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Ladies and gentlemen, good day, and welcome to the Gujarat Fluorochemicals Q2 FY '22 Earnings Conference Call hosted by Batlivala and Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Archit Joshi from Batlivala & Karani Securities India Private Limited. Thank you, and over to you.
Thank you. Good evening, everyone. On behalf of the B&K Securities, I welcome you all to the 2Q FY 2023 Earnings Conference Call of Gujarat Fluorochemicals Limited. I would like to thank the management for giving us the opportunity to hold this call. From the management, we have with us today, Mr. Vivek Jain, Managing Director; Dr. Bir Kapoor, Chief Executive Officer; Mr. V.K. Soni, Head of Projects and New Initiatives. Mr. Manoj Agrawal, Chief Financial Officer; and Mr. Vibhu Agarwal, Head of Investor Relations.
Without further ado, I would now hand over the floor to Mr. Vivek Jain for his opening remarks, post which we can have the floor open for our Q&A round. Thank you, and over to you, sir. Thanks.
Thank you very much, B&K team. On behalf of Gujarat Fluorochemicals Limited, I would like to extend a very warm welcome to all of you. We are happy to inform that Board of Directors of Gujarat Fluorochemicals Limited has its Board meeting, approved the financial results for the company for the quarter and 1/2 year ended 30th September 2022. The financial results were uploaded on the website of the stock exchanges as well as the website of the company. We have also uploaded our presentation for Q2 FY '23.
I will take you through this presentation initially, and then we can open the call for any questions that you all might have. Starting with the financial highlights at the consolidated level for the quarter ended 30 September [ 2020 ] on Y-o-Y basis. The consolidated revenue for Q2 FY '23 was at INR 1,461 crores, up by 52%. Consolidated EBITDA for Q2 FY '22 -- '23, was at INR 536 crores, up by 81%. EBITDA margins for Q2 FY '23 were up 37%, whereas 37%, up 6 basis points on Y-o-Y basis. Consolidated PAT for Q2 FY '23 was at INR 357 crores, up by 74% on Y-o-Y basis.
If you look through our detailed overview of the financial performance during the quarter for each of the business verticals in which we operate, in caustic soda -- the caustic soda revenue for Q2 FY '23 stood at INR 189 crores as compared to INR 102 crores in Q2 FY '22, up 85%.
Chloromethanes revenue for Q2 FY '23 stood at INR 80 crores as compared to INR 122 crores in Q2 FY '22, down by 34%. Refrigerants revenue Q2 FY '23 stood at INR 268 crores, which was at INR 92 crores in Q2 FY '22 up 191%. PTFE sales for Q2 FY '23 were at INR 443 crores as compared to INR 360 crores in Q2 FY '22, up 23%.
The New Fluoropolymers sales were at INR 341 crores, up 87% as compared to INR 182 crores in the same quarter previous year, that is Q2 FY '22.
The Specialty Chemical sales is up by 75% from INR 65 crores to INR 114 crores.
Similarly, on the RoCE and RoE front, the RoCE has improved from 24.46% to 36.88%, and RoE is improved from 20.10% to 29.05% as compared to FY '22. On the debt trend, companies remains [indiscernible] with a net debt equity ratio at 0.3. The working capital cycle, which got improved significantly during the last quarter, maintained in this quarter also at the same level of 119 days as compared to 120 days as on 31 March 2022.
On the CapEx and expansion side, the additional capacity is commissioned for FKM, PVDF and FPA during the quarter are under stabilizing. Stabilization and sales are expected to ramp up from Q3 FY '23 onwards. And similarly on the Specialty Chemicals front, commissioning of new Specialty plant which were actually originally planned in Q2 FY '23 quarter spilled over to Q3 FY '23. These are now commissioned and expected to gradually ramp up production in upcoming quarters. We expect with all these companies poised to offer a sustained business growth with superior financial performance.
With that, ladies and gentlemen is the walk through the presentation. I would like to open this up for any questions that you might have. which we'll try to answer. Thank you.
[Operator Instructions] We have the first question from the line of Sanjesh Jain from ICICI Securities.
