Aether Industries Limited (AETHER) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '25 Earnings Conference Call of Aether Industries hosted by HDFC Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nilesh Ghuge from HDFC Securities. Thank you, and over to you, sir.

Thank you, Rutuja. Good morning all. On behalf of HDFC Securities, I welcome everyone to this Aether Industries Conference Call to discuss the results for the quarter ended March 2025 and financial year 2024-25. From the Aether Industries, we have with us today, Dr. Aman Desai, Promoter and Whole-Time Director; Mr. Rohan Desai, Promoter and Whole-Time Director; Mr. Faiz Nagariya, Chief Financial Officer; Mr. Kushal Doshi, Lead Investment Relations; and Ms. Shubhangi Desai, Executive IR. Without further ado, I will now hand over the floor to Mr. Kushal Doshi to begin with the earnings call for the Q4 FY '25 and financial year '25. Over to you, Kushal.

Thank you, Nilesh. Thank you, and a warm welcome to everyone. Yesterday, our Board has approved the financial results for the fourth quarter and the full year -- financial year ended 2025, and the same has been filed with the exchanges as well as updated over our website. Please note that this conference call is being recorded, and the transcript of the same will be made available on the website of Aether Industries Limited and the stock exchanges. Please also note that the audio of the conference call is the copyright material of Aether Industries Limited and cannot be copied, rebroadcasted or attributed in the press or media without specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management's current expectations on future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Aether Industries Limited or its officials do not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now Mr. Rohan Desai will begin by sharing Aether's business outlook, then Mr. Faiz Nagariya will cover the financial highlights of the period under review, and Dr. Aman Desai will share the ongoing expansion and strategy of the company going forward. I hand over the call to Mr. Rohan Desai for his opening remarks.

Good morning, everyone. It is a pleasure to connect with you all today as we review Aether's outstanding performance for the quarter 4 of financial year 2025. I hope you are all doing well, and I'm excited to share our progress. We have achieved remarkable growth this quarter with overall volumes surging by 21% compared to the previous quarter. For the full year of financial year 2025, volumes soared by an impressive 34% compared to the financial year 2024. Pricing for our products have remained stable over the past 6 months, reflecting our strong market positions. Demand for our offerings continue to be robust, and we are thrilled to have welcomed 6 new clients in quarter 4 of financial year 2025, further expanding our reach. Aether's strategic pivot towards CRAMS, contract research and manufacturing services, and CEM, contract/exclusive manufacturing business models is yielding excellent results. In Q4 of financial year 2025, 38% of our revenues came from contract/exclusive manufacturing, 10% came from CRAMS, contract research and manufacturing services and 51% came from large-scale manufacturing. It is particularly exciting to note that CRAMS and CEM now contributes nearly 50% of our revenue, a trend we expect to strengthen as our robust CRAMS pipeline continues to drive opportunities for our CEM business model. Our goal is to achieve a 70% contribution from CRAMS and CEM with 30% from large-scale manufacturing, and we are well on our way to realizing this vision. Additionally, we have successfully commercialized Site 4 over the past 2 quarters and production is going on full-fledged manner in Site 4. Our expansion initiatives are progressing seamlessly. Site 3+ has been dedicated to a key client under the CEM business model with installation of piping and reactors well underway. We anticipate production to begin in the end of quarter 3 of financial year 2026. This milestone highlights our ability to forge unique high-value contract manufacturing relationships outside of agrochemical and pharmaceutical sectors, an achievement that underscores Aether's distinctive position in the industry. Similarly, Site 5 in Panoli is advancing steadily with first 2 production blocks on track for commissioning by December 2025. On the trade front, Aether's exposure to the U.S. market remains minimal at 7% of the total sales, insulating us from potential tariff impacts, if any. We continue to monitor this development closely. I will now hand over our phone to our CFO, Faiz Nagariya, who will share the financial highlights for this exceptional quarter. Over to you, Faiz.

