Aether Industries Limited (AETHER) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Aether Industries post-result conference call hosted by HDFC Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nidesh Gugay from HDFC Securities. Thank you, and over to you, sir.

Yeah, thank you, Alri. Good afternoon, all. On behalf of HDFC Securities, I welcome everyone to this Acer Industries conference call to discuss the results for the quarter ended June 2026. From the Acer Industries, we have with us today, Dr. Amman Desai, Promoter and Whole-Time Director. Mr. Rohan Desai, promoter and whole-time director, Mr. Fayez Nagariya, chief financial officer, Mr. Kushal Roshi, lead investor relations, and Mr. Shubhangi Desai, executive IR. Without further ado, I will now hand over the floor to Mr. Kushal Roshi to begin with the earnings for the quarter of FY26. Over to you, Kushal.

Thank you, Nilesh. A warm welcome to everyone. Today, our board has approved the financial results for the first quarter of fiscal year 2027, and the same has been filed with the exchanges as well as updated over our website. Please note that this conference call is being recorded, and the transcript of the same will be made available on the website of Aether Industries Limited and the stock exchanges. Please also note that the audio of the conference call is a copyright material of Aether Industries Limited and cannot be copied, rebroadcasted, or attributed in press or media without specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. These estimates reflect management's current expectations on future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Ather Industries Limited or its officials do not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now, I hand the call to Mr. Rohan Desai, who will begin by sharing Ather's business outlook, the ongoing expansion, and also discuss, and then to Dr. Aman Desai, who will provide input on the R&D and the new client initiatives and strategy of the company going forward, and then Mr. Farid Nagaria will cover the financial highlights for the period under review. Now, I hand over the call to Mr. Rohan Desai for his opening remarks. Over to you, Rohan.

Thank you, Vishal. Good afternoon, everyone. Thank you for joining us today. We have uploaded the investor presentation as well as the FAQs for your reading so that we can spend time on the call with respect to the current business environment as well as the business initiatives which will be critical for the growth of Ether. I am pleased to report that financial year 2027 started as per our plan, with growth in the core, discipline on the balance sheet, and the new strategic vectors opening up that Aman and I are genuinely excited to talk to you about today. Site 3++ block that we had commissioned in February 2026 is ramping up as per our expectations. The bigger-use contract continues to scale, and our CRAMs and contracts-exclusive manufacturing pipeline is the deepest it has ever been. Our two contract-led model contracts have access in manufacturing. CEM and Contract Research and Manufacturing Services grants have moved from promise to backbone. CEM runs at EBITDA markets north of 28 to 30 percent, so every point of mix that shifts toward this model makes our earnings both larger and more resilient. Under CEM states real contractual relationships, Long-term take-or-pay slash minimum volumes of the agreements with global leaders such as Baker Hughes, Sequence, Saudi Aramco, and Millicent. In quarter one of financial year 2027, we have onboarded 10 new marquee clients and cleared more than nine customer and certification audits. In financial year 2027, the demand signal is the strongest we have ever seen. Form order visibility, rising urgencies from customers in the West, and the trends to CEM conversion pipelines that keep deepening. My headline is simple. CEM and CREMS are compounding, getting more profitable as they scale, and we have a clear line of sight to these two models contributing 70 plus of our percentage of our revenue in the next couple of years. So the core business is performing well. But I do not want this call to be only about the good quarter. I want to use today to tell you where A3 is heading next. And that brings me to what I believe is the most exciting chapter in this company story since we listened. Since last 13 years, Ather has done difficult chemistries that we feel few companies in the world can do and have done it in India. Today, the single largest material science opportunity of this decade is the semiconductors behind AI and 5G revolution. And here is the exciting part. Some of the chemistries those semiconductor segments depend on is the chemistry in Ather's core competencies. Every time the world moves faster, 5G, AI data centers, high-frequency computing, the circuit board itself becomes the bottleneck. At this speed, ordinary board material leaks, gets overheated, and distorts signals. The industry's answer is a class of advanced low-dielectric materials, resins, and coupling agents engineered to carry high-frequency signals with almost no loss. This goes into the copper cladded laminate and high-speed printed circuit boards inside every 5G base station, every AI server, and every advanced device. This is one of the fastest growing corners of the electronic materials. Those lie low die electric. Materials are built from the small family of specialty monomers and coupling agents made by only a handful producers globally with no capacities in India. Few of them are the specialty monomers that Ather is actively developing. It sits in several steps upstream of the 5G and AI hardware supply chain as a building block for Sealant coupling agents that bond and toughens the glass fiber and resin layers of the high-speed circuit board, high-performance PPE-type resins used in copper-colored laminates for high-speed PCBs, the low-dielectric formulations that are today central to 5G and next-generation electronic materials. This molecule that Acer will be manufacturing in its brand new site, Magnum, i.e. Site-5, is upstream input to the board inside 5G and AI hardware. This is low volume, high value, genuinely hard to make product, exactly our type of chemistry and a rare and valuable place for an Indian specialty chemical company to stand. Why is it the right time for Ather to get into this? The answer is twofold. India's semiconductor and electronic market is on the path from roughly $50 billion today towards $110 billion in 2030. On top of a global high-speed electronic market compounding on the back of 5G and AI, the pool is structural and not cyclical. And the other is the global capacity for this specialty electronic monomers is concentrated in very few and is rationalizing, which makes a qualified cost-competitive Indian producer strategically valuable for both import sufficient and export. So here is how I would like to frame it. Our core specialty and CRAMS plus EM business is delivering 25 to 30% compounding growth you have come to expect. And on top of that, we are planting a seed today upstream of AI and 5G semiconductor supply chain, one that could grow into the most valuable material science franchise in the country. With that, let me hand over to Dr. Aman Desai to take you inside our operations, strategic initiatives, and expansions. Over to you, Aman.

