Gujarat Fluorochemicals Limited (FLUOROCHEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Gujarat Fluorochemicals 3Q FY '22 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ranjit Cirumalla from B&K Securities India Private Limited. Thank you, and over to you, sir.

Thank you, Mallika. Good evening, everyone. B&K Securities is reached to hold the conference call of Gujarat Fluorochemicals Limited to discuss its 3Q FY '22 financial performance. From the management, we have with us today Mr. Vivek Jain, Managing Director; Mr. V.K. Soni, Head, Products & New Initiatives; Mr. Manoj Agrawal, Chief Finance Officer; and Mr. Vibhu Agarwal, Head, Investor Relations. I would now like to hand over the floor to Mr. Manoj Agrawal, Chief Financial Officer, to start the call proceedings. Thank you, and over to you, sir.

Thank you, Ranjit. Thank you very much. On behalf of Gujarat Fluorochemicals Limited, I would like to extend a very warm welcome to all the participants. We are happy to inform that Board of Directors of Gujarat Fluorochemicals Limited has its board meeting approved the financial results of the company for Q3 FY '22. Financial results, along with the investor presentation, are uploaded on the website of the stock exchanges, as well as the website of the company. I will take you through the presentation initially, then we can open the call for any questions that you all might have. So starting with the highlight of the quarter. Consolidated revenue for the quarter were at INR 1,007 crores, up by 59% on a year-on-year basis. Consolidated EBITDA for the quarter was at INR 319 crores, up by 125% on a year-on-year basis. The EBITDA margin for the quarter were at 32% as compared to 22% for Q3 FY '21. Consolidated PAT for the quarter was at INR 201 crores, up by 95% on a year-on-year basis. Similarly, PAT margins handsomely increased from 16% in Q3 FY '21 to 20% currently. So growth in the quarter was mainly led by the increase in the PTFE and the caustic prices. New Fluoropolymers witness a growth of 41% on a year-on-year basis. However, on sequential basis the segment witnessed a dip of 17%. This was primarily due to unavailability of a key raw material, named R-142B, which was the feedstock for PVDF and FKM. Sales in this segment were further dented on account of the fire incident at our Ranjit Nagar plant, which delayed the commissioning of our in-house it to manufacture R-142B. As of now, we have now commercialized R-142B plant has been commercialized and started operating. As regard to new projects and additional capacity announced earlier, entailing a CapEx of INR 2,500 crores over '22, '24 are on track as a result. So this was the key highlight of the quarter. Now I will give you the detailed overview of the financial performance during the quarter. Consolidated revenue for the quarter Q3 FY '22 stood at INR 1,007 crores, which is 59% higher than the revenues for Q3 FY '21, which were at INR 634 crores. Further on quarter-to-quarter sequential basis as compared to Q2 FY '22 revenue was at INR 964 crores. There is a growth of over 4%. EBITDA for Q3 FY '22 stood at INR 319 crores as compared to INR 142 crores in Q3 FY '21, up by 125%. When compared with the EBITDA for the preceding quarter, that is Q2 FY '22, EBITDA was INR 296 crores. Current quarter EBITDA is higher by 8%. As far as PAT is concerned, PAT for Q3 FY '22 is at INR 199 crores. This is excluding a profit on sale of investment of INR 32 crores, up 95% from Q3 FY '21, which was INR 102 crores. Further PAT for the previous quarter, Q2 FY '22 was INR 186 crores, excluding profit on sale of investment property of INR 19 crores and is up by 7% on a sequential basis. So this is the brief financial overview of the company at the aggregate level. Now if you look at the performance of the various business verticals. The caustic soda business, revenue for Q3 FY '22 stood at INR 178 crores as compared to INR 70 crores in Q3 FY '21, up 154%. Caustic soda revenues when compared to previous quarter Q2 FY '22 is up 75% from INR 102 crores on a sequential basis. Caustic soda plants are currently running at full capacity. Caustic soda prices have also started trending during the quarter and now seems to have stabilized. The demand supply situation remains -- expected to remain balanced for the next several quarters. There has been a severe increase in the cost because of elevated energy prices. However, these costs have been more offset by the higher realizations in the caustic prices. Within the chemical verticals, next product line is Chloromethanes. So Chloromethanes revenue for Q3 FY '22 stood at INR 146 crores as compared to INR 75 crores in Q3 FY '21, up 95%. Chloromethane revenues when compared to previous quarter i.e. Q2 FY '22 is up 20% from INR 122 crores on a sequential basis. Our Chloromethane plants are also running at full capacities. Prices of MDC has started coming down from the peak levels achieved in the