Gujarat Fluorochemicals Limited (FLUOROCHEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Gujarat Fluorochemicals Q2 FY '24 Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital. Thank you, and over to you, Mr. Nitin Agarwal.

Thank you, Nigam. Hi, good evening, everyone, and a very warm welcome to Gujarat Fluorochemicals Q2 FY '24 Post Results Conference Call hosted by DAM Capital Advisors Limited. On the call today, we have representing Gujarat Fluorochem Management, Dr. Bir Kapoor, Chief Executive Officer; Mr. V. K. Soni, Head, Projects and New Initiatives; Mr. Manoj Agrawal, Chief Financial Officer; and Mr. Vibhu Agarwal, Head, Investor Relations. I will hand over the call to Gujarat Fluorochem management team to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir.

Thanks, Nitin. Good evening, everyone, and a very warm welcome to all of you on this GFL's Quarter 2 FY '24 Earnings Call. And Nitin, I also have my senior colleague, Mr. Kapil Agarwal (sic) [ Kapil Malhotra ], who is the Business Head of our Global Fluoropolymer business, with me in addition to the names that you mentioned. The company announced its quarter 2 results at its Board meeting held today on 3rd of November 2023. The results, along with the earnings presentations, are available on the stock exchanges and on our website. I will briefly talk about the numbers and then give you an update on the business operations and the overall outlook. The company reported a consolidated revenue of INR 947 crores for the quarter ended in June '23 -- September '23, I'm sorry, down by 35% on a year-on-year basis. Consolidated EBITDA for Q2 FY '24 was INR 163 crores, down by 70% on year-on-year basis. EBITDA margin stood at 70% -- 17% for the Q2 FY '24. And the consolidated PAT for this quarter was INR 53 crores, down by 85% on year-on-year basis. Let me briefly take you through the performance of each business segment for the quarter. The last quarter has been unprecedented for us where performances got impacted in all the 3 business segments, namely Biochemicals, Fluorochemicals and Fluoropolymers. And these were all for different reasons, which got coincidentally hit at the same time. This is however expected to reverse going forward. On the Bulk Chemical vertical, while the revenues were almost flat on quarter-on-quarter basis, the drop in prices of these commodities from the previous quarter led to the drop in profitability in this segment. We expect the prices to have bottomed out and the second half of FY '24 to be better than first half as we have seen before. GFL's consolidated PAT was largely impacted by Fluorochemicals segment. The major impact was on account of drop in exports volume of R-125 refrigerant. In the domestic market as well, the poor season also significantly impacted the volumes of refrigerant sales. Volumes are expected to improve going forward, though they are expected to remain subdued compared to FY '23, due to phase out in U.S. Fluoropolymer performance majorly impacted due to commodity and lower end rates of PTFE, where prices saw a sharp decline due to Chinese jumping. Due to continued destocking in higher-end grades and headwinds due to sluggishness in demand, particularly in Europe. H2 FY '24 is expected to be better as compared to H1, primarily due to expected phasing out of destocking, pickup in the demand in U.S. and positive impact of exit of legacy players. GFL has been working on optimizing our product mix for the entire Fluoropolymer segment to move towards higher-end grades, and this is expected to yield better results, starting H2 FY '24. Additional fluoropolymer capacities that were added recently are also expected to result in continued increase in sales over the subsequent quarters. We also expect that sunrise sectors, such as EV, green hydrogen, semiconductor and solar, amongst others, to contribute to further increase in demand for various fluoropolymers. Based on our interaction with our customers in various geographies and sectors, we expect the normalization of demand leading to full recovery by [ Q1 FY '24 ]. Let me also quickly touch base on our new vertical, which is the battery chemical vertical. The world is now moving towards EV. The global battery market is conservatively expected to reach 4- to 5-terawatt hours by 2030. Our battery chemicals play through salt-additive electrolytes, cathode additive materials and cathode binders will help cater to close to 30% to 40% of wallet share of EV and ESS batteries. This aligns with the global outlook on the sector provides GFL with an opportunity to create substantial value for all of our stakeholders. GFL is positioned itself as a leading supplier in battery chemical space with global play, and this has been in line with our demonstrated play in fluoropolymers. Our integrated LiPF6 plant and electrolyte plants are in advanced stage of commissioning, and we expect to start sampling to our customers very shortly. We have made a good progress in this space and discussion with global as well as domestic buyers is progressing well. In view of geopolitical reasons and new regulations across U.S., Europe and domestic markets, we see substantial growth opportunities in these large markets. On the optimum utilization of the assets, and asset turnover from this segment is expected to be upwards of 2x. And we expect the margins -- EBITDA margins to be in line with our existing businesses. Our currently committed CapEx in this segment is expected to provide complete asset utilization by FY '26. In terms of CapEx, some of the planned CapEx that we had announced for FY '24 are online. However, in view of the markets, we expect these CapEx to be staggered to earlier part of H1 FY '25 and CapEx plan for the subsequent years to remain unchanged. As for our last interactions in several quarters, I felt that there are several questions on the business as well as market aspects of our Advanced Materials segment, which is fluoropolymers. So I would like to take this opportunity to spend a few minutes giving an overall update on fluoropolymers and its market outlook. This business has been a core segment for GFL, which we have built at a global scale against various odds over last decade. To give a summary of this, I have invited my colleague, Mr. Kapil Malhotra, Business Head, Global Fluoropolymers, to give a brief overview. And with this, I would request Kapil to please share the market updates and the business update.

