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

Ladies and gentlemen, good day, and welcome to the Q2 FY 2024 Earnings Conference Call of Clean Science and Technology Limited. We have with us on the call Mr. Siddharth Sikchi, Executive Director, Clean Science and Technology; Mr. Sanjay Parnerkar, CFO; and Mr. Pratik Bora, Vice President. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Sikchi for his opening remarks. Thank you, and over to you, sir.

Thank you so much. Good evening, everyone. I am happy to connect with you all of you again today to discuss the performance of our company for quarter 2 FY '24. Let me start with giving you a little perspective on the business environment. The market continues to remain a buyers' market rather than sellers' market during this quarter. The overhang of destocking continued during the quarter 2. The overproduction in China has led to aggressive pricing of the products, thereby putting downward pressure on realization during this particular quarter. The demand in Europe and, to some extent, in the United States was unusually low. So to summarize, in quarter 2, we did not see a strong recovery in our demands. On financial highlights, quarter-on-quarter comparison. On Q-o-Q basis, the 4% decline in revenue was led by a drop in realization across the 3 products. In fact, improved sales volumes limited the decline in revenue. Contribution of non-flagship products to revenue increased to 25% during this quarter. However, EBITDA margins continued to be strong at 42.4%. This leads to 2 important takeaways: one, product diversification and geography diversification has gradually started to reflect; and second, despite that, EBITDA margins continue to remain healthy. EBITDA margins are higher on Q-o-Q basis by about 1%, led by lower consumption prices. PAT margins are lower on Q-o-Q basis due to lower nonoperating income. Year-on-year comparison. Revenues for quarter 2 FY '24 declined by 27% to INR 178 crore against INR 245 crore during Q2 FY '23. Volume degrowth and drop in realizations both contributed to 27% decline in revenue. EBITDA during Q2 FY '24 decreased to INR 75 crore against INR 97 crore during Q2 FY '23. Led by lower input prices and better product mix, company reported higher EBITDA margin of 42.4%, compared to 39.8% during Q2 FY '23. We are pleased to report that PAT margins are higher at 29.1% during Q2 FY '24 as against 27.9% during Q2 FY '23. On stand-alone basis, PAT is INR 52 crore against INR 68 crores during Q2 FY '23. Although the absolute PAT is lower, the PAT margin is higher, led by better gross margin and limited impact of negative operating leverage. On sales profile. Revenue contribution from Performance Chemical, Pharma and Agro Intermediates and FMCG Chemicals were 67%, 19% and 14%, respectively. Contribution from Pharma segment was impacted due to lower sales of guaiacol, led by ongoing issues in certain international markets with regards to cough syrups. HALS 770 and 701 continue to demonstrate progressive improvement with revenue contribution coming in from export market as well during this quarter. We are pleased to report that during this quarter, the sales contribution from nonflagship products increased to 25%. Despite that, EBITDA margins were 42%. As we have been mentioning that every product launch will go through following life cycle: stabilizing the production, securing approvals with clients, increasing the utilization levels, continually working towards improving yields and production efficiencies and backdrop, and invariably, the outcome of above process is product stewardship, which leads to better return on capital employed. A little on CapEx update. We have incurred CapEx of INR 165 crore during this quarter, of which INR 155 crore were invested in our new subsidiary, CFCL. Total investment into CFCL till date is approximately INR 275 crores. The progress with construction activity at the subsidiary Clean Fino-Chem, CFCL, is as planned. We expect the water trials to commence during this quarter while commercial production to kick start during quarter 4. We are happy to report that we have finally delivered on our commitment of approximately INR 300 crore CapEx during -- towards CFCL to commission by Q4 FY '24 with entire CapEx to be funded through internal accruals. We are also in process of erecting a state-of-the-art pilot facility, which is expected to commission over the next 4 weeks. This pilot facility will considerably strengthen the transition process from lab to pilot to commercial scale production. Our R&D efforts are fructified by our strong in-house engineering and project teams, which help us create global scale and automated state-of-the-art manufacturing facilities at a very competitive price and in time effective rates. This boosts our return on asset and reduces our time to market considerably. A little bit on ESG. We continue to work towards ESG actively through delivering products with lower carbon footprint, continually evaluating use of alternative raw material fuels and increasing our share in green power. We are pleased to announce that we have successfully cleared Responsible Care audit. We are now Responsible Care certified company. We will soon be publishing our maiden sustainability report and would be happy to have your review comments. We have now set a next 5-year ESG targets for ourselves, details of same will be elaborated in BRSR report. Outlook. Regarding new product development, we recently performed Bhoomi Pujan at CFCL for construction of a new chemical plant for manufacturing, pharma/agro intermediates. We will be sharing the details in due course, and we continue to execute our growth plans as committed. Thank you so much.

