Ladies and gentlemen, good day and welcome to Neogen Chemicals Limited Q3 FY25 earnings conference call. 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 touch-tone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you.
Thank you. Good evening, everyone, and welcome to Neogen Chemicals Q3 FY25 earnings conference call for analysts and investors. Today, we are joined by senior members of the management team, including Dr. Harin Kanani, MD , Mr. Anurag Surana, Director, and Mr. Gopi Krishnan Sarathy, CFO . We will commence the call with opening thoughts from the management team, post which we shall open the forum for Q&A, where the management will be addressing queries of the participants. Before we commence, I would like to share a standard disclaimer. Certain statements made or discussed on the conference call today may be forward-looking statements. The actual results may vary from these forward-looking statements. A detailed disclaimer in this regard is available in Neogen Chemicals Q3 FY25 earnings presentation, which has been uploaded on the stock exchange website. I would now like to invite Dr. Harin Kanani to share his perspectives.
Thank you, and over to you, Dr. Kanani.
Thank you, Nishid. Good evening, everyone, and welcome to our earnings call for Q3. Before I commence, I would like to wish all of you a very happy New Year 2025. I hope you had an opportunity to review our quarterly results presentation. As always, I will start by providing an overview of our performance and strategic direction, followed by our CFO, Mr. Gopi Krishnan Sarathy, who will detail the financial results. We have delivered impressive performance in the period under review, with 22% growth in revenue and 71% improvement in EBITDA. This performance is attributed to the hard work and dedication of the entire team, as well as the effectiveness of our strategic initiatives, and it came based on some challenges which we had in the prior year period in the same quarter.
The key drivers of this growth are strong ramp-up in BuLi Chem and sustained volume gains in our base business, both in organic products as well as inorganic products. Notably, higher top line was achieved despite the depressed pricing environment and ongoing global headwinds, demonstrating our ability to effectively navigate market and fluctuation. The robust recovery was also fueled by new product launches and a focus pursued on export opportunities. This success underscores our commitment to innovation and expanding our global footprint. Underlining our business model's responsiveness, we have strategically adapted to the persistent slowdown in the agrochemicals by proactively shifting our focus to other end-use sectors like semiconductors, flavors and fragrance, and select industrial custom synthesis manufacturing opportunities, diversifying revenue streams and capitalizing on emerging market trends. Now, before providing updates on the expansion initiative, let me share some important developments.
Honorable National Company Law Tribunal has approved the amalgamation of BuLi Chemicals India Pvt. Ltd. with Neogen Chemicals, with this BuLi Chemicals stands merged with Neogen Chemicals, effective 31 January 2025. Therefore, the standalone results you see include BuLi Chemicals. This is expected to streamline operations, reduce costs, and enhance Neogen's market position in pharma and agrochemicals. BuLi Chemicals saw significant progress this quarter. It broadened its product offerings with the introduction of new lithium products, further enhancing its profile in the market. In a key strategic move, we expanded our reach by commencing exports to EU, Korea, and Japan, opening up new avenues for the growth. Adding to this positive momentum, BuLi Chemicals received EC approval for its brownfield expansion, paving the way for increased production capacity and further opportunities after we received final regulatory clearances from the regulatory authority. I will now provide an update on the expansion initiative.
New capacity of 400 metric tons per annum of lithium electrolyte salts and additives at our Dahej and 2,000 metric tons of electrolyte at Dahej. Trial supplies and initial approved materials have been shipped to customers. A phased commissioning strategy is underway to meet India's growing battery materials demand, aligning with incoming battery capacities in India. The Indian ACC battery manufacturing ecosystem is gaining momentum, with one major manufacturer already in trial production at a giga scale, and several others expected to commence operation at a giga scale within the next two years. There are also several small megawatt-hour level capacities which have also started, and Neogen has actively started working with them on approval. This growth will drive demand for locally sourced electrolyte and lithium salts.
In line with this, we are discussing also establishing long-term partnerships with battery manufacturers for electrolyte supply, and we also submitted our samples for electrolyte salts to our international customers. We have submitted the data based on our production, and now we are awaiting their final approval for the audit, after which we can also commence international salt sales on a more active basis. To give you an update on the greenfield battery materials facility using MUIS technology, this project is rapidly advancing, having achieved full financial closure. Civil work is progressing quickly, with 70% of the civil work and design work completed. Modular plant development is underway at our international partner, and equipment assembly and installation is in progress. Key equipment and machinery are expected from MUIS, sorry, MEC, by the second half of calendar year 2025, after which plant installation will accelerate.
We are on track to have commercial production in FY26. We have also, from the INR 1,500 crore total CapEx and research, around INR 419 crore has already been deployed till Q3 FY25, and we remain on track to start commercial production here by FY26. Looking ahead, we are particularly excited about the progress of Neogen Ionics and its lithium salts and electrolyte projects. The Indian EV battery manufacturing landscape is rapidly evolving, and we are also seeing strong government support in policy to support faster adoption of EVs as well as battery storage systems in order to boost domestic manufacturing. The recent budget also included additional capital goods for EV manufacturing in the list of exempted capital goods, which will further speed up this process. Similarly, the customs duty on many lithium products and on the lithium carbonate remains nil, and also recycling is being encouraged.
This will significantly reduce overall production costs and encourage innovation in lithium and battery value chain. Based on our current momentum and promising outlook, we are confident in achieving our FY26 revenue guidance of 950-1,000 crore on the standalone business, and beyond FY26, the rapid scale-up of both lithium salts and electrolytes will be the primary driver of our consolidated performance. In conclusion, Neogen Chemicals remains committed to a long-term growth strategy. We are undeterred by short-term market fluctuations and are focused on capitalizing on emerging opportunities to generate sustained value for all our stakeholders. We are confident that our strategic investment, agile business model, and dedicated team will deliver continued success in the years to come. That concludes my opening remarks. I would now request our CFO, Mr. Gopi Krishnan Sarathy, to share financial highlights for the period under review.
