Navin Fluorine International Limited analyst Q&A

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.

A couple of questions, one on specialty chemicals and one set of questions on CDMO. In picking first, if you could please help us with an update on some of the key growth projects we've been implementing. So what exactly is the capacity utilization of the multipurpose plant? And how do we see it ramping up next year? Do we still expect it to hit full utilization in CY '24? Also, any discussions with the customers for the dedicated plant, which is already running at optimal capacity to double the capacity there or expand. And finally, the 5 new molecules that you've talked about, 1 introduced this quarter, maybe there's 4 more next quarter. What might be the revenue potential from these?

Abhijit, it's Anish here. Thank you for the questions. So on the capacity, as you know, we never generally talk about capacities. But what I will tell you is that in the spec chem space, we had 3 capex's. One was the MPP1 at Dahej. Then there was the MPP2 at the Dahej, and the agro - specialty plant -- dedicated agro specialty plant, part of it, which is dedicated. So on MPP1, in kind of FY '24, we expect that 80% of the peak annual revenue that we've indicated to you guys will be met. In MPP2, we believe that in FY '24, we will have already achieved the peak annual revenue. The dedicated agro specialty plant is expected to start chemical reaction by end of March or early April, latest. And the first commercial supplies are expected to be in end of 1Q FY '25. So I don't know if that answers your questions on the capacity on new agro capex's in the spec chem bases. But I'll take your question on the molecules in a second. But let me know if you've got anything more on that.

No, that's helpful, Anish. So just to clarify, the multipurpose plant for which we had a revenue potential of about INR270 crores. That one is running at about 80% in fiscal '24 itself. You said it? And the other one, which was INR160 crores revenue potential, that one is at full utilization for fiscal '24.

That's exactly right, Abhijit. So I mean, I wouldn't say 80% capacity, but I'm referring to the 80% peak annual revenues, yes.

Okay. Understood.

When we start -- when we factor in or model these multipurpose plants, they're not modelled to run at 100% capacity, right? They're modelled to certain utilization level, given that there will be batch processing, yes.

Okay. So of the INR270 crores, we are talking about 80% here.

Yes. On the 5 molecules that you mentioned, 1 molecule has come into play in 3 quarter, 4 we were expecting in this quarter. Some of that has been deferred to next quarter because of customer requests and some of that has been deferred because we needed more time on the chemical reaction side, but we expect all of those to come into play by the end of Q4.

Any revenue potential from these that you could share?

I would not like to speculate that at this stage. Leave it to when we get to say it, yes.

Got it. And just the other one I had was on CDMO. So while we've talked about the capex number for this MSA with the European customer, is there a revenue number also you could point at? And the other one was just that there was this large purchase order of $60 million that we had a year back or so, we were expecting some renewal of that order in CY '24. So any update on that?

So on the CDMO side, se e normally that business is not associated with guaranteed MSAs or contracts, right? But -- so if you're asking -- if your question was around as to what is the capacity. That's difficult to -- I mean, in terms of the revenue potential you're looking for, see our typical asset term in CDMO tend to be about 1.75 to 2x. So that wouldn't be sort of different here either. But neither the MSA nor the projections are sort of guaranteed. The thing I can tell you is the commercial product that these intermediates g o into is a patented product, and the prospects are extremely promising, and we are very excited with it as well.

Sure. And on the purchase orders, any update on that for the upcoming year?

Purchase order for?

There was this $16 million PO we had about a year back, and we were expecting a renewal of that order in CY '24.

So 4Q FY '24 will have an $18 million delivery.

Sorry. So -- sorry, you are referring to the last year that we've done the molecule in Q4, is it -- is that what you're referring to?

Yes, yes, Q3 and Q4 of last year.

So that as I ment ioned in my commentary, those campaigns are not expected to come in this fiscal, they will come in the following fiscal. Sorry, just to clarify that.

Yes, that's fiscal '25, right? The upcoming year, '24, '25.

Yes. Correct. Correct. Correct.

Okay. So we do have that visibility now clearly defined. That order is coming next year.