[Operator Instructions] The first question is from the line of Archit Joshi from B&K Securities.

Sir, I have a few questions. Firstly, if you can explain the sequential increase you've seen in the power cost this quarter.

So during this quarter, the production at our flagship products increased by over 25%. However, that increase in production did not totally reflect in the sales because of lower realization. And that is the reason the power cost has increased considerably during this quarter. We expect it to normalize by over 100 bps in due course.

Sure, sir. And secondly, sir, I wanted to check on a few accounts you were working on. Number one, the status of our backward integration initiatives in HALS through sebacic acid, any comments on that front, sir?

So far, I mean, we worked on R&D to establish a process to develop our own in-house sebacic acid using castor oil. However, the economies of scale do not permit us for the time being to invest into production of sebacic acid, because the price of these products are currently quite subdued coming from the current manufacturers based out of India and China as well.

Got it, sir. And sir, secondly, a clarification on the challenges that we are seeing in guaiacol. In the previous con-call, you are kind of trying to qualify our products with some Chinese and Taiwanese customers to sort of divert our sales from China. Has that gained any traction in our current business environment?

So we are one of the largest supplier of guaiacol to the China market, I mean, from India, of course. So we are approved in the Chinese market. Taiwan, customer is a little sticky customer with the competitor and it might take a little longer to get our approvals. However, last year, we would have -- or this year, sorry, this year, we would have shipped only about less than 10% of their annual demand. But we're expecting '24 calendar year that should increase a little bit, but not to the extent which I would have wanted. So we would look at some other avenues to sell guaiacol, particularly in the vanillin market in China.

Got it, sir. Sir, just one last if I can squeeze in. So the recent pharma/agro intermediate plant that you're working on, is this the same one that we had spoken of earlier with respect to a INR 200 crore CapEx that we had earmarked for some products, if you can elaborate?

Yes. This is a part of that CapEx. So this is the first product out of HALS, which -- I mean which we had discussed of about INR 200 crore CapEx. So this is the first molecule out of that.

The next question is from the line of Ashvik Jain from ICICI Securities.

This is Sanjesh here, can you hear me?

Yes, absolutely, Sanjesh.

Sir, a couple of questions. First, on the agro/pharma intermediate that we have started. Can you elaborate that in this INR 200 crores of CapEx, I believe it will be a multipurpose plant, what kind of product are we working? Will it be sold in the domestic market or it is to cater to the exports market? Any number of products are we working? More color around that will be really helpful. And what is the asset turn? I think we have said 2x asset turn earlier, do we stick to that?

So let me answer this. So this is -- this block would be INR 30 crore of CapEx. This is a single product dedicated line, and we expect a revenue of about INR 100 crores out of it in domestic market.

Okay. And it will be agro or pharma?

Pharma. Segment in our -- it's like performance, agro/pharma and FMCG, so this falls under the intermediates of pharma and agro.

But are we supplying -- what is the end application or it is -- it has a multiple application?

It has multiple applications, but pharma.

For the pharma. Got it. Got it. And the INR 200 crores of block that we have started now to work on, do we have a product portfolio over there?

So out of INR 200 crores, INR 30 crores is in this, balance INR 70 crore (sic) [ INR 170 crore ] is remaining. So we have some products in pipeline. So you will have to give me one more quarter to confirm those plants.

Got it. Got it. That's clear. Second, you earlier mentioned that we had seen a healthy volume growth, but couldn't completely offset the drop in realization [indiscernible] to reflect in revenue. Can you give us more flavor in terms of what is the kind of volume growth we have seen? That's number one. And number two, can you also help us understand what is the contribution of HALS within the new product? You said that 25% of the revenue is new products. But can you help us understand where are we...