Thank you, Dr. Harin Kanani. Good evening. A good evening, everyone, and welcome to the Neogen Chemicals Q3 FY25 earnings call. I shall now take you through the key financial highlights. Please note, these are all on consolidated basis, and analysis is based on year-on-year comparison. We are pleased to report a strong recovery in revenue, reaching INR 201 crore, marking a 22% growth. This was boosted by the volume growth in base business and healthy contribution from BuLi Chem, which is now part of the Neogen Chemicals standalone. Organic revenue for the quarter stood at INR 177 crores, reflecting an increase of 36%, while inorganic revenue witnessed a 29% decline, amounting to INR 24 crore. Both bromine and lithium raw material prices experienced a sharp decline during the quarter on year-on-year basis.
Adjusting for this fall, organic revenue would have been higher by INR 34 crores in Q3 FY25, while inorganic revenue would have been higher by INR 13 crores during the same period. EBITDA grew significantly by 71%, reaching INR 34.6 crore. This was driven by the improved plant utilization, operational efficiency, and lower employee costs. Despite pricing pressure, consolidated margin remained strong at 17.2%. Our profit after tax came in at INR 10 crores. This was tied by the strong operational results, coupled with favorable base effect due to one-time expenses recognized in Q3 of previous year. Ongoing Capex in Neogen Ionics led to increased depreciation and higher interest expenses on a consolidated basis. Domestic-to-export revenue mix for the quarter stood at 65 to 35%. This concludes my initial remark. I will now request the moderator to open the forum for Q&A session. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone 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. We'll take a first question from the line of Arun Prasad from Avendus Spark. Please go ahead.
Good evening, Dr. Harin. Thanks for the opportunity. So, Dr. Harin, you mentioned in your opening remarks that one of the customers is in the trial period of manufacturing electrolyte. So, without naming the customer for yourself, can you also tell me the status of construction of other key potential customers' plants and what stage of construction or near construction, and between them, what is our state of qualification with each of these customers?
Sure. So, as I said, one of the customers has started manufacturing in their giga factory. And in parallel, the second customer is also likely to start sometime in 2025. And there are at least two more customers who are likely to start by 2026, and another two more by end of 2026, early 2027. So, I think if we take, if you think of end of 2026 kind of scenarios, we expect at least five giga factories. Let's say the capacities they are targeting is between five giga to 30 giga range, which would be working, and maybe fifth one would be starting by 2027. Now, these are giga scale kind of customers.
On top of that, there are smaller companies who currently have plants like 100 mega or 1 giga kind of an ultimate because these are other capacities such as for, let's say, mobile phones, laptops, some drones, and some very specific lithium and battery applications, more niche applications which these guys are targeting. So, these customers also remain in contact with us. And many of these customers want to, they have just started consuming. Now, some of the customers, one of the challenges which they are facing is that they got the technology from an international partner, and some of them don't have the electrolyte recipes with them. So, at least their initial demand, unfortunately, they are forced to buy from with the international supplier at very small quantities.
But they are actively, because they are facing a lot of hurdles, because many times the material comes, if they are not able to use quickly, then it degrades, it creates issues with their performance. So, they are facing a lot of hurdles. So, we are right now working very actively with them to help them give an alternate electrolyte composition so they can basically, which is performing at least in our test similar or better, so that they can switch over to Neogen. So, we think gradually this switchover should start happening. And these smaller capacity customers will be permanent customers for our 2,000 KTA production in Dahej. And the giga customers, when they are beginning, when they require a few hundred metric tons, a few 500 metric tons per annum, in the beginning, when they are at 1 giga or so, they will start with our Dahej.
As they go to 4 giga, 5 giga, they will move to our Pakhajan facility. This is how we are looking at it. We feel as the trial production gets over, maybe towards the end of Q3 and early next financial year Q1, the electrolyte volume, once the giga factory starts, let's say minimum it requires like 500-1,000 metric tons per annum. That itself, one customer itself can fill 25%-50% of our capacity. We feel once that happens, we'll start seeing big jump, and each customer starting factory will give us one additional bump in our sales volume. I think the way we are right now, just when these first two customers, the giga customers who are starting in this year, they will be ready for a bigger volume beginning of calendar year 2026.
Around that time, basically Q4 of next financial year, we are also targeting our Pakhajan facility to come online. I think it is matching very nicely, and the customers are also very comfortable that they know the electrolyte they will not get stuck. The giga customers are happy. Wherever they need support in terms of figuring out their recipes, improving their recipes, either based on our expertise or using Mitsubishi's expertise, we are providing them. All the customers remain happy and very actively discussing with Neogen for their requirements.
Very helpful, Dr. Harin. Just similarly, can you also help us understand about the salt customers in the export markets?
Yeah. So, in the salt customers in the export market, as we had said earlier, that we had started that initial 200 metric tons per annum capacity, and in parallel, like 400 tons in which one section of that is making the intermediate and making some salts and additives on a trial basis. So, that is already commissioned, and the remaining is currently getting optimized. So, the quality is getting optimized. Now finally, we have achieved what is one of the toughest quality requirements of international customers. And this data we have recently shared with our customers. They are viewing at it. Once they feel that this production is stable, then they would basically come and do the audit. And in parallel, they might do some sample work, I mean, from this commercial stable final optimized process.
So, once those samples kind of get approved and we pass the audit, hopefully in Q, I mean, in the current financial year or maximum by early Q1, then they would basically start buying. So, their demand is much bigger. And once they approve, we can very quickly achieve full utilization level. So, therefore, we also continue to keep increasing the capacity from 400 to 2,500. So, that also we are quite confident that majority of it will be online by June 2025, and some balanced residual capacity would be ready by September 2025. So, let's say, so we'll have the. Basically, what we feel that the existing 400 metric tons, once they are optimized, once we have the customer approval, they will fully start contributing from, let's say, Q1 maximum by Q2.
