Clean Science and Technology Limited (CLEAN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Clean Science and Technology Limited Q3 FY '23 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Periwal from Axis Capital. Thank you, and over to you, sir.

Yes. Thanks, Susan, and good evening, everyone, and welcome to Clean Science and Technology Limited's Q3 FY '23 post results earnings call. The call will be initiated with a brief management discussion on the quarterly and 9 months performance followed by an interactive Q&A session. Management team will be represented by Mr. Siddharth Sikchi, Promoter and Executive Director; and Mr. Pratik Bora, Chief Financial Officer. A general reminder that today's discussion may contain certain forward-looking statements and opinions with respect to the anticipated future performance of the company. Such forward-looking statements involve a number of known and unknown risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. With that disclaimer upfront, I'll hand it over to Siddharth for his initial comments. Over to you, Siddharth.

Thank you, Ankur. Thank you so much. So good afternoon, everyone. We are happy to share our Q3 FY '23 results. Let me begin by sharing this news that our manufacturing plants for HALS 701 and 770 in our expansion in our Unit 3 got commercialized in early December. Now the product is streamlined. We have also sent commercial samples to customers within India, and we are glad that we have received our maiden order for HALS in this month of January. We are also very happy to announce that we are the only and the first Indian company to have commercialized this technology in India. As usual, we have committed some time lines, and we have been very close to these time lines. On financial highlights, some key financial highlights for this quarter are -- so I'm very happy to announce that we have recorded our highest ever quarterly profit after tax. We have recorded milestone of first quarterly PBT, which is more than INR 100 crores plus. Our -- this is the second quarter -- I mean, quarter 2 as well as quarter 3, where margins improvement have been seen. Also, I'm very pleased to announce that this is the first time we have announced interim dividend after our listing. Also, the ROCE stands at a very healthy number of 53.6%, and I'm happy to say that our 9-month FY '23 revenue stand at about INR 719 crores, which is 5% more than our 1 year revenue of FY '22. Our year-on-year revenue growth continues to grow across all geographies and segments. Revenues for Q3 touches INR 237 crores which is an increase of INR 31 crores as compared to Q3 FY '22. Exports have risen by 38% and domestic revenues have grown by 17% on a year-on-year basis. Our key raw materials, energy and fuel costs, have corrected a little bit, and that is the reason you see these numbers returning. EBITDA increased to INR 108 crores as against INR 76 crores, which is a 42% rise on a year-on-year basis and PBT at INR 112 crores and PAT of INR 84 crores grew by 44% and 45%, respectively, as compared to Q3 FY '22. The balance sheet continues to be debt-free with cash balance of approximately INR 280 crores. For 9-month FY '23 versus 9-month FY '22, the sales improvement was led by a combination of good volume growth and improved realizations across all products. Nine-month year-on-year revenue growth is 50%. For this 9-month FY '23, performance, pharma and agro contributes to 68%, 19% and 11%, respectively, to the revenues. Revenue mix stands at 72% export and 28% domestic. Contribution from our new product is now increasing steadily and currently, which stands at about 10%. On CapEx, we have incurred a CapEx of INR 105 crores during the 9 months of FY '23, with majority going towards our new plants for HALS in Unit 3 and upgradation of our existing equipment for efficiency improvement. And as always mentioned, these CapEx are done through internal accruals. Construction activity at our fully-owned subsidiary, Clean Fino-Chem Limited, is on track and various activities in this regard like site layout, initial civil construction and activities are progressing quite well. In terms of key organizational announcement, I would like to welcome our new CFO, Mr. Sanjay on board. He has a vast experience of 35-plus years in finance domain and is a valuable addition to the Clean Science team. Pratik Bora continues to be a key member and will oversee functions of strategy and corporate finance in his new role as Vice President Finance. In view of the new products that are under development or that are in pipeline to launch, we have also added strength to our sales and business development team. Our current R&D team stands at approximately 80 people, and it is further due to grow in the coming few months. The company are fully committed to sustainability and continuously implement several initiatives across the organization. We are continuously upgrading our facilities and investing in various new technologies across all our manufacturing units, which helped us to increase our energy efficiency and improve our focus on 3R, which is reduce, recycle and reuse. Our initiatives have helped us significantly to reduce water, energy consumption and also reduce our emissions. We are committed to continually implement globally benchmark ESG practices. On CSR, our focus still remains on education, environment, sustainability and health care. On outlook with our new series of products and a strong R&D pipeline, we continue to focus on diversifying our product portfolio and geographical presence. Our existing market segment continues to be robust and introduction of health will further contribute to the Performance Chemicals segment. We expect this contribution to increase in FY '24 and onwards. And that's all from my side. Thank you so much.