I'll give you that. So let me answer the second question first. So out of -- in that 25%, these are the new products apart from HALS are TBHQ and DCC. So these were smaller in contribution, because these plants -- actually, the TBHQ plant just started about a year ago. So all those qualifications with the needed customers was complete. And now we see volumes pick up. And same has happened with DCC where we were competing with the Chinese, where we could -- we had some product -- sorry, process improvement further, which has made us further more competitive and emerge or enlarge our market share within India and Europe and a little bit into Japan.

And where are we in P-BQ?

P-BQ, boss, we are still stuck. I think we will still need some more time, but the efforts are still going on, and we hope that in the next few weeks, we should have some decent outcome out of it, but we are working on it, for sure.

Got it. And HALS have we -- what is the -- have we started booking revenues in HALS as well or...

Yes, we have started booking revenue. We have done about -- I think we are monthly about 40, 50 tonnes per month we are selling. And in fact, we are very pleased that today -- I mean, today, we've got our first European container load order. So we'll be the first Indian company to export this product to the European territory. And gradually, we are seeing export market also showing some interest and Indian markets will keep continuing to grow for us.

Got it. And this will be what, 701 exports market or is it 770 only?

So of course, both, but 770 is majorly what I'm discussing. So that's a bigger market compared to 701. 701, we are happy to inform that we've got our first order from China. And of course, -- and also from Taiwan. So the validation time, which took about a year, I mean, 6 to 8 months' time, because this is a very specific application, is now completed with large buyers. And now these are trial orders are now commercial and getting into bigger commercial orders.

Fair enough. And last question from my side is on the China situation. I think for us to completely revive, I think China has to come back. We have a 64% revenue decline there. How are we reading? What are our buyers telling us in terms of Chinese situation? Do you think it will drag remain for another couple of quarters? Or do you think it will take slightly longer than that?

See, it will take couple -- definitely, it will take at least 2 more quarters, including quarter 3 and maybe a little bit of quarter 4 or maybe totally quarter 4. But now we are gradually seeing demand slightly picking up. But of course, China is also interdependent on Europe like we are, because eventually, their end products are also supplied to Europe and Americas. So since Europe is absolutely down and U.S. also is not at the best, hence, we are seeing lower demand across all the segments globally.

You don't see yourself getting replaced by any local vendor in China, that risk is completely ruled out, right?

Not at the moment, boss. But I -- to the best of my understanding, not at the moment, there isn't any competition in China for this product.

The next question is from the line of Huseain from Carnelian Capital.

Yes, sir. I just wanted to understand that INR 300 crore CapEx that we have done in the Clean Fino-Chem, a subsidiary, so what will be the asset turns there and how fast we'll be able to ramp up that part?

See, the asset turn should be between 2.5 to 2.8. And the entire CapEx to come to 80% capacity utilization will easily take between 2 to 3 years.

So we can't reach it to 100% in this year?

Sorry?

So this capacity cannot reach the -- the max utilization will be at 80% or we can reach to 100%?

No, no, no, typically, in chemical plants 80%, 85% is a very good capacity utilization. See, there are boiler breakdowns, there are equipment breakdown, there are maintenance breakdown, so typically 80%, 85% is a good norm.

Correct. Correct. Correct. And sir, this guaiacol issue that is there globally, so how long do you see this pain to continue? And when we see the demand revising, coming back? So any understanding on that front?

See, we are also regularly looking at the market, and we still believe it will take at least another quarter-or-so for this -- I mean the problems, which had happened with the cough syrup manufacturers within -- I mean, from India, I think it will at least take a quarter more for all of them to clear off their names and the demand to again come back to India.

Okay. Got it. Got it. Got it. And sir, lastly, on the agrochemical intermediate that you said we are investing approx. INR 200 crores in this -- in new agrochemical intermediate. So any specific products that are there? Will it be margin accretive? Some color on that, if you can share with us, how it will be in times to come?

