Ladies and gentlemen, good day and welcome to the Gujarat Fluorochemicals Limited Q3 FY25 Post-Results Earnings Conference Call hosted by B&K Securities. 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 * then 0 on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rohit Nagraj from B&K Securities. Thank you and over, sir.
Thanks, Rico. Good afternoon, everyone, and we welcome you to Gujarat Fluorochemicals 3QFY25 Earnings Conference Call. We thank the management for providing us the opportunity to host the conference call. Today, we have with us Dr. Bir Kapoor, CEO and Deputy Managing Director of Gujarat Fluorochemicals, along with the senior members of the management team. I now hand over the call to Dr. Bir Kapoor for his opening remarks, following which we can have a Q&A session. Over to you, sir. Thank you.
Yes, thank you. Thank you very much. Good afternoon, everyone. Very warm welcome to all of you for GFL's quarter 3 FY25 earnings call. For this call, I have with me my colleagues, Mr. Akhil Jindal, who's Group CFO, and Mr. Manoj Agrawal, who is CFO of GFL. I also have with me Mr. Kapil Malhotra, Business Head of Fluoropolymers, and Mr. Rajiv Rao, who is the Business Head of EV Chemicals. The company announced its quarter 3 FY25 results at its board meeting held today. The results, along with earnings presentations, are already available on the stock exchange and on our website. I'll briefly highlight the key financials and then give you an update on business operations and outlook. For quarter 3 FY25, on a consolidated basis, GFL reported revenue from operations at INR 1,148 crores, which was up 16% on year-on-year basis.
EBITDA stood at INR 294 crores, up by 43% on year-on-year basis. The EBITDA margin for the quarter stood at 26%, up from 21% in quarter 3 FY24. Consolidated PAT for quarter 3 FY25 was INR 126 crores, registering a 58% increase on year-on-year basis. Overall improvement in financial was largely driven by a sustained improvement in the fluoropolymer vertical and better product mix driving higher margins. As we continue to deploy high CapEx, primarily in our battery materials business, our profitability continues to be impacted by the associated higher depreciation and interest charges. However, we believe this will reverse once revenue contributions start from this segment. Now, let me briefly take you through the performance of each business segment for the quarter. Fluoropolymer volumes declined on quarter-on-quarter basis, primarily due to year-end holidays in key export market segments.
While prices remained stable during the quarter, the commodity-grade PTFE continued to face pricing pressures from low-cost suppliers from China. Looking ahead, the exit of a legacy player, combined with GFL's successful development and qualification of higher-grade fluoropolymers, it is expected to drive a significant increase in revenues and profitability in coming quarters. Furthermore, industry dynamics in key sectors such as automotive, semiconductors, and EVs present large-scale opportunities for value-added fluoropolymer. These developments are anticipated to translate into significantly higher revenues and margins for GFL in the next financial year. Within fluorochemical segments, refrigerant gas prices, particularly for R22, improved during the quarter, with further pickup expected going forward. For R125, which is primarily exported to the U.S., Q3 is seasonally weak quarter, but both prices and volumes are expected to improve going forward.
With improvement in the market dynamics and a positive outlook for R32, we are going ahead with our CapEx for R32, which we had temporarily withheld. Specialty chemicals remained flat during the quarter but are likely to see a pickup in volumes starting quarter 4 FY25, driven by improving downstream demand. The bulk chemicals segment operated at full capacity during the quarter, reflecting strong operational efficiency. Caustic soda prices improved after remaining weak for the past five to six quarters, thereby improving the segment's performance. MDC prices have improved during the quarter. However, it is expected to be muted in the near term because of additional capacity being commissioned in India. Let me now give you an update on the battery chemicals business. We cater to EV and ESS segments.
We continue to take rapid strides in this business to position ourselves as an emerging battery material supplier globally outside of China. The EV story continues to play out as per our expectations, and we see the segments emerging as a very large business for us. The demand for our products is going to be very robust, not only from the EV segments but also from the rapidly growing ESS segment, which is a very essential piece in the entire energy transition space, be it renewable energy or green hydrogen. The market is most promising, with large-scale battery manufacturing capacities being set up. Based on our ongoing interaction with our U.S. customers, despite what we are hearing in the news, the U.S. market is continuing with its ambitious capacity additions. The introduction of new models and ongoing technological advancements are likely to drive further growth.
