Himadri Speciality Chemical Limited (500184) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '26 Earnings Conference Call of Himadri Speciality Chemical Limited, hosted by MUFG Intime. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavya Shah from MUFG Intime. Thank you, and over to you, sir.

Thank you. Welcome to the Q1 FY '26 Earnings Conference Call. Today on the call, we have with us Mr. Anurag Choudhary, CMD and CEO; Mr. Somesh, EVP, Tire and Strategy; and Mr. Kamlesh Agarwal, CFO. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Our detailed safe harbor statement is given on Page 2 of investor presentation of the company, which has been uploaded on the stock exchange and company website. With this, I now hand over the call to Mr. Anurag Choudhary. Over to you, sir.

Thank you, Bhavya. Good afternoon, ladies and gentlemen. On behalf of Himadri Specialty Chemicals Limited, I'm pleased to welcome you all to our Q1 FY '26 earnings call. We deeply value your continued support and engagement. We are delighted to say that Q1 marks a strong and focused start to the new financial year. It reflects the strategic direction we have been undertaken, one rooted in capacity expansion, technology-driven product development and deeper global integration. These initiatives are aligned with our commitment to build a future-ready, diversified and sustainable organization. This quarter was particularly significant as it reflects the core spirit of Himadri reloaded the next chapter. This phase is more than just a theme. It captures the mindset driving us forward, reimagining what's possible through innovation, resilience and sharp execution. From a financial standpoint, we are pleased to report our highest ever EBITDA and PAT, underscoring the strength and stability of our operations. EBITDA stood at INR 234 crores, while PAT came at INR 183 crores on a stand-alone basis. This performance was led by increase in sales of high value-added products, better operational efficiencies, improvement in yield and strong waste heat recovery systems. While the revenue growth was marginally impacted due to correction in raw material prices, our profitability trajectory remains on a firm sustainable upward path. At the core of our business lies a deep commitment to developing innovative solutions that drive customer satisfaction powered by our robust in-house research and development. Much like our highly integrated manufacturing capabilities, this enables us to effectively cater to the evolving demand of sunrise sectors. We deliver high-performance products across diverse segments, including lithium-ion batteries, paints, plastics, tires, technical rubber goods, aluminum, graphite electrodes, agrochem, defense and construction chemicals. Our sharp focus on quality, process control and innovation continues to keep us ahead in a rapidly evolving global landscape. Post the successful acquisition of Birla Tyres Limited by Himadri Specialty Chemicals Limited strategic partner along with resolution applicant, Dalmia Bharat Refractories Limited in October 2023, significant efforts have been directed towards modernizing and revamping the Birla tire plant at Balasore. During the quarter, tangible steps have been continued to be taken to advance the transformation agenda with operations now having commenced at Birla Tyres, making a pivotal milestone in the journey to establish a high-performance future-ready specialty tire brand. A refreshed brand identity was introduced, featuring a modernized logo and a redesigned corporate website to reflect this strategic shift. We are pleased to inform there has been huge brand recall we have seen from the market. The focus is on building a comprehensive product portfolio of specialty tires catering to off the highway tires, commercial vehicles, agriculture, industrial and electric vehicles. Progress on commissioning the passenger car radial remains on track. This unit is designed to meet the specific requirement of EV and SUV segments, supporting expansion in both domestic and export markets. Additionally, our targeted multi-platform marketing campaign is being developed to enhance brand recall and engage effectively with contemporary consumers. In parallel, we made significant progress in building our clean tech and new energy material vertical, a pillar that will define Himadri's next growth wave. We entered into an exclusive technology licensing agreement with Sicona, an Australian innovator in silicon carbon and anode material. Their SiCX technology proven to enhance energy density by 20% and charging speed by 40%, gives us a strong edge in the evolving EV and storage market. With this agreement, we have taken a strong step towards localizing this technology and bringing it to scale in India. In addition to that, we invested in International Battery Company, IBC, a U.S. headquarter technology developer and manufacturer of chemistry-agnostic prismatic lithium ion cells, acquiring 16.24% equity stake. IBC has an established manufacturing facility in South Korea, which began operation in 2023 and is coming up with a gigafactory in Bengaluru through its joint venture with Mahanagar Gas Limited subsidiary. This gigafactory is expected to be operational by Q4 FY '26. Our advanced materials jointly tested with IBC have demonstrated outstanding results, fulfilling their stagnant requirements for high-performance battery manufacturing. This is a significant milestone for the company as it marks the start of commercial deployment of Himadri LFP cathode active and anode material with IBC presently developing its LFP-based Prabal 2000 using Himadri battery materials. This partnership also opens door to IBC's global customer base across U.S., India and East Asia. While these initiatives shape our future, we continue to strengthen our core with an established high-temperature liquid coal tar pitch terminal already operational at Haldia, we have now commissioned a new terminal at Mangalore. This expansion significantly enhances our logistic capabilities and export competitiveness. In parallel, we are setting up a unique facility, the first of its kind in India to extract high value-added chemicals like anthraquinone and carbazole from our existing coal tar distillates, which is expected to be commissioned in Q2 FY '27. This will help us to reduce India's dependence on import and unlock greater value from our integrated operations. We are also entering the consumer segment with the launch of Durofresh, our high-purity naphthalene balls retail brand, backed by 99.5% purity and stain-free performance, Durofresh sets new benchmarks in vapor strength and long-lasting freshness, reinforcing our technical leadership in refined naphthalene market. Meanwhile, our brownfield expansion of 70,000 metric tons per annum in specialty carbon black is progressing well and is on track to be commissioned by Q3 FY '26. With this, our specialty carbon black capacity will more than double to 130,000 metric tons, making it the single largest specialty carbon black site in the world and place us amongst the top 5 specialty carbon black producers globally. As part of Himadri's vision to become a global front-runner in production of lithium-ion phosphate cathode active material powering 100 gigawatt of lithium-ion battery capacity, we are making steady progress on phase 1 of this journey. This phase involves setting up world's first commercial LFP manufacturing plant outside of China with a planned capacity of 40,000 metric tons per annum. The project is progressing as scheduled and is expected to be operational by Q3 FY '27, with full-scale operations commencing in FY '28. This facility marks a significant milestone not only for Himadri but also as a step toward [indiscernible] As we look forward, we are entering a new phase, one that is bold, transformative and purpose-driven. With a robust pipeline of technologies, disciplined execution and clear road map, we are confident of delivering sustainable and profitable growth. The next three years will be defining years for [indiscernible] new age materials, deepen our global presence and capture opportunities across energy transition, specialty chemicals and downstream value chain. We thank you for your continued trust and support as we skip this new chapter of growth hardly reloaded. With that, I would like to hand over the proceedings to our CFO, Mr. Kamlesh Agarwal, to walk you through the financial performance in detail.

