Neogen Chemicals Limited (NEOGEN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Neogen Chemicals Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions]. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and welcome to Neogen Chemicals Q1 FY '27 Earnings Conference Call. Joining us today from the senior management team are Mr. Anurag Surana, Non-Executive Chairman; Dr. Harin Kanani, Managing Director; and Mr. Gopikrishnan Sarathy, Chief Financial Officer. We will begin the call with opening remarks from the management team followed by an interactive question-and-answer session. Before we begin, a standard disclaimer. Certain statements made during today's call may be forward looking. Actual results could differ and a detailed disclaimer is available in our Q1 FY '27 earnings presentation, which has been uploaded on stock exchange website. With that, I would now like to invite Dr. Harin Kanani to share his opening remarks. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us to discuss our Q1 FY '27 financial results and outlook. I hope you had an opportunity to review our investor presentation. I will begin with key performance highlights and strategic developments during the quarter along with progress of our growth initiatives. Following this, our CFO, Mr. Gopi Sarathy will cover the financial highlights. The global chemical industry continues to navigate a complex operating landscape characterized by persistent geopolitical volatility and even end market demand and ongoing redrawing of supply chain dynamics. While near-term macro headwinds persist, our core strength lies in how we navigate them with agility, financial discipline and operational rigor. anchored by the deep domain expertise and chemical synthesis capabilities, we have built over the past 3 decades. We remain focused on protecting core margins, supply reliability for our customers and driving rapid progress across 3 growth pillars, particularly the battery material segment. Amidst this ongoing shift, I am pleased to share that Neogen Chemical has delivered a strong performance in Q1 FY '27. marking a solid start of the new financial year. This growth was driven by volume gains across our core business verticals, sustained customer demand and our highest ever quarterly revenue recorded in both organolithium and battery chemicals portfolio. Let me quickly summarize the key financials in Q1 FY '27 on a consolidated basis, we reported revenue of INR 250 crores, registering a robust growth of 25% year-on-year, EBITDA grew by 15% year-on-year to INR 48 crores, with EBITDA margins expanding by 260 basis points to 19.3%. Profit after tax stood at INR 17 crore, 13.67% year-on-year. On base business, demonstrated immense resilience despite ongoing global supply chain volatility elevated shipping freight costs and temporary overhead related to interim toll manufacturing arrangements. We have successfully initiated cost pass-through mechanisms with customers across key raw materials and input costs such as utilities, freight and packaging to safeguard our operating margins. I will now provide key operational updates across our core operation and expansion project. The Dahej replacement plan and the short recovery update. So reconstruction of our replacement facility of Dahej is almost complete. Trial runs are actively underway with commercial production set to commence within current quarter -- within Q2. On the insurance front, cumulative recoveries to date stand at INR 164 crores, which is comprising of on-account insurance claims as well as sale realization still now. Our net claim receivable as on date stands a INR 186 crores on a consolidated basis, and we continue to engage closely with insurers to expedite final settlement against the same followed by some additional recoveries under various other insurance policies such as loss and profit. Board approval on fundraise QIP to support our long-term capital requirement and prepare our company for growth opportunities coming future in the battery material as well as organ TM space, we decided to deleverage our balance sheet. And the Board has approved raising of INR 600 crores through an issue of eligible securities via QIP subject to shareholder and regulatory approvals. Updates on battery chemicals and Neogen Ionic performance. So Neogen Ionics delivered a robust performance in Q1 FY '27 generating INR 19 crores in revenue compared to INR 5 crores in Q1 FY '26 and delivering over 50% of the entire previous year's revenue in just 3 months. Execution across our factory material facility remains on schedule, commissioning for electrolyte is targeted for H1 FY '27 and let molecularize sales remain targeted for H2 FY '27. Mechanical assembly for our electrolyte plant is complete, trial runs are already initiated and product validation leading domestic cell manufacturer is actively progressing. We have secured provisional approvals from 4 international customers for lithium electrolyte salts and successfully completed final site audits from all 4 electrolyte manufacturers. Commercial supplies will commence post final plan trial approvals with global cell producers, accelerating their transition towards non-POC non-EAP compliant supply chain to meet U.S. tax credit requirements by 2027. Neogen is uniquely positioned to serve this demand with our partner with established technology from Japan. Our strategic partner, Morita remains fully committed to their 20 million equity contribution towards the joint venture which is expected to come during Q2 and Q3 of the current year. Turning to the macro environment, the key industry dynamics, our battery material strategy is strongly backed by government support and proactive policy actions. Neogen with our customer remains currently the only giga-scale example where the local supply chain has been established, which has been appreciated by various government departments. The ecosystem is seeing accelerated momentum driven by the product ramp-up of PLI SEC battery manufacturers as well as non-ACPmanufacturers and further the allocation of 10 gigawatt our ACC PLI rebidding tranche and government's proposed PLI scheme for battery components, which will be pivotal in incentivizing raw material localization. According to the Ministry of heavy industry's report, domestic battery demand is projected to surge from already 33 gigawatt hours last year to 92 gigawatt hours by 2027 next year. eventually reaching more than 200 gigawatt hour by 2032. Out of that total almost 63 gigawatt hours currently under development in India, and further expected to be commissioned out of this 30 gigawatt hour is expected commissioning in 2026 alone. This rapid PLF underscores the expanding market opportunity ahead for us. we positioned Neogen Ionics to serve both domestic requirements and global non-SEC non-PF demand. FY '27 represents a strategic turning point for Neogen Chemical as our capital investment transition into revenue-generating assets with the rebuilt Dahej plant coming back online, Neogen are scaling rapidly and our strategic position as a trusted non-POC partners gaining strong global traction. We are set to capture expanding market opportunities across both specialty chemicals and advanced factory materials, backed by solid customer demand, improving operational leverage and disciplined capital allocation, we are happy to improve our stand-alone guidance from INR 875 crores to INR 950 crores to INR 950 crores to INR 1,050 crores in the revised range. We remain fully committed to disciplined execution, expanding our market leadership and driving sustainable long-term value for our stakeholders. With that, I hand over the call to our CFO, Mr. Gopikrishnan Sarathy.

