by April or May. These are all advanced version of HALS.
Understood. Any indication what is our percentage of advanced, excluding 701 and 770, what percentage of the portfolio is from the other HALS currently? Earlier it used to be 70%-80%. If you can indicate where we are at this point of time.
60% is still 770 and 40% is now the advanced HALS, and I think this ratio will keep changing as we move quarter- on- quarter basis.
Okay. Understood. Any idea when we will be able to achieve the, at what realization level we should be targeting higher margins for the HALS portfolio from the current levels? I am sure this is not our steady state margins.
Basically, again, I think every quarter- on- quarter we should see improvement because the higher grade of HALS will start seeing picking up. As this movement will start happening quarter- on- quarter basis, the margins will also keep improving quarter- on- quarter. Number two, as we are getting into this backward integration of making the key precursor, also that will help in improving our margins in those particular products of HALS.
Understood. Got it. Finally, one question on CapEx. What will be our full year CapEx this year, and probably for FY 2028, how much we intend to spend?
Arun, not much CapEx now because Performance Chemical 2 is largely funded.
Right.
For the adjacencies or the pipelines which Siddharth just alluded to, once we have the investment case approved by the Board, we will arrive at the capex number.
All right. Thank you very much and all the best, Siddharth. Thank you.
Thank you.
Thank you. Thank you, sir. Anyone who wishes to ask questions, please press star and one now. The next question is from the line of Abhijit Akella from KIE. Please go ahead.
Yeah, thank you and good evening. First on the phenol price difference between India and China, would you expect that the upcoming commissioning of Haldia Petrochemicals could possibly help to narrow the gap and bring phenol prices down in India?
See, that is always a hope, but you don't know how that is going to pan out, right?
Okay. All right. On the HALS portfolio, is it correct that we've generated about 22% of this quarter sales from HALS, so that would work out to about INR 66 crore or so? Just to confirm that number. The volume numbers—
More or less, yeah.
More or less, yeah?
[inaudible]
Yeah, the volumes and how do you see the total volumes or utilization going this year and next year now?
Currently, I think we are at about 30%, 35% capacity utilization, 40%. I think going forward, we expect that the coming few quarters we should touch between 55%-60% capacity utilization. Almost 50% increase.
Okay. Great. This increase will largely come from the higher end grades, is it?
Yes, absolutely.
Okay, great. Just from an EBITDA margin trajectory perspective, any outlook you'd like to share? I mean, where do you see it going once you're at 60%?
See, currently with this whole macroeconomics and with these crude oil prices, I think it is very difficult to determine anything.
Yeah.
I would like to pass that.
Okay. The other one was, just on ATBS, we are mentioning 3Q, we are commissioning the project. Any revenue trajectory you would like to share this year, next year?
The Performance Chemical 2, the deadline, I mean, we are hoping really to start the commercial production in Q4, so probably in the month of January, February.
Yeah. In the first calendar year, is it possible to touch, say, 30%-40% utilization, you would think?
See, it is very difficult to say because this is a tricky product. It has to stabilize samples, customers, validation. It is too preliminary to gauge at what extent we will reach that capacity utilization. But of course, the target is to touch 20%-25% capacity utilization in the first year.
Okay, understood. Just one last thing from me. The KSMs that you mentioned for HALS, how much of a sort of increase in margins or backward integration will that lead to? Is it a very significant benefit from a margin perspective?
Well, it will not be very significant, but it will be very important for us because then it makes us import-free. We can then manufacture it and use it for ourselves. So there could be between 5%-7% improvement in margins for those particular segment of HALS.
Understood. Great. Thank you so much. Wish you all the best.
Thank you.
Thank you. Please press star and one to ask questions at this time. The next question is from the line of Sahil Bhavan from SD Investments. Please go ahead.
One second. Hello, sir.
This is Sahil Bhavan. Yeah. Please proceed.
Am I audible, sir?
Yeah.
Sir, I have one question about HALS capacity in total. Sir, initially we had a HALS capacity of 10,500 metric tons. Now we have HALS in advance, N-OR HALS as well, and now we are talking about debottlenecking into further capacity. So in total, sir, where do you see us ending up in terms of the total HALS capacity, sir?
Yeah. HALS capacity as of now, it is close to 11,500 tons. With this N-OR collaboration association, we would like to add incremental capacity only in the advanced grade of HALS. So that will take out our overall capacity to close to 12,500 tons.
12,500 tons. Thank you, sir. And sir, I went through our annual report as well, and we are talking about a new antioxidant that we have commercialized, Clean AntiOX 962. So sir, can you throw some light on that again?
Yeah, it's a new grade of antioxidant. Of course, we have started supplying some small quantities, but let it pick it up and then I think you will have more picture on it. Currently, I think we are making just about 500 odd tons, but it's still not as big as we want it. Let it come up a little bit, then we will be able to get more information.
Sir, can you throw some light on the capacity that we have put up on this antioxidant?
Basically, currently we have not put any CapEx for that. It is being manufactured within our current assets.
Okay, sir. Okay. This is, sir, in our parent company, right?
Right.
Okay. Okay. Thank you, sir. These are all my questions. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference back to Mr. Siddharth Sikchi for closing comments. Thank you, and over to you, sir.
Thank you so much all for attending this conference. Wishing you all a happy Diwali in advance and looking forward to connecting with you for the next quarterly reviews. Thank you so much.
Thank you, members of the management. Ladies and gentlemen, on behalf of Clean Science and Technology Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.