By 2025, it is projected that one in four cars sold in the U.S. will be electric. Also, the U.S. market has evolved to a position where long-term vehicle ownership economics are gradually turning in favor of EVs. Europe too is marching ahead with its ambitious EV plans, and the battery production capacity in this geography is expected to grow significantly, reaching almost 800 GWh by 2030, with multiple gigafactories under construction. While the global material story remains intact, the domestic market offers a wonderful opportunity, providing another large addressable market for our products. Recently, based on our estimates, the capacity which has been announced is in excess of 300 GWh, providing an additional upside potential in the domestic markets for ESS and EV.
As some of you may be knowing, just this week, the Maharashtra government has announced the setting up of a panel to explore the banning of petrol and diesel cars in the Mumbai city area. The Delhi government is also exploring transitioning all the last-mile delivery logistics away from fossil fuels to EV by 2027. All these developments augur well for the growth in demand for EV. GFCL EV has the first-mover advantage as a non-Chinese global supplier in the battery material space. Early qualifications of GFCL EV products at this stage, combined with high entry barriers, put GFCL EV at a unique position to grow with its customers in this region. As our customers continue to invest large capacities or large Capexes in EV and ESS, we remain committed to our battery material Capex plans and expect a strong growth trajectory.
We are committed to our cumulative CapEx plan of INR 6,000 crores by FY28, as we had indicated earlier. At optimal utilization level, this business is expected to achieve around 2x asset turnover and approximately 25% EBITDA margins. GFL is well-positioned to capitalize on the opportunities across all segments. The fluoropolymer segment will benefit from the adoption of high-value-added products, while fluorochemicals will see improved pricing and demand from Q4 FY25. The EV battery material business is expected to ramp up significantly going forward. We are confident in delivering sustained growth and creating long-term value for all our stakeholders. Thank you very much. With this, I close and open the session for 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 * and 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Good afternoon, sir. Thanks for taking my question. I have a few of them. First, on the fluoropolymer business, has the 3M plant shut down? And you have said in the presentation that we have received the approvals or verification for the value-added grade, which I believe would have been sold by the legacy player. In this context, when should we start seeing the material offtake of fluoropolymer growth coming in, will it be Q4 onwards, or do you think it will be more like a second half of FY26? And second follow-up question on it is, India was expected to increase the consumption of FKM on the back of ethanol-based vehicles or ethanol-supportive vehicles coming into the market, which need FKM. Has that phenomenon started? This is first on the fluoropolymer business.
Okay. Thanks, Sanjesh. Thanks for your question. The first question is about the plant shutdown. As we understand, the plant was shut down in December last year, which is December 2024. So that is already shut. We have already gone through the qualifications on various grades. We have received qualifications, and we expect now to go into commercial sales in quarter 4 onwards. So it's not very far away. We have been waiting for this moment to be there, and I think it's now we will start seeing a ramp-up in our fluoropolymer sales. The second question you had was about Indian ethanol blending. There are several grades which are going through the qualification. However, we are not seeing the impact of this in our numbers, and we expect that growth to come in the next few quarters.
So that also is one of the reasons for us to be so optimistic about fluoropolymer's segment, Sanjesh.
Got it. And one on this international sales of FKM, we had 21,000 metric tons of PTFE, and including PVDFs, we were at 18,000-19,000 metric tons in the new fluoropolymer. Should we be reaching the peak utilization in FY26?
Yeah. I mean, I won't comment on the number, but all I can tell you, Sanjesh, is that we expect our full capacity utilization to be there by the end of FY26. Yes.
Got it. Got it. That means a very material. So what is the expectation of revenue and EBITDA for FY26 in that case?
We cannot provide the forward-looking statement, Sanjesh.
No, that's fine. That's fine. I understand.
Thanks.
See, the question on the refrigerant gas now, R22, we have put a pause. Now, why there was a sudden change in the R32 capacity addition, and what kind of CapEx and capacity addition are we looking at, and when should it come? Because we are already at a fag end of quota determination period by the time we come up with the plan. Does it really make sense because the quota we get and what we can sell thereafter will be a fraction of the plant capacity?