Thank you, Rohan, and a warm welcome to all from my side. Good afternoon. Rohan spoke about where the demand is heading. Let me take you inside the engine room, how we are building the capacity and the capability to meet it. I'll cover three things. Where each of our expansion projects now stand, the momentum building in our content and exclusive manufacturing business, and a milestone partnership that we announced just today. Site 3++, commissioned at the end of February, is ramping quite well and contributing at healthy utilization. This is the site that we have established the Milliken Supply Agreement for. It has reached meaningful commercial contribution much faster than we had planned. Site 5? 4? Our dedicated facility for the Baker Hughes and oil and gas sector has been a standout and continues to scale on the back of a long-term strategy contract. The centerpiece of our capacity story is Magnum, which is the name for our Site 5 in Panoli, a mega site with 16 production blocks commissioned in phases. Phase 1 has become online, and once fully operational, we expect a turn of 1.5 to 1.75. The total investment is in the order of 2,200 to 2,300 crores. Phase 2, F530. Several customers have already completed the pre-audits of Site 5, and the demand is lined up well ahead of the capacity. R&D, as always, remains our true engine. Our interim expansion is complete. Additional fume hoods and a new 400 MHz NMR are in service, and a much larger R&D facility, as you know, with around 15 new labs and close to 160 cumulative fume hoods is on track for commissioning in FY28. This is what lets us take on more complex chemistry for more customers at higher value in a continuously increasing rate. Contact and exclusive manufacturing has truly become the growth engine of the company. The mixed shift is margin-accurative. Crams and CEM carry materially higher margins than large-scale manufacturing, and every quarter, we convert more crams relationships into long-term exclusive manufacturing contracts. We see a clear rise in the urgency from customers, especially in Europe, where the economics of manufacturing at home have become difficult, if not impossible. Each new audit cleared and customer onboarded is a foundation for durable, contracted, high-quality revenue for Aether. Let me close with a milestone that we have announced on the 30th of July, i.e. today. Ather and Dow Chemical have launched one of India's first dedicated collaborative research programs to develop new manufacturing technologies for silicons. It is an exclusive multi-year program with all research and pilot plant scale-up activities to be carried out at Ather's facilities of R&D and pilot plant in Surat, Gujarat. Why does this matter? Silicons are a strategically important class of high-performance materials used across construction, transportation, electronics, healthcare, renewable energy, and personal care, and India today imports bulk of silicons, and especially the foundational molecules are all imported. There is no manufacturer of these foundational molecules in India. That dependence is exactly the kind of gap Aether exists to close, and now choosing us as an exclusive research partner in India, validates our process chemistry and technology competencies and scalar capabilities. The agreement also establishes a framework for long-term strategic partnership, including the potential commercialization and industrial-scale manufacturing of the technologies that we develop together. So while this begins as a research and pilot project, the door it opens is much larger, a platform technology development to address India's multi-billion dollar silicon market in step with the Make in India vision. Every decade, specialty chemical companies have one opportunity to enter a new platform chemistry. Twenty years ago, it was chlorochemicals. Today, it is advanced silicones. If we can develop differentiated manufacturing technology with Dow, we are not adding one product. We are opening the door to decades of innovation and combined value creation. So, to sum up my part, capacity is coming online on schedule, CEM is accelerating our profitability margins, our R&D engine is always expanding, and we have now today opened a landmark partnership with DAO. I'll now hand over to the financial review. Faiz, over to you.