Thanks, Dr. B. K. Good evening, everyone. Well, the fluoropolymers is experiencing a period of remarkable growth and innovation. Playing a pivotal role in the global materials industry. These polymers offer a unique set of properties that have rendered then indispensable in a wide range of traditional applications such as automotive, aerospace, semiconductors, electricals, pharma, chemicals, medical, wind and solar energy as well as newage applications such as e-mobility, Internet of Things, artificial intelligence, 5G networks. We are present in a large number of fluoropolymers, including PTFE, PVDF, FKM, and PFA. These highly versatile materials with a wide range of applications in diverse industries. GFL has gone through rigorous of multiple development, customers qualifications and approval, statutory certification process to reach to the current position. Let me briefly summarize you about the major fluoropolymers where we are well positioned and have added capacity and grades. First let's talk about PTFE. PTFE is currently our largest fluoropolymers segment, where we are present in wide range of products and grades. Today, we have a global market share of close to 10% in this segment. In the last few quarters, we have seen volumes in this segment being impacted primarily due to low-cost contribution from China and Russia, especially in the lower-end applications. In the higher-end applications, the volumes are marginally impacted by destocking and sluggishness in demand, which majorly emanated from the U.S. and the European regions. Going forward, we expect to see recovery in these segments as the destocking seems to be phasing out, which should lead to gradual growing starting H2 of this financial year. We also expect to see the opportunities created by announced exit of legacy players, which got delayed due to uncertainty driven stocking by the customers in earlier quarters to tie over the transition. Our strategy has been to continuously upgrade our product mix towards higher value-added applications. On the medium to long term, we expect to see significant growth in PTFE driven by new applications such as EV dry batteries, green hydrogen, semiconductor, amongst others. Our grades are well developed to cater to these applications. Coming to FKM now, FKM has basically remained stable in the current financial year. We are continuously getting approvals for the new projects on regular basis, and we expect to see its positive impact on volumes gradually starting as to current financial year. Similar to PTFE, there also, we expect to see significant impact due to the tailwinds created from the void cost by the announced exit of a major legacy player. We are well positioned to capture this business opportunity, thanks to the recently added capacities available along with full backward integration. We also expect to see the positive impact of some of the new emerging applications such as ethanol blending and some of the high-end applications in automobiles and semicon industry. We are in process to develop the advanced grades to cater to such applications. Coming to PFA. PFA has been doing well as there is a significant demand from semiconductor industry, led by recent developments in geopolitical situation and also demand emanating from new age applications like AI and 5G. GFL with its already developed grades in this segment is well positioned to capture this opportunity. We have finalized a couple of contracts with some of the global players in this segment. PVDF is one of the fluoropolymer that we are most excited about, giving the growth opportunity in this space. We have been building our capabilities in terms of grades and capacities to be able to capture this growth. The PVDF approvals are underway after a lot of tweaking and customizations moving towards qualification, our approval process is in line with the front-end battery EV applications coming to stream. EV to be a major driver, some reports estimate PVDF industry at upwards of 30,000 tonnes per year by FY 2030 from currently around 75,000 tonnes. This, along with the solar frame demand, should auger well for this future growth. In the near term, we expect to see growth from traditional industrial and construction sector driven by recently received statutory certifications. These certifications have taken close to 1.5 years due to [indiscernible], testing and qualifying procedures. So with this, I would like to hand over back to Dr. Kapoor for you.