Thank you, Dr. Kanani. Good afternoon, everyone. I will now take you through the detailed consolidated financial performance for the quarter 1. Please note all the comparison on a year-on-year basis. Revenue from operations stood at INR 250 crores, up 34% from INR 187 crores in Q1 FY '26. The revenue trajectory was incurred by strong volume led by Argo lithium inorganic chemicals and battery chemicals. Across our operational verticals, organic chemicals generated a revenue of INR 194 crores, reflecting an 18% growth while inorganic Chemicals segment delivered a stand of performance with the revenue surging 158% to INR 57 crores. Gross profit rose by 37% to INR 117 crores, reflecting an optimized product mix and cost pass-through arrangements. EBITDA stood at INR 48.2 crores, registering a growth of 53% from INR 31.5 crores in Q1 FY '26. EBITDA margin expanded substantially by 260 basis points to 19.3%. Margin expansion was achieved despite temporary expenses related to the Dahej plant rebuild to toll manu sites, jobwork-related expenses, initial expansion costs at Neogen ionic and freight spikes. Depreciated was higher at INR 8.2 crores, up 42% due to smaller capacities, which we had added -- small CapExes, which we had added during the year. Finance cost stood at INR 20.8 crores, up 64%. The increase in finance costs reflect the higher debt drawdown to fund the ongoing CapEx at Neogen Chemicals. Neogen Ionics increased working capital intensity due to supply chain inflation and temporary holding cost, tending the insurance claim disbursement. Profit after tax reached INR 17.1 crores, growing 67% with PAT margin of 6.8%. Looking ahead, as a replacement, the Dahej plant begins the regular commercial operation and NIL capacity scale up through H2 FY '27. We expect the operating leverage to improve significantly alongside normalized cost structures. Operating performance will be further rostered by pending insurance claim recovery. Additionally, our Traps QIP fund rate up to INR 600 crores will provide a substantial financial flexibility allowing us to optimize our debt profile and also create a headroom for future growth. I'm also glad to share for that -- for FY '26, we have -- we will be -- we are publishing our first integrated annual book, this report in core business responsibility and sustainability report BRSR along with reasonable assurance report. Moving to the integrated framework reflects our deep commitment to transparency, higher governance standards and long-term value creation for all of our stakeholders. That concludes my remarks. I would now request the moderator to open the floor for Q&A session.

[Operator Instructions] The first question is from Asit Bandarkar from JM Financial Mutual Fund.