Thank you, Dr. Raman, and good afternoon, everyone. I'm glad to present the financial results of Ether Industries Limited for Q1 of FY27. The consolidated revenue for Q1 of FY27 has increased by 27% year-on-year, and it has reached Rs.3,266 million in this quarter, as against Rs.1,028 million in Q1 of FY26, Rs.2,566 million of FY26. The EBITDA has reached to 1,028 million in Q1 of FY27 as against Rs. 785 million in Q1 of FY26, which is an increase of 31% year-on-year. EBITDA margins stood at 31% in this Q1 of FY27 as against 30% in Q1 of FY26. The PAT amounted to Rs. 627 million in Q1 of FY27 as against Rs. 470 million in Q1 of FY26, which is an increase of 33% year-on-year. The PAT margin stood at 19% in Q1 of FY27 as against 18% of Q1 of FY26. The final claim for the fixed assets lost in the fire accident on November 29, 2023 has been received from the insurance company in Q1 of F527. With this, we have received the entire claim from the insurance company. We remain fully cognizant on the one key capital discipline and its sustained reduction continues to be a clear operational priority. While overall working capital intensity has improved, inventory levels remain elevated primarily reflecting strategic raw material positioning and semi-finished materials for Site 3++ and Site 5. We expect the progress to decline in working capital days as revenues from Site 3++ materialize and Site 5 comes on stream. In parallel, the growing contributions From CM contracts and the expansion of our crimes capabilities are expected further to further ease working capital intensity and strengthen overall capacity, capital efficiency. The total capex for Q1 of FY27 was Rs. 943 million. The capex expected for financial year 2017 is expected to be between 3,000 to 3,500 million. The capex of FY27 will primarily be to Site 5 and also for the new R&D set, which is already progressing well. The capacity utilization at all trance stands as under side 2, 74%, side 3, 69%, and side 4, 59%. Thank you once again, and we look forward to better outcomes than this in future as well. Back to you, Kushal.

Thank you, Fais. We shall now request the moderator to open the forum for questions and answers.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Nilesh Kuge with HDFC Securities. Please go ahead.

Yeah, thanks. First of all, let me congratulate Aether team for collaboration with RAU India for the research program advancing on manufacturing technology development. The press release also mentioned that the agreement framework for a long-term strategic partnership, including the commercialization and industrial scale manufacture of technology. So my question is related to this. Guide us on any order that you have in hand for the semiconductor segment. The products you are planning to manufacture and to Amund particularly, which are the chemistry involved in this, which fit in your environment.

Can I take the first question, Amand? I'll take the first question back, which is related to the semiconductors, as Ninesh asked, do we have any orders in hand? So, Ninesh, for the competitive reasons, we don't break out our order book or the product count for the program at this stage. However, we will update you on the contracts being done in the due course, so please bear with us. We will announce them once we sign off with various multinational customers. But we are pursuing a focused market, a small number of high-value molecules, not a broad range, because the whole series here is the depth, not the breadth. On chemistry, it draws energy on our core for process chemistries and coupling it and multi-operability. The present is our Crams and CEM businesses, which is exactly what we call our Crams and CEM businesses. I'm answering your question in an indirect way, but please bear with us for the time until we announce the... Once we sign up the contract. Over to...

Yeah, and to answer the competencies question, it's a good question. It's the DAO program, manufacturing silicones and developing new technology to manufacture silicones aligns perfectly well with our existing core competencies, and this is why DAO has chosen us for our capabilities of chemistry and technology competencies and our ability to scale up such complex technologies And, you know, stuff like continuous technology, extreme process conditions, chemistries, high pressure, very high pressure, very high temperature chemistries. Catalysis, these are all going to be involved in these processes that we developed together with Dell, and they are a perfect fit for our competencies. Thank you.

And the second question is,

how do you order book for our LSM products, which you have started saving from Magnum size, size 5 and OU? And can you, if it's possible for you to share the name of the products or the end users of these products? Thank you.

Great question, Nilesh. Magnum, that is our site 5, which is at Panoli, began commercial sales of the new LSM products during this quarter, and we expect them to start contributing to our revenue in quarter 2 of financial year 2027. This is the first set of three new LSM products across pharmaceutical, agrochemicals, and materials science sector. Priced roughly at $30 to $40 per kilo range, and importantly, these are the molecules made in India for the first time. So this is a clear import substitution product and eventually having export opportunities also. Order build-up is in progress. As we already started manufacturing this, A particular pharmaceutical intermediate inside C for the time being at the 10 to 15 metric tons per month capacity to save time. On the specific names, we cannot disclose the name of the product for confidential reasons. In terms of the name of the pharmaceutical product, we cannot disclose, we want to keep it confidential for competitive reasons, but let me disclose that the application on the pharmaceutical side is to lower the blood, cholesterol, and triglycerides levels, and to prevent heart attack and strokes. Does that answer your question, Nilesh?

Yeah, yeah, thanks, thanks, Ravan and Aman, and all the questions.

Thank you. The next question comes from the line of Chaitanya Kamdar with Avesta Fund Management LLP. Please go ahead. Yeah, hi, all.

