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

Ladies and gentlemen, good day, and welcome to Navin Fluorine International Limited Q4 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 call 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.

Thank you. I hope you all are able to hear me properly. Good morning and warm welcome to all the participants. I'm joined by our CFO, Mr. Ketan Sablok; and Strategic Growth Advisors, our 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 you and your loved ones are safe and doing well in these difficult times. Our office in Mumbai continues to remain closed, except for some emergency work, and many of us continue to work from home. Our plant operations in Surat and Dewas and project activities in Dahej are running smoothly despite COVID-related disruptions. Currently, around 68 of our people, including our contract workforce, are out due to COVID infection across all our sites. Only a few of them are currently hospitalized. All of them are doing well and recovering. We are in touch with them and their families to help provide all the support they need. Thankfully, rate of infections across our sites is now coming down. We, however, continue to remain extremely cautious and operate zoning and other strict protocols across our sites. We are also working with local administration, especially in Surat and Dewas, to provide all the support we can with the local population in these times of crisis. We are working with our external partners, like customers, suppliers, transporters, et cetera, to ensure our operations continue to run smoothly. We hope that these challenging times will pass soon. And as the vaccination pace improves, it should start normalizing soon. We are planning on-site vaccination drive at all our sites to be run on a discretionary basis for all our employees and their eligible family members. Let me now start with key business highlights for the quarter and for financial year ended March 2021, followed by business segment-wise updates, and then Ketan will take you through financial highlights for quarter 4 and full year 2021. I'm happy to report that we delivered strong Q4 FY '21, in which our operating revenue was up by 22% to INR 324 crores. EBITDA was up by 25% to INR 84 crore and operating PBT but was up by 29% to INR 73 crores. This performance was primarily driven by a growth in Specialty and CRAMS. Our Specialty business registered growth of 26%, whereas our CRAMS business registered growth of 40%. For FY '21, our company delivered operating revenue of INR 1,133 crores with growth of 11% on Y-o-Y basis, operating EBITDA of INR 311 crores, a growth of 19% year-on-year basis and operating profit before tax of INR 269 crore with growth of 19% on a year-on-year basis in spite of the challenging situation that we faced related to COVID-91 (sic) [ COVID-19 ] especially in the first quarter of FY '21. The overall growth has been driven by high-value businesses. Our high-value businesses have seen good performance growth of 32% to INR 732 crores for FY '21 compared to the same period last year. It now contributes 65% of the total revenue as on FY '21. Our Specialty business reported a growth of 19% on a year-on-year basis to INR 453 crores for FY '21. Business has shown strong growth, driven by mix of new customers, new products and market share gains. We continue to focus on introducing new products by leveraging our R&D capabilities and deep fluorination expertise as well as continue working on debottlenecking initiatives, especially in Surat, along with building new capacity for existing as well as new products. Our CRAMS business has again reported strong sales with growth of 62% to INR 279 crores for FY '21 compared to the same period last year. The strong performance was driven by new customer acquisition and repeat business from existing customers. We [ achieved as such ] sustainable growth for this business backed by good project flows from new and existing innovators. We have also undertaken a few cost-improvement initiatives for repeat business in FY '22, which will lead to better operating efficiencies. Our legacy business, i.e., the Refrigerant Gas and Inorganic Fluorides, performance has shown positive momentum on back of new customer sign-ups and demand recovery from the end-user industry during H2. For FY '21, revenue was down by 14% on a year-on basis to INR 401 crores compared to same period last year. For Q4, revenue growth grew by 10% on a year-on-year basis [ to INR 117 crores ] as we see demand normalizing. Our Inorganic Fluorides business was down by 7% on a year-on-year basis for FY '21 to INR 193 crores compared to the same period last year. But for Q4, it recorded good year-on-year growth of 16% to INR 59 crores. The segment's performance improved quarter-on-quarter, supported by capacity enhancement through debottlenecking and recovery of end-user industries like stainless steel and glass. Widening of end-user segment in few products, along with new customer additions in exports will drive future growth in this particular segment. Our Refrigerant business was down by 20% in FY '21 on a year-on-year basis to INR 208 crores compared to same period last year. For Q4, we showed marginal growth of 4% to INR 58 crores. The trade and service sectors, along with exports, have registered strong demand in the quarter. The demand was also aided by addition of new customers in international markets. Work on HPP and MPP projects in Dahej continues at full swing. We managed to successfully work through first wave of COVID last year. Clearly, the second wave has been more hard hitting for the industry. Nevertheless, our team is working very hard to ensure we deliver the projects with minimal delay. At this point, we feel confident that we will be able to successfully complete work on HPP project with a potential delay of around the quarter. That is from my side. I'll now hand over to Ketan to give you brief on financial performance of the company. Ketan, over to you.

