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

Ladies and gentlemen, good day, and welcome to the Tatva Chintan Pharma Chem Limited Q1 FY '27 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. Mohit. Thank you, and over to you, sir.

Thank you, Anushka. Good evening, everyone. Thank you for joining on Tatva Chintan Pharma Chem Limited Q1 FY '27 Results Conference Call. We have Tatva Chintan management on the call represented by Mr. Chintan Shah, Managing Director; and Mr. Ajesh Pillai, CFO. I would now like to invite Mr. Ajesh Pillai to initiate with opening remarks, post which we will have a Q&A session. Thank you, and over to you, sir.

Thank you. Good evening. On behalf of the management, I'm pleased to welcome all of you to the Tatva Chintan results conference call to discuss financial results for Q1 FY '27. Please note that a copy of all the earnings call related disclosures is available on both the stock exchanges, that is NSE and BSE, as well as on the website of the company. Any statements made or recuse during the call which reflects our outlook for the future or which could be construed as forward-looking statement must be reviewed in conjunction with the risks that 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. I'll take you through the key financial highlights across our major business segments for the quarter. For Q1 FY '27, Tatva Chintan reported operating revenue of INR 1,671 million, reflecting a 43% year-on-year growth and 25% sequential increase. EBITDA stood at INR 323 million, representing 86% growth Y-on-Y and 15% improvement over the previous quarter. Now moving to the segment-wise performance. Phase Transfer Catalysts contributed INR 428 million in revenue, a 38% growth quarter-on-quarter and 47% increase year-on-year. Electrolyte Salts achieved INR 63 million in revenue, recording a down 52% sequentially and a growth of 76% Y-o-Y. Pharma and Agro Intermediates and Specialty Chemicals delivered INR 584 million in revenue, 63% growth quarter-on-quarter and a growth of 25% Y-o-Y. Structured directing agents reported INR 578 million in revenue, reflecting a 10% growth quarter-on-quarter and a 47% increase year-on-year. With this overview of the financial and operational performance of the quarter, now I will deliver the speech of our Managing Director, Mr. Chintan Shah, on his behalf. As we begin the new financial year, I believe this quarter marks an important milestone in Tatva Chintan's growth journey. Over the past several years, we have consistently invested in developing new chemistries, expanding our technology capabilities, strengthening manufacturing processes and building long-term customer relationships. We are now beginning to witness these efforts translating into tangible commercial outcomes across multiple business verticals. What is particularly encouraging is that this process is not being driven by a single product or a single market. Instead, we are seeing positive developments across several strategic business simultaneously. The increase in commercial acceptance of our products, the expansion of our opportunity pipeline and the confidence to undertake fresh capacity investments together reinforce our belief that the company is entering a new phase of sustainable growth. While the global business environment continues to witness geopolitical developments and evolving trade dynamics, customer procurement patterns across our key businesses have become significantly more predictable. This provides us with greater visibility and enables us to plan our manufacturing technology and capacity expansion initiatives with increased confidence. Let me now take you through the development across our major business segments. Phase Transfer Catalyst: PTC continues to remain one of the strongest pillars of our portfolio. As industries across the chemical value chain increasingly focus on improving process efficiency, enhancing product selectivity and adopting more sustainable manufacturing practices, the relevance of these transfer at least chemistry continues to expand across a wide range of applications. Rather than being viewed nearly as a catalyst, PTC is increasingly recognized as a process enabling technology of improving manufacturing economics while supporting greener chemistry. We believe this structure shift in customer preferences will continue to create opportunities for sustainable organic growth and further strengthen our leadership position in this business. Structured Directing Agents: The outlook for our SDA business continues to strengthen. The implementation of Euro 7 standards has now begun translating into revenue, and there is a very visible customer demand validating the opportunity that we have been anticipating. We are witnessing encouraging momentum across our customer base and the overall business environment for this segment is very robust. Considering gradual geographical implementation of Euro 7, we are confident that this business will position to witness a strong demand. Electrolyte Salts: Our Electrolyte Salts business continue to make a steady progress towards larger commercial scale. The demand of our electrolytes for energy storage device is rapidly increasing its consumption increasing broadly in line with our expectations. Severe short supply of certain key raw medias due to Middle East crisis led to significant production delays impacting the revenue recognition for the quarter, and the situation is now gradually getting streamlined in terms of its availability. Equally encouraging is the progress achieved in with our hybrid battery customer whose commercialization program is advancing well and steadily moving towards commercial supply. Coming to Pharma, Agro and Specialty Chemicals: The PASC business has delivered one of its most encouraging quarters from a strategic perspective. The molecules commercialized over the recent quarters are witnessing increasing customer acceptance resulting in repeat orders and visible improvement in demand. The transition from initial commercialization to recurring procurement is significant by soon, and it validates both quality of our products and the confidence our customers have reposed in our capabilities. On the Pharmaceutical side, I'm pleased to share that the commercial production of one of our pharma intermediates commenced during the very first quarter itself. We expect demand to strengthen progressively during the course of the year, while additional pharma molecules are also expected to move towards commercialization in the later half of the year. For us, the most satisfying outcomes of this progress is the confidence it gives us to accelerate the next phase of product development. Several R&D molecules with -- this segment are now entering pilot skill manufacturing while development activities for others are already underway. This ensures that even as today's products continue to scale up. The next generation of opportunity is already moving through our innovation pipeline. Coming to Semiconductor, I'm extremely proud to share that our first batch produced on commercial plan scale was delivered to the customer during this quarter. And this batch has been successfully qualified by the customer. We consider this to be one of the accidents glaring achievements of the past decade. The significance of this achievement extends far beyond a single product. It values our research capabilities, manufacturing excellence, quality systems and our ability to meet the demanding standards of the global semiconductor industry. More importantly, it opens the door to significant larger opportunities as additional products continue to progress through the customer qualification. While this business will continue to require patients owing to its rigorous validation process, we believe this milestone marks the beginning of a long-term value creation opportunity for the company. In line with the growing opportunities across our business, I'm pleased to share that our Board of Directors has today approved the establishment of a new greenfield manufacturing facility involving an investment of approximately INR 200 crores. We have scheduled the groundbreaking ceremony for this on 20th July 2026. This investment reflects our confidence in the future rather than nearly addressing today's requirements. The proposed facility is being designed as a future ready manufacturing platform that will support the commercialization of new products provide greater operational flexibility and create capacity required for company's next phase of growth. Our philosophy has been to build capabilities ahead of demand. This project reflects the philosophy and demonstrates our confidence in the opportunities that lie before us. We believe the progress achieved during this quarter represents an important beginning and we look forward to converting these opportunities into enduring value for all our stakeholders. Before I conclude, I would like to sincerely thank our customers, employees, business partners and shareholders for their continued trust and unwavering support. This year marks 30 years of the switching them, and this milestone belongs to every stakeholder who has been a part of our journey. As we enter our fourth decade, we do so with renewed confidence, stronger capabilities and an unwavering commitment to creating value through innovation, specialized industry and responsible growth. Thank you. I now request the moderator to open the floor for question-and-answer session.