Thank you, Anurag ji. Good evening, everyone, and thank you for joining us today. Hope everyone has had a chance to review our financial results and the latest investor presentation, which has been made available on both the stock exchanges and our company's website. We have commenced the financial year with a clear focus on execution, operational excellence and disciplined financial prudence. Let me begin with the key financial highlights of the quarter. Sales volume have increased to 1,40,090 metric tons as compared to 1,39,175 metric tons a year ago. Consolidated revenue for the quarter stood at INR 1,118 crores as compared to INR 1,200 crores a year ago. The revenue was marginally impacted majorly because of correction in raw material prices, which led to the reduction in the finished good prices. Our EBITDA stood at INR 235 crores as compared to INR 188 crores a year ago with a growth rate of 25%. Our PAT has significantly increased to INR 179 crores from INR 123 crores a year ago with a growth rate of 46%. On a stand-alone basis, the revenue for the quarter stood at INR 1,100 crores as compared to INR 1,200 crores a year ago. Our EBITDA stood INR 234 crores as compared to INR 188 crores a year ago with a growth rate of 25%. Our PAT has significantly increased to INR 183 crores from INR 123 crores a year ago with a growth rate of 48%. Our company has net debt -- net debt was INR 107 crores for Q1 FY '26, while ROCE was 32%, excluding investment and capital work in progress as of 30th June 2025. We remain committed to delivering strong value through our strategic priorities and operational rigor. That's all from our side. We will now open the line for question and.

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

I have a few questions. First, on the graphite, today, there was a news article telling that U.S. has put some 93.5% ADD or has proposed to put a 93.5% ADD on Chinese graphite, and we intend to be in the anode active material. How do we see this as an opportunity? Because we have generally spoken about cathode, not so much on the anode. Are we looking to harness this opportunity as well?

Good afternoon, Sanjesh. So the effective duty will be 165%. Already there is a duty on Chinese anode with this additional duty coming in. So this is a great opportunity for us to supply material to U.S. So it's open up.

Sir, what exactly...

Yes. What?

No, no. What exactly are we looking to export? Because in anode, we have not spoken much about and we have not announced any CapEx. Can you give more color on the anode side of the business?

So anode, we have been doing a lot of research and development, and our work is progressing very strongly. And at that point of time, we will announce the CapEx once the engineering -- now we are working on the engineering part of it. Once the engineering is completed, we'll announce the CapEx and time frame with capital investment...

Got it. So right now, we have not announced anything on anode? Right now, we have not announced anything on anode.

No, no, no. Nothing, nothing. But we are making a lot of groundwork for that in terms of customers' approvals, sending samples across geographies to OEMs. All those things are already moving very fast.

Got it. Got it. My second question is on the volume growth. Last year, we had a very healthy volume growth upwards of 15%, 16%. Now that volume growth looks to be tapering down, how are we planning to see that we sustain the volume growth at least 8%, 10%.

Definitely, we are looking forward from Q4 onwards, you will see a strong volume growth once the capacity like carbon black capacity will come in place in Q3. So from Q4, you will see that capacity coming up. In addition to that, we are debottling some coal tar pitch capacity also. That will also come into play. So from Q3, Q4, you'll see volume growth also coming up.

How much debottlenecking in coal tar distillation are we looking at right now?

So currently, we are at 500,000 metric tons. We are looking at debottling another 100,000 metric tons.

So from 500,000, we will go to 600,000 metric tons, right?

Right.

And this could be commissioned by?

By Q3.

By Q3. The work is...

See, this is not commissioned. This is just debottling. So there is no assets commissioning at a one go. And you will see quarter-on-quarter improvement in the numbers from next quarter onwards.