Thank you, Radhesh, and a very good morning to all the participants. I wish all of you and your families are in good health and safe. I'll quickly share the highlights of the financial performance, followed by which we'll be happy to respond to your queries. So for FY '21, on a stand-alone basis, the company has reported net revenue from operations of INR 1,133 crores in FY '21 as against INR 1,022 crores in FY '20, a growth of about 11%. Operating EBITDA stood at INR 311 crores for FY '21 as against INR 261 crores in FY '20, up by 19%. The operating EBITDA margin stood at 27.4%, a growth of 193 bps compared to same period last year. The increase in operating EBITDA margin was due to better performance in our high-value businesses and the revival of our legacy businesses towards the second half of the year. The operating PBT was up by 19% and stood at INR 269 crores for FY '21 as against INR 225 crores for FY '20. The margins for operating EBITDA stood at 24% in FY '21. PBT before the exceptional items was at INR 343 crores, a growth of 34% versus INR 257 crores in FY '20. Profit after tax stood at INR 299 crores for FY '21 as against INR 400 crores in FY '20. The PAT margins were at 26%. Coming to the unit-wise performance for the year. Our high-value business registered a growth of 32%, while the legacy was lower by 14%, again, due to the end-user demand impact in the first half of the year. In the legacy business, performance of Inorganic Fluorides improved substantially during H2 as the business registered a marginal revenue degrowth of 7% [ to INR 193 crores ]. However, Ref. Gas business took a little more time to recover, and the overall revenue showed a degrowth of 20% to INR 208 crores for the year. Specialty grew by 19% to INR 453 crores, and CRAMS grew by 62% to INR 279 crores. The overall robust performance during the year further strengthened our balance sheet and cash flows. Our net cash position stood at over INR 600 crores on a consolidated basis, and the prudent use of capital has helped us improve our operating return on capital to almost 31%. The net cash flow from operating activities stood at INR 296 crores, improved by about INR 140 crores compared to last year, showcasing an overall a strong improvement in operations. For quarter 4 performance, the company reported a growth of 22% in net revenue from operations of INR 324 crores against INR 265 crores in Q4 FY '20. The operating EBITDA was up 25% to INR 84 crores for the quarter as against INR 67 crores for Q4 FY '20. The operating EBITDA margin stood at 26%. Operating PBT grew by 29% to INR 73 crores as against INR 57 crores in Q4 FY '20. The operating PBT stood at -- the margin stood at about 23%. PBT before exceptional item was at INR 93 crores, a growth of 50% versus INR 62 crores in Q4 FY '20. For the quarter, the high-value businesses grew by 31%, and the legacy grew by 10%. Specialty segment had a growth of 26% to INR 131 crores, and CRAMS grew by 40% to INR 76 crores. The legacy business showed an upward trend with a growth of about 16% to INR 59 crores in inorganic and about 4% in Ref. Gas, touching INR 58 crores Y-o-Y basis. During the year, we completed the CCPL transaction on 21st of Feb 2021. As informed earlier, we divested our 49% stake in the JV to -- for INR 65.1 crores and gave up the rights on the lease on land at Dahej for INR 7.9 crore. The gain of [ INR 31.39 crores ] on account of the above transactions, net of all the incidental expenses, have been shown under exceptional items. The company also gave up its leasehold rights in the land situated at Dahej to our wholly owned subsidiary, Navin Fluorine Advanced Sciences Limited, and it's a gain of INR 34.8 crores. This again has been shown under exceptional items. That's pretty much from my side. I will now open the floor for Q&A. Thank you, everyone.

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

Congrats on a good set of results. Thanks for taking my questions. I just had 2. One was with regard to the gross margin movement in this quarter, it seems to have come a little bit under pressure if I look at it both sequentially as well as year-on-year. So just wondering if there might be some element of input cost inflation that might have led to this. Or is there any other reason?

Hello? Can you hear me?

Yes.

Yes, yes, yes. So as far as the gross margin in this particular quarter is concerned, it was basically driven by -- the decrease was basically driven by 2 BUs. One was Refrigerant Gas, and the primary driver was Refrigerant Gas, and then there was a minor [indiscernible] Specialty. In Refrigerant Gas, what happened was the demand for the domestic R22, especially on the non-MSE side, was lower in this particular quarter because one of our main customers had actually taken a shutdown for a month. So the sales into that non-MSE category was low, and that clearly is the high-margin business versus the exports of R22 actually grew in this particular quarter, which is a significantly lower-margin business. So it was driven by that factor. On Specialty, it was primarily because of -- so we have one big product in industrial segment, which we basically export. And there, because of the supply chain issue, the demand was lower in U.S. It wasn't particularly because of the end-market demand. It was basically because a lot of the containers, et cetera, got stuck because of the Suez Canal issue. So because of that, there was a dip in the demand of that product. And on Agro side, at the same time, there was an increase in the demand in one product, which is of a lower margin. So a lot of these 4, 5 factors actually happened at the same time, because of which we saw the dip in the gross margin. As far as the impact of raw material is concerned, on the industrial side, in Specialty, we also have a number of other products where there are certain solvents, et cetera, are currently used. So there, we actually saw a significant uptick in the price. And those products, we were not able to form the price because there is a contracted price there. But overall impact of that on the gross margin is minimal. So it was primarily because of these other factors rather than any significant increase in the raw material front, which we were not able to pass on.

Got it. Thank you. That's helpful. So just to sum up, this is more of temporary kind of issues, and we should see some normalization from next quarter onwards. Is that fair?

We believe so, yes.

Got it. Got it. And my second question was just with regard to the exceptional gain that you've shown on the 2 divestments. I notice that the exceptional gain on the consolidated books is much lower than that on the stand-alone. And I understand that it's largely because of the Piramal JV divestment. But if Ketan, sir, could just explain what's driving the big difference between stand-alone and consol.

