Operator: Ladies and gentlemen, good day and welcome to the Navin Fluorine International Limited conference call hosted by Cygnus Partners. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Today on the call, we have with us Mr. Vishad Mafatlal, Chairman, Mr. Nitin Kulkarni, Managing Director, and Mr. Anish Ganatra, Chief Financial Officer.
Operator: This call will contain forward-looking statement about the company, which are completely based on the beliefs, opinion, and expectation of today's call. Actual results may differ materially. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page number 2 of the investor presentation of the company, which is uploaded on stock exchange and on the company's website with it. With this, I now hand the conference over to Mr. Vishad Mafatlal for his opening remarks. Thank you, and over to you, sir.
Vishad Mafatlal: Navin Fluorine's Q2 and H1 FY27 earnings conference call. Joining me today are our Managing Director, Mr. Nitin Kulkarni, our Chief Financial Officer, Mr. Anish Ganatra, and Ms. Payal Dave from Cygnus Partners, our investor relations advisor. Before we proceed, I would like to take this opportunity to thank MUFG Intime team for supporting us in managing our investor relation activities during the last 5 years. We appreciate their contribution and assistance extended to us during this period. We have appointed Cygnus Partners as our investor relations consultant. We look forward to working with them as we continue to strengthen our engagement with the investor community. Coming to our performance, in the H1 FY27, our PAT crossed INR 500 crore with an EPS of INR 100. This result reflects our continued focus on strengthening our business, building capabilities for the future, and advancing our strategic priorities through disciplined execution.
Vishad Mafatlal: As we navigate the evolving business environment, our priority remains to strengthen our business fundamentals and deliver sustainable growth across all verticals. At the same time, the safety, health, and well-being of our employees remain paramount, and we continue to uphold high standards of safety and operational excellence across our facilities. I am also pleased to share that the board has declared an interim dividend of INR 8 per equity share with a face value of INR 2 per share. In our HPP business, we continue to strengthen long-term customer relationships and commercial partnerships. In this context, I would like to highlight an important development announced recently. The tenure of our existing HFO supply contract with Solstice Advanced Materials has been extended by 4 years until December 2032 and will have an additional revenue potential of approximately US dollar 180 million.
Vishad Mafatlal: I thank the management at Solstice for their continued trust in our capabilities and look forward to deepening our relationships with them. We are also making steady progress in developing Advanced Materials as a potential growth platform over the longer term. Focusing on specialized applications across areas such as data centers, electronics, semiconductors, and defense, leveraging our expertise in fluorination chemistry and R&D capability. We are confident this business will create additional growth opportunities for us. Let me now provide a brief update on our ongoing CapEx programs. During the quarter, we commissioned the debottlenecking of our MPP capacity at Dahej. Our HFC capacity expansion is progressing as planned and remains on track for commissioning shortly. The Chemours project, which will enable us to participate in the emerging advanced cooling market, is also progressing towards commissioning in Q3 FY27.
Vishad Mafatlal: Our investment in Advanced Materials adoption capacity is progressing as per schedule and is expected to commission by Q2 FY28. In our CDMO business, phase II of the cGMP-4 facility, involving a CapEx of approximately INR 125 crore, is progressing as planned and is expected to become operational by the end of Q4 FY27. The TDF project to develop an indigenous specialty material with DRDO is progressing well as per schedule. While we deliver sustainable results and continue to invest in growth projects, the leadership and I are actively looking at meaningful investments in cutting-edge technologies that drive value for all our customers and ourselves. This includes enhancing the integration of digital technologies across our businesses, leveraging AI to strengthen our research capabilities, and optimize our processes. We are also investing in renewable energy across plants, which will meet more than 60% of our energy requirement through renewable resources.
Vishad Mafatlal: As we progress to the next phase of growth, we recognize the importance of continuously strengthening our organizational capabilities and investing in our people. We remain committed to developing our existing talent, enhancing critical skill sets, and building the capabilities required to support our evolving business needs and long-term growth ambitions. I would like to also thank our customers, employees, partners, and all stakeholders for their continued trust and support, and we look forward to building on this foundation in the years ahead. With that, I wish you and your families a very happy Diwali and a prosperous New Year in advance. I will now hand over to Nitin to take through our business and operating performance.
