Neogen Chemicals Ltd
NSE:NEOGEN
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 194.2
2 337.3
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Neogen Chemicals Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Neogen Chemicals Limited Conference Call for analysts and investors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and welcome to Neogen Chemicals conference call for analysts and investors to discuss the business update. 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 initial thoughts from the management team on the development, post which we shall open the forum for question-and-answer, where the management will be addressing queries of the participants.
Before we begin, I would like to share our disclaimer here. Certain statements made or discussed on the conference call today may be forward-looking statements. The actual results may vary from these forward-looking statements. A detailed disclaimer in this regard is available in the press release that has been shared earlier.
I would now like to invite Dr. Harin Kanani to share his perspectives. Thank you, and over to you, sir.
Thank you, Nishid. Good evening, everyone, and thank you for taking out the time to join us today on this call. It's a historic and proud moment for all of us at Neogen Chemicals today as we collaborate with 1 of the global leaders of electrolyte to steer our growth initiative around lithium-ion battery chemicals.
We have signed a landmark agreement with MU Ionic Solutions Corporation in Japan, MUIS in short to acquire a technology license from manufacturing electrolytes in India. And we're all delighted and honored to share that MUIS has chosen Neogen Chemicals who are issuing the first ever license anywhere in the world for the manufacturing technology for electrolyte. This speaks leaps and bounds of our experience and decades of long expertise in lithium chemistry.
Not only will this agreement allow Neogen to ensure that the manufacturing plant meets stringent global standards for quality, reliability, safety and efficiency for electrolyte production, but also help in greatly reducing the approval times for lithium-ion battery makers.
Let me now give you some background on MUIS. MUIS is a JV between Mitsubishi Chemical Corporation and UBE Corporation and is a group company of Mitsubishi Chemical Group, which is a Japanese conglomerate, as we know. The group is one of the global leaders in electrolytes used in lithium-ion batteries and with a strong track record of 30 years and has 5 electrolyte manufacturing plants located in Japan, U.S.A., U.K. and China.
I will share some details of the agreement. As part of the contract, Neogen Chemicals will obtain a perpetual license from MUIS for proprietary and confidential manufacturing technology, which is globally acclaimed for building Neogen's electrolyte solutions' manufacturing facility in India with a planned installed capacity up to 30,000 metric tonnes per annum. The commercial production for which is expected to start in 2025.
These electrolytes will be sold in India and meet the growing demand of lithium-ion cell manufacturers here. This arrangement will give us a competitive edge and also a first mover advantage as you will be the first Indian company to have a proven global technology to manufacture electrolytes at scale for lithium-ion batteries.
With this, we will have full backward integration from manufacturing electrolyte to its major raw material that is lithium salts. We will leverage our deep relation with lithium suppliers to offer a high degree of indigenization of 2 battery manufacturers, thereby reducing the dependence on China for battery raw materials.
That ends my initial remarks and updates. I would now request the moderator to open the forum for Q&A.
[Operator Instructions] The first question is from the line of Manish Gupta from Solidarity.
Good afternoon. Dr. Harin, when you say it's a perpetual license, you also mentioned that the capacity is going to be 30,000 metric tonnes. So is this license limited to 30,000 metric tonnes or over time as much as you can produce?
The license currently is for 30,000 metric tonnes per annum. And as and when we want to increase capacity in the agreement, there are clauses built, in that for every additional 10,000 metric tonnes per annum, we have to again pay a particular license fee from time-to-time, and then we can keep increasing capacity. So it is a perpetual license for 30,000 metric tonnes per annum.
And for every additional 10,000 metric tonnes per annum, there is an agreement fee, which we need to pay. Also, if there is an upgrade in technologies over future that has to be discussed separately at the time when we are setting up additional capacity.
Okay. And will you be disclosing the commercial terms on this? Like [indiscernible] linked to revenue? Would you be disclosing any details on that?
Unfortunately, as part of our agreement, we are not able to share the exact commercials. But as I explained, this will be like a one-time fee, which we will be paying. So it will be basically like CapEx, like business CapEx, the technology that we require, which we are getting. So it will be part of our capital expenditure. And for the manufacturing technology, there is no royalty, which we have to pay down the line.
Okay. My second question was, can you explain a little bit more about how now your raw materials for batteries is derisked from China? Is it that you will be sourcing all the raw materials now from Japan?
No. So this is basically the manufacturing technology license. So the raw materials would still be basically be a Neogen choice as long as it meets the whatever minimum requirement of quality, which we or, let's say, MUIS would recommend for achieving the quality. So the raw materials can come from anywhere as long as they need the minimum quality requirements that we have.
We already had suppliers from India. I mean the key raw material, the salt, we were already planning to make ourselves, so that continues to remain the plan. And for other -- some of the lithium-based additives also we were planning to make ourselves. But for the non-lithium we had suppliers in Japan, in Korea, in China. So it will be a mix of that. And there are a few Indian companies also who might start making solvents or additives in the future, and we would be happy to work with them as well as long as they meet the requirements.
Okay. And my third question and the final one, Dr. Harin, was that China has much high-end steel; in India, in salts, right? I read somewhere that China has 95% of the world's capacity for salt. So if there is an Indian company that ties up with a Chinese company for salt and they import the salt into India and they use solvents locally to produce the electrolyte, would they not be far more cost competitive compared to you, even assuming some import duty just because of the massive scale that China has?
Yes. So when we have looked at historical stable price of China of the lithium salt versus, let's say, the price of the salt made by a Japanese or a Korean manufacturer, mostly what we have seen is the differences around 15% to 20% in the price between the 2 sources. So we feel with the Indian manufacturing cost advantage over, let's say, Japan or Korea, we would not be too expensive as compared to China on a stable like price.
