Anupam Rasayan India Ltd (ANURAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Anupam Rasayan India Limited Q2 and H1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kanav Khanna from EY. Thank you, and over to you, sir.

Thank you, and good afternoon, everyone. Welcome to Anupam Rasayan India Limited Q2 and H1 FY '25 Earnings Call. Please note that a copy of the disclosure is available on the Investors section of the website as well as on the stock exchange. Anything said on this call, which reflects the outlook towards the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company faces. Please note that the audio of the earnings call is a copyright material of Anupam Rasayan and cannot be copied or rebroadcasted, attributed in press or media without specific or written consent of the company. Today, from the management side, we have with us Mr. Anand Desai, Managing Director; Mr. Gopal Agrawal, Chief Executive Officer; Mr. Amit Khurana, Chief Financial Officer; and Mr. Vishal Thakkar, the Deputy Chief Financial Officer. With this, I would like to hand over the call to Mr. Anand Desai for his opening comments. Thank you, and over to you, sir.

Good afternoon, everyone, and a warm welcome to the Q2 FY '25 earnings call of Anupam Rasayan. I would also like to take a moment to wish you all a very happy Diwali and a New Year. As we have indicated in our earlier calls, the demand in agrochemical business has continued to be subdued in Q2 as well. October onwards, we are seeing a good recovery in this segment especially from Europe. Our pharma segment and polymer segment that are our new growth programs have continued to increase its share in our revenue. For the full year, we expect both segments to continue over 15% to our total revenue. This trend is expected to continue through FY '26. This move towards a more balanced portfolio with increased contributions from the pharma and polymer sectors is expected to provide stability from sector impacts. Now let me highlight our financial performance for the quarter and half year under review. Our consulted operating revenue for the quarter stood at INR 294 crores, which was 16% higher than Q1 FY '25 and around [ 22% ] lower than Q2 FY '24. This year-on-year degrowth, as you know, is on the back of a challenging demand conditions in agrochemicals. The EBITDA margin continued to be at around 28% in Q2 FY '25. And on a yearly basis, we recorded a revenue of INR 548 crores, which translated to around 30% degrowth vis-a-vis same period last financial year. On the margin front in H1 FY '25, consolidated EBITDA margin stood at 25.5%. As we are witnessing recovery from October onwards, we expect our numbers to be better from Q3 FY '25, with increased contribution from polymer and pharma business this year. Alongside new letters of intents and contracts, we anticipate similar revenue in FY '25 compared to FY '24. On the back of the momentum, we are seeing on the demand pickup and forecasted offtake from our customers. We believe that in FY '26, we should be back towards growth journey that we have seen in the past during last year and this year. At Anupam Rasayan, we are committed to building a sustainable business. And over the years, we have invested in various initiatives, including a recent INR 59 crores investment in a 9.2-megawatt hybrid power plant that combines solar and green energy. This project has been commercialized in October 2024. We the agro demand picking up, coupled with high conversion from pharma and polymers, we at Anupam Rasayan are confident to get back to our growth journey. With this, I would like to hand over the call to Mr. Gopal Agrawal, the Chief Executive Officer of our company to discuss and the business updates. Over to you, Gopal bhai.

Thank you, Anand bhai. Hello. Good afternoon and wish you a very happy and prosper Diwali to all of you. I will begin by briefly discussing the business highlights, which will be followed by financial highlights by Amit bhai. As Anand bhai mentioned, we are nearing the end of challenges we face in the Agro segment, while Pharma and Polymer segments have been experiencing strong growth, driven by the recent launch of our 17 molecules in FY '24 and 3 molecules in H1 FY '25. We anticipate increased contribution from this segment, as the molecules gain traction. Additionally, a launch of 3-plus new molecules that are planned in coming months shall further accelerate the growth in this segment. As you know, we are seeing strong momentum in Japan, particularly in our fluoropolymer segment. Thanks to our dedicated business development team, we are effectively capitalizing on these opportunities and expanding rapidly. Also, we have already stated in our previous call that within next 2 to 3 years, around 1/3 of Anupam sales will come from Japan, with majority of the business secured through long-term contracts. Further, we have multiple new polymer products in R&D and pilot aimed for the U.S. market as well. Our vertical integration with Tanfac for hydrogen chloride, which is HF, has been a key in securing this contract. Keeping the strong demand in mind, we are also glad to inform you that we have recently expanded our Tanfac plant capacity from 14,850 metric tonnes to 29,700 metric tonnes and the plant has been commissioned from October '24. As mentioned by Anand bhai in this call, keeping all these activities in mind, we believe that we should start seeing strong performance going forward. With this, to take you through the financial highlights, I would like to hand over the call to our CFO. Over to you, Amit bhai.

