Acutaas Chemicals Limited (ACUTAAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ami Organics Limited Q3 FY '25 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krishan Parwani from JM Financial. Thank you, and over to you, sir.

Good morning, everyone, and thank you for joining us on Ami Organics Q3 FY '25 Earnings Conference Call. Today, we have with us Ami Organics management represented by Mr. Naresh Patel, Chairman and Managing Director; Mr. Abhishek Patel, Vice President, Strategy; and Mr. Bhavin Shah, Chief Financial Officer. I would now like to invite Mr. Bhavin Shah to initiate the proceedings. Over to you, sir. Thank you.

Good morning, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q3 and 9-month FY '25 financials. Please note that a copy of our disclosure is available on the Investors section of our website as well as on the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as forward-looking statement must be reviewed in conjunction with the risk that the company faces. The conference call is being recorded and the transcript, along with the audio of the same will be made available on the website of the company and exchanges. Please also note that the audio of the conference call is the copyright material of Ami Organics and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company. Now I would like to hand over the call to our CMD, Mr. Naresh Patel, for his opening statement. Over to you, sir.

Thank you, Bhavin. Good morning, everyone. I hope you are all doing well. On behalf of everyone at Ami Organics, I would like to extend warm new year wishes to you and your families. As always, I will begin by discussing our perspective on the industry landscape before moving on to our performance for the quarter. Starting with the global economy, we continue to face significant uncertainty primarily driven by geopolitical tensions and the change in the leadership in the U.S. We will closely monitor how these factors evolve as we move further into 2025. Focusing on the chemical industry, raw material prices have bottomed out, but demand has yet to follow as anticipated. As a result, I believe the current scenario of low raw material prices and modest demand is likely to persist through the first half of calendar year 2025. Now let's look at the industries we serve. Starting with the pharmaceutical intermediates. Demand remains modest with raw material pricing remaining steady throughout the quarter. On the CDMO CMO front, we are witnessing a significant influx of opportunities in India. As one of the major players in the industry, we had already anticipated this trend. Accordingly, while building the new site at Ankleshwar, we developed all 3 blocks with the latest technology and machinery, keeping these opportunities in mind. To sum up, we are fully prepared to capitalize on these opportunities, and I believe this will be one of the key growth drivers for us in the coming years. On battery chemical side, while the long-term outlook remains strong, we are observing delays in the commissioning of new battery capacities in the near term. We are adopting a cautious approach in the segment and focusing on capital expenditure for additives where we already have long-term contracts in place. Semiconductor industry, although we are a new entrant, our discussions with both existing and potential clients have been very encouraging. We are doing some very interesting stuff with clients in Japan and Korea, and I hope that we will see the fruits of the same in coming years. Commodity chemicals situation remains unchanged from the previous quarter with pricing under pressure due to oversupply. Overall, we remain cautiously optimistic about an improvement in the industry landscape in the coming quarters. Moving on to the business performance. I'm pleased to share that we have already reached nearly the same revenue as the entire previous financial year within the first 9 months of FY '25, totaling INR 698 crores. Looking at the quarterly numbers, we are continuing to deliver robust growth with revenue from operations increasing by 65.2% year-on-year and 11.5% sequentially to INR 275 crores. This growth was driven by a ramp-up in our CDMO business, along with steady growth in the Advanced Pharmaceutical Intermediates segment. I would also like to highlight that we have around several additional projects in the CDMO pipeline, which has progressed to final stages. Discussions with innovators and partners are progressing well, and most of these projects are expected to begin commercialization by FY '26. Consequently, we anticipate our overall CDMO business to reach approximately INR 1,000 crores by FY '28 compared to INR 80, INR 90 crores in the last financial year. Looking ahead with a better visibility of Q4, I'm confident that we will beat our previous growth estimate of 30% growth for FY '25. And therefore, I would like to revise growth guidance upward from 30% to 35% for FY '25. Now I will hand over the floor to our Vice President of Strategy, Abhishek Patel, for further business updates. Over to you, Abhishek.

