Gujarat Fluorochemicals Limited ($FLUOROCHEM)

Ladies and gentlemen, good day, and welcome to the Q4 for FY '26 Earnings Conference Call of Gujarat Fluorochemicals Limited, hosted by 360 ONE Capital. [Operator Instructions] I would now like to hand the conference over to Mr. Rohit Nagraj from 360 ONE Capital. Thank you, and over to you, sir.

Thanks, Rituja. Good evening, and welcome, everyone, for Gujarat Fluorochemicals Limited Q4 FY '26 and FY '26 Conference Call. We thank the management to provide us the opportunity to host the call. We have the management represented by Dr. Bir Kapoor, CEO and Deputy Managing Director, along with the senior members of the management team. Now I would like to hand over the call to Dr. Bir Kapoor, sir, for his opening remarks. Over to you, sir. Thank you.

Thank you, Rohit. Good afternoon, everyone. A very warm welcome to all of you for GFL's Quarter 4 FY '26 Earnings Call. For this call, I have with me my colleagues, Mr. Akhil Jindal, who is Group CFO; Mr. Manoj Agarwal, who is CFO of GFL; Mr. Kapil Malhotra, Business Head of Fluoropolymer; and Mr. Rajiv Rao, who is the Business Head of Battery Materials. The company announced its quarter 4 FY '26 and full year results at a Board meeting held today. The results along with earnings presentation are already available on the stock exchange and on our website. I'll briefly highlight the key financials and then give you an update on business operations and outlook. FY '26 was marked by a highly volatile global operating environment. The first half of the year was impacted by uncertainty surrounding U.S. tariff policies and evolving global trade dynamics, while the latter part witnessed heightened geopolitical tensions amidst the war in Middle East, dampening the macros and the business environment, which continue to disrupt global trade flows, impact logistics and supply chains, and contribute to elevated volatility across commodities and currency markets. Sharp movement in energy prices have also resulted in higher input and logistic costs across businesses. While we are seeing some signs of stabilization, the conditions continue to be volatile. Despite these headwinds, the company remained focused on disciplined execution, operational excellence, supply chain optimization and stringent cost management across businesses, enabling us to navigate the evolving environment with agility and resilience. Against this backdrop, our chemicals business delivered a commendable performance during quarter 4 with revenue growing 11% year-on-year to INR 1,358 crores, EBITDA increasing 13% year-on-year to INR 353 crores, and PAT rising 5% year-on-year to INR 169 crores as compared to quarter 4 FY '25. The performance was led by growth in Fluoropolymers segment, and the commencement of our [indiscernible] production in March 2026, which marks an important milestone in our fluoropolymers growth journey. Continue on the growth journey, GFL has earmarked to INR 3,130 crores of CapEx for FY '27, of which INR 2,300 is for GFCL EV and INR 850 crores for GFL. Of INR 850 crores CapEx, approximately INR 150 crores will be spent on expanding our refrigerant gas and related infrastructure capacity; INR 222 crores will be spent on new high-purity electronic specialty chemicals or semiconductor sector; and another INR 250 crores will be spent on adding new fluoropolymer capacities and the remaining INR 230 crores will be spent on increasing capacities for backward integration, including the regular annual maintenance CapEx. The EV CapEx of INR 300 crores, [ INR 230 crores ] will be spent in increasing capacities across existing products, in addition to the CapEx for natural graphite material -- natural graphite [ ordactive ] material, I'm sorry. And this CapEx is part of the overall CapEx of INR 6,000 crores that we have earmarked for GFCL EV. The Fluoropolymers segment delivered a strong performance with revenues growing 19% year-on-year and 14% quarter-on-quarter to INR 848 crores in quarter 4 FY '26. The growth was primarily driven by value-added products and higher volumes across key product categories. Our focus on high-value specialty grades, deeper customer engagement and expanding global reach continues to support growth momentum during the quarter. Looking ahead, we remain constructive on the long-term outlook for fluoropolymers, supported by increasing penetration across structurally growing sectors such as semiconductors, EVs, battery energy storage systems and clean energy applications. In addition, global energy transition themes, including hydrogen, fuel cells, electrolyzers and solar are emerging as important long-term demand drivers for fluoropolymers. Given the increasing complexity and purity requirement in these applications, we believe the specialty fluoropolymers