Gujarat Fluorochemicals Ltd

NSE:FLUOROCHEM

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Gujarat Fluorochemicals' Q1 FY '24 Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Nitin Agarwal from DAM Capital. Thank you, and over to you, sir.

[Nitin Agarwal, analyst]

Hello, good afternoon, everyone, and a very warm welcome to Gujarat Fluorochemicals Limited's Q1 FY '24 earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Gujarat Fluorochem management, Dr. Bir Kapoor, Chief Executive Officer; Mr. V.K. Soni, Head, Projects and New Initiatives; Mr. Manoj Agrawal, Chief Financial Officer; and Mr. Vibhu Agarwal, Head, Investor Relations.I will hand over the call to the Gujarat Fluorochem management team to make the opening comments, and then we'll open the floor for Q&A. Please go ahead, sir.

[Bir Kapoor, executive]

Thank you, Nitin. This is Bir Kapoor. And first of all, a good evening and a very warm welcome to all of you on this GFL's quarter 1 FY '24 earnings call. As you know, the company announced its quarter 1 results at its Board meeting held on 5th of August 2023. The results, along with the earnings presentations are available on the stock exchanges as well as on our website.I'll briefly talk about the numbers and then give you an update on the business operations and the outlook. The company reported a consolidated revenue of INR 1,209 crores for the quarter ended June 23, down by 9% on a year-on-year basis. Consolidated EBITDA for quarter 1 FY '24 was at INR 328 crores, down by 24% on a year-on-year basis. The EBITDA margin stood at 29% for this quarter. And consolidated PAT for this quarter was INR 201 crores, down by 34% on a year-on-year basis.Let me quickly take you through the performance of each business segment for this quarter. To begin with, let me talk about the bulk chemical vertical. This segment has seen a quarter-on-quarter revenue decline of almost 30%, primarily led by a drop in prices due to excess supply in the market. This segment is also expected to remain weak for the next few quarters for the additional supply to be absorbed in the market and the demand to pick up. The fluorochemicals segment reported a 30% decline in top line on a quarter-on-quarter basis, mainly on account of refrigerants, and this has played out more or less as we expected and we had guided earlier. Clearly, the weak summer in domestic as well as overseas market impacted these sales. We, however, expect H2 FY '24 performance in this segment to be better.In the fluoropolymer business, the prices remained stable. However, the volumes have corrected marginally on account of destocking, with Advanced Materials segments, which is fluoropolymers, continue to be the growth area for us in the near future. We have developed grades in each of these fluoropolymers and the growing demand in most sunrise and new age sectors augurs well for our growth going forward.As you all know, this has been a challenging quarter. While we continue to hold in well in our fluoropolymer business, the macro headwinds impacted our current growth. As stated in our earlier call, we saw the impact of the destocking in our major businesses and geographies. And this is true for all major global companies who have witnessed them back of destocking in recent time and particularly in this quarter. And our thoughts are aligned in terms of outlook for second half of the financial year, which we expect to be better going forward.While the destocking have depleted inventories, we are closely monitoring the ground situation for things to turn around as things normalize due to restocking. It's early for me to say when this plays out, maybe possibly by the end of this financial year, but definitely, the second half looks better.In quarter 2, we expect to see things on the similar lines as quarter 1. However, as for the feedback that we have received from our customers, we expect the business environment to pick up from quarter 3 onwards and to become normal by the end of this financial year. Growth fundamentals for polymer business are firmly in place. There is no change to the structural story as the end industry segments, including semiconductors, EV, automobiles, among others, continue to be our growth drivers, ensuring overall strong fundamentals for fluoropolymers. This should augur well for the business as we have the capacity, the grades, and approvals in place, and we are in a position to capture this growth as soon as there's a turnaround.The battery chemicals piece is also shaping well, both the salt as well as the electrolyte plants are in advanced stage of commissioning. And we expect these to come online by end of this quarter, which is quarter 2 FY '24. And we expect to start recognizing meaningful revenues from these segments in '25, post-approval processes, which we expect to continue to grow, and we expect to continue to grow capacity or expand capacity in this segment. With our commitment to long-term sustainable growth, we are progressing well on our PEM development for green hydrogen, fuel cells, and electrolyzers. We have aligned and transitioned our business towards the sunrise sector, be it EV, semicon, telecom, green hydrogen, or energy storage.Regarding the CapEx, we continue to hold on to our CapEx plans, albeit possibly staggering some of the planned CapEx as we see this year unfolding. So maybe some of these CapEx may spill over to next year. We are very positive on the opportunity in our core business segments and be it fluoropolymer or battery chemicals. And we continue to focus our efforts in developing new and higher value-added grades.With this, I would like to open the floor for question and answers. So please, Nitin, you can take Q&A. Thank you.

