Navin Fluorine International Limited (532504) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited Q4 and FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Radhesh Welling, Managing Director of Navin Fluorine International Limited. Thank you, and over to you, sir.

Thank you. Good evening, and warm welcome to all the participants. I'm joined by our CFO, Mr. Ketan Sablok; and strategic growth advisers or investor relations advisers. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchange as well as on our company's website. I hope that all of you and your loved ones are safe. These are extraordinary times, and perhaps the most important thing for all of us, the safety of yourself and that of your family. I would like to start the call of the 2 key milestones that the company achieved during the financial year 2020. Our revenues crossed INR 1,000 crore landmark, and we signed a 7-year contract with one of the global companies, which is worth $410 million, approximately INR 2,800 crore, which will start contributing from FY '23 onwards. It is indeed a great achievement for the team at Navin as we report 1 more year of commendable performance. Our top line grew by 7% year-on-year to INR 1,022 crores. Our operating EBITDA reported 20% growth on a year-on-year basis to INR 261 crore, a margin of 25.5%. Operating PBT grew by 18% year-on-year to INR 225 crores with 22% margin. The company's robust performance was driven by good traction in Speciality Chemical business and CRAMS business. Our Inorganic business reported stable performance, whereas Refrigerant Gas business reported dipped numbers, especially in the last quarter due to lower volumes, driven by soft demand in March due to lockdown. Our high-value businesses that is Speciality Chemicals plus CRAMS, contributed 54% of our overall pipeline for top line for the year, and we remain very positive from both these businesses. Let me now take you through segment-wise performance. To begin with the Speciality business. The business continues its growth momentum for yet another quarter. It grew by 52% in Q4 FY '20 and by 27% in FY '20 compared to the corresponding periods last year. The growth was very well balanced between pharma, agrochemicals and industrial segments and between domestic and international markets. We now have very strong project pipeline in this business, and we believe this business will continue to perform well in the coming years. Moving on to CRAMS. Our CRAMS business performed well in the last quarter of FY '20. It grew by 26% on a year-on-year basis to INR 54 crores. On a full year basis, it was marginally lower by about 3% to INR 173 crores. Our cGMP3 has commenced with commercial production, and we are now manufacturing both new as well as some of our older products in this facility. During this year, we worked closely with global innovators in the pharmaceutical space, which has led to good inquiry flow, especially from key health care leaders. Our long-term outlook remains very positive for this business as we now have strong order book as we move into the new year. On Refrigerant Gas business, revenue for the business was really impacted with lower sales of R22 in both domestic and international markets. Demand in the nonindustry sector continues to be good, however. Moving on to Inorganic Fluoride. We were able to maintain performance in this business despite slowdown in some of the major end user segments, large industry and class. Lower demand in the domestic market was somewhat offset by increasing demand in the international markets. We were also able to improve prices -- pricing in some of the international markets, which helped us maintain margins. Coming to our new business vertical, high performance product, HPP. As you all know, we signed a 7-year contract, requiring total investment of about INR 365 crores towards process plant equipment, et cetera, and about INR 70 crore for setting up of captive power plant. The work is going on as per schedule. And at this time, we do not foresee any delays in the same. We'll keep you updated on the progress from time to time. Now before handing over to Ketan to take you through detailed financial performance, let me also touch on the impact of recent COVID-19 situation on our business operations. As you all know very well, COVID-19 pandemic outbreak has resulted to severe disruptions in terms of supply chain, RM availability, transportation, leveragability, et cetera. Navin Fluorine has also got impacted due to the lockdown imposed in the month of March. We restarted our operations on 14th April in a phased manner. Currently, all the plants manufacturing products for life science and crop science sectors are running to pre-COVID level, whereas those manufacturing products for industrial sectors, are currently operating at a lower level. The company has announced inventory of key raw materials for smooth operations and is also continuously working on developing alternate domestic vendors. The company is in very strong position to sustain these challenging times on the back of strong balance sheet position with cash of about INR 300 crores as on 31st March, 2020. The capital can be viewed as growth capital to be deployed for right opportunities. So that's it from my side. I'll now hand over to Ketan to give you brief on the financial performance of the company. Over to you, Ketan.

