Neogen Chemicals (NSE:NEOGEN) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Neogen Chemicals Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Nessus Chulanki from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and welcome to Neogen Chemicals Q1 FY 'twenty seven Earnings Conference Call. Joining us today from the senior management team are mister Anurag Surana, nonexecutive chairman, doctor Harin Kanani, managing director, and mister Gopi Krishnan Parathy, chief financial officer.

0:54 We will begin the call with opening remarks from the management team followed by an interactive question and answer session. Before we begin, a standard disclaimer, certain statements made during today's call may be forward looking. Actual results could differ, and a detailed disclaimer is available in our Q1 FY 'twenty seven earnings presentation, which has been uploaded on stock exchange websites. With that, I would now like to invite Doctor. Harin Khanani to share his opening remarks. Thank you, and over to you, sir. Good afternoon, everyone, and thank you for joining us to discuss our Q1 FY 'twenty seven financial results and outlook. I hope you had an opportunity to review our investor presentation. I will begin with key performance highlights and strategic developments during the quarter, along with progress of our growth initiatives.

1:45 Following this, our CFO, Mr. Gopi Sathi, will cover the financial highlights. The global chemical industry continues to navigate a complex operating landscape characterized by persistent geopolitical volatility, uneven end market demand and ongoing withdrawing of supply chain dynamics. While near term macro headwinds persist, our core strength lies in how we navigate them with agility, financial discipline and operational rigor. Anchored by the deep domain expertise and chemical synthesis capabilities we have built over the past three decades, we remain focused on protecting core margins, supply reliability for our customers and driving rapid progress across three growth pillars, particularly the battery materials segment. Amid this ongoing shift, I'm pleased to share that Neogen Chemicals has delivered a strong performance in Q1 FY 'twenty seven, marking a solid start of the new financial year. This growth was driven by volume grades across our core business verticals, sustained customer demand and our highest ever quarterly revenue recorded in both Organolithium and battery chemicals portfolio.

2:51 Let me quickly summarize the key financials. In Q1 FY 'twenty seven, on a consolidated basis, we recorded revenue of INR $2.50 crores, suggesting a robust growth of 37% year on year. EBITDA grew by 53 year on year to INR 48 crores with EBITDA margins expanding by two sixty basis points to 19.3%. Profit after tax stood at INR 17 crore, surging 67% year on year. On base business demonstrated immense resilience despite ongoing global supply chain volatility, elevated shipping freight costs and temporary overheads related to interim toll manufacturing arrangements. We have successfully initiated cost pass through mechanisms with customers across key raw materials and input costs such as utilities, freight and packaging to safeguard our operating margins.

3:47 I will now provide key operational updates across our core operation and expansion projects. The replacement plan and insurance recovery update. So reconstruction of a replacement facility of the is almost complete. Triad runs are actively underway with commercial production set to commence within current quarter within Q2. On the insurance front, cumulative recoveries to date stand at INR one hundred fifty four crore, which is comprising of on account insurance claim as well as salvage realizations till now. Our net claim receivable as on date stands at INR 186 crores on a consolidated basis, and we continue to engage closely with insurers to expedite final settlement against the same, followed by some additional recoveries under various other insurance policies such as loss and profit.

4:40 Board approval on Fundraise QIP to support our long term capital requirement and prepare our company for growth opportunities coming future in the battery material as well as organolithium space. We decided to deleverage our balance sheet and the Board has approved raising of INR 600 crore through an issue of eligible securities via QIP subject to shareholder and regulatory approvals. Updates on battery chemicals and Neogen Ionis performance. So Neogen Ionis delivered a robust performance in Q1 FY 'twenty seven, generating INR 19 crores in revenue compared to INR 5 crores in Q1 FY 'twenty six and delivering over 50% of the entire previous year's revenue in just three months.

5:30 Execution across our battery material facility remains on schedule. Commissioning for electrolyte is targeted for H1 FY 'twenty seven and lithium electrolyte salts remain targeted for H2 FY 'twenty seven. Mechanical assembly for our electrolyte plant is complete, trial runs are already initiated and product validation leading domestic cell manufacture is actively progressing. We have secured provisional approvals from four international customers for lithium electrolyte salts and successfully completed final price audits from all four electrolyte manufacturers. Commercial supplies will commence post final plant trial approvals with global cell producers accelerating their transition towards non FPOC, non PFE compliant supply chains to meet U.

6:21 S. Tax credit requirements by 2027. Neogen is uniquely positioned to serve this demand with our partner with established technology from Japan. Our strategic partner, Boreta remains fully committed to their 20,000,000 equity contribution towards the joint venture, which is expected to come during Q2 and Q3 of the current year. Turning to macro environment, the key industry dynamics, our factory material strategy is strongly backed by government support and proactive policy actions. NEOGEN with our customer remains currently the only giga scale example where the local supply chain has been established, which has been appreciated by various government departments. The ecosystem is seeing accelerated momentum driven by the product ramp up of PLI, ACC factory manufacturers as well as non ACC PLI and further the allocation of 10 gigawatt hour ACC PLI rebidding tranche and government's proposed PLI scheme for battery components, which will be pivotal in incentivizing raw material localization.

7:32 According to the Ministry of Heavy Industries report, domestic battery demand is projected to surge from already 33 gigawatt hours last year to 92 gigawatt hours by 2027 next year. Eventually we will be reaching more than 200 gigawatt hour by 2032. Out of that total, almost 63 gigawatt hours currently under development in India and further expected to be commissioned out of this 30 gigawatt hour is expected commissioning in 2026 alone. This rapid clear up underscores the expanding market opportunity ahead for us. We position NEOGEN IONIQ to serve both domestic requirement and global non FeOC, non PFT demand. FY 'twenty seven represents a strategic turning point for Neogen Chemicals as our capital investment transition into revenue generating assets with the rebuilt Zaih plant coming back online, Neogen are scaling rapidly and our strategic position as a trusted non APOC partner gaining strong global traction, we are set to capture expanding market opportunities across both specialty chemical and advanced factory materials.

8:45 That by solid customer demand, improving operational leverage and disciplined capital allocation, we are happy to improve our stand alone guidance from INR $8.75 crores INR $9.50 crores to $10.50 crores in the revised range. We remain fully committed to disciplined execution, expanding our market leadership and driving sustainable long term value for our stakeholders. With that, I hand over the call to our CFO, Mr. Gopi Krishan Sathi to walk us walk you through the financial highlights. Thank you, Doctor. Kannani. Good afternoon, everyone. I would now take you through the detailed consolidated financial performance for the quarter one. Please note, all the comparisons are on year on year basis.

9:34 Revenue from operations stood at INR $2.50 crores, up 34% from INR 187 crores in Q1 FY 'twenty six. The revenue trajectory was anchored by strong volume led by organic chemicals and battery chemicals. Across our operational verticals, organic chemicals generated a revenue of INR 194 crores, reflecting an 18% growth, while inorganic chemical segment delivered a standout performance with the revenue surging 158% to INR 57 crores. Gross profit rose by 37% to INR 117 crores, reflecting an optimized product mix and cost pass through arrangement. EBITDA stood at INR 48.2 crores, registering a growth of 53% from INR 31.5 crores in Q1 FY 'twenty six. EBITDA margin expanded substantially by two sixty basis points to 19.3%.

