Neogen Chemicals Limited ($NEOGEN)

Thank you. Good afternoon, everyone, and welcome to Neogen Chemicals Q4 FY '26 Earnings Conference Call for analysts and investors. Today, we are joined by senior members of the management, team including Mr. Anurag Surana, Non-Executive Chairman; Dr. Harin Kanani, Managing Director; and Mr. Gopikrishnan Sarathy, Chief Financial Officer. We will commence the call with opening thoughts from the management team, after which, we can open the floor for your questions. Before we begin, a standard disclaimer. Certain statements may be discussed today may be forward-looking. Actual results could differ and the detailed disclaimer is available in Q4 FY '26 earnings presentation, which has been shared and uploaded on stock exchange results. With that, I would now like to invite Dr. Harin Kanani to share his perspectives. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year FY '26 financial results. I trust you had an opportunity to review our investor presentation. I will begin with an overview of our operational performance and key strategic developments during the quarter, followed by an update on our long-term growth initiatives. The global chemical industry continues to operate in a challenging environment marked by persistent overcapacity, rising volatility and subdued demand across several and new sectors. In addition, the industry has witnessed elevated supply chain disruptions and input cost pressure arising from geopolitical development in the Middle East. Despite these headwinds, differentiated specialty chemical players with strong customer relationship, technological capabilities and niche product offering continue to demonstrate resilience. Against this backdrop, Neogen Chemicals delivered a strong financial performance during Q4 FY '26, supported by sustained demand visibility across our core products and high client utilization levels. Our growth momentum was [indiscernible] volumes across key end user applications, including pharma, flavors and fragrance and other specialty applications. While input costs, including packaging material and logistics-related expenses remained elevated during the quarter, our strategic pass-through mechanism help protect core profitability. Importantly, FY '26 was also a defining year for Neogen as we continued our transition towards a future-ready portfolio led by battery materials. This strategic shift was further reinforced by the promoter group's capital infusion of INR 161 crores through preferential allotment at a premium to the SEBI floor price, reflecting strong confidence in Neogen's long-term growth trajectory and significant opportunities emerging within the lithium ion battery materials ecosystem. The proceeds will support the expansion of Neogen Ionics, working capital requirement and other strategic initiatives. As our CFO will shortly take you through the detail financial performance, let me briefly highlight the quarterly performance. On a consol basis, revenue for Q4 FY '26 stood at INR 247 crores, registering a strong growth of 22% year-on-year, while EBITDA increased by 21% year-on-year to INR 44 crores. EBITDA margin sustained at 17.8% despite expansion-related overheads, geopolitical supply chain disruptions and temporary costs associated with the Dahej replacement subsidiary and total manufacturing arrangements. Profit after tax for the quarter stood at INR 11 crores. On Dahej replacement facility, construction of the plant is progressing rapidly and commissioning remains on track on June 2026. On the insurance front, we received a recent tranche of INR 60 crores in February '26, which provides additional liquidity comfort during our ongoing transition. This brings our total cumulative on account insurance claims received to INR 140 crore, plus a realization of INR 7 crores. Our receivables stands at INR 203 crores, and we are working closely with insurers towards expediting the final settlement process. Let me now turn to our battery chemicals business, which remains the most important strategic pillar for Neogen's current future growth. Our Pakhajan greenfield site continues to progress in line with planned activities. Commercial manufacturing for electrolyte remains targeted for H1 FY '27, while electrolyte salts are expected in H2 FY '27. During the quarter, the project achieved a significant operational milestone with completion of mechanical assembly and successful transition into the trial run phase for the specialized electrolyte plant. Our immediate priorities are stabilization, phase capacity ramp-up and customer qualification. We continue to witness improving demand visibility for India's industrial ACC battery manufacturing ecosystem alongside strong international interest for [ non-SEOC ] compliance supplying. Encouragingly, we have received provisional approval from additional global customers for lithium electrolyte salts while final audits for multiple U.S. was electrolyte makers have also been completed and are currently awaiting final commercial clearances. These developments position us well to transition from pilot and qualification volume towards regular commercial supplies over the coming quarters. During the period under review, we calibrated our execution strategy, which led to a revision in the project timeline and capital outlays for our battery metals projects. Please note that the updated project timelines remain fully aligned with our earlier guidance. We are on track to commission both the Dahej and Pakhajan plants within the current financial year FY '27. Under this updated schedule, the Dahej Phase 1 project is budgeted at INR 420 crores and is firmly on track for completion by February 2027. Concurrently, the revised cost for Pakhajan Phase 2 stands at INR 137 crores and expected completion by March 2027. These revisions primarily reflect design-led optimization following the integration of advanced Japanese technologies, along with higher localization of critical subcomponents aimed at improving long-term operational reliability and reducing import dependence. Importantly, this investment significantly strengthened the competitiveness and technological robustness of our battery material platform over the long run. Our strategic partnership with Japan's [ Morita ] continues to progress well and their planned equity contribution of 20 million towards the joint venture is expected during H1 FY '27. Through this partnership, Neogen is building India's first [ non-SEOC ] compliant electrolyte salt manufacturing platform backed by proven Japanese technology, creating a differentiated and globally relevant supply chain alternatives. Neogen is at a pivotal inflection point as we enter FY '27, a year that will fundamentally transform our business scale. The commissioning and ramp-up of one of India's largest dedicated battery materials facility at Pakhajan, combined with normalization of our stand-alone operations, following Dahej replacement plan commissioning will significantly strengthen our growth trajectory. We believe Neogen Ionics is well positioned to emerge as a globally competitive and reliable partner within the battery chemicals value chain, supported by improving customer visibility, technology partnerships and India's rapidly evolving energy transition for the ecosystem. We remain confident of achieving revenues in the range of INR 875 crores to INR 950 crores in FY '27 on a stand-alone basis considering full production from MPP-5 from Q2 FY '26 onwards. With that, I would like to hand over the call to our CFO, Mr. Gopikrishnan Sarathy, who will take you through the financial performance for the quarter and the year in greater detail.