will continue to witness strong demand over the medium to long term. The earlier CapEx in this segment should achieve its optimum utilization level in the current financial year. We will be incurring further CapEx starting this year to continue on the growth journey in this segment. In the Fluorochemicals segment, production and sales of R-32 commenced from March 2026, strengthening our refrigerant portfolio, despite weakness in the Middle East market [indiscernible] and an overall challenging global environment, segment delivered a stable performance. We will be incurring INR 150 crores of CapEx on increasing capacity of refrigerant gases in the current financial year. Increased production of R-32 will provide major growth in this segment in the subsequent quarters. Demand for refrigerants is expected to remain healthy, supported by increasing penetration of residential air conditioning, commercial refrigeration, cold chain infrastructures and surge in demand of cooling infrastructure for AI data centers across the globe. Within bulk chemicals, the demand outlook for caustic soda is expected to remain stable in FY '27, while pricing is likely to remain range-bound due to domestic capacity additions and balanced supply/demand dynamics. Similarly, the performance in fluoromethane business is expected to remain range-bound in the near term amid moderate demand conditions and competitive market dynamics. As we look at our battery materials business, we believe the segment is now at an important inflection point. The global energy transition continues to accelerate and the demand environment for advanced battery materials remains highly encouraging. The battery energy storage system opportunity, in particular, has strengthened significantly over the last few quarters. Increasing investment in AI and machine learning infrastructure coupled with driving data center capacities are driving the power requirements and creating structural demand for energy storage solutions globally. Against this backdrop, we are pleased to share that all the initial capacities planned under phase one have now been commissioned and contracted for. We have secured marquee anchor customers across all our battery material products, which provide confidence on utilization ramp-up and commercial scale-up over the coming quarters. The LIPF 6 salt has now received approvals from most of the major global electrolyte players, and commercial sales are scaling up in line with our plans. We have orders in place for FY '27 and beyond. Accordingly, production will be ramped up quarter-on-quarter. In cathode active material, sample from our plants have received initial approval and final qualification is expected by the end of this year -- end of the third quarter, I'm sorry. Thereafter, commercial supply will commence, for which we have already off-take agreements for the entire capacity. As part of our next phase of growth, we are also setting up natural [ graphite ] and [ ordactive ] material facility. With this addition, we will be able to address nearly 70% of the value of the LFP battery cells, positioning us as one of the most integrated battery materials platforms globally. To support this growth road map, we have planned a CapEx of approximately INR 2,300 crores for FY '27 across the battery materials portfolio, largely focused on growth CapEx, including the anode material project. To support this growth road map, we have planned -- I'm sorry, we remain committed to our previously outlined guidelines of INR 6,000 crores cumulative CapEx by FY '28 across the battery materials portfolio, with targeted asset turns of nearly 2x and EBITDA margins of over 25% plus. The full earnings potential of these investments expected to be realized by FY '29 as the facilities progressively ramp up and achieve optimum utilization levels. While the macroeconomic environment remains challenging, the broader business landscape is gradually showing signs of improvement. We remain focused on strong execution, prudent cost management and disciplined scaling of our emerging growth platform. We remain confident in our ability to deliver sustained growth and create long-term value for all our stakeholders. Thank you very much. And now I open the floor for questions.

[Operator Instructions] The first question is from the line of Ankur Periwal from Axis Capital.

Congratulations on a good set of numbers. First question on the CapEx announcement, both on the battery side as well as on the stand-alone side. The fluoropolymer expansion will this be on [ PTFE ] side or the new fluoropolymers? How do you see that? And just commensurate to that, the fluoropolymers growth for the full year that we are seeing around 15-odd percent, how will you break this up between PTFE and new fluoropolymers?