Even Sanjesh asked the same question, the answer was, it is not INR 200 crore, it is INR 30 crore. It is a pharma intermediate. The revenue expected is about INR 100 crore, and major market is Indian market. So out of INR 200 crore, INR 30 crore is this, INR 170 crores the products are still to be announced to the market.

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

My question is in terms of such -- what's happened is our volumes have basically tipped off or had a steep fall from the past year. And what I believe is our product goes into -- the critical application is superabsorbent polymers, which have various applications. So I expect that demand should be sort of stable in nature. But of course, there's a steep demand fall. Now I can see that China has markedly slowed down. There is a steep increase in interest rates all over the world as well, which is having an impact. But could you give us some more color as you've spoken about in the presentation that 2/3 is basically a volume drop. So what is the exact reason for this -- such a sharp fall in volumes? More color on that, just I wanted some more color on that.

The point is that there is also a terminology called as destocking. Similar in pharma industry, if you see their revenues or volumes have dropped. It is not that people have stopped taking medicines. But the deal is people had overbooked capacity or overbooked products from us in the past, assuming there would be a product shortage or there would be logistics issue, which -- that's what I mentioned on my starting remark that this destocking continued to happen during quarter 2 and that is the reason why the offtake has been lower than -- I mean, than it was in the past.

Okay. Sure, sir. Yes. And sir, I just wanted to -- just a clarification, this Clean Fino-Chem, basically, whatever CapEx you're putting into Clean Fino-Chem is that particularly going to be only for HALS?

No, sir. Basically, Clean Fino, it's a very large facility. I mean the land is about 35-odd acres. There will be at least 5 or 6 more facilities like HALS to come in there. HALS is just 1 part of the entire block. But because it is a greenfield project, we have to invest in admin block, in warehouse, in ETP, in utility blocks, in solvent storage. So the entire thing is building up. But like if you see the new facility, which -- the new pharma intermediate, which we are starting, the only production block cost is only about INR 30-odd crores, which will give us the revenue of INR 100 crores, because all the other ancillaries are made with the HALS. I hope I'm able to explain you.

Yes, sure, sir. So HALS is only a part of it. You are, of course, going to do more capacity expansion in that large piece of land. Basically, that's what you said?

Absolutely. So there will be a lot more products coming into that facility.

Right, right, right. Sure. And sir, lastly, I just wanted to know if you can share guaiacol, sir, how much percentage of revenue does it contribute to?

We don't share individual product contribution, boss, sorry.

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

Yes. First, on the sales part. Now Q-on-Q basis, you did mention that there is a volume recovery. Just curious from a volume decline, what we saw in the last quarter, how has been the improvement? And any specific business segment wherein the improvement is more or less out of the 3 segments?

So in quarter, this is expectation, right, of quarter 3. So we feel Pharma should be good enough. But other, we are still trying to understand because it is -- plus it's a November and December month, which are typically slow, because everybody is on the mode of reducing stock across the world. So November and -- typically slower months for us. I think the best judgment we will be able to give you on the next con-call, where we'll have Q4 picture more clear to us.

Sure. My question actually was more specific to this quarter. So 4% Q-on-Q decline, right, wherein you said volumes have grown. So obviously, there is a decline in realization here. But from a volume decline perspective, the volume that we were doing in the last quarter versus this quarter, is there any specific segment which is driving or it is pretty broad based?

No. So FMCG segment boosted -- we saw volume growth and DCC and TBHQ also, as we mentioned, we have witnessed a volume growth. So volume-led increase in sales during this quarter was INR 8 crore, realizations impacted by negative INR 15 crore, and that's how we see a negative INR 7 crore quarter-on-quarter decline.

Sure, sure. That's helpful. Secondly, on our gross margins. Now on a year-on-year basis or Q-o-Q basis, there have been a pretty decent improvement. And this is when 25% of the revenues are coming from the noncore part, right, the new products, the non-flagship products are contributing. So will it be fair to say that whenever the demand bounces back sharply, the margin jump could be even higher? Or are there efficiencies that we have derived in the nonflagship product wherein the margin accretion of these products is also strong now?

No, it is decent enough, but I think it will be wise to consider these margins only for these noncore products.

