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Gujarat Fluorochemicals Ltd
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Ladies and gentlemen, good day, and welcome to the Gujarat Fluorochemicals Q4 FY 2022 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal. Thank you, and over to you, sir.
Thanks, Peter. Good afternoon, everyone, and a very warm welcome to Gujarat Fluorochemicals [ to its ] results earnings call after Q4 results hosted by DAM Capital Advisors Private Limited. On the call today representing Gujarat Chemical -- Fluorochemical management, we have Mr. Vivek Jain, Managing Director; Dr. Bir Kapoor, Chief Executive Officer; Mr. V.K. Soni, Head, Projects and New Initiatives; Mr. Manoj Agrawal, Chief Financial Officer; and Mr. Vibhu Agarwal, Head, Investor Relations.
I'll hand over the call now to Mr. Manoj Agrawal of the management team to take it forward from here on. And please go ahead, sir.
Thank you very much, Nitin. On behalf of the Gujarat Fluorochemicals Limited, I would like to extend a very warm welcome to all participants. We are happy to inform that Board of Directors of Gujarat Fluorochemicals Limited at its Board meeting approved the financial results for the company for Q4 '22. The financial results are uploaded on the website of the stock exchanges, both BSE and NSE, as well as the website of the company. We have also uploaded the earnings presentation for Q4 FY '22.
I will take you through this presentation initially, and then we can open the call for any questions that you have -- you all might have.
Starting with the highlights for the financial year '22. Consolidated revenue for FY '22 was at INR 3,954 crores as compared to INR 2,651 crores for FY '21. That is up by 49% on a year-to-year basis. Consolidated EBITDA for FY '22 stood at INR 1,198 crores as against INR 638 crores for FY '21, up by 88% on a year-on-year basis. The EBITDA margins for FY '22 dropped at 30%. For FY '22, this was at 24%, up 6 basis points. Consolidated PAT for FY '22 was INR 775 crores as against INR 355 crores for FY '21. That is up by 118% on year-on-year.
Other operational highlights. The company has commenced export of R142B and R125. Lithium-ion battery chemical projects under construction and progressing as per schedule. Other new projects and additional capacity announced earlier are also progressing as per schedule.
Now we would like to give you the detailed overview of the financial performance during the quarter for each of the components. Consolidated revenue for the quarter, Q4 FY '22, stood at INR 1,074 crores, which is 28% higher than the revenues for Q4 FY '21, which were at INR 840 crores. EBITDA for Q4 FY '22 stood at INR 331 crores as compared to INR 195 crores in Q4 FY '21, up by 70%. As far as PAT is concerned, PAT for Q4 FY '22 is at INR 217 crores, up 97% from Q4 FY '21, which were at INR 110 crores. So this was the pre-financial overview of the company for the quarter on a quarter basis and by aggregate level.
Now if you look at the performance of the various business verticals. Caustic soda revenue for Q4 FY '22 stood at INR 169 crores as compared to INR 82 crores in Q4 FY '21, up 106%. The caustic soda plants were running at the full capacity during the quarter, barring plants, annual shutdown, which was taken by the company during the quarter. As we have mentioned in the earlier call also, the caustic soda prices, which were increased partly during the last quarter, have now been destabilized. There has been an increase in the cost because of elevated energy prices.
Chloromethanes revenues for Q4 FY '20 stood at INR 91 crores as compared to same numbers in Q4 FY '21 that is almost flat. Chloromethane revenues during the quarter when compared to the previous quarter of Q3 '22 is down by 38% from INR 146 crores on a sequential basis. This is essentially due to the prices of MDC, which were peaked out in Q3, have been moderated in Q4. As indicated in the previous earnings calls also, prices are likely to be impacted going forward as additional domestic capacity are expected to be commissioned.
Refrigerants revenues for Q4 FY '22 stood at INR 78 crores, which was INR 93 crores in Q4 FY '21, thus having a marginal degrowth of 16%, but demand is expected to start standing from Q1 FY '23. The company has also started to export of R125, which is going to expect to grow going forward.
PTFE sales for Q4 FY '22 were at INR 451 crores as compared to INR 290 crores in Q4 FY '21, up 56%, gaining significantly on account of rising both prices and volumes due to robust demand across all geographies and applications. The company has also planned the capacity augmentation in line with the demand growth. As regard to new polymer vertical is concerned, new fluoropolymer sales were at INR 183 crores, up 59% as compared to INR 115 crores in the same quarter previous year, that is Q4 FY '21. Capacity utilization during the quarter was dented by the availability of TFE due to plant shutdown, which was not available for the feedstock for Micropowders.