months of October, November '21. We expect that prices are likely to be impacted in Q1 FY '23 as additional capacities will be commissioned in the domestic market. Refrigerant revenues for Q3 FY '22 stood at INR 69 crores, which we have seen as same levels as in Q3 FY '21, almost flat. Refrigerant revenue when compared to previous quarter, Q2 FY '22 is down by 25% from INR 92 crores on a sequential basis due to seasonal factor. We expect that the demand for Refrigerants is expected to start strengthening in the current quarter as soon as the summer season kicks in. The next business vertical is our polymer business. So PTFE sales for Q3 FY '22 were at INR 386 crores as compared to INR 215 crores in Q3 FY '21, up 80%. Again significantly on account of rising both prices and volumes due to robust demand across all geographies. PTFE sales when compared to previous quarter Q2 FY '22 is 7% from INR 360 crores on a sequential basis. Our PTFE plants are also now running at full capacities, demands are robust across all geographies, prices have moved up and remained firm and demand is also expected to remain robust for the next few quarters. We will be doing capacity augmentation and debottlenecking, et cetera, with the demand growth. The next business vertical is new Fluoropolymers. New Fluoropolymers sales were at INR 156 crores, up 41% as compared to INR 111 crores in the same quarter of previous year Q3 FY '21. However, on the sequential basis, it is marginally down due to raw material constant as explained earlier. So currently, we are having a capacity utilization of around 55%, majorly because of raw material constant, which we had earlier. Now with R-142B plant coming up, we should able to do away with this limitation of availability of 142B. Specialty chemical vertical. Specialty chemical down by 44% from INR 87 crores to INR 49 crores when compared to same quarter of previous year, that is Q3 FY '21. As you all are aware that the production and sales during the Q3 FY '22 majorly got impacted due to fire incidents, which has happened in the last fortnight of December at our Ranjit Nagar plant. However, the plant is limping back to normalcy based on the various approvals, which we are getting to restart the plant. So this company has posted a robust growth in most of the business verticals, surpassing the revenue and profit achieved in FY '21 in the 9 months of the operation of the current year. Revenue for the 9 months ending 31/12/2021 is at INR 2,883 crores, which is 9% higher than the full year revenue of FY '21, which was at INR 2,651 crores. Similarly, PAT for 9 months ending 31/12/2021 is at INR 870 crores, which is 36% higher than the full year PAT for FY '21, which was INR 638 crores. With a significant increase in profitability and the return ratios have also improved significantly, ROC improved from 11.92% to 24.06%, and ROEs improved from 9.91% to 19.77% as compared to FY '21. ROC is expected to improve further, given the higher margin from incremental sales of existing as well as new products. On the debt front, the company is now virtually debt-free with the net debt equity ratio has reduced further to 0.28 from 0.33 in FY '21. We intend to reduce this further so as to become a zero-debt company in the near future. As regards to new initiative, which was explained in detail in the presentation and during the last con call. Now, during the quarter, the company has incorporated following wholly-owned subsidiaries, namely GFCL EV Products Limited for providing solutions for entire value chain of all types of batteries, battery components and products of electrical electric vehicles, et cetera. GFCL Solar and Green Hydrogen Product Limited for providing solution for the entire value chain of all types of production components for solar and green hydrogen products, et cetera. And 1 more subsidiary named Gujarat Fluorochemicals FZE, UAE for trading and manufacturing of chemicals. The GFL expect that all this initiative to offer a sustained business growth over a foreseeable future with higher margins and which will lead to further improvement in our financial return ratios. So that, ladies and gentlemen, let me walk through to the presentation. I would like to open this up for any questions that you might have that we'll try to answer. Thank you.

[Operator Instructions] We have the first question from the line of Ketan Gandhi from Gandhi Securities.

Congratulations on a really good set of numbers. My question is, sir, there is a significant improvement in the demand of the PTFE and the price worldwide. So I think between -- are we looking to -- looking at increasing the price of the PTFE?

Well, Ketan, we have already increased the prices from first of January -- substantial price increase from first of January this year.

So can you quantify, if you don't mind?

Between 20% to 25%.

That's great. I had only 1 question. If I have something, I'll join back in the queue.

