Q1 2027 Navin Fluorine International Ltd Earnings Call

August 5, 2026

Speaker #1: Ladies and gentlemen, you have been connected to Navin Fluorine International Limited Conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, you have been connected to Navin Fluorine International Limited Conference call.

Operator 2: Ladies and gentlemen, you have been connected to Navin Fluorine International Limited conference call. Please stay connected, the call will begin shortly. Ladies and gentlemen, you have been connected to Navin Fluorine International Limited conference call. Please stay connected, the call will begin shortly. Thank you. Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited conference call hosted by MUFG. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Ms. Pooja Swami from MUFG. Thank you, and over to you, ma'am.

Speaker #1: Please stay connected. The call will begin shortly. Thank you. Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited conference call, hosted by MUFG.

Operator: Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited conference call hosted by MUFG. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Ms. Pooja Swami from MUFG. Thank you, and over to you, ma'am.

Speaker #1: As a reminder, all participants' lines will be listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded.

Speaker #1: I now hand over the conference to Ms. Pooja Swamy from MUFG. Thank you, and over to you, ma'am.

Speaker #2: Good evening, everyone, and welcome to the Q1 FY27 earnings conference call of Navin Fluorine International Limited. Today on the call, we have with us Mr. Rishad Mafatlal, Chairman; Mr. Nitin Kulkarni, Managing Director; and Mr. Aneesh Ganatra, Chief Financial Officer.

Pooja Swami: Thank you, Buddy. Good evening, everyone, and welcome to the Q1 FY27 earnings conference call of Navin Fluorine International Limited. Today on the call we have with us Mr. Rishad Mafatlal, Chairman, Mr. Nitin Kulkarni, Managing Director, and Mr. Anish Ganatra, Chief Financial Officer. This call will contain forward-looking statements about the company, which are completely based on beliefs, opinions, and expectations as of today. Actual results may differ materially. These statements are not the guarantee of our future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page two of the investor presentation of the company, which is uploaded on stock exchanges and on the company's website. With this, I hand over the call to Mr. Rishad Mafatlal for his opening remarks. Thank you, and over to you, sir.

Speaker #2: This call will contain forward-looking statements about the company, which are completely based on beliefs, opinions, and expectations as of today. Actual results may differ materially.

Speaker #2: These statements are not the guarantee of our future performance and involve risks and uncertainties that are difficult to predict. A detailed Safe Harbor statement is given on page 2 of the investor presentation, of the company, which is uploaded on stock exchanges and on the company's website.

Speaker #2: With this, I hand over the call to Mr. Rishad Mafatlal for his opening remarks. Thank you, and over to you, sir.

Speaker #3: Thank you. Good evening, everyone, and welcome to Navin Fluorine's Q1 FY27 earnings call. I am joined today by our MD, Mr. Nitin Kulkarni, our CFO, Mr. Aneesh Ganatra, and Ms. Payal Dave, our investor relations advisor.

Vishad Mafatlal: Thank you. Good evening, everyone, and welcome to Navin Fluorine's Q1 FY27 earnings call. I am joined today by our MD, Mr. Nitin Kulkarni, our CFO, Mr. Anish Ganatra, and Ms. Payal Dave, our investor relations advisor. I am pleased to share that we continued to execute our strategy with discipline while responding to the evolving business environment. Our performance reflects the strength of our differentiated business model, the resilience of our customer relationships, and our continued focus on disciplined execution. Equally important is the safety, health, and well-being of our employees, which remains a core priority, and we remain committed to maintaining high standards across all our operations as we pursue sustainable growth. As part of our long-term strategy, we are building a strong pipeline of advanced materials that can evolve into a high-growth, high-margin business vertical.

Speaker #3: I am pleased to share that we continued to execute our strategy with discipline while responding to the evolving business environment. Our performance reflects the strength of our differentiated business model, the resilience of our customer relationships, and our continued focus on disciplined execution.

Speaker #3: Equally important is the safety, health, and well-being of our employees, which remains a core priority. And we remain committed to maintaining high standards across all our operations as we pursue sustainable growth.

Speaker #3: As part of our long-term strategy, we are building a strong pipeline of advanced materials, that can evolve into a high-growth, high-margin business vertical. Our focus is on applications catering to sectors such as data centers, electronics, semiconductors, and defense.

Vishad Mafatlal: Our focus is on applications catering to sectors such as data centers, electronics, semiconductors, and defense. Leveraging our core fluorination chemistry expertise and strong R&D capabilities, we are developing differentiated solutions for global companies in these sectors. We have made significant progress in building our advanced materials business. Key achievements include the Chemours liquid cooling project, adoption facility of advanced materials, and a technology development partnership with DRDO. These milestones reflect our steady move toward commercialization. We remain positive about the long-term growth potential of this business and are continuing to invest in the skills, technology, and manufacturing infrastructure needed for future growth. These initiatives are expected to generate meaningful contributions over the medium to long term as customer adoption increases. Now let me brief you on these developments in detail. The adoption capacity.

Speaker #3: Leveraging our core fluorination chemistry, expertise, and strong R&D capabilities, we are developing differentiated solutions for global companies in these sectors. We have made significant progress in building our advanced materials business.

Speaker #3: Key achievements include the Chemos liquid cooling project, adoption facility of advanced materials, and a technology development partnership with DRDO. These milestones reflect our steady move toward commercialization.

Speaker #3: We remain positive about the long-term growth potential of this business and are continuing to invest in the skills, technology, and manufacturing infrastructure needed for future growth.

Speaker #3: These initiatives are expected to generate meaningful contributions over the medium to long term as customer adoption increases. Now, let me brief you on these developments in detail.

Speaker #3: The adoption capacity. The board has approved a new capex of 90 crores, funded through internal accruals, towards setting up adoption capacities for our advanced materials business.

Vishad Mafatlal: The board has approved a new CapEx of INR 90 crore, funded through internal accruals, towards setting up adoption capacities for our advanced materials business. This CapEx will cater to the pipeline of indigenous products for emerging sectors mentioned earlier. DRDO. We are proud to partner with DRDO, Ministry of Defense, Government of India, on a critical TDF project to develop an indigenous specialty material. By transitioning of this highly critical imported chemical into a localized asset, we are directly contributing to nation's strategic autonomy. This milestone underscores Navin's unwavering commitment to India's economic growth, technological capabilities, and the mission for Atmanirbhar Bharat. Together with DRDO, we look forward to engineering a more self-reliant tomorrow. Chemours project. Chemours project, which also form a part of this vertical, is targeted for completion by end of Q2 FY27.

Speaker #3: This capex will cater to the pipeline of indigenous products for emerging sectors mentioned earlier. DRDO. We are proud to partner with DRDO, Ministry of Defense, Government of India, on a critical TDF project to develop an indigenous specialty material.

Speaker #3: By transmissioning of this highly critical imported chemical into a localized asset, we are directly contributing to nation's strategic autonomy. This milestone underscores Navin's unwavering commitment to India's economic growth, technological capabilities, and the mission for Atma Nirbal Bharat.

Speaker #3: Together with DRDO, we look forward to engineering a more self-reliant tomorrow. Chemos project. The Chemos project, which also forms a part of this vertical, is targeted for completion by end of Q2 FY27.

Speaker #3: In addition, to the capex in the advanced materials, we have initiated, in our CDMO business, phase two CGMP4 capex of 125 crores, funded through internal accruals.

Vishad Mafatlal: In addition to the CapEx in the advanced materials, we have initiated in our CDMO business Phase II, CGMP 4 CapEx of INR 125 crores funded through internal accruals, expected to operationalize by Q4 FY2027. Phase II of our capacity expansion is supported by growing demand from our European CDMO partner and an expanded footprint in their supply chain. This CapEx was a part of the CGMP CapEx of INR 288 crores approved by the board in February 2024. Phase I of this CapEx was operationalized in Q3 FY2026. Let me now brief you on the ongoing CapEx across our existing business verticals. The HFC capacity expansion. The additional HFC capacity equivalent up to 15,000 metric tons of R32 remains on track for commissioning in Q3 FY2027. MPP capacity expansion.

Speaker #3: Expected to operationalize by Q4 FY27. Phase two of our capacity expansion is supported by growing demand from our European CDMO partner, and an expanded footprint in their supply chain.

Speaker #3: This capex was a part of the CGMP capex of Rs. 288 crores, approved by the board in Feb of '24. Phase one of this capex was operationalized in Q3 FY26.

Speaker #3: Let me now brief you on the ongoing capexes across our existing business verticals. The HFC capacity expansion: the additional HFC capacity equivalent up to up to 15,000 metric tons of R32 remains on track for commissioning in Q3 FY27.

Speaker #3: MPP capacity expansion: debottlenecking activities are the hedge MPP facilities are progressing well and are expected to be completed by Q3 FY27. A renewable energy project: an investment of 15.73 crores in a group captive hybrid renewable project for 14.9 megawatts of renewable power supports our sustainability and decarbonization goals.

Vishad Mafatlal: Debottlenecking activities at the Dahej MPP facilities are progressing well and are expected to be completed by Q3 FY2027. A renewable energy project. An investment of INR 15.73 crores in a group captive hybrid renewable project for 14.9 MW of renewable power supports our sustainability and decarbonization goals. Once operational, this project is expected to meet more than 60% of our energy requirements through renewable sources. Looking ahead, we are entering the next phase of growth with a strong pipeline of opportunities, multiple capacity expansion projects under execution, robust customer engagement, and a healthy balance sheet. While global macroeconomic conditions continue to remain dynamic, our focus remains unchanged, investing in technology, strengthening customer partnerships, maintaining capital discipline, and creating sustainable long-term value for all stakeholders. I would like to thank our customers, employees, stakeholders, and partners for their continued trust and support.

Speaker #3: Once operational, this project is expected to meet more than 60% of our energy requirements through renewable sources. Looking ahead, we are entering the next phase of growth with a strong pipeline of opportunities.

Speaker #3: Multiple capacity expansion projects are under execution, robust customer engagement continues, and our balance sheet remains healthy. While global macroeconomic conditions continue to remain dynamic, our focus remains unchanged.

Speaker #3: Investing in technology, strengthening customer partnerships, maintaining capital discipline, and creating sustainable long-term value for all stakeholders. I would like to thank our customers, employees, stakeholders, and partners for their continued trust and support.

Speaker #3: Their confidence and commitment remain the foundation of Navin Fluorine's success. Thank you once again for joining us today. I would now like to hand over to Nitin to provide an update on our operating and business performance.

Vishad Mafatlal: Their confidence and commitment remains the foundation of Navin Fluorine's success. Thank you once again for joining us today, and I would now like to hand over to Nitin to provide an update of our operating and business performance.

Speaker #2: Thank you, Mr. Advait. Good evening, everyone, and thank you for attending the call today. I'm excited about the progress in the advanced materials business and the capex announced today, which will unlock the growth potential of the business.

