Sudeep Pharma (NSE:SUDEEPPHRM) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Sudeep Pharma Limited Q2 and H1 FY 'twenty seven Earnings Conference Call hosted by three sixty one Capital Market Private Limited. 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. Please note this conference is being recorded. I now hand the conference over to Mr. Rohit. Thank you, and over to you, sir. Thanks, Nagin. We thank Sudeep Pharma management for providing us the opportunity to hold their 2Q FY twenty seven conference call.

0:46 We have with us Mr. Suneel Bayani, hold time director and Mr. Ketan Jas, Chief Financial Officer from Sudeep Pharma. I would like to hand over the call now to Sunil sir for his opening remarks, post which we'll have Q and A session. Thanks and over to you, sir. Thank you, Rohit, and thank you to the three sixty one team for hosting today's call. A warm welcome to everyone joining Sudeep Pharma's Q2 and H1 FY 'twenty seven earnings conference call. I trust you have had the opportunity to review our results and investor presentation. I will begin with our operating performance, followed by updates on Specialty Ingredients, Pharma Food Nutrition and our Battery Materials business.

1:39 We are pleased with our performance this quarter. Q2 marked our highest ever quarterly revenue and EBITDA, supported by strong growth in our core business and improvements in both gross margin and EBITDA margin. Revenue from operations reached INR 196 crores, growing 21% year on year and 24% sequentially. EBITDA stood at INR 73 crores, up 32% year on year. Gross margin improved to 64.7% compared to compared with 62.5% a year ago, while EBITDA margin increased to 37.2%, an improvement of over 300 basis points. PAT stood at INR 51 crores, growing 11%, reflecting a higher effective blended tax rate together with lower other income.

2:35 Ketan will explain this in more detail. These results reflect healthy customer demand and improving contribution from higher value products and continued progress in manufacturing efficiencies. The principal operating challenge during the quarter was logistics, particularly elevated sea freight cost. Our selling and distribution expenditure was approximately INR 8 crores above the normal quarterly average, largely because of freight. We absorb these costs without passing them on to our customers to honor our commitments and ensure on time deliveries. Despite this additional expenditure, we were able to improve our operating margins. Let me now turn to Specialty Ingredients, where accelerating growth is a key priority for us.

3:25 Revenue stood at INR 54 crores, up 9% sequentially, although 25% lower year on year. Accelerating growth in this segment is a key priority, and our focus is on translating recent customer approvals and contracts into revenue and profitability. Two factors affected the segment's performance this quarter. First, the Government of India's Fortified Dries program, which is a significant contributor to this segment, has temporarily been paused. Procurement typically begins in August or September and contributed to Q2 revenue last year. That contribution was absent this quarter, and we currently do not have visibility on whether the program will restart during this financial year.

4:16 Second, NSS had a softer quarter with lower revenue and earnings. Despite these factors, we have good visibility into Q3 and Q4 through customer contracts and new approvals. During Q2, we received approvals from large customers across infant nutrition, dietary supplements and human nutrition, with commercial revenues expected to begin in Q3. These approvals expand our presence with large customers and provide opportunities to build recurring volumes across multiple applications. As these contracts begin contributing, we expect Specialty Ingredients to return to positive year on year growth in Q3 and Q4 and make a stronger contribution to overall profitability.

5:07 Importantly, this expectation is based on customer contracts and new business alone and does not assume a restart of the Fortified Rice program. At NSS, we continue to strengthen the project pipeline. NSS has secured five customer approvals and has approximately 12 customer projects at different stages of evaluation and development. We broadening its customer reach beyond Ireland and increasing sourcing from India, where it improves competitiveness and operating flexibility. Our focus is on converting these projects into regular commercial business and progress so far gives us confidence in a stronger FY 'twenty eight for NSS.

5:54 Across Specialty Ingredients, the priority is clear, execute the contracts already secured, build the volumes with newly approved customers and improve the contribution of the business to consolidate growth and profitability. Turning to Pharma Food Nutrition, the business delivered an excellent quarter and demand continues to strengthen. Revenue grew 57% year on year to 142 crore, contributing approximately 72% of consolidated revenue. Segment EBITDA margin increased to approximately 41% from 33% a year ago, while segment EBITDA nearly doubled. Growth was broad based across India, Africa, APAC and Europe, supported by our phosphate portfolio, new customer additions and a growing contribution from higher value ingredients.

6:50 In India, demand from pharmaceutical customers remained healthy across our core mineral ingredients. Africa and APAC benefited from new customers and opportunities across pharmaceutical applications and food fortification. In Europe, our direct commercial presence in helping convert customer approvals into regular orders and deepen relationships with existing accounts. With our current facilities operating close to optimal utilization, additional capacity is an important next step. It gives us the ability to respond to demand, increase volumes with existing customers and participate in larger supply opportunities.

7:37 This is where our greenfield facility at Nandezeri becomes particularly important. During the quarter, the facility received FDA approval marking a significant milestone. With annual capacity of 51,000 tons, it provides substantial headroom across our existing PFN portfolio and newer product categories, including glycinates, gluconates, citrates and phosphates. The approval strengthens our ability to pursue a larger share of business from major customers who already know our products and capabilities. For these customers, having additional approved capacity gives us the opportunity to bid for larger volumes and take a greater share of the requirements.

