Aether Industries Ltd

NSE:AETHER

Earnings Call Analysis

Aether Industries Sees Revenue Growth and Capacity Expansion Amid Challenges

In Q2 FY25, Aether Industries reported a revenue increase of 9% to INR 2,098 million, with EBITDA rising 18% to INR 613 million. The EBITDA margin improved to 29%. Despite facing pricing pressures due to competition, strong demand remains, with 12 new clients added. The company expects to reach 100% capacity at its fire-affected Site 2 by November 2024 and to expand Site 5. Looking forward, they anticipate significant growth in their CRAMS business model and expect EBITDA margins to move toward 29% by FY25's end.

Strong Revenue Growth in Q2

Aether Industries reported a solid performance in the second quarter of FY 2025, with total consolidated revenue climbing to INR 2,098 million, marking a 9% increase quarter-over-quarter from INR 1,920 million. This growth is attributed to the robust demand for their products, even amidst price pressures from Chinese competition.

Profit Margins on the Rise

The Company also saw significant improvements in profitability, with EBITDA rising to INR 613 million, up 18% from the previous quarter. The EBITDA margin increased to 29%, reflecting effective cost management and operational efficiencies. Similarly, the profit after tax (PAT) reached INR 348 million, a 16% increase compared to Q1, resulting in a PAT margin of 17%.

Positive Outlook for Revenue Growth

Looking ahead, Aether expects to see revenue growth particularly in their CRAMS (Contract Research and Manufacturing Services) segment with the addition of 12 new clients. The management anticipates commercial orders to begin shipping in Q3 and Q4, which should further boost revenue from this segment.

Impact of Regulatory Delays and Recovery Plans

The Company continues to address the aftermath of a fire incident that occurred last November, with Site 2 anticipated to resume 100% operations by mid-November 2024, subject to regulatory approval. They are also processing stock loss claims from the incident, which they expect to settle in Q3 FY 2025.

Cost Management and Inventory Reduction

Management highlighted successful efforts to reduce the inventory cycle from 210 days to 178 days, with a goal to further reduce it to around 160 days by year-end. They also improved their debtor cycle from 142 days to 136 days, enhancing cash flow and working capital efficiency.

Sustainable Growth Initiatives

Aether is also making strides in sustainability, having commissioned 10 megawatts of its solar power plant, which is expected to save on electricity costs. This aligns with their commitment to sustainability and cost reduction.

Guidance on Future Margins

The management aims to return to earlier EBITDA margins of around 28-30% as pricing pressures ease. They project that product prices may increase starting from Q1 of 2025, as competition dynamics shift and demand normalizes.

Long-term Growth Strategy and Partnerships

Aether's long-term strategy includes expanding its R&D capabilities and enhancing its production capacity across its sites. The management is particularly optimistic about their CRAMS business model and collaborations with international players like SEQENS, which should bolster future revenue streams.

Challenges and Market Dynamics

Despite the strong results, challenges remain due to external pricing pressures primarily influenced by China's market dynamics. However, Aether has managed to maintain a competitive position in the market, with plans for strategic pricing adjustments in response to market trends.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Aether Industries post results call hosted by HDFC Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nilesh Ghuge from HDFC Securities. Thank you, and over to you, Mr. Ghuge.

[Nilesh Ghuge, analyst]

Yes. Thank you. Thank you, Rinju. Good afternoon all. On behalf of HDFC Securities, I welcome everyone to this Aether Industries conference call to discuss the results for the quarter and half year ended September 2024. From Aether Industries, we have with us today, Dr. Aman Desai, Promotor and Whole Time Director; Mr. Rohan Desai, Promoter and Whole Time Director; Mr. Faiz Nagariya, Chief Financial Officer; Mr. Kushal Doshi, Lead Investment Relations; and Ms. Shubhangi Desai, Executive IR. Without further ado, I will now hand over the floor to Mr. Shubhangi Desai to begin with the earnings call for Q2 FY '25. Over to you, Shubhangi.