Thank you, Radhesh, and a very good evening to all the participants. At the onset, I hope that all of you and your families are safe and in good health during this trying time. I'll share the highlights of our financial performance, following which, we'll be happy to take questions from your side and respond to your queries. To start with, the Board of Directors declared a final dividend of INR 3 per share on a face value of INR 2, about 150%. With this dividend, the total dividend payout for FY '20, including the 2 interim dividends announced earlier, was close to 550%. Payout ratio, adjusted for the tax provisioning of earlier, which we have done in this quarter, comes to about 30% for FY '20. So I will give you a brief on the Q4 performance first. The company has reported a net revenue from operations of INR 265 crores as against INR 244 crores in Q4 FY '19, year-on-year growth of about 8%. Operating EBITDA stood at INR 67 crores for Q4 FY '20 as against INR 52 crores in Q4 FY '19, a Y-o-Y growth of 29%. Operating EBITDA margins expanded by 399 bps to 25.4% in Q4 FY '20. The operating PBT stood at INR 57 crores for Q4 FY '20 as against INR 46 crores of Q4 FY '19, year-on-year growth of about 24%. Operating PBT margin expanded by 265 bps to 21.3% in Q4 FY '20. As the profit after tax stood at INR 269 crores, profit for the quarter is higher on the back of the tax provision. I'll talk about it a little later. Now coming to business slide performance for Q4 FY '20. The legacy business was lower by about 19%, whereas the high value business grew by 42%. The legacy business was down largely due to weak numbers posted in the Ref. Gas business, which was down by 31% to INR 56 crores on a Y-o-Y basis. The Inorganic segment reported stable performance. Revenue stood at INR 51 crores. The highlight for the quarter was for the 2 businesses of Speciality, which grew by 52% to INR 104 crores; and CRAMS, which grew by 26% to INR 54 crores. I'll give you a brief now for the FY '20 performance. As Radhesh mentioned, we crossed the INR 1,000 crore mark this year with net revenue from operations reaching INR 1,022 crores in FY '20 as against INR 955 crores in FY '19, a Y-o-Y growth of 7%. The operating EBITDA stood at INR 261 crores for FY '20 as against INR 218 crores for FY '19, a Y-o-Y growth of 20%. Operating EBITDA margin expanded by 267 bps to 25.5% in FY '20. Operating PBT stood at INR 225 crores in FY '20 as against INR 192 crores in FY '19, a Y-o-Y growth of 18%. The operating PBT margin expanded by 197 bps to 22% in FY '20. Profit after tax stood at INR 400 crores, again higher duty tax adjustment over the last quarter. On the business side performance, the legacy was marginally lower at -- by about 2%, while the high value business grew by 16%. Refrigerant was down by 6% to INR 261 crore, while Inorganic grew by 5% to INR 207 crore. Speciality segment grew by 27% to INR 381 crores, while CRAMS was flat at INR 173 crore. We have a strong balance sheet with cash and investments now totaling to about INR 400 crores as on 31st March 2020. The net cash flow from operating activities stood at INR 157 crores, improved by almost [ INR 66 crores ] compared to last year, focusing on our operating efficiency. And before I conclude, I'd like to give you an update on the tax position as on 31st of March. So the company had contested receipts on account of Certified Emission Reduction that we see as capital receipts not chargeable to tax for the earlier financial year, I think from 2007-08 to 2012-13. During the current year, towards the end of the year, we received favorable appellate orders for some of the aforesaid years. This has resulted in the company becoming liable to tax on its book profit for all these years under section 115JAA of the Income-tax Act. That is -- the company will be moving into the MAT review and correspondingly will be eligible for tax credit, which can be utilized for all the tax liabilities of the succeeding years. Though this matter has been contested by the tax authorities, but considering the favorable pronouncement from various [ side dealings ] in High Court and of course, also from the jurisdictional High Court in Mumbai. And as legally advised, the management expects that the favorable decision will come on this side and hence, there'll be no outflow for the same. Accordingly, the company has now recognized this MAT credit to the tune of INR 73.5 crores under section 115JAA, for which claims have been made. The company has also recomputed the tax liabilities for all the earlier year. And within that, the excess tax provision to the tune of INR 141 crores for these earlier years. Yes, that's all from my side. I will now open the line for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Anand Bhavnani from Unifi Capital.

So come back a little to the wonderful performance. I just wanted to understand in this particular quarter due to the last [ depot ] shutdown, what you have in the approximate revenue loss.

Yes. So because of last 2 weeks of shutdown, we saw marginal revenue loss in Speciality as well as our CRAMS business, but we certainly saw a relatively large number in terms of Inorganic and Refrigerant Gas. The total loss was to the tune of approximately about INR 26 crore, primarily coming from these 2 business units.

Sir, are the INR 26 crores for the company as a whole?

That's for the company, primarily coming from Ref. Gas and the Inorganic business.

Sir, my second question is about our Ref. Gas business, where because I think of this new regime, we might have seen lower revenues. So if you can give us a sense of what's the outlook going forward. Because in FY '21, I guess, the same regime will continue and from there on, there'll be this volume challenge in the said segment. So what is the guidance? Should we assume that Q1, Q2, Q3 of this year, we might see similar fall in revenues corresponding as compared to the corresponding quarters last year as we saw in Q4?