10:31 Margin expansion was achieved despite temporary expenses related to the hedge plant rebuild toll and job related expenses, initial expansion cost at NEOGEN IONIQ and freight spikes. Depreciation was higher by higher at INR 8.2 crores, up 42% due to smaller capacities, which we had added smaller CapExes, which we had added during the year. Finance cost stood at INR 20.8 crores, up 64. The increase in finance cost reflects the higher debt drawdown to fund the ongoing CapEx at NEOGEN Chemicals NEOGEN IONIQ increased working capital intensity due to supply chain inflation and temporary holding costs, building the insurance claim disbursement.

11:20 Profit after tax reached INR 17.1 crore, growing 67% with PAT margin of 6.8%. Looking ahead, as a replacement, the hedge plant begins the regular commercial operation and NAL capacity scale up through H2 FY 'twenty seven. We expect the operating leverage to improve significantly alongside normalized cost structures. Operating performance will be further bolstered by a pending insurance claim recovery. Additionally, our proposed QIP fund rate up to INR 600 crores will provide a substantial financial flexibility, allowing us to optimize our debt profile and also create a headroom for future growth. I'm also glad to share for that for FY 'twenty six, we have we will be we are publishing our first integrated annual report. This report incorporates our business responsibility and sustainability report, BRSR, along with reasonable assurance report. Moving to the integrated framework reflects our deep commitment to transparency, higher governance standards and long term value creation for all of our stakeholders.

12:29 That concludes my remarks. I would now request the moderator to open the floor for Q and A session. Sure. Thank you very much. We will now begin the question and answer session. The first question is from Asit Bandhakar from GM Financial Mutual Fund. Please go ahead.

13:24 Good afternoon. Just wanted to understand the battery outlook for in terms of chemicals. How big can this opportunity be in five years' time? And what would it be as a proportion of our business in that period of time, one? Second is that we hear that battery technology is being restricted by China. So is it realistic to assume that the growth will take place the way we anticipate? Sure. Thank you for your question. So when we are thinking of battery, Neogen as a policy talks about what revenue guidance we can give based on CapEx, which is currently underway.

14:10 So the current CapEx that is currently undergoing can cater to give us a revenue of around INR 2,400 crores to INR 2,900 crores, depending on the lithium prices ongoing. And we expect to achieve this by FY 'twenty nine. So that was the target for full utilization, which we had taken. So if we are talking of two or three years period, we expect around INR 2,500 crores to INR 2,900 crores of revenue potential. This is mostly taking care of only 30 gigawatt hour of, let's say, electrolyte demand and then little bit around five to 10 gigawatt hour of salt, which is being sold internationally. So that is what the current capacity is fully designed for, around 40 gigawatt hour of soils and 30 gigawatt hour of electrolyte.

14:59 Now as we have shared in our presentation that even today, around 60 gigawatt hour of electrolyte sorry, cell production capacities are ongoing. And over five years, the government expects the total demand to be two thirty six gigawatt hour. So total demand is going to be approximately 7x of what we mentioned just for India for the sake of electrolyte. And then also we will be open to international demand. The demand is going to be like reaching, let's say, if we are talking of five years, like tens of thousands of crore in that range. If we consider both electrolyte as well I mean, electrolyte for India and electrolyte salts and additives for the international market.

15:45 At Neogen has already taken a significant step to achieve INR 2,500 to 3,000 crores in the next two point five years. So in five years, it would be significantly higher. But as a policy, once we make some investment decisions, then we will we can give a specific number to that. So does this mean that our business, the way it will look is about 60% will come from battery chemicals and 40% from other chemicals? I mean, based on Yes. So in other chemicals also, we have many growth drivers, our pharma, agro, CFM, future potential business in semiconductor. So like we have not given any long term guidance around that. But yes, five years on the line, it can be fifty-fifty.

16:33 It's a challenge to my regular business team also that how they can keep up with the growth we will have in the battery space. And what about the change in battery technology, How will we handle that? Yes, sir, you also mentioned about restrictions from China. So today, NEOGEN's electrolyte and electrolyte salt capacity, we are very fortunate that we have Japanese partners and internationally, like so there is no dependency on China for NEOGEN in terms of technology as well as we had our own homegrown technology also and the Japanese technology further improved the same. So we don't have dependency on China.

17:20 Also in terms of changing technology, so lithium ion battery remains one of the most efficient technologies currently. There is some discussion about shifting to the sodium ion, but that will be gradual and will be, in my view, only for some niche applications for low temperature or very low cost kind of applications. However, lithium ion batteries are right now the most efficient. Having said that, in case of electrolyte, the way the sodium ion technology is developing today, like the same plant can also be used for sodium ion. And like so between sodium and lithium ion, there will not be too much impact on Neogen's operations. The next question is from Arun Prasad from Aventispark.

18:20 Doctor. Arun, if you can start with what is your current year guidance for the petrochemical business top line and margins, then probably it will be helpful. As we've explained earlier, we are looking at INR 300 crore kind of revenue for the current year for the battery business. We currently maintain the same. Most of this would be in the second half as The U. S. Customers are expecting to shift from China to like non China or FeOp to non Op suppliers from January onwards. So we have already started some trial supplies and some trial sales towards these customers, and we expect that to ramp up, and we expect the shift to happen in Q3 and Q4.

19:13 In terms of the other guiding factor for this is the increase in the ACC PLI, the cell production in India. So already there is one Gigafactory, which is started at a Giga scale and now increasing in the midst of increasing capacity. The second Gigafactory also has started their trial production and expected to start commercial production soon. So and there are two more expected to start before the end of the current financial year. So I think with these four customers, depending on the exact time at which they start, we would be able to we would be able to either exceed the production. But currently, what we have done is that we kept some buffer because last year we had gone wrong. So we would like to maintain the same production. And if India ACC PLA, the cell production increases or starts in a very nice way or ramps up faster, then we might be able to increase from the current guide.

20:19 Okay. So safe to assume that a large part of this INR300 crores guidance is coming from the Salt revenue rather than the Electrolite. And if that is the case, and you also mentioned that most of the revenue main volumes will come from the January 2027. So so largely, the three months of Salt revenue should itself will be giving this kind of a revenue. That... That's the right understanding? So, yes. So we would expect sometime from November, December, the uptick would start because January is when they need to ship. So shipments from India will start in November and December. Of course, there will be some sales before that also. So we have currently like approximately kept around INR 200 crores for the soil and INR 100 crores for the electrolyte.

21:07 Of course, electrolyte is subject to like India, like Indian ACC, PLI exact production, how the plant ramp up and how they start. And we have not considered any revenue from Paphazen yet. So we have set Paphazen to come online in H2. The team is making efforts so that we can complete it by Q3. So any shortfall in electrolyte like can be made up by additional salts, which we can get from Pakhajan in Q4. So that's the way we currently plant it. In case if the electrolytes are on track and we are also able to deliver revenues from Pakhajan, then we would be able to outperform our current guidance.