8:23 Customer qualifications are underway, and we expect commercial supplies to begin in H2 FY 'twenty seven with utilization building as these qualifications convert into orders. Within PFM, magnesium bisglycinate is a product category we are particularly encouraged by. Our absorbers range continues to grow strongly. As we mentioned on the previous call, Q1 sales have already exceeded sales for the whole of FY 'twenty six, and the momentum continued in Q2. We see scope for significant sequential growth as customer additions and approvals translate into commercial volumes. Magnesium bicarbonate builds directly on our expertise in mineral chemistry and our relationships with pharmaceutical, dietary supplement and nutrition customers.

9:18 It also supports a higher value product mix with average realization more than three times the average of our PFM portfolio. We plan to introduce a dedicated brand, MEKXOBIS, to strengthen the product visibility with supplement and nutrition customers. The Greenfield facility includes dedicated glycele capacity, giving us the manufacturing base to support this opportunity. With growing customer interest, progress in approvals and additional capacity becoming available, we are optimistic that magnesium bisglycinate can become one of the top three revenue contributors within PFN over the next two to three years.

10:04 Our focus would be on building that position through consistent quality, customer relationships and reliable supply. Finally, let me turn to Sudeep Advanced Materials, our battery materials business. The Dehay project continues to progress, and we remain confident of commencing commercial operations in April 2027. Phase I will have an annual capacity of 25,000 tons of battery grade iron phosphate, a key precursor in the LFP battery value chain. Our immediate focus remains on project execution, product qualification and customer readiness, so that commissioning is followed by a steady buildup of commercial supply.

10:50 Customer engagements and contract discussions continue to advance. We see strong demand to support the first 100,000 ton annual capacity, and we expect to provide a more concrete update on firm binding offtake contracts in Q4. In parallel, customer discussions for the next phase are progressing faster than expected, giving us increasing confidence in our planned expansion towards 200,000 tons of annual capacity. The pace of investment will remain aligned with firm customer commitments and progress in the initial phase. We are developing these relationships across The U. S, Korea, Europe and India.

11:38 Our customer base across multiple geographies is an important part of our approach as we build long term partnerships and establish the business. Disciplined capital allocation remains central to this project. We will assess each stage of investment against demand visibility, execution requirements and the returns we expect to generate. Our objective is to build a business that uses capital efficiently and delivers attractive returns as it scales. We will keep all our stakeholders updated as commissioning progresses and customer agreements reach firm milestones. To conclude, this has been a strong quarter for Sudeep Pharma with record revenue and EBITDA and improved margins.

12:24 PFM continues to see strengthening demand, new customer contracts give us visibility for a better second half in Specialty Ingredients. The Nandesari facility provides capacity to deepen customer relationships and scale high value products, while our battery materials project continues to move towards commercial operations. We remain confident in our business plan and focused on delivering against these opportunities with discipline. Thank you for your continued trust and support. We look forward to sustaining growth and creating long term value for our shareholders. With that, I will hand over to our CFO, Mr. Ketan Vyat, to take you through the financial performance in more detail. Thank you, Shannon, and good afternoon to everyone.

13:11 SUDEEPPHRMAN delivered a strong performance in Q2 FY 'twenty seven with our highest ever quarterly revenue and EBITDA. Let me start with Q2 FY 'twenty seven highlights. Revenue from operations grew 21% year on year to INR196.7 crore compared with INR162.7 crore in Q2 FY 'twenty six. Sequentially, revenue grew 24% from INR158.3 crore in Q1 FY 'twenty seven. EBITDA grew 32% year on year to INR73.2 crore compared with INR 55.5 crore in Q2 FY twenty twenty six and thirty three percent sequentially from INR 54.9 crore in Q1 FY twenty twenty seven. EBITDA margin was 37.2% compared with 4.1% in Q2 FY twenty twenty six and thirty four point seven percent in Q1 FY twenty twenty seven. The supply chain cost as Shantanu mentioned remains elevated in Q2 FY twenty twenty seven above the normal levels.

14:11 Our new greenfield plant is capitalized in the current quarter and put to use. With that being operative, expense related to plant are now getting charged to the P and L. Similarly, certain expenditure on SAM are also part of the P and L. Profit after tax was INR51.8 crores compared with INR46.8 crores in Q2 FY 'twenty six and up 28% sequentially from INR40.6 crores in Q1 FY 'twenty seven. PAT margin was 26.3. Year on year, PAT growth was lower than EBITDA growth mainly because of other income, which was lower by INR6 crore and against INR10.2 crore in Q2 FY twenty twenty six and our effective tax rate was at 27% compared to about 21 last year.

14:59 This was mainly due to depreciation increase because of the new assets getting capitalized and the revenue mix contributing from PFN, which has a higher tax rate of 28% on an average of 28%. By geography, export accounted for about 65% of revenue and domestic sales about 35%. Exports grew 24% year on year. Moving on to the half yearly financial performance. Revenue from operations for H1 FY twenty twenty seven grew 23% year on year to INR $3.55 crore compared with INR $2.87.6 crore in H1 FY twenty twenty six. EBITDA grew 29% year on year to INR 128.1 crore compared with INR 99.3 crore in H1 FY twenty twenty six with an EBITDA margin of 36.1 compared with 34.5% in H1 FY twenty twenty six.

15:53 PATH grew 18% year on year to INR 92.4 crores compared with INR 78 crores in H1 FY twenty twenty six. H1 FY twenty twenty seven delivered PAT margin of 25.22%. At the end of H1 FY twenty twenty seven at consolidated level, cash flow from operations was INR 43.5 crores, up by INR 26 crores on year on year basis, driven by higher profitability and stable working capital. On the balance, we remain focused on the working capital discipline and net working capital days remained at two fourteen days as on 09/30/2026, similar to the level of March 26. Considering the geopolitical situation, we strategically stocked up the raw materials of few key raw material like 35 phosphoric acid to ensure our finished goods demands are met to enough supply of raw material.