Yes. So as far as Ref. Gas is concerned, the prior guidance that we have given is that there will be certainly volume loss, especially for its market in the NFIL segment. And some of that will get compensated by increase in the demand that we are seeing on the non-emissive side of the market -- of the segment. And some of it will be compensated by increasing the prices that we believe we should be able to have a period of time. So we believe that we should be looking at a flat revenue line for our Ref. Gas for foreseeable future. Having said that, we believe that in the short term, there would be a debt till we are able to get this pricing up to the level where we will be able to compensate for that loss. Most of the dips that you are actually seeing in Q4 has primarily come from that loss of business in the month of March, which happened in the domestic market in the month of March. And in international markets, it had actually started happening even prior to the active lockdown announcement in India. So it was not so much because of the quota issue. It was more because of COVID issue. But we believe that in this particular year, this coming financial year, in the immediate quarters, we will see some dip in the revenue, primarily with the volumes. But we believe that in the coming quarters, in the possible future, we should be able to compensate for that loss through the strong demand that we are seeing on the non-emissive side until the price correction that we are looking to make in the market.

And sir, lastly, the bonanza that we have gone on in terms of tax losses. Does it improve our willingness to bring forward certain perspective, which we underline on balance sheet perspective would have thought of more from a 3-, 4-year perspective as our CapEx or new initiatives come forward because our balance sheet has gotten strengthened because of this favorable tax outcome?

So as far as the CapEx decisions are concerned, you are aware that we've always had a relatively strong balance sheet with access to lot of cash for these kind of decisions. So I wouldn't necessarily say that our decisions with respect to capital investment will significantly alter because of these pronouncements that we have got on this tax decision. So they will be made on the individual merit of each business case.

[Operator Instructions] The next question is from the line of Sudarshan Padmanabhan from Sundaram Asset Management.

Sir, my question is now that the cGMP3 has started, on the CRAMS side, in the fourth quarter, we have seen some improvement sequentially and, of course, good increment on a year-on-year basis. If you can give some color with respect to what is the utilization at this point of time. And how much of revenues we can do? If you can also give some color on the JV side as well, how we are performing there.

With respect to JV, you're talking about the Piramal one?

Yes. The Piramal one as well as the non-JV side. If you can give the capacity utilization and what is the road forward for both the CRAMS part, JV or non-JV.

Yes. So specifically related to our performance in quarter 4. I would say quarter 4, though we successfully commissioned our cGMP facility and the production in cGMP plant started, not much of it actually got translated into actual sales because, as you know, the cycle time here in this particular business is relatively longer than in other businesses that we have. Overall, if you see in this particular year, in this particular business, there are a few things that we have been focusing on. We have been focusing on increased business coming from the existing customers, getting entry into new customers, especially from customers in Europe because that is where we were hardly present earlier. So all those efforts that we have been making over the year have actually started bearing fruits and which is what now getting translated into these sales. As we go into the new year, we are going with relatively stronger order book than what we saw going into the last year. As we have indicated earlier, it's difficult for us to give capacity utilization number plant by plant because it keeps varying from month to month, et cetera. So we don't want to get into that because that sometimes could be misleading number. However, we are -- as we move forward in this particular year, we, at least in some of the quarters, are seeing a pretty optimal utilization of all the 3 plants, the cGMP1, 2 as well as 3. As far as the JV is concerned, that is our Convergence Chemicals, which is a JV with Piramal. We had a record performance in this particular year. Not only our sales volume went up, but also our margins improved because -- primarily because of operational improvements that we had in that particular business.

Okay. And sir, with respect to the long-term contracts, one is that $410 million contract, that's a 10-year contract that we have as well as the 7-year contract that we have. Can you give some color specifically with respect to when it starts in FY '23, would it be something like -- something like $41 million over 10 years? Or should the volumes kind of pick up towards the second half? And similarly for the 7-year contract as well for the high performance product, I mean, what would be the asset turn, and what could be the ROC, like some color on sales and margins on this side?

Yes. So we have actually given this indication earlier. But just to correct you, before I go into the specifics, these are not 2 separate contracts. This is one single contract. So this is $410 million is the size of the contract spread over 7 years, not 10 years. So it's a $410 million contract for 7 years. The production, the manufacturing will start in Q4 of FY '22, and FY '23 will be the first year of full operation of that particular plant in that particular project. As far as the ROC is concerned, it will be in line with our current company ROC. And as we have indicated that the total investment made for this particular plant is approximately INR 360 crore, INR 365 crore and the $410 million that we have actually indicated, would be more or less evenly spread out over 7 years. So you can calculate the asset turn on the basis of that.

The next question is from the line of Vihang Subramanian from Samsung Asset Management.

Just one thing. When I look at your business over the last 2 to 3 years, the mix of the higher-margin businesses and demand [Audio Gap] right, and your margins have also improved. So basically, going ahead, when I look at the 4, let's say, FY ‘23 that represents Inorganic Fluorides are kind of going to be flattish or low single-digit growth. But as the high value businesses increased in proportion to like the total, don't you see that the margin should also probably move north of like 25%, like 26%, 27% types?