No. So, yes, Abhijit. So as I said that one of the gains of about INR 34.8 crores was due to giving up the lease or rights and land to our subsidiary, which we have recognized in the stand-alone books. This gain is not there in the consolidated accounts because the gain is actually coming out of the transaction with our wholly owned subsidiary 100%. So that's getting knocked off in the consolidated accounts. So that's the reason why you see that stark difference between the exceptional item in the stand-alone and the consolidated accounts.

Thank you so much. I wish you all the best.

Thank you.

The next question is from the line of Amar Mourya from AlfAccurate.

Thanks a lot for the opportunity and congratulations for a very good set of numbers. Sir, my question is, first, on the CRAMS. Now this kind of run rate, is it sustainable given that the cGMP3 had started, along with that, we had also expanded our marketing team by appointing 2 people, one in North America and one in Europe?

Yes. So is this kind of performance in terms of the result, et cetera, sustainable? We clearly believe so. Is this kind of a growth rate sustainable? This business, as we have maintained all the time, it's a little difficult business to track on a quarter-to-quarter or a year-to-year basis. So we might not be able to show consistent growth in terms of percentage on a year-on-year basis. But over a trajectory, if you see of this business, we continue to remain extremely positive, as we have always said, because we are clearly seeing a lot of tailwinds here. A lot of hard work that we have put in over the last few years in terms of acquisition of new customers or delivering on the existing orders, et cetera, are now resulting into a higher set of businesses. So overall trajectory, we remain very, very positive and confident of. But will we actually see exactly the same percentage growth year-on-year? Maybe. Maybe not. But the overall trajectory will continue to remain positive.

Got it. And second question is on the Specialty Chemicals, sir. Sir, we did 2 round of debottlenecking, I think second quarter also and now in the third quarter. So what would be the total quantum of this debottlenecking CapEx?

So if you actually look at these CapExes, I mean we continuously do debottlenecking projects. We currently have in Surat for Specialty about 4 projects going on debottlenecking. Not all of them require CapExes, or even if they have CapExes, they are actually minimal. There is one relatively larger CapEx, which was there, which was approximately about INR 10 crores, that we had undertaken last year. But most of these CapExes that we talk about are relatively small CapExes. Sometimes the debottlenecking exercise that we do does not even entail CapExes. So we continuously identify ways and means to sweat -- to basically sweat the assets that we currently have so that we can map new products or get extra volume of the existing products. And till Dahej actually comes on board, which will happen next year, we'll continue to get growth in specialty through these initiatives.

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

Yes. Congrats on a good set of number and thanks for the opportunity. Sir, first question on the new molecules or the products that we are seeing. How is the run rate across the Spec Chem and CRAMS, sir?

So we are actually seeing a number of new products currently in the pipeline, both on the Specialty Chemical side, on the CRAMS side. Also, we are seeing pretty good generation of good opportunities on the HPP side. So those are the opportunities currently in the pipeline that we are currently working on.

Sure. So sir, and if I focus on Spec Chem here, so if I remember it right, last year, we were around 20, 20-odd, 20, 22 molecules there in the pipeline across agri and pharma. So currently also, the run rate is similar or there is some ramp-up there?

No. We -- the run rate continues to remain more or less the same. So what we typically do is as the molecules actually go on or come off that pipeline, we keep adding new molecules. So the run rate right now is slightly higher than the run rate that we had last year. But what has happened is the quality of the projects has significantly improved. So for example, earlier, maybe about 18 months back, some of the opportunities that we were working on were the molecules which were already launched or where we were basically the second or third of both supplier. There is now the opportunities that we are working on. In many of them, we are either the first company or customer that -- a company that these customers are working with or the second company. And wherever we are the second company, we are the first one in the Eastern Hemisphere that they are working with. So the quality of those opportunities have significantly changed.

Sure. Sure. That's encouraging. Sir, the second thing on the capacity addition part, while on CRAMS, we already have cGMP, here, on which you have guided decent utilization over the next 2 years. On the Spec Chem side, anything incremental there?

Yes. As I mentioned earlier, we continue to do the smaller debottlenecking projects because given the limitations in our existing Surat site, we cannot do really any large brownfield project in Surat. So the next big CapEx or CapExes will happen only in Dahej, one of them we have already announced a few months back, and we are continuously working on new opportunities there. But as far as Surat is concerned, we are working on multiple debottlenecking projects, which will actually help us, not only bring incremental capacities on board, but also for various cost-saving initiatives.

Okay. Okay. And sir, just one last clarification here. On the gross margin front, while you did explain the Q4 margins there and the reasons for the decline, on a full year number also, if I see -- while the legacy business has degrown from a full year perspective and the Specialty one has grown, but the gross margin side numbers do not look as high in terms of growth. They are largely flattish. So just your comment on that. Were those the same reason what led to this flattish gross margin, henceforth, there will be an improvement? Or how should one look at it?

Yes. I think one of the big factors which led to this was, as you know, our domestic Refrigerant Gas business was always a very high-margin business. And that because of these -- the phaseout schedule, et cetera, because that business has taken a significant dip this particular year, which we had actually anticipated, we had planned for, that is why we are actually seeing that. But what we really did very well was we ensure that we compensate for the drop by identification and development of newer opportunities in CRAMS and specialty.

Hello?

Hello?

Yes. Sorry. Sorry.

Could you hear me?

Yes. I could hear you, sir. That's it.