And this volume constraint, what we are seeing is purely because of the capacity utilization and not that we have seen any softening in demand?

No, no, no. We are, like carbon, we are running at 99%.

Hello?

Yes, we are at very high capacity utilization. So this is because of the capacity constraint, not because of demand issues. So basically, if you look at the turnover also, the top line compared to the previous corresponding quarter last year came down by INR 100 crores, whereas the volumes are more or less same. The reason is the raw material price has considerably corrected. And because of that, the finished price has also come down. It's the effect of that.

No, no, that we appreciate. That I got when you initially made that remark. But purely on the carbon black, we have seen Orion Carbon Black announcing a plant shutdown in Europe region. Is more of a specialty or it's more of a rubber carbon black? The question is that do we see that as an opportunity as well for Himadri?

Yes, definitely, since we are strong in Europe, we definitely look forward to that as a great opportunity.

So how much of our carbon black today is sold in Europe?

So you can say currently, we are exporting around 20% of our carbon black -- 15% to 18% of our carbon black to European market.

Okay. So the export contribution of Europe in carbon black is almost 15% to 20%.

Yes, yes.

Got it. Got it. And the last one is on the gross profit per kg, that looks like improving secularly. Now we are 15% Y-o-Y growth or 16% Y-o-Y growth. what is this driving a consistent steady increase in the gross profit per kg? That's number one. Number two, sir, when you say that you are seeing favorable product mix, when you say favorable product mix, can you elaborate which product has grown faster where the margins are higher and which product we are curtailing where margins are lower. Some mix on the -- some color on the mix would help us appreciate this improvement in the gross profit and EBITDA per kg.

Sure. So the product mix has changed like we were doing more percentage of crude naphthalene. Now the percentage of refined naphthalene has significantly improved. Second, in terms of specialty carbon black, we are moving up in the ladder of specialty carbon black. With that, the margin per metric ton margin keeps on improving. And regarding the gross margin, we have been able to improve on the gross margin basically because of operational efficiencies, improvement in yield and reduction in wastage. So we have also installed the waste heat recovery system, which helps us to recover all the high-temperature gases can be used and used in the heating back in the process. So all this together has been helping us to improve on our gross margin and plus high value-added products like I told refined naphthalene means high -- very high grade of refined naphthalene that has higher value addition, high grades of specialty carbon black, specialized pitches going into defense, all these things are helping us to improve on the margins. And these are sustainable.

And then what -- how much more can we grow from here on the EBITDA per kg? We are already at INR 17 EBITDA per kg. How do you see this number going in, say, FY '26 and FY '27?

We are confident of this number being maintained. And gradually, you will see upward movement in these numbers. I don't want to give specific numbers. But yes, for sure, you will see upward movements.

Very clear, sir. Some questions from the tire business now that we have started branding and all. Have we started the production and sales as well? Or right now, we are focusing on the softer side of the market?

No, no. We never did any softer side. Nothing can went free. From the day 1, we have been selling with the consideration. So, for June quarter, we did a sales of INR 18 crores, INR 5 crores -- sorry INR 5 crores from tire business. And it just started on the 29th of May. So now in the current quarter, you will see a good slight ramp-up. And quarter-on-quarter, you will see improvement. But one thing is there when we are going to the market, we have already appointed 20 distributors. And below these distributors, there are many dealers, like every distributor has ranging from 8 to 20 dealers. So this is -- this -- we are getting very strong brand recall from the market. So people are highly appreciating our brands like BT112, then Ultra Mileage, Kalapatthar, all these are very well appreciated in the market, Shaan Plus these are very well appreciated in the market. And when we are going to the customers, when they are saying Birla Tyres is back, we are getting very, very good response.

So we have appointed the distributor dealers. And this is what mainly into the East region?

No, no, no. We -- like already, we have appointed in 11 states. And every quarter, this will be increasing without increase in production, like every quarter, you will see increase in production and higher capacity utilization. So with that, you will see more and more state being capture.

Got it. Just one last bookkeeping question. We have this first-time purchase of stock of INR 57 million or INR 5.7 crores. What is this?

What?

Purchase of stock in our cost of goods sold, there is INR 5.7 crores of purchase of stock, which we have sold. What is really this...

This, we have -- it's a 100% subsidiary of Himadri Birla Clean -- Himadri Clean. So that is buying from DBRL, the tire they are making and selling. So it's the marketing arm of Himadri. That is what the stock purchase...

Okay. Okay. But in consol level that should get knocked off, right? But this time I'm seeing in consolidated.

Consol will come because we are buying from the outside entity. We are buying from DBRL. That's why it is coming in the consol as a separate entity, separate line item.

When is this entity expected to come within the Himadri? Because I thought that manufacturing unit...

There is no intention as such now as of date of its coming into Himadri.

I will take this offline for more clarity. But this is very clear. Thank you very much, sir, and best of luck for the coming quarters.

The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

So sir, I have a couple of questions regarding the business. So first of all, can you please elaborate on how Invati's product. Am I audible?

No, no, you're not audible. Please, your voice is cracking.

Okay, sir. Now I'm -- am I audible now?

Yes.

Sorry to interrupt you, sir. Sir, can you please use your handset?

Ma'am, I am already on handset.

Okay, sir.

Yes. Now, it's clear now.

Yes, it's better. Please tell me.