Thank you, Rohan, and good morning, everyone. I'm glad to present the financial results of Aether Industries Limited for Q4 of financial year '25 and the financial year ended on March 31, '25. The total consolidated revenue of the company stood at INR 2,453 million in Q4 of financial year '25 as against INR 2,333 million in Q3 of financial year '25, resulting in EBITDA of INR 819 million in Q4 as against Q3 INR 757 million, an increase of 8% in the comparing periods. EBITDA margin stood at 33% in Q4 as against 32% in Q3 of financial year '25. The PAT amounted to INR 504 million in Q4 of financial year '25 as against INR 434 million in Q3 of financial year '25, which is 16% increase quarter-on-quarter. The PAT margin stood at 21% in Q4 of financial year '25 as against 19% in Q3 of financial year '25. The consolidated revenue of financial year '25 increased by 38% to INR 8,803 million from INR 6,374 million in financial year '24, enabling a very healthy EBITDA of INR 2,709 million, which is 31% margin in financial year '25 as against INR 1,577 million, which was 25% in financial year '24, resulting an increase of 72% year-on-year. PAT stood at INR 1,584 million in financial year '25 as against INR 825 million in financial year '24, which is an increase of 92% in the comparing periods. PAT margin increased from 13% in financial year '24 to 18% in financial year '25. During the quarter, we have also received the stock insurance claim from the insurance company. The revamping of the affected site is completed, 100% operations at the fire affected site has been started since January '25 post the approval from the regulators. The remaining claim for the fixed assets for the loss has been put up to the insurance along with the loss of profit claim, and we are confident to get the same settled by insurance company by or before the end of Q2 of financial year '26. We have been able to reduce the inventory cycle to 173 days on March 31, '25 as against 210 days on March 31, '24. The debtor cycle has also been reduced to 126 days as on March 31, 2025, as against 142 days as on March 31, 2024, encompassing the payment flow from the customers. With more of contract manufacturing businesses unfolding in near future, we anticipate to have the better debtors and inventory cycles in future. The return ratios have also improved for us, wherein the ROE has gone up to 7.12% in financial year '25 as against 4% in financial year '24 and ROCE has grown up to 8.5% in financial year '25 as against 4.7% in financial year '24. We are continuously using the solar power benefit, and we will be expanding that to our other units as they come up. And the total benefit of solar power in financial year '25 has been INR 188 million as against INR 172 million in financial year '24, encompassing the sustainability initiative of Aether Industries, and we would continue to add capacities to the solar or wind or hybrid models of renewable energy for our upcoming new sites as well. Now I would like to request Dr. Aman Desai to share updates on Aether's ongoing expansion plans and strategies moving forward. Aman, sir?

Thank you. Thank you, Faiz, for the financial highlights. Good morning, everybody. I'm very happy to connect with you all again. I thought for this call, perhaps I'll start by giving an idea of the various 5 sites that we have, Faiz and Rohan have spoken extensively about how good the quarter has been and the fiscal year has been. And so just to give you an idea of the 5 sites that we have and what's happening and how bullish we are. Site 1 is the R&D and the pellet plant. We have 8 research groups, 60 fume hoods in the Site 1 in the R&D center. We are doing a double expansion of this Site 1 R&D center. The excavation has already begun. This represents our bullishness on the R&D and the CRAMS business model that we have. The CRAMS business model has grown by 24%, which is quite pleasing, and this continues to be the heart and the engine of Aether's new ventures. Our R&D expenses for the fiscal '25 stood at INR 681 million, which is approximately 8% of the total revenues was R&D spending. We already have what we call the largest pellet plant in the world, and that also reflects on the bullishness that we have on the CRAMS business model. The Site 2 and Site 3, we're largely LSM with some large-scale manufacturing, which is against Chinese import substitution, which was our original business model. A significant portion of it was also contract manufacturing, exclusive manufacturing, but largely LSM business model that has also stabilized. Both sites are running at full capacity. We have fully stabilized post the fire accident that happened in November 2023. Both sites are running at full capacity. Chinese pricing have flattened out and they are on the way up. The volumes are back and the pricing is also inching upwards. Site 3+, as Rohan mentioned, is now fully dedicated for contract manufacturing, exclusive manufacturing for one particular material science company for one particular product. And this particular product is transitioning from the CRAMS business model to the contract manufacturing, exclusive manufacturing business model. We have been working on this product for the last 3 to 4 years now for this particular customer, and now we are fully dedicating our Site 3+ to the exclusive contract manufacturing of this particular product for the material science company. The Site 4, which is for the oilfield services company, a large part of that being towards Baker Hughes is also running quite well, a very healthy order book already in that site and expanding more and increasing more on a monthly basis. And that is now fully on track. Site 5 is currently progressing very well in the Panoli site, which is a very large production site that we are constructing. We have full line of sight of about 3 to 4 plants in Site 5, and that's going to be a -- the first couple of plants will be the large-scale manufacturing business model, which were the products which were kept on hold for Site 3+, which will now go into Site 5. And also, we are -- we have already finalized and are on the verge of finalizing several contracts for the contract manufacturing and exclusive manufacturing of various products in the material science arena from European and American customers for Site 5. And more of this will come in the next few months as you see these announcements unfold. I think especially the Site 3+, Site 4 and the various... [Technical Difficulty]

Sorry to interrupt ladies and gentlemen, we lost the line for Mr. Desai. Please stay connected while I'll reconnect him. Gentlemen, thank you for patiently holding. We have the line for Mr. Desai connected. Over to you, sir.