Nitin Kulkarni: Thank you, Vijay Beth. Good evening, everyone, and thank you for attending the call today. I'm excited with the progress in the advanced material business and the CapEx announced today that will unlock the growth potential of the business. Further, we are privileged to partner with DRDO in their drive for Atmanirbhar Bharat. Likewise, within the CDMO business, CapEx initiated today for Phase II signals a deepening of relationship with our European CDMO partner. The quarter reflects a robust performance, with all three of our business verticals delivering strong performance. The revenue of the quarter grew 44% YOY to INR 1,044 crores, and EBITDA stood at INR 357 crores, up 73% year on year, and PAT at INR 243 crores, registering a growth of 108% year on year. These results reflect the strength of our portfolio, the continued trust of our customers, and disciplined execution across the organization.

Speaker #2: Further, we are privileged to partner with DRDO in their drive for Atma Nirbal Bharat. Likewise, within the CDMO business, capex initiated today for phase two signals a deepening of relationship with our European CDMO partner.

Speaker #2: The quarter reflects a robust performance with all three of our business verticals delivering strong performance. The revenue of the quarter grew 44% YOY to Rs.

Speaker #2: 1,044 crores, and EBITDA to that Rs. 357 crores up 73% year on year, and PACT at Rs. 243 crores registering a growth of 108% year on year.

Speaker #2: These results reflect the strength of our portfolio: the continued trust of our customers and discipline execution across the organization. Talking about the business verticals, the HPP business continued to deliver a strong performance during the quarter, with revenue of Rs.

Nitin Kulkarni: Talking about the business verticals, the HPP business continued to deliver a strong performance during the quarter, with revenue of INR 530 crores, registering a 33% growth year-on-year, driven by healthy volume growth and improved realizations. The pricing environment of HFCs remains constructive, supported by favorable demand-supply dynamics. Our specialty chemical business has reported a revenue of INR 325 crores, registering a growth of 48% year-on-year. This business vertical continues to witness sustained momentum, supported by good order visibility across both existing and new molecules. The product pipeline remains robust, with meaningful scale-up opportunities across existing molecules and a strong lineup of new product introductions. Moving on to our CDMO business. The business continues to demonstrate strong momentum with improved visibility. Revenue for Q1 FY2027 stood at INR 180 crores, growing 82% year-on-year, with strong outlook for the year.

Speaker #2: 540 crores, registering 33% growth year-on-year, driven by healthy volume growth and improved realizations. The pricing environment of HFCs remained constructive, supported by favorable demand-supply dynamics.

Speaker #2: Our specialty chemical business has reported revenue of Rs. 325 crore, registering a growth of 48% year-on-year. This business vertical continues to witness sustained momentum, supported by good order visibility across both existing and new molecules.

Speaker #2: The product pipeline remains robust, with meaningful scale-up opportunities across existing molecules, and strong lineup of new product introductions. Moving on to our CDMO business, the business continues to demonstrate strong momentum with improved visibility.

Speaker #2: Revenue for quarter one FY27 stood at Rs. 180 crores, growing 82% year on year, with strong outlook for the year. Our CDMO strategy remains firmly focused on maintaining a balanced portfolio comprising of healthy mix of commercial, let's say, and early-stage programs.

Nitin Kulkarni: Our CDMO strategy remains firmly focused on maintaining a balanced portfolio comprising a healthy mix of commercial, late-stage, and early-stage programs. We continue to increase our participation across several promising therapeutic areas, including oncology, respiratory, cardiovascular, neurology, and animal health, partnering with leading global innovators. Overall, we remain optimistic about the growth prospects across all these businesses. Our strategy of disciplined investment, deepening and broadening customer relationships, and expanding differentiated capabilities continues to create a strong platform for sustainable growth. I would like to hand over the call to our CFO for giving you details on Q1 financials.

Speaker #2: We continue to increase our participation across several promising therapeutic areas, including oncology, respiratory, cardiovascular, neurology, and animal health, partnering with leading global innovators. Overall, we remain optimistic about the growth prospects across all these businesses.

Speaker #2: Our strategy of disciplined investment, deepening and broadening customer relationships, and expanding differentiated capabilities continues to create a strong platform for sustainable growth. Now, I would like to hand over the call to our CFO to give you details on the Q1 financials.

Speaker #3: Thank you, Nitin. Good evening, all, and I welcome you all once again to the earnings call. Moving on to the financial performance of the company in Q1 FY27, on a consolidated level, we reported a revenue of ₹1,045 crore for the quarter, reflecting a strong year-on-year growth of 44%.

Anish Ganatra: Thank you, Nitin. Good evening, all, I welcome you all once again on the earnings call. Moving on to the financial performance of the company in Q1 FY2027. On a consolidated level, we reported a revenue of INR 1,045 crores for the quarter, reflecting a strong year-on-year growth of 44%. Operating EBITDA for Q1 FY2027 was INR 357 crores, with a growth of 73% compared to the same quarter last year. The operating EBITDA margin stood at a solid 34.2%, a growth of 566 basis points versus Q1 of last year. Operating PBT for the quarter was INR 283 crores, reporting an increase of 101%. Profit after tax stood at INR 243 crores, registering a growth of 108%. Operating cash flows for Q1 stood at INR 173 crores. Navin also became net debt-free during the quarter.

Speaker #3: Operating EBITDA for Q1 FY27 was 357 crores, with a growth of 73% compared to the same quarter last year. The operating EBITDA margin stood at a solid 34.2%, a growth of 566 basis points versus Q1 of last year.

Speaker #3: Operating PBT for the quarter was Rs 283 crore, reporting an increase of 101%. Profit after tax stood at Rs 243 crore, registering a growth of 108%.

Speaker #3: Operating cash flows for Q1 stood at ₹173 crores, and Navin also became net debt-free during the quarter. Our net working capital days stood at 81 days of sales, which is again within the financial framework.

Anish Ganatra: Our net working capital days stood at 81 days of sales, which is again within the financial frame. With that, I would like to request the moderator to open the call for questions and answers.

Speaker #3: With that, I would like to request a moderator to open the call for questions and answers.

Speaker #1: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.

Operator 2: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions assemble. The first question is from the line of Ankur from Axis Capital. Please proceed.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions assemble. The first question is from the line of Ankur from Axis Capital. Please proceed.

Speaker #1: 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.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the questions are assembled. The first question is from the line of Ankur from Axis Capital.

Speaker #1: Please proceed.

Speaker #4: Yeah, hi, sir. I'm audible? Yeah. Yeah, hi. Thank you and congratulations on a strong set of numbers. My first question in on is on, you know, the capex program and especially on the advanced material side, the expansion there.

[Analyst] (Axis Capital): Yeah. Hi, sir. I'm audible?

Anish Ganatra: Yes.

[Analyst] (Axis Capital): Yeah. Yeah, hi. Thank you, and congratulations on a strong set of numbers. My first question is on the CapEx program and especially on the advanced materials side, the expansion there. If you can, one, highlight some more details in terms of advanced materials, where and which all end use applications, et cetera, are we looking to expand our capabilities? Secondly, from a growth perspective across Spec Chem and other segments, HPP including advanced materials, how are we looking at growth from FY 2029 onwards, given that the current CapEx will be suffice to drive growth till 2028, but beyond that, if any thoughts over there. Thank you.

Speaker #4: If you can, one, highlight some details more—some more details on, you know, in terms of advanced materials: where and, you know, which all end-use applications, etcetera, are we looking to expand our capabilities?

Speaker #4: And secondly, from a growth perspective, across STEC-Chem and other segments, HPP including, including advanced materials, how are we looking at growth from FY, you know, 29 onwards, given that the current capex will be surprised to try growth till 28, but beyond that, if any thoughts over there?

Speaker #4: Thank you.

Speaker #3: All right. Thanks, Ankur. So again, we've always talked about advanced materials and said that we are incubating this vertical with a strategic intent to make it a material business unit by the end of the decade.

Anish Ganatra: All right. Thanks, Ankur. Again, we've always talked about advanced materials and said that we are incubating this vertical with the strategic intent to make it a material business unit by the end of the decade. We've given a color to it in the past saying that it should look like the CDMO business of today. The CapEx announced today actually starts to unlock that position, and together with the other components of CapEx, as you know, we had earlier announced the Chemours project, which will also be part of advanced materials as it sort of grows. The DRDO announcement will also be part of the advanced materials vertical. They're not yet announced, but you know that we're talking of electronic grade, HF, et cetera, which will also come into advanced materials as and when it sort of comes through.

Speaker #3: And we've given a color to it in the past, saying that it should look like the CDMO business of today. The capex announced today actually starts to unlocking that position, and together with the other components of capex is, you know, we had earlier announced the Chemos project, which will also be part of advanced materials, as it's sort of gross.

Speaker #3: The DRDO announcement will also be part of the advanced materials vertical. And the not yet announced, but you know that we're talking of electronic-grade HF, et cetera, which will also come into advanced materials as in when it's sort of comes through.

Speaker #3: The idea here Ankur is that these this vertical will focus on niche sort of applications in high-growth sectors, mainly data centers, electronics, defense, and semiconductors.

Anish Ganatra: The idea here, Ankur, is that this vertical will focus on niche sort of applications in high-growth sectors, mainly data centers, electronics, defense, and semiconductors. It will more specifically cater to applications that support the chip fabrication process, chip cooling process, manufacturing of display OLEDs, data centers. We've also talked about fire suppressants, which have applications in data center as well as beyond. High voltage electrical applications as well, and new energy sort of wind applications, which will again focus on high purity HF, et cetera. That will come in due course. The sort of other area to look at is the advanced intermediates for fluoroelastomers and advanced intermediates that go into sealants and films and coatings, et cetera. These are all sort of specialized products that require engineering at a very high level both from a molecule perspective and from the chemical perspective.

Speaker #3: And we'll more specifically cater to applications that, you know, support the chip fabrication process, chip cooling process, you know, manufacturing of display, OLEDs, data centers, we've also talked about fire suppressants, which have applications in data center as well as beyond, you know, high-voltage electrical applications as well.

Speaker #3: And new energy sort of, you know, wind applications. Which will again focus on high-priority HF, et cetera, that will come in in due course.

Speaker #3: The sort of other area to look at is the advanced intermediates for fluoro elastomers, and advanced intermediates that go into sealants. Yeah, sealants and films and coatings, et cetera.

Speaker #3: These are all sort of specialized products, you know, that will impart—sort of, you know—that require engineering at a very high level, both from a molecule perspective and from the chemical perspective.

Speaker #3: But their intended to give specialized properties in their end applications. That is the intent. I'll take a pause here if you have any questions on that before I go on answering the other.

Anish Ganatra: They're intended to give specialized properties in their end applications. That is the intent. I'll take a pause here if you have any questions on that before I go on answering the other.

