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Ami Organics Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '23 Earnings Conference Call of Ami Organics Limited hosted by Elara Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Reena Shah from Elara Securities. Thank you, and over to you.
Thank you, and good afternoon, everyone. Welcome to Ami Organics Q4 and FY '23 Earnings Conference Call. We at Elara Capital would like to thank the management for giving us the opportunity to host this call, and we would like to congratulate the management for the best-ever results.
Today, from the management side, we have Mr. Naresh Patel, Chairman and Managing Director; and Mr. Bhavin Shah, CFO of Ami Organics. I would now like to hand over the call to Mr. Bhavin Shah for opening remarks. Thank you, and over to you, sir.
Thank you, Reena. Good afternoon, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q4 '23 financials. Please note that a copy of our disclosure is available on the Investors section of our website as well as on the stock exchanges.
Please do note that anything said on this call which reflects our outlook towards the future or which could be construed as forward-looking statement must be reviewed in conjunction with the risks that the company faces. This conference call is being recorded and the transcript, along with the audio of the same, will be made available on the website of the company and exchanges. Please also note that the audio of the conference call is the copyright material of Ami Organics and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company.
With that, I would like to hand over the floor to our CMD, Mr. Naresh Patel, for his opening statement. Over to you, sir.
Thank you, Bhavin. Good afternoon, everyone. I hope you all are doing well. A warm welcome to our Q4 FY '23 earnings conference call.
Before we jump to an update on our performance. I would like to take a couple of minutes to reflect on how FY '23 has fared for us. It is no secret that the year began on a very challenging note with the ongoing war in Ukraine, seasonally affected supply side, impacting commodity and gas prices, increasing raw metal prices, among others. All these factors have added to significant cost reserve for all the companies. While supply and side issues continue to pile up, we also saw muted demand environment across industries. While the start of the year was demanding, the situation has gradually improved as the year progressed, albeit at a slower pace.
Moving to the current scenario, on the industry front, things are on the mix, specifically on pharmaceutical segment. Cost prices has rationalized to a great extent. An important update closer to home is that the Chinese chemical industry is backed with a strong production and competitive price which has started hurting many industries and players. I believe we will see more of it in coming quarters.
While these factors play out in the industry at Ami Organics, our business model is designed in such a way that the revival of the Chinese chemical industry has a minimum to no bearing on us. To put things into perspective, we never benefited from the setting up plants in China, due to COVID or supply chain issues. And second most important thing is that we remain a global market leader in our key products, with China and other geographies in the second and third spot. So Chinese industry coming back strongly will not affect us.
On the demand side, we are witnessing gradual upswing in the demand in half year of FY '23. And I believe the revival will continue in H1 FY '24.
At Ami Organics, we have used the challenging area to create various growth drivers for the coming year. Let me discuss these growth drivers one by one.
I will start with electrolyte additives. I'm happy to inform you, as of today, we have received approval from 6 customers worldwide. We have also received plant-scale trial commercial orders of few metric tons. And we are also expecting a bigger commercial orders during the current quarter. We believe the volume will be ramped up slowly as we progress through the year.
Looking at progress on the electrolyte additives segment, we have started working on the plans of expanding our capacity for these products. I will provide update on the same once our plans are finalized.
One more important update on this one is that we have developed 2 more products in this segment. One of them is liquid electrolyte additive to increase electrocapacity of the lithium batteries and one more additive for solid-state battery. The products have been approved at the subscale and are in advanced stage of valuation.
Moving on the second growth driver. We started working on initiatives to get into long-term contracts with customers, which improves our future revenue visibility. We have successfully signed some long-term LOIs and contracting some of our big customers on this front. The Fermion deal was one of the same line of thought. I'm delighted to say that we have been able to expand the scope of our contract with Fermion, and we have added a couple of high value intermediates for the same. This means we will now be doing 3 advanced intermediates for the same which increases the value of the -- our contract manifold.
The third growth driver for us would be new products. During the year, we had developed several niche specialty chemical products, which are at different stage of valuations and approvals as we speak. Some of these products are very big when you look at our current size of business, and I will update you on this product as they reach certain milestones.
Last but not least, we announced the acquisition of 55% stake in Baba Fine Chemicals last month. At Ami Organics, our inorganic growth strategy is based on 2 elements, one, where we are either interested in buying the asset, which we can then use to expand our products; or the other where we are able to gain access to newer products or technology which is difficult to create organically in short term. The acquisition of Baba Fine Chemicals falls under the second subsidy, where we are gaining entry into a very high integrated semiconductor industry. They have been in these industries since inception, and we're looking for an opportune partner who share their business ethics and chemistry capabilities. I am happy and proud that they chose Ami Organics.
