Himadri Speciality Chemical Limited analyst Q&A

Thank you so much. We will now begin with the question-and-answer session. The first question is from the line of Sanjesh Jain from ICICI Securities.

First question on the anode business, like you have mentioned the growth path for your cathode where you want to start with, say, 2,000 metric ton and scale it to 40,000 in FY '27 and eventually to be 200,000. Can you share us the thought process of the growth trajectory for anode?

So for the anode business, we are still working on it. And in due course of time, we'll come up with the figures and the investment required and the time frame.

Got it, sir. But what will be the market size for anode today? And what is the economics between cathode and anode? And how do you see the pitch-based cathode anode demand versus silicon- based carbon, which we are developing parallelly? How do you see the portfolio playing out for us?

See, cathode and anode together constitute an integral and important raw material for lithium - ion batteries. In terms of cost, it is 65% of the cell, lithium-ion cell cathode anode together. And in the ratio suppose for lithium-ion cell, anode and cathode is used in the ratio of 1:2. So suppose 100 is the requirement of anode. So 200 will be the requirement of cathode. So basically, in whichever cathode chemistry you are working, but anode requirement remains stable. So, whether it's NMC, CLO, LFP, whichever the chemistry is, but you need anode. And anodes, there are different types of anodes, natural synthetic, synthetic they are petroleum-based and coal tar pitch based. So, we have the unique positioning of both. And regarding silicon carbon anode material, it is added to synthetic or natural anode to increase the capacity of the battery, increase the density and reduce the chargin g time. So, silicon is an add-on, it makes to make hybrid anode. So, it's not actually that you can use either this or that, the silicon has to be added to this material.

Got it. Got it. But today, we don't add it, right? This is something which will happen…

Got it. My second question Anurag, on the Middle East issue. We were planning to export coal tar pitch in the Middle East and obviously, South Africa and other geographies. But Middle East is something where we have already started. With this situation, what's happening in the Middle East , do you see there will be some shift in the focus for coal tar pitch from Middle East to other geography and which will be those geographies?

See, this is a temporary phenomenon, we feel. And so some shipments were planned for Middle East, but that's not going to have any material impact because we are diverting those material to other geographies. So there is absolutely no issues with that.

So which are the geographies we are trapping apart from Middle East?

We are looking at different geographies like Southeast Asia, Africa remains intact. So, these are the one

Got it. But Southeast Asia, we would see competition higher from China, right, geographically?

China competition is not there because the quality we supply is very high and plus the China cost is higher than India. So even in India, we supply coal tar pitch at a price lower than China. So that dynamics doesn't work for our business. China dynamic is not at all valid for our business.

Got it. Got it. For the Carbon Black business, we started this new plant. How has been the ramp- up in that? That's one. Number two, the situation in Carbon Black should be positive for us, right? Because carbon black realiz ation has gone up. Globally, there is a large capacity which uses crude-based feedstock while we use coal tar-based feedstock. Now that coal tar prices, my sense is would not have gone as sharply as crude. So this shift in the Carbon Black business from the higher input cost should positively reflect for Himadri?

So see, what we have developed is a long-term sustainable business model, and we don't look at quarter-on-quarter ups and downs. But one thing is there, the model what we have bui lt up, we can transfer the increase in price to our customers. So whether it is crude-based or coal tar-based, whatever increase in price is there, we transfer to our customers. So that has helped us to build up a resilient business model.

No. But in a situation where one carbon black feedstock is expensive, we can use more of our own oil to produce carbon black that economics is much better right now?

Yes, definitely. That economics is better, but coal tar prices has also go ne up. So I don't think that is the delta on which Himadri has built up its business model also. And that is not something which we, eye also. We work on sustainable profit and which is probably assured.

Yes, yes. Firstly, coming back to this anode capacity, specifically the 200 metric tons, right? Can you tell us what will be the peak revenue potential from there, and how will the utilizations look like in FY '27?

This capacity is basically to commercialize our R&D efforts and to showcase that what we have worked on R&D is workable in a commercial plant. This is the beginning of the journey. And next step, we will be announcing capex for the large-scale commercial capacity where meaningful revenue will start coming in.

Okay. As of now, nothing is expected from these 200 metric tons in terms of numbers?

In terms of numbers, these are not significantly materialistic based on volumes.

In FY27, this will not be contributing to our revenue in any sort?

This will be contributing, but not materialistic.

Not materially. Okay. Secondly, coming to the Birla Tyres segment which you've restarted, how much did you contribute in FY26 in terms of revenue, and how will it scale up now going ahead?

Birla Tyres top line contribution for this year was INR 187 crores, and we expect to be around INR 3,000 crores of top line from this business in next 4 years.

