The first question is from the line of Sanjesh Jain from ICICI Securities.

A couple of questions from my side. First, on the HALS volume, I think last quarter, we did a run rate of 200 metric ton and this quarter, we are at 125 ton. Is that right understanding?

No, I don't think t he understanding is right. We had touched about 80, 90 tons a month, which now we have at about 125 tons a month.

200 tons is aspirational?

200 tons is aspirational. I mean, eventually, we want to reach 200 tons.

Okay. Okay. Sorry, sorry. I got confused between the guidance for March '24 and this -- that's fine. And second, on the -- on the CFCL side, if I console stand-alone, the number what I get is largely CFCL where we have done INR67 million of revenue and INR22 million of gross profit, which implies a gross profit margin of 33%. Is this a representative margin for the HALS series?

This is for only 1 HALS product. See, right now, we have only commercialized 1 product, right; HALS 770. And that too is on a very limited capacity utilization. As I mentioned in the opening remarks, that 3 more products, 622, 944 and 783, we just commercialized over the last 2 to 3 weeks' timeframe. So now these will also start picking up. An d additionally, 119 will commercialized by August 2nd week.

Today, there are wide variety of applications. These are called Hindered Amine Light Stabilizers. So the 770 would be usually used in master batches, whereas the 944 would be used in agricultural sales. So they have -- all of them have a variety of different applications. 292 would be used in coating industry. So depending on the price, depending on the application, all of them have a different application base. We can connect offline to give you the entire scenario of each product and their application because each one has a variety of applications.

Fair enough. That's fair. I will connect separately on this. Just on the America side, the revenues have been declining for the last 3, 4 quarters, while it was very strong in FY'23. What has changed in America?

In America? Oh, in the U.S.?

Yes, in the U.S.

There is nothing specific. Of course, overall, there was the highest destocking was there in the U.S. because of the geographical -- the transit time distances. So you know the destocking took longer compared to other parts of the globe. But other than that, there is nothing significant to pinpoint here. Like if you see our Europe business grew. So we were able to onboard some new customers. And some of the U.S. entities who also have offices in Europe probably prefer to produce more in Europe compared to the United States.

And Siddharth, on the two Pharma capex which we spoke about in the earlier call, we were on pharma -- so we said to 1 in August to May, the other 1 in Septembe r, each with the potential capex of INR1 billion, which is INR100 crores.

No, no. So 1 is performance chemical segment, not pharma. Let me re-explain. So there are three capex - 1 underway, which is Pharma intermediate, which will start in by October, November.

INR30 crores?

This is INR30-odd crores, correct. After that, another 1 is the Performance Chemicals segment, which I just explained, the construction has begun which has a capex of INR150 crores. Again we have -- variety of applications, but we will term it into a Performance Chemicals segment. The third one where the capex should start in September, the construction activity, again, could be about INR150 crores. And that has, again, probably wi ll also fall under Performance Chemicals segment.

Okay. And the 1 we have started, we said that we will be to start with 15% of the market. You were referring to India market?

So you said that you will be 15% of the market when you will start this capex. You were referring to India, 15%? Or the...

Global capacities. Always global capacity.

Okay. We will be 15% of the global capacity. So what will be the total revenue from this?

See, the total revenue should be closer to INR350 crores.

Okay. And major application will be?

There is, again, a variety of applications, but you coul d consider performance chemicals -- I mean, the major bucket where we can put these products into.

No, no. I was more looking at what is the end industry application, agro, pharma, auto, polymers.

These are, again, stabilizers. You can assume, and also intermediates for pharma.

Okay. So basically polymers and pharma?

Yes.

And -- okay, okay. So this is a global. So for India, we will be the sole producer of this product, right?

Not -- no, no. There are some companies who are manufacturing it.

Okay. There are already some companies manufacturing it. Got it.

But it would be a differentiated technology.

When we say differentiated, we generally mean continuous flow, right?

It means that the economics could be better. Commercially, it should be better.

Okay. Fair enough. Yes. That's it from my side. Thanks, Siddharth, for answering all the questions and best of luck for the coming quarter.

Thank you. The next question is from the line of Ankur Periwal from Axis Capital.

Congrats for a decent set of numbers. Just continuing with the capex bit, a clarification there. So there are 3 capex, all the 3 are in pharma products. Will that be right understanding?

Okay. And...

1 in Pharma segment and 2 in performance segment to put it simply.

Sure. And the third 1 is the one, which, if I'm not wrong, we alluded that wherein we are doing some work at the pilot and R&D stage and we'll decide whether we go ahead or not on that?