Nitin Kulkarni: Thank you, Vishad bhai. Good evening, everyone, and thank you for attending the call today. We have delivered strong set of results in what is otherwise a very volatile geopolitical environment. In this regard, I would like to recognize the efforts of our leadership and their teams for their commitment, agility, and effectiveness in navigating these challenging times. All our business verticals witnessed a strong performance during the quarter, supported by healthy growth momentum. In our HPP business, we continued to deliver healthy revenue growth during the quarter, supported by higher volumes and improved realization. The pricing environment for HFC remains firm, with realization improved on a sequential basis. We are also witnessing encouraging customer interest in our upcoming capacities, providing good visibility for the business going forward. Our new HF facility has witnessed an improvement in utilization, contributing to our growth momentum.
Nitin Kulkarni: R32 CapEx is progressing as planned and remains on track for commissioning shortly. An extension of contract from Solstice Advanced Materials provides potential visibility beyond FY28, and would like to extend my appreciation to the partners and teams involved. With our established customer relationships, growing portfolio of products, and expanding geographical footprint, we are well-positioned to secure the opportunities in this business vertical. In the specialty chemical business, we continue to see healthy growth momentum supported by strong order visibility for the H2 of FY27 and beyond. Our product pipeline continues to expand across both existing and new molecules, strengthening our portfolio of differentiated chemistries, and supporting our growth prospects. During the quarter, we commissioned the debottlenecking of our MPP capacity at Dahej in September 2026, further enhancing our production capabilities.
Nitin Kulkarni: Moving on to CDMO business, we continue to see strong momentum with our FY27 target well within reach, supported by encouraging business developments and healthy product pipeline. I am pleased to mention few of our existing molecules have seen positive developments in their end use with favorable results of the trials. Our engagement with leading European CDMO major continues to deepen, driven by increasing demand for an existing molecule and expanding role in the customer supply chain. From a strategic perspective in this vertical, we continue to focus on building a balanced portfolio of late-stage and commercial molecules, complemented by early-stage programs. We are also expanding our presence across promising therapeutics areas, including oncology, cardiovascular, neurology, and animal health through engagements with global innovators. With this, I hand over the call to Anish for sharing the financial highlights.
Anish Ganatra: Thank you, Nitin. Good evening, everyone, and a warm welcome to the earnings conference call. Moving on to the financial performance for Q2 and H1 FY27, let me begin with the key highlights for the quarter. On a consolidated basis, operating revenue for the quarter stood at INR 1,191 crore, registering a year-on-year growth of 57%. Operating EBITDA grew by 66% year-on-year to INR 407 crore, with margins expanding to 34.2%. Operating PBT increased by 87% to INR 336 crore, while profit after tax rose by 81% to INR 269 crore, reflecting the strong growth in both revenue and profitability. Turning to the half-year performance, operating revenue for H1 FY27 increased by 51% to INR 2,236 crore, supported by broad-based momentum across HPP, specialty chemicals, and CDMO businesses. Operating EBITDA grew by 69% to INR 765 crore, with margins expanding by 367 basis points to 34.2%.
Anish Ganatra: Operating PBT grew by 93% year-on-year to INR 619 crore, compared with INR 320 crore in H1 FY26. Profit after tax also increased to INR 513 crore, a growth of 93% year-over-year. Our EPS stood at INR 100, and our net operating working capital days stood at 70 days, which is within our financial framework. With that, we can now open the floor for questions and answers.
Operator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Sanjesh Jain with ICICI Securities. Please go ahead.
Sanjesh Jain: Yeah, good evening. Thanks for taking my questions. My first question is on the revenue bridge. All the three segments sequentially has grown impressively. Can you help us understand what has led to this sequential growth? Because prices in ref gases has largely been stable in the HPP, and Specialty, I thought we were, except Corteva, most of the plants were running full. And in CDMO, I think there is more offtake in the European Union. How much more can we do there? Can you help us understand all of the three segment, what is driving the growth, and from here on, what growth driver from the Q2 base?
Anish Ganatra: All right. Thanks, Sanjesh. Good evening to you. I mean,
Sanjesh Jain: Good evening, sir.
Anish Ganatra: Good evening. Good evening. If you look at Q1 to Q2, right? That is what you are referring to when you say-
Sanjesh Jain: Correct. Correct.
Anish Ganatra: I mean, if you look at it, the HPP business has largely grown both from a benefit of pricing advantage in the business. There has been movement on prices. I mean, this is the danger of relying on averages, right? I mean, averages do not tell you what we kind of Our teams manage to place the product at better pricing. We have also had good volumes because, like we have said before, our HF plant has come into play. So volumes on HF are pretty good. That is helping. Also, Q-on-Q, we have had growth in the Orchid business too, the HFO business of Solstice. So that has also helped. Specialty, I mean, again, I refer back to my commentary, I think probably in the last two, three quarters, where we have consistently said that this business will become more like a INR 350 crore business.