Couple of them. First on the refrigerant gas side. Despite 2Q being a very seasonally weak quarter, we see that the revenue growth has been quite strong. I think some of it is INR 125. But overall, we thought that this could be more of a softer corner, but it looks like it has done phenomenally well. Can you help us understand -- what's driving the growth in the refrigerant gas even in the very weak seasonal quarter? Is it a shortage of the product, it is that in seasonally the quarter they are getting a slightly better pricing than what it will be in the seasonally stronger quarter? So what is driving this unusually high growth in HFC?
[indiscernible], as far as the main growth is coming from R125, where we are largely exporting to the U.S. and we have had orders which were to be executed during this quarter, which is what we were able to fully execute. So that is the reason why sales are there.
And I think that this is a pattern which will continue in the future quarters also. So maybe there might be a dip for a month somewhere, but otherwise, by and large, quarterly performance should be fairly robust.
Our '22, of course, again, July, August, September, sales are still not so much down from a refrigerant point of view. There is some impact in October, November, December, for sure, but July, August, September is normally good sales for refrigerants
R-125, now where are we in terms of capacity utilization in terms of production and sales? And do you think this crisis in HFC, particularly R-125 and R-32, are they now stabilizing, going up? Or have they shown any sign of weakening anytime now?
I don't see any signs of weakening. I think we will stabilize at this level now, where prices should remain stable. That -- at this point of time, that is what I can say. I don't see any substantial upside or downside on this price.
And we thought that the R-125 prices went up partly because of significantly higher power cost, freight cost and all those things. And some of them have already started showing some correction. So are we not seeing some of those benefits getting passed through? Or it's purely the demand supply, which is driving the prices in R-125?
See largely demand supply, but also when pure customers will also negotiate or we negotiate to try and see that you can bring down your prices given the fact that there might be some reduction in some costs like logistic cost, et cetera. But what you're saying is maybe the difference, it could be plus and minus $1, $1.5, not something significantly more than that.
Great. Great. Great. Second question on the New Fluoropolymer, sequentially, it was flattish, while we have added capacity, 2 questions there. Can you help us with what has been the capacity addition in the New Fluoropolymer for this quarter? And -- So number 2, despite capacity addition, I know we said that we are stabilizing the plant. So from Q3 onwards, should it start adding materially to the revenue growth?
Yes. For Q3 onwards, maybe from 15 November onwards, 2 new additional reactors, which we are commissioning for FKM would start coming in. and we should see additional sales happening in December. And from January quarter onwards, I think the full benefit of that capacity expansion will be evident.
So what is the capacity we have added in...
So in FKM, we are adding 200 tonnes per tonne -- per month additional. And in PVDF, we are adding another 100 tonnes per month, which will come in line by maybe about January next year. It will be commissioned in January next year. And there is some additional capacities which we are commissioning in PFA for which also the product out will be from January onwards.
And have you added anything in the first half?
Sorry?
In the gone 2 quarter, have we added any capacity in FKM, PVDF and PFA in Q1 and Q2?
We had added capacity of almost rising about 200 tonnes in April -- also April, May, which we saw the bump up in that came sales happening in -- from the quarter April through the last quarter till soon.
So we were 800 metric tonnes when we ended FY '22?
No, we were 700-plus, Sanjesh and when we ended that and we guided that we will be 1,500 by end of this year. The addition will keep coming through the year. We have added some [ capsule. ] Today, we would be at around swift top of 900 to 1,000 tonnes, adding another 200 to 300 by end of this year will be at 1,500. That's how we should look at it.
Got it. So from 700, we are already at 900 to 1,000. And by end of this fiscal year, we should be at 1,500. That's an assumption we should...
Close to 1,500.
Yes.
Give or take one month year-on-year because there is sometimes always some delay or the other this takes place in commissioning. So give or take one month, I think we should be there. That is what we are targeting.
Got it. Got it. And how are we...
Ramp up of production and sales from there could happen over the next 6 months thereafter.
No. That's fair. That's fair. We understand that its time for stabilization, approval, audit and all.
Yes. Yes.
But on the realized...
Sanjesh, we request you to kindly come back in the queue for follow-up questions?
We have the next question from the line of Harsh Shah from L&T Mutual Fund.
Just 2 questions from my side. First is on the margin side. So our margin in this quarter also was very impressive. Are the prices are also holding up quite nice. Entering H2, where do you see the margins going to? Will it stabilized at 36%? Or you think with the ramp-up of further new capacities, we -- there's still some room before we end the year?