Yes. So you're absolutely right in terms of your assumptions with respect to each of those 4 businesses. As we have indicated, we expect Ref. Gas -- again, when we give this indication, we are not necessarily talking about quarter-to-quarter or year-on-year. But directionally, we believe that Ref. Gas will remain flattish because whatever we use in volume in emissive segment, we will be able to make up through running the [ fixed agreement ] price correction. Inorganic will continue to grow at a GDP plus/minus level. Major growth that the organization will see will be coming from Speciality and CRAMS and from the new business needs that we have just formed this high performance product. We believe that the margins in Speciality business unit and high performance product will be higher than some of the legacy businesses. At the same time, in CRAMS, we have invested heavily in fixed costs ahead of the growth. So as the top line and as the gross margin in terms of absolute month of growth is able to absorb some of the fixed cost, we will hopefully start seeing improvement in the margin. But we do need to see how that actually bears out because we don't want to give any specific guidance at this point in time until we actually start actually seeing how things are panning out because there are so much uncertainties...

Another thing on the ref side, sir, another thing on the ref side, sir, I think last time when you had spoken, you had said that we might be planning to think of some new CapEx there or launch some new products there. So anything -- any color you could give us? And probably not like right now, but like over the next 3 to 5 years, do you think that the Ref. Gas -- I know you said that directionally, it will be flattish, but is there any work that we are doing to kind of change that?

Yes. So currently, as you know, we are only present in the HCFC category. We are evaluating options in both HFCs as well as HFO category, and the flattish guidance that I had given was primarily on the basis of what we have today on the ground, which is the products that we have on the HCFC. So I was not taking into account any future investments that could come up in HFCs or HFOs because that is a bit premature to speculate on. As we finalize our business case, we are currently developing business case on the HFC segment as we are trying to learn more on that segment. So once we have a business case, we take it to the Board, get the approval. We should be -- we will be happy to make those announcements. But currently, if you look at our -- and this is what we have indicated before, if you look at our priorities, our immediate priority is going to be Speciality. Then we'll be talking about expertise where we have announced major CapEx and then whatever further CapEx is that will be required in the current. So it's not only from the point of view of access to the capital, but also from the point of view of management bandwidth to be able to execute this project well. So those will continue to be our priority, given our return expectations, et cetera.

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

One, on the long-term project, long-term contract that we've embarked upon, I hope there is a proper safety network in terms of take or pay of protective clauses because we've been investing into the project. And if there is any change of the mind that the customer aims at a later date, then it can put everything into jeopardy. You might be aware of a recent event where the industry had a 10-year contract with Bayer, and that project there was terminated with the compensation being sought to be paid out. Just wanted to understand the safety mechanism in protective clauses.

Yes. So before getting into the specific safety net or the downside protection part of the contract, I would just like to distinguish between the product that we are looking at versus the other product that you talked about. This product is a relatively new product, goes into multiple applications, and the overall demand for this particular product is growing exponentially. So that is basically the context driving this entire investment. So that's point number one. Point number two, you're absolutely right. Because this is a pretty significant investment for our company and we have put in measures for downside protection, where we capture not only the investment that we are making in the specific -- the investment that we will be making in the plant, but also the margin that we would have otherwise made in this particular project. So both from the point of view of capital investment and margin on. There is adequate downside protection provided in the contract.

I mean there can be any force majeure applied by them is an excuse and for some contract for any change of strategy or any apprehension will lead into hard start.

So there is, as it is there in any contract, there's provision for force majeure on both the sites. And for event of force majeure, there is adequate time that will be given to both the parties on the demand side for them; for supply side, for us, where we could address the specific demand side or supply side issues. In event our customer is not able to address the demand side issues, yes, then we again go back to the same protection, downside protection that we had talked about.

No. In a sense that your customer can't say that he has change of strategy or there is some issue he's facing in the demand for his using your product that he has to do and cite that is a reason to walk out.

Yes. So that's it. So you need to distinguish between a temporary phenomena and kind of a permanent phenomena. So if you take temporary phenomena for a month or 2, there is a provision kept for a slight postponement. But if there is a permanent shift in the demand or a demand destruction, et cetera, it will then intend us for the payment that I earlier talked about. So there is a clear provision in that kind of a force majeure you are talking about. When there is a significant demand disruption, et cetera, the customer will not be able to walk away from the contract without providing for the capital investment and the margin that we would have otherwise earned in the project.

And that's a -- I'm asking, just allow me to finish. So that's a watertight kind of an arrangement, right?

Yes. That's correct.

Okay. My second question was about given the way things are with China, do we have any export or riders on the forward or backward linkages, which potentially impact us, either in terms of raw material or in terms of direct or indirect relationship to sell our goods to them? Are there any material exposure in any alternatives?

