NGL Fine-Chem Limited (524774) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 Earnings Conference Call of NGL Fine-Chem Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Mehra from TIL Advisors. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining this Q4 and FY '24 earnings conference call of NGL Fine-Chem Limited. The results and investor update have been uploaded on the stock exchange. To take us through the results of this quarter and answer your questions, we have with today, Mr. Rahul Nachane, Managing Director; and Mr. Rajesh Lawande, Whole-Time Director and Chief Financial Officer. We'll be starting the call with a brief overview of the financial performance, which will then be followed by the Q&A session. I want to remind you all that everything said on this call, reflecting any outlook for the future, which can be construed as a forward-looking statement must be viewed in conjunction with the uncertainties and risks that the company faces. These uncertainties and risks are included but not limited to what we have mentioned in our annual report, which you'll find on our company website. With that said, I now hand over the call to Mr. Rahul. Over to you, sir.

Thank you, Abhishek. Good morning to all of you who have joined us on this call. It is a great pleasure that I welcome all of you to the Q4 and full year FY '24 earnings call of NGL Fine-Chem. As we can reflect on the last year, it is evident that our current company has demonstrated remarkable resilience and growth despite the challenges in market conditions that we [indiscernible]. Let me tell you -- let me start by highlighting the few financial metrics for FY '24. Revenue from operations grew by a robust 21.8% year-on-year to INR 338.69 crores, driven by strong volume growth across our product portfolio. EBITDA witnessed a significant increase of 55.22% to INR 53.27 crores compared to INR 34.32 crores in FY '23. EBITDA margins expanded by 339 basis points to 15.7%, reflecting our ability to optimize operational efficiencies and leveraging revenue scale. Profit after tax stood at INR 41.32 crores, nearly doubling from the previous year's figure of INR 20.50 crores. Throughout FY '24, we faced significant headwinds; subdued demand; higher customer inventory levels and currency volatility in key markets, such as Egypt, Pakistan and Turkey. These factors initially constrained our performance and created a highly competitive landscape, marked by intense pricing pressures. These challenges initially constrained our performance and created a highly competitive landscape, marked by intense pricing pressures. However, as the year progressed, we observed a gradual easing of these challenges. The inventory destocking phase, which has been -- which had significant headwind, finally came to an end leading to a notable recovery in demand, particularly from the Asia region. This recovery was driven by robust volume growth even as average realizations remain stable. Additionally, a significant reduction in raw material costs allowed us to return to normalized margin levels, contributing to an overall improvement in our financial performance. Our strategic focus on maintaining a diversified product portfolio and not relying excessively on any single product, customer or geography has been the cornerstone of our resilience. This approach has enabled us to navigate the volatile market conditions effectively and sustain our growth momentum. Looking ahead, we are cautiously optimistic over the future. The demand recovery we have witnessed is encouraging, and it continues to remain robust. We may explore the possibility of outsourcing some bio manufacturing to capitalize on growth opportunities with our new facility becomes operational. Our CapEx plan is progressing well and remains on track with the first phase expected to be completed by the end of Q2 FY '25. We anticipate sustained demand for the coming year, although margins may take time to fully recover. We expect EBITDA margins to remain within the 14% to 17% band for the next financial year. Our focus will be on gaining market share and growing our business while maintaining financial prudence and sustainability. Before we proceed further, I must issue an important disclaimer. We have observed that competitors might use the detailed information from our public disclosures to their advantage. Therefore, we'll be exercising greater depletion in the details we share going forward. We request your understanding and cooperation in refraining from asking for a specific questions during this call, as such queries will not be answered. This step is crucial to safeguard our strategic interest and maintain our competitive advantage in the marketplace. Having said that, I'll now open the floor to any questions you may have, keeping in mind the disclaimer I have shared. We will endeavor to address your queries in the best of our abilities, while maintaining the necessary confidentiality. Thank you for your continued support and trust as we navigate these times with cautious optimism and a focus on sustained growth and value creation. The floor is open now for questions.