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

Good morning, Sir. Thanks for the opportunity. A couple of questions from my side. First one is Specialty Chemicals. This quarter has been a very strong growth on the domestic side. It should be led by pharma generic. There is a lot of talk on the import substitution part on the pharma side. Are we seeing a lot of opportunity on that side? And a connected question to this is from the import substitution, which can help from a product to have more backward integrated within India, that was the first. The second one is on the export side, the agrochemical side. That looks like a slowdown, a lot of it. We have a 12% Y-o-Y growth, whereas last year was -- the same quarter was slightly a dead quarter. And exports generally are very strong in Q4 and Q1, given approaching summer. So how are you seeing the agrochemical business for next year? So this is the first question.

Yes. So if you see the growth that we are seeing in domestic was driven both by agrochemicals as well as by pharmaceutical. There is one new introduction of -- this new product introduction we made this particular year, where the molecule has actually gone to another Indian company to make the final active, the final formulation. And then it is going to get exported to multiple other countries. Whereas the dip in the exports that you see, that is primary -- as I mentioned a little earlier, that has primarily happened because of dip in the product that we sell into the industrial segment, where it wasn't necessarily because of any dip in the end-user market. It was primarily because of the supply chain issues. There are a lot of our empty containers actually were held up because of the supply chain issues. And hence, we were not able to get the rotation in this particular quarter. But now we are again back with those empty containers, et cetera. So we believe that going forward, the supply chain should function seamlessly. So it was primarily that it was a temporary dip because of that in this particular quarter. But overall, on agro side, we continue to see extremely strong momentum. On the both agro as well as pharma side, if you ask me, on import substitution piece, we continue to see a lot of noise around import substitution. But the problem is that as soon as you start working on these opportunities, and as soon as another Chinese company starts manufacturing on that product, the Indian customers expect us to actually match the price that they're getting from a Chinese vendor. So what we have ensured and which is what the commentary have always been giving is that we will not let our strategy be driven by import substitution. We will do what is the right thing for us. If it helps because of import substitution, very good. But we will not let import substitution be the primary driver of our strategy.

Great. Great. And just one follow-up question. The spillover of industrial should be visible in the next quarter's revenue, right?

Some amount of that, yes, we will see in the next quarter.

Okay. And the second question from my side. On the CapEx, we already have announced close to 600-plus kind of CapEx and our balance sheet as that kind of cash, and we have good 2 years to run on it. Do we expect any large CapEx announcement this year? And what will be the first focus for the next round of CapEx?

So as I have indicated earlier, we have really good opportunities currently in the pipeline that we -- the operating team remains very excited about. We are working on that. We would have probably liked to take one such opportunity to the Board, that was relatively a smaller opportunity, to the Board last week. But because of the COVID situation, and there is a likelihood of the projects are getting slowed, et cetera, so we said we will actually move that a little bit. But overall, will there be announcements of CapEx? It's very difficult to say because the announcements can only be made once the Board gives us the approval. But the operating team currently is working on a number of such opportunities, which we intend to take to the Board in this financial year. And as soon as the Board gives us the approval, we will be happy to make announcement on those. This will primarily be on the Specialty Chemicals side.

Next question is from the line of [ Nirav Jimudia ] from Manual Research.

Sir, my question is basically with respect to the [ trust ] which Navin has developed or from the M&T customers in terms of either protecting the right tenders and even adhering to the EHS standards, which are, I think, the 2 most critical elements for contract manufacturing. So once this first [ parts ] develop over a period of [indiscernible] as well as the technology arbitrage, so there's a key role in terms of moving the customers a lot with the value chain for high value-added products or probably developing the intermediate product for the finished products. So if you can help us understand where is actually Navin currently in terms of the past arbitrage as well as the technology arbitrage.

Yes. So you're absolutely right. And we are actually seeing that momentum kick-in in at least 3 of our businesses, CRAMS, Specialty and HPP, where, because of the way we are working with our customers, the customers are now feeling a lot more comfortable in coming to us with more projects, more complex projects and more value-added projects. We've actually already seen that happening clearly in CRAMS and specialty, and we believe this will happen in HPP business as well. Also, because these projects are a lot more complex and a lot more value-added, the kind of technology required to handle these projects or the technology -- the level of technology is very different from the kind of technology that we have been used to. Some of these, we are actually developing 4 sets of partners. There are some we are developing jointly with some of our partners. And in some cases, the partners are actually giving us their proprietary technology, which we then will be able to use as a platform. We will be able to leverage that for multiple products across the BUs. So we -- and that is what I always talk about in terms of technology arbitrage. So that is the direction we would like to go in. And we are already seeing that happening in the CRAMS as well as in specialty, and we believe we will actually continue to see this in HPP as well going forward.

Okay. So basically, the focus of the company is on the basic partnership as well as developing the products around them through cost center technology arbitrage.

That's correct. The cost arbitrage, so what -- by cost arbitrage, what I meant was only the projects would come to India or an Indian manufacturing partner primarily because of the cost arbitrage. So what we are saying is that we would like to move away from that. That does not mean that our focus on cost will get diluted. Our focus on cost always has to be there, from the technology side, from the supply chain side and from the operations side. So that will continue to be there. What we are saying is that the prime -- that will not continue to be the primary driver. The primary driver will move to our ability to develop and then handle the newer technologies.

And sir, the second question is with regards to the [indiscernible] as compared to the traditional geographies of [ Western Europe ], I think [indiscernible] even the opportunity in the [indiscernible].