Congratulations on the results. I had a few questions. Could you help us understand the scope of the DAO collaboration specifically? What is being developed under this program? Is it mainly silicon products or something else? And who are the major players in India? Secondly, what's the path to commercialization and timeline, if there is any? And what should investors like us track over the next few quarters or years out here? And finally, beyond CRAM's revenue, what else is Ather's economic upside out here?

Yeah, thank you for the question. Let me take this step by step. So the program develops new manufacturing technologies for silicons, not a single product. It's a whole platform technology that we're developing. Silicons, as you know, are a high-performance glass used across construction, mobility, electronics, healthcare, and other fields, and India imports the majority of the silicon needs today, mainly from China, Germany, and the U.S. In India, there are no companies that manufacture the foundational elements of the silicones. They are mostly imported. They're largely imported. The global majors, of course, include Dow, but other global majors include Walker, Momente, Velk, and Shinitsu. What's effectively absent is any indigenous development. Office of Equal Manufacturing Technology, and that's the white space that this program addresses, and which is why we call it one of India's first collaborative programs of its kind. And so we are not entering into a crowded domestic field area. We are, in fact, creating a whole platform field in India. What should investors track? You know, think of it in stages, R&D and process development first, pilot case validation, and then this agreement also establishes a framework for the potential manufacturing and commercialization of this technology. And so we are early, at a very early stage. We announced it today. We are going to start the recession pilot plant program, which is intensive and significant. So the markers that, you know, as investors, you can track is the first, the progress and completion of the pilot work at Surat. Second, in the future, transitioning from research into a definitive commercial framework with Dow. And the third, potentially, in the future, would be a CapEx commitment, I suppose, or a dedicated block on an entire site year month for the platform silicon technology. So we'll flag each one of it as it happens, of course. But as you can understand, we can't put a revenue date on this right now. And what else does Ather get from this? You know, it's part of a cramps portfolio. But we are building new capabilities. We are building a new platform technology with deep process know-how and silicon chemistry, which is one of the largest material process, which we weren't in at all before. A global silicon leader like now choosing us as an exclusive research partner is a powerful endorsement, I believe, of our process chemistry technologies and technology competencies and scale-up capabilities. It deepens our silicones and silanes platform, which is adjacent to our advanced material opportunities, specifically the semiconductor opportunities that Rohan has been highlighting. And it creates, finally, a long-term platform. To tap into India's multi-billion dollar silicon market. So, hopefully, I answered each part of your questions. I'm happy to answer more.

Thank you. Thanks a lot. I think this is very useful and all the very best.

Thank you.

The next question comes from the line of Keshav Bharadia with Walford Financial. Please go ahead.

Thank you, sir, for taking my question, and congratulations on a great set of numbers, as well as the tie-up with Dow Chemical. So just wanted to understand if we could get some broad timeline of when we could expect a meaningful breakthrough in the research and when it could convert into a large scale industrial manufacturing, as well as how large would the opportunity be to be able to potentially dedicate an entire site to it? Like in terms of production blocks, what could we look at from this? And another extension to that, since DAO is also present across other multiple product segments, is there potential to collaborate on other product segments within DAO's portfolio as well?

So, thank you for the question, Keshav. Sorry, in terms of a timeline, this is a multi-year research program, but as soon as we get promising results, you know, you could potentially think about moving it up ahead in the value chain. So, let us not comment on a specific timeline right now, but it is a firm program. It's a dedicated program, and needless to say, the point of it is to scale, and the point of it is to go upwards in the value chain. And so... And then, I'm sorry, I missed the last part of your question.

Yeah, the question was, is there potential for collaboration for other products as well in Tal's portfolio?

So, you know, we have, as some of you might recollect, we have significant history with Dow Chemicals. I, myself, worked in Dow's core R&D organization for three years. Our CTO is Dr. Jim Ringer. He spent 30-plus years at a direct level of Dow. Our business development leader, Ray Roach, is also 30-plus years with Dow. And so there's a lot of history. And so, you know, this is our first program that we are officially launching, right? And it's a significant program in itself with the potential of tapping into the almost $1 billion silicones market in India, which is projected to go at a CHR of 7% to 10%, I believe. And, of course, needless to say, now it's one of the largest chemical companies of the world. Once you have the first program initiated and aligned and are established as a trusted partner, then needless to say, yes, it should open the door towards other opportunities with Dow Chemical, considering especially the history that we have together. So fully expecting that, but currently focusing on this program, getting it off the ground, and having fun in the lab, right?

Great, sir. So just a follow-up question I had was, it's been remarkable how we've been able to onboard new customers when it comes to the CEM model. So could you talk a little bit about what other kind of customers are we in conversations with new European or U.S. majors who are looking to shift manufacturing to low-cost basis such as India, and potentially when could we hear of those announcements?