On the financial side, they have strong balance sheet with zero debt. Overall, the acquisition feels perfectly in our strategy and chemistry capabilities.
Overall, our organic pharmaceutical business will continue to grow strongly. And now we have some good growth lever lineup which will boost the overall growth of the company.
Moving on to our Q4 and early results. Starting with Q4 FY '23, we delivered highest-ever quarterly number in Q4 at INR 186 crores. This translates into close to 13% growth on a year-on-year basis. The growth was driven by advanced pharmaceutical intermediates business. On the full year numbers, we continue our strong momentum in FY' 23 achieving total revenue of over INR 621 crores, which was higher than 19% when compared to last year.
Our core pharmacy business aided the growth for the whole year with 22% growth year-on-year, whereas specialty chemical business grew slightly by 3%.
Our operating margins for the year were flat due to cost pressure which is I discussed during the start-up of my speech, which impacted our margin at half -- H1. However, our margins rebounded strongly in H2, and we ended Q4 at 21.9% operating margin. I will let Bhavin discuss financial in detail.
To conclude, I believe the challenging days are behind us, and I am confident that we will continue the strong growth momentum in FY '24 as well. With that, I request our CFO, Mr. Bhavin Shah, to discuss the financial review. Over to you, Bhavin.
Thank you, Naresh. Good afternoon, everyone. I would like to briefly touch upon the key performance highlights for the quarter and year-ended 31st March 2023. And then we will open the floor for question and answer.
I will begin with quarterly updates. Revenue from operations for the quarter was at INR 186 crores, up 29.8% compared to INR 143 crores in Q4 '22. The gross profit for the quarter was at INR 81.3 crores, up 28.3% as compared to INR 63.4 crores in Q4 '22. The gross margin for the quarter was at 43.6%. Lower gross margin was due to high cost inventory, which has been completely consumed by Q4 FY '23.
EBITDA for the quarter was at INR 40.8 crore, up 58.3% as compared to INR 25.8 crore in Q4 '22. On a sequential basis, EBITDA for the quarter increased by 32.5%.
EBITDA margins for the quarter were at 21.9% compared to 18% in Q4 FY '22 and 20.2% in Q3 FY '23. We continue to improve EBITDA margins on a sequential basis as per our guidance. EBITDA margin in Q1 was 18.%, and we have been successful in gradually improving our EBITDA margin to 21.9%, an expansion of 380 basis points.
Now dissecting the margin further. I'm happy to report that EBITDA margin for the pharma business was 23.6% in Q4 FY '23, and our margin on the specialty chemicals side were at around 11.1%, which is an improvement of 100 basis points.
PAT for the quarter was at INR 22.7 crores, up 27.6% on Y-o-Y basis and 21.9% on a sequential basis. The PAT margins for the quarter were at 14.6% as compared to 14.8% in Q4 FY '22 and flat as compared to Q3 FY '23.
Coming on to full year FY '23 updates. Revenue from operations for FY '23 grew by 18.6% Y-o-Y to INR 617 crores compared to INR 520 crores in FY '22. This was driven by Advanced Pharma intermediate business, which grew strongly by 22% on Y-o-Y basis.
Gross margin for the year was slightly below at 46.3% when compared to 47.5% in FY '22. EBITDA for the year came at INR 123 crores, up 16.6% Y-o-Y compared to INR 105 crores in FY '22.
EBITDA margin for the year remained flat at 19.9% as compared to 20.2% in FY 2022. If you adjust one-off items like loss on insurance claim receivable and loss on sale of assets, our EBITDA margin for the year would be around 20.5%, which is slightly higher than the last year.
PAT for the year was at INR 83 crores, up 15.8% on Y-o-Y basis. PAT margin for the year was at 13.5%.
Export for the year was at 59%, whereas domestic business was at 41%.
Coming to the balance sheet, we have a net debt-free balance sheet with cash and cash equivalent of around INR 59 crores.
During the year, we have generated strong cash flow from operations of INR 65 crores which was driven by better working capital management. I believe we will continue to generate robust cash flow from operation in the coming year as well, which will support our routine OpEx as well as CapEx.
With this, I conclude my remarks and request the moderator to open the floor for a question-and-answer session. Thank you.
[Operator Instructions] We have our first question from the line of Chirag Lodaya from Valuequest.
Congratulations on a good set of numbers. I have a couple of questions. First on segmental margins. If you can help us understand what were the full year margins in specialty chemical and advanced intermediate division?