Thank you, Dr. K. Good afternoon, everyone, and welcome to Neogen Chemicals Q4 and FY '26 Earnings Call. I will take you through the financial highlights for the quarter and the year. Please note, all the numbers are on a consolidated basis. Revenue for Q4 FY '26 stood at INR 247 crores, registering a strong growth of 22% year-on-year. Performance was driven by improved volumes, sustained high plant utilization across our core businesses, despite ongoing supply chain disruptions, elevated input costs arising from geopolitical developments in Middle East. Neogen Ionics also maintained steady momentum during the quarter, contributing INR 13 crores to Q4 revenue and INR 36 crores for the full year. Looking at our operational verticals. Organic chemicals recorded a revenue of INR 194 crores, up 7% year-on-year, while inorganic chemicals segment delivered a standout performance with INR 33 crore in revenue, marking an impressive 145% expansion over the previous year base. EBITDA for the quarter stood at INR 44 crores, up 21% year-on-year, with consolidated EBITDA margin maintained at 17.8%. As indicated by Dr. Kanani, the performance remained resilient despite expansion-related overhead at Neogen Ionics, temporary supply chain disruptions and one-off costs associated with Dahej replacement facility and interim toll manufacturing arrangement. As the upcoming Pakhajan and Dahej facilities progressively scale up, we expect stronger operating leverage and improved fixed cost absorption. Further, this would also be supported by insurance recoveries. Profit after tax for Q4 FY '26 stood at INR 11 crores, reflecting robust profitability. Finance costs remain elevated on account of ongoing capital deployment towards Neogen Ionics and the reconstruction of the Dahej facility. For FY '26, revenue stood at INR 862 crores, registering a growth of 11% year-on-year, while EBITDA increased to INR 137 crores while PAT stood at INR 29 crores. H2 FY '26 reflected a significantly stronger cash flow performance compared to H1 FY '26, supported by improved operating efficiency, better working capital management. Net cash from operating activities turned positive to INR 14.6 crores in H2 FY '26 versus an outflow of INR 26.1 crores in H1 FY '26, driven by healthy cash generation from operations. Turning to our balance sheet. Consolidated total debt reached INR 1,330 crores in FY '26, bringing the net debt to INR 1,295 crores. The increase in debt was driven by targeted funding for the Dahej facility building and ongoing capital deployment at Neogen Ionics. We remain focused on optimizing our balance sheet, driving working capital efficiency and maintaining high prudent capital allocation strategy to maximize sustainable returns on our investments. Reflecting our strong performance and long-term growth confidence, Board has recommended a final dividend of INR 1 per equity share for FY '206. This underlines our commitment to delivering consistent value to our shareholders. That concludes my remarks. I will now ask request the moderator to open the floor for Q&A.

[Operator Instructions] The first question is from the line of Nilesh from HDFC Securities.

Sir, my first question on this revision in the cost for the battery chemicals projects. So you mentioned that there will be distribution and there will be long-term operating reliability. But our cost as far as this project is concerned has gone up more than INR 50 crores. But can you tell us how much savings you can do or the returns that you expect? Are you increasing your return, as you mentioned in an earlier discussion kind of evidence you expect from this project. But if you are investing [indiscernible] INR 60 crores CapEx, or any improvement in that? That's the first question.

Sure. So thank you for your question. So like as you can see, we are basically aligning our technology to Morita technology. So that has been one reason. And the second reason, if you would have seen that in the investor presentation, Neo added additional 500 metric ton intermediate facility of a central lithium compound for which we have an opportunity to sell to our international customers, including our partners. So this is the total of that. And with the savings that we have in raw material and other operational efficiencies, even today, when we look at our return on capital employed, ROCE numbers, they are like at 20% -- so around 18% to 20%. So when we put together the revised model also, the return remains at 18% to 20%, 20% being the base target on the salt side. And with electrolyte, like as I said, we are finalizing it. But effectively, we should be targeting 18% to 20% ROCE even after the revised CapEx.

Okay, okay. And secondly, sir, how much was the revenue from electrolyte business in FY '26?

So the total INR 36 crores kind of revenue numbers, it was below INR 10 crores, but I don't have the exact number for you right now. The majority of it is from the salt.

Okay. So sir, when you are guiding INR 875 crores, INR 950 crores kind of revenue in FY '27 for our stand-alone business, how much revenue you are capturing from salt plus electrolytes in this?

No, INR 875 crores to INR 950 crores is nonbattery business, right? So there is no salt or electrolyte sales in the INR 875 crores to INR 950 crore revenue. .

And this is after factoring in the Dahej replacement plant?

Yes. If you remember, our original was like around INR 950 crores to INR 1,000 crores on full utilization level. So Dahej plant is starting a little bit later. So if we are targeted to start in Q1, instead of that, there were some delays to start to complete the project because there were labor shortages related to constructions over last 2, 3 months. So it got slightly delayed. So that's why we are saying INR 875 crores to INR 950 crores. But we are seeing very positive signs for organo lithium sales as well as lithium sale, which is not impacted by Dahej. So if we are able to outperform in that, then we would be able to even achieve the original INR 950 crores to INR 1,000 crores. But because there was a slight delay in starting Dahej plant, that's why we said INR 875 crores to INR 950 crores. We are trying our best with organo lithium and lithium compounds to achieve the original target of minimum INR 950 crores and the INR 950 crores-plus kind of revenue from the stand-alone. And this doesn't include any electrolyte salt or electrolyte. The electrolyte salt and the Neogen Ionics revenue potential, we had mentioned last year to be INR 300 crores plus. So the same remains. Like it remains, the current guidance also. We expect to have a INR 300 crores plus kind of revenue from our NIL business. However, like this will be mostly in the second half. We will see some improvement from Q1 to Q2 as compared to -- so we see quarter-on-quarter improvement. But majority of the sales will be in the second half as more giga factories come online for electrolyte as well as our Pakhajan site is also expected to come online in the second half. And the final capacity in Dahej is also expected to come by Q3. So I think all of this will give a higher boost in Q3 and Q4, and that is where you will see majority of the revenue coming.