Yes, now we have decided to go ahead.

Sure. And any thoughts on addressable opportunity for that specific product or segment and where it is -- the end-use applications are?

Again, it is a very large segment. And you could consider it into like a water treatment -- water treatment chemical.

Okay. And any broad thoughts on revenue size opportunity, both at the global scale for these products? Just trying to understand the size and scale of what can they generate internally.

I mentioned about INR300 crores to INR350 crores.

On the INR150 crores capex, yes.

From the third project, it is -- the working is still going on. So let me work a little bit more and get back to you with firm numbers.

Okay, sure. And while the second -- the INR150 crores capex that you mentioned, there are other producers of those products in India. For the third 1 also, that is the case? Or it's -- sorry, I missed that part.

Yes, there are producers in India.

Okay. Great. Secondly, on the volum e-led growth across more or less all the segments there, just trying to understand whether this volume that growth was led by 1 or 2 products or it was decently widespread across our portfolio?

No, it was widely -- I mean, so spread across the portfolio.

Okay. Great. And just lastly on the capacity utilization side, where are we now across Performance, Pharma and FMCG?

Between 60% to 65% capacity utilization.

Across all the segments? Sure. An d just last -- yes, yes, got that answer. So just last bit, there was some pressure on the realization front earlier. And since last 2 quarters, we have been seeing a decent uptick there. Will it be fair to say that most of that pain is behind us and probably things are either improving or stable across the products?

Stable. I am not seeing any increase in prices and it would be possible over the next 2 or 3 quarters.

Okay. But demand is picking up? Or it is towards your market share gain that we are witnessing here?

Yes, yes. Volume-led growth is happening. Realization, there is no growth. I mean, they are all steady numbers on Q-on-Q basis.

The next question is from the line of from Arun from Credit Aspat. Please go ahead. Hello Mr. Arun, your line has been unmuted. Please go ahead with your question.

It is Arun from Avendus Spark. Good evening, Siddharth. Thanks for the opportunity. First, on the domestic front for the HALS, you said we ar e on track on 125 tons per month. What we understand is the domestic demand market for this is around 250 to 300 tons per month. Given that the market share in HALS is somewhere around 50 to 60. So does it mean we have saturated the domestic demand for this product?

First of all, 125 is not domestic. It is -- I'm talking group -- I mean, India plus export, because export is a very small portion, but it is both. And no, I mean, there is still quite room and I think we still have to cover a lot of ground in India. So I think it will take a little bit more longer because a lot of large players were also waiting for the other HALS product to start because I mean they always have this thou ght that they were only buying one from us and balance two or three from the competitor. So once we have the full basket, they would be able to switch more or less everything with our quality is at par. So I think with the entire basket coming in, I have a feeling -- strong feeling that now the conversion -- I mean, customers converting to us would be far better chances compared to what we had with just 1 single product.

Right. So other grades should help you to scale up, but is it -- what is the target we are -- 100% import substation? Or what is it they can aspire to be? Has the customer indicated anything, like how much they will take it from us once all the grades come in?

So no customer commit anything, but we typically aspire that we should have 70% to 75% of Indian market becaus e of a variety of reasons compared to what people are importing. So the aspiration is to have 70% to 75% of Indian market. And of course, grow in Asia, in American and European markets which now has started picking up because, again, the same issue, a lot of customers were reluctant to only test 1 product. Now with the basket, they have that confidence that, okay, now we can look at buying mixed container rather than buying just 1 single product. Because also, Arun, like all my competitors make the entire range. So we were the only ones, we had only 1 product. Of course, that was how we started. But the design is to have all the products in the basket so we are at par with our Chinese and European competitors.

And HALS, if I'm not mistaken, Siddharth, the range of product will include close to 10 to 15 different grades?

Including blends, yes.

Okay. But on a -- excluding blends, how much is our coverage in terms of -- 5 out of how many products?

It could be 9.

So we'll be still -- the remaining 4 is still working, work under progress or...?

It is work in progress, but the 4 which we have commercialized 4 to 5, these are like the bulk products. Those that are after this, t hese are more ver y specific, niche, very high, means these are now upwards of $15, $13 products, which will now come up in the Phase 2.

Okay. So major roadblock that stopped us from scaling up is now clear with the introduction of these 3 products? That is my understanding, right?

4 products. Yes, you're understanding is right. So with these 4 products, we have covered a basic -- these are like the basic HALS which are needed by all the customers. Then it becomes very, very specific that some need this number, some need that number. But that also we want to start so that we can also target some niche customers, and these are also more profitable products compared to the regular HALS.

And what is the current -- from the current going rate? What is the premium realization for these compared to, say, 770 or 771, Siddharth?

So that, let me -- I'll have to work once we held out the plant scale. But these are decently priced product. And see, the point is these premiums HALS are upwar ds of $15, but then the market size is also smaller.

No, no. Not -- when I say $15, it is for 622, 944 and 783 or?

Okay. Okay. No, I was wondering about this 622, 944 and 783. It will be much higher than the 770 and 701, right? That differential I was inquiring?

622 is more or less similar to 770, but yes, 944 and 110 are twice the price of these products.

Understood.

Upwards of $9.

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

Yes. I just wanted to ask you that t he last time around on the call, you had mentioned that for HALS, we're looking at a 3,000 tons -- around the 3,000 tons sales volume for FY'25 with an average $8 realization for the entire basket. Do we still stick to that? I mean, that's sort of that ballpark guidance?

No. Because see, our overall capacity installed would be around 9,000 tons to 10,000 tons, which I think over the next 3 to 4 years, we will ramp up to take it to 80% capacity utilization. So you understand this 8,000 tons would be the ideal capacity utilization, spread over 3 to 4 years. So roughly 150 to 180 tons per month, we should start achieving now going forward. I mean, of course, let a quarter go because we these products have just started commercial production. But probably in the next 3 to 4 months' time, our target is to touch 150 to 200 tons a month of all those together.

Okay. Okay. So for FY'25, probably 2,000 tons would be a fair kind of volume assumption?

For all of them put together, yes.

Yes, yes. Rough assumption. And for FY'26, would you like to -- I mean, any kind of rough growth where you can see HALS going, considering that we have a 10,500 capacity -- capacity I believe for HALS, we have at CFCL. So 2,000 tons starting with '26, probably what we can do in your view?

See, in my view, being aspirational and of course, I have to push that. But we would be around 2,500 tons to 3,000 tons more. So 2 plus 3 sorts, 2.5, 3. So about 50% capacity utilization, which we should achieve by FY'26.

Okay. And realization is probably at $8 is a fair assumption as of now? For the average of the entire market?

Okay. Okay. Sure, sure. And Siddharth, in terms of -- I mean, when you look at HALS, you have, of course, said that you will also look to target towards the export markets as well. So how do you see the Chinese compet ition playing out in that? Or are we very cost competitive as compared to the Chinese players?

See because today it's a very large facility and the base is too high, I mean, in terms of costs. Hence, until we reach a proper scale and size, it will be difficult to be cheaper than the Chinese because today, we are running at probably less than 20% capacity utilization, whereas I'm competing with people who have been in this business for 15 -odd plus years. So you will have to give me a couple of quarters to reach a typical scale or volume where I can cover a lot of my fixed cost, and then I think the margins will start coming.

Sure, sir. Sure. Sure, Siddharth. But roughly, you had said that probably when you start, you will come out -- probably margins will be around 15% levels. Then as the capacity ramps up, it can reach 25% levels. So that stands kind of?

I'm still with that statement. But 15% cannot happen with only 20% capacity utilized.

Right, right. Absolutely, absolutely.

I have capacity utilization to come up with this margin. You are right.

Yes. Sure. Sure, Siddharth. And I also wanted to note that, of course, we are focusing on looking at more growth from the non -primary products, which is MEHQ basically. So how has that growth been in this quarter? From DCC, TBHQ?

See all the other products are now growing. I think the volumes have come back. I mean, individually, I cannot give you a number right now. But typically, all the products have been -- we are running at 70% plus brand capacity utilization of all the products, 65%, 70%. So we are decently covering up. And of course, if there's new products like DCC and TBHQ, which you just mentioned still, there are more new customers being onboarded as we move along.

Okay. Sure, sure, sure. And just 1 -- last 1 from my side. I just wanted to understand the capex which you have said the last one, which you were starting in Septemb er 2024, I believe that's also CFCL. This is for Performance Chemicals, and that will basically cater broadly to the water treatment segment. Of course, the revenue projections we will give later, but this is broadly the thing. Is that right?

Yes.

The third capex which you mentioned. Of course, this Pharma intermediates is INR30 crores, then there's a novel process, which is going by Performance Chemicals, capex of INR150 crores and expect it to commercialize the 1H? 15% of the demand, and this is the third one, which will basically cater to water treatment. Right?

So 150, 150 and 30 crores.

Okay. This also is at 150. Okay. The third 1 also is INR150 crores capex. And this you are looking at INR150 crores -- and this is also probably -- the third 1 also you're looking at more import substitution demand. Would that be a right understanding?

You could say that.

The next question is from the line of Krishan Parwani from JM Financial.

Just a couple of questions from my side. Firstly, I think that 1Q FY'25, you mentioned there is INR100 crores capex. So where was it spent?

Investment in subsidiary company by the parent company.

Okay. Okay. Understood. And now with all the capex, what will be the gross block of -- I mean that was what INR330-odd crores, right? There's no incremental capex in the HALS?

Yes. So we have infused total INR435 crores in the subsidiary as of date.

Understood. So that -- but the fixed asset that you have for HALS is 330 or so? Or is it 430?

Overall, as of now, the gross fixed asset could be in the range of INR350 crores.

Okay. And just on Pharma intermediate side, so I think you've highlighted that the commercialization will be done by the third quarter of this year. So are the samples approved by the customer? Or is it still ongoing?

Yes. The pilot samples are approved by some of the customers because not all pharma customers are okay testing pilot samples, they need commercial samples.

Understood, understood. And just last bit on the legacy products, do you think you would have fully utilized your capacities by FY'26, of all the -- prior to the HALS, whatever products that you used to have? You still have?

Some of the products, there is a possibility. But in that case, again, we'll make investment in subsidiary, CFCL, and rebuild those facilities. So I think that decision, we will make by end of December.

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

701, we are already at 70% plant capacity utilization. We are exporting to Europe, U.S., you will see very shortly. We have also exported i t to China, where there are already, I assume 4, 5 producers. And India, of course. So -- I mean, it is a very good product for us, and we aim -- looking at this, if this continues, very shortly, we will have another facility to make 701 in our subsidiary.

Okay. Okay. The reason I asked is I thought in the opening remarks, you had mentioned that this quarter, we reported sales only for 770. Is that only from CFCL? Is that what we meant to convey?

In subsidiary, there is no 701.

Okay. I get it. Got it. And second thing was just -- I'm sorry if I have missed this in the past, but just in terms of year -on-year and quarter -on-quarter, possible to help us with the breakdown between volumes and prices for the quarter?

Abhijit, on year-on-year basis, it's largely volume driven. In fact, realizations have offsetted the growth. And quarter-on-quarter basis, it's fairly steady. We have seen a decline in realizations, and that has offsetted the growth, but volume has pulled it up.

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

Congrats on decent set of numbers. First question is in terms of our product pipeline. So now that we have been completely tapped and there are a few more products for which we are doing the capex, how does the pipeline look like? And which in all are the areas which we are currently working on in terms of user acquisition?

So in terms of future product pipelines, we just discussed 2 large capex totaling to INR300 crores. And again, the sector remains Performance, Chemical, intermediates for pharma, agro, water treatment and FMCG chemical. So the universe remains the same. And the INR300 crores additional capex is planned I mean, within -- which will be done within FY'25 and a little spillover to FY'26 first half. And in the meantime, of course, whenever there is more opportunities which come up. I mean, because we are working on a few more products in R&D and pilot. As and when these go ahead, I will discuss it during the earnings call.

Yes, I understood the first part. I was referring to the products which are currently in, say, R&D and pilot. So which areas we are looking at in terms of the user application? Will it be the same areas as currently we are working on? Or will it be different areas in terms of user segment?

No, I think we are very similar to performance chemical, agro intermediates . Pharma intermediates in particular, is big for us. So I think the segment remains the same for us.

And second thing, in terms of the subsidiary, if I recollect properly, probably the pace that we have, we can accommodate INR1,000 crores of capex. Was that the number correct? And we are currently probably having maybe INR300 crores to INR400 crores of projects which are commissioned and which are in pipeline, just perspective.

Yes, I think you're correct.

The next question is from the line of Arun from Avendus Spark.

What is our current utilization in our core business today across MEHQ and BHA and other core products?

So Arun, I'll speak segment-wise, FMCG is higher, it's close to 80%. Performance and Pharma is in the range of 65%. Performance segment is a little lower because of HALS capacity, which is largely underutilized.

Just the other question is c an you just break the performance into -- excluding this core -- excluding HALS and our traditional volumes?

No, that will tantamount to giving product -wise utilization, which we are not very comfortable with.

Okay. Ex HALS -- just wanted to understand how is our position?