Sir, could you please elaborate on how Invati's product integration and [ Trancemarine ] panned out in quarter 1 '26 any visible contribution of pipeline build from this acquisition for going forward?

Please speak clearly. Your voice is not clear at all.

Now I am clear, sir.

Please tell me.

Sir, can you elaborate on how Invati's product integration and revenue synergy panned out in quarter 1 and any visible contribution or pipeline buildup from this acquisition going forward?

So Invati has developed nanotechnology for battery material, and this is in development stage. So looking forward, once it materializes and the technology matures, but then we will have a very big difference in terms of what we will be able to produce in terms of raw material component for lithium-ion batteries. Currently, they are selling some product in terms of animals and agriculture products, out of which the top line for this quarter was INR 3 crores and INR 1 crore of PAT.

Okay. Okay, sir. Sir, my last question is towards your B2C brand, how it performed in quarter 1 in terms of distribution revenue contribution or any early customer feedback you get? Or going forward, are you targeting this segment aggressively in FY '26 and '27?

You please speak clearly. Your -- which company you are asking for?

Sir, I'm from Trinetra Asset Manager. Sir, now I am clear?

No, no, no.

Sir, I'm talking about B2C brand, your Durofresh.

Okay. Okay. So Durofresh, we are the largest manufacturers of naphthalene in India with 68% market share. So historically, we have been selling crude naphthalene and now we are selling refined naphthalene in a big way. So the next step is mothball. So mothball is a significant value addition to the refined naphthalene. So this is the first time Himadri is going to B2C segment. So we are launching this brand, Durofresh. And looking forward, we look for a very strong demand from the entire country and from export market.

Okay. Okay, sir. And sir, last one question, sir, any future guidance regarding EBITDA margin or revenue growth you are targeting for two to three years down the line?

So we -- as we have already told in our last con call also, we expect our net profit to double from FY '24 to FY '27.

And for EBITDA margin, sir?

EBITDA, we don't look at EBITDA margin. We look at more EBITDA per metric ton because raw material prices and finished product prices fluctuating, the margins can always fluctuate like [indiscernible] is 21%. Last quarter, it was 17%. So this can fluctuate. EBITDA per metric ton margin is around INR 16,500 now.

The next question is from the line of Vriddhi Shah from SAS Capital.

So my first question is that how are you positioned against global competitors in the high-margin specialty carbon and battery materials segment?

See, Himadri has an inherent strength that for specialty carbon black, we have our own raw material. So when we do coal tar distillation, we produce oil, which is very clean oil like -- and very consistent in terms of quality. Our sulfur content is 0.002%. Plus, there is hardly any impurities in the oil. This gives Himadri an inherent edge in terms of specialty carbon black compared to any of the peers globally. And regarding lithium-ion battery component materials, so we have developed a technology for LFP in-house and the product is pilot scale product we have supplied to many customers and have got very good response from them. And one clear evidence is from IBC. We have supplied samples to IBC for LFP and anode. So after doing a diligence test of one year, we are satisfied with the quality of Himadri LFP and anode that they themselves came forward for a collaboration. Himadri being the only company outside China who is coming out with the first plant for lithium-ion phosphate is a big advantage, first mover advantage. Same in anode also. Anode, we have done a lot of groundwork. Now only thing is that at that point of time, we'll announce the capacities also and CapEx with the time lines once the engineering and everything is completed.

Okay. Okay. My second question is what percentage of your revenue now comes from export? And how are global carbon black and advanced material marketing behaving?

So 34% of our revenue is coming from export. And there is huge opportunity in the global market with the current geopolitical situation, India is at a much preferred stage compared to any of the country we are competing with.

The next question is from the line of Vikas Gupta from RG Capital.

So my first question is, can you shed some light on the LFP-based Prabal 2000? What stage is it currently at? And what kind of demand outlook do you foresee for this product in the near to medium term?

So, see, IBC has already launched one cell, prismatic cell with the branding Prabal 1000. So Prabal 1000, that chemistry is NMC. So now they are going to launch in next one year time, Prabal 2000, which will be with LFP chemistry. And this LFP chemistry and anode material is being built around Himadri raw material. So -- and the market for this is huge. The market for cell -- lithium-ion cell is very large. And LFP now being used in both the segment, BESS and EV has huge market potential.

Understood, sir. Sir, my next question is that there was a noticeable increase in the other income in the profit and loss statement this quarter. Could you please provide the clarity on the key components or sources of this increase?

So other income has increased basically because of we have taken loans we issued commercial papers and deposited as fixed deposit in bank. So the delta between that has helped us to improve on our other income. In addition to that, the investment what we have made, some change has happened in the fair value of that, minor changes, which has also helped to increase the other income.

Okay. All right. Understood, sir. And sir, my last question is that with your recent foray into the refined naphthalene ball segment under the brand Durofresh, could you elaborate on the pricing strategy and what differentiates this product from existing offering in the market that would drive consumer preferences?

So one thing which will really drive this is the purity of the naphthalene. We produce the highest purity grade of naphthalene in India. And I can rather say one of the highest in the world. We are supplying already. We are the largest supplier to mothball market in U.S. Willert. Willert, there is a company called Billet, who are the market leaders in mothball in U.S., and they buy more than 70% of the requirement from Himadri only because the reason being that our quality and our purity levels are very high. So with this and Himadri being backward integrated, being the largest player in naphthalene, so we have a natural edge compared to anyone else who is buying naphthalene and then purifying it and then selling as mothball.