Okay, okay. And sir, lastly, on the quarterly numbers. Our revenue grew by about 12% Q-o-Q and around 22% Y-o-Y. So can you speak that in volumes and value?

So most of this is basically by volume. There was hardly impact of maybe 2% or 3%, which was because of value. Rest of it was completely through volumes.

[Operator Instructions] Next question is from the line of Arun from Avendus Spark.

Dr. Harin, My first question is how is the lithium price and the bromine price currently as compared to the previous quarter? Have we seen destabilizing? And how will this reflect in our top line in our legacy businesses?

Yes. So when it comes to -- thank you for your question. So I think bromine prices have stabilized a bit because we saw that like after there was a pause in the war, so there were shipments which [indiscernible] was able to arrange to China market, which over a period of time, started stabilizing the bromine prices. And bromine prices have remained stabilized. We'll see. If there is no further disruption, they may reduce also because they remain kind of a little bit on an elevated level. When it comes to the lithium prices, lithium prices continuously -- there was one large jump. But after that, like it is slowly increasing. So we have not yet seen a stable lithium price. It's very difficult to predict how it works. But we feel this is like driven by higher demand for ESS, and even some areas, we are seeing a little bit more push towards EV with the current gasoline prices and higher petrol and crude oil prices. So if the trend continues, we may see lithium prices increase further beyond level, but it is very difficult to predict at this point in time.

And if these kind of price sustains, our potential from the stand-alone business, how much it will increase? Because we are currently still sitting close to INR 900 crores top line. Any early indication how we can expect kind of an increase in this potential revenue?

So I normally don't factor in like commodity price increase, how it will change our top line significantly because most of it is like a pass-through and it's anyway something which is difficult to predict. So for us, more focus is on what we consider as a normal price revenue potential, what we have given you right now, which is basically INR 875 crores to INR 950 crores. So any -- this sustained lithium price, even now lithium prices are around $24, $25 lithium carbonate prices, which, as for me, is kind of a normal price because $15 to $20 is what I consider as a long-term stable lithium price. So it's only slightly above. So the abnormally low prices are gone. Now it's like more closer I would say, $20 plus minus $5 as a long-term stable price. So we are kind of in that range. So if it goes beyond that, then you may have some additional revenue, but there's no point to factor in it. Basically, it will be a pass-through. My top line to that extent will be higher, but doesn't mean that it will have any impact on the EBITDA on that higher price. So therefore, I don't tend to consider. Similarly, bromine price also ideally should be between INR 300 plus/minus INR 50. Today, they are a little bit higher. Although because of our contracts, we didn't see a very significant impact in the last quarter. But yes, if they remain at this elevated level, there will be some increase on the bromine prices as well, which will impact the top line. But currently, we are not factoring that top line when we are doing our budgeting. Whatever -- if they remain at an elevated level, to that extent, our revenues will be slightly higher.

Understood. But sir, what explains the absolute increase in the inventory, receivables and...

Okay. Yes, yes, sorry. So absolute increase in inventory was mainly driven because we had taken some of the outside locations on kind of rent basis to basically get capacities. So these contracts were getting over by month of March. And since Dahej was not fully yet online, we kind of build up some inventories to take care of our sales like in Q1 and Q2 level. We also decided to ultimately decide to extend it slightly by a month, 1.5 month to take care of the sales. But we wanted to wind down those operations with Dahej plant coming online. So it was mostly driven by that and like some product mix-related requirements that we had, where we had to create some inventory.

[Operator Instructions] Next question is from the line of Ankur from Axis Capital.

First question on the salt pricing. How is the price gap now with China versus us?

Yes. So when you compare with China, if you see majority of the beginning of the last year, the prices were actually almost 30%, 40%, 50% lower or even sometimes higher, lower as compared to what our, let's say, long-term formula price were. However, after December, January, we saw -- like when the lithium prices increased, again, we saw increase in the salt prices as well. And then afterwards, it's kind of reduced a little bit. So we still have like a 20%, 30% decrease, but it's lower as compared to earlier, but it is still a bit lower as compared to our price. But in December, January, we saw an increase but then it didn't sustain for too long. So there was a period in time where they were even more expensive than us. And then again, they cooled off a little bit. but still not to the same levels earlier. But this is more like more reasonable price as compared to it was, but still like a little bit lower as compared to what ideally it should be.

So what is the gap now? You said they went up, they came down. But what's the differential now?

Now the differential would be like around -- like if you look at our formula long-term price, so it would be between around 20% to 25%.

Okay. Fair enough. And two clarifications. One is the interest that we have, right? So when does it start, from what date one should build that in? And it will be a cash flow relief, right? The P&L provision, et cetera, will still continue. And the second question is on the stand-alone manpower cost. We saw a sharp jump there on a Y-o-Y basis full year. So what is driving that?

So sorry, I'm not very clear on what do you mean by interest subvention?

So there is a deferment that we -- sorry, not subvention, the [ moratorium ] that you got from bank side, so from that.

Yes, yes. So I think all the moratorium is for the period of 1 year from the revised start of commercial operations. So whenever we have the first start of stable commercial operations, there will be 1 year morat from that. So as we announced, I think, last call itself, that for Pakhajan, there was an extension of 1 year for the electrolyte as well as the salt. And assuming like from our side, I think most of the work on the electrolyte should be like targeting to be ready by H1, so if we start commercial production and all the qualifications are completed in the H1, then like 1 year from that. And in case of the salt in H2, from the time we have the commercial production, 1 year from that. And in case of our Dahej side, like we requested again an extension for 1 subsection of 1,000 tonne capacity, which again were delayed. And instead of Q1, we are expecting it to start in early Q3. So I think wherever that FAOD happens from that, there will be a 1-year morat.