And the demand continues to be very robust for all our [ PTFE ].

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

Vivek, the first question on the PTFE. The price increase of 25% looked like very steep. Where are we seeing the demand coming from for the PTFE? Which is the segment which is driving the growth? Because auto, which used to be the largest segment for us earlier, that segment, at least, is underperforming globally. So what is driving such a strong PTFE? And what is -- what is that we are able to push a 25% kind of a price increase without seeing an impact on demand?

Can you see, to some extent, the prices had been suppressed, given the sharp raw material price increases, which had taken place in the previous quarters? One of the starting points to go in for this price increase. Second, there is a -- for most of the products that we make across all geographies, whether it is Europe, U.S., South Asia or India, there has been a very robust one. And it's coming from all application areas. I don't think I can say it is limited to only automobiles. It's coming in from all areas. And automobile also has been up despite the fact that there has been some headwinds as far as auto sector is concerned because we're chip shortage. But despite that, there has been a robust increase in requirements from the auto sector also. And we expect that every chip shortage eases, the demand from the auto sector will further increase.

And can you give which other sectors are important for us from the PTFE perspective?

Sorry?

Which is the other sectors which contributes materially to our PTFE apart from auto?

It is the chemical industry, the mechanical industry, the electronics industry, semiconductor industry also has done very well. So I think -- I don't think -- I can't tell -- say that it is from 1 particular sector. We are seeing this demand growth from across sectors, across applications. And across geographies frankly speaking.

Got it. Is there any shortage from the China side? Is the China being seen any major shutdown of PTFE? Or in general the demand has been stronger and supply has been stable?

China, as I've been -- as I mentioned earlier, is substance -- about 80% of the production in China is for the domestic market. It's very limited with the export. And there has been an increase in the Chinese demand also. And -- which we are operating in U.S. and Europe. Chinese have not been able to penetrate the high-end application areas. We see limited -- the competition in China in a substantial percentage of our markets abroad.

Got it, sir. Got it. Got it. That's fair. Second, on the 142B, what is the kind of capacity we are putting in 142B? And I understand that you also mentioned last time that we would start from VCM to 142B to the VDF. So how much is this 142B and when would we see the full backward integration in the 142B?

So -- as we just mentioned, 142B plant was supposed to have been commissioned by middle of December. But because of the fire there, the new tender it got delayed. So it's got commissioned now around the 10th of January. So now we are able to put the capacity, eventually will be about 70 to 75 tonnes per day. We will, of course, not be able to utilize the entire capacity now. But over a period of time, as our 142B -- as our previous capacity keeps on going up, we will keep on increasing the usage of 142B. And we are also looking at the prospects of exporting 142B because, as you may know, there is a huge shortage of 142B worldwide. Prices, of course, have gone up. And we are now exploring opportunities over and above meeting our own requirements of -- meeting our own increasing requirements of 142B for captive deals.

Got it. And say, by end of next quarter, we should be hitting the full capacity utilization of 70, 75 metric tonnes per day?

This is something which we have to watch and see by when we will be able to utilize full capacity. But it is important to know that we have the backwards in -- when we backward integration to the BDC facility by the end of the year, we will have substantial capacity of 142B available to meet all our requirements going forward of PVDF as we keep on expanding the PVDF business for the lithium-ion EV batteries.

Got it. Got it. Now that brings me to the next question of PVDF. We have started submitting the samples of PVDF to the battery cells manufacturer. Any luck there? Have we seen any approvals for our PVDF? And when should be supplying the PVDF from the battery side?

So we -- as I mentioned that we sent out the grades which we have currently made to some laboratories in Europe and U.S., as well as some users in South Asia. So the latest, of course, with all the year-end closures, et cetera, so we've just been able to receive some feedback from the U.S. customer who has substantially okay-ed the product which we have made. It's going to undergo further testing of 3 months. Thereafter which, thereafter, we will be able to qualify it for their requirements. On the other side, South Asia, again, we have sent the grades which we have developed to 3, 4 customers, but we have yet to receive the feedback. We are expecting that maybe by the middle of February, we'll start receiving feedback from active 1 or 2 of the current customers.

Got it. Got it. And from the PTFE perspective, and now -- so first of all, have we completely restarted the Ranjit Nagar plant or it is partially operational as we speak today?

So as I mentioned, the 142B facility is now fully operational. The other plants, we are starting commissioning them one by one. And we are expecting that at least a majority of the plants we would have commissioned by the end of the first week of February.

