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

Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited Q3 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the 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, Mr. Welling.

Good morning, and a warm welcome to all participants. I'm joined by our CFO, Mr. Ketan Sablok; and Strategic Growth Advisors, our Investor Relations advisers. I hope all of you 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 you and your loved ones are safe and doing well in the current challenging times. Now let me give you performance overview of various business units of the company. During the year till date, we have reported a strong profitable growth with our EBITDA margin for 9 months FY '21 growing by 260 basis points on a Y-o-Y to 28%. This growth is a result of continued momentum in high-value business and improved performance of our legacy business during the quarter, which was particularly weak during H1, primarily on account of demand-related issues. We recorded revenue of INR 809 crores. Operating EBITDA is at INR 228 crore with margin of 28% and operating PBT of INR 197 crores with a margin of 24% in the period 9 months FY '21. Our high value business, that is, the specialty and CRAMS, grew by 33% on a Y-o-Y basis to INR 525 crores for the 9 months period. It now contributes 65% of the total revenue as on 9-month FY '21. Our specialty business reported a growth of 16% on a Y-o-Y basis to INR 322 crore for 9-month FY '21 compared to the same period last year. The business has shown sustained growth on back of strong customer partnerships. The business has been growing profitably, and we see this momentum to continue. We are leveraging our R&D capabilities and deep fluorination expertise to strengthen our new opportunity pipeline, expand product portfolio and expand capacities, both through greenfield and brownfield projects. Our CRAMS business has reported strong sales with growth of 71% to INR 204 crores compared to the same period last year for 9 months FY '21. These strong results were on the back of robust order book, driven by new customer acquisitions and also deeper penetration into existing customers. Our current engagements with innovative pharma majors will augur well for sustaining our future growth. During last 9 months, we have significantly strengthened the demand generation as well as the demand fulfillment parts of the organization. Our legacy business that is Ref. Gas and Inorganic Fluorides performance was impacted on the back of weak demand from the end user industry. For this period of 9 months FY '21, revenue was down by 22% on a Y-o-Y basis to INR 283 crores compared to same period last year. For Q3, it was marginally down by 5% on a Y-o-Y basis to INR 103 crores compared to same period last year. Our Ref. Gas business was down by 27% in 9-month FY '21 on a Y-o-Y basis to INR 150 crore compared to same period last year. The performance was impacted by slower demand in domestic market and competitive scenario in international markets for emissive application. However, we were able to record good volume traction during the quarter, that is Q3, especially in international markets. On the domestic front, the trade and service sectors, which is impacted on the account of COVID-19, have started showing signs of revival. Our Inorganic Fluorides business was down by 14% on Y-o-Y basis for 9-month FY '21 to INR 134 crores compared to same period last year. This segment has started showing signs of improvement quarter-on-quarter in the back of recovery in end-user industries like stainless steel and glass. I'm happy to share that we continue to sign up new customers leading to widening of our end-user segments. With regards to our JV with Piramal, we expect the transaction to be completed before end of FY '21. Work on both the new capital investment projects is on track. That's it from my side. I will now hand over to Ketan to give you brief on the financial performance of the company. Thank you.

A very good morning to all the participants. I hope all of you, your families are keeping well and safe. So I'll -- well, Radhesh has explained most of the points, but I'll again share the highlights of our financial performance, following which we'll be happy to respond to your queries. To start with the 9M FY '21 performance, the company reported net revenue from operations of INR 809 crores, a growth of 7%, against INR 757 crores in this 9-month period. Operating EBITDA is up by 18% at INR 228 crores as against INR 194 crores in 9M FY '20. The operating EBITDA margin stood at 28% compared to same period last year with a growth of 260 bps. Despite business challenges due to COVID-19, EBITDA margins have improved on the back of increased share of the high value business. Operating PBT stood at INR 197 crores for the 9-month FY '21 as against INR 169 crores in 9-month FY '20, up by about 17%. Operating PBT margin stood at 24%, up by 200 bps as compared to the same period last year. Profit after tax stood at INR 178 crores for the 9-month FY '21 as against INR 131 crores, again up by about 35%. And the PAT margin was at about 22%, up by 460 bps as compared to the same period last year. Now coming to the unit-wise performance for the 9 months FY '21, the high value business grew by 33%, while legacy was low by 22%. In the high value business, specialty grew by about 16% to INR 322 crores and CRAMS grew by 71% to INR 204 crores. The degrowth in legacy business was due to fall of about 14% to INR 134 crores in the Inorganic Fluorides business and about 27% to INR 150 crores in the Ref. Gas business on a Y-o-Y basis. Now quickly on the Q3 FY '21 performance. The company reported a net revenue from operations of INR 297 crores, a growth of 18% during the quarter as against INR 252 crores in Q3 FY '20. The operating EBITDA is up by 26% at INR 82 crores for Q3 FY '21 as against INR 65 crores in Q3 FY '20, with operating EBITDA margin of 28%, a growth of 185 bps. Operating PBT stood at INR 72 crores for Q3 as against INR 57 crores in Q3 FY '20, up by 27%, with the operating PBT margin at 24%, up by 180 bps. Profit after tax was at INR 59 crores as against INR 45 crores in Q3 FY '20, up by 30%, with PAT margins at about 20%. On the unit-wise performance for the quarter, the high value business grew by 35%, whereas the legacy business was lower by 5%. Again, in the high value, we are seeing strong momentum in Specialties growing by 27% to INR 122 crores and CRAMS increasing by 52% to INR 71 crores. Legacy business, the Inorganic Fluorides started showing recovery with revenues moving up by about 10% to INR 57 crores, while the Refrigerant Gases were lower by about 18% to INR 47 crores on a Y-o-Y basis. I think I've covered most of the numbers. So that's all from my side. We'll now open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Naushad Chaudhary from Systematix.