Thank you, Gopal bhai, and good evening, everyone. I'll begin by outlining the financial highlights for the quarter, after which, I'll hand over the call to Vishal bhai for a more detailed discussion. Starting with our CapEx update. As of September 30, 2024, we have completed CapEx of INR 601 crores. The remaining CapEx will be completed over the next 2 quarters in FY '25. Our working capital has risen slightly on account of launch of new molecules as well as anticipated growth in the revenue from Q3 FY '25. Further, we anticipate the working capital would stabilize by the year-end and will have significant improvement in FY '26 and going forward. As mentioned by Anand bhai in his opening remarks, the new hybrid project of 9.2 megawatts has been commercialized in October 2024. This initiative is projected to save approximately INR 15 crores annually in energy cost. This, combined with our previous investment of INR 65 crores in 17.9 megawatts would contribute to aggregate savings of INR 28 crores. Together with our earlier efforts, this will enable 65% of the company's electricity needs to be met by green energy in the future. We remain focused on cost optimization and operational efficiency. This strategic focus, along with our expansion plans positioned us well for sustained growth. With that, I'll turn it over to our Deputy CFO, Vishal bhai, to provide further insights into the financials.

Thank you, Amit bhai. Good afternoon, everyone, and wish you a very happy Diwali -- and a prosperous Diwali and New Year. Thank you for being with us today. And thank you, especially on a holiday. So again, we appreciate your participation here. I would like to share some key performance highlights for the quarter and half year ended September 30, 2024, before we open the floor for Q&A session. I hope you have had the opportunity to review the detailed presentation and the results which were submitted to the exchanges and posted on our website. Kindly note, our numbers for the quarter and half year are on a consolidated basis, and they also include Tanfac numbers. Let me first discuss the consolidated financial highlights for the quarter ended September 30, 2024. Operating revenue for Q2 FY '25 was at INR 294 crores as compared to INR 392 crores in Q2 FY '24, down 25% Y-o-Y. EBITDA for -- the EBITDA, including other income, was at INR 82 crores in Q2 FY '25 as compared to INR 111 crores in Q2 FY '24, down 26% Y-o-Y. This would translate to an EBITDA margin of 28% in the quarter. Profit after tax was at INR 31 crores compared to INR 49 crores, a degrowth of 37% and would contribute to around about 10% of the top line. Our top 10 customers contributed 91% of our revenue in Q2 FY '25. Talking about the half yearly financials, our operating revenue was at INR 548 crores compared to INR 779 crores. EBITDA was at INR 142 crores as compared to INR 225 crores, which would translate to an EBITDA margin of 25% for the period. Profit after tax was at INR 43 crores compared to INR 101 crores and a degrowth of 58%. With that, we will open the floor for Q&A. Thank you.

[Operator Instructions] We have a question from Mr. Tushar from [ Kamaya ] Wealth Management.

Sir, I'm just new to the company, recently started tracking. I could see that you got some good orders and seeing good growth going forward. Sir, just wanted to know the inventory levels considering the revenue, if I consider the inventory as a percentage of sales, which was in the range of 50s, if you consider the history. In middle, it peaked out. But currently, it's near to 70% of your entire -- the revenue. So just wanted to understand the business prospect, why that is so? And what are the measures are you taking in order to keep a check on the working capital?

Thank you, Tushar. I'll try and answer this question for you. So Tushar, you're right that my inventory levels and the working capital intensity has increased. And that has been primarily due to 2 major reasons that I would say. One is that the revenue that we had anticipated, which we had expected to happen in this half, has not materialized in this half and has been pushed out to the next half, which has led to lower liquidation of the inventory. Along with that, there have been new molecules which have been launched, which has also added to the inventory, which would be further recovered back -- or revenues back once we start the ramp-up of those products. So these 2 has led to the higher level of inventory. And with a lower revenue, this number has been accentuated further because if you look at it at a degrowth of 25%, you would see that for the same inventory also, my turn days would go up by 25% to 30%. So that is the 2 reasons. What we are looking at is that if you look at the -- once we start the revenue pickup happens, these numbers will start getting more in the normalization phase. And if you look at over the next 2 years that we have been seeing like in 18 to 24 months' time, we would see that those numbers are more similar to what we have been seeing in the historical months around '21, '23 kind of a time frame so -- FY '21, '23 kind of a time frame. So we are actively working to optimize on this. And I appreciate your observation on this.

Fair enough, sir. Sir, just wanted to know like you acquired -- I think you invested 24%, 25% in the Tanfac. Sir, how do you see the growth prospect going forward in terms of your product in the fluorine chemistry going forward. Like there are players in the market who are into the fluorine chemistry. So our product is different from those? Or like how do you see the competition in India?

