Neogen Chemicals Ltd

NSE:NEOGEN

Earnings Call Analysis

Revenue Decline and Outlook Amid Capacity Expansion

The company reported a year-on-year decline, with Q3 revenue dropping from INR 186.3 crores to INR 167.4 crores, EBITDA decreasing from INR 30.1 crores to INR 25.8 crores, and PAT falling from INR 14.7 crores to INR 5.8 crores. Guidance indicates a likely revenue potential of INR 1,000 crores from a gross block of INR 400 crores, targeting EBITDA margins around 18%±1.5%. The company’s CSM business has fared well, contributing 14-15% of revenue, while facing stronger competition in the Advanced Intermediates segment. Additionally, the company has seen increased demand for products in the flavors and fragrances sector, which, along with approved agrochemical projects, posit a potential recovery in demand in H2 of the next fiscal year. In the battery chemicals business, despite a global slowdown, the company expects steady demand growth in India, with cell manufacturing capacities coming on track in 2024. Plans to scale up the electrolyte plant, anticipation of a 30 KTA plant by late 2025, and preponed additional capacity for electrolyte salt and additives underscore long-term market confidence.

Financial Performance and Capital Expenditure Outlook

In the recent quarter, revenue decreased to INR 167.4 crores from INR 186.3 crores in the comparable period, while EBITDA and PAT similarly fell to INR 25.8 crores and INR 5.8 crores from INR 30.1 crores and INR 14.7 crores, respectively. Looking ahead, the company plans a substantial capital expenditure of approximately INR 1,500 crores over the next few years, with the expectation of a gross block around INR 1,900 crores by the end of FY '26. On existing assets, totaling INR 400 crores, the company aims to generate revenue of around INR 1,000 crores and targets an EBITDA margin of approximately 18% ± 1.5%.

Impact of Raw Material Price Volatility

The company faced challenges due to a mismatch in the timing of raw material procurement and subsequent sales, particularly with lithium, which led to inventory write-downs. An estimated loss of around INR 4.5 to INR 5 crores was incurred due to the lithium price fluctuation in the quarter, and the company anticipates remaining impacts to ease in the following financial year. They have made refinements to their approach, positioning themselves for better material pass-through and management of price volatility going forward.

Strategy and Progress in Chemical Specialty Manufacturing (CSM)

CSM now accounts for almost 14-15% of the revenue with a target to reach 20%. Although competition from China has intensified in the Advanced Intermediates segment, Neogen has cultivated more partnerships within the agrochemical sector and diversified into flavors, fragrances, and specialty molecules, which should drive growth once agricultural demand recovers. The company also aims to foster closer ties with large agrochemical firms in Europe and the U.S., leveraging their bromination and Grignard chemistry expertise.

R&D Expansion and Commercial Focus

Neogen is expanding its R&D lab in Karakhadi, with additional capacity coming online next financial year. Although new R&D efforts might not be significant revenue drivers initially, they are meant to foster early relationships for a better project pipeline. The primary focus remains on commercial manufacturing, where revenue is largely generated.

Outlook on Battery Chemicals and Electric Vehicle Market

Despite recent reports of a slowdown in electric vehicle adoption, the company anticipates that the demand will continue to grow, particularly in India. The commissioning timelines for battery chemical projects seem to be on track, with cell manufacturing capacities emerging by 2024 and scaling up into 2025. Neogen's 30 KTA plant is expected by end-2025 to cater to the blossoming demand. Additionally, with global reliance on China for battery materials, opportunities for Neogen to serve as an alternative source are expanding. This has led to a planned increase of capacity from 400 to 2,500 metric tonnes for electrolyte salt and additives in response to a preponed international demand.

Projected Revenue and Margins in Battery Chemicals

For the battery chemicals business with stable lithium and bromine prices, a target revenue potential of INR 2,500 crores and an EBITDA margin of about 18% ± 1% is projected. Realizations for electrolytes are estimated at around $10 per kg, while for lithium salts, they range between $27 to $35 per kg. The focus on a Return on Capital (ROC) approach aims to secure at least 20% ROC in the electrolyte segment, guiding their strategy for sustaining profitability as capacities grow.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Neogen Chemicals Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki. Thank you, and over to you, sir.

[Nishid Solanki]

Thank you. Good afternoon, everyone, and welcome to Neogen Chemicals' Q3 FY '24 Earnings Conference Call for analysts and investors. Today, we are joined by senior members of the management team, including Dr. Harin Kanani, Managing Director; Mr. Anurag Surana, Director; and Mr. Ketan Vyas, Chief Financial Officer. We will commence the call with opening thoughts from the management team, post which we shall open the forum for Q&A where the management will be addressing queries of the participants.

Before we come in, I would like to share our standard disclaimer. Certain statements made or discussed on today's conference call could be forward-looking in nature. The actual results may vary from these forward-looking statements. A detailed disclaimer in this regard is available in Neogen Chemicals' Q3 FY '24 investor presentation, which has been uploaded on the stock exchange website. I would now invite Dr. Harin Kanani to share his perspectives. Thank you, and over to you, sir.

[Harin Kanani, executive]

Thank you, Nishid. Good afternoon, everyone, and thank you for joining us on Neogen Chemicals' Q3 FY '24 Earnings Conference Call. We released our quarterly results on Friday and subsequently distributed the earnings presentation. I trust you had a chance to go through them. I will be guiding you through the performance highlights, important developments and update on expansion initiatives, after which, Mr. Ketan Vyas, our CFO, will walk you through the financial performance.

Our performance during the period under review was marked by sustained weak demand environment, influenced by recessionary trends in few geographies. This, along with persistent inventory destocking, ongoing conflicts, in Middle East and Red Sea crisis collectively hindered the momentum, leading to a sharp correction in the prices of the raw materials. Both our key end user industries, agro and pharma continue to be under pressure, barring select products that remains stable. In light of the situation, I believe we have performed satisfactorily while preserving our base volumes and then managing at least a small volume increase.

This achievement was aided by the resilience of our business model, coupled with active engagement with customers and partners. We are beginning to observe a gradual demand recovery in pharma sector and select pockets in agro and anticipate this trend to gain momentum in the future. On a consolidated basis, our performance appears weak primarily due to 2 factors: initial expenses, CapEx linked to battery materials or Neogen Ionics, where contribution is yet to come and onetime impact on BuLi Chem and a little bit on Neogen due to liquidation of high-cost inventories in lithium in addition to subdued demand for products linked to agrochemical and pharma. Our stand-alone performance, on the other hand, exhibited slight improvement as we navigated through the sector uncertainties. For Q3 FY '24, our revenue stood at INR 167 crores, while EBITDA came in at INR 26 crores, PAT at INR 6 crores. Mr. Ketan Vyas will provide a detailed overview of our financial performance.