We expect it’s still kind of how good the business is, right? I mean, at the end of the day, the update we have at the moment that it is expected next fiscal, but we constantly remain in touch with the customers and projections could change. There is a lot of dynamism involved in this, Abhijit.

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

So my first question is on the HFO project. So just wanted some understanding. When we started the project within a period of 3 to 6 months, we went up to the optimal utilization. And now in the last 3 quarters, we've been struggling to again get back to the optimal level or the ramp -up is slow. So is there any deferred demand issue? Or is there any structural issue at plant level? And how do we foresee in terms of the revenue potential, which earlier we were envisaging about INR400 crores to INR500 crores annually. Whether we are on target for that in FY '25 or that is also deferred?

All right. So let me take that in 2 parts. First is the HFO project, as you mentioned about the ramp-up and the stabilization of the productio n. Now the plant is a very advanced technology plant. Honeywell operates this plant apart from obviously with us in India, in China and in the U.S. And one of our learnings out of this is being that the operating -- the optimum operating parameters of this plant is in a very, very narrow range. So as we experience issues, we have to be very precise in terms of how the planned parameters are being set. And that's a learning experience. Unfortunately, we did not take into account as we started the ramp-up and the technology absorption. So that has taken a little more than what we would have liked to have. But there are no struct ural problems. We're very closely working on this with Honeywell to resolve and fix it. And we hope that this will be behind us very, very soon, yes. So that's the first part of the question. The other part in terms of is there -- on the demand side, now while we are being able to dispatch and meet Honeywell's requirements on what they have ordered from us as a result of the contract that we have, the demand, obviously, also is slightly subdued. So it is -- the orders at the moment are at the minimum level of what we have under our contract, not at the higher end of that. To answer your question on the peak annual revenue from that in terms of what we've promised. We believe that in -- it's already on track. So the FY '23, we commissioned, we said in 2 years, we will be at the peak annual revenue of up to about INR460-odd crores per year, which we are on track. That doesn't change.

Sure. That's helpful. Second question is, again, similar on CDMO. So we've been guiding that - - on a normalized basis, we will have about $40 million of yearly run rate barring any lumpiness on a quarterly basis. So how are we expecting the run rate during FY '24 and in FY '25, as you mentioned that there will be this additional order of maybe $16 million to $18 million, would that be over and above this normalized run rate of $40 million?

So in CDMO, typically see, as I've mentioned this before as well Rohit, the business itself is very lumpy, plus what we've done, as I've told you before, is we changed our mindset. Earlier, we are focused on early -stage molecules. We a re now complementing them with commercial stage molecules, right? As we go on into next year, our expectation is that about 30% to 35% to 40% of the revenues will come from commercial stage molecules. And this is where our entire team is focusing efforts on. We will have some contribution from the European-based API customer into next year's revenue, though, of course, that revenue will come in materially or start to make material impact on the numbers from FY '26. Additionally, the strategic partnership that Vishadbhai referred with the CDMO in the U.S. will also open up opportunities. But all those efforts are ongoing. This is -- obviously, it's going to be in addition to any order that we get from ongoing campaigns. All these efforts are going to be in addition to that. But I wouldn't sort of be able to put a number on it at this stage.

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

I got a few of them. First, on the R32. We thought that R32 capacity add ition was freezed in December '23. Can you just help us understand the regulation now that we are going to expand, does this qualify for the quota determination period because this capacity is coming after December '23.

Okay. You want to finish questions or should I take them one by one.

Sir, let's take one by one.

Okay. So the regulation around the December '23 date is actually for receiving subsidy under The Kigali Agreement. The quota period is the average production you have in '24, '25 and '26, '27 being the unrestricted year, and from '28, I believe, the quotas kick in, with '32 being the first year of phase down at 10%.

This capacity will not qualify for subsidy payout, but this whatever we sell from this plant will qualify to get the baseline capacity for the next.