Sure. Thank you for that. And if you look at fluorination -- see, fluorination-based products have a vast majority. If you look at the last 20 years, the number of new molecules that have been launched across polymer, pharma and agrochem, all 3 sectors have 40% of those new molecules have fluorine as a molarity, okay? And that means that it is -- so there is a market which is a very, very large growing market of fluorination-based products, one. Two, when we say fluorination, we don't mean to say I'm only -- going to do only fluorination process. I have multiple chemistries that I'm doing, and I have my value chain. In that value chain, if I add fluorination as one of the processes, my target market expands significantly. I'll just give you an example, like fluoropolymer market, today would be around about [ $8 billion ] is the fluoropolymer market, of which, if I were to look at what my peers are doing, they are largely into the segments, which are into PTFE, PVDs and other kind of applications, where if I take that off, I would be ending up with around about $3 million market, which is the fluoroelastomer, fluorosurfactants and other kind of play. I'm just talking right now polymer. And there, if you see -- if I convert it into the intermediates that we play in, like we are not into polymerization, we don't do polymerization. We do only monomers. In that also, if I look at it, I'm talking about a $600 million worth of market. Now that is a large market for me to address, where I'm not having any competition -- I'm not trying to compete with my peers here. Here -- and the products that we are trying to focus are these products where we have our own niche, where I'm working on my own value chain. So there was -- there are products that have my value chain, in which if I add this chemistry, I get into product application, which goes into this application. Similarly, if you look at the same approach happens in pharma side and same approach happens in the agro side, where I'm leveraging on my current supply chain, current value chain and having this -- offering to give this new product application to my customers. So we do not see any major competitive intensity on that side. Two, fluorination is something that we have been doing for the last 5, 7 years. It's not that we're doing fluorination now. Even before acquisition of Tanfac around 10-odd percent of my revenue used to be -- had been fluorinated products. Now with Tanfac coming in, what happens is that I'm able to demonstrate to my customers that I have a supply chain assurance and my supply chain has been very well taken care of, especially when we come to the HF, which even Gopal bhai had mentioned in his opening remarks, that HF availability is very essential because in the country, there are only 4 manufacturers of HF and Tanfac is one of them. So having access to that, ensure that I'm able to capitalize on that supply chain and -- which is the reason you are seeing a lot of traction that we have been able to demonstrate in terms of my product inquiries and product conversions in terms of LOIs and all. If you look at the last 4 -- 5 LOIs, 4 LOIs have fluorination is one of the process in this offering.

Yes, exactly...

So I hope I have clarified.

Yes. Yes, sir. Sir, just wanted to know like apart from the contracts, what would be the revenue? Like you have mentioned in your IP, the number of contracts. So if we consider for next 3 years, how much would be the contracts and how much would be the other revenues?

So are we only talking about LOIs or are we talking about contracted revenues?

LOI, sir.

Okay. So LOIs, if you look at it -- see, if you look at my LOIs, the total LOIs that I have signed is about INR 9,000 crores worth of -- approximately INR 9,000 crores of LOIs. If you look at -- if I were to divide it by 5 or 6 years on an average, which is the average time of the contract period, we are talking about INR 1,400 crores to INR 1,500 crores of revenue from there. What we anticipate is that typically, it takes around about 2-odd years to really commercialize -- from LOI to commercialization is 2 years on an average, plus or minus 6 months. And then there are another 2 to 2.5 -- 2 to 3 years for a ramp-up. So we believe that over the next medium term, we should be able to get INR 1,200 crores to INR 1,400 crores of revenue on an annualized basis from these products.

Got it, sir. And sir, just wanted to know like for the midterm, what are our EBITDA margin target and what are our ROCE target -- internal target? So just wanted to know your take on that.

So see, historically, if you see, we have been always been in the range of 26% to 28% EBITDA margin, and we believe that we should be in the range of that numbers, maybe a percentage point plus or minus, may be the case, but that's the range that we believe that EBITDA we should be able to -- so let's say today, in this market, I would say 25% to 27% is EBITDA margin that I would be comfortable with guiding, though we have delivered a little better, but on a consol basis that's kind of a number, I would go by. In terms of ROCE, historically, also, if you look at it, we have been able to do a high teens to the 20s ROCE. It's been that 2 major events has led to a lower number, a, higher CapEx and lower CapEx asset utilization, which is now ramping up. And two is also my working capital intensity, which has expanded, which we expect to get more into my normalcy. These 2 will ensure that with the kind of EBITDA margins that we have and an asset turn of, let's say, more than 1.5x, we should be coming back to the kind of ROCEs that are more meaningful to us.

Sir, just post this fluorination contract, do you see that, that adding to your ROCE going forward?

Absolutely, absolutely. If you look at it, I have -- we have done CapEx where fluorination process will also be included and then the new molecules of fluorination will also be processed. And just that -- this will always add to the performance of the company in terms of revenue and in terms of margins and translating into the return ratios.

Okay. Sir, you guided for good H2 earlier. Just wanted to know your view in terms of volumes going forward?

So yes -- see, so if you look at it, the last half, the volume -- lower volume has been the reason for the lower realization -- lower revenue. And we believe that -- what our understanding with our customers has been and the communication from them has been also is that the volumes are going to pick up from the next -- for the next half. And hence, you would see a decent volume uptick on this -- in this next half.