Sir, sorry to interrupt. Sir, your voice is very low.

Yes. Am I audible now?

Yes.

Yes. So sir, as compared to the traditional geographies of U.S. and Europe for the CRAMS business, I think [indiscernible] and Korea is also up probably a lot of opportunities predominantly from electronic chemicals point of view. So if you can share your thought process on the same that how India could be a part of this opportunity and in a way how Navin can be a part of this opportunity.

Yes. So first of all, I would like to say that if you look at the size of the company that we are, we are nowhere close to fully exploring and then exploiting the opportunities that even the Western Hemisphere offers -- has to offer. So there is significant headroom available there for us. So other than diluting our attention, we would first like to make the most of those opportunities that U.S. and Europe has to offer. Having said that, you're absolutely right. There are a number of newer opportunities that this new segment as well as new geographies would offer. We've actually just brought on board a new customer in Specialty on the industrial side, Korea. And we believe that, that would be a relatively big customer for us going forward. And as I have indicated before, we continuously -- we continue to identify and develop new opportunities in these emerging segments like EV, et cetera, that you talked about. But these are not opportunities which we will be able to monetize like next quarter or this year or something. These are typically opportunities that take a little longer to develop. But once you develop, these are absolutely sticky. So they don't go away. So once we develop those and we are in those opportunities, those are here to stay for the next 10, 15, 20 years. But there are a number of these kind of opportunities we are currently working on.

Thanks a lot for answering the query, Sir and all the best.

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

Yes. So Radhesh, like while you spoke about spec and pipeline, it would be great if you can give us some color on the current side of the pipeline also. And if you can highlight in terms of how many molecules currently are in the commercial sales and how could the -- how many molecules are in the advanced stage [indiscernible].

Yes. Thanks, Manoj. So as you know, we typically don't indicate numbers on the CRAMS side. We typically don't -- for various reasons, there are some confidentiality issues, et cetera, et cetera. So we are not allowed to -- because typically, if you look at in CRAMS, and if you look at our portfolio in CRAMS, there are 2 sets of opportunities that we have, one: which are at the other end of the spectrum, Phase 2, Phase 3, which are actually developing quite well. And then there are a number of opportunities at the beginning of that particular pipeline. So we don't typically like to give the numbers. Having said that, what I can tell you is that if you look at the number of opportunities that we today have in Phase 2, Phase 3 versus the number of opportunities that we had, let's say, last year or year before at the same time in Phase 2, Phase 3, the numbers have gone up significantly. And more importantly, these opportunities are with the same set of customers that we have been working very closely with. So what that means is these opportunities will develop, hopefully, because a lot of that is also beyond our control. It depends on how the customers' drug actually performs. But because of the way this is developing, and because of the way this partnership is developing, and this is kind of a long -- relatively long life, because of that, we have actually now started getting a lot of good interesting new projects from the same set of customers, which is also kind of filling up the front end of that pipeline. But today, if you look at the overall number, we currently would be working on approximately about 25 plus/minus number of new projects currently. So that's the number of projects we are currently working on in CRAMS.

That's good to know. And the second question that I would like to ask, obviously, clearly, we are seeing a lot of tractions on the pharma side, spectrum side as well as the HPP side. And you have also indicated the use of fluorination in other area like we spoke about, battery-led electrical vehicle [ all have been seen in 2020 ]. And I understand that these are relatively new areas. So just would like to understand that how are you thinking about these areas. And what are we doing in terms of building the capabilities in those areas announced maybe 3, 5 years down the line? What is the bigger growth driver for us?

Yes. So there are a number of new opportunities, as you rightly said, in the fluorination space that are emerging, and we believe some of these opportunities at least are going to -- basically, they are here to stay. So we're just trying to understand these opportunities a lot better, primarily through partnerships. So some of these companies who we have very strong relationships with today also have very deep relationships with these companies who are actually driving innovation in this particular newer segments. So true, we are leveraging these partnerships to actually get better understanding of the spaces. As far as the technology is concerned, we are currently evaluating a possibility of setting up an innovation center outside of India for some of these emerging segments. So this innovation center will not only focus on developing new products but also focus on developing new applications. We're currently in the initial phase of designing, et cetera. But as soon as we are ready to have some announcements to be made on the CapEx side, we would be happy to come back to you. But we believe that this capability, not just on the product development side, but on the application side, is what will be -- will differentiate us and what will be required for us to have a very good, sustainable growth over a long period of time in these newer segment.

Sure. Thank you very much and stay safe.

The next question is from the line of [ Bikshit Mittal ] from [ LIC ] Mutual Fund.

Sir, just wanted to know what is the kind of raw material inflation we are seeing in our basket? Because we're seeing commodity across the board rising quite substantially. So any indication that you can give on that front?

