Acutaas Chemicals Limited (ACUTAAS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Equitas Limited Q2 FY27 Earnings Conference Call, hosted by Aquarius Securities Private Limited. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Gadekar from Equirus Securities Private Limited. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining us on Acuta Chemicals 2Q FY27 on this conference call. Today, we have with us Dr. Dr. Chemicals Management presented by Mr. Nareesh Patel, Chairman and Managing Director, Mr. Abhishek Patel, Vice President, Strategy, and Mr. Bhavinshah, Chief Financial Officer. I would now like to invite Mr. Bhavinshah to initiate the proceedings. Over to you, sir.

Thank you. Thank you, Siddharth.

Good evening, everyone. We are pleased to welcome you all to our earnings conference call to discuss PUTU and H1FI 27 financials. Please note that a copy of our disclosure is available on the investor section of our website as well as on the stock exchanges. Please do note that anything said on this call which reflects our outlook towards the future The conference call is being recorded and the transcript along with the audio of the same will be made available on the website of the company and exchanges. Please also note that the audio of the conference call is the copyright material of Equitas Chemicals and cannot be copied, rebroadcasted, or attributed in press or media without specific and written consent of the company. Now, I would like to hand over the floor to our CMD, Mr. Naresh Patel, for his opening statement. Over to you, sir.

Thank you, Bavin. Good evening, everyone. I hope you are all doing well. With Diwali just around the corner, I would like to extend warm wishes from the Acuta family to you and your loved ones. May this festival's season bring joy, prosperity, good health, and success to everyone. Wishing you and your family a very happy, Diwali. I will start my remarks with pharmaceutical intermediate business. Demand environment remains robust and whatever cost pressures we face due to geopolitical issues, we have been able to pass them on successfully. On the generic side, several large products are going off pattern. We have already developed intermediaries for those products long best. Therefore, we are benefiting from our strategy of developing products ahead of the market. Coming to CDMO, during our Q3 FY25 earning call, in January 2025, we had said our ambition of achieving 1,000 crores in CDMO revenue by FY28. Based on the current orders of existing as well as new CDMO contracts, we now believe we will achieve this target one year ahead of CDMO. It means in FY27, we will be achieving this 1,000 crores. Here, I would like to highlight that we continue to add very exciting products to our CDMO pipeline. A couple of these products, we have potentially to become a billion-dollar product for our innovative customers. Here, I would like to say that the CDMO business will be double in next three financial years. It means from 1,000 crore, a new target we had set as 2,000 crore by F.2030. Now, let me move to specialty chemicals. Starting with battery chemicals, from industry point of view, demand continues to exceed supply. I am happy to say that this was our first quarter of commercial revenue from battery chemicals business. Initial commercial treatment of our third products were dispatched during last quarter. We will see a scale-up of third products in coming quarter. We have also sent pilot-scale validation batches of food products to the customers. Overall, the start is very encouraging, and I believe we will see a very strong ramp-up as we already have orders in our hands. Coming to Semiconductor Chemicals, I am happy to say that we have inaugurated our plant in South Korea ahead of CEDU. This state-of-the-art facility will manufacture chemicals that goes into photoregist, packaging material, etching materials, and other semiconductor applications. We have been submitting multiple qualification bases to customers in South Korea, which showcase strong customer traction. I believe FY28 will be a year of ramp-up for the initial products, while we will continue to add more products into the basket. Moving to BFC, BFC is seeing strong order demand from its U.S. customers, as well as we have started receiving orders from Korean and Japanese customers. During the last quarter, our U.S. customer was acquired by another U.S.-based company. This caused a temporary pause in the ship plan. Supplies have now resumed and operations are back to normal. On commodity chemicals, phasing out of old product is going on as per plan, and that is visible in our numbers as well. Turning to our performance for the quarter, we delivered strong revenue of 4,369 million Indian rupees, which is growth of 42.7% year-on-year. This was driven by strong performance of our pharmaceutical intermediate business, whereas specialty chemicals business was muted during the quarter. Since we are on track to achieve our CVMO earlier targets ahead of time, we would now like to set our – Before I conclude, I would also like to revise our revenue growth guidance for current year from 25% to around 30%. We are also raising our EBITDA margin guidance to 38 to 40 – between 38 to 40% range from FY27. With that, I would now like to hand over to our Vice President of Chetajee, Abhishek Patel, who will walk you through the detailed business update.