16:47 The inventory also includes bit of inventory buildup on the battery project materials. We remain committed to bringing down our working capital cycle down to about one hundred seventy to one hundred eighty days, excluding the battery material inventory and to about one hundred fifty days over a longer period of time. Capital expenditure in FY 2027 was about INR 77 crores mainly towards the battery material project at the hedge and the completion of the greenfield facility. Net debt was INR 72.5 crore as of 09/30/2026 with net debt to equity ratio of about 0.07x compared with INR 33.6 crore and 0.04x as of 03/01/2026. Even as we invest in our growth project, our balance sheet remains conservatively leveraged and gives us flexibility to fund the next phase of growth.

17:37 Our returns on annualized basis, ROCE for H1 FY twenty twenty seven was 22.4% and ROE on annualized basis was 19%. These returns are because the numbers are because we have deployed the capacity our capital to the Greenfield facility and SAM, which are not yet which will start generating revenues in the coming period of time. As this project commence operations and scale up, we expect ROC to move to improve. To conclude, we have delivered a strong half first half with healthy growth in revenue and EBITDA. Our focus on high value product pricing discipline and operational efficiency positions us well to meet our growth objective for FY twenty twenty seven. With this, I would like to conclude the presentation and open the floor for questions.

18:27 Thank you. Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjay Jain from ICICI Securities. Please go ahead. Yeah. Good afternoon. Thanks for the opportunity. I got a few questions. First on the specialty chemical.

19:15 Apart from Fortified, how was the like to like growth if we if we are just for the Fortified Rides program which got passed? If we remove that, what was the underlying growth? And number two, now that we don't have a visibility for even next couple of quarters for this to come back, What was the contribution of this segment in the second half how much of it will be able to compensate from the new order? So what is the growth we are looking in the specialty for the second half? That's the first question. Second question on the margin, again, specialty overall margin looks very, very strong and healthy. But if I look at segmental margin, the specialty margin was 28%, which is significantly lower than last year.

20:09 The margin in the has gone up very sharply. So why was there so much of divergence in the margin in the two segment? These were my first set of questions. Thank you. Yeah. Good afternoon, Sanjayji. I think to answer both the questions, the first one specialty. So broadly speaking, let's say for the full year, the the revenue contribution from the rice program was approximately, say, to... Around 20% to 25% of our overall overall specialty ingredients revenue. Right? So if I look at overall performance of last year, roughly 40 to 50 crores.

20:56 This... If you if if... And that was also at a higher higher realization. I think you do not have volume data. But if I were to break up the segment for you, Specialty Ingredients, even in Q2, actually has grown in volume, but has not grown or has degrown in the from a value perspective because of product mix change. So our capacity utilization, everything continue to improve in other areas, including spade drying encapsulation. Premix business specifically is the one that got impacted. However, as I mentioned, we have very good visibility for non fortified rice demand for specifically the premix business for Q3 and Q4, which will largely offset or I would say almost entirely offset the loss of revenue due to motivated rise, but also additionally contribute to growing this category. So we still remain comfortably confident that Q3, Q4, we should see positive growth contribution from specialty.

22:07 Second question on the margin profile. So I think, again, it was primary to do with operating leverage. I think our premix, which was a large contributor generated limited revenue plus how does that impact along with the drag from NSS is what kind of depressed the margins in specialty. I would say the business that will have come in Q3 and Q4 and the contracts that we have done will probably have a better margin profile than the 45 rise business that we used to do. So all in all, Q3, Q4, you should also see margin improvement, it is going back to the pre Q2 levels, basically or maybe if you look at the last couple of financial years, we should be able to go back to those levels from a margin standpoint.

23:06 That's quite helpful. On the PFN side, the growth is very strong. I think FDA approval we got very recently. Was this growth largely from the old client? And how much was it pricing? And how much was it volume led? So so as you rightly mentioned, the the FDA approval for the greenfield only came last week. So there is zero contribution from the new site. What we basically have done is we have a lot of, I would say, prospects, which is the largest product category has grown significantly, I think, closer to 70%, 80%, if not higher.

23:52 And we have I think because we have fungible capacity, we have allocated higher capacity to certain product categories. So phosphate was one. Second was the bisglycinate category, specifically magnesium bisglycinate. Whatever was the maximum possible capacity we could allocate to magnesium bisglycinate in our existing setup is what we have produced and that is both these product categories have supported the growth in the PFN segment. We are... And we are... And with the FDA approval, that would only kind of help aid the growth for the PFN category, not just for the coming two quarters, but a more mid to long term basis as well. So PFN should continue to strengthen because demand there continues to remain very strong.

24:41 And I would say volume growth also actually, I were to give you volume data, I would say around 35% is what around 30%, 35% is what the CFN has also grown from a volume perspective. Because I thought the blisklycinate had a much higher realization. If that has started contributing, that means a lot more realization gain should have come, right? And then there's a pass through for phosphonate and all. Was there an adverse mix in the base category beyond base for the entire growth to come from the volume side? Because on a Y o Y basis, our revenue has only grown 35%, right? We are telling that the entire growth has come in from the volume.