Anish Ganatra: Now, again, our philosophy in this business, given the global dynamics, is to extract more and more juice from the current assets. Our MPP plants, and the operational efficiency that we are doing allows us to do more campaigns in the same plants, because of the way we are mapping the products and minimizing the steps. Also, our teams in R&D and innovation are helping us do that. That is helping. I mean, in fact, if you see Specialty MPP1, MPP2, we will have far exceeded the bar by the end of this year. In this environment, our teams are able to deliver that. CDMO, there is growth both from the base business from Fermion, as well as some encouraging new qualification campaigns that we have run too, so that is helping the CDMO business. But essentially, this is kind of the growth experience in the sequential from quarter to quarter.
Anish Ganatra: Hereon, if you look going forward, right?
Sanjesh Jain: Correct.
Anish Ganatra: Growth will come. We recently commissioned the debottlenecking at the end of September. You should start to see growth coming in from that in the Specialty, even beyond where we are today, because that has not been factored in the numbers. You will also see growth coming in, excuse me, from the new plant that is being commissioned shortly. Of course, it will ramp up towards the end of this quarter, and you will start to see some incremental sort of growth coming in this quarter, but then full ramp up possibly in the next quarter, yeah?
Sanjesh Jain: Correct.
Anish Ganatra: CDMO, of course, like we said, and I think Vishad bhai and Nitin both mentioned, we are at the striking distance of our USD 100 million target in terms of order book visibility. There will be growth for that business too by the end of this year. Beyond that, again, we have already announced the phase II CapEx that will start delivering growth also in that vertical.
Sanjesh Jain: That is great, Anish. I think what has impressed more in this quarter is that we were able to maintain the gross profit despite a very inflationary environment. What is helping us to hold on to gross profit while all our peers have struggled there?
Anish Ganatra: So again, if you look at our EBITDA budgets, I mean, in terms of the financial position, I am telling you both from the year-on-year and a quarter-on-quarter perspective. I mean,
Sanjesh Jain: Okay
Anish Ganatra: we are able to, between the currency tailwinds and the price actions, pricing actions we are taking, largely we are able to offset the sourcing impacts. Okay?
Sanjesh Jain: Okay.
Anish Ganatra: Also, what is happening for us is operating leverage is playing in, plus there is a lot of effort being done on operating efficiency, which is also helping capture and protect the EBITDA.
Sanjesh Jain: Okay.
Anish Ganatra: As we go forward, this is something, and that is exactly the reason why Nitin Kulkarni brought out in his speech, the fact that even in this environment, the commitment of the teams, the agility of the teams is helping us navigate. That continues. Sorry, there is some disturbance there.
Sanjesh Jain: No, no, sir. I am there. I am there. Sorry.
Anish Ganatra: Okay. No, so exactly, I mean, we will all have to remain committed and agile to respond to the geopolitical challenges, because I do not think we are out of the woods yet in terms of the geopolitics.
Sanjesh Jain: Got it. One last question before I join back in the queue. The contract extension, I thought we had a higher headroom for the volume, but the implied contract for next four years implies a USD 45 million run rate annually versus a USD 58 million run rate we had. What could be missing in this?
Anish Ganatra: No, the way you should look at this, there are two things happening here, right? One is the fact that the extension gives us a longer visibility and adds in about close to USD 180 million potential for revenue over the next four years with the same assets. It definitely will not add any leverage in terms of where we are. Second, the pricing mechanism is always a pass-through mechanism in these contracts, right? That is something to bear in mind, that as we go from now here on, how the pricing mechanism works, if you recovered your CapEx, there will be a different answer to it. There is a lot to the commercial contract in the way they get structured that you cannot make a simplistic notion on the average rate.
Anish Ganatra: In fact, if anything, this contract is going to guarantee us larger volumes than what we had before.
Sanjesh Jain: Got it, Anish. I think these are my questions. Thanks for answering all the questions, and best of luck for the coming quarter, and happy Diwali in advance.
Operator: Thank you. Our next question comes from the line of Rohit Nagaraj with 361 Capital. Please go ahead.