So the investment will be on new fluoropolymers. And so far, we have not been given -- we have not been giving any breakup of growth of respective fluoropolymers. However, all I can say at this point, Ankur, is that the capacity that we have set up a few years back are almost reaching its full capacity -- optimum capacity utilization. And now is the time for us to add CapEx in new Fluoropolymers segment right now.

Okay. Sure, sir. On the [ res gas ] side, INR 150-odd crores expansion there. This is largely for the 20,000 tonne capacity that we are looking at? Or are there any further thoughts to expand that capacity further with respect to the quota that we have?

No, it's mostly -- as of now, we have announced that we'll be going up to 20,000 [ tonnes ] in R-32. So it's related to that as of now.

Okay. And by when are we expecting this 20,000 tonne to be commissioned and production [indiscernible]?

The production has already started. As I said last time that we have achieved over 10,000 tonne capacity at the moment. And over a period of time, I think it will be ramped up to 20,000 tonnes.

Sure, sir. And just lastly, on the battery chemical bit. Good to see the CapEx seeing a ramp up there. When we are saying from a product approval perspective, a large part of things are already there. These are largely for the [ salt ] approval or even the other products, the value chain, et cetera. How is the progress there? And on the technology side, any tie-up or it is largely homegrown for us there?

So Ankur, we started with [ salt ] and electrolyte in the beginning, as we had indicated. So initially, obviously, that our initial capacity was in the salt, capacity commissioning was in that area. So our approvals are all in the salt at this space. The second we added was cathode active materials. So that plant was commissioned recently. And we have prepared the sample, and our initial samples have already been qualified. So now it will go through the full qualification, and which we expect to get it by the end of this year, which is the third quarter of this financial year. And then our supply will start after that so we get the full qualification. So in LIPF 6, we have achieved the full qualification from a number of players and the supply is being ramped up. LFP at the early stage plant is already commissioned, as I said, and samples are made. We have optimized the product as per the customer need. And once the product is fully qualified, the supply will start and this entire plant is fully contracted.

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

I have a couple of questions. First, on the battery side. When we say that we are fully booked for the existing clients, are we talking about LIPF6I? And how much revenue potential when we say? Because for us, we don't know capacity, we don't know the CapEx you have put. So how to think about FY '27, FY '28 revenue? And when you say we have fully sold capacity, is it fair to assume that in FY '27, that entire capacity will be sold to the customer?

Okay. What we have is that whatever capacity that we have in place now is contracted, okay? This is true for LIPF 6 as well as for LFP, which has been recently commissioned. Now coming back to your question, Sanjesh, regarding revenue potential. And I think we had guided earlier that once you put in a CapEx, there's a certain gestation period in terms of plant getting stabilized, getting the right quality and then qualification. And subsequently, the revenue starts coming up. And product mix average, I had indicated 2x the asset turnover. So I would follow the similar approach because it would be difficult for me to give an exact number in terms of the -- but if you look at the way our investments are happening and the CapEx are being built in, over a period of time after certain gestation period, we would start seeing a 2x revenue coming in.

So FY '27 be a more, again, a qualification year or we intend to supply a material quantity in this year?

So FY '27 will be a material quantity for salt, which I have already indicated very clear, okay? Because our initial investment is all in salt -- salt plants. See, let me tell you initially, I think this I've explained in several calls earlier, that our initial phase of investment is building up that capacity, which is a smaller commercial scale capacity, to achieve the quality level and get approvals. And then subsequently, we'll go through the ramp phase, okay? So initial capacities in the salt has already been built. We are ramping up phase right now continuously. So that salt, we already have a qualification. So salt, you will see a consistent growth in supply and the revenue coming in. LFP, this will happen a little later. As I said, that it will probably happen at the end of the -- after the third quarter of this year.