See, frankly speaking, it is difficult to say, but as we have maintained earlier, we will -- even with our expanded capacities, et cetera, which are coming up, we should be able to maintain a margin in excess of 30%. That is for sure. That is what I've stated even earlier, we were at 31%, 32%. I think our margins will remain upwards of 30%. Whether that will remain in 30%, they go down to 35% and go up to 37%, is difficult to extrapolate at this point of time.
Okay. Okay. And just second question from my side. For at least this quarter or this half of the year, can you please help me understand the breakup of our growth between how much of that was volume driven and how much of that was value driven?
I don't have the numbers just now. But I don't have the numbers here. But -- do you have the numbers?
It is equal mix of both of volume and -- See, we have got -- did a number of products. So it's a fair mix of both volume as well as price growth. We have got good prices in bulk chemicals and good growth in the new polymer and the polymer business.
Okay. So basically, for this first half, we have done a revenue growth of almost 60-plus percent, if I'm not wrong? So you think that it is equally divided?
Yes. So, 50% is our revenue growth for the first half. Do you think that is equally divided between volume and value?
Yes, volume and value both. Yes, if you see year-on-year basis, that would not be the right comparison because that 700 tonnes are coming through the year, which is like commercialize in the first quarter.
Got it. Exactly. And actually, that was the reason why I was asking this question to get a better understanding.
And it will continue to go further out.
We have the next question from the line of Rohan Gupta from [indiscernible].
So a couple of questions. First is on -- this ref gases from Q1 to Q2, we have seen a remarkable improvement in revenue from almost INR 196 crores to INR 268 crores. Sir, it is all in the ramp-up of volume of R-125 or we have also benefited any sort of price increase? And what is the current utilization of R-125, including exports?
Yes, of course, there has been a ramp-up of 125. And at this point of time, we would probably be at about 70%, 75%, 80% of capacity utilization.
So it means that there is further room for improvement in revenues from ref gases only by reaching to 100% utilization, right?
Yes. Yes.
And sir, is there any possibility, given the solid demand environment in R-125 and you are also mentioning the solid demand from -- in export market in U.S. Do we have any room for further expansion in R-125 in the current...
I think we have adequate capacity in R-125. There's to -- cater to the demand which we are seeing in the next year, there is a certain amount of debottling also, which is in progress. So I think we should be able to meet the demand coming up in the next year.
How much is this cope for increasing capacity by debottlenecking further, which we are planning?
See, it's difficult for me to give you a number, but maybe about 10% to 15%.
Okay. Okay. And sir, in the pricing scenario, you see that remains solid in R-125?
It appears to, at this point of time. I see no great reasons why the prices will change substantially.
And sir, do we have also plans to expand our refrigerant gas market to improve or to cater to some other gases also blend?
So we are -- we have taken a investment decision to put up our new facility to meeting or R-32 and the equivalent capacity for the hydrochloric acid, which is going to be required for manufacturing this. This is likely to be commissioned by end of first quarter of calendar year '24.
Q1 CY '24?
Yes, Q4, '23 - '24.
Okay. And sir, any idea on the capacity which you're planning to put in R-32 under CapEx?
Currently, we are looking at a capacity of 10,000 tonnes.
With the CapEx of?
Maybe the CapEx is something which we are still streamlining the numbers, but it should be in the region of about INR 125 crores plus.
And it will be targeting for domestic or export market?
Both.
Okay. Sir, second question is on our Fluorospecialty chemicals, where we have seen some Q-on-Q, some slight decline. So you had a run rate of INR 119 crores revenue in Q1. This quarter INR 114 crores. Any particular drop or any delays in some shipments and how this business vertical is progressing so?
No, I think it's generally been flat in the last 2 quarters because as we mentioned, the new plants which are supposed to be commissioned, there was a delay and generally speaking, this year, the monsoons in Gujarat have been very severe. A lot of the projects which were getting implemented have got delayed by one month to 4, 5 months. So that unfortunately has been story across the board. And even till until a short time back rains were continuing. So that really has disturbed the implementation schedules for many of our projects.
So there's a new plant for the new capacities which are coming and which were supposed to have been commissioned in specialty chemical have, as we speak, just now being as -- been commissioned, we will see a ramp-up of this business from these new plants to happen in the next 1, 2, 3 quarters. So business growth will start being seen from the Specialty Chemicals segment from this quarter onwards.
