Tatva Chintan Pharma Chem Limited (TATVA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Tatva Chintan Pharma Chem Limited Q4 FY '25 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjesh Jain. Thank you, and over to you, sir.

Thanks, Abiruth. Good afternoon, everyone. Thank you for joining on Tatva Chintan Pharma Chem Limited Q4 FY '25 Results Conference Call. We have Tatva Chintan management on the call represented by Mr. Chintan Shah, Managing Director; Mr. Ashok Bothra, Chief Financial Officer; Mr. Ajesh Pillai, Investor Relations. I would like to invite Mr. Dinesh Sodani, AGM Finance to initiate with opening remarks, post which we will have Q&A session. Over to you, Dineshji.

Thank you, Sanjeshji. Good evening, everyone. On behalf of the management, I'm pleased to welcome all of you to Tatva Chintan's results conference call to discuss financial results for the quarter and year ended March 2025. Please note that a copy of all the earnings call related disclosures is available on both the stock exchanges, that is NSE and BSE and as well as on the website of the company. Any statements made or discussed during this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. A detailed disclaimer in this regard has been included in the Investor Presentation that has been shared on both the stock exchanges, that is NSE and BSE. Now I will hand over the call to our Investor Relations Officer, Mr. Ajesh Pillai, for his opening remarks. Over to you, Ajayji.

Thank you, Dineshji. Good evening, everyone. It is my pleasure to welcome you all to the Quarter Four of Financial Year 2025 Earnings Call of Tatva Chintan Pharma Chem Limited, the details of which have already been shared with the stock exchanges and are available on our corporate website. This evening, I'll walk you through the key financial metrics and segment-wise highlights for the quarter. In Q4 of financial year 2025, Tatva Chintan reported revenue from operations of INR 1,079 million, representing a 10% year-on-year growth and a robust 26% increase quarterly basis. EBITDA for the quarter stood at INR 90 million, reflecting a 43% decline compared to the same quarter last year and a 27% increase quarter-on-quarter. Now let me briefly share the segment-wise performance, Phase Transfer Catalyst. This segment delivered a revenue of INR 389 million, marking a strong 32% quarterly growth and an impressive 43% increase year-on-year. Coming to electrolyte salts, the segment generated INR 9 million in revenue, representing a 65% decline quarter-on-quarter and a 36% decline year-on-year. Pharma and Agro Intermediates and Specialty Chemicals, this segment maintained its positive momentum with revenue reaching INR 327 million, up 10% quarter-on-quarter and 17% year-on-year. Structure Directing Agents, the SDA segment recorded a revenue of INR 346 million, showing a 51% quarterly growth, though down 15% compared to the same quarter last year. With that, I would like to invite our Managing Director, Mr. Chintan Shah, to share further insights on the company's strategic direction and broader outlook. Thank you. Over to you, sir.

Thank you. Good evening, everyone, and a warm welcome to our earnings call. Let me take you through the key developments and strategic directions we have taken during the past year and would like to walk you through what lies ahead for Tatva Chintan. Today, I want to start on a positive note, informing you all that we strongly feel the worst is behind us, and we optimistically look forward to a good future. The last financial year at Tatva Chintan was marked by a mix of challenges and transitions. We navigated a tough macroeconomic environment, particularly in key export markets, where subdued demand, extended inventory destocking cycles and geopolitical developments impacted performance across segments. Despite these external pressures, we maintained our strategic course, deepening customer relationships, expanding product offerings and continuing to invest in future-ready capacities. Our commitment to innovation and sustainability remains strong and we made notable progress in customer onboarding and various product validations. Internally, the focus was very clear: Strengthen the operational efficiency; invest in future and prepare the organization for the next phase of growth. As we step into the new financial year, we remain cautiously optimistic. Destocking trends and fall of prices that impacted volumes are gradually stabilizing. Clear signs of demand upticks are visible. So I firmly believe that we have better times ahead. Encouragingly, we are seeing clear signs of recovery in customer inquiries and gradually becoming confident of uptick in demand in coming quarters. New customer acquisition and product developments also provide a strong foundation for revival in top line. Furthermore, strategic initiatives in capacity expansion and R&D are aimed at positioning us for long-term growth. We anticipate a year of good growth with strong recovery visible in second half. Our long-term structural growth drivers remain intact, and we are committed to creating value for all our stakeholders. At Tatva Chintan, we see the future not just as a recovery but as an opportunity to emerge stronger, leaner and more aligned with the evolving needs of our global customers. Let me take you through segment-wise outlook, Phase Transfer Catalyst. Our PTC business continues to demonstrate steady performance with the growing adoption of PTC across the broader chemical industry. This segment represents a consistently growing and expanding market. Our standing as a preferred supplier of specialized PTCs positions us well to capitalize on these opportunities. We are witnessing a gradual but sustained increase in demand supported further by positive traction from new customers onboarded in last year. SDA; as shared in our earlier calls, we have begun observing early indicators of a potential recovery in demand, and I'm pleased to report that these green shoots have started to materialize gradually. Over the past few months, customer engagement has improved meaningfully, and we are seeing a consistent uptick in demand volumes. Furthermore, we will witness uptake from customers who approved our products during last couple of years. This development, combined with the approaching Euro 7 implementation provides a strong tailwind for growth. Based on these encouraging trends, we remain optimistic that this segment will continue to be a stable and significant contributor to the company's overall performance in the coming years. Electrolyte Salts; the customers using our electrolyte for energy storage device has been gaining momentum and the volumes have started to pick up from the first quarter of FY '26. Besides the electrolyte salts for energy storage devices, our pilot scale sample for the third product required to make a electrolyte solution -- to make a solution from the electrolyte, we need a base material. So the product required to make the electrolyte solution has now been formally approved by the customer. We are now undergoing minor modifications to our existing setup to incorporate commercial supply for this high-purity material required for making the electrolyte solutions. We will be sending commercial scale material for final validation of the product in Q2 of FY '26. This marks a meaningful step forward in deepening our engagement with this key account and also enabling us to do a step forward from electrolyte salt to electrolyte solutions. Additionally, our qualification process with another strategic customer who is involved in manufacturing batteries for hybrid vehicles is progressing well. We have not received any adverse feedback in terms of quality from them, which reinforces our confidence in the robustness of our offering and our alignment with their technical expectations. Given these developments, we anticipate that this segment will continue to grow steadily. More importantly, we see it evolving into a long-term value contributor for the company aligned with global trends towards electrification and sustainable mobility. PASC; it gives me immense pleasure to share a significant milestone in PASC segment. We have secured a bulk commercial order for one of our major agro intermediates, marking a crucial step forward in this vertical. The commercial supplies for this product will commence in the third quarter of FY '26. This development is expected to make a substantial contribution to our top line in this financial year and also increasingly in the coming years. This is a result of our innovative approach, which has enabled us to invent a new alternative route of synthesis using our catalytic technologies. It has created a win-win situation for us as well as our customer establishing a sustainable supply chain. Foreseeing the high market potential of this product, we are accelerating the construction work of our new facility, which will undertake its production. We expect the facility to be ready by the end of third quarter to fulfill the anticipated future demand of this product. Simultaneously, the approval process for a second agro intermediate is advancing positively. We remain confident that this too will translate into commercial success within the current -- within the upcoming financial year. Additionally, the commercial supply of third agro intermediate will begin in current financial year and witness an increased offtake in coming years. And the validation of fourth agro intermediate is under progress. With this our agro portfolio is poised to emerge as a strong pillar of growth for the company in coming quarters and future years. The development process of another two agro products is progressing well, and we expect to commence piloting, validation and approval for this product within the current financial year. On the Pharma intermediates front, we have made commercial supplies for the first two products. Our customer will utilize these materials to conduct validation batches for their product. For the other two pharma products, intermediates, validation is progressing very smoothly. Flame Retardants; the challenges in flame retardant market are continuously increasing, and it does not make yet a prudent commercial sense to start commercially producing them. So we have decided to withheld the production and -- production of these products. Further, with the commercialization of our agro intermediates, the capacity allocation of these products are going to be consumed completely. The company is stepping up its game by significantly enhancing its technological and manufacturing capabilities, particularly in a very specialized area of high-purity chemicals for semiconductor industry, traditionally seen as a formidable challenge for us. This domain demands an exceptional degree of precision and quality control. We are proud to share that Tatva Chintan has made remarkable progress in this area through persistent R&D efforts. What was once considered an ambitious goal has now become a reality with our capabilities being recognized by global customers who see us as uniquely positioned to deliver on this demanding requirement. The journey to this point has not been easy. It involved years of meticulous research, trials and process innovation. However, our success in this space is a testament to our technical depth, resilience and unwavering commitment to pushing boundaries. This development is more than just a technological milestone. It has the potential to be a game changer for the company. We firmly believe that this will pave the path for Tatva Chintan to emerge as a key player in the niche yet rapidly growing field of ultrapure chemicals for semiconductors and electronic applications. As we wrap up a year that tested the resilience of the chemical industry, we are encouraged by the positive momentum building across several segments. With FY '25 demanded caution and adaptability, it also allowed us to sharpen our focus, strengthen our operations and invest in future growth levers. Looking ahead, FY '26 is poised to be a turnaround year with new products entering into commercialization phase, demand improving across key markets and capacity utilization forecasted to increase at significant levels. This -- we anticipate a good top line growth in this year. Coupled with better operating leverage, it is expected to drive meaningful improvement in EBITDA levels. Our foray into ultra-high purity chemistry for the semiconductor industry signals a bold and strategic shift, one that positions Tatva Chintan as a differentiated player both in India and globally. Backed by strong R&D, expanding customer interest and a diversified product pipeline, we are confident in delivering sustainable value to all our stakeholders in the years ahead. Thank you for your continued trust and support. With this, I hand over the proceedings to our CFO, Mr. Ashok Bothraji.

Thank you, sir, and good evening to everyone present on our call today. The financial highlights for the quarter -- current quarter Q4 FY '25 versus Q4 FY '24 are as below. Revenue from operation of INR 1,079 million versus INR 983 million in Q4 FY '24; EBITDA of INR 90 million versus INR 156 million in Q4 FY '24; EBITDA margin at 8.3% versus 15.9% in Q4 FY '24; PAT of INR 10 million versus INR 96 million in Q4 FY '24. PAT margins at 1% against 9.8% in the same previous quarter. During Q4 FY '25, export stood at INR 662 million, constitute around 61% of the revenue. The financial highlights for FY '25 versus FY '24 are as below. Revenue from operation of INR 3,827 million versus INR 3,935 million in FY '24; EBITDA of INR 342 million versus INR 682 million in FY '24. EBITDA margin at 8.9% versus 17.8% in FY '24. PAT of INR 57 million versus INR 304 million in FY '24. PAT margin at 1.5% versus 7.7% in the same period previous year. That concludes an update on the financial highlights of the company. I shall now request the moderator to open the floor for question and answers.

[Operator Instructions] The first question is from the line of Sudarshan Padmanabhan from ASK MDPMS.

Sir, my question is to understand a little bit more about your fixed cost and operating leverage. If I look at your numbers specifically on a Q-on-Q basis, there is an improvement by and large on all the key segments, subsegments, almost INR 85 crores, INR 86 crores going to INR 105 crores. But when I'm looking at the absolute margins, the margins remain flat. So partly, I understand that there is gross profit, which has come down probably because of the mix. But also the other cost has kind of moved from INR 24 crores to INR 27.5 crores on a quarter basis. So can you elaborate a bit on the fixed cost structure and also when you're talking about next year, the operating leverage, what is the kind of margins that one should expect in this...

This was one unique quarter where we actually commercially produced all the four Agro intermediates, the new Agro intermediates in really tonne lots. So we executed product with 40 metric tonnes as a commercial supply. So that was one. Then two new products, one of which for which we got the order recently. So these two products required formal qualification for which they urgently wanted some 20, 40 metric tonnes of this product. And the third product, which is entering into commercial validation. So that was also produced during this quarter. So this was one -- and the two products, which they required for final formal qualification, this was not anticipated earlier from the customer. So everything came like an urgent demand to be done. Secondly, there was always a business sense in deciding whether we want to postpone this commercial validation or we want to do it fast so that the product can be actually commercialized early. So we opted that let us go with early validation of these batches so that the commercial business can eventually start within the coming financial year. And we proved right on that, in fact. So post that qualification, we now got the final formal order to execute on a commercial scale. So -- but by saying this, what has happened is all these four products produced simultaneously, not meticulously planned, well-planned in advance has led to a lot of operational inefficiencies. Number one, a large cost in terms of whether we have the time to recover and reuse the solvents, which we did. So if we wanted to maintain the timeline we had to let go of those solvents without reusing and every batch we had to -- as fresh solvents. Number two, distilling all the four products at the time, the efficiencies were impacted because these are all teething problems, if you can understand when all simultaneously such large molecules are getting into commercialization. So we face a lot of such technical inefficiencies, some technical issues, some infrastructural issues related to significantly not having utilities at the right place at the right time of the right quality. So this takes its time to get rectified and corrected. So I would say the quarter in which we made these all four new products in larger volumes, which actually is contributing to a growth in terms of revenue as well were not produced the way it is designed to be. So there were certain inefficiencies, which factored into this, which led to higher cost in terms of material consumption and at times, certain lower efficiencies in terms of conversion. So once these problems are identified, each of this is being taken care of one after another and the necessary rectifications if required changes of pumps, motors, some inefficiencies in terms of putting brine of the right temperature at the right place. So all those infrastructural issues are currently being taken care of so that we can get rid of all these teething issues one after another. I would say it would take us at least 3 to 6 months to really master the production of these items. These are -- we are talking of very large volume products and lengthy chemistries involving multiple chemistries, multiple technologies. So of course, I should give my team a bit of time; keep some patience to let them master this hard and then start delivering the processes as they are designed. So I would say I'm not concerned with a couple of crores here or there in terms of raw material consumption for this product but it's a part of the learning and commercialization of the product process. So I would request to be patient, let them do their task, give them a 3- to 4-month time window, and I'm sure we will overcome all these operational issues and start delivering the raw material cost consumption as it is designed for the process.

And in terms of the learning curve, I mean, now that I would have assumed that you would have spent a few months in manufacturing these products. Yes, sir. Can you hear me now?

Yes.

So I'm just trying to understand in terms of learning curve now that almost one quarter has passed and we are probably in the middle of the next quarter. I mean, how do we see this operational efficiency? I mean I'm not exactly asking in terms of the steps what we have been able to correct. But if -- I am assuming..

Sorry to interrupt. Just to give you a flavor to make you understand what I'm talking about. For example, in one stage, we had defined the conversion has to be at 88% to the desired product. We ended at 82%. Then there is the base analysis that happens at why it did not perform up to 88%. So there I'm finding that the desired temperature, for example, 3 degrees, but we were operating at 6 degrees because the pumping efficiency was not good enough to remove the heat. So we did the processes at 6 degrees. And if we run it at 6 degrees, we are resulting into certain impurities which are not wanted. So now what happens is you are sitting on 6% of impurities. But eventually, what it translates into when you distill the product, the 6% impurity removal, extra 6% impurity removal takes another 3%, 4% of your useful product also with it. So though the conversion may look only 3% or 4% poor, the output will convert into 6% or 7% inferiority. So these are the technical issues which we face, we identify and one after another, we are sorting out them. So I probably believe by end of June, most of the processes we should be on the optimum level. And despite of that, since we already now have the order, it was already verbally committed by the customer that this is coming your way. And as you know, we are still constructing the new plant where we can go to full capacity. So we continue to produce even as of today. So with all these ongoing modifications, the process is still on, production goes on to pile up the inventory. Otherwise, we'll not be able to complete the desired order. So the first priority is to execute the order on time of the desired quality and cost factors will gradually be taken care of within the next 3 to 4 months timeframe.

Sure, sir. Sir, I'm trying to understand the size of the Agri intermediate specifically the 3 products that you are talking about, I would first assume that it is for the innovator and for product which could be very large. I'm just trying to understand what could be the scale, say, in the next 2, 3, 4 years because if it is in the patent, you also have a longer runway of growth.

The global volume of this product is very high. It's a CapEx-intensive product. What we have delivered to customer is Tatva is the first company globally to produce it commercially by an alternated route of synthesis. So this is where we are bringing our catalytic technology in play on this product, which has helped us to achieve this milestone. So all the rest of the companies offering this product offer it via different route of synthesis. And we have a process which is more sustainable for a long-term supply. So this is the biggest milestone that we achieved by establishing this process, which we are the first company globally to achieve it and to commercialize it. Secondly, in terms of scalability, so this product definitely -- there are still a lot of things that we can do with this product. Certain byproducts have to create values. So this is a long way. See, for Tatva Chintan, we are looking at potentially increasing 50% of our top line just by this single product. So when we are talking of that volume with a given customer base, so it's a large volume product that we are entering into to cater this market. So you will have downstream a lot of byproducts, a lot of efficiency improvements in terms of how much solvents you are able to recover and reuse, how much other ingredients you are able to recover and reuse or recover and sell it more efficiently. So these all things will gradually become a part of the development process. This is what we can isolate. We can create a value out of it. So all those background work are right now going on in R&D, piloting. So all those development work is going on, talking to different set of customers, which will utilize the byproduct. So all those activities will continue in the background. And the real worth of this product should probably be visible within a year's time. But this is definitely a very large scalable product. You can go to multiple customers, multiple markets to sell the product. And we have some uniqueness in the process. So despite of being a smaller company in terms of competition, we strongly believe that we will hold our position in this market just because of the technology that we could establish.

And what about the other products? I would assume the other products will be over and above the size that you talked about.

So they are not this big. So each molecule that we have selected ranging between INR 30 crores to INR 75 crores potential.

And sir, coming to the SDA opportunity...

But just to add to it. So this all will scale up in three years, right? The customer is not going to give me full volume in year one. So year one, year two and year three will go to full scale.

Sure. So we have a runway of growth if we are able to execute the products as per what we think. I mean there is at least 2, 3 years kind of a long runway of [indiscernible]

Two years.

Yes. Sir, coming to SDA, I mean what we have seen consistently is the prices were coming down, which is why our finished goods prices were also coming down. Now the last, we have seen some kind of an uptick and your commentary also is talking about it. If you can give some color with respect to, one, what is the utilization that we are seeing in SDA currently? And second is what is the kind of scale up that one can expect given the BS-VII is also getting implemented?

Right. So what we anticipate in terms of SDA's is -- see, unfortunately, as you all know, the product prices have dropped and still they continue to remain at the same level. So there is still no uptick in terms of raw material pricing, which I am suspecting very strongly will happen, but it has not happened so far. So considering that we are remaining at the same value levels in terms of product pricing, same value levels in terms of raw material costing. But in terms of revenue that this can bring in would range between 50% to 70% growth -- 40% to 70% growth in terms of volume and value. So this is poised to grow significantly within the coming financial year. Both the products -- both things as I told on my previous speech is both things are going to be the factor in this growth. One is commercialization of the new customers taking up commercial supplies from this financial year and also the impact of increase in demand of the BS-VII thing, Euro 7. So both these factors. And I see a good pathway in terms of -- see, the basic shift that has again gradually happened for the customer vehicle also, the passenger vehicles is again a shift from purely electric to a hybrid system. So the IC engine seems to stay even in the passenger vehicles. So this will continue to maintain the momentum. And of course, the heavy-duty vehicles continue to remain strong. So again, a strong recovery is not on the horizon, very strong what we saw in '21 or '22. The reason is because China is still not coming up in the radar in terms of increasing demand. So that is one key issue which the industry -- automotive industry continues to face in terms of heavy-duty vehicle demand. But the European and American sectors have shown significant improvement.

Sir, one final question before I join back the queue.

Mr. Sudarshan, may we request that you return to the question queue for follow-up questions as there are several participants waiting for the turn?

Sure. Sure.

The next question is from the line of Vipin Goel from Mirabilis Invest.

I had a question regarding the SDA demand revival, specifically from China. I think you mentioned some comments also. So the question is that -- so are you aware that there is a structural shift that is happening in the Chinese heavy-duty truck market because in 2024, some 50% of the new heavy-duty truck sales were LNG, which was practically almost zero, 3, 3.5 years back. And this has been largely driven by cheap piped gas, which is coming from Russia, so -- which has basically led to implications on new diesel truck sales and hence, probably low SDA demand from that market. So are we aware of this?

Yes. So basically, what had happened is because of the cheap fuel gas available from the Russia being provided to China. So a lot of the heavy-duty trucks market moved on to the gas segment. So this was the key impact which resulted into reduced demand for SDA's or the IC engines in the Chinese market. What has fortunately happened over the last few months is the gas prices have increased -- gradually started to increase. And simultaneously, the crude prices have started to drop. So when I'm talking to my customers as of today, so everyone is very closely monitoring the situation. And it seems like an influx point where again the demand will start switching from the gas engines to the IC engines. So this I'm not considering as a part in terms of what I want to forecast, but we are definitely very optimistic that this switch will happen sometime very soon. And the whole industry as such per se is expecting that switch to happen.

So you're saying the switch that happened just two years back and from 0% LNG truck sales to 50% now, which will...

Sorry, I was not in this field since a lot many years, but when I talk to my customers, I understand that over the span of last 25 years, such incidences have happened 3 times. This is the third incident where suddenly the markets moved to gas when the gas products became cheap and again switch back to fuel when the gas prices started to rise. So this is not the onetime incident. This is the third time that the industry has seen this phenomenon. I am observing it for the first time.

Got it. And if I were to -- quantify the impact of this on our SDA portfolio, so I suppose we had a large Chinese customer, which has not come back to those original volumes. So let's say, if it were to come back and this cycle was to reverse, which might take at least 3, 4 more years. If this were to come back?

At the peak time when we were selling into the China market of the total SDAs, don't get me precisely on this number. I'm just giving you a ballpark number. Our exports into China for SDA was close to about 40% of the overall SDAs we were selling. So it has a significant impact. So if the things start turning back, it will significantly impact the volumes, very significantly.

Sir, also one observation, given this is such a significant structural change, maybe, okay significant, if you want to call it. But could this insight has been proactively communicated to analysts and investors in the past quarterly calls because kind of...

This is one realization, which we also understood about 5 to 6 months back that what is actually happening in the Chinese market. And we kept on studying these numbers of what is selling but my end customer always felt that this is not the reason related to the drop in demand. They always felt the reason related because potentially they have a different way to treat that environment and stuff like that. But this all turned out to be false. The real reason behind it definitely turned out to switch from IC to the gas engine. And now the reversal is what they are anticipating should happen at any time. And I'm also strongly hoping that it happens. It's good for our business.

Then probably we need to study the history again and see if this has happened earlier or not because if the customer is positive that this has happened 3 times.

This has happened twice in the past. Happened a couple of times in the past.

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

First on the agrochemical because we are talking about 60% to 70% growth in the SDA for this year, assuming prices being stable, which is in my case, the PTC...

Sanjeshji 40% to 70%, I'm seeing.

Okay, 40% to 70%. But in our presentation, we have talked about total growth of 25%. That means other segments are expected to grow much slower. How to see this?

Basically, in terms of growth, if we see, so PTC has been technically expanding 10% to 12% on a year. And Electrolyte Salt itself, the segment is small. So even if it grows at 200%, it will not have a very significant impact on the line. So we expect the Electrolyte Salt segment to grow by at least 200% this year. But what significant impact will it have is hardly anything because it will go from, let us say, from INR 6 crores to INR 23 crores, INR 25 crores, INR 26 crores in terms of revenue is what we forecast. But though in terms of numbers, it looks -- though in terms of percentage, it looks huge. In terms of value, it doesn't look so significant. So what is growing is in terms of SDA and PASC, both growing at about 40% to 50% is what we anticipate. And PTC will be a consistent growth through the year, whereas PASC with the kind of schedule we have been provided today, the growth will reflect from Q3 and Q4 because Q1, Q2, we will just keep on producing so that we are able to dispatch in Q3.

So we will be -- so assuming with this kind of 25% is a ballpark INR 500 crores of top line, we should be hitting what a significant portion of utilization in the plant or we can optimize still further to extract more value out of it?

Yes. So those gaps, that is what I was talking to right now to the first call. What I said is those are the gaps, which are being identified how to increase the process efficiency where we can see, basically, let us say if I'm sending a water of 6 degrees at a certain pressure and if I am able to send 3 degrees water at a more higher pressure, then my cooling times comes down, then my reactions become faster. So these are the things which are being now understood, taken care of modifications are going on to increase those process efficiency. So I would not claim that this is going to be optimum. There are a lot of scopes to improve your processes, improve your performance, improve your yields and improve utilizations of your byproducts.

Got it. My next question is on the PTC side itself. In the last quarter, we said that we have added two new customers, one for the polymer, special polymer and for the recycling. And I thought that could aid the growth for FY '26. Haven't...

Material is being delivered this Wednesday, day after tomorrow to the customer. So after that, we will have maybe 4 to 6 weeks to know what is happening there.

Okay. It is for what, approval, validation or it will take a longer cycle like...

So samples, piloting, everything was done. So now we have said [indiscernible] of product, 20 metric tonnes kind of thing, which is being delivered day after tomorrow, Wednesday.

And the realization in this product will be same as other PTC or these are higher than others?

More or less the same. No, no, more or less the same.

Okay. So it's not going to add in terms of value chain. It's just going to add volume to us.

Yes, yes. It's just slightly better margin but not significantly higher, which can shift PTC broad margin. It cannot shift it.

Got it. We haven't talked about the polymer chain in the SDA segment. We were doing one through electrolysis process. Any update on that?

Yes. So that has been commercialized. We have sent material to the customer now. So in fact, I'm also traveling on this weekend and meeting the customer in next week. So we will have some basic feedback probably by end of May what is happening there. So now we are just sitting idle for the customer to respond in terms of how they think the material is and what is their feedback in terms of quality of the commercial supply.

Got it. Got it. And lastly, on the PASC side, how do you see this pharma side coming up? We don't expect any revenue to be booked in FY '26, more of FY '27 phenomenon because we spoke in FY '26 largely about agrochemical. And any update on the photochlorination part of it?

So that -- photochlorination product is what we are expecting commercialization in this year. So that is under final validation, which we expect should be with us by -- latest by June. And then we expect commercialization within the current financial year itself. In terms of pharma, we have executed commercial scale supplies so a few metric tonnes of two products have already been supplied. So our validation part is done. And now -- the next customer to me is now doing commercial validation for his batch and then it goes to the final customer. So my part is done. The validation from my angle has gone, everything is well. The samples have been approved well. We have supplied a few metric tonnes of each of these products to the customer. And now they are running their validation trials with them. So there may be a possibility to commercialize something by the end of the current financial year. But I would say that would be optimistic or if there is any changes in -- because now it is -- the ball is not in my court. Ball is in my customer's court and then the ball goes to the final customer's court.

And how about the regulatory part? Are we already part of the filing or that's a different process we need to run?

Yes. So once these validations from my immediate customer happens, we will become part of the dossier.

Okay. That process is on or that process is yet to start?

Yeah, yeah, yeah. No, no, it is on. We are onboarded. Basically, we are onboarded.

We are onboarded. Okay. The next question is on the margin. Now that we are now looking at improving the process, improving the utilization, how should margin -- we should look at margins from here on because we have already taken a lot of cost on the P&L. How should the EBITDA margin transition should happen from here?

If you want more of a precise answer to this -- a ballpark number of around 20% should be more realistic for the current year. I'm expecting there have to be certain challenges when we are scaling up each of these new large value products. We are talking of increasing the top line with new products that is also a significant part of the overall growth. So when this is happening, I'm suspecting that efficiencies what we have estimated will take some time, let us say, 3 to 5 to 6 months' time to reach to that operational efficiency to derive the real value. Considering that, still, I feel a guess of about 20%, 21% in terms of EBITDA would not be a wide guess.

My last question is on how the things are evolving from the U.S. perspective because we have some exposure to U.S., the tariff and everything. Given this scenario, are we seeing increased customer query? Are the customers very worried once the 5th July pass, how are you planning the supplies and all because the tariff remains very uncertain there?

See, there is something they call -- there is some annexure that is published that these are the products or categories which are exempt from the special duty. And I believe almost all barring a couple of products, almost all the products what we are into is under that exemption list. So theoretically, this doesn't change anything for us unless and until they end up changing the list itself.

Got it. Got it. But any increased inquiry from the customer as a policy to ship from...

No, because Sanjeshji, what the exempt list is not only for India. It is globally. So even China is exempted from that list. Any country in the world is exempted from that list.

So we are clearly not seeing any benefits or negative impact from that?

So we don't see negative, positive either of the situation arising. So only if something changes in terms of removal of certain key products from that list, then it can significantly change something. But honestly speaking, talking to other industry peers, I feel that no one is expecting anything major to happen there.

The next question is from the line of [ Darshil Jhaveri from Crown Capital ].

Hopefully I'm audible. So just firstly, a clarification of what we -- I think the answer to the previous participant, we are expecting 20% margin for the next year, full year or that would be maybe our exit run rate as scaling up quarter-on-quarter, the margin will improve and finally it will be or overall, we want to be able to reach 20% for the full year, sir?

Overall full year because there will be significant difference in terms of H1 and H2 because the -- both the large Agro products will have commercial -- we will continue to produce in H1 but the sales will be booked only in H2. So there will be a significant difference in H1, H2. So whatever I'm saying is for the full year.

That's really great to know, sir. So just maybe going a bit towards a longer period of time, I think in the presentation itself, you mentioned this year you want to have a 25% top line growth. And you are saying each agro product can maybe be a INR 40 crore product itself. So like by FY '25 and '28, like our growth momentum can continue? And how do we look next 2, 3 years in terms of top line and margin, sir?

So each of these new products, let us say the rest of the segments are just evolving and growing, for example, SDA, PASC, Environmental Salts, so Electrolyte Salts will also grow. But the value is too low as of today. So the growth will not be seen in terms of big numbers. But PASC segment is what -- for example, this product, we anticipate to make, let's say, 200 tonnes, 300 tonnes one year, 500 tonnes second year, and we are setting a plant to be able to reach 1,000 metric tonnes. So that is the way these things will progress. And this all has one reason is that we deliver right thing at the right time and with the right price. So -- but we are confident on that. That is why we are expanding the capacities and setting up a plant which can cater the demand one year down the line. So we are anticipating the growth in this product as the customer confidence increases, we will have better [indiscernible].

Okay. So the new plant, what is the CapEx we are doing, sir?

Currently going on.

No, the amount of CapEx we are doing and [indiscernible] will be operational by end of FY '26, right? What is the amount of -- the depreciation will hit next year, right? So how much is the CapEx you're doing?

We expect this -- so this will be about INR 105 crores between -- anywhere between INR 105 crores and INR 110 crores. And we expect and we are striving very hard to get it operational before January of 2026. So it should be available for production by January is what we are targeting.

Okay. That's great to know, sir. And so just again, sorry to harp on the margin because I think our best margins were around in the last 17% last year. And then before that, we were able to do 20%. So now going forward, our business model, we can expect 20% as a base for margins, right, sir?

I didn't get your last line. Please repeat.

So I'm just asking we can expect now 20% to be the base for our margins going forward because all the new products and new CapEx are kicking in. So at least going forward, we'll be able to do 20% EBITDA -- that will be the bare minimum that we can do it.

Fair assumption to do. Yes.

The next question is from the line of Jay Vagashiya, an individual investor.

Hello Chintan. Am I audible?

Yeah, yeah, very loud and clear.

So Chintan, my first question is in Q1 of this year, despite the sharp fall in raw material prices for SDAs, we had guided for 20% growth for the full year, but we are very much off the mark. So what is the reason? Where did we get it wrong?

It is purely the volumes that dropped, the prices that dropped, realizations practically came down. If I recollect correctly, if we benchmark last 1 year, then Phase Transfer Catalyst dropped in terms of value by 23%, SDAs dropped anywhere between 27% to 35%, so those were the kind of drops which happened. So your absorption of cost becomes a challenge. And that is where we went wrong. And also, we were expecting somewhere in the range of INR 410 crores or INR 415 crores in revenue is what we had forecasted and we ended up at INR 385 crores, INR 390 crores. And despite of that, I would say the volumes have remained healthy. The impact what has brought in is just because of the price realizations of these key products. And potentially with the increasing raw material price, which is slightly evident, but it is going up, again, falling back, going up again falling back, but the prices are trying to increase now, at least that is what is visible. So if this happens, then this changes happen much faster.

Okay. And Chintan, next is for the entire PASC segment, can you give the guidance for the current year? Because in the last call, you had said all the agro intermediates are -- they are going into commercial supply from April. And the photochlorination product has also started commercial supply from April, I think, and polymer also you are saying. So can you give guidance on PASC segment growth for this year?

So we will cross at least 40% in terms of growth, that is what we clearly foresee.

Okay. So at least 40% in PASC and 40% in SDA, right?

Yeah, yeah.

Okay. And in the semiconductor space that we are working on, so our existing -- the current suppliers for that substances would be SACHEM only, right? Because these are the -- SDAs are only going into this application, if I'm right, correct?

Not SDAs. It's a different set of products. But yes, that is where we are competing with the U.S. major company. Yeah.

Okay. And have we reached the PPB levels? I was late to join the call, so I couldn't get you. PPB purity levels that you discussed last time, have we reached those levels or there is still some time?

Yes, yes. So we are sending our samples. See, basically, we have achieved the desired quality. Absolutely everything below 10 PPB levels has been achieved inside the reactor. Now we are waiting for the right packaging materials. So we got a few suppliers product, one from Malaysia, a couple of them from India. But these jumps are not getting qualified in terms of accepting these high-purity materials. So the jumps are giving out a lot of contaminations to the product. So we are holding the batch in the reactor now waiting for a couple of packaging materials coming in from Germany and Japan and let's see. So we are just waiting to unload the batch to send the first lot to the customer. So from our end, in [indiscernible] condition, it is approved. So that was a big milestone that we achieved during this quarter, big milestone.

The next question is from the line of Chetan Thakar from M3M [ Investments. ]

Sir, the question is more on the asset utilization. Over the last two, three years, we've seen fair degree of CapEx and the CapEx still continues. So just wanted to get a sense on with the current cross block that you have another INR 100 crores that you are spending, what kind of revenue should we potentially see? And why has utilization? I understand products have not scaled up as anticipated, yet we continue to do CapEx. So how do you see this CapEx getting utilized over the course of the next three to four years?

So there are two parts of our plant. One is the conventional plant where you see reactors and stuff like that. And another part of our CapEx is involving the assembly lines. So -- and this particular part of the assembly lines part is only associated -- purely and purely only associated with the SDA part, right, and the rest of the chemistries are done is done in the rest of the parts. The rest of the plant today, we see at an occupancy level of about 83%, 84%.

So out of the total...

Yeah. And the SDA part of the plant, so the plant where we expanded and then we saw the sudden drop in terms of volume and the challenges that we face in the SDA part. So that plant has been running at about 29% to 32%, which since last one month, we are seeing it operating at about 60% level, 58% to 61% occupancy levels. So that has been a significant shift in terms of productivity in that plant as well. We continue -- we expect it to continue to operate at about 60% levels during the year. Whereas the conventional plant we expect to given an overall occupancy in the range of 80%.

So sir, out of our gross block in absolute terms, what is the amount that you can associate with the SDA plant itself?

Which plant?

SDA assembly because what I wanted to understand is, so the balance, how much -- so you said the balance is working at 83% optimum utilization. So just to get a breakup of the gross block in terms of what is clearly purely associated with SDA so that we can track separately the ROCE for the CapExes that have happened? Because currently, that is depressing the return ratios largely.

It is -- you have asked a very difficult question to put a number to it because of see 30% drop in value, where do I factor it. So -- and if there is a jump, then where do you factor it? It is difficult. But let us say -- let me just give a thought. Give me a second. So let's say if you put SDA's projected value and volume at the current price levels. Let us assume that the prices for next two, three years, just an assumption, wild assumption. I'm just doing my mathematics. So it goes to roughly about INR 450 crores in terms of top line from the SDA plant if it is getting occupied at 100% levels. Again, it depends a lot of things. There are multiple products within the SDA category. So something ranging from $5, something going up to $12 or even $16. As a fair estimate of what could sell more and what would not sell so high volumes. So based on that, I would say we can reach -- at the current price levels, we can reach to a revenue of INR 450 crores.

Got it. So once the SDA is fully utilized, we theoretically can add INR 450 crores, the balance INR 250 crores that we are doing currently, which is non-SDA and the scale-up that you've already highlighted, so we should count that scale up and associate the fresh CapEx there and try and work it reverse to see what is the actual ROCE of ex-SDA so that we get a fair degree of understanding how ex-SDA is progressing.

Absolutely.

I would now like to hand the conference over to Mr. Ashok Bothra for closing comments.

Thank you. On behalf of the management of Tatva Chintan, we thank you for joining us on our earnings call today. We hope we have been able to address majority of your queries. You may reach out to Mr. Ajesh Pillai or our Investor Relations partner, E&Y, for any further queries that you may have, and they would connect with you offline. Thank you, Sanjeshji for hosting our call. Thank you everyone.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.