Sure. And this is a cash flow relief. The P&L provisioning will still continue.

Yes, sorry. I'll just Gopikrishnan to answer that.

Yes, it's a cash flow relief only for the principal repayment. Interest will start immediately after the [ COD ]. .

And just for clarification. Like whatever interest is during the project is already considered in the revised cost of the project. So until the time it is capitalized, the interest is already included in the revised cost.

Next question is from the line of Rohit Nagraj from 361 Capital.

Congrats on one good Q4. So first question is in terms of the battery manufacturers plant in the market. So individually, what is the status? And just a light question to that. On Slide #12, we have given current product updates, where we have mentioned that the first approval material is shipped to the customer. And for remaining 1,300 MTPA, the trial production is ongoing. So will we have to validate the entire 1,500 metric ton capacity as and when it gets commissioned from a trial production perspective? And what could be the timelines for the same?

Sure. So let me answer the second question first. So basically, the samples that we have given is representative for the entire 1,500 metric tons. And even the 1,000 metric tons which is remaining is going to come from the same site. So basically, now with whatever samples that we have submitted, and like we also announced that we also intimated that 3 customers, 3 electrolyte makers in the U.S. have now just completed the audit trial. So I think with those, for the 3 customers who have already audited and for the others, we have submitted samples. For Dahej, we don't need to submit any fresh samples unless there is a customer request because sometimes a customer for each electrolyte maker, for each battery maker, they may request a separate sample. And for the majority of our customer requirements, most of the sampling work is done. The audits are also completed. Post audit, they have given us some corrections, which we expect to complete within 1 month or 2 months. And then once we demonstrate that, like gradually, the commercial supply can start. So we expect by July or August, we will have commercial supply start, and we don't have to wait for additional approvals from the Dahej site. Also, like all the customers who visited, they also visited Pakhajan site which is under commissioning, and they were all very appreciative of the way the site is shaping up and the systems which we have put in the site, especially because it is designed from scratch with the Japanese technology. And most of them of the opinion that approval cycle in Pakhajan also will be shorter because our testing method, raw material supply, manufacturing, all of this is already aligned. Only does the site is changing. So Pakhajan will have a relatively shorter approval cycle. So this was the feedback from the customers who audited and approved us during the last quarter.

Right. And just one clarification on the question. In terms of the domestic, where are they in terms of putting their plans and probably doing the commercial orders?

Sure. So I think so one of the customers have been already buying from us a small volume for last 1 year. And they have now also increased their capacity which is coming online. So within the first half, the capacity is also increasing from 1 giga to 5 giga. The estimation that we have received from them will increase for the current year. We expect a much significantly higher volume as compared to last year. There, all the approvals are in place and we are on track. It's just a question of their actual consumption. And Neogen right now is the only source of them, and we have excellent relationship with them. So that business is certain. And the only volume depends on their actual production and actual consumption. When it comes to a second customer, the second customer has like also visited and done an audit and, in principle, approved Neogen as a site. There will be still more detailed qualification. And this customer is also giga customer, who is starting a pilot line sometime in the second quarter and they will start commercial production in 2027. So right now, the way it stands, we are still discussing some commercials, but technically, they have qualified the site to use the material in their trial production line, the pilot line, which the volume will be much smaller. It will not be a large scale. It will be mega scale. But the important thing is that since they will use it in the pilot line, they are likely to -- like they'll have a customer approval. So the shift to the giga factory will be more smooth. On top of that, two of the giga customers who have started production or are expected to start later on in calendar year, both of them have like given us their recipes and we already submitted other samples. And right now, they are testing ours versus China performance of the cell using Neogen electrolyte versus China electrolyte. So once they do the performance trial and they have sufficient data, then we will start the process of moving Neogen as a qualified supplier for them. So we already have 2 customers, 1 giga scale, 1 mega scale who have qualified Neogen. Two more are in the process of -- like we are starting in 25, we are in the process of like validating Neogen's electrolyte versus Chinese electrolyte and 2 other customers who are likely to start in 2027. So we had good commercial and technical discussion, site visits. So like we remain engaged with them for the final approval and qualification. Again, the question is they both had an original intention to switch from China. But how to switch from China to Neogen is what is currently being worked out.

Sure. The second question in terms of the funds for our expansion. So given that we'll be receiving INR 200 crores from the insurance [indiscernible] from Morita JV, do we need any additional funding during FY '27? And after the current projects commissioning, what is the gross block at the end of FY 27?

So both the Morita money coming in, insurance is expected. And as you know, INR 150 crore equity has done, has been taken care of. So this money is sufficient to take care of completion of the project and to take care of the initial requirements. So we are on track for that. And I think the total gross of Neogen Ionics would be around INR 1,700 crores, INR 1,700 crores to INR 1,800 crores at the end of FY '27, as most of the CapEx will be completed.

And for stand-alone on a consolidated basis?

Stand-alone would be like somewhere around INR 450 crores to INR 550 crores? That's right. Like once [indiscernible] our Dahej site expansion is completed, we expect to be in the range of INR 450 crores to INR 550 crores. You can say basically, whatever was a stand-alone growth log before fire, plus maybe INR 40 crores, INR 50 crores more, which would have gone towards higher cost of the rebuilding. Again, hopefully, that will also majority be covered by the insurance process.

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

First one, would it be possible to just share a breakdown of the organic chemicals business line between the 3 lines that you mentioned, bromine derivatives and the other 2?

I think bromine derivative was about 40%, 35% of the revenue. The advanced intermediates was about 30% of the revenue. The organic lithium and lithium them together were the balance.