[Operator Instructions] First question is from the line of [ Shlok Patel ] from Zeno Finance.

Am I audible?

Yes, you're audible.

Congratulations on the great results. My first question is on PTC segment. PTC segment did very well this quarter. What led to this growth? And can we expect similar numbers in coming quarters?

See, PTC, demand is increasing because of the widening acceptability of fascinates across the chemical industry. When we started back in 1996, PTC was a very new product. But over the time, chemical industries, I mean, various chemical segments in the industry itself have recognized the benefit of using Phased Transfer Catalysts. So the acceptability of this is going to an increasing and the demand for the same is going to increase. But the factor in our case is that we have forward integrated the PTC into SDA and Electrolyte Salts and Solutions also. So as and when the demand of SDA and the Electrolyte Salts and Solutions increase, we will be consuming more PTC into those products, and we will be selling less of PTC into market. But at the same time, we will have to cater to our loyal and long-term customers. So we'll continue to produce and sell pieces to our best of our capabilities.

Okay. Great. My second question is on PASC. So can you give us outlook on the [indiscernible], which we sell for mine batteries? And what are the other molecules we sell in the segment?

We don't sell for lithium batteries. We are not into lithium batteries. And probably, the pushing you're asking is from Electrolytes Salts and Solutions segment. And PA is Pharma and Agro segment.

Okay. So in [indiscernible] manufactured glands which is used as oven in lithium in beta. So that's what I was asking.

Yes. You are correct. So basically, monocline is one of the key products which we are doing on conventional chemistry and converting it into the continuous global industry. By the time we actually successfully translated this into a continuous low chemistry to make it more sustainable. The environment scenario in terms of pricing has become too aggressive from the Chinese supplies. So we have held our plan to invest as of now into the client's capacity addition. So we continue to produce at a different scale using our existing infrastructure in place and we cater to this big one. So basically, we have very less exposure to the battery manufacturers, whereas we -- our large customer base in terms of clients we sell into more of pharma industry.

We take the next question from the line of [ Parth ] from Trinetra Asset Managers.

Am I audible?

