Ladies and gentlemen, good day and welcome to the Neogen Chemicals Limited Q1 FY 2027 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 call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you and over to you, sir.
Thank you. Good afternoon, everyone, welcome to Neogen Chemicals Q1 FY 2027 earnings conference call. Joining us today from the senior management team are Mr. Anurag Surana, Non-Executive Chairman, Dr. Harin Kanani, Managing Director, and Mr. Gopikrishnan Sarathy, Chief Financial Officer. We will begin the call with opening remarks from the management team, followed by an interactive question and answer session. Before we begin, a standard disclaimer; certain statements made during today's call may be forward-looking, actual results could differ, and a detailed disclaimer is available in our Q1 FY 2027 earnings presentation, which has been uploaded on stock exchange websites. I would now like to invite Dr. Harin Kanani to share his opening remarks. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining us to discuss our Q1 FY 2027 financial results and outlook. I hope you had an opportunity to review our investor presentation. I will begin with key performance highlights and strategic developments during the quarter, along with progress of our growth initiatives. Following this, our CFO, Mr. Gopi Sarathy, will cover the financial highlights. The global chemical industry continues to navigate a complex operating landscape characterized by persistent geopolitical volatility, uneven end market demand, and ongoing redrawing of supply chain dynamics. While near-term macro headwinds persist, our core strength lies in how we navigate them with agility, financial discipline, and operational rigor.
Anchored by the deep domain expertise and chemical synthesis capabilities we have built over the past three decades, we remain focused on protecting core margins, supply reliability for our customers, and driving rapid progress across three growth pillars, particularly the battery material segment. Amidst this ongoing shift, I am pleased to share that Neogen Chemicals has delivered a strong performance in Q1 FY 2027, marking a solid start of the new financial year. This growth was driven by volume gains across our core business verticals, sustained customer demand, and our highest-ever quarterly revenue recorded in both organolithium and battery chemicals portfolio. Let me quickly summarize the key financials. In Q1 FY 2027, on a consolidated basis, we recorded revenue of INR 250 crores, registering a robust growth of 34% year-on-year.
EBITDA grew by 53% year-over-year to INR 48 crores, with EBITDA margin expanding by 260 basis points to 19.3%. Profit after tax stood at INR 17 crore, surging 67% year-over-year. Our base business demonstrated immense resilience despite ongoing global supply chain volatility, elevated shipping freight costs, and temporary overheads related to interim toll manufacturing arrangements. We have successfully initiated cost pass-through mechanisms with customers across key raw materials and input costs such as utilities, freight, and packaging to safeguard our operating margins. I will now provide key operational updates across our core operation and expansion projects. Dahej replacement plant and insurance recovery update. Reconstruction of a replacement facility of Dahej is almost complete. Trial runs are actively underway, with commercial production set to commence within current quarter, within Q2.
On the insurance front, cumulative recoveries to date stand at INR 164 crores, which is comprising of on-account insurance claims as well as salvage realizations till now. Our net claim receivable as on date stands at INR 186 crore on a consolidated basis, and we continue to engage closely with insurers to expedite final settlement against the same, followed by some additional recoveries under various other insurance policies such as loss and profit. Board approval on fund raise QIP to support our long-term capital requirement and prepare our company for growth opportunities coming future in the battery material as well as organolithium space. We decided to deleverage our balance sheet, and the board has approved raising of INR 600 crore through an issue of eligible securities via a QIP, subject to shareholder and regulatory approvals. Updates on battery chemicals and Neogen Ionics performance.
Neogen Ionics delivered a robust performance in Q1 FY 2027, generating INR 19 crore in revenue compared to INR 5 crore in Q1 FY 2026, and delivering over 50% of the entire previous year's revenue in just three months. Execution across our battery material facility remains on schedule. Commissioning for electrolyte is targeted for H1 FY 2027, and lithium electrolyte salts remain targeted for H2 FY 2027. Mechanical assembly for our electrolyte plant is complete. Trial runs are already initiated, and product validation leading domestic cell manufacturers is actively progressing. We have secured provisional approvals from four international customers for lithium electrolyte salts and successfully completed final site audits from all four electrolyte manufacturers. Commercial supplies will commence post final plant trial approvals with global cell producers accelerating their transition towards non-FEOC, non-PAP compliant supply chains to meet U.S. tax credit requirements by 2027.
Neogen is uniquely positioned to serve this demand with our partner with established technology from Japan. Our strategic partner, Morita, remains fully committed to their $20 million equity contribution towards the joint venture, which is expected to come during Q2 and Q3 of the current year. Turning to the macro environment, the key industry dynamics, our battery material strategy is strongly backed by Government support and proactive policy actions. Neogen, with our customer, remains currently the only gigascale example where the local supply chain has been established, which has been appreciated by various Government departments. The ecosystem is seeing accelerated momentum driven by the product ramp-up of ACC PLI battery manufacturers, as well as non-ACC PLI manufacturers, and further, the allocation of 10 GWh ACC PLI re-bidding tranche and Government's proposed PLI scheme for battery components, which will be pivotal in incentivizing raw material localization.
According to the Ministry of Heavy Industries report, domestic battery demand is projected to surge from already 33 GWh last year to 92 GWh by 2027. Eventually, we will be reaching more than 200 GWh by 2032. Out of that total, almost 63 GWh currently under development in India and further expected to be commissioned. Out of this, 30 GWh is expected commissioning in 2026 alone. This rapid scale-up underscores the expanding market opportunity ahead for us. We position Neogen Ionics to serve both domestic requirements and global non-FEOC, non-PAP demand. FY 2027 represents a strategic turning point for Neogen Chemicals as our CapEx transition into revenue generating assets. With the rebuilt Dahej Plant coming back online, Neogen Ionics scaling rapidly and our strategic position as a trusted non-FEOC partner gaining strong global traction.
We are set to capture expanding market opportunities across both specialty chemical and advanced battery materials. Backed by solid customer demand, improving operational leverage and disciplined capital allocation, we are happy to improve our standalone guidance from INR 875-950 crore to INR 950-1,050 crore in the revised range. We remain fully committed to disciplined execution, expanding our market leadership, and driving sustainable long-term value for our stakeholders. With that, I hand over the call to our CFO, Mr. Gopikrishnan Sarathy, to walk you through the financial highlights.