Of course, when we work with China even internationally, if forever even pharma intermediates for the last 20 years, China can make prices which are very low and very high. And at that point of time, you can't always match them. But like on a stable basis, what we have seen is that our cost should not be very high, it's not like -- it's not the same as compared to the Chinese salt production.
So we believe that with the backward integration -- so the other thing would be that people who are part of PLI would require at least like ideally a 16% plus kind of a valuation. So it will be very difficult for somebody to just import everything and mix it in India and do that and meet the 60% criteria.
The final bit will be that you need to be assured that the quality of whatever salts are coming from China are meeting. So if you're going for a quality Chinese production, again, the cost differential might not be too high. This is our assumption.
If I may slip in 2 more questions, Dr. Harin. One is that given with this technology tie-up, does it also include any contract manufacturing opportunities for you, for the global market?
So this technology is mostly for electrolytes and our main focus for electrolyte formulations is for India. So therefore, this would not directly like open up contract manufacturing per se. However, in some sense, it can help in a soft way in a sense that this shows the confidence which, let's say, global companies have in Neogen's capabilities for building the plant with the complex plant of global standards. And indirectly, it may help us in our like salt production for the international kind of an application.
Okay. And my last question is that, given that you have now signed these technology agreements with output kind of milestones, do you -- basis what you know today -- what is your best guess by which time you think you can hit 30,000 metric tonnes?
So, this is to new. So we would still stick to what we had said of guidance which we have given for 10,000 metric tonnes per annum to reach by FY '26 and '27. But again, this was before the agreement. So now that the agreement is signed, we wish to basically go to our customers again, see like how many customers signed up and what are their projections. And once we have their projections, based on that, we'll able to decide how the 30,000 metric tonne will be reached. Like how the -- will it be in phases, will be direct, so accordingly, we'll take a decision on that.
Next question is from the line of Tarang from Old Bridge Capital.
3 to 4 questions from me. One, [indiscernible] applications in NMC batteries or LFP or both?
So the electrolytes that we'll be producing will be for both and other cathode chemistries also. So the electrolytes are common. However, the recipe for each 1 is different, and the composition will be unique, but this plant will be able to produce for both. At electrolyte level, only the mixing changes, but the technology remains more or less similar, whether you are making for NMC or for LFP.
Got it. Actually, I had a follow-up on some of the lines. So the output, the 30,000 tonnes output, will it be homogeneous or will it be heterogeneous depending on the customer and his requirements?
Yeah. This 30,000 metric tonnes per annum is planned for multiple customers and multiple recipes to be produced in the plant.
So it'll be heterogenous, right?
Yes.
Okay. And just a couple more. Typically, on a per tonne or per kg basis, what is the dollar value that you are anticipating? And secondly, how long was this interaction in the offering? I mean, what were the considerations from your partner side to sort of select you? And my sense is that there would have been other players as well. So if you could just give us some sense on that.
Yes. So actually, the specific electrolyte price depends a lot on the composition and the purity. So you have electrolytes which are used for very high-end use, where the quality requirements are very stringent, which is what gives also important for the battery life and the quality and the performance of the battery. So the electrolyte price keeps varying. I would still request you to use our prior guidance that when we hit 10,000 metric tonnes per annum with some extra salt capacity, we were looking at a revenue potential of around INR 1,000 crores to INR 1,200 crores. So maybe take some kind of an idea with that.
It's difficult to give you a very specific number because of the variation in this heterogeneous electrolyte compositions which we discussed as well as the volumes.
In regards to your second question. Yes. Why they chose us? I think -- I mean we basically demonstrated to them our ability and expertise to make lithium and salts. We've been doing that for last 30 years. Also, we were preparing on this for last 2 to 3 years. So we had done our homework. And as I said, on our own also, we had already made samples and we were able to submit samples to our customers.
So we feel just the fact that we've been -- like we approached them for quite some time back, our homework, which we had done in terms of making the salts, the technology development and the understanding that we really had as well as the fact that already most of the customers were in touch with Neogen.
So we think it's a combination. They never said a specific reason why they chose us. But if you get a chance, some time, please ask them, and let me know if there is something additional to this.
Got it. Last, how much is the CapEx that you are anticipating for this capacity?
See, again, I would point to our last guidance, which we have, which is like for making the 10,000 metric tonnes per annum capacity as well as the electrolyte salts required for that with our own technology, we estimated around INR 450-odd crores of CapEx.
Now there are 2 things we have to -- like in the next couple of months, we need to basically work with our customers to understand, okay, is it going to be 10,000 metric tonnes and then 30,000 metric tonnes or 15,000 metric tonnes and 30,000 metric tonnes or directly 30,000 metric tonnes, et cetera.
So are we doing in phases? Are we doing directly? Also, we need to understand what is the difference between our technology and their technology and to some -- like we have some idea, but to what extent there will be additional CapEx required. So it will be more appropriate for me to share a more specific number. Once we have the basic -- first few exchanges with the customers, as well as with them. And then we go to our board, get our plants approved and then share the revised CapEx plans and revenue plans.
Next question is from the line of Noel Vaz from Union Mutual Fund.
Yes. So just to -- are the investments [technical difficulty]
Noel, sorry to interrupt you, your voice is not coming very clear.
I'll rejoin the queue then.
Next question is from the line of Nilesh Ghuge from HDFC Securities.
Hi, Harin. Congratulations. Harin, my question is on the electrolyte. See, electrolyte to produce by using this technology, considering what percentage of total existing an electrolyte produce globally?