Two questions. Just -- first one, just a clarification, sir. In the CRAMS business, how much capital we have deployed so far. As per my understanding, we have invested around INR 210 crores in CRAMS business. Is this number correct, sir?

Yes, approximately correct. The last investment that happened was in cGMP plant, which was approximately about INR 115 crore and prior to that was close to about INR 100 crores. So your understanding is correct.

This business gives us around 2.5x of asset turnover. So it has a potential of generating around INR 500 crores of revenue. Is this also correct, sir?

So when we did the investment of this INR 115 crore in the cGMP plant, that is when we had said for that specific investment, the investment turn to the peak annual revenue to be approximately between 2 to 2.5x the investment that we were making.

Okay. So total of INR 200 crores of capital, which we have deployed. How much revenue can this capital generate for us?

See, as -- yes, sorry. So as Radhesh said that for the new investment that we had done for the cGMP3, what we had said was we'll do an asset turn of between 2 to 2.25x on a peak load, so over a period of 3 years. And the current -- the way this business is -- the traction that we are seeing, I think we are well within that target. And as far as the investments which have already been done at Dewas, I think we have reached revenues which are peaking from INR 100 crores to INR 200 crores, depending on the projects that have come in. So over a period of time, I think your understanding of about 2 -- more than 2x the asset turn is correct.

The current quarterly run rate is optimal utilization? Or is there a potential to increase the utilization in CRAMS?

There is potential to increase utilization. We are constantly working on that. As we had said, we expect to reach the annual -- the peak annual turnover in about 2 to 3 years post the commissioning of the plant. And as you know, the commissioning of the cGMP plant just happened earlier last year.

Yes. Second question, is there any brownfield expansion we are planning for FY '22 growth in Spec Chem? Or will we focus on increasing more value -- high value products for FY '21 growth? Because if I do the rough calculation, I don't think we have much capacity there for FY '22 growth in Spec Chem.

Yes. So if you actually look at even your FY '21 growth, if you -- I'm sure you would have read our earlier commentary that we made last year. Even for FY '21 growth in Spec Chem, we hardly have -- I mean we didn't really have much headroom capacity available. A lot of that has actually come through smaller brownfield expansions that we did, primarily with respect to debottlenecking, et cetera. And these are kind of projects and investments that we continue to make. So these continue to happen on a regular basis. These are typically smaller debottlenecking projects that we continue to do in our existing plants. So those will continue to happen, and those will actually then contribute to the growth in FY '22. And those will continue to happen even after Dahej comes in.

[Operator Instructions] The next question is from the line of Ritesh Gupta from AMBIT Capital.

Just a bit on Inorganic Fluorides and on Refrigerant. How should we expect the recovery to pan out, let's say, in the quarter 4 of next year? If Refrigerant at least, let's say, for example, YTD [indiscernible] 27% [indiscernible] and that gas would have been consumed and, I mean, largely R22 [indiscernible]. So how -- is it a realization-led drop [indiscernible] next 2, 3 quarters? Or there could be pent-up volumes which may come back very quickly, let's say, in Q4 and Q1 next year?

Yes. So let's take both the businesses separately. As far as the inorganic business is concerned, you will see that in this particular quarter, that is Q3, we have already seen a small growth over Q3 last year. The business has actually, again, started coming back on track. We will see a similar kind of a growth in Q4. And we -- as we had explained earlier, in next FY, we should basically be able to see a growth of around 10% plus/minus. A lot of that will happen through -- because of the baseline effect as well and also some of the new customers that we have been acquiring. As I mentioned in my opening commentary, there are 2 very good customers that we acquired in this particular quarter for our inorganic business, one of which was in India, another one was in the U.S. We're trying to understand exactly how -- what would the peak revenue impact be of those customers' businesses. But we expect that in the next financial year, the growth to be in kind of low-teens for our Inorganic business. As far as Ref. Gas business is concerned, again, as we had given the commentary earlier, because of the cutoff which was going to happen from 1 January 2020, we were expecting the demand, especially in the domestic market, to soften this particular year, which got further aggravated because of the COVID situation. And as you can imagine that Ref. Gas business typically happens on a season-to-season basis, so the volume that we lost last year, especially during the peak season, we don't expect to bring that volume back. In this particular -- in the coming year, we again expect that Ref. Gas business to grow at a low-teen level, primarily driven by the growth in the non-emissive segment and growth in the exports market for the emissive segment.