[Shubhangi Desai, executive]

Thank you, Nilesh. A warm welcome to everyone. Today on October 18, 2024, our Board has approved the financial results for the second quarter and half year ended on the fiscal year 2025, and the same has been filed with the exchanges as well as updated over our website. Please note that this conference call is being recorded, and the transcript of the same will be made available on the website of Aether Industries Limited and exchanges. Please also note that the audio of the conference call is the copyright material of Aether Industries Limited and cannot be copied, rebroadcasted or attributed in social media without specific and written content of the company.

Let me draw your attention to the fact that on this call, our discussion will includes certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management's current expectations on future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Aether Industries Limited or its officials do not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now Mr. Rohan Desai will begin by sharing Aether's business outlook. Then Mr. Faiz Nagariya will follow the financial highlights for the period ended and Aman Desai will share the onward expansions and the strategy of the company going forward.

Now I should hand over the call to Mr. Rohan Desai for his opening remarks. Over to you, sir.

[Rohan Desai, executive]

Good evening. I hope everyone is doing well, and I'm delighted to connect with you all to share our company's performance during the second quarter of financial year 2025. During this quarter under review, total volume has increased, but the prices remained low due to China's dumping. While we feel prices have bottomed out, is the current change in the trend is only likely to start in the fourth quarter of financial year 2025. The demand for our products remains strong and we have added 12 new clients during this quarter.

The accident affected Site 2 has been redesigned and is planned to be fully operational by mid-November 2024 in a highly compliant and safe manner, where this -- as we are awaiting regulatory permissions to restart at 100% capacity. We expect to commission Site 3+ and 3++ in early quarter 1 of financial year 2025, '26. Our greenfield CapEx expansion is on track on Site 5, which is located in with Phase 1 being expected to be completed in quarter 3 of financial year 2025, '26. Due to a prior delay in finalizing the contracts and subsequent long lead times in procurement of raw materials for use contracts, Site 4 is likely to witness an increase in production beginning from quarter 3 of this financial year. We have commissioned 10 megawatts of solar power plant, out of total order of 15 megawatts, which was given earlier. The remaining 5 megawatts power plant will be commissioned by the end of October 2024. This is a significant investment towards our sustainability goals. And we also -- will also help us save money on electricity overheads, which will enhance the company's operational CapEx.

With respect to Aether's business panel, we have seen 57% of contribution coming from large scale manufacturing business model, 27% coming from contracts of manufacturing business model and 14% coming from contract research and manufacturing services business model during the quarter 2. We have seen volume growth in all the 3 business models. Contract plus exclusive manufacturing is expected to rise significantly beginning from quarter 3 and quarter 4 of this financial year when the commercial orders from the SFA with use will begin to be shipped. Our exports and our domestic revenues stand at 50% of our total revenue each in quarter 2 of financial year 2025.

Last week, we showcased ourselves in in Milan, which gave us great insight into the prospect of the current business dynamics landscape and helped us to position our capabilities globally. With this, I would like to conclude speaking and wish you all a very happy Diwali in advance. I would now request our CFO, Faiz Nagariya, to touch upon the financial highlights for the period under review. Over to you, Faiz.

[Faiz Nagariya, executive]

Thank you, Rohan, and good evening, everybody. I'm glad to present the financial results of Aether Industries Limited for Q2 and half year ended for financial year '25. The total consolidated revenue of the company stood at INR 2,098 million in the quarter 2 of financial year '25 as against INR 1,920 million in quarter 1 of financial year '25, which is an increase of 9% quarter-on-quarter. This has resulted in EBITDA of INR 613 million in Q2 of financial year '25 as against INR 521 million in quarter 2 of financial year -- quarter 1 of financial year '25, an increase of 18% in the comparing periods. EBITDA margin stood at 29% in Q2 as against 27% in Q1 of financial year '25. The PAT has amounted to INR 348 million in Q2 of '25 as against INR 299 million of quarter 1 of financial year '25, an increase by 16%. The PAT margin stood at 17% in Q2 of financial year '25 as against 16% in Q1 of financial year '25. The standalone PAT has been INR 381 million in Q2 as against an INR 303 million in Q1 of financial year '25, resulting in healthy PAT margin of 18% against 16% in the comparing period. The consolidated revenue in the half year of H1 of FY '25 increased by 18% to INR 4,070 million from INR 3,470 million in first half of financial year '24, enabling an EBITDA margin of INR 1,134 million in H1 FY '25 against INR 1,071 million in H1 FY '24 and PAT being INR 647 million in half year financial year '25 as against INR 665 million in half year '24. The main reason in decline in the PAT margins on the consolidated basis on half year is the result of the operations to begin into Aether's facilities, whereas the expenditure of common like salaries, utilities, et cetera, coming up. We expect this to be turned around well by the end of financial year '25.