[Nitin Agarwal, analyst]

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Sanjesh Jain from ICICI Securities.

[Sanjesh Jain, analyst]

A couple of questions. First on the new fluoropolymer, I understand that the destocking is hitting us, and you said that the H2 and Q4 will be probably the normalized quarter. In previous calls, you said that we will be hitting a run rate of 1,000, 1,200 metric tonnes per month in Q4. Do you think it is possible? Or do you think that that target may get spilled over to FY '25? How do you see that volume ramp up in the new fluoropolymer in the context of destocking.

[Bir Kapoor, executive]

Sanjesh, you have another question? You said 2 questions.

[Sanjesh Jain, analyst]

No, I got 2 questions.

[Bir Kapoor, executive]

So you want me to answer this, okay. So yes, I think there is -- as I stated, there is -- within the overall market. And I think we are seeing our approval process going forward. However, in order to realize the full asset and capacity utilization, I think this may spill over probably by a quarter or a little bit more, around that. I mean there might be a little bit delay, but the plan is moving forward, and we are seeing a positive response in terms of expected growth in these areas.

[Sanjesh Jain, analyst]

A related question, where are we in terms of getting approval for our battery grade PVDF and semiconductor grade PFA? Have you seen any feedback from the R&D customer side? Are we increased? Are we seeing some problem, issue which need to be fixed? Where are we in this entire approval process?

[Bir Kapoor, executive]

Let me take step by step. The first is PVDF. PVDF, as we have indicated earlier, we have grades and obviously PVDF is not one single PVDF. There are, for different types of battery application, there are different PVDF. And we have made these grades and our grades are made and they are being tested at the lab scale. And lab scale, we have given -- received positive feedbacks also. But the approval process is still taking time because eventually these approval processes have to go through the final testing in the battery. And this process is on. And again, slowed down a little because there has been a slight slowdown in the overall lease segments also. So we see it progressing, but we expect to get it in the next 1 or 2 quarters.

[Sanjesh Jain, analyst]

And on PFA?

[Bir Kapoor, executive]

In PFA, the situation is that we have, there's -- again, I would tell you that some of our PFA is going into semiconductor application as we speak. But semiconductor application also, there are different purity levels and different grades, okay? While in the basic level, we have been supplying to one of the leading manufacturers. But we are progressing step by step into higher grades. And as we get into approvals, we may look into expanding our capacities in PFA for semiconductor grade as well. But we are well into that process, Sanjesh, okay?And again, I just want to remind you that there's not one single grade in semiconductor. There are grades, 57, and then higher and higher grades in terms of the -- depending upon the impurity profiles.

[Sanjesh Jain, analyst]

So what I understand is that you said that you're making base grade, which you're already supplying to semiconductor grade. But higher grade, when you say higher grade, what are the applications you are looking at in the semiconductor?

[Bir Kapoor, executive]

In the semiconductor, there are multiple grades which are there, and it's like going up the value chain. And because as semiconductor, again, is a very wide word, Sanjesh, depending upon the kind of the application of the circuits, whether it's what, nanometer, et cetera, there's a special requirement. So we are already into this business of supplying to semiconductor industry.

[Sanjesh Jain, analyst]

But when we say higher grade, are we looking at what, have you made some pilot grade or samples to be supplied in the higher grade or we are still waiting for this basic grade to stabilize and then move up in the value chain?

[Bir Kapoor, executive]

This is a continuous process, Sanjesh, it's a continuous process. And we are continuing to improve our grades and getting into higher and higher end application in semiconductor grades. And this is being supplied to one of the leading manufacturers.

[Sanjesh Jain, analyst]

On the comment you have made that in the presentation that we expect the fluoropolymer blended realization to improve because of the product mix. When we say this, we mean that more new fluoropolymer will be sold or within the PTFE also, we expect the blended realization to go up?