Understood. Understood. And sir, if you could just give us an update in terms of CRAMS. I understood that in the past that there's 1 or 2 molecules which have been commercialized. Could you just give us a sense in terms of how they are ramping up? How -- once these drugs have been launched, how are they ramping up? What part of the value chain you're doing in that particular molecule? Just remind us on that.

Yes. So that particular molecule has done quite well. We actually again got repeat orders for this financial year for that particular molecule because they're actually expanding the geographies for that particular molecule. So that molecule is doing very well. We are expecting another molecule to actually get very close to the commercialization. The customer has already started ordering for the commercialization for that particular molecule. So the first one that I talked to you about was with a U.S.-based customer primarily for U.S. market. The second molecule that I'm talking to you about now is for a European customer primarily for European market. Also, there are 2 other molecules, which are currently in the pipeline, a little further away from the commercialization, but those also, the results have been extremely heartening. So those molecules are also progressing quite well through our pipeline.

Understood. Sir, but when I see your growth rates, I mean, they -- while they are, of course, very good in absolute sense, but let's say when -- I mean, my understanding is that when something goes from a lab stage to commercial stage, volumes increase dramatically, and they are not just, let's say, 1x or 2x, but they probably would be, let's say, 4x, 5x. So if you could just give us a sense that is it yet to happen for that U.S.-based molecule? Or -- because, let's say, you might have to actually put a dedicated plant for that particular molecule. So I'm also working for that CapEx, let's say, if that happens. So how should we think about that in terms of the volumes per, let's say, once the molecule gets commercialized?

Yes. So typically, if you see, as the molecule progresses from preclinical to stage 1 to stage 2 right up through commercialization, your understanding is correct that it actually moves from gram level to kg level to metric ton level. And the molecule that we are currently -- the volume that we are currently manufacturing and supplying for this commercialized product is on a metric ton level. However, unlike agrochemicals, the volume doesn't go into hundreds of metric tons for pharmaceutical. It remains in -- it remains at a metric ton level. Of course, we see that 10x effect, but it's still at tens of metric ton level, not hundreds of metric ton level. Now what is the right time to actually go for a dedicated plant for such opportunities? This is something that we are continuously having conversation with our customers because in a lot of these cases, even the customer does not have a complete visibility on how this molecule is likely to work for the next 5 to 7 years to be able to justify a dedicated CapEx. So we're continuously in dialogue with this customer and with other customers where the products are also approaching commercialization to understand what would be the right time to either, a, go for dedicated plant for that specific product or to go for a larger MPP designed specifically around these 3 or 4 opportunities.

Sure. Sure. And just if I can squeeze in the last, in terms of your Manchester Organics and, in the past, you've said that you will -- I mean, you'll keep it separate from India business and you have been taking a lot of strategic steps there. So if you could just highlight some of the changes or progress that have been made on the Manchester side -- I mean, augmentation of R&D capabilities, et cetera.

Are you asking any specific business related or overall?

No. I'm just asking for the Manchester Organics.

Oh, Manchester. Okay. No, so Manchester, unfortunately, because of what's going on in the U.K., some of those efforts have been a little slower than what we would have liked them to be. Currently, as you know, there is a lockdown in [ works ]. We basically got very minimum staff currently operating in U.K. And because a lot of these activities which are going on with respect to fillings up the capacity, et cetera, for our plants in India, the senior leadership team within that business is also kind of focused -- the focus of that team also has kind of shifted a little bit. We expect that -- we are currently working on finalizing the overall business case for Manchester Organics, which will focus on not only significantly upgrading our R&D capability there, but also expanding the capability and also bringing in some piloting capability where we will be able to do multi-hundred KG level product in Manchester. So that effort is on, and we expect that the business case would be ready by Q1 FY '22.

But sir, just on this COVID bit, I mean, does it actually put you 1 year behind in terms of, let's say, whatever the development was going on, even, let's say, with pharma companies, whatever the development was happening probably could have got delayed. Is it the right understanding? And probably what you were working on for those clients in your R&D side would have also got delayed a bit? Because I would understand R&D is a job that you can probably stay away from -- I mean work from home and do it. So is that something -- right understanding?

Yes. So when COVID actually set in, which was basically around February, March of 2020, post that, we clearly saw an issue for about 4 to 5 months, where the things were extremely slow. Of course, we were not able to have a lot of these meetings with the customers that we would have liked to. But some of the pharma companies also changed their focus and moved to COVID-specific therapeutic areas. So we saw that happen for a period of about 4 to 5 months, but it came back on stream pretty quickly. So your question related to 1 year might not be true, but few months, definitely.

[Operator Instructions] The next question is from the line of Karthi Keyan from Suyash Advisors.

Can you elaborate a bit on one line you have written in your presentation, which says you have strengthened demand generation and demand fulfillment parts of the organization? Why would this have been necessary? Because I thought you were already pretty well placed on that count. So some details on that would be helpful.