Thank you, Naresh. Good morning, everyone. Let me provide further insight into our business performance. Starting with Pharmaceutical Intermediates. This segment delivered strong growth with revenue increased by 85.7% year-on-year and [indiscernible] sequentially to INR 239 crores in Q3 FY '25. Growth was driven by continued ramp-up in our CDMO business and steady performance in Advanced Pharmaceutical Intermediates segment. Our focus remains on chronic therapeutic area, including anticancer, antidepressant, seizure disorder, antipsychotic, Parkinson's disease, anticoagulants and cardiovascular treatments. Moving to the key growth driver for Pharma Intermediates business, which is CDMO business. As Naresh mentioned, we have long-term growth plan for this segment, and we are confident in achieving our targets. However, please note that we are unable to disclose specific CDMO revenue numbers for the current and upcoming financial year due to confidentiality constraint as per agreement with the customers. Now Specialty Chemical business. The segment reported revenue of INR 36 crores, a slight decline compared to the same quarter last year. Sequentially, revenue dropped by around 11%, primarily due to lower volume in our commodity business -- chemical business. Within Specialty Chemicals, the BFC business remained flat year-on-year, but showed steady sequential growth. We believe Q2 was the bottom for BFC revenue, and we expect consistent growth from here onwards. Capital expenditure side, CapEx for the first 9 months FY '25 stood at INR 118 crores, primarily allocated to Ankleshwar site as well as solar and electrolyte additive projects. Let me give some further updates on the CapEx. At Ankleshwar site 1, I'm happy to share that Block 2 has commissioned -- commercialized successfully and Block 1 should be commercialized by end of the quarter -- this quarter. Coming to electrolyte additive CapEx, the CapEx is well on track and is expected to be completed by H1 FY '26. With that, I will now hand over our floor to CFO, Bhavin Shah, for the financial update. Over to you, Bhavin.

Thank you, Abhishek. I would like to briefly highlight the key performance metrics for the quarter before we open the floor for questions. I will start with quarterly performance. Revenue from operations for the quarter reached INR 275 crores, representing 65.2% growth Y-o-Y and 11.5% on Q-o-Q basis. Gross profit for the quarter was INR 127.2 crores, reflecting 78% increase compared to the same period last year. The gross margin expanded by 333 basis points Y-o-Y and 281 basis points sequentially to 46.2%. Gross margin was driven by better product mix. EBITDA for the quarter was INR 68.7 crores, which was more than 2.5x when compared to the same period last year. EBITDA margin were at 25%, up 904 basis points Y-o-Y and 198 basis points Q-o-Q basis. EBITDA margin was driven by expansion in gross margin as well as operating leverage. PAT for the quarter was INR 45.4 crores, which grew more than 2.5x compared to the PAT of INR 17.8 crores in Q3 FY '24. PAT margin for the quarter was 16.5%, which shows expansion of 582 basis points Y-o-Y and 133 basis points on Q-o-Q basis. Moving on to the performance for the 9 months. Revenue from operations for the 9 months '25 reached INR 698 crores, representing a growth of 41.8% year-over-year. As Naresh mentioned, this is almost close to our full year revenue FY '24. EBITDA for the 9 months FY '25 was [ INR 156.6 crores ], up 41.8% Y-o-Y. PAT for 9 months FY '25 was at INR 97.7 crores, up 78.3% Y-o-Y when compared to the adjusted PAT for the same period last year. Moving on to the balance sheet items. Net cash and cash equivalents were at INR 306 crores. I'm happy to share that even with strong growth, we were able to control our working capital, which was 95 days during 9 months FY '25 as against 108 days as on H1 FY '25. This was driven by improved debtor days and stable inventory. Better working capital management led to strong generation of cash flow from operations of INR 119 crores, which was 81% of the EBITDA for the 9 months FY '25. Overall, as Naresh sir has mentioned, we are well on the track to deliver more than 35% of growth for the year with improved EBITDA margins. With that, I request the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Bharat Shah from Ask Investment Managers.

After all the efforts, finally, things seem to be settling in the right direction. I just wanted to understand, we have good visibility as far as our pharma intermediate and CDMO business is concerned for the next 2 years. But what are the steps we are taking to build growth engine ahead after 2027? Next 2 years, as I understand the business, I think business is reasonably secured and clear. But after 2027, what are the initiatives which we are building today in order to drive the growth engine ahead thereafter?

As you know that our business model is divided into the [indiscernible] business, generic -- our own generic business as well as first-to-file business. So we have business security till 2040. We had already done developing monitoring for generic application up to 2040, which will cater our steady growth up to 2040 with the customer also secure. So in that sense, we are worried about the business. We are -- regarding to the growth, which is exponential growth, which is expected by everyone, which is coming from our new chemical [indiscernible] business as well as CDMO and CMO business in pharma, which is going very well. We have a lot of CMO, CDMO in pipelines. One is [indiscernible]. That's why it is highlighted very well, but there are some others which are also moderately good in quantity and quality in a revenue point of view. And we already said that in FY '26, some of are coming out. Similarly, there are several which is coming in FY '27, '28, '29. So we have a good visibility in terms of CMO, CDMO because there are some molecules which are in Phase III, some are in later stage of clinical approval also. So that will bring our future growth into the business as well. And that is the reason why we had we had built up this new facility considering this modern requirement and latest policy requirement by the FDA as well.

So apart from the generics where we have long-term visibility, are there further engines being built today for maintaining or accelerating growth beyond 2027?