So Chirag, full year margin for Pharma business is 21.57% and specialty at 10.3%.
Okay. And how do we see margins going ahead segment-wise?
As we are guiding that our first target is to reach to our FY '21 margin for pharma business which we have already achieved in Q4 that is 23%. So we are -- we would like to maintain this margin and would like to go further from here.
As far as our specialty business is concerned, we have improved 100 basis points in last quarter. And in the coming quarters, we'll see 50 to 100 basis point improvement quarter-on-quarter basis.
And if you can throw more color on specialty chemical division, what kind of ramp-up we are seeing next year. And you have also talked about a few new products which are under pipeline and which will help to scale up the business. So some color on specialty chemicals, what to expect and what will drive the growth there?
Chirag, this is Naresh Patel. Specialty is our more focused area currently in Ami Organics, and we have a robust plan for growth in specialty chemicals and also phase out the old product of Gujarat Organics. And in that line, we have developed around 20 molecules in specific chemical segment in Gujarat Organics and some of our already [ Li ] started qualification at the end of the customer. And these are all versatile applications, including electronic donor, polymer industry as well as some paint industry additive, [indiscernible] as well as some electronic industry. So it is cumulatively that once it will come inside, it will be bringing a lot of large volume and large value.
We are targeting this year the specialty chemicals segment will grow around 25% to 30% against our normal growth of 20% to 25% of -- 22% to 25% of our pharma.
Right. And coming to this new acquisition, which it is undergoing of Baba Fine Chem. If you can just help us understand what is the overall opportunity size for this company because current revenue is quite small. It is a niche business, it looks like. So some color there, what kind of scale we can create maybe 3, 4 years down the lane.
It's a very, very right and very wise question you had asked, it's because currently, the size of the company is small because it is running by the 3 scientists and they all are market scientists in the semiconductor industry having holding several patents in their name. And now out of the 2 scientists, 1 is already got passed away in COVID and one is aged out, so he wants to exit and that opportunity we got to get the major stake in the Baba Fine Chem. Baba Fine Chem has a main application, photoresistance chemical in semiconductor industries and they are making very high pure chemical past [ protingent ] kind of purity PPT. Normally, we talk in PPM but this is part of [ mitigating ] any impurity. So that is a very unique technology and capability of Baba Fine Chem. And upward going the all market is more than $2 million in photoresistance chemicals. And so there's a huge potential available. So by Ami Organics introducing with them, we can be able to give them the operational leverages that will help them to grow the business.
But any ballpark number what to expect over, say, 3, 4 years?
It will be -- definitely, it will be growth of more than 3x, 3 to 4x up year.
Okay. That is helpful. And lastly, bookkeeping question. What would be the CapEx for FY '24?
Currently, the CapEx for FY '24 is just a CapEx which is ongoing. And whereas once these electrolyte orders start flooding, we will do some cap plans, some extra capacity for that, and that CapEx will be in the second half of FY '24. We will announce you this CapEx once we are ready for that.
Ex of electrolyte, overall number would be?
Ex-electrolyte, we are having INR 35 crores on the maintenance CapEx. And there will be additional CapEx for solar, we are planning. So that when we'll announce that, so there will be additional CapEx for that also. And we -- so this is the CapEx plan for the year.
And greenfield facility will have around INR 160 crores, INR 170 crores balance CapEx?
The greenfield capacity will have around INR 160 crores, INR 170 crores CapEx spending to be done in the year.
So put together, INR 200 crores plus next year, right?
Yes.
We have our next question from the line of Mitul Mehta from Lucky Investment Managers.
Congratulations on a very good pharma operating numbers. Sir, on the day we acquired Gujarat Organics still today, our numbers have not been up to the expectations. So can you help us to understand what sort of product portfolio are you building there? Are we -- do you think you can scale up the pharma business -- I'm sorry, the specialty chemicals business in the next 2, 3 years? Because the current investment -- I mean, the current investment that we did when we acquired Gujarat Organics and working capital, the current ROC looks very, very suboptimal. So just wanted to get some color on that.
My second question is on the Fermion contract. If you can help us to understand when does the delivery commence for Fermion? And -- can we get some more color on this contract? I mean, this is going to be over, let's say, 10 years or even further on? So can you help us to understand both these questions.
Your number one question is related to specialty chemicals portfolio related to Gujarat Organics. Let me tell you one thing we acquired Gujarat Organics in the April 2021. Since then, 2 to 3 years had just passed for the takeover and taking the management and all. Then 3 months, we worked on what are the areas need to focus and we make a robust plan for that. And that is how we shifted all the manufacturing sites from Ankleshwar to Jaghadia and we make the -- free land for our pharma expansion, and that is without losing any single KG order.