Okay. And you mentioned that most of the revenue growth was volume driven. Does that apply even to the inorganic business? Because inorganic, we've seen 140% growth. Is that largely volume still?

Yes, it's mostly volume because I think people knew that the lithium prices were kind of going up and we still had some inventory. So there was a good demand, so we were able to capture that. We see that when the lithium prices are on upward trends, volumes increased first. We'll have to see whether that will be sustained because sometimes people are expecting higher lithium prices coming down the line so they are covering up. Anyway, if you know, like Q4 is usually our strongest quarter for lithium most of the year. So we'll have to see how the next year goes. But we have also added a few new customers, and like we are now able to recycle the lithium which is coming out of the organo lithium plant. So all this also has made our lithium business a little bit more stronger. So we'll see if that will allow us to still continue the growth as well as whatever is the growth because of the higher price of lithium in terms of the overall top line we expect in the coming year.

Okay. And just the last second one I had, just 2, 3 small parts within this some, accounting indications. One is in the stand-alone cash flow statement, there is under investing an INR 86 crore proceeds from sale of assets. So is this by the parent to Neogen Ionics? I just wanted to clarify that because it doesn't show up in the consol books. Second thing is the capital work in progress. If I look at consol minus stand-alone, the difference is about INR 700-odd crores, which implies that we still have another INR 1,000 crores to go given that total project cost now at least INR 795 crores or so. So this entire INR 1,000 crores, do you expect to complete by 3Q? Or could that be -- I mean it sounds a little bit holistic there. Last one was just the employee costs. Sequentially, it seems to be down about 22%. So just wanted to get your perspective on that.

So I'll answer just the -- like in the calculation that you did for CWIP, INR 700 crore plus, I wanted you just keep in mind that some of the CapEx for our inorganic -- for the battery business has already taken place, right? So it's not INR 700 crores plus what is capitalized is what we have spent. So that will be roughly at around INR 950 crores to INR 1,050 crores is what we have spent. And the remaining INR 600 crores, INR 700 crores will be spent [indiscernible] and also some in the capital advance. Again, some of it is also part of the capital advances which are in there. For the specific query about your INR 86 crores, I'll ask Gopi to give insight.

Okay. Just say you are right, the sale proceeds relates to the sales transfer of assets from NCL to NIL, which was done 2 years back. The money was not received while the transfer has happened earlier. Now that the CCD is in place, NIL has paid off that money. So that's why it has been recorded in the cash flow as a sale of property, plant and equipment. And the other question on the employment costs, sequentially it has come down mainly because of the actuarial. There was some change in the actuarial assumption that has resulted in some credit. That's the reason between on a sequential basis the employment cost is showing a reduction.

Next question is from the line of Jason from IDBI Capital. .

Sir, just wanted to understand, you did speak about lithium pricing being on a normalized level right now. Just with regards to that, just wanted to know what could steady state realizations be in dollar terms for salts and electrolytes both?

So for me, the more stable lithium price would be $15 to $20, $20 kind of being like a base price. So I feel, ideally speaking, on a long-term basis when supply and demand are kind of balanced, $20 of lithium carbonate is a reasonable price considering the cost of the lithium, the spodumene like mining cost and some royalties, which are paid to the government on that. So plus/minus $5 would be the kind of fluctuation. So $15 to $25 would be like, ideally speaking, range of lithium, which should be. So right now, we are a little bit on the higher side. We are around $24, $25. So higher end of it. And at $20, we have given salt around $20-odd and $20, $21, and our additive around $25 to $30 in that range. So right now, it will be a little bit higher as compared to that.

Okay. And so you said salts, $20, $21, [indiscernible] around $25. What about electrolyte?

So electrolyte also, depending on the volume and the scale. As you remember, in the beginning, we had said around $8 to $10. And later on, I had said around $6 to $8 per kg. So we expect currently it should be, with the current lithium price, somewhere around $7 to $9 per kg, otherwise $6 to $8. This also depends on other raw material inputs. So we've seen -- like they are still -- the lithium prices have corrected, but some of the other inputs like solvents, et cetera, are not yet fully corrected. I'm not taking the war related because if I consider today's prices with impact of war, then it can be even above $8, like more closer to $10 plus kind of a price. This is like a 5,000, 10,000 tonne level. And in the beginning, customer demand would be 1,000 to 2,000 tonnes at which it should be a little bit higher because the raw material cost and conversion cost is higher at that point in time.

Sure. So $6 to $7 to $8 would be a decent range for it.

If you are thinking of $20 with the other raw materials $6 to $8 would be the range. So $7.5 as an average price.

Yes, yes. Sure. And sir, I just wanted to know, I mean, when you look at the consol cash flow, CapEx has basically amounted to INR 555 crores in '26. Now -- and of course, our CapEx also has been revised upwards, which is around 15 billion now. It's basically gone to around 18 billion. So it's a INR 300 crores, which is mixed for the revised CapEx. Now just aligning all these things. Just wanted to know what could be the CapEx outflow on a like-to-like basis in '27 and '28 going ahead?

Okay. So see, '27 and '28, you mean calendar year '27 '28, right?

No, no. So when -- I mean, when you look at the cash flow statement, INR 556 crores. So '26 is INR 556 k. So '27, '28, I just wanted to talk out how that would look like. Yes. .

So FY '27, we would complete with the balance CapEx, right, which would be around INR 600 crores, INR 700 crores, right, plus maybe about INR 100-odd crores in [indiscernible] so total together at around INR 800 crores. So that was FY '27. And '28, unless something changes dramatically, we don't have at present, any fixed plans for increase in CapEx for Neogen because we want to fully stabilize the plant, achieve full utilization. And similarly, we have not yet planned any major CapEx for FY '28 at present, although as we have said in the past, that if both international demand and India demand comes up, we will have to increase our salt and additive capacity. But to what extent, we have not yet decided. So I'm not able to give a number at present.