Moving to our segmental performance. In Q3 FY '24, organic chemicals reported -- revenue reported a decline of 5%, mainly on account of year-on-year drop in bromine and other RM prices. which when adjusted, increased our revenue by INR 12 crores. Likewise, inorganic chemicals revenue declined by 30% year-on-year due to steep fall in the prices of lithium raw material, which otherwise would have been higher by INR 23 crores if we compare to the same period last year. Let me now share an important development. Neogen Ionics Limited 100% subsidiary of Neogen Chemicals, recently completed land acquisition totaling approximately 264,285 meter square in Pakhajan, Dahej PCPIR Gujarat to establish a world-class state-of-the-art battery material facility. This greenfield site will be our largest facility dedicated solely for battery materials and new future business opportunities.

Here, we will set up electrolyte plant using manufacturing technology license from MUIS Japan and electrolyte salts and additives plant based on Neogen's indigenous technology. The MUIS team has completed the design of the plant. And accordingly, now we are preparing ourselves to start construction of the plant. We expect permissions to be received by March. And by March or April, we expect to start construction of the 30 KTA electrolyte plant. This plant is expected to be operational in second half of FY '26.

Coming to our existing expansion initiatives, our battery material project is progressing well and adhering to the schedule and advancing with the plant design using MUIS Japan technology, construction is also expected to begin shortly thereafter. Let me provide you some more specific updates in our existing business, brownfield expansion of specialty organic chemicals by 60 meter cube out of which 31 meter cube was already commissioned this Q4 FY '23, and remaining 29 meter cube will be commissioned by -- during FY '25 as depending on business needs. In the battery material business, new capacity of 400 metric tons per annum for Lithium Electrolyte Salt and Additives. Trial productions have already commenced statewide and final check and tests are currently ongoing.

We expect customers' approvals to start coming through by end of Q4 FY '24 and start revenue by end of Q4 FY '24 early Q1 FY '25. The 2,000 metric tonne electrolyte manufacturing facility at Dahej using our indigenous technology is also scheduled for commissioning by end of Q4 FY '24. Furthermore, we propose to expand our Lithium Electrolyte Salts and Additive capacity at Dahej SEZ to 2,500 metric ton in phases, which will be operational during FY '25 to cater to immediate demand of electrolyte salts and additives in the international market.

At our new greenfield site at Pakhajan, Dahej PCPIR, we will set up the 30 KTA plant using MUIS technology and 3,000 metric tonne of electrolyte salts and additive plant using our indigenous technology. The aggregate CapEx for all these capacities set to come online in FY '24 and beyond, will be close to INR 1,500 crores and will translate into peak revenue potential ranging from INR 2,500 crores to INR 2,950 crores, depending on the lithium prices. This investment will be done in a phased manner and funded through a mix of debt, internal accruals and recently raised equity. Once operational, these projects will drive us into a rapid growth trajectory in the sunrise sector of lithium and battery materials, leveraging our first mover advantage over competitors.

Our aim is to become the most dependable player by maintaining consistent product quality and ensuring timely supply. This will establish Neogen Ionics as the market leader for electrolytes in India for EV applications. While this remains our effort to strengthen the existing business continue, we continue to make deep inroads in advanced intermediate and custom synthesis and manufacturing by leveraging our skill set and customer relationship. This, along with increased contribution from BuLi Chem will anchor our performance going ahead as now we are able to onboard new customers in India as well as in the international market on top of the existing customers of BuLi Chem, who, after a brief period of 6 months of low demand are now starting to consume n-Butyllithium on a regular basis.

I will conclude by saying that India remains an attractive destination for global majors with promising sectors prospects in the medium-to-long term, our sound understanding of market nuances, unique value proposition and unwavering commitment to innovate will set us apart posting our growth potential and delivering value to the shareholders. That ends my opening remarks. I would now request our CFO, Mr. Ketan Vyas, to share financial highlights for the period under review.

[Ketan Vyas, executive]

Thank you, Dr. Harin. Good afternoon, everyone, and welcome to Neogen Chemicals' Q3 FY '24 Earnings Call. I shall now take you through the key financial highlights. Please note that these are on a consolidated basis and based on year-on-year comparison. We reported revenue at INR 164.4 crores depicting a fall of 12% over last year. The quarter witnessed a decline in raw material costs and resultant realizations, albeit on steady volumes. BuLi chemical revenues moderated on the back of slowdown in pharma and agrochemicals, of which chemicals saw a revenue decline of 5% at INR 129 crores, whereas inorganic chemicals noted a decline in revenues by 30% at INR 35 crores.

As stated by Dr. Harin, this was due to a significant fall in prices of both bromine and lithium, excluding which the overall revenues for Q3 will have been higher by these INR 35 crores. EBITDA was at INR 20.4 crores, reflecting the impact of higher employee costs and other expenses related to ongoing expansion initiatives around Neogen Ionics. This was in addition to liquidation costs of high-cost inventories in BuLi Chem. That said, the gross margins were largely maintained. In line with the moderated operational performance, PAT came in lower with -- lower at INR 1.1 crores.

This includes the impact of higher financial and -- higher finance cost and depreciation coupled with onetime tax charge incurred during transition to New Tax Regime. This means our effective tax rate from next year will be lower. The domestic to export mix stood at 78% to 22%. On a stand-alone year-on-year basis, our Q3 revenue came at INR 167.4 crores versus from INR 186.3 crores. EBITDA was at INR 25.8 crores versus INR 30.1 crores and PAT was at INR 5.8 crores versus INR 14.7 crores. That then concludes my initial remarks. I will now request the moderator to open the forum for Q&A session.

[Operator]

We will now begin the question-and-answer session.

[Operator Instructions]

The first question is from the line of Manish Gupta from Solidarity.

[Manish Gupta, analyst]

So just wanted to check a few numbers with you. Our gross block at the end of FY '23 was roughly INR 400 crores, and the CapEx that we are doing in FY '24, FY '25 and FY '26 is about INR 1,500 crores. So barring any new project we announce, roughly by the end of FY '26, will we have a gross block of approximately INR 1,900 crores. Is that approximately right?

[Harin Kanani, executive]

Yes.

[Manish Gupta, analyst]

Okay. Now sir, on our existing gross block of INR 400 crores, you do help us by giving revenue numbers but the challenge is that because these revenue numbers are so strongly linked to lithium prices and bromine prices, it becomes a bit complex for us to interpret. Would it be useful if you can guide a range that on what is a peak practical capacity utilization, the INR 400 crore of gross block will roughly translate into how much EBITDA and what is the practical peak capacity utilization?