[Operator Instructions] The first question is from the line of Rahul Jain from Credence Wealth.

Congratulations on a good set of numbers and that too in a challenging environment. Sir, a couple of questions. First, on the gross margin side, sir. So this current year, we have ended with a gross margin of around 53.3% for the full year financial year '24, and it was somewhere around 52.5% for the fourth quarter. So as far as the gross margins -- you have given a guidance on EBITDA margin. So as far as the gross margin is concerned, given the product sizes and the raw material prices, how do you look at the next 12 to 18 months?

Is this the only question or you have [indiscernible].

No, no, no. Sir, the second question is on the other expense side. The other expenses has seen a sharp up move in last 4 quarters, more so in the last 2 quarters. General average was around INR 15 crores to INR 18 crores on a quarterly basis. And this is, for last 2 quarters, jumped to almost INR 21 crores and INR 25 crores. For the full year, we are at INR 81 crores compared to INR 67 crores. So is there some kind of one-off? Or is there some kind of expense the fruit of which could be in the future, maybe something on the new plant or if you could share some details on the sharp increase in the other expenses. And last question, you have mentioned in your initial remarks and your presentation commentary, with regards to outsourcing, the possibility of that. So do we envisage the possibility of outsourcing in this current year [indiscernible]? Those are my 3 questions, sir.

Right. So your first question was on the gross margins. And what do you think -- you asked me what we think would go, be a situation going forward. So currently, we are more or less in the range of about 47% -- 46%, 47%. And -- sorry, that's material cost. Gross margin is probably reverse of that, about 53% as compared to 50% last year. So it's improved in the current year. And going forward, we expect that this sort of margin will be maintained. With regard to other expenses, your question was we have gone from INR 67 crores to INR 81 crores. So there has been an increase in the total operating cost, and this main increase is mainly on account of fuel -- power and fuel basically, which has contributed a large amount to the increase. So out of the, let's say, about INR 15 crore increase, about INR 4.5 crores is just cost of power and fuel. About INR 2 crores is cost of processing charges. But that's mainly to our subsidiary. So in a consolidated -- sorry, after consolidation, we still have about INR 6.5 crores -- INR 5.5 crores outsourcing. So we have been gradually increasing the amount of outsourcing, which we have been doing to meet the incremental demand, which is emerging from the market. So going forward, higher cost will prevail. No question about that. And with regard to outsourcing, as I said, we have been gradually doing it since last year. Our total cost as compared with earlier financial year, has gone up from about INR 3.5 crores to about INR 5.6 crores. So that's been a significant jump. And going forward, during the current year also, it will go up. So as and when we feel that there is going to be a supply issue, we address it by outsourcing our production, so that this [indiscernible] market is not lost. I hope this answers your question.

Yes. So just 1 bit over. Our growth in top line, and you have mentioned this in your commentary also. In last 2, 3 years, it has come majorly from the Asia Pacific region and the India region. Europe continues to stagnate at around INR 80 crores business for the full year. In fact, last year, it has come down to INR 72 crores. So yes, on one side, Asia Pacific and India has helped us, and the rest of the world. Anything on Europe, in terms of demand recovery or some kind of scope for there?

So as I said earlier also, our sales in Europe has been basically -- we don't have any significant product registrations in Europe as of now. So all our customers in Europe who are buying are buying it for the export. Now as the domestic presence grows internationally, buying in Europe and exporting to these countries is gradually going to reduce. So we are getting our routes directly now into the end market, which is a good thing for us. So the rest of the world, as it is [indiscernible] called, regulatory and the rest of the world, market is growing at a much faster pace than the EU and American one. And I think our Europe focus will probably emerge a couple of years down the line as we start getting some product [indiscernible] done. But right now, the focus is very much on the [indiscernible] market, and that's being well for us.

The next question is from the line of Dhwanil Desai from Turtle Capital.

Congratulations for a very strong performance in a very challenging year. So sir, my first question is, I think you mentioned that the large part of growth is driven by volumes this year. So if you can give some range and you also talked in the last call also about realizations and prices bottoming out. So how do you see the trend on the realization side moving into FY '25? And how do you look at the volume growth in FY '25? That's my first question. You want me to put all the question?