That's fairly clear. Got the regulation clear now. The second is on the gross profit margin. Sequentially, it is down by 500 basis points in the stand -alone entity, close to 430 basis points, while the mix in the CDMO business has improved. Anish sir, can you help us understand what is driving down the margins in this quarter despite having a higher CDMO contribution?

So you're referring to stand-alone, right?

Yes, stand-alone. As well as consol as well. Consol also, we had a equivalent decline in the gross profit margin, which is your...

So on a stand -alone the sort of main drivers over there of lower margin are really the ref gas environment. There's a pricing sort of pressure in R22 which has sort of affected it. The fluorspar crisis, we had high-value inventory in stock, which has kind of played into it as well. Of course, as we deplete that stock, we expect that to be recouped from next financial year. In addition to that, we've had some one-off charges in the business. So if I look at your 20% to 15%, as you said, sequentially, right, 5% roughly. That 5% broadly is split out in those 3 compartments, about 1% being on spar prices, about 1.8% to 1.9% bei ng on R22, the reasons I talked about, and about another 1.4% relating to one-off charges. So most of this, know, Sanjesh, we expect to recoup as you can obviously see the reasons play out, most of them with loss margin will be recouped over time.

Just one follow -up on this, Anish sir. I thought fluorspar prices have actually gone up. That means inventory -- excess inventory should have positively benefited us on the gross profit, right?

No. So fluorspar prices have gone up, but it depends on what our contracts are, right? I mean if you look at it, this -- the material that we are now consuming is at higher fluorspar price. If you know, when we started off, I think, at the end of March '23, we had high inventories of low fluorspar prices. So that inventory is depleted and the new fluorspar inventory has come in, which was our contract from the last calendar year, and which is why I said we expect this to be recouped because as we go forward, we'll again see the benefit of low spar prices come back into the play.

Got it. Again, sorry, I'm sticking to a few bookkeeping questions to get the modeling right. The other expenses has also gone up sharply quarter-on-quarter. Any particular reasons for that? Or it is largely to do with the HFO plant getting corrected in the Dahej and that's been booked here.

So the other expenses that you see in the -- as reported comprises both of production -related expenses as well as fixed costs. As I've already told you, there is an element of one -off costs within that. But the way I would hold it for your modeling purposes, if you take the 9 -month number, right, and you look at the quarterly allocation, I'm talking consol level, yes. I mean I'm not talking standalone. If you take that at a consol level, that broadly should be the number that we should look at. So INR120 crores to INR130 crores per quarter, roughly.

Yes, because there are effects, right? I mean in some quarters, , like this quarter, we may have a higher CSR spend compared to last quarter, etcetera. So those timing effects also come into play.

Fair enough, fair enough. I got two few small er questions. One on the peak revenue from the HFO. Last time when we met, we said that the peak revenue because of currency as well as higher raw material prices now stands at INR5.5 million. But in your -- in the previous question for peak revenue being that INR4.6 million. What has changed in last 2, 3 quarters?

No -- so I'm referring to peak revenue on the basis on which we made the promise to the market on that basis, saying that we had talked to, if you remember, I think it was INR2,800 crores over 7 years, something like that, right? So I'm saying that on that basis, when you talk of INR2,800 crores over 7 years, what we are expecting to see in FY '25, you will largely see that, that would be met.

So we will be doing INR460 crores in FY '25.

Yes, yes. That's our hope, yes. That's where we are today.

That's what we are looking at today. Fair, fair. My last one is on the dedicated facility. I think dedicated facility; we ramped up completely. Now we are talking of an 80% utilization. It's more of a timing issue that 80%...

So Sanjesh, just to clarify, the dedicated capacity, as you rightly mentioned, has already been ramped up. In FY '24 itself, we would have achieved the peak revenue that we'd indicated. The multipurpose plant, which is not dedicated, I said 80% of our top line revenue, the peak revenue that we had indicated, we expect to see in FY '24 itself.

That's fine. I think I got confused between the two plants.

No, no worries.

Sir, one last question on the CDMO. Previously, we said that we will be able to achieve that $100 million revenue from existing cGMP 1,2,3 and cGMP4 will help us expand from there.