The overall capacity utilization for new fluoropolymer verticals in Q4 FY '22 was around 65% on account of limited availability of R142B. However, from Q1 FY '23 with own stable 142B production, the capacity utilization is expected to improve further. And we also expect to reach almost full capacity utilization by end of Q1 FY '23. There is substantial increase in demand for FKM, PVDF and Micropowders, which will be met with the additional capacity expected to be commissioned over next 2 quarters. As already indicated earlier, the company has also commenced export of R142B and VDF.
Specialty chemical verticals, which was hampered due to a fire incident, is down by 38% from INR 92 crores to INR 57 crores when compared on same quarter previous year, Q4 FY '21. Production and sales during Q4 FY '21 marginally improved from the previous quarter, which was impacted due to fire incident. Three new plants are expected to be commissioned by Q1 FY '23. The commissioning of this plant, which was expected in Q4 FY '21, have been delayed due to supply chain issues. But we envisage further increase in revenues from Q2 FY '23 with the new plants getting operational. Thus, the company has posted an all-round growth in most of the business verticals, suppressing the revenues and profit achieved in FY '21 by substantial marketing.
As regards to operating efficiencies -- capital operating efficiencies. The RoCE has improved from 11.92% to 24.48% and ROEs improved from 9.87 to 20.10% as compared to FY '21. RoCE is expected to further improve given the higher margins from the incremental sales of existing as well as new product profiles. On the debt front, the company is virtually debt-free, with net debt-to-equity ratio reduced to 0.26 from 0.33 in FY '21. We intend to reduce this further [indiscernible] company in near future.
Our continuous focus and efforts has resulted in reduction of working capital cycle from 168 days as on 31st March '21 to 128 days as on 31st March 2022. The company has further increased its [ planned ] capital expenditure outlay by around INR 300 crores to INR 400 crores during FY '23 to meet the increased demand. We expect all these initiatives to offer a sustained business growth for the foreseeable future with higher margin will lead to further improvement in our financial performance.
So that, ladies and gentlemen, is a walk-through of the presentation. I would like -- now like to open this up for any questions that you might have that we'll try to answer. Thank you.
[Operator Instructions] Our first question is from the line of Sanjesh Jain with ICICI Securities.
A few questions from my side. First, on the CapEx guidance. So for FY '23, we have earlier said that we will incur INR 900 crores of CapEx, which I think we have revised it to INR 1,150 crores, that's an increase of INR 250 crores. Can you walk us to what is the incremental investment going into, which are the products? That's number one.
Number two, it will be very helpful if you can give us -- INR 1,150 crores of CapEx. What are the things which we can expect to commercialize in FY '23? And what are the commercialization pending from FY '22? So just wanted to understand what are the capacities we expect to commission in FY '23. That's first on the CapEx side. I'll ask the question as we go. It will be helpful if you can answer this first.
Okay. Thank you. Regarding the CapEx, a rough breakup of INR 1,150 crores against INR 900 crores we told earlier. There was an increase of INR 250 crores because of some of the capacities we have advanced from the following year, FY '24, because of the increase in the market. So roughly, the breakup would be it includes specialty chemicals, including lithium complex, which is about INR 300 crores. It includes new fluoropolymers, including new age fluoropolymers going into [indiscernible] that's about INR 300 crore. And we also have backward integration into [ VDC ] as well as some refrigerants capacity. And so this is about INR 250 crores. And the balance, about INR 300 crore is for wind power and miscellaneous debottlenecking. Thank you.
Okay. So we don't expect anything to spend on PTFE during FY '23? Because I think we are running at a full capacity there, right?
Yes. PTFE is covered under the debottlenecking, which I mentioned.
Okay. Okay.
We are debottlenecking capacity by about 20%. So that is covered in that investment. That's not a different -- new plant. It is just debottlenecking.
Okay. Okay. Second one on the R142B and R125, which we said that we have already started exporting, it will be very helpful if we can provide what are the capacities do we have in our R125 and R142B that is salable to the external market and how much of that we think we will be able to place in FY '23 considering that this is our first year for these products.
So Sanjesh, 125, I will not be able to give you the exact capacities, but we are expecting that we will be able to export about 4,000 to 5,000 tonnes during this year.
Okay. Okay. That is a possibility. And on R142B, sir?
R142B and VDF again would -- PVDF exports will depend upon our own internal consumption. And as Mr. Soni mentioned that we have preponed some of the investments in new fluoropolymers such as PVDF and FKM to this year because the demand is very strong. And to fulfill that demand, we have decided to prepone so our own requirement for R142B will increase. To the extent that there is a gap between our own demand and the -- our production capacity, we will continue to export both R142B as well as VDF. So I would expect that during the course of next -- in the next 12 months, we should be exporting about -- equivalent to about 500-odd tonnes of R142B per month. From perhaps, I would say, August onwards, we should be in a position to export about 500 to 600 tonnes equivalent R142B.