We have a question from S. Ramesh from Nirmal Bang Equities.

So if you were to look at the second quarter numbers and how to read the prospects for the second half, how much was the decline in volume in second quarter? And secondly, was there, again, additional sales to domestic customers where we had to give them credit like in one of the earlier quarters?

So one -- thank you for the wishes and same to you, Ramesh ji. And if you were to ask in terms of volume, so Q1 to Q2, if you see there has been a growth. So we are seeing that there is an uptick happening. Yes, on a Y-o-Y basis, the numbers have been lower on account of the lower volumes compared to the last year. So that is there. Yes, there has been some bit of a compensation coming from the domestic market, especially from the pharmaceutical industry, which has typically a longer working capital cycle, both in terms of -- as a geography and as an industry, both is the case. So there has been an expansion that is happening. However, what we are now seeing is that the agrochem and my international business is expected to pick up in the second half, which will have a better impact in terms of volume, revenue and working capital.

Okay. So to put things in perspective, if you look at the statement Anand bhai made about we achieving FY '25 revenue close to FY '24, that means you are talking about a run rate of around INR 750 crores in the second half. That's about INR 375 crores. That's a very, very high growth compared to the base of FY -- the second half of FY '24. So what are the levers that will drive this sort of growth in the second half? Is it just the existing business increasing volumes? Or are you also seeing some of the new LOIs and new molecules kicking in, in terms of growth with higher realizations? How do you -- can you explain how you expect the second half growth?

So Ramesh ji, one, I will not comment on the deduction that you have made in terms of the number for the H2. But directionally -- let me answer the question on the directional point, and that is a fair ask. So I'll put it in 3 or 4 buckets that where we see the traction coming from. If you look at my H2 '23 -- if you looked at my H2 '23 and if you look at the run rate of the H2 '23, I would have done a similar kind of a number as what would be there. But let's forget about that. And let's talk about the trends from now on. Where are the 3 or 4 big trends that are coming from? One, that my lower demand from the agrochem cycle is now looking better for us. So we are seeing now the offtake requests coming from the -- from my existing customers and my volumes are going to pick from the side. Second, what you rightly identified that my molecules that we had launched last year are now picking up and it is gaining momentum. So that is the second part of the demand that we feel that will be there. And along with that, if you look at it, price, I don't see too much of a price movement coming in here. I think prices, we feel that it will be in the stable range. This is our estimate. And as per my understanding, that numbers will be in the similar range. But volume offtake is where the revenue is going to be coming from. That's my understanding on the projections.

Yes. So just a couple of thoughts more. One is when you talk about this agrochem customers giving you confidence in terms of buying more volumes from your company in the second half, this is something which is totally different from what international companies are saying and other domestic peers are saying in terms of customers actually deferring orders, both in agrochem and pharma, and they are also laid in with excess inventory. So yes, what is exceptional in terms of your set of customers? Are they not having this inventory situation? And are they building up for new launches? So what gives you the kind of confidence that they will actually give you the kind of volume growth you're talking about? Because it is totally contrary to what we are hearing from the market from other companies.

Sure. So Ramesh ji, just to draw a backdrop. If you look at my last 4 quarters, my last 4 quarters has been where I have had a very -- I would say that one of the lowest demand from the agrochemical sector, if you look at in the recent time. So when we look at that and when I contrast it from there, there is volume uptake that we can see from our customers, okay? Now also please appreciate that on an annual basis, my demand is there of the total volume, right? That -- let's say, it was 100, it has dropped by some number. But this 2 quarters, if you see, that number has been even lower than that. So on an average, if you look at it, we see that the customers are looking at picking up. At least there is demand. That's exactly what we see, the demand is picking up. Are we coming back to the normal growth rate? That's what we are saying it is '26, right? And this is where the MGO also will kick in, right? So the H2 is where the MGO kicks in. And also, please appreciate that H2 is a very classic year -- quarter -- sorry, half because Q3 of my -- Q2 of my customer, but Q4 of mine is Q1 of theirs, which where the year changes and the budget changes as well for them. So they have a very comfortable situation in that sense to accommodate a level of volumes that are meaningful to both of us, right? And that's where we are coming and seeing that numbers. Are we saying that are we out of the woods fully? Answer is no. That I think will be in '26. But '24 -- '25 ending, I think, should give us a bit of a reason to feel confident about the same, is what I'm saying.

So just to -- if I was to just add to what Vishal bhai said, Ramesh, I think as he's narrated, our H2 growth -- or let's say, the higher growth is basically based on 2, let's say, kind of segment. One is that we are seeing a decent amount of growth in pharma and polymer, which roughly would be really like 15% plus each of my revenue. So that segment is contributing and is growing at a higher pace. So that's one leg. The second leg, as Vishal bhai said, is that on the agrochem side, and I may not be necessarily able to comment on some of my peers in terms of what they are saying. But as he said, we are getting enough and more, I would say, comfort, some of them even in terms of future purchase orders to say that the customer is basically asking for higher volume than what they asked me in, let's say, last 2 or 3 quarters. So our, I would say, what we call, H2 assumptions are basically based on these 2 legs, wherein we are seeing some bit of a recovery from our agrochemical customers who are basically placing higher volumes and orders with me. And second is the increased growth on polymer and pharma side of it.