Yes. So we don't really sell much into China directly or indirectly. So from the demand perspective, as such, we are not impacted directly by China. As far as raw materials are concerned, as you are aware, some of our main raw materials are from CRAMS products like [ Clostar ], et cetera, where we are pretty well diversed. So we are not impacted by China. There are some smaller raw materials which are required for Speciality as well as for our CRAMS, where we have started working on either backward integration or developing alternate vendors. So we are not seeing any major impact, neither in the short term or midterm from the -- because of these raw materials. There is one particular thing that we might see, but that's more of a short-term disruption than it is fundamental shift is where, let's say, we are supplying an intermediate to the customer and customer is buying another intermediate from a supplier in China. And then there is typically a coupling reaction to make the final AI. And if that customer has a problem in getting that other intermediate, he might ask us to postpone the delivery by a month or 2. But that's about it. There is no significant fundamental shift that we are seeing either from the demand side or supply side to our existing business because of the China situation.

Let me choose raw material. Supposing raw material from China is shut out, say, assuming from tomorrow, beyond the short-term disruption will not have any permanent impact on the business?

Not for any of the major raw materials. Again, we have -- I mean we do have to look at the number of the specific business. But all the critical raw materials where we are only dependent on China, we have all the developed vendors outside of China. So we will not be.

Right. And that will cover validity of the...

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

I have 2 questions. One on the gross margin side. Quarter-on-quarter, we have seen the mix improve towards high value products. But if you look at quarter-on-quarter, gross margin has declined by around 310 basis points or the mix has improved by 250 basis points. That's one. I just wanted to understand what's going wrong or what is missing in our understanding in terms of gross margin movement. The other one is on the Speciality Chemical, the year has been fantastic. We haven't announced any major CapEx on the Speciality. How much headroom do we have in terms of revenue traction from the existing capacity? And any plans on the future CapEx there?

Yes. So I'll take the second question first, and then I'll let Ketan answer specific question with [ SGM ]. So as far as Speciality is concerned, this year, we did a number of debottlenecking projects, which have led to -- these are smaller debottlenecking projects, putting in a reactor here or moving from a low-value reactor to a higher-value reactor, et cetera, which has given us some additional space which helped contribute to that additional sales of this year. We foresee that we will continue with similar kind of a strategy for our FY '21 as well. More or less, our capacity headroom is very limited in our existing facility in Surat. We are currently working on a number of projects and we should be, in this year, hopefully, coming to you with some announcement with respect to CapEx for Speciality. So we are working on a few business cases. We will, in this year, the financial year, going to the Board for these approvals. And once we have this approved, we will be coming back to you for specific announcements. So we expect those multipurpose plants or dedicated plants will come up in the hedge and will hopefully start contributing towards revenue growth from FY '22 onwards. FY '22 is when it will come, so FY '23 onwards on a fully annualized basis. And on -- specifically on [ SGM ], I'll refer you to Ketan. Ketan?

Yes. Yes. So on the project front, I think there's no specific reason why the margins have come down. But even though these sales are picking up stronger than the last quarter, but it's more to do with the product mix, especially in the Speciality business wherein certain products where the margin profile was slightly stronger and had a higher sales volumes in the quarter 3 compared to the products that in -- hold in the quarter 4. So that's probably the reason why the gross margins are slightly lower. And to add to that, as we had indicated that because of this lockdown, almost INR 26-odd crores, INR 25 crores, INR 26 crores of sales we are unable to schedule because of the shutdown. I think if those would have happened, then the overall margin in those products would have definitely improved the margin percentage this quarter. So these products then have now gone into and stuck in the inventory. So yes, so that is then the...

You said that most of the revenue loss was from Ref. Gas and then more than that would have only deteriorated the margins, right? Just -- I'm apologizing for one more question because I know I have asked my 2. Just one question on the JV side. We said it has been a record here. But if I look at the platform position for our company and the investment we have done, it is still under 10% ROC. How should we see now that we have added to what utilization level we are and how much of gains we have in terms of expanding the ROC in that particular business?

Ketan, do you want to take it?

Yes. So as you know, this was the first year after the JV was formed that we have finally managed to be a year of stable performance. This year, we had a profit after tax of almost [ INR 16 crores ] in the JV. And yes, the ROCs of the JV compared to the investments that we've done have not been really great, but with the productivity now improving in the current year and probably with production volumes ramping up further in this year, I think it will show on the account.

The next question is from the line of Manoj Garg from White Oak Capital.

So Radhesh, like -- just a question. Since you've indicated that you have a limited headroom on the spec side of the spectrum side over the next 1 or 2 years. So how do we see the growth until the tide is see the new CapEx coming in fiscal year '22?