21:53 Understood, sir. Just one more follow-up on the same topic. This INR 200 crores salt we are talking about, what kind of a pricing or a salt pricing and electrolyte pricing and MCU pricing that we are building in based on which this number is coming? So currently, we are considering like a so we have like a long term contract with one of the customers. And in this contract, the pricing is currently already based on a lithium based formula. So we and the normal stable lithium price is expected to be $20 plus minus $5 So $15 to $25 So currently, we are expecting like the current lithium carbonate prices are in that range. So this is kind of like the stable lithium price between $15 to $25 close to around $20 of lithium carbonate. So based on that, the salt pricing is currently derived, both salt as well as electrolyte.

22:54 Both prices are derived based on like a stable lithium price. And for us, lithium is a pass through for both salt as well as electrolyte customers. Understood. And of this INR200 crores that we were talking about, how much do you think is I mean, do you see if it's from the firm order that you already have, I mean, of an order book kind of a business? So, I think if you look at our contract, then based on the contract, everything is firm. But as we as I explained in our opening remarks that as the customers complete their qualification, so they've already completed all the four customers have audited and approved Neogen facility. Some of them are now ready to start purchasing slowly in Q2 as well as Q3.

23:41 And in Q2, Q3, they might require some special kind of a pricing. Some of them are doing the trial at a commercial level in the plant and then they would start shifting. So we expect this process to get over in Q2, Q3, so that towards the end of Q3 and in Q4, they are able to fully buy their requirements from us. So that is currently the status with them. Sir, you said something like a special kind of a pricing. What do you mean by that? No, we have a formula for special pricing, meaning like normally, we expect once the non FEOC requirement kicks in, so it will be completely formula based price. But before such a period, they may want to have, okay, what is today's market price?

24:29 And the market price in China can be like it's fluctuating every month on month. So depending on to secure some volumes in Q2 or Q3, it could be slightly lower than the long term formula price that we have. But as we move to the regulated supplies in Q3, Q4, then it would have it would be based on the formula price, which we have taken for consideration. Current spot prices lower than the formula price, sir? Yes. Current China spot prices are lower than the formula price. Understood. Understood. And So finally, in last six months, a few times they were higher, few times they are lower, right? So it's a very fluctuating. But the difference between the formula price and the spot price is now significantly reduced as compared to what it was in 2025 and maybe some part of 2024.

25:28 Understood. Understood. One one final question on the cash flow for this year. If you take the cap, I mean, if you take the CapEx for this year, you can guide for that number? And what is the source? How how you are how you are proposing to source fund those CapEx number? That will be helpful. So whatever is the balanced CapEx left for NEOGEN IONIQ that has been fully been that will come from like whatever the remaining debt that we need to still draw because our contribution is largely done. And then some weight, which will be coming from Morita's contribution. And ultimately, from our side, maybe only INR 30 crores, 40 crores as a equity contribution we would need to do towards the end of the financial year when we complete fully the CapEx and start getting ready for contributing for the working capital.

26:23 So from the Neogen side, there'll be very limited contribution needed till the completion because the financial closure, we already received. Understood. Sir, one final question on the legacy business. You increased the guidance for the legacy business. Was it driven largely by the underlying price increase or some kind of a capacity addition or a mix change? How should we understand that number? So what we have seen is our organic lithium capacity, we hit like our peak utilization level. So as you have seen, when we took the plant, it was like 10 tonnes per month active or 120 tonnes, and we increased the capacity 2.5x to 300 tonnes.

27:09 So now in Q1, our plant was able to hit the full utilization already. And based on that, like we are also I mean we are also considering to further increase capacity slightly by end of the financial year. So I think it's largely driven by that. Also, when the organic lithium business grows, in the past, we have explained that we can also get some byproduct lithium, which we can recycle back, which also helps our inorganic lithium sales. So both these did very well. So based on the performance of the organo lithium, lithium, and we're still seeing strong demand in the organic chemical space as well. So considering that, we have revised our revenue guidance in the legacy business.

27:56 Sorry, in legacy business, what was the underlying volume growth for the quarter and the last six months, if you can share? It would be helpful. So when we are comparing Q on Q, so last quarter, we had just was the first quarter after fire and still our job work, etcetera, were not in place. So majority so of that Ophir growth around INR 15 crores kind of came from increased sorry, 15 crores came from increased prices related to lithium and other raw materials. The rest of it was like completely volume driven. Understood, sir. Thank you very much and all the best for all your best. Thank you very much.

28:43 Thank you. Thank you. The next question is from Vijay Takala from KIE. Please go ahead. Yes. Good afternoon. Thank you so much. So first on the INR 600 crores proposed fundraise. If you could please just help us with the proposed uses of this. Is it primarily debt repayment for the time being or also some CapEx that you're considering? And if it's debt repayment, then by how much do we expect the finance cost to go down following this? Okay. So the Board has right now approved the QIP. And we basically expect as a temporary measure, yes, it will be basically for debt reduction.

29:32 And the main purpose of this is that we are seeing many future opportunities. So for example, in my opening remarks, I mentioned the Government of India is planning battery material supply chain, PLI, as well as like after Morita, after JV with Morita, we've also seen a very strong demand in the international market. So we would like to be ready for the case. The current salt capacity that we have in place will take cater to either The U. S. Demand fully or our India demand. But we have to be ready for a case where we need to take care of both. So of course, it's something which doesn't have to happen immediately. But as the business develops, we have to be ready for that. There are some like we have also be ready the way organolithium business is progressing if we have to increase some capacity.

30:23 And we also want to get into the next phase of R and D, where from just making basic process, we need to invest into R and D, where we are working on battery performance improvement by novel additives and novel electrolyte designs. So I think to basically be ready for these and few other opportunities, which are in front of us, the Board decided it would be good to kind of deleverage the balance sheet and reduce the debt so that we are ready to capture any of these growth opportunities, which are expected to present in front of us. So that's the main guidance. I would ask maybe Gopi to comment how much the finance cost would reduce down there. See, at the maximum thing, I'd say, full INR 600 crores, naturally, if I don't I repay around, say, it's just a max if I don't I repay, say, whatever crores I repay, you can just multiply with the interest rate, say, 8% to 8%, 8.5%, you can multiply it and take it as the interest saving.

31:32 So maybe roughly around so if the entire thing is just repaid, roughly around INR 40 crores, 50 crores of for the year for the reduction annually once we generate. This is subject to, like I said, if there are some other opportunities. So considering that, we will have to decide what the final interest rate is. Yes, sure. And just so number one, on the battery PLI components that you spoke about, would it be possible to just help us understand maybe the broad contours of what might be offered by the government? I mean, is it CapEx linked incentive? Is it OpEx linked incentive? And how much in quantitative terms could Neogen potentially hope to benefit from it? Also, any expansion that you consider because of all of these developments, what would the time line to embark on such an expansion be? Do you have to do that by the end of this year or maybe sometime closer to, say, approaching optimal utilization of your current expansions?