That's useful. So just to get a perspective on '26 and '27 growth so if you see your order book, some of them have been commercialized and then there are some, which are being commercial in '26. So if you take these 2 buckets, in the LOIs already commercialized, how do you see that ramp-up in percentage terms on the value of the order book even if you divide it by, say, 5 or 6 years, say -- it's about INR 4,800 crores. You see the value of the LOIs already commercialized. If you take it over 6 years, about INR 800 crores, how much of that would you expect to book, say, over FY '26, '27 in terms of actual deliverable? And similarly, whatever you are talking about commercializing in '26, if you take a value of about another INR 2000 crores. So on that, when it starts picking up, how much of that would you be able to actually monetize, say, from FY '27 and over '28? Ballpark numbers you can give, that will be useful for us to recheck our assumptions on this LOI monetization.

Sure. I think on the LOIs, I would put it very simply, and that's where I would put it for now. And that -- you're right, a large commercialization that has happened is on the FY '22 LOIs that we had signed, which were around about INR 2,600 crores worth of LOIs, right? Those INR 2,600 crores would mean that INR 450 crores to INR 500 crores is the revenue coming from that. We believe that of that we are doing around about [ INR 200 crores, INR 250 crores ] kind of a number -- and that should ramp up and should be peaking out by '26, '27. So that's the number that we can see. So you have to look at it in 3 different buckets. The second bucket is the one that we have signed in '23 principally, which would be in the range of total -- if I were to add the total, it is around INR 1,000-odd crores more. So INR 1,000 crores, if I divide it by 6, you would be doing around about 1,500 -- INR 150 crores a month, which should ramp up by -- which should start in '26 and ramp up by '27-'28, and that's how you should look at it. And that's where I would put it. And then the balance, we should be starting to see the commercialization in '26 and '27. And then you see a 2 years of ramp-up from then on. So I would put it very simply, 2 plus, 2 plus, 2; 2 years for getting into LOI, 2 years from LOI to commercialization, another 2 years from LOI to -- commercialization to ramp up. Now give an allowance of a 6 months on either side, which happens because of either about the validation, about the environment, all that plays out and maybe 6 months of average you can give or take on that.

We have a question from Pradeep Rawat from [indiscernible].

Sir, we are doing CapEx of close to INR 600 crores. So I just wanted to know when this CapEx is going to complete? And can you also highlight on the ramp-up of this particular facility?

So see, we have done a large part of the CapEx. The balance, whatever is left out, we should be able to do it in next 2 quarters. So this year, we should be able to finish the CapEx on it. Then -- and of that, a couple of the plants, we have started doing the trial runs. So typically, once the plant is ready -- plant is constructed, you have your trial runs, then you have a customization and then your commercialization happens. So typically, it is around -- it is anything between 6 to 9 months that you will see that kind of a time frame on this. And that's what I would put it at.

6 to 9 months from the commercialization of the plant?

From completion to commercialization because you have your trial runs, you will have your validation and then the plant starts for the large operations.

Okay. And what kind of peak revenue can we expect from this facility?

So total -- if you look at my total CapEx that I have done till date, and if I look at the whole asset, I think I should be able to do 1.5 to 1.7x the asset block, which will be around about INR 3,000-odd crores kind of a number is what I can say based on the current product portfolio. As I evolve the product portfolio, the number changes because the plant volume remains the same, but the revenue changes on a per tonne basis as well. So that value engineering and the revenue optimization can happen. But today, when you look at the portfolio and the plant portfolio, we can go up to that level is what I would suggest.

Yes, sir. And what is the peak revenue of our current facility?

That's what if you look at it today it is about INR 1,200 crores to INR 1,300 crores of my block, and you can add 1.5x to that because this is where I have a lot of other CapEx also like extra land and my R&D facility and my other utilities. So the asset turn, I would put it at 1.5x and not higher. But for the new ones, the asset turn will be higher.

Okay. That was helpful. And how much revenue are we envisaging from pharma and polymer segment going forward given our existing commitments?

So see pharma and polymers as today also, if you're saying, they are contributing meaningful in double digit for me in terms of teams, I think pharma should -- and polymer should contribute more than 1/4 to 1/3 of my revenue at least going forward. Probably pharma will be first, which will contribute in 20s in medium term and polymer should follow on that.

Next question we have is from Krishan Parwani from JM Financial.

So if I just look at the stand-alone numbers, your inventory -- absolute inventory is somewhere about INR 1,185 crores. And if I calculate the inventory days in the stand-alone business has jumped to more than 550 to 600 days. Can you elaborate, please, what is going there?