[Operator Instructions] The next question is from the line of Prathamesh Dhiwar from Tiger Assets.

Yes. Most of my questions are answered. Sir, just one thing. I think we mentioned we are going to double our PAT by FY '27. So around INR 1,000 crores to INR 1,100 crores of PAT we are targeting by FY '27. Is it right?

No. I told we are doubling from FY '24.

The next question is from the line of Vivek Gupta from Star Investment.

Sir, in your presentation, you have indicated that additional CapEx is planned for the Birla tire segment beyond the INR 300 crores already outlined. Could you please share an estimate for the incremental CapEx involved and the expected revenue contribution from this additional investment?

See, we have -- we are doing it in phases. So it will be done over a period of next three years. So in total, we have yet to come out with a total number. But ballpark figure as of now during the current year will be around INR 250 crores to INR 300 crores additional CapEx compared to what we have invested. And this will continue for next two years since we will be ramping up the capacity and modernizing and idea is to convert the existing buyers capacity into OHT and OTR and to modernize and restart PCR. So I think for next year, three years, this capital deployment will continue in this manner only.

Okay. So regarding the upcoming LFP cathode plant, which is scheduled to commence operation in third quarter of FY '27, will the initial production primarily cater to domestic demand or exports? Or also, could you provide a ballpark pricing expectation for the LFP product?

See, LFP product pricing keeps on varying depending on the raw material prices, where the lithium prices goes. But on a ballpark figure, it will be between INR 6 lakh to INR 7 lakh per tonne as of what it looks today. And we will be basically targeting export market with some domestic because not much capacities are coming up in India by Q3 FY '27. So the capacities which are coming up, definitely, we'll supply to them. But in addition to that, whatever capacity will be there, we'll be supplying to the global market, particularly Europe and U.S.

The next question is from the line of Anubhav Sahu from MC Pro Research.

My question is regarding competitive landscape within the domestic end market for the carbon black. I mean we have been doing quite good on the export side, but how is it in the domestic side given that there's a bit of a muted auto end market scenario. Secondly, there have been inflow of dumping of carbon black from Russia. So any comments on that, please?

See, the advantage Himadri has, we don't have huge volumes to sell. Like we have only 180,000 tonnes, and we'll go to 250,000 tonnes. So with the limited volume, we choose our customers very prudently. And we only look at customers who value quality and who value delivery, quality, consistency, high statistic process control system is very strong. All those parameters who value we focus that those customers. Over the years, because of this focus, we have developed a very niche basket of customers. And these basket of customers are not import agnostic means they don't depend on import. They don't really look on imports. So that gives us a big advantage. Even being a carbon black player within the group, we don't supply to Birla Tyres even.

That I got it from last call. In fact, Birla Tyres feedstock actually comes from other players and it was probably because of the cost advantage you mentioned. Secondly, how do you see the volume growth for fiscal '26 given that we would have a bit of a constraint on the carbon black in Q3? Would it be safe to assume that large part of the volume growth for this fiscal would actually come from Birla Tyres and this initiative on the naphthalene business?

Yes. Large part of volume growth will come from three segments. One is Birla Tyres. Second is specialty carbon black from Q4. Q3, it will commence production. Q4, you will see the PF and volume growth and existing coal tar pitch business where we are going to debottleneck and that additional capacity will come also from Q3, Q4.

Got it. And sir, last bit, would it be possible for you to share what revenue contribution or volume contribution we get it from naphthalene, naphthalene business.

We don't give product-wise contribution of cost. It's -- everything comes in the carbon chemicals. So we don't do product-wise accounting.

The next question is from the line of Bharat Shah from ASK Investment Managers Limited.

First of all, hearty congratulations. Very significant journey has been evolved over a period of time from a kind of a commodity product portfolio to evolved and specialty portfolio. It has been many, many years of hard work. So many congratulations to Himadri, yourself and the entire team. Two questions. One, while many of the acquisitions fit in well with your strategy of specialty and moving up on the value chain. So that is quite sustainable one. But I was just wondering whether Birla Tyres acquisition, is it going to be more an advantage or it is going to be a distraction? Because at the end of the day, you may use a lot of your material in tires, but tire is a very different business than the specialty chemicals business that you are in.

Thank you so much. I'll just -- one thing for us, Birla Tyres for Himadri is not a customer. Himadri is not supplying any carbon black till date to Birla Tyres. So because Himadri is able to sell its carbon -- carbon black for a niche application at a much higher price than at what Birla Tyres can get from outside. Birla Tyres is a stand-alone business. And why we have -- see, 15 years back, I ventured into carbon black. That time, I was knowing nothing of carbon black, I was supplying oil to carbon black. And then big question was that whether I will be able to get the technology light, I will be able to make it the product and the day we started, we are bang on the product, the first day itself. And now we are far ahead in terms of specialty carbon black, which many of the companies in the world have not been able to do after so many years. Same thing with Birla Tyres. We have been supplying carbon black to the tire companies for the last 15 years now. So we know the industry in and out very well. We know the people, we know the people who are doing -- who are great in this business. So it's much easier for me to make my team. And I'm telling you the kind of team within a short span of time we have been able to build is unreal. And when we started builder tire, our rejection rate is minimum with old machinery. We are ramping up very fast. And the entire business from buyers tires will be converted into OTR and OHT tires. And we will again be launching passenger car radial and EV. And the ROCE that Himadri will be delivering in this business will be unimaginable. Basically, our investment has been only INR 300 crores for asset worth INR 3,400 crores. So we have got at less than 10% asset. So after the CapEx we are proposing, the ROCE will be significantly higher than any of the peers. And with our relationship in the industry for the last 15 years and the way we have been able to build up the team and still continue to build up, I'm 100% confident of amazing results from Birla Tyres.