Yes. So this comment was specific to CRAMS business. So this period, in the last 9 months, if you see, we have strengthened our presence in the market. So we have actually brought in 2 new resources: one is a full-time resource that we have actually brought in, in North America; and one we have actually brought in, in the form of a consultant in Europe to further strengthen the order book for our CRAMS business. And on the demand fulfillment side, we have significantly strengthened our Dewas team. So we've actually made some changes. We've kind of upgraded our capabilities because we clearly realized that the kind of capabilities that we had, which helped us deliver the top line of close to about INR 100 crore to INR 150 crore would not be adequate for us to deliver the top line that we expect to deliver in the next year or 2. So we had to, again, go back to the drawing board and significantly upgrade those capabilities. So that process happened in this particular period. That was primarily from the point of execution. So it includes operations, includes QA, includes R&D, includes technology transfer. We didn't have technology transfer as a separate function prior to that, which we brought in, in this particular period.

Yes. Secondly, on the second commercialization molecule that is, say, on the verge of commercialization, any thoughts on timelines?

No. So we have already started supplying the quantity for that. Exact timeline the customer has not informed us because of the confidentiality. But we are seeing -- I mean there is a line of sight visible now.

Right. Right. So for FY '22, for example, would commercial volumes account for at least, say, 30% of revenues kind of thing in the CRAMS piece? Some indication on that? Would you want to comment on that?

If you actually look at our revenue for FY '21, a large percentage of that sale -- I mean when I say large percentage, I don't mean 60%, 70%, but there is a significant portion of that sale has actually come from the repeat business for 1 molecule, which was commercialized and the second molecule, which is close to commercialization because, as I said, they've already started getting the volume for that. And we hope to -- or we expect to see that continue for FY '22 as well.

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

First question, what is the typical time lag before -- which will be there typically for a new plant to come up, the moment we decide that we'll go ahead and the time when, let's say, the plant will be commissioned, both across Spec Chem and CRAMS?

So I'll give you 3 scenarios. First is CRAMS, CRAMS because last time when we did cGMP3, we actually did -- there were some issues with respect to OSBL, which we actually addressed there. So CRAMS, we feel confident that we should be able to bring in new capacity in a period of about 9 to 12 months. As far as specialty is concerned, when we talk about the brownfield projects, where there is either a capacity expansion or we actually add one more line or something like that, it typically takes, again, 9 to 12 months. For CRAMS -- for specialty to come in Dahej, which -- it's basically a greenfield, that will take about 15 to 18 months.

Sure. So the reason I asked this question was more given the number of inquiries, which you had earlier highlighted what we are getting as well as the few molecules which are getting commercialized, which as per you probably could see the light of the day over the next, let's say, a couple of quarters coming in. But at the same time, barring that 2 billion incremental CapEx, which we announced on Spec Chem, there is still some catch-up to be done, while on CRAMS, you had mentioned that we'll probably take a call in the coming quarters once we have more clarity. But on the Spec Chem side, whether debottlenecking-led expansion will be suffice for us to drive growth over the next, let's say, 1, 2 years? Or there should be some more capacity addition or built-up going ahead?

So the question is, will it suffice in the next 1 year? The answer is no. But we don't really have any much option because the Dahej investment, which we announced end of calendar year last year, will actually be -- the plant will actually get commissioned only in FY '22. Now what -- one thing you need to understand is that when we talk about inquiries, it takes time for us to go from inquiry to actually get to the stage where we are actually building the plant for that particular product. So when the inquiry comes in, we first do our internal assessment if that is the right opportunity for our company over a longer period of time, does it tick all the boxes that we have for our filters, then it completes the complete R&D piece, then it completes the piloting, et cetera, which is when it basically gets ready for setting up of new clients. But the way we are currently looking at is that these products, the new opportunities which are coming up, will come into R&D, then we'll go into the pilot plant, and we are now looking at our smaller MPP or at least the sections of that smaller MPP in Surat as kind of an incubation piece before it merits a full-fledged, larger plant in Dahej. So for example, one of the projects that we are expecting certain growth from for next year, we've completed the R&D., we've completed the piloting, and we will be supplying multi-tenths of the volume. So it's basically in about just less than 100 metric ton level from our Surat plant. So for -- as you can imagine, that's for our agro business. So that will basically be like an incubation piece for this new agro opportunity. Once we have done that successfully, we will also get a lot more confidence over the process, et cetera, and then those opportunities will be ready for larger plant, either dedicated plant or to be put in larger multipurpose plant in the Dahej. And we believe that the cycle will continue.

Sure, sure. That's helpful. Sir, just one clarification if I may. You mentioned the delta in the CRAMS business that we have seen from a 9-month year-on-year perspective, that is largely -- or that is also led by the first molecule, which has got commercialized. The second one has not yet contributed. Is that right?

Second one has also started contributing.

Has also started contributing?

Yes. Because as I mentioned in my earlier -- in the opening commentary, it's basically led by the new customer acquisitions as well as some of these repeat business. As you can imagine that we've actually seen good trend on new customer acquisition. But while that process is at the front end of this one, the typical revenue impact tends to be relatively limited.

Fair enough. And broadly, we should be on optimal utilization front on the CRAMS side with these 2 products -- 2 molecules being there.

These 2 -- there are some other opportunities in the pipeline also. We continue to ensure that we have enough opportunities in the pipeline, should one of them or 2 of them fall off. So it's important that we continue to have enough number of opportunities. So we feel confident that we should be able to get to the optimum level as we had indicated when we did the CapEx.