So sir, you are saying that it is constrained by capacity, not from the demand? There's nothing changes in demand...
No, no, not capacity, the capacity of new plants which we are putting up, the new investments which we have put up, the plants which are under implementation, because of -- because of the monsoon, there have been delays in commissioning. And so those plants which were supposed to have been commissioned in the last quarter are actually getting commissioned now in this month. And so we will...
Otherwise, our capacities -- I mean old capacities are fully utilized. That's for...
Yes, by and like fully utilized. But those are for different products. These are for different products. The new capacity you talking about -- talking about a different products, which are now going to be sort of rolled out.
And sir, have you also witnessed any increased traction in your Fluorospecialty chemical business given the crisis which you are seeing in Europe related to energy?
Not really. We have not yet seen anything substantial for that reason in the Fluorospecialty business.
And in Fluoropolymer?
Well, Fluoropolymer also -- being of the demand, of course, continues to be good, but that has yet not been impacted by anything which is happening in Europe.
So -- see, as I mentioned earlier, we -- we are across diverse geographies. So what happens in this particular geography is slightly down. We have seen that we have the ability to make that up in the other geographies. We can push more quantity than other geographies. And this has been the case up to now.
So even if there is some weakening in demand in a particular geography, we hope that we will be able to more than overcome it by shifting products to other geographies but we have a very, very wide variety. On -- the range of products as well as the customers. We have a very, very diverse portfolio of customers. So for us to sort of shift some quantity from one geography to the other is practically feasible.
We have the next question from the line of Aman Vij from Astute Investment Management.
My first question is on the new edge fluoropolymers. So if you can talk about the number of customers we are engaged currently with PVDF battery and PFA semiconductor grade? As well as when can we see some revenues coming from these 2 new products?
So. Both in -- in all our fluoropolymers, we have multiple customers. So at this point of time for me to give an off-hand reply on how many customers we have in each segment is going to be difficult. But -- but coming to the EV grade battery, as we have mentioned that grades have been developed. The grades have been sent for qualification to settle customer in South Asia and 1 or 2 laboratories in India as well as in Western Europe.
So the process of -- it is a fairly lengthy process of evaluation and testing and evaluation, which is currently ongoing. We expect that we -- in the January, March quarter, we should be getting feedback from some of the customers to whom test samples have already been sent. And we can -- and perhaps start commercial business from the second half of 2023. After the qualifications are over.
And for semiconductor grade PFA?
Semiconductor will be at range for various applications of PFA. We are, again, for the semiconductor range are -- samples have been sent to customers for their approval. We have done our own internal checks, and we find that the quality is meeting the requirements.
Typically in situations like this, if there is something -- is some quality parameter deviation, which is noticed by our customers. They pointed out to us, and that is something which we then work on at our plant to rectify that and sell those samples back again. So it's a bit of a back and forth which takes place. But I think PFA in the next 1 to 2 quarters, we should be able to have qualifications for applications in semiconductor also. Just now even for other applications, the demand is very strong in PFA.
Next question is if you can update us on the solar film plant as well as LiPF6?
So LiPF6 plant is currently under construction. As we have said, we are expecting by, again, first quarter of the next financial year, which is April, May, June, that plant should be commissioned and we'll be able to send the samples across to customers for their approval. And once that happens, then we can start commercial production.
But the plant is under implementation at this point of time. And so we are hoping that mechanically, the plant should be commissioned by February next year.
The solar film plant also, if you can talk?
The solar film plant -- solar film facility will be ready by June next year.
Sure. The final question I have is on the realizations of FKM, PFA and PVDF, if you can talk about the same currency?
Well, the realizations continue at this point of time. We have to see what happens in the next few quarters. But that's -- I mean it's difficult for me to say at this point of time again what will be the scenario. But I think FKM and the demand is fairly strong for our products.
As mentioning that we have developed so many grades of PFA now, which -- which have been completely qualified by diverse customers in Europe and U.S. and even in Japan. Of course, also in India. So the demand as well as the demand continues to be strong. We don't have too much of an issue on the pricing at this point of time.
And PVDF also, the demand is strong, and we hope that by the time we commission our second reactor, which will happen in January. We will have enough qualified customers to quickly ramp up the capacity utilization of that reactor also.
Prices more or less...