Sure. And just one final clarification. I believe you said INR 36 crores was battery chemicals revenue for '26. And '27 you expect INR 300 crores, but it will be more towards H2 FY '27. That's the second half. Am I correct?

Revenue you mean, right? For the non-battery, it is INR 870 crores to INR 950 crores.

I Got that. Yes, battery, you said INR 300 crores. Entire battery chemicals, INR 300 crores for 27, right?

Yes, more than INR 300 crores for FY '27, larger portion in the second half. Every quarter sequentially, you should see an increase. .

Yes. And '28, with everything going onstream finally, what do you -- I mean, the entire CapEx, any ballpark numbers for '28.

Yes, we had in the past calculated that just the salt capacity at 80% utilization, and we expect a very healthy salt demand, electrolyte salt and additive demand. So that itself is like revenue of INR 1,000 crores plus, right. So depending on how the electrolyte demand shapes up, it will be something more than INR 1,000 crores. As we said, on FY '29, it's like INR 2,400 crores to INR 2,900 crores. So we feel in FY '28, it will be something more than INR 1,000 crores, let's say, INR 1,200 crore, INR 1,400, some kind of a number like that. But we'll be able to give you more clarity like in the second half of the current year. .

Next question is from the line of Meet from.

Am I audible?

Yes.

Sir, customer is highly satisfied with Neogen compared to our competitors, so mainly because of our key response time and our ability to modify the electrolyte solution as far the requirement, right? So this helped us to secure the supplier position with them. So I just wanted to check how the negotiations are progressing the other cell manufacturers who are not using the standard -- who are not using the [indiscernible], right? So are we also achieving a dominant portion there?

So I think as I explained earlier in my call that the second customer also visited our facility and qualified to use our electrolyte for their second line. And then there are 2 more who are now evaluating our electrolyte performance versus China like-like performance and 2 more are discussing with us. I think the factors are Neogen's existing experience and like the bigger plant capacity which is available because you need a higher capacity to take care of all the customers. So we have a 30,000 tonne plant, which is under trial production, and that too, which is built with Mitsubishi technology. So I think all of this is like a positive for the customer. And now some are, with their experience in China last 1 year, are also looking at localization. So the fact that Neogen has electrolyte, salt and additive, backward integrated, even electrolyte solvent purification is backward integrated, so some of these features are very attractive for the customer. And all the 6 giga factories under construction, we are having very positive discussions.

And sir, second around [indiscernible] your peers already have their plans in the U.S., right, for electrolyte. And they have also already announced CapEx in Korea itself for salt manufacturing right, either JV or MOU. So in this context, are your U.S. salt customer looking at Neogen as a second source or as a main supplier? Or do you see[indiscernible] visibility for Neogen to become a meaningful supplier for the year for U.S.?

Yes. So at present, if you look, there are already existing established -- we have discussed in the past calls that the one Japanese company and the Korean company with a limited experience. And there are 2 manufacturing plants which are coming up in India. And in Korea, while there were many announcements, but of the announced today, actively being pursued in only 1 company which is still working on, and they are working with the technology. So you have 2 existing, 1 Japanese and 1 Korean; and 3 new, 2 Indians and 1 more Korean who's trying to start up. So Neogen is only one which has technology partnership with Morita, which is really seen as an established kind of a technology because it has been in use. So between the 3 new, we see some advantage of customers looking at us as a stabilized or more reliable supplier. And hence, like they look at Neogen a bit more preferentially as compared to the others. This is our kind of view for a light basis.

[Operator Instructions] Next question is from the line of Archit Joshi from Nuvama. .

Two short questions, squeezing them into one. What would be the contribution of chem in Q4 and FY '26? And number two, what explains the sharp increase in trade payables, almost as good as the COGS for the whole year. If you can explain these two things, sir. . [Technical Difficulty]

So then it gives the exact volume to the competition. So part of our...

We were not able to hear the beginning of the answer. May I request to repeat from the beginning, please.

Sure. So we are not giving our sale of organo lithium plant individually because it's a single molecule. But as compared to last year, we have seen an increase in our revenue and we have seen approvals in the international market in the semiconductor application, and we are expecting a few more approvals in the international market. So for our current year in organo lithium is -- organo lithium business has been -- we are looking really forward to the year where we expect a sharp increase in the business contribution from the organo lithium side. We achieved one of our highest production. And as some of you may know, in the past, we had announced we had increased capacity 2.5x. So we reached the full monthly volume, the highest peak volume ever in the month of March, and we continue to see that in the current quarter as well. So as compared to the installed capacity, which was around 120 metric tons, we had increased 2.5x to 300 metric tons per year. And last year was somewhere in between. So this year, we are like very strongly looking at a potential to achieve almost 80%, 90% of our increased capacity. And then if everything goes well, we may do a small CapEx to further increase this capacity in the coming year that we are seeing a very strong response to our organo lithium business.

Sir, second, it was on the trade payables, the very sharp spike that we've seen. Like I said, almost like 365 days outstanding of trade payables. What would explain that?

So I think as you know that we have -- like last year, we had already lot of financing to do. So like there are a lot of funds which are required. So we also -- and we are awaiting some insurance payments. So we kind of discussed with our suppliers, and we were able to negotiate like longer credit terms with them. And some of them we're also able to get factoring against Neogen's payment line. So we were able to get longer credit terms. So you basically use longer credit terms with item. And our target is like -- yes. Our long-term target, as we said, is to balance our debtors with our creditors. This time, the creditors were still a little bit on a higher side than that, which was like some kind of a [ threshold approval ] because of fire-related situation from our supplier.

Got it. So in '27, we should start seeing the payables to come down as we get insurance part of and supplier.

Yes. And hopefully, like I said, our debtors and creditors will stabilize each other, and our stock will keep improving as we use full utilization level. So we'll achieve the long-term working capital cycles gradually over next 2 to 3 years as we had informed early. .