No, which I deeply appreciate. My only limited point was as a specialty chemicals company, starting from supplying to carbon black industry to becoming a full-fledged carbon black player to becoming the specialty carbon black player and now many other offshoots from that into a specialty chemical journey. But all of that is a B2B kind of a business. Tires is a B2C kind of an activity. Even if it is in specialty area like off the road and commercial vehicle and agri and other applications that you inherited, it still remains kind of a B2C business, sales organization, overall organizational mindset, all that needs to be different for a tire business than what a specialty chemical operations is. So it was just from that point of view, whether this is a risk of causing distraction in the strategic footprint of the company or strategic management bandwidth of the firm?

See, one thing, what has happened -- what really we did over the last few years, see, what we did from being a chemical company, now I started focusing on building management bandwidth. So that is what I did. I started building last 6, 7 years. I was only focusing on building management bandwidth and strengthening each vertical with a business head. So today, if you look at me, I am hardly engaged in any operations. So Birla Tyres is like that also it's a separate vertical with business head looking into it with complete independence, but strong reporting systems and processes clearly defined. So with the increased bandwidth that I am able to develop over the last few years, that is the reason today, if you look at our annual report also, we have given the team Himadri reloaded the next chapter. Why? Because we have done the groundwork for the future and now we are ready to take on many assignments at the same time and with 100% confidence to deliver value to our stakeholders.

Okay. Really appreciate. That does require a material change in the mindset to...

And sir, one more thing. I just wanted to tell, see, you have -- I don't want to remain only a product-specific company for life that I have been making a coal tar display product, so I end up doing that only. With my years of experience, we have expertise in processes over the year, 35 years, we have expertise in doing acumanship of doing business. So now to increase our foothold, we cannot get a better launching pad than Birla Tyres. If today -- see, today or tomorrow, I have to go into B2C. I will not -- from what I want for future of the company, I don't want to be only B2B business. I want to look at several B2C businesses also. For that, if I have to restart and make a brand, it will take 20, 30, 20 years minimum to build up a brand. And by God's grace, we have got Birla Tyres brand with 40 years of legacy and water recall. So that is the game changer. Today, with Birla Tyres brand with you, the B2C business looks like a cake walk.

Sure. And I'm sure one last point on this particular thing before I move to the second part. I'm sure you would have analyzed the reasons for a 40-year-old well-known brand to fall into the kind of a state of -- disrepair that it fell into, which is why you acquired a business like that for 1/10 of the underlying asset value. So what, in your opinion, went wrong? And what are lessons which have been built into the acquisition footprint in order to ensure that Himadri doesn't suffer from any consequences?

We did thorough -- say before taking over the unit, I got in touch personally with most of the CEOs, ex-CEOs of Birla Tyres. And I did a deep drive. I talked to the lowest level people who are working there and mid-management and top management. And then we did a thorough analysis of what really went wrong. Because of some constraints, I'm not able to explain that online at a conference call, what really went wrong because it's not right on my part to tell something negative about some other management or something, which I don't feel like doing. We did a deep dive and clearly articulated our strategy. And we made a full -- we made a 10 guiding principles for this business, learning from the failure of Birla Tyres, we call it. And those are our founding pillars for success. This is going to be our founding pillars for success. We have clearly identified what was the loophole, what went wrong and everything. I'll give you a very small example. Like when we took over this unit, 13 unions were there. Now we have no union. I don't want to go into details. But from that, you can understand our capability metrics.

Sure, sure. Now all the very best on a very major step, not in terms of the CapEx amount involved, but in terms of the direction of the firm in the business. Coming to the second part, if you look at the 5-year period, that is financial year 2021 up to last year '24, '25, we have made a remarkable progress. Our volumes have gone up about 1.5x. Our top line has gone up about 3x. Our operating profits have gone up 6x and profit after tax has gone up about 12x. You've also narrative that from '24 to '27, the bottom line is likely to double. So what is the picture to be expected from -- after '27 to say, further 3-year period or from '25 to the next 5-year period, '30 year till fiscal '30?

Yes. So actually, I'll tell you that -- if you ask me on a scale of 1 to 10, according to me where we rank now, I'll rank it a little less than 1. I think that is what we have achieved till now. The real story will unfold in the next 5 years. And I'm very confident of it. And if I'll request you to kindly go through our annual report very carefully, you will find there a page called future growth drivers. You go through that and read carefully each item, and you will have the answer. And every quarter or 6 months when we come up with new things, you will see the things unfolding. But I can tell you that things are going to be very different from what it is today. I don't want to put a number to it.