So first, thank you, Krishan, and I wish you also a happy Diwali. In terms of simple, I would say you are right, my inventory has expanded. I'm not saying that it has not expanded. Now what we are seeing is only from the -- you would have done it from a TTM basis. And TTM is -- if you look at these are the 4 quarters, which are my least quarters. And if you use that as a base, yes, these numbers will be in that range. Now we can look at this. But to my mind, 2 things will happen from here on. There is an additional inventory, which you are seeing, which will get liquidated over the next 2 to 4 quarters, which is the volume that I have manufactured but not sold. So that will happen. And two is when -- and then two is the same when I sell it out, that converts into revenue and gets into my denominator also. So when you do numerator reduction and denominator addition, you will see that the numbers will start getting more and more representative with them in terms of what we have seen in FY '24 -- at the end of FY '25 and FY '26 is where you will start seeing the reduction from the FY '24 numbers further significantly because I'm expecting a decent growth in FY '26, which will further allow me to liquidate the inventory and also becomes the base for my days calculation. So both will happen. But today, you are right, it has expanded and there is a very sharp focus on -- from the management side to ensure that, that gets liquidated sooner.

Understood. And -- but if I just look at the second half of last year to second half of, let's say, FY '25, do you expect a growth in top line?

Second half to second half -- just a minute. It would be -- it would have a growth. The second half of last year was a weak half. And from that perspective, yes, it should -- I would expect a growth from there, yes.

Okay. So even if -- let's say, even if you assume a growth of 20% over the second half of FY '24, then also your top line -- just the stand-alone top line could be in the range of -- anywhere in the range of INR 950 crores, INR 960-odd crores. Even then -- so let's say, you liquidated, let's say, more like INR 100 crores, INR 120-odd crores of inventory. Even then if the stand-alone inventory days, it's going to be much higher than 360 days. So how do you kind of propose to reduce the net debt, which is kind of balloon to almost like INR 1,200-odd crores in September '24?

Sure. So Krishan, let's answer it in 2 parts, okay? One is the inventory you rightly added it. So when I do that, what we are doing is we are [ approximating ] the lower revenue that I have in Q1, Q2, H1 also into this calculation. But when I'm running the business, and if I'm doing, let's say, INR 350 crores as a revenue on a quarter, let's say, because if you -- the numbers that you are speaking, if I add that as in my exit year, I'm not saying -- I'm not guiding for that, but just for the reason of mathematics, I'm saying that number, if you look at it from that perspective itself, that's the kind of an annualized revenue that I'm seeing going forward, right? When I'm seeing that, then that inventory has to be -- because see, unfortunately, we take the historicals of the financials and we take the cross-section of the balance sheet to do it, and that's how we all have been doing, and that's all the most scientific way of doing it. But when you look at it from a business point of view, there is this distortion. Like I would look at the going-forward revenue and accordingly, I will have my balance sheet. But let's take that apart -- so that's one part I would want to say. And second, when you come back to the, let's say, the net debt part of it, I believe the net debt, I would be far more comfortable as we go because see, the second half, if I were to do whatever number you are saying and if I make a 25% EBITDA margin, let's not even talk about a 28% that or 28% to 29% that I'm doing on a stand-alone basis also. We are talking about a sizable contribution that is coming from there, right? Okay? That itself is enough and more to take care of it. And if I'm saying that I'm going to reduce the working capital intensity and not increase, then there is no absorption of working capital, right -- absorption of cash in the working capital, one. Two, my CapEx has done and CapEx is perfectly okay. So that's the second part of it, right? So there is no cash usage that is there over and above servicing of the debt, which is largely and largely working capital and not the CapEx growth. So to that extent, I have enough and more comfort there. And then Q1 FY '25 -- '26 is when my preference of -- preferential shares of 270 also comes in. And that will further ensure that I have -- I'm reducing the loan. But let's -- if I would take that off, I am very comfortable from the quarter performance itself -- sorry, half performance itself. And that's how the management's -- internal management plan is that we don't need any further external debt to really finance my growth for at least near term.

Okay. Got it. And just the last bit from me. It's like on your guidance that you mentioned, like the long-term guidance of INR 3,000 crores with whatever capacity that you have with your current product profile. So does that include the Tanfac revenues or if that's...

No, I'm talking standalone. That's the reason I was saying 1.5, 1.7x [indiscernible] is what I was saying. So you're right. No, this is not including Tanfac. So if you add Tanfac, whatever their revenue will be over that period, will be added on top of it.

Okay. So -- and this is the guidance you're giving in like the long run, right? I mean -- or is it FY '28, '29...

I didn't hear you well, Krishan.

Sorry?

No, no, sorry, I couldn't hear you well. So if you can just repeat this question...

[indiscernible] FY '28, '29 or how is it?

I would put it in the medium term, which is 3 to 4 years, and I'll leave it there, Krishan. As we get here, I can really come and comment better on this.