Good afternoon. Just wanted to understand the battery outlook in terms of chemicals. How big can this opportunity be in 5 years time? And what would it be as a proportion of our business in that period of time, one. Second is that we hear that battery technology is being restricted by China. So is it realistic to assume that the growth will take place the way we anticipate.

Thank you for your question. So when we are thinking of battery, Neogen has a policy talks about what revenue guidance we can give based on CapEx, which is currently underway. So the current CapEx that is currently undergoing can cater to a revenue of around INR 2,400 crores to INR 2,900 crores depending on the lithium prices ongoing, and we expect to achieve this by FY '29. So that was a target for full utilization, which we have taken. . So if we are talking of 2 or 3 years period, we expect around INR 2,500 crores to INR 2,900 crores of revenue potential. This is mostly taking care of only 30 gigawatts or of let's say, electrolyte demand and then a little bit around 5 to 10 gigawatt hour of salt, which is being sold internationally. So that is what the current capacity is fully designed for. around 40 gigawatt hour of salts and 30 gigawatt hour of electrolyte. Now as we have shared in our presentation, that even today, around 60 gigawatt hour of electrolyte -- cell production capacities are ongoing. And over 5 years, the government expects the total demand to be 236 gigawatt hour. So total demand is going to be approximate 7x of what we mentioned just for India, for the sake of electrolyte. And then also, we will be open to interaction demand. So the demand is going to be like reaching, let's say, if we are talking of 5 years, like tens of thousands of crores in that range. if we consider both electrolyte as well -- I mean, electrolyte for India and electrolyte salts and additives for the international market. At present, Neogen has already taken a significant step to achieve INR 2,500 crores to INR 3,000 crores in the next 2.5 years. So in 5 years, it would be significantly higher. But as a positive, once we make some investment decisions, then we will -- we can give a specific number to that.

Does this mean that our business, the way to look is what 60% will come from battery chemicals and 40% from other chemicals, I mean...

Yes. So in other chemicals also, we have many growth drivers. Our pharma, agro, CFM future potential business in semiconductor. So like we've not given any long-term guidance around that. But yes, 5 years down the line, it can be 50-50. It's a challenge to my regular business team also that how they can keep up with the growth we will have in the battery space.

And what about the change in battery technologies, sir? How will we handle that? .

Yes. Sorry, you also mentioned about restriction from China. So today, Neogen's electrolyte and electrolyte salt capacity, we are very fortunate that we have Japanese partners. And internationally like -- so there is no dependency on China for Neogen from -- in terms of technology as well as we had our own homegrown technology also and the Japanese technology further improve the same. So we don't have dependency on China. Also, in terms of changing technology, so lithium-ion battery remains 1 of the most efficient technologies currently. There is some discussion about shifting to the sodium ion, but that will be gradual and will be, in my view, only for some niche applications for low temperature or very low-cost kind of applications. However, lithium and batteries are right now the most ambition. Having said that, in case of electrolyte, the way sodium ion technology is developing today, like the same plant can also be used for sodium ion and like -- so between sodium and lithium ion there will not be too much impact on Neogen's operations.

The next question is from Arun Prasath from Avendus Spark.

Dr. Harin if you can start with what is our current year guidance for the battery chemical business top line margins then probably it would be helpful?

As we've explained earlier, we are looking at a INR 300 crore kind of revenue for the current year for the battery business. We currently maintain the same most of this would be in the second half as the U.S. customers are expecting to shift from China to like non-China or FEOC to non-FEOC suppliers from January onwards. So we have already started some trials -- supplies and some trial sales towards these customers, and we expect that to ramp up, and we expect the shift to happen in Q3 and Q4. . In terms of the other guiding factor for this is the increase in the ATC P&I, the cell production in India. So already, there is 1 giga factory, which is started at a giga scale and now increasing in the midst of increasing capacity. The second giga factory also has started their trial production and expected to start commercial production soon. So -- and there are 2 more expected to start before the end of the current financial year. So I think with these 4 customers depending on the exact time at which they start we would be able to -- we would be able to either exceed the production. But currently, what we have done is that we kept some buffer because last year, we had gone wrong. So we would like to maintain the same production. And if India CCP, the cell production increases or starts in a very nice way or ramps up faster, then we might be able to increase from the current guidance.

Okay. So safe to assume that a large part of this INR 300 crores guidance is coming from the salt revenue rather than the electrolyte. And if that is the case, and you also mentioned that most of the revenue -- mean volumes will come from the Jan 2027. So largely, the 3 months of salt revenue should itself will be giving this kind of revenue. That's the right understanding.