32:41 Yes. So regarding the PLA scheme, think this is still under discussion by the government. And while it has quite advanced stage, but not yet finalized, so it would be not right for me to comment on that because ultimately, this is government policy. And only once the scheme has been like published, we should basically consider it. But the broad idea or the main intent of the government is to support localization of the cell production. Because as we mentioned, the government is seeing very high growth in the demand for the ACC PLA that the cells and unless there is a local production, there will be a strong dependence on imports internationally.

33:28 So any restrictions can restrict our plants to reduce dependency on oil through EV or through ESS storage. So considering this as a very strategic area, the government has already reannounced the bid for 10 gigawatt hours. So to make sure that the entire 50 gigawatt hour ACCP and there are recipients, they also want to increase the number of recipients. So the revised scheme, the 10 ACCP is targeting two to three different players, minimum two to three. So that there are at least four or five PLI recipients. So this is what the government's current target is. And like to the competitiveness because the Indian industry like Neogen and few others, battery materials supply are just starting against competing against Chinese or other companies where already more than 100 gigawatt hour of capacities are available.

34:23 So therefore, like to give us some kind of a level playing for the initial the government is considering these options. Any step by the government would be helpful, whichever form, whether it is Cape Fate, whether it is OpEx. And more important is the intention of the government to support the industry and the desire to have the local supply. Of course, this was already part of the AGC PLI requirement, but now the government is more proactively ready to support whichever stage each and every stage, which is a positive sign for Neogen. In reference to your second, when the capacity increase would be triggered, I think we will be very careful in triggering this. So once we have a full visibility of the utilization of the existing, only after that it would be triggered.

35:13 But we have to appreciate that anything in the factory we do requires around twelve to eighteen months to set up the capacity and then other than at least six months to twelve months to qualify. So therefore, we need to plan at least two years, two, two point five years in ahead, like whenever you expect the capacity. So we will take a call based on that. But currently, there are no specific time lines. We just want to be ready so that if needed, Neogen is ready to basically take action in that area. So these P and I incentives, would you expect to pass along to the customers, Harinbai? Or would you think that the industry could retain them? That's question number one. Second was these some of these cell manufacturers in India, you know, they have Chinese technology partners, like, for example, Excite and Amar Raja.

36:06 And there's an understanding that maybe the technology partners might be asking them to use Chinese electrolyte formulation itself. So in that context, how easy is it for us to break through with these guys with our Japanese formulation? And in that context, how confident are you thinking about the FY 'twenty nine guidance for full utilization of electrolyte? Or what exactly underpins the confidence over there? Sure. So like again, in reference to how the PLI benefit will be shared, I think it's too premature to discuss till the government actually comes out with the PLI scheme. But what basically we expect is that it basically puts us at par and while electrolyte is a local required material. So therefore, it has to be bought locally.

36:52 But the ultimate aim is that when the customer is doing that, they are not paying heavy price as against what our international prices. So basically, to remove the disparity between prices, which comes from time to time in international prices and India prices. So that would be the first concern to make sure that the customers receive like a very competitive price in line with whatever is the global prices. So that the sales which they are making are also very competitive. So that is the main intention of the PLI and that would be the principle with which NEOGEN would work in like basically sharing the benefit so that the customer is not having a financial penalty to basically purchase from Neogen once the government also gives us the support.

37:42 In terms of technology, see, there is always a period where the company sorry, there is always a period where the cell producers have to work with the technology provider. But that is usually three months, six months, whatever period. Post that, the customers are free to change over to raw material, local raw material supplier, the PLI further makes it more possible for them to take that on a more active basis. And when it comes for us, we have right now worked with five out of six gigafactories, the large gigafactories which are coming. And we are very confident that we should be able to give them electrolyte, which has a similar performance or better as compared to what they are using currently or what has been proposed by their technology partners.

38:41 We are also working on the fixed one, like where we can work together, but at least for the five, we have a clarity. So considering that and considering the fact that just today in finance in current and next financial year, so current financial year, like almost four out of six Giga factories would start and another two would start in, let's say, beginning of next financial year. So it gives us enough time for them to reach at least 50%. So the combined capacity of these people itself is more than 60 gigawatt hour. So even if they hit 50% utilization also, then also we would basically reach our full utilization target. So I think this is like normally takes about a year for somebody to stabilize.

39:32 And the fact that two gigafactors have already started and others will be starting this year. So we feel by FY 'twenty nine, they should be at least at 50% of higher utilization. There is already demand. The good thing is that the demand already exists. It's just the manufacturing needs to get stabilized. So even if they reach 50% plus kind of utilization level, then Neogen has a very strong case to reach full utilization level. Further, this is just talking of local electrolyte. We will also have international salt business as well as like some of the solvent also are now required under non FeoT requirements of the 45X. So the components, so the electrolyte salt additive as well as the solvent also can be sold internationally.

40:18 So any capacity, if at all, unutilized when we sell internationally, we anyway achieve 70, 80% of the total value. So therefore, like considering that, we are still confident that in FY 'twenty nine, as per our original guidance, we can hit the full utilization of INR 2,400 crores to INR 2,900 crores. Got it. Thank you so much. That's very helpful. Just one last thing from me, if I may. Just two, three data points, very specific. One is the INR 19 crore revenue from Neogen Ioniqs this quarter. Possible to break it down between salts and electrolytes? That was one. Second thing was just largely salts. Okay. And any inventory gains during the first quarter given that gross margin seem to have gone up significantly despite rising raw material prices?

41:13 Indirectly, in a sense that we had some older inventory, but when we were selling it, we got some benefit out of that. Possible to quantify that or? Very difficult, sorry. Okay. All right. And last thing was just, you mentioned that the guidance upgrade is largely due to the Organolithium business, which I guess is clubbed within organic chemicals, right? But organic chemicals revenues have been largely range bound between, say, INR 180 to INR 190 odd crores for the last four quarters, whereas it's actually inorganic that has gone up very sharply in the last three, four quarters. So if you could please just explain that a little bit. Yes. So there is as I explained that the Organo Lithium also supports the inorganic growth.

42:03 And as so the sharp increases as compared to the same quarter, let's say, o Q basis sorry, on a year on year basis, if we are looking at a year on Q o Q, so consecutive quarter, this was already increasing. So as we mentioned, we reached the full utilization, but even previous quarter also was 17%, 18%. But yes, this is a time where our new capacity was fully utilized. So we reached our highest revenues. So therefore, like some of the organic lithium capacity increase was already built in, let's say, Q3 and Q4, and now we hit the peak. But when you look at a year on year comparison, there's a sharp difference in organic because of that. Thank you very much.