Okay. Because we have already put 1/3 of the money what we have thought about, which is almost INR 2,000 crores has already gone into the battery materials. And we are still [indiscernible] 4,000. Even if I just say thumb-rule of 2x, this itself should potentially give us a -- 4,000, probably we have utilities [indiscernible] so probably giving some discount to that. A INR 3,000 crore revenue potential itself comes from the investment already done.

But there is a gestation period. Again, I must say that this is sort of a relatively long-term play, Sanjesh. It's not quarter-on-quarter kind of business. There is a gestation period for each plant because there's a long qualification period, almost could be 9 months to a year, okay? So once the plants are commissioned, qualification for the quality and then the qualification, and then the revenue starts kicking in. And the number that you're talking about will come eventually, yes. But then when the capacity utilization is complete.

Got it. Got it. And on this anode, I never heard about this. Suddenly, why anode? Why [indiscernible]? Because all across, we talked about LIPF 6, [ LFC ] and [indiscernible] and binders. And now with a twist.

Not a twist. It's one of our -- we have been adding product in our battery materials portfolio. And this was kind of one of the last bit, that too, because battery has typically 3 major components: cathode, anode and electrolyte. We are present in cathode, electrolyte we are present, salt, binders, and now anode. And this, we are talking about the natural graphite anode, okay? There are different kinds of anodes, synthetic as well as natural. I'm talking about natural right now. And there's, of course, certain synergy with our capability in natural graphite and all.

What capability? Can you help us understand that?

It would be -- I'll hold on to that for now, but there are definitely synergies that are existing businesses.

Got it. One related question on that before I go to the core business. In this quarter, we saw a sharp jump in the losses because the revenues are largely same as last quarter. But if I look at the EBITDA loss, it appears to be significantly large. Now, why such a large cost [indiscernible] in this quarter?

See, as we are capitalizing our assets, once we qualify, we reach the point where the assets are qualified, all the cost starts coming up right away, Sanjesh, as the volumes are being ramped up. So this will eventually ease off. okay? It's a short-term thing because it's kind of a startup business.

Because your depreciation number on the EV segment has really not gone up.

No. Depreciation number, because as we capitalize, the depreciation number starts coming in. So as the plant and the product gets qualified and we commercialize it, this number gets up. And again, I'll request Manoj to answer. Manoj is here with me.

So you're specifically speaking about the segment of EV business?

Yes, he's talking about the [indiscernible].

Okay. Essentially, we have applied the LIPF 6 plant on 5th of January this quarter, okay? So our operation has started. So before the operations, we are eligible for capitalization of all [indiscernible] expenses and trial production losses, everything. Once we start operations, the accounting standard doesn't allow you to capitalize the expenses. So all the expenses flows through P&L, irrespective of whether your sales [indiscernible] or your capitalization has happened or not. So this has resulted in this. So earlier also, if you have seen some of the expenses which were always we charge to P&L, was around INR 20 crores or so, but this has gone up from INR 20 crores to INR 45 crores roughly. Out of that, one, we have started utilizing the [indiscernible] foreign currency, and that was unexpected onetime loss that will not recur in future because we have now -- M2M, and we have all now recovered it 100%. In vehicle, we don't have to cover anything because we have got [indiscernible] there. Because sales are ramping up. this [indiscernible] on the balance sheet rate and, unfortunately, the movement of dollar and INR was extreme due to Iran and U.S. war, okay?

Got it. Very clear. Another one on core business. So on the core business [indiscernible] was going up in the fluoropolymers by one of the large competition. Have we taken the similar price increases? That's number one. Number two, on the volume and demand itself, generally what happens in an inflationary environment? And destocking happened last year, and it also kicks in restocking which you were struggling because [indiscernible] quantities of 3M and Solvay was still there in the system. I hope this entire phenomenon should help you to get back the demand and approvals. And also in that scenario, how should we see FY '27.