Yeah, and so, you know, if you look at the announcements that they've made over the last few years, you know, they include marquee names like Baker Hughes, Milliken, Sequence, now Dow Chemical, Polaroid, Osaka in Japan, and so on and so forth. There's a few more, and so these are marquee names, and if you analyze the... Business domains, industry domains, these are in. They include pharmaceuticals, they include microchemicals, they include material sciences, they include oil and gas, performance materials, Dow Chemical, now Pure Play Chemical Company. And so it's really across the board that our partnerships are in the CRAM space, behind every Dow Chemical that we are able to get permission. From them to name, there are at least four to five others that we are already working with as well at various stages where the ability of these companies to give permissions for their names to be announced together in the public domain is a very... And so, again, everyone that we are able to announce, there are at least four to five others in the same domain space that we are working with at various stages. And so, it's a very exciting timeline, I believe, time, I believe, for our company, especially with the foundations firmly in place and these partnerships firmly established. Thank you. You probably named the innovator in these spaces, and we are already talking to them at some of the other levels, and so it's a very exciting time, and hopefully many more announcements to come in the near future and mid-term future. Thank you.

That's great. Sir, just a last question from my side. Sir, just on the semiconductor materials, what kind of product applications would these chemicals have if you could talk a little bit about that, as well as would we have any benefit from the upcoming ISM 2.0 because I believe that is more on the equipment and chemicals and the raw materials side. So any benefit there? As well as we have announced for one production block by Q3FI27, how confident are we to commercialize that? And going forward, just based on the discussions you're having with customers, what could be the potential size of this opportunity?

I'll take this question. So the applications are basically in the 5G and AI hardware supply chain. It is used as a building block for sealant coupling agents that bond and toughen the glass fibers and raising layers of high-speed circuit boards. Also, it is used in high-performance PPE-type resins, used in copper-led diamonds for high-speed PCBs, print circuit boards, and also low dielectric permissions that are today which are very important to keep 5G and next-generation chipsets cool enough. So that's the application. We are starting with capacities of 400 tons at this point of time, which is supposedly going to grow three times by 2030. That's what we are looking at. So that's the size of the business. The average product value is approximately $50 a kilo. And so it's a high-end, low-volume, high-value, very hard-to-make product, which falls into our core competency, and where nobody in India is manufacturing this product. Does this answer your question?

Yes, sir. And if you could just talk a little bit about is there any benefit or are you looking to participate in ISM 2.0 for this?

Yes, so, yes, we are looking into it, we are applying into it, I will not promise anything at the moment, because the structure is still not clear, we are getting clarity at this moment, and as soon as we have clarity, we believe that we fall into this space, and so we can take advantage of that, this structure, which government has introduced.

Perfect, sir. Congratulations again, and all the best for the future.

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

Yeah, thanks for the opportunity. Congratulations, team. What an alliance, what an announcement. Just a couple of questions. You've described a clear path from joint research to pilot validation and potentially dedicated manufacturing. At what point does this relationship become genuinely hard for either DAO or Ether to replace rather than simply, you know, being a very successful research partnership?

Yeah, thank you. A very interesting question. It is a genuine partnership already. It's a multi-year research program, and borrowing on our core competencies already that have been established. But yeah, so once we hit success with the program, once the alignment happens on the scale-up and the ultimate potential manufacturing, that's really when it becomes a... A hardcore, inseparable partnership, especially towards commercialization as well, right? And so that will take some time, a few months to a few years, but very much the target is that, right? And so the fact that we could do such an announcement with quotations from very senior leadership within Dow India and the Dow U.S. It really sends a very strong signal to prompt them towards this partnership that we are building. And so it's set on very solid foundations. The fundamentals are very strong of the partnership, and then it's up to us now, of course, as you say. The R&D and the pilot plant will be done. Activities will be done at Ather. The bulk of the development will be done by Ather and at Ather. And so the ball is really in our hands now to take this ball that has been given to us. You know, hit a 6-0 with it out of the stadium, right, which we fully intend to. So, thank you, and more to come.

Yeah, yeah. No, I'm definitely keeping our fingers crossed for that. So, and then just my last question is, you said DAO will help Ether build deep process now how in a chemistry you weren't in before. How much of... That learning becomes an ether capability that can compound beyond the DAO program versus remaining specific to just this kind of an alliance. I mean, what would tell us that transfer has happened and the capability is compounding years after, you know, that alliance may or may not exist?