Okay. But sorry, just a clarification there. So your current asset base in the stand-alone business is what INR 1,700 crores, right? And then 1.5x, it is INR 2,500 crores odd. So is there incremental CapEx that you are envisaging in the stand-alone business?

It is INR 1,900 crores is -- my block will be once I commercialize everything. So there will be some in the base period. That's the reason you might not be seeing it...

Yes. I think INR 183 crores, yes.

So INR 190 crores. INR 190 crores into whatever that multiple you will take it at, we will be in the range of INR 3,000 crores. That's what I was saying.

[Operator Instructions] We have a question from Rohit Nagraj from Centrum Broking.

So in our Slide #12, we have given the business vertical-wise split up, pharma 20% and other specialty 10% during the first half of FY '25. So other specialty is only polymers or excluding polymers. And allied question to that is from the total LOIs that we have, how many of them or if you can just quantify how much of that is from agro, how much of that is from pharma and how much of that is from polymers, I mean out of that INR 9,000-odd crores?

So let's go with the first question that you asked. Others is practically polymers. So you can -- for practical purposes, you can use polymer as a reference on the other products, okay? So that's one clarification. Second, if you look at the first 1, 2, 3, 4, 5 and 6, the 6 LOIs that I signed in 2022, they all are agro-based product, okay? And then the 2023 LOI, that is also agro one. Then the balance, if you look at it, the 1, 2, 3 and 4, the 4 next are polymers and engineering fluids kind of application and one of them has also pharma applications also. And then the last but one is agro and the last one is a polymer again.

So maybe I believe that next time whenever we are putting up the slide, if you add it, it will be more comfortable for us to understand?

Thank you, Rohit. Definitely, we'll do that. No problem. We'll do that.

Yes. So just one question on the other...

Okay. Okay. I think we -- see the problem -- we will do that because today, we report into 2 segments only, life sciences and other specialty and hence, you're not seeing it. So other specialty, whatever are you seeing are all polymers. Then you will be able to answer it simply. And the life sciences practically are all agro because pharma very limited, have an LOI -- long-term LOI kind of a contract. They are more domestic market where typically you have a long-term relationship, but not a contractual relationship to a large extent.

Perfect. So now other question which comes into mind is that so during the first half, whatever growth we have seen in pharma and other specialty, which is nothing but polymers, this is predominantly from the legacy products and non-LOI products. Is that assumption right?

Polymers, so I would say there is some bit on the polymer side you would have seen, but legacy -- it's not legacy. There are new products which have been launched in pharma, which is really -- so last year, I launched 17 new products, right? That revenue -- that 17 products is giving me the revenue as well, right? So it's a combination of 2.

Right. Sorry, my mistake in that. Legacy in the sense, I just wanted to bifurcate between the products launch and LOI -- LOI and non-LOI.

So see, I'm saying that this year also my LOI revenue should be in the range of 20% of -- 20%, 20-plus percent of my revenue. So I will speak it annualize because see quarter-to-quarter, when we see there is always a scheduling, there is always a lot of other parts. But if you look at it on an annual basis, I should be there.

So FY '25 will be about 20% plus/minus from the LOI?

20-plus from LOI, yes. Yes.

And another question in terms of the outlook or probably visibility from the MMC customers, given that most of the scheduling for 2025 calendar year is already done. So what is the visibility that currently we have from the legacy portfolio and the ramp-up of the new products which are being launched for the LOI purpose?

So what has happened, if you look at my legacy products in the last 4 quarters have been pretty low compared to what average should have been, even in a tepid environment. However -- so that -- so it's a combination of 2. One is we are seeing a little bit of buoyancy coming up. Now that buoyancy is Q3, Q4 or Q1 that we can debate about. And second is there is a bit of a pendency on the demand, which is also looking to pick up. So from that side, we see that Q3, Q4, so the H2, we have a reasonable confidence in terms of the volume uptake, right? Now -- and when I'm saying quarter 3, you would also appreciate that for us, the business is in continuum. We review ourselves on a cross-section of a time. But on a continuum basis, when I see, I can see that there is a buoyancy in the conversation, buoyancy in terms of forecast given by the customers and there is a buoyancy in terms of now the offtake that they are doing.

Sure. That is helpful. Just one last clarification. When we are talking about the LOIs in terms of [indiscernible] contract, however, given that there has been pricing pressure in most of the products currently, next year, when we are talking about, is there a compensation on the pricing part or in terms of volumes to attain that particular contract value over a period of time?