So we expect the growth that we saw in this particular year, which is FY '20, we expect similar kind of growth in this coming year, which is FY '21. And we expect that from FY '22 onwards, this new investment that will happen in Speciality will start taking in growth. So that's basically the -- and that is where you should typically -- in our kind of business, what happens is the investment and growth typically doesn't happen in a very linear manner. So you do have a significant investment and then the year immediately after the investment, you kind of start seeing an uptick in the sales. So we expect that FY '21 would be on the lines of what we saw in FY '20, but FY '22 is when the new investment will actually kick in. And FY '23 will be the full year of the annualized performance of this new investment in Speciality, new investment or the investments in Speciality.

Sure. Understood. And on the other hand, on this new project of HPP, you indicated that you will be manufacturing both intermediate as well as right now, one product, but it has applications in the various areas. So a, are we the sole manufacturer of this intermediate? Or there are like other suppliers as well? And how do we see the ramp-up in terms of the other portfolio through this intermediate?

Yes. So currently, the plan is for us to make the intermediate and the final product. The final product will be supplied to the customer. And currently, there is only one manufacturer who's doing both the intermediate and the final product, which is the customer himself. As I mentioned, there are some other opportunities for the intermediate but currently, the capacity that we are seeing of the investments that we have announced is to make intermediate with matching capacity of final product. So since we're basically in the process of evaluating what else can be done, so a, it will basically work as a kind of a backup option in case the final product starts seeing some demand-related issue, we can put the intermediate in other options. But that would be then part of our expansion option beyond this particular project that we have talked about. So for now, by focusing on manufacturing this intermediate, which will then go into the final product and the final product will be given to the customer and the margin capacity that we are setting up the plan for.

The next question is from the line of Abhijit Akella from IIFL.

The first question was just on the legacy business and the industrial side of the business. So you spoke about the fact that the industrial plants are operating at suboptimal capacities. If you could just quantify what level of utilization they are at. And when we think about how the Refrigerant business, Inorganic Fluorides and the industrial piece of Speciality Chemicals should perform in FY '21, should -- can we -- should we expect, say, a double-digit kind of decline in any of these parts of the business?

Yes. So if you look at our total business, we typically tend to divide it into 3 segments: that is pharma, agro and industrial. Now if you look at the Speciality business that also serves 3 segments: our CRAMS business, both in the pharma and your Ref. Gas and your Inorganic business primarily serves the industrial application. There's only a small part of that non-emissive side, which goes into pharma, whereas it's primarily industrial. So if you look at the industrial piece within the Speciality, it's now operating actual capacity, operating at a pre-COVID level. So everything in Speciality and in CRAMS, which is more or less operating at pre-COVID level. So we don't see -- as of today, we don't see any impact. Now on industrial, for the Ref. Gas as well as your Inorganic, we started the plant in the month of April as we started for other applications as well. The brand has been relatively lower. So we currently are at about approximately -- I mean again, there are a number of products in both these businesses, especially in other industrial and going to the industrial application. But more or less, I would say, we are at 2/3 of capacity utilization, plus/minus. Some products, it's much better conservative like below that.

Okay. Got it. Yes. And the second was just with regard to -- on the balance sheet, there seems to have been a shift of our investments, current as well as noncurrent investments, into cash and bank balances. So if you could just explain what that is about. And is this also the reason why other income has fallen sharply in this quarter? And what we should expect on this front going forward?

Yes. Ketan, do you want to take it?

Yes. So given the current -- the way the situation is developing in March, we realized that there was a lot of volatility in the fixed income market. And the time that India went into the lockdown on account of the COVID-19 resulted in [ lost time ] in the short term. At that time, considering this unprecedented situation and the uncertainties, and with the aim to prioritize safety of our investments, we redeemed almost around [ INR 200 crores ] in March, towards the end of March or mid-March and between mid-March and end March on various streams separately and we have passed all these funds as of now increased fixed deposits with various banks and we are at different tenor. As of now, that's how we fund currently are there and separately, you see the cash and bank number in the balance sheet assets. And we will keep assessing the situation. And as we -- we'll take a call in the coming months, taking into account how the markets are appealing and how the economy is taking share. But as of now, most of these are entered into the expedited things.

The next question is from the line of Balwindar Singh from Canara HSBC Insurance.

Yes. Most of my questions have been answered. Just one thing. So you highlighted on the Speciality side of the business that FY '21 will be similar to FY '22, and then FY '22, '23, where you take off on this because of the CapEx. On the CRAMS side, what is your view given that cGMP3 will have full year of performance this year? So what kind of growth rates can we expect on the CRAMS side for FY '21? Also in FY '22, what is your outlook on CRAMS?