[Operator Instructions] Next question is from the line of Tejas from Asian Market Securities. .

I just have one question. In the results document you have mentioned the revised product timeline for Pakhajan Phase 2 as March 2027. So I just wanted to understand this is -- the timeline which you provided is more for the electrolyte formulation part. And also Dahej Phase 1, as you earlier highlighted, the capacity which we are setting up at Dahej will be largely based on our own technology. While in the [ demand ], I've also said that we are transitioning from in-house to the Morita technology. That will be more towards the Pakhajan part? Or are we also will be shifting our 11 -- 2,100 incremental salts capacity to the Morita technology?

Yes. So I think most of the Dahej capacity remain our capacity. We've done some adjustments through the technology, but majority remain. And also the sold capacity in Dahej also includes additive, where we don't have the collaboration with Morita. That remains completely Neogen's own technology. So large part of that 2,500 is related to our own. And majority of the Morita-related technology adjustments were in our Pakhajan facility as well as -- but one thing. If you look at our investor presentation, we've added 500 metric tons of additional intermediate sold capacity, which is required or it is a starting material for our -- raw material for electrolyte salt, which we are in discussion, where this is consumed by our partner, Morita in China as well as a few other customers who are making a [indiscernible]. And Morita being our partner, they are positively considering to purchase this from us. And other established producers are considering to buy this intermediate from us to achieve the China-free requirement. So I think that is the additional CapEx required for in our Dahej side, which has been updated in our presentation.

Okay. Got it. And on the revised project timeline, which you have given in the results document was March '27. That is for our electrolyte 30,000 tonne capacity which is coming up?

No, That is for the entire project because now like the bank is in the process of dividing it. So this is the FAOD which we have taken approval from lenders. In terms of our timelines,we expect H1, we should have completed the majority of the electrolyte work and H2 for the salt. So that remains unchanged. And similarly, in case of Dahej Phase 1 also, by Q3, we feel we should -- like already 1,500 tonnes is completed and only the last bit of 1,000 and the 500 tonne addition that we have planned should be completed by Q3 and maybe a little bit some capacity by Q4. So again, this is the approval which we have taken from the bank. We remain committed to complete majority of the Dahej -- the balance, the 1,000 plus the new 500 intermediate by Q3. And as we explained for the [indiscernible] H1 for electrolyte and H2 for the salt. And in H2 also mostly by end of Q3, it should be ready. Q4, we should be able to do additional revenue, revenue can start getting generated. But since sometimes approval takes longer, so we have not factored in any revenue from this. We kept it as a backup in case if electrolyte revenue is reduced because of lower demand in India, then whatever revenue we will get from Pakhajan in Q4 will be used as a backup. Or otherwise, it will be additional revenue, which is the INR 300 crore plus part depends on Q4 from Pakhajan minus any reduction in electrolyte. So that would be the balance sheet.

Okay. And just a small follow-up, sir. So 5,500 are totals salts plus additive capacity. And the 500 in it, which we are setting would be over and about 5,500 tonnes of capacity.

That's right, yes.

And out of that 5,500 tonnes, what will be the split between salts and additives? .

So salts will be approximately around 4,000 -- around INR 4,000-odd crore and INR 1,500 crores to INR 750 crores would be the additives.

[Operator Instructions] Next question is from the line of Pratham from Quantum Asset Management.

Just one thing. Since we have increased the CapEx, what would be the debt that you envision? Previously, we have alluded to INR 1,700 crores, I guess, the paid debt. And what will it be now?

So as we said in our presentation, since we have already INR 160 crore equity which has come in from the promoter as well as the 20 million for our JV partner, which was not factored in during the initial discussion, so the peak debt will not change. It will remain the same.

Okay. And just one thing since . [Technical Difficulty]

I'm sorry to interrupt you. You're losing your audio.

Am I audible?

Yes, go ahead.

Yes. Just wanted mention that INR 36 crores on Neogen Ionics. So if I just deduct that from inorganic capacity, actually degrown. So what is the reason degrowth?

Sorry, I couldn't get your question. You are saying was there a degrowth..

Inorganic chemical business, if I just deduct the INR 36 crores revenue which we received from Neogen Ionics, then there is just a 10% drag in the inorganic chemical business. And it has been dragging us continuously. So what is the reason that we can attribute it to?

So I think it was -- I mean, during majority of the year, the lithium prices on an average was lower, so I can see one of the reasons. But I would need to take a little bit more closer look before I can answer.

And in volume terms, have we been growing on that front? .

I have seen no significant increase or decrease, have been more or less overall stable on price increase also.

Just one more thing. So if suppose there is a delay in ramp-up in capacity given what I'm trying to factor in, I foresee a liquidity issue in the company. So if you can just help me, if you can just clarify on this part, how is the ramp-up happening?

So as you see, whatever has been the delay in our project start-up has been -- like so the repayment schedule has been already been delayed to the same extent. So broadly speaking, let's say, whatever was supposed to get completed in March is getting March '26. So everything is getting completed by March '27. But now that we got the extra time, most of the approvals, everything will be in place. so the revenues also will ramp up. And so we feel overall, I don't see a big change as compared to that. [ And the additional CapEx, which was required was already funded through additional equity, both from promoter side as well as JV partners. So for us, there's not too much of a difference, whatever insurance proceeds we are receiving on a regular basis and whatever balance also we expect to receive in a relatively shorter period of time. So therefore, we are not concerned. But if there is any need, we will always keep a watch. And if required, we would raise money if needed or is required.

Next question is from the line of Akshay from Alpine Invesco.

Sir, the question was regarding our domestic giga factory customers who is utilizing dry battery electrode. Sir, how does the architecture shift impact the technical specifications of the electrolyte considering it's a dry battery electrode? It will be a little more sensitive to moisture. So I wanted to understand that.