Sure. First, let me answer that quickly and then I'll hand it over to Kapil for a detailed answer. There has been a price increase. We have also taken a price increase, Sanjesh, okay? Because if you look at it, that we have been, in spite of increasing raw materials and the logistics prices, we have been able to maintain our EBITDA margins and continue to show growth in our business. So that, of course, has happened with us also. But for a detailed FY '27 outlook, I'll let Kapil answer. Kapil?

Yes. So as Kapoor has mentioned, we are also seeing the demand growth in this year mentioned by the sectors, which have been semiconductor and a couple of other growth sectors. Plus also we have been mentioning in the past calls also that we are totally focusing on the value-added applications and value-added customers. So this year, we expect to see a growth of around 15% to 20% as compared to the last year in our fluoropolymers products, which we are going ahead. And that is why we are also entailing CapEx also because we are seeing that whatever CapEx are made last couple of years, we are almost at the complete utilization cycle of those products in this financial year. So we are seeing a growth outlook for this year as well as for the next couple of years also, growth coming from the sectors which we are mentioning.

So 15% to 20% when we say it's volume growth, right? Pricing, I think -- pricing itself has gone up by 15%.

You're right. So obviously, that effect also starts coming in. You will see in the results when they are coming out. So that also starts coming out. Whatever -- but there have also been the cost pushed also from the back end also. So that also gets out balanced out also. But we are seeing the growth in prices as well [indiscernible] volumes also.

[Operator Instructions] The next question is from the line of Arun Prasath from Avendus Spark.

Sir, my first question is on the fluoropolymers business. Generally, chemicals business excluding EV. So in the past, we said our [indiscernible] targets for the existing assets and capacity at a much higher level. But now we are saying that we have not even reached 80 percentage of that, but still we are seeing that we are fully utilized and we would like to add CapEx. So how should we look at this? Was it any expectation of [indiscernible] didn't happen because we are not able to ramp up or what's happening around in this fluoropolymers and [indiscernible] business?

Okay. Arun, first of all, we have never given ever capacity utilization numbers earlier. All we are saying right now that the initial capacity that we had put up in new fluoropolymers, we are seeing now that reaching a -- pretty much reaching an optimal utilization. And the time has come for us to now put a fresh set of investments into fluoropolymers because the growth that we are seeing is consistent. Now you're asking that why it has taken some time, et cetera. Because I've said many times that there is a -- as we go into higher and higher grades of polymers, the qualification time becomes longer, okay? And particularly now, for example, if you talk about some of the fluoropolymers which is getting into an application like semicon, the gestation period or the qualification period is long. But today, I think we are in a much, much, much stronger position. And Kapil, do you want to add something?

Yes, continuing on the same path, obviously, when we are going to the high value-added applications, we're talking about semiconductor, talking about hydrogen fuel cells, talking about the other applications, the approval cycles are definitely a bit longer. But now we are on the end where most of the approvals have come in. Commercial businesses have started doing well. And we are seeing that growth coming in. That is why we are very confident about the figures, which I told. And going ahead the new fluoropolymers business, especially [indiscernible] and a couple of other products which we have added, we are seeing that the growth is continuing, and that is why our CapEx is also being planned. We feel that by this financial year, we'll be almost to the maximum capacity utilization of these products.

Actually, there is -- what I meant was not with respect to the product approval time lines, but we understand that it's fairly longer gestation period products. But what I am trying to ask is, is the kind of EBITDA numbers for the fluoropolymers at least in the chemical business, is this a steady state number that we actually envisaged when we put up those plants 2 years ago? Or is it something like lower than what we envisaged?

No. I think, Arun, this has been in line with what we had thought because we had already given an indication of certain EBITDA margins and which we have been sustaining. So I don't think there is any disconnect with respect to what we have talked to.

Understood. And when you're adding capacities, is it across all the new fluoropolymers or is it in some pockets, some -- if you would like to call out a few fluoropolymers where we are adding this proportionately?

Obviously, there are -- the margins are different depending upon the different grades. So some of the new polymers, which is very high end, the margins are disproportionately higher, obviously, yes. So when we talk about it, we talk about [indiscernible].