So, what I know is that, as I've said in our press release and the slide deck, which went with that, that they currently have -- they are already having plants in Japan. They have a plant in Europe, U.S. as well as China. So totally, they have 5 plants which they're operating. They are operating for 30 years.
Like -- because -- like there's no very clear percentage market share globally, which is very clear. In some reports, I have seen it as a 20% market sale, but there's no specific number which has been given worldwide. However, what we know is that they are 1 of the oldest. They've worked with almost majority of the cell producers of the world. And like they are really looked up to as a market leader or a global leader for electrolyte production.
Okay. And Harin, apart from this, let's assume that they have 20%-25% market share. So apart from this, the leading manufacturer, the 30-year experience in it, apart from that, is there any, you can say, synergy between your way of producing electrolyte and their? And that's the reason you go with them, [Foreign Language] you want to go with the MU Ionic Solution?
Yes. So the main motivation behind this is that, look, as we have said also earlier in the call that while Neogen has been preparing for quite some time, we are working with our customers, we are learning. But if we partner with somebody who already has 30 years of experience, we can like increase our learnings to global scale much faster. So like if on our own, if you would have got it right first time, 98%, 99%, with the partner, we can do that 99.9%, 99.99%, right? So this gives a lot of comfort.
While customer can sell or approve a sample from our lab, but again, there will be a question if Neogen will be able to produce the same at a commercial scale. But if the commercial scale is being built by somebody who has already made plans in 5 different locations and supplying successfully from there, then that gives the comfort to our customers. So I think that's the main motivation.
And outside of China, like while you said 20%, 25% world over, if you look at outside of China, I mean, the market share percentage is much, much higher.
So any idea how big the other plants are -- other plant capacities are?
Sorry, their plant capacities?
Yes.
I'll have to check. They are in tens of thousands of range. Okay? Yes. But I don't know if that's a public information, which they've shared with everyone. So maybe -- let me check and come back. But they are on the similar scale as what we are planning. Some are slightly bigger, some are slightly smaller, depending on the time when they were set up.
And just last question, Dr., I see, this MU Ionic Solutions, will they help Neogen in marketing this electrolyte in India, in any way?
Yes. So we have plans, we can discuss with our customers jointly, et cetera. But again, as far as the agreement is concerned, the main intention is they are providing a comfort that whatever quality and the capacity which is designed for will be met. So that is the main comfort, which we'll get out of that for the customer.
The next question is from the line of Yash Shah from Investec.
Congratulations on this development. Sir, my question was now the additional of the 10,000 tonnes, we've already set up 250 tonnes. So the additional 9,750 tonnes -- this is more of a clarity question. The 9,700 tonnes which are going to come, will the MUIS technology will be incorporated in that? Is that right? The understanding is correct?
Yes. Yes. So now, especially the greenfield plant that we were basically planning, we plan to build it using the MUIS technology. So like the new plant. So the intermediate trial plan will have to go ahead and see, but the large plants, which we were planning. So the bulk of the 10,000 metric tonnes that we are planning will be with this technology.
Okay. So basically, how our schedule was divided was that the 5,000 tonnes will come in H1 of '26 and are these technologies also coming in '26, like mostly 2025 calendar year. So that's mostly '26 -- FY '26. The 5,000 tonnes of the 10,000 tonnes will come in MUIS and the rest 5,000 tonnes will be using our technology itself. The understanding is correct, right?
Yes. So we'll basically relook at our plans with this, and we'll just make sure that -- and also, we'll have to talk to our customer and customer demand. And based on that, we'll try to see that the majority of the capacity which is coming online is coming online with the MUIS technology.
Okay. Okay. Got it, sir. Sir, another question was I just wanted to understand, what kind of barriers our competitors could face if they have to basically enter into a similar kind of a tie-up with global majors like how we have done it? Like what are the other barriers you think our competitors can face, which gave us an edge?
So I earlier answered a question why they chose us over others. It's very difficult. I mean this is a technology which people don't give out very easily. They guard this technology very strongly. So first of all, convincing somebody to part with this technology, giving them the confidence that you'll use it properly and the products which will be made using this will be good. So it requires a lot of convincing to do. It took us many visits, many interactions with the customers to get to that point. So I think that could be the main challenge.
Next question is from the line of Noel Vaz from Union Mutual Fund.
Yes. Can I be heard now?
Yes.
Yes. So I just wanted to just be more specific on the exact CapEx and the capacity. So the earlier guidance regarding capacities and CapEx stand, there's no upward divisions in the government, right?
So Noel, as I mentioned that currently, what we had shared was 10,000 metric tonnes per annum, INR 450 crore CapEx, including the salt. Now with this announcement, we'll have to again go back and talk to our customers and see whether we need 10,000 metric tonnes or we need more or like what is the capacity which is needed in the same period of time. Of course, that 10,000 metric tonnes was also going to get increased. So 1 is basically, we need to redetermine whether it is 10,000 metric tonnes or more than 10,000 metric tonnes.
The second point is going to be that was with Neogen's own technology. Now we also have a Japanese technology. So there will be some components of the technology or the CapEx requirements, will be slightly different. So we'll have to put both these. So once the agreement is there, we can have a little more open. So we have a -- approximate broad-level idea, but we need some more additional details, which we clarified when the license is signed. And over the next few months, once we get this information from them, then we can have a revise, basically how the CapEx is going and that -- like how the capacities are going to build and what's going to be the CapEx required for that.
Okay. Okay. So just to understand, so our margins regarding these per margins, return ratios, it's sort of these [indiscernible] technology or say, new technologies in terms of [indiscernible] result, I think it should not be -- there's no major deviation as such? I mean that's [indiscernible]
Yes. I mean the intention is and like the target would be to maintain the same margin levels.