Fair. Fair. And we are confident of having that VCM to VDC by then, right? And that will help us to produce more.
Yes. VCM to VDC, we should have it by the -- by March next year. We are trying to commission it by the end of this year. But in our own planning, we have assumed it to be by March '23.
Okay, sir. One small bookkeeping question. What was the loss because of the incident in Ranjit Nagar? We have mentioned that we have claimed an insurance for INR 27 crores in the report. Plus why there was such a large plant shutdown? And what was the total impact of this plant shutdown on the EBITDA for this quarter?
See, if you see there is a 2 component to the overall insurance losses, one was -- your material damage, which is around to the tune of INR [ 43 ] crores. There was around business loss, which is due to interruption that is around INR 27 crores. And there are some additional expenses we got incurred in terms of compensation, medical expenses and other things is to the tune of INR 7 crores. So these are the 3 figures, which has impacted.
As regards to material damages there, there is no P&L impact because it is just -- removed from the [indiscernible] property plant and equipment and moved to the insurance claims [indiscernible].
Got it. And what was the impact of plant shutdown for the maintenance, which we have mentioned for quite a few plants in the presentation? What was the impact of that?
Yes. Because insurance policies normally have the compulsory deductible to the tune of 7 to 14 days, depending upon the size of the policy, whether it will make up or is or regular policy.
No, no, no, I'm not talking about that. I'm asking about the plant maintenance shutdown, which we took in quite a few plant.
About 7 days -- 7 to 10 days. And that impact may not be precisely computed actually because there are various stages of the shutdown, different plants and different products. So that may be [ all ] 7 to 10 days.
I think, Sanjesh, what you're asking about is plant shutdown [indiscernible] side where there was an unplanned shutdown in [ PTFE ] during this quarter, which resulted to some loss of production of PTFE.
Correct, correct. That's what I was.
Yes. That's right.
Okay. One last quick from my side. Now that we are running PTFE at a full capacity, is there any scope to debottlenecks producing more PTFE capacity for FY '23? Or FY '23 will predominantly we will just write the benefit of the price hike, which has been taken?
So we are working at debottlenecking. And I think that exercise will take us a couple of months. And subsequent to that, as Mr. Soni mentioned, we expect about 20% of our capacity increase, which would be about 200 to 300 tonnes per month addition to PTFE available, which might happen from the first -- from the last quarter of this financial year.
Next question is from line of Ketan Gandhi with [ Ambit Securities ].
Sir, as a follow-up on the previous question. That loss of business of INR 28 crores has been expensed out or it is the balance sheet item? I mean it has been reduced from the assets.
No. Actually, loss of business is partly extends out indirectly because we cannot record that around 14 days of your compulsory deductible. And partly, we have recorded, and net of expenses will be INR 20 crores. So roughly INR 28 crores will be a loss, which has got [ indirectly ] built into the P&L, and INR 20 crores would be recruited because of [indiscernible] policy.
So INR 28 crore is P&L item and another INR 7 crore is also P&L item?
Yes, yes.
Okay. Sir, in January, we have taken the price hike of the PTFE. So currently, it is stable. I mean the hike -- price hike is stable or further increases there in the PTFE price?
Yes. So the prices, which we have introduced in the last quarter in -- from January onwards, we have now more or less been accepted by the customers. So this quarter, we will see the full impact coming in.
[Operator Instructions] Our question is from the line of [ Vishal Prasad ] with [ VP Capital ].
Good to see the kind of work that we are doing. I have 2, 3 questions. So if we look at the new edge industry verticals, specifically EV and , [ Hydrogen Cells ], these are the areas where it is extremely difficult for the new player to get in given the scale of CapEx that we are planning to do. I mean I'm sure you guys will be having a plan that you will execute, but is it possible for you to help me properly understand what gives us the confidence that we will be able to sell our products for the customers like battery manufacturers or some middle men? What kind of contracts we would be having? Like if I look at PTFE, our current things that we are doing in North America, we have short-term contracts. We do not get into long-term contracts. So in battery chemicals, are we looking at long-term contracts? So -- and any other things that would help me understand whatever you have in mind, that will be really helpful.
Well, eventually, in battery chemicals, we will get into some kind of long-term contracts. Though at this point of time, it's still too early for us to say anything beyond that. Our plant will, as we said, will probably be commissioned by the end of this year and will take maybe a quarter or 2 for the product quality to get stabilized and getting the initial approvals from customers. But we would expect that -- and from whatever initial discussions, which we've had with potential customers, they would be looking for longer-term contracts there.
Yes. That would be on contracts. But are we selling our products directly to the end battery manufacturers? Or we will be going through somebody else, who will be the prime?
No. For PVDF, we will be going to directly to battery manufacturers. And for battery chemicals, we will go through companies, which are putting up electrolyte manufacturing facilities in U.S. and Europe. In India, we will make electrolytes for -- and supply directly to battery manufacturing.