Okay. All right, sir. Second question on the EV. We say that all of our capacities are contracted. Does it mean that is it something like a take or pay, or after you are done with the qualification, is it take or pay, or is it like more like a soft commitment?

I'm not really at liberty to give details of our contracts, Arun. However, these are all I can say, that these capacities we had put up. There are anchor customers, there are specs agreed on, there are pricing that has been agreed on. And you have some other contract which is inviting. Okay. Do you want to add in? So I would not be able to give details of the customer contract or any detail about the customers.

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

Firstly, accept my hearty congratulations for such a good, resilient performance on the chemical segment, especially from fluoropolymers, against a rather challenging global backdrop. Also very encouraging to see that we are aspiring to be at 70% of the EV battery value. Just one question I had, sir. Just trying to put the CapEx figures in perspective. The INR 800 crores planned CapEx of '27, I understand INR 150 crores, as you mentioned, is towards the R-32. So is the balance part of any specific polymer expansion or is it part of [indiscernible] sir? Because I'm trying to add the numbers up and taking queue from your comment that the cumulative CapEx figure remains at INR 6,000 crores.

Sir, we are unable to hear you.

Can you hear me now?

Yes, please go ahead.

Okay. So Hansal, I think maybe there might be a mismatch in the numbers. The projected number that we have said is around INR 800 crores for GFL, okay? Out of that, INR 150 crores is for [ rev gas ], INR 220 crores for electronic specialty chemicals, which is primarily for semicon. And we have fluoropolymers, we have said INR 250 crores. Yes, you had some question on the fluoropolymer CapEx, Hansal?

Yes, sir. So I got my answer. I'm just trying to wonder how this totals in the INR 6,000 crores of the unchanged CapEx figure. But I guess it has something to do with the bifurcation of the CapEx FY '24, I'm guessing.

So the INR 6,000 crore number that we had said when we started the journey in the new EV vertical or the EV business, at that time, almost a couple of years back, we had said that our plan is to invest INR 6,000 crores in EV business over a period of 4 to 5 years. So I was -- so INR 2,300 crores for EV is part of that 6,000 that we had indicated earlier. Is that clear? And the GFL CapEx are separate, because GFL CapEx are in the chemicals part of the -- is the mother company investments and EV is now being separated out.

The next question is from the line of Archit Joshi from Nuvama Wealth.

Just had one question. Rather a clarification, if you can give on the R-32 capacity, we would be eventually at a 20,000 tonne capacity of R-32, if I understand that correctly. Do we -- would we have any plans to add more capacity going into 2027 given that we have a sufficient quota from the baseline of the [ HCFCs ] and there's another year for us to make use of the time line to add more capacities. And on the same lines, how do we see the ramp-up of R-32 capacity in F 27? Any elaboration over there?

Archit, first of all, we had said that we would be adding 20,000 tonnes in R-32, okay? So we are going through that process right now, and our capacities will soon reach 20,000. It hasn't reached yet. And regarding the subsequent additions, we have also made it very clear that we will be adding the full capacities and utilizing our quota or allocated quantities. We have time, and we will take that call as we go along, looking at the market dynamics and opportunities to utilize it and looking at the product mix and what's the right product mix for refrigerants.

So for that, we will have to wait until a few more quarters to understand how much capacity might get added and what's the kind of quota that we are targeting maybe in the next year?

Yes, our quota numbers are very clear. We have internal estimates because there's a very well-defined guidelines for the quarter. So that number are very clear to us. And we are clear about adding capacities to reach that number.

Got it. And this INR 220-odd crores CapEx, if I heard that currently, for R-32, this is for F '27, assuming that we would have that capacity towards the end of the year or we are very close to commissioning that capacity?

Sorry, Archit, I think we mentioned INR 150 crores for...

150, sorry. Right, right.

So it will happen very soon. Very soon.

All right. So by second half, would we have the full 20,000 tonnes available for sales, would that be right assumption?