[Harin Kanani, executive]

Sure. So see, we've always tried to give you a range that with lithium prices variation what is the fluctuation that you see, what is the range in the revenue which can happen, and similarly, EBITDA ranges also. But let's say, if we take a case, so on a INR 400 crore, as we had guided earlier, we can have a revenue potential of around INR 950 crores to INR 1,000 crores -- sorry, INR 1,050 crores, and let's say, with whatever is our understanding now of a unique business, we've seen with the same CapEx or with slightly incremental CapEx, we can get more revenues out of BuLi. So we can say around INR 1,000 crores of revenue we can earn, and till we reach the full utilization level, our target would be to achieve at least 18% plus minus 1.5% kind of a EBITDA range. So let's say, around INR 180 crores and, let's say, if you consider the plus or minus range, that's somewhere between INR 170 crores to INR 200 crores EBITDA on a full utilization level in the base business.

[Manish Gupta, analyst]

Okay, excellent sir. So now if we say that -- let's just work with a round number of about INR 180 crores, I do understand the range you're talking about. Would it be fair to assume that when we reach peak utilization on the INR 1,900 crore gross block, our pro rata EBITDA for the company would be INR 1,900 crore divided by INR 400 crore multiplied by INR 180 crore roughly in that range? Would that be broadly similar? Or would the -- because the bulk of the incremental CapEx is actually happening in battery chemicals, you think the EBITDA there would -- on a pro rata basis might be lower or slightly higher than the base business?

[Harin Kanani, executive]

Yes. So as I've shared earlier, in the battery business, basically, we are looking more like from an ROC concept. So we are basically targeting because that business is going to be driven more with the lithium price and even other battery materials also will fluctuate depending on supply demand. I mean, what we have seen is the prices of solvents and lithium what they were 1 year ago or 1.5 years ago versus today sees a lot of fluctuation. So we look more from an ROE, ROC point of view. But let's say, if we were looking -- again, the EBITDA there was like more like 15% to 18%, depending on lithium price fluctuation.

So broadly speaking, yes, I mean even if you take like the revenue potential, which we have given you of let's say INR 2,500 to INR 2,950 crore. So on the INR 2,500 crore, you can assume like about 18%, again, plus/minus 1.5% kind of an EBITDA. So like that will -- sorry, that will basically translate into total EBITDA of about INR 450 crores plus like -- around INR 600 crores to INR 650 crores, I've just done a mental math here. I hope that's what -- basically, you can take INR 1,000 crores at 18% and another INR 2,500 crores at 18%. So beyond that, like it will be a pass-through, and of course, as we reach full utilization levels in FY '26, we -- our target would be then to do a better product selection in our base business and then to try to improve our EBITDA margins in the base business.

[Manish Gupta, analyst]

Yes. Very clear. My third question, sir, is that while the electrolyte is a new business for us basis discussion with your technology partner, what is the typical life of these electrolyte plants?

[Harin Kanani, executive]

Life, so the battery -- the electrolyte plant, which was established in Japan, I think, 2 or 3 decades ago, that is still running. The plant which was set up in the U.S. also for 8, 9 years ago, is still running. We keep making improvements as customers' recipes become more complicated or modification, but generally, the plant will run for a long period of time.

[Manish Gupta, analyst]

And sir, how do you propose to depreciate these?

[Harin Kanani, executive]

I'm sorry, I don't have a very accurate answer on that. I think it would be similar lines of what we have. But as of today, I don't have an accurate number. I don't know if -- Ketan, in our models, if you have taken depreciation, if there's a percentage defecation you are taking, if you can add, but I don't right now have an exact number or a decision on that.

[Ketan Vyas, executive]

No, we don't do on a percentage basis. We do on the life of the assets, which we await to get conformation from the technical team.

[Harin Kanani, executive]

So currently, are you using a particular number, which you have. So it's beginning 10 years, 15 years, 20 years?

[Ketan Vyas, executive]

We do about 15 years old.

[Manish Gupta, analyst]

Okay, fine. And the last question, if I may, sir. Right now, we haven't announced any CapEx for the cathode -- the LFP cathode but I wanted to ask that for a minute, if we assume that Neogen will not be participating in this opportunity. I wanted to understand that players who are getting into the LFP cathode, how will they source the lithium? Will they themselves start with lithium carbonate and refine it or will they be looking to source lithium salts needed for the LFP cathode from a player like yourself?

[Harin Kanani, executive]

So as we have shared in the past also that Neogen has not announced any capacity in lithium cathode but we have capabilities around lithium cathode both our own developed technology as well as in partnership with international customers. So let's say, maybe not as reputed as MUIS because when it comes to cathode and LFP and some other cathode chemistries, this is -- very few companies have worked on this outside of China. But we do have this technology. The main reason why we have not done is because our customers are making several choices. Will they do NMC or will they do LFP. If they do LFP, would they want to import or would they want to make it in-house. And then some of them because cathode is a very large contributor, they also consider whether they want to make it -- whether they want to make in India, whether they would want to make it in-house or buy from a company like Neogen, right?

So because there is not enough demand clarity like we have in electrolyte and electrolyte salt. So we have not moved up with the CapEx or any plans around that. But we do have a visibility. And like our only condition is for cathode we will move ahead only when we have a very firm, like a binding contract or like some kind of a joint development or a joint plant, some such situation is only when we will basically venture into a cathode area. The way we have currently moved in electrolyte and electrolyte salt, we would not move into the cathode just because there are multiple options. Whereas for electrolyte, there's a strong clarity that it has to be local, like people want to buy from us and most of the companies are not going to make it ourselves. So this was just clarifying on your cathode comment about Neogen, but on the second...

[Operator]

Sorry to interrupt, sir. We had lost what you said in the last.

[Manish Gupta, analyst]

I think the management may have dropped off.

[Operator]

Yes, sir. Right now, it's just stopped. [Operator Instructions] Ladies and gentlemen, we have the management line connected back. Sir, you can please continue with the question-and-answer session.

[Harin Kanani, executive]

Yes. I'm sorry I dropped off -- the call got dropped. So basically, Manishji, to answer your question, I don't know how much got, but Neogen has made like work in battery materials -- in the cathode material, but we will basically proceed in cathode material only when we have a strong business clarity and a very committed customer clarity. Because in electrolyte, we have like that clarity now, we also have that strong need of localization. So that's why we have proceeded further on the electrolyte. And just to answer specifically your question about where they will source the lithium from, so the lithium mining majors generally make lithium carbonate and lithium hydroxide battery grade. So depending on the technology which you are using, in such a case, you directly buy carbonate and hydroxide directly from them. At least in the lithium to the best of our understanding, most of the companies would do that.

[Operator]

The next question is from the line of Abhijit Akella from Kotak Securities.

[Abhijit Akella, analyst]

Just on the inventory write-down first. Will it be possible to share our numbers regarding how much has actually been written down?