So in a typical supply chain, like if they have to get a new vendor like us, how much time generally needed to approve a new vendor? And how does this [indiscernible] happens for the battery chemicals?
See, the time it could take is 3 to 6 months for qualifications. And the scale up -- I mean we are all aware what is going to happen as far as demand is concerned on batteries. So from 24 onwards, we are expecting large capacities to come up in Europe, U.S. And, of course, [ EV ] battery capacity will come up, too. So in the years to come, I think there will be a rapid increase in demand for the products, which we are offering for the batteries.
Sure. Then 2 small questions. One, I mean, we are doing a lot of CapEx. And I understand that there's a lot of inflation happening. And so what impact does inflation have on our CapEx? Are our outflow going to increase?
Sorry, I didn't get your question right.
I understand there is a lot of inflation happening in raw materials. So if I look at the CapEx that we are doing in the next 2, 3 years, it's a huge amount. So do we have a number in mind, which we think, I mean, probably not going to increase in CapEx because of inflation?
No. We have -- whatever numbers which we have given in are assuming current prices of equipment, steel, et cetera. So this is current pricing. We have already assumed current pricing.
Next question is from the line of Dhruv Muchhal with HDFC Asset Management.
Sir, on this R125, I was just reading through some documents available on Web. It seems our production route is using the TFE an input, which is -- it seems is a bit different than the traditional route or I'm not sure the other routes, which I believe uses the -- uses per chloroethylene. Sir, is that right? And because we are using TFE, does it -- has some implication for the output of PTFE and the other downstream changes that we have in polymers?
No. Yes. We used TFE route for making R125, but we had a third TFE plant, which we had commissioned about 2 years back, which was not fully utilized. So we have enough TFE capacity available to meet our R125 export plan.
And you mentioned about 4,000 to 5,000 tonnes potential export.
Yes.
And sir, it seems the refrigerant market is picking up quite a bit, and some of the other refrigerants are also picking up the [indiscernible] 410 and others. You mentioned some comments about investing in refrigerant capacity. So sir, are there any other plans -- are there any plans for some of the other refrigerants as we are -- see, R125, you already have R22 and some of the other refrigerants?
Well, we are exploring the possibility. We might have some investment going into one of the existing refrigerants.
So the INR 300 crores -- INR 250 crores that you mentioned for backward integration to VDC and refrigerant, does that -- the INR 250 crore investment you mentioned for backward integration into VDC and refrigerant capacity, this includes some of the new refrigerants or that will come up later?
Actually, that included the debottlenecking of the existing refrigerants like R22 and for R125, et cetera. The new refrigerant, which we are planning, is just on the plan. We will form up the plants and then inform.
Sure. And sir, one last question. I have more questions, but I'll join the queue. Sir, is it possible to share what will be effective utilization this quarter for PTFE?
This quarter, PTFE -- except for another TFE, one of the TFE plants, which are going to be as part of a planned shutdown, it should be at about 90%, 95% of our existing capacity.
Sorry, sir. I mentioned Q4, the quarter gone by, Q4.
For the quarter, which is now.
[indiscernible], right, Dhruv?
Yes, yes, Q4 FY '22.
As we announced, we had taken a shutdown in one of the TFE plants. So the quantity production of PTFE got impacted only to that extent. Otherwise, it's operating at full capacity.
Yes. Because, sir, even if I assume about 85%-odd utilization, some quick numbers, I get the PTFE realization of at least around $13 to $15. So I'm just trying to understand, is this a fair number to work with as we are going ahead and looking in the outlook for PTFE? Or do you think this is a bit abnormal and there could be some relaxation here?
Sorry, what number did you say? 13.
$13 to $15 per KG.
Yes. I think that number will stay. Maybe there might be some improvement, but that number will stay.
Sir, this is a decent improvement over the couple of quarters back. These are also, again, back of the envelope calculations.
Because the market has been fairly robust. And of course, there has been some certain amount of cost push, but the grades, which we have developed, are in -- where the demand for those products is very strong. And that is the reason why we -- it has enabled us to revise our prices upwards. The demand still continues to remain fairly strong.
Our next question is from the line of Rohit Nagraj with Emkay Global. We'll take the next question from the line of Hansal Thacker with Lalkar Securities.
Congratulations on another great quarter, sir. Sir, quick question. Just wanted to know where are we in terms of our new age verticals as in -- from the point of view of plant readiness, trial production, et cetera, for the electrolyte sold and the hydrogen PMs? The solar, obviously, you mentioned will start next year. So if you could throw some light, I'd appreciate it.