The next question is from the line of [ Tejas Arun Sunamis ] from Asian Market Securities.

Yes. My first question is on the EV CapEx. Could you help us with how much has been the total CapEx so far on the EV side and how much have we capitalized for that CapEx?

So approximately 1,900 to 2,000 is what we have already invested so far previous. The plan is to go for 2,300 next year or this coming year. And so this is -- actually is our ramp-up phase now, okay? We have done what we have to do for learning customers, qualifications pretty much. So now this is a time where the serious investments of that, our committed CapEx are going to take place. So with this, I think the remaining -- the subsequent financial year probably would see the similar order of CapEx to reach the 6,000 numbers.

Okay. So this INR 2,000 crores is the amount which you have already commercialized? Would that be correct?

The CapEx that we have already invested, that cash flow. Some part of it is capitalized, not the entire thing, as we are getting ramped up as the plants are commissioned with the intended -- whatever intent of that CapEx is, that's reached, we are capitalizing it.

Understood. And second, on the Oman CapEx, which we indicated last quarter, with whatever has happened in the Middle East, what is the state of that project? Are we on track to go ahead with the CapEx?

We will go ahead with the CapEx, Archit, because -- Tejas, I'm sorry. There are no -- we have not -- no impact on Oman, if you look at the overall capacity. Oman has been overall one of the safest countries so far in the Middle East. And so there's no change in our CapEx plan and we are going ahead with it.

Okay. One last question on the gross margin front. This quarter, we have seen that the gross margin has seen some decline. Could you help us understand what could be the reason we ended up [indiscernible]?

So it's not really decline. It's probably, what, maybe 0.5% point. Very small number. It's not a significant change, Tejas. It's pretty much flat overall.

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

Follow up, sir. You were discussing about the contracts in the EV business. And you said it is not exactly -- I mean it's contracted and sold out. Does it mean we should have no kind of revenue visibility for this year? Isn't it at least for those products where we are done with the approvals and qualification [indiscernible]?

Yes. I'll let Mr. Rajiv answer. Rajiv, please go ahead.

Yes. So we have, as mentioned earlier, our first investment of LIPF 6 salt, where the plants are -- our product has been fully qualified by most of the major electrolyte players. So the commercial sales for that product has started now and we should be expecting revenue for LIPF 6 salt for all of FY '27. As far as LFP is concerned, our initial samples have been approved and the final qualification of that product is expected sometime in Q3 of this financial year. And revenue for LFP [ camp ] should start subsequent to that. Additionally, binders have been fully qualified at major customers and revenue from that should start in the next couple of quarters.

The next question is from the line of Darshita Shah from DSP Mutual Fund.

Just a question on the working capital. Inventory days have continued to move up. A, how do you think this will pan out? Do we have any plans to bring it back to 90, 95 days that we used to have in FY '22, '23? First on that. And second, as the battery business scales up, how should we see the working capital panning out?

Yes, Darshita. I'm requesting Mr. Manoj to take this. Please, Manoj.

First of all, numbers which you are referring to is at the higher base level that was exceptional outlier year where our turnover INR 6,300 crores because the exceptional increase in the chemical prices. That was the first reason. So denominator effect -- base effect was there, which has resulted into abnormally lower inventory cycle of 120 days to 150 days. So far our distribution model is concerned within the polymers, we stock at our Germany warehouse, we stock at our U.S. warehouse and [indiscernible] so almost we have to keep 30 days inventory -- 30 days to 90 days inventory in our plant, 30 to 90 days inventory at warehouses, and the sea transit time also takes 30 to 60 days, depending on whether it's going to Germany or USA. So that is the thing. And our average [ credit ] period is also span between 60 to 90 days. And our -- because we are fully integrated, a lot of creditors are not there in our system, so we don't get that credit benefit. And in terms of that, our average working capital cycle remains high. Further, being we are now stabilizing the or started doing our EV business [indiscernible] business, we have to start procuring the inventories for our EV business and the raw material inventory and we started commercial production of LIPF 6 that has also added. So as we go along, we reach our full capacities and the turnover, automatically that denominator effect will come back and this will get reduced.