Yeah, so that's a good question, and there's two answers to that, and that's the beauty of sticking to your core competencies, right? And so we've always mentioned our so-called bi-metrics of chemistry and technology competencies. We have always focused on these competencies, and this program is a firm fit to these competencies already, and so we are going to significantly enhance these competencies by the way of this program. Thank you. The use of chemistry and technology is really an ocean, right, and so there's going to be so many opportunities out there where we can leverage the learning from the expertise gained from such very complex programs, and so that's one answer to that question. The answer is really this is not about a single product. It's not about a single... It's about a platform technology development in this program, right? And so we should be able to leverage into the whole platform of silicons technology in the future if we go into manufacturing and commercialization along with Dow, right? And so this should enable us to cater towards advanced silicons, which satisfy multiple industry domains, semiconductors, electronics. Coatings, formulations, encapsulants, and so on and so forth, right? And so that's what, I think once we start pouring into these products, into these industry domains, and into these announcements, that's what will be your trigger as an investor to keep track of.

Thank you. Very, yeah, very, I think very helpful. Thank you so much.

Participants, in the interest of time and fairness to others, please restrict yourselves to two questions. For any more questions, you may rejoin the queue. The next question comes from the line of Soham Jain with Dalal and Broshal stock broking. Please go ahead.

First of all, congratulations on good set of numbers. So just wanted to understand what does exclusive research partner mean in Scope? So is Ethos exclusivity with DAO limited to India or does it extend globally to specific silicon product lines? And does this restrict DAO from working with other Indian CRAMCM players on PHS and silicon chemistry?

Yes, so in terms of the research program that we are doing, it's an exclusive relationship between DAO and Aether. And so DAO will only work with Aether, Aether will only work with DAO in the research program that we are specifically targeting towards new ways of manufacturing silicons and NTR. Thank you.

Yeah, and a second question. So, Ather's semiconductor products are currently being supplied to customers in Japan. So, while Sumitomo Chemical is also looking to manufacture high-purity semiconductor process chemicals in India, so could you explain how Ather's offering differs from this opportunity, and are we focused on different parts of semiconductor value chain, And is this the high priority process chemical segment, something Atherm will explore in future?

Mr. Jain, this is an excellent question, a very important question to ask. You know quite well how the semiconductor is developing in India, and you are tracking it. But I would like to draw a clear line here. If you see the most recent entrants or announcements which multiple companies are making are targeting Thank you. Long FAP qualification cycles. That's not where we are playing, basically. Our entry point is advanced electronic materials, specifically the low-dielectric materials inside high-speed circuit boards for 5G and AI hardware applications. This is at the center where the core is a specialty monomer. We are developing the sets upstream of the coupling agents and raisins those boards are made from. The difference is chemistry. It is complex, it is low volume, high value molecules, and our core strength for 13 years, which we have been developing, rather than the commodity purification. And we are doing it in a capital light, R&D and pilot plant first fashion, a very different risk profile from building a large dedicated plant on specification, which we have to run. So we are totally differentiated than the rest of the companies who have announced their foray in the semiconductor space. And we believe that we are going to manufacture or are manufacturing these products for the first time in India. Does this answer your question, Mr. Jain?

Yeah, it was quite helpful. Thank you and congratulations on good set of numbers.

The next question comes from the line of Rohit Nagaraj with 361 capital. Please go ahead.

Thanks for the opportunity and congrats on a healthy set of numbers. First question in terms of the incremental products that we are commercializing, they are also going into traditional applications of pharma. Um, you know, agro oil and gas, uh, just, uh, you know, understanding, uh, we've seen that particularly post COVID, uh, our, I mean, generally our focus has been on, uh, niche specific molecules, uh, and gaining larger market share, but post COVID, we have seen that there has been certain, uh, competition from China and even those niche molecules had got their, you know, impact on the pricing. So how about we now change the strategy so that we don't get impacted from such competition for the newer molecules which we are developing and commercializing? Thank you.

I will take this question, Rohit. So what you are seeing is our focus is being CRANS and CEM where we are focused to take this both business models to 70 plus percentage in the years to come. We are already above 50% on this, as it has been a clear focus from the start for Ather to be focused on CEM and trends. But if you see on the LSM side, we have never lost the market share against the Chinese companies on the products we have been manufactured, even when the price is reduced by 30-35% post-COVID times. The prices have corrected quite a bit in the recent last few months, and we believe that we are still competitive on all the products which we are manufacturing, and still the LSM product line business segment is important to us, even though it will contribute only 35% of our total top line in the few years to come.

Sure, that's helpful. Second, on the DAO collaboration, so first of all, congratulations on the team. A few questions on this. First, in terms of R&D investment, what is the kind of investment that we are looking at? Second, in terms of the opportunity, given that you mentioned that Dow has been doing this particular product for several years, so why indigenous technology? What would be different in terms of developing the technology which is already established? And third, if there is an import substitute market in India, which is a billion dollar, why not start with initial production and over a period of time, then optimize the technology so that we become relatively better off than the traditional technology. So three questions to this part. Thank you.