Yes. So starting with the battery chemicals for the EV batteries, our plant for the main salt LiPF6 is under construction. It should be ready by end of this year. And with validation, we should have commercial product ready in the first quarter of next calendar year. And regarding the other product, PVDF for the binder for cathode, the product is already available for sampling, and validation has been in progress, and that was [indiscernible].
For 2 quarters.
That product would be available for commercial sale in next 2 quarters. Other than this, our new age, as you mentioned rightly, the PVDF film that will be commissioned next year, which is for the solar back-sheet application. The other major project is hydrogen proton exchange membrane for the electrolyzers and for the fuel cells. So there, the technology is under development, and it is -- the project has kicked off, but we'll be keeping on advising you the progress. It is still under development of the technology. We expect the -- as per our current estimate, expect the product to be ready for sampling by next 1 year.
Wonderful, sir. And truly, we appreciate the dividend. And sir, just one follow-up question on the previous question. So would I be right in assuming that the steady-state profit would include this amount of INR [ 2,789 ] crores, which we have suffered on account of loss of profits?
Yes. Once we recruit all our plants are running up for the specialty chemical division, this will be automatically [indiscernible].
Our next question is from Rohan with Edelweiss.
Sir, first question is on our fluoropolymer business. The capacity utilization was close to 65%. And you have mentioned that in Q1 itself, you are targeting full utilization. So just wanted to get some update that already almost 1.5 quarter -- 1.5 months is over. So how we are on the capacity utilization on fluoropolymers? And can we achieve 100% utilization? And/or there is a further scope for taking it forward?
Yes. That's right. So in the first quarter, we should almost be at full capacity utilization. And as I've mentioned, we are putting up additional capacities for some of the fluoropolymers like FKM and PVDF. And additional product from these further expansion will start coming in by the second quarter -- from the second quarter onwards in this financial year.
And as of now, they are running at -- the current capacity is fully utilized. When you say fully utilized, is it 100% or it can go beyond that, sir?
Well, by the end of the second quarter, it would have gone beyond that because additional capacity is -- we are currently putting up additional capacities for PVDF and FKM.
Okay. Sir, second is on our fluorospecialty chemicals. There, also, we have mentioned that the 3 plants, which were expected to actually commission in Q4, is now going to commission in Q1. Just wanted to understand that the delay, probably, it's because of some supply chain issues, which you mentioned in the presentation. Will this -- this will be fully available from Q1 onward? Or the customer trials will begin from Q1 and the ramp-up of fluorospecialty chemicals we'll see during the year? And what is the revenue potential of these 3 plant commissioning in Q4 -- Q1?
So out of these new products, some of the products are for backward integration. So there, the ramp-up would be, I mean, immediate because we are already making those end products. Regarding the other one products, the ramp-up, as we go from experience, it takes few quarters because of the sampling and the other processing. Although during the R&D, the samples were all approved. But from the actual commercial plan, we'll have to undergo 1 or 2 quarters of validation.
Sir, do I understand also for the backward integration, if you can give or throw some ballpark numbers, the total revenue potential from this plant.
So we had earlier also indicated a number. We expect once these -- the specialty chemical contract is fully on, we would expect a revenue of about INR 600 crores to INR 700 crores on an annual basis.
Okay. Sir, just last question from my side, if I'm allowed to ask, and I'll get back in the queue. Sir, on the chloromethane, you have mentioned that definitely, the plant was impacted because of the annual shutdown, which prolonged. But you have also mentioned that the current dynamics of chloromethane, because of the increasing competition, is seen this [ fierce ] competition from the -- in the domestic market. Do you see that it is going to impact -- the chloromethane business is going to be impacted in the current year? And what is the capacities, which are coming in this market in chloromethane?
See, it's difficult to say [indiscernible] will get impacted in the subsequent quarters. Of course, there has been a substantial impact from the third quarter of the last financial year and the last quarter of the last financial year. There has been a decline. And going forward, it's still very difficult to estimate what could be the impact. There is some additional capacity, which is coming up in the domestic market. And we still have to wait and see what could be the potential impact.
As you know, the demand is also going up. Industry has also started exporting Methylene dichloride. We ourselves have started exporting Methylene dichloride. There seems to be a good market. So all in all, it's -- we hope that it will remain stable, but I think it's something which will pan out in the next 1, 2 quarters as we move on.
Our next question is from the line of [ Karan Shah ] with [ GC Holdings ].
So [ 3 ] questions from my side. Firstly, on R125. So could you quantify a ballpark number as to what could be the revenue potential from this product?
Well, I mean I don't have an immediate answer this now. But as I mentioned that we'll probably be able to do about 4,000 to 5,000 tonnes of R125 during this financial year. So -- no, I don't have a figure as to what would be the financial impact at this time.
Okay. And sir, what would be the overall global demand for this, maybe the market size?