[Harin Kanani, executive]

So I think in BuLi Chem, not a write-down, but basically, what happened in BuLi Chem is that we acquired the company in June, and in June, there was a very strong demand both from pharma and agro sector. So we imported the raw material, which is lithium metal and other materials required for making n-Butyllithium. So this material came through by, let's say, August or September, but that is when we -- the specific customers with whom we were working, their demand had gone down significantly or they had already entered into some contracts. So then we were barely -- and last quarter, the lithium prices instead of like being above stable lithium price, they actually went below stable lithium price So basically, we had to then like sell those material at lower cost, which is today's market cost. So because of this timing mismatch by the time we ordered the material came and we were able to sell because of just the start-up related conditions, we were building that inventory.

So there was a charge of around INR 4.5 crores to INR 5 crores is our estimate that we lost just because of the price fluctuation on lithium. So that was on the BuLi side. And also, as I explained, lithium had gone to stable price. So we were able to manage the journey of lithium from, let's say, $15 to all the way up to $80 and then back at $20, $25, which is supposed to be the stable lithium carbonate prices. But today, those prices have become even half of that. So on Neogen side also, we had around INR 2.5 crores related losses, which was because of like the price dropping very fast and we had an option either to wait more or -- for the prices to recover, but since we didn't see the price recovery happening very seriously, immediately, we basically decided to go ahead and sell at what is today's market price.

So there was a INR 2.5 crore kind of a [indiscernible] on Neogen and around INR 4.5 crores to INR 5 crores [indiscernible] on the BuLi because of the lithium price fluctuation. So of course, with that majority of the high-priced inventory, like I know it's kind of already factored in, there'll be some bit of impact of this on Q4. But like Q1 onwards, so next financial year onwards, we should be back at normal. And like you will not see too much of further erosion or impact because of lithium price fluctuation. Now in BuLi also, we have a regular set of customers who are getting established. So it's not that we are building up inventory to support. It will be more pass-through. So whatever material comes, we think we will have a better pass-through, and we'll be able to better take care of this in the coming financial year.

[Abhijit Akella, analyst]

Understood. No, that's really helpful. The other thing was on the CS business, would it be possible to share some update on how the business has been progressing? If it's possible to share a split between the 3 components of the base business, that would be helpful. And then specifically on CSM, how we are producing in terms of relationships and molecule development and that sort of thing?

[Harin Kanani, executive]

Sure, so I think unfortunately, for us, the CSM business has done well. It's like now already contributing almost like 14% to 15% of our revenue. So our goal was to move from 10% to 20%. However, in the Advanced Intermediates segment, we see a little bit more strong competition from China in the pharma side. So together, they are still at about 30%, what we had targeted to reach up to 40%, the Advanced Intermediate and CSM. This is the exact contribution. Now in terms of the relationship, so the positive news has been that more and more agrochemical companies have already now approved Neogen.

So like we did the first trial campaigns for them. And we have done more than now 9 or 10 different molecules for different agrochemical companies. The demand for these molecules can be as low as like INR 10 crores, INR 15 crores just to start the relationship to as high as INR 50 crores per annum kind of a revenue potential. So that's a good news. The difficult news is that in the next year, most of them don't have a very large demand. So while the number of relationships have increased, number of molecules we have increased. But still, we don't have a very good clarity, at least in the first half for the next financial year. So we are again hoping that beyond Q2, these existing relationships that we have built or the approvals that we have done will start contributing as the customers will start planning their 2025 calendar year demand, let's say, in the second half, and that is when if the agro recovers, then we have a good way to basically increase our revenue contribution from CSM business.

Further, as we had mentioned, we also have now several projects into flavors and fragrance segment. So these are also now moving along as well as some non-agro, non-pharma, non-flavor like specialty application kind of molecules. So these also are now contributing. So to some extent, whatever agro we were not able to get because of weaker demand, these flavor and fragrance and other industries have supported. So when agro comes back, it will like help us to make our CSM and Advanced Intermediate business stronger.

Finally, our goal was that once Dahej site is there, we start talking to the large 5 agrochemical companies in Europe and U.S. So most of these discussions have initiated. They have also started their evaluation work. Of course, there's a big slowdown because of lack of demand or lower demand from their side. But still, they have recognized the capabilities that we have in bromination chemistry, Grignard chemistry. Now that we have approval, 7, 8 different molecules of multistep synthesis as well as the synergies which come with this n-Butyllithium. In fact, those projects where there is n-Butyllithium use, we have seen maximum interest. So I think all of these, once the agro demand will pick up, will really benefit us.

[Abhijit Akella, analyst]

Understood. And sorry, just more point to clarify regarding to -- regarding our strategy in the CSM business. So we intend to focus only on commercial scale molecules or like some other peers in this industry, we intend to get in into the relationship right at the stage of, say, molecule development early on during R&D or early commercialization and ramp up the relationship from there. How would our thought process be?

[Harin Kanani, executive]

So, so far, all the work which we have done is more on the commercial manufacturing side. And like so basically developing commercial business and focusing our R&D efforts on that. However, we are in the process of expanding our R&D lab also in Karakhadi. So this capacity will basically come online like sometime in the next financial year. So once we have this additional CapEx, part of this, especially in pharma, what we have seen is that sometimes it helps if you start this relationship really early on. So we will also maybe offer a little bit of our R&D capabilities of that. But in terms of revenue significance, it will be more like it's not basically for revenue. It's just to start the relationship early so that we can have a better pipeline. So that will be only -- that's the only difference. But otherwise, our focus still remains on more commercial. And in terms of revenue coming in, the revenue will largely be from the commercial manufacturing activity.

[Abhijit Akella, analyst]

Got it. And 1 last thing from me. On the battery chemicals business, there has been some sort of growing amount of news reports regarding somewhat of a slowdown in the adoption of electric vehicles, et cetera. So in that context, how do you see the industry progressing? I mean, is it broadly rolling along as per your original expectations or are things moving a little bit slower than you expected. And with regard to your projects commissioning time line, plus maybe what others have announced, how is the situation looking in terms of time lines in terms of demand, et cetera?

[Harin Kanani, executive]

Sure. So far, whatever we have seen, I mean, we still feel that the India demand kind of continues to grow. See, the fact in India is that there's already a demand which is not being met because today, we are not manufacturing the cells, right? I mean there's already a strong demand which exists -- would have existed today for battery materials if there was a cell manufacturing capacity. So most of the cell manufacturing capacity in India, as we had stated earlier, remains on track. So like in 2024, we will start to see some cell manufacturing happen, like 1 or 2 gigawatt hour level projects will just make their start. And then they will basically ramp up in early 2025, and like a few more will come, let's say, in the second half of '25.