Yes, sir. Baba Fine Chem is one of the master investment, I can say because that has a huge potential to grow in semiconductor sector. We are already producing photo resist chemical, but we have several another backend packaging side, also some chemicals, which already developed and now these monomers and chemicals we are pushing in Japan and Korea, which will be mature in the next couple of years. So that also adding a new additional growth driver for our future as well as the electrolyte additives are -- we have only 2 in the past, but now we have more than 12 electrolyte additives now. And these all are also -- will be used by all the battery cell manufacturers. That also will be used -- and we have already started [indiscernible] stage with the existing customer as well as the new customer. And beauty is that we have right from beginning, we are in line with the Chinese price. So whether IRA will be there or not there, it is not impacting us because Chinese price is in line with us. It will be, in fact, beneficial for us if the IRA is not there, then we can have leverage of raw material sourcing from other cheaper [indiscernible], and that will also help us to have an addition in the margin as well. So this is a good move for us in terms of positioning ourselves in electrolyte as well.

And on Specialty Chemicals, any insight you want to share?

Specialty Chemicals segment is a highly commoditized segment, which is we acquired from Gujarat Organics. We've done a lot of development in that size. We sustain ourselves. With this highly price pressure, raw material drop down topline eroded by 30%, even though we are sustaining the market share so far. So that is the reason why we had -- until now in the last 3 years, we had not declined our revenue in Specialty Chemicals by -- with maintaining the EBITDA at a very double-digit level. So that is a good achievement for us. Now we had also done some good qualification in regulated market for specialty chemical as well, which is under validation right now. So once it will go, then it will also -- '27, it will also give a very good fruit in terms of specialty chemicals as well.

The next question is from the line of Krishan Parwani from JM Financial.

Congratulations on a very strong set of numbers. Three questions from my side. Firstly, on the margin front, I believe on account of higher CDMO contribution, EBITDA margins have jumped to almost like 25%. Do you think that with further ramp-up of CDMO business and solar power benefit, your margins could reach 26%, 27%? Or you think 25% is a peak for us?

So on the margin side, as you know that we have improved our GM by 281 basis points in this financial and EBITDA of 5% -- and we expect quarter-on-quarter improvement going forward in next financial year also. It will be always a sequential improvement in next financial year on the revenue as well as on the margin side. But on a blended side, we can expect that we will cross the EBITDA margin for the full year of the highest peak EBITDA margin of more than 23.5%, which we recorded our highest margin. But obviously, the margins are sustainable and the way the business is going, these are definitely a sustainable margin.

Got it. Got it. And on the second CDMO contract, are we on track to start the supplies from 4Q FY '25 as indicated, I think Naresh indicated during the last call?

Yes. It is the validation review, and it will be definitely start from FY '26, the commercial supply from second CDMO from Block 2 of Unit 2.

Okay. Okay. And last bit, so on -- how is the demand visibility from apixaban and rivaroxaban intermediates?

As everybody knows that it is publicly available, the apixaban is expiring in '26. So the demand already started for api and api manufacturing. And we already have a ramp-up in this Q3 as a small quantity, Q4, it will be a little bit higher. And by FY '26, we are expecting to go at a very moderate level against the very minimized in last couple of financial years. Rivaroxaban has an expiry in FY '26, '27. So it will be ramped up by end of this year. But still, we are selling some quantities to the -- our partners in Europe as well as in India.

The next question is from the line of Sundarshanadmanabhan from JM Financial PMS.

Sir, quite happy to see the ramp-up in the pharma intermediates being much faster than expected, thanks to the CDMO. Sir, my question is today, what is the capacity utilization and whatever the CapEx that we have done in the past, given that the existing product itself is doing well for us and there are multiple products that are there, do we have capacities in place to cater the kind of growth that you talked about to the INR 1,000 crores? Or do you think that we will have to acquire more land? Can you give some color?

On the capacity front, let me update that at Unit 1 Sachin, capacity is more than 70% utilized. At Unit 2, 50% capacity utilization we have achieved in Block 3, which is already capitalized. And at Unit 3, the capacity utilization is 50%. So we have room available for pharma intermediate business at Unit 2 and the next block is already inaugurated block #2 and block #1 is also expected to get commercialized by end of this March quarter. So it will cater largely our capacity requirement for next 2 to 3 years requirement. And for spec-chem business, the capacity is already at 50% utilization at 50% level. So that will also cater our capacity requirement for next 3 year time. For the new business of electrolyte additive, you already know that CapEx is going on, which is expected to get completed by H1 FY '26, and that will again secure our revenue requirement for next 3 years. So this way, we are quite very well placed to support our growth for next year. And of course, it's an industry cycle. So as and when it's required maybe 1.5, 2 years in advance, citing the new next level of revenue growth, we will have additional land acquired as and when required. Even today also, we have 8,000 square meter land available at Sachin GIDC, which can be used for some additional requirement. But for high CapEx, we can have additional land in future.