Thank you, Narej Vaid. Good evening, everyone. Let me share some additional insight into our business performance for the quarter. Starting with Advanced Pharmaceutical Intermediate Segment, this segment delivered robust performance with revenue of $4,020 million in Q2 FY27. Reflecting a strong year-on-year growth of 53.1%, CDMO business continued its strong growth trajectory, supported by robust growth in core pharmaceutical business. We are happy to share that we deliver more than 25% year-on-year growth in our core business this quarter driven by ramp-up of new products as well as strong growth in top products. We are happy to share that we have received order for new CDMO contracts, which are expected to start contributing revenue from H2F527. Moving on to specialty chemical segment, the revenue of quarter was R$349 million, which is down 20% YOI, even by phasing out of old commodity products, as well as temporary pause in shipment in BFC business due to ownership change of the U.S. customer, as highlighted by KnowledgePy. I am happy to share the shipments have started, and we are very much on target to deliver a growth in BFC this year. Now, turning to the capex, capex for H1F527 was Rs.1239 million. It is spread across electrolyte additive project, pilot plant, Indicam site, and maintenance capex. Furthermore, for the full year, we believe our total capex would be around Rs. 3,000 million. So in H2F527, we plan to do additional capex of Rs. 1650 million capex, which will have around Rs. 1,000 million for electronic-grade chemicals, Rupes 450 million for second phase of electrolyte additive capex, and remaining will be for the maintenance capex. Please note this calculation does not include planned R&D capex as well as the land acquisition. With that, I will now hand over the floor to our Chief Financial Officer, Bhavin Shah, who will walk you through details related to financials. Over to you, Bhavin. Thank you, Abhishek Bhai.

I would like to briefly highlight the key performance metrics for the quarter and half year before we open the floor for questions. Let me start with quarterly performance. Revenue from operations for the quarter reached 4369 million, representing 42.7% growth YOY. Gross profit for the quarter was 2715 million, reflecting 59% increase compared to the same period last year. The gross margin expanded by 637 basis point YOY to 62.1%. Gross margin was driven by higher contribution from pharma intermediate business compared to the same period last year. EBITDA for the quarter was 1,750 million, up 84.6% YOY. EBITDA margins were at 40.3%, up 914 basis point YOY. EBITDA margin was driven by expansion in gross margin as well as operating leverage. Paid for the quarter was $1,231 million, up 71.4% YOY. Paid margins for the quarter were at 28.2%, which show an expansion of 472 basis point YOY. Moving on to the half-yearly number. Revenue from operations for H1FI27 was $7,666 million, representing 49.3% growth YOY. EBITDA for H1FI27 was $2,890 million, up 97.7% YOY. EBITDA margins were at 37.7% up 922 basis point YOY. Paid for the first half, FY27, was 1,981 million, up 71% YOY. Paid margin for H1, FY27, were at 25.8%, which show an expansion of 328 basis point YOY. Moving to the balance sheet item, net cash and cash equivalents were around 3,009 million as on 30th, September 2026. Our working capital for the quarter stands at 115 days, vis-à-vis 99 days in Q1 FY27. This was driven by higher data days. With that, I request the moderator to open the floor for questions. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, you will wait for a moment while the question queue assembles.

The first question comes from the line of Abhijit from KIE.

Please go ahead.

Yeah, good afternoon. Thank you so much, and congratulations on the very strong results. Just on the new CDMO products that you mentioned, which will begin contributing in 2-H, any sense you could give us on the revenues that we should expect in this financial year itself? And then when we are speaking about this target of doubling CDMO revenues in the next three years, how much would be the contribution of these newer products within that target?

So, I am afraid that I will not be able to share the product-wise revenue guidance. That's the reason we are saying that we are very much confident to close this year with 1,000 crore revenue in CDMO segment because we have already got some good orders for some of the products which were already validated a few quarters back, and now we are getting the orders. And we see a very good new business opportunity in this new CDMO, as well as some of the CDMO pipeline, which we are expecting to get a good revenue generation in coming quarters and dry years. That's the reason we are giving the 1,000, 2,000 crore kind of guidance for next three years. But I'm afraid I will not be able to share any product-wise revenue by profession.

Okay, got it. Just, I mean, maybe the number of products that you have that are getting commercialized this year, could you talk about that?