Sure. Sure, sure. No, I have read about various initiatives and various plants, which are there. In this quarter also, you have laid out some of them in the various -- clearly hunger for strategic initiatives has gone up in Himadri than ever before, given the success and the strength of the balance sheet. But if you -- like you mentioned or as I mentioned in 2021 to '24, '25, we have had a very strong journey on volume, top line, profits and the bottom line. '24 to '27 also, you mentioned about roughly doubling our bottom line. So I was just wondering from '27 to '30, if you take the next 3-year block, what do you think will be the key initiatives which will play out? And what kind of an outcome possibly, not in terms of numbers, but qualitatively, what kind of picture can we envisage?

See, if you look at the broader picture, today, we are into coal tar, which we are expanding. The business is expanding. Specialty carbon black is expanding. naphthalene is expanding. Then tires, you will see the story unfolding in the next four to five years completely with full capacity, full margins coming into play. That will give a big top line to the company and big bottom line to the company. Then you have raw material components from lithium-ion battery. You know I have been talking about lithium-ion components for the last 12, 13 years. It's not that we -- everyone is talking, so I have started talking.

No, no. I remember.

You remember you have been associated with the company for the last 20-plus years. You have been an investor. So we have been doing -- we have been early is -- we had full confidence when no one used to look at lithium-ion that this is going to be a game changer in future. And that has really happened today. And Himadri is doing wonders in terms of how we are going to position ourselves. Then you talk of anode, there are three types of anode, natural, synthetic and silicon carbon, and that makes a hybrid anode. If you look at my reports and everything, I'm working on all three of them. Only company which is working on all three of them. As a customer, you see, you come to Himadri, you have a host or you have full product basket. Where else will you go? Where you will get silicon carbon, where you get natural at the same time. This hybrid material will change the entire chemistry. Suppose you are getting a capacity, I'm going a little technical at 350 with little silicon, you will go to 370. It game changes. So that is something which will come into play. Lithium phosphate, first company in the world outside China to have a commercial plant, we are setting up. We have a huge expansion in that capacity. I've clearly outlined 100 gigawatt capacity in the next five to six years. Other than that, if you look at our presentation, we are going into backward also. We are going for lithium carbonate in future on which research and development is going on in full scale now. So currently, lithium carbonate is made through a lining means today, lithium is extracted from rock through a lining process through using acid. We are going to do it through carbon dioxide, which is a game changer in the world. It will be a green lithium. This itself will make revolution in the world. So like this, every product, like we are working on -- I've also outlined waste from waste to energy. So there, we are working on a lot of waste products, which will be converting into finished product and energy in future. So if you look at my current portfolio, current oil, an oil or the carbon black oil, we are just using to make carbon black. Now we are setting a plan for anthraquinone and carbazole. Anthraquinone and carbazole, the selling price is 7x of the oil with hardly any processing cost. So all these are game changers to outline a few of them, other than there are many things which are happening. So I am confident that looking forward, things will unfold in a big way in Himadri.

Sir, if I'm just allowed to put one last point on this. We have seen a journey which has been multifold over '20 to '25. You have already outlined from '24 to '27, another phase of that journey. Can you -- will you say that from '27 onwards, the third phase of the journey will be equivalent or better or similar to the Phase 1 and Phase 2 that we are -- Phase 1 that is over in Phase I that we are experiencing. Will you say Phase 3 will be superior, equal or lower than the Phase 2 that we talked about, both in quantitative or qualitative terms?

I'll put it other way around. Phase 3, with Phase 3, I believe the real journey will start.

Which is why you say in a scale of 1 to 10, you are just at 1.

Right. So with Phase 3, after '27, the real Himadri journey will start. And time will only tell what we will achieve. I don't want to put any word or number to this.

Thank you, Anurag. And real best wishes to you and Himadri and the Himadri team.

The next question is from the line of Vignesh from KSEMA Wealth.

So just want to understand what is the revenue potential of the Phase 1 of the LFP just on approx on to, just to understand how is the potential for LFP.

Between INR 2,500 crores to INR 2,700 crores.

Okay. And another one is regarding the anode development, which you spoke of. Any time line when we are planning to put a CapEx or announcement regarding the anode material?

I don't want to announce now. I don't want to disclose now. Ahead of a schedule, means 2.5 years, 3 years before I announced that it will happen. This time, I will not give so much. That only I can say.

Okay. And one more, sir. And regarding are we planning to go into a mining kind of thing, sir? Or backward integration.

Yes, we are looking at some mining thing and already made some investments. So yes.

And this will be mostly for backward integration of the LFP?

It will be in various aspects. First experience, we'll do some minerals and then we'll see how the things unfold.

Ladies and gentlemen, due to interest of time, that was the last question.

We can have more questions. Babia, we can have more questions. No problem.

The next question is from the line of Priti Agarwal from SK Associates.

So my question is that we've seen a margin uptick. So how much of this is attributable to value-added product contribution? And any structural change in product mix under it?

Everything is attributed to value-added products only. Nothing changed structurally.

Okay. And any structural -- any product mix underway?

Any product?

Product mix underway.

Same, it's a product mix, blended product mix.

Okay. And my second question is, what gives Himadri a technological or R&D edge in advanced carbon material versus peers?