Got it. That means are we seeing any PTFE expansion acceleration now given that the PTFE demand is so robust and we already have a plant of putting PTFE and we already have a [ TFE3 ] any plans to expedite that expansion or it's on track?

We are going with the idea, we've actually know -- but otherwise, what we have indicated is probably that it is likely to be the second -- about the second half of the calendar year -- beginning of the second half of calendar year '23. But we are looking at some possibility where we can put it back by 1 or 2 months. But I suppose it will take that much of time.

We have the next question from the line of Rohit Nagraj from Emkay Global.

Thanks for the opportunity and congrats on a very good set of numbers. And hearing the commentary is also quite encouraging. Sir, the first question is new Fluoropolymers will be having 100% utilization by Q1. PTFE currently 100%. So if you could just give us a time line of when the new capacity for both these will come because that will be essential from the gross volume growth perspective?

So as I mentioned previously, we will be able to get to almost 100% capacity utilization by the first quarter of '22, '23. We are putting in an additional capacity of 300 to 400 tonnes of new fluoropolymers, which will also get commissioned by July of this year. And we hope that by 31st March '23, we will be operating this additional capacity also at full capacity.

Right, sir. Got it. Sir, the second question is on the Fluorospeciality. So this particular business has been slightly struggling over the last couple of quarters. And as last indicated, we have a CapEx of about INR 550 crores, INR 600 crores by March, with a revenue potential of close to about INR 800 crores, INR 900 crores. So given the current situation on this particular segment, do you foresee that there will be challenges in the near term and probably the revenue potential of INR 800 crores, INR 900 crores by FY '23 will get by a couple of quarters?

Well, if you look at the entire '22, '23, maybe there might be some dip in the turnover. We had expected about INR 800 crores. It might go down to about INR 700 crores. But it will also depend upon how fast we are able to get these new capacities, which are being set up. And as I mentioned earlier, there are 3 new brands which are slated for commission by end of March this year how quickly we ramp up sales and production from those new facilities. So I would say that the, yes, the good number would be about INR 700 crores top line in '22, '23 given the current situation.

Got it, sir. And just one last clarification about the accident that has happened. So was there any impact on the revenues during Q3? And since this plants will be now starting operation in phased manner, would there be any revenue impact which is foreseen in Q4 as well?

When we are at the brand, there was perhaps loss in profitability of about INR 25-odd crores in December. And perhaps it might have another impact of about INR 15-odd crores during January. But I think that it will be limited to that. And we have already mentioned that we have a loss of profit policy and we have already filed claims with the insurance company for their compensation.

[Operator Instructions] We have the next question from the line of Hansal Thacker from Lalkar Securities.

Congratulations to the team on another fantastic quarter. So my question, first question is, I just wanted to know if there was any update as far as securing our lithium bicarbonate supply under the [indiscernible] scheme?

So we are, of course, full -- we are in touch both directly as well with the government -- as well as to the government of India, [indiscernible] were the tying up sources of lithium carbonate or lithium hydroxide from 2, 3 geographies, 1 is Australia and some of the South American countries. So we are progressing well, and we are sure that we will be able to tie up the DPM requirements for our upcoming projects. It will take maybe a couple of months, but we -- since our plant, first plant is going to be commissioned by December '22, we have sufficient time to be able to tie up the contracting for lithium. But we made substantial progress as we speak on discussions with the potential suppliers.

Excellent. So this will be a one-on-one, right? As in whatever agreement happens will be one-on-one with the supplier or it will basically go through the government?

No, no, no, it will be one-on-one.

Okay. Fabulous. And sir, my second question is, so Congratulations, I just noticed that [ SEIA ] has basically forwarded our expansion plans to the [ SEIA ] Any update on when that meeting is likely to be or when we are likely to receive that clearance?

It's always difficult to predict a date as far as government clearances are concerned, but we expect to receive it fairly shortly. Or maybe in the next 1 to 2 months, we should be able to get our clearances.

Great. Excellent. Excellent. Good to know. And given that we are in such a healthy state, any thoughts on when we can become a dividend-paying company, sir?

Certainly from this financial year before the...

We have the next question from the line of Rohan Gupta from Edelweiss.