Okay. Remember, we talked about R32 earlier also, and that kept our project on hold, partly because at that time, the market conditions and pricings were not really conducive to making investments. Okay. We had quota at that time. We still have quota, and we still have time. We still have time up to FY27. So it's not the fag end, and we can discuss it separately, but there's a significant potential in R32. And as the pricing has turned up, as you may be knowing, so we are looking at investing in R32 now because we see a business potential going forward. And our capacity plan, of course, will come into phases, but we are looking at almost setting up a capacity of 30,000 tons. Okay. And we have time in terms of till we can utilize this quota.
30,000 metric tons.
From a business perspective, it makes sense to invest because the pricing is right, and the demand-supply situation today is conducive to making this investment and looking at good returns.
You said 30,000 metric tons.
Yes, up to 30,000.
The first phase will come by what time frame and how much?
We had started this project earlier, so a lot of groundwork has already been done, Sanjesh. So we will probably take approximately by next year, by the end of maybe quarter 4 of next financial year, we'll probably be there.
That means March 26.
Correct.
Got it. Got it. No, because it's been on and off for us. We have not been very confident with this business, and we thought that fluoropolymer.
What were the prices, Sanjesh? So you tell me what were the prices when we talked last time and what are the prices today.
Some of your peers still went ahead, right?
What's that?
Some of our peers still went ahead.
Of course. Of course. Everyone has their own set of and most importantly for us, we had several other priorities, Sanjesh. We were investing in fluoropolymer at that time, and then we had a cycle on EV. This is the time, I think. Now, for GFL, our investment in fluoropolymer is not going to be there in the coming years. So it's mostly now GFL would focus more onto this area with opportunity which we had put on hold earlier.
What is the CapEx for this entire capacity?
Entire capacity would be higher, but initially, as I said, it will be in the phases, so it will probably be at the order of INR 150 crores.
150 crores.
Case, yes.
Last question. The U.S. is looking to grab the IRA subsidy on the EV and other things, which clearly suggests that the encouragement which government used to have on the EV side in the U.S. market, that appears to be tapering off, and they're pushing for more oil drilling, which supports the ICE vehicle. We still believe that we will be able to do this INR 6,000 crores of CapEx. What gives us that confidence?
Okay. First of all, what gives us this confidence is our continuous interaction with our customers, which we have been engaging very closely in the last several weeks. In fact, this announcement of IRA subsidy may go away, or the considerations; it was under consideration to be revoked. It's been there for quite some time. It's not new, and we have been talking to our customers, and most of our customers' plan in terms of their investment and setting up the capacities is still there, so based on their investment and their capacities, we have a visibility that at least in the next three-to-five years, the plans that we had given are going to be intact. Okay.
But Chinese will.
There might be some minor impact because, of course, this subsidy. We'll have to wait and see what happens to the policies because there are several policies which are intricately closely linked.
Okay.
So if this goes away, then what else comes in? We'll have to look at that and then look at the opportunity that it brings in.
Got it. Got it. That's it from my side. Thank you.
Thank you.
Thank you for giving all the opportunity and best of luck for the coming quarters.
Thanks, Sanjesh. Thank you.
Thank you. The next question comes from the line of Aatur from ICICI Prudential AMC. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So just on R32, I mean.
I request you to use your handset, sir. Mr. Aatur?
Hello. Yeah. Is it better now?
Yes, sir. Please go ahead.
Yeah. Thanks for the opportunity. So just on R32, sir, I mean, I didn't clearly understand that based on today's just because pricing has improved, what if pricing drops after another six months? What happens to our CapEx decision? How can basically someone decide on current pricing, and how should one think on that?
Yes, Aatur. So what we are, our position right now is the price of R32 going up is closely linked to certain quota reductions. Okay. And there's a demand-supply situation, and we expect it to continue. That's what our projections are internally. And that's how we are taking the business decisions to invest in CapEx for this.
No, I mean, you are not a new player in ref gas. I mean, it goes through its own cycle, pricing, etc. I mean, having clearly denied three months back and now suddenly setting up just because prices have gone up doesn't make any sense.
We had to put this on hold, Aatur, if you remember, almost two years back because we had too many things on us and we had the plan of investment. We had gone ahead to some extent and then put on hold because of several other things.
So for example, if three months down the line, pricing again dropped, you would still go ahead with the 30,000 tons, right? That's what you mean.
Based on our estimates, I think it's unlikely that we will go back and see the number of $2.3.
Okay. Fair. Thanks.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question comes from the line of Ketan Gandhi from Gandhi Securities. Please go ahead.