By Q2 next year, we would also have the remaining capacity up to 2,500 tons coming online in phases. So, in the second half of it, we should have that also fully available. To support our electrolyte production in Pakhajan, additional salt capacity also which is required to support that, that also will come online by, let's say, March 2025 in the next financial year by Q4. So, Pakhajan remains on track. In case of Dahej's electrolyte capacities, we are, again, the main challenge there is customer demand increasing. For the electrolyte salt, we have now achieved reasonably stable production, which data we've shared. So, once we get customer approval either this quarter or next, then we'll achieve full utilization very fast.
Just one clarification, Dr. Harin. So, the export customers with whom we are engaging, have all of them started their side of the plant?
Yeah, yeah, yeah. So, these guys are already buying from China. They want to start switching from China to us.
Okay. Understood, and this will be how many customers you are talking about?
Just approval, and then the demand already exists.
Okay. We are talking about how many such customers, Dr. Harin?
Overall, we have engaged with more than 20-25 customers globally, out of which four or five are active. For the remaining, we feel, like the discussions or the MOUs we have in place, can completely take our full capacity. We are not actively engaging. Our first focus is to focus on these customers. As our capacities come online and once we start regular business with them, then there are other customers also to whom we can approach. These four or five customers, we are working quite actively.
Understood. And just my final question on the Ionics business. You talked about the formula-based pricing a couple of quarters ago on these products. Is this now fairly accepted by the customers, or still you are having exposure to the open market?
So, the long-term contracts or the MOUs we have are all formula-based, okay? But those are the customers who will, like I told you, once the quality approval comes, once the audit comes, that business will kick in there. Till such a time, we are just basically right now trying to sell in the spot market or trying to sell the intermediate, right? So, till now, our salt, so again, finally, our salt as well as additive, everything together in nine months, we at least were in single digits. Now we are in double digits. So, that's the good news. Some of it is considered trial production, so will be adjusted as part of our CapEx. But still, at least in Ionics, we reach double digits. But most of this is intermediate sales to our competitors in China or some not very high-quality required kind of markets.
The long-term formula-driven market will basically kick in once those contract approvals come in place.
Great. And in a steady state, what kind of a long-term versus spot mix that we are targeting?
Most of it will be long-term because the long-term contracts we have can basically take care of our entire capacity, what we have planned.
Right. Right. Understood. Thanks for answering all the questions. I have a couple of questions, but I'll come up with the follow-up. Thank you.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at a time. You may join back the queue for follow-up questions. We'll take our next question from the line of Abhijit Akela from Kotak Securities. Please go ahead.
Yeah. Good evening and thank you so much. Just on the battery chemicals business, Dr. Harin, we previously had an expectation of doing somewhere around INR 50-75 crores of revenues this year, followed by somewhere around INR 450-500 crores next year, I believe. So, if you could please just update us on whether you think those numbers are still on track or could there be a little bit of slippage in terms of timelines?
No. So, I think for the current financial year, we expect there will be slippage, both because the electrolyte plant, the India's electrolyte demand, which was expected by us to pick up in the second half, is now going to start only towards the end of the year and early next year. That was basically from whatever our battery production or the cell production which was going to happen in India.
And on the salt side, because of this delayed approval, it would be more like somewhere between INR 20 crore to INR 25 crore, maximum up to INR 30 crore for the current financial year. And next year, we are still reviewing. The upper end still remains INR 500 crore based on the capacity. But depending on when these approvals come in, right, whether we get that in, whether we get that end of the current financial year or Q1.
Second is how fast the electrolyte demand picks up. Depending on that, it would be somewhere whether it will be 300, 400, or 300, 500. That's the range which we'll let you know by next financial year, like May, in the next quarter call. We'll have a better visibility on that.
Okay. Got it. And just the other one was with regard to some of the financials. So, one was regarding the other expenses, which seem to have increased quite significantly quarter on quarter. So, what's driving that? And if you could please also just update us on the debt position at the end of the quarter. Thank you.
Yeah. So, maybe I'll let Gopi answer this question. Other expenses compared to last, on a quarter-on-quarter basis, is on the higher side by around 7 crore. But this has been largely seasonal. Even last year on a quarter-on-quarter basis, it has gone up. The main reason being one is some Diwali bonuses to the workers. And also, there are some major exhibitions which happened during this part of the year. So, these two factors, along with a few one-timers, have contributed to this increase. So, this is something which is quite seasonal and has been there in every quarter, even in the past. Coming to the debt amount, on a standalone basis, my debt has been close to 450 crores. And on a consolidated basis, it is at 570 crores.
Thank you. I'll come back in the queue for more. Thanks.
Thank you. Thank you.
Thank you. Next question is from the line of Rohit Nagraj from BNK Securities. Please go ahead.
Yeah. Thanks for the opportunity and congrats on good set of numbers. First question, Dr. Harin, is in terms of feedback from the customers and time taken to, again, rework on the recipes. So, generally, how much time does it take for us to, again, go back to the quality that the customers are asking? And have we seen such kind of quality lapses, at least in the initial part when we have been sampling to the customers? Thank you.
Sure. So, Rohit, for electrolytes, we don't have any quality issues. So, whatever electrolytes we've been supplied, we are doing well there. There is no challenge on the electrolyte side. Electrolyte, as you know, is basically mixing the salt along with solvents, along with additives. What I referred to earlier was that some of the customers, they import the technology, let's say, from a Chinese, Japanese, or a Korean cell maker. But sometimes the cell makers, they also don't know what is the recipe of the electrolyte. So, till they don't know what is the recipe, we are actually helping them figure that out to find an electrolyte composition which is giving as good as what they are getting or even better. So, that is what I am referring to.