Congratulations on a solid set of numbers. Sir, 2 to 3 questions from my side, sir. First is on PTFE. You mentioned that you have taken in January almost 20% to 25% kind of price increase. Just wanted to know, is it primarily driven by the cost push, which we are seeing that the increase in input cost is driving the prices across? Or is it just coming from the demand pool and solid demand supply scenario globally?

See a bit of growth, but also, of course, largely because the demand pool, which is coming from sectors across geographies, from all sectors across geographies. And that, see, at this point of time, we have also achieved the position of -- we are a critical part of supply chain for a lot of customers. And our grades have been fully qualified now with the various end customers. Their demand is also growing. And the -- and it is very difficult to get -- we will get suppliers who will be able to give products which are required for those exact requirements. It's been mentioning earlier, it takes a lot of time to develop products, as well as the testing and qualification cycle also, which has to be undergone. So I think at this point of time, we are in a very strong position to meet the current demand. And so that has also allowed us to have some additional price increase.

And sir, with the solid demand supply scenario and rising price trend and our PTFE plant is already fully utilized. So you do have a capacity expansion plan in PTFE by 25%. Is there any thought process of reviewing that capacity addition which you are planning by end of next year?

I think, at this point of time, we are staying put with those numbers. We will see how the entire situation materializes. We always have the possibility of further adding capacity because we will have the Monomer additional capacity in our Monomer plant. So on a modular basis, we can further increase capacities. But that, of course, will totally be dependent upon how we see the markets.

Okay. Sir, on our fluoropolymer, so I understand that this quarter has been impacted by the raw material availability, but you had mentioned in your presentation that you expect almost 100% capacity utilization to reach by Q1 of next year from 55% utilization in the current quarter. That's almost close to just doubling the volume by Q1. So we have not seen any -- I mean, just any customers have not -- who have not bought from us and have resumed to supply or sourcing the product from somewhere else, in this kind of scenario when the raw material availability is impacted. I'm sure that customers definitely will be demanding the product and will be needing the product and with the -- our inability to meet those demand, probably they would have resumed to some other suppliers. So how quickly we repair it and how quickly they come back to us? I just wanted to understand that, how the dynamics works here?

Well, see, there is an overall shortage of availability of the different fluoropolymers. So while, to some extent, say, in the December quarter, these are impacting the manufacture of PVDF and FKM because of nonavailability of 142B. There's a shortage prevail. It's not that customers were able to get the materials from elsewhere that from other suppliers. So there is a lot of pent-up demand. And as we speak now, since we have started resumption. We have resumed production of FKM and PVDF. The next couple of quarters are going to be very strong as far as demand is concerned. So getting back to the customers is of no issue at all. And the customers are already lined up there, and they are waiting for us to enhance our production to meet the requirements. And that is what we are pushing for just now is to get those additional capacities up as quickly as possible so that we can cater to the requirement there in the market. So there has been a demand push. There's been a fairly robust increase in demand. And at this point of time, since we are an integrated player, we have 142B available with us, and we -- the customers are looking at as [ preferentially ] as we have control of the critical raw material. As I mentioned, the critical raw material 142B will be a tremendous short supply. And for that reason, too, the production of the FKM and PVDF has not been able to keep pace with the rising demand.

So sir, when you say that the unavailability of the end quarter, so even at the higher prices, it means the raw material was not available. And I assume that it was not available to anybody else also?

Yes. For instance, we had already contracted to import 142B from China for the months of October, November, and then they refuse to supply. So for November, we didn't have any raw material available. And our own plant which has been commissioned now, was supposed to be commissioned by middle of December month. But because of the fire, there was a delay. So we were caught in the situation where we didn't have the raw material even though there was a huge demand for the end products. But now that we have our own 142B, we are in a very, very strong position to be able to cater to this demand for these polymers.

Okay. And sir, at 70,000 tonnes per day capacity of 142B, which we get commissioned, at 100% sort of fluoropolymer, what will be the capital consumption of this 142B?

No. So it's not 70,000 tonnes. It's [ 75,000 ] tonnes per day.

[ 70 tonnes ] per day.

That is our capacity. But I don't foresee us being able to utilize the full capacities until the next 2, 3 years, until such time that the PVDF demand from EV battery application starts picking up substantially. But at this point of time, we will possibly be able to utilize about meeting our own captive requirements and exports. We would probably be able to run the plant at about 50% capacity.

There is roughly [ 35 tonnes ] per day.

50% to 60% capacity, yes. This will keep on increasing as we keep on increasing our PVDF capacities going forward.