Thanks, Kapil. And we plan to have a similar session where we'll give you a detailed outlook on our battery segments later this year. So before I open up the floor for question and answer, let me reemphasize on our business outlook. While the last 2 quarters have been primarily impacted by external conditions, we are very positive on the opportunities in our core business segments, be it Fluoropolymer or the Battery Chemicals. There are large opportunities before us. And we all have the -- we have all the building blocks in place to use this large opportunity. On the market side, as we have stated earlier, the destocking has started to win. We are also seeing signs of positive impact due to exit of legacy players and are in the getting of -- are in the process of getting customer approvals. The same is expected to gradually add to our top line in the subsequent quarters. We are confident of delivering growth from next few quarters, and we are hopeful that FY '25 will be better as compared to FY '23. So thank you, all of you, and let's have question-and-answer session, Nitin, thank you.

[Operator Instructions] The first question is from the line of Harsh Shah from HSBC Asset Management. Harsh, we are unable to hear you?

Yes, sorry. Is it -- yes, you can hear me now right?

Now I can hear You, you're audible. Go ahead.

So firstly, on the business side, I understand on the revenue, there has been a lower offtake and on top of that, there has been declining prices. But if I look at the margins, can you just help us understand where are we taking such a higher margin hit versus our peers? Is it safe to say that incremental margins that we were making all this time was because of the ref gas only?

Well, I would -- ref gas actually contributed significantly to the overall top line as well as the bottom line. But I would not really say because now -- if you look at it since the reporting is on consolidated terms. So it would be difficult to say or identify segmental margins. However, at this point of time, the margins in other areas are not hit -- not particularly, as I indicated earlier, that particularly our high-end fluoropolymers, there, we have seen a very, very minor impact in the pricing as well as volumes.

Understood. So for the full year, earlier, it was a constant commentary that a 38% also -- you did not say that you will achieve it out, but there was a constant commentary that 30% is a very sustainable number and that is where the focus remains. Taking apart this one-off overall situation, are you still confident of achieving the 30%? And for this year, what is the margin guidance or outlook, if you can give? If you cannot give a specific figure, it's fine, but just a guidance of where exactly you will end up for this year and next year?

Yes, Harsh, for this year, at least, we can say that we'll achieve the 30% margin. We expect to catch up going forward. However, for the next year, I think we normally don't give any guidance in terms of what our numbers will be. However -- and we have stated again and again that we expect our margins to remain around 30%. That position we are still holding on to.

So H2, you will catch up significantly faster to achieve that consolidated full year 30% margin, correct?

I'm sorry, could you come up again, Harsh. I'm sorry...

So H2, you will pick up significantly faster in terms of margin, which will lead to consolidated FY '24 margin to be hovering around 30%, am I correct?

I think I misspoken there. I think we -- what we are saying is that, that FY '25, we expect to come back to our stated 30%. This year, of course, so far have been severely impacted by a number of parameters, as you know. So we expect the margins as well as the top line also to be lower. We expect to see, of course, the coming quarters to be better than what we have seen in the last 2 quarters. That's what we are stating.

Understood. And second question is on the balance sheet. Overall, our working capital days have short quite a bit, and a large part of that incremental is because of inventory. So how is our inventory situation right now? And once we enter the H2, now we'll directly see the balance sheet now towards the end of the year. But from now to till the end of financial year, how will our overall working capital and inventory position look like? And what led to also such a spike in overall inventory days?

Yes. The working capital has increased primarily because of the finished goods inventory and because you know that since the -- our volumes have come down. However, most of our sales actually is in overseas market, where we have a stock [indiscernible]. So our stocks overall, based on our planning, has gone up in our depots overseas. However, going forward, we expect to -- feed to come down and by the end of the year.

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

Wishing you a very happy Diwali in advance. And Kapil, so thank you a lot for your brief remarks on fluoropolymers business. Sir, my question is to you, if you can share a few moments on the PFAS issue, while there's a lot of literature available to read, but it's still quite an undiscovered topic. So if you can share what's exactly happening across the globe and if there's any impact we see in the business going forward?

Thanks, Archit. First of all, happy Diwali to you as well. As far as PFAS is concerned, we have already stated that PFAS primarily, the concerning area is the small molecules and molecules which are mobile. And in case of fluoropolymers, which are very long-chain molecules with very little or no mobility at all, we do not see this issue going forward. And it's not the impact of PFAS what we have seen lately in the volumes. And we don't see PFAS significantly impacting or at all impacting our fluoropolymer business.