Sure, sir. Sir, if I split the 2 businesses, I mean, you usually give the margins across the 2 businesses. I would assume that if I look at the overall margins of 25%, the pharma intermediates in this quarter should be north of 30%. I mean, is that right? If you can give some color on that?

Come again?

The margins between the specialty and the pharma...

So Advanced Pharma Intermediate margin for the quarter is 26.4% and specialty is 15.16% blended.

So both has increased. Sir, just taking forward the previous participants, the margins today is at 25% with around 50% to 60% utilization across both the plants. I mean intuitively, as the CDMO proportion increases, I mean, from the current products and the new products, I mean, I'm not talking about next year, say 3 years down the line. Should we be looking at, say, a margin closer to, say, 30%, I mean, which is also something a lot of CDMO players are doing and it's not very different. So just wanted to understand a bit about how much an operating leverage as you scale up this business [indiscernible]

So as you know that CDMO business has just ramped up in this Q3 FY '25. And with the commercialization of other 2 block also, our operational efficiency will again kick in. And it will definitely go beyond the 25% mark, no doubt on this. It can reach to, let's say, 27% to 30% also. But you have to be -- you have to understand that this is a CDMO business, not the API, it's an intermediate business. So that industry, other player, we contain ourselves a little conservative as against others for guiding EBITDA margins.

Sir, one final question before I join back the queue is on the specialty side. And if I look at the semiconductor to...

Sorry to interrupt. I would request you to rejoin the queue for follow-up question. [Operator Instructions] The next question is from the line of Nikhil Mathur from HDFC Mutual Fund.

Many congratulations to Naresh and team for such great execution. My first question, Naresh, is on your management commentary that the pipeline of CDMO projects is progressing well. So just wanted to understand, are you talking here about the current couple of patented products which are kind of scaling up? Or you're also talking about projects which are beyond, let's say, FY '27, '28, which will kind of progress to Phase II, Phase III in the next 12 months, and you will get visibility over the next 12, 15 months or so. So I just wanted to understand if you can split between the next 12, 15 months and beyond that as well, what is the visibility you're getting on some of the patented projects that you would be working on?

Thank you, Nikhil. It's an [indiscernible] question. Due to confidential nature of the agreements and because it's a clinical trials, I can't disclose more on that, but you are rightly saying that I'm talking about the existing as well as the new CDMO CMO, which will be matured in '27, '28, '29. So these all are moving very good, and it's a strong robust pipeline we have with multiple application in terms of pharmaceutical final dosage form. So it's -- these all are ramping from -- so several are moving from Phase II to now Phase III, some are Phase III to the approval stage. So that will be coming in '27, '28 like that.

So can we extrapolate, sir, that the current success that you are seeing in the -- on the patented side that is leading to better and more inquiries ever since this success has been visible to other customers as well? Can it be assumed?

You can see like that. But for me, I can say that I started my career in this company on clinical trial only. And then I move on to the Generic. So we have a lot of molecules which are -- we supply sometimes in a very early stage development or on some are in the later stage development. But whoever the customers who are with big names in Europe or U.S. or in Japan originators, they now also realize that we are fully capable enough to execute at a very large scale production for any kind of requirement in terms of regulatory as well as in terms of supply chain, without any deviation or without any hurdle. So that is one of the things which gives us the confidence. Definitely, you say is one of the right thing that, yes, with the success of this current project gives a lot of confidence to our buyer and that also encouraging them to give us more project to us as well.

Got it. Sir, another question I had was a slightly longer-term horizon. The peptide-based development is kind of gaining -- I mean, it always has been in prominence, but it is only going up and will go up in the coming 10, 15 years as well. We talk about GLP-1, but at a very broad level, peptides are finding or they are getting tested and tried for multiple other indications as well. And then hence, an assumption that next 10, 15 years, a company which is on the chemistry side will have to be in the larger molecules and essentially on the peptide side as well. So any broad thoughts you can share on how Ami Organics is placed to latch on to this tailwind, maybe not in the next 2, 3 years, but beyond that. Is that something which we can look forward to from Ami Organics standpoint as well?

Ami Organics is chemistry-driven company, and we are very strong in chemistry. This is our core strength. And based on that, we had nurtured our business in a horizontal manner. Peptide is a future, definitely, but it is not solution for all the disease. There is definitely peptide is used for some disease, but it is not future for all the disease. Synthetic chemistry or synthetic drug will never go out or phase out in the system, right? And there is a huge potential available for us. In fact, in peptide also, there is a synthetic chemistries are required and there are also opportunity available for us, and we are already catering this kind of small opportunity what we have, we are getting it. But being in our -- it's not our core area of bio -- people are rushing towards the gold. I don't want to put myself into the same rush because by this way I'm risking my existing infrastructure as well as my future of my company. So we are a highly focused company, which is -- we know our strength and weaknesses, and we are focusing on that area only. So peptides may be good for someone, but it is not that great for me for today or for the future.