We have the next question from the line of Rupesh Tatiya from IntelSense Capital.

Congratulations for the great set of numbers. My first question, sir, is from various analyst reports. We see what we understand is the Fluorospeciality margins are lower than company average. With new products and new CapEx coming down, do you see these margins going to company average in next 1 or 2 years?

Sorry. I didn't get your question right. From which segment are you talking of?

Fluorospecialities. Fluorospecialities.

Fluorospecialities, sir. Fluorospecialities.

So yes, the investments we are expecting it should come up to the company average. And we expect that the company average EBITDA numbers will go up, given the fact that we are both in new polymers and PTFE. We are -- the margins are very, very strong at this point of time. So Specialty Chemicals, maybe the margin will still remain lower than the Fluoropolymers and new Fluoropolymers segments.

Okay. But there will still be significant improvement?

There will be an improvement from where we were. There is going to be an improvement.

Okay. Okay. And sir, in PVDF films also, can you provide if products are developed? Some customer sampling is happening.

In PVDF. We have -- for PVDF films, we are setting up a plant to manufacture, to convert that PVDF resin to film. This will be up by September of this year. And thereafter, we will start offering the films to solar panel manufacturers, both in India, as well as abroad. So this will also be 1 more avenue for increasing our PVDF volumes going forward, apart from the lithium ion and [indiscernible] application.

Okay. And just 2 small follow-up there. So this PVDF film will largely be domestic?

Domestic as well as overseas. There's large capacities of -- because of the climate change imperatives, almost every country has come out with aggressive plans to increase renewable energy, and solar is going to be a mainstay there. So there is going to be a huge increase in demand or production of solar cells worldwide. So we hope that, other than India there, of course, there is also a big capacity increase, the production increase, which is later to come. But we expect the market to expand in Europe and U.S. also. And we are -- hopefully, we will be able to cater to that to those geographies also.

Okay. That is good to know. And can this be thought of as a forward integration and PVDF films might have better margin than just PVDF?

Yes, there will be better margins for sure because there is a conversion into value-added products. So there will be an improvement in margins. For that quantum of PVDF which is going to go into solar films.

Okay. And then, sir, my final question is, can you give update on the wind power projects? I think, 25 megawatts was..

So we will have about 20 megawatts put up by March 31 this year. And the balance, as I said, we are dependent on -- we are waiting for the policy to be announced by the Gujarat government on captive wind. If the policy is conducive and can permit us to put up additional capacity of wind for a capital use, we will go ahead and put up additional capacity. And to the extent that we are not, by end of June, we will know for sure, the money, the advances which we have paid will be returned back to GFL.

Okay. And sir, then with this 20 megawatt, what kind of cost savings can we expect? Because sequentially, power cost inflation is actually quite high.

So what kind of savings we can -- is we might we would be able to get on this 20-megawatt investment will be about INR 120 crores, you would expect about 40% ROCE. So maybe about INR 3 crores to INR 4 crores in a month on the 20 megawatt.

The next question is from the line of Anand Jain who is an Individual.

Congratulations on the new set of numbers. Most of the questions that I had have been answered. Just 1 question, sir. Did the fire had any impact on our CapEx plan? And has the construction in that pipe started?

No, it hasn't had any significant impact at all. It was the -- the fire took place in a small plant. The plant machine in total CapEx in that plant was about INR 35-odd crores. And of course, we have a machinery breakdown policy. So we expect to recover that from the insurance claim.

Second question is on the PVDF side. So right now, we have 100 tonnes per month PVDF capacity. And going ahead, we'll have 100 tonnes added by Q1 of FY '23 and then 100 tonnes more for the film. I think that I'm right there, right? Is that the [indiscernible]

No, we will have another 100 tonnes added by June, July this year. And that will cater, at this point of time, towards both lithium battery application, as well as the film application. We will not -- we are expecting and we are watching the market, but we expect that there's going to be a shortage of supplies for EV batteries even in China, because just now most of the battery manufacturing takes place in China. So we are expecting that there will be a demand coming in from China also. And from the year '23 onwards, from the second half of '23 onwards, we will expect the increase in demand coming in from U.S., Europe and India. As EV battery -- as battery plant capacity keeps on getting added in these [ 3 ] geographies. So actually, most of the demand will really start sharply increasing from the beginning of '24 onwards. But in the year '23, we would expect that there would be demand which is going to be coming in from China, which we are -- and I mentioned, we have already sent the grades which we have made for qualification there. Hopefully, in the next few months, we should see some qualifications taking place, and we will then look at supplying the PVDF binders to China, in the next 1, 1.5 years.