During the quarter, we had submitted the stock loss claim, resulting from the fire accident, which had taken place on 29th of November 2024 to the insurance surveyor, and the same will be processed and claims settled by the insurance company in Q3 of financial year '25. The revamping of the affected site is progressing as per the plan with certain delays from the regulators. Still, we anticipate 100% operations at the fire-affected site within a month or so. The remaining claim for the fixed assets for the loss will be put up to the insurance company in the month of November '25, along with the loss of profit and we are confident to get the sum settle by the insurance company by or before the end of this financial year '25. We have been able to reduce the inventory cycle to 178 days as on 30th September 2024 as against 210 days as on March 31, 2024. The debtor cycle has also been reduced to 136 days on September 30, 2024, as against 142 days as on March 31, 2024, encompassing the payment flows from the customers.

With the commercialization of SSA with debt we anticipate to have better debtors in the cycles in future. Now I will request Dr. Aman Desai to share updates on Aether ongoing expansion plans and strategies going forward.

[Aman Desai, executive]

Thank you, Faiz, for the financial highlights. Good evening, everybody. I'm very pleased, as always, to connect with all of you again. To begin my section, we've been working diligently and augmenting our capabilities with our ongoing CapEx across multiple sites, integrated with the incremental additions and chemical reaction capabilities in our core competencies, where we begin all the way from R&D through pellet plant all the way to commercial scale. And this is aiding us significantly in enabling and developing newer technology, which we are translating into our CRAMS business model. We are -- we continue to witness a significant influx of business inquiries in the CRAMS business model against the backdrop of the various global scenarios. This business model of CRAMS has lead grown quarter-on-quarter. This is on the backdrop of our expanded state-of-the-art R&D infrastructure, what we think are cutting-edge technology and chemistry core competencies.

With our efforts to broaden our range of end-use industry applications, we have again successfully this CRAMS business model by entering into and publicly announcing our contracts that -- exclusive manufacturing contract with the SEQENS group of Europe. It's a take-or-pay contract under the take-or-pay contract, it will produce a series of natural bio-based products exclusively for the SEQENS Group. The innovative manufacturing process, which involves continuous reaction technology, which is one of our core competencies, was collaboratively developed at e by Aether and the SEQENS Group over the last 3 years in the CRAMS business model, and this is now translating into the contract/exclusive manufacturing business model under the current executed contract. Sustainability in renewables continues to be an important emerging area for us, now evidence to buy numerous publicly announced collaborations with Saudi Aramco Technology Company, Novoloop in the U.S., a major lithium-ion battery producer and now the current contract with SEQENS Group. We are further working on numerous other projects in this overall platform, and we anticipate several positive developments in the near future in this overall platform.