So if you go to 2026, my estimate is you will at least have 4 or 5 projects. And like so we'll already have 4 or 5 projects -- 4 to 5 plants which are basically working at a gigawatt hour level. And by '26, I also see the one we will start in '24 scaling up their operations. So I think our -- from a timing perspective, our electrolyte plant starting now will be -- will take care of the initial gigawatt hour plants which are coming up in India, as well as some international customers as well as some non-EV but let's say, electronic battery customer demand as well.

So we'll start with that in 2024, which is basically FY '25. And then their initial ramp-up also will take care from Dahej, and our target remains that in the second half of 25, so let's say, somewhere around, let's say, December 2025, 1 quarter before or after is when we expect the 30 KTA plant to come. So I think it will be in the perfect time that in 2026 when majority of these customers are ramping up and more new plants are coming online, we will be ready from the beginning to take care of them for their electrolyte needs.

Similarly, if you would have observed in our opening remarks, the international battery material demand non-China because of IRA and because of heavy dependence on China. So alternate source to China remains strong. So there's a very strong interest in our non-Chinese electrolyte salt and additive demand. And this is why our original plan was to increase 400 to 1,000 and then from 1,000 directly go to the 3,000. But we have already -- we had to increase the capacity to 2,500 metric tonnes to take care of the demand like before our new plant will come up.

So in fact, the way we are seeing that demand come in, it's actually getting preponed, the electrolyte salt and additive demand as compared to what we had originally estimated, whereas I think electrolyte demand remains on track. And I think overall, if we talk of just like EV and energy storage, we feel there's a bit of slowdown mostly in China. And of course, there's a little bit of challenge which people have seen in the U.S. but still EV numbers keep continue to grow in all the regions. And I think the commitment of majority of the automakers also still remain and the non-EV, which is basically energy storage applications is still picking up, still the models are getting set around that.

So that is also still in demand as the world moves more and more to renewable, they will basically need more energy storage. So I think more or less, we feel our electrolyte demand the way we see remains on track. The electrolyte salt and additive, we have actually preponed and added some more additional capacity, which has been also 1 of the reason why our CapEx numbers -- the estimated CapEx numbers were higher. So that's based upon the final design that we received from Mitsubishi and this additional salt capacity which we needed to have because we see the electrolyte salt demand kind of getting a little bit preponed in the international market.

[Operator]

The next question is from the line of Jason Soans from IDBI Capital.

[Jason Soans, analyst]

So first of all, sir, I just actually wanted to confirm, I mean, from a previous participant, you mentioned that on a gross block of -- I just wanted to confirm this, on a gross block of INR 400 crores. Just considering stable lithium prices and bromine prices, we're able to do revenue of INR 1,000 crores with an EBITDA margin of 18%. And then same thing, you mentioned that for battery chemicals business with an EBITDAM of 18%, INR 3,000 crore revenue potential. Is that right? That's what you mentioned?

[Harin Kanani, executive]

So 18% on INR 2,500 crores.

[Jason Soans, analyst]

INR 2,500 crores -- 18% on INR 2,500 crores. And on the base business side, INR 1,000 crores with an EBITDAM of 18%, right?

[Harin Kanani, executive]

Correct. And plus or minus 1% is what we take in that, both.

[Jason Soans, analyst]

Yes, yes. Sure. Sure. And sir, I just wanted to know, I mean, in terms of -- we have spoken about this before that in terms of, sir, realizations, probably we are looking at a number for electrolyte probably something in the range of $5 to $10 per kg. Just wanted to know in terms of electrolytes as well as lithium salts what are you taking an average realization considering a stable or an average lithium price? I just wanted to know what are the realizations you are taking in your calculations for this -- for both the electrolytes as well as lithium salts.

[Harin Kanani, executive]

Yes. So the electrolyte realization is somewhere around $10 and it will depend basically on a recipe to recipe kind of a situation, okay? Because each customer has a unique recipe in which -- so it's very difficult to give 1 single price. And also, like I said, there's 1 price in China, there is 1 price in Japan. There is 1 price in U.S., and all of these are like varying quite a bit. So what will be India's price depends on the volume, it will change as the volumes will increase. But again, as we said, electrolyte business is mainly going to be like an ROC driven kind of a business. And at least we see a ROC of 20% plus. So that will be the basis of our assumption. So actually, EBITDA number is like a derived number, but ROC is what we are targeting because as you keep increasing higher capacities, you can afford a lower price based on the ROC that you are doing.

[Jason Soans, analyst]

Okay. So $10 per kg is what you're working with currently, of course, and lithium salt, sir, in dollars per kg?

[Harin Kanani, executive]

So again, there are multiple salts and the range would be, let's say, around like $27, $28 to $35 in that range.

[Jason Soans, analyst]

Okay. And sir, just in terms of battery -- I mean in terms of electrolytes, lithium salts, how are you looking at the traction on the ground with the negotiation customers who have been Ola and TVS, Panasonic, et cetera, how are the negotiations with the customers. Just could you speak about some color on the ground, how is the traction going on?

[Harin Kanani, executive]

Yes. So we are having very good conversations with all our customers. Of course, the customers -- so we've been -- we have been giving like a few kgs, samples to these customers for almost last now 15 months. Now some of these have started like a larger trial. So they are also now buying, let's say, 100 kg, 200 kg kind of electrolyte volumes. And most of them, like are expected, at least 2 or 3 of them are expected and actually are after us to ensure that our facility will be ready let's say, by end of the current financial year because they are expecting trials like larger -- like trials on their commercial plant start, let's say, in the first half of FY '25. So we are on track basically to deliver that. So our facility will be ready so that we can give them the initial trials.

So far, whatever they have presented Neogen, whatever quality systems of Neogen they have seen or the quality of electrolyte they have seen, they are very happy with that. Also now with MUIS, we give them the option that if they want to try MUIS recipes, so we can also work with MUIS to suggest to them recipes, which can improve the performance of their cells. So this is also taken very positively. And most of these customers remain engaged. In fact, what we are seeing that even more new OEMs like in India who are either planning in future 2-wheeler and 4-wheeler. They are also engaging basically when they want to consider the option of making the cells in India.

So this is in the Indian market. And internationally, basically when we are talking of the electrolyte salts. So again, we are working with several customers where they are visiting our site. They are taking our samples. Some of them already approved our samples from either R&D or the early production sample runs from the trial production run. So we are also seeing a very positive feedback both on the salts in the international market as well as the Indian electrolyte customers, future potential Indian electrolyte customers.

[Jason Soans, analyst]

Sure, sir. And sir, just if you could just explain sir, electrolytes, of course, have to be sourced locally. And what is the impediment or what is the hurdle to so that it cannot be exported? And I mean, if lithium salts, that can be exported. Is my understanding correct? Or could you just -- so what is the impediment towards an electrolyte solution being exported or something like that?