Ex HALS -- it's in the range of 70%, which is basically the 4 products - MEHQ, BHA, AP and TBHQ.

Okay. So how long will it saturate this capacity? For 770, we can say, 85, 90. So what is the timeframe that we have in mind?

So I think probably if -- see, I think we will have to really gather this information. And I said that probably by end of this year, we will evaluate whether there is a need to set up. I think 1 of the time it would be, but when should we would be the right time to set up additional capacities of these MEHQ, Guaiacol, anisole. People, I think, take a call in the next six months' time.

So basically, we will wait for competition? That is what I can -- wait for competition before the -- that's...

I don't know. We are not waiting for any competition. We are waiting for our own evaluation to see whether the market is able to absorb these capacities. And what should be the capacity for the next installations.

The next question is from the line of Surya Patra from PhillipCapital India.

Yes. My first question is on the one of the costs that could be there because of the new capacities. So could you quantify that? Because my point is, in fact, on a consolidated basis, although we are saying that our new capacities are currently not optimally utilized. And hence, there would be the kind of impact that our consolidated business witnessing. But despite that, we have seen a consistent improvement in the margin in the consolidated business. So that means something is really driving despite the kind of the business challenges that we are witnessing for the industry at this moment. So what is the another cost and what is - - in such a situation, what is on the core business front driving this margin sequentially?

So basically, the -- I mean, the parent company is doing well. I mean, this is, again, on account of the new product addition, on account of improved yields, efficiencies, on account of reduced raw material prices. So these are the various factors why the parent company is still doing well. And of course, the subsidiary, as you rightly said, it's still -- I mean, of course, because th is is the first working quarter is at loss because of the heavy duties, which we have already on net.

Exactly, sir. Is it possible to quantify, sir, like what is, let's say, the EBITDA level, what would be the kind of hit that you would be facing for the new business?

So for subsidiary, apart from raw material, we have incurred employee expense , power & fuel cost, and also other expenses, which is in the range of INR5 crores to INR6 crores.

Okay. Okay. And then for the existing business or continuing business, this margin expansion, you said on the revenue -- in the prices front, there is no sequential improvement that is flat. And on the cost front, sequentially, there is no reduction, rather, it is slight improvement or stabilized price. So then is it the volume growth that is helping out to showcase a slightly better margin?

Yes, because the increased cost is getting hedged off due to product mix . But at gross margin level, it's fairly steady. 34.4% was RMC for Q4, and this quarter is 34.1%. It's basically EBITDA which has gone up because other expenses have come down a little bit.

Okay. And do you see really in terms of the demand recovery or demand for the existing product as well as the new product, it is a kind of sequentially, let's say, 10% kind of better, 20% better? Some sense in terms of the demand improvement that you can talk about?

The demand is sustainable, you can see on quarter-on-quarter, the volume growth is happening. And of course, we are aspiring to take more and more volumes going forward.

Of course, sir. Okay. I mean I wanted to also have a sense. So whether it is like -- what is the intensity of the demand recovery or, let's say, demand impro vement that you are witnessing? It is sub 10% or better than 10%? Or any sense on that?

On Y-o-Y basis, if you see the entire demand -- I mean, the entire revenue growth has only happened on volume increment. The prices has remained lower only.

I just needed a better clarification on the third capex that you mentioned, which is towards the water treatment chemical INR150 crores is what you are saying? Could you just clarify the timeline for the construction and commercialization for this project?

See, typically, it is a 10 to 12-month process for us from construction to plant direction to water trials. So assume if we start in September or October, you can add 12 months to that.

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

So just wanted to understand 1 thing. Actually, I was under the impression that all the HALS products are coming through CFCL. But you just mentioned that in the subsidiary, there's no HALS 701. So how does that work out? Just wanted some explanation on that.

So there were -- there were 2 typical HALS, 770 and 701, which we originally started in Clean Science, which we started in February '23. But of course, the capacities were very small. But that also helped us to build these large plants in the subsidiary.

Okay.

But 770, we have replicated, and 701, we have not replicated.

Okay. Okay. Sure. So 770, you have replicated. So the sales which we see from CFCL is only 770, the 67 million which has come, right?

Yes. Absolutely.

Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Siddharth Sikchi for the closing comments.

So thank you so much, all of you, for taking time out to understand the company. That's all from my side. If there are any further questions, people can connect with me or Pratik or Parnerkar for any offline questions you might have. Thank you so much.

On behalf of Clean Science and Technology Limited, this concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.