[Bir Kapoor, executive]

It's both because now we are not really giving a segmented profitability or the value. But our effort has always been within PTFE as well as on new fluoropolymers to grow for the higher and higher-end grades. And as you know very well, for example, PTFE, there is a very lower end, there's a granular grade. And as we go up, there are fine powders and [indiscernible] structure. Similarly, so our effort has always been is to upgrade and go to the higher value-added grades. And when we say blended, we mean both, that we want to -- we are slowly pushing our product mix to the higher end.

[Sanjesh Jain, analyst]

Why are we catering to both, as in PTFE commodity grade as well because…

[Bir Kapoor, executive]

Journey, that's the journey, Sanjesh. It's you grow up because these are very, very specialized advanced materials. And this is a journey that a manufacturer has to process because we have to go qualify for the higher, higher grade, you need to have a relationship and the capability to reach that.

[Sanjesh Jain, analyst]

On the refrigerant side, I think your commentary with one of your peers has a very contrasting thing where your peer expect Q2 to be better than Q1, while our expectation is that Q2 will be similar to Q1. Can you help us reconcile the position here? What are we missing in this commentary from our side?

[Bir Kapoor, executive]

It's -- again, it's -- the future is anybody's guess in this case. What we are -- where we are coming from is that, obviously, this year, looking at the weather pattern, you know that summer have been very, very weak. And so we are looking and gearing up mostly for the coming year, and we expect that that starts typically from quarter 4 onwards or quarter 3 onwards for us. Okay. So again, Sanjesh, this is -- this is depending upon the product mix and the markets in which one is operating, one can have a view on that. Okay. I would not like to comment on that.

[Nitin Agarwal, analyst]

Mr. Jain, may we request you that you return to the question queue for follow-up questions as there are participants waiting for their turn.The next question comes from the line of Ketan Gandhi from Gandhi Securities.

[Ketan Gandhi, analyst]

Yes. Sir, there are a lot of negativity around PFAS regulation in [ EU REACH] and so forth. Even after -- I mean, one of the Indian brokerage report are continuously hammering that in the mind of the investor, even after the news report published by the Guardian newspaper, which is a very reputed that PFAS regulation is the thing of the past. Do you have anything to say on that?

[Bir Kapoor, executive]

We have, Ketan, we have always maintained a position that PFAS regulation is more towards molecules, which has mobility, which are mobile and which are bioaccumulative. Fluoropolymers as a set of compounds are a very long chain compound, which is -- and while it was proposed, but I don't see that being part of any restrictions that may come into this because right now -- and, again, the PFAS regulation was more towards application of fluorochemical compounds, a surfactant, which is geared towards a large number of consumer applications, okay? Whether it's related to upholstery or the carpet or the stain repellents, firefighting foam, et cetera, et cetera. Fluoropolymers typically are long chain compounds. And I think what we believe is that eventually the regulation comes out, although right now, they are going through the consultation phase, which are interacting to the -- where they're interacting to the application and the manufacturers.But fluoropolymers all said and done or solids and these are not soluble in water. These are long chain compounds, and they have -- they have no leachable water mobile compounds to it. So we still hold with the same position. And we believe that whenever this regulation comes into place, that fluoropolymer would be carved out of this because they really do not pose any problem per se as a product.

[Ketan Gandhi, analyst]

And sir, in environment filing, as per the latest filing, we have mentioned that we are going to manufacture LiFePO4, that is LFP, active cathode material, and [ FSKM ] also. Can you throw some light, color on this? I mean, what is the opportunity size and how -- when will we be able to produce this and when we can start sending it commercially?

[Bir Kapoor, executive]

Fundamentally, we have said very clearly that we would like to be in the EV battery segments. And of course, LFP happens to be one of the compound, which is proactive material, which is used. So when we apply for environmental clearance approval, et cetera, we apply it for a longer period. We have a plan for setting up these, but at this point of time, I think it may be premature for me to share any details. We'll definitely share with you, at least both, in case of what you mentioned about the specialized FTM, which is FFP or with LFP. LFP is certainly part of our plan, and we will come to…

[Ketan Gandhi, analyst]

Sir, can you please throw some light on usage? I mean, where do we use -- I mean, where do industry use FSKM? Any specific application?