Sure, sir. Would this also be the case for the other -- I know that we have discovered route to make PFAS free, PTFE and PFA. But what about the other molecules? I just wanted some more elaborate understanding on just the way we see it going forward because I think the EPA and 5 countries in Europe are still kind of [indiscernible] with respect to taking this issue a bit ahead, which this comes out quite negative. So I just wanted to check your understanding on this.

Our position in this, again, is the same Archit, that fluoropolymer will not be impacted. And as we had stated earlier that also have processes developed using non-fluorinated surfactant. We -- we have infact in almost all fluoropolymer where we are present. So we do not see PFAS to be an issue going forward in impacting fluoropolymers business.

Sure, sir. Sir, just one more question on PTFE. Firstly, if you can share where are we on the debottlenecking that you are planning to take it to close to 21,000 tonnes of capacity? And if you can also share where are we with respect to the increase in other fluoropolymers capacity? Just one supplementary thing on the PTFE, the clarification that I was speaking for was more from the understanding of prices, I know that we've seen quite a good -- or rather a healthy pricing in PTFE in the last 2 years. And probably in the current state, the commodity grades have -- coupled with the inventory situation have dragged the per kg realization, which used to hover somewhere between $10 to $11 earlier. I just wanted to get your understanding on where the pricing can be going ahead in FY '25, where do you see it heading to? Would the specialty mix be so high that it can take up or rather offset the lower grade commodity PTFE that we are selling currently?

Yes. I think you asked multiple questions in the same question Archit. Let me go one by one. First, about the debottlenecking. As I stated earlier that we have staggered our CapEx plan. And based on the market right now, our capacity debottlenecking plan has been slowed down because -- and however, we are probably slowed down by a couple of quarters, which should come back online. We have all the pieces and plans in place to achieve that as soon as we see an uplift in the market. Coming back to the pricing side, there's been a continuous effort of us, as Kapil stated, to go to higher-end value grades and sort of upgrade ourselves in the product mix in PTFE. So -- although we don't give the pricing for the individual polymers, but what you have stated, we expect to remain there or even do better going forward in next year as the product mix is going to be more or less skewed towards higher value add up. Kapil, do you want to add anything?

No, I think you're absolutely right. We are constantly churning our grades to see to it that we go into higher than we did application as the way I have stated to you earlier. And that process keeps on going on.

Sir, can I squeeze in 1 more, sir?

I'm fine.

Yes. Sir, actually, we were given to sort of understand that when the chip shortage happened, the TFE monomer was rather diverted towards manufacturing more of PFA than PTFE, which also had some ramifications on PTFE prices, which we also enjoyed. Now do you see this issue kind of normalizing that the availability of PFA and PTFE both has more or less become a level playing field for but the competition also? And would that also take away some of the pricing benefits that we enjoyed in the past?

I'm not really clear about your question. But what I'm asking is that -- what I understand from you is that you are saying that the TFE going to PFA versus PTFE, is that correct?

Yes, yes. Yes. We are made to -- by speaking to some of the industry guys, we kind of understood that PTFE prices went up because there was some unavailability of the TFE monomer. Like I said, it was used more in making PFA because there was an inherent shortage of chips and since it finds applications in semiconductors, PFA had a higher demand than that of PTFE. Correct me if I'm wrong. I could be absolutely wrong also.

We are not seeing that. But as Kapil has indicated in his overview, obviously, PFA has a good potential and primarily driven by the semiconductor segment. As far as we are concerned with respect to our own availability of TFE, we have a fairly high capacity of TFE available. All our TFE plants are geared towards meeting their demands, not only at PTFE but also for PFA.

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

First question, again, on the margins. I'm just looking at the gross profit margin, which is your revenue minus cost of goods sold, which in this quarter came in at around 64%. If I go back into FY '22, FY '21, where it was only R22, we didn't had R-125. We used to do 67%, 68% or close to 70% as well in few quarters. So can you help us understand why there is a drop? And even in last quarter, I don't think refrigerant was big us. We did a 70% gross profit margin. What has changed in this quarter for a gross margin can drop by 700 basis point?

Okay. I'll let Mr. Manoj Agrawal, who is here. Yes, Manoj.

Yes, Sanjesh, essentially, gross margin got impacted due to the volumes have gone not only because of quantities but because of prices -- the softening of prices also in both lower-end polymers and as well as other chemicals. And our refrigerants also. So also these put together has reduced the gross margins.