So that's -- sorry, I don't mean to interrupt you, but yes, finish your question.

I got you -- you got the question and that's what I was...

Okay. No. So what we said was that 1, 2 and 3 would not be sufficient to take us to $100 million. We would need a 4. If you see what we've done is while announcing the capex for 4 at INR288 crores, we have opened up Phase 1, which we believe is very, very critical to support the MSA that was referred by Vishadbhai. And that not only supports the MSA, but also unlocks our ability to achieve that $100 million. So it's a double side thing that you will see just with that portion of the capex.

So that is directional, oka y… That is directional. It could be '27 or '28. Would I worry about it if it slipped by a year, I wouldn't care about it. I mean , directionally, we are there. Does pace matter?.

No, no, that's fine. That's very difficult to predict, but I got the point.

Yes. So the idea is, today, we are investing in the business with that as an aspiration, yes?

So Sanjesh, just one thing to add is the sheer fact that -- in this market, we are going ahead with the calculated investment in this business is the belief that the management and the customer have the understanding and the belief in us that we can deliver, we are the right partner of choice and that this business is going to increase going forward. And that time, if we go ahead and invest, we will lose out because customers today are looking at capacity. They cannot wait if the molecules are flying off. So it's our definite belief that going forward, this business has to reach the optimum levels that you have discussed with Anishbhai.

The next question is from the line of Siddharth Gadekar from Equirus.

First on the specialty chemical business, with capacity utilization that you have alluded to in this quarter for the entire year, if we do a back calculation, it seems the base business specialty, which was there till FY '22 would have declined by anywhere between 45% to 50%. What has led to that significant decline? And how should we look at that business going ahead?

No. So when you talk of the base business, I think you're referring to our legacy capacity in Surat, right?

Yes.

Yes. So there are 2 things that have happened this year, yes. There has been 2 sorts of -- one of our molecules in Surat has faced some demand challenges, which has started to recover. But during the year, that has been the case. The other thing a lso to remember is that we ran several campaigns from Surat last year, which obviously have not seen themselves in this fiscal, but are expected to come back into next fiscal. The third thing is I referred to the 4 molecules. Out of the 4 molecules, 3 molecules, I believe, are going to come in Surat. So all of that is going to bring the business again in the base. So some of the nature of these businesses is when it's campaign-driven, you kind of tend to see that year-on-year, yes.

Okay. Got it. Sir, secondly, on the HFO side, we have always spoken about the debottlenecking, which was expected to come in CY '23. And then we were also talking about a possibility over Phase II. Where do we stand on that project?

So again, see, the thing is I don't know how this gets -- I'm going to clarify this once again. The debottlenecking was a project and is a project that remains in our hopper. It is not a project that has matured enough for us to even take it to the Board. As and whe n that matures, we will take it to the Board, we will announce it to the market. So that is a possibility in the hopper, much like a lot of other projects that we have in the hopper. We continue to look at these, develop this and those become conversations with customers, okay. So that is not to be taken as something that we have committed to. Yes. And similarly, on your question on the doubling the capacity of HFO, etcetera. I mean, our discussions with Honeywell and particularly between Vishadbhai and at the highest levels in Honeywell, cover a range of topics and range of opportunities. And depending on the market dynamics, those opportunities are being matured and will sort of see themselves come in to play. Sorry, you want to add something Vishadbhai? Did I answer your question, Siddharth?

Yes. So just one last thing on R32 capacity. So going into CY '28, is it fair that we will be operating the capacity at around 66%, 67% capacity utilization?

R32?

Yes.

No, R32 is a low GWP product with a very long cycle. So it's first cut starts in 2032.

But given that we have to produce an average of '24 to '26, so our average will be lower than what we produce in '25, '26. So technically, from '28 our production will be around...