[Operator Instructions] The first question is from the line of Sanjesh from ICICI Securities.

A couple of them from my side. First, on the China side, I think China has opened up finally. We have a very large exposure to China, almost 35% of our revenue, and which has sort of underperformed in last 2 years for the obvious reasons. Do you think China open-up can add tailwinds to our growth beyond the existing product expansion and the new product expansion?

Sorry, Will China what, sorry?

China opening up help in terms of driving the faster revenue growth in that geography? China has underperformed growth, if you see, with its geographies, right?

So Sanjesh, over the past few years, I mean, last 2 years, we did not have any stoppage or reduction in business in China. In fact, I feel that maybe with China opening up with full swing could only help us to increase our business in China.

Yes, that was the precise reason. Do you think that could add to the growth as in China opening up and sourcing more will help us, right?

It shall add to the growth.

It shall add to the growth. Got it. Got it. Second, on the pharma piece, I think we added PBQ in the course of last 1 year. As the growth in pharma looks likely underwhelming, any particular reason or any particular product which is causing the drag on the pharma growth?

See, para-benzoquinone in itself is a little -- as the market -- and in one of the key agro intermediate became quite slow in this year. So we saw quite a reduction in the volume of PBQ. But I am expecting post March, these increase in volumes to restart again.

Got it. So basically, it's largely PBQ?

Largely PBQ driven product.

[indiscernible] and DCC continues to do well?

Yes, because Guaiacol is a coproduct and we have to sell to the extent we produce it and which we are able to sell quite -- I mean that's not a big issue for us.

Okay. Got it. The next question is on the sequential revenue growth. There was a decline of 4%, while the gross profit has improved by 3%. Is it fair to assume that some of the reduction in the raw material prices have been passed on, and hence, there is a decline in the sequential revenue and volumes have grown, right?

Absolutely, yes. You are right. So wherever there is spot businesses -- where there are spot businesses where we have to adjust the prices, do the adjustment in the lowering of raw material prices.

Why I'm asking this question is last quarter, you said that you would want the margins to stabilize at 39%, 40% in this quarter, which was already half a quarter into this quarter, and we are at 45% margin. In half a quarter that looks like slightly stretched. Were you surprised or it's more mathematical where you have passed on the margins? How have been your EBITDA per KG if you want to assess that? Is there an improvement even in that?

We would not -- I don't think we can share the EBITDA product-wise or segment-wise, but...

I'm not asking for number. I'm more willing to look at the trend?

No. So Sanjesh, just to add here, there have been 3 major factors which have contributed to EBITDA margin. The first factor, as you rightly pointed out, the raw material cost, which is corrected to the tune of close to 17% to 18% between our flagship raw materials. And the end product prices have largely remained steady. The second key factor is the power and fuel costs. So you'll see almost a 2% improvement there. And the third factor has also been on a year-on-year basis, if you see now we are at a very large revenue base, close to INR 240 crores a quarter. And our fixed cost -- cost is now getting absorbed over this larger revenue base. So of course, there are benefits of operating leverage, which are playing around.

Got it. Now coming to that other expenses, which has declined, this is purely because of the reduction in the power cost and the freight cost because I thought we have started to commercialize health, so some of the costs would have come from the commercialization of the plant where it has decreased 15% quarter-on-quarter. Is there any one-off or it is steady state you don't see any...

No, no. So in other expense, there is no one-off. So a couple of things have played on power and fuel cost. The coal pricing has come down from INR 13 to INR 11 per kg. So we saw a delta of close to INR 2.5 crores there besides there was a small refund of coal set which has also benefited us. So that has led to a moderation in other expense costs. But apart from that, there is no one-off.

Because it has come down from INR 47 crores to INR 39.5 crores, there's a delta of INR 7 crores to INR 8 crores, you did mention about INR 2 crores from the coal. Other INR 5 crores benefit is coming from?

Q2 to Q3 -- yes. So basically, there are 3 big ticket items, power and fuel cost. Second is repair and maintenance. And the third is other expenses put together, where there is, of course, a CSR component as well.