42:50 Before we take the next question, I request to participants to please limit your questions to two per participant. For follow-up questions, we request you to rejoin the queue. The next question is from Jason from IDBI Capital. Please go ahead. Sir, thank you for taking my question. I'm so sorry. Just wanted to understand first thing, I missed out on the revenue guidance for the base business. So could you if you could just repeat that for 'twenty seven and 'twenty eight, both we clocked in around INR $8.26 crores and INR 26 crores. So just wanted to know what is the increase guidance for 2728, just for the base business? For the 2728, you mean? Yes, yes. Yes. So this year target, we had originally given INR $8.75 crores to INR $9.50 crores, but based on the Q1 performance, we revised it from INR $9.50 crores to INR $10.50 crores. So we feel the base business should be able to cross INR 1,000 crores in the current financial year.

43:51 For the next year, we had expected around 10% to 15% growth. We have not given a specific number for FY twenty third, 'twenty eight, but we feel it will have at least more than 10% growth because we are not doing any significant capacity as of now. The focus next year would be to stabilize the business, optimize the business, make it more efficient in terms of margins and in terms of working capital. So in the base business, the next year focus will be to further streamline the business and optimize it. So at least it would with the same capacity, we feel we should get at least 10% to 15% increase. So we should be somewhere between INR 1,100 crores to INR 1,200 crores kind of revenue for the next financial year. However, our proper guidance will be more closer towards the end of the year.

44:41 Sure. And sir, this is assuming, I mean, the direct plan will be back on track, of course, and there'll be a good, smooth ramp up going ahead, right, for the next two years, one or two years? Yes. So there will be a ramp up in the current financial year. And next year, we want to basically work on better optimizing of because once we have a full utilization, which is around INR 1,000 crores to INR 1,100 crores, so we start hitting like INR $2.50 crores to INR 300 crores kind of quarterly revenues. Then the main focus will be on improving the product mix, like trying to select for larger volume molecules, reduce the total large number of products that we have, right, and then focus on margin and working capital efficiencies in the base business.

45:30 And so for '28, what are we running for battery chemicals? You said INR 300 crores or INR 27 crores, but 28 crores, what are we running for revenue for battery chemicals in '28? We have not given the guidance on that. But what we had estimated in the past is that looking at there should be a very strong demand for the salt. So we should have a salt business at 70%, 80% utilization level. And the electrolyte also would be like between 30% to 50% utilization level. So we feel there's a very strong case for us to cross INR 1,000 crores. It should be something more than INR 1,000 crores. But the exact number, because all these businesses are just starting, so it's better that we provide again towards the end of the financial Thanks, sir. And sir, just one question I had. In terms of, of course, lithium ion is a very well proven technology. Now I just wanted to know in terms of the silicon carbon batteries, you know, that also is an evolving technology, you know, in premium smartphones, etcetera, that's being adopted rapidly and showing good efficacy, longevity as well. So just wanted to know in that technology also, you know, our electrolytes and soils have the same usage?

46:47 Or is there any reduction or increase? Just could you give some color on that? So I think most likely when you think silicon, carbon, like battery usage, what you are referring to that the anode side. So the anode side usually is normally only graphite, but to increase the efficiency of the battery, people use a combination of silicon and carbon in the graphite. So it's still a lithium ion battery, but instead of just a traditional anode with the graphite, you are using silicon carbon graphite, which increases the efficiency and the performance. So yes, so the electrolyte mix changes a bit, the additive change a bit, but broadly, it remains within the same contours where like the same plant can make it, the same type of additives are used, only the percentage is optimized a bit when you have this anode for the optimum performance.

47:43 Thank you. Before we take the next question, a reminder to participants to please limit your questions to two per participant. The next question is from Rohit Nagaraj from three sixty one Capital. Please go ahead. Thanks for the opportunity. Sir, first question is just a clarification on the legacy business and battery chemicals business EBITDA margins for FY 'twenty seven and 'twenty eight at the Investor. Yes. So I think we can provide you like EBITDA margin. So as we have said, in the current year, like our base is 18% plusminus 1%, 1.5%. Mostly once the plant starts, we will have a job work like the job work related or such kind of expenses would kind of come down.

48:33 So like again, first quarter is very strong, but we expect that it is during the year, we can maintain the same guidance to 18% plus minus one one point five percent. There will be some additional cost also, which would come online once the plant comes and maybe it's not fully utilized. So we would like to maintain the same margin. And next year, like depending on how the global macroeconomic is, we would like to optimize the business a little bit better that little bit better and basically have between, let's say, 18% to 20% kind of gross margin sorry, EBITDA margins for the next financial year. So 18% plus minus 1%, 1.5% for the current year. Next year, like 18% plus, hopefully not minus or 19% plus minus 1% kind of a range for the next financial year. This is for the base business.

49:28 It's very difficult to view EBITDA for battery business. So we would like to kind of maintain like 20% ROCE on full utilization levels. So in FY 'twenty nine, we expect a 20% return on capital on the battery business. So it would be, let's say, around INR 1,800 crores of CapEx and some working capital requirement. So based on that, you can estimate like our EBITDA at a full utilization level. Interim EBITDA percentage because retail price can fluctuate, different capacities would be fully utilized, partly utilized. So depending on that, it's very difficult to predict the exact EBITDA for the current and the next financial year. Sure. This is helpful. Sir, second question is, this year, Battery Chemicals, you said the components will be INR 200 crores electrolyte and about INR 100 crores sorry, INR 200 crores salts and INR 100 crore electrolyte.

50:26 In case the domestic market activities get delayed, then probably there could be a delay of business. Is that the right way of looking at it? However, the INR 200 crores short business is largely in terms of the contract. Sorry to interrupt you, Rohit, but your line is breaking. We can't hear you clearly. Maybe, Rohit, I got your question. So as I explained earlier, that what we have done is that for INR 200 crore, we have just considered what we can do from our direct capacity and we have not considered the Pakajan volume. So what we are trying that in case if the factory manufacturing is delayed and we are not able to achieve the INR 100 crores revenue from our battery business, from the electrolyte business or like we are falling short, then Farhagen's contribution in Q4, we have not considered in this guidance. So we hope with the Parajan contribution, we can make up and we can still achieve the INR 300 crores revenue.

51:37 The next question is from Ankur Periwal from Axis Capital. Yes. Hi, Thanks for the opportunity. First bit on the Salt side. Now given that we have some initial confirmations and success there with global clients, Would it be fair to say that the ramp up in Salt business for next year will be more or less, let's say, full utilization? Yes. We are also targeting in the next financial year around 70%, 80% utilization levels for the Salt business. Sure. And just related to it, any incremental Salt capacity or even additive capacity as you highlighted earlier, how much time it will take for you?

52:22 And whether on a from a basic intra perspective, largely things are in place or will so it will be more modular? Or will it require a significant CapEx? So no, sir, it will require a CapEx, but we have kept the space from a timing point of view to add around 2,000 ton capacity salt capacity in Pakhajan and 500 tonne capacity for additives in the hedge. So around 2.5 tonnes can come relatively faster. When I say relatively faster means like twelve to fifteen months kind of a period, just to get the capacity online and then maybe approval takes another three to six months. But yes, and anything more than that, we have to start from a foundation level, so it will take longer time.