I don't -- again, I don't have an answer for that, what would be the overall demand. But whatever demand estimates, which we have done, and whatever customer feedback, which we are getting, we should be able to do about 4,000 to 5,000 tonnes of exports during this current financial year.
The demand is pretty strong. And if you look at it also, the antidumping duty, which has been enough.
So the antidumping duty, which has been imposed against China, is also resulting into an overflow of orders to us.
Okay. And sir, secondly, on fluoropolymers. So what would be your current capacity in it?
About -- that's also been there. It's about [ 1550 ] tonnes per month currently.
And the new -- sorry.
See, the PTFE capacity is about [ 1550 ] tonnes per month. And the new fluoropolymers capacity is about 700 tonnes per month, which, as we mentioned, is being expanded to about 1,100 tonnes per month.
Our next question is from the line of Rohit Nagraj with Emkay Global.
So congratulations on good FY '22 numbers. So the first question is on wind power. So last, we indicated that 20 megawatts will be commissioned by March '22. So what is the current status of this? And we had also indicated that because of the delay in Gujarat government policy, we were not able to execute the 105 megawatts, which was supposed to be executed from Inox Wind. So what is the status on that? And again, in the CapEx, we have said that INR 300 crores of CapEx for wind power. So how all these numbers [indiscernible]?
See, around -- as we have mentioned, around 20 megawatts is currently under commissioning. And there has been a delay, but we expect this 20-megawatt to be commissioned by beginning of July this year. And beyond that, the policy -- government of Gujarat policy for captive wind is still not been announced. What they have done is they have extended the current policy until 31st of July. And then we have to still wait and see what is the final policy, which they come out with. So depending upon that, to what extent, it is conducive for putting up more captive wind, we'll decide how much investment is actually going to be -- additional investment is going to be [indiscernible]. And as we have already stated before that what we cannot [ invest in ] will be returned back from Inox Wind by the end of -- by the close of this year.
All right, sir. Got it. That's really helpful. Sir, second question is given that we have seen -- there has been an increase in the prices of all the fluoropolymers and -- including PTFE, is there any kind of demand side slowdown given that there is a lot of issues in terms of Russia, Ukraine war and logistics issue as well as Europe issue? So are we finding any kind of slowdown from the demand perspective in any of our fluoropolymer?
No. We are not seeing any slowdown at all. On the other hand, for some of the other polymers, there is a huge demand pull. So we are not seeing any slowdown despite the prices being what they are.
Our next question is from the line of [ Anand Jain ], an individual investor.
My first question is, is that this new capacity for FKM and VDF -- FKM and PVDF that we are planning, you said will be coming on stream by Q2. Can you give me the final capacity numbers after this new capacity comes, sir?
Yes. Mr. Soni just mentioned.
Yes. I mentioned that the total new fluoropolymers are 700 tonnes per month. And the add-on is about 400 tonnes per month, which is making it total to 1,100 tonnes per month. And this would happen by September this year.
And do we have any.
We are planning to further expand this capacity by another 200, 300 tonnes before the close of this financial year.
Okay. So that was what my question was. So by end of this financial year, 1,400 to 1,500 tonnes capacities of new age fluoropolymer.
Yes.
Okay. That's great. The second question is, what we have seen is that one of the Russian companies called HaloPolymers, which used to have around 10% in PTFE market worldwide and which used to majorly export in European and American markets, is that now out of picture because of the Russia-Ukraine issue?
The supplies from them have been hampered for sure. But they, of course, were not 10% of the market. They were lower. But there has been a disruption of their supply for -- the granular grades of PTFE, which we [ make ].
Okay. And our PTFE capacity is going to be like after, let's say, at the end of this year from 4,500 tonnes that we have quarterly, how much would that go up, let's say, by Q4?
Maybe about 1,800 tonnes, 1,800 tonnes in a month.
1,800 tonnes. Just one last question from my side. What we have seen is that this non-PTFE capacity, the market sizes -- or rather the non-PTFE fluoropolymers, the market size is roughly [ 150,000 to 200,000 ] metric tonnes worldwide. And in the next 3 to 4 years, can we reach like 10%, 15% of this market? Do we have that as a part of our vision?
Absolutely. That is part of our plan because we have all the building blocks to increase both sales as well as production for these products. As you know, we are backward integrated into R142B. That enables us to keep on expanding the capacity for these products as we keep on moving on. And as the demand keeps on increasing from the battery sector, we'll keep on expanding our capacity of PVDF.
And one question on the fluorospecialty chemical side. So what we hear in -- like, again, like we are just hearing from other people who are into fluorine chemistry, the complexity of fluorine chemistry is probably defined by the number of molecule -- number of fluorine items in the molecule, F1 to F6 kind of a range is what people generally say. If that is how it is, then if I were to understand how complex is the chemistry for -- in fluorospeciality chemical business, if that is a bar or -- that we use? How difficult is fluorospecialty chemical business? Just to understand the entry barriers there.