25:30 That... Sorry, I was talking about revenue growth for the quarter or the volume growth for the quarter, not on H1 basis. I think on H1 basis also, would say the volume growth is approximately 19%. I was talking for the quarter only, not for the H1. Okay. TFN revenue growth for this quarter is 31, right, Y o Y? We were INR 90 crore last year, we are INR 142 crore this year. Correct? So when we say that's, 31% kind of a revenue growth, if we say 35% Sorry. Sorry. Think there's a... So PFN PFN has grown 57% for the quarter.

26:17 Okay. Let me see. Let me see. I think there is some problem with my modeling in that case, then let me let me reconcile. But how is this blitzed in it now, the reception as... Is this more like commercial supply we have started or it's still an approval stage we are in this life in it? I would say commercial supplies have started, but to select customers because again of because of this lack of capacity. But I would say, let's say, I would not really account for Q3, but starting Q4, we should start seeing a lot more sizable volumes being supplied to this glycemic customers in India as well as globally. And we have all the approvals.

27:02 Now how many we said we had two approvals in U. S. Has it increased? The number has gone up? That has gone up. I would say U. S. Alone, I think we have maybe eight or nine approvals. I would say globally, if I were to include India, Europe, I would say close to maybe 30, 35 approvals is what we have. Wow. That's good. Last question on battery chemical. Any more progress? We said we added two more final approval. Last quarter, we were at eight. Any improvement in that number as well? So Sudeep, I think coming to battery materials, I would say number of customer approvals continues to increase. I think for us, because we have limited capacity coming live in phase one and then even the scale up to 100, What we are largely focused on is how we can scale the partnership with, say, five or seven customers, large customers, the large Korean customers in Korea, Europe and The U. S. And allocating capacity with them.

28:07 So while number of customer approvals continuously increase, we may not be able to allocate too much of capacity to those new approvals just because the offtakes or the contracts will be for the current 100,000 tonnes, but they give us visibility beyond the 100,000 closer to 200,000 tonnes. That's great. Sanjeev, these are my questions and thanks patiently answering all those questions. And best of luck for upcoming quarters, and happy Diva in advance. Happy Diva. Thank you. Thank you. Next question is from the line of Manav from Dhama Capital. Congrats on building up the business such a scale so fast.

29:06 My question is regarding how you as a management think about the business, especially as far as GTM is concerned. How much of the market can we service with our capacity at full utilization? And how do you, as a management, think about how do you want the customer base to look like? Are we looking at a concentrated customer base, picking up most of our capacities, or are we looking at a much diversified customer base where nobody has a large share? How sticky is the customer base? So if you could throw some light on these aspects. Thank you. Hi, Manav. Good afternoon.

29:54 On I would say it will be a combination of some customers who will drive significant volume because they also hold significant market share in their respective regions. For example, in The U. S, I mentioned in my last call that globally the opportunity for the magnesium bisglycinate ingredient is close to a billion dollars. 40 to 45%, so roughly 400 to $450,000,000 is from The US alone. Within that, you have four, five very large tolling contract manufacturing companies, which produce for most of the customers, and they will probably have 50% of The U. S. Demand. So, have approvals with two of those very large or the two of the largest customers in The U. S. So when we start allocating volumes to them, they would probably take up a fair share of the demand, but I would say we will not run a highly concentrated book just from a derisking perspective.

30:56 So I would say maybe 50% demand would come 50% of the volume would go to larger customers globally as well as in India. And then the remaining 50% would be kind of diversified with mid to smaller companies. How much of the sorry, how much of the Nandesari capacity are we comfortable allocating to these closings? So currently, 40% of our capacity is allocated to other products, which includes bisglycinate, gluconate and citrate. The capacity is fairly fungible. Today, we expect out of that 40% majority, at least closer to 70%, 80% will go to bisglycinate purely just because of the demand and the kind of approvals that we are seeing.

31:44 So a large part and which is why I mentioned that in the next two or three years, we see the not even the larger business license, but specifically magnesium business license becoming a top three revenue contributor to the segment, right? And for us, when I say top three, typically it would be north of INR100 crores as an ingredient alone. So we see a lot of potential in this category. Got it. And one last question is, how much higher in percentage terms are we expecting our realizations to be on deglissonates, citrates and gluconates portfolio when compared to the current PSN blended realization that we are achieving?

32:33 So I would say, again, it's a combination of how we allocate capacity. But if 7080% is bisglycinate, then as I mentioned, it's typically anywhere between two to 3x the average utilization, two to three times higher average utilization compared to our current PFN category. However, within PFN also, the remaining 60% capacity in the greenfield will be from is largely of phosphates, which also have a higher realization than our other carbonates oxide category. So hard to give you a specific number, but in general, we would expect the Nandesari site to operate at a higher realization than our compared to our existing site just because of how the product mix that we are planning to scale from this site.

33:25 Got it. And if needed, can we use the remaining 60% capacity at Nandesari for bisglyphonates, citrates, gluconates as well? Or is that capacity not fungible? No, that capacity is currently not fungible. Let's say there is 50% of the processing, which remains the same, there would have to be certain CapEx, not significant, but certain CapEx that we have to be made if you want to allocate more capacity to business unit. Perfect. Thank you so much. That's all from my end and all the best going forward. Thank you, Bharat. Thank The next question is from the line of Nirali Shah from Ashika Investment Managers. Please go ahead.

34:19 Yeah. Congratulations and great set of numbers. So I have a couple of questions. The first one is in in q two, so this quarter, our EBITDA margins have improved to 37 percentage plus. Just wanted to know with the phosphoric asset prices increase being passed on, how much of that improvement is sustainable? And should we expect any further benefit from that pass through? Yeah. Hi, Nirari. Good afternoon. So I would say, as as given we mentioned, phosphoric acid has has seen a significant upswing in cycle. When we maybe last spoke in Q1, it was up anywhere between it was up maybe 40% compared to Q4 levels.