Now, that process and approval depends on the customer, and stringency can take any time from two to three months to even six months, seven months, but so far, wherever we have submitted our electrolytes to all the customers, the quality has been good and has been well appreciated. In fact, some of them found our quality is better as compared to even some of the Korean or the Chinese electrolytes which they imported, and again, they are all very keen to localize this in India, either because of their PLI benefit issues or because it's just very difficult to import electrolytes, even at small volumes, from internationally. Coming to the electrolyte salt, again, electrolyte salt, we are able to achieve the quality which is required internationally.
But we are trying to reach the highest quality which is required, which is the most stringent one, which is required for some of the best customers in the world. Now, that has already been achieved. We have already shown this data to our customers, and our customers are currently evaluating. And based on that, they will further proceed. So, this was something which was expected. It was just something which took a little bit longer for us to achieve as compared to because it was the first time we were doing it, and there were some small learnings. But we have now incorporated those, and now we are able to achieve the quality which is required. So, we are now waiting for the final customer go-ahead, where the customer will come to evaluate the final modified because any change has to be validated by them.
So, the final modified process or the improved process will come and validate, and then the commercial field can start.
Sure. This is helpful. Second question is in terms of the overall capacity. So, the 400 MTPA electrolyte salt additives plus 2,000 metric tons of electrolyte, how much of this capacity will be utilized for the domestic market, and how much of this capacity is likely to be there for the exports market? And as I understand, MUIS's electrolyte, the entire capacity is supposed to be for the domestic market because I think the electrolyte, it does not make sense to export to any other geographies because of the composition. Thank you.
Yeah. You are absolutely right. So, the electrolyte capacity of 2,000 and 30,000 is largely targeted for the domestic market. Maybe some small quantity in geographies where there is no niche electrolyte producer, where small niche guys don't have an option. That's where we might export a little bit. But I would say 95% would be domestic, only 5%, if at all, would be exports in case of electrolyte. When it comes to electrolyte salt, look, we are the electrolyte makers, so we'll be the internal consumers, and the rest of all will be exports for the international market. So, we are having 400 now, which is going to become 2,500 by, let's say, next financial year. And then it is going to become 5,500 by the end of next financial year.
So, all of this, except for whatever is the electrolyte internal consumption, will be sold in the international market. And between four, five customers, which we mentioned, they can pick up this entire quantity. So, their consumption is there for this entire quantity. So, that's where it will be mostly exports. And then, as our electrolyte demand in India continues, most likely in the future, we'll have to add capacity both to keep meeting the increasing demand of the international customers as well as our increasing internal consumption.
Yeah. This is helpful. Thanks a lot. And all the best.
Okay. Thank you.
Thank you. We'll take our next question from the line of Jason Soans from IDBI Capital. Please go ahead.
Yes. Sir, thanks for taking my question. So, my first question is, I mean, sometime back, you did mention that steady-state realizations for electrolytes, I believe, was around $8-$9 per kg, and lithium salts around $28-$35 per kg. I understand that. But what's happened in the interim is battery-grade lithium carbonate has witnessed a steep decline. It's gone from around $15,000 per ton to around $10,500, around that in that range itself. So, I just wanted to know, with the raw material price seeing such a sharp decline, what would the steady-state realizations for both these products be?
I still believe that, and even recently also, when I talked to lithium companies, the lithium companies expect the stable lithium price to be between $15-$25. What do you mean as a steady-state? Current price is not sustainable because the majority of the new miners are not able to make money. So, if the situation doesn't change, they will stop production, and then you will have another supply-side shock. So, steady-state people expect to be between $15-$25, $20 being the average lithium carbonate or lithium hydroxide price. And the range is what we had given is keeping in mind $15-$25 lithium carbonate kind of price range. So, all the guidance we had given, we had given based on steady-state, not based on large numbers, right? So, they continue.
Yeah, I mean, if the price remains what it is today, then let's say maybe electrolyte could be cheaper by about $1, $1.50, depending on the raw material. Not only lithium, but other salt and solvent and other additive demands are also prices are also lower. So, depending on that, we again don't worry too much about that because we are more focused on the absolute EBITDA or absolute ROC, what we are basically focusing on. So, that remains what we have guided, and that remains our main focus. So, depending on the price fluctuation, EBITDA percentage or those numbers can change. But our CapEx doesn't change because of that, except slightly for working capital adjustment. But otherwise, the majority of the investment remains the same. And therefore, the absolute EBITDA or margin that we are targeting also remains the same.
Yeah. Sure, sir. Sir, actually, my question was just emanating from the fact that if the raw mat decreases, then the absolute EBITDA also, if the realization comes down to the absolute EBITDA also goes down, that could hamper some of the positions. But you are saying that probably you expect the lithium carbonate prices to revert back to mean levels going ahead. And so, fair thing. Now.
Sorry to stop you. Also, the contract is such that the raw material price increase or decrease is a pass-through. While the percentage will change, but let's say per kg or per dollar, whatever our contribution that we are looking for, that does not change. It only changes that we have projected that when we do 30 KTA plant, what will be my operating cost, what will be my utilization levels. As long as I'm able to achieve those operational numbers, the absolute EBITDA will not change.
Yeah. Sure, sir. Okay. So, my next question is, I mean, we have again spoken about it. I understand that electrolytes, they need to be domestically procured as it's not feasible to transport being a voluminous in nature. But again, just from this perspective that raw mat prices, lithium carbonate, they have seen such a sharp decline. So, do you see a significant risk from China import of predatory pricing for the electrolytes?