But the last year was more mainly for the consolidation in terms of the product sustainability, technology upgradation, we had done a technology upgradation for methyl salicylate, we did the technology upgradation for parabens, as well as we have done 4 or 5 new molecules which are commercialized in FY '24 which are in the application in [indiscernible], an application in agrochemicals as well as an application in petrochemical industry.
So these are the molecules we developed and started commercial orders in FY '24. So our target is to -- for sustain the business without losing the money and volume and then make sure that the now this business will be replaced as well as grow with the new product and the margin and operating margin from 0 to we bring to 10%, and that we sustained for the last 8 quarters. And now we are increasing -- last quarter, we increased by 100 basis points, and now we are targeting to increase -- bring it to 18% to 19% of margin in specialty chemicals in this year. So this is what we are doing in specialty chemical segment. And revenue side will be 2.5x in the next 2 to 3 years, which is our targeting. This is just a projection. It is a text book plant.
And in terms of Fermion contract, that is a long-term contract, and it will start supplying from Q3 of FY '24. And that will be somewhere around -- I can't say the value because it's a very big value. And it will be mature. The full capacity supply will be starting FY '25 because it is a pharma, and it takes some time to registration in 180 countries worldwide. So in FY Q3 and Q4, it will be giving us such a sizable revenue. But from FY '25, it will be giving us a full revenue so this is how we are targeting Fermion. And in that contract only, we have 3 more products in that and that all 3 products is additional to the contract. So that will also help us to grow more numbers in the upcoming years.
The 3 products that you mentioned are other than the product that we have with Fermion, right?
So basically, we are going to supply very well advanced intermediate in that with 3 raw materials which we are supposed to import from China, but that we made in-house and now we are consuming in-house. So that is an additional advantage for us to have not only the top line increase, but also the revenue and profitability also can increase in that.
Sir, if -- I was just looking at some of the primary data releasing by Bayer on their presentation. It's a public information. So their current run rate is about EUR 180 million for the [ beta series ]. So if I annualize that comes to roughly about EUR 800 million. Currently, our supply is, let's say, we're to begin in Q3 and will scale up in FY '25. So at present, is it possible for you to [ remain ] from whom they are currently sourcing the...
If you've done such a good research, then this product is growing unexpectedly 200 or 300x a year. So it will be -- their expectation was -- whatever they expected in 2026, they already closed in 2023. So it's going very fast. And the basic API manufacturing plant in Fermion is fully utilized and the instrument which they are trying to source from us, they are currently making in-house. They don't have the source other than us. So that is how they are increasing their capacity, and we are going to make their intermediate in Ami Organics and they will make the final API. So the growth rate of this product is so high, they want to move faster and we have all the capacity and all the technology, everything is available with us. So that is adding advantage to that.
Is there a technology barrier in this particular product? I mean, can they develop an alternative supplier? I mean, is there any alternative supplier who has...
They don't have currently any alternate supplier. And this is a CDMO kind of work, where we do the development and then manufacturing of the product. So it fall in the CDMO -- CMO and CDMO segment of Ami Organics.
Okay. And sir, your thoughts on epic -- I mean, the anticoagulant family that we are currently supplying, how is the growth rate there? And do you also foresee that this particular segment can be a very big growth driver for us in the next 2 to 3 years?
Yes, definitely. Our anticoagulant is always a key basket for Ami Organics. And that is the reason why we have developed all the anticoagulant basket, which is currently launched or going to be launched, which include apixaban, rivaroxaban, edoxaban, betrixaban, all kind of which are -- have expiry to 2035. We have -- full basket is ready.
Apixaban and rivaroxaban is a growth driver for us for the next 2 years because it's going to be launched. And our generic player worldwide more than 26 customers in apixaban. They are all ready to launch. And also they won some litigation in U.K. against the originators, so that will help us to start moving us very faster.
In rivaroxaban, the originator has qualified us and they started placing order in Q4 to us, Q4 FY '23. So now we are supplying to originator as well the rivaroxaban. So it's a very good growth driver for us for anticoagulant segment.
Sir, as far as edoxaban is concerned, that seemed to be a very promising product. It's a new generation anticoagulant which currently is selling very well in Japan. So are we going to play a significant role there also?
We have already 3 customers in Japan who had qualified us.
So Daiichi has already qualified us?
Daiichi has not because they are making all the chemicals themselves there. But rest of the all generic player had qualified us.
But the product...