[Bir Kapoor, executive]

These are very, very specialized applications going into space and semiconductor applications. These are fluorinated FTMs.But they are very, very high-end materials for extreme condition applications.

[Nitin Agarwal, analyst]

[Operator Instructions] The next question comes from the line of [ Anand Jain ], an individual investor.

[Unknown Analyst]

And some of my questions have been answered. One question that I have is in the PFA, where we are already supplying the semicon related PFA, as you said, some grades of semicon grade as PFA. And in some -- what we have also seen is that we have also seen campaign happening for other fluoropolymer. Do you think that we can have contract-based supply like large dedicated contract-based supplies in these fluoropolymer, that is my first question, with large companies? And similar question is for the battery manufacturer, battery chemicals that you are planning to do because you also see one of your competitors today coming out with a press release saying that they are having fixed supply kind of arrangements with some of -- for some of these materials.

[Bir Kapoor, executive]

Thanks, Anand. Thanks for your question. We certainly see that as a possibility as market evolves. And let me tell you, semiconductor still is coming up, going through, expecting a high growth phase. So we certainly look for that, both in semicon as well as in battery, where look at a long-term contract with future customers.

[Unknown Analyst]

And are we in -- so are we in talks with like Indian players, international players? I know you can't name them. So if you can give some idea about the kind of players that we are looking to partner with you?

[Bir Kapoor, executive]

All I can say, yes, we are, Anand. And there are a lot of discussions going on. Our materials are being tested and at various stages of discussions and approvals. Okay. That's all I can share.

[Unknown Analyst]

The second question that I have is we've read a few reports where R32 seems to be like in some ways, a replacement for a lot of gases like R125 that is being used currently. Now again, for us, the reference point has always been our EC filing. The environmental filing and there we have, I think, articulated a 10,000 tonne capacity at TPA. So do you think that if required this capacity can go up?

[Bir Kapoor, executive]

Right now, if I look at R32, looking at the situation, the global situation of refrigerants. At this moment, we are holding on with our plan. And we may look back again maybe a quarter later. But at this point of time, we are holding on to our plan of setting up our R32.

[Unknown Analyst]

You're holding on. You're not going ahead with R32 plan, you're trying to see?

[Bir Kapoor, executive]

At this point of time, it's on hold, yes.

[Nitin Agarwal, analyst]

The next question comes from the line of Archit Joshi from B&K Securities.

[Archit Joshi, analyst]

Sir, I have a couple. First, on the ramp-up that we are doing in the new fluoropolymers. I think what was mentioned last time on the call was that the ramp-up will be from the existing 1,100 tonnes per month to almost 1,800, 1,900 tonnes per month, within which we know that the new PVDF application for the solar panel grade will be coming in. Any color on where we are in terms of the capacity addition on that front? And any light that you would want to throw on any new fluoropolymers that we are adding in the current regime of the expansion? And when are we scheduled to have the entire capacity online?

[Bir Kapoor, executive]

Yes, Archit. We had said last quarter -- last call about the PVDF solar. PVDF solar, we expect to come online by quarter 2 of FY '24, and we are still holding on to the plan. Now coming back to other capacity expansion. It's primarily one of the areas is PVDF. And as the EV market unfolds and we see a growth on EV market, we'll add capacities to reach in a stepwise manner. Now in these things, it comes in 2 parts. One is to have the base monomer plant setup, which we are all done. And as the market requirement comes up, we can keep on adding reactors to add capacity.

[Archit Joshi, analyst]

So 1,900 -- 1,800, 1,900 tonnes per month is what we plan to achieve by the end of the financial year, that will still be our guidance? You are holding on to that, right?

[Bir Kapoor, executive]

I cannot comment on the quantities right now, Archit. However, it's probably -- as we said that our expansion plan, some of it may spill over to next year, our current CapEx, as I said in my opening statement. So there may be a spillover of a quarter or so, but that's probably -- but plans are in place. We have all the building blocks in place. And looking at as the market turnaround and market picks up, we will add that capacity. There's no point in adding capacity if there is -- there are headwinds.