Actually, if we add like number of fluorine chemicals, this battery chemical LiPF6 has got 6 fluorine chemicals. That is a special one and with special requirements for electrochemical properties. But the other fluoro intermediates would go for pharmaceuticals or for agrochemical intermediates, they have a number of stages. But generally, the fluorine molecules are lesser than 6, but they are complex depending on the number of stages. In some chemicals, stages are 7 to 8, and some, they are less than 4. So the complexity is proportional to that.
Our next question is from the line of Dhruv Muchhal with HDFC Asset Management.
Sir, one clarification firstly from your previous responses. As you mentioned, the PTFE capacity currently is about -- so I had the PTFE number at about 20,000 tonnes capacity per annum-, but your number is suggesting a bit lower, about 18,000 tonnes odd. And you mentioned it will increase to about 1,800 tonnes per month, which reflects about 21,000 tonnes per annum. Yet again, this is a bit lower than what was earlier, I believe, guided, which was about 25,000 tonnes.
The capacity was about 1550 tonnes per month of PTFE, which would have been about [ 18,500 ] tonnes of PTFE for the entire year. And we did an expansion of another [ 200, 250 ] tonnes of PTFE per month. It will be up to about 21,000 tonnes, 20,000, 21,000 tonnes.
22,000 tonnes, 21,600 tonnes.
Okay. Sir. Secondly is on the specialty business, the -- For the specialty business. Sir, what would be the gross block -- and you mentioned about 600 -- if I'm not wrong, you mentioned INR 600 crores, INR 700 crores full potential run rate. What would be gross block that we have invested here? And when would this -- on a broader level, when do you think should we build in this full run rate reaching? And any further plans that you have in that segment, please, sir?
The gross block for specialty intermediates is about INR 600 crores -- after the plants, which we are commissioning.
And -- okay. And sir, shouldn't the revenue potentially be a bit higher? Generally, I believe the asset terms are about 1.5-ish. This is the number we should currently think of INR 600 crores, INR 700 crores.
Mr. Jain said it is about INR 700 crores. Yes. There's going to be a time lag of ramp-up. So yes, next financial year, we will have a full year. But at that time, we are expecting that the revenue would be about INR 700 crores to INR 800 crores. But during this financial year, because there is an initial time it will take to ramp up capacity, will be lower.
All right, sir. And sir, one last clarification. The PVDF plus the FKM, the expansion is PVDF is 100 tonnes per month and FKM is 200 tonnes per month, both are coming in FY '23. I believe earlier, it was some bit of capacity is coming in FY '24, which you have preponed now. Is that understanding right, sir? Yes?
That's right.
Our next question is from the line of Ashish [indiscernible] with [ JM ].
Congratulations on a good set of numbers. Sir, you mentioned about INR 300 crores CapEx on the wind power side. So is this for GFL? Or is it for the Inox side of it?
It's for GFL, not for the Inox side.
So you're building capacity for wind -- for GFL.
Yes. That's right. Of course.
And what would be your contingent liability, including corporate guarantee for your European business? What would be the corporate guarantee of the [ contingent liability ], on the wind side of the business on GFL? Total outstanding.
Again, by the end of this financial year, most of the corporate guarantee, which has been given, will be revoked.
Our next question is from the line of [ Sanjay Kular ] with ACME Private Limited.
Sir, first of all, compliments to you for delivering excellent results. I have a few questions. Considering strong demand in our businesses, any price hikes will be expected by the company in other polymers like FKM or fluorospeciality chemicals and fluorochemicals in the last 2, 3 months?
Yes. Well, for -- in the polymer business, we have -- going ahead with further price increases because the demand is very strong. For FKM, PVDF, micro powders, et cetera, we are going ahead with further price increase.
Could you please give the quantums on how much price increase is?
See, it's difficult to give a number. It will vary from grade to grade, but it'll be a double-digit increase.
Okay. Okay, sir. And what's the top line growth do you see in the current year?
What -- it is in line with what we've guided earlier as well. So we are looking at in FY '23 around 20%, 25% growth over the previous year. And we stay by those numbers. And these numbers -- in all the additional capacities that we are preponing, this could only look upwards.
Okay. What will be the revenue potential of FKM in the current year and the next year in the current FY '23 and FY '24? Because we see very strong demand coming in FKM [ business ], fluoropolymers.
It's difficult to say, but yes, our production capacities are going up significantly in FKM. Prices are also going up, and they are firming up even now. So I think it'd be -- yes, it'll be maybe about $100 million.
Okay. That's a very, very good number, sir. And sir, any challenges or impediments that you -- that could probably hamper demand scenario in our businesses going forward?