Thank you, Dr. Kanani. Good afternoon, everyone. I will now take you through the detailed consolidated financial performance for Q1. Please note all the comparison are on year-on-year basis. Revenue from operations stood at INR 250 crore, up 34% from INR 187 crore in Q1 FY 2026. The revenue trajectory was anchored by strong volume led by organolithium, inorganic chemicals, and battery chemicals. Across our operational verticals, organic chemicals generated a revenue of INR 194 crore, reflecting an 18% growth. While inorganic chemical segment delivered a standout performance with the revenue surging 158% to INR 57 crore. Gross Profit rose by 37% to INR 117 crore, reflecting an optimized product mix and cost pass-through arrangements. EBITDA stood at INR 48.2 crore, registering a growth of 53% from INR 31.5 crore in Q1 FY 2026. EBITDA margin expanded substantially by 260 basis points to 19.3%.
Margin expansion was achieved despite temporary expenses related to Dahej Plant rebuild, job work related expenses, initial expansion cost at Neogen Ionics, and freight spikes. Depreciation was higher at INR 8.2 crore, up 42%, due to smaller CapExes which we had added during the year. Finance cost stood at INR 20.8 crore, up 64%. The increase in finance cost reflects the higher debt drawdown to fund the ongoing CapEx at Neogen Ionics, increased working capital intensity due to supply chain inflation and temporary holding costs, pending the insurance claim disbursement. Profit After Tax reached INR 17.1 crore, growing 67% with PAT margin of 6.8%. Looking ahead, as a replacement, Dahej plant begins the regular commercial operation and NIL capacity scale-up through H2 FY 2027. We expect the operating leverage to improve significantly alongside normalized cost structures. Operating performance will be further bolstered by pending insurance claim recovery.
Additionally, our proposed QIP fundraise up to INR 600 crore will provide a substantial financial flexibility, allowing us to optimize our debt profile and also create a headroom for future growth. I'm also glad to share further for FY 2026, we are publishing our first integrated annual report
This report incorporates our business responsibility and sustainability report, BRSR, along with reasonable assurance report. Moving to the integrated framework reflects our deep commitment to transparency, higher governance standards, and long-term value creation for all our stakeholders. That concludes my remarks. I would now request the moderator to open the floor for Q&A session.
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from Asit Bhandarkar from JM Financial Mutual Fund. Please go ahead.
Good afternoon. Just wanted to understand the battery outlook in terms of chemicals. How big can this opportunity be in five years' time, and what would it be as a proportion of our business in that period of time? One. Second is that we hear that battery technology is being restricted by China. Is it realistic to assume that the growth will take place the way we anticipate?
Sure. Thank you for your question. When we are thinking of battery, Neogen as a policy talks about what revenue guidance we can give based on CapEx, which is currently underway. The current CapEx that is currently undergoing can cater to give us a revenue of around INR 2,400 crore-INR 2,900 crore, depending on the lithium prices ongoing, and we expect to achieve this by FY 2029. That was the target for full utilization, which we had taken. If we are talking of two or three years period, we expect around INR 2,500 crore-INR 2,900 crore of revenue potential. This is mostly taking care of only 30 GWh of, let's say, electrolyte demand and then a little bit, around 5-10 GWh of salt, which is being sold internationally.
That is what the current capacity is fully designed for, around 40 GWh of salts and 30 GWh of electrolyte. As we have shared in our presentation, that even today, around 60 GWh of electrolyte, cell production capacities are ongoing. And over five years, the government expects the total demand to be 236 GWh. The total demand is going to be approximately seven times of what we mentioned, just for India, for the sake of electrolyte. Also, we will be open to international demand. The demand is going to be reaching, let's say, if we are talking of five years, tens of thousands of INR crore in that range. If we consider both electrolyte for India and electrolyte salts and additives for the international market.
At present, Neogen has already taken a significant step to achieve INR 2,500 crore-INR 3,000 crore in the next two and a half years. In five years, it would be significantly higher. As a policy, once we make some investment decisions, then we can give a specific number to that.
Does this mean that our business, the way it will look is, about 60% will come from battery chemicals and 40% from other chemicals?
In other chemicals also, we have many growth drivers, our pharma, agro, CSM, future potential business in semiconductors. We've not given any long-term guidance around that. Yeah, five years down the line, it can be 50/50. It's a challenge to my regular business team also, that how they can keep up with the growth they will have in the battery space.
What about the change in battery technology, sir? How will we handle that?
You also mentioned about restrictions from China. Today, Neogen's electrolyte and electrolyte salt capacity, we are very fortunate that we have Japanese partners. Internationally, there is no dependency on China for Neogen in terms of technology, as well as we have our own homegrown technology also, and the Japanese technology further improved the same. We don't have dependency on China. Also, in terms of changing technology, lithium-ion battery remains one of the most efficient technologies currently. There is some discussion about shifting to the sodium-ion, that will be gradual and will be, in my view, only for some niche applications, for low temperature or very low cost kind of applications. However, lithium-ion batteries are right now the most efficient.
Having said that, in case of electrolyte, the way the sodium-ion technology is developing today, the same plant can also be used for sodium-ion. Between sodium and lithium-ion, there will not be too much impact on Neogen's operations.
Thank you, sir. Wish you all the best.
Thank you.
Thank you. The next question is from Arun Prasath from Avendus Spark. Please go ahead.
Hi, good evening. Thanks for the opportunity. Dr. Harin, if you can start with what is your current year guidance for the battery chemical business top line and margins, probably it will be helpful.
As we explained earlier, we are looking at a INR 300 crore kind of revenue for the current year for the battery business. We currently maintain the same. Most of this would be in the second half as the U.S. customers are expecting to shift from China to non-China or FEOC to non-FEOC suppliers from January onwards. We have already started some trial supplies and some trial sales towards these customers, and we expect that to ramp up, and we expect the shift to happen in Q3 and Q4. In terms of the other guiding factor for this is the increase in the ACC PLI, the cell production in India. Already there is one gigafactory which is started at a giga scale and now they're in the midst of increasing capacity. The second gigafactory also has started their trial production and expected to start commercial production soon.
There are two more expected to start before the end of the current financial year. I think with these four customers, depending on the exact time at which they start, we would be able to either exceed the production, but currently what we have done is that we've kept some buffer because last year we had gone wrong. We would like to maintain the same production, and if India ACC PLI, the cell production increases or starts in a very nice way or ramps up faster, then we might be able to increase from the current guidance.
Okay. Safe to assume that a large part of this INR 300 crore guidance is coming from the salt revenue rather than the electrolyte. If that is the case, and you also mentioned that most of the revenue main volumes will come from January 2027. Largely, the three months of salt revenue should itself will be giving this kind of a revenue. That's a right understanding?