Okay. Okay. So there is no ForEx gain or anything of...

Mr. Sanjesh, we are not able to hear you clearly. Can you speak a little louder?

Yes, can you hear me now?

A little better.

Yes. Apologize for that.

So Sanjesh ForEx gain sits in other income, not in other expenses. So either gain or loss recorded in other income line item.

So the increase in other income...

[Operator Instructions].

This is a follow-on. I'm completing. This is just a follow-on question. This increase in the other income from INR 2.8 crores to INR 12.6 crores is what that explains?

Yes. So in other income, INR 12.5 crores, there are 2 heads to it. First is the regular treasury income and the ForEx income, which is INR 4.5 crores plus INR 2.7 crores, ForEx plus treasury INR 7 crores. And the balance INR 5 crores is coming from disposal of noncore asset and some coal set refund which we received this quarter.

Got it. I got all the clarification on the bookkeeping, but I have a few strategic questions, but I will come back in the queue.

The next question is from the line of Arun Prasath from Spark.

Siddharth, if we take your 2 major products, MEHQ and BHA, how much room you have to grow volumes from the current levels without the need to put additional capacity? Some ballpark numbers will be helpful.

So here, I think -- so we had put -- we had increased our capacities by 50% in the month of April. And of course, we had anticipated that these -- that this capacity in itself will take care for 2 years of our needs. But we were able to commercialize and the market was able to absorb all of this maybe also because of the European energy crisis. But I feel that our MEHQ and Guaiacol because these are coproducts of each other, should grow at typically 5% to 6%, and maybe not for now, but maybe after a year or so, I would be able to exactly comment on whether a newer facility will be needed or not. At the moment, it will be a little difficult to confirm on this point.

This 5% growth -- 5% to 6% growth is on the category level, right?

On the category level.

So you were -- your growth should be much higher if you are gaining market share?

No. But now the market share. See, after a point, it will become very difficult to grow market share, and it will only lead to price revision because we will have to lower the prices to get additional market share. So we feel that new growth will come from our new segments of product, which is the HALS segment, which we have commercialized and also the new products like PBQ, TBHQ and other pharma and agro intermediate.

All right. And regarding the HQ prices....

[Operator Instructions]

Sure. I hope this is clear. And regarding the hydroquinone prices, do you see any softening of the prices? Do you see any early indication of some softening in this year? And if it happens...

See, prices have already revised. They have started revising. I mean, it had gone as high as $13, and today, it is already at $7 -- slightly above $7. And I expect these prices can also further revive a little bit more. Because conventionally, hydroquinone is about $5.5, $5.75 a product.

Right. So if we are going back to that kind of a pricing revision, how much MEHQ supply can come from your competition? Because then it becomes very attractive for the competition to come back into this market, isn't it?

Again, when you see HQ, when they convert it into MEHQ, they also get additional product called as PDMB, para-dimethoxybenzene, which is now as almost the market has reduced to substantially lower level. I mean there are available PDMB but no offtake. So that byproduct has to be monitored and addressed before making the main product. And plus, of course, the effluent related issues are always there. And what happens is for products like -- additives like or performance chemical like MEHQ, my customer prefers steady supply. They don't like on and off of supply because these are very important additives for them. So if somebody then restarts a MEHQ facility, and if I am able to offer them, they would still want to buy from me because we have a sustainable process and we do not have these on and off and non-dependent on just our raw material called as HQ.

So whatever you have gained market share because of the closure of the HQ based players. So you will -- are confident you will be able to maintain that and sustain it?

100%, 100%.

Right. That's very helpful. My last question is on HALS. I think you have reiterated the time line. So can we expect the ramp-up in next 6 months? Is it the right assumption at this point of time?

Because now we have commercialized. The samples have started flowing in the customers. People have approved. We have started getting some maiden orders. So I'm very hopeful that in the next 6 months, 770 will be well entrenched in the market.

Okay. Typically, for the additives like this, isn't the approval process is longer than, say, a couple of years. Why, it's, for us -- especially for HALS, it's a very short period? Can you just explain...