So basically, when it comes to electrolyte, any current you change in your manufacturing changes the electrolyte composition. So when you go from LFP to NMC or within LFP for the application -- I mean, different kind of like cylindrical versus plasmatic type, or even depending on the application, whether it is for energy storage or like energy storage or whether it is for EV applications, each one has a unique electrolyte design depending on the size, shape and the type of technology used in the battery. So as you know, on the anode also, you have carbon only or carbon silicon. So all these formulations combinations require a separate individually recognized design and optimization. Yes, dry cathode is a readily challenging technology. So it required more trials to begin. But in my view, it's one of the stringent requirements when you go for NMC, dry cathode, [indiscernible], like no secondary cooling. So I think we've already kind of achieved electrolyte, which is performing really well in this condition. So yes, each electrolyte, each cell design, we have to optimize electrolyte.

Okay, okay. Got it. And questions from same customer who they have been scaling up the capacity to 2.5 gigawatts. So that would create a demand for 350 to 400 tonnes. I wanted to understand what portion can we cater to demand?

So normal rule is 1 gigawatt hour requires 1,000 tonnes for LFP -- I mean, actually a 1,200 to 1,400 tonnes for LFP. And in case of NMP, 400 to 600 metric tonnes per gigawatt hour. So again, I won't be able to comment specifically. But as I explained earlier in my call that the scale up, which has been done by the customer, we expect a higher electrolyte demand from them as compared to last year, significantly higher. However, actual consumption, one is the capacity. But you run the plant at capacity depends on the customers production and sales plans. So depending on that, we will see how much actual electrolyte gets bought. But yes, the demand will be only higher as compared to last year. .

Okay. Sir, based on what's going on, the current demand that's been going to the customer, can we say we could do 50%, 60% of the requirement?

From our side, we can meet 100% of the customer requirement and more because we have a capacity of 2,000 metric tonnes, which is already in place and another 30,000 will be ready by H1. So we can take care of the entire customer requirement.

Sir, you can take care of the customer requirement, but is it feasible or even wise? So I'm just trying to understand what is the probable scenario.

So there is a very high probability that last year also 100% was met by us. And unless there are commercial differences, next year, also 100% can be met by us. It's very common for a battery company to work with only 1 electrolyte company. I mean they are historically for decades, companies have worked in this way or, at the most, when they go to like a 500 gig kind of volume or very large volume they may have 2 suppliers. But there are very many examples were like for decades, 1 entire battery company consume electrolyte for only 1 company.

Ladies and gentlemen, we will take the last question from the line of from Nirmal Bang.

Am I audible?

Yes, sir, go ahead. .

Sir, I want to understand. We wrote in our press release that we are confident of achieving a revenue in the range of INR 875 crores to INR 950 crores in FY '27. See, the INR 875 crores, it's kind of 2.3% growth for a full year basis. So can I get some understanding of in 3 to 5 years of the timeline is to get all the approvals, our all CapEx capacities come into picture, what kind of revenue we can make at Neogen on a consolidated basis?

For the financial year next year?

3 to 5 years' time same I'm asking, sir.

3 to 5 years. Okay. So our FY '29 full utilization level, so we have already stated that this year was INR 950 crores to INR 1,000 crores. We've been a little conservative saying INR 875 crores to INR 950 crores. As I explained earlier, we'll try our best to achieve the higher end of the spectrum, which was the lower end earlier. So this is on the Neogen level. And our guidance was that for FY '28, we would like to have a full utilization with optimization, which can produce INR 1,100 crore plus kind of revenue. So our, FY '28 tentative target is around INR 1,100-odd crores. And if we maintain the same growth rate, like by FY '29, we should be INR 1,200 crores plus -- between INR 1,200 crores to INR 1,400 crores plus revenue just based on the regular demand in the existing business. If we make a significant further investment in battery material -- sorry, organo lithium or some semiconductor-related or flavor fragrance or to take care of higher CSM needs, that would be additional. But with investments which we have done today, we would expect somewhere around INR 1,200 crores to INR 1,250 crores by FY '29. And on the battery side, we already guided to INR 2,500 crores to INR 2,900 crores, so somewhere around INR 3,700 crores to INR 4,200 crores is the expected revenue by FY '29 on a consol basis. Again, like I told you, I see a need that we would have to add some additional salt capacity in FY '28 because we are seeing increased both local demand of electrolyte as well as international demand for electrolyte salt as well as we see increase -- we would also expect the CSM demand to start coming in from FY '29 onwards. So there will be some additional investment, which we may have to make in FY '28, which will give a higher revenue in FY '29. But that is something we don't know yet with the existing capacity. We can have a revenue of around INR 3,700 crores to INR 4,000 crores plus the other projections that we have made until now. In terms of capacity, currently, our Pakhajan site can take care of around approximately 30 gigawatt hour of electrolyte and electrolyte salt. There is space to go 3x higher, like in Pakhajan if you're talking about 5 years. So depending on how the demand in India shapes up and in the international market, we can basically increase capacities for that. And similarly, across our organo lithium site and our Dahej site as well as our Baroda site, we have an ability to go up to INR 4,000 crores, INR 5,000 crores of revenue through brownfield expansions. So we'll see like depending on how the demand shapes up. On the 3-year FY '29, with whatever guidelines we have given, our projections we, have given we project somewhere between INR 3,700 crores to INR 4,200 crores kind of revenue by FY '29. And then, let's say, if we are thinking of FY '31, whatever we decide in the future CapEx to increase on electrolyte, electrolyte salt as well as in the base business for more CSM, more semiconductor, more organo lithium as well as the inorganic lithium demand to kind of go further.

Thank you very much. I now hand the conference over to the management for closing comments.

So thank you for your time and engaging discussions. For any remaining questions, our Investor Relations team is available to answer you. We value your continued partnership and look forward to sharing our next quarterly update with you. Thank you again.

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

Thank you.

Thank you.