There are multiple products. As we said, the four products were already kind of validated a few quarters back, and there are additional products which are getting commercialized this year. And there are eight to nine products in total. You can say that they are getting into revenue stream in next one, one and a half year time.

Understood. And the other one I just had was on the specialty chemical side. Of the key growth projects you have there, battery chemicals, semiconductor chemicals are now this electronic grid. Could you please help us with the, you know, timeline for commencement of revenues from each of these and what sort of trajectory we should expect from each of these?

As we said last time that now we are phasing out some of our old legacy products related to parabens and MS, and those are getting replaced with some better margin and a futuristic product. In that context only, we have announced the CAPEX related to bulk electronic-grade chemical manufacturing. As we just announced the CAPEX, it will take one and a half year time to get the CAPEX to get completed. So maybe by H1F529, we should be starting the production. But meanwhile, the battery products have already started contributing in the revenue pie, and that's encouraging signals for our specialty chemical business side.

Okay, got it. Thank you so much, and I'll get back in the queue for any more.

Thank you. Thank you. Participants who wish to ask a question may press star and 1 on the touchtone telephone. The next question comes from the line of Aditya Iyer from HDFC Securities. Please go ahead.

Hi, am I already? Yes. Okay, so congratulations on a great set of numbers. So, for the existing CDMO business, what kind of action are we seeing for Daryl Atomide in terms of product adoption, and what kind of revenue potential do we expect from this molecule in the near future?

So, for Dharata, we are not in position to comment anything about that product because it's not our product. It's an innovator-driven product, and that is very well covered in the market. So, for that, I think it's better you refer all those already available public market information. What we are saying that, based on the customer's requirement of that particular product, as well as the other customer, based on that, we are guiding that our CDM or revenue should get doubled in next year's time.

Okay, and for our Ankhleswar unit, what is the total amount that we invested and the utilization as of H1FY-267?

For Anklashwar unit, we have invested 330 crore. Utilization level for Q to FY27 was 30%.

And so, by FY28, we are expecting peak utilization for this.

Yes, yes, it should largely get filled up by FY28.

And in these electronic-grade chemicals, when we say, do we mean battery-grade or semiconductor-grade chemicals?

Both. Both. It will be a kind of trajectory will move forward for various grades.

Okay. So, one is to one mix or what is it? Sorry? Is it 50-50 battery semiconductor grade or

what is the proposal? Going with the electronic-grade technicals, going forward, we'll have an additional plan, but it will be starting with electronic-grade technicals only.

Okay, thank you. That's it. Thank you.

The next question comes from the line of Mr. Siddharth Garikar from Equirus Securities Private Limited. Please go ahead.

Hi. Guys, so the first question is on the electrolyte business. When we historically spoke about this business, the realizations for these products were closer to $10, $12. But in the last six, seven months, if you look at the prices, they have moved up to $35, $30, $35 plus. So how should we think about this business going ahead in terms of the realization and margin?

So, right from beginning, we are saying that we have already signed long-term supply contract all in place. And based on that contract, we get the revised pricing based on some of the key raw material price movement as well as the exchange rate fluctuation. So, we are not riding on some of the waves wherein price fluctuation, we don't want to get benefits from those price fluctuation or when it gets down, we get down. It is more often we look into our plate and we get our good profit wherein we get a timely payback of our investment and then look for newer projects. These are the policy philosophy what we are following. Okay.

So, from a modeling perspective, when we look at the revenue potential from these projects, should we assume like an asset turnover or they would be more closer to spot prices given that raw material prices also could be volatile?

No, for the understanding of your thing, as you know, it was near to kind of double-digit kind of dollar value. So, there will be additional sum of the realization because of price movement, but it will not be kind of $30, $35 kind of pricing. It can be early teens kind of pricing scenario.

Okay. So, second question on the electronic chemical business, given that it seems like a 2x asset turnover, where your realizations are closer to $1, $1.50, so can you give some sense on what kind of product this is and what would be the major end applications and it would be more like a commodity chemical or a niche molecule in this space?

First thing, we are not saying it is a kind of 2x kind of asset, and it will be at least 3x kind of asset, and we are expecting there. We have not commented anything on the realization side, but what we are saying is it will be a kind of bulk electronic, chemical, and solvent product.

Okay, got it. And timeline for this still remains at 529?