35:13 Currently, it strengthened further, right? So we have done our pass through keeping in mind the contracts we've done in Q1. And because we had visibility that the market will further strengthen, we basically built up a lot of inventory in Q1, which has catered the business in Q2 and will kind of also support the business in all of October, also November. I think... That will help. So I would not say the margins will be we are not expecting margins to further strengthen at this level. We would have to still look at the new contracting cycle before we look at margin improvement. Understood. And the second one, if you could help us understand what differentiates Sudeep's iron phosphate at the product level, how it compares with what other manufacturers are producing, and what makes customers choose Sudeep over them?

36:10 You mean for battery? Yes. Yes. So, Niraj, as as I've alluded to in the past, today, produce 100% of battery grade iron phosphate is produced in China, right, which is close to 5,000,000 tons. We are the first and only company today to produce at scale battery grade iron phosphate. We have an indigenous tech, which is proprietary. It is green chemistry, has is very competitive on OpEx, has very good and also it is delivering at par product performance. So I would say having a X and a supply chain, certain regulatory requirements in The U. S. Are driving the change and us being the fourth in the industry is what is driving the development of the optics. Currently, we do not see anyone close to producing battery iron phosphate at a commercial level. So we would have an eighteen to twenty four month head start to anyone else that would start working on this now.

37:21 Yeah. So if I'm not wrong, we are the only non Chinese player. Right? Correct. But if the... So what I'm trying to understand is the iron phosphate that we are doing and the other companies that are working on the sodium portion of it. So what is the differential? Which one is, you know, better in quality purpose? You're... I think you are comparing LFP, which is lithium ion phosphate with sodium ion batteries. Sodium ion is I would say newer to LFP. It is only put to use and scaled recently in China. CRT will announce some plans. I'm a firm believer that LFP will continue to grow over the next five, seven year period, especially for energy storage.

38:06 However, the silver lining for us is even in sodium ion, they will still need iron phosphate as a precursor. So the chemistry for us, the market becomes even bigger if both the chemistries continue to grow. That's fabulous. That's it. Thank you. Next question is from the line of Tanmay from Finterest Capital. Congratulations on good set of numbers. Sir, I have one question regarding on greenfield facility. How do we expect the capacity utilization to ramp up across this financial year in FY twenty eight? And at maturity...

38:53 Once we reach at maturity level, so what kind of asset turnover can we expect from this facility? Hi, Sudeep. So I would say, typically, in the PFM category, you would expect not a significant ramp up in year one. Typically, it will a lot of it takes six to twelve months, as I mentioned before, for customers to approve this facility. Some approvals are already in place. So we would start to see revenue contribution from this side largely in Q4. And then I would say FY 'twenty eight, we would typically target, I don't know, maybe closer to a 15%, 20% utilization.

39:39 And then over a three year period, a three to four year period is when we would see the significant ramp up, where we would be at the 75% optimal utilization level. At that level, we would... Typically, you can expect a close to three x asset. Okay. And sir, for our battery business, you have already indicated that we have a number of customers who have progressed to commercial validations, and we are in discussion with binding of the agreement. Could you help me distinguish between the volumes that is currently covered by the binding commitments against the volumes that are under negotiation? Just trying to understand what proportion of our phase one capacity do we have secured under the update agreement.

40:26 Yeah. I think,, I will... So I think, let's say, I will refrain from giving out too many details today. In the next two months or maybe in our next call, we would be at a point where we can very openly share with everyone how our binding for the... Volume our binding agreements are secured. But I would say, let's say, Phase one, which is 25, but beyond that, we have very strong very, very strong visibility for Phase one, but also to our 100 ktpa capacities that we are looking to build. And then also from 100 to 100. So when we talk maybe in the next call, we will be able to break it out by customer and what kind of optics we have up to 100 and then beyond 100.

41:17 Right. Okay. Fair enough. So one last question on our Bioglossian portfolio. So if you could give some colors on what was our contribution to the total revenue of FPN revenue? I think maybe product specific breakup, we don't typically share. But maybe what I can tell you is, let's say, even today, the contribution in in CFN would be insignificant because the... Because because of this very limited volume availability, what we will start to see is maybe from q four and then q one onwards is when you will start to see, I would say, a much larger 10%, 15%, 20% contribution from this category. Once we are able to start producing this at the new greenfield in Nandezi.

42:28 Next question is from the line of Nirali from Unique PMS. Congratulations on good set of result. My question is on battery grade iron phosphate. So as you mentioned that you are the only non Chinese player, how would the pricing work for us? Will we get a premium, or there will be a pricing pressure because of this Chinese competition? Some light on that side. Diraji. Good question. I think, let's say, typically, so first of all, our goal is not to compete with China. We have positioned Sudeep, you know, as an ex China source, which come... Which operated at at a slight premium.

43:19 The premium cannot be 100% because you said it will be competitive and the end customer has to be competitive. But it it would be... It would largely be at a price higher than China. What is driving this is we we we see The US as a as a main market. The regulation in The US require for the cell manufacturing in The US to receive any credit, which is called 45 x, wherein they get 35 per kilowatt hour of cell capacity in The US. Now for them to be eligible for that, they have to use a PIP compliant, which is a probable foreign entity compliant supply chain where India benefits from that. And basically, then the customers are willing to pay a premium to have a VIP compliant supply chain and then for them to become eligible for the 45x credit.