So what will happen is we currently have a capacity that's already in play at 4,500, right? So that capacity is actually operating extremely well, and we may be able to do more than 4,500. Bu t argument’s sake, let's just hold that to 4,500. So that 4,500 goes into the quota as an average of 3 years production, so 4,500. With the current new capacity that we've announced today, we will be able to take in 2 years as opposed to 3 years because that plant will take 12 months to commission. So by February, we commission the plant, which means we won't have production for '24, correct? Our production for '25 and '26, the production for '25 and '26 will basically get divided by 3. So that's what we'll get into the system in '28. So to answer you in a more simple and direct way, doing the math for you is basically, we are saying 9,000 metric tons will be our expanded capacity and 7,500 will be the quota to us from '28 onwards.

The next question is from the line of Vivek Rajamani from Morgan Stanley.

So first question on your Specialty Chemicals and the CDMO segments. In 2Q, you had mentioned we'd seen certain deferrals which you were expecting in this quarter. Just wanted to clarify if these are the same molecules which are continuing to see some sort of deferment or postponement even in this quarter? And if you could just spend a minute to kind of explain what exactly is the issues that the customers are facing with respect to some of these molecules?

So some of this is -- it's a combination of deferrals -- and mainly deferrals. And also in some cases, we had to do more work on getting the chemical reactions right. But the deferrals are nothing different to what's happening across the industry at the moment. Everybody is looking at year-end and trying to reduce their inventory and cost of carrying the inventory, etcetera. So that's a deferral. It's not an order which is lost, but we expect that to be made up in this quarter.

So you mean Q4?

Yes, Q4. That's right.

Sure, sir. And the second question I had was, and I can understand this is a bit of a difficult question to answer. But just with respect to both your Specialty Chemicals and CDMO. Would it be possible to give a sense of how much do you think your portfolio is immune to these risks or deferrals? Or how much part of your portfolio do you think is actually immune to such risks? And how much is actually very, ve ry reliant on the customers changing the use and demand? Would it be possible to give some sense there?

So I can't -- so again, as you rightly said in the beginning, it's a very difficult question to answer. What I can tell you is strategically we try to play in products which go into early-stage patented life cycle. So that the risk of them being subjected to market dynamics, substitutes, etcetera, is reduced and is minimal, okay? That's our -- that's always been our philosophy, and that continues to be our philosophy. As Vishadbhai tells us, he doesn't want to be in the me-too business. So that is our thinking, right? But at the end of the day, the deferral again in CDMO, what you talked about -- see in CDMO, the deferrals are not actually deferrals. They are the nature of the business. The CDMO intermediate business runs on a campaign basis. And those campaigns are ordered in 1 year, but then depending on how they are rolled out, etcetera, could take another year of gap and then come back to you. So that happens as a very natural part of the business. What we are seeing in the spec chem business is what's happening by global majors to control costs, etcetera, and manage their inventories, etcetera, as you get into year end and obviously, look at destocking effects, etcetera, etcetera, which again, you probably know more than I do, Vivek.

The next question is from the line of Chetan Thacker from ASK Investment Managers.

Just two clarifications largely. One is on the HFO plant. Just wanted to clarify, so this year, we will be undershooting the optimum number that is there on revenue, and that should get back to that optimal number in FY '25. Is that correct understanding?

So what I'm saying is that in FY '25, we expect the peak annual revenue that we've indicated in rupee terms to be met. In FY '24, we will still be delivering the demand that Honeywell has put on us. So there is not likely to be any unmet demand. Like I said, as we speak and touch wood, the plant today is operating at 80% of what we expect it to.

So the -- so as you have this, Chetan, in any of these agreements, you have a certain minimum demand and a certain maximum capacity demand, right, which you can't go beyond. What I'm saying today is that we have the minimum demand. If the environment was better, you would have probably seen it higher than that minimum demand. That's all I'm saying.

Understood. And sir, just on the spec chem bit, so the base business is expected to come back in FY '25. And the additional 3 molecules that will get added, that will also start to co ntribute in '25. That should be a fair understanding over and above what we're seeing in today's numbers.

So over time, I mean, our philosophy is to optimize and utilize the assets across both the entities. See, we don't see this as entity -by-entity-by-entity conversation. We see it as a collective spectrum conversation on how to optimize the assets, whether they are in Surat or in Dahej.