Hi, sir. It's regarding the follow-up on the previous investor. According to Section 7 of the Executive Order, what they have frozen is the freeze of the fund for EV charging stations and nothing to do with the EV batteries or EV per se. And they are only talking about reduction in the IRA, that $7,500. And I believe that has to be done only amended by the legislation or legislative action. And it requires a lot of effort. So is my understanding correct in this? And even that for Biden's target for new electric vehicle sales by 50% by 2030, 35, it was only a guidance, and that has been knocked down by the new president. So basically, it's a neutral. And with that respect, what is your view with respect to our company? I think we are neutral, or still there is an issue in that?
No, when you say getting by neutral, you mean that if IRA revoked, overall, there'll be neutral impact on the market? Is that your suggestion or question?
No, basically, it doesn't change anything because law-wise, they have done for battery charging station, one end. And second, they have removed the guidance.
Of course, it's not right for me to comment on other countries' policies and their decisions. But what we typically go by, by the assessments of our customers who are most closely associated with the policies of their governments, okay, and based on what we hear from them and what we interact with them, it seems some of those plans are intact. So perhaps what you're saying may be correct.
Yeah. And my second question is, I think first week of January, China has banned critical tech and mineral export for EV. I believe it will be much more beneficial for GFL's EV batteries. Any view on that, sir?
First of all, any other companies or anyone who's looking for procuring technology, of course, may get difficult for us. But as we are concerned today, we have LiPF6 plant set up. Our LFP plant would be set up in another several few weeks, in fact, mechanical completion and then startup by the end of this financial year. So we have most of our basic, I would say, building blocks for our EV chemical plants are in place. So we are not that much concerned about that. Of course, if you go and read the fine print of the restrictions, that is typically on materials which are newly developed or highly developed products, not on some of the product which is currently in the market. That's what our understanding is.
So, in short, if that is to come into the picture and new plant were set up in India also, GFL is going to benefit because we are everything.
Yeah. We have a fast-mover advantage. We are far ahead. We have almost all our basic modules of commercial modules of all the verticals we have already set it up.
Fair enough, sir. So I have some more questions back in the queue. Thank you.
Thank you. The next question comes from the line of Arun Prasath with Avendus Spark. Please go ahead.
Good evening. Thanks for the opportunity. Sir, my first question is on the R32 and related raw material. So fluoromethane, I believe currently we are selling outside externally. So we will be post this plant, R32 commissioning, will we be completely captively consuming, or will we still be exposed to the fluoromethane prices?
It depends on, of course, how we phase in our capacities, but we are expecting at least 50% of our MDCs will be utilized in-house.
Okay. All right. So 50% will still be spending at?
Still MDC would be available for merchant sale.
Thank you. So if we are going for taking advantage of the quota availability, and then if you have a very long-term view on the R32 that it will be continuing to be higher, why don't we go full-fledged and completely take a plan to reduce fluoromethane? Because either way, if you see, we are staying on CapEx. Two years before, INR 150 crores on our balance sheet, on our cash flow generating ability, it was not a very big amount. So is the CapEx the only concern, or something else has changed?
There's a lot of disturbances. Have you requested to use your handset?
Yes. There's a lot of disturbances. It's hard to hear. Please.
All right, sir. Sorry. I hope now it's very clear.
It's better. Please.
Yes, so I was asking, CapEx alone was the reason why we had a change of heart because 150 crores two years before, or even now on our balance sheet, it's not a very big mover. But given that the long-term positive outlook on the R32 and how our quota we can utilize, is there something else which has made us doing the shift, or it's more about consuming fluoromethanes? How should we look at this?
It's got typically these business decisions are taken with several factors in mind. Of course, CapEx is one part, but of course, with the pricing, the market scenario, the future of market scenarios, what the competition is doing, what is the situation in one of the largest suppliers in the world, what is the pricing there, what is the quota, what is their capacity to supply, all those factors get into these kind of decision-making. So I would not say that it was purely INR 150 crores that had held back. It's multiple reasons, and today, we are seeing a business potential. And of course, we had quota at that time. We still have quota, and we would like to utilize going ahead.
Thank you. Mr. Arun, just a question to return to the question queue for follow-up questions as there are several participants waiting for their turn.
Thank you, sir.
The next question comes from the line of Dhruv Muchhal with HDFC AMC. Please go ahead.