See, Sanjay, it's difficult to say at this point of time, the demand is strong across most of our businesses. So I don't see any great headwinds at this point of time other than MDC, which we said that because of additional capacity, which is coming up, there could be some pressure on prices going forward. But in the fluoropolymer business, which is including both PTFE and non-PTFE fluoropolymers, the demand remains quite robust, and we don't see any headwinds at this point of time.
Our next question is from the line of Aman Vij with Astute Investment Management.
My questions are related to the new fluoropolymer business. Firstly, if you can talk about the current realization of, say, PFA and FEP as well as LiPF6.
Regarding PFA and FEP, we have given the overall capacity utilization of new fluoropolymers, which include these 2 -- prices of PFA would be somewhere around [ $35 ] at this point of time.
And sir, for FEP will be?
FEP is a small component. It's nothing very large. It's, I think, about [ $25-odd ]. That's a very small component, not [ doing ] much of [indiscernible] FEP at this time.
And LiPF6, what is the current realization in the market?
Current realization in the market is 2 types. One is the spot, which is about $70, and other is a contract, which is about $50. But these are subject to change because these are also dependent on the current spike in the demand and the raw material prices. So on a long-term basis, maybe $30 or so would be the price -- yes, would be a reasonable price to assume.
And sir, for the other fluoropolymers, for example, PFA and PVDF, you had extend nicely last time the realization like 2 to 3x up. What should we assume as a long-term stable number? Should we assume around [ $30 ]? Should we have been around $20, $25?
I think crystal ball guidance that -- can't really be sure. I can't say. But I think PVDF and FKM the prices will remain firm because the global demand is expanding. And especially PVDF, because the huge growth, which we foresee coming in from lithium-ion batteries, it should keep the prices fairly buoyant in the years to come.
You had talked about the overall increase in capacity of 600 to 700 tonnes. So sir, broadly, if you can divide it into -- FKM will be increased by, say, 300 tonnes, PVDF by 200 tonnes or 300 tonnes. Is my understanding correct?
Yes. PVDF will be expanded by 300 tonnes during this financial year, and FKM will be expanded by 300 tonnes to 400 tonnes during this financial year. The good thing is that we had starting raw material, which is [ R142B ].
Sure, sir. So sir, the global market of these 2 products are roughly around 50,000 tonnes [ needs ], and we are like almost nothing as of now. Is the global market growing suddenly this past? Or are we taking market share or the capacities of other sales have gone out? If you can explain what is driving according to this demand.
See, for PVDF, the demand is being driven, of course, in the current sectors in which PVDF has been used. But the major demand spike is coming from lithium-ion batteries.
You are seeing the whole pie of 50,000 tonnes, 60,000 tonnes market globally. [indiscernible] growing at, let's say, 15%, 20% now. Is that what.
Yes. Perhaps more. Perhaps more.
Sir, shouldn't we -- now we have this backward integration. The [indiscernible] issue is no more. Shouldn't we be expanding at a much faster rate given.
I think this is fine. What we are doing is fine because, again, in the next year, we will be putting up additional capacity. So it's -- these are reactor by reactor. This is not one single plant, which we have to put up. So we'll just keep on adding more and more reactors as we see that demand going up. There's no point in putting up too much capacity in -- ahead of the demand. It takes us about 6 months to put up an additional 100 tonnes PVDF reactor. So it's -- so we are fine-tuning it to the increased requirements in the market.
Yes. But the strong demand, does it suggest that every year, we can ease our capacity by 50%? Obviously, first, we need to fulfill the current capacities. But given the strong demand, this is how you are thinking in terms of FKM and PVDF.
We certainly are expecting that we'll keep on putting CapEx in every year on enhancing our capacities of PVDF and other battery chemicals because we expect strong demand -- the demand going up fairly at a very good pace in the next decade.
So when you talked about INR 300 crores CapEx, you are assuming as of now only 400 tonnes per month increase, right? The additional 300 tonnes, 400 tonnes will require another INR 300 crores, INR 400 crores? Is my understanding right?
Sorry, I didn't get you. Can you repeat your question.
So sir, you had given a split of INR 1,150 crore CapEx that we are doing this year, right? So the INR 300 crore number you had mentioned for the new fluoropolymer, this only includes the additional 400 tonnes from the additional -- you have talked about one more CapEx, which will be preponing so that CapEx number is still not included or we have included it someplace else?
No, no. It is included it. The number here is higher. Our earlier estimate was INR 900 crores. Now it is INR 1,150 crores. So this INR 250 crores addition is due to advancing the capacity into this year.
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And now I would like to hand over the conference over to the management for closing remarks.
We would like to thank you all for your interest in the company, and we look forward to your continued participation in these earnings update calls in future also. Thank you very much.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us today, and you may now disconnect your lines.
Yes. Thank you.