[Harin Kanani, executive]

If you look at Mitsubishi, when they started in Japan, this technology started in Japan, they set up a plant in Japan. Then similarly, when their customers moved to, let's say, U.S., Europe or China, so they also set up a plant in Europe and -- U.S., Europe and China, instead of just setting up more capacity in Japan [indiscernible] right? So the main reason is that electrolytes require very low moisture content, very low acidity, very low impurities and some of them have additives, which require also temperature below 10 degrees. So if you think of tanks which are required for transporting this across the world, right, the cost of such a tank and the cost of transportation and sending this tank to the customer, bringing them back. And certainly, if you have multiple customers with multiple chemistries, making sure that we deliver them on time, whatever is needed the particular recipe.

So this is more complicated. And that's why in terms of the performance and the quality of the electrolyte, it is always preferred that the electrolyte is made locally, okay? Now when you think of electrolyte salts, this salts. First of all, the volume of the salt that you are sending is usually between, let's say, if it's a salt, it's between 10% to 15%. And it is a additive it's between 2% to 5%. So the quantum of salt that you need to ship as compared to the quantum of electrolyte reduces, right?

The second thing in this is that this doesn't require low temperature, the shelf life is longer. It will require moisture-free conditions. So it requires a specialized packaging, but the volume of it is lower and the fact today also remains that 90%, 95% of the salt is in China. So people are anyway used to buying from China and then making the electrolytes locally. So therefore, when we are going and offering, let's say, a salt, so then what the question, which is simply remaining, instead of importing from China, I have to import from India, right? So that's why we are not like making a very big change from what is already being done. So that's the reason why salts are more easier to export in the international market whereas electrolytes are usually made locally. So therefore, we are not targeting very large export market in electrolyte as well as the fact that we are also not seeing most of the Indian customers like basically relying on imports totally to basically get the electrolytes into India on a large scale on a sustainable basis.

[Jason Soans, analyst]

Yes. Sure, sir. Now in terms of -- sir, of course, we have seen specialty chemical companies. We've seen a weak underlying demand, which is driven by driving down raw material prices and hence, realizations as well, especially with Chinese competition, especially with generics, et cetera, being very intense and they are driving down intermediate prices also. Just sir, in your sense, do you think we have bottomed out? Or I mean, just some color on how -- are we -- have we bottomed out probably we can see a gradual recovery from here on the world markets? What's your sense on the entire pricing -- of course, with the falling prices, our EBITDA also -- absolute EBITDA definitely has gone down. That's been the story of this. So I just wanted to understand in your sense, how is it -- do you see the price realizations having been bottomed out and been a gradual recovery from here on? Or is there more gain still left?

[Harin Kanani, executive]

So what we have seen is that in pharma, we are basically saying that more or less, I mean, again, in pharma, there are some customers who are basically doing okay. And there are some customers who have already recovered, and there are still some customers who are like still like recovering. So there are some categories like antiretrovirals or some specific large molecule even related to heart-related ailments. So they are still seeing that there's still inventory corrections happening and the demand is still coming up, whereas there are some segments more specialty, more niche pharma have already recovered, on the pharma side. On the agro side is where we will see more challenge where people are still not getting visibility. So of course, we -- like our supply chain is in the international market, especially in Japan and in India basically people who are working with innovators. So most of these, like are basically guiding us, that only in the second half of the calendar year, when they will start looking at 2025 demand, that is when basically agro will improve upon.

Also, like the main -- so in terms of raw material prices, like we really feel that most of the people had credited a stable lithium price, which is slightly higher than the previous 30-year-old average. Let's say the 30-year-old average is at around $12 to $15 of lithium carbonate. And what -- most of the people who are predicting $20 to $25 will be a long-term stable price of lithium. But unfortunately, today, the lithium prices have gone down towards historically low or historical low average of $10 to $12. So we don't see further decrease because as that happens, more and more new edge mining companies or the newer mining companies who especially those which out of Australia will not be able to sustain it for a long period of time, reducing the supply.

So anyway, this is what is our belief that it should not reduce further down. If at all, maybe 10%, 15%, but not a very large decrease from today and because the prices have gone down so much, by 2025, '26, when there is, again, revival and more battery production will come in non-China markets, that is when you might see another lithium price jump. So this is anyway my estimate, but let's see how the markets proceed. And I think our EBITDA, I mean, it's -- barring this particular lithium thing and the fact that we have not yet reached full utilization the way we have targeted, we think more or less our EBITDA margins, we have still done a decent job to protect it. It's just that $25 to $12 was something which took us by surprise and our customers held back and especially the BuLi situation because we were just starting. It came at a little bit wrong time when we are not fully ready. But going forward, we'll be able to manage it better.

[Operator]

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

[Yash Shah, analyst]

My first question is more of a clarification question, sir. Last quarter, we had revised our expansion for the salt -- electrolyte salt from 2,000 tonnes to 4,000 tonnes. I heard you saying basically mentioning 2,500 something. I'm really not sure about it. Can you please reiterate the same?

[Harin Kanani, executive]

Sure. So the 4,000 was broken down into 1,000 metric tonne in our Dahej facility and 3,000 metric tons in the Greenfield facility. So now because we have seen more stronger demand of the salt, that 1,000 is being increased to 2,500 metric tonnes, and we are seeing 3,000 metric tonnes still in new Greenfield remains constant. So total is becoming 5,500 metric tonnes. So what we had increased from 2,000 to 4,000 now stands to increase to 5,500 metric tonnes. And the increase is basically coming in our Dahej facility because the customers are not able to wait until our new facility comes online. So we are using the existing land available in Dahej to increase to this capacity.

[Yash Shah, analyst]

Understood, sir. So basically, and this -- the rest of the 600 tonnes, it was expected to come by the end of next quarter. So now since we've increased it to 2,500, when is that expected to come, sir, since we've increased the capacity on the Brownfield side?

[Harin Kanani, executive]

Yes. So our 400 tonnes, like I said, all the trials and everything have started, that's basically commissioning this. Let's say, we are having several phases. So like 1,000, then maybe we'll have a 1,500 and then ultimately 2,500. So most -- our target is at least 1,000 and 1,500 to come online let's say, in Q2 or Q3 and 2,500 let's say, by end of Q4. So by end of next financial year, we would be at 2,500 totally, and it will be in sales. So as you said, 1,000 will come first, then there's another particular plant getting added which will increase it to 1,500 and then 2,500. All of that will be happening in next financial year. And then that will take care of FY '26 requirements of our customers. And then another 3,000 metric tonnes will get added in FY '26. That will basically take care partly of our own electrolyte requirement and partly take care of the additional requirements of our customers.