Yes, sir. Thank you so much. Sir, in the presentation, you say that we are going ahead with the expansion of the salt production capacity. So if you can please help us, what is the quantum that you are planning to put, say, in the next two, three years, and the visibility probably that you have in from your customers?
Yeah. Look, we have not given any capacities, but what we are doing, what we meant when we said we are going for the expansion, because we initially started to set up our small plant, which is the minimum commercial scale capacity to establish the proof of concept, the quality, everything. So everything is fine now. So we are adding multiples of that. And that is again based on our business requirements and the contracts that we have with our customers to supply in the near future. So it's based on that. Now we have started work to expand.
Got it. So if I understand it right, in the EV ecosystem, the first set of growth will probably come from the salt, followed by probably the LFPs. And then as the domestic market ramps up, the electrolyte solution also. Is that a fair understanding? And because if you're going ahead with the salt plant, is that you're seeing a larger visibility from your U.S. customers?
Yes. I think you're right. Initially, we started with salt and, of course, parallelly continued with electrolyte. The electrolyte is mostly for domestic market. And domestic markets, we are seeing, but as in case of any new technology, new emerging industry, there is a hiccup to start up. And that's what we are seeing at our customers' end. And some of the plants have been shifted. So clearly, the salt and electrolyte, in my view, probably will go almost parallelly and electrolyte for domestic markets. Okay.
Sure, sir.
Of course, one point that I think you missed is the binder. That will also be another one which will continue.
Correct. Yeah. Anyways, sure. So the second question was on the FKM opportunity because of the ethanol blending program. Is it possible to give us some sense of the size that the India market can be for these kind of products? And how soon can that ramp up happen? So I believe the changes in the engines where the product gets used. So what can be the potential demand?
Yes. I will request our fluoropolymer business heads, Kapil, to take that question. Kapil, please, can you take this?
Yeah. Hi. Kapil Malhotra. Yeah. So for the ethanol blending, as Dr. Kapoor said, that the qualifications for some of it because you see, they are all very critical items. So qualifications have been done. And now we are just waiting for the OEMs and Tier One to start placing the commercial orders. So we will start seeing the ramp-ups from the next quarter onwards, and it will keep on happening for quarter to quarter, probably for the whole financial year. And when the market gets stabilized totally after that, once they have consumed all the qualifications which have happened and a couple of other modifications which have happened.
But what is your sense of the overall demand in tonnage? Probably tonnage would be a reasonable sense for us. So some sense of the demand potential.
Significantly higher.
See, it is going to be significantly higher from the current volumes. But right now, to assess the demand is slightly tough because each vehicle will have its own grammage. So it's very difficult to calculate.
Okay. Sure. Probably I'll come back later on that. And sir, just last quick question is on the R32 expansion. Given it will be about 30,000, would you need to also expand your AHF, and is that factored in your CapEx plans? Because I think your AHF, you also will require for your other programs, say, PTFE and a lot of other programs, as there will be growth even there. So just some thoughts there, please, sir.
Yes. We have a plan for AHF as well, though. Of course, in next quarter, I think we'll share our CapEx plan for the next year, and then we'll talk about it. But yes, you're right.
So the.
Eventually, because we'll have an AHF requirement on several fronts, so looking at that, we'll be adding AHF capacity as well, and then that's not included in 150.
That's not included. And what is the quantum in the phase one that you're planning to do for the R32? So 30 is the overall number. Phase one will be how much?
Initially, around 20,000 tons.
Okay. Sure. Thank you so much. Thanks. That's all. And sir, just for you, one request is, sir, a lot of your businesses that you have stopped giving capacity numbers or volume numbers, it has become difficult to, I mean, build your growth forecast. For example, the salt capacity or the FKM capacity. So probably if there is some other better way to make it more transparent, it will be very helpful. That's a request.
One of the ways that we have now started guiding just like we did doing EV is we give capex, and then that's a turnover number and indication of the margins. Because capacity numbers often, of course, we provided in the past, but unfortunately, sometimes it also goes to certain areas where we do not want it to go.
Sure. Thank you. Thanks for attending. Thank you.
Thank you.
Thank you. The next question comes from the line of Archit Joshi with Nuvama Institutional Equities. Please go ahead.
Thank you, sir, for the opportunity. A lot of questions on R32. I have a couple of them. Sir, the capacity that you've planned, so 20 maybe in the first phase and 10 in the second, this is the quota that we have. Will all the capacity that we'll be putting up be available for sales, or there's a capping on that with respect to available capacity for sales?