Next question is from the line of Nitin Tiwari from Yes Securities.
Congratulations to all for signing of this agreement. Sir, my questions are actually very basic. So what my understanding when -- for electrolyte. Was that the primary component of that electrolyte is actually the salt, right? So that understanding is correct?
Yes.
And that salt that is still something which you are going to manufacture. That's not a part of this technology. That is your core competency that you'll still be doing as per your early established plan?
Yes, that's correct.
Sir, what I'm trying to understand is, is that what basically changes, I mean, like, from the electrolyte salt onwards in terms of technology that making this new business agreement are sort of value add vis-a-vis what we were already planning to do?
Yes. So, Nitin, see basically what the customer is going to be finally using is the electrolyte. What is going inside the cell is the electrolyte. So of course, salt is where we need to control purity, control impurities. But then this entire process of making very accurate composition of the electrolyte, which is required as per customer, like, again, from a batch-to-batch, batch-to-batch bases. So this consistency from batch-to-batch ensuring that each lots are meeting the exact specification.
Now let's say you have an additive, which is used like 0.5%, right? Now, your -- 0.5% or even 0.05%. So the accuracy of that, the variation which is allowed in that is like 0.005%. So this level of precision, repeatability is something which at a commercial level, we are basically trying to do on our own. But now if we have a partner, there's a bigger confidence in the minds of the customer that, yes, this will be of the same quality or the composition which I want. So that peace of mind which you get to the customer.
Also because -- so 1 thing which Neogen missed is that, my electrolytes produced in the commercial plant are not used in batteries, let's say, for decades; whereas the electrolytes, which are produced by Mitsubishi are used in batteries for decades. They've proven themselves. So that's that proven factor gives additional comfort to the customers. And yes, if Neogen makes using Mitsubishi's -- I mean, MUIS' technology, then Neogen is more -- the commercial plant as will like -- will be in line with the expectations, which they are getting.
Understood. So basically, this is basically in terms of the process and the additives which go beyond electrolyte salt in terms of manufacturing the company electrolyte. Is that where the expertise comes in?
And second part of the question is that like does this technology license also basically includes the technology which goes in setting up the plant in -- I mean, like in terms of what equipments, what facilities and so on and so forth are going to come up in the plant. Does that -- is that also part of the license?
Actually, that is the main part of the license. So the license part is going to be how to set up the plant. What should be the specification of the -- let's say, reactor, the load sales, the equipment, the sensors, so the entire design. And like, like if you are mixing also 10 things, which is the order in which you will mix, you will mix for how long. So that process and the plant is what is the manufacturing license, which they have shared.
Separately, as and when like my customer is, wants a specific Mitsubishi recipe, right, so they said, do I want MUIS' recipe numbers, A,B,C,D, E,F,G; then we have to go back to them and say, okay, can you give us a separate license for the recipe. So the recipe can be either specified by customer or can be proposed by MUIS. So that is a separate requirement.
The current requirement is basically setting up the plant. So what will be the design of the plant, what will be the process by which we will be doing. And it's not only just the design of the plant, but they have another subsidiary, which will actually be a group company, sorry, which will actually be constructing the main plants where the mixing is going to take place. So it's then -- again, it's using the same vendors or same people who have already produced from them in the past. So again, that gives a comfort that the plant is made with the same technology as which it's already operating in other parts of the world.
Understood, sir. So sir, then the next question is that, given that you mentioned that you would go back to them in terms of like seeking a secondary license for manufacturing of the product, right? So I mean, do they then have a control over who you're going to sell the product? Can they -- are they going to be decision -- make a -- in that decision that making where the product is going to get sold?
Yes. No. So like for example, if my customer already has a recipe, I can use my customer recipe and then I don't have to go back to them. So there is no requirement. The only condition as part of this agreement is that this is for supply of electrolyte within India. Because as I have shared earlier, electrolytes are always like supplied locally. So this is again targeted for Indian supply of electrolytes. And there is -- the only restriction is that we can't sell the electrolyte internationally without taking their prior permission.
Right. So like, again, and possibly this is my last question on this. So just making it simple that thought a little bit more. So what I'm trying to get at is that, is the use of this technology and this license -- is this going to create any kind of commercial dependency on them in the time to come, where your decision-making would be impacted by what they decide in terms of like either maybe licensing or like in terms of allowing you to use a certain additive, not using certain additives. So I'm just thinking along with you. [indiscernible]
No. So, there's no commercial dependency of that nature. As I said, the only dependency is that whenever we go beyond 30,000 metric tonnes per annum, we need to pay them a certain license fee for every 10,000 metric tonne per annum additional capacity increase. We have a set number in the agreement which we need to pay to them. And the only other requirement is that we can't set up a plant internationally using their technology.
So these are the 2 restrictions that we have without taking their prior permission. So again, even if we want to set up internationally, they are happy to discuss with us as long as there is no overlap or interference with their existing business and subject to conditions, they may agree for our international license as well. But again, our focus right now when it comes to electrolyte is India. So that's the only thing which we are thinking.
And for 30,000 metric tonnes per annum, we already have a license. Beyond that, for every extra 10,000 metric tonnes, we are supposed to pay them a fee, but we are free to basically increase capacity in India.
Understood. So to sum this up and correct me if I'm wrong in my understanding. Basically, this license is for setting up the plant and like in terms of equipment and process flow and you are basically free to source your own raw material and to sell the product to whoever you choose to sell? Is this that like, they are helping you in terms of manufacturing of the product by sharing with the tech -- sharing with you the tech like, which is involved in terms of proportions and so on and so forth in which you are manufacturing the product?