No, Manoj. Again, our raw material prices would have also fallen equally, right? Because the entire chemical has fallen -- in fact, when the raw material prices fall, finished prices fall, mathematically, margins go up. They don't come down if we are protecting the spreads.

Finished goods prices all acceleration is higher than the raw material prices falls because you always keep the inventories of the raw materials and even finished goods inventory. So that is -- there is always a lag effect between the catching up the raw material prices with the finished goods prices. So that effect will play out in next quarter or so once the inventories are leveled out and both raw materials and finished goods.

Okay. So there is some inventory impact, which is dragging this. So this is not a representative margins or it's a representative margin?

No, this is not any representative margin because both finished good prices and raw material prices are there. Raw materials and finished goods inventories are the high-valued inventories based on the earlier procurement. So once this thing get level out, our definitely margin will be better and going forward.

Got it. Got it. Second to Kapil. Kapil, can you help us understand the competitive landscape in the European market for the fluoropolymer space? That's number one. Number two, how does the exit of Dyneon is going to help us in FKM, FFKM and all those things? Can you just help us how this market is going to restructure and how are we looking ourselves to position in that scenario?

Yes. See, as I've already indicated that some of these legacy suppliers, either they have -- one of them is exiting and the other one is [indiscernible], definitely, the landscape is going to change. As GFL has constantly striven to reach to the higher value-added segments always, going away from the commodity kind of grade. So this is going to help us because a lot of market share from that exit should be captured by GFL, too. And we are positioning ourselves to do that.

Okay. And can you help us with the competitive landscape because Chinese will also be looking for the same market as well, right, at the same time? And they're already sitting on a huge capacity.

Fortunately for us, they are mostly in the commodity grades. They don't come into specialty grades, neither do they have the grades to qualify for those applications which take a lot of time. The other landscape of the competition is that most of our legacy competitors has also not increased any capacity in the last couple of years and neither do have any announcement to increase their capacities. So that should help definitely us in capturing more market share.

One more thing I would like to add here, Sanjesh, is that the exit of the player that we are talking about was present all in the very high end of segments, okay? And what happened is that these were not a commodity segment. And some of the segments were actually developed and created by these players -- or this player. So developing and meeting that is also -- has been a challenge, which we have been able to overcome very successfully. And we have been able to develop those grades.

So are we getting approval for the similar grade because we need the supplies before the exits, right? Will the approval stage, we have approved by some of them? And when is the supply is going to start, which they have approved with then?

Let me add one more point for clarification for you just to make you understand the whole situation. Because we mentioned this exit of legacy players earlier. But this process actually has been delayed. Because what happened when these exits were announced, due to uncertainties, the customers have stocked up materials, okay? Because these were some of the difficult grades. They were not sure who could supply, who could come up and reach up to that. So in that uncertainty, the customers have already stocked these materials quite a lot from these players. And that has also added to a destocking. While we had started developing those products, getting approvals, they were not reflecting that much in terms of the orders or the volume. But we expect to see that now in this current quarter -- end of this current quarter and move from the Q4 of the financial year. Anything, Kapil, you want to add?

Yes. So whatever Mr. Kapoor had said...

Sorry to interrupt you, Mr. Sanjesh Jain, I would request you since...

It is not me, it's the management speaking.

Sorry, go ahead.

Yes. So I think I'm in sync what Dr. Kapoor said in absolutely in the same way. And as I had said that -- and you're talking about the approvals. In fact, a lot of the grades are already approved, and we already started seeing the tailwinds coming up. And the process will hasten further from the next quarter onwards. As Dr. Kapoor is saying, the destocking also ends with those customers.

So are we already approved in many parts of it or it is still under the process, Kapil?

The majority of the grades, yes. Some of the other grades, which we were earlier not really going and competing, but now we are competing and the approvals are under placed because these announcements were made around 3 quarters back. So the grades were given for approval. The approvals have started coming in. And some of the approvals will come by this quarter end.

[Operator Instructions] The next question is from the line of Ketan Gandhi from Gandhi Securities.

Dr. Bir Kapoor, I have a question for you. In your opening remarks, in the last statement, you said next year would be better than FY '23, that is the previous year, which we've shown the highest profit in life. So it is FY '23 or FY '24?

Definitely better than FY '24, but we were sort of benchmarking FY '23. So we expect FY '25 to be on the same line and better than FY '25. You heard it right, yes, Mr. Gandhi.

Great. And just repeating, next year could -- will be better than FY '23?

Yes.

The next question is from the line of Rohan Gupta from Nuvama.