We would expect sometime from November, December, the uptick would start because January is when they need to shift. Shipments from India will start in November and December. Of course, there'll be some sales before that also. We have currently approximately kept around INR 200 crore for the salt and INR 100 crore for the electrolyte. Of course, the electrolyte is subject to Indian ACC PLI exact production, how the plants ramp up and how they start. We have not considered any revenue from Pakhajan yet. We have set Pakhajan to come online in H2. The team is making efforts so that we can complete it by Q3. Any shortfall in electrolyte can be made up by additional salts, which we can get from Pakhajan in Q4. That's the way we've currently planned it.
In case if the electrolytes are on track and we are also able to deliver revenues from Pakhajan, then we would be able to outperform our current guidance.
Understood, sir. Just one more follow-up on the same topic. This INR 200 crore salt we are talking about, what kind of a pricing or salt pricing and electrolyte pricing and LCE pricing that we are building in based on which this number is coming?
Currently, we are considering like a we have a long-term contract with one of the customers, in this contract, the pricing is currently already fixed based on a lithium-based formula. The normal stable lithium price is expected to be $20 ± $5, so $15-$25. Currently, we are expecting like the current lithium carbonate prices are in that range. This is kind of like the stable lithium price between $15-$25, close to around $20 of lithium carbonate. Based on that, the salt pricing is currently derived, both salt as well as the electrolyte. Both prices are derived based on a stable lithium price. For us, lithium is a pass-through for both salt as well as electrolyte customers.
Understood. Of this INR 200 crores that we are talking about, how much do you think is you see from the firm order that you already have, kind of an order book kind of a business?
I think if we look at our contract, then based on the contract, everything is firm. As I explained in our opening remarks, that as the customers complete their qualification, so they've already completed, all the four customers have audited and approved Neogen's facility. Some of them are now ready to start purchasing slowly in Q2 as well as Q3. In Q2, Q3, they might require some special kind of a pricing. Some of them are doing a trial at a commercial level in the plant, and then they would start shifting. We expect this process to get over in Q2, Q3, so that towards the end of Q3 and in Q4, they are able to fully buy their requirements from us. That is currently the status with them.
Sir, you said something like a special kind of a pricing. What do you mean by that?
No, we have a formula. Special pricing, meaning, normally we expect once the non-FEOC requirement kicks in, so it will be completely formula-based price. Before such a period, they may want to have, okay, what is today's market price? The market price in China can be fluctuating every month on month. Depending on to secure some volumes in Q2 or Q3, it could be slightly lower than the long-term formula price that we have. As we move to the regulated supplies in Q3, Q4, then it would be based on the formula price, which we have taken for our consideration.
Current spot price is lower than the formula price, sir?
Yes. Current China spot prices are lower than the formula price.
Understood. Finally.
If you see last six months, a few times they were higher, few times they are lower, right?
Right.
It's a very fluctuating price. The difference between the formula price and the spot price is now significantly reduced as compared to what it was in 2025 and maybe some part of 2024.
Understood. One final question on the cash flow for this year. If you take the CapEx for this year, if you can guide for that number and what is the source, how you are proposing to fund those CapEx number, that will be very helpful.
Whatever is the balance CapEx left for Neogen Ionics, that will come from whatever the remaining debt that we need to still draw, because our contribution is largely done. Some bit which will be coming from Morita's contribution. Ultimately from our side, maybe only INR 30 crore-INR 40 crore as an equity contribution we would need to do towards the end of the financial year when we complete fully the CapEx and start getting ready for contributing for the working capital. From Neogen's side, there will be very limited contribution needed till the completion, because the financial closure we already received.
Understood. Sir, one final question on the legacy business. You increased the guidance for the legacy business. Was it driven largely by the underlying price increase or some kind of a capacity addition or a mix change? How should we understand that number?
What we have seen is our organolithium capacity, we hit our peak utilization level. As you have seen, when we took the plant, it was 10 tons per month active or 120 tons, and we increased the capacity two and a half times to 300 tons. Now in Q1, our plant was able to hit the full utilization already. Based on that, we are also considering to further increase capacity slightly by end of the financial year. I think it's largely driven by that. Also, when the organolithium business grows, in the past we explained that we can also get some by-product lithium, which we can recycle back, which also helps our inorganic lithium sales. Both these did very well. Based on the performance of the organolithium, and we're still seeing strong demand in the organic chemical space as well.
Considering that, we have revised our revenue guidance in the legacy business.
Sir, in the legacy business, what was underlying volume growth for the quarter and the last six months, if you can share, it'll be helpful.
When we are comparing Q-on-Q, last quarter we had just was the first quarter after fire, and still our job work, et cetera, were not in place. Of the total growth, around INR 15 crore came from increased prices related to lithium and other raw materials. The rest of it was completely volume build.
Understood, sir. Thank you very much and all the best for all your plans. Thank you very much.
Thank you.
Thank you. The next question is from Abhijit Akella from KIE. Please go ahead.
Good afternoon. Thank you so much. First on the INR 600 crore proposed fund raise, if you could please just help us with the proposed uses of this. Is it primarily debt repayment for the time being or also some CapEx that you are considering? If it is debt repayment, then by how much do we expect the finance cost to go down following this?
The board has right now approved the QIP, and we basically expect as a temporary measure, yes, it will be basically for debt reduction. The main purpose of this is that, we are seeing many future opportunities. For example, in my opening remarks, I mentioned the Government of India is planning battery material supply chain PLI, as well as after JV with Morita, we have also seen a very strong demand in the international market. We would like to be ready for the case. The current sort capacity that we have in place will cater to either the U.S. demand fully or our India demand. We have to be ready for a case where we need to take care of both. Of course, this is something which does not have to happen immediately, but as the business develops, we have to be ready for that.
We have to also be ready the way organolithium business is progressing, if we have to increase some capacity. We also want to get into the next phase of R&D, where from just making basic process, we need to invest into R&D where we are working on battery performance improvement by novel additives and novel electrolyte designs. I think to basically be ready for these and few other opportunities which are in front of us, the board decided it would be good to kind of deleverage the balance sheet and reduce the debt so that we are ready to capture any of these growth opportunities which are expected to present in front of us. That's the main guidance. I would ask maybe Gopi to comment how much the finance cost would reduce onwards.
At the maximum thing, I'd say at full INR 600 crore, if at all I repay around. It's just a max. If at all I repay, whatever crores I repay, you can just multiply with the interest rate, 8%- 8.5%. You can multiply it and take it as the interest saving.
So maybe roughly around-
If the entire thing is just repaid, roughly around INR 40 crore-INR 50 crore for the year, for the reduction annually.
That's right.
Once we start.
Got it. Again, this is subject to, like I said, if there are some other opportunities. Considering that, we will have to decide what is the final interest rate, see.