Yes. So if you actually look at the raw material basket that we have. The market consists of 3 kinds of materials. First, which is a big chunk, is the fluorspar, okay? And typically, we have a very long-term contract in the fluorspar, the fluorspar. So we don't really -- we're not seeing any inflation on that side because there, we have very good, deep relationships with the suppliers, and there is no significant impact. Then we have a basket of intermediates that we buy for our Specialty business and our CRAMS business. So there, again, either we are not seeing inflation or even if there is an inflation, there is a clear pass-through. So there, we are not really seeing a significant impact on our business due to inflation. There are some products where there has been an inflation of about 20% or 25%. But there, there is a very clear pass-through, and hence, we are not really feeling the heat there. Where we are really having a problem is on the commodity side, on the bulk chemical side. So there could be solvents or a lot of other bulk chemicals is like bromine, et cetera, is where there is a significant inflation. In some cases, it's been 50% inflation, 75% inflation. But if you look at the business that we have, we typically play way down the value chain versus where these raw materials are. So even if there is a 25% or 50% inflation, overall impact that it has on our cost structure is not that significant. But we are continuously monitoring that, working on ways to mitigate that. Just because there is no significant impact doesn't mean that we are not continuously monitoring and working on that. For example, things like chloroform, et cetera, we actually had a specific initiative last year because of which, though the domestic price went up significantly, if you look at our pricing on chloroform, maintain -- we were able to maintain it or actually bring it down somewhat.

Okay. And sir, any pressure at all, that will only be reflected in Refrigerant and Inorganic Fluorides only, right, and Specialty and CRAMS will be a complete pass-through?

Yes. Only thing is that in specialty and CRAMS, it might be a pass-through with certain lag. But yes, if the pressure continues to remain for a longer period of time, there will be a clear pass-through in Specialty and CRAMS. But if there is a sudden spike, let's say, for 2 or 3 months, and then it again normalizes, then we might not be able to pass through only for that short period of time. For the sake of long-term partnership, we might decide to absorb it.

The next question is from the line of Tejas from Nippon India. The line for the participant dropped. We move on to the next participant. Next question is from the line of [ Ankur Jain ] from [ Bras ] Capital.

Yes. I don't have any questions. I have 2 suggestions, if I may. So the first -- yes. So the first suggestion I have is about the website of the company. I think that nowadays, the websites are the digital assets, and they are the first port of call for all the stakeholders. So I think there is a refurbishment required for the website, and it's dry and lackluster. So we can make it exciting. And there is one peer in the flow chemical space, which I see, which is called Halocarbon and their website really caught my attention. It's into engineered tools and their COVID solutions. So maybe the management can look at that particular refurbishment of the website. That is the first suggestion. The second suggestion, I wanted to highlight this part that now Navin Fluorine is on a very strong record with clear signs of growth and opportunities, which the management has talked about. But in a recent -- a couple of years back, there was an HR crisis in the company where the CEO and the CFO resigned in quick succession, and the controlling promoter, Mr. Vishad Mafatlal, he took the reins of the company in the interim and had a call with the investors as well where he talked about the strategic direction, et cetera. So given that background, I just wanted to suggest, is it possible to have a call with the controlling promoter, Mr. Vishad Mafatlal, where he can guide us that what is the level of involvement he has with the company now and how is he thinking about building this business. How does he think about this business over the next decade or so? And how -- what are the thoughts on building the second line of leadership in the company if something happens?

Sure. So thank you very much for both the suggestions. I think both the suggestions are good ones, and we'll definitely take note of both of them and come back on board. I completely agree with you on the website front. There is not something which -- I have to be very frank with you, even I don't like going to our company's website. One of the things that we have now undertaken, which we want to really do first before we actually go to the company website, is that, actually, now doing a complete rebranding of our CRAMS business. So the CRAMS business will have its own identity, its own name, its own website so that these innovative drug companies, when they want to know about our CRAMS business, don't have to come to Navin Fluorine website. They can directly go to that particular website. That is something that we are currently working on, and we will actually see a launch of that in this financial year. I'm sure you will be very excited to see that website along with the entire branding exercise that we are currently doing on that. Once that is done, then we intend to actually work on the Navin Fluorine website as well. But I completely 100% agree with your remarks around the website, the quality of the website we have. I also agree with your point related to Halocarbon. David Bacon, who's the CEO of that company, is a close friend of mine. And I've been tracking Halocarbon for quite some time. So they have a really good website. As far as the second point is concerned, we have a very deep bench inside our company. As you rightly pointed out, some time back, we had a quick departure of -- the succession of departure when the CFO left and CEO left, et cetera. But as you must have noticed, despite 2 very senior-level departures, the companies -- neither the performance took a great hit, nor the direction of the company significantly changed. And that clearly is due to the fact that we have been around for many, many years, and we have a very extremely deep bench here. You obviously don't get to see the entire team that is there behind me and Ketan. But I would like to assure you that we have an extremely strong team behind us, which is actually doing most of the hard lifting. But to your point, yes, we will definitely have an internal discussion. We will also speak to our Chairman, Mr. Mafatlal. And at the right time, we would definitely have him come in front of all of you to address, which is a good suggestion. We will definitely take a note of it and have interim discussion on that.

Thanks a lot, Sir. That is very heartening to know and thank you for taking my suggestions.

The next question is from the line of Naushad Chaudhary from Systematix.

First thing I wanted to understand, sir, if we look at our new gross lock-in on the next [ 4 to 6 ] quarters, we will be having 80% to 90% gross drop lock-in to it. So just wanted to understand in terms of our overall operational capability, what do you think that Navin has been expanding [indiscernible] to get maximum profitability for this investment? What are the areas of [indiscernible] 4 to 5 CapEx [indiscernible]?

I'm sorry. I wasn't able to get that entire question properly. Ketan, were you able to get -- I got the first part of the question. I didn't get...

You were not clear enough, sir. Can you...