Advantage of HALS is, first of all, this is a majorly Indian business. Typically, India is a very price-sensitive market. In compared to MEHQ or BHA, first, MEHQ is the market out of India, like Europe, U.S., Japan, where the time lines are far higher to approve a vendor. But these markets, which go into master batches, it anyway is a very price-sensitive market, plus these products are not going into poor products. So where approvals are far higher in a cosmetic or food industry, the poor process is far higher compared to a master batch. And since the market is completely built out of them, majorly, we are going to first target Indian market, which is price sensitive. So the import is about 3,000, 3,500 tonnes, and I am only targeting 30% of only Indian market share, which is a very doable number.

Okay. And the price of 770 series is sustaining at the level that you anticipated last year?

Because the raw material prices have come down, the prices of HALS have come down to about $6, $6.5, and we are able to maintain that. That's not an issue.

Okay. And then initially, we will be taking a little bit the price cut to fulfill our capacity, isn't it right?

Sorry?

We will have to take a price cut to fulfill the capacity?

I need to make it attractive for a customer that we have to have that ability to shift from his existing vendor. And fortunately, because it is overseas vendor, so there is always an inclination to buy in India because just in time, we can supply them as per their needs. They don't have to keep stock in their factories. So all those advantages we offer plus the import duty of 8%. So all those benefits they get when they approve us in their system.

Okay. So what kind of utilization we can expect on the 770 and 701 by the end of, say, next year?

We should expect at least 50% to 60% of capacity utilization for sure. Because by December, our other line of HALS will begin. So in the next 6 to 9 months, my target is to touch about 1,000 tonnes of sales minimally. I mean 100 tonnes, 120 tonnes per month type.

That's a very, very aggressive number, isn't it?

Well, at least we keep some good margin. I mean, we should have some higher targets, and so that -- I mean, at least I target, we should sell 100 tonnes a month, say, by October, November. And let's see, I mean, I think it is possible that let's see how it goes on.

The next question is from the line of Ankur Periwal from Axis Capital.

So just 2 questions there. One on HALS. I recollect we earlier mentioning that we had already cracked a couple of products at lab-scale pilot scale, and you were looking to scale them up. Two of them are already sort of commercialized. So 1 -- first question, what are the time lines that one should look at in terms of launching of new HALS product? And secondly, from a revenue ramp-up or a product approval perspective, will it or will the sharper sort of revenue ramp-up in HALS products will come only when we have, let's say, a portfolio of maybe 7, 8 products which makes an impressive offering from attracting client perspective? Or it is slow and gradually and it will keep on adding up? How should one look at that?

I will answer 1 question at a time. So all other HALS are now successfully developed, which comprise of 622, 944, 119, 2020, and 944. All these products will start by December. So between December and March '24, all these products will come online. So that is answering your first question. Second question is Indian market has -- does not buy all of it. So they buy majorly 770 and they buy majorly 944. So today, when I'm starting with 770, the whole reason of starting 770 is that in India does not need this buffet of all these products. Because these are different segments and India chooses 770 more than other HALS in their process. So we are -- so 770 in Indian market or Indian perspective does not have any implication if I have other products in the market or not. But when I start with 770, I develop confidence of customer by December. So when my new capacity ramp-up comes in, they are convinced that even the other HALS, we will be able to supply them with good or the quality which they are currently buying and we are actually a sustainable source for them.

Sure. So on the -- yes, on the domestic market, that helps. On the international market, how should one look at the ramp-up or the product improvement?

So international markets, we are already talking to some of the distributors. Of course, they have this thought that we can start by sending samples of 770 and telling the customers that see these other products in pipeline are going to come in about 9 months' time, which is not a very, very long waiting period. I mean, by the time I give samples, by the time they approve it, they can see that in the next few months, we will be ramping up the other facilities as well.

Sure. And on the pricing-wise, competition here, since BASF is the largest one and there are respective power, gas-related issue there. How our pricing would be -- how you'll be faring pricing of our products versus theirs? What could be the gap?

I think we will have to offer at least 5% discount, 5% to 10% discount where BASF is still dominantly present. That is how a customer will get that boost. And plus with this whole power energy issues, I'm sure even a European would want to look at Indian source to -- because if this power problem or returns or whatever, they still need another supplier, non-EU base, so that they can depend or they can have 2 suppliers for this product.

Sure. And on a backward integration side, any thoughts there for HALS or it is still probably early days?

No, no, we are fully backward integrated. We are starting from the basic raw material, acetone and ammonia. That is the whole beauty of this technology. These are catalytic transformations, and we are starting from basic raw materials. I cannot make acetone and I cannot make ammonia. So I mean, these are the most commonly available commodity chemicals, which we're using to meet the entire series of HALS.