[Archit Joshi, analyst]

Sir, one final question. On R125, I think the U.S. market was quite buoyant in the last financial year with respect to a lot of exports happening out of India to the U.S. How is the scenario there? I mean, we also might have benefited quite a lot from the tailwinds from this entire rhetoric. Currently, how do we see specifically the outlook for R125?

[Bir Kapoor, executive]

In this context, the first half was slow, and we expect at least R125 also to pick up in H2, going forward with the other set of refrigerants, which will primarily be catering to the next year's requirement. That's what our position is right now.

[Nitin Agarwal, analyst]

The next question comes from the line of Rohan Gupta from Nuvama.

[Rohan Gupta, analyst]

Sir, first question is on our fluoropolymer. Sir, what we have understood so far that in many chemicals, it's basically Chinese camping, which is affecting the prices and a slightly lower demand and lower acceptance from U.S., Europe, and all because of the recessionary environment there that is leading to all the destocking in many of the chemicals. As far as the fluoropolymer is concerned, sir, what we understand that there is a huge demand still untapped from China itself because they are catering to batteries and all which are the new emerging sector and the demand scenario is very robust there. What actually is driving this negativity then in fluoropolymer when the world do not have enough capacity, the largest market, China, is still having a strong demand from -- coming from EV batteries. So why your fluoropolymer is also being impacted in a current scenario while, I mean, following and chasing the same thing what we are seeing in [indiscernible]?

[Bir Kapoor, executive]

Rohan, again, let me address this into 2 -- this question in 2 parts. The first is fluoropolymer, again, has multiple rates, multiple type of fluoropolymers. We are operating in majority of fluoropolymer in a very high grade, which are not impacted that much from the China. However, there's a phenomenon of destocking going on, which we've talked about earlier in my opening statement. Because of the business reality, high interest rate, it's -- U.S. there's a destocking phenomenon happening. But in some fluoropolymers, and I would -- specifically would mention PVDF, for example, the EV sector has a little bit of slowdown in China. And because of that, there has been an excess supply of PVDF. So in PVDF, in certain segments, yes, we have seen a pressure from Chinese, an excess capacity and pressure on pricing. Most of the others, we do not see that. It's -- the phenomena is mostly impacted in volume because of destocking going on.

[Rohan Gupta, analyst]

So you are saying that destocking is even in fluoropolymer. Anyway China has already started witnessing the slowdown in EV market, though there was a strong demand from battery chemicals. And there was -- I mean, what we understand and what's in earlier conference calls, we had mentioned that there is -- that China itself is producing, but the consumption of China is more than what they are consuming. And, I mean, sorry, consumption is more than what they're producing. So there is still demand environment is very robust, but that is also now all looks like changing in the current environment with the inventory destocking taking place across, right?

[Bir Kapoor, executive]

I, again, I think it's a short-term phenomenon because the EV market, because of the long value chain, there is a little bit of slowdown. It is picking up again, as we understand, and China right now is the largest EV market, it's picking up now with relatively muted first quarter, relatively, again, is all relative. So growth in EV in China this year is much less than last year, and that is the first calendar year quarter. So this has some impact because PVDF is one fluoropolymer, which is closely linked to the EV side. So it has its dynamics, which gets impacted.And other than that, we do not see much of an impact. And if you look at the EV as a sector, the both in areas which is outside China, which is Europe, U.S., India, the growth is still yet to happen. The buildup is expected to happen in the year 2025 onwards. There's a lot of capacity -- the plans are in place, investments are being planned, and this will eventually reflect going forward maybe '25 onwards. So what we are talking about, for example, for battery chemicals to some extent, would also the similar growth I would see in PVDF as well as because PVDF to some extent is linked to the battery.

[Rohan Gupta, analyst]

Sir, second question is on our CapEx plan of INR 1,500 crores for the current year. Is there any changes because a lot of investment planning to go into [ LICF ] and PVDF expansion and also [indiscernible]. And you already have mentioned and indicated that probably R32 CapEx plan right now is on hold given the current scenario. So any likelihood on the CapEx plan of INR 1,500 crores, how much we have incurred so far?