Like I said, even some of the customers who are also currently getting small volumes from China or Korea because of the reasons I explained to you earlier, right? They are all very actively having even if they are getting even if they are running a 10-megawatt or a 50-megawatt-hour plant, still it's such a big headache that they are just actively working with us to basically localize it. It is a big pain. Also, there are many hidden costs that when you bring it and suppose if the material has gone bad, so either your performance of the cell goes bad or you have to discard that electrolyte, which is also not very easy to do, by the way. Because of that, people do want to change. That remains a very clear view. Already, China is doing predatory pricing.
But when we look at our 30K, 30 KTA, and we look at China, then we look at further logistic costs in bringing those containers, sending it back. And then, if you further factor in customs duties which are expected to come in beyond 2026, so I think when you factor all of that in, most customers can clearly see value in a local supplier.
Okay. Sure, sir. And finally, sir, just wanted to ask from a related standpoint only. Now, in the two-wheelers and the Ola's of the bikes, etc., I believe these fully imported battery packs are being imported from various players like LG or Panasonic. So, these fully imported battery packs are being imported from China or from whichever geographies, most are from China. So, could that be a risk? I mean, if they continue to be imported at a cost-effective price for fully imported battery pack, could that be a risk to our battery chemical business by any chance?
Sure. So, just a clarification. So, most of the companies like OLA, etc., they are not importing full battery packs. They are basically importing the cells. And the battery pack is mostly made internally. Some of them might be importing the battery pack, but most of the battery packs get made in India. Only the cells get basically imported. In any case, I mean, in both the cases, the main issue is, would these companies directly import cells and not make it in India? So, there are two parts, right? One is there is a PLI. So, that was the whole reason for the PLIs, where at least there is OLA and there is Reliance, two of whom basically have very large 20, 20 giga kind of support from the government. So, this is one aspect.
Then, in the past, the government was very clear that once cell production will start in India, there will be customs duties, there will be BIS standards. So, those kind of things will come. Right now, they are not there because there are no manufacturers to basically take care of the requirement. So, I think that is what is something which is very clear to all cell producers that government definitely wants localization. On top of that, for many of Indian customers, if you look like, for example, Tata has internal consumption. They have plant Tata Agentas, right? OLA has plant its own OLA giga factory. So, many of these have internal consumption, right? So, even from a strategic point of view, batteries are the new engines of vehicles. That is where your performance from one car to another car changes. I mean, one of the key factors.
Most of this, even from a strategic, from innovation, from design point of view, they want to internalize it. That's the reason why, as I mentioned, there are at least six or seven companies actively working to set up capacities ranging from minimum 12-13 giga to 30 giga in the next three to four years. I think none of them are worried about cells coming from China at very low cost. Of course, they want to reduce the gap. They want to be as competitive as possible. But at the same time, they know this is something required local production. There's a very clear government policy and mandate and also their own requirement to localize it.
Sure, sir. Thanks for answering all my questions.
Thank you. We'll take our next question from the line of Barker from Ambit Asset Management. Please go ahead.
Yeah. Good evening, sir, and congrats.
Thank you, Bhargav ji.
We have lost the current participant. We'll move on to the next question from Arshit Joshi from Nuvama Institutional Equities. Please go ahead.
Hi. Good evening, sir, and thanks for the opportunity. Sir, earlier we said that over the next maybe two, three years, we do expect giga factories in the range of, let's say, somewhere around 5-30 gigawatt hours. I just wanted to understand why these giga factories are being set up for the first time in India by most of them. I think some of them already have it, but a large part of this will be by newer companies and new capacities, so while they put up the capacity, how is their own ramp-up time? I'm sure there's going to be a learning curve involved in that.
While they ramp up their capacities, how does it affect our own demand dynamics, including the ones that you mentioned before, the ones maybe you are importing already and are unable to figure out what kind of recipes to use in the existing set of battery cells? We are trying to figure out how to replace them or to create an equivalent grade of what they are using. What challenges do we foresee in the OEMs who wish to ramp up the capacities over the period of, let's say, three to four years?
So, I think each battery maker will have their own learning. And like I said, one of the approaches that when they are learning in the initial smaller volumes, we can take care from Dahej. And as their volumes stabilize and become bigger, we can take it to Pakhajan. So, kind of Dahej becomes a more flexible startup plant. But Pakhajan, hopefully, the newer site that we have is kind of fully ramped up and is basically working with customers where we have very strong clarity of demand and basically can work with a lot of clarity and with good operational efficiencies. See, each customer is aware of these challenges. They keep some time. They keep some learning time for that.
And of course, when the first factory happens in India and after that, when the second happens, third happens, within country, also a lot of knowledge and the learning which keeps coming in, which helps make the second one better than the first, third one better than the second, and so on and so forth. So, I'm sure we will do a better job there. Of course, each customer has their own strategy. One of the customers is going to have a whole set of team who will be running their plant for six months. So, the experienced guys will come and they will run the team here for six months. So, there are many such strategies to basically reduce the timeline. And I feel, yeah, I mean, see, the way I see it, 2025, the demand will depend on that. Maybe 2026 in the first half.
But after 2026 second half, there will be ramp-up happening from existing guys, which will be more predictive, right? Because when, let's say, somebody starts with one giga, maybe the first giga is tough, but then one giga to five giga is smoother, and five to 20 is even big smooth, is even more smoother. So, I think there will be ramp-up which will be happening, which will be more predictable. So, I think, yeah, we'll have some pain in 25 and 26. But I think second half of 26, 27 onwards, we should be good. And with the giga factories which are coming and the position in which Neogen is, we are quite confident to achieve FY28 or FY29, the guidance which we have given for full utilization of our electrolyte plant. Because you can appreciate, right?
I mean, it's only going to be able to serve only 30 giga. So, all these customers, six or seven customers are coming at 10 giga plus kind of volume. That is something which will be very easy to fill, let's say, by FY28, worst case FY29, the way we had predicted.