So Darshita, one of the reasons is the kind of the business model that we have, where we have stocks in sail and also large dependence on the export market. Because of that, our working cycles or the days are long. But part of it is, of course, is also related to capacity utilization. As our capacity builds up, we'll probably see these numbers go down. .

Sir, if you could explain as to why will we require a 30 to 90-day kind of an inventory at the warehouse in the U.S. and Germany. I mean how does the offtake usually work? I mean why would we require such a high inventory day at the warehouse in the U.S. and Germany like in those stages as well?

Darshita, Kapil Malhotra this side. First of all, the kind of business we are in, we also have to keep the insurance stock for certain marquee customers in both the European as well as the U.S. market because there we have the concept of just-in-time. So we have agreements with them where we have to keep the stocks for them for 2 to 3 months as an insurance. That's one. The second important thing is if you understand now currently, if you see the geopolitical scenario, the voyage time has increased from almost 3 to 4 weeks to almost 7 to 8 weeks. So our material in the stocks has actually helped us in converting the sales. And also we have to see to it that there is almost 8 weeks which is taken in transit time to reach to these destinations. So that is why to ensure that our customers receive material, we have enough stock with us to convert into sales. we have to have these working capital days with us with material in stock.

[Operator Instructions] The next question is from the line of Rohit Nagraj from 360 ONE Capital.

Sir, first question is on R-32. So given that we have commissioned the 10,000 tonnes of capacity, have we already started operating at optimal levels from March? Or will it be happening in subsequent months?

It's already started operating from April onwards. So it's already operating at the optimal capacities. And it will be ramped up as we go along.

Right. And in terms of the customers, how are we looking at it? Is it domestic? Is it exports? And do we have any contracts in place for this 10,000 and the additional 10,000 that is coming in? Any [indiscernible] customers where we have [ leased ] a part of the volumes which are contracted for medium to long term?

Rohit, we have been in refrigerant business for a very long time. We have -- one of the legacy suppliers in this area with a lot of experience in export market as well. So when we look at R-32, it's both domestic as well as exports. And in some cases, we have contracts as well. So we are quite confident that when the capacity is -- when we ramp up the capacity and go to 20,000 tonnes, we'll have no challenges or no issue at all in terms of selling that material. It's contracted as of now.

Got it. And sir, second question is on the fluoropolymers business, what is the kind of potential EBITDA that we are looking at a -- whenever we reach the optimal or full utilization for the existing capacity?

So the thing is that we have still has not reached the full capacity, as I said earlier. So as we are seeing the volume growth in fluoropolymers, the EBITDA will continue to grow. In fact, as we have seen earlier also, as more and more new fluoropolymers are added which are high value add, we see our overall EBITDA going higher because of the higher margin products. So we will see EBITDA growth as well along with the volume growth.

Right. And just last bit on the battery chemicals front. So given that this quarter there has been some improvement in the revenues, do we see a significant or exponential improvement in revenues on a Q-o-Q basis? And by Q4 of FY '27, there could be potential 3-digit number from the battery chemicals front, high 3-digit number from the battery chemicals front as an exit rate?

Yes, Rohit, you are right, we would -- we'll still see a growth going up quarter-on-quarter, and the rise would be significant. And we expect to reach, of course, the 3-digit number by the end of this quarter -- by the end of the financial year in the last quarter, yes.

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

Yes. Thank you very much. And the strong growth driver for short term to long term are all in place, I think. And short to medium-term growth will be driven by the refrigerant and fluoropolymer segment. And the medium to long-term growth journey is equally encouraging for us as advanced battery materials business is scaling up and reaching up to the full potential in coming years. So with this, I would like to thank you all for your interest in GFL, and thank you very much for being part of this call.

Thank you. Ladies and gentlemen, on behalf of 360 ONE Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.