44:11 Right. Okay. Okay. And how will the business metrics look like, say, on EBITDA margin or the return ratios given that Chinese don't make a lot of margin in this business? So... So I think I will maybe not comment specifically on EBITDA margin, but high level, what I can share is for us, whether the battery business or for any any business for it to be investable, right, and for us to put capital behind it, it has to meet certain requirements. The margin profile in this business will be different to our core business because it's at significant scale. What we look at is delivering similar asset terms and a similar ROCE profile. And if a business is able to achieve those two, then it becomes investable, and that is what we are targeting in the battery business as well.

45:06 Okay. No. Great, sir. Thank you for answering my questions. Thank you, Nelly. Thank you. Next question is from the line of Meet from. Please go ahead. Yeah. Hi. Hi, congratulations on a good set of number. Just one question on on battery... One, two questions on battery materials. So let's say it's... Well, I was talking with two, three, our Indian customer. Right? So they were saying that Sudeep is a monopoly outside of China. There is no one from whom we can source high end prospects. So they were even... At least thinking that on, let's say, in this year or next year, we can even... At least we are thinking that we can make high end prospects.

45:51 Right? So can you just tell us that the kind of process that we made from IANHOSTER? So is it very difficult to replicate, or is there any mode that they they will take too much time to develop the process process? What what we think is it's easy to grab or or or ours is very unique that a competitor will not be able to match the costing of ours. Approval cycle is there that they will require, let's say, one, two years of approval cycle. But is there any more that suppose if anyone thinks to put iron phosphate, Sudeep will be in better position as compared to them? Hi. Good afternoon, Amit. I think, again, great question. So let's say, if I were to tell you iron phosphate, 100%, there would be other other players in India, maybe globally will produce battery iron phosphate.

46:49 I think what will eventually differentiate them from Sudeep or anyone else who is successful in this business is the technology. We have now an eleven year learning curve behind us in producing iron phosphate across pharma. And from 2018 to now, we have what we have worked on the battery in iron phosphate. Within that, if you look at the Chinese chemistry or what is called the conventional process, it is extremely high in effluent generation. Just to give you idea for metric ton, the conventional process produces 15,000 meters of effluent per ton. Now imagine this at scale at a 100,000 tons, 200,000 tons. Now all that effluent, first of all, getting permission in India is close to impossible.

47:38 The only way you can run this process is if you then set up an ME plant to evaporate the affluent, they will drive the byproduct. That byproduct has a parallel market in China, but does not exist in India because it goes into the poultry or the pork industry in China. So all of those OpEx advantages which China has, India does not have. So the easiest thing for someone to do or probably the only thing that someone can do to move fast is to replicate the conventional chemistry, but then they will reach a scale limitation where beyond 10,000, 15,000 tons would become difficult to produce in India. In our process, which is why we call it green, right, that we have reduced the fluent by 90%. We have reduced our solid base by almost 95%.

48:24 And I would say from an OpEx perspective and CapEx perspective, our process is more competitive. And that is what we believe that even at scale, we will compete with non Chinese manufacturers, but will give us an advantage. Understood. Understood. And let's say, suppose if someone wants to, let's say, follow the same method that we are doing, right, qualification route of cheaper iron fleet. So let's say broadly, how much time you can take for any new player? I I cannot comment on capabilities of others, but I can tell you it took us four years to develop this process. So it took... So there is two things that we're solve for. Right? One is four... It has taken us four years to to develop this process, then to get this process validated by customers to two years or normally would take two years because we have gone through that process since then. And the third thing someone has to solve for is also how you look at upstream.

49:20 Right? We have in phosphoric acid, which is a very large cost contributor. So the largest cost contributor for battery grade iron phosphate. We have been buying this product for the raw material for the past fifty years. So we know cycles. We really have those long term contracts in place to support the ramp up because... So there are multiple aspects that someone would have to kind of solve for before they before they build scale, right, at at a at a small scale, they would they would be able to do it. Understood. Understood. And just one last question. Let's say, our 110 initial iron phosphate CapEx is around INR 600 crores, right? So another 110 would be brownfield only. So any rough CapEx number that you would like to share if we announce additional CapEx?

50:08 I think the incremental ROCE should be good, right? Extremely good in another one lakh 10 crores. So any broad number you can share? I mean, you are right. I I think that is the expectation when when we scale from 100 to 200,000 tons. I think I will refrain from sharing too much about the CapEx numbers and ROCE, especially because you mentioned that you spoke to there are people who are looking at doing high cost. Don't know. Very, very good. But I would say I would say, I think we are very focused on maintaining the the three times, let's say, at a higher... You did add 200,000, it could be higher than three x.

50:54 I don't wanna say a specific number. And the ROCE, as I mentioned, if you look at our ROCE, maybe not for FY '27, but if you look at maybe FY '26 and earlier, we... Those are the kind of ROCE that we target with the battery business as well. And just one last question, right, two Korean customers, we were planning that supposed to say they have a capability to be a very large order, right? So do this require even approval when we start our planning in February 2019, supply from that plant also '19, and then we'll get approval or it does not work like that. If we qualify through our 5,000 ton line, it is sufficient. So, it fast track the approval. Typically for the new greenfield in the age, let's say, who take typically either three months, maximum six months to go through approval.