Mr. Mehta, I request you to come back in the queue, sir. Thank you. [Operator Instructions]. We have a next question from the line of Sudarshan Padmanabhan from JM Financial PMS.
Congrats on great set of numbers. Sir, my question is also taking forward from the previous participant. When I'm looking at the next 18 months, we have multiple figures, one from the Fermion contract. Then we have a new generation coagulant -- anticoagulant drugs that is going to drive growth. And the [indiscernible], which can actually become fairly big for us. In the context of the fact that we are operating the specialty at around 55% on the pharma side and volumes obviously will drive operating leverage. I mean do you think that the 20% to 25% kind of a growth that you have given on the pharma and the 30% guidance, I mean, could basically be a little bit more on the conservative side? And could you also talk a little bit more beyond FY '24, because some of these contracts are going to be more visible in FY '25. So what is the kind of gain in terms of top line and margins that one can realistically expect?
Very logical questions you had asked. So normally, Ami Organics is always proactive in terms of product pipeline as well as the capability and productivity. So our Ankleshwar facility is upcoming facility which will be ready by December '24 for operational. So that will come with a very huge volume, 4x volume than the our unit 1 in Surat. So that will be definitely help us to next FY '24, FY '25 FY '26 growth of the pharma. And also not only that, to make -- derisk ourselves if there is any delay in that, we had already started shifting of several chemistries like chlorination, nitration, diazotization and esterification. Currently, we are making in a flow at a very high volume. So that has freed our capacity also in Unit 1 as well. So that is how we can have a buffer of at least 1, 1.5 quarters for us to sustain our growth rate in pharmaceutical intermediate segment.
In specialty chemicals, we have Unit 3, which is in Jaghadia, is running currently at 35% to 40% capacity. And it has capability to handle up to 80% in next 2 year. Not only that, in Unit 3 also, we have shifted Ankleshwar unit blocks there, that will help us in another 15% capacity, which is currently under installation, finishing of the installation. So that will also add another 15% capacity in specialty segment.
So ongoing FY '25, '26, we have several contracts which are in line, few are in UV [indiscernible] area, few are in petrochemicals area, which are LOI oil already signed. But we are not declaring the LOI because it's -- once it will materialize and start converting the MOU then we will disclose about the growth plan and value of this LOI in FY '24 and '25.
On the margin side, sir, because we are talking about 150 bps or so, but even if you're not assuming that these contracts doesn't come with high margins, the operating leverage itself should take care of the 100, 150 bps. So are we looking for a surprise on this side?
We are conservative in terms of our comments, and that's why we are saying that 100, 150 basis points. Whereas once these all high value contracts will be in place, the margin definitely will go up in that sense as well.
And it will basically be 150 bps again for FY '25 because you will see again a volume growth as well as better margin. It should be -- you see margin expansion again and much strong top line in FY '25 as well [indiscernible] over FY '24. So we are looking at multiple years, not this one.
So margin expansion is a continuous process. So as we grow our revenue will grow, system process will be more mature. So currently, we are running at 23%, and we are looking at sustained margin improvement quarter-on-quarter and year-on-year basis. It is premature to speak anything about '25 currently.
Sure. I know just a small [ depleting ] question, one on the current quarter's gross margin. I mean we've seen some kind of a depletion because of high cost inventory or just the mix. But on a longer term, the positive side is we've seen a great reduction on the working capital. I mean you have been able to release about INR 40 crores to INR 45 crores of cash on the inventory side. So can you talk a little bit more about the kind of growth you've done on the working capital end? Should this improvement continue? What's our target in terms of working capital days?
See, so currently, on a average basis, on a considering sales as a base, our working capital cycle is 108 days. And I try to bring this at 100 days. So we are continuously working on it. We have improved our inventory days. We are trying to get more credit from the -- our supplier. And our endeavor will be to reduce our receivable days by another 10 days.
Sure. And on the near term...
Mr. Padmanabhan, I request you do come back in the queue, sir, as there are other participants waiting. Thank you.
We have our next question from the line of Rikin Shah from Omkara Capital.
All right. So just expanding on to what's discussed earlier. So in darolutamide, NUBEQA, which is the FDF, in FY '21, we saw 220 million ARO sales. FY '22, we've seen 466 million. And now we've already reached EUR 180 million target and Bayer's aspiration is around EUR 3 billion in 2 years or 3 years. So considering that materializes, could that result in an intermediate market which was perhaps INR 500 crores, INR 600 crores?
Your calculation -- based on your calculation, it may be. I'm not claiming on these things because I'm not supposed to, but whatever you calculate, I hope it will be okay for you.