Trying to understand the kind of capacity we are building in the next 4 to 6 quarters. So internally, what do you feel? Where is the gap in terms of our operational capabilities, which we have to build to get the maximum out of the investments? So in terms of adding [indiscernible], in terms of [indiscernible] HPP, which is something new for us. So what are the gaps in terms of overall management of the [indiscernible]?

Sure. So I would actually not necessarily look at it from the GAAP perspective. I would basically look at it as a continuous evolution. So we continuously keep identifying new technology platforms. And when I talk about new technology platforms, they could either be from the chemistry perspective or engineering perspective. We continuously identify those, and we bring them on board. And we continuously bring them on board in Surat, in Dewas, and in future, we will be doing that in Dahej. Now if you look at most of the investment going forward will obviously happen in Dahej where we are setting up a huge greenfield piece. So a lot of investment will happen in the next 5, 6 years there. Also will happen in CRAMS where we will continuously to invest in -- first in debottlenecking our cGMP 3, and then we'll have -- there are provisions there for cGMP4, cGMP5, et cetera. So currently, if you look at the gap is primarily from the headroom for the capacity in certain products, in certain pockets. So there, we continuously do debottlenecking exercise, et cetera. As far as the specific capability -- technology-driven capability is concerned, those are something that we can even bring in our existing set of assets that we have in Surat and Dahej. But if you look at the majority of the investment that's happening in Dahej, and the focus of that investment is to bring in platforms which are very different from the ones that we have worked on in the past. I don't know if I was able to give some...

Yes. Slightly one specific question. How many number of more people will be needed for these 2 plants and, currently, at what stage we are in terms of getting these people?

So when you say people, I assume you're basically talking about people in operations, right?

Yes. Yes.

So we will probably need -- for our HPP plant, we probably will need approximately about 60 to 70 people at an operating level. And for our MPP, we'll probably -- in total, between 2 of them, we probably will need approximately anywhere between 150 to 200 people. And these will be between manufacturing and supply chain.

And how is -- is it to get the lot of people for the plant?

No. These are -- no, I think it's more about finalizing the time line for these hires so that you're not burdened with excessive fixed cost way ahead of the plants actually commissioning. At the same time, you don't delay the process so much so that you don't get adequate time for training, et cetera. So it's more about the training. Getting the right capabilities, I don't, think will be an issue because what we intend to do is that in all the core areas of operation, which are basically very proprietary to our company, we intend to actually take people from our existing plants, that is in Surat especially, and put them in those critical positions there. So for all the critical operations in Dahej, we will be relying on our existing capabilities, our existing people in Surat.

Okay. Lastly, on balance sheet side, [indiscernible] receivable. So last 3 years, we have seen, as mentioned [indiscernible] in terms of number of days. Is there any specific reason or just because of some logistic [indiscernible] adding [indiscernible]?

No. Naushad, I don't think there's any concern on that front. It's more again to do with is the way the business is shaping up the product mix and the business mix that's changing over the last year or so. So if you see, we've gone up by about -- in 12-odd days in terms of our receivables. But I think we are quite in control of the overall receivables. And the overall net working capital position, I think, is quite apt for the business as it is growing.

The next question is from the line of [ Kaushal Shah ] from [ Dhanki ] Securities.

I just had one question on the inorganic business. Now that aluminum steel industries are reviving, and are we seeing any tangible change in our business prospects for inorganic? And do we see a higher growth trajectory for this particular segment over the next, let's say, 4 to 8 quarters?

In the next 4 to 8 -- in the next 4 quarters, would we actually see a significant change in the trajectory? The answer is no, okay, because currently, there will be some incremental growth, which is happening because of this -- what we are seeing in the end-user industry. But we are not expecting any huge tangible or non-incremental growth there. Primarily, it is because our management bandwidth is focused really on other deals where we are actually seeing huge opportunities and sustainable opportunities to grow our business profitably. So we intend to prioritize -- so we have decided to prioritize those, just the ones that we are actually seeing in organic. And if you were to basically force rank these 5 deals, and I'm including HPP also in that, if we were to force rank these 5 deals, I would probably say inorganic would come first in terms of priority and priorities in terms of the investment that it will get. And again, when I talk about investment, I'm talking about a significant investment for a non-incremental growth. We continue to invest for some debottlenecking projects, et cetera. But there won't be any significant investment going into inorganic the way it will go in other BUs.

The next question is from the line of Rohit Nagraj from Sunidhi Securities and Finance.

Congrats on good performance. The first question is on the Specialty Chemical side. We had earlier alluded that FY '22, we'll be able to achieve 20% growth, so which implies that about INR 90 crores of revenues. So do we have the ability to keep these INR 90 crores of revenue simply through 20 -- debottlenecking? Will it be able to release about 20% incremental capacity just from the debottlenecking that has happened and probably currently in progress?

Yes. So as I mentioned, we continue to identify and develop these opportunities. One of the things that we also do is that continuously look for opportunities to move the business along that value parameter, right? So earlier, if we were selling a $5 per KG product, we now look at opportunity to sell a $50 per KG product, which means with the same manufacturing footprint, we basically are able to get a slightly larger turnover. So we continue to look for these kind of opportunities, and that's basically an ongoing process. For next year, as we have indicated before, I didn't indicate any specific number before. I have basically said that we should be growing at a mid-teens plus/minus percentage next year.