Ranges you can give. Range, if you can give. Any range you can give on these 3 products? Range of the prices over the last one quarter?
FKM would be, say, about $28 to $31, $32. PVDF would be a similar range, about $30 -- $28 to $30. PFA would be something like about $33 to $35.
We have the next question from the line of [indiscernible] from [ Invest Research ].
Hello -- good evening, sir. Am I audible?
Yes.
Okay. Sir, my first question is, for the last 5 quarters, is it great to say there is a continued growth in the top line and operating profit margins are also consistent? So can you please summarize the key drivers behind the same? And how these drivers look like to continue in the medium term, say, next 1 to 2 years from now?
My concern is to ask this question because I simply want to know as our bulk chemicals has been significant contributor. And in last 2 quarters, there is a significant growth in RFG as well. So to this growth and we know that there has been a real in caustic soda prices as well. So can you please explain the future viability of this growth that we saw in the last 5 quarters?
Well, in terms of volumes, our growth is going to come up largely from polymers, fluoropolymer, which is mainly from the New Fluoropolymers and from the battery chemicals, which we start commissioning from the first quarter of the next financial year from April May June. So once that is there, the real growth in the future will come.
The other, of course, is the fluoropolymers, other fluoropolymers will continue to grow because of -- they find utilizing -- there are multi users of different fluoropolymers in the entire EV battery ecosystem. And later on, of course, in the -- in the electrolyzer hydrogen fuel ecosystem also.
Okay. Good. And sir, what is our top line and bottom line guidance for next 2, 3 years? And how operating margin is going to shape up for the same period?
I'm sorry, we won't be able to give that. We normally don't give futuristic guidance.
Okay. Understood. And sir, you were talking about some R-32. Sir, what is the size of opportunities and how we are looking at this?
So I just mentioned that we are putting up a 10,000-tonne plant. And we hope in the next -- after the plant is commissioned in a year or 2, we should be able to get into full capacity utilization.
And I think -- you were mentioning that it will be commissioned by the end of financial year '23?
Yes. '23, '24, yes. By March '24. Yes.
Okay. Understood. March '24, you are saying?
Yes, March '24.
We have the next question from the line of Nitin Agarwal from DAM Capital.
Question on the New Fluoropolymer business, on a QoQ basis, have the volumes is fair to assume the volumes have been flat on a Q-o-Q basis in terms of sales?
Yes, because the fact that we were not able to commission new capacity in time to be able to build up volumes in the July-September quarter.
And sir, on the capacity that we installed -- that we've already installed and commissioned, are we operating closer to peak capacity in the peak growth in those installed capacity -- commission capacity with New Fluoropolymers?
By and large about 75%, 80% capacity in the last quarter again because since we were in the process of commissioning these new additional capacities in PVDF and FKM, there was a shutdown which had to be taken for our backward integration plant, which is VDF plant for hooking up. So that has been done. That shutdown is necessarily for hooking up has been done.
So now as soon as these capacities were commissioned in this quarter, as I mentioned a few minutes back in about 200 additional tonnes from November -- end of November onwards this year. And PVDF from January of next year, we should see these additional volumes kicking in.
Okay. And sir, secondly, on -- in the ref gas sales component also includes some sales of R142B gas also?
Sorry?
The ref gas, does that include R142 ref gas sales also? Are we doing some of that third-party sales also?
[indiscernible] special...
No, that doesn't include anything on 142.
And sir, is there a plan incrementally to do that going forward?
See, this is something which we constantly evaluate. We look at both our own internal requirements and internal availability. Our first priority is to ensure that we have enough 142 to be available for our own internal captive consumption, which is for FKM as well as PVDF.
In both these 2 areas, we are expanding capacity, as I just mentioned. So after those capacity expansions are over, which will be during this quarter and January next year, we will then have to see what is the quantum of 142B, which will be available for our supplies for sale outside. And if the prices are good, then we will sell, otherwise, we will not sell.
[Operator Instructions] We have the next question from the line of Vivek Gautam from GS Investment.
Yes. Congratulations on a good set of numbers, consistently coming after one quarter or the other.
Sir, a few questions about do you have that registered company, I know -- when taking you had extended zones and other things. Some positive figure is happening in that particular wind energy sector [indiscernible] and the IPOs are coming out, will it help in reducing our own loans and related party transaction that also come to full stop?