Yeah, sure. Number one, on the battery PLI component scheme that you spoke about, would it be possible to just help us understand maybe the broad contours of what might be offered by the Government? I mean, is it CapEx linked incentive? Is it OpEx linked incentive? How much in quantitative terms could Neogen potentially hope to benefit from it? Any expansion that you consider, because of all of these developments, what would the timeline to embark on such an expansion be? Do you have to do that by the end of this year or maybe sometime closer to, say, approaching optimal utilization of your current expansions?
Regarding the PLI scheme, I think this is still under discussion by the Government and while it has quite advanced stage, but not yet finalized. It would be not right for me to comment on that, because ultimately this is Government policy and only once the scheme has been published, we should basically consider it. The broad idea or the main intent of the Government is to support localization of the cell production. As we mentioned, the Government is seeing very high growth in the demand for the ACC PLI, the cells. Unless there is a local production, there will be a strong dependence on imports internationally. Any restrictions can restrict our plans to reduce dependency on oil through EV or through ESS storage.
Considering this as a very strategic area, the Government has already re-announced the bid for 10 GWh. To make sure that the entire 50 GWh ACC PLI there are recipients, they also want to increase the number of recipients. The revised scheme, the 10 ACC PLIs, is targeting two to three different players, minimum two to three, so that there are at least four or five PLI recipients. This is what the Government's current target is. To increase the competitiveness, because the Indian industry like Neogen and few others, battery material supply are just starting, competing against Chinese or other companies where already more than 100 GWh of capacities are available. Therefore, to give us some kind of a level playing for the initial, the Government is considering these options.
Any step by the Government would be helpful, whichever form, whether it is CapEx, whether it is OpEx. More important is the intention of the Government to support the industry and the desire to have the local supply. Of course, this was already part of the ACC PLI requirement, but now the Government is more proactively ready to support whichever stage, each and every stage, which is a positive sign for Neogen. In reference to your second, when the capacity increase would be triggered, I think we will be very careful in triggering this. Once we have a full visibility of the utilization of the existing, only after that it would be triggered. We have to appreciate that anything in the battery we do requires around 12- 18 months to set up the capacity, and then another at least 6- 12 months to qualify.
Therefore, we need to plan at least two years to two and a half years in ahead, whenever you expand the capacity. We will take a call based on that, currently there are no specific timelines. We just want to be ready so that if needed, Neogen is ready to basically take action in that area.
Thank you. These PLI incentives, would you expect to pass along to the customers, Harin Brother? Would you think maybe that the industry could retain them? That is question number one. Second was, some of these cell manufacturers in India, they have Chinese technology partners, like for example, Exide and Amara Raja. There is an understanding that maybe the technology partners might be asking them to use Chinese electrolyte formulations itself. In that context, how easy is it for us to break through with these guys with our Japanese formulation? In that context, how confident about the FY 2029 guidance for full utilization of electrolyte, or what exactly underpins the confidence over there?
Sure. Again, in reference to how the PLI benefit will be shared, I think it is too premature to discuss till the government actually comes out with the PLI scheme. What basically we expect is that it basically puts us at par, while electrolyte is a local required material, therefore it has to be bought locally. The ultimate aim is that when the customer is doing that, they are not paying a heavy price as against what are international prices. Basically, to remove the disparity between prices, which comes from time to time in international prices and India prices. That would be the first concern, to make sure that the customers receive a very competitive price in line with whatever is the global prices, so that the sales which they are making are also very competitive.
That is the main intention of the PLI, that would be the principle with which Neogen would work in basically sharing the benefit so that the customer is not having a financial penalty to basically purchase from Neogen once the government also gives us the support. In terms of technology, there is always a period where the cell producers have to work with the technology provider. That is usually three months, six months, whatever period. Post that, the customers are free to change over to a local raw material supplier. The PLI further makes it more possible for them to take that on a more active basis. When it comes for us, we have right now worked with five out of six of the large gigafactories which are coming.
We are very confident that we should be able to give them an electrolyte, which has a similar performance or better as compared to what they are using currently or what has been proposed by their technology partners. We are also working on the sixth one, where we can work together, but at least for the five, we have a clarity. Considering that, and considering the fact that just today in current and next financial year. Current financial year, almost four out of six gigafactories would start, and another two would start in, let's say, beginning of next financial year. It gives us enough time for them to reach at least 50%. The combined capacity of these people itself is more than 60 GWh. Even if they hit 50% utilization also, then also we would basically reach our full utilization target.
I think, normally it takes about a year for somebody to stabilize. The fact that two gigafactories have already started and others will be starting this year. We feel by FY 2029, they should be at least at 50% or higher utilization. There is already demand. The good thing is that the demand already exists, it is just the manufacturing needs to get stabilized. Even if they reach 50%+ kind of utilization level, then Neogen has a very strong case to reach full utilization levels. Further, this is just talking of local electrolyte. We will also have international salt business as well as some of the solvents also are now required under non-FEOC requirements of the 45X. The electrolyte salt additive as well as the solvent also can be sold internationally.
Any capacity, if at all unutilized when we sell internationally, we anyway achieve 70%-80% of the total value. Therefore, considering that, we are still confident that in FY 2029, as per our original guidance, we can hit the full utilization of INR 2,400 crore-INR 2,900 crore revenue.
Got it. Thank you so much. That is very helpful. Just one last thing from me, if I may, just two, three data points, very specific. One is the INR 19 crore revenue from Neogen Ionics this quarter, possible to break it down between salts and electrolytes? That was one.
Largely salts.
Largely salts. Okay. Thank you. Any inventory gains during the first quarter, given that gross margins seem to have gone up significantly despite rising raw material prices?
Indirectly, in a sense that we had some older inventory, but when we were selling it, we got some benefit out of that.
Possible to quantify that or?
Very difficult, sorry.
Okay. All right. Last thing was just, you mentioned that the guidance upgrade is largely due to the organolithium business, which I guess is clubbed within organic chemicals, right? Organic chemicals revenues have been largely range-bound between, say INR 180-INR 190 odd crores for the last four quarters. Whereas it is actually inorganic that has gone up very sharply in the last three, four quarters. If you could please just explain that a little bit.
Yeah. As I explained that the organolithium also supports the inorganic growth. The sharp increases as compared to the same quarter, let us say, on a year-on-year basis. If we are looking at a year on QoQ, consecutive quarters, this was already increasing. As we mentioned, we reached the full utilization. But even previous quarter also was 70%-80%. Yes, this is the time where our new capacity was fully utilized, we reached our highest revenues. Therefore, some of the organolithium capacity increase was already built in, let us say Q3 and Q4, and now we hit the peak. When you look at a year-on-year comparison, there is a sharp difference in organic because of that.
Thank you very much. Before we take the next question, a request to participants to please limit your questions to two per participant.