Yes, first round of F529. It will take around one and a half years to get completed in CAPEX.

And the last question is on the CDMOs. When do we expect the next round of CAPEX given that now we have given a guidance for 2000 crores by F530?

So next round of CAPEX as we just discussed that plant utilization at Angleswar may get filled up by year 2028. So then, that's the reason we are already starting with our future plan, and that is for land acquisition. Then we will plan for the next round of GAPEX. That size and scale will decide based on that.

Okay, sir. Thank you, sir.

Thank you. The next question comes from the line of Sajal Kapoor, from Anti-Fragile Thinking. Please go ahead.

Yeah, thank you, and congratulations on sustaining a strong execution yet again, Naresh. My questions are, first, as the Korea semiconductor facility moves from qualification into commercial ramp-up in next fiscal, should we expect the initial economics to be somewhat lower at the company level, given utilization and startup costs, before improving as the volumes scale up? I mean, what would need to happen for the business to reach its targeted steady-state economics? That's my first question. Thank you.

So, obviously, the plant was integrated last quarter only, and now it's time to first get the customer qualification process going. So, that's the reason for this financial year. We are not giving any tall commitment from next financial omnibus, only it will have some revenue coming up. So, obviously, it will not be a kind of huge revenue or profitability. It will slowly ramp up, but the encouraging thing is we are getting a very good customer inquiry. We have already started submitting the sample as well as the pilot-scale dispatches, And that's the kind of confidence we can get from that newer geography where we are operating.

And second, you know, as CDMO programs move from launch into commercial scale, as you just highlighted, there can sometimes be, you know, an initial inventory will be followed by normalization. So, given the revised 2,000 crores CDMO target by FI30, how confident are you that this growth will increasingly be diversified across multiple customers and multiple molecules rather than, you know, concentrated in one or two molecules? And if you could just, you know, broadly mention how many programs do you expect to become, you know, or how many programs you expect would be material contributors in, let's say, FI-28?

So, as we already discussed, we have multiple products for which the validation basis were already submitted a few quarters back. Now, they have started giving the contribution in terms of commercial revenue, and there are 8-10 products already in pipeline. So, that's the reason we are very confident that we will be again able to achieve this second milestone of 2,000 crore revenue by FY30, despite of any cycle, industry cycle moving up and down. We are confident that we will achieve those kind of revenue targets.

Excellent. Excellent, sir. So, just to clarify, the second 1,000 crore, so 1,000, we will achieve this fiscal. The second 1,000 crore will be a lot more diversified and broad-based in terms of molecules and customers, right? Yes, absolutely, right. Yeah, yeah. Thank you. Thank you. That's all.

Thank you. The next question comes from the line of Nilesh Ghugay from HTIC Securities. Please go ahead.

Yeah, thanks. Thanks for the opportunity. Just one question. When we are saying 1,000 crore of revenue in FY27, so what will be the utilization of our CDMO unit at Angolishwar? And as you mentioned, there is no further capex required till 2,000 crore CDMO revenue. So, what will be the utilization in FY30 when we achieve CDMO revenue of 2,000 crore?

So, for last quarter, as we said, it was a utilization of 30%. And so, when we reach this end of this financial year, it should not be more than, let's say, 40% of the total utilization at unit 2, Ankhleshwar. For the future, it is difficult to say as of now because it's a function of multiple things, the volume, the realization, and the kind of processes.

Okay. Thanks. Thanks a lot.

Thank you. The next question comes from the line of parts, Dahlia, from Union AMC. Please go ahead.

Yeah. Hi. Thank you for the opportunity. I just had one question. So, this is specifically on daraltomide. So, Bayer's recent trial showed that given the risk of metastasis or death by 58% and high-risk localized prostate cancer. So, if this goes into approval, you know, without going into product specifics, how do we think about the volume opportunity if that indication expansion comes through? And directionally, do you have the capacity and contractual framework in place to support that meaningful step-up of volumes over the next two to three years?

So, as you know, we are an intermediate supplier for this API called Darutamide, and what you are talking about is the formulation market and their indication. So, at least being at the bottom of the pyramid, we are not able to comment anything on those programs. But this is good for you or the market to understand how the products are going. For us, what we track is what we are getting from the customer and we should be the beneficiary, whatever our customers is gaining in the market. And that is what we see that we are getting a good traction in this product as well as for the next three years. And that is how we are going, giving the good guidance also.