[Yash Shah, analyst]

Understood, sir. That was really helpful. Sir, my next question was on the base business. Now as you mentioned before that, we had a INR 36 crore impact in the current quarter. So now if you just look at the numbers which were there in the last quarter -- last year same quarter, we would ideally touch INR 200 crores, and that will be ideally the same -- at the same amount of volume. So just really wanted to understand since agro makes about 60% to 65% of our base business. Is it like -- which end user industry did you see this demand from and also in this geography, sir, if you can just harp a little bit more on that?

[Harin Kanani, executive]

Sure. So just to clarify, that INR 200 crores what you have calculated is when the lithium prices were at its highest, right? So again, that was the peak volume. And of course, on a full utilization, we will cross that. But today, we are not there. So the plants are not fully utilized. The second clarification I wanted to make, for us, pharma was always higher. So it's 50% to 60% and agro was around 20%, 25%. So that 20% to 30% in that range, depending on -- so that 20% to 30% is a bit lower, which has been right now made up by pharma and like some business which I told you flavor and fragrance and some non-pharma non-agro, so basically other industries. So that has made it up.

[Yash Shah, analyst]

Understood, sir. Understood. And any particular geography, sir? Like is it Europe or U.S., Japan, if you can?

[Harin Kanani, executive]

No. So currently, especially our agro business, as you know, was mostly international. So -- and even in India, it was linked to the international. So that is where you have seen our exports have gone down significantly, mainly driven by that as well as the fall in lithium prices. So it's mostly we have done more pharma customers. So we have done molecules, which we are normally not doing, but we have done those molecules in this quarter to make up for the shortage in the demand. So mostly, it's pharma, generic India.

[Yash Shah, analyst]

And sir, 1 last question. I just wanted to understand what is our current gross debt and with this expansion coming in, what do we target as a gross debt-to-EBITDA ratio or net debt-to-EBITDA?

[Harin Kanani, executive]

So our gross long-term debt today will be somewhere around INR 150 crores. And let's say, working capital will range between around INR 200 crores to INR 250 crores in that range depending on which period of time you are basically looking at. I'm sorry, I don't have the number for long-term and maybe in the next call, we'll prepare and we'll give you an update on that, or you can send us an e-mail. And if it's not a nonpublic information, we'll try to [indiscernible].

[Operator]

The next question is from the line of Anirudh Shetty from Solidarity Advisors Private Limited.

[Anirudh Shetty, analyst]

So my first question was on when you look at our battery chemical business, the assumption of margin behind that ROCE of 20% upwards is actually 18%. I just want to understand, unlike our bromine business where we have a long-term history, the business model is more established. This is more of a [indiscernible] business, the economics are still getting -- revolving. So I wanted to understand the basis behind our assumption of 18%. And also, there is 2 segments, electrolyte and salts. So if you could just give some color around what is the implied margin for electrolyte and salts, respectively?

[Harin Kanani, executive]

So the basis for our assumption is basically what we are looking is that, okay, like if we are doing investment, we are taking the risk, if we are the first mover, and to be able to justify the risk and the investment, this is a bare minimum that we need. Now when we put that bare minimum number and arrive, let's say, at what is my selling price, right? Because you would put all your costs, your depreciation interest and you'll put this number and arrive at a cost, and what we have seen is that when we put that cost, let's say, when I'm talking of salt, we are expensive as compared to China, but we are cheaper as compared to Japan and Korea, which are the next 2 available options, right? So then we are confident that, look, this is something which if somebody says, I want a non-China price, or in fact, if we are looking at more stable because right now, the China prices are very depressed because of overcapacity. But if I were to put the old lithium prices and if I were to look at stable salt prices in China, we are more or less tracking that.

So that's the reason why we feel confident enough that this is something which we will be able to use it. We'll be able to get. Similar situation in terms of electrolyte. So when we put this number in our model, look at the electrolyte prices, what we feel that when I'm looking at the price, we are somewhere lower than the prices which are, let's say, prevailing in Japan or Korea and, let's say, within the range of the lowest and the highest Chinese prices. So we feel like if the remaining markets also are able to sustain that, and this is what we have done. So therefore, this is a business. Again, there's no buyer. There is no seller of this in India today, and this is a fragmented more geographical concentrated market, the way we have seen. So therefore, right now, this is the basis of our assumption.

[Anirudh Shetty, analyst]

Got it. And right now, there's no local manufacturing, a lot of it is being imported. Would it be fair to assume that a lot of the imports are coming from China? And at certain scale, would it be fair to assume that as a local supplier, and there will be some PLI benefits as well, would we be cost competitive versus China at a cell level? Or will there be requirements of some antidumping duties to kind of bridge the gap?

[Harin Kanani, executive]

You are saying at the cell level?

[Anirudh Shetty, analyst]

Yes, yes.

[Harin Kanani, executive]

I mean, I think this is a question you have to ask my customers, cell manufacturing. But most of them like are confident enough that like they should be able to, because what we have seen worldwide, and I think if you see some international reports also, while the cell-manufacturing costs have dropped like [indiscernible] has been dropping, but what people are commenting that majority of the scale benefits are already achieved. Like for example, when somebody was making only 10-megawatt hour or 100-megawatt hour, from there you went to like 1 gigawatt hour.

So the savings that you do when you move from 10, 100 to 1 giga is substantial, then from 1 people started going to 5 or 10 gigawatt hour. And then from 5 and 10 now today, people talk of plants, which are 20, 30 gigawatt. So as you start like going to these scales, so as long as you've started designing your plant at like 20 giga -- 10 giga, 20 giga and multiples of those, what I have gotten the feedback is beyond that, the scale benefit is not that much, okay? So basically, then you are basically driven simply by what is the material cost, what is the efficiency with which you are operating, which will basically make like 10%, 15% kind of a difference.

So I personally believe majority of the scale benefits that we needed to get, we have gotten. The Indian companies are also talking of at least their initial plants are all 10 giga, 20 giga, and some of them are even considering like a ultimate 50 or 100 giga sort of volume. So I'm confident that they will be competitive in terms of competing against China in a fair competition. Now I personally feel the PLI benefit will help them get to that scale. And after that, if the price remains fair, then I think we'll be able to manage well. If it's unfair, then you need something like antidumping duty production if somebody decides to just dump like crazy. And we've seen China do that in China, in, let's say, even in pharma markets and in other markets. So that's where the government, if it needs well, I feel they are quite committed to protect the Indian companies in that level.

[Operator]

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

[Archit Joshi, analyst]

I just have 1 question. So just building up on the previous discussion that you're having with respect to the amount of gigawatt hour capacity that it's rather going to be built up over a period of time. But I'm slightly looking at it from a myopic perspective from, let's say, for CY '24 or CY '25, I think the earlier anticipation was that we'll have close to 0.5 gigawatt, maybe 1 gigawatt or sort of a capacity in India in this year. And then it will start sort of doubling up exponentially over a period of time.