Sure, sir. I've got a few more, sir. Second one on the long-term contracts, I mean, that we at least can start as one day. With the kind of movement that we have seen in lithium carbonate and lithium hydroxide, while they are stable probably now, we have seen a haywire cycle of that maybe in the past during COVID. Of course, it might be completely abnormal at that point in time due to various reasons. But these contracts, I think, ideally, I think the endeavor will obviously be to have our per kg or per ton margin protected. How do we foresee these kind of challenges while we speak to our customers for a higher volume sale to a particular OEM? How do we have any understanding of this particular design with the long-term contracts?
No, so I think most of the, at least customers, especially the ones which are OEMs, which have self-consumption internally, they prefer this model because they know lithium price and commodity price are going to go up and down. And just think if you are an automaker or something, you have seen steel prices also fluctuate. And this is what they like. When they work with their tier one, tier two vendors, they want those vendors to have a pass-through on the material cost and basically focus on efficiency in the conversion cost or things like that. So, I think that's the model, especially where you have internal consumption of the cells. Those customers really appreciate that, and they are okay with it. So, I think we've not seen so far challenges. So, some, we have already signed MOU while we've not started getting the POs.
But the MOUs or even contracts that we have signed, in those contracts, the raw material price is a pass-through. And with others, while we have not signed the contract yet because the customer demand is crystallizing, but as a principle, they also expect a pass-through pricing. We've also shown data that if you go back four years and you have a pass-through price versus you have a spot price, actually, the pass-through price, the customer saves money because in the spot, you go with crazy lows, and then you go with crazy highs. So, the crazy high is more than make up for the crazy lows. So, on a stable basis, the pass-through is good for the customer because they have seen that they can get more value out of it, and they save money over a three-year, five-year kind of period of time.
And that's what most of the OEMs are looking for. So, we have had success so far in whatever two, three contracts we've done. And the other people are not averse to that logic. So, I don't see a big challenge there.
Sure, sir. I've got two very short ones. I'll squeeze both of them into one question. So, first, your thoughts on IRA? Is the narrative coming under threat by any chance, given the incumbent president and import tariffs that we are stirring? Second, this INR 300-500 crore revenue band that we are speaking of on the Neogen Ionics business for the next financial year, how would that split be in terms of salts and electrolytes? That's it from me. Thanks a lot.
So, I think on the IRA side, see, again, each government.
Go ahead.
Sorry again for the drop. I think on the IRA side, look, each government will decide on their own what is best. If you look at from a policy on one side, there is a discussion about IRA getting changed, modified. On the other side, there's also a threat to put more customs duties on China than what are already in place. We've basically asked our customers, "What do you feel about it?" They said, "Had an IRA or no IRA?" I'm talking of the international customers. Just from a supply security point of view, also, we want to have an alternate because we can't depend 95% on China. Many customers are even 100% dependent on China. They definitely want an alternate.
My view is that, considering the consumptions which my customers have and the contracts which they have done, none of them have said that, "I'm going to require less." So, I think whether IRA, whatever modified avatar of that, or once the dust settles after whatever customs duty modifications, etc., happen, the customers definitely want it. Depending on how finally, when the dust settles, how the IRA looks like and how the customs duties look like, that will just mean how fast we need to grow our salt capacity for the international market. So, the speed and how much more is a question. What we are planning today is, in my view, not a question irrespective. And that's what the customers, even just in our Pharma Agro, we kept using China plus one kind of ton. Just that China plus one, our existing capacity is bare minimum required.
Maybe even on a China plus one, we would need more. If there is a stringent IRA, then we would need much more. So, that's my view on that. It's a little bit difficult. So, the 300 to 500, the range of how much will be salt and how much will be electrolyte, it depends again, as I said, one of the variables is how much electrolyte will be needed from India. We have a model where it can be 50-50, 50% domestic, 50%. But most likely, I expect salt will be heavier. We'll have more contribution from salt. But again, let me give you more color on this in our next call once I have more clarity from my customers.
Sure, sir. Thank you. All the best.
Thank you.
Ladies and gentlemen, we request you to restrict to two questions at a time, please. You may join back the queue for follow-up questions. Next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah. Thank you. Am I audible?
Yes. Sorry, last time you dropped out.
Yeah. Sorry. Sir, I was just looking at your PPT, which says that in electrolytes, you started supplying this 200 tons to four customers. But as against that, the electrolyte salt capacity commissioned is also 200 tons. So, is it fair to say that we are using external salt or everything is captive when we are supplying this electrolyte?
No. So, the salt that we have, the 200 tons will require only 40 tons of the salt. So, I mean, and again, we are also not using 200 tons fully, right? So, yeah, we are selling the salt capacity is still additional. So, if you basically say in terms of giga terms, the 200 metric ton electrolyte is 0.2 gigawatt-hours of LFP, NMC kind of mix. And 200 ton of salt is approximately close to around, sorry, around 2 giga. So, we still have extra salt capacity. And that is how we will be in this year and next year because this additional salt capacity is targeted for the international market.
So, this 100% electrolyte which we are supplying, we are using our own salt, right? That's fair to assume as of now.
We are still using some international salts, but that is mostly for one customer wants to have a backup. Second, we also retain the flexibility that if the international salt demand is much more, we can use for India purpose where there is still not IRA, so I think we are approving some other international sources as well, but yeah, I think the intent is to use maximum internal consumption, and then only if there is additional required, we will import.
In these trials which we are giving to four customers, so you mentioned that we need four to five customers to fill our capacity for electrolytes. So, these four customers whom we are supplying, is that part of the four or five potential customers we are looking to supply for filling our full capacity?