Rohit Nagaraj: Thanks for the opportunity and congrats on, again, a good set of numbers. First one on the clarification on the HFO contract. If you look at for the last 7 years, the average update has been about $61 million. But for the next 4 years, it indicates $45 million. Just want a clarification in terms of whether the revenue run rate will moderate beyond FY29. Second question, allied to that, our own HFO commercialization, will that get delayed because now we will be supplying to Honeywell beyond 2030? Thank you.
Anish Ganatra: I will take the second one first. If you think of this, Rohit, at the end of the day, we will not get into the same application. You and I both know there are 40 different varieties of HFOs. As long as we are not within conflicting of the contract, there is nothing to stop us to do that. Therefore, I do not think that means anything on whatever else we are doing on the other HFOs. We have also said before that as we do the other HFOs, we will be looking both at partnership models as well as product models, depending on whatever suits best for us.
Anish Ganatra: In terms of your question on the contract and the average, I was just telling Sanjay, you can look at this in a very simplistic way, dividing by the number of years. Because frankly, if you had a certain pricing environment which you set in 2022 for the current contract, or 2020 actually for the current contract, that pricing environment is different to what we are today, what will be in 2028. The way to look at this is that on a same asset base, you are going to extend both the volumes, the revenues, and also the period. This was a 7-year contract, this now becomes an 11-year contract. In other words, whenever we talk of our growth between now to FY30, and there was this question, what happens to the Honeywell contract after 2028? This particular thing actually addresses that the base is protected.
Rohit Nagaraj: Right. Perfect. Second question on Chemours, we have seen some delay and obviously there have been challenges in terms of geopolitical and other things. Just one clarification here that whether because of the delay in commissioning of the project, the qualification cycle also will get delayed or since we have been supplying the material in the interim, that qualification cycle will not have material impact because of the commissioning of this project. Thank you.
Anish Ganatra: No, we have said this before, Rohit. When you look at this project, we have been working with Chemours to co-develop this. The project itself, which started from a tech pack and developing in the lab to the pilot scale and to supplying them currently to the initial capacity, the process routes are different. We are actually, the delay is more attributable to looking at the right process to go into the initial capacity, which then allows us to accelerate the larger capacity should there be demand. In fact, the delay is a conscious choice rather than anything else between the partners. This is evidenced by the fact that as we are coming to commission that asset, we already have orders in place coming in for the future quarters, yeah?
Rohit Nagaraj: Perfect. Thanks a lot, and all the best, and Diwali wishes to the entire team. Thank you.
Anish Ganatra: Thanks. Same to you. Good.
Operator: Thank you. Our next question comes from the line of Ankur Periwal with Axis Capital. Please go ahead.
Ankur Periwal: Yeah. Hi, sir. Thanks for the opportunity and congratulations on a strong set of numbers. First question on the CDMO side. With phase II of the cGMP-4 coming in, will it be largely used or consummated for Fermion contract itself, or there could be newer molecules also which will be driving growth here?
Anish Ganatra: cGMP-4 phase I and phase II, Ankur, are both dedicated plants to Fermion. This is going to be completely dedicated plants.
Ankur Periwal: Sure. The follow-up question to that will be that, since you mentioned there are 3 molecules that we are working on, and we are at advanced stage for one of them, if I got that right, what are the timelines one should look at for the next phase of expansion here for the newer molecules?
Anish Ganatra: Well, again, you have to look at this that when we started to do the phase II cGMP-4 plant, we were already doing the warehouse all the way up to phase VI, and we are doing ETP all the way up to phase V, right? We can actually go to cGMP-5 pretty quickly with the infra there, in terms of the utility, et cetera. The developments that you are referring to are actually positive on 2 molecules. If you picked it up, one of the molecules has already received approval in China, and that is on fast track on FDA approval in the US market, so that will sort of probably come in. Again, the other molecule is more about the potential expansion, later expansion of darolutamide itself, and that again has promising concepts on value.
Anish Ganatra: I mean, we are very quick, so the moment we see intense utilization of our cGMP plants coming to 70%, 80%, we will be triggering off phase five. There is absolutely no doubt in our mind on that. I have said this before as well, come to INR 100 million number, we will sort of be starting to knock in that door very soon, that way.
Ankur Periwal: Sure, Anish. That is very helpful. Just second bit on the specialty chemical side, with Nectar looking to be ramped up probably, let us say, within this financial year, fully utilization in terms of the peak revenue. How do you see that revenue piece picking up? Well, Chemours is one to ramp that up, but apart from Chemours and MPP debottlenecking, any other projects that we are working on which will require separate dedicated capex?