Understood. Got it. But just extending the question to, let's say, if Bayer, for the formulation opportunity, are there upside estimates? Do you reckon that? Sorry? Your voice is breaking. Sorry. Is it better now? So I was just a follow-up on that question. Let's say to the innovator sales, the formulation sales, does this trial lead to a meaningful upgrade in Bayer numbers?

We don't know. We are not very well placed to comment on whether their formulation market is how much they are going. I think that we will not be able to comment on this.

Okay, no problem. Thank you so much.

Thank you. A reminder for all the participants. Participants who wish to ask questions may press star and 1 on the touchtone telephone. The next question comes from the line of Rohit Nagaraj from 361 Capital. Please go ahead.

Thanks for the opportunity and congrats on a very strong set of numbers. So, first question is on the CDMO front. So, the 2,000 crore guidance for FY30, in terms of EBITDA margins, would it track the current margins on 1,000 crores Or would there be some kind of a dilution that we're expecting? Thank you.

Largely, it should be in the same range what we are getting for the CDMI business as on this.

So, and second question is on the semiconductor chemicals. Given that our plant is operational, we are probably sending the validation matches to the South Korean players. Are we also engaged with any of the Indian counterparts for validation? And are there any immediate plans of, if not, are there any immediate plans of serving them? Thank you.

So, you are, when you are, say, Indian, that means you are talking about Indian semiconductor, you are referring to Indian semiconductor industry?

Yeah, so the ecosystem which is getting developed now and which probably will be operational over the next couple of years.

So as of now, whatever we have planned, the capacity, that is for Indicam, it is a Korean ecosystem and then after outside Korea, geography like Japan and Taiwan. From India, Baba Find came again because this ecosystem is yet not that matured and we have already market available in the export market. So that's the reason we are targeting more of a Korea, Japan, US market only. That is where we are getting very good traction also. In future, when this ecosystem gets developed, we would be happy to part of that. But as of now, all our capacity as well as the business development largely focus on the export market only.

Sure. Just one clarification. In terms of products, once they get validated from our international customers, would it be relatively easier and with a shorter period of time frame to validate for the Indian counterparts?

Let me answer this. See, customer validation is their internal process. It's not that one customer, big customers approve, means that that product can be used by someone else immediately. So, it's because their process and their requirements are different. So, the validation process is robust, long-term, time-consuming, and it's long-term. So, but the beauty is that ACUTAS and Indicam has the capability to produce very high-end chemicals, and our process is validated, our manufacturing side is validated. That will help us to consider our Indian customer to, as a, based on the experience, what we have. So, that will, this is an advantage against the other competitor of ours.

Perfect, sir. Thanks a lot for answering all the questions and all the best.

Thank you.

Thank you. The next question comes from the line of Bharat Shah from Bharat Shah Capital Ideas Private Limited. Please go ahead.

And I just wanted to have two important views. Over the last three to four years, we have made a considerable progress in converting the sheep of our farm. From commodity chemicals to the specialty and from limited relationships to more customer and sticky long-term relationships, our margins, top-line, and capital efficiency all reflect the painstaking work of the past. Now that will be stained, and a good part of the TPEX for the future is under our belt. When you look at next five years, what are your key aspirations? And what are the milestones with which you would like to define AQTAS or AMI's journey? And secondly, as you stand at these important junctures where we have achieved, made a considerable progress, but many more important milestones are linked ahead, what are your key apprehensions or challenges that you pursue?