That's right. Yes. So you are perfectly right that this is basically on the manufacturing technology on the plant. And then what product gets produced can be with our own recipe -- customer recipe. And in case if we are using their recipe in future, we need to get into a separate agreement for that. But otherwise, we are free to basically source raw materials from wherever we want, like as long as they meet their specifications, if they want to guarantee the final output also the customer specs. But otherwise, we can basically source it from anywhere else. And also, we can sell it to anybody in India.
Next question is from the line of Rohit Nagraj from Centrum Broking Limited.
Congratulations on this landmark development. My first question is, if the PLI plans from the domestic manufacturers get delayed, then how are we safeguarded because we plan to come up with the plant sometime in 2025 , but if their plants get postponed and they get delayed to 2026 or '27, then is there any remedy election that we believe have?
Whatever I have talked to customers -- I mean, to my customers, most of them need to start or want to start by '24 or '25. So like I don't see them having a delay going into '26 and '27, where all of them are delayed and all of them start only in '26 or '27.
The second thing is, in such a case, as you shared earlier, in case if there's no electrolyte demand, of course, our investment also we will keep reviewing and keep staggering. The second thing also is that the salt which we are trying to like try to achieve global customers. So salt is where the demand in the market is already there, and that's our kind of plan B, that at least the salt capacity, which we will be building for this can be utilized to solve the global market as well.
Right. And just an adjacent question to this. Is there any toll manufacturing opportunity from MU given that their capacities are at particular level and we are coming up with our newest capacity, in case there is demand from other regions and if they are not setting up the capacities in the immediate future, we could supply to those particular locations? I mean, let's keep that to MU or to those customers?
So Rohit, again, as I mentioned earlier, most of the time the electrolytes are like efficiently produced and sold only locally. So therefore, like mostly the target of this is for the India market, okay? However, like specifically, if there is a short-term need where, let's say, 1 of the regions of where MUIS already has a plan. And if they feel there's a shortage and they want to approach us, that's something we will discuss at that point in time. And of course, the plant which is designed by them would give them a comfort. But currently, neither the intention or the intent current is that this will produce electrolytes for MUIS world over.
Okay. The second question is how many recipes does MU manufactures for different customers globally, right now?
I don't know. It must be tens or hundreds of them. But yes, I mean, they have a very wide range of recipes over the last 30 years, which they would have produced for all different kinds of cells. My guess is it would run into 100s, but I don't know the exact number for them.
And just a concurrent question, how many recipes the Indian manufacturers would like to have? I mean the customers that you're talking to, so a single customer will have multiple recipes or they will stick to a single or 2 recipes?
So historically, what happens is that each particular cell design has a recipe. So like, for example, like even especially in the EV segment, if you have a particular model of, let's say, a particular OEM maker, which has a particular cell. Once the recipe is finalized for quite some time, they don't change. So suppose like if there are 3 different kinds of cells or 4 different kinds of cells being produced by the cell makers, they will have 4 different. So it depends on the number of customers they will have and the number of models they will be serving, that will decide the number, but it will always be multiple recipes for each given customer.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
I had a related question around technology transfer. Can you just talk us a bit about of how you would be kind of getting the know-how transfer as well in terms of manpower, marketing, et cetera?
So the know-how transfer -- so, basically, first is the design than detailed SOPs. And then also there will be some training, which we will be receiving at their side and some training, which their team will provide at our site. So together, a combination of this, the design, the SOPs, the in-person training and sharing the information. That's how it will be. And they will also be involved in the startup of the plant. So like making the initial products, which are required by our customers and showing that they need the specification desired by the customer as well as the capacity that you plan is being achieved. So that will be part of the technology transfer again.
But on the marketing side, will they be involved as well?
So we've had some, because we were discussing with Indian customer needs, and they were also discussing some of the Indian customer needs. So we've planned that like post this agreement, we will also align our strategies, because their main intention is to supply the electrolyte and this plant to supply the electrolyte to the customers. So we will work together with them on the marketing side. But it's not part of this agreement signed in which we have currently done.
Got it. And just the last question was in terms of the 30 Kt of capacity, what kind of battery capacity that can it support?
So again, it depends on NMC or LFP, because NMC requires fair enough, but LFP require more electrolytes. Based on whatever numbers you've gotten from customers and assuming it kind of half and half, we have basically assumed around 950 metric tonnes per annum per gigawatt hour. So this would support somewhere between 30 to 35 gigawatt hours of cell production capacity.
[Operator Instructions] The next question is from the line of Amar Maurya from AlfAccurate Advisors.
A couple of questions. First is like, let's say, what kind of cost advantage we will be having, let's say you producing in India and MUIS producing in Japan?
Each site will have its own cost structure, but the biggest advantage when it comes to electrolyte is that electrolytes have to be made locally, because it requires very specialized tanks, and the investment into these tanks is so much, that suppose if we wanted to serve same 30,000 metric tonnes from Japan as opposed to making it in India, the investment into tanks will be almost the same as the investment into electrolyte plant. So therefore, that's 1 of the advantage.
And also the logistic advantage of sending the tanks to India and then returning it back. And also just like practical sense of like trying to work with multiple customers, multiple chemistries. So all of this is very difficult to do internationally. And this is the main advantage of the plant being in India as opposed to being in Japan.
Okay. And secondly, let's say, on the license fees, since you are planning to initially, let's say, I'll start with 10,000 or 15,000 metric tonne, but you would be paying the license fees for total 30,000 metric tonne, correct?