For follow-up questions, we request you to rejoin the queue. The next question is from Jason Soans from IDBI Capital. Please go ahead.
Sir, thank you for taking my question.
I'm so sorry. Just wanted to understand, first thing, I missed out on the revenue guidance for the base business. If you could just repeat that for 2027 and 2028, both. We clocked in around INR 826 crore in 2026. Just wanted to know what is the increase guidance for 2027 and 2028 just for the base business.
For the 2027 and 2028, you mean?
Yes.
Yeah. This year, target, we had originally given INR 875-INR 950. Based on the Q1 performance, we revised it from INR 950- INR 1,050 crore. We feel the base business should be able to cross INR 1,000 crore in the current financial year. For the next year, we had expected around 10%-15% growth. We've not given a specific number for FY 2027 and 2028, but we feel it will have at least a more than 10% growth because we are not doing any significant capacity as of now. The focus next year would be to stabilize the business, optimize the business, make it more efficient in terms of margins and in terms of working capital. In the base business, the next year focus will be to further streamline the business and optimize it.
At least with the same capacity, we feel we should get at least 10%-11% increase. We should be somewhere between INR 1,100-INR 1,200 crore kind of revenue for the next financial year. However, a proper guidance we will give more closer towards the end of the year.
Sure. Sir, this is assuming, the Dahej plant will be back on track, of course, and there will be a good smooth ramp-up going ahead, right? For the next two years, one or two years.
Yes. There will be a ramp-up in the current financial year, next year we want to basically work on better optimizing. Because once we have a full utilization, which is around that INR 1,000 -INR 1,100 crore, we start hitting INR 250 crore-INR 300 crore kind of quarterly revenues. The main focus will be on improving the product mix, trying to select for larger volume molecules, reduce the total large number of products that we have, right? Then focus on margin and working capital efficiencies, in the base business.
Sure. Sir, for 2028, what are we running for battery chemicals? You said INR 300 crore for 2027, 2028, what are we running for revenue for battery chemicals in 2028?
We have not given a guidance on that.
What we had estimated in the past is that, looking at, there should be a very strong demand for the salt. We should have a salt business at 70%-80% utilization level, and the electrolyte also would be between 30%-50% utilization level. We feel there is a very strong case for us to cross INR 1,000 crore. It should be something more than INR 1,000 crore, but the exact number, because all these businesses are just starting, it's better that we provide again towards the end of the financial year.
Sure. Thanks, sir. Sir, just one question I had. Of course, lithium-ion is a very well-proven technology. Now, I just wanted to know in terms of the silicon carbon batteries. That also is an evolving technology, in premium smartphones, et cetera, that's being adopted rapidly and showing good efficacy, longevity as well. Just wanted to know, in that technology also, our electrolytes and salts have the same usage, or is there any reduction or increase? Just could you give some color on that?
I think most likely when you are saying silicon carbon battery usage, what you are referring to is the anode side. The anode side usually is normally only graphite, but to increase the efficiency of the battery, people use a combination of silicon and carbon in the graphite. It's still a lithium-ion battery, but instead of just a traditional anode with a graphite, you are using silicon carbon graphite, it increases the efficiency and the performance. Yeah, the electrolyte mix changes a bit, the additive change a bit, but broadly it remains within the same contours where the same plant can make it, the same type of additives are used. Only the percentage is optimized a bit when you have this anode for the optimum performance.
Thank you. Before we take the next question, a reminder to participants to please limit your questions to two per participant. The next question is from Rohit Nagraj from 360 ONE Capital. Please go ahead.
Thanks for the opportunity. Sir, first question is just a clarification on the legacy business and battery chemicals business EBITDA margins for FY 2027 and FY 2028, I think I missed it.
I think we can provide you EBITDA margin. As we have said, in the current year, our base is 18% ± 1%, 1.5%. Mostly, once Dahej plant starts, we will have the job work related or such kind of expenses will kind of come down. Again, first quarter is very strong, but we expect that at least during the year, we can maintain the same guidance so 18% ± 1%, 1.5%. There will be some additional costs also, which would come online once Dahej plant comes. Maybe it's not fully utilized, so we would like to maintain the same margin. Next year, depending on how the global macroeconomic is, we would like to optimize the business a little bit better and basically have between, let's say, 18%-20% EBITDA margins for the next financial year.
18% ± 1% and a half for the current year. Next year, 18%+ , hopefully not minus, or 19% ± 1% kind of a range for the next financial year. This is for the base business. It's very difficult to give EBITDA for battery business. We would like to maintain 20% ROC on full utilization levels. In FY 2029, we expect a 20% return on capital on the battery business. Which would be, let's say, around INR 1,800 crore of CapEx and some working capital requirements. Based on that, you can estimate like an EBITDA at a full utilization level. Interim EBITDA percentage, because lithium price can fluctuate, different capacities would be fully utilized, partly utilized. Depending on that, it's very difficult to predict the exact EBITDA for the current and the next financial year.
Sure. This is helpful. Sir, second question is, this year battery chemicals, you said, the components will be INR 200 crore salts and INR 100 crore electrolyte. In case the domestic battery factories get delayed, then probably there could be a delay of business. Is that the right way of looking at it? However, the INR 200 crore salt business is largely in terms of the contracted-
I'm sorry to interrupt you, Rohit, but your line is breaking. We can't hear you clearly.
Maybe, Rohit, I got your question. As I explained earlier, that what we have done is that for INR 200 crore, we have just considered what we can do from our Dahej capacity, and we have not considered the Pakhajan volume. What we are trying, that in case if the battery manufacturing gets delayed, then we are not able to achieve the INR 100 crore revenue from our battery business, from the electrolyte business or we are falling short, then Pakhajan's contribution in Q4, we have not considered in this guidance. We hope with the Pakhajan contribution, we can make up and we can still achieve the INR 300 crore revenue.
Thank you. The next question is from Ankur Periwal from Axis Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. First bit on the salt side. Now given that we have some initial confirmations and success there with global clients, would it be fair to say that the ramps up in salt business for next year will be more or less, let's say, full utilization?
We are also targeting in the next financial year around 70%-80% utilization levels for the salt business.
Sure. Just related to it, any incremental salt capacity or even additive capacity as you highlighted earlier, how much time it will take for you? Whether from a basic infra perspective, largely things are in place, so it will be more modular or will it require a significant CapEx?
No, sir. It will require a CapEx, but we have kept a space from a timing point of view to add around 2,000 ton capacity salt capacity in Pakhajan and 500 ton capacity for additives in Dahej. Around 2.5 tons can come relatively faster. When I say relatively faster means 12-15 months kind of a period just to get the capacity online and then maybe approval takes another three to six months. Anything more than that, we have to start from a foundation level, so it will take longer time. Normal is, let's take 15 months up to 2,000, 2,500 would be around 15 months just to get the facility online, and then maybe another three to six months for approval. It is still an 18-24 months kind of a process from the time we decide to get-go.