Can you hear me okay?

Yes, sir, we can hear you, please, sir.

Okay, apologies for that. Somehow the line got disconnected. But anyway, I was mentioning that -- I just gave a highlight of the various 5 Sites. And so especially Site 3+, Site 4 and Site 5, all the various contracts that we have either finalized or finalizing right now, as I mentioned, are very firm validation and I think absolute incontrovertible proof that our CRAMS business model is working in a very robust manner. We are forging relationships with innovators across the globe, across the industry spectrum. And these are actually completely non-pharma and largely non-agro. And by next year or definitely over the next 2 years, we'll be firmly -- fully diversified with a very broad 25% pharma, 25% agro, 25% material sciences and 25% oil and gas into our overall pie of revenues. I think especially over the last few months as the global conditions have intensified and in some cases, further exacerbated, the CRAMS and the contract manufacturing business models are seeing major inquiries and fast tracking of some of the CRAMS projects. We are seeing a palpable sense of urgency from various customers across the globe as they look towards expediting the finalization of contracts with companies, especially in India. And I think we are very well placed for that, considering all the relationships that we have already forged with these various companies. Currently, we have over 50 CRAMS projects that we are working on, out of which 70% in the R&D are non-pharma and non-agrochemical projects. And there is mostly almost 35 CRAMS projects in the R&D that are ongoing today, which are non-pharma, non-agro. Over the last 3 months, we've also had numerous international customers who have come to visit our Site 5, which is the Panoli site, which I talked about already. We have a clear line of sight, as I mentioned, for the various projects that we would like to start at Panoli in Site 5 in the first 3 to 4 plants. For the fiscal year '25, the CRAMS and exclusive manufacturing business model has grown by 55%, which has also helped us to increase the company's margins as well as reduce the pricing pressure from which the LSM model has been suffering. So I always mention that this has been a golden age for the Indian chemical industry and especially over the last 3 to 6 months, we are seeing that this is especially the case. We are seeing tremendous potential in all the opportunities that are available to Indian specialty chemical companies who are diversified and have their fundamental thesis well in place, and we are working tirelessly towards converting these opportunities into actual projects, which are going to start within Aether. So let me stop there. Thank you, everybody, for your time and attention today, and happy to answer any questions from the investor community. Again, thank you for all the support. Kushal, back to you.

Yes. Thank you. We shall now request the moderator to open the floor for question and answers.

[Operator Instructions] The first question is from the line of Akshay from AK Investment.

Hello, Am I audible?

Yes.

Yes, you are. Please go ahead.

So my first question is how much capacity we will increase by expanding our capacities in Site 3++, 4 and 5 combined compared to the Site 2? Hello?

I'll try and explain you, Akshay. It is very tough to measure the capacities in the specialty chemical field. Obviously, with the Site 3+ contract or whenever it happens, you'll come to know about the capacities and everything once it is available on the public domain. Site 4, we have always mentioned that we are putting up a capacity of 16 KTA, that is 16,000 tonnes that is for Baker Hughes' plant. And Site 5, we are talking about each production block having capabilities and capacities of manufacturing about 500 tonnes of product. But as the product mix are differentiated and which plant the combinations will happen, we will soon let you know. But at this moment, it would be very tough to mention this. I'm sorry, I could not answer it in a straight line, but this is a very complicated question which you asked.

Sure, sir. Not an issue. Sir, my second question is, can you put some light on our products and our competitive edge on all our products like in oil and gas sectors and in the material science sector. So I am new to this company. And so I would like to understand what is our market share and product competitive edge.

Aman?

Yes. So Akshay, thanks for the question. Again, we are very competitive. We focus on chemistry and technology innovations and -- across the spectrum of the productions that we do. And so the idea is to be the most competitive source in the world for any product that we take into manufacturing. We incorporate a lot of technological and engineering innovations in all the chemistries that we perform. And so there's a marriage of chemistry, technology and engineering always, which brings a lot of efficiencies into the systems and drives down the costs. And so it's difficult to pin down specifically on any particular product because we are -- as I had mentioned, we are quite diversified into pharma, agro, material sciences, oil and gas. We are selling products which are $2, $3 per kg, and we are selling products which are $5,000 per kg and everything in between them. And so to pin down anything, it will be very difficult. But I think suffice it to say that we are very competitive because we bring innovations, which is aligned to our core competencies, which is the fundamental foundation of the company to begin with 13 years ago. Thank you, Akshay.

Akshay, I can add 2 more points over here. For the large-scale manufacturing, we manufacture products for the first time in India, and we are the only manufacturer of most of the products which we manufacture on the large-scale manufacturing business model. In terms of the CEM and CRAMS, what we are doing currently is partnering with the innovators and launching the products for the first time in India. And now with the few launches which are coming up in Site 3++ and Site 5, we will be launching them for the first time in the world. Would that answer your question?

Yes, yes, yes. Very, very sufficient, sir. And lastly, on the FY '26 outlook. So how much you are anticipating the growth and the margins in FY '26?

So Akshay, we don't give forward guidance on numbers, but suffice to say that the margins will remain pretty much the same.

The next question is from the line of Abhijit Akella from Kotak Securities.

First one is on the quarter 4 results. The EBITDA margins, even excluding other income, seem very strong at north of 33%. And it does seem like there's been a quarter-on-quarter decline in the OpEx lines, especially maybe other expenses, a little bit in employee cost as well. So if you could please just help us understand what's happened there? And do we expect to continue this 33% margin in upcoming quarters as well?

Yes, Abhijit, I'll just take this question. You are right that this time, the EBITDA margin is more inclined towards the revenue from operations as the QIP funds, which we had raised, we have deployed. And so now other income, which was coming from mostly FD interest is reduced. And going forward, we will be at 30% EBITDA margins for sure. And the expenses which have reduced is, there's no reduction. Actually, what has happened is new projects have started. So various -- as per the accounting standards, various capitalizations of expenses of project and processing is still being done. So that is the thing, and that will be as a CapEx thing. Otherwise, there is no change in the expenses. Also, other expenses have reduced because I think in my comment also if you heard, I said that solar power plant is giving a good return to us. So that has also helped us reduce the electricity cost overall, which is also a good factor which has increased our EBITDA margins.

Abhijit, just to add to that, if you see the CRAMS business model and the CEM have now started firing, especially the CRAMS, if you see for the first quarter -- for the financial year FY '25, CRAMS has for the first time passed INR 100 crores of revenue. This is, of course, a very high EBITDA margin business, which is for us. And as you realize that R&D is the call for this company. So now you're seeing the results of the R&D coming in as well as the CEM now taking off with the 2 new CEM contracts, which were mentioned by Rohan and Dr. Aman.

Got it. Yes. That's helpful. The other one was just on the working capital. There's been some improvement year-on-year. But for the year ahead, if you could please share some outlook regarding how you're seeing things moving now that the revenue mix has started to shift.

Yes. So we are going -- we are trying to incline more towards the contract manufacturing and CRAMS more. And in contract manufacturing, there will be definite payment terms and also the inventory flushing will be continuously going on. And so there will be no more piling of the inventories because it will be -- the context will be very much defining the quantities which we have to sell to these customers. So of course, we are looking forward to reducing this more. Currently, we are at around 195 days of working capital. We expect it to bring it down to better levels. And within a couple of years or 3 years, we would try to bring it down to 150 days level for sure.

Understood. And on the revenue growth that we have seen in FY '25 in LSM and CSM -- sorry, CEM, would it be possible to just share broadly which product or which contracts have sort of driven this kind of growth?

Abhijit, we can connect separately on this. Basically, we do not want to mention the product names and the companies because they are more of confidential in nature. So we can discuss this offline if required.

Fair enough. And the last thing for me is just on the tariff situation. I know our U.S. exposure is only 5% to 6% of total revenues. But I mean, could there be some sort of indirect impact coming in from other geographies because of all this environment? And there's also some concern that Chinese may turn more aggressive outside of the U.S. in case they are blocked from the U.S. market. So how are you seeing the industry environment evolving in that context?

So I don't know about people, but what we are seeing is a lot of inbound inquiries and interest, which are fast tracked towards conversion into contracts and commercialization. So in fact, we are seeing a lot of companies moving towards -- in a very, very fast manner towards getting the things into commercial stage because they are worried about the tariff structures and what U.S. might do in the next few months. And we are not seeing any negative impact for Aether, especially at this moment. And the contribution from the top -- of our top line for the last financial year was only 7%. So we are not at all worried on this at the moment.

Most of our products are exempt from the tariffs? Or are they actually subject to them?

No, nothing is going into U.S. So I mean, except for the 7%, nothing is going into U.S. And that 7% is also mostly constituting of CRAMS businesses. So that's more of a service-oriented business, which we are doing.

The next question is from the line of Chaitanya Kamdar from Avestha Fund Management LLP.

Congratulations on the good set of results. I had a question. Basically, we see Aether as a major player in the material science space, which is unlike other players in India to the scale of what you are manufacturing. So can you give us your strategy in -- your strategy over the next 2 to 3 years as to how Aether is tapping into this segment? And what can we expect?

Yes, I can take this. Thanks, Chaitanya, for the question. It is a good question. We are focusing consciously on increasing the partnerships and the CRAMS projects and the contract manufacturing projects in material sciences as well as oil and gas. And so that's a conscious strategy adopted by the company. The focus is quite simple, actually, it's strategic partnerships with innovators in the material sciences and oil and gas space. And for every one that we announce, we are working with 4 to 5 others in the space as well. And so the strategy is -- always has been and will continue to be quite simple, is strategic partnerships with these innovators, where we would like to be their one-stop solution and their go-to partner for all complex chemistry and technology needs. And so if they have pipeline molecules of various launches in the future that involve complex chemistry and complex technology, then we want to be the first ones they connect with. We look -- we are and we look to be the -- to be considered as the internal research, scale-up and commercial supply arm of these various innovators which just happens to be a different company located in India. And so that's the strategy, has always been the strategy, and that will be a continued strategy, and we are focusing on this much more is focus on the core competencies of the company in chemistries and technologies and then focus on strategic partnership with innovators, having multiple eggs in the basket with the same partner. And so we want to be working with the partner for their R&D needs in the CRAMS business model, for the scale-up and supply needs in the CRAMS business model and then also be their partner for commercialization as the products are launched, which now we are seeing the proof in the pudding with the Site 3+ and the Site 4 and the Site 5 contracts that have been finalized already. Hopefully that answered your question, Chaitanya. Happy to expand more.

Yes. No, no, that's great. It's -- you've answered that. And just a bit of a follow-up question on -- a follow-up to the previous question is, how is the Site 5 shaping up in terms of Phase 1? And do we have any clarity on the first 4 plants?

Yes. So Site 5, as I mentioned in my little ramble earlier, is shaping up quite well. We are -- the Zone 1, the Phase 1 is 4 plants, and we have more or less 80% clarity on the first 4 plants that we are going to be installing and operating. And it is healthy. It is actually -- we had 3 products that we were going to launch in the LSM model in Site 3+, which has now been dedicated to a contract manufacturing customer, as I mentioned earlier. And so this -- those 3 products are going to be launched first in the Site 5 in the LSM model and then the next 2, 2.5 plants are going to be dedicated for contract manufacturing projects with various customers, the contracts for which have been and are being currently finalized. So firm line of sight of the first 4 plants mostly.

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

Congrats on very strong set of numbers. A couple of questions from my side. First, I think you mentioned that the revenue from Site 3++ would begin from 4Q FY '26. So just wanted to check if you have already received the orders for the same or the orders will come in probably over the next couple of quarters?

The contract is being finalized. Once the contract is being finalized, we are on the very end to finalize this contract. And so once it is done, the orders will follow immediately.

Understood, sir. And on -- from Site 4, was there a large revenue in 4Q FY '25? Just from an understanding point of view, given we've seen a good increase in our top line in 4Q. So just wanted to check whether the contribution has started from Site 4.

Yes. So from Site 4 in Q4, we had approximately around INR 25 crores of revenue, which was the validation contract which were sent and now the commercial purchase order received, and we are going to do the commercial supplies to them from this quarter onwards. It's already started in April itself.

Okay. That's great, sir. And just last bit. So just can you highlight revenue trajectory for Site 4 and Site 3++ in case if you are able to publicly. I think in the past, we had indicated that Site 4 will gradually ramp up to INR 300 crores -- INR 250 crores, INR 300-odd crores. So just wanted to understand the trajectory for both the sites.

So Krishan, in terms of Site 4, our statement remains valid, what we had mentioned in the past. It will gradually ramp up in FY '26 and then fully ramp up in FY '27. Site 3+, we cannot give you any projections for time being. We'll come back to you later during the financial year.

Noted, sir. Noted, sir. And just last bit, I think on the EBITDA margin, you answered to a previous participant that EBITDA margin will go up from here. But just wanted to understand like, let's say, for FY '26, a 33% EBITDA margin is the right number to work with or probably more like an average 30%, 31% kind of an EBITDA margin?