Near future should also see significant projects being translated into the contract exclusive manufacturing business model from the business model, specifically a significant project for our Site 3++ as well as multiple projects in our Baker Hughes partnership. R&D expenses for the quarter 1 of the fiscal year '25, which is the current quarter past, stood at INR 143 million, i.e., 7.5% of our total revenues was R&D spend. Our in-house pilot launch has enabled us in enhancing chemical development and scale-up of our in-house molecules as well as further expanding in CRAMS portfolio. We have been working relentlessly to leverage the learnings from the upheaval that we faced because of the fire accident in the past year with continuous sustainable improvements and enhancements being made across the board to implement stringent safety measures, which are also progressing and have been vouched by numerous full-scale HSE audits led by various regulatory bodies as well as our innovative customers across the globe. In just in the past quarter, we have faced 9 customer audit, including four full-scale HSE -- multi-day HSE audits by four of our multinational global leading innovator customers, and we have successfully passed all these audits. And in the process, we have also reinvigorated our collaborations with these various innovators. So all in all, I believe we are proceeding in a significantly positive direction. And with that, thank you, everybody. Wish everybody a very happy Diwali and a prosperous new year and a safe and satisfying vacation wherever you all are. Looking forward to your questions and Kushal back to you.

Thank you. Shall we begin the Q&A?

[Ashwin Desai, executive]

Yes, sure.

[Operator]

[Operator Instructions] The first question comes from the line of Krishan Mundada with NG Wealth.

[Unknown Analyst]

Am I audible.

[Operator]

Yes, please go ahead.

[Unknown Analyst]

I have a couple of questions. Firstly, regarding the operating capacity utilization at our sites, what was the capacity utilization for second quarter at Site 2 and manufacturing Site 2 as well as Site 3.

[Aman Desai, executive]

The capacity at Site 2 was around 55%. And at Site 2, it was -- at Site 3 it was around 62%.

[Unknown Analyst]

Okay. So we are improving gradually. And what is the target for the end of the year?

[Rohan Desai, executive]

So we -- our target for the year-end is around -- we should be 100% on with the Site 2 also, and so we should reach against the 70% mark. And for the Site 3 also, we would expect to reach around 70%, 75%, which is the maximum we try to go ahead and then we keep the other capacities free for any kind of downtime or any contingencies.

[Unknown Analyst]

Okay. And on the realization spend, our product portfolio saw some growth at the --

[Operator]

Your voice is not clear, can you speak once again.

[Unknown Analyst]

Okay. On the realization front, product portfolio saw some growth at Site 3 the newly launched chemical [indiscernible]

[Rohan Desai, executive]

The average regulation remains the same as quarter 1.

[Unknown Analyst]

Okay. So are we seeing any improvement in the realization or the increased pressure would further always down?

[Rohan Desai, executive]

We expect the revision to improve from quarter 1 of this financial year.

[Unknown Executive]

The quarter 4. Quarter 4 of this financial year, calendar 1 -- quarter 1 of calendar year.

[Unknown Analyst]

Okay. And since the contracts have not yet started contributing to your revenue. So our projections regarding Baker Hughes contract is INR 200 crores top line this year and INR 400 crores next year. Is it still intact?

[Rohan Desai, executive]

That would be impacted for the current year, but for the next year, it is pending, still the same.

[Unknown Analyst]

Okay. And like I have a question regarding the capacity, and we have around 7,000 metric tonnes per annum capacity at Site 4 and our contract to manufacture the chemicals to vehicle uses is around 17,000 metric tonnes. So are we going to expand us from where we are to a supply additional capacity?

[Rohan Desai, executive]

The capacities of Baker Hughes will be utilized from Site 4 basically. And Site 4 we have already have the necessary approvals, which are in place, and it is available in the public domain.

[Operator]

The next question comes from the line of Ankur Periwal with Axis Capital.

[Unknown Analyst]

And sorry for the background noise. First question, in your opening remarks, you did alluded towards the new customer addition, the double-digit addition that we had done. Just your thoughts on which are these customers specific to some segment or end application and which geographies are we seeing good traction from?

[Rohan Desai, executive]

They are broadly in for pharma agro division majorly. And we have two customers in coatings, which we are already selling by products on commercial level. Although we have added 2 customers in other from manufacturing services business model. And majorly 7 customers are from India and the remaining are from outside.

[Unknown Analyst]

Okay. Good. And you did mention two of them to whom we are selling the existing products. Will it be fair to say that all of them will be will be selling our existing products to them? Or there are some new products as well, which is getting sold to these new clients?