[Analyst] (Axis Capital): Anish, that's interesting. Just one clarification. Our earlier growth across AgChem and CDMO has been more in collaboration or in partnership with the global innovators. Will it be fair to say that the growth outlook over here will also be on the similar lines?

Speaker #4: Anish, that's interesting. And just one clarification, our earlier growth across STEC-Chem and CDMO has been more in collaboration or in partnership with the Global Innovators.

Speaker #4: We'll be fair to say that the growth outlook over here will also be on the similar lines?

Speaker #3: So this will be a combination of a product and service play. I mean, the Chemos project is a service play, as you know. The adoption capacities that we are putting in largely build on our fluorination capabilities that we have, along with the infrastructure capabilities that we've set up on our side, particularly.

Anish Ganatra: This will be a combination of product and service play. I mean, the Chemours project is a service play, as you know. The adoption capacities that we are putting on largely build on our fluorination capabilities that we have, along with the infra capabilities that we've set up over the last two years in the R&D side particularly. There the intent is to progress it more as a product play. Of course, there will be service components to that, too. Combination of the two, but it will play out as we sort of go through it.

Speaker #3: And there the intent is to progress it more as a product play. Of course, there will be service components to that too. You know?

Speaker #3: So combination of the two. But it will play out as we sort of go through it, you know?

Speaker #4: Sure, that's helpful. And if you can highlight on the medium-term capex, yeah. Thanks.

[Analyst] (Axis Capital): Sure. That's helpful. We can let you.

Anish Ganatra: Ankur

[Analyst] (Axis Capital): do the meeting during CapEx. Yeah. Thanks.

Anish Ganatra: Yeah. like you rightly said, the growth perspective, with the CapExes we have already got ongoing, growth to FY28 is largely baked in. These CapExes we are putting through now, both the CGMP phase I, the adoption capacities, and possibly Chemours as well as the adoption increases, will start to figure out on the growth beyond FY28 sort of thing. That is the idea. The CapExes are also being put in a very thoughtful manner. the adoption capacities we are putting out in two phases with the idea that the first phase of the CapEx will be complete more towards kind of the middle of last quarter of this financial year. Therefrom, that should allow us to start doing qualification of commercial sale quantities with customers, which then should open up the funnel for further CapExes and accelerate the growth. That is the idea.

Speaker #3: Yeah, so like you rightly said, the growth perspective, you know, with the capexes we have already got ongoing, growth through FY28 is largely baked in.

Speaker #3: These CAPEXes we are putting through now—both the cGMP phase one, the adoption capacities, and possibly Chemops as well as the adoption increases—will start to figure on the growth beyond FY28, sort of thing.

Speaker #3: That is the idea. The capexes are also being put in a very thoughtful manner. So the adoption capacities we are putting out in two phases, with the idea that, you know, the first phase of the capex will be complete more towards kind of the middle of the last quarter of this financial year.

Speaker #3: And therefore, that should allow us to start doing qualification of commercial-sale quantities with customers, which then should open up the funnel for further CapEx.

Speaker #3: And accelerate the growth. That is the idea.

Speaker #4: Okay.

[Analyst] (Axis Capital): Okay. Great.

Speaker #3: Yeah, on HPP speciality, et cetera, I mean, on HPP, if you look at it, the HFC capacity is already being put in, you know, you know that that's going to come up.

Anish Ganatra: On HPP.

[Analyst] (Axis Capital): Yeah

Anish Ganatra: On HPP, Specialty, et cetera. I mean, on HPP, if you look at it, the HFC capacity is already been put in. You know that that is going to come up. That will fuel the growth over the next sort of two years. Beyond that, we are talking of electronic grade. Of course, Advanced Materials, when I talk of it being incubated, it will figure into the existing verticals until we carve it out as a separate vertical, right? All these three verticals have got solid sort of tailwinds around it in terms of on the activity sets we are putting behind it. HPP will continue to grow from that perspective. Specialty business, we have been very thoughtful about how to navigate that space given what we all know on the AgChem side.

Speaker #3: That will fuel the growth over the next sort of two years. Beyond that, we're talking of electronic-grade. Of course, advanced materials, when I talk of it being incubated, it will figure into the existing vertical until the carve it out as a separate vertical, right?

Speaker #3: So all these three verticals have got solid sort of tailwinds around it, you know, in terms of and the activity sets we are putting behind it.

Speaker #3: HPP will continue to grow from that perspective. Speciality business, you know, we've been very thoughtful about how to navigate that space, given what we all know on the AdChem side, you know, while volume growth is recovering, pricing pressure continues to remain.

Anish Ganatra: While volume growth is recovering, pricing pressure continues to remain, particularly in the LatAm market, which is already well supplied, right? That, we all know, but our strategy around increasing our footprint into the innovators pipeline as well as broadening the customer base is working well. Like we said, last year we did about 13 to 14 new molecules, and this year we have strong visibility to Campaign orders at least of four to five molecules in the active space, which gives us very good confidence of the growth this year and then going into next year as well. CDMO, we have already talked about it, right?

Speaker #3: Particularly in the latter market, which is already well supplied, right? So, that we all know. But our strategy around increasing our footprint into the innovator's pipeline, as well as broadening the customer base, is working well, you know?

Speaker #3: Like we said last year, we did about 13 to 14 new molecules. And this year, we have strong visibility to campaign orders for at least four to five molecules in the AdChem space, which gives us very good confidence in the growth this year.

Speaker #3: And then going into next year as well. CDMO, we've already talked about it, right?

Speaker #4: Yeah, yeah. Great, sir. Thanks for, you know, the detailed answer. I have a few more, but let me get back into the queue. Thank you.

[Analyst] (Axis Capital): Yeah. Great, sir. Thanks for the detailed answer. I have a few more, but let me get back into the queue. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from the participants in this conference call, please restrict your questions to two per participant.

Operator 2: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from the participants in this conference call, please restrict your question to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Madhav from CLSA. Please proceed with your question.

Operator: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from the participants in this conference call, please restrict your question to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Madhav from CLSA. Please proceed with your question.

Speaker #1: Should you have a follow-up question, please rejoin the queue. The next question is from the line of Madhav from MLP. Please proceed with your question.

Speaker #5: Hi, good evening. Thank you so much for your time. Sir, just my question on R32. I wanted to just understand, if I look at the presentation we've indicated about 15,000 of the volume, and peak revenue of 600 to 825 crores, that roughly implies like pricing of, I think, $5, $6 per kg.

[Analyst] (CLSA): Hi, good evening. Thank you for your time. Sir, just my question on R32. I wanted to just understand, because if I look at the presentation, we've indicated about 15,000 tons of volume and peak revenue of INR 600 to 825 crores. That roughly implies like pricing of, I think, $5, $6 per kg. Should we take that sort of like, I think we've indicated some of incremental volume coming from more contractually based offtake. Is that how we should read in like the pricing environment for contracted R32 as we go into next year and the years after that?

[Analyst] (MLD): Hi, good evening. Thank you for your time. Sir, just my question on R32. I wanted to just understand, because if I look at the presentation, we've indicated about 15,000 tons of volume and peak revenue of INR 600 to 825 crores. That roughly implies like pricing of, I think, $5, $6 per kg. Should we take that sort of like, I think we've indicated some of incremental volume coming from more contractually based offtake. Is that how we should read in like the pricing environment for contracted R32 as we go into next year and the years after that?

Speaker #5: Should we take that sort of like I think we've indicated some incremental volume coming from more contractual-based off-take. Is that how we should read in like the pricing environment for contracted R32 as we go into next year and the years after that?

Speaker #3: No, Madhav, I'll just kind of, you know, the R32 number that you see in the slides is actually a number that we gave out when we approved the capex.

Anish Ganatra: No, Madhav. I'll just The R32 number that you see in the slide is actually a number that we gave out when we approved the CapEx. We are holding to the same asset tone that we had reflected at that point in time. I do think that it's important when we look at R32 that we do not look at it like a deer who's gazing through headlights, yeah, and not seeing anything else. The important part here is to understand that R32, the long-term demand environment remains constructive. We all know that over a decade, the demand for R32 is going to double while the supply, quota-driven supply, is going to sort of shrink to half. There is nothing to kind of concern around the R32 long-term demand.

Speaker #3: So we are holding to the same asset term that we had reflected at that point in time. But I do think that it's important when we look at R32 that we do not look at it like a deer who's gazing through headlights, yeah?

Speaker #3: And not seeing anything else. The important part here is to understand that 32, the long-term demand environment, remains constructive. We all know that, over a decade, the demand for 32 is going to double, while the quota-driven supply is going to sort of shrink to half.

Speaker #3: So there is nothing to kind of concern around the 32 long-term demand. Now, in the near term, you know, one has to look at beyond pricing, because pricing is neither in your hands nor my hands.

Anish Ganatra: Now, in the near term, one has to look at beyond pricing because pricing is neither in your hands nor my hands. What we actually do is we tend to remain as the most competitive cost of manufacturing on R32. Our integrated HF value chain, the effort that we are doing on productivity improvements, along with the example of that being the hybrid power, et cetera, which will start to give in close to about 60% of our power coming from renewable sources and will also result into savings on power, will ensure that R32 remains very competitive on the pricing side. The third thing to remember is that I currently have a 9,000 to 10,000 tons of capacity, and I'm adding in 15,000 tons of capacity. For Navin, the operating leverage on R32 is going to be fantastic.

Speaker #3: What we actually do is we tend to remain as the most competitive cost of manufacturing on 32. Our integrated HF value chain, the effort that we are doing on productivity improvements, along with, you know, the example of that being the hybrid power, etc., which will start to give in—you know, close to about 60% of our power coming from renewable sources.

Speaker #3: And we'll also result into savings on power. We'll ensure that R32 remains very competitive on the pricing side. The third thing to remember is that I currently have a 9 to 10,000 tons of capacity.

Speaker #3: And I'm adding in 15,000 tons of capacity, so for Navin, the operating leverage on 32 is going to be fantastic. You know, that will play out in our favor and support the EBITDA growth and the margin growth.

Anish Ganatra: That will play out in our favor and support the EBITDA growth and the margin growth, frankly, in any pricing environment.

Speaker #3: Frankly, in any pricing environment.

[Analyst] (CLSA): No, sir. That point is very well taken, different to opinion the rich part as well. Just wanted to understand, if you think from, and I guess this is probably well debated already that in terms of the capacity coming in India for R32 from yourselves, some of the incumbents and some new players. How do we think about that from a calendar year 2027 perspective, which is a 3 year? Like quota probably kicks in from January 2028, is what my understanding is. Please correct me if I'm wrong.

[Analyst] (MLD): No, sir. That point is very well taken, different to opinion the rich part as well. Just wanted to understand, if you think from, and I guess this is probably well debated already that in terms of the capacity coming in India for R32 from yourselves, some of the incumbents and some new players. How do we think about that from a calendar year 2027 perspective, which is a 3 year? Like quota probably kicks in from January 2028, is what my understanding is. Please correct me if I'm wrong.