We want to go one by one.

Yes. So sir, second question is on the margin. I think I mean, we have always maintained that our steady-state margin range is 17% to 22%. And this time, we are saying that this year probably we will settle in 14% to 17% range and idea is to gain market share. So is it that this is a conscious strategy that we want to be more competitive. Or is it a function of the competitive intensity, which has gone up, which is leading to the lower gross margin and maybe hence, the lower EBITDA margin. Or the third one that kind of investing more for the next 2, 3 years and hence, the margin range would be on the lower side? So that's my second question. And third question, sir, is on the upcoming plant, which we are kind of putting up for largely regulated markets. So if you can talk a bit about in terms of the ground work that we are doing to ensure that in FY '26 and Q4, when the plant comes up, how do we build that capacity in terms of the new product registration tie-up with the customer? And whether the nature of the business in those markets will be significantly different than what we are doing in the other markets, say, in term of the contract things, in terms of the stability of the margins, et cetera. So more color on that, if you can. So these are the 3 questions.

All right. With regard to your first question on the pricing and volume growth. As having -- as I said earlier in my earlier call also that in 2023, we have seen a steep decrease in prices, which started around the time when China opened up in [indiscernible] of 2023. And by August, we've seen -- we saw price slide down a good almost 30%, 40% from the peak. And they continue to double, though at a slower pace in about -- probably around Jan of this year. So we are -- what we think is that the welcome is more or less bottomed out. It is now flat parity. We haven't seen the price rise occurring yet, except in a couple of isolated products. As a gradual role price increase has still not taken place. But we see that the bottom of the [indiscernible] is achieved. Now at this low price levels, the demand is going up quite a bit because buyers have never had it so good except low prices. So demand is definitely increasing. That is driving the volume growth. With regard to the margins, because the prices have been more or less at a long-term low, we think that the current year margins will continue to depressed. If we try to increase our margin at this juncture, we are likely to lose out on market spend, which we don't want to do. So we will continue to operate at lower prices -- price realizations and the margins will continue to be suppressed. And it's a conscious strategy. It's a conscious decision which we have taken. With regard to our upcoming plant, currently, to prepare for -- we can't prepare for the U.S. market because U.S. market registers the plant. So that will be done as and when we go into production. We'd like to first do variation metrics, so the U.S. [indiscernible] steady probably another 3 years away. But we have started registering our products in the European market, and filings have already started. And these filings are transferable from one plant to the other. So that work has already started by us. So as and when the plant comes up, we will at least have prepared them to start selling into Europe.

Sir, can you talk about the nature of the business? Is it very different than what we do in the regulated market in terms of contract, in terms of timeline, in terms of margins?

It's very different because of the effort which is going into registering a particular product, we have to work closely with our customer. And once the customer has you on the file, we normally does not work with more than 2 or 3 suppliers at any given point of time for any single product. So the relationship becomes much more stronger and longer term. Whereas in the [indiscernible] market, it's completely price driven. So yes, it does become a long-term relationship.

Okay. Okay. And sir, 1 just follow-up on this margin. So essentially, we are baking in a stable price at current level. If the prices realizations go up, then there may be an upside to the margin, which, as of now, we don't see prices going up. That's what we're reading, right?

Yes. .

The next question is from the line of Ankit Gupta from Bamboo Capital.

Congratulations for good set of numbers. Sir, my first question was on the current capacity with limited outsourcing, we have reached almost INR 100 crores kind of quarterly run rate. So given the outsourcing might increase and in the past, we have done debottlenecking also. So as the existing plan, what kind of revenues can we generate if we increase capacity -- if we increase outsourcing and maybe due to some debottlenecking that we have done in the past. So that is the first question. Second question was on European filings we have been doing for almost a year, almost more than 2 -- more than 1 year or almost 2 years, I think, if I remember correctly. So any success in getting approval for single lower [indiscernible] products? How many products filing have we done till now? And how do you see -- when do you expect the approvals for the same? Early -- on our product basket, how many products do you have currently and we had set up a target of commercializing 5 products every year. So how they are beyond those on that path? And how are the new products that we had launched in FY '23 and FY '24 doing?