[Rohan Desai, executive]

No, no, no existing products only.

[Unknown Analyst]

Okay. Secondly, on the new production and the new -- sorry, the new products and your discussion with clients, any feedback you can share across maybe even agro or pharma customers? How is the demand outlook there? We have seen some deferment in demand earlier. But any updates there will be helpful.

[Rohan Desai, executive]

Yes, in the earlier quarter, we have persisted are back. Surprising is still a challenge. The pricing of the products are derived by China and the competition and something of China, which is affecting the price levels for us. However, we are seeing demands on the new molecules are coming back to its normal -- normality and also new products are being discussed with a lot of customers and new opportunities are also being discussed with a lot of customers. So except for the price, everything seems to be good at the moment.

[Unknown Analyst]

Sure. Just two follow-ups there, if I may. One, from a volumetric growth perspective, what is the thought process, both from existing customers as well as from the new one? And secondly, you mentioned that Q1 CY '25 onwards, we should see some pricing uptick. What gives you the confidence there?

[Rohan Desai, executive]

It will be a New Year for Chinese. We hope that in the new financial year, that is based on the calendar year under which they operate, we can assume that they will change their stance and start increasing the price. That is what we are assuming. And during our visits and in the exhibitions and meeting with the Chinese suppliers who are supplying to us. We understood that they are all paying tremendous pressure. And so we hope -- and we are assuming that the prices which have bottomed out will start increasing from quarter 1 of the calendar year -- next calender year.

[Operator]

Next question comes from the line of Christian Paravani with JM Financial.

[Krishanchandra Parwani, analyst]

Congratulations on a great set of numbers. Just a couple of times from my side. First is you can see there has been a sharp improvement in your agrochem intermediate sales. So by when do you think -- or when do you expect uptick in other segments, please?

[Rohan Desai, executive]

We are seeing a good uptake in pharma segment also. Oil and gas is going to increase. It's just a matter of time at this moment. So we're not seeing any challenges on oil and gas. High-performance photography has been pretty stable. The textile divisions have shown great increase and which will also increase in the future, but not immediately. And on the coating side, also, we expect certain percentage increase in the next 2 quarters. That is how we are seeing this business in the quarter 3 and quarter 4.

[Krishanchandra Parwani, analyst]

Understood. And when you mentioned that you are expecting price improvement from 4Q '25, so were you referring more to, let's say, pharma intermediates because I think pharma intermediates sales have been like flattish quarter-to-quarter. So were you referring more to that in your commentary?

[Rohan Desai, executive]

Yes, so we are referring to overall prices, overall prices from commodities has to change to specialty as to change physically. So you should see a price direction in various pockets from quarter 1 of the next calendar year. That is what we are assuming. And as for our understanding and discussions, that could potentially happen.

[Krishanchandra Parwani, analyst]

Okay. And a follow-up to that. So with improvement in pricing, would we see further improvement in our EBITDA margins, as it jumped from 24% to 27% in this quarter. So would we see kind of this kind of trend continuing going forward?

[Faiz Nagariya, executive]

See if there's a price correction, this will definitely increase the margins for us. But also remember that the raw material prices are also dependent upon China. So if the prices of products increase, there is going to be a little bit increase in the raw material prices also. We see the traction, and we are on the target to reach our original margins of around 29% EBITDA margin.

[Krishanchandra Parwani, analyst]

Yes. Yes. I was coming to that 1 Yes. Got it. Got it. No, that's fair. And just last 210 from my side, sir, if I may. From which site will this SEQENS contract be served?

[Rohan Desai, executive]

Aman?

[Aman Desai, executive]

Yes. So it will be 3++.

[Krishanchandra Parwani, analyst]

Okay. And just last bit on that. So I'm not sure whether we have given any revenue potential from this, and if -- and also, are there any more products under work with SEQENS given this is, I think, in your opening remarks, also mentioned that looking at more sustainable products. So what's your view there?