Yes, you are audible.

My question is like what do you see as the biggest execution risk to achieving your FY '27 guidance? Is it customer demand, raw material volatility or commercialization of new products?

None of them. We don't foresee any obstacles to HR this guidance because all the demand from the customers and the segments are quite visible. And I don't think there should be any upcycle in achieving this target.

We take the next question from the line of Raman Kerti from Sequent Investments.

Can you hear me?

Yes.

Sir, firstly, congratulations on good set of -- on an expense start to the year. I have a few questions. Sir, firstly, on the pharma molecule side, which you earlier in the Q4 call, you mentioned that you will be commercializing 1 molecule in Q1 and 2 more molecules by Q3 end. So was the incremental revenue do we expect over FY '26 from the 3 new molecules which will be commenced -- which are commenced during this year? And how much will these molecules scale in the coming FY '28?

It should contribute around INR 70 crores to INR 80 crores of revenue from all these pharma molecules in this current year -- current financial year. And gradually, it should uptick -- gradually, it should have taken next financial year, too.

And how much can we expect from -- like at full utilization, how much can we expect from these 3 molecules?

INR 200 crores. In the range of INR 200 crores.

Okay. And sir, my second question is on the semiconductor side, can you just talk about the product, which -- or what product are we working on? And where this semiconductor, chemical -- at what part of the value chain it is used? And if possible, can you also let us know what is the total addressable market opportunity for us in this particular sale?

Basically, the application of this product, what we have now commercialized the first commercial supply that become successful. So this product has application getting into as key starting raw materials to make the semiconductor. So it's a key starting block to make the semiconductor. Parallelly, it also has applications in heating of the printed circuit loads as well as in cleaning of the circuits. So it is being used as pitching agent as a streaming agent and also as a starting block for making. Of course, all these 3 acquisitions have 3 variety of specifications, out of which the most stringent 1 is where you use it as a starting block for making semiconductor. And approval, what we have got from this quarter for this is basically for being used as a key starting block for making semiconductor. So it is the most rigorous specifications among all the 3 applications, and we have successfully met with the specification criteria [indiscernible]. In terms of addressable demand, it is too early right now to date, but I'm sure it's going to be a very large potential. Ament, this is my first plan still trial. I believe at least 3 or 4 such plant fill tiles will happen over the course of next 2 years, and customer would want to test the consistency in terms of how we can deliver the product in terms of consistency of quality and all the rest of the parameters. And after that, we will start taking commercializing use of it. And of course, as you know, any change in semiconductor is extremely difficult. So probably, it's not an easy take up. It's going to be a tough time getting into the commercialization and acquiring business. But once we set our putting into any commercial application, then I think it opens up both for very large opportunity.

And just a follow-up on this. You said you -- we have received approval for this product. Can you also specify...

Successfully qualified. So this is now successfully qualified by the customer. So this is my first batch coming out from my plant. So a plant scale first batch, as has now been successfully qualified. So customer has confirmed that your product mix all the desired specifications. So now there will be multiple stages call happen. So today, we have just delivered a few tons of this product. And it will go to a few tens of tons, a few hundreds of tons and the new top of commercializes.

So can I ask you who is the end client from whom you are getting quality approval? Is it the semiconductor company, which makes the starting semiconductor or someone else [indiscernible].

Someone else. So semiconductor companies will never directly by such things. So there are always MNC companies who would end up supplying this to the semiconductor or the fab manufacturer.

Understood, sir. Also, you mentioned in the call that you are -- there is a INR 200 crore greenfield CapEx plan for the year. Can you specify for what product this is? And can you specify what kind of revenue do you expect from this INR 200 crore CapEx? And by what time line this cap will be in place?

See, we have been working on our R&D products for quite a long -- quite a few years now. And this facility is being built for actually in scaling up of those R&D ready products as well as to meet the domestic demand that is we are looking at economic development in India. The demand of these chemicals would increase more rampantly in Indian economy. So we would like to cater to the domestic demand, too. So this facility is more going to take care of these requirements. And as far as the revenue is concerned, we will be looking at somewhere around 1.2 to 1.5x asset turnover ratio, which means we would end up having around INR 300 crores of revenue at peak utilization.

Yes, I get that. I just want to understand, is it like a pharma agrochemical intermediate we are working towards? Or is it towards the electrolyte side? Or is it towards the SDA, right? Or is it a new category as it?