Okay. Thank you for your question. As you said we are already at high capacity utilizations. And where do you -- do we see going forward. So capacity utilization is definitely high. No question about it. We have been able to still drive volume growth because we have been continuously debottlenecking operations. And at the same time, as we are scaling up, we are outsourcing our production. And this will continue going -- continue to do going forward. Now with regard to how much revenue this can generate, unfortunately, I'm not able to give you any revenue guidance. But our endeavor is always to ensure that whenever we see that there is a volume growth, we try to increase our outsourcing and make sure that we are not slipping out on any of the demand, which is there in the market. With regard to EU registration, we started our filings exactly 2 years ago. May 2022 was our first filing. And normally, it takes probably -- it used to take something like 15 to 18 months to get product approved in the EU. But now EU has -- there are 2 issues which are taking place. Due to COVID, there has been a backlog which has been built up. And they are also asking for numerous other additional studies to be conducted, like genotoxicity and other studies to be conducted, which is taking time. So unfortunately, I'm not able to give you a timeframe. Our estimate initially was that it would take us between 18 to 20 months to get registrations done. It's already '24, and we are still in the process of applying to -- for the -- to the European authorities. So our fingers are crossed, I would not like to give an opinion about when this will come through because that's no longer in our hands. Your third question was about new product launches, 5 products, which we aim for every year. And we have not done 5 new products in the current year. In the last year, we have done only 3 new product launches, but they have worked well. We are now doing a basket of close to about 30-odd APIs. And we are in the process of getting these done pretty well. And our market share from our top products, 10 products, gradually has been decreasing over the last 3 years, which was that sales is now coming from a wider basket. So that is the whole objective of trying to derisk it.

And sir, I mean, any -- can you tell us like how many products have you filed in Europe till date?

How many products?

Have we filed in the European markets for approval for the European regulators?

Totally, 8 products have been filed for.

Okay. So this has ramped up significantly, of course, approval is given, but we continue to file in the European markets.

I'm sorry I missed your second question.

My point was that we have continued filing...

The line for you sounds muffled and it's low in volume. I request you to please use the handset when you're speaking.

I am using handset. So I'll just repeat a bit loudly. So we have continued increasing our filing in the European market from 1 product that we had filed 2 years back, we have filed 7 more products in the past 2 years now.

Yes, that's what I said. We have a total of 8 filings as of now. .

Sir, my last question was on the margins, just prior to FY '22, our gross margins have remained in the range of around 55% to 60% for a very long time, let's say, almost 7, 8 years, we have been able to maintain that. Last 2, 3 years have been challenging, given the inventory destocking and the pricing pressure. Do you think over -- it's not next year, but let's say from FY '26 onwards, our base business, it's excluding the regulated market business that we plan to do. Do we come back to its original gross margin levels around 55% to 60%?

I'm very hopeful, but I cannot comment on that, unfortunately, because there are macroeconomic factors at year-on-year right now. And that -- those, I think, again, whatever margins might have been earned, there have been ups and downs. And I've always said that EBITDA margin, what we started to do is between 17% and 20%, 22% And that's what we will try to attain in the long term. I don't want to comment on the gross margin because that can go up and down. But yes, the last 2 years have been challenging, margins are depressed. 2 years after COVID were fantastic. It was much more. So in the long run, yes, we'll get to that margin.

[Operator Instructions] The next question is from the line of Ishan Thakkar from Fort Capital. As we are not getting a response from the line of Ishan, we will proceed to the next question, which will be from the line of Shivan Sarvaiya from Humiviction Investment Advisers LLP.

Sir, a couple of questions. One was on the margin. So like the previous participants also mentioned we're always leaving the range of 17% to 22%. And now we were looking for 14% to 17% for FY '25. So sir, is it because of some intensity in competition that has increased in our top 3, top 4 products? Or is this just a small cyclical downturn and we plan to get back to those margins moving ahead?