Basically, it's very difficult for that to contribute in this or next financial year. Looking at once we have a clarity on FY 2029, we will have to plan sometime towards end of FY 2027 or early 2028 to basically take care of the requirements in FY 2029.
Sure, sir. Second bit on organolithium as well as the CSM part of the business in the standalone, the core operations. You said organolithium we are largely fully utilized as per the run rate of Q1. What timeframe are you looking at in terms of ramping this up? Secondly, on the CSM side, we had plans earlier to scale this part of the business up as well. What are your thoughts there in terms of timeline?
We would like to take a view because, while this quarter was the first quarter we hit full utilization, I think next quarter we would like to propose to the board about organolithium. Fortunately, it will be incremental CapEx, it will be less than INR 10 crore kind of INR 10 crore-INR 15 crore kind of a CapEx. The value will not be very high. Once we see the business visibility continuing for one more quarter, then we will basically go ahead and plan at least the initial capacity increase in the existing and then also maybe a long-term capacity beyond what we can do at the existing and the current site. That would be something which would be decided maybe at the end of Q2, but broadly in the H2 of the current year. This is on the organolithium side.
To answer your question on CSM, in a way, the customers are still interested. It's a very broad-based CSM where we have pharma, agro, semiconductor, some flavors and fragrance, as well as some specialty materials. We have four or five industries. The customers are committed, but in CSM, you are actually selling your capacity, not a product. Dahej was our flagship capacity for that. In absence of Dahej, we've not made any further progress. All the customers remain engaged once our Dahej plant restarts, and again, it's restarting with many improvements also, which we have incorporated based on our experience. It should be even more attractive for our CSM customers. Based on the outcome of that, we will see CSM business.
We'll have a better clarity in the CSM business in next financial year, where we wanted to have the customer do test one more time in this year, and next year would be where we would ramp up further. Depending on how this year and next year goes, will basically pave the path for increase in the CSM business. A dedicated investment to support CSM, I expect to come on board by FY 2029, FY 2030. That is when the CSM business will have a big increase.
Sure, sir. Just lastly, on the core working capital, you said peak utilization in 2028, after that we should see improvement or there should be some improvement in 2027 as well? That's it from my side.
No. 2027 also we would target. Once our Dahej plant starts and streamlines, you will see some improvement in FY 2027. In the first six months, it's very difficult because we are trying to manage this growth as well as getting a new site online. FY 2028, you should see a significant improvement in the working capital cycle.
Done, sir. Thank you from my side, all the best.
Thank you.
Thank you. The next question is from Deepak Poddar from Sapphire Capital. Please go ahead.
Hello, am I audible, sir?
Yes.
Hello.
Yes, we can hear you.
Okay, great. Thank you very much for this opportunity, sir. Just first off, wanted to understand on this battery chemical CapEx out of INR 1,800 crore, I think INR 1,300 crore we have already spent. Incremental INR 500 crore would be debt-driven, I mean, the incremental CapEx that we are likely to do, and this CapEx is likely to get commissioned by FY 2027 end in entirety, right?
Yes. I'm just asking Gopi to confirm that our INR 1,300 crore number is correct. Yes, the entire INR 1,800 crore would be completed by the end of current financial year.
This would be financed by debt? What would be your-
Debt as well as equity, which is going to come from Morita, and around INR 40 crore-INR 50 crore of equity that we need to still complete.
Okay. Understood. Then, sir, just wanted to understand on your working capital. In FY 2026, we were at about INR 860 crore kind of a revenue. On that, we required about INR 500 crore of working capital. Right? Hypothetically, in three years, FY 2029, if we have to achieve around INR 3,500 crore- INR 3,700 crore kind of a revenue, which includes your base business plus the Ionics business. Ideally, your working capital requirement might be close to what? INR 2,000 crore? Even if we assume some kind of improvement, that effectively means a INR 1,500 crore kind of a funding requirement. How are we going to do that? Can you throw some color on this too?
Sure.
Yeah.
Yeah. See, basically what we feel is that one thing which we've clarified from the beginning of the battery business, because the nature of this business is very different from our pharma agro, where we have more than 200+ molecules, and we have more than some 350-400 customers that we serve every year, and each customer has a specific specification. In case of battery business, we have contracts, we have firm demand, and we have, let's say, two or three salt and additive, some solvents and electrolytes. The complexity is much lower. From the beginning, we have guided that the working capital cycle should not exceed more than 90 days for this business.
Also for the base business, this was largely affected by some changes in demand in the last two years as well as the fire incident that we had. Long term, what we have is, by the time we reach full utilization, let's say by next financial year, which is FY 2028, we would be at around 140 days working capital cycle, which is stable. Beyond this, as we grow, our intention is to have larger molecules. Reduce or increase per molecule kind of business size. With that, it should further improve to maybe 110-120 days. In the beginning, first stage would be to reach around 140-150 days by next financial year. 90 days would be for the battery business.
Okay.
I think with these numbers, you would not need as much capital as what you currently estimate.
What is your expectation? I mean, at let's say a consolidated INR 3,500 crore kind of a revenue level, what sort of working capital would be required assuming all this improvement that you just spoke about?
I'm sorry, I can't do this math on the fly right now. If you take 90 days for let's say INR 2,500 crore kind of revenue, you take 140 days for around let's say INR 1,200 crore revenue, whatever number comes, minus what is today. It's something which has already been factored.
Okay. Understood. What's the peak debt we are looking at? I mean, considering this INR 600 crore also, you would look to repay the debt, right? By FY 2027, what's the debt level we are targeting?
Before INR 600 crore, the peak debt was around.
The peak net debt of INR 1,800.
INR 1,800 net debt.
Yeah. If the INR 600 crore is fully used, then it would be maybe INR 1,200 crore, INR 1,300 crore kind of, depending on how much gets used for other applications. It's not just this. We have also insurance proceeds, which is going to come, and hopefully working capital cycle also improves as we stabilize the plant. We will see. I mean, it should be below INR 1,500 crore for sure, more closer to INR 1,000 if everything falls in place. Broadly, I would say once the INR 600 crore is raised, it should be, let's say between INR 1,000-INR 1,500, like best case, worst case kind of scenarios.
Got it. That's very helpful, sir. That would be it from my side. Wish you all the best. Thank you so much.
Thank you.
Thank you. The next question is from Shivam Gupta from Trinetra Asset Managers. Please go ahead.
Hi, sir. Thank you for the opportunity. Hello, am I audible?