No, that four to five is for our completing our 30KTA plan, right? So, we don't even need four or five, maybe, but yeah. But those are different because some of them have not yet started.
Okay, so these four customers essentially are sort of fairly small customers.
Yeah, and the trial requirements of a Giga Factory.
Okay. Because then I was just wondering how do we scale that up to in FY26? Because if we are still not supplying trials, then confident that we'll reach that INR 300-500 crores of revenue which we are guiding for 26.
Yeah. So, again, we'll give more details. But like I said, the Giga Factory is likely to start regular production by end of this quarter, early next quarter. And also, more customers are approving us. Then in the second half of the year, you'll have a second Giga Factory also expected to start. So, all this will basically help us the electrolyte demand. And on the salt side, as we keep adding, the 200 metric ton will become 400, and then will become 2,500 by next year. So, that will allow us to add more salt capacity. And in Q4, the existing giga customer will also start ramping up, as well as the new giga factory also may have started or would be ramping up. So, together, we expect between 300 to 500.
Lastly, the gestation from trial to commercial sale would be how long, sir?
So, in case of electrolytes, we are already working with some of the customers from the beginning. So, then it's very smooth because when they are at KG level, they approve us KG. When they are at tens of KG, tens, then hundreds, then thousands. So, then as their capacity is ramping up right from the beginning, they are using us. So, then it's very smooth. And most of the customers, we are working in this way. So, for electrolyte, we don't see a separate gestation period for approval. Sometimes they do tell us that, "Send it to my partner internationally." Then it will, depending upon the cell, between three months to six months for the approval.
Great, sir. Thank you for answering all my questions and all the best.
Thank you.
Thank you. We'll take our next question from the line of Sabyasachi Mukerji from Bajaj Finserv AMC. Please go ahead.
Yeah. Thanks for the opportunity. Dr. Harin, first question is.
I'm sorry, Dr. Can you use your handset mode, please? Your audio is not very clear.
Yeah. Hello. Am I audible?
Yes.
Yes.
Go ahead.
Yeah. So, first question is, on the international customers, I believe in the last call itself, you mentioned that we have already supplied the trial samples. I believe that there is a slight delay probably in the approval process. By when we can expect the commercials to come in?
As I explained earlier, so we expect maybe in Q4 or early Q1, we should start getting approval. Then the commercials can start. So, let's say next Q1 or maximum by Q2, you can see the salt volumes to start increasing.
Okay. And any specific reason for this delay? I mean, because of the changes in administration in the U.S. or something like that? Or is it, I mean?
No. So, like I said, just we had to achieve stable production. When I say stable, it means continuous batches with uniform quality for the electrolyte salt. So, we had met for normal international customers, but what we wanted are our customers who have the most stringent demand. Those we had just started meeting. So, we had to optimize our production processes also a little bit. And now, with the data, the customer will restart the qualification process with this modified. Because any change you do in the process, they have to audit, approve everything again. So, that's what we are currently undergoing.
Got it, and whenever this Pakhajan facility comes online, will there be fresh, again, approval process, or how does it work?
Yeah. The approval process will be, again, fresh. So, that side also needs to get approved. But that's basically factored in in the time. When we said we will start by end of 2026, so we expect that trial production will happen. Electrolyte, I think, might be a bit faster because, like I said, existing customers in India will graduate from here to there. But for the salt, we will have to, again, see. Of course, we are now more aware of the quality, the modification in the processes have already happened. But again, it's a new site. So, currently, we estimate that we would have approval trial production and approval, let's say, by end of next financial year.
Got it. Second, on the domestic electrolyte, in the presentation on the commentary, I see that you have mentioned the major ACC battery manufacturers already started trial production. Any color on the timelines with their interaction with this specific customer that when probably they will ramp up and they will take our electrolyte in any timelines you can?
No, they are already taking our electrolyte. They need to take more of it, and as I explained earlier, that we expect maybe end of current quarter, early next quarter, their ramp-up should happen to more closer to a giga scale, so when that happens, then the volume of the electrolyte being sold to them will increase.
Got it. Lastly, Dr. Harin, on the base business, when do we expect the next set of CapEx, both on the BuLi and as well as the legacy part of the business?
So, we'll be presenting our budget proposal to the board in some time. So, once the board approves, we can share more numbers. We are seeing in BuLi good demand. So, I think that's one area which we are going to discuss on. By the way, it's no longer BuLi, so it's technically now Neogen Patancheru plant. So, in Neogen Patancheru plant, we are considering CapEx for increasing the capacity. But I think we are discussing internally with our customers. And once the board approves, we'll duly update on the same. And similarly, I think in our Dahej and Pakhajan facility, we are just doing some de-bottlenecking or for some different molecules, some specific equipment needed, but no major CapEx or capacity increases currently.
Karakadi.
Karakhadi. Sorry. Karakhadi and Dahej.
Okay. Gopi sir, if you can just disclose the nine-month cash flow from operations number, that would be helpful.
Generally, cash flow is not given in this December quarter, but one thing, I can just say it is substantially improved from what you saw in the September quarter, in the September results, so it's almost equal to, how do I say? It's close to.
Basically, it's on an improvement track.
Improvement. Yeah. So, we are maintaining the improvement you saw in the six months. That has continued in.
That is a very high accelerator .
So, it's continued in nine months also. So, yeah.
I mean, on the inventory thing, the elevated inventory level that we saw last year, those things are in place. That's the one concern that I had.
See, basically, since we have not disclosed the balance sheet in this quarter, it'd be difficult for me to tell you on those things. One thing I can tell you is working capital days have substantially improved. It is very much in line with the guidance which we had told last. There has been substantial improvement in the working capital days.
Okay. Thank you. That's all from my side.
Thank you. We'll take our next question from the line of Nilesh Ghuge from HDFC Securities. Please go ahead.