Actually, this question was already answered a little while. This was the first question, which was asked with regard to the margins. Margins, you're right in saying that long-term margins have been in the range of 17% to 20%, 22%. Currently, we are lower, that is the range of about 14.5%, 15%. And we gradually hope that it will go into the range of about 17%. And this is because of various factors. Low demand led to -- so COVID basically led everyone to believe that there is going to be a very large sustained demand, a lot of capacity has been added into the industry, especially in China. Chinese were out of the market for a long time and came back after where -- all controls were relaxed in February last year. And we started dumping. So it's -- competition is very intense right now. And again, just -- I'm repeating myself in saying that we think that the bell curve in terms of pricing is more or less bottomed out. It will only go up, but we don't know when it will start going up. Prices are different right now. So margins will continue to be depressed. As and when prices start recovering, we hope that margins will also recover.

Okay. Sir, you mentioned about the additional capacities that came up in China. Sir, are these yet there? Do you expect them to move out of the market?

I am unable to comment on anything from China because we don't have any first time report which comes in. We just have news, which comes on the market. So I would not like to comment on secondary reports and tell you if this is sustainable or not, really don't know what -- answer to that.

Sure, sir. Sir, my last question is on the new plant since we are targeting regulated markets. So what would be the asset turn that would -- that we would be looking at on a INR 140 crore, INR 150 crore investment?

Probably about 2x. .

The next question is from the line of Ankit Gupta from Bamboo Capital.

One thing on the employee cost, we've seen that apart from other expenses, which you highlighted have increased because of fuel and power expenses. The employee also has seen a significant jump in last year and even in this quarter. So is it the team building that is happening for the new plant? Or like if you can talk about increase in employee cost that we had done in last year?

So we have seen it go up from roughly about INR 34 crores to, I think, about INR 41 crores. Let me just cross check my numbers. Yes, about from INR 37 crores to over INR 45 crores, it's gone up. So that's about INR 8 crore increase, which is about 20%. Part of it is because salaries go up by 10%, 15%, 12% every year [indiscernible]. And part of it is because of as production requirements went in, we have to hire more people. And whether it's on account of the project, project expenses cannot be charged to P&L. They have to be capitalized. So nothing on the project is getting reflected on the P&L yet.

Maybe on the sales team, you might have increased some people since you are feeding the [indiscernible]?

All around. It's not just sales, it's sales and overall -- see, our volume growth has been substantial. And to meet the increased volume growth that means more material to be handled, more buying to be done. So the requirement of people personnel has been across all departments.

So what kind of volume increases have you seen in FY '24?

I am unable to give you product-wise.

Rather ranges you can give on a company level?

I can give you just a guesstimate, and I don't want to guess it right now. I don't have a data available with me right now.

Okay. Okay. And the price erosion that you've spoken about. In FY '24 also, as you were saying some gradual decline has happened until January, February. So compared to FY '23, what kind of price erosions have we seen in, let's say, some of our molecules in FY '24 ?

We have seen prices go down from a range of about 20% to 40% from product to product.

Last year expense, that's a '24 expense?

In FY '24, yes.

Okay. So this is the addition of the kind of decline we saw in FY '23. So FY '23, we saw a big decline and last year also was a big decline in terms of...

The increase -- the decrease we see in Fy '24, it started in February '23. So in FY '23, it just started. The main decline -- decrease took place in last year.

Okay. So if you factor that in -- despite that we have seen at least 18%, 20% kind of renew growth. So logically, this is a number that the volume growth would have been significantly higher in FY '24?

Correct, yes.

[Operator Instructions] We have the next question from the line of Debashish Niyogi from Digitian Investments, Inc.

Congratulations, sir, for a good set of numbers, not only this quarter, sequentially, we have been doing very well. And whatever you have been guiding, you're very being very cautious in giving guidance and conservative in giving guidance, and we have been meeting that. My question to you, sir, is that always, you have maintained that we operate in an unregulated market where our competitive intensity is very high. We do have pricing power. And hence, most of the top line growth came from volume. Now you said and we have read in the annual report. So we have filed for products in Europe, 8 products. Now my question to you is that this is a strategic shift of operating from a nonregulated market to a regulated market. So in that case, our competitive intensity will be lower than before? And what would be the opportunity size because all these years, we have been looking at very small size of the pie in terms of when we launch a product. So my question to you is that these 8 products going forward, if you fast forward 3 years from now and assuming all the 8 products have got approval, what would be the opportunity which we would be fighting for?

Sorry, I missed your last sentence.

So what I am saying is, sir, we have filed 3 products in '22, '23. And in total, you have filed 8 products for Europe, right? So I think what would be the opportunity size in these 8 products [indiscernible] after 3 years?

Yes, I got it. Actually, I would not like to give you -- give a guidance update because everyone is aware of what are the products which we have already filed because that information goes into public knowledge. So I would not like to share data about sales potential of products because this data can also be used by competitors. So please excuse me, but that data becomes of a little confidential nature.

No, [indiscernible] I appreciate that. I will ask -- let me ask you in a different way, which may be helpful for you. So do we see a long-term average, if you look at, say, 5 years, 10 years, our top line growth has been in the range of 15%, 17% CAGR. And this, I would assume, sir, because we don't have pricing power, a majority of this is coming from volume. So if we fast forward for the next 5 years, I'm not looking for guidance. And think if our historic growth has been 15%, 17% for the last 10 years, can we assume that our top line growth for the next 5 years, CAGR should be above 15% and there will be a price growth into it because of Europe getting into regulated markets?

Well, that is our objective. We want to keep on maintaining our growth level at -- that level.

Right. And in that process, you expressed the operating margin, which you had been guiding now 14%, 17% will be a notch higher than what it is today? .

So we come back to it. See, again, I would love to be more specific, but I wouldn't have a looking glass in the future. But I hope looking back on the past and looking at the history, that we will be -- we should be able to get back to a margin range of 17% plus. And last year, during our worst quarter, we were probably at about 10%. It's gradually climbed up to about 15%, close to 15% in the last quarter. And we are looking forward that it will go up in the coming year.

Sir, you have been a great allocator of capital, okay? And which is why you are -- earlier, you thought you would be spending the entire INR 114 crores and now you're doing it modular. You spend [ 45 ], and now you're spending another [ 25 ]. So my question to you, you just answered the previous participants that your [indiscernible] will be 2. Historically, this has been more than 2. So even if it is 2, this you expect to happen in next 1 year, 2 years, 3 years, when you were [indiscernible] an asset term, you're looking at the [indiscernible] after 3 years?

Yes. So in the last -- probably about 7, 8 years, we have basically done only brownfield projects. We have not done any greenfield projects, except for Macrotech, which was again a buyout. So this is the first greenfield we are doing. And asset turn in the greenfield is much lower than that's kind of in a brownfield, which is why we are expecting only a 2x asset turn. And since this is meant mainly for the European and U.S. market. It will take a bit of while to build up the velocity in terms of sales because of challenges which can we face in registration, which is why we have started the European registrations, which are tad bit easier as compared to the U.S. ones. We started that 2 years ago. And earlier, this particular plant also we're trying to split into various phases and go a little slow. But now everything is being accelerated, the whole plant will be available by next year. So we are quite positive about this market, the European and U.S. market. At the same time, we will not ignore where we are only strong with the -- you know, in the ROW market. And even when this plant is coming up, our next 2 years of growth, we are looking to fund them from existing markets.

The next question is from the line of Ankit Gupta from Bamboo Capital.

Sir, in the existing 3 plants that we have, will it be possibility to do some brownfield CapEx? Or we'll just have to do some debottlenecking and increase capacity?

I'll get, frankly, that depends on what opportunities present themselves. Advantage of a brownfield expansion is that it takes the early 6 months to 9 months to get the plant up and running, time period is much shorter as compared to a greenfield, which takes, in our case, it's going to take much longer period, over 2 years, because we went through slower at earlier. But we will not let brownfield opportunities if we see that if the demand is strong and there are opportunities, we will not let it go. We will keep our eyes open, and we'll look forward for those opportunities.