So we would expect some time from November, December, the uptick would start because January is when they need to ship. So shipments from India would start in November and December. Of course, there will be some deals before that also. So we have currently like approximately kept around INR 200 crores for the salt and INR 100 crores for the electrolyte. Of course, electrolyte is subject to like India -- like Indian ACC PLI exact production how the plant ramp up and how they start and we have not considered any revenue from -- yet. So we have a -- to come online in H2, the key is making efforts so that we can complete -- so any short fall in electrolyte can be made up by additional costs, which we can get from charges in Q4. So that's the way we currently plan it. Increasing the electrolytes are on track, and we are also able to deliver the -- then we would be able to outperform...

Follow-up on the same topic. This INR 200 crores salt all we are talking about, what kind of a pricing or a salt pricing and electrolyte pricing and LCD pricing that we are building in based on which this number is coming?

So currently, we are considering like -- so we have like a long-term contract with 1 of the customers. And in this contract, the pricing is currently already fixed based on a lithium-based formula. So we -- and the normal stable lithium price is expected to be $20 plus minus $5. So $15 to $25. So currently, we are expecting like the current lithium carbonate prices are in that range. So this is kind of like the stable lithium price between $15 to $25 close to around $20 of lithium carbonate. So based on that, the salt pricing is currently derived, both salt as well as electrolyte. Both prices are derived based on like a stable lithium price. And for us, Lithium is a pass-through for both salt as well as electrolyte customers.

Understood. And of this INR 200 crores that we are talking about, how much do you think is -- I mean, do you see from the firm orders that you already have in kind of an order book kind of a business?

So I think if you look at our contracts, then based on the contract, everything is from. But as we -- as I explained in our opening remarks that as the customers complete their qualifications -- they've already completed, all the 4 customers have audited and approved Neogen facility. Some of them are now ready to start purchasing slowly in Q2 as well as Q3. And in Q2, Q3, they might require some special kind of a pricing. Some of them are doing the trial at a commercial level in the plant and then they would start shifting, so we expect this process to get over in Q2, Q3. So that towards the end of Q3 and in Q4, they are able to fully buy their requirements from us. So that is currently the status is.

Sir, you said something like a special kind of a pricing. What do you mean by that?

No, we have a formula. So special pricing meaning normally, we expect once the non-POC requirement kicks in, so it will be completely formula-based price. But before such a period, they may want to have, okay, what is today's market price. And the market price in China can be -- like is fluctuating every month on month. So depending on to secure some volumes in Q2 or Q3, it could be slightly lower than the long-term formula price that we have. But as we move to the regulated supplies in Q3, Q4, then it would have -- it would be based on the formula price, which we have taken for our consolidation. .

Current spot price is lower than the formula price, sir?

Yes, current China spot prices are lower than the formula range. .

Understood. Understood.

In last 6 mohths, a few times, they were higher, few times they are lower, right? So it's a very fluctuating -- the difference between the formula price and the spot price is now significantly reduced as compared to what it was in 2025 and maybe some part of 2024.

Understood. Understood. One final question on the cash flow for this year. If you take the CapEx for this year, you can guide for that number? And what is the source -- how we are proposing the source fund those CapEx number that will be very helpful.

So whatever is a balance CapEx left for Neogen Ionics, that has been fully been -- that will come from like whatever the remaining debt that we need to still draw because our contribution is largely done. And then some of it, which will be coming from Morita contribution. And ultimately, from our side, maybe only INR 30 crores, INR 40 crores as an equity contribution you would need to do towards the end of the financial year. when we complete fully the CapEx and start getting ready for -- contributing for the working capital. So from Neogen side, there will be very limited contribution needed till the completion because the financial closure we already listed.

Understood. One final question on the legacy business. You increased the guidance for the legacy business. Was it driven largely by the underlying price increase? Or some kind of a capacity addition or a mix change? How should we understand that number?

So what we have seen is our organic lithium capacity, we hit like our peak utilization level. So as you have seen, when we took the plant, it was like 10 tonnes per month active or 120 tonnes and we increase the capacity 2.5x to 300 tonnes. So now in Q1, our plant was able to hit the full utilization already. And based on that, like we are also -- I mean we are also considering to further increase capacity slightly by end of the financial year. So I think it's largely driven by that. Also when the organolithium business grows in the past we explained that we can also get some byproduct lithium, which we can recycle back, which also helps our inorganic lithium sales. So both these did were well, so based on the performance of the organo lithium, lithium and we're still seeing strong demand in the organic chemical space as well. So considering that, we have revised our revenue guidance in the legacy business.