Thank you very much, first of all, for seeing our journey right when we started in IPO 2021 till today. You are always inspiring and motivating us. It's a journey which is now giving the fruit of what we had done in last one decade and transforming family company into the structure and professional company, focusing on each area, right, starting from raw material secure to process engineering to operational efficiency to manpower, upgrading technology implementation, process improvements, plant optimization, And at the end of the day, customer satisfaction. This is a cumulative effort of our last one decade working, which is giving proof now. Regarding what you say, the inspiration for next five years, I have a visibility of, for the generic, as so many times I say that we have developed a lot of molecules, which having an expiry up to 2045. So this is how we are working in our research department for generic portfolio strengthening, whereas for regulated market, we have a long-term agreement with several customers, and that is also helping us to guide for next three years. We had revised our CDMO target from 1,000 to 2,000 crores based on this new CDMO as well as the old CDMO pipeline. And considering transforming company from pharma to speciality chemicals and multi-applications for the chemistry, now, as I said, when we made it, it was a very primary stage of the battery chemical. Now, it is almost mature and having very strong protection from the customers, long-term orders are expanding with us, and now it's commercial supply also started. So, slowly, slowly is ramping up and is now self-sustained. And the second stage is the semiconductor segment, which is very important for us because it's a very – the beauty of semiconductor business is that everybody cannot be – they start today and enter into market because it's a very technical driven. One, very high purity chemical production and very customer-sikki business. So that is helping us by acquiring BAPA FinCAM has opened our door right from the first day into the ecosystem. And then this ecosystem has learned, teach us how to go for the more pure material, and that's how we put IndyCAM in South Korea. So this is like a business is teaching us, and we are learning very quickly, and we're implementing also very fast. This experience also helping us when there is an ecosystem start in India. Today, there is no any demand for something like a chemical in India because they have not failed started. But once the failed start, we are one of very few out of them having all the experience of very high pure chemical production, and that will help us to immediately cater the market in India as well. So this is how our aim is that in five years, we should be not known as a chemical, a pharma company, but as a chemical company having multiple, multiple avenues which can be applied, supply a chemical in a different sector.

And what, in your opinion, are tangible and more qualitative aspirations that you believe AmiOrganics is likely to fulfill in the upcoming five-year journey? And what possible apprehensions that you carry in your mind or concerns about potential retentions?

Let me just give some internal metrics at our end. And as Narej Bhai shared his vision that he wants to create an organization which is not only focused on a pharma chemical, but then we are getting into the multiple chemistry related to battery, related to semiconductor, related to electronics, and there are other multiple areas where we are already working. For us, internally, as tangible, we work on, let's say, on various parameters related to the capital deployment. Ultimately, the business has to be self-sustained, standing on its own feet, as well as generating a long-term cash flow and sustainable growth in the future. Like for the battery chemical, we started with two products. Then we keep on adding multiple. The third and fourth products are already commercialized. And then it should generate a good cash flow every year. And then comes the sustainability. In terms of sustainability, what we are doing is we are building a very good, healthy customer relationship By not focusing, as we discussed in the last question, only that we are not riding on those $30, $35 kind of pricing wave, rather than we are focusing more on the customer relationship. So this is how we want to convert this business into long-term, sustainable cash-generating machine, and that is what we are focusing for each and every business, what we are targeting. And it's not that we start the business today, we run for three years, and then we want to just let it, it can go down. It has to be sustainable, long-term business only. That is what we are focusing on each of those businesses.

And concerns, if you need?

The concerns are always there, Bhargavai, and we have to find out, we have to find out the way out of the concerns. There is a geopolitical issue that there. Supply chain, logistic, operational, electricity, water, there are so many constraints that are always coming, you have to find out the way out of that, that is what we are doing, day-to-day operation, and like a semiconductor ecosystem is happening in India, if it is delayed, it will be delayed of implementation in India. So, similar kind of opportunity, it's a huge opportunity for Indian chemical manufacturer in India as well as abroad. And whatever the current mindset of China Free is helping Indian chemical manufacturer on their own capacity to grab the opportunity which is available. So, these are, sometimes you grab a lot of opportunity, but you cannot be able to grow all because of the competition as well. So these all things have to be considered, and this is what we do whenever we enter in the segments. We first analyze everything, whether it is good for us, sustainable for us, long-term, what will be the situation of the market, and then we enter in that segment. So this is what we try at most, that all the concerns need to be covered, but then if unexpected will come, that will be able to face that.

Sure. Just one last thing. We've come a long way over the last few decades from me to Etutas, and we've built a lot of tremendous strength, even as we still remain relatively rather modest in the size of turnover in business, but rapidly progressing. Would you, Naresh, I say that the coming decade will be the most defining and probably most momentous decade in the kind of future that you visualize given the opportunity in this space?

Absolutely, sir. That is what I said, that last decade was our foundation year, decade where we done lot of seeding. Now, the seeding one by one is giving us the fruit. So, now, the next decade will be the more important decade for us in terms of getting fruits out of whatever we seeded in last one decade.

Thank you, Narishmai. All the very best and to the entire ACRAS team for attending this transformation of the firm.

Thank you, Bharat Bhai. Thank you very much. Happy Diwali.