Our intention is to utilize the quota that we have available with us. Okay.
So that would be 30,000 tons in totality?
Yes. Or whatever the number comes out to be. It's around that.
Right. Sure. So second one, 30,000 tons in terms of capacity. I was just doing a few calculations. I think the total HFC market is roughly around a million tons. And with the current quota reduction that we have seen, especially a lot of higher GWP gases being reduced and more focus coming on R32 having a lower GWP, this market roughly seems to be somewhere around 2.5 - 3 lakh tons. And 30,000 tons seems to be almost 10% of that, which is the calculation that I've done. And in the past, you must have seen that iGas had announced a 40,000-ton capacity in Abu Dhabi. That also seemed to be a fairly large number. Sir, what has been our internal calculation while deciding this 30,000-ton plant? Is it fair to assume that it'll be completely subsumed in the demand ecosystem?
Yeah. And I think we also expect the demand growth to come going forward. And this we are, of course, looking at globally because India is one of the few countries which has capacity to expand and has quotas. Okay. And we will have that propensity to add capacity till 2027. So I think when we look at our potential growth and the potential that is available globally, I think we think that this can probably be able to. We'll be able to meet the targets of demand.
Sure, sir. Thanks. Thanks for the clarification, and all the best.
Thank you. The next question is from the line of Siddharth Gadekar with Equirus. Please go ahead.
So just one question on the R32. When we say that we will be able to utilize the entire capacity given the quotas, these quotas are mainly due to the R125 quotas also that we have that we are assuming that we will be able to use for R32?
Yes. Correct. Because the quotas are for HFC use.
Okay. Okay. Got it. So basically, even if we produce lower than CY26, we will be able to produce the entire 30,000 tons in CY27 and beyond that. That is a fair understanding, right?
Correct. Correct. You're right.
Okay, sir. Thank you. Thank you.
Thank you. The next question comes from the line of Yash Shah from TCG AMC. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, my first question is with regards to our EV business. We've mentioned till the last quarter that we've incurred CapEx of around INR 1,000 crores and cumulatively we'll be incurring INR 6,000 crores in the FY28. Just wanted to understand your point of view of what kind of capacity utilization are we targeting on year-by-year basis till FY28, assuming that we will be reaching peak utilization by FY30 of the INR 6,000 crores of CapEx which we will be incurring. So just wanted some kind of an idea on that part.
Typically, of course, capacity utilization number is another number which we cannot provide quarter on quarter. But our understanding is that these businesses, particularly EV, is qualification-based. So there is certain qualification time. So there'll be certain time period in which the capacities get utilized. Okay. Initially, that time may be slightly higher, and then subsequently, if I go closer to FY28 and beyond, that time would come shortened because our growth then or capacity additions gets closely linked to customers' capacity addition because then our plant becomes a qualified plant as a part of their supply chain. So initially, it can be anywhere, probably, I would say, one year to two years in terms of fully utilizing, and then it'll shorten up as we go to FY28. And in terms of I've already given you the approximate asset turnover ratio, which is a factor of 2.
Just a continuation of the previous question, the CapEx which we are increasing of our salt plant, will it also be included in the INR 6,000 crores? And are we basically planning to reduce CapEx on some other constituents of the EV business, or how does it work?
No. Our intent of giving the statement about salt was it's not an additional CapEx. Our CapEx plan is still what we had indicated, INR 6,000 crores. However, so the intent was to say that we have now reached a point where we feel the capacity addition has to be done. So that was sort of a kind of a milestone. But whatever the CapEx that is involved is all part of what we have indicated. There's no additional CapEx which are going to be done.
Got it. Just last one question from my side. Sir, on the gross margin front, we've seen expansion on quarter-on-quarter basis. And you mentioned in your opening comments that we saw improvement in the product mix. Whereas in the presentation, you said that there have been lower volume pickup in fluoropolymer business. So just wanted some clarification on that. In which particular segment did we see improvement in the product mix? And what has led to the improvement in gross margin?
So let me tell you first is that the volume that we talked about is typically the seasonal impact because quarter three, if you go back and look, always been slightly lower because there is a holiday season in the U.S., almost a week to 10 days during Thanksgiving and Christmas, and then similarly in Europe. So because of that, there is always a dip, and then so it's a seasonal impact. And when coming back to margin improvement, margin improvement is purely by product mix. As our overall fraction of our value-added products and the new polymers are increasing, the margins would keep on going up.