Anish Ganatra: We have got, like I said in my last commentary on call, we have got five molecules, new molecules that we were working on. Some of the numbers that you see, the growth that you see, which Sanjesh was asking, is actually out of those molecules as well. There are campaign orders for those molecules going all the way until the end of this year and beyond as well. So, there will be growth coming from there. For Nectar, we had always clarified that FY27, we would be somewhere around 60%, 65% of the par, and the balance par will come into FY28. So, that is the ramp-up sort of around the specialty business. Previously, as Anuj, we have said about last three quarters, so that is what you are seeing play out as well. It will go up because of the reasons we talked before as well.
Ankur Periwal: Yeah. Sure. Okay, sir. That is it from my side. Thank you, and wishing you all a very happy Diwali.
Anish Ganatra: Thanks. Same to you also.
Operator: Thank you. Our next question comes from the line of Archit Joshi with Nuvama Wealth Management. Please go ahead.
Archit Joshi: Hi, good evening, everybody. Thanks a lot for the opportunity. Just one question. Any development on the DRDO contract, any ramp or economics that we have been coming across, and you can share anything on that account?
Anish Ganatra: Hi, Archit. The DRDO, again, we are working to the schedule as prescribed with the defense. That is going on track with them. Again, like we shared, this molecule has dual use. As and when the product is developed, we will be accelerating the application in the pharma phase sooner than what time the defense takes, because that will take time from the defense side in terms of when they get comfortable, right, in terms of the qualification, et cetera. Again, you know the potential market over there. Even at 50%, just the Indian market is roughly about INR 400 crore in the pharma side.
Archit Joshi: Sure, sir. Just one small bit again on, so the HF prices also have firmed up quite a lot in the entire onslaught within the world. Have you been able to benefit since we have also commissioned the capacity?
Anish Ganatra: I think, again, pricing, as we know, is an equation of cost, right? I mean, when you look at how HF prices have gone up, you should also look at how prices for sulfur, gas, right? A lot of raw materials has gone up, right? Fluorspar is also going up. So, I mean, frankly, I think in this sort of an environment, a 34% EBITDA is really a solid EBITDA that cannot come only from pricing. That has to continuously come from the efficiency and the improvements we drive within the organization. And that is going to be our mantra.
Archit Joshi: Right, sir. Of course. Get that point. That would be all from me. Wishing a very happy Diwali. Thank you.
Anish Ganatra: Thanks. Same to you.
Operator: Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you. I now hand over to you. Sorry. I am so sorry. I am so sorry. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Arun Prasad with Avendus Spark. Please go ahead.
Arun Prasath: Yeah. Good evening, everyone. Thanks for the opportunity. Anish bhai, my first question is that, I think, first of all, it is impressive that they have reached the CDMO targets of $100 million on a 100 basis much earlier than we initially said. But following up that, am I right if I assume that for including the phase II, the new target will be somewhere close to INR 1,200 crore to INR 1,300 crore?
Anish Ganatra: Arun, again, we have always been saying that we will do $100 million by FY27. So, it is not early, it is actually on time. We have been saying this for some time now. We have also said that cGMP-4 phase II, when it is phase I and phase II put together, the peak annual revenue potential is close to 3x of the capital, or about INR 900 crore to INR 1,000 crore by FY28, 2029, if I am not mistaken. So, that is also on track. The molecules that we talked about, the label expansion for darolutamide, the approval for the other molecule in the China jurisdiction, which then gives a greater confidence of approval in the other jurisdictions, is all positive development. So, envisaging a growth beyond FY27 in the numbers that you talked about is not sort of unimaginable.
Arun Prasath: Understood, sir. Second, Anish bhai, I think given the growth that we are seeing in all the three segments, inevitably we are going to have a post-tax OCF of more than INR 1,200 crore, INR 1,300 crore in the steady state. But so far, we have not announced, obviously something will be in the plans, but how should we see your CapEx? Will the CapEx will continue at the current rate, or we will have a lot of surplus free cash flow which we will be distributing to the shareholders? How should we think in this capital allocation perspective?