So typically, we don't give forward-looking guidance at the company level or at the business level. In terms of Speciality, I basically have just given a directional, understanding that the growth will be similar to what we saw last year, FY '21 -- or FY '20. As far as in CRAMS, we clearly mentioned that there are 3 points. One, we have given -- we have mentioned that we should be able to reach asset turn of 2.25 to 2.5x the investment that we have made in about 3 to 4 years. We'll remain fully committed on that. The second point that we've mentioned is that we've actually seen pretty strong order flow, inquiry flow, both from our old customers as well as new customers in CRAMS. And third, we have actually gone into this particular year with much better order book position. When I talk about order book position by order book, will be actual POS in hand. So we've gone to this new year, this financial year, with much better order book than what we went into in the previous financial year. So we expect that this coming year will be stronger, the performance will be significantly stronger than the last year. But it will be difficult for us to give percentage guidance year-on-year for each of the businesses.

Sure, sir. Completely appreciate that. And on the CapEx side, we are evaluating opportunities on the Ref. Gas side and on Speciality Chemicals side. So you mentioned that there, you can see some CapEx announcements going ahead, I think [ 45 ]. Was my understanding correct?

Yes. So as we indicated earlier, we are seeing opportunities flattish. So as we had indicated earlier, there are basically 3 or 4 areas where we should be seeing capital investments. One is we have basically talked earlier about areas outside of these 4 deals, which has already happened now, which is in form of HPP. Second, we talked about in Speciality, so which is something that we are currently working on. The third one is on Ref. Gas where we are developing the business case. And fourth is additional CapEx that will be coming up in CRAMS, depending on this order book or new orders, et cetera. And it will basically be in that order of priority. So HPP is something that has already happened. We are a little in advanced state as far as Speciality is concerned, not as advanced on other 2 -- in other 2 areas as far as the completion of the plan and taking it to the Board, et cetera, are concerned.

The next question is from the line of Karthi Keyan from Suyash Advisors.

Wonderful commentary, so I wouldn't belabor the same topics. Just one clarification. Is there -- is the tax reversion that you talked about, INR 220 crore a done deal? Or is it still continuing? I'm asking you this because you spoke about how this has been happening again. So can you throw some light? Can this still be contested? So just clarifying.

Yes. So the -- for some of the years, the department has gone into appeal. For the other years, they are still not...

Mitigate them?

Yes. So for some of the years, the department has gone into appeal. For the others, they still haven't taken up the appeal. But we have favorable orders from multiple high courts on similar matter. And this year, we also had a favorable order from the jurisdictional high court, that is a very high court. And that led us to conclude that this case is strong for the company, and we took specific tax and retail advisers and then we went ahead with the write-back.

And what part has not been recognized yet? And will it be spending a favorable order are not contested so far?

No. That's for the department to contest. We have taken the increase...

Or the entire amount, the return of investment this year?

Yes, sir. Because the cases are the same for all the year.

[Operator Instructions] The next question is from the line of Amar Mourya from AlfAccurate Advisors.

Two questions from my side. Number one is in Speciality Chemicals, the kind of run rate which we have seen in export, basically, that has led to a significant growth as well as if you see the 9-month figure, it was basically in export, there was only 7.8% of growth. So my question is, does this INR 57 crore kind of a run rate for export in Speciality is sustainable?

Yes. Going forward, the growth trajectory that we talked about, either for this year or going forward for -- either for short term or for midterm, will be between these 3 segments, that is pharma, agro and industrial and will come from domestic as well as international market. So the growth in pharma will primarily be from India and the growth in agro and the growth in industrial will be primarily from international. Going forward, I mean, quarter-to-quarter, there could be some movements here, there. But otherwise, we feel quite confident that the growth, at least that is our intent, to ensure that the growth is well balanced between these 3 segments and domestic and international markets.

[Operator Instructions] The next question is from the line of Dhaval Shah from Girik Capital.

Sir, just one question. Sir, given in our CRAMS entire businesses from the exports, in terms of the business development and new business, what constraints are we facing right now? Or are things getting back to normal? Yes, just some thoughts on that. Yes. And also, since given a lot of research was focused towards COVID vaccine and medicine, has the others have taken a step back, this could impact our CRAMS areas that we're focusing on?

Yes. Some of the main customers -- some of our main customers are currently not really focusing on COVID-related medications. So we've not seen a shift from the therapeutic areas that they have traditionally been focused on to COVID-related discoveries, et cetera. So we don't foresee a major shift happening either in the short term or mid to long term. Now as far as the disruption is concerned, we did see some challenges towards end of March, beginning of April, but those were primarily related to supply chain, primarily related to transportation and shipping, et cetera. But currently, we don't -- we have not really seen any major disruption, either from the logistics point of view or RM movement point of view. So logistics, I'm talking about logistics of are finished goods or logistics of movement of the raw material.

And also your travel by the business development team, by staff, by yourself has been restricted to Western countries. So that's not a big problem right now? Or it's getting the best...