[Rohan Desai, executive]

Yes. So I think we are under strict confidential terms. And so giving the revenue outlook will be difficult in terms of the confidential agreement that we have. But we are working on other products. And also, this is a series of launched products for them. And so the 100-metric ton contract that we have currently launched and market development quantities and kind of the plant. And so it's 100 tonnes is a launch quantity, then you can imagine that the ultimate commercialization, mature volumes will be significantly higher and that we are currently discussing with them as this project moves already.

[Operator]

[Operator Instructions] The next question comes from the line of Nilesh Ghuge with HDFC Securities.

[Nilesh Ghuge, analyst]

Congratulations for a good set of numbers despite these challenging times for the chemical industry particularly. So congratulations for te Industries team. My question -- first question is to Faiz, particularly on the working capital. So how is the current situation as far as the working capital inventory is concerned compared to FY '24 end?

[Faiz Nagariya, executive]

So in the FY '24, in the financial year '24, we had a fire incident and then we started the facility in the month of February -- January, February. Most of the products are in the production and the inventory had increased tremendously, and it was around 210 days inventory which we have been able to bring it down to 178 days as of 30 September. So a good decrease where we are continuously working on that. And we are -- because most of the raw materials are now available in India, so we are taking the materials as and when required and for the production, which is -- for the production which is required. So we have -- we will be still working on that and our target is to bring it down to 160 days odd by end of this year or more than that. And the debtor cycle also, which was around 142 days has come down to 136 days odd. And as I mentioned in my comment, also with Baker Hughes, which is another contract manufacturing projects start with other customers. This cycle also will be coming down, and our target is to reach around 130 days by end of this year and then further bring it down to 115, 120 days in the next year.

And [indiscernible] and also our cash flow from operations is positive is just because of the good working capital cycle management, which we have done in the 6 months.

[Unknown Analyst]

Okay. Okay. Okay. And the second question is to Aman. Aman, can you just elaborate on the number of molecules and the type of a molecule that we are planning to come out from our Panoli facility?

[Aman Desai, executive]

Yes, it's a good question. So we have -- currently, we are planning for six production blocks in Panoli. And we have line of sight and we're looking for about 6 or 7 of these production blocks already in terms of the in house molecules that we are developing in the pipeline as well as we exclude the contract manufacturing opportunities that we have in the CRAMS pipeline and -- and so we already have visibility of about 40%, 45% of the production capacity of the Site 5, which is I think really to be considering where we are in terms of timeline. The products will be a mix of in-house as well as external manufacturing. We are currently into several advanced stocks with several of our customers, especially in the renewables and segment and the oil and gas segment for contract and exclusive manufacturing partnerships in Site 5. And so we have various projects that are ongoing there in these industry applications. And then we have a few pharmaceutical advance that we are developing in our large scale manufacturing business model currently and advanced stages and 1 or 2 -- 1, I believe, agrochemical advance intermediate in a very advanced phase -- finishing of the pilot plant validations right now, again, in our in-house large scale manufacturing business model. So in the mix of both models and in the last scale manufacturing models that will be heavy on the pharma and ag sector, I mean the contract manufacturing business model like it stands today, it will be heavy towards sustainability segment as well as the oil and gas segment.

[Unknown Analyst]

Okay. Okay. And just you touched upon this CRAMS segment. If I look at the numbers also, the CRAMS segment is continuously doing better and better with every quarter. So what kind of revenue we envisage, let's say, FY '25, '26 from our CRAMS business. Currently, we are doing a run rate of more than INR 25 crores per quarter.