Anish Ganatra: Yeah. So, like I have said before, our CapEx frame will be in the INR 700 crore to INR 1,000 crore every year. INR 700 crore this year is what we are looking at given where we are. I think the H1 captures something in the range of INR 300 crore, INR 310 crore. So, we are on track for what we are saying. We would do this year on the lower end of that range. We are working on several projects, and as these projects kind of mature through our stage gates, you will see CapEx being announced. We are very conscious of the fact that with the CapExes we have in place, our growth to FY28 is pretty much baked in. Some part, of course, goes to 2029, like the cGMP-4 that I was talking about.
Anish Ganatra: But there will be other projects that will come in to capture the growth before, and our portfolio is looking quite healthy and rich on the pipeline, yeah?
Arun Prasath: Understood, sir. Sir, one more clarification on the HFO contract extension. It is very clear that from what you said is that we will have some reduction in the gross margin at a portfolio level, but should we also extend, I mean, incremental volume, should it result in a margin accretive at an EBITDA level, sir?
Anish Ganatra: Incremental, I mean, when we are growing at the rate of 20%, 25% annually, our costs are not going to grow at that rate. The question is, what will be the EBITDA in the future? We are not going to change the guidance from 30%, because frankly, I will be the first one, future, long term, we are not going to change the guidance from 30%. I am not talking of the year, I am talking long term, right? The reason for that is that I will not sit here and let you believe that I have full knowledge of the future. In fact, if at all, our cognitive ability does not allow us to predict the numbers for five years and six years, yeah, on EBITDA margins. The geopolitics are massively volatile, as you all know, so we will figure that out.
Anish Ganatra: For this year itself, for FY27, just to be clear, we are going to be working on the margins that you see for the H1, in the same sort of range for the year. That is what we will be working towards.
Arun Prasath: Understood, sir. Sir, I also heard that you spoke about the HF placement, if I heard it rightly. So, that means are we selling it in the domestic market also, the HF, from the HF plant?
Anish Ganatra: Sorry, I missed that. What did you say?
Arun Prasath: Sir, I heard that you, something like you talked about HF placement in the market. So, can you clarify that please?
Anish Ganatra: No, I was saying that from a ref gas point of view, everybody talks of averages, and you know the danger of averages, does not recognize the superlative ability of teams to place the product in the right prices in the market. We are doing better than the average. Therefore, to look at the average and say that you have not had any upside from the ref gas environment would not be a fair statement. That is what I was trying to say. And of course, on the HF side, we had always said that our merchant sales would be an X number. Today, we are seeing that it is actually far larger than that we are able to place. Some of the material that we are placing is also going in the international markets and also serving high-pure HF as well.
Arun Prasath: Okay. If you can clarify what is our HF utilization rate, sir, at this point of time?
Anish Ganatra: We would not want to talk of utilization rates. I mean, rest assured that we have said it is being ramped up, so it has not hit the full capacity, yeah? It is being ramped up, and it is a large plant, so there is going to be more time to kind of hit the full capacity.
Arun Prasath: Understood. Thanks for answering all the questions, sir. All the best.
Anish Ganatra: Thanks again.
Operator: Thank you so much. Ladies and gentlemen, anyone who wishes to ask a question, please press star 1. Our next question comes from the line of Aditya Iyer with HDFC Securities. Please go ahead.
Aditya Iyer: Hi, am I audible?
Anish Ganatra: Yes.
Operator: Yes, you are.
Aditya Iyer: Okay. Congratulations on a great set of numbers. I have a few questions. On the Chemours project, what early indicators are we observing on OEM engagement, and under what conditions would the proposed NX scale-up be triggered?
Anish Ganatra: Again, we have talked about this, Aditya. This is more a Chemours conversation than a Navin conversation, but I will help you in as much as I can. I cannot talk about specific numbers, et cetera, on the project. We are under an NDA. But, if you look at what is available in the public domain, you will see that Chemours, earlier in this year, qualified its product with a French company called 2CRSi, and they are one of the OEM manufacturers of high-compute kits, so they do one new architecture. There is actually, that has been a joint development agreement with them, which then accelerates the adoption in the hypercomputing. Because as you know, anybody that establishes hypercomputing environments is likely to use OEMs to qualify their materials, et cetera. It is very encouraging.
Anish Ganatra: I think the fact that as we commission the project and we have line of sight and purchase orders in hand from Chemours, again, signals that there is demand for the adoption that is coming through. We had always said it would take about 15 months once the project is commissioned to know what the adoption rate is in the market, what the size of that market is, and hence what the CapEx will be. So, a bit premature to talk about the final eventual CapEx that will result at the end of all of this.