All right. And in this, you mentioned there is no other supplier. So would we be the ones taking majority of the business?
This will be 100% with us we and Fermion, only 2 guys will manufacture these intermediates.
All right. Okay. And in terms of our anticoagulants portfolio, we've seen genericization of apixaban in many geographies and many API players in India also commenting for better growth on that end. So how would the entire portfolio be managed? Because in India, perhaps the treatment is at rivaroxaban level, right? I mean there could be a shift in treatment as well. So globally and in India, per se, how would our coagulants portfolio be shaping up going forward?
Basically for us, antiglobulin segment is the completely a bundle of the product. And this is the reason why we file patent for both the product in apixaban and rivaroxaban, and we are holding process patent for both the intermediate. And we have sizable customers also worldwide in all geography. And these all are ready for launching, some has already started launching product and all. So that -- it is immaterial for us rather rivaroxaban goes in the market or apixaban goes. For us, it is like is a bundle and we have capability to produce. In all the products, we are going up to N-1. So we have a good advantage of selling the product in a large volume.
All right. And on the edoxaban end, you touched upon a few things. So Daiichi is selling, I think, JPY 97 billion worth of Lixiana, right? So considering the generic market of Edoxaban in Japan, how big of an opportunity can the intermediate side be here?
Same answer, I have to say that if you -- see, basically, anticoagulant is a lifestyle disease and that is like an anti-cardiovascular similar kind of this. And day by day, the people having a lot of problem of this which we sensed very early during our inception, so that's how we put our portfolio in this segment. So we are ready with all N-1 in that as well, and we have a very good number of customers worldwide, and these are all big pharmas, including Teva, and there are large manufacturers worldwide. They all are our customers and qualified us as their raw material supplier. So we are also expecting the revenue coming in upcoming as from this segment.
All right. And sir, last one from my end. On the electrolyte end, you have mentioned developing 2 new molecules. So you had mentioned in the earlier con calls that you had Vinylene and fluoroethylene. So would it be possible to give some more color here? What's in the pipeline?
These 2 molecules we got from the customer and it is under NDA, CDA agreement, exclusive manufacturing kind of things. And these are molecules that is used to -- for high-voltage batteries and for increasing the electrocapacity of the battery, lithium battery as well as one is for the solid-state battery. So this is what we have developed. And both the molecules are in -- outside China. And they are qualified. And now we are in process of larger scale manufacturing compliances with them.
We have our next question from the line of Tarun Shetty from Haitong Securities.
Congratulations on the good set of numbers. Sir, on the Baba acquisition, I just wanted one clarification. 45% of your PAT will be booked under minority interest rate. Is that understanding correct?
Yes. The 45% is one of the minority third partner, which is a key partner of the Baba Fine Chem, will be remained as a partner.
Okay. In one of your recent interviews you did claim to -- even on this call, you addressed that the revenue would grow around three to fourfold in the near term. Could you give any rationale on this? Because I believe the Baba currently has only 1 customer that it is servicing. Does they have any exclusivity contract there or any kind of restriction on sales, anything that you can give color on?
Yes. The product which Baba Fine Chem is currently manufacturing and delivering to one customer is exclusively for them. But there are more than 40 products, which is already developed and on sample that can we go to the world apart from U.S., other segment like Japan, Korea and other countries. So there, we started promoting this product in that country also.
Okay. Okay. So basically, your trajectory of fourfold growth on top line of Baba will still stand?
Yes.
Right. And just on the margins, I believe currently the 60% plus and you did give recently, again, in the same interview, that margins would be around 40%. Anything -- any good reasons for this?
See, when we -- see margins is a part of when the number and volume will grow also, there is a -- and then -- when you go from one layer to another segment of that, there will be some change in the margin side because of some operational and other compliance, not compliances, I can say, but other involvement, a new core product capacity involvement and all that will increase the energy consumption and everything. So that will -- so we are conservative in terms of 10% reduction in the margin, but definitely, it will not like that. But conservative is better than bullish.
Okay. Just one final from my side. Can you give us an understanding of vinylene carbonates pricing right now, I believe it was trading around $40-odd below. Is it increase or decrease for you?
Which one?
Vinylene Carbonate.
Vinylene Carbonate is now almost $10, $11. And fluoroethylene carbonate is raised to [ $8 ]. But we have a process where we can -- in this also, we can do good margin.
We have our next question from the line of Dhaval from Girik Capital.
One question on the electrolyte additives. So over next -- what time frame should we assume some revenue to start coming for us?