Understood, sir. And just one final question, if I may please squeeze in. On the base intermediate portfolio, which is on the generic side, can you give some sense, sir, how EBITDA per tonne or if you can talk about margins, how margins have played out in last 12 months or so? And if there is a recovery at some point in time, maybe not this year, but let's say, in FY '27 or sometime, can there be a big reversal in EBITDA per tonne or margins, whichever you want to talk about?

To be very honest, to nature and sensitivity of some agreements as well as commitment, we have stopped doing this bifurcation and all because it is impacting on our future contracts as well. So that's why we are more -- yes, we are committing to improve ourselves and that you can see in last 10 quarters, 12 quarters.

Sir, I'm talking about the portfolio where there is pricing pressure last couple of years due to demand or Chinese dumping.

As I told you every time that Chinese pressure is not directly impacting us. It is impacting to my manufacturer. You can see my all last 4 quarters where I did the commentary. You can get your answer from that as well that it is not -- and then we find out the way to how to maintain our margin there as well.

The next question is from the line of Rohit Nagraj from B&K Securities.

Congrats on a very good set of numbers. So first question is on the Pharma Intermediates front, excluding the CDMO part. So this is just the beginning of 2025. So how are we expecting the pricing environment from our customers given that the last couple of years have been relatively benign, although it is stable. But given that hopefully, the inventory situation, et cetera, has been managed, whether there is an improvement as far as the 2025 contracts are concerned? So your views from the customer interactions.

Apart from the CDMO patented product agreements, raw material prices is stabilized. Our topline is also now stabilized. In the past, when the problem arise for our end user, we changed our contracts to the spot basis and now we return back to the contract. And this contract is now very well executed and that contract also and rolling forecast also giving us a good visibility for us for the next 1 year, 1.5 years. So that's why we are very much confident about our margin claim, whatever we are announcing, that is all based on the -- even our incremental forecast, the revenue forecast for this quarter also based on these contracts as well as the visibility, which is provided by the generic uptake in manufacturers from us only.

That's helpful. Second question on the battery chemicals and semiconductor. So here, still, we are at initial stage in terms of commercialization of the plant as well as qualifications. Maybe in FY '27, '28, when we will start the supplies, what is the kind of revenue potential that we are looking at and whether the margins also will be in the similar range of CDMO or there will be change in terms of the margin profile for these 2 particular products?

In terms of the capacity point of view, we already announced that we are putting a plant for 4,000 metric ton inclusive all additives, which will give you the guidance about the revenue as well as the margin right from beginning. When we develop, we always said that the margin will be better than specialty, but lower than pharma. So this is the same thing which is right now is applicable for us in terms of electrolyte additives as well.

And the same goes for semicon as well? No. Semicon is a very different game where we are the only company in India who are right now have a good situation and position ourselves in this semicon supply -- chemical supply, where the margins are much higher than the pharma as well as CDMO, which will be -- it may vary from 40% to 65%. It depends on which product at what scale and this all depends on customer to customer as well. So it is not a low-margin product at all because it's a very high purity molecules, which we are making, which is a very unique strength of Baba Fine Chem, which is they know the know-how how to produce this kind of molecule.

Ladies and gentlemen, we have lost the connection for the current participant. We will move on to the next participant. The next question is from the line of Prashant Nair from AMBIT Capital.

Just one clarification. When you say CDMO, are you referring to all sales that you make to innovator pharma companies? Or is there any other way you're splitting the business?

Mostly CDMO -- Ami Organics is doing the CDMO only for the innovator pharma company or the innovator pharma companies, toll manufacturer based in Europe or in India. So we don't do the generic CDMO or CMO because it's -- we are way beyond of these kind of things. So it's a small company very initial way they can do this kind of big CMO, but we are doing only CDMO CMO for originators either directly or supplying to the toll manufacturer of the originators based in Europe, China or in India.

Right. And that is the business which you expect to get to INR 1,000 crores by fiscal '28, right?

Yes.

Yes. And just a follow-up on this. Would you be able to give a split of -- so of the supplies you make to innovators or their toll manufacturers, currently, what proportion would be for products that are off patent versus, say, those that are under patent or those are still in development? Can you give that split?

If I will be 2 years back, I would love to do this but this has bring a lot of problem to my marketing team. So we have now stopped this kind of sharing because we are generating our own competitors. So we don't want to discuss these kind of things on a call or on one-on-one anywhere.