Understand. Just not talking about on an asset level, but at an overall revenue level, the number that we are seeing today for FY '24. For FY '25, there will be a bump up which happens as the base business, again recovers, which you mentioned right now, campaigns come back and you see 1 molecule...

So we have visibility to the n ext -- this Q4 being stronger than Q3, and I'm saying visibility to that. What we are saying, and this includes the deferral of the molecule that I mentioned, okay, as a result of that, too. What we also know and in speaking with our customers that the challenges within the spec chem business are going to play out and recovery is going to be progressively better next year. But we expect that recovery to be better in the second half of next year rather than the first half.

Understood. And on the CDMO bit, again, FY '25 will start getting more towards normalization, and we remain -- we would adhere to the medium-term target of $100 million once this cGMP4 comes in place.

So directionally right. Again, we will given the efforts that we've taken, the agreements that we've done, including the 2 that we have discussed earlier that Vishad bhai pointed out it will take some time for us to play that out. So the CDMO business should start seeing in the way we've described to you a stable revenue from commercial business with capacities that we use to get higher-margin early-stage products. That will start becoming more and more visible again as we go into second half of next year.

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

I just had a few facts checks, especially in CDMO. So you've had a few announcements in the past. So there was -- there's been a contract that we signed with Fermion. And then there was a discussion abo ut the $16 million PO with an American company. And now speaking of expansion of the MSA with 1 European customer and the commercial opportunity that we have received from an American customer. Is there any overlap with this?

There is definitely overlap.

There is definitely overlap, Archit. The first name that you referred is actually the European - based API. We had signed an MSA with them covering 1 molecule. Now this expands it to 2 molecules -- 2 more molecules. So in total, 3 molecules. Yes, and the American CDMO is something very new. That's absolutely recent. We've never announced that before. That -- the partnership there is very promising because here we are tying up with a player who' s got the skills or experience in the early stages. And we've got experience and capacity in the commercial stage. So this is going to be a complementary partnership both in terms of how we utilize our common capacities to -- capabilities in a more complementary manner, but also it will open up access for us in the U.S. markets to customers.

Got it, sir. And with the same American partner that we are speaking of, we have intended to commission around INR160 crores in Phase 1, which I think Vishadji mentioned earlier is towards this particular contract. But the total capex number being INR288 crores, I was just wondering if there are 2 dedicated blocks separate to service different customers? Or how should we read this?

So say, let me first sort of clarify this, okay. In CDMO business, we do not have any dedi cated blocks. When we say dedicated, dedicated, what we mean is we've allocated the capacity. There's no concept of dedicated plants, there's no concept of take or pay or anything of that sort, okay? The other thing that you talked about was the reference you made to the Phase 1. The Phase 1 supports the European -based API customer and not the American one. The third thing to point out is we have entered into a partnership with the American API. It's a strategic partnership, which means we have an arrangement, Amutual beneficial commercial arrangement that we will tap into our respective capabilities and we see how to maximize the value of that relationship.

Got it, sir. And just one last clarification. I wanted to squeeze in. Earlier, just pi cking up cues from the previous calls, I think the multipurpose plant that we had announced our capex for, we had close to 3 molecules towards agri, and I think 1 was in the pipeline which you were supposed to go towards pharma. And we are now speaking of 4 more molecules, I think which takes the total tally to close to 7, 8 molecules. So these new 4 molecules would effectively come under the same ambit of the total potential that we are talking of, let's say, INR60 crores to INR70-odd crores. Would that be a fair assumption?

No. So again, you know what I think you're mixing 2 things up because the MPP 1 client had certain molecules that have been brought into play in the Dahej, and that was an indication. Your first comment relates to that. I think the second comment which I was talking about 4 new molecules, as I said, 3 of those are actually coming in Surat and one is being introduced in Dahej. So they are mutually exclusive in that sense.

Sir, my question was on the R32 capacity. Just wanted to understand, given that we are -- actually, first question here is, why did n't you announce these 4,500 tons earlier, then you can make use of the quota for CY '24 as well because this baseline period has been known. So I'm just wondering why announce it now and not earlier than sort of let go of 14, 16 months of production for the quota?