Yeah. Hi, Nandini. See, my question is on your standalone revenue guidance. You mentioned that you will reach to about 952 crores in FY26. If I look at the current run rate of nine months, so that means about 25-28% YoY growth in FY26 in standalone business. So, can you just tell me which end-user industry you see with demand? Because I hope this number is based on the normalized lithium and bromine prices.
Yeah. So, currently, the lithium and the bromine prices are a little bit on a lower side. So, we expect by next financial year, these prices will come back a little bit. I mean, even if they become normal, so there will be some contribution which is coming from there. Because as we showed, as compared to last year, of course, last year, if you look at nine months, lithium price still in the nine months was elevated. So, there is still a delta from there. But I think some will come. But majorly, we expect. So, we are seeing good demand. What we had said, so pharma has improved significantly. We are seeing good demand for organolithium. We are seeing bromine derivatives also do well. Agro has just started. So, in Q4, our contribution into agro. Sorry, in Q3, there was some Agro contribution, some more we are expecting.
So, we feel Agro will also recover. And as you said earlier, we have taken several steps in F&F and some other projects, as well as TSM business for flavor and fragrance and some industrial. So, overall, with that, we expect that we'll be able to target INR 952,000 crores. Of course, if the lithium prices and bromine prices remain what they are today, maybe they will be in INR 900-950. But on an absolute EBITDA basis, on INR 950, whatever we say, 18% plus minus 1, 1.5% is what we are expecting. Now, depending on lithium and bromine prices going up and down, it can be slightly lower, slightly higher.
Okay. And my second question is on your TSM business. What was the TSM business contribution in nine months FY25? And how is the traction in this business? And if you can talk about the long-term contracts, large-scale contracts with the Japanese and US-based pharmaceutical and other similar companies.
Yeah, so I think, again, the TSM business is at close to around 14% of our overall revenue. On a quarter-on-quarter basis, it's fluctuated between 12-15% in the current financial year. Again, we are targeting that in the next year, we can take it between 15-20%. This is actually contract manufacturing business. So, in line with what we are, only depending on how Agro improves, whether it will be Agro-heavy or whether. I mean, we still have right now Agro, pharma, flavor and fragrance, as well as some industrial and semiconductors. So, all five categories are contributing in that 12-15% business. But many of these are just trial productions which we did this year and the previous year. So, I think next year, maybe some of them will start stabilizing, and even year after, we should see even further growth in that.
But right now, we are focused on next year. We will be above 15%. 15-20% would be the TSM contribution is what we are expecting. I think the Bromine Derivatives will, today, it's at around 50%. And as a percentage, may remain between 40-50%. Advanced Intermediate is a little bit of a weak area, which might be 15%. Ideal target is 20%. But right now, it's more closer to 10-12%. So, we'll see. That depends on how China situation changes. Because right now, there's a lot of dumping happening both at the API level, which reduces the generic API demand, API production in India, and also some intermediates also which they sell very low. So, I think that's something which we need to watch on the Advanced Intermediate side.
But we are taking steps to actively , so the organolithium business can do slightly more than 5—we had said 50 to 100 crores. With the current run rate, we might be able to do slightly better than that. So, that might contribute slightly more than 10% to make up for it. And the inorganic lithium will be between 15-20% what we expected. So, I think more or less the only area or a little bit of a concern is the advanced intermediate, mostly because of low Chinese prices of API and intermediate which they are dumping in India. I think that remains the only area of concern. I think everybody, all other segments should be doing well. And as an industry-wise, pharma is doing good. We are seeing growth in the semiconductor application, flavor and fragrance. Agro, we are seeing slight improvement.
Started a little bit, but we still have to wait a little bit more to figure out how strong the recovery will be in the next year.
Thanks, Doctor, for answering my question.
Thank you. We'll take our next question from the line of Abhijit Akela from Kotak Securities. Please go ahead.
Yeah. Thank you so much. Just a couple of quick follow-ups. One is on BuLi Chemicals, would it be possible to share some metrics regarding the performance this quarter? I believe there has been some improvement.
Yeah. So, I think in BuLi also, we have seen growth. This year, particular quarter, even EBITDA was slightly better. But overall, if you see, it's in, like I said, it's still that 18% plus or minus 1-1.5% range, which I keep telling you, which depends on lithium price and other factors. So, I think BULI is now already reaching full utilization levels. In Q3, even Q4 is expected also full. And as we said, we've already gotten the central permission. EC has been received. We are just awaiting local approvals. So, if that happens, we are on track to double our capacity with very small CapEx. And that will allow us to grow this even further in the next financial year.
Would it be possible to just share the revenues for this quarter and the YTD?
So, ideally, BuLi has only one or two molecules. So, if I share revenue of that, it's almost revenue of that molecule. So, we'd like to keep it as a mixed basket if it's okay. Because it becomes direct information on how much exactly we are selling. But whatever we have said, full utilization will be between INR 50-100 crores. So, we remain in that range even for the current financial year. And next year, we will be more closer to 100 or even exceed the 100 if the approvals and everything comes in.
Got it. Thank you. And just the other one was on the battery chemicals business. Would it be possible to share the YTD revenues from battery chemicals we've got?
So, together, now we are into double digits in the YTD number. So, more than 10 crores. And we've guided overall at around 20-30 crores in the current financial year. So, that's what remains target for the current financial year. By the way, some of this revenue is from trial production, so might not be recognized as a revenue. So, the actual final balance sheet number could be a little bit lesser. But if I look at the actual sales which have happened, they are in that range.
Okay. Got it. Thank you so much. All the best.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
Thank you all for participating today. We hope we were able to answer your questions. Our investor relation team is available for any further questions you may have. We appreciate your time and look forward to speaking with you again next quarter. Thank you.
Thank you. On behalf of Neogen Chemicals, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.