Yes, we can hear.
Yeah. I want to know, like beyond India, which international market do you believe offer the largest opportunity for battery chemicals? What edge does Neogen have in winning global customers?
I think U.S. is the biggest market here. One, in terms of cell production, where there is a restriction of not depending on a single country. I think currently after India, U.S. looks like the biggest market for us, or U.S. could be even bigger because the total volume or the capacity which is already existing there is much larger, and many Japanese and Korean cell producers are already active in the U.S. market. I think U.S. is the biggest. As I explained, the intention is to sell battery electrolyte components, electrolyte salt, lithium additives, and now maybe even some of the solvents, battery grade solvents. Together they constitute around 60%-70% or 70%-80% of the cost of the electrolyte. There are five major electrolyte makers in the U.S., out of which four have already approved our site.
Hopefully the fifth one also is interested once our Pakhajan site starts, because that's with a stable Japanese technology. Since that was a very short time, he says he will directly approve the same. Therefore, we would have access to all the U.S. customers through these four or five major electrolyte makers. The advantage of Neogen is that, let's say for example, we have some of the international partnerships. For electrolyte solvents, it's based on whatever we've designed with Mitsubishi technology or our LiPF6 is with Morita technology. Having established technology as compared to somebody who's just starting new gives a lot of confidence to the customers. I think that is the advantage that we offer. We can scale capacity relatively quickly as compared to other geographies.
We already have a site, the same site which is currently, let's say Pakhajan site is starting at a 30 GWh for salt and electrolytes, but has a room to go up to 100 GWh. Therefore, the incremental CapEx would be even more efficient as compared to somebody starting new. I think these are the things that we offer to our customers.
Okay, sir. Thank you.
Thank you. The next question is from Dara Shah from Northern Arc Capital. Please go ahead. Dara Shah from Northern Arc Capital.
Hello. Yeah. Am I audible?
Yes.
Yeah. Thank you. I have a question on Neogen Ionics. Since most of the Ionics revenues are currently coming from the ACC PLI scheme players, what happens to offtake if these customers miss their own PLI targets or slow down their production? The ACC PLI scheme has been slowing down a bit since its inception, is Neogen actively building a non-PLI customer base to reduce its dependency?
Just to clarify, as I answered one of the previous investors, the current majority of the revenue is coming from electrolyte salts, which is in the international market. Currently it's not that we are doing only for PLI customers. The second point is that the PLI is not slowing down, just the startup of the plants took longer than expected because battery cell production is a very complex plant. As I explained, and also in our investor presentation, that almost six companies which are building together 60 GWh of cell production capacities are coming online, have already come online or coming online in the current year or by next year. Once they come online, they will take about a year to stabilize. Just the starting capacity is two times of Neogen's existing installed capacity. Therefore, we feel like it's PLI or non-PLI.
Electrolyte has to be made locally. Neogen right now has the largest capacity with an internationally stable Mitsubishi technology. We are not just dependent on PLI benefits.
Okay. I wanted to ask that the liquid electrolytes have a limited shelf life, as I studied. How is management thinking about the logistics and lead times for exports if we are exporting electrolytes? Because it becomes difficult to export short shelf life articles.
Yeah. That's why we are not planning to export electrolyte. We will export electrolyte components such as electrolyte salt, additives, solvents, et cetera, which are stable. Electrolytes are for the local market.
Okay. I wanted to ask, with the consolidated debt to equity at 1.4 versus standalone at 0.68, Neogen Morita are now authorized to borrow INR 500 crore additionally. What is the peak consolidated leverage amount the management is comfortable with? When does the 600 QIP start de-leveraging the balance sheet rather than just funding more CapEx?
Yeah. I think, the Neogen Morita INR 500 crore approval is basically some of the loan which was already planned by NIL will now shift to Neogen Morita. It is not an additional debt. It is in line with whatever we had decided. Only part of it will shift to Neogen Morita, we wanted to have the approvals in place. Right? That is not increasing the debt. As we explained earlier, that once we complete, the peak debt should be somewhere around INR 1,000 crore-INR 1,500 crore, to begin with. Therefore, that would significantly reduce the debt equity ratios.
Okay. Sure, sir. The final question from me is, the electrolyte salt capacity long-term plan is to consume it entirely captively for in-house electrolyte production. We have a more room for merchant sale strategy for the salt itself?
It's both.
Like we're aiming to have a more merchant sale and a little bit on the in-house production?
No, no. We would like to do maximum in-house production, which would be in consultation with the customer. At the same time, we are already serving international customers, so they also remain our focus. Therefore, both are equally important for Neogen. The volumes can change from time to time, depending on how much is the demand in the local market and how much is demand in the international market. We'll keep monitoring that, then basically plan our capacities accordingly.
Thank you.
Thank you. The next question is from Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah. Thank you for taking my questions. Hi. Over the last five years, Neogen reported a very healthy cumulative INR 582 crore of EBITDA. On the operating cash flow, it has been a negative INR 93 crore number, even including the FY 2025 insurance inflow. Some of this clearly reflects necessary CapEx and CapEx cycle-related drag on the balance sheet. The question really is, what structural changes are required for at least 70% of EBITDA to consistently translate into operating cash flow, and when we might expect to see that kind of a conversion going forward? That's my first question. Thank you.
I think one of the points is that, when we start the battery business, our working capital cycle requirement there is significantly lower. 90 days as opposed to 140 days target in the base business. Of course, long higher, which has been the case in the last two, three years due to various difficulties we faced or challenges that we faced. In the base business, what we expect is that today, till we reach INR 1,000 crore and then we have a full utilization levels, the business model today requires around 140- 160 days of working capital cycle because of a large product mix.
As we get more into CSM molecules, where the single molecule is like INR 50 crore, INR 100 crore, or even our own target own molecules which are developing, we are targeting like a INR 1,500 crore single molecule. As we have more molecules of these type, then the working capital cycle further improve. Actually, this has been a challenge because last five, six years, Neogen has grown, and historically we used to keep as a de-risking strategy, no single molecule to be higher than 10% of the revenue. That was the internal target during our initial growth times. That number ideally was around, like five, six years back, it was around INR 30 crore per revenue. As today, once we are hitting INR 1,000 crore, we should have molecules which are INR 100 crore, like round about that.
So far, we've not been able to scale because these were largely going to come from agro and CSM business. Last two, three years, agro slowed down and the CSM business also took a hit because of the fire. I think once we are able to move to such large volume molecules, then the working capital cycle will further improve in the base business. On the electrolyte side, right from the beginning, we are targeting a 90-day conversion cycle, which should be more efficient. Whether it hits your 70% number or not, I'm not able to do the mental math right now, but at least it should be significantly better than now.