Yeah, so let me take that. Thank you. Let me try and answer each one. It's an exclusive DAO Funded Research Program. We will not be able to comment on the size of the investment, but it is significant in terms of what we are setting out to do. It's an intensive, complex, multi-year program. It is a different technology, so the goal is not to make... The same silicons the way that, you know, now and the other leaders of the globe make it currently. The goal is to get into newer technologies and new methods of manufacturing the same products. So, there is a time gap for that, right? You have to develop the technologies. They are already developed to a certain stage. It has to be fully fleshed out and scaled up and validated, and then it can be put into commercialization. And so, the goal is completely different. The goal is to develop new technology methods and new ways of manufacturing silicones in India for the first time, and then take it towards commercialization. And so... That's answer to that question. And then in terms of the import substitution, yes, so the foundational silicones are not manufactured in India at all. They are imported from outside India, and there's a billion-dollar market that is currently existing and growing in India as the advanced materials segment grows continuously. And so that's the market that we're going to be addressing potentially in this region. So hopefully I answered your questions. I'm happy to clarify more if required. Thank you.

That's all from my friend. Thank you so much for clarification. We're all the best.

Thank you. The next question comes from the line of Akshay with AK Investment. Please go ahead.

Hi, sir. First of all, congratulations.

I'm sorry to interrupt, Akshay. You're not audible. Could you be a little louder, please? Am I audible now? Yes, much better. Please go ahead.

Okay. So, sir, my first question is about the material science segment. So, you have given the very good insight about the material science and the growth levers about the EI and semiconductor and all these segments. So, when do we expect to start a commercial supply for this type of developments? And also, we have developed the semiconductor chemicals. So, when do we expect to commercialize these chemicals?

I'll take this question, Akshay. We have already started manufacturing this product in Site 3 on one stream, whereby we have completed the qualifications, matches with our customers, submitted the samples, also got a few smaller quantity orders, which we are delivering at this moment. Also, the big stream, that is a large stream of semiconductors coming on site 5, that is Magnum site, which is located in Paloni, whereby we will come out with 45 tons per month capabilities, split it into three streams of 15 tons each, and that is going to be online in the end of September. That's the target, and that is how we are working towards it. Does this answer your question, Achai?

Yes, sir, but my question was broad-based, like in the material science segment and oil and gas segment, what are the other chemicals and what are the other chemistries are we planning to develop, and when do we expect these things? Currently, Cremes and CEM is the biggest contributor, so when do we expect this material science and oil and gas to be a very large segment over the next coming year?

We have already approximately 20% in oil and gas business as of today. Since last two years, we have grown from zero to 20% already, and we hope to increase this in the years to come. We will not be able to tell you the firm timelines on this, but a lot of developments and a lot of new products will be launched in oil and gas and material science divisions in the quarters to come. So that's the best answer I can give you at this moment. Please allow us time to sign few contracts and then let you go.

Okay, sir. Okay, fair enough. And lastly, on the margins profile. Currently, our margins profile are 28 to 30% EBITDA margins. So, once we commercialize these products in the material science and oil and gas, also in the semiconductor segment, what are the margins profile from these segments?

So, I'll take that. Akshay, we do not give product-specific or industry-specific margins. What we can guide you from the company's perspective is that we look at consolidated EBITDA margins for the CEM business vertical anywhere between 28% and 30%.

Thank you. The next question comes from the line of Jaspreet Singh, an individual investor. Please go ahead. Am I on? Yes, Jaspreet.

Am I on? So, sir, my question is, so all those partnerships with world leading companies we have done in the past, world leading companies are customers of us. So, my question is, what is driving this outcome, what has been done behind, which is unseen? So she can elaborate that,

I think it's a... The story of the entire last 13 years, but yeah, it's basically a focus on core competencies of chemistry and technology. It's focused on differentiated capabilities, a very sound and fundamental foundational program of R&D, pilot plant, and manufacturing, the extensive team that is in place, which excels techno-commercially. A lot of hard work and some luck as well. So we've only been, we still can sit down as a startup company. You know, it's a long time to go, a bright future ahead, and we are looking at making the most of it. Thank you.

In the last five years, how much we have spent in the backward integration?

We don't have such numbers that we publish. But we, wherever required, especially to reduce China dependency, we always not going to give it.

Thank you. The next question comes from the line of Bhavika Sangvi with Nivashay. Please go ahead.

Yeah, thank you for the opportunity. So, basically, I want to know from the other customer, which is a bigger use. So, in the last call, you have mentioned that we have two products in our pipeline. So, we have started commercialization of those products. And also, on the Milliken side, like, have we added any new product for this particular customer?

So, let me try and answer. Thank you for the question. Yes, we're continuously launching new products for BetaViews. It's a family of products that we go. We are exclusively partnering with them on manufacturing, and so I think that from the last call to this call, yes, the answer to that question is yes, we have added them. In terms of Millicent, it is a multi-year supply agreement for a single product, which is a key strategic pipeline molecule for Millicent that we have launched. And so we have a partnership with Millicent that now goes back nine, ten years across various projects and various programs for the current. Publicly announced agreement is on one particular product. Thank you.