[Bir Kapoor, executive]

Rohan, the CapEx plan, as I said, that will probably be -- I mean, quarter 1 is a little bit too early to talk about it. But what we are foreseeing right now that plan in terms of whatever we are going to put in, will happen, but it may actually spill over to next financial year as well. Some -- the entire 1,500 may not happen this year, okay? And largely, we had also indicated earlier that a large part of our CapEx is there, is going to be in battery chemical in the future growth. So as we see our battery chemicals grade approval and the market growing up, the CapEx will be linked to that segmental growth.

[Nitin Agarwal, analyst]

Mr. Gupta, may we request that you return to the question queue for follow-up question and there are participants waiting for their turn.The next question from the line is Pratik Jain from Solidarity Investment Managers.

[Pratik Jain, analyst]

I have one question. On this electrical vehicle battery, electric vehicle battery segment, can you just help me understand the economics of this business, like what are your internal calculations? What can be the [indiscernible]?

[Bir Kapoor, executive]

Pratik, it would be very premature for me to share the economics about this, but we already talked about that we have a plan to get into various battery chemicals and even going into electrolytes. So our plan is to make electrolyte as a product and maybe look at making all the chemicals and components which goes into electrolytes. So that's all I can say. And this is a very early stage of development because if you look at, for example, Indian battery industry is still a little bit away from setting up capacities. So I would rather wait for some time and then -- and again, it's premature for me to talk about the ROC, et cetera, or any other financial parameters related to battery chemicals segment.

[Nitin Agarwal, analyst]

The next question comes from the line of Dhruv Muchhal from HDFC Mutual Funds.

[Dhruv Muchhal, analyst]

Sir, first question is on -- if you can give us some sense on what would be the effective capacity that we would have in our polymers business by the end of the year from the start of the year because -- segmental changes now we have very limited information in terms of how to forecast the business? So any color on that will be very helpful.

[Bir Kapoor, executive]

Dhruv, actually, we have already indicated our capacity plan earlier. But right now, as you have said that the question is that how and when this capacity gets fully utilized. And we had indicated quarter 4, which probably maybe spill over by one more quarter. That's all I can say. And this is -- and the plan is in place to put the capacity completely. And we have already added capacity. So right now, our volumes are not constrained by the capacity. It's more by the approval and the market demand and the market requirements.

[Dhruv Muchhal, analyst]

So we have the capacities in place, just as we get the approvals probably, I believe, you are seeing it for PVDF and PFA that we have expanded, it seems, if I remember right. As you get the approvals, probably the ramp-up can happen there. But sir, we also had expansions in PTFE, if I'm not wrong.

[Bir Kapoor, executive]

In PTFE, we had said that it's more of a debottling, not -- it's -- and that's already -- again, that's -- a lot of it is market dependent. At this point of time, we have whatever the plan we have planned in a phase-wise manner because this is -- we already have the TFE in place and -- inside in terms of reactor debottlenecking, et cetera. That's already in place. We have done it. And as the market turnaround happens, we are very well positioned to capture that.

[Dhruv Muchhal, analyst]

Sir, the other thing was on the -- you mentioned about some weakness in demand in the polymer, probably a bit temporary, but also some pressure from Chinese, at least, in some particular grades. Sir, so volumes are a thing, but are we seeing some pricing pressure too? Because some of your peers like [indiscernible] have not highlighted too much on pricing. So I'm just wondering, are you seeing also some pricing pressure, it's currently only volumes which are causing it and you expect that to improve?

[Bir Kapoor, executive]

We are not seeing pricing pressure on the…

[Dhruv Muchhal, analyst]

So the polymer side, yes. Yes.

[Bir Kapoor, executive]

Not on the higher-end grades and the grade which has been qualified because there's a sense of stickiness, et cetera, and then these are high end grades. So I would agree with that statement, and we have not seen significant. Of course, the volume because of destocking, as I stated earlier, is getting impacted. And I hope that whole thing to get sorted out probably by the second half of the financial year.

[Dhruv Muchhal, analyst]

Sir, and in terms of mix, how much -- just to get some sense, how much would be the higher end grades for us? And probably, I'm not sure, in terms of volumes or in terms of value of the overall polymer business, say, last year or some ballpark range in terms of what -- where are we? How much of this business is, I'm just trying to understand the mix?