So basically, we've not yet decided, in a sense what I wanted to say was that our original plan was 10,000 metric tonnes per annum, which is what we had already announced. And now with this announcement, we'll go back to our customers and make the decision. But -- so that will decide whether it's like how the capacities are going to get scaled up. And we will come back to you in a few months on that. But yes, I mean your clarity is correct that the license fee is onetime and that license fee is for a 30,000 metric tonne per annum plan.
Okay. And you have not disclosed that license yet, correct?
Yes. We have not disclosed that as part of the requirements of our agreement.
Next question is from the line of Aashish Upganlawar from InvesQ Investments.
Sir, I wanted to again understand the road map of revenues that you shared, I think, INR 1,200 crores by -- in 3 years. Is it -- we are at around INR 650 crores, INR 700 crores run rate right now. What would that be, INR 1,200 crores by?
So I think if you go back to our last investor presentation, we have given 2 numbers there. Our existing revenue, our existing business of pharma intermediates and agro intermediates will also grow between INR 950 crores to like around INR 1,200 crores, depending on the price of lithium. So, [ INR 950 crore ] to INR 1,100 crores, depending on the price of lithium by FY '26 or so. And separately, we had said that we are making this INR 450 crore investment into an electrolyte salt production, which would reach around 10,000 metric tonnes per annum capacity. And for that, we had shared a revenue projection of around INR 1,000 crores to INR 1,200 crores by FY '26, FY '27.
Okay. So we are saying that this business adds, I mean, 50% of -- I mean, equal to the current business revenue by '26-'27?
That's -- I mean, yes, I mean the existing business mix will continue to grow. I mean not may will continue to grow. But yes, this is our...
And opportunity in this, again, is the same as the current business to reach in 3 years?
Yes. And that's our -- [indiscernible] because this is going to grow at a very different growth rate as compared to our existing business. So we wanted to have that clarity because the CapEx, the performance of this will have its own positives and bonds, et cetera. So that's why we've created a subsidiary, which gives clarity to the investors on what's happening in the regular business and what's happening in the battery material business.
And how would the working capital cycle for this business be? Because historically, I mean, we understand that your inventory days have been higher because your inventory has to be in different stages of production and then your orders come from customers. So is it similar in this business or this will be more shorter than [indiscernible] working capital?
This has to be a shorter working capital cycle because as we've shared in the past, the main driver for the higher working capital requirement of our existing businesses that we have many products and many customers, we have more than 100 molecules which we make every year, and we sell 350, 400 to customers. As opposed to that, this will be like lesser number of clients, like 15 or 18, again, even if we take average 3 or 4 formulation.
If we work with all of them also, it's around 35, 40 different formulation. And these are like engineering applications, so it's kind of more clear requirement throughout the year. So we estimate that the working capital cycle or the complexity in this will be very different and will be improved and better.
So should we assume about maybe 100 days or something like that against 150 days plus for the current business? Or is it too early to guess on that?
Yes. So I think it's too early, but I think we've given some guidance around that, like in our last few calls. So I'd request you to kindly refer.
Next question is from the line of Sabyasachi Mukerji from Bajaj Finserv.
Congratulations, Dr. Harin. So my first question is on the license fee. I understand that you are not disclosing the quantum of the license. But then regarding the nature of the payment, will it be like a onetime bullet payment? Or will it be like a milestone basis on revenue recognition? How will it be?
It will be milestone basis, but it's basically this is, as I shared earlier, this is the licensing agreement for manufacturing, right? So it is related to manufacturing technology. So it will be part of our CapEx. And as we complete our CapEx in 2 years or 2.5 years, by the time we complete our CapEx, so there are some internal milestones of the project and accordingly, the fee will be paid.
So it will not hit the balance sheet at 1 time, right? And over the years, next 2, 3 years this will [indiscernible]
But it's [indiscernible] 1 time, yes, you are correct.
Okay. Okay. And next -- my second question is, does this technology enhance our efficiency of the manufacturing process or I mean, does it improve the asset turns and the entire unit economics for the battery chemicals business? Does it help on that side?
Yes. So we also believe that with 30 years of experience, which they have, there are a lot of things which also we can learn on efficiency, getting it right, the speed at which we can make electrolyte, what is the best combination. Like also, we feel that it will teach us some new things as compared to what we already know and improve when we combine our knowledge and their knowledge, we will be better off and have more efficient, more reliable.
I mean, more -- from the point of view, reliable, so consistency of supply because when you start something new for the first time, you are likely to make some mistakes. Like in a chemical plant, whenever we scale up, there are bound to be some learnings. But if you have somebody who has already done such scale up and is already doing it, at a very large scale and you can actually go in their plant, learn or they can come and teach you in your plant, then that's when we feel the learnings will definitely help us be more efficient.
Got it. That's very helpful. My last question is on -- one of the previous participants also asked that China is a very large in terms of the battery, the lithium, salt and all. And I believe [indiscernible] is one of the [indiscernible] in that. And some of the global cell manufacturers like LG and all and even I think Tesla have contracts with [indiscernible] . What if -- if the same thing happens like in India, like the cell manufacturers, go to contract with the Chinese guys, will it be a threat for Neogen and how do you look at it?
See, there is [indiscernible] there's also MUIS and then there are more Japanese and Korean companies, which are already producing electrolytes and competing against [indiscernible] worldwide, correct? So like this is 1 point I would like you to consider.
The second thing is that like [indiscernible] wants to make it from China and then supply to India like as I've explained earlier, that this has to be a local business, and they will have a lot of challenges in terms of the cost, the logistical cost and the complexity associated with the transfer of the cylinders going back and forth and the investment which they would have to meet. So I think these are our modes.