Do you have any indication as to what will it be in FY27 particularly?

We don't give year-on-year guidance.

Okay. So what about like overall in consolidated levels, any guidance there for revenue and our EBITDA margins for FY27?

See, again, coming to that, I have given a guidance that FY25 we had a PAT of INR 555 crores. We have committed to double this PAT in next three years in FY28 to INR 1,100 plus crores. The right way to look at Himadri is not at EBITDA, but at PAT levels. If you consider, look at Himadri’s PAT as a percentage of top line, it is 16 %-plus. Because there is no interest and no additional cost, the right way to look at Himadri is the consolidated top line and PAT rather than EBITDA.

Okay. Just last thing then, if I observe, your top line has, I think, in FY25 it grew at 10%, and FY26 it largely has been flat, correct? With these new additions of the Birla Tyres and the added carbon black capacity, will your top line also grow? And at what rate, if so -- yes. Any indication there?

Sure, sure. Up till now, last 3, 4 years, we have not been able to see any growth in the top line practically. Maybe few percent but now the real top line growth starts. FY27, you will see a top line growth also and bottom line growth also.

I don't want to give any growth numbers.

The next question is from the line of Akshay from AK Investment.

Congratulations for the great set of numbers. My first question is, we have generated the highest ever gross profit margin this quarter. Do we see this trend will be continuing going forward for the next 2 to 3 years? Also, do we able to continue the 20% EBITDA margin going forward?

Yes, we are confident of achieving this on a sustainable basis. And we are looking forward also, you'll see growth in the numbers.

Okay. Sure, sir. Got it. Sir, secondly, on the U.S.-Iran war and geopolitical situation, due to the commodity prices and inflation and all over the world, how do we see impacting our types of business and whether we will face any pressure going forward due to this war?

See, as I told in my opening commentary also, we are resilient to any shock in any movement or dislocation, supply chain logistics in West Asia because of the ongoing geopolitical situation, given our nil dependence on this geography. Definitely with energy pricings going up, the material prices going up, this will have impact, but good thing is that we'll be able to pass on this to our customers. As such, we don't have impact on our P&L because of this geopolitical situation.

The next question is from the line of Nitin Shakdher from Green Capital Single Family Office.

This is Nitin Shakdher from the Green Capital Single Family Office. My question is more from an investor's point of view rather than an analyst type of a question is that for this annual year and in terms of approximate margin guidance for the 3 businesses, which is, let's say, advanced battery materials, the turnaround of the acquired assets on Birla Tyres, and obviously the main core business, which is the speciality carbon black. Are you able to give any sort of an indication margin guidance growth rate for the year? I do understand that geopolitically your raw material costs will be up and down, but just as an indication. Thank you.

For the current year, we don't prefer to give any specific number guideline, but on a macro basis, I can give you guideline that current year we will see both top line and bottom-line growth. Up till now, we were not able to give any top line growth basically because we are going for value added within the same product profile. What was happening, we were adding value to our exi sting products, so the margins were increasing, but the top line was not increasing in a big way. But now with new capacities coming up, you will see top line growth plus margin expansion. Both of which you will see in the year to come.

I want to ask, what is the current utilization level that we have, newly commissioned 70,000 metric ton of speciality carbon black? And what is the steady -state utilization leve l and its EBITDA per ton?

We expect to have around 85%-90% capacity utilization for our newly announced capacities for FY27. And EBITDA in terms of if you look at our EBITDA per metric ton, it was around INR17,000 per metric ton on an average on the entire basket of portfolio. With this being a speciality, it will be significantly higher than this average 17,000 plus.

And I want to also ask about that we have set up new subsidiary in China that we have mentioned. Why we have set up that subsidiary and what is the...

We will be importing some raw materials and equipment from China. For that, we have set up our subsidiary to take some local tax benefits.

The next question is from the line of Dhruvin Kadakia from SKP Securities.

Hello, sir, and congratulations on this robust set of numbers. My only request would be that in terms of sales volume, will it be possible for you to provide me with a break -up as to what was the volume generated between your legacy business, carbon black and tyres in this particular year?

Tyres till now, we have not consolidated. Once we consolidate, then we can discuss this. Now it's a part of sales only, which is coming into Himadri. As such number, the detailed numbers we don't disclose.

Okay, sir. Not a problem. Any new updates with regard to the capex plan than what we already know? Like, is there something on the block?

No. As of now, we have already announced all the capex. Yes, anode capex we'll be announcing soon. Once that is finalized, the volume, the capacity and the capex, that will come up with a new disclosure.

The next question is from the line of Sagar Jethwani from PhillipCapital PMS.

This significant jump in the other expenses is because of the forex loss. Is that correct?