No worries. And -- but would the split of -- say, would the share of products that are under development or under patent go up over the next few years? I mean I know there's one big contract, which obviously will lead in that direction. But beyond that, in your pipeline, would you have enough molecules which are either under development or still on patent that are yet to scale up?

So I can narrate it like this. You maybe figure out from there. It's -- we have more than 570 molecules last year -- till last year invoice. Maybe this year, it will be added another 40, 50. Out of that, in a clinical trial, somewhere around 60 to 80 molecules are right now either in Phase II or Phase I kind of things, which we are supplying to them. So this is one of the -- from there, you can narrate about whatever you want to get an answer from that.

The next question is from the line of Yash from Stallion Assets.

Just with respect to your CDMO business, could you tell me what is the expected asset turns on the CapEx that you are estimating by FY '28?

Normally, we target any asset turns which we invest would be 3x. So similar kind of use. You should be -- make your [indiscernible] calculation like that.

Okay. Okay. And just from a longer-term perspective, because we're seeing some headwinds in the specialty chemical business. So like what was the reason for having that segment? Why don't we just concentrate on the pharma intermediate side of the business? I mean, I'm sorry, I'm just new to the company. So I just wanted to understand the...

No worries. No worries. See, let me tell you one thing. If I will be only pharma last 2 years, I will be in a trouble. If I will be in a subsidiary also, I will be in a trouble. Ami Organics is always focusing on sustainability and long-term growth. And that can be -- so what happened that? Our policy right from beginning is that not depend on one customer, not depend on one product, not depend on one area. And this is how we develop pharma, agro, specialty, polymer, petrochemicals. So if one segment will not perform well, other segment will help support to us. And that is one of the reasons that every year, every quarter-on-quarter, we have an improvement in our revenue. And also, it has been also giving us an improvement in our operating leverage as well. So these are multiple things which help us to remain in the position. And not only that Specialty chemicals is also very lucrative. It required a lot of efforts to make viable for that, and that's what we are doing right now. We also knew in specialty last 4 years only, we enter in this. So we are also learning and we learn a lot of things in that, and that will give us a foot in the upcoming years as well.

The next question is from the line of Rikin Shah from [indiscernible]

Congratulation, a very stellar quarter. I remember not too long back, there were questions on margins being ever recovering. My question is, I know you have expanded on the battery chemicals segment, but perhaps with the geopolitical changes that have happened, has our stance as a company changed or altered for this?

No, because we have an agreement in place, and we -- our position is great in terms of the competition against the competitor base in China as well. Thing is that our buyers would be -- so they have some limitations to start. So once that limitation is over by the -- and they got the green light from the final OEM EV manufacturer, it will be ramped up very quickly for us. If that not happen, then we have -- any buyer is completely vanish. -- then market is open for everyone. And in that case, we are very happy in that to cater that worldwide as well.

All right. Sir, in terms of a very molecule-specific question, there is a lot of activity by Johnson & Johnson and Caplyta, and they have done an AMPD filing. So they estimate this asset to be more than $5 billion, and we sort of have a process patent for the intermediates of lumateperone. So is there any sort of possibility of having an early entry into this molecule -- because earlier we were expecting...

We've already done that with our partners. There are 3 partners who had already filed first to file, and now we are waiting for their upcoming. So we are already there.

The next question is from the line of Manav Kapasia from Antique Stockbroking.

Congratulations on a stellar -- just...

Sorry to interrupt Mr. Manav, I would request you to please use your handset.

Am I audible?

Yes sir, please go ahead.

Sir, firstly, congratulations on a stellar set. My only question was on the spec-chem business. The degrowth that we've seen -- small degrowth, is it largely on account of BFC -- or has the base business also seen some problems? And also, if you can give the growth for this quarter ex of BFC, which you had given last quarter?

Spec-chem Business is a deferred -- we have an order in place, but it is a deferred supply. So that's why it is a little bit degrowth in a commodity spectrum of cosmetic as well as parabines. And BFC, as we already said right from beginning of this year that this year will be muted for us, and that will be happening in BFC. So BFC has a stable every quarter, INR 2 crore to INR 3 crore demand right now because of several compliances and all, which is now finished. So from next year, it will be uptick in BFC. But whereas here in Specialty Chemical segments where we have some orders, which is deferred to this quarter as well as we also lose some orders based on the pricing as well. So these are the combination of both.

Okay. And ex of BFC, if you could give us the growth for this quarter?

We already announced that this quarter growth, the overall year will be 35%.

No, no, I'm asking for the spec-chem business. Ex of BFC, what would be the growth?

Ex of BFC, the growth anticipated for full year is more than 15%.

Okay. Understood. And you just said that there are some orders that are deferred to this quarter, that is 4Q and maybe 1Q. So this quarter, maybe we should see some recovery in the spec-chem business, right?

No, no, no. It's definitely going to be recur, but you see it like this. For Q1 and Q2, the ex of BFC spec-chem business has done very good. And this is only a cyclical nature for temporary for Q3. And again, Q4 will be a normal thing. So overall, for the full year, the expected growth is more than 15%. That's for sure.

The next question is from the line of Jason from IDBI Capital.

Am I audible?

Yes.

So sir, just some quarters back, you used to give a breakup of your pharma intermediates business in terms of being 50%, 55% being for the generic API, then 40%, 45% for innovator pharma, 5% for CDMO and 1% to 3% for import substitutes for domestic pharma. So sir, currently standing, how does that mix stand as of now?

So we learned this mistake. And now that's why we are saying we are not breaking it up. We are also learning this how to handle disclosures because the disclosure is only not for the investors, but also for our partners who are buying from us. So that's why we are now restricted ourselves to breaking out everything and giving disclosure to the people.

Sure, sir. So I mean, one thing is for sure, sir, that your CDMO business will definitely in that mix, it must be -- the revenue contribution must have increased quite a bit for that. Yes. So sir, just in terms of that, I mean, we have seen -- you did mention that you are -- tailwinds are strong for CDMO and you target to reach INR 1,000 crores. That's your target aim by FY '28. So currently, sir, what is the revenue size for CDMO?

The CDMO business last year was INR 90 crores. This year, we have already crossed more than double of that last year's business. But as I mentioned, we are not giving the segment-wise revenue splits from here onwards -- from this year onwards.

Okay. Okay. And sir, just also -- I mean, I understand that you are not giving specific numbers. Just wanted to understand also that -- I mean, of course, one is that the darolutamide or the Nubeqa sales will definitely must have helped you in your intermediate sales. So sir, just -- I'm not asking about specific details, but just from a directional standpoint, how are you seeing such other long-term contracts filling up the placeable capacity? How is the pipeline looking going ahead for more and more contracts vis-a-vis our competition globally as well? How are you seeing India traction playing out? Just wanted from a directional standpoint, how is that looking as you again look to basically increase capacity utilization for Ankleshwar facility as well?

We look very promising in that area. We are already moving in Block 2 with some CDMO has already started, and there are other under negotiation and discussion and development. So it's going very well. We don't see any issues in terms of demand. It is only in terms of when it will be -- they are ready to transfer. That is -- because right now, you see CDMO, CMO innovators, either they make themselves or buying from someone. So it's a procedure in pharma where we have to follow it, and it will become soon several new projects which are in the pipeline and development will be start in Block 1 as well.

Okay. Sure, sir. And sir, just one final thing. For BFC, you said the year is muted, but by FY '26, are we looking at a significant ramp-up in BFC contributing well to topline and bottom line by FY '26? Do you see whatever initiatives and whatever strength building up we are doing in BFC with the Japanese and the Korean customers, do we see a significant revenue buildup in FY '26?

No, not in FY '26, but FY -- it can go on from FY '27. It has already started. As we mentioned, the Q2 was -- we see Q2 as a bottom out quarter for BFC. It has already started moving up. But slowly, slowly, it will ramp up, not in very big way in FY '26, but '27 onwards because we have done a lot of seeding in market like Korea and Japan. We have already shipped samples and validation batches has started going. So that -- I think that will take some time, and it will from '27 onwards, it will definitely ramp up.

Okay. Okay. So by '27, it should ramp up. Okay. And sir, just one final thing, just one final question.

I would request you to rejoin the queue for your follow-up question. The next question is from the line of Ajay Surya from [indiscernible]

Congratulations, on a good set of number. So my question was like I was checking the investor presentation of the Fermion, right? So [Foreign Language]

[Foreign Language]

The next question is from the line of Mohammed Abbas from InCred Financial Services.

I just wanted to know the revenue split between the exports and domestic business. I believe it's around INR 209 crores for Q3...

Yes. You lost your voice.

It's around 76%.

76%, right? So we have seen a significant growth in exports compared to last 2 quarters. So sir, I also wanted to know how is demand visibility in European market as well as are we on still track for 30% growth guidance earlier...

Sir, we lost your voice. Can you repeat your question, please?

It's too low to hear us.

I would request you to please use your handset.

Okay. Is it better now?

Yes.

So how is the demand visibility in European market as well as are we still on track for 30% growth guidance?

Yes, we have already guided -- Naresh has already guided during his opening remarks.

And the guidance are based on the contracts and commitment from our European as well as the other [indiscernible].

The next question is from the line of Maitri Shah from Sapphire Capital.

Yes. So I just wanted to know, firstly, congratulations for the great results. I just wanted to know the next 2 years kind of guidance and the growth that we are expecting in the topline and the margin?