Speaker #5: No, sir. That point is very well taken. I understand the operating leverage part as well. But just wanted to, you know, understand if you think from and I guess this is probably well debated already that in terms of the capacity coming in India for R32 from yourselves some of the incumbents and some new players, how do we think about that from a calendar year 2027 perspective, which is a free year?

Speaker #5: Like, you know, quota probably kicks in from Jan 28, is what my understanding is. Please correct me if I'm wrong.

Anish Ganatra: No.

Speaker #3: No, sir.

Speaker #5: So, if you think about the next year—yeah. Thank you.

[Analyst] (CLSA): If you think about the next year. Yeah. Thank you.

[Analyst] (MLD): If you think about the next year. Yeah. Thank you.

Speaker #3: No, so I think, again, when you're looking at India capacity is why you're only looking at 27. You should look at the next five-year view, right?

Anish Ganatra: No. I think again, when you are looking at India capacity, why are you only looking at 2027? You should look at a next 5-year view, right? We all know that in the next 5 years, all the Indian players will not. India is going to be oversupplied for 5 years, right? We are going to be servicing the export in the global market. 32 is not going to be seen as only an India demand supply situation. One has to look at it from a global context point of view. In that context, one of the comments we've always made is the end, our customers today are increasingly interested in contractually committing for 32 over the next 5 years. We've been in conversations with, in advanced conversations with a couple of them.

Speaker #3: We all know that in the next five years, all the Indian players will not India is going to be oversupplied for five years, right?

Speaker #3: We are going to be servicing the export and the global market. So 32 is not going to be seen as only an India demand-supply situation.

Speaker #3: One has to look at it from a global context point of view. And in that context, it's, you know, one of the comments we've always made is, you know, the end our customers today are increasingly interested in contractually committing for 32 over the next five years.

Speaker #3: And we've been in conversations with in advanced conversations with a couple of them, you know, and our idea is, as we've said before, to look at about 35 to 45 percent of the, you know, total capacities will be contracted for the five-year period.

Anish Ganatra: Our idea is, as we said before, to look at about 35% to 45% of the total capacities will be contracted for a five-year period. This is not a necessary thing, but this is something that we are working towards. As you get into beyond 2027, you will see the gains coming in as China goes through a cut, et cetera. There is a lot that will evolve over the next five years. For one particular year, like I said, the fact that I am the lowest cost of manufacturing on R32, I will always have a competitive play, and my leverage will always protect my EBITDA earnings at the group level. Because again, Navin, on an overall basis, is also well diversified.

Speaker #3: This is not a necessary thing, but this is something that we are working towards. You know, as you get into beyond 27, you will see the gains coming in as China goes through a cut, et cetera, et cetera.

Speaker #3: There's a lot that will evolve over the next five years. For one particular year, like I said, the fact that I am the lowest cost of manufacturing on 32, I will always have a competitive play.

Speaker #3: And my leverage will always protect my EBITDA earnings at the group level, because, again Naveen, on an overall basis, it's also well diversified. So I don't want to labor the point too much on 32, but I don't think it's just a 32 story.

Anish Ganatra: I do not want to labor the point too much on R32, but I do not think it is just a R32 story, and that is what I meant when I started the conversation.

Speaker #3: And that's what I meant when I started the conversation.

Speaker #5: No, absolutely. That point is very well taken. Thank you. Thank you.

[Analyst] (CLSA): No, absolutely. That point is very well taken. Great. Thank you. Thanks a lot.

[Analyst] (MLD): No, absolutely. That point is very well taken. Great. Thank you. Thanks a lot.

Speaker #3: Thanks, Madhav.

Anish Ganatra: Thanks, Madhav.

Speaker #1: Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please proceed with your question.

Operator 2: Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please proceed with your question.

Operator: Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please proceed with your question.

Speaker #6: Hi, good evening, sir. Thanks. Thanks for the opportunity. I got a couple of questions. First, on the CDMO business, these new capacity again will be entirely dedicated for the existing contract?

Sanjesh Jain: Good evening, sir. Thanks for the opportunity. I got couple of questions. First, on the CDMO business, this new capacity again will be entirely dedicated for the existing contract? When you say we want to participate more in the supply chain, what does it really mean?

Speaker #6: And when you say we want to participate more in the supply chain, what does it really mean?

Speaker #3: Yeah. So, Sanjesh, you're right. The new capacity will be dedicated to the European CDMO partner, and it's a reflection of the increasing demand for the molecule itself.

Anish Ganatra: Yeah. Sanjesh, you're right. The new capacity will be dedicated to the European CDMO partner, it's a reflection of the increasing demand on the molecule itself. We are also getting into an MSA for an extra molecule in the same supply chain. This takes us to an API minus one, effectively.

Speaker #3: We are also getting into an MSA for an extra molecule in the same supply chain. So this takes us to an API minus one, effectively.

Speaker #6: Okay. That means we will be equivalent to your competition in India in terms of supply chain for the CDMO?

Sanjesh Jain: Okay. That means you will be equivalent to your competition in India in terms of supply chain for the CDMO?

Speaker #3: I think you will only get—you know, if you look at what I'm talking about, the asset term—you'll get enough indications from that.

Anish Ganatra: I think it will only get If you look at what I'm talking of the asset turn, you'll get enough indications from that. On the INR 288 crore, we talked of an asset turn of 3x, and I think you said that by FY29, if I remember correctly. Sorry, not even 2029, maybe sooner. That's there. Whatever you want to read out of that, frankly. I don't think this is a case of being equal. We will be at similar par levels, whether one is higher or not, it doesn't matter. Ultimately, we are part of the same supply chain.

Speaker #3: I mean, on the 288 crore we talked of an asset term of 3x. And I think you said that by FY 29, if I remember correctly.

Speaker #3: So, or sorry, not even '29, maybe sooner. So that's there, you know? So, I mean, whatever you want to read out of that, frankly.

Speaker #3: You know, I don't think this is a case of being equal. You know, we will be at similar par levels, whether one is higher or up, it doesn't matter.

Speaker #3: Ultimately, we are part of the supply chain.

Sanjesh Jain: No. I'm asking from the supply chain participation perspective, we will be supplying the similar level of product or we will be moving up higher in the value chain than the competition?

Speaker #6: No, no, no. I'm asking from the supply chain participation perspective. Will we be supplying a similar level of product, or will we be moving higher up in the value chain than the competition?

Speaker #3: I actually don't know that answer. I mean, you know, I honestly don't know if our competition has got a similar offer going on, to be honest.

Anish Ganatra: I actually don't know that answer. I honestly don't know if our competition has got a similar offer going on, to be honest. You'll have to ask them that.

Speaker #3: We'll have to ask them about that.

Speaker #6: Got it. Got it. Got it. One more on CDMO. We were looking at a couple of readouts. I think one didn't come quite remaining how are we placed for the new lateral entry for FY 27 and 28?

Sanjesh Jain: Got.

Anish Ganatra: Yeah.

Sanjesh Jain: Got. One more on CDMO. We were looking at a couple of readouts. I think one didn't come quite well. Remaining, how are we placed for the new lateral entry for FY27 and 2028?

Speaker #3: Yeah. I mean, the one not coming well is all part of the game, which is why we already.

Anish Ganatra: Yeah. The one not coming well is all part of the game, which is why we always-

Sanjesh Jain: I agree.

Speaker #6: I agree. I agree. I agree. I agree.

Anish Ganatra: Yeah. Which is why we've always-

Speaker #3: Yeah, which is why we are.

Sanjesh Jain: How many are we looking at?

Speaker #6: But how many are we looking at?

Sanjesh Jain: How many are we looking at?

Speaker #3: Yeah. Which is why we've always maintained a portfolio. As I'm talking now with you, we have got three more molecules that are expected to go through an FDA readout over the next 8 to 12 months.

Anish Ganatra: Yeah. Which is why we've always maintained a portfolio. As I am talking now with you, we have got three more molecules that are expected to go through an FDA readout over the next eight to 12 months.

Speaker #3: So you know, there is enough in the pipeline to not worry about an outlier, yeah?

Sanjesh Jain: Okay.

Anish Ganatra: There is enough in the pipeline to not worry about an outlier. Yeah.

Speaker #6: Got it. Got it. On the margin side, if I look at console minus standalone on FY, which used to be very strong, this quarter it appears to be slightly weakish.

Sanjesh Jain: Got. On the margin side, if I look at the consolidated minus standalone, Anish Ganatra, which used to be very strong. This quarter it appears to be slightly weak-ish. The beta margin, which used to be in the range of 40% and 45%, I think that is calculated because you have some elimination. The beta percentage on a similar parameter has come down to 32%. There is a sequential drop of 12 percentage point in the margin. Any particular thing to call out there? Because it is all coming up from gross profit margin contraction.

Speaker #6: The beta margin, which used to be in the range of 40, 45 percent, I think that's calculated because you have some elimination. But the beta percentage on a similar parameter has come down to 32 percent.

Speaker #6: So there is a sequential drop of 12 percentage point in the margin. Any particular thing to call out there? Because it is all coming up from gross profit margin contraction.

Speaker #3: No, so two things. I think when you are taking out standalone from console, you are implying the subsidiary NFASL, right?

Anish Ganatra: No. Two things. I think when you are taking out standalone from consolidated, you are implying the subsidiary NFASL, right?

Speaker #6: Correct. Correct.

Sanjesh Jain: Correct.

Speaker #3: Yeah. So there are two things. One, you know, you know how this business is driven through campaigns. So every quarter may have different campaigns going through, which may have different margin profiles.

Anish Ganatra: Yeah. There are two things. One, you know how this business is driven through campaigns. Every quarter may have different campaigns going through, which may have different margin profiles. There is that that is playing out. The other important thing to remember is that we have commissioned the AHF capacity in the subsidiary. As AHF capacity commissions, the transfer of material from Dewas to Surat or NFIL is where the value is occurring, right? Because you are transferring AHF on an arm's length basis.

Speaker #3: So, there is that that is playing out. The other important thing to remember is that we have commissioned the AHF capacity in the subsidiary.

Speaker #3: And as AHF capacity commissions, you know, the transfer of material from the H into Surat or NFIL is where the value is occurring, right?

Speaker #3: Because you are transferring HF on an arm's-length basis, as opposed to transferring a value-added product. So, you know, as we get into more HF, you will see that overall, the margin will remain at a group level quite solid.

Sanjesh Jain: Correct

Anish Ganatra: As opposed to transferring a value-added product. As we get into more AHF, you will see that overall the margin will remain at a group level quite solid. The individual moments in the subsidiary will happen. That's not to worry about it. We are also looking at further expansion capacities of downstream products. At some point that will come into NFASL, which will again then make it margin accretive. There's a combination of two things that's happening over there.