And once this new regulated plant is ready. So there'll be a demarcation that regulated markets will be served from this new Tarapur plant and the unregulated markets will be served from the remaining 3 plants? Or it's not like that, like we can use the existing plant also for European markets?

We can, but we are not planning to do that. We are looking at 2 different territories, separate plant for Europe and U.S.A, and separate plant for the ROW market.

The next question is from the line of Dhwanil Desai from Turtle Capital.

Sir, this question, you may find it slightly pre-mature, but so logically thinking since you are purveying, new plant will follow regulated markets largely and you are expanding their product basket and even existing products are doing good volume growth. And considering you have mentioned in the past that our existing capacity or plants have limited room for expansion. So for ROW market, do we need to look out for some facility or new CapEx, something along that line, are you thinking currently, because everything -- if it's a greenfield, it will take a little longer. So maybe you have to plan in advance. So any thoughts on that?

Right now, we don't have any concrete plan on any of the other plants to meet it up. But we keep our ears and eyes open. And if the opportunity present itself, we'll definitely take it. So as I said, meaning our -- except for a short period in 2016, where we were not able to grow volume, even though there was a demand because we did not have our new plant available. I don't know if it was '16 or '17. But one year, we failed. Other than that, in our 20 years history, we have never failed to meet market expectations and demand. We have always find a workaround. And I hope we'll be able to continue doing the same.

Okay. But preferably, you would like to first stabilize and scale the regulated market plants and then think about anything greenfield, right? Is that the right -- is that is how you guys are thinking?

All of the market, we will not plan a greenfield one at all because that takes too long. If there is opportunity available, we will look for a buyout. But again, as I said, it's up in the air right now. Depending on how things work out, we will add up to the situation.

Okay. But no greenfield for ROW, that part is clear?

No such plan at the current moment, no.

[Operator Instructions] The next question is from the line of Shivan Sarvaiya from Humiviction Investment Advisors LLP.

Sir, you mentioned about the issue that we are facing at the EU registration end, that there is some delay out there. So sir, how do we go about doing these registrations? Do we have an in-house team, which handles this? Or do you open consultants to help us with the registration?

Both based. We have an in-house team also. And for things which we can handle ourselves, we refer to consultants. But roughly about 85% of the work is done in-house, only about 15% is outsourced.

Okay. And these skills were already there at NGL or they have been -- you kind of recruited the required personnel over the last year or so?

No, this team has been set up roughly about 3 years ago. It takes time to start preparing for documentation. So the team has been growing now over the period. But we first started this probably around 2021. So more than 3 years, actually, more like 3.5 years ago we started this. So gradually, it has -- the team has been growing.

And then the strength of this team would be, sir, around?

I don't know. Because there's a little bit of mixture between QA, RA and QC. So I don't know how many are devoted to filing part actually. There are 3 things which work, QA, RA and QC.

Okay. So could you just give the full forms of the acronyms?

So, QA is quality assurance. QC is quality control, and RE is regulatory effects. So RE is responsible for the final filing, but the data is prepared by the quality control and quality assurance teams.

Okay. Got it. And do you guys deal with the third-party consultants, if required?

Correct, yes.

The next question is from the line of Ayush Mittal from Mittal Analytics.

Sir, just to get better clarity, like I've been on the call, but I'm not really clear. So like I think we have mentioned that our new plant, we hope to start by? What is the timeline on that?

End of 2025 calendar year.

Calendar year 2025. And this is for both the phases, if you are doing it in 2 phases or this is like, some parts will start earlier?

No, one part will start earlier. By, probably about -- we hope to be ready by September, probably take another couple of months to get approvals with regard to pollution and other things. So already in Q3 of this financial year, we plan to start the first phase, where we will start doing the valuation batches at this site. And by the end of next calendar year, we'll start the whole plant. But we wanted to get at least one phase started earlier, so that at least validation batches could progress and our filings get start that much faster. So we are able to start filing by 2026 for the U.S.

Okay. And once this plant is ready by end of Q3 of this year, will we be in a position to do commercial operations or that also takes time?

No, this is just a small plant to do validation batches. Commercial production will start only after the full plant is set up.

Okay. Okay. So -- and the other thing that I think you mentioned is that this being a greenfield plant, the asset turn will be lower. At the same time, this will be a dedicated regulated market plant. So logically, we should be expecting much higher margins from this....

Yes.

To be able to justify the kind of gestation period investment that we are doing. Is that what we are working with?

Yes. So we expect margins to be much higher than what we derive on the ROW market.

Okay. Okay. And in the meanwhile, before we -- because it's quite a bit of time before all this commercial ramp-up and those things will happen. Currently, from the existing plants, what would be our capacity utilization? And do we have expectations of further volume growth, like you did mention, we are seeing good demand. What kind of scope do we have from the existing setup?

I will not like to put any numbers again because we -- I would not like to give a number guidance. But yes, we are already at 90% plus capacity on our plants currently and it is impossible in a chemical plant to work at 100%.

That's why I asked, yes.

Yes, 90%, 95% is the best we can hope to attain. And gradually, we have been improving our outsourcing also, as we go along. So as we've seen from the cost, from INR 3.5 crores, we gone to roughly over INR 5.5 crores. So if we go further into current year, we will not lose the -- the key thing is that our intention is not to lose any opportunity for not having a production [indiscernible] in the background. That is what we aim for.

Okay. That's really good to know that we are already at 90% plus utilization. So perhaps the value terms were lower because you mentioned that prices have fallen. That is the only reason?

Yes.

So we have done well on the volume growth in the last 2 years?

We have, yes. And this year, not last years. The year before last, demand had fallen.

Yes, that was a very...

That was -- yes, that two years after COVID were good. The third year was not very good. So demand fell, costs were very high because of high chemical prices. And from last year, everything is falling. Material pricing have also fallen and finished product prices have also fallen. And it's been an uneven journey, sometimes something's fallen more, which is why the margin has improved actually, in spite of falling prices.

Okay. Sir, if we have to -- like if you -- like for the regulated market, I think if you have to expedite on that, are there anything that we can focus more or do something as a company? Or this is the standard time that will happen for us to be able to scale up?

So for the U.S. market, there is nothing which can be done because you have to ready the plant. We are to make validation batches. We have to do the filing. We have to get somebody -- a client to trigger the inspection. So manufacture, then create the database for that, which takes a year, then do the filing. So it's basically about 2- to 3-year process. Nothing can be done to accelerate that. For the European one, it can be accelerated, which is why we are already starting to [ write ] the filings. And then we'll do a transfer of site, so that the registrations are valid at the new site also.

Got it. Got it. For the U.S., you said it has to be triggered. Is that a USD audit also?

Yes.

Okay. Okay. Okay. Got it, sir. Sir, one more -- one addition I had, given a stock, the way it's around like, INR 2200. So is there any thought on the bonus split or something that can be done to include the liquidity because that is something a big constraint on the stock, and that will help the shareholders.

We'll definitely take that into consideration.

The next question is from the line of Shivan Sarvaiya from Humiviction Investment Advisers LLP.

So on the equation on bookkeeping, sir, on the EU filing. So the expenses that we would incur, are they return in the P&L? Or are those capitalized? If you could give some understanding there?

No, they are being written in the period.

Okay. And sir, cumulatively for these 8 filings, sir, what would be the cost that we would have incurred till date? And what would be the cost that we'll incur going ahead?

I'm sorry, but I have no data for that. I can't answer your question.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Rahul Nachane for closing comments. Over to you, sir.

Thank you, gentlemen, for joining us today. We appreciate your time and interest in our company, NGL Fine-Chem Limited. I wish you the best and a great day ahead. We will conclude our earnings call now. Thank you very much again.

On behalf of NGL Fine-Chem Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.