So we always say that we want to double ourselves in 3 years' time. And so that's a 25% to more than 25% growth guidance we are committing.

And in the topline, do we expect to achieve like 27%, 30% in the next 3 years in the margins?

Margins are definitely going to improve from here onwards in this and in next financial year also.

The next follow-up question is from the line of Jason from IDBI Capital.

Sir, this was just in response to a previous participant where you mentioned that your CDMO, what you do is basically with innovator company or you did mention it's with the CDMO or with CMOs of the innovator company. So just one clarification. So if the innovator could be Bayer and if Fermion makes -- let's say, Bayer has given Fermion to make the APIs, so probably you just deal with either Bayer directly or through Fermion. That's what you meant, right? Is my understanding correct?

Both are originators. So here -- say, for example, we say one innovator based in -- hypothetical innovator based in Europe. And then they have an API manufacturer like BVC has been of a CMO for big pharma -- API manufacturing for them. Similarly, so they give to the API manufacturer and API manufacturer, so these innovator ask us to supply to the API manufacturer in India. Innovator has another manufacturer in China. So they also ask us to supply to China as well. So we have to supply to India as well as China. So similar -- so both the Fermion, they are selling right to the Bayer. So Bayer is not an innovator there. Bayer are joint innovator of that molecule, daroglutamide, whereas the our CMO, there is a toll manufacturer of other innovators, to them, we supply them, but it's controlled by the innovator.

Okay. But it's controlled by the innovator directly or indirectly. That's what you're saying.

Yes.

The next follow-up question is from the line of Prashant Nair from AMBIT Capital.

Abhishek, you gave some outlook on margins for next year in your initial comments. Can you please repeat that, I didn't get that clearly at the time.

So as on date for 9 months, our margin -- our blended margin is 21% in 9 months FY '24. For FY -- it is -- obviously, we are expecting it to improve in Q4 also. And for FY '26 for full year, we are expecting this margin on a blended basis to reach at a peak or highest margin ever reported by Ami Organics. It will be on a blended basis. Sequentially, it will improve from Q1 to Q4 for next financial year.

Yes. And when you say highest ever, you are talking at an annual level, right, not the highest ever.

Annual level, of course.

The next question is from the line of Krisha Kumar Yoga, who is an individual investor.

Sir, my question -- I have 2 questions. One is the recent regime change in the U.S., a large South Korean companies actually -- the EV companies taking a little fall in the development. So are we seeing any sluggishness in the electrolyte CDMO with the Korean companies?

Can you repeat your question? I couldn't get it.

Am I clear now?

Yes, sir.

Yes. Sir, due to regime change in the U.S., there are large South Korean EV manufacturers taking a little pause in the development. So are we also seeing any sluggishness in our domestic electrolyte, the one which we recently announced the CapEx of INR 170 crores?

For CapEx of INR 170 crores, that is for the purpose of electrolyte additive business, which is going on. We have already signed some supply contracts, and we have long-term visibility available for electrolyte additive business, and we are going ahead with this business. But for solution business, which is the Korean JV, which we announced earlier, -- that we are -- that status quo we are maintaining because we don't want to rush into the market which is yet to get fully developed and we don't want to allocate capital or struck our capital. We are very cautious in this business, and we'll take a call at a relevant level.

Okay. Sir, one small question. In percentage terms, what is the revenue share of ARV intermediate?

We don't have any ARV. Only Dolutegravir is there, but that is almost contributing 1% of the total revenue.

The next question is from the line of Prathamesh from Tiger AMC.

Yes, just one question. Sir, do we have potential and capacity to clock around USD 100 million in CRAMs segment in coming time?

CRAMs segment, $100 million, we are not CRAMs company dedicated only for CRAMs. We do CMO, CDMO for API early stage [indiscernible] on intermediates. CRAM is a clinical research and research. So we don't do some [indiscernible] and these kind of things. So it's not really for us.

The next question is from the line of from Systematix Group.

Sir, just one question on industry per se. Is the role of artificial intelligence can be used in chemicals also? I mean you are a CDMO company. So can we use artificial intelligence. So if you can throw some light on it?

It's confidential, but yes, we do some AI in our products and the new plant has some AI implemented in operation.

So the use of AI is there in CDMO and chemical industry and pharma industry?

AI we use in operations, some equipment controls and operations, we use some AI. But this is really an insider, but it's -- we don't want to disclose these kind of things, our new things.

Ladies and gentlemen, that was the last question for today's conference. I now hand the conference over to the management for closing comments.

Thank you to the JM Financial team for hosting our conference call. We appreciate everyone's question and hope we have addressed most of your queries. If we miss any of your questions, let reach out to our Investor Relations team. and we will get back to you promptly. Thank you very much and have a good day to you.

On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.