We move on to the next question, that is from the line of Abhijit Akella from Kotak Securities.

First, just on the revenues and volumes for this quarter, but there's been a modest decline in revenues on a quarter-on-quarter basis. Is this possible to share the volume numbers for -- on a quarter-on-quarter basis, like what the volume growth might have been and how much prices were down?

Abhijit, we are not very comfortable sharing the volume and pricing for individual products. But I think quarter-on-quarter, it's not a fair comparison here because Q3 is generally a leaner period for us because anyway, the majority of the sales is coming from export market and because of general inventory destocking, exports are a little slower. So year-on-year comparison would be a fair comparison.

Okay. Got it. And as you mentioned previously, the EBITDA per kilo, our spreads would have actually improved because of the falling raw material prices. That's why the profit margins have picked up. Is that fair to interpret?

Yes. And the correction in raw material prices has not transpired into production in the end product prices. End product prices have largely remained steady.

Got it. And 1 last thing. The presentation mentioned that about 10% of revenues have come from new products. Is it possible to just share some color on which of these have prominently contributed to this?

So these are TBHQ, PBQ and [indiscernible] products which we have started and which have contributed to 10%.

The next question is from the line of Rohan Vora from Purnartha Investment Advisors.

I would like to ask a question. So my question was partially answered when you answered an earlier question, but I would like to ask, how do you look at the competition in India for MEHQ and Guaiacol specifically? Given that one of the players is coming up with the capacity in the next year?

We will like to focus on our business than rather focus on what others are doing. I think this is how we would like to remain. And you see if competition comes, we think we are quite equipped to counter the new competition in this business.

Okay. But -- so sir, would it have an impact on margin for a while or market share for a while or we would be able to maintain that?

We'll be able to maintain. Let the capacity first come in.

The next question is from the line of Archit Joshi from B&K Securities.

Congrats on a good set of numbers. My question was on a comment that you made earlier that Indian customers don't need the plethora of how that we intend to manufacture in the future. So there's naturally going to be us looking at the exports opportunity in HALS. So I just wanted to understand how the approach is going to be in terms of selling these newer HALS that will eventually start manufacturing in our facilities later on. Because there is a competition from global majors like BASF, and since this is again going to be a product which will have quite a bit of customer stickiness, how difficult or easy would it be to kind of grab market share from them. So just your thoughts on that.

All the products which we have started in our earlier days of career have been manufactured by someone or the other. For instance, MEHQ, when we started, [indiscernible] was a very, very dominant player globally. However, over the year, we were able to establish our footprint and increase our market share. However, those times and this time, the difference is, today, we are quite matured in the market. We have distributors across the globe. We have customers whom we have known. So the penetration will not be as difficult as it was in those earlier days. And the second important is that as a purchaser, BASF is also quite, I mean, strict on their policies, where we, as a smaller player will be quite flexible, for instance, packaging. If a customer needs specific packaging, BASF would not do a specific packaging for a specific customer. But for a player like us, we will be able to do this. And that is how we will win over these customers compared to -- and I'm not looking -- plus the best part about us is the market itself is growing at about 10-odd percent. So without too much of disturbing this big boys of the game, we'll still be able to get a reasonable market share for us.

Understood, sir. Just 1 thing on the market that you showed is growing at 10%. I think in the past year, you mentioned that this is a $1 billion market. And there's just some confusion I had with respect to the volumetric size of which we had mentioned that is about 12,000 tonnes, 13,000 tonnes in terms of volumes. But I do -- if I do a -- add then it works to be like $90, $95 per kg sort of a product on a blended basis. Is there some discrepancy in my understanding? Is it that the 12,000 tonnes, 13,000 tonnes that you're looking at is only specific to the product that we're manufacturing? Or the entire HALS market is as that big and the realization is actually...

The entire HALS market, meaning adding all the global capacity stand at $1 billion. I am just making some percentage of this. So hence, your assumption of calculating my volumes and dividing by $1 billion and making $95 is not right, it's incorrect way.

Okay. sorry, I still couldn't get that. So the 12,000 tonnes, 13,000 tonnes that we are -- we had spoken of earlier is specific to the products that we are going to manufacture...