53:08 So normally, let's say, let's take fifteen months up to INR 2,000, INR 2,500 would be like around fifteen months just to get the facility online and then maybe another three to six months for approval. So it's still a eighteen to twenty four months kind of a process from the time we decide to get go. So basically, like it's very difficult to for that to contribute in this or next financial year. But looking at once we have a clarity on FY 'twenty nine, we will have to plan sometime towards end of FY 'twenty seven or early 'twenty eight to basically take care of the requirements in FY 'twenty nine. Sure, sir. Second bit on organic lithium as well as the CSM part of the business in the stand alone in the core operations.

53:56 How much time you said for organic lithium, we are largely fully utilized as per the run rate of Q1. What time frame are you looking at in terms of ramping this up? And secondly, on the CSM side, we had plans earlier to scale this part of the business up as well. What are your thoughts there in terms of time line? See, we would like to take a view because while this quarter was the first quarter we hit full utilization, so I think next quarter, we would like to propose to the Board about Organo Lithium. Fortunately, it will be incrementally CapEx. So it will be like less than kind of INR 10 INR 15 crores kind of CapEx. So the volume is the value will not be very high. So once you see the business visibility continuing for one more quarter, then we will basically go ahead and plan like at least the initial capacity increase in the existing and then also maybe a long term capacity beyond what we can do at the existing and the current site. So that would be something which should be decided maybe in at the end of Q2, but broadly in the second half of the current year.

55:05 This is on the Organo Lithium side. To answer your question on CSM, in a way, like the customers are still interested. It's a very broad based CSM where we have like pharma, agro, semiconductor, like some flavors and fragrance as well as some specialty materials. So we have four or five industries. The customers are committed, but in CSM, you are actually selling your capacity, not a product. So and the hedge was our flagship capacity for that. So in absence of the hedge, we've not made any further progress. So all the customers remain engaged once our hedge plan restarts. And again, it's restarting with many improvements also.

55:51 So like which we have incorporated based on our experience, so it should be even more attractive for our CSM customers. So based on the outcome of that, we will see CSM business. So we'll have a better clarity in the CSM business in next financial year, like where we wanted to have the customers who test one more time in this year and next year would be where we would ramp up further. And then depending on how this year and next year goes, we'll basically pave the path for increase in the CSM business. So like a dedicated investment to support CSM, I expect to come on board by FY 'twenty nine, FY 'thirteen.

56:38 So that is when the CSM business will have a big increase. Sure, sir. Just lastly, on the core working capital, you said peak utilization in 'twenty eight and after that we should see improvement or there should be some improvement in 'twenty seven as well? That's it from my side. No, sir. 'twenty seven also we would target. So once our diet plan starts and streamlines, then you will see some improvement in FY '27. But in the first six months is very difficult because we are trying to manage this growth as well as getting a new site online. But FY 'twenty eight, you should see a significant improvement in the working capital side. Thank you from my side and all the best. Thank you.

57:25 Next question is from Deepak Podhai from Saphyr Capital. Please go ahead. Hello, sir. Hello. Yes, we can hear you. Okay, great. Thank you very much for this opportunity, sir. So just first I wanted to understand on this battery chemical CapEx out of INR1800 crores, I think INR1300 crores you have already spent. So incremental INR500 crores would be debt driven, I mean the incremental CapEx that we are likely to do? And this CapEx is likely to get commissioned by FY 2027 and the entire in entirety, right? Yes. I'm just asking Gopi to confirm that INR 1,300 crore number is correct. But yes, the entire INR 1,800 crores would be completed by the end of current financial year.

58:16 And this would be financed by debt? What would be your... As well as the equity which is going to come from Morita and around INR40 crores, INR50 crores of equity that we need to sell our company. Okay, understood. And then, sir, just wanted to understand on your working capital. In FY 'twenty six, were at about INR8600 crores, I mean, INR860 crores kind of a revenue. So on that we required about INR 500 crores of working capital, right? So hypothetically in three years FY 2029, if we have to achieve around INR 3,500 to 3,700 crores kind of a revenue, which includes your base business plus the INX business. So ideally, your working capital requirement might be close to what INR 2,000 crores?

59:06 I mean, even if we kind of assume some kind of improvement, that effectively means a INR 15 crores kind of a funding requirement. So how are we going to do that? I mean, so can you throw some color on there? Yes. So basically, what we feel is that so sorry, so one thing which you clarified from the beginning of the Patrick is that because the nature of this business is very different from our pharma agro, where we have more than like 200 plus molecule and we have more than some three fifty, 400 customers that we serve every year and each customer has a specific certification. In case of electrolyte, have like in case of battery business, we have like contracts, we have formed demand and like we have, let's say, two or three salt and additive, like some solvents and electrolytes. So the complexity is much lower. So from the beginning, we have guided that the working capital cycle should not exceed more than ninety days for this business.

1:00:09 Also for the base business, like this was largely affected by like some changes in demand like in the last two years as well as the fire incident and that we had. So long term, what we have is like by the time we reach full utilization, let's say, by next financial year, which is FY 'twenty eight, we would be at around 140 days working capital cycle, which is stable. And then beyond this, as we grow, our intention is to have like larger molecules. So reduce like or increase per molecule kind of business size. So with that, it should further improve to maybe one hundred and ten and one hundred and twenty days. But in the beginning, first stage would be to reach around 140, one hundred fifty days by next financial year. And the ninety days cycle would be and ninety days would be for the battery business.

1:01:05 So I think with these numbers, you would not need as much capital as what you currently estimate. So what is your expectation? I mean, at let's say a consolidated INR3500 crores kind of a revenue level, what sort of working capital would be required assuming all this improvement that you just spoke about? So I'm sorry, I can't do this math on the fly right now. But if you take ninety days like for let's say INR 2,500 crore kind of revenue and you take one hundred forty days for around, let's say INR 1,200 crores revenue, then whatever number comes minus what is today. But it's something which has already been factored. Okay. Okay, okay. Understood. And what's the peak debt that we are looking at? I mean, considering this INR600 crores also you would look to repay the debt, right? So by FY 2020, you look at debt level we are targeting?

1:01:57 So the before INR600 crores, the peak debt was around 1,800. INR 1,800, net debt. And if the 600 crores is fully used, then it could be like maybe $1,213,100 crores kind of depending on how much gets used for other applications. So it's not just this, we have like also insurance proceeds, which is going to come like so and hopefully working out cycle also improves as we stabilize the plant. So we will see, I mean, it should be below INR 1,500 crores for sure, more closer to 1,000 crores if everything falls in place. So broadly, I would say INR 100 to 600 crores is rate, it should be, let's say, between INR 1,000 crores to INR 1,500 crores, like best care, worst care kind of scenarios.

1:02:45 Got it. Got it. That's very helpful, sir. That that would be it from my side. Wish you all the best. Thank you so much. Thank you. Thank you. The next question is from from Srinitra Asset Management. Please go ahead. Hi, sir. Thank you for the opportunity. Hello. Am I audible? Yes. We can hear you. Yeah. I want to know, like, beyond India, which international market do you believe offer the largest opportunity for battery chemicals? And what edge does NEOGEN have in winning global customers? So I think US is the biggest market here. One in terms of cell production, like where there is a restriction of like not depending on a single country.