No, no, it's a multipurpose multi product facility that we are setting up. So it is fungible within the sectors. And basically, we have introduced a lot of new products over the last 2, 3 years. You see this new pharma introductions, new agro introduce products, which is causing now capacity issues. So -- and of course, we foresee there is a lot of organic growth that is also going to happen. There would be new molecules that are in pipeline to be introduced in the market. So just keeping this vision in mind, we are setting up this facility. So that by the time we nearly saturate our Dahej facility, we have a while infrastructure in place is been catered to the upcoming growth opportunities.

Understood, sir. Finally, sir, you guided for 10% revenue contribution from Electrolyte Salts in FY '27. Are we sticking to the guidance? And can you also how are we planning to increase the uptick from currently? In the current quarter, it contributed to INR 6 crores of the revenue? And how are you planning to scale from INR 6 crores to roughly, let's say, INR 60 crores, almost, INR 50 crores to INR 60 crores.

Between INR 40 crores to INR 60 crores is what we still hold the guidance. Yes, we have enough capacities in place to cater to this demand. So we don't have to do anything special towards in this revenue. Now everything is in place, customer demands are very crystal clear, very highly visible just moving about in this zone.

Do we have any order book...

A couple of months -- unfortunately, we lost a couple of months due to unavailability of a couple of key raw materials in this space. It just happened because of maybe small situation we impacted our productivity. So we had to see idle for a few weeks together. Otherwise, yes, there is no issue, no challenges at our and in terms of infrastructure is in place, customer demand in place, clear visibility. I don't see any challenges.

Do we have any specific order book for this in hand?

It is not never an order book in hand. So it is happening on quarter-on-quarter basis.

We take the next question from the line of Nirali Gopani from Unique PMS.

Congratulations on a very good set of numbers. So my first question is on this revenue growth that you have seen in the quarter. So what would be the contribution from the pricing improvement? Because last few quarters, pricing was an issue. So still it be volume driven or pricing has improved?

Marginally, so that's not a major impact coming from pricing. The large impact is coming from volumes because actually, honestly speaking, we have not been thorough in terms of passing on the increase in cost that is visible on our margins as well because that was not an easy because the price increase was to endpoint and pay at a very short notice. So it just happened overnight kind of a thing. So most of this is genuinely the volume growth and not a pricing differential. Now we are looking for price increase. Now we are translating that we -- so since last, I would say, since last [indiscernible] now that price pass on has started customers have started accepting the higher price because there is no other way to go lower in the prices have rise and they have to gradually want to accept. And that's what we are also doing from our raw material suppliers. So basically our value chain has -- the prices on all the fronts have gone up in terms of our incoming raw materials. And now we are pushing the price change in terms of selling out the goods as well.

Okay. Okay. Perfect. And second is on the current capacity and on the further capacity. So currently, with our capacity, we can do a peak revenue of INR 900 crores. Does additional Dahej capacity available for next year? Or it's only after the third lot comes into the picture?

We are doing some deep bottlenecking stuff. We have 1 small block where we can do maybe 4, 5, 6 that sort of stuff like that. But not something which can really address the growth of the coming of demand. So in reality, anything beyond this INR 800 crores, INR 850 crores will look -- we should have a place already infrastructure in place to cater to this group. Otherwise, we'll start kind of getting seated. And I foresee that happening from next year itself. So that is the reason why we are focusing on these greenfield projects to push path. So theoretically, we want to finish it. So theoretically, we say we want is side to be in place within -- into operations within 21 months. Internally, we are pushing to get it through within 18 months, if possible. It's a task in itself, but we are pushing hard for that.

Right. So post this INR 850 crores, will have some new capacity at [indiscernible] then at Dahej. And then semiconductor will be the third opportunity.

Dahej, we are nearly saturated. We have consumed all the piece of parcel of land in the. So now there is hardly anything. So very small production block is what is feasible to be made. So ideally speaking, Dahej is now getting into saturation, more in terms of available space. any major growth has to happen only from the new side.

Okay. Okay. And semiconductor will be over and above this, right? For that, we are not doing any CapEx at the moment.

Not at the moment. Because we don't -- honestly speaking, we don't foresee a major commercialization happening until at least I would say not before Q4 of 2028. I don't see that it will commercialize in a large volume because it's going to take on with time and very well on the process, how they are qualified. So I know it's not going to be an overnight thing. It will save it also with them to commercialize.

All right. And lastly, so for this FY '27, do we see this quarterly run rate of Q1 being maintained?

We see, yes. So 25%, 30% growth is what we forecasted, and that's what we stick out. So we are in were mathematic terms, we are saying that, yes, we should maintain this run rate.

Right. And for the full year, what kind of margin should we work with? EBITDA margins?

As I always say. So unfortunately, we have lost 1 quarter with a little lesser margin, but I would still stick to 20%, 22% margins in a year.