So again, a good question. I mean I think -- see, this is something that is a homegrown developed technology. Having done the first phase gives us significant confidence of go ing into the expansion. And so one driver is that. Second, we believe that the R32 pricing environment will see a similar pricing environment that you saw in R22 as the quotas kick in, etcetera, etcetera. Third, we know that it's a low GWP product. So it has a longer play apart from having a play in the transition to HFO eventually, whether in India or outside. Outside the likelihood, overseas of it being used in blends. Similarly, in India, that transition will also go to blends, etcetera. So we have strong belief on the demand for this. We also think that this is very strategic for us in the sense that it's secures our play in the industry and the market position that we have. So to answer your question in a simple way, better late than never..

Understood. And when you said pricing should be like R22, basically, you're saying that once the quota, etcetera, is frozen after CY '26, as demand kind of grows because India should -- and the world should see good pickup for R32, as you mentioned, across various blends etcetera. So you're saying that's why demand support should be quite tight for this product longer term, is that how we should reason.

Yes, yes. So both the demand side and also I meant that you've seen an R22 that every time the quota kicks in, the pricing sort of becomes more tighter, right, and more stronger. So having -- so that's what we expect to play. Of course, this is a long play. So things will pan out as they pan out. But it's not unfair to expect a similar pricing curve that you saw in our R22 in R32. You would expect to see something similar play out.

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

Just first is on taking from the previous question itself sir, so R32, you had menti oned that the current capacity has been fully utilized. While we understand that the industry scenario still remains weak and there has been significant capacity additions has happened. Just wanted to understand, sir, what is driving this demand, whether it's domestic exports from where it will be primarily coming from the exports market? Or what is the driver?

So our -- so first, your -- the 4,500 we talked of is absolutely, we've had very good response. And the uptake is very good. So that is not a question. And also in our conversations both with the industry and globally, we believe that R22 has a very unique play in the transition. As I mentioned earlier, the blending opportunities will increase, but given one, it is low GWP and it is a fairly competitively priced product compared to HFO. So you will see it being played more and more in the blending philosophy even globally. Our view is also that India itself will have short capacity to meet the demand from '28, '29 onwards.

Sir, my question was around the current demand environment of R32, which you have mentioned that the plant is fully utilized.

Yes. So current demand is fully utilized. It's not a problem. My reference on pricing pressure was in relation to R22, unless I'm -- I don't know if that was what was driving the confusion.

No, sir, I'm talking about R32 only. And just wanted to understand what is the driving factor for R32 which has led to full utilization at our plant?

Driving factor is there's enough demand. I mean that's -- I don't -- sorry.

Sir, second question is on your...

So R32 is also being exported. And as you know, even in U.S. as the quota -- as the restrictions kick in, I believe i t's from 1st January of this year, the blending potential for R32 will also increase, like I said before.

Okay. Sir, second question is some clarification with -- sir, can you hear me?

Yes.

Sir, second question is o n the CDMO U.S. -based new contract, which we have done with. So just wanted to understand that about -- a little bit more about this new customer, the kind of chemistries which we will be doing here and the kind of investment which we may need to put for t his CDMO/cGMP facility. If I clarify the INR288 crores investment, which has been approved by the Board, it does not include this U.S.-based new customer coming in, right?

So can I just clarify, the U.S. -based partnership is with another CDM O player. It's not a customer. There are 2 capabilities here. We bring in fluorination capabilities, apart from other chemistry synthesis that we are good at. Those players, the CDMO in the U.S. also brings in their unique capabilities to the table. They b ring in their access to the U.S. market, we are stronger in the Europe market. So we're bringing that. So I think it's a partnership in that sense where we share the chemistry capability with each other. We share the market capability with each other, and we allow access. So it's an enabler to future growth. There is no investment involved in that. The European-based MSA, which is a customer where we have to do investment. So the INR160 crores supports that MSA.