The fact that we are here locally, PLI requires local production. It's difficult to do this business internationally. The fact that we are backward integrated into making the salt. And now that we also have a partner who already has a global approval, so all of these become kind of our moats to be able to be more competitive against international competition.
Next question is from the line of Alok Ranjan from IIFL Asset Management.
Congratulations. So first question is I just wanted to understand the technology part more. So whether we were talking to other companies apart from MUIS? And is there a difference between technology of different electrolyte companies given the same salt and solvent. So is there any efficiency of electrolyte different taking MUIS technology or taking other company's technology and whether we were talking to other companies also apart from MUIS?
See, I would like to say that, of all the companies which are outside of China in electrolyte production or even including China, MUIS was -- or like the Mitsubishi and UBE were the oldest and most regarded for and in our opinion, has the highest market share and highest number of customers as compared to anybody else. So this is our advantage. Yes, we did talk to others, but like the most serious discussion that we've had has been with MUIS for quite some time now.
And whether a particular technology, let's say, MUIS technology or let's say, other than MUIS, can there be difference in terms of efficiency of the electrolyte which will come given the same salt and the solvent which is there, just basis on the technology, which will be used to mix it?
Yes. So just the technology with which you are mixing it and then ultimately also what you are mixing, both of these things are important. Of course, right now, we are discussing the -- like how to mix part. But again, doing it in an efficient way can ensure, one is the productivity and the second is the quality and the consistency. So these are the things where the technology will play a role.
Also, this allows us to then like discuss with them about what to mix and that is some -- the recipes, and the specific additives which they use in this. So these are, again, each company has its own proprietary. And once we start with this, if -- once we have the plan, then the opportunity for us to get their recipes for Indian customers with a specific additives becomes high. They also constantly keep developing new recipes as well. So we also like -- can work with them for such kind of joint development for India specific customer requirements.
And second question is, is there any safeguard from your side as in whether MUIS will not give technology to any other company in India? And also the associated question is, let's say, Tata, which is a leading EV player in India, and they are -- they might be currently having a typical recipe either bought from LG [indiscernible] or let's say MUIS. So we need to buy in majority of the case, the recipe, also the secondary also technology part we need to buy. So they are the 2 last questions.
So I think the technology procurement will be partly be driven by the customer choice in the sense that if the customer has his own recipe, then we don't need to buy it. If the customer is depending on a technology partner who has approved MUIS, then we need to separately buy the recipes also. However, like again, so that's -- that will again depend on the choice of the customer.
However, the fact that we already have the license from them, whenever we have to do that becomes more efficient because let's say, we made it with our own plant, and we just wanted that recipe. Again, will our plan be able to produce the right quality of the recipe, remains a question. But having their plan gives them the confidence that yes, this recipe can be more easily be implemented in the urgent and that makes it easier.
But again, it's finally ultimately going to be driven by the customer. So it's the customer like some of the customers are doing their own R&D and coming up with their own recipes. They have their recipes and only the manufacturing plan gives them the confidence that yes, this is a globally designed plan. So it will have the safeguards required to meet the quality and consistency of your product.
And response to that question, in terms of whether MUIS will not give technology to any other companies, is there [indiscernible]
So this is a perpetual license. So like in our experience, no Japanese company will give a perpetual license, which is exclusive for life, right? So it's like not a exclusive license for life, but like currently intention is both MUIS and Neogen will work together. And so far, as we know, they currently have no intentions of like licensing it immediately to anybody else.
Got it. And just last question, if I could squeeze in. So now our focus since we have the technology partner, now our focus will be to create more and more recipe based on the customer specification. That will be the key area of focus. Am I understanding right?
Yes. So now our focus directly is that once we have this question mark, kind of answered to our customers, that will Neogen commercial plant be able to produce the electrolyte of the same levels of which the samples we have given to them or the recipe is the desire. I mean once the customer has more confidence, go to these customers, again, understand their requirement and then get a clarity on what the volumes would be and then accordingly make our plans to basically take care of those customer requirements.
Next question is from the line of [ Sanjay Sen ] from ICICI Securities.
First on the key raw material, I think the salt we plan to manufacture in-house. What are the key ingredients that we may want to produce in-house and what are the others we want to buy from the market? Because salt is, I guess, is 17% to 20% of the recipe. There is still 80% of the recipe needs to be added to reach to the solution, right?
Yes. So basically, electrolyte consists of any lithium electrolyte salt, followed by solvents. So maybe 3 or 4 solvents are used by the customer. And then between, let's say, 2 or 3 and as high as maybe 4 or 5 additives. So it's a measure of totally there's 8 or 9 components. So historically, what we've said is that's the electrolyte salt, which is the main component in terms of cost, will be made by Neogen or our intention is to make it ourselves.
Then the additives also which are [indiscernible] , if they are lithium-based additives, once they achieve some scale, we would like to make this lithium additives also ourselves and Neogen has already developed several technologies for these additives in-house. And when it comes to the solvents, which are the other major components, these are mostly like a petrochemical outcome. So this is not like Neogen's key expertise. So either you can buy this internationally or there are Indian companies who have intention to develop these solvents in India, because they have markets other than lithium and batteries as well.
So when these get produced in India, there are 2 things. One, they can be just a commercial grade but need to get verified to make the, let's say, electrolyte grade to such purification Neogen may be able to do. And if they can already give us the electrolyte grades from the beginning from India, then we would directly buy.