That is right [indiscernible] which is a combination of all the products, meaning HALS 770, 701, 119, 944, 2020, I mean whatever.

Got it. Got it. Sir, I believe the -- is it that the $1 billion market size is for all light stabilizers because I think there are UV stabilizes also so -- or is it very specific to HALS?

HALS is the major part. UV stabilizer is like very, very minor percentage in this entire HALS business. And these are -- UV stabilizers, these are called UV absorbers, whereas HALS is called as UV stabilizer.

The next question is from the line of Rohit Nagraj from Centrum Broking.

Congrats on good set of numbers. My first question is in terms of capacity utilization across 3 segments. If you can just broadly tell us in Performance Chemicals, pharma and FMCG, maybe excluding HALS, how has been the capacity utilization by Q3 end?

I think Performance Chemicals were 60%, 65%; pharma, agro was 19%; and FMCG was about 10%, 12%.

No, sorry, a small correction there. These are revenue contribution numbers which he just mentioned. In terms of capacity utilization, Performance Chemicals is higher, close to 75-odd percent; followed by pharma, which gets close to 65%; and FMCG Chemical is between 60% to 70%.

Right. And that excludes HALS because HALS started just now, right?

HALS is excluded in that.

Sure. Second question is in terms of the CapEx that we're planning. So if you just can give us the details in terms of FY '23 CapEx and FY '24 CapEx in terms of different segments and what will be the amount?

Yes. So FY '24, in the parent company, there will be a small maintenance CapEx, but the majority of the CapEx will happen in the subsidiary company, which could be north of INR 150-odd crores.

Okay. So it will be -- and FY '23...

FY '24.

Yes. FY '23, for the first 9 months, we have done INR 105 crores...

That would be the parent company. And in subsidiary company, we have included INR 65 crores over and above INR 105 crores.

The next question is from the line of Nitin Agarwal from DAM Capital.

So I think on your -- the comment that you made about the fact that during the quarter, raw material prices have come off, but the end product prices are holding stable. So sir, is this the nature of our product portfolio that our end product prices reasonably exhausted from a pricing perspective? And I guess, in periods of raw material -- and it's really impacted by the raw material volatility either way?

So basically, the beauty of Performance Chemical is such that people -- see, there is a range which is stuck in the purchaser's mind. So when the raw materials increase steeply, they don't want to increase steeply. But even when the raw materials fall steeply, they are not looking for total correction. So that is the beauty of this [ perf chem ] business is that it is really very little price pound compared to the raw material volatility. Hence, in quarter 1 and the earlier quarters when the raw materials were quite steeply high, we were not able to pass everything to the customer, and which is why our customer base still remains impact -- intact to us.

Fair enough. So I guess -- so wherever -- I mean, is it fair to assume that during the period or during a phase where if the raw materials stay reasonably benign, are gross margins reasonably strongly hold on as we've done in the past, barring the aberration in the last few quarters.

Correct.

Yes. Okay. And then secondly on -- likewise similar question on your other expenses. Now in the current manufacturing network that we have or the setup that we have, is there -- are fixed costs around staff costs and overheads, are they largely in the base now? So whatever revenue growth that you will get will incrementally have operating leverage on it?

Absolutely, yes. Yes.

The next question is from the line of Arun Prasath from Spark.

Siddharth, now that your R&D bandwidth is mostly free given that HALS has moved to the commercial stage and operations stage almost. Currently -- how many products you are currently working on R&D side? And when we can expect the next major announcement regarding the new products?

So what we prefer is, I mean, going forward is when we are about to commission the facilities or when we are in mid-construction phases, when we would make the announcement, not make earlier announcements anymore.

Okay. So we will be only announcing once you have built a plant? Or is it like that?

Yes. I mean we prefer doing that way. I mean we do it rather than just make announcements.

Okay. Just as an indication, how many products are there in your pipeline at this point of time, R&D phase?

There would be more than 10 products at any given point of time.

And all these products are in the similar end categories or similar adjacencies or it's something away from your current...

Some are in performance chemicals, some are in agro, pharma intermediates. So our space remains quite -- I mean, we are quite clear about the space we want to operate. So we are quite sticking to this space, and we like this space quite a bit.

Okay...

[indiscernible] very interesting products are working on pilot scale and very soon, we will start working on the plant. So just after HALS commission, there will be a line of interesting products coming up, too.

Okay. So this CapEx guidance of INR 150 crores includes the plant -- this plant as well?