Okay. Fair enough. On the HALS pricing, you did mention that -- and congrats for the new orders from China, Taiwan as well as 770 getting good traction. How are we pricing these products vis-a-vis, I'm presuming BASF will be the largest competition here. So how are we pricing our products vis-a-vis BASF?

See, BASF is one of the supplier. Today, the prominent pricing level guys are the Chinese. So today, we have to mark our products at par with the Chinese prices. And we have no choice, but to mark closer to them to grow our market share, even slightly lower to Chinese to get more market share within India.

Correct. Which is fair. And from an operating performance perspective, I know it is still early days. But going ahead, we should expect process-led efficiencies and the pricing being the same or maybe the product mix itself will change and contribute better on the margin front?

Both. I think, one, even like I mentioned during my talk also that China has cut prices across all products and all segments, which might improve in the future, which I'm not very sure about whether it will happen in Q3 or Q4, but that should happen. So once these prices -- once Chinese start raising their price, we will be able to also raise our prices, number one. And number two, starting January when we will have the other range coming in, that will give our customers more -- I mean they will be able to buy more products from us, and that will help us to reduce our fixed cost by adding more production -- I mean selling more volumes from our facilities.

Fair enough. Operating efficiency is basically great. Just last bookkeeping question. On the working capital bit, the inventory days have shot up a bit. Any specific thing to read over there?

Ankur, actually inventory value, value-wise it remains same, closer to the March number, right? I mean because you're calculating it either on the COGS or on the raw material purchase that is why optically the number of days looks higher. But if you look value-wise, it's almost in line with the March number.

So volume-wise, the numbers would be higher, because the raw material prices have come down as well, so...

Yes. Yes. So it's essentially the WIP stock, which has gone up.

Okay, okay. Because of the dispatches that we have been doing now.

Yes.

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

Just with regard to the outlook for the second half of FY '24, given that it's likely to take another couple of quarters almost for demand to come back. So should we sort of expect that -- I mean volumes gradually pick up from the levels of 2Q over the next 2 quarters or should we continue to work with these volumes and pricing also remains around these levels? How would you sort of expect things to shape up in the next 2 quarters?

So boss, no forward-looking statement. We'll see as it comes, because we are also amidst trying to understand where the market and where the world is leading to.

Okay. Fair enough. Then just on the 2Q results, I'm sorry, I wasn't exactly able to understand the reason for the increase in power cost on an absolute basis. I guess you were mentioning in regard to percentage terms it's gone up for some reason, but why the absolute increase quarter-on-quarter? And also if you could please just share the breakdown of volume versus price on a year-on-year basis for 2Q, if that's possible?

Sure. So first on power and fuel cost, actually, the production has increased for the key products by over 25%. However, that production increase is not reflecting in sales, because the inventory has also gone up and also for the sales, the realization has come down, okay? But with the increase in production, the power and fuel cost has shot up. And as a percentage of sales -- because sales number is lower, so as a percentage of sales, it looks even a little higher.

Okay. Okay. So this also explains the increase in inventory in that case, is that right?

Exactly. Exactly.

Okay. Understood. And also, yes, the volume versus price breakdown for the quarter year-on-year?

Year-on-year?

Yes, please, if possible.

You are asking year-on-year or quarter-on-quarter?

Year-on-year.

So of 27% decline, primarily, it is led by, yes, almost 50-50, volume- and realization-led.

Got it. And just one last thing from my side. I believe the agro/pharma project that we had announced a couple of quarters back, right, for which we have just done the Bhoomi Pujan. If I'm not mistaken, the original schedule was maybe to start construction around July-August and then commission the plants around 2Q of FY '25. So are we still on track for that commissioning timeline or is it going to take a little bit longer than that?

You're absolutely right. We had announced a little earlier, but I think we got delayed because of this market situation and we were evaluating ourselves. But with Bhoomi Pujan happening on 20th of October, you can calculate about 9 months from today, the plant should be up and running.

Okay. And then the same timeframe for the subsequent products as well as and when we announce them?

No, no, we have not announced them. We are still under evaluating. But hopefully, we should start announcing as and when we move forward with those.

Right. But it will again take 9 to 12 months, is it to commission those as well?