[Bir Kapoor, executive]

So [ FC ] most of our new fluoropolymer, et cetera, is in, I would say, in the higher end grade. And if I look at the entire PTFE spectrum, some of the grades which are probably in the granular segment at a very low level, maybe 10% might be in that area, which could possibly get impacted. But other than that, most of our grades are in higher-end grades.

[Dhruv Muchhal, analyst]

So what we are currently seeing on this, it's pure volume thing because given a higher end grade exposure? Got it, sir. And sir, last question, just the question is, on the PFA side, there was some discussion earlier. So you mentioned there are multiple grades. Now in PTFE, we understand you are almost similar to any of your Western peers in terms of the product mix that you have, the grades that you cover. If you can give some similar sense on PFAs or probably how many grades are there? How many we have already tried? How many are in process of approvals? And how much can you probably track in the next, say, 2 years or 3 years? Or you are targeting to convert in 2 to 3 years?

[Bir Kapoor, executive]

In PFA, again, there are multiple applications. When I talked about the grades, et cetera, high end and super high-end grades, that was primarily for the semicon application, where the requirement of impurity profile, et cetera, is highly stringent because of the application. Other than that, in PFA, which in other grades, we are -- I don't see such segmentations, okay? There are, mostly in other application, I don't see such a big difference per se. So most of it, PFA, anyway is a polymer, fluoropolymer, which is a high-end fluoropolymer, with advanced applications. So that grade that I talked about in PFA was more focused towards the semiconductor applications.

[Nitin Agarwal, analyst]

The next question comes from the line of Krunal Shah from ENAM Investments.

[Krunal Shah, analyst]

Sir, one question I had on PFAS to PTFE. Just wanted to understand where we are in the stage of diverting PFAS to PTFE?

[Bir Kapoor, executive]

See, if you look at the PTFE per se, as I said earlier, that fluoropolymer per se, the long chain component. These are solid, not soluble in water. So they anyway have a very, very low level PFAS, okay? So however, there is a fluorosurfactant, which is used in the manufacturing of PFAS. And we have been working towards using nonfluorinated surfactant and as far as PTFE is concerned, we have developed grade in nonfluorinated surfactant grades in most of the PTFE segments or PTFE grades. And we are in the advanced stages of getting it approval and taking it to the market.

[Dhruv Muchhal, analyst]

So actually I was [indiscernible] most of the peers and no one talks about PFAS, PTFE. So any reason why they are not working on that or why there's no discussion as such?

[Bir Kapoor, executive]

I'm sorry, could you come up again? I missed the -- it was not clear.

[Dhruv Muchhal, analyst]

Actually, if you see your peers' commentary, most of them talk about [ PEF ] and [ FPMR ] being PFAS, but nothing on the range of PTFE being PFAS they're developing? Any reason why they're not working on this?

[Bir Kapoor, executive]

Yes, again, I would not like to comment to others. But again, if we talk about [ FCM ], FCM anyway is we don't use any surfactant there with PFAS. And same is in PVDF. So PTFE, I think, I'm not sure which competition you're referring to. However, it's an issue with one of the leading manufacturers who have been using and be the main component for the fluorinated surfactant. So at this point of time -- at this point of time, we would not like to comment on it. But our effort to move towards nonfluorinated surfactant much before this PFAS issue came, what we hear in last 6 months or so. We have been working on it for the last probably 5 years.

[Nitin Agarwal, analyst]

The next question comes from the line of Rohit Nagraj from Centrum Broking.

[Rohit Nagraj, analyst]

Sir, my first question is the gestation period between the product approval and the commercial orders. So we have sent a lot of samples across fluoropolymers. So if we get the approvals during the next few quarters, do we expect substantial commercial orders coming from, say, FY '25? Or what is the general timeline between the approval process and the commercial order start? Thank you.

[Bir Kapoor, executive]

Rohit, typically, to answer your question, by FY '25, certainly, we look for sort of approval to be in place by FY '25. And in terms of timelines, depending upon the grade, it can take anywhere from 6 months to 1 year. And there is another process, Rohit, that once material get approved, the customer doesn't start taking the entire capacity from us and the capacity ramp-up further takes time, okay? So it's probably conservatively, I can say, 1 to 1-1/2 years' timeframe. So let's say, 3 to 4 months, 5 months from approval or 6 months depending upon the grades and then the small capacity starts. And by that time, the significant part of customer requirements come into place. Based on our past experience, it takes a long time.