So see, please appreciate that as we have said in the past, the input raw material cost is a pass-through, right? You're right that pricing across various prices have been up and down. So you have to also appreciate in '22, the numbers -- the pricing of '22, which will be the pricing reference of '21, which we have signed in '22. And there are contracts which I have signed in '24, which will be pricing reference of '23 or early part of '24. So there is a whole cycle in it. And also, please appreciate this is a 5-year contract or a 7-year contract. So today, prices may be lower, tomorrow, there are -- there will be higher price, right? So we believe that there is an averaging that happens across the time frame. In terms of revenue per tonne, now is that how we do it? Answer is no. The way we do it is very simple that the costs are passed through. But when I say that in 7 years or 8 years, I will do so much of a revenue from these contracts? It is an assumption of an average price that I would have seen over a period of time, right? And hence, we are not trying to say that if I would -- so I'm not doing mark-to-market, if I want to use the word. Mark-to-market, it will be there, but every quarter, the mark-to-market number will change then, right? And it doesn't help in terms of understanding how the business is going there.

We have a follow-up question from Mr. Ramesh from Nirmal Bang.

So when you discuss the growth for the existing molecules and the new molecules and the LOIs, incrementally, what are the working capital terms in terms of inventory days and receivable days for the new LOIs and the new molecules? And to what extent will that help you reduce your working capital cycle?

So -- see, if you look at it, my current working capital is out of ordinary than my normal business working capital should be. So the new LOIs are also the LOIs where I have -- tend to have a control on the working capital side. On the new demand from a pharma side, if you look at pharma side -- Indian pharma side, tends to have a little higher working capital, especially on the debtor side. But maybe on the inventory side, I will have a lower number because I don't need to stop because the pricing is more live in that condition. So to my mind, the new contracts should be in the range of historical -- not the recent one, but the historical working capital cycles of 2020, 2021 kind of a time frame. So that on a blended basis also will be helping and also when I start liquidating my working capital, I would have a double effect on this.

So how much of debt can you expect to repay, say, over the next 2 years on the current debt level?

So first, anyways, I will be repaying around 200 plus of debt in the H1 of '26 because I will have my -- sorry, my pref and warrants money coming in and -- where I have announced to repay that. So that anyways, I will do. So largely, my term debt will be largely done except for a little bit if that is left off. But then on a net cash basis, it will be practically in the 0 scenario, which I had mentioned earlier also. And on the working capital side, basically, I don't have a CapEx going forward -- any significant CapEx except maintenance CapEx. And I do not have a more absorption of working capital because there is enough in more working capital, which will ensure that the current working capital is sufficient to take care of the growth, which if you look at it, had happened in 2022 versus 2023. If you look at it, my working capital -- even after a growth of 25%, my working capital was same and hence, my whole growth was funded by the same working capital. And I believe that, that kind of a similar effect will happen going forward as well. So, one, that is there. And then there will be free cash flow, which comes in like that will help me lower my working -- my debt. But from INR 1,200 crores, the debt would be in the 3 digits by the next -- middle of the next year.

That's useful. And then one last one on the HF expansion done by Tanfac, what will be your average sourcing of HF from them, say, per annum in the next 2 to 3 years based on the expanded capacity?

So see, even if you look at it, I'm not the largest consumer of them because my input into them is -- my absorption of them is limited. But if you really ask me, I'll be in the top 5 to 6, but there will be many other players also, who will be consuming this product. So today, whatever is the demand that is -- whatever we are supplying to their customers, they will continue to. From the additional volume, I will be able to absorb it, but that's okay.

We have a question from Siddharth Gadekar from Equirus.

In one of our slides, Slide #14, we have highlighted new chemistries where we have highlighted pyridine chemistry. What are we exactly doing in that chemistry?

Just a minute, I'll go to that slide and then we can talk about it. Yes. So you are saying we have highlighted pyridine chemistry. Yes, so we are using this pyridine chemistry for manufacturing of a couple of our products, which will be going into the pharma application.

Sir, we would be manufacturing the pyridine or we would be sourcing pyridine from outside?

No, we are not manufacturing pyridine, right? We'll be doing...

Are we doing the derivatives?

Process on pyridine.

Okay. Got it. Sir, secondly, in terms of the photochemistry, how many molecules are we doing in that technology as of now?

So there are 3 to 4 molecules which are in the pipeline, where we are doing it in the photochemistry right now.

Okay. Sir, lastly, just on the working capital. If I want to look at it from FY '26 perspective, where should we look at the working capital days given that we have been guiding to lower working capital for the last 2.5, 3 years, but we haven't seen that playing out?

So on the working capital side, again, I'm saying that I would say this year will be similar to last year. '26 will be a significant improvement. I'm not wanting to hazard a guess right now, but I would try and recommend guide that probably in the next coming 2 quarters because I want to look at the volume offtake and the revenue uptake the ramp-up before I guide on that.

That was the last question for the day. I now hand the conference over to management for closing comments.

Thank you, everyone, for your active participation and for your questions. We hope we have been able to answer most of your queries. In case we have missed any questions or we have not addressed it sufficiently, please reach out to our IR partners, E&Y, and we will be happy to get them answered to you. Once again, thank you very much for participating. Thank you for coming on a holiday, and wish you a happy Diwali. Thank you.

On behalf of EY and Anupam Rasayan India Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.