The next question is from the line of Tejas Sheth from Nippon India Asset Management.

On the commercialization trend, typically, would the understanding be right that this will lead to lower volatility in the CRAMS' revenue? And what would be usually the margin profile once the commercialization hits? Is it something which is very significantly lower? And if we have to put up a dedicated plant, what is usually the ticket size?

Yes. On the CRAMS, it's a little difficult for us to comment right now on the dedicated plant. As far as the stickiness of this one is concerned, so that is a -- again, it's a little difficult question to answer because these are all new molecules. So they can actually fail at any point in time. They can fail after Phase I, Phase II, Phase III. Post commercialization also, there could be some problem that could happen with 1 or 2 molecules, and thereby, there could be some issues. We are continuing to do various things to ensure that we decrease the volatility in our business. But by definition just because one molecule has got commercialized doesn't mean that the volatility has gone down because tomorrow, if there is some problem with that one molecule, certainly, there could be a potential dip. So this is a -- the volatility of the business is slightly kind of a different topic, and we continue to address that, as I mentioned earlier, through newer opportunities, newer customer opportunities, also to ensure that we have a number of these kind of businesses, which are -- a number of these kind of products which are getting close to the commercialization, and hence, the number of repeat business continues to go up.

Okay. Just on this, once we have touched, let's say, a commercial level for a client, does the client's confidence on outsourcing more of their projects towards Navin Fluorine improves substantially and hence a larger share of their outsourcing comes to us? Is that the right understanding?

We are seeing that. Your understanding is absolutely right.

Okay. So there could be a point of us where we would be very small of share of their outsourcing, but now we have been showing our results towards the commercialization of a molecule, we can get a good share of their revenue potential. I mean the client mining may improve substantially.

Yes. Yes. So to give you an example, the second molecule, which is close to commercialization, is a molecule that we have been working on for the past 6 years. And in the last 1 year, because of the way the relationship has developed with that particular partner, currently, we have 5 new opportunities that we are working on with that particular partner. Not necessarily the same thing will happen with everyone, but just to give you one example of what you were describing.

Okay. That's good to hear. Just last question. The new manpower, which we have put up in U.S. and 1 consultant in Europe, is that only for CRAMS or...

Only for CRAMS.

But they will not source any business on the Specialty side for us?

No, no, no. I mean at least that is not the intent. But in those -- in their conversations, if an opportunity comes up, sure. But that's not the intent. The intent is for CRAMS.

No, but they would be predominantly approaching pharma companies rather than agro chem companies, right?

Yes. But we also have a pharma piece in specialty, right? It's a different color. So that's why I'm saying, through those conversations, if an opportunity comes up, which fits the profile of the opportunity that we work on in specialty, definitely. But your understanding is absolutely right. The intent is CRAMS.

[Operator Instructions] The next question is from the line of Abhijit Akella from IIFL Securities.

So just 2 from my side. First, on the Specialty Chemical business, we've been indicating that FY '21, we would see similar kind of growth rate in terms of revenues as last year, so somewhere in the mid-20s. Given the kind of performance we've had so far in the 9 months, that would imply a fairly sharp increase in the fourth quarter. So anything along those lines that you are seeing in terms of a further jump in Spec Chem revenue?

So we are expecting -- if you see in Q3, we saw a growth of approximately about 27%. So it was close to about mid-20s. We're expecting a similar kind of a growth in Q4.

Okay. Got it. And the other one was just -- on the CRAMS business also, we can expect a similar growth rate or similar revenue number as in 3Q?

Yes. So our focus right now is to ensure that we give -- first of all, we try to bring some steadiness to the revenue in CRAMS. And at least our internal target now is to stabilize that run rate at around $10 million plus/minus on a quarterly basis.

Got it. Perfect. And last thing, sir, on the CapEx side, I know there are some more announcements expected, both maybe in Spec Chems and in Refrigerants, so what could we expect in terms of timeline and which area specifically?

No. No. I think that's something which is difficult to give specific timeline around. We are working on opportunities in Specialty Chemicals. We are also working on opportunities in Refrigerant Gases, but it's very, very difficult to give specific timeline because while we work on this, it's also important for us to ensure that we execute on the opportunities which are already in the pipeline. So we ensure that we continue to strike the right balance. But we expect that in the months to come, we should be able to bring at least some of those opportunities to the Board and then make appropriate announcement post Board approval.

The next question is from the line of Rohit Nagraj from Sunidhi Capital.

So the first question is on the Spec Chem business. So currently, how many molecules are there in our portfolio, both for pharma as well as agro? And what is the pipeline that is -- that we are looking at? And in terms of commercialization in the next couple of years, how many molecules will be commercialized?

Currently, we have about 20 to 25 molecules that are currently in the pipeline. As far as new opportunities are concerned, there are quite a bit. We continue to filter those out, but we currently, I would say, have at least about 15 qualified opportunities in the pipeline. And what was your third question, sorry?

Yes. The current portfolio, how many molecules are there which are in pharma as well as in agri?

Yes. Yes. So currently, we have about 25 molecules and about 15 new qualified opportunities that's over and above the existing this one that we have in the pipeline right now.

Okay. And the commercialization in the next, say, FY '22 and FY '23.

That's correct. Yes, in the next 2 years, we're expecting those to start getting commercialized.

All right. Sir, the second question is on the multipurpose plant that we have put up a slide in the deck. So this particular plant, are those molecules finalized as of now or we are making the initial infrastructure development? And based on this -- just now you told that 10, 15 molecules are in the pipeline. Based on how that progresses, those molecules will be finalized for this MPP?

No. So when we took this opportunity for this investment to the Board, which happened in end of December, that time we already had a good set of opportunities where we had completed the R&D work, where we had completed the piloting, and there was some form of an agreement with the customer for the next, let's say, 5 to 7 years. In some cases, it was 3 years. Some cases, it was 7 years. On the basis of those opportunities, we actually went to the Board for seeking approval for that particular investment. These 15 opportunities that I mentioned to you, those include the 4 opportunities that we talked about during that investment call that we had in the end of -- during the end of December.

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

First question on the Ref. Gas side. This year, that means in CY '20, we have seen a 28% decline, 25% probably was a volume dip. And if I look at export realization, have fallen by 13%. So emissive should have come down by 35%, 38%, whereas the decline is 28%, that is, non-emissive is contributing. Can you give us some understanding on what is the current contribution of non-emissive? And by when can you reach or entirely start using the capacity available for us for the non-emissive? And can the realization -- some thoughts on the realization between emissive and non-emissive.

Yes. So in the current 9-month period, the volumes have significantly dipped, especially in the first half because of the slowdown in the market. While the -- has happened both, to some extent, even on the non-emissive side because of the lockdowns and things like that. But in the quarter 3 that we have seen, we saw the trade and the service sector now slowly coming back to at least opening up towards the end of the quarter. So probably in the month of December, half of November and December, we saw some traction coming on the trade side. But -- and our volumes also on the export front have been a little better in this quarter. But as you said, the realizations have kind of suffered, one, because of the global pricing scenario of R22 and many of the export customers had to complete their part of the quota. We had to complete our part of the quota for the calendar year FY '20. So all these things cumulatively played into the overall volume dips that we've seen as well as the realization pressure that we have seen on the export side. Going forward, I think Q4, we are seeing prices in -- at least in the exports, again, slowly strengthening. We've seen towards the end of December prices again coming back to the -- showing an upward trend at least. And with the new year and the customers, export customers again getting back their quota, we hope that the Q4 Ref. Gas business will be stronger than what we've seen in the quarter, both from the volume front as well as on the realization side.

No, no, I'm telling you have done better because 25% volume dip, which was because of Phase II and assuming 10%, 13% of a realization decline, the revenue should have declined by 38%. It's declined by 27%, 28%. So there is a 7%, 8% coming from non-emissive, whereas you are telling that non-emissive has fallen, I think...

I'm talking about it on a quarter-to-quarter basis.

No, I'm looking at a 9-month...

Okay. So 9-month, yes, the emissive have shown. But on a quarter -- and especially, I was talking from a quarter 3 perspective, where we've seen a dip, specifically in the export realization, which we are hopeful now...

No, no, my question is on the -- more on the non-emissive side, not on the emissive side. I'm telling what is the contribution of non-emissive? How should we see this? Will the non-emissive demand will be good enough to completely run that capacity at peak utilization?

Yes, of course. The non-emissive side, we -- today, we are at -- about 20-odd percent of our total volume sales comes from the non-emissive side. And I think going forward, we are expecting this segment to show growth. Not sure whether it will be able to make up for the entire 25% dip in the volumes, the quota volumes, but we are also expecting that realizations, once they become stronger than at least on the overall top line, we should be able to maintain our current FY numbers going forward. So it will be a mix of better realizations in the next year plus growth in the non-emissive.

Okay. On the realization side, it was surprising to see a 25% cut in the volumes and the 13%, 14% decline in the pricing. I thought the [ pace down ] should have helped in hardening the prices. The reverse has happened. What is the reason?

Yes. So I think a lot of this has got to do with -- in the domestic market, the demand...

No. End user domestic and international quotas are not fungible, right? So we are just [ thinking about ] international.

Yes. So international, yes, once -- we saw that once China opened up post the lockdown, they significantly brought down prices internationally. So internationally, the price got suffered more with...

No. But the quarter was lower. They can sell only what they can sell, right? My whole question is the demand being equal, the production being lower, what has been the reason for such a sharp correction in the prices, whereas the expectation was hardening of prices?

No. So let me just intervene here. In terms of pricing, even if there is the -- quota typically gets set for the country. Then within that quota, company can actually have the flexibility. So for example, for last year, there was a quota which got set for India. And then we went back later in the last year to ask for a higher quota for exports. So that provision does exist. So what we actually saw, what Ketan was referring to is that, typically, there is a certain pricing expectation in terms of what the suppliers will basically price their product at. What we saw is towards end of last year, the calendar year 2020, the prices coming out of China, for whatever reason, were significantly lower than what we are expecting and what the prices were at earlier. It was necessary for us to push the additional volume. Hence, we also had to take a hit on the overall pricing, especially for the international -- the volume that we sold in the international market. That is what he's referring to.

No. So we changed the quota more from domestic to international in the anticipation of the hardening of the prices?

No, no, no. So typically, we get a quota for the total production, and we get quota for exports. We don't get quota for domestic sales separately. So what happened was because the local market was much slower because of COVID and other related issues, especially during the peak season, which typically comes up in Q1, because the demand was very soft, we realized that we might not be able to utilize the full quota, and that is why we went back and asked for additional exports quota.

Understood. Understood. One follow-up on the CRAMS. In your initial remark, Radhesh, you mentioned that new customers have been added good part of the growth and now you said that the commissioning of the -- commercialization of new products have added to the growth. Can you give some color on the new product, new customer addition and some brief on what is the contribution of the new customer, which geographies these coming in? And what kind of product categories we are looking at here? Product categories means, more -- if it is either a fluorine or a non-fluorine kind of a thing. I think you're doing pharma as of now.

It mostly is fluorine. There is very little which is coming in, in non-fluorine. Some of the non-fluorine that we are seeing is from -- coming in from the customer with whom we have had long-standing relationships, and they are now coming to us for non-fluorine opportunities as well. For all -- the new customer, it's all fluorine related. In terms of revenue contribution, as you can imagine, a significant portion is primarily coming from repeat business from existing customers. So repeat business could be either newer molecules or these are basically businesses which -- these are products which we have been supplying over the last few years. The second part, the new customer acquisition, that becomes important, not from the revenue perspective for that specific quarter, but that positions the company very, very well for the years to come. Because what we bring in today as new customers and new products will then get scaled up over the next few years to the stage where the old businesses are today. So from that perspective, it actually becomes important. But specifically, if you look at the revenue impact coming in from these new customers, it's not significant revenue impact.

And which geographies are these customers...

In terms of geographies, the new customers that I talked about was primarily from U.S. But today, if you see overall our portfolio, it's actually -- so earlier, if you look at it, let's say, 3 years back, it was relatively unidimensional. It was all focused on U.S., and we have actually gradually started moving it more towards Europe. So overall, if you see, it's pretty well balanced between the U.S. and Europe, but specifically related to this new customer acquisition that I mentioned, a lot of them were from U.S.

Just one clarification on your initial comment. You said that this FY '21 run rate will continue in FY '22. So that's a fair assumption to make that FY '22 will have a similar kind of growth as FY '21?

Similar kind of what, sorry?

Growth in Spec Chem in FY '22 similar to FY '21?

No. So -- you're talking about Spec Chem, you're talking about...

No, no, Spec Chem.

Yes, more or less, we should probably see a similar kind of a growth, plus/minus.

Yes. So 20% -- 20%, 22% kind of a revenue growth is what we're talking there?

Yes, 20% is what our expectation would be.

The next question is from the line of Bharat Sheth from Quest Investment.

Congratulations on a good set of [ numbers ]. Sir, I mean, earlier, someone asked on the margin profile once the CRAMS portfolio move is commercialized vis-à-vis, which is in the clinical stage. So how this ramp-up of volume and margins really play out? If you can throw some color on that.

Sure. Sure. And yes, I'm sorry that I missed that question, which was asked earlier. You're right. So on margin, we have actually given this commentary before as well, especially on the CRAMS. Typically, what happens is when the molecule is in early stage, as you can imagine, the price tends to be very high, then the price continues to move down. And what we basically have seen and we will continue to see that the margin at a contribution margin level or a gross margin level kind of starts dipping in, especially when the molecule is just getting from a scale to, let's say, 5x scale, et cetera, you actually see margins slightly drop because all the improvements, et cetera, have not actually featured in yet. But at the same time, because the scale, because we get a certain scale, at EBITDA level, it more or less tends to actually [ stay ]. And again, I'm not talking about quarter-on-quarter, but directionally, it continues to be same because what typically happens is ahead of growth, we typically start building in fixed cost, right? As I mentioned, we have actually brought in more people this time in CRAMS, et cetera. So when we do that, basically, the fixed cost goes up. And hence, the EBITDA margin at the operating level comes down, the scale goes up, it starts absorbing that. So year-on-year, our efforts will be to ensure that we either, a, maintain the operating margin or we actually start moving the operating margins up as these opportunities start scaling up. Again, that commentary might not be relevant for quarter-on-quarter numbers because quarter-on-quarter, a lot of things happen. So it is really difficult to comment on a quarter-on-quarter basis. But if you see overall trajectory, you'll see that happening.

And that remains same for pharma as well as agro?

We don't have any agro in the CRAMS -- on the CRAMS side. CRAMS is all pharma.

The next question is from the line of Jason Soans from Monarch Networth Capital.

I just wanted some color on, obviously, Spec Chem derives its revenues from life science and crop care segments. Just wanted to know how is the end user industry, how is the demand coming from both these key end user industries?

Yes. So as far as the agro piece is concerned, I think the demand continues to be strong. It's -- some of it is also because of the China-related issue. But as I have mentioned previously as well, we don't really focus a lot on that opportunity because we believe a lot of that could be kind of a short-term blip. A lot of what we are seeing -- the growth that we are seeing on the agro side is driven by new product launches, et cetera, that are happening for the customers. And that will continue to be the case in the years to come. On the life science side, again, this is basically the molecules which are getting off-patent. So this is primarily driven by generic opportunities, opportunities that we are basically seeing in the Indian market. And again, so we will basically keep tracking the growth that the pharma industry at a macro level will see plus impact of the import substitution.

Okay. Okay. And my next question is, I mean, with regards to CRAMS. It's more of strategic in nature. So we, obviously, have a lot of long runway for growth for CRAMS. So in terms of strategy, you have Asian peers such as Tigermed and Samsung Biologics, et cetera, who have excellent in terms of growing fast. So what is -- where do you see Navin Fluorine growing? I mean, obviously, we have like in-depth expertise in fluorine. So what -- how do you see CRAMS shaping up in next 3 to 4 years? What is your long-term vision for CRAMS?

See, first of all, one thing let me make it clear. Some of the examples that you gave, be it Samsung Biologics or be it SK biotek, et cetera, they play in completely different arena, okay? We play primarily on the small molecule side. And there, again, our focus is on intermediate, advanced intermediate. We don't necessarily call ourselves a supplier of API because there are 10,000 other people who actually call themselves that. And again, our specialization is around certain chemistries and technology platforms. That is how we clearly differentiate ourselves. And when we look at the market space, we don't see many players. We don't see anybody in India. We see very few people in China or, let's say, Asia. And there are very few people in the Western hemisphere who have similar kind of a value proposition. So we don't really see a lot of players actually having kind of value proposition that we have in this particular space.

Okay, sir. And just to -- I mean, just a small confirmation. You said Inorganic Fluorides and Refrigerant Gas is expected to show a growth of low teens in FY '22, right?

That is the expectation. Yes.

That is the expectation. And what about Specialty Chemicals and CRAMS, sir?

Yes. As I mentioned, in CRAMS, our focus is going to be to ensure that we generate a run rate of $10 million per quarter. That is what our primary focus for FY '22 going to be because -- to ensure that we bring in that steadiness, something that we've so far not had in that particular business. So that would be our primary focus. And in specialties, as I mentioned earlier, our target would be to get to close to 20% growth next year.

Okay. And one final question from my side. Just wanted to -- your deal with Convergence Chemicals, Piramal Pharma increasing 100% in Convergence Chemicals. Just wanted to know the exact -- the rationale behind it.

Rationale behind what, sorry?

The rationale behind the Piramal Pharma increasing 100% in Convergence Chemicals?

No, no. So that is a completely separate discussion. We've already had a lot of commentary around that. That was a joint venture that we had with Piramal, where we had 49%, they had 51% stake. And we decided that because we wanted to focus on what we are good at and Piramal -- we wanted Piramal to focus on what they are good at because if you look at CCPL, that was primarily a single customer -- single product, single customer opportunity, and given the fact that we felt that we are better off conserving our resources, both financial and human resources, on opportunities that we can scale up on our own, and hence, we decided that for both the parties, it would be right thing to do to sell our 49% to Piramal. So that is what has actually happened, and that agreement with Piramal gives us access to the technology, which we had originally built. They can continue to use that technology for manufacturing of that product for their requirement, but we will have access to that technology to do anything else that we want to do in other segments.

The next question is from the line of Madhav Marda from Fidelity.

I just had one question. Actually, business has been doing quite well, especially on the specialty, on the high value businesses. I just wanted to understand like on the high value businesses, what are the 2 or 3 key risks that you see going ahead? Outlook seems good, like, we are well positioned. But what could sort of that worries you on [ those 3 segments ]?

Yes. I would say there are the top 2, 3 things that worry me. One is selection of wrong opportunity. Because as you all know, the overall inquiry flow is very strong, especially on the Specialty Chemicals. So it's important that we don't get unnecessarily influenced by the strong inquiry flow and not convert all of them into opportunities. So ensuring that we qualify these inquiries is, I think, the one most important thing that a lot of my personal time also goes into that, so that we don't end up going down the path of a completely wrong opportunity because we're looking at something which is going to be sustainable and profitable, not only next year, but over the next 5, 7, 10, 15 years. So that's point number one. The second point is to ensure that we build the organization wherein we will be able to execute on these opportunities very, very diligently because the discipline in execution is, I think, going to be one of the very key factors in doing that. And the third thing is while we look at all these opportunities, we continue to look at a lot of these opportunities to grow as well as to invest. We continue to maintain the capital prudence, capital allocation prudence. Those would be the 3 important factors, and the risks associated with not doing those 3 things would be the key risks.

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Welling for closing comments.

Thank you. The businesses are poised to grow from here, backed by end user industry tailwinds, new capacity additions, new customer acquisitions as well as new product introductions. We are confident of continuing our journey to move up the fluorine value chain supported by our strong expertise and experience in fluorine chemistry. I would like to thank everyone for joining on the call. I hope we have been able to respond to your queries adequately. For any further information, request you to get in touch with SGA, our Investor Relations advisers. Please take care and stay safe. Thank you very much.

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