Yes. I think on this issue, I stated a number of times by March, by the end of this financial year, most of the related party transactions will be completely dealt with. And as you like to mention, there is an IPO, which is coming up the Inox Green, and the promoters have also committed to pumping about INR 800 crores into Inox Wind essentially for repaying the loan, which has been taken from GFL. So by end of this financial year, the intention is to completely square of all these transactions.
And sir, what has been the impact of the current Ukraine war -- Russia war, positive or negative for us, export getting impacted, freight cost also coming down any impact? And what is the opportunity size and growth rate in the next 2 to 4 years?
So to some extent, it has helped in caustic soda, where because of higher energy prices in Europe, there is export demand, which has come up. So it has helped -- helped us in shoring up soda prices. As far as polymers are concerned, at this point of time, it's a bit too early for us to say anything. But as I mentioned, even the U.S. market and the domestic market, of course, are doing well. And also the Japanese market, if there is some slowdown, which comes up in Europe, that stack can be picked up by the other geographies at this point of time.
Unless, of course, that every geography is impacted by the recession of something, then I suppose I can't say anything. But as it looks like if there is some impact and there's been talk about discretionary concerns in Europe, is that -- that hopefully, that impact could be mitigated by growth in our other geographies.
And the opportunity size and expected growth rate in the next few years, sir? A few word.
So as already mentioned, we are expanding our capacities on New Fluoropolymers in FKM, PVDF, PFA, et cetera. So these will provide future growth possibilities. And as the EV battery manufacturing commences in India, Europe and U.S., I think that will be a very big opportunity for us to sell -- sell our EV battery grade PVDF as well as other fluoropolymers also which are required in the entire battery ecosystem.
We have the next question from the line of [indiscernible] from [ Newbury Capitals ].
Two questions. About PTFE and FKM global supply scenario. Have you seen that I haven't come across that there is a supply shortage in these 2 categories because our government cost through the occupants indicating automotives are getting force measures from the suppliers in the Europe region. So how is the supply scenario in these 2 fluoropolymers?
Well, there have been some supply constraints in U.S. and Europe, where for reasons of raw material disruptions. But despite that, there's the fact that our sales are robust is also because of the fact that there's not too much there in fact, barely any new capacity, which has come up in Europe and U.S. for PTFE and FKM. And so the growth which is taking place is the one which is also creating some supply imbalance.
So we will be able to capture that supply and balance if we have that variance at our end, right?
Yes, that's right. That is why we are investing in additional CapEx.
Understood. And second question is about cash flow conversion. I understand that we are going through a CapEx and measure of the funds will be blocked into the inventories. But what's the back to CFO conversion that we internally track and at what level we will be able to take it further?
Sorry your question is not clear. Can you repeat, please?
So back to CFO conversion, what -- at what level the internally -- do we track it internally and at what level we would like to have it?
So see, currently, we don't have any specific target on free cash flow versus PAT because normally, we are in a growth phase, and our working capital quantitatively will increase as soon as the growth increases on the sales front. Similarly, we have got a number of CapEx targets. So we have to see that. So based on that, our free cash flow will be fully utilized in either feeding their own working capital or the CapEx requirement.
By and large, what we are trying to ensure is that all our future growth takes place from our internal generation and not by external debt. To the extent that there is room for us to grow, putting new CapEx we will continue to use our cash generation for that purpose.
We have the next question from the line of [ Anand Jain ], an individual Investor.
Congratulations on a great set of numbers. My first question is around 2 quarters back in the call, you had indicated that we are going to make a few changes which should -- which should actually result in large power cost savings for us in FY '24. You did not give more details about that, but would you be able to share some details in terms of the quantum of savings that we are looking at, what mechanisms are we going to use to do that?
See, at this point of time, again, we are freezing our alternative supply arrangements. So I would not like to talk much about it at this point of time until that has actually been done, but that is progressing very well. And as I mentioned, after maybe about once we have completed that in 18 months' time, we will have that additional power coming in, which will be at a fairly far more reduced prices than what we are paying at this point of time either to the grid or for our own capital generation.
So okay, the question is more like, is it like internal heat recovery? Or is it going to be like renewable...
We are tying up for additional power through a different source. It would significantly reduce our power costs.