[Aman Desai, executive]

Yes. So let me not give you numbers on that, but let me give you an idea of what we are doing for that. We are -- we expanded our R&D significantly last year or 2 years ago. We are further expanding by additional 2x in the same site in an adjoining plot R&D center that will happen by next year from '25. We have what we've been calling the world's largest pilot plant. It's certainly one of the largest pilot plant, and I've been calling it the world's largest pilot plant. And both the R&D infrastructure and the pilot plant have significant extensive infrastructure and all of this is focused towards the trans business model. And so CRAMS business model has become the growth engine of the company, our R&D, the growth engine of the company is the foundation of which the company stands on. And so we are very upbeat and positive on the CRAMS business model going forward, and we are continuously adding new customers. And these customers are innovators and they are across the industry spectrum. And so we are not dependent on any industry spectrum. We are really across the industry spectrum, and our partnerships are in the pipeline of these customers, and we are working with our R&D directors and the technology directors and the CTOs of these companies, of these innovators. And so the vision of CRAMS business model remains upbeat, even more upbeat than ever, which if it is possible, because I have always been very upbeat on the business model, but I'm a little more of upbeat than ever in this business model and we should be seeing -- and we should be having a really good fun with the numbers on this business model in the years to come.

[Operator]

The next question comes from the line of Atishray Malhan with Group.

[Atishray Malhan, analyst]

I have a couple of questions, but first, a clarification. So in the investor presentation and the results disclosure you've provided, the stated revenue for large-scale manufacturing and contract manufacturing is about INR 75 crores and INR 64 crores, respectively. But in the coming quarter, the corresponding disclosures you have provided last year for Q2 and FY '24, the stated revenue seem to be INR 112 crores and INR 27 crores. So has there been some sort of reclassification for some products from large scale to contract manufacturing?

[Faiz Nagariya, executive]

Yes. Yes, there was a reclassification in the last year's quarter. That's why there was a change.

[Atishray Malhan, analyst]

Okay. Okay. And can you maybe provide some names or some contracts, something on the sort?

[Faiz Nagariya, executive]

Pardon?

[Atishray Malhan, analyst]

Will you be able to provide the names of the chemicals or some contracts that have been shifted from large scale to contract manufacturing?

[Rohan Desai, executive]

Unfortunately, no, for confidential reasons, we cannot do that.

[Atishray Malhan, analyst]

Okay. Fair enough. So I didn't hear you too well earlier. So I need a clarification regarding the Baker Hughes contract. So again, please correct me if I'm wrong. So last quarter, you had provided a guidance of about INR 200 crores to INR 250 crores from the contract for this fiscal year and about INR 350 crores for next year. And now because of some of the delays that you had spoken about earlier, the guidance for next year seems to be intact, but the revenue guidance for this year will be a bit less than INR 200 crores to INR 250 crores, right?

[Rohan Desai, executive]

Yes.

[Atishray Malhan, analyst]

Okay. So -- okay, fair enough. And just another question. I think last quarter, you had mentioned that there were some delays in the Otsuka contract. Has that been sort of figured out? And is that commercialized from this quarter?

[Aman Desai, executive]

Yes. It's already back on track, and we have already received the orders.

[Atishray Malhan, analyst]

Okay. So those numbers are reflecting in this INR 56 crores in the contract manufacturing for this quarter?

[Rohan Desai, executive]

By 2026.

[Atishray Malhan, analyst]

Okay. Okay. Fair enough.

[Operator]

Next question comes from the line of Rohit Ohri with Progressive Shares.

[Rohit Ohri, analyst]

Aman, congrats on adding one more feather to the hat, that is the SEQENS group. And every 9 months or so, the team at Aether keeps surprising as something or the other. Sir, my question is that if you can take us through what exactly are these natural bio-based products? And where are the applications? And what is the market size that we intend to cater to?

[Aman Desai, executive]