1:03:34 So I think currently, after India, U. S. Looks like the biggest market for us or U. S. Could be even bigger because the total volume or the capacity, which is already existing there is much larger and many Japanese and Korean cell producers are already active in The U. S. Market. So I think U. S. Is the biggest. As I explained, the intention is to sell battery electrolyte components. So electrolyte salt, lithium additives and now maybe even some of the solvents, battery grade solvents. So together, they constitute around 60%, 70% or 70%, 80% of the cost of the electrolyte. And there are five major electrolyte makers in The U. S, out of which four have already approved our site. And hopefully, the first one also is interested once our site starts because that's with a stable Japanese technology.

1:04:27 So there was a very short time, he said they will directly approve the same. So therefore, we would have access to all The U. S. Customers through these four or five major electrolyte makers. The advantage of NEOGEN is that, let's say, for example, like we have some of the international partnerships. So for electrolyte solvents, it's based on whatever we've designed with Mitsubishi technology or our LIPF6s with Morita technology. So having established technology as compared to somebody who's just starting new, gives a lot of confidence to the customer. So I think that is the advantage that we offer. We can scale capacity relatively quickly as compared to other geographies. And we already have a site. So the same site, which is currently, let's say, Patajan site is starting at a 30 gigawatt hour for salt and electrolytes, but has a room to go up to 100 gigawatt hour. So therefore, the incremental CapEx would be even more efficient as compared to somebody starting. So I think these are the things that we offer to our customers.

1:05:33 Okay, sir. Thank you. Thank you. The next question is from from Capital. Please go ahead. From Northern Capital. Yeah. Yeah. Am I audible? Yes. Yeah. Thank you. I have a question on Neogen IONIQs. Since most of the IONIQs revenues are currently coming from the HPC PLA scheme players, what happens to uptake is these customers meet with their own PLA targets or slow down their production because the HPC PLA scheme has been slowing down a bit since its inception.

1:06:20 And is Neogen actively building a non PLI customer base to reduce its dependency? So just to clarify, as I answered one of the previous investors, the current majority of the revenue is coming from electrolyte salts, which is in the international market. So there is no so currently, it's not that we are doing only for P and I customers. The second point is that the PLI is not slowing down, just the startup of the plants took longer than expected because battery cell production is a very complex plant. And as I explained and also in our investor presentation that almost six companies which are building together 60 gigawatt hour of self production capacities are coming online, have already come online or coming online in the current year or by next year. So once they come online and they will take about a year to stabilize, just the starting capacity is two times of NEOGEN's existing installed capacity.

1:07:24 So therefore, we feel like and it's PLI or non PLI. Electrolyte has to be made locally. And then NEOGEN right now has the largest capacity with the internationally stable like Mitsubishi technology. So therefore, we are not just dependent on PLI benefits. Okay. And secondly, I wanted to ask that the liquid electrolytes have a limited shelf life as I studied. How is management thinking about the logistics and lead times for exports if we are exporting electrolytes? Because it becomes difficult to export short shelf life articles. Yes. So that's why we are not planning to export electrolyte. We will export electrolyte components such as electrolyte salt, additives, solvent, etcetera, which are stable.

1:08:13 Electrolytes are for the local market. Okay. And finally, I wanted to ask, if a consolidated debt to equity at INR 1.4 crores versus stand alone at INR 0.68 crores and Neogen Monitor now authorized to borrow INR 500 crores additionally, What is the peak consolidated leverage amount the management is comfortable with? And when does the 600 QIP start deleveraging the balance sheet rather than just funding more CapEx? Yes. So I think the NEOGEN MORITA for 100 crore approval is basically some of the loan, which was already planned by NIL will now shift to NEOGEN MORITA. So it is not an additional date. It is in line with whatever we had decided.

1:09:00 Only like part of it will shift to NEOGEN Morita. So we wanted to have the approvals in place, right? So there is no that is not increasing the debt. And as we explained earlier, like that if once we complete the peak debt should be somewhere around INR 1,000 crores to INR 1,500 crores like to begin with. So therefore, that would significantly reduce the debt equity ratios. Okay. Sure, sir. And the final question for me is the electrolyte salt capacity, long term plan is to contribute entirely captively for in house electrolyte production or, like, we have a more room for merchant sales strategy for the salt itself? It's both. Like, we're aiming to have a more merchant sales and a little bit on the in house production?

1:09:53 No, no. We would like to do maximum in house production, which would be in consultation with the customer. At the same time, we are already serving international customers, so they also remain our focus. So therefore, both are equally important for Neogen. The volumes can change from time to time depending on how much is the demand in the local market and how much is demand in the international market. So we'll keep monitoring that and then plan our capacities accordingly. Thank you. Thank you. The next question is from Sanjay Kapoor from Antiprazyal Thinking. Please go ahead. Yes. Hi. Thank you for taking my questions. Hi. Over the over the last five years, Neogen reported a very healthy cumulative INR $5.82 crores of EBITDA.

1:10:47 But on the operating cash flow, it has been a negative 93 crore number, even including the FY 'twenty five insurance inflow. Some of this clearly reflects necessary CapEx and CapEx cycle related drag on the balance sheet. And the question really is what structural changes are required for at least 70% of EBITDA to consistently translate into operating cash flow and when we might expect to see that kind of a conversion going forward? That's my first question. Thank you. So I think one of the points is that when we start the factory business, our working capital requirement is significantly lower, ninety days as opposed to one hundred twenty and one forty days target in the base business.

1:11:40 And of course, long higher, which has been the case in the last two, three years due to various difficulties we faced or challenges that we faced. In the base business, what we expect is that today, till we reach INR 1,000 crores and then we have a full utilization level, we like the business model today requires around one hundred forty, one hundred fifty days one hundred forty to one hundred sixty days of working capital cycle because of the large product mix. So as we get more into CSM molecules, where the single molecule is like INR 50 crore, 100 crore or even our own target, own molecules which are developing, we are targeting like a INR 1,500 crore single molecule. So as we have more molecules of these type, then like the working capital cycle further improve.

1:12:28 So actually, this has been a challenge because last five, six years, Neogen has grown. And historically, we used to keep as a derisking strategy, no single molecule to be higher than 30% sorry, 10% of the revenue. So that was the internal target during our initial growth times. So that number ideally was around like five, six years back, it was around INR 30 crores per revenue. So today, once we are hitting 1,000 crores, we should have molecules which are INR 100 crores, like round about that. But so far, we've not been able to scale because these are largely going to come from agro and CSM business. But last two, three years, agro slowed down and the CSM business also took a hit because of the fire.