Aditya Iyer: Okay, that is it from my end. All the best to the team and wishing you a happy Diwali in advance.
Anish Ganatra: Same to you, Aditya. Thanks.
Operator: Thank you. Our next question comes from the line of Sanjay Satpathy with Marcellus Investment Managers. Please go ahead.
Sanjay Satpathy: Hi, sir. Just wanted to confirm that your annual CapEx, you said that will stay at around INR 700 crore, INR 750 crore this year as well as next. Is that correct?
Anish Ganatra: I said our CapEx range. What I mean by that is we have built a very strong balance sheet, and a very strong capital frame which allows us to hold our working capital to 70 to 75 days. All of that means that we are able to generate an EBITDA conversion of 60%, which 60%, 65% on a more sustainable basis, and that then translates the ability to spend. So, we have got the ability to spend INR 700 crore to INR 1,000 crore every year within our CapEx range, which is good enough, both from a point of view of the project hopper that we have in our line of sight, as well as the growth that we are targeting over the next five years, right? In some years, you will find the CapEx on the lower range, some year on the higher range.
Anish Ganatra: It will end somewhere in the middle every year, right? This year, I have said that we are looking at INR 700 crore. Next year, as we come towards the end of this year, there are several projects in the hopper. Depending on what comes in and gets approved through our stage gate processes, we will be announcing those CapExes, and they will certainly then be more clear in terms of what we will spend. Does that help?
Sanjay Satpathy: Yes, this is very helpful. Last question, sir. Can you just articulate that among the three segments that you have, over next three or year, will there be a significant shift away from HFC business in your overall revenue mix or investment mix?
Anish Ganatra: No, I think we are going to build on the businesses we have, and we, as we have also said, that we are incubating a new business vertical called Advanced Materials, which is, again, we have given out when we spoke in the last call, that if you think of Navin from now to 2030 and look at 20% to 25% growth, Advanced Materials will be roughly about 10% to 15% of the expanded pie by 2030. But that is a milestone. That is not the end of the journey. This is a growth business we are looking for the next decade.
Sanjay Satpathy: Understood. Thanks a lot, sir, and wonderful to see your success story panning out the way it is. Thank you, sir.
Anish Ganatra: Thank you, Sanjay.
Operator: Thank you. Our next question comes from the line of Jason Soans with IDBI Capital. Please go ahead.
Jason Soans: Yes, sir. Thanks for taking my question and congratulations on a very strong set of numbers. Sir, I just wanted to know, if I remember correctly, the utilization for the HFO plant end of FY26 was around 80%. Sir, just wanted to know, of course, you have an extension now, and when you look at our average kind of utilization over the years, are you expecting it to be around 80% to 90% only going ahead, even going beyond 2029 and so?
Anish Ganatra: The utilization will improve. As you know, this product goes into two sort of end applications, right? As the global market scenario improves over time, you will see the demand going up in the construction sector, and of course, this also gets used in chillers for high cooling, et cetera. So, demand is expected to go in that side too. So, we will see the volumes go up. What we've indicated there is the numbers that we see as potential based on the minimum quantities or minimum expected quantities from the customer, yeah?
Jason Soans: Sure. And sir, earlier you did speak about working on the five molecules in the second phase, and you said there are good orders, campaign orders for these molecules. Do we see any visibility for any dedicated plants or any going ahead for any of the molecules?
Anish Ganatra: See, we've always said that in the ag market, we remain constructive of the long-term fundamentals of the demand for agri products, right? Our approach to navigating and accessing that growth is going to be to utilize the current assets and juice them up more and more. Which is why we confidently said that when you look at FY27 at the end, you will see that our bar of MPP1 and MPP2 will have been far exceeded, because we've done a lot of work in terms of making sure that more products can be mapped into those plants, and these molecules will get not only mapped into those plants, but also in the debottlenecking space. All in all, will we see a new kind of MPP? I think it's a hypothetical question at this stage.
Anish Ganatra: Our approach is going to remain to extract more and more from the current assets. If there was something that could come up there from a business demand a dedicated capacity, of course, we'll openly look at the commercials, et cetera. If it passes through our stage gates, we'll go through the approval and announce it to the market.
Jason Soans: Sure. And sir, on the last call, you had said that in CDMO space, you're working on 10 molecules. Three molecules expected to have a readout in the next 8 to 12 months. So there is a healthy pipeline clearly. I just wanted to know any update or any new things you would want to share on that front? How is that pipeline looking, right?
Anish Ganatra: Yeah. In fact, I just said earlier in the call that you have got two of those molecules where the progress is very encouraging. So, in the near term, that is the update that I can share actually. I mean, I am happy to repeat it unless you missed the earlier comment.
Jason Soans: No, sir, that is fine. And sir, just one clarification. I missed out, you did mention that certain plants for the CDMO are basically dedicated to the darolutamide or the Fermion contract. So, could you just repeat what exactly is dedicated for the Fermion contract?
Anish Ganatra: Dedicated means-
Jason Soans: Yeah
Anish Ganatra: that plant will run. It has been customized to run and optimize for the molecule that we require for that particular product. So, dedicated means we will not do batch product changes, campaign changes. It would run that product daily. I mean, I do not know another word for dedicated, but that is possibly the best I can explain.
Jason Soans: Yeah, yeah. That was a bit. Okay. Sure, sir. That is all from my side. Thank you so much.
Operator: Thank you. Our next question comes from the line of Ranjit with IIFL Capital Services Limited. Please go ahead.
[Analyst] (IIFL Capital Services): Yeah. Hi, sir. Thank you for taking my question, and congratulations on a very strong set of numbers. My question is on the HFO pricing environment. How do you see
Operator: Ranjit, I am really sorry, but can you just be a little loud?
[Analyst] (IIFL Capital Services): Yeah.
Operator: Thank you.
[Analyst] (IIFL Capital Services): Yeah, is this better?
Anish Ganatra: Yes, as loud as you can.
[Analyst] (IIFL Capital Services): Yeah.
Anish Ganatra: Something faint.
[Analyst] (IIFL Capital Services): Let me use the handset just a second.
Anish Ganatra: Yeah.
[Analyst] (IIFL Capital Services): Yeah, sir. This is good?
Anish Ganatra: Let's try. Go on.
[Analyst] (IIFL Capital Services): Yeah. I was saying, sir, thank you for the opportunity and congratulations on a great set of numbers. My question is on the HFO pricing environment. How do you see the global HFO pricing environment evolving over the next years, particularly as the patent expires and the competition increases? Specifically, if you look at-
Anish Ganatra: No, if you are referring to. Sorry, I didn't mean to cut your question, but you have to be a little bit louder. Your last part was very faint.
[Analyst] (IIFL Capital Services): Yeah. My question was largely on the global HFO pricing environment. How do you see it evolving post the patent expiry? In relation to that, the extension that we have seen does offer some bit of a comfort on the realizations.
Anish Ganatra: No, I think the way you have to understand these markets, one, each HFO has a different application, and largely the patent owner will also cover a qualification route for the use of the product. We'd always said that in our discussions with Solstice, they've always indicated that this product is an evergreen product in terms of the end-use application that they're looking for. In fact, like I've said before as well, the extension is not just the time extension, but there is expectation that the volumes will be larger too. Yeah?
[Analyst] (IIFL Capital Services): Yep. Any comfort on the realization that you have got from them?
Anish Ganatra: Comfort on the realization? Yes, of course. I mean, in what way do you mean? Sorry. We have already given the numbers out as potential revenue numbers, and that is all. I think that should be good enough, no, Ranjit?
[Analyst] (IIFL Capital Services): Yeah. All right, sir. My question was largely if you see there is a large difference between the HFO and the other refrigerants, and eventually when these will have a patent expiry, the expectation is that there will be competition and the price erosion will happen.
Anish Ganatra: No, I think you are looking at the ref market and HFO in the ref market. This product is slightly different even if it is an HFO. Similarly, the Chemours product is again a different HFO. Chemours product is a different application, Solstice is a different application. You have to look at it from the end applications. If you are looking at the ref market, I mean, the global HFO capacity is 10% of the global ref demand in tonnage terms. I mean, there is not enough volume there to kind of play in the market on the pricing. Whichever way you look at, HFO is a product that is on the higher pricing side in the end market for the end application itself, because it is a more greener product, more cleaner product. So, it is going to come at some sort of premium, right?
[Analyst] (IIFL Capital Services): Yes. Thank you. That was all from my side.
Operator: Thank you so much. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
Anish Ganatra: All right. Thank you all for taking the time today and be with us. On behalf of the Navin team and Cygnus, we wish you all a very happy Diwali and a happy New Year in advance. Yeah? Thanks again.
Operator: Thank you so much. Ladies and gentlemen, on behalf of Navin Fluorine International Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.