Okay. That's super, sir. Last question is on or R-142B. At 75 tonnes per day, we roughly have 1,000 tonnes of annual capacity roughly. And if I were to look at PVDF requirement, that's like roughly 1.6 tonnes per tonne of PVDF. Is that right?

2 tonnes of 142B for 1 tonne of PVDF.

So we will have significant spare capacity for 142B.

Yes, for the -- in the next few years and for the next couple of years. And during that time, we intend to export also.

So we can expect...

And 142B is also a raw material for FKM, where we are also increasing capacities now.

So we expect ourselves to export significant amount of R-142B going up?

Well, it all depends upon what is going to be the gap in the market. We are exploring that. But there could be a situation where we might have surplus capacity available over and above our own requirements as well as the export requirements. But frankly speaking, it doesn't matter because that surplus capacity will get used up as we keep on adding more and more PVDF capacity. Because PVDF is modular. You can keep on increasing capacities reactor by reactor, whereas 142B and the precursor [ BDC ] are the continuous process plant. So you have to set up a certain capacity plant in any case.

Okay. One last question, sir. Are we also looking to make separator coating? Because we only talk of binders, but I think separator coating will also require PVDF?

Mr. Soni?

Yes, sir, separator coatings do need PVDF, but the volumes are very small in comparison to the PVDF binders. So for the moment, we are focusing on the PVDF binders, where we have to add a substantial capacity.

And if you can give some rough estimate in terms of gigawatt or kilowatt or whatever of PVDF required of megawatt, kilowatt of battery?

Yes, sure. You see globally, there are estimates which range from 2,500 gigawatt hour to 4,000 gigawatt hour by 2030. And very broadly, the PVDF norm there is, of course, from chemistry to chemistry of each battery. But on average, about 60-tonne per gigawatt. So if you multiply 60-tonne by 2,500, so 150,000 tonnes of PVDF at the minimum side would be needed. Only for the batteries.

That is by 2030, right?

That's by 2030. Right.

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

First, on the pricing of the PVDF, FKM and the new Fluoropolymers. We have taken a 25% price hike in PTFE. Just wanted to understand how is the pricing scenario in the new Fluoropolymers?

See, the FKM and PVDF prices also have substantially increase over the last 1 year. so given the shortage. So PVDF prices would be ranging from $35 to $45, depending upon which application. FKM prices would range from about $28 to about $35, again, depending upon this rate.

And what were they a year back?

FKM prices perhaps have been about $12, $12 to $15.

Okay. Almost double the price. And then the PVDF?

PVDF would also be maybe about $12. But of course, PVDF pricing for lithium grades is much higher than prices for the normal usages of PVDF.

Okay. So you are telling lithium grade will be higher than $35 to $45?

At this point of time, currently.

Got it. Got it. And we will be able to place at least $35 to $45 once we start manufacturing it completely.

That is the intention. So let's see. Once the qualification is over and the initial trials are over and the customers start taking initial commercial quantities and then build it up. So we're keeping our fingers crossed.

Got it. Got it. Just 1 clarification on PTFE. This 25% price hike we have taken is on the 100% of the revenue we generated in the Q4 -- sorry, Q3? Or will there be some annual contracts which are yet to be renewed. There are long-term contracts. There are certain grades where the similar price hike or not taken or it's a blanket 25% price hike across the customer, across the product category?

Actually speaking, it will be a blended price increase. Of course, as we have mentioned earlier, PTFE is sold on spot, sold on 1 month, 3 months, 6 months, 12 months kind of different customers follow a different buying pattern. But at this point of time, I would say that, yes, between 20% to 25% will be a weighted price increase from the first of January.

And this entire effect should take in a quarter? Or will it take a 2 quarter or 3 quarters?

It will start in this quarter itself.

Okay. So entirely will start coming. Got it. Got it. One on the 142B, you made an interesting comment telling that you are looking at an export opportunity. Now given that the prices of PVDF and FKM are such high, I believe that 142B also be expensive, and that is also a great opportunity to [indiscernible] cash. How much of the 142B can we export, say, in a year or 2 years? And what is the prevailing prices for 142B?