51:46 Because they were so it will only be a plant approval. The process and product approval would remain the same because they've already approved the current or the current product. Understood. Understood. Thank you so much. All the best. Thank you. Thank you. Next question is from the line of Gagan from MK Global. Please go ahead. My question is regarding this battery material business. So will Phase II start only after the some binding contracts are signed? And typically, how much is the percentage you have the target on the contract to be signed before the commissioning phase? So our target today is to be able to sign binding commitments, as I mentioned, in q four.

52:43 So that would still largely be before we commission our phase one in April 27. And once those binding commitments are signed, then we would be... We would have a very clear visibility of the the the the deliveries that they require for each calendar year or each financial year. And then we would base our scale up or our Phase two expansion, Phase three expansion based on those plans. Doesn't necessarily we don't have to wait till our Phase one is commissioned. A lot of back end engineering design work is something that we're already doing to kind of curtail the time to market. And sir, my second question about the return, sir. You have guided typically 3x asset turnover for this business, although margins slightly below PFN. So what is the EBITDA margin? Will see you have assumed typically for the 100 ktpa and might be some different for the 200 ktpa.

53:45 So, Kagan, as I've mentioned on this call and in previous calls, currently, do not guide for for EBITDA margins in the battery business. What I mentioned is, we target a similar asset term, which is close to 3x and a similar ROCE profile, right? And that is what has made the business investable for us to really put capital behind it. EBITDA levels today is something that we would not openly talk about. Okay, sir. And sir, my final question is just to be eligible for getting the 45x U. S. Benefit. So my sense is that your supply source should be also in the non China. So how do you secure the non China, this purified phosphoric acid at this larger scale of 100,200 Kt per year?

54:40 Yes. So again, great question. So we currently already operate an ex China supply chain for both our raw materials. We have secured supplies for the first or the up to 100,000 tons largely from India. There are some players who are currently producing it, some that have announced CapEx, some that will be entering this space. And then geographically, there are other markets, which are who are large producers of purified phosphoric acid. You have Morocco, you have Israel, you have Vietnam, you have Mexico. So, have diversity also in terms of how we will solve for 100,000 tons, but as well as 200,000 tons of our requirement. But it will all be ex China. Yes. Yes. That's all my answer. Thanks. Thank you.

55:50 I'm unable to hear anyone if someone's asking question. Shreya, you're not audible. Hello? Am I audible now? Yes. Yeah. Hi. Thank you for taking my questions, and congratulations for a registered numbers. My question was more to understand in the next few quarters, what would be, like, the volume of take and what are some of the new products like magnesium glycinate, which would have a better pricing? And what is the current capacity utilization across all your facilities? And how do you see that evolving over the next two to three quarters?

56:42 Yeah. Hi. Hi, Sudeep. So I'm I'm assuming that you you... You're referring to our current core business, which is PFN and specialty ingredients and nonbattery. Yes. Yes. So our current our current site in Nandita River PFN, as I mentioned, for the for the core product categories, phosphates and all, it's operating at optimal utilization. Maybe we would have stretched it slightly higher, it may be closer to 80% utilization. Our greenfield just received the approval, so it doesn't have any utilization today. We expect some utilization to start coming flowing through from Q4, maybe some small quantity in Q3, but largely from Q4. Specialty ingredients, say, on a full year basis in FY 'twenty six, maybe would have been closer to 40% utilization, 40%, 45.

57:32 This quarter, it has been lower, but we expect to go back to the 40% of utilization, if not slightly higher to 45% by Q4 of this year in the Specialty Ingredients segment. And the greenfield, as I mentioned, will take some time. You can expect some growth, 10,000,000,000, 15,000,000,000 utilization from this site in 'twenty eight. And then in year two and year three, it will start to ramp up faster once all the approvals are through, customer approvals are through. Got it. And with the US FDA approval coming through, how do you see the volume growth ramp up across these facilities? And what... Like Magnesium glycinate, are there any other other certain attractive products in your pipeline? And how do you see it evolving in the next two to three quarters? If you could just quantify some of those metrics, it would be really helpful.

58:28 So I think I mentioned that we are... Glycinate is one category. You have multiple types of glycinate. Magnesium is one of those. So you have other glycinates, but I also... We all spoke about gluconates and citrates and sulfates. So, where we are seeing a bit so citrates and sulfates specifically, they have been around for a very long time. Some people globally have been producing these categories. Why are we deciding to develop these categories is we see clinical nutrition or basically adult nutrition as a very large area. Everyone that is on a GLP-one related diet. So, anyone who's patient for Ozempic or Mounjaro, they typically end up skipping a meal. What they do is protein demand has increased substantially along with protein intake, they need their necessary daily requirement of vitamin and minerals.

59:24 And for that application, these sulfate titers with water soluble will see a very large demand. And that is and it is built by certain because we are developing these for certain very large customers, and that will also drive demand for these two product categories. So we have already received RFPs or customer volume contracts for these categories that you have mentioned? I would say... I would not say binding volume contracts, but, I mean, these are customers that we have been working with for a very long time, maybe ten years or longer. And we... They are also currently in the development of their products. So as their product scales, our their demand for SUDEEP will also scale. And how big can these magnesium glycinate, gluconate, citrate being maybe next one year or so?

1:00:14 How much can they contribute to the total revenue, like if broadly as a percentage of something? Given everything is normal, obviously, there's no supply chain disruption and nothing up and down comes through the normalized. Yeah. I I I think as I mentioned that we we see a lot of potential in business. If were to give you a three year view, two to three years, we do see this having at least 100, if not higher than 100 crore opportunity as a product alone to contribute revenue to Sudeep. So that is one number that I can I can share based on the visibility and the number of customer approvals we we have? Collectively, Citrate, Groupon and combined could be similar, but those would be hard to tell exactly when the scale up happens because customers are also under the development process.