Yes. So Krishan, it will be an average of around 29%, 30%. And from there, it will grow gradually. So currently, we are not looking at 33%. This -- it will gradually grow in a couple of years or so. But 29%, 30% average EBITDA margin is what we are expecting and we are working on.

[Operator Instructions] The next question is from the line of [ Krishna Mundra from NG Invest ].

Congratulations on a good set of numbers. So I think...

Sorry to interrupt you, [ Mr. Mundra ], can you please speak a bit louder. We cannot hear you, sir.

Hello? So am I audible? No? Hello?

Not actually, can you speak a bit louder, sir?

Hello, am I audible now?

Yes, you are. Please go ahead.

So congratulations on a good set of numbers. So as you mentioned that U.S. sales are just only of 8%, which is true from CRAMS business. So regarding the Baker Hughes' contract, is it going to the U.S. or other geographies? So just wanted to like get color...

Other geographies...

On that. Okay. And next is on the Converge polyols business. So we had started commercialization with H.B. Fuller. So are there any developments on that part?

Yes. So we have a contract with H.B. Fuller, and that contract is being well executed. In this financial year, we are looking to close 2 new contracts in the Converge platform, which will take us about 500 tonnes of manufacturing and sales as per our estimates for this financial year.

And the next is regarding, in the last quarter, you said that you were evaluating for starting LSM or CEM business from the Site 3++. So have you done that? Or have you taken any decision regarding that, what we are planning to do?

Yes, Site 3++ will be dedicated to CEM business model.

And in that CEM, if you can provide any like which chemical we are planning to manufacture, any agrochemical, pharma or material science?

It's non-pharma, non-agro, that is the max I can say at this moment. Once the agreement and the contract is finalized, I will -- we will publish it in the public domain, and we can discuss this more openly at that point of time.

Okay. And the next was regarding the pricing. Like you said that we are -- we will -- from the -- starting the Chinese New Year, we can see an upward trajectory in the pricing. So during the fourth quarter, did we see only -- the rise in top line was only due to volume increase or there was some price increase, which we have seen?

Price was stable. We have seen only volume growth.

[Operator Instructions] The next question is from the line of [ Manish Bhadani from B&K Securities ].

Congratulations for the good set of numbers. Sir, I'm new to your company. So just to understand the rationale behind your strategic goal of -- I think of 70-30 split between CDMO CEM service and large-scale manufacturing. Like what drives this mix? And how does it align with your long-term growth strategy?

Yes. Thank you, [ Manish ], for the question. Basically, the focus is to -- as I said earlier in response to one of the questions is to have strategic partnerships with various innovators across the industry spectrum across the globe. And that's the push towards the increased portfolio of contract manufacturing, exclusive manufacturing. The large-scale manufacturing business model is a business model where we pick our own products, which are generic advanced intermediates for pharma and ag primarily, which are against Chinese import substitution. That was the business model that we started the company with, and that is a business model that we still continue to nurture and grow. But the contract manufacturing, exclusive manufacturing is a business model that is driven by both us and the customer together, and that grows much faster. And that's what you see in the numbers that are being portrayed. And in the future going forward, this will stay more or less the same. We'll try our best to keep the large-scale manufacturing business model at least at 25% or more in the years going forward. But especially in terms of the global scenario that we are in today, the push towards contract manufacturing, exclusive manufacturing and partnering up with companies in India is significant from various companies and innovators across the industry spectrum across the globe. And so we see the increased numbers of the contract manufacturing. Thank you, [ Manish ].

The next question is from the line of Rohit Ohri from Progressive Share PMS.

A couple of questions. The first one on Site 5. If we see that you've added -- you have acquired some more properties, taking it from 31 acres to 46. Dr. Aman and team, my question is that what gives us that sense of positivity or what are you looking at? Because Dr. Aman said that R&D is the backbone and you will be focusing more on the R&D. But what gives us that sense that we have added this approximately 15 more acres of land?

Yes. Thank you, Rohit, for the question. We've always been very bullish in terms of our partnerships that we have been forging over the last 13 years now with the various customers, primarily in the non-pharma, non-agro sector for the CRAMS business model. We are very bullish about the growth trajectory of the company going forward. It is a golden age for the chemical industry -- it has always been a golden age for the chemical industry over the last few years and especially since the last few months as the global conditions have further exacerbated, we are seeing a very sense of urgency for various customers to start finalizing partnerships with especially companies in India. And so everybody wants to be not in China and the only obvious choice for everybody in the world is India more or less. And so we are seeing this pan out in the kind of inquiries we are getting, the urgency we are sensing from customers to close contracts and finalize the contracts with us. We are based on R&D and technological and chemistry innovations as the fundamental base of the company. And so the fundamentals of the company are very sound in terms of chemistry and technology and innovation and R&D. We continue to expand that as well in terms of the infrastructure and the resources and the manpower. We are led commercially from the top. And so this -- and we are seeing now actual proof in the pudding in the way the contracts have been finalized for Site 3+ and the Site 4 and some for Site 5 in these exclusive manufacturing, contract manufacturing business model, which are actually results of the efforts done in the CRAMS business model in research for these various customers over the years. So it is actually a proven this business model that it is quite robust, and that leads us to be very bullish and that leads us to continuously expand on all fronts of the R&D pellet plant and production, which is as a result of which you see the additional land being bought next to Site 5 in Panoli.

I know it's slightly too early to kind of gauge the time line for completion of the additional land because we already have probably 14 or 16 subunits, which are coming up in Site 5. But any thoughts on by when do you think that Site 5 construction and the entire work will be completed so that we move on to Site 5+?

I'll let Kushal or Faiz answer in terms of what guidance we are giving to people.

I'll take this up. The goal is to complete Site 5 in 3 to 4 years. That's the internal goal -- I mean that's a thought as the projects are developing. It can accelerate based on the incoming projects and inquiries, which are getting commercialized as we speak. Site 5, additional land, which we have acquired, which is 15 acres more, which makes the total land parcel at 46 acres. What we are projecting is try to keep it isolated for a large customer, which would give us space to expand that customer the likes of Baker Hughes, a similar kind of customer who can -- whom we can dedicate the whole parcel of land for a very big manufacturing facility.

Rohan, Faiz, is it possible to share the cost of acquisition of this property?

It's approximately INR 420 million.

Okay. Faiz, with this quarterly run rate coming up to somewhere around INR 230 million, INR 240 million kind of a range, do you think you'll be able to sustain this going forward as well with the inquiries that are coming in the CRAMS business or maybe the CDMO business?

Yes, that's the target and the internal goal for the company to be at around 29%, 30% EBITDA margins and grow from there for sure. And we are seeing this coming up.

And is it possible to chalk out maybe 18% or 20% CAGR growth over the next 3, 4 years or maybe faster than that?

Yes, we -- currently, we closed at 18% PAT margins, and we think that we can continue at 18% and grow from there. It's definitely possible as new contract manufacturing and CRAMS business customers are coming up, and we are getting business with them.

Last question from my side, team. The promoter holding is somewhere around 81.7%. When do you think that you'll be able to come to this SEBI requirement or rules of 75%? How much time do we have for that?

So the time line for this regulatory requirement is May 31. We are in discussion with our bankers, and we'll come back to you all shortly once we have decided the right course of action.

Any thoughts whether you'll be placing to some strategic shareholders or maybe go for OFS or something like that?

There are only certain mechanisms which are allowed by SEBI for allowing us to reach the minimum promoter shareholding. So we'll be abiding by those requirements. So we'll come back to you.

The next question is from the line of Nilesh Ghuge from HDFC Securities.

My question is to Aman. Aman, we look at Industry as an R&D-driven technology-oriented organization. And this year also with the 8% of your revenue spend -- if you look at the revenue spend on R&D, it's about 8% of your revenue. So going ahead, let's say, a couple of years down the line, your expansion in R&D, you are doubling your capacity. So will that number go up from 8% to somewhere like 10%, 12%? Are you looking at that kind of number with opposite responses?

Nilesh, thanks for the question. As you know, I'm originally a scientist, unfortunately, I've become a manager now. And so if it were up to me, I would be spending a lot more money, but I have the likes of Faiz and Kushal and Rohan slapping my wrists every now and then. But jokes aside, we anticipate to be investing significantly in R&D, continue to invest. Just for an example, we are placing an order for an NMR, which is an analytical equipment, which is almost a little less than $1 million for a single equipment for R&D in the next few months. And so those are the kind of advanced technological, analytical and R&D tools that we'll be investing in, in addition to the expansion of the infrastructure and the manpower that is going to be there. We have started excavation for the new R&D center, which is right adjacent to our existing R&D center, which is going to more than double the capacity of our R&D and the excavation of that has already started, and we are going to come above the ground before the monsoon, which is like 1.5 months from now. And so that activity has started. It's going to be a grand, very nice, a globally advanced R&D center for organic synthesis and organic chemistry. And so that's what we're already building. And so I think at least for the next few years, we will continue to expand and continue to invest in R&D. These numbers will more or less stay the same. Faiz can comment more on the numbers, but the -- especially the vision from our side is that the investment into R&D will be a continuous effort and work in progress.