We have the next question from the line of Dheeresh from WhiteOak.

So Anish, when you are explaining the project's revenue potential, the key projects that we had undertaken in the last few years, I just want a clarification on that. So Orchid is where we are seeing INR400 crores revenue potential, right?

INR460 crores is the peak annual revenue is what we are saying.

Yes, in FY '25.

Okay. MPP, which was supposed to be INR280 crores as per my understanding on an annualized basis, we are saying -- we are turning 80% of that in current year and then do full in FY '25, right?

So MPP1, which you said that was, I think, INR260 crores to INR280 crores as far as my memory goes. And I'm saying 80% of that. Yes, that's right.

80% in FY '24 we'll do.

As I said, it's the range, yes, INR260 crores to INR280 crores.

Yes. Yes. Understand, understand. I understand, not a precise estimate just the range I am trying to understand.

I'm giving you a broad sort of indication that while we have had -- we would have thought that should have come in this year fully, it has slipped slightly, but not materially is all I'm saying.

I totally understand that it's not a point estimate. There will be a range around it, understand that. Freesia which is agro intermediate, that was supposed to be INR160 crores that we have already done full revenue this year, right?

That's correct. That we expect by end of FY '24.

What about next year?

So next year will have 2 years to run its par once it(new agro-capacity) comes into play, which, again, I think that as we see today, that's the target.

FY '26 is when you expect to hit INR600 crores.

So if we are saying the chemical reaction we said we will start in March or end of March, and with first supplies coming in July for all practical purposes, I would see the 2-year period being FY '27, that's when you should start to see or expect to see peak revenues.

The next question is from the line of Ranjit from IIFL Securities.

My question is largely on the thought process. Earlier, we were only kind of sticking to R22, now over the years we have seen kind of a diversified to HFO and now we are also getting aggressive in R32. How do we see the refrigerant space evolving probably 5 y ears down the line? Is there a plan to further diversify into more refrigerants, given that we have an HF capacity coming in the Dahej in 3 years' time frame?

Sir, Ranjit, again, if you look at the refrigerant growth space, even in India is growing at double digit. R32 is also having a CAGR globally of double digit. Will we remain in refrigerant space? We were pioneers in that space. I think it makes sense for us to remain in that and play into the transition from high GWP to low GWP to event ually HFO. So we will be playing our part as a player in the industry in that transition. I don't think we've ever said we would not do that.

So will that also pay way for our entry into blends in the future?

I can't speculate that, but I'm kind of saying the whole landscape is open, depending on what opportunity is available and how our capabilities are there to tap into it.

One last...

But we will move fast wherever we see the opportunity is right, and our capabilities meet that.

Right. Understood. And any plans on utilization of HF capacity that is likely to come up in a couple of years at Dahej?

Lots of things are being worked in the hopper and lots of things will be progressed in a progressive fashion. But we've consciously put in the capacity to ultimately use in the downstream. We are -- and I think we've said this before, we will be looking at emerging sectors, etcetera, as we progress into the future. So some of that will play out as well.

Hopefully, we should hear in next year, next fiscal something -- some announcement on this...

I'm not going to second guess that one. It would be when it would be. We are working at it, believe it, as soon as we can talk about it, we will talk about it.

Right. So the question was because even on the cGMP4, we have kind of given out a 3-year time period to kind of Phase 1 and Phase 2 so whenever we do make an announcement, even on that new emerging opportunities, one should take a similar time frame. So that was the impact....

So I mean, again, I know what you're saying there, but the intent is there. We're working, it is in the hopper. I mean I don't know what else to say at this stage. It will be -- it will come when it will come Ranjit. But it's not something that we have lost line of sight to. We are putting a lot of effort internally to progress that area. So if things materialize, we'll probably hear on it sooner than later.

Right. And finally, on the gross debt level, can you share the figure for -- the gross debt figure for the December ending quarter.

Gross debt figure is INR 1,200 crores, including I'm talking the expanded debt, including what we take borrowed on working capital, yes.

Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

On behalf of Navin Fluorine International Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. **********