My apologies for the number. Sir, the second question is on the supply chain issues. So you indicated that during this quarter, because of the supply chain issue, our customer order was postponed. So what is the current situation both on the raw material sourcing front and on the exports front. Whether it has eased out or whether it is still challenging? And will it have some kind of impact which will come in Q1 and probably, to some extent, in Q2 as well? Your thoughts on this.

Yes. So as you know, we went through a lot of challenges last year. When the COVID started in February to March, there were a lot of issues -- initially because the material coming in from China was getting delayed. A lot of factories were shut. Then there was, again, a lot of -- because of the ISO's availability, and then there was a problem because of Suez Canal, et cetera. But despite all these challenges, I think the team has really done an excellent job of ensuring that we never had to actually shut our plant because of unavailability of raw material, nor did we have, at any point in time, problem with respect to movement of our FG because of nonavailability of ISOs or anything. So we didn't really see a huge issue last year. Going forward also, we don't foresee -- I mean at least Q1, we have a complete visibility. Q2, we have already started working on the specifics. We don't really see a big issue, and that's primarily because of the way we have planned all the raw material, FG movement, et cetera. The problem that I spoke to you about was a very specific problem on a specific product related to a specific market, which is U.S.A. Where a lot of these -- and these are very specialized containers that we require for this product. And hence, it is not very easily possible to replace the ones which are available off the shelf or because of that, we had to wait for these containers to reach the customer for the material to get offloaded and the empty containers to come back. Wherever there is a fungibility involved where we can use one ISO versus other ISO, we have done an excellent job. But here, just because of that physical challenge, we got into some issues. But now we have actually addressed that issue. And more or less, we feel confident that Q1, Q2, we should not see a challenge. We actually walked through April quite well. We are also seeing very strong movement of empty containers into India for the month of May. June, we are keeping our fingers crossed because we really don't know what's going to happen with this lockdown, et cetera, et cetera. Some people keep talking about national lock -- so we're working through this. But currently, we believe that going forward, both for Q1 and Q2, as you asked the question, the movement of these empties should be quite serious.

The next question is from the line of Nitin from Green Capital Single Family Office.

My question is looking at the Inorganic Fluorides business and the Refrigerant business, there is a slight decline in segment revenue annually. So any particular reason or factor that the management can attribute for the annual decline in these 2 segments? If you could talk us through that, please.

Yes. So if you look at -- I mean if you look at our commentary over the last few quarters, we have actually clearly mentioned that in Q1, we had a huge problem, where our sale for inorganic products in various end industries was very low because the customers' plants were really closed down. So if a lot of it is actually because of what we saw in Q1. And so there was this after-effect of that. In Refrigerant Gas, again, the trade market was almost shut in Q1. So because of that, there was no sale into the trade market in India. Also, some of it was basically because of the phaseout of R22, because of which the sale into OEM was going to be down in the year 2020 anyway. So that is something which was, any which way, I anticipated. So it's primarily because of these 3: A, lower sales of some of our products because of the end industry getting impacted, especially in Q1 inorganic; second, again, beginning of the year, the trade market was completely closed, and hence, we were not able to sell much of our R22 into that; and then sale of R22 into OEM basically because of the phaseout.

Okay. And in terms of capacity expansion for HPP, you had indicated an investment of INR 365 crores in the manufacturing facility. How is the unveiling of the work and the development on the new manufacturing facility going on? And when can we expect it to come online with the stock suppliers? If you could just give a brief on that, please.

Yes. So first of all, it is not a capacity expansion. It is a completely new greenfield investment, okay, which is what we are doing in Dahej. We had earlier indicated that the plant -- the operations will actually start -- or the plant will basically start towards end of Q4 FY '22, beginning of Q1 FY '23. The work has been going on well. We actually walked through Phase 1 despite a lot of worker migration, et cetera, et cetera. We worked extremely well through that. Now we are actually seeing a lot of issues because of availability of manpower, because of unavailability of oxygen for industrial means, a lot of fabrication work has got impacted. A lot of our vendors' work has impacted because of some of the equipments are getting delayed. We're trying to assess the situation. As we sit here today, we believe that the delay would be approximately about a quarter. But as you know, this is a fast-evolving situation. It's very difficult to predict how this thing is actually going to unfold. But we are keeping a very, very close tab. We meet twice a week. So we have a Steering Committee for this project. So we meet twice a week. Earlier, we used to meet every Friday evening. Now we meet twice a week, where we go through every equipment, every key equipment, which could potentially be on a critical path. Some of them, I'm actually talking to their owners, et cetera, to ensure that some of these things actually happen on time. So we are closely monitoring that. As we sit today, we believe that the delay should not be more than a quarter. But as you can imagine, it's a fast-evolving situation. So every day, the things are changing. So we are keeping a very close strap on this.

Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Radhesh Welling for closing comments.

Yes. Thank you very much for those questions. So just to sum up, we believe our businesses will benefit from the strong tailwinds in the coming years. With new capacity coming on stream for next couple of years, we see the strong growth momentum sustaining. The addition of new customers as well as new products will help us in derisking, and our strong expertise and experience in fluorine chemistry will enable us to continue our journey of moving up the fluorine value chain. We aim to scale up the business sustainably and in a profitable manner over the next few years. 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, I request you to get in touch with SGA, our Investor Relations adviser. Please take care and stay safe. Thank you very much.

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

Thank you.