1:01:03 Got it. Got it. Thank you so much for taking my question. Thank you, Sudeep. Thank you. Next question is from the line of Hoshang from Elios Financial Services. Please go ahead. Hi. So I actually had one question. So this is regarding, you know, the... Like, I understand currently, you know, there's, like, a geopolitical situation because of which you need to keep, you know, higher amount of inventories. As a result, the working capital cycle has increased like year on year as well. I just wanted to check, would you be like in the long run, would be the plan to perhaps reduce it? Do you see any pace in perhaps even reducing the inventory cycle?

1:01:53 Poojan, good afternoon. We are taking multiple steps on inventory, receivables and payables, closely monitoring the key inventory levels which we require and where we can do just in time part. But that being the policy or the philosophy that should not hamper the business. So where appropriate time has to be this has to be taken to ramp up the inventory level, like we had the case now because of the geopolitical situation, we had to do the wrong pre purchase. We had to. Otherwise, we would have been at much lower inventory level. Also, should be looking at when we look at our customer we have to be mindful where our key customers are there and at what credit terms we can get the volume business from them. So what we will be mindful more is what good customers we have, what appropriate levels of inventory we should be able to maintain. As we said that about one hundred seventy odd days, one hundred seventy, one hundred eighty days is our first this year's target.

1:02:52 That's the first step that we want to take in managing our working capital. So this 171,000,000 you're talking about? It's better business. This should because there would be an investment required in the as we are doing our plant setup, there would be materials required for doing for the battery business. And that so that we are excluding from the calculation. Though officially, will have the public result, consult results, we'll have those numbers, but this 170, one hundred eighty days would exclude those battery business inventory packets. Okay. Excluding battery, roughly 180 around FY 2027 of the packet, right? Thank you.

1:03:47 Next question is from the line of Rohit from three sixty one Capital. Please go ahead. Thanks and congratulations on strong set of numbers. First, on the NFS front, given that we have secured approvals from five customers, what is the kind of revenue that we are looking for FY 'twenty seven? And how is it likely to scale up by FY 'twenty nine? And similarly, on the margin profile also, you can talk how the margins will be scaled up from FY '27 to FY '29. Thank you. Yeah. Hi, Rohit. So let's say, as I I... As I mentioned, I think, in the last call also that NSS will have a flattish year in FY '27.

1:04:37 They will not have any significant growth coming in, But these five customer approvals will largely support the growth in FY 'twenty eight and then also in FY 'twenty nine. What we see is that in FY 'twenty eight, NSS, let's say, conservatively should grow at a similar pace to what to the... Our our core business is growing today. So that is the growth that we are currently targeting or kind of envisaging for NSS for FY '28. Additionally, I would say the change in supply chain that we are doing, optimizing that from India, it should operate closer to a... Or the target for NSS is to operate close close to a 30% EBITDA margin and largely barring any additional supply side challenges, shocks that come, but if nothing of that sort happens, then in 'twenty eight, we should be able to target that profitability and margin profile for NSS.

1:05:38 Perfect. The second question is on our iron phosphate. So once our plant gets commissioned by April next year, how much time line are we looking at from the commercial scale batches validation from the customers? And given that the domestic customers may not be really ready with their CAM capacities, are we initially looking at the exports market and with geographies? Yes. So I would say for us, the battery business, the 25,000 done, even maybe the phase two that we scale up, and we will maybe talk more specifically about this when we talk in our next quarter once the binding is signed, but it will all be largely export driven.

1:06:30 I mentioned that we see Korea as a very important market where cathode capacity, LFP capacity already exists. You also have very large cell companies in Korea who are present in The U. S. So that's one market key market that we're targeting, eventual supply going to The U. S. Outside of that, Europe is one area that we are seeing some very good progress with specific customers. And I would and I would say from a scale up perspective of phase one, we are we are assuming that it will be largely between three to six months for customers to kind of validate the site in the hit. So we can we can assume six months, maybe half year of FY 'twenty eight to have commercial supplies and generate revenue for SAN.

1:07:24 Perfect. And just last one clarification on Q2 margins. We said that we had benefit from the low cost RM and at the same time, there was adverse impact from the higher freight costs. Given that we have reached about 27% margins, can we safely assume that for the next couple of quarters, barring any incremental disruptions, the margins would be able to stabilize at these levels? So I would say PFN has benefited from a lot of operational leverage that we will continue to see. So PFN as an independently will will we should be able to sustain specialty will also sustain. But just to keep in mind that the greenfield that we have just capitalized in commissioning or have received approvals, that will operate, start to operate at a lower utilization, but we'll have certain operating costs.

1:08:25 So those will come in. So the goal will be to kind of sustain these margin levels. There would not be any significant change from these margin levels, but we would have certain battery costs as we continue to come close to commercialization and the operating cost from the greenfield, that will also kind of start getting accounted in our P and L. Perfect. Thanks a lot for answering all the questions and all the best. Thank you, Rohit. Thank you. That was the last question for today. I now hand the conference over to the management for closing comments. Yes. I would like to once again thank Rohit and the three sixty one team for hosting today's call and all our participants and shareholders. I would like to wish them in advance a very happy Diwali and a very happy and prosperous New Year. Happy Diwali to you all, and happy New Year. Thank you.

1:09:20 Thank you. On behalf of three sixty one Capital Market Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.