Yes. Thank you. Thank you for the wishes. If it is up to me, it will be much more -- much more frequent than 9 months. So I hope we will be making it even more briefer than that. As you can imagine, it a lot of efforts and coordination to be able to get approval for main release, especially for these innovators who are very, very with how their publicity we've seen worldwide. And so I think at the time that we looked at a few of these, I think, speaks to the kind of partnerships that we have, but hopefully, it will be much more in the future and we are continuously working towards that. I'm afraid I'm not able to give a lot of information because as you can imagine, the R&D pipeline projects rolling off into commercialization for these innovators and we have been working with them on developing the process for the last 3 years now, and they have been -- before that, they were in discovery for a couple of years. We consider all things have been rolling off now for the last 5, 6 years from the pipeline into commercialization. And as you can imagine, these sort of companies are very, very secretive on what we sort of saw, what the applications are and what the future looks like. But these are measured bio-based products, continuously technology where innovative technology of making these materials, which previously, as you can imagine, have been obtained from raw materials, which were very crude oil. And so they are -- and the industry applications. We are now switching out the products which were previously available from crude oil to completely biobased raw material and materials towards the sustainability of these end applications. And as I mentioned before in an answer to a previous question, these are market development qualities for the customer and launch quality. And so if 100-tonne is launch quantity and the ultimate commercialization is much bigger, which we do hope to be a partner for with Group. So hopefully, much more to come in the years to come on this as well.

[Rohit Ohri, analyst]

Aman, is it possible to share from which of the segments that you will be working consequence, generally works on pharma, personal care and some specialty custom-made products. So if you can just share some more details whether -- which is the domain that you intend to work on with them?

[Aman Desai, executive]

It's not the pharma I can say that.

[Rohit Ohri, analyst]

Okay. Okay. That makes a lot of sense. Will you be interested in moving more towards certain products, which are related to PEKK or certain raisins of polymers or something like that?

[Aman Desai, executive]

I didn't get the first one. I have the floropolymers and then I will

[Rohit Ohri, analyst]

PEKK.

[Aman Desai, executive]

Okay. Yes. So in the general field of polymerization, we are entering into significantly. And so for example, the polyol, converge polyols that we make with -- we have our technology company and that we for commercialization is a polyol example, we are, for example, Novoloop is the new polymerization of PV polymers back into monomers and then circular economy and upcycle towards other polyols. A lot of the products are polymers in fact and using oilfield services. And we are working on potential contract manufacturing of hydrocarbon resins with other partners as well. And so we are in the general field of polymers, but I don't think we ones that you're talking about.

[Rohit Ohri, analyst]

Would you be interested in working as you say that going forward, there are many things more in the offering from this partnership that's coming from SEQENS, will you be interested in working with Arkema also?

[Aman Desai, executive]

Arkema?

[Rohit Ohri, analyst]

Arkema.

[Aman Desai, executive]

Well, we haven't -- we don't have any business with them currently, but of course, we will be interested yes.

[Rohit Ohri, analyst]

Okay. Okay. Sir, my next question for Rohan. Sir, we used to the time when the molecules which were sold by were at par or they were much, much better in terms of the pricing of the Chinese counterparts? And post that, and we see that since last 3 or 4 quarters, there's been immense pressure. Sir, your thoughts on where exactly and what is exactly that is going wrong because there was a time when we were in a position to sell certain products or molecules which were far better than the Chinese prices.

[Rohan Desai, executive]

Yes. So even today, we are holding majority market shares on all the products in spite of the fire accident, which has happened 9 months ago -- I mean 11 months ago. The raw material prices have also corrected quite a bit, and there's a pressure in the APIs and the AIs, which is pharmaceutical end products and agro end products. And hence, the prices had to be in line with the Chinese competition. And we are still competitive or at par with the Chinese prices. And this is clearly reflected in our margins also in terms of the percentage margins where we are producing more, we are still able to retain the same percentage margins, which shows that we are able to perform And again, if you see we have -- we do not have a better business edge as compared to China in terms of the currency devaluation, in terms of the export benefits and so on and so forth. So we are -- I consider that we are doing better in this circumstances also.

[Rohit Ohri, analyst]

Rohan, is it possible or is it fair to assume that going forward that you'll try to inch more towards the traditional margin levels which you would have in the past to the numbers of like 28% or 30% EBITDA margin kind of level for the second half of the year?

[Rohan Desai, executive]

Yes. That's the target.

[Operator]

As there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

[Shubhangi Desai, executive]

Thank you, everyone, for participating in the call. We hope that we have addressed the majority of your questions. If you still have any further questions, then please feel free to reach out to us. Safe day and have a great day ahead. Thank you.

[Operator]

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