Sir, first question is on our PTFE, where you had mentioned in the presentation and your opening remarks as well that there will be significant pressure in low grade of PTFEs, commodity in nature. Sir, what I understand that we have a probably high share of PTFE in a high end of the product portfolio. So why our product basket and margin has been getting impacted in the current scenario with the Chinese dumping if we were already in a high grade and value-added?

Yes. Thanks, Rohan. And I'll let Kapil answer that question. Kapil, please?

Yes, Rohan. In fact, as earlier calls, Dr. Kapoor has mentioned, that we have somewhere around 25% to 30% of the portfolio which still we compete with the Chinese and Russian players in the commodity segment. So those prices definitely went down. And they were competing -- we had to compete with them in the Indian as well as global markets. So that has impacted to some extent. However, as already stated that it's a constant endeavor for us to move on to the next value-added chain. And that process has gone on. And probably subsequent quarters, we'll still move away from that 30% difference to even much smaller, minuscule difference in terms of going to the share of the high value-added grades. That impact will be seen in subsequent quarters.

Okay. Sir, second question is on our margins. What we are trying to achieve is roughly 30% EBITDA margin. Sir, we have definitely seen a very high, extraordinary margins. And even you have earlier mentioned that 35% to 40% kind of margins in the fluoropolymer high end is likely to continue. We have seen a significant correction in the prices and product realization across the product basket in fluoropolymer as well, which is into the tune of almost 30% to 40%. With this kind of price reduction, we are still talking about only kind of 30% margin. So it means that the spreads, which we have enjoyed earlier, there is almost 50% kind of reduction in those spreads. So even in terms of percentage, we may talk about the 30% margin. But in terms of the contribution to the profitability from the fluoropolymer segment is going to remain significant lower than what we had achieved in FY '23 or probably earlier until unless that we are looking -- the new product chain, the new product introduction is going to have a very, very high margin, and that can compensate these kind of losses.

Rohan, we've always stated that sort of upwards of 30% margin on overall. Because our endeavor has always been to -- as the prices are -- we are hit at very low end of product, we are upgrading our product mix continuously to go to the higher margin products. And our endeavor has been to maintain that.

So just to clarify that on average realization, you still aim to achieve that whatever realization we were working earlier by improving the product mix. And on them, you're talking about these kind of margins, right, not on the lower commodity prices and lower end of the realization.

I'm not really clear, Rohan, what you're asking. Because the thing is that the overall product mix of fluoropolymer is changing.

What I meant to say that our average blended realization earlier, a year back, was close to $35 to $40 -- $40-plus, which has corrected significantly. And on that, you were talking about 35% kind of margins. Now that product basket, you still aim to achieve at $35 to $40 with the introduction of new fluoropolymers and [indiscernible] fluoropolymers going forward. And on them, you're talking about 30%-plus margin. Because right now, the realization -- our basket realization has come down very sharply. That is also visible in your presentation. So just need some clarification on that.

Rohan, I don't think we ever stated that our average share pricing is $35 to $40. Some products in the price range that you stated, some are on the lower side. So this realization is different than what you stated. So it's never we stated that the overall realization is the range of $35 to $40.

Fine, I'll seek for further clarification later.

PTFE, as earlier stated in the call, was $11, $12 kind of range. That's...

I was more referring to fluoropolymers ex PTFE in the high-end value-added, which included FKM, PVDF and more importantly, catering to the [indiscernible]

High-end fluoropolymers with the new-end fluoropolymers, it's going up. Yes, you're right. But on an average, taking up to $35, $40, I'm not so sure. I don't think we indicated that number ever.

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

Sir, first question is on the EV and new energy space. So what is the kind of revenues at peak utilization levels based on the current investments that you're looking at? And then it will start flowing, so FY '25, do we expect any revenues to come in or to be starting from FY '26?

On battery chemicals, as I stated earlier that, we will give you a separate brief. What I have stated today is that the investment that we have made so far, the asset turnover for that is 2x. And we expect to see the capacity utilization of these assets by FY '26. That's what we have stated. And we have a separate business outlook and our view on battery chemicals, right?

Just to get a perspective, what would be the number of -- what is the number in terms of the investment that we have made right now?

We have already stated, I think it's around INR 800 crores -- INR 600 crores to INR 800 crores that we have invested in our battery chemicals business so far, particularly in the integrated LiPF6 plant and also electrolyte plant.