Speaker #3: The individual moments in the subsidiary will happen; that's not something to worry about. We are also looking at further expansion capacities of downstream products at some point—that will come into NFASL, which will again then make it margin accurate.

Speaker #3: So there's a combination of two things, you know? That's happening over there.

Speaker #6: Very clear. Very clear. Thanks. Thanks, Anish, for all those answers and just a plug for the coming quarters.

Sanjesh Jain: Very clear. Thanks, Anish Ganatra, for all those answers and best of luck for the coming quarters.

Speaker #3: Thank you.

Anish Ganatra: Thank you.

Speaker #1: Thank you. The next question is from the line of Rohit Nagraj, from 361 Capital. Please proceed with your question.

Operator 2: Thank you. The next question is from the line of Rohit Nagraj from B&K Securities. Please proceed with your question.

Operator: Thank you. The next question is from the line of Rohit Nagraj from B&K Securities. Please proceed with your question.

Speaker #5: Yeah, thanks for the opportunity and congrats on a strong set of numbers. So, first question is about the ₹90 crore capex on the Advanced Materials.

Rohit Nagraj: Yeah. Thanks for the opportunity and congrats on a strong set of numbers. First question is, the INR 90 crore CapEx on the advanced materials. Given that it will be completed by Q2 FY2028, what is the kind of gestation period in terms of qualifications and based on which, what could be the timeline where we can go ahead with material significant CapEx to go from these maybe pilot scale capacities to commercial scale capacities? Thank you.

Rohit Nagraj [Head of Sector: Yeah. Thanks for the opportunity and congrats on a strong set of numbers. First question is, the INR 90 crore CapEx on the advanced materials. Given that it will be completed by Q2 FY2028, what is the kind of gestation period in terms of qualifications and based on which, what could be the timeline where we can go ahead with material significant CapEx to go from these maybe pilot scale capacities to commercial scale capacities? Thank you.

Speaker #5: Given that it will be completed by Q2 FY 28, what is the kind of gestation period in terms of qualifications and based on which what could be the timeline where we can go ahead with material significant capex to go from these maybe pilot scale capacities to commercial scale capacity?

Speaker #5: Thank you.

Speaker #3: So, Rohit, as I mentioned, we've been very thoughtful about how we progress the advanced materials capex. The pipeline of products that we have—there are at least four to five products that have already been lab qualified by the customer.

Anish Ganatra: Rohit, as I mentioned, we've been very thoughtful of how we progress the advanced materials CapEx. The pipeline of products that we have, we have at least about four to five products that have already been lab qualified by the customer and this adoption capacity will take it to commercial scale qualification, which is why we are doing the CapExs in phases to prioritize the commercialization of those five at a faster pace than the others in the pipeline. While those five are being commercialized, you will also see that the pipeline has progressed to bringing the next set of four to five products into the adoption capacity. This will act like a wheel. One has to think about it like that. You will have new products coming into this wheel. As the products go through commercial scale, they will come out.

Speaker #3: And this adoption capacity will take it to commercial scale qualification. Which is why we are doing the capexes in phases to prioritize the commercialization of those five at a faster pace than the others in the pipeline.

Speaker #3: While those five are being commercialized, you will also see that the pipeline has progressed to bringing the next set of four to five products into the adoption capacity.

Speaker #3: So, this will act like a wheel. One has to think about it like that, you know? You will have new products coming into this wheel.

Speaker #3: As the products go through commercial scale, they will come out, whether they go into an MPP or a dedicated capex, that's a conversation for the future as the commercial scale gets qualified, etc.

Anish Ganatra: Whether they go into an MPP or a dedicated CapEx, that's a conversation for the future as the commercial scale gets qualified, et cetera. We are in a good state because customer relationships have already been established. The basket is pretty wide. I'm talking of close to about at least a dozen of products that I'm referring to, five of which are at a sort of early lab scale approved already, and those will then sort of move into commercial scale. This is also sort of across geographies. Very wide. Like we've always said that we don't want to be in the me-too business. This is all going to be in niche chemistries. To be honest, we would probably be one of the most credible supply chain partners over here if somebody is looking to de-risk their supply chain.

Speaker #3: But we are in a good state because customer relationships have already been established, you know, the basket is pretty wide, you know? I'm talking of close to about, you know, at least a dozen of products that I'm referring to, five of which are at a sort of early lab scale approved already.

Speaker #3: And those will then sort of move into commercial scale. This is also sort of across geographies. So you know, so very set. Plus, you know, like we've always said that we don't want to be in the me too business.

Speaker #3: This is all going to be in niche chemistries. And to be honest, we would probably be one of the most credible supply chain partners over here if somebody is looking to be this best supply chain.

Speaker #5: Perfect. Got that. Second question is Chemors, in their presentation, have indicated that during this quarter gone by, they have recorded something like 1 million dollars of sales from the two-phase cooling liquids.

Rohit Nagraj: Perfect. Got that. Second question is, Chemours in their presentation has indicated that during this quarter gone by, they have recorded something like $1 million of sales from the two-phase cooling liquid. Would we be the largest supplier for the same?

Rohit Nagraj [Head of Sector: Perfect. Got that. Second question is, Chemours in their presentation has indicated that during this quarter gone by, they have recorded something like $1 million of sales from the two-phase cooling liquid. Would we be the largest supplier for the same?

Speaker #5: Would we be the largest supplier for the same? And, you know?

Anish Ganatra: We-

Speaker #3: We. Yeah.

Rohit Nagraj: You know.

Rohit Nagraj [Head of Sector: You know.

Anish Ganatra: Yeah.

Speaker #5: Yeah.

Rohit Nagraj: Yeah.

Rohit Nagraj [Head of Sector: Yeah.

Speaker #3: Sorry, I didn't mean to cut you off. Please finish what you were saying.

Anish Ganatra: Sorry, I didn't mean to cut you off. Finish what you're saying.

Speaker #5: Yeah. And does this mean that the scalability would be relatively faster once we commission the project by the end of this quarter?

Rohit Nagraj: Yeah. Does this mean that the scalability would be relatively faster once we commission the project by the end of this quarter?

Rohit Nagraj [Head of Sector: Yeah. Does this mean that the scalability would be relatively faster once we commission the project by the end of this quarter?

Speaker #3: So we are the only supplier to Chemors. We are today supplying the products that Chemors is actually supplying, and we are the end. And like we said, this is the only manufacturing site that Chemors has.

Anish Ganatra: We are the only supplier to Chemours. We are today supplying the products that Chemours is actually supplying at the other end. Like we said, this is the only manufacturing site that Chemours has. Regarding scale-up and all, let's wait to see. I think that 15-month window that we've always said to watch is still very valid. As we hear something different, we'll obviously keep you guys updated on that.

Speaker #3: Regarding scale-up and all, let's wait to see. Like, I think that 15-month window that we've always said to watch is still very valid. And, you know, as we hear something different, we'll obviously keep you guys updated on that.

Speaker #5: Sure. Thanks a lot, and all the best, sir.

Rohit Nagraj: Sure. Thanks a lot and all the best, sir.

Rohit Nagraj [Head of Sector: Sure. Thanks a lot and all the best, sir.

Speaker #3: Thanks.

Speaker #1: Thank you. The next question is from the line of Jason. From IDBI Capital. Please proceed with your question.

Anish Ganatra: Thanks.

Operator 2: Thank you. The next question is from the line of Jason from IDBI Capital. Please proceed with your question.

Operator: Thank you. The next question is from the line of Jason from IDBI Capital. Please proceed with your question.

Speaker #5: Yeah, sir. Thank you so much for taking my question. So my first question just pertains to the specialty chemical business. Now, after a subdued FY 25, we saw very, very strong growth coming in the spectrum business.

[Analyst] (IDBI Capital): Yeah, sir. Thank you so much for taking my question. My first question just pertains to the specialty chemical business. Now after a subdued FY25, we saw very strong growth coming in the Spec Chem business. Just wanted some color on it. Of course, I understand that there is a lot of ramp-up in whatever CapExes we have commissioned. That is well understood. Just in the backdrop of AgChem recovery still being gradual, my understanding is just that this growth predominantly will be volume-led with the ramp-up, and pricing probably will play a minimalistic part in this. Is that the right way of looking at it? Just wanted some more color on the growth trajectory ahead for FY27.

Speaker #5: So just wanted some color on it. I mean, of course, I understand that there is a lot of ramp-up in whatever capexes we have commissioned.

Speaker #5: So, that is well understood. But just in the backdrop of AgChem recovery still being gradual, my understanding is that this growth will predominantly be volume-led with the ramp-up, and pricing will probably play a minimal part in this.

Speaker #5: Is that the right way of looking at it? And just wanted some more color on the growth trajectory ahead for FY 27.

Speaker #3: Yeah. So Jason's, I think, again, you know, if you look at what we started talking a year and a half ago when we said that, you know, we are navigating this phase very differently, right?

Anish Ganatra: Jason, I think again, if you look at what we started talking a year and a half ago when we said that we are navigating this space very differently. Right?

Anish Ganatra: Today what you're seeing for Navin is actually those coming into play. When I'm talking that we are participating into five new molecules, it means that our customer relationships are both deepened and broadened in that space. It also means that out of those five, there are three which are patented molecules and do not face the kind of pricing pressure that one would expect. Of course, does it mean that we are going to go back to the old days of 30% EBITDA that's taken for granted in Spec Chem? I don't think so. The philosophy here is always going to be to keep driving productivity gains, to keep driving efficiencies. If you see how we've kind of worked that space, we are not investing today to create large capacities, but we are investing today to extend current capacities.

Speaker #3: And today, what you're seeing, Naveen, is actually those coming into play. You know, when I'm saying that we are participating in five new molecules, it means that our customer relationships are both deepened and broadened in that space.

Speaker #3: It also means that out of those five, there are three which are patented molecules and do not face the kind of pricing pressure that one would expect.

Speaker #3: Of course, does it mean that we are going to go back to the old days of 30% EBITDA that's taken for granted in spec chem?

Speaker #3: I don't think so. The philosophy here is always going to be to keep driving productivity gains to keep driving efficiencies. And if you see how we've kind of worked that space, we are not investing today to create large capacities, but we are investing today to extend current capacity.

Speaker #3: Like the MPP, the bottlenecking capacity is coming at a two. Affect us. Which is in some sense, if you look at even our own history unheard of in the AgChem hem space, right?

Anish Ganatra: Like the MPP bottlenecking capacity is coming at a 2x factor, which is in some sense, if you look at even our own history, unheard of in the AgChem space. Right?

Speaker #3: So it's how you navigate. I don't what you said is generally true, but I think what differentiates us is how we navigated that landscape.

Anish Ganatra: It's how you navigate. What you said is generally true, but I think what differentiates us is how we navigated that landscape.

Speaker #5: Sure, sir. Thank you so much for that. And sir, just another question: in terms of the stated AHS capacity, which is 60,000 tons, I just wanted to understand, sir, how much is captively consumed and how much is sold externally?