Sir, in the legacy business, what was underlying volume growth for the quarter and the last 6 months, if you can share would be helpful.

So when you compare -- we are comparing Q-on-Q. So last quarter, we had just -- was the first quarter after fire and still our job work, et cetera, were not in place. So majority -- so of the total growth around INR 15 crores cash came from increased -- sorry, INR 15 crores came from increased prices related to lithium and other raw materials. The rest of it was nitro, completely volume driven.

The next question is from Abhijit Akella from KI.

Yes. Good afternoon. So first, on the INR 600 crore proposed fund raise. If you could -- please just help us with the proposed uses of this? Is it primarily debt repayment for the timing or also some CapEx that you have considered? And if it's debt repayment, then by how much do we expect the finance cost to go down following this?

Okay. So the Board has right now approved the QIP. And we basically expect -- as a temporary measure, yes, it will be basically for debt reduction. And the main purpose of this is that we are seeing many future opportunities. So for example, in my opening past, I mentioned the government of India is planning battery material supply chain PLI as well as like after Morita, After a degree with Morita, you've also seen a very strong demand in the international market. So we would like to be ready for the case. The current sort capacity that we have in place will cater to either the U.S. demand fully or our India demand. But we have to be ready for a case where we need to take care of both. So of this is something which doesn't have to happen immediately. But as the business develops, we have to be ready for that. There are some -- like we have to also be ready the way organolithium business is progressing if we have to increase some capacity. And we also want to get into the next phase of R&D where from just making basic process, we need to invest into R&D where we are working on battery performance improvement by novel additives and novel electrolyte designs. So I think to basically be ready for these and a few other opportunities which are in front of us, the Board decided it would be good to kind of deleverage the balance sheet and like reduce the debt so that like we are ready to capture any of these growth opportunities, which are expected to present in front of us. So that's the main guidance. I would ask maybe Gopi to comment how much the finance cost would reduce downward.

See, we see at the maximum thing [indiscernible] full INR 600 crores naturally -- but on repay, I would say, it's just a maxcare whatever growth is repaid, you can just multiply with the interest rate, say 8% to 8.5%. You can multiply it and take it as an interest rally..

So maybe roughly -- if the entire thing is just repaid roughly around INR 40 crores, INR 50 crores of the year for the reduction annually once we see -- this is subject to, like I said, there are some other opportunities. So considering that, we will have to decide what the final interest rate.

Yes, sure. And just -- so number 1 on the battery PLI component theme that you spoke about. Would it be possible to just help us understand maybe the broad contours of what might be offered by the government? I mean is it CapEx-linked incentive? Is it OpEx linked incentive? How -- and how much in quantitative terms could Neogen potentially hope to benefit from it? Also, any expansion that you consider because of all of these developments what will the time line to embark on such an expansion? Do you have to do that by the end of this year or maybe some time closer to, say, approaching optimal utilization of your current expansions?

Yes. So see, regarding the PLI scheme, I think this is still under discussion by the government. And while it has quite advanced stage but not yet finalized. So it would be not right for me to comment on that because ultimately, this is government policy. And only once the scheme has been like published, we should basically consider it but the broad idea or main intent of the government is to support utilization of the cell production. Because as we mentioned, the government is seeing very high growth in the demand for the ACC PLI -- the cells. And unless there is a local production, there will be a strong dependence on imports internationally. So any restrictions can restrict our plans to reduce dependency on oil through EV or through ESS storage. So considering this as a very strategic area, the government has already reannounced bid for 10 gigawatt hours, so to make sure that the entire 50 gigawatt of ACC PLI they are recipient, they also want to increase the number of recipients. So the remind them that ACC PLI is targeting 2 to 3 different players, minimum 2 to 3. So that there are at least 4 or 5 PLI recipient. This is what the government's current target is. And like to increase the competitiveness because the Indian industry like Neogen and few other battery suppliers just starting against competing against Chinese or other companies were already more than 100 gigawatt hour of capacities are available. So therefore, like to give us some kind of a level playing for edition, the government is considering these options. Any step by the government would be helpful, whichever form, whether it is CAPEX whether it is OPEX, and more important is the intention of the government to support the industry and the desire to other local supply. Of course, this was already part of the ATC PLI requirement. But now the government is more proactively ready to support whichever sale, each and every sale, which is the positive sign for Neogen. In reference to second, when the capacity increase would be tendered, I think we will be very careful in triggering this. So once we have a full visibility of the utilization of the existing only after that it would be triggered. But we have to appreciate that keeping in the battery we do requires around 12 to 18 months to set up the capacity. And then other than at least 6 months to 12 months to qualify. So therefore, we need to plan at least 2 years, 2.5 years in ahead like whenever you expect that capacity. So we will take a call based on that. But currently, there are no specific time line. We just want to be ready so that if needed, Neogen is ready to basically take action in that area.