So, if you can quantify this, so basically I want to know, like, in two to three years, how much we expect this to customers via, like, in our top line? Like, what's the potential revenue from this particular two customers?

Yeah, sorry, we don't give these kind of answers to these questions, so we'll not be able to comment on that.

Got it. And on the silicone side, I just want to understand that we are right now in the R&D phase. So, when we expect that the application testing from the customer will start, like by what time period we can expect this to be started?

It's a multi-year research program, and so you're talking about a few years till we get into the application testing and commercialization and the manufacturing. As long as it works out. And so, we are still starting off. As I said earlier, it's an intensive multi-year research program, and we are very excited about it.

Thank you. The next question comes from the line of Divya Casera with Craving Alpha Wealth Fund. Please go ahead.

Thank you. Am I audible?

Yes, sir.

Thanks for the opportunity. So, I had two questions. My first question was, you guys mentioned that there was a 22% year-on-year decline in the LSM volume, and which was reallocated to the CEN vertical. While also you guys said that there is no decline in the LSM demand. So, are there any orders that are going up? So, is there a margin on the capacity higher or lower now that it's running as CEM production, which is what it earned as LSM?

So I'll take this. Yeah, so basically the LSM business model, basically, if you see, there's a decline of 22.5% in terms of volume, but that's family on the back of us dedicating some of the production lines to the CEM business model, which we've done in Site 3, and we continue to see where the opportunities are there for the company, where we can increase the margins on the CEM contracts. Having said that, the LSM business model continues to see demand. We've seen pricing improved by 22.5% also on the back of the products which we have. So there's no decline in the demand. It's just that we are reallocating some of the production lines to the CM business vertical from the LSM.

Okay. Then the second question is the oil and gas segment. It generated the revenue around a thousand million this quarter. So, is this driven by bakeries or strata ramps specifically, or is it broad days across other oil and gas customers? And also, I wanted to know, is this a recurring demand pattern or a large one-time order?

No, so this has been, of course, this is a large part of it has been driven by Baker Uges, which you have seen, which has been scaling up from Q1 of last year, where we started with around 45-odd crores. Today, you know, SiteFow is already producing closer around 70-odd crores with a clear line of sight, which we have for demand for these products. There are other products also, other customers we are servicing, but right now, Baker Uges is the biggest customer we have on the OregonGas side.

Thank you. The next question comes from the line of Pankaj K, an individual investor. Please go ahead. Thank you.

So, congratulations on the strong set of numbers. I mean, I'm seeing like, you know, at exchanging the simultaneous shift in segment mix, aggressively expounding the capacity, now there is a potentially landmark partnership with Dove. Like, how does management ensure these don't stretch execution standards, and what could be, like, one or two risks that could genuinely derail your part?

Yeah, thank you for the question. Yes, we are establishing landmark opportunities and partnerships, and it's a continuous progression there. And this is nothing new, right? We've been doing this for the last... 10 years now, and it's a focused business model. And so we remain pragmatic in how we approach the expansions and the increased partnerships. There is concurrent expansions going on in R&D, as well as pallet plant, as well as manufacturing assets. The manufacturing of assets that we have chosen in Panoli, our Magnum Site 5, is the closest chemical zone to Surat, for example. We haven't gone to the Hedge or we haven't gone to other states. We have remained. We're cognizant of our capabilities to expand and the limitations of the core team that we have. And so a lot of – this is just one example, but there's a lot of other examples where we are fully cognizant of the limitations that we have and that of our team and approach these opportunities accordingly. The potential problems and the challenges I've always maintained in a chemical industry is safety, and so that remains the foremost concern of the company, safe chemical processes. And the second one, especially now for companies like us in India, is our ability to execute, right? And so our ability to continuously deliver innovative solutions to complex problems, our ability to put steel on the ground and safely and economically run manufacturing plants. And so when we focus... On these challenges, I have the topmost company priority, channeling resources, channeling manpower, channeling core team members in a practical manner. And the fact that, you know, we are technocommercially led in the promoter family itself, the four of us, helps a lot in streamlining these. Streamlining this vision and streamlining these efforts that the entire company makes towards addressing these multiple opportunities. And so decision-making is very rapid, and the appetite for it is tremendous. And so, but point well taken, you know, but rest assured, this is a strategy that is strongly and well thought out. Thank you.

Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you, everyone, for participating on the call. We hope that we have addressed the majority of your questions. If you still have any further questions, please be free to reach out to us. The first quarter has started with a solid foundation for this financial year. Stay safe and have a great day ahead. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of HDFC Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.