[Rohit Nagraj, analyst]

Sir, second question is on the wind power project. So does this 20, 25 megawatt power project gets commercialized? And have we started receiving the benefits of it? And on a yearly basis, what would be the saving because of the wind power projects?

[Bir Kapoor, executive]

Yes. I'll request my colleague, Manoj, to take up that question. Manoj, please go ahead.

[Manoj Agrawal, executive]

Yes. Hello, Rohit. As we've indicated in the last call, that foreign tech policy has been amended. And now they have included wind power locations in the units as well. In the last quarter, we have applied for the -- we have identified 8 wind pockets in and around our [indiscernible] plant. Out of that, we have initially applied for the 3 locations for which we have received the approvals, and another 5 locations, application is in the pipeline, which we expect to get in this quarter. And as soon as we get all the approval for our 8 locations, we'll start commissioning the wind mills.

[Rohit Nagraj, analyst]

And what is the time line that we are looking and the savings in terms of power cost?

[Manoj Agrawal, executive]

Yes. So after -- in the Q2 -- by Q2, we should get all the approvals and within 6 months, we should put up all the wind mills. So the benefit in terms of cost reduction will come in the next financial year.

[Rohit Nagraj, analyst]

Any quantum, sir?

[Manoj Agrawal, executive]

It's around INR 20 crores, INR 25 crores at most. That depends on the peak power tariff and that other power rate -- conventional power cost.

[Nitin Agarwal, analyst]

The next question comes from the line of [ Bish Mohit from Sonic Intelligent Research LLP ].

[Unknown Analyst]

Just kind of a small question, just in terms of full year margins, do we expect to move back about 30% EBITDA margin?

[Bir Kapoor, executive]

Yes, I think we had indicated earlier that we'd probably be in 30s or maybe 28 to 30, 32, 33, this range. So we expect our margins to remain in that range.

[Nitin Agarwal, analyst]

The next question comes from the line of Yash Shah from Investec.

[Yash Shah, analyst]

Sir, it is more of a clarification question. Can you shed some color on, if different nonfluorinated or surfactants will be required for different fluoropolymers? Is the understanding correct?

[Bir Kapoor, executive]

Sorry, Yash, can you come up again? It's not clear. What did you say? Nonfluorinated surfactant?

[Yash Shah, analyst]

Sir, as you mentioned that you will be using nonfluorinated surfactants for the fluoropolymers, right? What I wanted to understand is, if different nonfluorinated surfactants will be used for different fluoropolymers? It won't be standard for all the fluoropolymers is what I'm trying to understand.

[Bir Kapoor, executive]

That's correct. That's correct. Yes, Yash. Because it will be -- there are different types of surfactants, which are used for different application, different grades, different fluoropolymers. It's not one unique molecule.

[Yash Shah, analyst]

So sir, as far as guidance that will be completely in batch 3 across all of fluoropolymers by the end of FY '24. Is it fair to conclude that we have found a nonfluorinated surfactant for all the fluoropolymers?

[Bir Kapoor, executive]

We expect to get most of our products moved into NFS probably by the end of this financial year. And again, from our side, we -- probably we'll be ready with most of the grades and the products, and then slowly, we have to see how the transition happen. But our effort is to make it happen as soon as possible and perhaps by end of this financial year.

[Yash Shah, analyst]

And sir, one more thing which was mentioned in our annual report that emerging surfactants as GX902 and 905, the prices of it had remained extremely volatile in the previous year. Now moving to the nonfluorinated surfactants, will we still continue to use these? Or can you help explain this, sir?

[Bir Kapoor, executive]

No. These will not be used, and these will be replaced by a surfactant, which do not have fluorine. So they will be completely eliminated to some extent.

[Nitin Agarwal, analyst]

Due to time constraints, this was the last question. I would now like to hand the conference over to the management for closing comments.

[Bir Kapoor, executive]

So thanks a lot, Nitin, and thanks to everyone. We're really thankful to all of you for having interest in GFL as a company and looking at our growth story as it unfolds.So with this, I would like to thank you all and look forward to connecting again by the end of next quarter. Thank you so much.

[Nitin Agarwal, analyst]

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