Sure, that answers it. And the second question, again unfortunately, harping upon the margins part, so in 2018, when we had actually started working on the fluoropolymers front, in one of the presentations, we had indicated that from -- I mean, the investments that we were going to make that time, the revenue potential was about INR 600 crores and EBITDA of about INR 300 crores, indicating probably 50% margins. Just to get a broader perspective, what would be a broad margin range for the fluoropolymers and the fluorochemicals segment? I mean, I'm not talking about the current environment or the last year's environment. But in a normalized environment, what would be a broader range? Again, I mean, it may not be a small range of, say, 30%, plus/minus 1% or so, just a broader range from -- this will help in terms of modeling what could be the broader consolidated margins for -- at a business level.

We have stated, Rohit, that under normal conditions, our average margin to be around 30%. Obviously, in this average, the fluoropolymer is at the top, where [indiscernible] maximum and followed by specialty and wet gas and finally, the bulk chemicals. Because we have a spread from bulk chemicals to fluoropolymers. So we do not give guidance on individual segments. However, we have stated that under normal conditions, we expect to get 30% margin.

The next question is from the line of Mithun Soni from Geecee Investments.

Sir, I want some clarity in understanding, so let's say if you were to benchmark on an index of 100, all the prices for Q1 or Q2 last year, whatever way you like it, how -- where is -- which products is where you have seen the maximum decline and if you can give some percentages as to what has been the decline?

It's difficult to give, but let me start from the -- in the commodity segments, where the prices have gone [indiscernible], okay? There's a significant erosion in terms of the pricing in this segment. There's also in case of [indiscernible] also, there's an impact more on the volume side and marginally on the price side as well. Fluoropolymer, if I look at it, as Kapil has stated and I said earlier that the major impact has been on a low-end PTFE commodity segment, which got impacted more than [indiscernible]. So this is the situation.

Sir, can you give like a percentage form, like on a base of 100, like in the lower-end PTFE, the percentage decline in pricing would be brought about -- which this is for us or for the industry, would it be about 10%, 15%? Or is it mid-20s? And similarly, in the ref gas.

Again, I'm struggling to how to give product because there's a very large number of product mix and the product...

Sir, I'm just trying to -- I mean, a broad indication. The idea is that when the -- which is impacted significantly by Chinese and Russian, the drop has been very significant, probably 25%, 30% almost?

25%, plus/minus 5%, yes.

Okay. So that would be the impact, which you would have seen in the low-end PTFE grade where the competition was high?

And you know the numbers for the other commodity segments.

Got it. Sir, you're saying if you were to exclude these three categories, the fluoropolymers, your specialty and everywhere, the impact of pricing is not material, in the sense, it may marginal plus/minus 3%, 5%.

I'm sorry, impact of what did you say?

Impact of pricing in the specialty fluoropolymers or specialty chemicals, other than this low-end PTFE, the high-end PTFE, the PVDF, the PFA, the impact of pricing...

No, not been impacted, as I stated earlier.

Okay. So basically, this is the only impact which has affected us to some extent. And given that the raw materials, we had this higher-priced raw material, we have also seen the gross margin impact, which should go back to normal in the subsequent quarters. Is that a fair way to...

I think once the volumes would track and we see a tailwind from the factors that we stated, we expect to get back to numbers in fluoropolymers what we had achieved earlier.

Okay. But sir, and you said that recovery of destocking coming to completion, competition is also sort of normalizing from China. Are you seeing the things start improving at the ground level in this quarter itself? Or you feel it will -- it has still to catch up in terms of the improvement?

Yes, I'll let Mr. Manoj...

See, the headwind from China still remain in this quarter also. However, as stated earlier, at least I am seeing in the business prospects from all the global arena, so our fluoropolymers, the green shoots have started coming in. And the number of inquiries are going up. And I expect that momentum now to continue. And as we stated for the reasons earlier, the subsequent quarter should start seeing us uptrends quarter-by-quarter.

Got it. And sir, one last question -- clarification, as we indicated that FY '25 should be -- we would like to surpass FY '23, can we -- should we look at it as an absolute basis surpass both in terms of the revenue as well as operating profit? Because margins, I understand there's a lot of volatility, 30%, 32%, 35%. But on an absolute top line and revenue and absolute operating profit, what we did, will we -- can we -- do you think we can surpass that in FY '25? Or we'll try to hit that?

Yes, exactly what I stated earlier, yes.

The next question is from the line of Yash Shah from Investec.