We will be expecting by H1 FY '24 revenue will be start. So maybe in this quarter or latest by next quarter, the invoicing will start with the customer. We already have some orders in our hand, but we are expecting some big orders from some customers. So we want to plan clubbing the production together.
Okay. And how will this revenue -- what will be the size of revenue over 2 years' period look like?
Revenue guideline is I can say it's a very huge number, more than $2 billion, $3 billion industry where we are not expecting full. The advantage for Ami Organics or, say, for Indian manufacturer, is that the U.S. and other European countries have stopped buying any battery cells or anything which is generating from China. So that is an added advantage that any manufacturer based outside of China need to have a raw materials from outside China. So that is helping us to push ourselves in a faster mode of getting the orders and all.
Okay, fine. And then just a little bit more understanding on these electorates additives. So there is this electrolyte salts and then there is additive and then there is electrolyte formulation. So -- and you must be aware there are many companies who are working on this product chain. So we are only into additive and the salt are also -- is a the macro indication, we are going to make it or will we buy it from outside? Just help me understand this.
See, normally, Ami Organics never go for the competition to the customer, either it is in formulation, in API or in specialty chemicals. And these electrolyte also, we make the additives which is one of the -- one of the component of the formulation of electrolyte. And so we will remain making additives or other chemicals which are used in the formulation.
Salts are active part, which is manufactured by a few of the companies claiming in India as well as several companies in the world who are making the salts, but these are all things which is used to make the formulation.
Okay. So that salt so you will be selling it to other electrolyte -- the formulation maker, the additives?
Yes, the formulation maker is buying salt and additives and solvents, and then they make the formulation. So we -- Ami Organics is focusing only on additive segment.
Okay. So over a 3-year period...
Mr. Dhaval, I request you to come back in the queue, sir. Thank you.
We have our next question from the line of Amar Mourya from AlfAccurate Advisors.
Most of my questions have been answered. Only 2, 3 questions. First, sir, you are guiding for like the profitability improvement in the specialty chemical something, around 200 basis point margin improvement, let's say, in the coming year for the specialty part, EBITDA margin?
Yes. Definitely, it will come 200 basis points. It is more than that, but yes, definitely 200 basis is there.
Okay. Okay. And this is led by the flow chemistry which we had done -- is that because of that?
It's a mixture technology, volume and the new product.
Got that. And secondly, sir, you are guiding for 25% plus growth in specialty and 20% to 22% growth in the -- basically your core pharma business, right?
This is based on the current projections we received from our customers.
Okay, okay. And when you say 150 basis point improvement in the margin, that is also in the pharma as well, right?
Pharma we're targeting to go to FY '21. And then from then onwards, it will be a tough job for us. So that will be our second part of our planning.
Got that. And third is Baba Chemical. I mean if you see the growth rate, it has grown at the rate of 30% kind of growth. So going back -- let's say, in '24, again it will see the similar kind of trajectory?
Based on the current order in hand, yes, it will be look like similar kind of that.
Okay. And sir, you talked about that you have a similarity in the chemistry of the Baba Fine Chem versus your existing chemistry, so if you can give us some understanding how it is basically related to your existing chemistry in specialty business?
I think this is a little bit confidential question. I can not able to answer.
We have our next question from the line of Rohit Nagraj from Centrum Broking.
Just one question. In our presentation on Slide #24, we have talked about continuous flow reactors. So I just wanted to understand currently how much of our revenues are we generating from the CFR process? And are these developed by us? Or are we buying it from third-party? And incrementally going forward after, say, 3, 4 years, what is the -- based on our current reactions and capability, what kind of revenue generation can be done from the CFRs?
Basically, we don't take the dedicated product flow reactors. We make the chemistry [ D1 ] flow reactors. It means that -- in [indiscernible] give us certifications. These are the flow where we do n number of products. In [indiscernible] we are doing 11 products. In nitration, we do 9 products. In [ SME ], we do 20 products. So it's a chemistry-driven flow reactors, design multipurpose flow reactors, which can help us to switch over from one product to another product in a easy manner. And we do these kind of -- so.
And our single product is containing more than 3, 4, 5 reactions. So it is difficult to bifurcate how much revenues coming from flow reactor. It is important that the flow reactor will help us to improve our operating efficiency as well as the [ actual ] generation minimization and energy consumption minimization. So that is achieved by this flow reactor.
In upcoming years, are -- we are going to do the several 2 or 3 reactions like n-butyllithium and grignard in the flow, which is our pipeline right now.
We have our next question from the line of Aman Vij from Astute Investment Management.
My first question is if you can talk about as a basket how much does anticoagulant contribute to our revenues? And given the strong growth, where can we see this number in the next 2, 3 years?