So the solvents will still be bought out. And some of the additives, which are like, let's say, non-lithium base, we need to take a call. I mean Neogen's organic business can they make that or whether it makes more sense to buy from the existing. So those will be bought, but the lithium salts and the lithium additives which have lithium in it, these are the ones which Neogen intends to make ourselves.
Great. Great. My second question is more on the type of the cells, which these electrolytes salt will go in. One is EV, these cells and the other 1 goes into the consumer electronic, which will be used at [indiscernible] lithium battery. The expertise is equally strong in both the applications for the MUIS?
Yes. So technically, we can use the facility for both. Although I think our major target has been -- I mean, at least my understanding is most of my customers' major target has been for either EV or the energy storage. I mean these are the 2 applications because the majority of the volume is coming from that. But let's say if somebody has also for consumer electronics, they set up a cell manufacturing, we should be able to cater to that as well.
Just to rephrase it. I'm telling the capability which we are getting is equally competitive globally for the EV segment as well, right?
Yes. I mean, the main target is the EV and energy storage for the electrolyte in terms of volume.
Got it. One last question. I apologize I'm adding 1 more here. So in terms of approval, what we are getting is just the process, the product and all we intend to make it either by recipe coming from the customer or in-house or seeing some cases from the partner. So the approval cycle doesn't change, right? Because it's just a process which we are getting and probably we are becoming more efficient from the product perspective, we have to go through that entire stabilization, validation and verification and only then the supplies will start. My understanding is clear?
Yes. Ultimately, each customer would want to validate a plant, but validate your commercial plant and make sure that the product from there is approved, but it is just this process of the validation becomes faster. And also, there's more confidence so there can be a pre-decision that is, as long as it's coming from the same technology like as the previous plan, which they have used, then the validation process can just be to make sure that if the product which is made, let's say, internationally versus the one which produced by Neogen has the same spec because the technology by which it has to be produce, it remains the same. So in that sense, it reduces the validation time.
Next question is from the line of Nandini Maheshwari from Mirabilis Investments.
Vipin Goel, this side from Mirabilis. Sir, I had just 1 question, kind of a basic 1 on the electrolyte making process. So while we do understand there are varieties of electrolytes based on [indiscernible] And then they mentioned pricing of electrolytes had also dependent largely on the lithium availability and how the price moves there.
But then if I have to see -- so if you could just help us bifurcate the value addition being done in the process of making salt. And then from salt to electrolyte. In these 2 steps, what's the value addition being done? So for example, let's say, it's in our calculation, we have assumed $12.5 per kg as the electrolyte cost, once it gets fully utilized by the end of FY '26. So of this $12.5 what could be the price of salt and yes, what would be the actual price of the value addition that we're doing, while making salt to solvent?
So again, it's a bit difficult for me to answer because it depends on each composition, what additives, which solvents, et cetera. But broadly speaking, in the final price of electrolyte usually, the electrolyte salt contributes somewhere between 30% to 40%. Again, this also depends on the price of lithium, et cetera. But usually, that's the contribution which comes from the salt. Then there is a contribution which comes from solvents and additives and the rest is the manufacturing cost and the profits that you have for making the electrolyte.
Okay. So of this $12 to $13, we can largely assume that roughly $5 -- $4 to $5 is the salt cost and then rest is you're adding solvents and additives on to it and then finally have the electrolyte. So if again from this -- moving from salt to solvent, if, again, like move out the cost of solvents and additives, all the raw materials that have added into that stage, so what would roughly they will be?
So again, like ultimately, when you go back, what you've said is that when you're doing the entire process ourselves, our EBITDA is expected to be similar to our existing business, like in the range of around 17.5% to 18%. We said that electrolyte around 30%, 40% is usually the salt contribution. This $12.5 number might be the right number. We've never shared that. And again, the price of the electrolyte also varies significantly.
So I'm not able to give further clarity at this point, unfortunately than this. Maybe as our customers become more clear, the formulations become more clear, then we'll have a more clearer idea and also lithium prices also worldwide kind of stabilize a bit, will have a better, clearer idea of numbers, which we can give to you.
Okay. Okay. Sir, if $12, $12.50 is mainly based on the INR 1,000 crore top line guidance that we are giving and 20,000 metric tonne capacity on the electrolyte?
Yes. Again, there is a range that INR 1,000 crores to INR 1,200 crores. It's the total business. So there's some electrolytes, also some electrolyte salt, which may sell it in the form of salt. So that's why I'm like -- this $12.5 number is a derivation, but if something which is not directly implied by us.
Okay. Okay. Sir, the reason why I'm asking this is that since the [indiscernible] consists 100% of the overall battery roughly. And of that, it's 50% is value addition is being done from salt to electrolyte. Then that means 5% is what we are talking about of the overall 60% in the PLI. Like that, value addition that a battery maker would be kind of incentivized to take this step. So there is a possibility in future that they might be thinking of importing salt from China and then giving it to us and converting it to electrolyte. So is that also a possibility?
So if you are thinking from like -- if you're thinking from a point of view of PLI requirement of 60%, see, as I mentioned, if you just import electrolyte salt that itself is 40%, then you'll also have the solvents, which are currently not made in India, which have to be again imported. So when you add all of that, it's very difficult to raise the 60% target. Because as opposed to that, is when we are doing it when we are only importing lithium metal, I mean lithium carbonate, which comes out of the mine and doing majority of the processing. We also have to import a bit of phosphorus or depending on some other imports. But in any case, we are always safely able to cross the 60% barrier.
Thank you very much. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you so much, everyone, for joining for our call today. Thanks for your interest in Neogen and your support always. We hope you have a great evening and we hope you all are safe and looking forward to interact with you over time. Thank you.
Thank you very much. On behalf of Neogen Chemicals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.