[Analyst] (IDBI Capital): Sure, sir. Thank you so much for that. Sir, just another question. In terms of our stated AHF capacity, which is 60,000 tons, just wanted to understand, sir, how much is captively consumed and how much is sold externally?

Speaker #3: So we don't sort of give out those numbers, but I'm sure you know the R32 capacity, etc. You can work out backwards. We've talked before that when we started this capex that we would look to do some intermediate you know, some interim sales of AHS downstream.

Anish Ganatra: We don't sort of give out those numbers, but I'm sure you know the R32 capacity, et cetera. You can work out backwards. We've talked before that when we started this CapEx that we would look to do some interim sales of AHF downstream, and that will continue for some time. Obviously, till our own capacities come up. I will leave it at that, Jasen, if you don't mind.

Speaker #3: And that will continue for some time, obviously, until our own capacities come up. But I would leave it at that, Jason, if you don't mind.

Speaker #5: Sure. Sure, sir. And just finally, sir, just one if I can add, I mean, you have spoken about advanced materials. So one thing, just wanted to understand that you've mentioned 90 crore of the capex and it's coming on stream in Q2 FY 28.

[Analyst] (IDBI Capital): Sure. Just finally, sir, just one, if I can add. You've spoken about advanced materials. One thing, just wanted to understand that you mentioned INR 90 crore of the CapEx and it's coming onstream Q2 FY28. Any asset turns or something we are working and a certain timeline by which we can reach that for the advanced material section?

Speaker #5: Are there any asset terms or anything we're working on, and, you know, a certain timeline by which we can reach that for the advanced materials section?

Speaker #3: So like I said, this is akin to a wheel of fortune, right? You turn the wheels and you have new products coming into that wheel and they will throw out into your commercial scale opportunities, which is what will fuel the growth engine.

Anish Ganatra: Like I said, this is akin to a wheel of fortune, right? You turn the wheels and you have new products coming into that wheel, and they will flow out into your commercial scale opportunities, which is what will fuel the growth engine. The INR 90 crore that we are spending is sufficiently risk managed because what I said was, there are five products that have already been lab approved. I am going to go into commercial scale production for those, for commercial scale approval of those products, obviously on the back of orders. This project, while it's an adoption project, is also going to self-earn for itself. In some sense, will pay back the money faster. Now, this vertical is also going to be highly accretive to our EBITDA margins.

Speaker #3: The Rs 90 crore that we are spending is sufficiently risk-managed, because what I said was, you know, there are five products that have already been lab-approved.

Speaker #3: So I'm going to go into commercial-scale production for those, for commercial-scale approval of those products, obviously on the back of orders. So this project, while it's an adoption project, is also going to self-earn for itself, you know?

Speaker #3: And in some sense, we'll pay back the money faster. Now, this vertical is also going to be highly accurate to our EBITDA margins. So from that point of view, you can obviously understand the payback is going to be pretty soon.

Anish Ganatra: From that point of view, you can obviously understand the payback is going to be pretty soon. When Navin is investing into this wheel, we are looking at this as a seeding investment. It's an investment to capture the longer-term growth play and not necessarily an asset turn on INR 90 crore, which is why we've consciously not reflected that in any number out.

Speaker #3: But when Naveen is investing into this wheel, we are looking at this as a seeding investment—you know, it's an investment to capture the longer-term growth play.

Speaker #3: And not necessarily an asset turn on ₹90 crores, which is why we've consciously not reflected that in any number.

Speaker #5: Sure. Thank you so much for answering my question. Thank you.

[Analyst] (IDBI Capital): Sure. Thank you so much for answering my question. Thank you.

Speaker #3: Thanks.

Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in this conference, please restrict your question to one per participant.

Operator 2: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in this conference, please restrict your question to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please proceed with your question.

Operator: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in this conference, please restrict your question to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please proceed with your question.

Speaker #1: Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Sajal Kapoor from NTS Agile Thinking.

Speaker #1: Please proceed with your question.

Speaker #5: Yeah, thank you. And congratulations to the team and what stands out to me is not the growth itself, but the consistency with which things discussed over the last several quarters are now showing up in execution and numbers, of course.

Sajal Kapoor: Yeah, thank you. Congratulations to the team. What stands out to me is not the growth itself, but the consistency with which things discussed over the last several quarters are now showing up in execution and numbers, of course. If I could just ask one question, it would be, your European CDMO relationship is clearly deepening. What evidence should investors look for that this CDMO business is also broadening across customers rather than growth being driven primarily by deeper penetration of one relationship? Thank you.

Speaker #5: And if I could just ask one question, it would be: your European CDMO relationship is clearly deepening. What evidence should investors look for that the business is also broadening across customers, rather than growth being driven primarily by deeper penetration of one relationship?

Speaker #5: Thank you.

Speaker #3: No, I think it's so thank you for recognizing what you know, our sort of walk-the-talk mindset. But you know, see, a couple of quarters ago, you know, this is we were thinking how do we get to scale in CDMO.

Anish Ganatra: Thank you for recognizing our sort of walk the talk mindset. A couple of quarters ago, we were thinking, how do we get to scale in CDMO? The deepening of relationship is actually a great opportunity because it gives us a strong base load on which we can work, and that's exactly what we've done. Today, if I talk about my molecule pipeline, we are talking about 30 to 40 molecules that I'm actively working on. About 10 molecules are into late stage, of which I'm saying three to four molecules have got a FDA readout in the next eight to 12 months. As these readouts come out and we start announcing more capacities for growth, I think that's what you watch for.

Speaker #3: The deepening of relationship is actually a great opportunity because it gives us a strong baseload on which we can work. And that's exactly what we've done.

Speaker #3: You know, today if I talk about my molecule pipeline, we are talking about 30 to 40 molecules that I'm actively working on, about 10 molecules are into late stage, of which I'm saying 3 to 4 molecules have got a FDA readout in the next 8 to 12 months.

Speaker #3: You know, so as these readouts come out and we start announcing more capacities for growth, I think that's what you watch for. Now, do we have anything to know, you know, crystal ball gaze and know for sure if all three are going to work out on an FDA approval?

Anish Ganatra: Now, do we have anything to crystal ball gaze and know for sure if all three are going to work out on an FDA approval? We don't. That's how we manage it on a portfolio level, right? By constantly making sure that our portfolio remains relevant and remains continually refreshed.

Speaker #3: We don't. But that's how we manage it on a portfolio level, right? By constantly making sure that our portfolio remains relevant and remains continually refreshed.

Speaker #2: Yeah, thank you.

Sajal Kapoor: Thank you. That's amazing honesty. Thank you so much.

Speaker #5: Amazing honesty. Thank you so much.

Speaker #3: Yeah.

Anish Ganatra: Yeah.

Speaker #5: Yes.

Speaker #1: Thank you.

Operator 2: Thank you.

Operator: Thank you.

Speaker #5: Absolutely. Thank you so much. Thank you.

Sajal Kapoor: Thank you so much.

Speaker #1: The next question is from the line of Prasad from Union MF. Please proceed with your question.

Operator 2: The next question is from the line of Prasad from Union AMC. Please proceed with your question.

Operator: The next question is from the line of Prasad from Union AMC. Please proceed with your question.

[Analyst] (Union AMC): Hi, sir. Congrats on a good set of numbers. Sir, in your previous communication, you highlighted that you have a upcoming MSA within the same value chain. Could you please clarify more on, in terms of which therapeutic area it will cater to? Is it a same therapeutic area, or will there be different therapeutic area?

Speaker #5: Hi, sir. Congrats on a good set of numbers. Sir, in your previous communication, you highlighted that you have a MSA upcoming MSA within same value chain.

Speaker #5: So, could you please clarify further in terms of which therapeutic areas it will cater to? Is it the same therapeutic area or will there be different therapeutic areas?

Speaker #5: Thank you.

Anish Ganatra: No. Prasad, thanks for the question. What I meant was I think my own voice is echoing, which is not great. Just give us a minute. Better now? Can you hear me, Prasad?

Speaker #3: No, so Prasad, thanks for the question. What I meant was the MSA. I think my own voice is the same way—it's not great.

Speaker #3: Could give us a minute. Better now? Can you hear me, Prasad?

Speaker #1: Yes, sir. We can hear you.

Operator 2: Yes, sir. We can hear you.

Operator: Yes, sir. We can hear you.

[Analyst] (Union AMC): Yes, I can hear you.

Speaker #3: Yeah, but everything's echoing here. Okay, let me sort of continue. So Prasad, the MSA that you're referring to or that I was referring to is actually extending our participation in the same supply chain and hence I meant API minus one.

Anish Ganatra: Yeah, everything's echoing here.

Anish Ganatra: Okay, let me sort of continue. Prasad, the MSA that you're referring to or that I was referring to is actually extending our participation in the same supply chain, and hence I meant API minus one. We are deepening that relationship with the same molecule by participating further deeper into it. Additionally to that, we are also working on an early-phase molecule for the same customer, which is an early-phase molecule. There is a broadening of molecules also with the same customer. Apart from that, of course, like I said, we've got working relationship with all the top majors or top 20 pharma companies. In fact, some of the three to four molecules that I'm talking about are all with different sort of global majors. Yeah. The therapeutic areas are also quite broad.

Speaker #3: So we are deepening that relationship with the same molecule. By participating further deeper into it, additionally to that, we are also working on an early-phase molecule for the same customer, which is an early-phase molecule.

Speaker #3: So there is a broadening of molecules also with the same customer. Apart from that, of course, like I said, you know, we've got working relationship with all the top majors or top 20 pharma companies.

Speaker #3: And in fact, some of the four to five, three to four molecules that I'm talking about are all with different sort of global majors, yeah?

Speaker #3: And the therapeutic areas are also quite broad. So like we've said on our slide, we are focused on cardiovascular, respiratory, oncology, animal health, and neuro, yeah?

Anish Ganatra: Like we said on our slide, we are focused on cardiovascular, respiratory, oncology, animal health, and neuro. Yeah. Those we believe are the high growth areas, those we believe where our credentials add greater value, and therefore we are making sure that these projects or any RFQs that are received on this, we have a solid reason to be rejected for.

Speaker #3: So, those we believe are the high-growth areas. Those, we believe, are where our credentials are of greater value. And therefore, we are making sure that for these projects, or any RFQs that are received on this, we have a solid reason to be rejected for.

Speaker #5: Oh, okay, sir. Sir, and if these molecules are in the early stage, though, how big could this opportunity be in terms of market?

[Analyst] (Union AMC): Oh, okay, sir. Sir, if this molecule is in early stage, so how big could be this opportunity in terms of market, if we can?

Speaker #3: Yeah, in early stage, you know, if you do a Google on any molecule that's early stage, you will find ranges of peak revenue that will probably lead you to believe it's guesswork.