So basically, in a greenfield, when you start any greenfield, you have to start with everything together. I mean you need to build a common admin block, you need to build a common utility block, you need to build a common effluent treatment facility. So some of these facilities will be useful for any other plant we build. And next CapEx will only be pertaining to that manufacturing block, but not with overall site development, which is -- which always you have to do, when you'll start with the first line of business.

Great. What I was asking is the new product that you said you'll launch after HALS, that already the construction kind of underway or...

No. We want to first let the HALS come to a decent and shape because we have this -- I mean, we want to start this production by December or at least have commercial runs by December. So we don't want to divert too much of attention into getting into something else right now. Because HALS in itself is a very large segment we are getting into. So once we reach a decent scale here, I mean, in terms of construction or something, then probably by March end, we might start construction for our other facilities.

The next question is from the line of Rohit Nagraj from Centrum Broking.

So you mentioned that we have strengthened our sales and business development team along with R&D. So in terms of the staff cost expenses, would this be the trend going forward? I mean, increase in terms of inflation?

Not too much, don't worry, our numbers are never going to be very flamboyant. And with the revenues growth coming in, it will be on similar levels. So don't worry about that bit.

Sure, sure. That's wonderful. Second thing, in terms of CapEx, just 1 clarification. On the subsidiary front, we mentioned about INR 150 crores of CapEx. And partly, this will go in terms of infrastructure and partly for creating capacities. So in this particular phase, how much amount of CapEx will go for capacity creation?

Partly, this INR 150 crores will go towards this HALS products which we just mentioned. It will go for these HALS products put together.

The next question is from the line of [indiscernible] Search.

All of my questions have been answered. So just 1 question. Our company's product applications in various diversified industries like pharma, agri, agro, and cosmetics et cetera. Can you please give me a brief outlook how the demand traction and things are happening there and how do you see them shaping up in the near future?

I have not understood your question. What do you want to know?

Industry outlook? Overall industry outlook, what you are expecting from the demand traction side from our industries in which we are supplying the products. How are the things happening there and how...

Let me answer your first question. The Performance Chemicals is looking quite robust. Same is the case with pharma. A little bit agro is down. So that is what I mentioned about PBQ, para-benzoquinone. But all in all, it's a decent growth. So I don't see any too much negative vibes around it.

Okay. Sir, can you guide me the next 1 or 2 year outlook, how are we seeing...

[Operator Instructions]

We are not giving any forward-looking statement, sorry.

The next question is from the line of Sanjesh from ICIC Securities.

First, I wanted to understand our go-to-market strategy, particularly, you did elaborate on the domestic market. But can you similarly help us understand for the 701 and other products which we are targeting the international market. One, which are the applications which you think are low-hanging and would be very easy to tap? And number two, which are the geographies which you think there is an inherent demand and which fits very well in our portfolio. These are the first 2 questions.

I'll give you very broad view, Sanjesh. I cannot give you product-wise and market strategies and application and area-wise segment breakup, these are very...

Broader strategy, whether it would be a...

The broader strategy is, like, our other products, we will have both channels. We will have direct customers, and we will have distributors for these products. Because European or American customers who prefer stock point, they would like to only buy through distributor channels. And we have our existing distributors who are already into additive businesses or Performance Chemical businesses, are quite equipped to -- or understand these markets. So these will be our first point of contact, and the sales which we have made in domestic -- anyway I have explained you the domestic market. So this is all -- I mean this is how broader market will look like.

Got it. Got it. Second, again, a question on the HALS. You said that it's growing at 10%. It looks like a phenomenally fast considering that the global GDP is growing at 3%. What is -- what are the applications which is driving the HALS growth to grow at such a rapid pace? Is there a new applications being developed. How should one see this 10% growth and it would be very helpful if you can help us understand what is driving the growth and all that?

Each product has a different application. And we will be able to send you across because these are 11 products with 11 different application across different segments. So it will be very difficult to explain you on telephone call.

Great. Great. I will get in...

You can get in touch with Pratik and he will send you the details.

Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

So I thank all of you for taking time out to understand our results and to -- and for the interesting questions. With this, I look forward -- I mean, of course, we have declared an interim dividend, and I look forward to, again, getting in touch with all of you folks after our Q4 or FY '23 numbers. So thank you again, all of you, and thank you so much.

Thank you. Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.