Sir, first question was regarding on the ref gas side, we mentioned during our opening comments that the [indiscernible] business was impacted majorly because of leaving out in U.S. Just wanted to understand from you, sir, wasn't it supposed to be helpful for us that we would have been able to [indiscernible] like cutting down some of the production that would have given us an advantage? Just wanted some clarification on that portion.

Yash, your voice is breaking. Can you -- still not able to get your question, please? Can you just repeat that? I think you're asking about the U.S. market, the ref gas.

Yes. With the U.S. phasing out -- yes, with the U.S. phasing out, sir, was that not supposed to benefit us is what my question is, sir, on the ref gas side.

Yes. Actually, the thing is that the phasing-out is of particular -- as you said, the R125 because that's high GWP potential. And the thing is that this time, it got impacted from domestic as well as U.S. both. And there's also been some other issues in the U.S., which I would like to point here that there have been some [indiscernible] has happened in U.S. imports. And because of that, some of the volumes to U.S. has been impacted. That's [indiscernible] avoiding or circumventing the duty structure.

Understood. So sir, is this not structural in nature? Like what can lead this to -- for this trend to change? Are there any duties coming that you are aware of? Or can you throw some light on that?

See, I think this is what we understand from the market space that this is not structural in nature. It happened and then now it's normalizing. So we had stated that our ref gas volume is expected to improve from what we have seen. However, it may not be as they were as high as what we have seen in FY '23.

Okay. Sir, my next question was regarding our new age verticals which you are targeting by the likes of EV and solar. Can you provide some kind of an idea of when do we plan to launch PVDF in battery and solar [indiscernible] in semicon? Also, if you can basically give some idea of how many customers we are [indiscernible] on the electrolyte and [indiscernible] side, some kind of a qualitative answer on these new age verticals, sir?

See, in the EV segments, our plants are already in the final stages of commissioning. We expect to do the sampling from these commercial plants very soon. Some of the samples created at the lab scale has already been with the customers. So we are engaged with a large number of not only domestic but also global customer on EV. And as I said earlier, that once we have these plants fully commissioned and commercialized, we will have a special call and a separate call to give you all a complete overview of the battery chemicals and our plan going forward on that.

Understood, sir. Also, sir, one last small clarification question, sir. We have seen PFA demand to have picked up significantly in this quarter. Is there any specific reason for that, sir?

Yes, Kapil, please?

Yes, Yash, so the semicon industry is doing well. And because we already mentioned that the demand is going to come from AI and 5G segments, too, so because of that, expansions are happening in the semicon industry. You have also seen that PLI has been announced. So in anticipation of that, the investments are coming and the demand for PFA is coming up quite nicely for us. And we are also making our expansions and debottlenecking just to suit that demand also.

Got it. One last one question from my side, sir. How much capacity have you added in the fluoropolymer side in H1?

We have stated earlier that there are certain nameplate capacity, but when we add -- when actual products are made, different product grades have different productivity. But we already had stated earlier that the new fluoropolymer capacity addition was, I think, around 1,400 or 1,500 tonnes, something like that, what we stated earlier, several quarters back, okay? So we are in the phase of ramping up those because -- as we speak. And these all will get utilized over a period of next year.

The last question is from the line of Resham Jain from DSP Asset Managers.

Sir, just one question on the price fall. Sir, one is that whatever you have sold, there will be a lower gross margin and that's a part of P&L. And the second is whatever raw material and finished goods inventory you might be carrying. Has there been any provision element also in your numbers this quarter?

Yes, I'll invite Manoj. I don't think we have a provision.

No, no, no. There's no provision [indiscernible]

I would now like to hand over the conference over to the management for the closing comments.

Yes. Thanks a lot. And let me close this call by reassuring all of you on the positive outlook that we hold for us and the work that we have done behind the curtains to be able to tide over this tough phase and embark on the growth journey. We have all the building blocks in place in our major business segments, be it fluoropolymers or specialty chemicals. We are poised for a very strong growth going forward. There were also some questions on margin. And I would like to assure you that going forward in FY '25, we expect to get back to our normal business margin, which is 30%. And looking at the current business scenario, I would not be able to provide much guidance on FY '24. So to close it, we are confident of delivering growth in FY '25. And the remaining quarters of H2, we expect to be better than what we have seen in H1. We are seeing some green shoots also. And with this, I would like to close this call, and thank you all for your interest in GFL, and would like to wish you and all your families a very, very Happy Diwali. Okay, thank you. Thanks, Nitin.

Thank you very much, sir. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.