Anish Ganatra: Yeah, in early stage we probably doesn't apply much. If you do a Google on any molecule that's early stage, you will find ranges of peak revenue that will probably lead you to believe it's guesswork. I don't want to get into that. To give you a sense, if you look at something that's early stage and you try to figure out what its peak sale revenues are, you will find that the estimates go from one billion to three billion. Now, what does that mean, right? I don't think at early stage you look at that. You look at the therapeutic area, and you look at the promise of that therapeutic area in terms of what sort of is happening globally around health and sort of dynamics around healthcare.

Speaker #3: So I don't want to get into that, because to give you a sense, you know, if you look at something that's early stage and you try to figure out what its peak sale revenues are, you will find that the estimates go from $1 billion to $3 billion.

Speaker #3: Now, what does that mean, right? So I don't think at early stage you look at that. You look at the therapeutic area and you look at the promise of that therapeutic area.

Speaker #3: In terms of what is happening globally around health and, you know, the dynamics around healthcare. And as the molecule progresses, then the novelty of that molecule is certainly better.

Anish Ganatra: As the molecule progresses, then the novelty of that molecule is a certain vector, the patient size it is addressing is a certain vector, and you get a more realistic sense of the potential.

Speaker #3: The patient size it is addressing is certainly better. Then you get a more realistic sense of the potential.

Speaker #5: Okay, sir. Thank you.

[Analyst] (Union AMC): Okay, sir. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that management is able to address question from the participant in this conference, please just stick to your question to one per participant.

Operator 2: Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from the participant in this conference, please restrict your question to one per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Abhijit from Kotak Securities. Please proceed with your question.

Operator: Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from the participant in this conference, please restrict your question to one per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Abhijit from Kotak Securities. Please proceed with your question.

Speaker #1: Should you have a follow-up question, please rejoin the queue. The next question is from the line of Abhijit from Kotak Securities. Please proceed with your question.

Speaker #6: Yeah, thank you so much. Just one question on the CDMO side. So just to clarify, Aneepa, you mentioned this 288 crore capex has a 3x asset terms, is it?

[Analyst] (Kotak Securities): Thank you so much. Just one question on the CDMO side. Just to clarify, Anish, you mentioned this INR 288 crore CapEx has a 3X asset turn, is it? That we are expecting by FY29 itself. Just wanted to clarify that I heard that correctly. The other thing was just for this year, we have previously spoken about $100 million. Does that still seem on track?

Speaker #6: And that we are expecting by FY29 itself. Just wanted to clarify that I heard that correctly. And the other thing was, just for this year, you know, we have previously spoken about $100 million.

Speaker #6: So does that still seem on track?

Speaker #3: Yeah, yeah. I mean, $100 million is very much on track. I mean, there is—I mean, that's—we are now talking of exploring that business, yeah?

Anish Ganatra: The $100 million is very much on track. We are now talking of exploring that business. FY29 3X is correct, and it will actually be longer than that, but I've given a near-term view of what that will be.

Speaker #3: So FY29 3x is correct. And it will actually be longer than that, but I've given a near-term view of what that will be.

Speaker #6: Okay, so just to clarify: ₹900 crore from CGMP 4 itself, savings on space to combine, plus whatever we have from the first three CGMPs.

[Analyst] (Kotak Securities): Just to clarify, INR 900 crores from the CGMP 4 itself, phase I plus phase II combined, plus whatever you have from the first three CGMP is over and above that.

Speaker #6: It's over and above that.

Speaker #3: Yeah, yeah. Possibly. I mean, that's a math, right? So that's absolutely right. 288 into 3, yeah, roughly it will come to that, I think.

Anish Ganatra: Yeah. Possibly. That's the math, right? That's absolutely right, 288 into 3. Hereafter we'll come to that again.

Speaker #6: Okay. Thank you so much, and all the best.

[Analyst] (Kotak Securities): Okay. Thank you so much. All the best.

Speaker #1: Thank you. The next question is from the line of Arjit Joshi from Ruvama. Please proceed with your question.

Operator 2: Thank you. The next question is from the line of Archit Joshi from Nuvama. Please proceed with your question.

Operator: Thank you. The next question is from the line of Archit Joshi from Nuvama. Please proceed with your question.

Archit Joshi: Sir, thanks a lot for the opportunity. Two quick ones. You've spoken of increasing interest for contractual uptake in HFCs. If you can elaborate a bit if there's a contract in place or there's an emerging one that we are expecting. Second, the AHF capacity utilization and the contribution for the quarter, if you can help us out with that. Thank you.

Speaker #5: Sir, thanks a lot for the opportunity to quick one. So if sort of spoken of increasing interest for contractual off-take in HSCs, so if you can elaborate a bit if there's an there's a contract in place or there's an emerging one that we are expecting.

Speaker #5: And second, the EHF capacity utilization and the contribution for the quarter, if you can help us out with that. Thank you.

Speaker #3: So, increasing interest is—you know, we were originally thinking of trying to do 30%, but I think where we are now is we've already entered into a couple of contracts.

Anish Ganatra: Increasing interest is, we were originally thinking of trying to do 30%, but I think where we are now is we've already entered into a couple of contracts, and we are also having couple more in recent stage of conclusion. That is what I meant by increasing interest. Of course, like we've always said, we are going to do a balanced approach here. Beyond the point, we will refuse contracts because we think there has to be some open position here as well over the next five years. Yeah. We are going to do a balanced position on this. What was your other question, Archit?

Speaker #3: And we are also having a couple more in the recent stage of conclusion. So that is what I meant by increasing interest. Of course, like we've always said, we are going to take a balanced approach here.

Speaker #3: So beyond the point, we will refuse contracts because we think there has to be some open position here as well over the next five years, yeah?

Speaker #3: So, we are going to take a balanced position on this. What was your other question?

Speaker #6: It's just yeah.

Archit Joshi: AHF utilization. Yeah.

Speaker #3: Yeah, HF utilization, I mean, we said I mean, we're not going to talk about specific capacities here. But, you know, between Surat and Daheed, 60,000 should be good enough for us over the next sort of four to five years.

Anish Ganatra: The AHF utilization, we said, we're not going to talk about specific capacities here. Between Surat and Dahej, 60,000 should be good enough for us over the next four to five years. Of course, barring what we don't see at the moment as I speak. If we need to, we will go for an expansion also. That's not a problem. In the interim, while we come down with downstream capacities, there will be more sort of downstream value-added, focuses for AHF. The advanced materials, like we said, talking about building on the fluorination capability is exactly trying to achieve that. Yeah.

Speaker #3: Of course, barring what we don't see at the moment as I speak. But if we need to, we will go for an expansion also.

Speaker #3: That's not a problem. In the interim, while we ramp up downstream capacities, there will be more of a focus on downstream, value-added initiatives for EHF.

Speaker #3: The advanced materials, like we said, talking about building on the fluorination capability is exactly trying to achieve that, yeah?

Speaker #5: Sure, sir. Thanks a lot. All the best.

Archit Joshi: Yes, sir. Thanks a lot. All the best.

Speaker #3: Thank you.

Speaker #1: Thank you. The next question is from the line of Vidram Mehta from Ask Investment. Please proceed.

Anish Ganatra: Thank you.

Operator 2: Thank you. The next question is from the line of Vidrum Mehta from ASK Investment. Please proceed.

Operator: Thank you. The next question is from the line of Vidrum Mehta from ASK Investment. Please proceed.

Speaker #5: Yeah, thank you for the opportunity, sir. I just wanted to understand on the margin front. If I look at quarter on quarter, that is Q4 of FY26 and Q1 of FY27, the margins are more or less, you know, stable.

Vidrum Mehta: Thank you for the opportunity, sir. I just wanted to understand on the margin front. If I look at quarter-on-quarter, that is Q4 of FY2026 and Q1 of FY2027, the margins are more or less stable. In terms of segment-wise mix, HPP plus CDMO, if I add up, it is around 69% as against 62% on a quarter-on-quarter basis. Ref gas, higher pricing in terms of ref gas and higher contribution from CDMO should have generated higher margins on a quarter-on-quarter basis. Usually, HPP being supported by higher ref gas and CDMO structurally has a higher margin. The same is contradict when I look at on a YOY basis. In Q1 of FY2026 it was 70%, the mix contribution of HPP and CDMO. Right now it is 69%, but our margins have expanded.

Speaker #5: But, you know, in terms of segment-wise mix, HPP plus CDMO, if I add up, it is around 69% as against 62% on a quarter-on-quarter basis.

Speaker #5: And, you know, ref gas higher pricing in terms of, you know, ref gas and higher contribution from CDMO should have generated, you know, higher margins, right, on a quarter-on-quarter basis? Because usually HPP, being supported by higher ref gas, and CDMO structurally has a higher margin.

Speaker #5: And the same is, you know, contradicted when I look at it on a year-on-year basis. Because, you know, in Q1 of FY26, it was 70%.

Speaker #5: The mix contribution of HPP and CDMO. And right now it is 69%. But our margins has expanded. So how should one look at margins from a structural?

Vidrum Mehta: How should one look at margins from a structural-

Speaker #3: No, I think with yeah, I think like with everything else, you know, numbers tell you only half the story, right? You have to relate this to the context.

Anish Ganatra: Yeah, I think like with everything else, numbers tell you only half the story, right? You have to relate this to the context. Q1 of last year, HF prices were very high. In some sense, the margin profile of the HF itself was high, forget R32. Today, as we are talking in a heightened global war tension with supply chain risks, the cost of raw materials increasing, et cetera, that profile will change. It's just obvious that it will happen. Even between Q4 to Q1 you will see gross margins have taken 100 basis points sort of dip. We've made up through productivity improvements coming through fixed cost initiatives that still has the EBITDA at that level. Now, this doesn't mean this is permanent, but I can't be taking price increasing every month or every day, right? There is going to be a lag effect to this.

Speaker #3: I mean, Q1 of last year, HF prices were very high. So, in some sense, the margin profile of the HF itself was high. Forget 32.

Speaker #3: You know, today as we are talking in a, you know, in a period of heightened global war tensions, with supply chain risks, the cost of raw materials increasing, etc., that profile will change.

Speaker #3: It's just obvious that it will happen. I mean, even between Q4 to Q1, you will see gross margins have taken a hundred bits sort of this.

Speaker #3: But then we've made up through productivity improvements coming through fixed cost initiatives and still held the EBITDA at that level. Now, this doesn't mean this is permanent, but I can't be taking price increasing every month or every day, right?

Speaker #3: So there is going to be a lag effect to this. So we constantly look to make sure that the price increase, or inflation that we are seeing on the RM side, is being passed on to the products wherever we have the pricing power, you know?

Anish Ganatra: We constantly look for making sure that the price increase or inflation that we are seeing on the input side is being passed on to the products wherever we have the pricing power. If that makes sense.