The second question is in terms of fluoropolymer capacity, you said that by FY '23, and we would have 1,500 tonnes of speciality fluoropolymer capacity. How do you think this quantity -- this will ramp up by FY '24?
I think it will take about 12 months for all this capacity to be completely utilized.
In the sense that new capacity addition by FY '24 and between '23 and...
New capacity addition, maybe up to 12 months. I mean it will be a ramp-up process, it will -- and maybe by the end of the financial year, we hope that the entire incremental capacity will be converting into sales.
No. I mean creating new capacity in FY '24, not the ramping up, ramping up is very clear that FY '23 capacity will ramp up in FY '24, creating new capacities in FY '24 post specialty flow of volume ?
So we will -- most of this new capacity increase is likely to -- so it will be coming in from 2 quarters. One is the debottling of the PTFE capacity, which is currently on cards. And secondly, additional capacity, which we'll be putting up for PVDF for use by EV battery manufacturers. So that -- so that real demand is going to start coming from beginning of 2025 from January 2025, by which time we will put up additional capacities during the calendar year '24 to cope up -- to cope with that additional demand which will come in from 2025.
So that will be additional increase in capacities. There will be a debottlenecking, which is going to take place on our PTFE plants that will increase further capacities and usually putting up some additional capacities in PFA.
And what is the additional capacity...
The PFA maybe by March '24.
So can you just repeat the capacity, additional capacity in PFA and PVDF there that we are looking to put up in?
In March '24, we'll put up additional capacity to PFA. We will put up additional capacity to...
The quantum?
Sorry?
The quantum in terms of tonnage, like we'll end up 15 -- '23 with 1,500 tonnes, in '24, what will we end up with?
So we are -- by end of -- by March '24, we expect to double the capacity.
Okay, sir. So like this 1,500 will go to 3,000, if I get it right?
Yes.
Okay. So 3,000 tonnes per annum or per month?
No, no, it's not 3,000. It will be about 2,400 tonnes.
No, that is only for PFA, I'm asking overall for -- all the fluoropolymers?
PVDA will be much larger, actually PVDF, we have to watch and see how the progress by the commissioning of new battery capacity is there, whether we put up how much reactors we put up in '24 will be dependent upon that. But that is a continuous process. We will keep on putting up additional capacity of PVDF.
The more -- as we see demand coming up, we'll keep on putting more reactors because in any case, the backward integration piece is all done and putting a PVDF capacity in modular. In 6 months' time, we can put up reactors. So depending upon how the battery manufacturers commission their capacity, we'll keep on adding more capacity for PVDF.
Great, sir. One last question, if I may squeeze in. Which is like, sir, looking at all this, we are currently doing this everything in our integrated complex. So do you think that we can -- we are looking to have plans for a much larger CapEx and in a new complex altogether? Do we have any plans of -- in running?
We plan to do at the future expansion which will take place will have to be done a new complex because we -- so we have run out -- will be soon running out of land in our -- in our currently and new complex. But -- so we are already in the process of selecting and finalizing additional land, where we will house our CapEx is coming up in the future years.
We have the next question from the line of Rohit Nagraj from Centrum Broking.
Sir, first question is in terms of Q3. So is there any seasonality factor due to holidays in Europe and U.S., and that might impact some demand for some of the products which are going to that geography?
Yes, it could. I mean, yes, because the December month typically in Europe and U.S. is muted. So we -- traditionally, the October, November, December quarter is a bit slower than other quarters. But the pace of business starts picking up again, typically from January quarter onwards.
Right. Sir, second question is in terms of the CapEx. So as I understand earlier, we had clear guidance for LiPF6 by Q4 -- I mean, end of 2022, but now it got delayed by a few months. Across the board, the delays primarily because of the heavy rains in Gujarat and that's why some of the CapEx, which was there earlier plan for this year has got shifted to next year?
Yes. That's right.
Right. And sir, just one last clarification on the wind power project. I understand last quarter, we had indicated that 20 megawatts will be commissioned in Q2. So any progress on that?
Yes. Yes. It is already -- we have sought certain permissions, which is underway. So we expect in this quarter, we'll have those permissions.
So we are trying to put -- we have sort of -- there's been a change in plan. We are putting up this addition, this new capacity -- this capacity we're talking about in EOU because putting it up in EOU gives us certain advantages, both in flexibility of operating -- also using the power as well as some indirect cost benefits.
So that process of getting the EOU clearance is on. Again, as it so happens as delays in getting government approvals, but we hope that shortly, we should be able to get that and before -- before the end of the year, in any case, all that will be commissioned.
We have the next question from the line of [ Marcell ], an investor.
This is the operator. Can you hear us?
Yes, we can.
[indiscernible] I can go ahead and ask a question?
I think Marcell is not there, we can move ahead.
We have the next question on the line of [ Tal Shah ] from [ Girik Capital ].
Congratulations are great numbers and the great visibility of growth going forward. Just one question. A couple of quarters back, one of the conference call, you mentioned about R-32 being a commodity kind of product. And as a company, we were not planning to get into it, the manufacturing side. While now we have announced this 10,000 tonnes capacity. So what has changed our thought process towards this product?
See, one, we've done more extensive study in our R32 because it has a very, very low GWP. The longevity of this and the growth in demand across the geographies, again, especially India, of course, in the other -- this is going to be -- at this point of time, the main substitution for R-22. So -- so that's one. And there seems to be a lot of demand in the Middle East, which will be for 410, which requires both R-32 and R-125.
And other than that, some of the other geographies also like the U.S., et cetera, they will also continue to use 32 for a grower period of time. Simply for this reason that it is a very low GWP. And it is -- if they have to keep to the GWP targets, it's easier for them to use more of R-32 and curb the use of some other reference where the GWP is higher.
So for all these reasons, we see that there is a growth potential there. And that is the reason why we have -- that it will also help us in supporting our R-125 business.
Understood. Great. And sir, second question is, you mentioned about EBITDA margin visibility to some participant, you said 30%-plus. So is my understanding correct? So over a medium- to long-term, you feel our company will maintain its margins at like 30% EBITDA minimum? That's what -- is that understanding correct?
That is what we expect. Who can predict the future? Underline what happens. It's something which is not predictable, but we reasonably expect that we should be able to maintain given the portfolio of our products, we reasonably expect that we should be able to maintain this level of margins.
Okay. Okay. Because what has happened is that like one to other, especially the [indiscernible] like ours, pre-pandemic and post-pandemic. The margin trajectory has completely changed. And as investors, it always keeps us guessing -- there could be the peak margins. So I think this sort of visibility from your at about 30% being amazed will really help us.
So yes, the point -- as I mentioned, we think that with the portfolio of products and our product range, we would expect -- and the margins which are there in our business, we would expect that we should be able to keep to a 30% EBITDA margin. It's also not very easy. There are barriers to entry into our business, and it takes a long time to build this business, this customer base, get this qualification. So -- so we have reasonable hope that we will be able to maintain this margin. And some of our -- the new expansions are taking place again, are in areas where we expect the margins to be better, and those are more sort of new age kind of industries. So we are hopeful that we will be able to maintain this level of margins.
Okay. And sir, in terms of our -- we have a great integration across that in different chemicals. Now which would be those key raw material which would might worry you in terms of its availability in terms of -- for you to give a final product price to your consumer that raw material can act as a very large variable...
So as you know, with our integration, that is one of the primary reasons why we are so integrated and why we keep on -- even with new products, which you come up, we look at integration is to ensure that we are in control of our raw materials -- critical raw materials.
And going forward also, that will remain. So there might be periods of time where we are dependent upon outside purchase but once we are able to sort of build the capacities for those critical raw materials, our dependence on outside supplies keeps on reducing. So this is what we are doing even at this point of time, for instance, we are putting up a VDC plant basically as a backward integration for our entire 142 business. So once that is commissioned, our dependence upon external supply reduces.
And lithium carbonates?
[indiscernible] on our own or maybe at least a significant part is captively produced, so that we are only marginally dependent upon buying from third parties.
Okay. And we also were in a discussion with parties for long-term arrangement of lithium carbonate?
Yes.
So are we already into it? Or what is...
Yes. So that process is on. This takes time. So the process of tying up is on. There is a very, very strong focus on that. And -- and I think in the next few quarters, we should be able to tie up some long-term supply sources for lithium.
Before our big demand starts coming up, we would have tied up.
Thank you. That was the last question. I would now like to hand it over to the management for closing comments.
Thank you. We would like to thank you all the participants for their interest in the company, and we look forward for their continued participation. Thank you very much all the participants.
Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.