Sanjesh, we are still exploring it. We have started contacting customers because there was no point in contacting customers prior to our having started producing the product and getting the right quality. We have just started doing that. Where we, we are exploring the market. And I won't be able to very accurately tell you how much we'll be able to export every month. But there will be an export opportunity, and the pricing should be quite remunerated.

Got it. Got it. One last on the LiPF6. Where are we in the entire process? I understand that we are in the process to get a clearance. But from the product development, is it completely ready for a commercial product? And is that product being approved by certain customers, certain consultant or certain labs, which we need the right purity and right moisture?

So we are setting up. As I mentioned, we are setting up a commercial plant, which will be up by the end of this year. And we will start sampling from that plant. But we are also setting up a pilot facility, which will be ready by August this year. This is primarily to ensure that we are able to develop the process of using very different kind of ores because ores can differ from origin to origin. So basically, this facility is being created to ensure that we are able to optimize the process, which will be utilized in our main plant. So thereafter, we will start -- after the pilot plant is up, then we will start sampling to customers, both in India, as well as overseas.

Got it. Got it. And we will be buying the pentaphosphorus, right? Or we will be buying phosphorus and also making pentaphosphorus?

Yes, Mr. Soni?

Yes. Actually, we will be starting our initial plan by importing the PCL5 phosphorus pentachloride, but we will be converting it to PF5 ourselves. And later on, we have plans to make PCL5 also our [indiscernible] starting with the yellow phosphorus.

Got it. Got it. That will then, we will require the fluorine plant also to support that?

No, fluorine plant requires for all the components. fluorine means, you mean the [ AHF ] plant?

No, no, no, not AHF plant, for the CL plant, caustic plant.

The caustic plant. Yes, caustic plant, we already have, but that we will decide at the appropriate time, whether to buy or make fluorine.

The next question is from the line of Hansal Thacker from Lalkar Securities.

So thank you again for the opportunity. Purely for academic understanding. Sir, would I be right in comparing our LiPF6, salt and electrolyte business to [ Tinci ] minerals from China?

[ Tinci ] minerals?

Yes.

Yes. Yes. In battery industry, there are different type of players. Some players who make lithium batteries themselves, but there's a player you mentioned, they made the lithium salt, as well as electrolyte, yes. So we'll be making the salt and also integrating it up to the electrolyte formulations.

Due to time constraint, this will be the last question. I now would like to promote Mr. Rohan Gupta from Edelweiss Securities.

Just a small clarification on various Fluoropolymers. So we are in a various stage of development as far as the many battery-related products are concerned, especially LiPF. And all. So just wanted to understand, sir, what kind of customer confidence you are getting? And in terms of engagement or in terms of customers' approval for this new Fluoropolymers. What is the timeframe you are keeping in mind that [indiscernible] getting approval is basically coming from the batteries and solar panels?

So, Rohan, as we mentioned that we have already developed some grades, which are required for EV batteries. We have pilot plant facilities, and we are working on some additional grades, which are also required for some battery applications. So the whole process of qualification starting from -- as we develop these new rates could take about 6 months to 1 year. So for the grades which we have earlier developed, as I mentioned, that we've already centered for qualification to some labs in the U.S. and Europe, as well as to some customers in South Asia. For this -- for the grades which we have already developed, we expect that by end of February, we would have received the initial feedback from these customers. Should the feedback suggest that we still have some gaps to cover, then we will do that in the pilot facility and cover those gaps, and then send the product back for qualification to the customers. But at this point of time, we have sufficient time before the demand really picks up for EV batteries. Except for China, of course, as I mentioned, that maybe since our initial grade itself, are in the process of qualification. And hopefully, in the next 1 month, we should see some favorable response, we might start exporting to China, to Chinese customers for their requirements. So otherwise, normally -- otherwise to develop the grade and take it to -- and I will fully qualify could be a process which could take almost a year.

So probably by Q1 or maximum Q2, we should be seeing that some of the products grade, which we have already developed, we'll see the customer qualifications and approvals and should start contributing to revenues maximum by Q2?

Yes, from -- in the second half of the, yes, current calendar year, yes.

Thank you. I would now like to hand the conference over to Mr. Manoj Agrawal for his closing comments.

Yes. We would like to thank you all participants for your interest in the company, and we look forward for your continued participation on this earnings update call. Thank you very much.

Thank you very much, sir.

Thank you.

Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.