No. We have business development teams based in those specific markets. So we have an office in the U.S., which is responsible for the business development there. And we have offices in Germany, in the U.K., et cetera, that are responsible for business development in those specific markets. So we don't see any major impact because of travel-related restrictions. Even when there was a complete lockdown in those countries, a lot of business continue to happen on the phone. So the travel doesn't seem to be constraint.

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

Most of the questions have been answered. Just one question on the balance sheet, especially working capital. Now if I look historically, although your initial comment did mention higher -- slightly higher inventory to be sure on the production side. But there has been a slight uptick in terms of receivable and tables. And if I look at the net number, which is even less stable over the last 2, 3 years, there has been slight uptick from around 25, 30 days to [ 40, 30 ] now. Is that just a onetime thing because of lockdown? Or there is something more that we need to look into?

Yes. If you look at the -- I think your conclusion is -- so if you see the inventory position in the current balance sheet as in March, we are at about around 49 days. And on the receivables front, we are at about 75 days. So these numbers have slightly gone up more to do with the lockdown impact in March. And with the lower sales happening in the month of March, most of these sales have gone and part themselves in the inventories and that's where the inventory number has slightly gone up. And also, with the planned collections, which were there for the month of March, if all these collections was delayed because of the closure of banks and a lot of DLC payments could not materialize. So of course, now post -- the bank started operating, most of these receivables are back on track. So I would say this is -- I think this year has been -- the year-end has been a one-off case and should get back to our improved position going forward.

The next question is from the line of Ranjit Cirumalla from B&K Securities.

Congratulations on a good set of numbers. The first question is that we are looking on a tax rate going forward. So have we decided anything on the tax rate as far as standing is concerned? And the second, you said Speciality Chemical business would start seeing the growth from FY '22 onwards. So that does mean that we are probably working on some brownfield expansion that has been communicated.

So I'll just take the first part on the tax point. So our business, the current tax position that we are in, I think, for the current year of FY '21, we will stay put, which are earlier -- the earlier tax regime because we have the MAT credit which we would like to utilize. And probably we'll take the call on moving into the new tax 115JAA in the year '21, '22.

And second question, I believe you had on the Speciality business but your question was not very clear. Can you just repeat? I couldn't hear your question.

Yes, sir. You indicated that the Speciality Chemicals growth would this time be on the higher side from FY '22 onwards. For FY '21, you are indicating that for the company at the overall level, the growth would be in the range of FY '20. But from FY '22 onwards, one can see a higher growth, and we believe that probably would be led by the CRAMS and the Speciality. And you also indicated that something would be coming up soon in the Speciality Chemicals, the CapEx part. So I was just asking the question, would it be safe to assume that CapEx would be more of a brownfield expansion, and one has to probably wait for a greenfield expansion on the Speciality Chemicals side?

No. So we continue to do smaller greenfield debottlenecking projects in Surat, which is where our existing Speciality plants are, which is what led to the growth that we saw in FY '20, and that is what will also lead to the growth in FY '21. What I talked about, which is FY '22, FY '23 onwards, that will be the greenfield investment that will happen in a completely new location. That will happen in the hedge where we have already announced investment in setting up of infrastructure and other project that we're expecting. So that investment is a completely separate set of investment that will happen in Speciality, but that will happen in greenfield. As far as brownfield is concerned, those are the ones which are typically very small ones, and those continue -- we continue to do those kind of debottlenecking projects. But there is no further scope for any significant brownfield investment in Surat, which is where our existing Speciality facility is.

Okay. So you had indicated for FY '22, I thought in passing was less than 15 to 18 months, so obviously will be more in the brownfield expansion.

Your voice is not very clear. It's barely audible.

Yes. You indicated a time frame that you indicated was within less than 12 to 18 months. I thought it would be more from the brownfield expansion because for the HPP, we are almost taking 24 months like the end of FY '22 and earlier for FY '23, the ramp-up that we've seen. But the time frame for the Speciality Chemicals looks to be a little less than what you have indicated for HPP.

Sure. Now if you look at HPP, there is a complete or CLPs that is involved there, which is investment in the roads, setting up of basic infrastructure, et cetera. Once having done that, that will not be required or even setting up of a few end treatment plant, et cetera. Typically, those are the things, which take significantly longer duration. Once we do that, the time required for processing plant is typically about 12 to 18 months. So we are expecting that the business case will get finalized for Speciality in this coming financial year. We'll take it to the Board, the final announcements will be made. And the production from those clients will start in FY '22, and FY '23 will be the year when you actually see the full annualized impact of those investments coming up in Speciality business.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Radhesh Welling for closing comments.

Yes. I would like to thank everyone for joining on the call. I hope we have been able to respond to your queries adequately. Should you need any further information, if you have any further questions, request you to please get in touch with SGA, our Investor Relations advisers. Please take care and stay safe. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Navin Fluorine International, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.