These PLI incentives, would you expect pass along to the customer arena or would you think that the industry could retain? And that's question number one. Second was the -- some of these cell manufacturers in India, they have Chinese technology partners, like, for example, Exide and Amara Raja and there's an understanding that maybe the technology partners might be asking them to use Chinese electrolyte formulation itself. So in that context, how easy is it for us to break through with these guys with our Japanese formulation? And in that context, how confident in about the FY '29 guidance for full utilization of electrolyte or what exactly underpins the confidence over there?

Sure. Like, again, in reference to how the PLI benefit will be shared, I think it's too premature to discuss until the government actually comes out with the PLI scheme. But what basically we expect is that it basically puts us at par. And while electrolyte is a local required material. So therefore, it has to be bought locally but the ultimate aim is that when the customer is doing that, they are not paying a heavy price as against what our international prices. So basically, to remove the disparity between prices, which comes from time to time in international prices and India prices. . So that would be the first concern to make sure that the customers received like a very competitive price in line with whatever is the global prices. So that the cells which they are making are also very competitive. So that is the main intention of the PLI and that would be the principle with which Neogen would work in like basically sharing a benefit so that the customer is not having a financial penalty to basically purchase from Neogen once the government also gives us support. In terms of technology, See, there is always a period where the company -- sorry, there is always a period where the cell producers have to work with the technology provider. But that is usually 3 months, 6 months, whatever period. post that, the customers are free to -- like free to change over to raw materials -- the local raw material supplier. The PLI further makes it more possible for them to take that on a more active basis. And when it comes for us, we have right now worked with like 5 out of the 6 the large giga factories which are coming. And we are very confident that we should be able to give them a electrolyte which has a similar performance or better as compared to what we are using currently or what has been proposed by their technology partners. We are also working on the fixed one, where we can work together. But at least for the 5 we have clarity. So considering that and assuming the fact that just today, in finance -- in current and -- like current and next financial year. So current financial year like almost 4 out of 6 giga factories would start and another 2 would start in, let's say, beginning of next financial year. So it gives us enough time for them to reach at least 50%. So the combined catality of these people itself is more than 60 gigawatt hour. So even if they hit 50% utilization also, then also we would basically reach our full utilization targets. So I think this is like -- normally it takes about a year for somebody to stabilize. And the fact that 2 giga factories have already started and others will be starting this year, so we feel by FY '29 there should be at least at 50% or higher utilization. There is already demand. The good thing is that the demand already exists it's just the manufacturing needs to get stabilized. So even if they reach 50% plus kind of utilization level, then Neogen has a very strong case to reach full utilization level. Further, this is just talking of local electrolyte. We will also have international salt business as well as like some of the solvents also are now required under non-POC requirements of the 45x, so the component -- so the electrolyte salt additive as well as the solvent also can be sold internationally. So any capacity, if at all, unutilized when we sell it internationally we anyway achieve 70%, 80% of the total value. So therefore, like considering that we are still confident that in FY '29 as per our original guidance, we can get the full utilization of INR 2,400 crores to INR 2,900 crores revenue.

Got it. That's very helpful. Just 1 last thing from me, just 2, 3 data points, very specific. One is the INR 19 crore revenue from Neogen Ionics this quarter, possible to break it down between salts and electrolytes that was one. Second thing was just -- largely salts, okay and any inventory gains during the first quarter given that gross margins seem to have gone up significantly despite rising raw material prices..

Indirectly in a sense that we had some older inventory, but when we are selling it, we got some benefit out of that.

Possible to quantify that or...

It's very difficult, sorry.