Got it. Got it, sir. Thank you. Thank you for answering all the questions.
Okay. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. The next question comes from the line of Arun Prasath with Avendus Spark. Please go ahead.
Thanks for the follow-up opportunity. Sir, last year, we used to guide about reduction in the power and fuel costs. Is it now fully reflected in our numbers, or still there is a potential to reduce from the current levels?
I'm sorry, I couldn't get your question. What is this regarding reduction in?
Power and fuel.
Reduction in power and fuel costs. Okay. Manoj, can you take over that question?
Yes. With that, we are aggregating all our wind assets in one platform, and the power cost will reduce from the next financial year. Currently, our power cost is at around INR 800 crore. So we expect a reduction of 10%-12%. 10%-12% reduction. That is around INR 100 crore.
100 crores. So that we will completely see in 2026 at the current volume.
Yeah.
If the corresponding volume growth happens, what kind of, so in the new set of procurement, what will be our weighted average power cost, sir, on a per unit basis?
Yeah. So if I may answer, the current prices are certainly higher because we are buying from the grid and other things. The power purchase agreement that we have signed for the new renewable energy is at INR 4. So that would constitute more than 80% of our total requirement. So to that extent, the weighted average will be in the range of around INR 4.5.
Okay. Understood. And my second question is on the EV side. We have said that we have kind of stabilized the plant, most of the plants. This will be at the very pilot stage or at what stage? Because when the utilization goes up, we once again need to prove the stabilized operations. Is that the right understanding?
No. All our plants are commercial scale. There's no pilot scale we are talking about. Okay. And these are typically modular plants. So this is the small commercial module, and then this will be the repeated units. And these are fully commercial plants. There's no pilot plants.
Thank you. Mr. Arun Prasad, may we request that you return to the question queue for any follow-up questions? Thank you. Our next question comes from the line of Rohit Nagraj with B&K Securities. Please go ahead, sir.
Yeah. Thanks for the opportunity. Sir, first question is you mentioned that fluoropolymers' optimal capacity utilization by end FY26, and probably you will give us what will be the CapEx for FY26 and FY27. How much gestation period will it take for the CapEx to fructify in case those capacities are being completely utilized in FY26? Thank you.
Rohit, are you referring to fluoropolymer?
Yes, sir. Fluoropolymer. Right.
Fluoropolymer, the CapEx has already been incurred, as you know. We have been saying, and now the capacity utilization is going through. So we expect, as I said, that by end of the next financial year, we will have the capacities which is available to us fully utilized. So if you go back and look at, you can see how much time we have taken. It's probably a year and a half to two years to have the capacities set up and then utilized.
My apologies.
What was your question?
Yeah. My apologies. My question was for the next leg of growth, if we were to put up capacities because those capacities will get consumed in the next one year, what is the time frame that we are looking at for either de-bottlenecking or adding the new capacity?
See, what happens is that I think this I had indicated several earlier that typically our CapExes are high for setting up the monomer plants. Okay. And once we have monomer plants there, then adding capacities through reactors is normally incremental CapExes. Those CapExes are not very high. So coming back to addition of I think the future capacity addition will primarily be on reactors because both of the monomer that we have two value chains. One is R142b, another is TFE, R22 and TFE. Both we have monomer capacities available. So going forward, adding further capacities and reactors is incremental costs. Rohit, are you there? Is that okay?
The line from Mr. Rohit Nagraj has dropped. One moment, sir. So we move to the next question. The next question comes from the line of Hansal Thacker from Lalkar Securities. Please go ahead.
Hi, Dr. Kapoor and gentlemen. Congratulations on an encouraging and a steady quarter. Sir, just a quick comment on the disclosure that the company made on the 27th of December, wherein we signed power purchase agreements at INR 4 a unit. My understanding is that this could generate approximately INR 400-INR 450 savings in power costs. So firstly, is that an accurate figure?
Yeah. I'll request Akhil to take that. Akhil, please.
So 400 MW, obviously. It's a renewable energy. So it can't be compared with the thermal energy where the PLFs are 90% plus. This is a hybrid PLF, hybrid project. So the PLFs are in the range of between around 30% as a good estimate. So you can imagine when we are setting up a 400 MW, it's roughly around 100- 130 MW as a net generatable power. To that extent, there would be savings.