Thank you. The next question comes from the line of Pratik Dharamshi from Union Mutual Fund. Please go ahead.

Yeah, thanks for giving the opportunity. Many congratulations, Nadesh Bhai, Abhishek Bhai, for a splendid sleight of numbers. Just my question is on the new CDMO projects which you are working on. So you mentioned, initially you used to mention around four new projects or CDMOs you're working, and now the number has gone up to seven, eight. Some color on the therapy would be really appreciated. Apart from, you used to mention around 50 crore each sort of molecule. Is the run rate similar, or you are expecting some change to it? Is it accelerating based on now the commercial supplies are starting? So, some more color on it would be really helpful. Thank you.

For CDMA projects, because these are all innovator-driven projects, we are not able to at least share any details related to their product or their therapeutic segment or their potential. But as we generally say that for the non-blockbuster products, 50 to 100 crore is the kind of range because that's the kind of revenue we can get it as an intermediate player. But as Narish Bae mentioned, there are some of the very exciting projects already going on, and VCF has a better revenue possibility. And that gives the confidence that it will be a good growth engine in future also in terms of newer CDMO projects.

Yep. Thank you, and all the best. Thank you.

Thank you. The next question comes from the line of Meet Vora from JM Financial. Please go ahead.

Thanks for the opportunity. Sir, what gives us the confidence to increase our EBITDA margin guidance to 38% to 40% beyond FI27 on a sustainable basis. This is what we have mentioned in our presentation that higher margins are led by gross margin and operating leverage. But will this operating leverage continue going into FI28 as well? Or maybe this upgrade is more to do with higher contribution mix from CDMO?

So, first thing, at the material or the gross level, the margins are always a function of the product mix. As you see that just our battery chemical business has just started in this quarter. So, that's the reason the large portion of the revenue is coming from the pharma intermediate and growth is given by CDMO segment. And that is where the high margin is coming. And with the kind of order books we have already in place for the S to F527, we are confident to achieve this 1,000 crore match, which converts into a good kind of margin for F527. That's the reason we have raised our margin guidance. Related to operating leverage, obviously, as and when this revenue keeps on increasing within the same premises or the facility, the operating margin has to kick in. And as we just mentioned, the 30% utilization level at Unit 2, and obviously the very low utilization level at our battery chemical business, the operating margin will keep on adding once those production level scales up.

So this 38 to 40% EBITDA margin variance is for FI27, or this continues for... FI27. Yeah, that's it from my side. Thanks a lot, and best of luck for coming quarters.

Thank you. The next question comes from the line of Siddharth Negandhi from CWC. Please go ahead.

Congratulations on a great set of numbers. Three questions from mine. On the pharma intermediates business, you mentioned that CDMO could achieve 1,000 crores on FI 27th. Could you help us understand how much of that is already in the bag in H1, which is your pharma intermediates business, the innovator and generic split? That is question one. The second question was on Daro. Can you potentially double the supply from the same facility over the next two years, or will you need CAPEX? And what is your current utilization and your wallet share in this? Uh, and the third question was on the base business in specialty chemicals. So how many more quarters before this complete the commodity chemicals completely go off business and most of this will be, uh, will be the, uh, battery chemicals and the other specialty chemicals. Um, yeah, these were my three questions.

So, related to CDMO, first thing, we are not doing any generic work. We are doing all the CDMO projects with the originator only. So, these are all originator business, no generic piece over there. And related to what, question related to what is in our bag. So, as Narej Bhai already mentioned, this 1,000 crore mark guidance for this financial that is based on the customer visibility and the contract in place. So, that is very much, very good, achievable, definitely achievable target for us. Your second question related to the kind of split in the business or the market share, We are not able to comment on this because we only see what originator gives us as a business, and that is what we are guiding. We are not concerned about the kind of who and who are getting what. Third question related to specialty chemical business. See, we have already started scaling down this old legacy product related to paraben and MS. It takes some time because right up front, we cannot say no to the customer because they also need to develop their alternative vendor and supply line. So that's the reason it may take around one, one and a half years to scale down this business. Yes. MS business, we may continue for some time because there are some good customer already in place. So, it may take some time beyond one and a half year also to scale down MS business.

Got it. Sorry. Just a clarification on the first one. What I meant is not that CDMO is generic. What I meant is if I look at the advanced pharma intermediate segment, right, part of that is CDMO business. And part of that is base business. If you could help us with that split.