Okay. All right. And last thing was just you mentioned that the guidance upgrade is largely due to the organolithium business. which I guess is clubbed within organic chemicals, right? But organic chemicals revenues have been largely range bound between say INR 180 crore to INR 190-odd crores for the last 4 quarters. whereas it's actually inorganic that has gone up sharply in the last 3, 4 quarters. So if you could please just explain that a little bit.

Yes. So there is -- as I explained that the organolithium also supports the inorganic growth. And so the sharp increases as compared to the same quarter, let's say, a Q-o-Q basis -- sorry, on a year-on-year basis. if we are looking at a year -- on Q-o-Q, so consecutive quarter, this was already increasing. So as we mentioned, we reached the full utilization. But on previous quarter also was 70%, 80%. But yes, this is the time where our new capacity was fully utilized, so we reached our highest revenues. So therefore, like some of the organolithium capacity increase was already built in, let's say, Q3 and Q4, and now we hit the peak but when you look at the year-over-year comparison, there's a sharp difference in organic...

[Operator Instructions] The next question is from Jason Soans from IDBI Capital.

Sorry, I just wanted to understand first thing. I missed out on the revenue guidance for the base business. So could you -- if you could just repeat that for '27 and '28 both. We clocked in around INR 826 crores in '26. So just wonder to know what is the increased guidance for '27-'28 just for the base business?

For the '27-'28 you mean? .

Yes, yes.

Yes. So this year target, we had originally given INR 875 crores to INR 950 crores but based on the Q1 performance, we revised it from INR 950 to INR 1,050. So we feel the base business should be able to cross INR 1,000 crores in the current financial year. For the next year, we had expected around 10% to 15% growth. We have not given a specific number for FY '27, '28, but we feel it will have at least at -- more than 10% growth because we are not doing any significant capacity as of now. The focus next year would be to stabilize the business, optimize the business. make it more efficient in terms of margins and in terms of working capital. So in the base business, the next year focus will be to further streamline the business and optimize it. So at least it would -- with the same capacity we've seen, we should get at least 10% to 15% increase, so we should be somewhere between INR 1,100 crores to INR 1,200 crores kind of revenue for the next financial year. However, a proper guidance, we'll give more closer towards the end of the year.

Sure. And sir, this is assuming, I mean, [indiscernible] will be back on track, of course, and there'll be a good smooth ramp-up going ahead, right, for the next 2 years, 1 or 2 years.

Yes. So there will be a ramp-up in the current financial year. And next year, we want to basically work on better optimizing up -- because once we have a full utilization, which is around that INR 1,000 crores to INR 1,100 crores. So we start getting like INR 250 crores to INR 300 crores kind of quarterly revenues. Then the main focus will be on improving the product mix like trying to select for little volume molecules, reduce the total large number of products that we have, right, and the focus on margin and working capital efficiencies in the base business. .

And sir, for '28 what are running for battery chemicals? You said INR 300 crores for '27, but '28 what are we running for -- revenue for battery chemicals in '28?

We have not given a guidance on that. But what we had estimated in the past is that looking at like there should be a very strong demand for the salt, so we should have a solid business at 70%, 80% utilization level. And the electrolyte also would be like between 30% to 50% utilization level. So we feel there's a very strong case orders to cross INR 1,000 crores, it will be something more than INR 1,000 crores. But the exact number is -- because all these businesses are just starting, so it's better that we provide again towards the end of the financial year.

And sir, just 1 question I had. In terms of -- of course, a lithium-ion is a very well-proven technology. Now I just wanted to know in terms of the Silicon carbon batteries that also is an evolving technology, even premium smartphones, et cetera, that's being adopted rapidly and showing good efficacy, longevity as well. So just wanted to know in that technology, also our electrolytes and salts have the same usage? Or is there a reduction or increase? Just could you give some color on that?

So I think most likely, when you think silicon carbon, like battery usage, what you are referring to that the anode side. So the anode side usually is normally only graphite, but to increase the efficiency of the battery, people use a combination of silicon and carbon in the graphite. So it's still lithium and battery, but instead of just a traditional anode with the graphite, you are using silicon carbon graphite which increases the efficiency and the performance. So yes, so the electrolyte mix changes a bit, the additive changes a bit, but broadly, it remains within the same controls where like the same plant can make the same type of additives are used only the percentage is optimized a bit when you have this anode for the optimum performance.

The next question is from Rohit Nagraj from 360 ONE Capital.