So if I take a 30% PLF, then we are looking roughly.
Yes. Yeah. So say.
So 457 MW at 30 PLF is working out to around that figure only, right, sir? INR 400, INR 450 crores?
Because obviously, today also we have some renewable sources and everything. We have worked out the net saving, I think, just as a first cut, it would be in the range of around INR 150 per year, roughly.
Okay, so the net saving is about INR 150 a year?
Yeah. Yeah. All in all, put together, yeah.
And for my second question, sir, I mean, much has been deliberated on this refrigerant gas. I just want to know that whether these price increases of refrigerant gas actually reflect in this quarter, or they're likely to reflect in Q4 and thereafter?
I think Q4 and thereafter is a marginal impact, not much of this.
Okay. So this quarter really does not show any major impact on the ref gas margins, but it will continue going forward?
Yes. Yes.
Right. And sir, my last question. So taking from one question prior, so as we understand that China periodically plays around with these export controls, etc., and to some extent, would it be right to assume that going forward, manufacturers will try to diversify their suppliers outside China, and to that effect, we might benefit from this?
Yes. That's one of the factors that has already been considered because I think India as a country, of course, has an advantage there.
Great. Great. All right, sir. Thank you so much for that clarification. All the best.
Thank you. Thank you, Rohit. Thank you. Hey, my handset fell. I'm sorry.
No problem.
Thank you. The next question comes from the line of Vimox Shah Goyam Luxy Fintech Private Limited . Please go ahead.
Yeah. Thank you for the opportunity. I have a question in the battery material side. What is the CapEx plan for the next 12-18 months? Now, will it be funded?
Next 12-18 months, I think we already, of course, as you know, we have already raised funds, and that process of raising funds is already on.
So just to add on to what Dr. Kapoor said, if you remember in the last quarter, we have told everyone about the INR 1,000 [crore] raise that we have already done. So that money is very much available for, say, our CapEx for the period of next 12 months. We are also in the advanced stage of discussion with various large international sovereign funds. So hopefully, by the end of this quarter, we will be in a position to share concrete names and other things once we have completed the full exercise with them. But I can only tell you that most of this growth is only coming from equity. We are not borrowing anything at the EV level for any of these CapEx, and we are well funded without really depending upon the GFL cash flows to fund the EV for the foreseeable future.
So to that extent, the INR 1,000 is in the bank, plus the new discussion happening with the sovereign funds, that would be good enough for our future programs.
Okay. Got it. And thank you. Second question. Yeah. Thank you. Second question.
One moment, sir. Mr. Vimox, are you able to hear us? Mr. Vimox?
You in the hello? Yeah.
Yes, sir. What is the question? So you are not audible, sir.
Hello? Can you hear me?
Yes, sir. What is the question?
Yeah, Vimox, please go ahead. We can hear you.
Given the IRA regulations, what kind of opportunities do we see in the U.S. market, and what is the expected timeline for this growth?
Of course, as we had said earlier, that we are seeing it as a large opportunity market. It's a very, very large market for us. And as an alternate supply chain or a supply chain which is alternate to China, I think we have a tremendous opportunity which is available to us. Okay. And of course, IRA is creating a tailwind, but fundamentally, also, we see that this opportunity is very, very large, and GFCL EV can play a very large role as a credible alternate supply chain alternative.
Okay. Okay. Thank you. Yeah. That's it.
Thank you. The next question comes from the line of Deepak Sharma, who is an investor. Please go ahead, sir.
So thanks for the opportunity. And my first question is, what is the long-term EBITDA margin which is sustainable for the next one or two years?
Thanks, Deepak. I think it's a forward-looking statement, which, of course, we cannot provide. But whatever our expectation, etc., from our business, that EBITDA margin, etc., expectation we have already provided.
Okay. Okay. Thank you.
Thank you. Ladies and gentlemen, that was the last question for the question-and-answer session. I now hand the conference over to the management for closing comments.
Yeah. First of all, I would like to thank you all of you for being part of this con call. Clearly, as I said earlier in my opening statement, that today, GFL, we are very well positioned to capitalize various opportunities that are there in all segments, whether it's fluoropolymer or refrigerants or battery material, which is an emerging business for us, so we look forward to continue to interact and share our stand.