Speaker #3: If that makes sense. So you have to look at it in the context of the environment, what I'm saying.

Vidrum Mehta: Yeah.

Anish Ganatra: You have to look at it in the context of the environment, what I'm saying.

Speaker #5: Okay. So on a normalized run rate basis, how should one expect margin over the next one to two years?

Vidrum Mehta: Okay. On a normalized run rate basis, how should one expect margin over the next one to two years?

Speaker #3: Yeah. So where we are today and what we can see some upcoming capacities you know, the you've got the new HFC capacity coming in.

Anish Ganatra: Yeah. Where we are today and what we can see from our coming capacities, you've got the new HFC capacity coming in, you've got the debottlenecking plant coming in, you've got Chemours coming in. We've got enough to have confidence from a point of view of operating leverage that what we are talking about will be in the range of that 32%, 33% ±1% here or there. There will be a range, but I think it's fair to assume that that's what we are working on. Of course, we'll keep sort of looking at this every quarter when we come on, review our numbers and seeing again the environment in which we operate and what's that doing to us.

Speaker #3: You've got the debottlenecking plant coming in. You've got Chemos coming in. So, you know, we've got enough to have confidence from a point of view of operating leverage that what we are talking about, you know, will be in the range of that 32, 33% plus minus 1% here or there, yeah?

Speaker #3: So, there will be a range. But I think it's fair to assume that that's what we are working on. Of course, we'll keep sort of looking at this every quarter when we review our numbers and see, again, the environment in which we operate and what that's doing to us.

Speaker #5: Yeah, sir, just one more thing. On the fixed front, over the last, you know, five years, we have roughly spent more than ₹3,000 crores.

Vidrum Mehta: Yeah. Sir, just one more thing. On the CapEx front. Over the last five years, we have roughly spent more than INR 3,000 crores, and in the coming three to four years, we are again going to spend around INR 3,000 odd crores. Roughly INR 6,000 crores of CapEx is what we are doing over a period of seven, eight years. Now broadly, when you incur a CapEx, what kind of revenue visibility you have in terms of RFQs or order backlog you already have in place, and what could be the gradual utilization or asset turn which can ramp up over a period of, say, one, two years?

Speaker #5: And, you know, in the coming three to four years, you know, we are again going to spend around 3,000 odd crores. So, you know, roughly 6,000 crores of capex is what we are doing over a period of, you know, seven, eight years.

Speaker #5: Now, broadly, when you incur a capex, what kind of revenue visibility do you have in terms of, you know, RFQs or order backlog you already have in place?

Speaker #5: And what could be the gradual utilization or asset turn, which can ramp up over a period of, say, one to two years?

Speaker #3: Yeah. So again, I'll take your question from a past standpoint. From a future standpoint, we've always indicated that our capex framework allows that. We will only pursue those capexes which are value-accretive, and that's what our sort of discipline around investment guides us to, yeah?

Anish Ganatra: Yeah. Again, I'll take your question from a past standpoint. Future standpoint, we've always indicated that our CapEx frame allows that. We will only pursue those CapExes which are value accretive, and that's what our sort of discipline around investment guides us to. If you want asset turns or something like, again, not relevant for a high margin business because typically you look at asset turns more relevant in low margin commodity type plays. Having said that, asset turns is something that you will sort of see it play out. I don't know what to answer on that, to be honest. If you're asking me, there will be different for different businesses. The philosophy here is that we will play both a product and a service play.

Speaker #3: So but, you know, if you want asset turns are something that, again, you know, not relevant for a high margin business because typically you look at asset turns more relevant in low margin commodity-type place.

Speaker #3: But having said that, you know, asset turns are something that you will sort of see play out, you know? I mean, what sort of—I mean, I don't know what to answer on that, to be honest, you know?

Speaker #3: I mean, if you're asking me, you know, it will be different for different businesses. But the philosophy here is that we will play both a product and a service play. You know, we believe that our sort of technical competency lies in the product or the R&D side, much like the adoption capacity capex that you're seeing today.

Anish Ganatra: Where we believe that our sort of technical competency lies in the product of the R&D side, much like the adoption capacity CapEx that you're seeing today. We will go ahead with sort of putting in the capacities on the basis of engagement with customer. That necessarily doesn't mean that we have purchase orders. There is visibility, though. I think there are shades of gray over there, but of course, if it's a service contract, it will always be backed by a proper sort of order projections and commitments. Yeah. That's an example with the Chemours project. You have both that we will play. We de-risk our CapEx allocation quite significantly in both stages.

Speaker #3: We will go ahead with sort of putting in the capacities on the basis of engagement with customer that necessarily doesn't mean that we have purchase orders.

Speaker #3: There's visibility, though, you know? So I think there are shades of gray over there. But of course, if it's a service contract, it will always be backed by proper order projections and commitments, yeah?

Speaker #3: And that's an example with the Chemours project. So, you know, we have both that we will play. We de-risk our capex allocation quite significantly, you know, in both stages.

Speaker #3: There are stage gates we follow for technical evaluation, technical clearance, and commercial evaluation, commercial clearance. And then ultimately, the financial sort of framework that we have in place as the threshold before which capexes are put to the board for approval.

Anish Ganatra: There are stage gates we follow for technical evaluation, technical clearance, commercial evaluation, commercial clearance, and then ultimately the financials or a framework that we have in place as the threshold before which CapEx will be put to the board for approval.

Speaker #5: Okay, sir. Thank you. Wish you all the very best. Thank you.

Vidrum Mehta: Okay, sir. Thank you. Wish you all the very best. Thank you.

Speaker #3: Thank you.

Anish Ganatra: Thank you.

Speaker #1: Thank you. The next question is from the line of Siddharth Gadikar from Equirius. Please proceed with your question.

Operator 2: Thank you. The next question is from the line of Siddharth Gadekar from Equirus. Please proceed with your question.

Operator: Thank you. The next question is from the line of Siddharth Gadekar from Equirus. Please proceed with your question.

Siddharth Gadekar: Hi, sir. First, on the INR 90 crore CapEx, largely we would be doing this CapEx in Dahej itself, and it would be largely setting up some dedicated capacity or more like a pilot plant?

Speaker #5: Hi, sir. So, first of all, the ₹90 crore capex—largely, we would be doing this capex in the half itself, and it would be mostly for setting up some dedicated capacity, or more like a pilot plant.

Speaker #3: So this capacity will create sort of two core platforms and also augment our capabilities around equipment, etc., for analytical. We've already set up, but there is a need to augment those two.

Anish Ganatra: This capacity will create sort of two core platforms and also augment our capabilities around equipment, et cetera, for analytical. We've already set up, there is a need to augment those two. This CapEx will address that. The idea of calling this as adoption CapEx is as different from pilot CapEx is because lab scale products have been approved. In effect, we've already made the product at lab scale. Of course, there is scale-up involved and the risks associated with not being able to scale up. Again, that's why we have a product portfolio that we are playing with here. This is being done at our Surat site.

Speaker #3: So, this capex will address that. The idea of calling this adoption capex, as different from pilot capex, is because lab-scale products have been approved.

Speaker #3: So in effect, we've already made the product at lab scale. Of course, there is scale-up involved and the risks associated with not being able to scale up.

Speaker #3: But again, that's why we have a product portfolio that we are working with here. And this is being done at the Surat site, you know?

Siddharth Gadekar: Okay. Second, on the HFO part, if you look at our annual report, our HFO revenue to Honeywell has been in the range of INR 460 crore, INR 470 crore, and our contract was for 5 years. How should we think beyond FY2020 from this?

Speaker #5: Okay. So second, on the HFO part, if you look at our annual report, our HFO revenue was to Honeywell has been in the range of 460, 470 crores.

Speaker #5: And our contract was for five years. So how should we think beyond FY27 on this?

Anish Ganatra: There's time for that. Beyond 2029. The asset commercialized in July 2022, if I remember correctly. The original term was for 7 years, and there is an auto extension to that at Honeywell's interest for further 3 years. We have enough runway to go, boss.

Speaker #3: There's time for that, beyond '29. So, the asset was commercialized in July '22, if I remember correctly. And, you know, the original term was for seven years, and there is an auto-extension to that at Honeywell's interest for a further three years.

Speaker #3: So we had enough runway to go bust.

Speaker #5: Okay.

Siddharth Gadekar: Okay.

Anish Ganatra: Nothing to worry about today.

Speaker #3: Not something to worry about today.

Speaker #5: Okay. Thank you, sir.

Siddharth Gadekar: Okay. Thank you, sir.

Speaker #1: Thank you. We will take the last question from Hiral from Shratunjaya Investment Manager. Please proceed with your question.

Operator 2: Thank you. We will take the last question from Hiral from Shatrunjay Investment Manager. Please proceed with your question.

Operator: Thank you. We will take the last question from Hiral from Shatrunjay Investment Manager. Please proceed with your question.

Speaker #2: Yeah, hello.

[Analyst] (Shatrunjay Investment Manager): Yeah. Hello.

Speaker #3: Yeah.

Anish Ganatra: Yes.

Speaker #2: Yeah, good evening, sir. I wanted to understand the DRDO order that you have received. So can you, sir, give can you give some more details on that, that what how will it impact our revenues and margins?

[Analyst] (Shatrunjay Investment Manager): Yeah. Good evening, sir. I wanted to understand the DRDO order that you have received. Can you give some more details on that? How will it impact our revenues and margins?

Speaker #3: So DRDO order, I can only tell you what we've seen on the internet any which ways because it's bound by confidentiality. But obviously, the product name is out there and the product has application beyond defense.

Anish Ganatra: DRDO order, I can only tell you what we've seen on the internet any which ways, because it's bound by confidentiality. Obviously the product name is out there, and the product has application beyond defense. Again, that application beyond defense is also a material opportunity that Navin can pursue. I'll leave it at that, if you don't mind.

Speaker #3: And again, you know, that application beyond defense is also a material opportunity that Navin can pursue. So I'll leave it at that if you don't mind.

Speaker #2: All right, all right. Thank you.

[Analyst] (Shatrunjay Investment Manager): All right, sir. Thank you.

Speaker #3: All right. Thank you.

Anish Ganatra: Thank you.

Speaker #1: Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to management for their closing comments. Thank you.

Operator 2: Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to management for their closing comments. Thank you. Over to you, sir.

Operator: Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to management for their closing comments. Thank you. Over to you, sir.

Speaker #1: Over to you, sir.

Speaker #3: All right. Thank you again all for taking the time to join us today. Really appreciate it. And have a great evening. Thanks.

Anish Ganatra: All right. Thank you again all for taking the time to join us today. Really appreciate it. Have a great evening. Thanks.

Speaker #1: Thank you. On behalf of Navin Fluorine International Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.

Operator 2: Thank you. On behalf of Navin Fluorine International Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Operator: Thank you. On behalf of Navin Fluorine International Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

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Q1 2027 Navin Fluorine International Ltd Earnings Call

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