Okay. I'm sorry. Also, we are not giving those split also. We see completely as a pharma intermediate business only. But definitely, it will cross the 1,000 crore market. We already committed for that.

So, but when you say 1,000 crore crossing in that business, you mean not for the advanced pharma intermediate segment? Only CDMO within that outside of the base business, right?

Yes, yes, yes.

Got it. Got it. Clear. The second one, while clear on, you know, you're not looking at wallet share, could you give us some color in terms of Daro if you have to potentially double the Daro supply, right? Will that need more capex, or are you, you know, where are you in terms of utilization of the facility there, and how should one look at that?

As we said, the capacity utilization is 30% only, so there is some room available, but we are not disclosing anything about whether it is sufficing the production requirement or not.

Okay, very clear. And last question on the South Korea facility, what are the markets that you will target for supply from this facility? Will it be Korea, Japan primarily? Are you looking at some cell manufacturers in India or Southeast Asia also? How should one think of that business?

So, for Korea, it's a semiconductor business. So, our target customer for photoresist and the fab industry and semiconductor consumption industry. It's not a kind of cell manufacturer and largely because those are based in Korea and Japan, they are on the potential customer market.

Understood. Sorry. Sorry. Got it. Thank you. Thank you very much, and with you all the best.

Thank you. The next question comes from the line of Juhi Kumari from Dagnolia Financial Services Limited. Please go ahead.

Yeah, thanks for the opportunity, and congratulations on the strong set of numbers. My first question is regarding the battery electrolytes at greatest production. It was expected to start in 7th quarter, FY27. So, just wanted to know that has the commercial supply begun and what was the revenue contribution during the current quarter?

We have already started commercial supply for VC and FEC as well as the third product also ahead of the time. And the fourth product, the validation batches are already been supplied from a pilot scale. Revenue contribution, we are not disclosing. It is just a start, and ramp-up is expected in the next two to three quarters.

Okay, sure, thanks. And my second question is regarding what portion of the remaining 349 million speciality chemical revenue is still compromised of commodity chemicals scheduled for exit? And once this phasing out is complete and BFC normalizes, what is the steady state quarterly revenue expectation from speciality chemicals?

For specialty chemical, we are not giving any split between traditional specialty chemical product or the battery chemical. But it will remain in this territory and with a ramp up from the battery chemical business. Overall, there will be a growth as against what number we have reported last financial year.

Okay, so we expect this to remain in a state where it has been in the first half FY27?

Yes.

Okay, and just one last question about the gross margin expansion that has expanded significantly to 62.1% this quarter. How much of this expansion came from raw material prices softening versus a structural shift in product mix towards higher margin?

A gross margin expansion is a function of both product mix as well as the raw material price. So, in total, we cannot bifurcate between the raw material price escalation or the kind of product mix. It's a function of both.

Okay. So, is there any, like, leverage that we have got from raw material price softening this quarter?

No, no. We are not saying that raw material price has softened in this quarter. In fact, that is definitely not the case.

Okay. Okay. Okay. Yeah, thanks for the answer, and all the best for the coming quarters.

Okay. The next question comes from the line of Basant Bansal from NBG Investments. Please go ahead.

Yeah. Good evening, Abhishek Pai. My question to you is that in the first half, our pharma revenue is 6.95 crore. Can you tell me out of 6.95 crore, how much is CDMO?

95 crore? I didn't understand.

695 crore. 694. 695 crore is our first half revenue from part of particular.

So, sorry, your voice is a little echoing. You are saying after 695 crore?

No, no, I am saying, I am seeing your slide number 6, wherein the revenue from pharma intermediate vertical is shown as 695 crore. I want to know out of this how much is CDMO?

Okay, oh, sorry, we are not disclosing those split in sub-segment of this pharma intermediate business.

Okay, okay, and can you tell me in percentage terms is possible? No. Again, it's the same thing, sir. Same thing, sir. Okay. Okay. No problem. Thank you. Thank you.

Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.

Thank you, Equerius team, for hosting our conference call. We appreciate everyone's questions and hope we have addressed most of your queries. If you miss any of your questions, please reach out to our investor relations team and we will get back to you promptly. Once again, thank you very much and happy festivals.

Thank you. On behalf of Equerius Securities Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.