Yes. And Nilesh...

That is the engine and that is what drives the company for, and that is going to be the sustained focus of the company for years and years to come. So Faiz, over to you.

Yes. Yes. So Nilesh, we will continue to invest in the R&D, as Dr. Aman said. And we would be minimum around 6% to 6.5% for sure because we are expanding R&D and new products will be developed there, new people will be added. So our thought is that at least 6% to 6.5% of our revenues will be invested in R&D for the next few years for sure.

Okay. Sir, Aman, coming on the R&D, see now you are expanding your infrastructure. So before that, can you tell us -- or can you break up the number of projects or a molecule you are working on in 2 parts. Firstly, which are -- which will be you are working on your large-scale manufacturing and other in the CSM or contract manufacturing. Can you break up now? And where do you see that number going after expansion? Because as you mentioned that R&D will reflect in your revenue terms over a longer period. So we would like to know the number of molecules you are working on so that we can estimate that number of projects which will be fulfilled into large-scale manufacturing or the contract manufacturing?

Yes. Thanks, Nilesh. Just to give a high-level summary, we have 8 research groups. These groups handle -- we have a total of 120 R&D scientists plus more than 100 engineers. But in terms of broadly, we have 8 research groups. Each research group handles between 5 to 8 projects per research group. And so if you take an average number of, say, 6, 6.5 multiplied by 8, you are at about 50, 60 projects going on in the R&D at any given time. And about 70%, 75% of those projects are towards the CRAMS and the contract manufacturing business model and about 25%, 30% are towards the LSM manufacturing business -- LSM business model, which is Chinese import substitution largely. And so if you count a 60-odd number of R&D projects and 70% of that, you are at more than 40 projects in the CRAMS business model and then the remaining 20, 25 projects are in the LSM business model, 20 projects, let's say. And as we expand further, I think we'll have to try hard and we will because it's going to be a sustained focus is to keep the LSM model alive and growing and nurture it. But we see a tremendous amount of inquiries coming in into CRAMS business model and projects. And so keeping the CRAMS as we expand more, say, even achieve a 2x expansion in the next 2 years of our R&D, keeping the CRAMS at 70%, 75% is going to be, I think, personally straightforward and quite easy, I mean just in terms of the relationships we are forging and the inquiries we are seeing and the reputation and foundation that we are standing upon today. But we'll try hard to make sure that the LSM business model stays at 20%, 25%, 30% at least in terms of the overall number of projects we do in the R&D. Hopefully, that gives you a good sense of the numbers.

Yes, yes, sir. Just last bit to Rohan and Faiz, see as you mentioned in your comments that contract manufacturing and CSM, which is currently contributing close to about 50% and in a few years, it will -- you are expecting to reach to about 70% plus. So don't you think that it will be easier for you to manage working capital in a much, much better way because your share of your CSM or contract manufacturing going up compared to current scenario and working capital cycle should reduce drastically with rising share of contract manufacturing and CSM. Any thoughts?

Faiz?

Yes, that's the total plan, and we have been hearing about working capital since various quarters. So we are happy that we are able to bring it down to a good level, and we will be further working on it and contract manufacturing CRAMS business model -- business will definitely help us bring them down more. And our target, as I told to even one of the earlier speakers was to bring it down to 150 days levels in next 2 to 3 years.

The next question is from the line of Abhijit Akella from Kotak Securities.

Just to check if you could please help us with the capacity utilization at present across your key manufacturing plants. And by when you expect them to hit full capacity utilization? And what sort of revenue potential do you see from each of them?

Yes. So Abhijit, Site 1 is R&D and pellet plant, and we do not measure the capacity because it depends upon on the contracts and the R&D which is done. But Site 2 is currently operating at around 70% capacities, and we expect it -- because the site has come up slowly with the regulatory approvals as it was hit by fire. So we expect that it would be working to full capacities of around 80% to 82% in the current year -- in the financial year '25-'26. And Site 3 is also approximately around 66% capacity utilization, and we expect that it should be around 75%, 80% in this current year itself. And the revenue trajectory, we would not be able to give any forward-looking statements. So we wouldn't comment on that. Site 4, Site 4, yes, it is -- Site 4 is -- we have started the validation quantity. So currently, we are at around 25% to 30% capacity utilization. And this year, there will be -- it will be a great jump, and it will be around 75% utilization.

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

Thank you, everyone. We look forward to seeing you guys again for Q1 FY '26 financial results. If any further queries, you can reach out to Faiz, myself or Shubhangi, and we look forward to meet you'll. Thank you.

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