See, we have been in this field for the last 12-plus years. So we have done a lot of investment in research and development, building our teams and capabilities from ground zero. So we know the product in and out. you cannot -- you can never say that I know everything, but we have done our homework quite well. And we have a very strong team who knows the subject, and that is the kind of development we have done over the years. And if you look at any other company, they are talking of this over the last two, three years or one year only. And we are -- if you open my 10 years back annual report, you will find lithium-ion battery. So we know the subject very well. And being in China, like China is the leader in this space. And we have our manufacturing facility in China since last 15 years. So I have seen very closely the development of this industry very closely. So that gives a unique positioning to Himadri and the edge compared to anyone else globally.

The next question is from the line of Ashit Kothi, an individual investor.

Congratulations on the numbers. Just two things. One is with regards to the current quarter numbers, where we don't see much of a volume growth as well as revenue growth, but our profitability is increasing. So is the same trend would continue? Or you see volume as well as top line and bottom line growth also along with higher margin?

See, I clearly explained the top line has not grown and has come down basically because of the raw material prices. And looking forward, as I told, from Q3, actually from Q4, you will see the specialty carbon black new capacity coming in place. You will see debottle capacity of coal tar pitch and you will see ramping up capacity of Birla Tyres. So all this will help to increase the top line and bottom line at the same time.

Okay. Sir, with regards to the lithium ion batteries, I mean, sir, do we consider that Birla Tyres is your first step towards B2C is what Bharat bhai was asking. And from there on, you would want to move on to within battery systems and all related products in B2C manner?

No, no. We have clearly outlined our growth plan and where we want to play in this segment. We don't want to be a cell manufacturer. B2C, we are launching with Birla Tyres, and we will strengthen our position in next three years in B2C. And then we will see what product to launch. We have a product portfolio for B2C, which we are preparing. And at the right point of time, we'll disclose and launch. But yes, cell is not in our portfolio. We want to be a component manufacturers for lithium-ion cell, not a cell manufacturer.

Okay, sir. And something on graphite, I mean, what is our exposure? And what are our plans on that, something which was mentioned in the presentation?

No. This is about anode material. So I clearly told -- I have told in the conference call about what we are doing in anode material, what is our plan, everything I've told already.

No, I'm talking about graphite electrodes.

No, no, I have to do nothing with graphite electrode. We are supplying coal tar pitch to graphite electrodes. That's the only relation.

Okay. So further value addition or moving on those lines would not -- is not the case right now.

No, no, not at all, not at all.

The next question is from the line of Jaiprakash Kumhar from Korman Capital.

Yes, my question on the depreciation, sir, from last 10 years, I'm looking at depreciation. So 10 years back also, it was INR 57 crores and now it is INR 57 crores only. And the gross block is INR 2,500 crores. So I'm not sure what kind of plant and machine viz-a-viz plant life and all that. But depreciation looks very low for last 10 years, it has broadly remained at the same level.

No, I think you are mistaken with the figures. It has come up over the years. If you look at 10 years back and depending on -- because we have not done much CapEx in last seven, eight years. So -- but whatever CapEx we have done corresponding to that depreciation has definitely gone up. It is on written down value, SLP, straight line, yes.

It's a straight line, right, not the written down value.

Yes, yes. Exactly.

So straight line. And on this INR 2,500 crores, this is just INR 50 crores of depreciation. So I think it's a very small percentage. So can you highlight like why the depreciation is so low on such a high cost?

This is directly correlated with the life of the plant. So depending on what's the life span of the plant, the depreciation rate item-wise has been calculated, and that is what it is.

Okay. And depreciation will include the maintenance expenses also because...

The maintenance CapEx, we don't put in CapEx. We take it through P&L only.

Through P&L only. And it will part of depreciation, right?

No, it's not part of depreciation. It's part of P&L, maintenance CapEx.

Okay. Okay. And you are saying the life of the plant and machinery is very high, like maybe 30, 40 years. That's why the depreciation is low?

So we got a detailed study done. And basis that, we have identified life of each and every equipment and basis that we have charged depreciation. And you will get in the audit report in details.

The next question is from the line of Anand, an individual investor.

Yes, I just wanted one question on Birla Tyres. How do you expect to maintain pricing power in such a competitive industry?

How do you expect to maintain pricing power?

Yes. In such a competitive industry?

Yes, industry is competitive. The EBITDA margin ranges from -- in normal case tires from 10% to 15%. And for OHT, OTR, it is 25% plus. So we are playing within this. And Birla Tyres has a good brand recall. So as a brand -- even being a reentry after three years, we don't have to give any special discount or something like that for positioning Birla Tyres.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you. Thank you so much. I would like to thank everyone for taking out time and joining us on the conference call today. I hope we have been able to respond to your queries adequately. Your continued interest and feedback play a vital role in our journey forward. This quarter marks the beginning of what we believe will be transformative phase for Himadri. With a clear strategy, strong execution and an unwavering focus on innovation and sustainability, we are confident in the road ahead. We remain committed to delivering long-term value and are pleased to have your support as we scale new frontiers and shape the next chapter of Himadri growth story. Should you have any further questions, please feel free to reach out to our Investor Relations partner, MUFG Intime IR. Thank you once again for joining the call today. Good day.

On behalf of Himadri Specialty Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.