No, that's helpful, Dr. Kanani. Any sort of ballpark? Is it fiscal 2029 and thereafter? Looking at the pipeline, no one is sure about the agro cycle recovery in the industry.
Yeah.
From where you are and based on the CapEx that you have planned and the kind of working capital we expect, both on the Neogen Ionics and the base business, what is the first year you expect that the pain on the balance sheet and the cash flow to be behind and we could just be realistic? I understand it may not be 70%, it may be 60% or whatever. What is the first year we can see that, going forward, starting this year, we expect consistently positive operating cash flow?
I can't promise consistently positive cash flows because Neogen will always be growing. As I've said that we want that once we reach full utilization levels in this year, next year, which is FY 2028, we would want to optimize the business so that wherever we have, make some structural changes or select molecules which are more capital efficient or working capital efficient or margin efficient. That would be the target in FY 2028. FY 2029 is where you will basically have a full year with the optimized kind of a business. The future growth also which will come will be basically considering that. Then FY 2029 is also the year where you have a full utilization of our initial investments into the battery. Therefore, I think FY 2029 would be a very good year from cash flow conversion point of view for Neogen Chemicals.
Of course, battery represents a very strong opportunity. A free cash flow, operating cash flow, of course, would be positive, but free cash flow because depending on how much investment which we are doing at that point in time, for the battery or even for the base business would be right for a CapEx around that time, for future maintaining the growth. I'm not able to answer on that part, but the business would be very efficient from working capital standpoint by FY 2029.
Thank you. The next question is from Umang Khanna from Avana Investment Management. Please go ahead.
Hi. Am I audible?
Yes.
Yeah. First of all, thank you for the opportunity. Most of my questions are answered, but, sir, I needed one clarification on the salt bit. You have mentioned that we have a formula-based pricing which is dependent on the LCE, lithium carbonate pricing, and most of our capacity is booked by the customers. Sir, can you explain that how much this pricing is influenced by the spot pricing of the salts, and does that, even the spot pricing impact our contracted capacity that we have with our customers?
I think the spot price would be more till the majority of the customers are following the contracted price. It's only in the interim till we start supplying under the existing contract or we enter into similar contracts with some of the established players. Till such a time, and this is largely being driven by the requirements for having non-FEOC kind of a supply. Once we shift to that, hopefully majority of our demand should be met by that. Therefore, there is no dependency on the spot market. Similar thing we are also targeting for our electrolyte business, where we are not impacted by the spot market. Because spot market is very volatile, so therefore it's very difficult to do a business that way.
In the interim, till all these comes into place, we may have to sell for few quarters or maybe in the future, once everything develops, a certain percentage is spot market or/and certain percentage is contracted, currently the target is for everything to be under contracted terms.
This situation post 2029 only, right? Given the demand that we have.
No, post FY. Post FY, Q4, current financial year. By the time we hit current financial year, already there is a demand for a non-FEOC, therefore, sales starting the current financial year Q4 should be under the contracted base.
Sir, if I extrapolate this, are you saying that the U.S. customers that we have, they are okay to pay a little higher pricing to us compared to the China pricing, just we are a, what, a risk diversification or we are a backup supplier to them? How these thing in the pricing work?
What we would like to say is that not higher price, but basically like a fair price, which is a consistent, reliable price. For example, China prices sometimes are very low and sometimes extraordinarily high. Whereas here they will have a very predictable price which is only linked to lithium and the conversion margins are also more predictable. That is what basically they get, and we had seen a period of four or five years when we entered the contract where overall actually they were making more money over a three-year, four-year period with a contracted price rather than follow very low spot price and then sometimes exceptionally high prices in case of a shortage. I think that is the basic logic.
In addition to, like you said, this China-risk-free and a second backup supply, there's also a policy guideline in the U.S. where it's called Section 45X tax credit. To get this tax credit, a certain value addition or certain percentage of the supply has to be free from supply from Foreign Entities of Concern. In such a case, they need to have a non-China kind of a source. It's also for if they want to achieve the benefit they want from the subsidy, which they want to get from the government. It's kind of like a precondition for that, in addition to the backup and supply security.
Thank you. We'll take the last question from Jason Soans from IDBI Capital. Please go ahead.
Sir, thanks for taking my question again. Sir, just wanted to know, you did mention that organolithium did hit peak capacity utilization in Q1. I just wanted to know, is there any seasonality attached to this? I understand that probably the inorganic chemicals piece, which is basically related to HVAC cooling, that must have seen some seasonality impact. Just wanted to know in terms of organolithium, what is the exact reason for this demand picking up so sharply, and do you see this demand being sustainable going ahead?
Yeah. This is basically like in last one year. If you remember, we took this business sometime mid of FY 2024. I think when we took, the lithium prices suddenly decreased and there was some instability around that. Afterwards, in the next two years, we have worked to basically get ourselves approved in the international market. Also when we took over this business from the previous company, they had only one major product and only three or four customers. Now the customer base has been fairly diversified. After that, we needed the additional capacity. Additional capacity came online one year ago, and then during the whole of last year, we gradually kept increasing, reaching the revised capacity by end of current Q1. It's something which we've been working on for two years.
In fact, if you think when we took over the one year before, whatever was the volume which was sold, now we are selling every month. In two or three years, the demand, like what we've been able to generate with a diverse customer base, is almost 12 times. This is some of the advantage of having a bigger customer base and bigger product base where we are into with many customers. Once we go through the approval cycle, we can ramp up new molecules in the same industry much faster. That's the main driver for that. We still see stronger and stronger demand. More international approvals are coming. To keep up with that, we are adding more capacity.
Sir, just follow up to that. End user industry wise, sir, which is the biggest segment for organolithium? Will it be pharma?
Yeah. Today, pharma is the biggest segment. There is also use in agro, which is ramping up. There is also use in semiconductor, where we have just gotten approval and we are expecting more volumes. Then there are some other very specialty polymer type or specialty polymer type applications also where this is used. It's, again, multi-industry applications. Yeah, for as right now, pharma is the biggest driver, but pharma and semiconductor honestly are the two biggest drivers here. Agro is just picking up, and we are also working in other industries where we are expecting approval soon.
Sure. Thanks a lot for that, sir. Thank you so much.
Thank you very much. We'll take that as the last question. I would now like to hand the conference over to the management team for closing comments.
Thank you everyone for your time, insightful questions, and continued interest in Neogen Chemicals. Should you have any further questions or require additional details, please feel free to reach out to our investor relation team. We look forward to interacting with you again next quarter. Have a great day ahead. Thank you again.
Thank you very much. On behalf of Neogen Chemicals, that concludes the call. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.