Typically, a block for us takes about 9 months.

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

Siddharth, my first question is on this destocking phase that you are talking about. In the last 15 years, you would have seen this kind of a situation a couple of times. So from that experience, can you help us understanding this destocking to, say, restocking, what is the typical timeline in terms of, say, months or weeks you have seen in the past?

So typically, to my understanding, it should be anywhere between 2 to 3 quarters. See, this time, it is also more, there have been 2 reasons. One, people have really overstocked because of COVID and assuming there will be logistics issues and all that. And the second big problem happened was that demand collapsed when the world opened up. So it has been a 2-sided sword. So we expect it should be anywhere between 2 to 3 quarters of this destocking depending on region to region, company to company and product to product.

Okay. When you see demand collapse that you are seeing across all your, say, top 3 products or is this more specific to more like guaiacol situation or where there is an uncertainty whether it will come back or is this more like a temporary setback?

See, it was more predominantly in the Performance segment. It was more predominant in Performance Chemicals segment. But fortunately or unfortunately that accounts for the major portion of our revenues, which is about 65% to 67%. We did not see so much destocking issue in Pharma Intermediates or in FMCG segment.

Okay. Because our understanding is if you see MEHQ, which majorly goes into superabsorbent polymers. Though there will not be any growth, it is more or less kind of a very resilient end consumer demand will be there. So is it really a demand setback in terms of -- is it demand setback or there is a market share loss? That's the key question there.

See, if it was a market share loss, we would have known for sure. But I think maybe a little bit plus/minus 3%, 4%, 5%, I'm not able to gauge to that extent. But what had happened is because Performance Chemical becomes the cheap -- I mean, the lowest in the priority of a purchase manager, but it is one of the most important items. So he doesn't want to stop his production or miss his production because of lack of performance chemical. So I feel there is more stocking of these performance chemicals because these are the tiniest items in the purchase list. So when destocking happened, these items were far more in their warehouse than the major key raw materials, is my anticipation of this entire situation. Hence, we saw more problems in Performance Chemicals rather than Pharma Intermediates or Agro -- in Pharma, Agro or the FMCG segment.

Right. Understood. And looking at the October-November in terms of monthly volume, how far you are from, say, typically that you will see this kind of -- you will see the volumes in this October, November, December quarter? How far we are from the, say, steady state numbers in terms of volume?

I think that I'll be able to tell you in our February call.

Okay. My second question is on your commentary on the noncore products like TBHQ and DCC. We have seen fairly volatility in the demand of these products. Or there is, I would say, some kind of a seasonality is there. So this what you are seeing in this last quarter, it is more sustainable or still we'll be seeing some ups and downs on these?

No, these are not cyclical products, because TBHQ is used as a stabilizer in edible oil business, and DCC is a pharma intermediate for valacyclovir, which goes into ARV, it's a pharma product. So these are typically decent volume, I mean, steady condition product -- I mean steady supply products. These are not cyclical at all.

So that means what we are seeing, the demand uptick that we have seen in this quarter that I think what you are saying is sustainable?

I mean you can take plus, minus 20%. But these are not cyclical for sure.

Right. Okay. Okay. Understood. And if TBHQ is going to be your major -- I mean, can become potentially the major product, your dependence on HQ will also go up?

Yes, we have dependence on HQ and all products we manufacture are important products for us. I mean we will never manufacture a product which is not important to us, right?

Right. But do you have any process, which can take care of the HQ production in case this becomes big...

So today HQ is quite evidently abundantly available from India, China, Japan, United States, Europe. So today, we have no issues in procuring these raw material and the prices, which we are able to get, these are also quite competitive compared to our competitors.

Okay. Understood. And finally, on HALS, you spoke about the export markets. Can you give a little bit more color on where we are in terms of building relationship with this end customer and distributor? What are the pushback, key pushbacks that you are getting? And how we are going to make roads in these markets?

See, we are actually in a dating phase with our customers. They are evaluating us, we are evaluating them. We are trying to show them what best we can do for them. They are not willing to totally believe us. They want to evaluate us more. It's all dating thing happening. And I think it will take a few quarters for the marriage to happen.

And this is typically a direct relationship with the customer, no distributor involved in these products or how it is?

Both. Because, say, for instance, in India, we have direct relationship with large customers, we also have distributor models because some customers -- I mean a lot of small customers prefer to get the product in a day's time. Same is in the case with Europe. We have distributor model. And also, we are speaking to some large customers if they can. If we can [Technical Difficulty] Hello? Something got stuck ma'am.

Sir, we are able to hear you. Please proceed.

Yes. That was my answer, boss.

The next question is from the line of [ Manan Poladia from MKP Securities ].

Congratulations on a decent set. Am I audible, sir?

Absolutely.

Right, sir. Sir, my question is, firstly, on the TBHQ HALS side. What I want to understand is you said that about 25% of the business this quarter is basically from the new products, right, which sounds quite interesting. If you could quantify that going forward for the next 3 or 4 quarters, per se, how much you expect them to contribute to your top line in terms of absolute terms and percentage of revenue terms?

See, I think it is -- see, this is the first quarter when we have -- nonflagship products have 75%, and we have grown our new products to 25%. Of course, since we are not raising capacities of our flagship product at the moment, so all the growth, which will keep coming, would be from the newer products. So subsequently, in each quarter and quarter, we will start seeing that our flagship product percentage to revenue will start coming down and these newer products will start contributing more and more. Now I would not be able to give you exact quarter and exact absolute numbers, but typically, if you see, if we are able to start our HALS with an investment about INR 200 crores, INR 250-odd crores to begin the plant in January, and so let us assume we will have that sales coming up, so when these sales numbers starts coming up, my flagship product numbers in comparison will start -- I mean the percentage will keep -- our flagship will keep reducing and nonflagship product will start increasing.

Correct, sir. I understand. That makes a lot of sense. Just a short follow-up on that. So you expect this trend to continue even after your guaiacol capacity has come back to more utilization, right?

Yes, yes, yes. I mean guaiacol is a one-off case, but we don't expect that, that will change the entire scenario and guaiacol is still being produced because it is a co-product for us.

Correct. Correct. Right, sir. Also sir, just one last question on the CapEx side. You said that you've done another INR 150 crores this quarter, and we have about INR 250 crores on the balance sheet, right? What are our CapEx plans for, let's say, the next 3 fiscals?

So there will be more projects which are coming up. We have anticipated or we have earmarked additional about INR 170- crores, INR 180-odd crores, which will be done -- which we will announce probably in the next 1 to 2 quarters for the products, which we will start with that investment.

Correct. And so that will all be financed by internal accruals, correct?

Absolutely. And everything will be happening through our internal accruals. We are sitting on cash of INR 250-odd crores, so the new CapEx will also happen through our internal accruals.

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

Just one from my side. I think you mentioned that your HALS sales have reached 40, 50 tonnes per month. So just wanted to understand what's your internal target, let's say, by end FY '24 and start of FY '25?

200 tonnes per month. That is 1 product. I mean that is my target. I don't know how much I will be able to achieve by. End of '25, right, so you are talking about, say, probably March '25, our target is to sell this [Technical Difficulty] per month. And new products of these series should also start selling. So we have a big target in front of us.

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

Sir, in your opening remarks, you mentioned that there has been a pricing pressure across most of the products. So have we seen those prices coming down to the pre-COVID levels? And what is your sense in terms of whether these prices will stabilize at these levels? You mentioned that once China comes back to normalcy, probably the pricing will move. But in the intervening period, what is your sense in terms of how the pricing will behave?

See, to my sense and to my best of my understanding, the prices which we were offering in quarter 2 were one of the lowest prices we have seen over the last several, several years. So I do not see further discounting of price unless something new comes up and the commodity prices further or the crude oil prices drops further, and the demand is an issue, then the prices might have to further lower. But to my understanding, the prices should not lower beyond this point, it's my sense of this business.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for their closing comments.

So thank you so much for all -- I mean, for your time and to understand the performance of our company, Clean Science and Technology. Again, wishing all of you in advance a very happy Diwali and a very happy and safe and healthy Diwali. Thank you so much. Take care.

Thank you, members of the management team. Ladies and gentlemen, on behalf of Clean Science and Technology Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.