Normally, our product basket is well distributed and none of the basket is more than 15%. So either it is antipsychotic, anticoagulant or anticancer, so it's a very well widely distributed so that if any basket will not perform, it will not impact badly on our performance.
So currently, anticoagulant basket is contributing 12% of the total revenue.
Okay. And say, for next FY '24 and FY '25, which basket do you think will be the growth drivers in this segment.
All are growing in their space and manner. So every -- it's -- what can I say that because all the products are performing well and they are giving us a good drive for -- that is the reason we were able to give the guidance of next 2 years.
Sure, sir. And second question is on the electrolyte segment. So you've talked about one product in the normal batteries and one for state. So I thought we are doing 2, VC and FEC. So if you can correct my understanding on that part as well as in terms of timeline, you've talked about you're expecting order this year, but this electrolyte business scaling, will it happen in the second half? Or do you think it will happen in next year only? And is it initially driven by domestic customers or international customers? If you can talk about that also?
So we have 4 products now in electrolytes. Two is CB VCB, and FEC is a tool that is already matured and now in commercializing stage. And 2 more is developed, one is in liquid and one is in a solid-state battery. So these are the 2 new ones. So total 4 products now we have. So I hope this is clarified to you.
VCB and FEC, we already have some order in hand. So this year only, it will be commercialized and so go to the market. And the customers are based in outside India. And in India, there are 2 manufacturers who've taken a sample from us. And they -- some has also order some few KGs, but they are still under evolution of themselves.
So in India, we don't have currently more than 2 customers. And for the rest of the world, we have 9 customers out there.
Are there any non-Chinese customers out there or is it mostly Chinese?
Yes.
I want you to come back in the queue, sir. Thank you.
We have our next question from the line of Ridhima Goyal from [indiscernible].
Mr. Naresh. Most of my questions are answered. There's just one question which is left. I just wanted to, what is the bifurcation between volume growth and price growth?
This time, I can say only volume growth because price is already depressed suppressed, I can say. And this is also one of the reasons that we could not reach to our top line. It is -- top line is compromised by 2% to 3% because of the price reduction because raw material goes down. So this fully is a volume growth.
Okay. Okay. And second question which I had was the -- I just wanted to know what is the revenue potential we have for the Fermion contract like on a year-on-year basis as it is a longer-term contract.
We are not allowed to say that because our other party is also a public company. So top line, we will not announce.
Okay. Okay. And just one clarification. You said that the Ankleshwar unit, the new CapEx, the greenfield CapEx which you are doing on the Ankleshwar unit, when will it get completed, like what is the time line?
December '24.
December '24.
Sorry, '23. Sorry, sorry. This is '23, December '23, FY '24.
Okay. Okay. So December '23. And what is the asset turn we can expect from there?
Normally, we do 3 -- 3x is our asset turn. However, asset turn is high because we have a very high-value products. Our products are ranging from INR 2,000 to INR 1 lakh. So it's because of that asset turn is very high.
We have our next question from the line of Rikin Shah from Omkara Capital.
Just wanted to ask in, this presentation could observe that we have added Lianhetech as a client. So Lianhetech Diane is a very big player in the global custom synthesis market from China. So anything that has materialized here significantly?
So, yes, we are supplying to Lianhe. Our China export is mainly to Lianhe.
We have our next question from the line of Tarun Shetty from Haitong Securities.
Just a couple of follow-ups. Just to understand the Baba deal structure, again. You will not be raising any debt and you'll be giving up certain amount of profession shares. Could we see -- what will be the amount of outstanding shares increase for this deal?
Deal value we already declared INR 68 crores. So according to INR 68 crores, we will view the preferences their accordingly.
So there will be no cash involved in this deal?
There is a very minimum cash.
Okay. Okay. The -- on the balance sheet, I see there's a sharp improvement in current provisions. So could you help me I understand why this is there?
So current provision is mainly -- it is in line with the increase in turnover. And sometimes what happens that few invoice are pending for bookings, so that will go under provision for expenses.
Okay. And my last one, I just missed the CapEx guidance for this year. Could you just repeat that?
So for current year, CapEx outlay will be ranging between INR 200 crores to INR 220 crores including the brownfield project for Ankleshwar.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir.
Thank you, Elara team, for hosting our conference call. Thank you, everyone, for your patience, and we hope we have been able to answer most of your queries. If we have missed out on any of your questions, kindly reach out to our IR adviser, E&Y, and we will get back to you offline. Thank you very much, and have a great day to you. Thank you.
Thank you. On behalf of Elara Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.