In the current scheme of things, sir, in your discussion with your customers on the same account, especially in domestic battery manufacturing, where we are going to mostly were to sell electrolytes. Sir, what is the progress there, sir? And how exactly do the scale get generated? Is it that it goes into a testing phase wherein our pilot plant will be occupying more of capacity towards that particular demand. And then it takes a year's time to ramp it up from 0 to 1 gigawatt hour. So that time frame is essentially something that I'm curious to understand if you can explain both these things in 1?

[Harin Kanani, executive]

Sure. So I think the way this will work is that our principle has been, we have to be ready when the customer is ready, okay? Because if they want electrolyte and if I don't have a plant to make electrolyte, then, basically, we are forcing them even if they don't want to basically import correct? So if you look at what Neogen has done is, so there were several customers in India who for last like 15, 18 months, had developed a capability to test, make the cells at a -- in the lab, like a few 100 cells, 200 cells. So we were also ready with our facility, and even up to 10,000 cells, et cetera, kind of a demand when they wanted, we were able to basically give them the few hundred liters of electrolyte. We were the only Indian company who was able to do that for last let's say, 18 months. And like most of these customers have either bought the material to make their initial cells or send the material for evaluation to their international partners who can basically evaluate the cells.

Now next, what will happen is as these people set up their giga plant, they will also need electrolyte to support a giga, as I said, 1 gigawatt hour, depending on NMC or LFP, somewhere between 500 to 1,500 metric tonnes. So let's say, the 2,000 metric ton capacity can support up to 4 gigawatt hour of NMC cell production in India or, let's say, 1.5 gigawatt hour of LFP or on an average basically 2 gigawatt hours of cell production can be supported by our existing facility. So if you -- and this is a facility which we have from now till, let's say, September or December 2025. So will India at least make 2 to 3 gigawatts hour of cells let's say, by December 2025? So to me, the answer is yes. With whatever is happening today, they will be at 2 to 3 gigawatt hour or let's say per month if you are thinking of, around 0.2 giga per month kind of production, which can be supported by my existing plant.

In fact, if they really ramp up well, I might even have to increase this. I mean until the bigger plant comes up, I may have to increase this 2000 to 3,000 or 4,000. But with amazing infrastructure in place, that can happen relatively quickly. So we'll be ready for that if it's needed. So I think that will take care. And I personally see that once they start giga production in '24, '25 they will start stabilizing, and there will be more people who will come online in '25 and '26 is when the guys who have stabilized in '25 will jump, make the 5x jump in '26 and the guys who are stabilizing in, let say, '24, '25 who are starting, they will also have some additional requirement in '26.

So the '26 is when we need that Mitsubishi plant to come online. So we will keep watching how they are progressing and while the Mitsubishi plant, so they already finished the design, they've already shared the final design numbers like estimation of the -- what is it that we will need. So we have also completed that, and we are in a very advanced stage talks with some of the letters who want to give us a very long term. So they also look at this as a priority, long-term project finance kind of a mode. So like they are giving us preferential terms also so that we can manage our debt service coverage ratios and things like that. So I think we see -- what I see, if you look 2030 number of 150,000 metric tonnes kind of employee demand, I personally feel that will happen. By 2025 -- and will my 2,000 metric tonne run at a full capacity? My guess is yes. So in fact, starting in, let's say, March '24 and by, let's say, 18 months or 21 months, if I'm reaching full utilization levels. I would be very happy with that. And the 30 KTA plant, I still believe, if it starts in end of 2025, which basically is FY '26, so full utilization of that might happen in FY '28 or FY '29.

[Archit Joshi, analyst]

Got it, sir. Just a small one. So this year, we are not expecting any battery capacity to come on then, right?

[Harin Kanani, executive]

[indiscernible] coming online. So like I said, already trial runs have started. And like if everything goes well, before March we will start like at least make some trial steps, so that's our internal target, to achieve some kind of battery sales before March '24.

[Archit Joshi, analyst]

Sir, not ourselves, talking about the gigawatt power capacity in India for this year. Any visibility on that?

[Harin Kanani, executive]

This year, meaning FY '24 or FY '25?

[Archit Joshi, analyst]

Let's say, CY '24, this calendar year.

[Harin Kanani, executive]

No, I still have -- there is battery capacities which would come online in calendar year '24. At least, whatever I have seen so far. They will have -- they will not be fully optimized. They will not be running at full capacity, but they will start manufacturing cells in the current financial year -- I mean in the current calendar year '24.

[Operator]

The next question is from the line of Manish Gupta from Solidarity.

[Manish Gupta, analyst]

Sir, just wanted to ask for this entire CapEx program, would you now need to raise any more equity?

[Harin Kanani, executive]

So we'll answer that question. As of now, we see what we have raised is sufficient enough. The bank also, the financial institutions also with which we are also looking at -- we are also working with are also like satisfied with the amount of equity which we have raised. So it's not a necessary condition, but whether it's a desirable condition or not and when between, let's say, now till 2026, so that's the question we'll take a look. That will depend on how fast and how aggressively the base business will recover, how BuLi will start contributing and how exactly we are phasing out the electrolyte salt and electrolyte capacity. So we'll keep a watch on that. Again, it's not a necessary condition, but if it's a desirable condition considering [indiscernible] we'll basically take a view on that as the year progresses.

[Manish Gupta, analyst]

Just a follow-up on this, sir, that you've mentioned that you are comfortable with a debt to equity of 1.25, but if we were to look at a lot of our earnings are perhaps going to be more back-ended, more FY '28 and FY '29, right? What is the debt to EBITDA number that you will be comfortable with say, going into starting FY '27?

[Harin Kanani, executive]

FY '27?

[Manish Gupta, analyst]

Yes, because that's when your -- the battery chemical business will really start contributing, right, to let the build up phase. If it's a INR 1,500 crores CapEx program and you're not going to raise any more equity, the amount of debt in the business relative to the earnings or the EBITDA seems to -- might really expand. So what's the number you're comfortable with on debt to EBITDA?

[Harin Kanani, executive]

So ideally, we want debt EBITDA to be below 3. But like I said, for a certain period of time, like as long as we have comfort in terms of the repayment schedule. So like the DSCR and those numbers also become more relevant, right? Your -- what is the interest you are going to cover, et cetera. So I think ideally, we want it to be below 3, okay? We know for a certain period of time, it will be high. So that's a call that we'll have to take at that time. That's the reason why I told you that it's not that we are close to taking equity, we'll -- so we have the necessary equity, if we want a desirable equity, that's something which will keep evaluate.

[Operator]

Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to the management for closing comments.

[Harin Kanani, executive]

Thank you all the participants for joining the call and your very interesting and insightful questions. I hope we were able to address your queries. If you have any further questions, please feel free to reach out to our Investor Relations team, and we will address them. Thank you once again, and we look forward to connecting with you again in the next quarter.

[Operator]

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