Yes. Yes.

What is our hedging policy in that case? Can we see some curtailment of this impact from the forex volatility?

Yes. As you know, there was sharp depreciation in rupees which impacted us on the import side. And export side also, we hedged something, but generally we keep our position open. Becau se of this huge volatility, we hedged. Because of the hedging, we had to incur losses this time. It was the other way around. Looking forward, we are very vigilant on this and maybe we are confident that after Q1, there may be some hit, but after that the re will be very strong position in terms of any open position of capex.

Actually, my question is not quarter -on-quarter. It is more of a structural in nature. Can we reduce the volatility swing from these forex losses in long term?

Definitely, since we have exports and imports more or less are in parity, so leaving the position open leaves us with very less chance of any FX volatility. That -- this time we hedged the position, thinking it was going to be volatile, and that' s why we had the FX loss. Our standing policy was to keep the position open being import and export being more or less in parity with each other. We'll continue with our existing principles only.

Understood. You're saying that beyond Q1, the impact would reduce?

I don't think there will be any impact before or after Q1.

Okay. Secondly, how many new clients that we have added in last two years? Geography-wise, any new countries that we are planning to enter or scale up where you might be witnessing some kind of a significant opportunity, given China Plus One? There's you know, cost escalation in Europe as well. Some color on that would be helpful.

Definitely. In last year, our exposure was 56 countries, we were selling our product. This year it is 61 countries. We've added 5 more countries, particularly Europe is doing good and U.S. is doing good. For us, in Europe also, more and more countries are being added. Because of this, as you correct ly said, because of the cost structure in Europe and U.S, this is giving us a lot of advantage, and China Plus One policy is also working out well for our supplies to the global market.

Lastly, any color on margin, can you give until FY28? I'm not talking about FY27 again, not the one-year guidance. Typically, just structurally long term, how do you see the margins? Because we are adding some new capacities also, considering that fact?

With the new capacities coming on, we are confident of strengthening our existing margins further.

From here on?

From here on.

The next question is from the line of Suhani Singh from Seja Capital.

PCR, we target to commission in next 24 months. Differentiating strategy will be , we'll be focusing more on EV. That is the segment we will be focusing on, and a specialized tyre for electric vehicles. Given the Himadri's strength in carbon black chemistry, that gives us a unique advantage of building a value-added tyre with more strength, resilience and this gives us a unique positioning in the business, the understanding of key raw material.

I also wanted to understand, the standalone other income jumped from INR 51 crores, INR 176 crores. Could you break down the composition of it means treasury, dividends from subsidiaries, government incentives or one-offs?

Basically, this is because of FDR interest in investments that we have put in mutual fund gains. NCDs that we have deployed in for operation of Birla Tyres, that fair value calculation. Based on our investment, different investment, their fair value calculation. It' s a combination of all these.

Lastly, with Haldia and Mangalore liquid coal tar pitch terminals commission, what is the targeted FY26 export value? What proportion of standalone CTP revenue do you expect from exports by FY28?

See, by FY28, we expect the new commissioning capacity of 100,000 tons, which gives us 50,000 tons of coal tar pitch that will be completely exported to the global market.

The next question is from the line of Rohit Nagraj from 360 ONE Capital.

Congrats on good set of numbers. First question is on the anode material facility that we have commissioned. Here in terms of the commercial validation of materials, how much time will it take? And which and all are the customers where we will be targeting to send the material? Is it domestic, exports? How are we looking at it? And once the validation is done, how much time will it take for us to put up a new commercial scale plant?

The idea to commercialize and start this plant was to expedite the timeframe required for validity of material. That is the idea behind commercializing this plant. We are engaged with all the customers in India and who's who in the industry globally. We have already sent them sample A, which has got a very good response from our customers in terms of quality validation. Now we are to send them sample B, C, D. That will start now. Once it is done, then we'll come up with the roadmap for our future capacity expansion. That will happen very soon. It will not take a significantly long time now.

Sure. Just one allied question in terms of the anode material pricing, how has it changed over the last 5 years? What was the price about 5 years back, and given that new technologies have come, commercial operations, capacity, how the price are being currently in terms of INR per kg or dollar per kg or how you prefer it?

Sir, I don't want to comment on price per metric ton, but to give you a broader idea, all the cell component prices have come down between 50% -60% over the last 4 to 5 years, whether it is cathode or anode. The grade in anode also, depending on what quality you make, what grade you make, what application is this, so prices significantly vary. It will be not right on my part to comment on per metric ton price.

Sure, sure. That's also. The second question is, in terms of our gross margins which have expanded, so just to get a perspective, could be pricing of finished goods, work in progress and raw materials would have been at a higher level given that there have been increase during the month of March. Is there any element of inventory gains that we have observed during this quarter? And if so, what could be the quantum on the same?

See, the margins expansion that you are seeing is not one-off thing. It's a sustainable long-term margin improvement that, because of our all efforts in terms of improvement in yield, operational efficiencies, waste recovery systems we have been able to do, and these are sustainable on a long-term basis, and will strengthen further only.

I was just concerned more on the gross margins front. Because of revaluation or better valuation of the inventories, is there any benefit of inventory gains which we have observed?

No, no, not really.

The next question is from the line of Dhruvin Kadakia from SKP Securities.

I just wanted to confirm that in the segmental breakup of revenues that we've given, we've included a new category called others, which includes mining and other businesses. Could you shed a little light on what the other businesses are? Like, is it tyres combined?

Yes, it's tyre combined. Right.

You mentioned a figure for tyre sales this year. What was it? Could you please repeat that?

INR 187 crores.

INR 187 crores. Would you be comfortable in sharing what was the realization per ton on this that you've gotten for this year?

We don't give per metric ton realization like that.

The next question is from the line of Vignesh S.B.K., from Ksema Wealth.

I just want to understand about upcoming cathode segment business. What would be the typical asset turn for the project or for this segment?

Sir, just want to understand the asset turn for the upcoming cathode segment, sir?

Just 2x. It will be 2x of the asset investments. Turnover to assets.

Okay, sir. One more thing, for the first phase, we said around 2,000 tons would be commissioned. Through this Phase 1, how much would be the total tons in the Phase 1?

What is? Can you speak louder? You are not audible.

Hello. Is it better now, sir?

Yes. It's better.

We said initial will be 2,000 MTPA. What would be the total Phase 1 capacity?

40,000.

40,000 would be commissioned by FY '29. Is that clear?

Yes, yes. Well, before FY '29. So, FY29, you will see the full year of operation of the entire 40,000 ton capacity. The reason, logic, capital allocation has been done, but we are very careful in terms of deployment of capital because we are focused on ROCE. I don't want to. As a company policy, we don't want to deploy capital ahead of requirement. We can very well set up the facility and start the commissioning and deploy capital for 40,000 metric tons. But since t he approval period itself takes longer time, it makes sense to get 2,000, get it approved, and in the same time, 38,000 will continue, and it will commission. That there is full realization and proper return on capital employed.

Got it, sir. Helpful. What will be the total capex incurred for this 40,000?

INR 1125 crores.

Okay, thank you. In this cathode facility, usually it is energy heavy or how are we planning to any plan for the energy side as such, renewables or something like that?

For cathode?

Yes, cathode plant.

We have renewable plans to consume renewable energies.

Those can be fund…

No, there you buy or enter into a long-term contract. We don't plan to invest on our own.

I want to ask, are there any binding LOIs, MOUs or offtake signed with Indian or global cell manufacturers for LFP supply? What proportion of Phase 1 capacity is contracted?

What's the?

What proportion of Phase 1 capacity is contracted?

See, any MOUs or LOIs which we have signed, we have NDA. We cannot disclose this now. At the right point of time, it will be disclosed. For our Phase 1, the capacity, depending on the product approval, these LOIs will be affected.

Okay. Got it, sir. My next question is, as we can see, the net cash declined from INR 392 crores to INR 122 crores despite record PAT. The standalone current borrowings also rose from INR 306 crores, INR 719 crores. Could you please walk me through the FY26 sources and uses? Moreover, can you tell me about the steady-state debt level that you will be comfortable carrying forward?

See, the increase in borrowing is basically we have significant bank limits. We need to utilize this limit to keep our limits intact. We take at a lower rate and provide back to the bank at a higher rate. That gives a delta also, which is part of our income. For our future expansion, our plan is to use internal accrual only for all the expansion. In any case, if we take debt also, that will be very significantly low portion and will be just timing gap , not much. We don't want to be heavy on debt.

Due to time constraints, I now hand the conference over to Mr. Anurag Choudhary for closing comments.

Thank you once again for taking the time to join us on today's conference call. We hope we have been able to address your queries adequately. This year has been truly transformational, as we set new performance records, achieved world- class capacity additions, earned landmark recognitions, and made decisive progress on our future growth engines. Yet, we firmly believe the best chapters of Himadri's story are still ahead of us. We remain committed to delivering long -term value and are grateful for your tru st, confidence and engagement as we scale new capacities and capabilities and scale new frontiers and shape the next phase of our growth. Should you have any further questions, please feel free to reach out to our investor relations partner, MUFG Intime IR. Thank you once again for joining the conference call today, and we look forward to your continued support. Thank you.

On behalf of Himadri Speciality Chemical Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.