1:13:14 So I think once we are able to move to such large volume molecules, then the working capital cycle will further improve in the base business. And on the electrolyte side, we are right from the beginning, we are targeting a ninety day conversion cycle, which should be more efficient. Whether it hits your 70% number or not, I'm not able to do the mental math right now, but at least it should be significantly better than now. That's helpful, Doctor. Karani. I mean, sort of ballpark, I mean, is it fiscal 'twenty nine and thereafter? Or I mean, looking at the pipeline, I mean, no one is sure about the agro cycle recovery in the industry. But from where you are and based on the CapEx that you have planned and the kind of working capital we expect both on the Neogen ionics and the base business, I mean, is the first year you expect that the pain on the balance sheet and the cash flow to be behind and we could just be realistic? Yes, I understand it may not be 70%, it may be 60% or whatever. But what is the first year we can see that, yes, going forward starting this year, we expect consistently positive operating cash flow?

1:14:28 So I can't promise consistently positive cash flows because Neogen will always be growing. But as I've said that we want that once we reach full utilization levels in this year, next year, which is FY 'twenty eight, we would want to optimize the business. So that we are like wherever we have to make some structural changes or like select molecules, which are more capital efficient or working capital efficient or margin efficient. So that would be the target in FY 'twenty eight. So FY 'twenty nine is where you will basically have a full year where you optimize kind of a business. And like the future growth also which will come, we'll be basically considering that. And then FY 'twenty nine is also the year where you have a full utilization of our initial investments into the battery. So therefore, I think FY 'twenty nine would be a very good year like from cash flow conversion point of view from years.

1:15:28 Of course, like battery represents a very strong opportunity. So like a free cash flow, operating cash flow and like of course would be positive, but free cash flow because depending on how much investment which we are doing at that point in time for the battery or even for the base business would be right for CapEx around that time, right, for future maintaining the growth. So I'm not able to answer on that part, but the business would be very efficient by from working capital standpoint by FY 'twenty nine. Thank you. The next question is from Uval Gadha from ABNA Investment Management. Please go ahead. Hi. Am I audible?

1:16:15 Yes. Yeah. First of all, thank you for the opportunity. Most of my questions are answered. But, sir, I needed one clarification on the salt bit. Right? You have mentioned that we have a formula based pricing, which is dependent on the NCE, lithium carbonate pricing, and most of our capacity is booked by the customers. So, sir, can you explain that how much this pricing is influenced by the spot pricing of the salts? And does that... Like, even the source spot pricing impact our contracted capacity that we have with our customers? I think the spot price would be more, you know, till the majority of the customers are following the contracted price, right? So it's only in the interim till we get into we start supplying under the existing contract or we enter into similar contracts with some of the established players, still such a time like and this is largely being driven by the requirements for having non FeOC kind of the supply, right?

1:17:22 So once we shift to that, hopefully, majority of our demand should be met by that. So therefore, there is no dependency on the spot market. And similar thing, we are also targeting for our electrolyte business, where we are not impacted by the spot market. Because spot market is very volatile. So therefore, it's very difficult to do a business, right? But in the interim, don't deal all these comes into place. We may have to sell for a few quarters or maybe in the future, once everything develops a certain percentage is spot market or in certain percentages contracted. But currently, the target is for everything to be under contract in terms of. This situation post FY 'twenty nine only, right, current given the demand that we have no, post FY like Q4 current financial year, right?

1:18:12 Because by the time we hit current financial year, already there is a demand for a non FPOC. So therefore, sales starting the current financial year Q4 should be under the contracted base. So sir, if I extrapolate this, are you saying that The U. S. Customers that we have, they are okay to pay a little higher pricing to us compared to the China pricing just we are a water risk diversification or we are a backup supplier to them? How how do you think in the pricing work? So, yeah, so the... So what we would like to say is that not higher price, but basically, like, a fair price, which is a consistent reliable price, right? So like for example, China prices sometimes are sometimes very low and sometimes extraordinary high, whereas here they will have a very predictable price, which is only linked to lithium And the conversion margins are also more predictable.

1:19:08 So that is what basically they get. And yes, so we like we had seen a period of four or five years when we entered the contract, where overall, actually, they were making more money over a three year, four year period with a contracted price rather than follow very low spot price and then sometimes exceptionally high prices in case of a shortage. So I think that is the basic logic. And in addition to, like you said, like this China is free and a second backup supply, there's also a policy guideline in The U. S, where it's called 45x tax credit. To get this tax credit, a certain value addition or certain percentage of the supply has to be free from supply from foreign entities or of concern. So in such a case, they need to have a non China kind of a source. So it's also for if they want to achieve the benefit they want from the subsidy, which they won't get from the government. So it's kind of like a precondition for that in addition to the backup and supply security.

1:20:18 Thank you. We'll take the last question from Jason Sons from IDBI Capital. Please go ahead. Sir, thanks for taking my question again. Sir, just wanted to know, I mean, you did mention that organic lithium did hit peak capacity utilization in Q1. So I just wanted to know, is there any seasonality attached to this? I mean, I understand that probably the inorganic chemicals piece, which is basically related to the actual cooling that must have seen some seasonality impact. Now just wanted to know in terms of organic lithium, what is the exact reason for this demand of, going picking up so sharply? And do you see this demand being sustainable going ahead? Yes. So this is basically like in last one year. So if you remember, we took this business sometime mid of FY 'twenty four.

1:21:12 And I think when we took the lithium prices suddenly decreased and there were some unstability around that. Then afterwards, in the next two years, we have worked to basically get ourselves approved in the international market. Then also when we took over this business from the previous company, they had only one major product and only three or four customers. So now the customer base has been fairly diversified. So therefore and like after that, we needed the additional capacity. So additional capacity came online one year ago. And then during the whole of last year, we gradually kept increasing, reaching the revised full utilized capacity like revised capacity by end of like in current Q1.

1:22:01 So it's something which we've been working on for two years. In fact, if you think, when we took over the one year before, whatever was the volume which was sold, now we are selling every month. So in two or three years, the demand like what we've been able to generate with a diverse customer base is like almost 12 times. So this is some of the advantage of that, like having a bigger customer base and bigger product base where we are like into with many customers. So once we go through the approval cycle, we can ramp up new molecules in the same industry much faster. So that's the main driver for that. And we still see stronger and stronger demand, more international approvals are coming. So to keep up the chart, like, you know, we are adding more capacity.

1:22:50 So... And sir, just follow-up to that. End user industry wise, sir, which is the biggest segment for vanadium, will it be pharma? Yes. So today, pharma is the biggest segment. There is also use in agro, which is like ramping up. There is also use in semiconductor, where we have just got an approval and we can we are expecting more volumes. And then there are some other very specialty polymer type or specialty polymer type applications also where this is used. So it's a, again, multi industry application. But yes, for us right now, pharma is the biggest driver, but pharma and semiconductor honestly are the two biggest drivers here. Agro is just picking up, and we are also working in other industries where we are expecting approval soon.

1:23:42 So thanks a lot for that, sir. Thank you so much. Thank you very much. We'll take that as the last question. I would now like to hand the conference over to the Bank of India for closing comments. So thank you, everyone, for your time, insightful questions and continued interest in Neogen Chemicals. Should you have any further questions or require additional details, please feel free to reach out to our Investor Relations team. We look forward to interacting with you again next quarter. Have a great day ahead. Thank you again. Thank you very much. On behalf of Neogen Chemicals Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect.