Clean Science and Technology Limited (CLEAN) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q1FI 27 Owning's Conference Call of Clean Science and Technology Ltd. We have with us on the call Siddharth Sikchi, Managing Director and Promoter, Sanjay Parnirgarh, CFO, and Prateek Bhora, President Commercial. 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 touchtone phone. I now hand the conference over to Mr. Siddharth Sikji for opening remarks. Thank you and over to you, Mr. Siddharth Sikji.

Thank you so much, Ikra. Good evening, everybody. Thank you so much for attending the call on a Saturday evening. So, let me start by welcoming everyone and a warm welcome for the quarter 1 FY27 earnings call of the company, and I thank you for joining the call. Let me first speak on the business environment. The water performance shall be viewed in backdrop of geopolitical headwinds, impacting raw material supply chain and its cost. Non-availability of shipping vessels impacted timely export of goods, leading to supply-side challenges. Further, the raw material costs in China were not impacted as much as they were compared to India. Despite external challenges during the quarter, Clean Science reported a steady performance during the quarter. The company was able to improve revenue, maintain operational stability, and continue progress on its value, creating initiatives. We are also pleased to report our highest ever consolidated sales in company's history, reaching approximately 264 crores during the quarter. Let me speak on a standalone business performance. On sequential basis, the revenue improved by 5% to 203 crores, largely due to increase in realization in all the products. The EBITDA and the PAT margins are at 43 and 36%, translating into an EBITDA of 87 crores and PAT of 73 crores. The 426 EBITDA and PAC, after adjusting the one-off operative expense transactions, is roughly $83 crores and $53 crores, respectively. Thereby, the current quarter EBITDA and PAC reflected a growth of 5% and 37% respectively. The Q-on-Q increase in revenue was primarily led by improved realization in all the segments. Speaking on YOY comparison, the sales were moderated by 6% during the quarter. The revenue moderation was primarily led by a decrease in sales volume, which was on account of supply-side headwinds as mentioned earlier. The demand environment continues to be steady. On consolidated business performance, the HALS scale-up continues to drive operating leverage and sustainable IELTS is now 22% of our sales, and we have been able to de-risk our reliance on the top four legacy products by moderating their share from 85% in Q4 FY23 to 60% this quarter. Another important point was that CFCL, By becoming operationally self-sustaining. Having fully recovered its operating expenses, we now shift from investing phase to monetizing phase. This quarter reflects a much more diversified geographical mix, with exports contributing nearly 50% of the HAL sales. On sequential basis, the consolidated revenues grew by 7% to 264 crores. EBITDA and TAC are 37 and 28% respectively, which stands at 96 and 73 crores respectively. This is the revenue increase by 10% during the quarter. Thank you. and FMCG, respectively 83%, 10%, and 7% respectively. The key business development which happened during the quarter. One, we entered into a strategic collaboration with our Swiss partner called a Genus Chem. This represents an important step in the next phase of our health journey. This will provide clean science and entry into differentiated advanced grade of health chemistry that are technology-intensive, value-added, and aligned and evolving global customer. Thank you. We believe that the platform is steadily moving towards more meaningful scale, stronger margins, and greater strategic importance within the company's portfolio. The stabilization of the hydroquinone catechol plan has been largely completed, and our operations are now progressing well. We have received the necessary customer's approval and are ramping up for commercial supplies. As the action scales up, we expect a gradual increase in revenue in the coming quarter. I think that's all from my side, and I am open for any.

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 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 is from the line of Sanjeev from ICICI Securities. Please go ahead.

Good afternoon. I'm Shiddharth. Got a couple of questions. First on the health, what was the volume this quarter? Because for Consol Miner subsidiary, it shows we have grown close to 170%. So what was the mix of volume and pricing? How much was the contribution of the products beyond 701 and 770?

Sangeesh, the product mix has improved. From 770622, we have now moved to the higher grades. So I think the average prices have moved from... And in terms of volume, the product mix has significantly improved to the higher grades of HAL, meaning last quarter where almost 50% of contribution came in from HAL 770, this quarter it has come down to 35% and hence the gross margin has improved on the subsidiary level.

Got it, got it.

We were looking at what's close to 3,000 metric ton for HALS this year. You think you can do much better than that? We have started with 1,000 metric ton in Q1.

Yes, yes, my HALS guys said yes, they can do it.

So what are we looking at now? And even the export aspect of you mentioned that 50% of the revenue now HALS is coming from the export market. So, what is the realistic number we are looking at in house for FI27?

So, I mean, if you just annualize this also, this will reach to 250-300 crores of annual heavy.

That we are very comfortable, correct? Now, second question on the gross profit margin. Last year, we were hovering under 40%. This year, consistently above 40%. Was there any benefit of low-cost acetone we were carrying, and price increase, helpers, and lower raw material costs is benefiting on gross profit margin, or do you think this 43-45% of gross profit margin in this segment is sustainable?

I think it should be sustainable, and we had no real advantage of cheap raw material. In fact, we since moving to higher grades, and of course, improving our operational efficiencies has helped us to get to these margins.

Got it. Got it. One last question on Hal. Can you give us more detail on Genesis? Are we also trying to acquire 25% in the distribution company, and it's more like a distribution company, right? They are not really a technology company.

How did you get that?

No, I thought I read that in the press release. I was a little confused. So what is the transaction between Asda and Genesis?

No, no. So the deal is if you go through their website, the founders are highly technical people, and they have come up with advanced help. And I think also China. I'm unsure of China. And these are far advanced level of Norhal, which is called. Which is...

And the tech transfer is happening from them to us, or how is it?

Yes, yes, yes. They have developed this very interesting technology and this patented product, and this is, the tech transfer is happening, and the plans will start in quarter three this year.

And what is CineScience paying for all this? So, the tech transfer and all is for the production, and we will be official contract manufacturer for this Swiss company. Is that the way to think of it? We are a contract manufacturing with the tech belonging to the vessel.

No, no, no. We are also doing joint marketing.

Okay.

Yeah, so we will also do joint marketing this product.

And the product will be exclusively supplied to them, or we are free to supply to anybody?

So we have some geographies defined between us so that we don't want Clash, but everything will be like a co-branding. Yes, it will be like a co-branded product where their name and our name will appear on the packaging and in all the documents.

Got it. And what is the revenue potential we are looking for from this partnership, say, in 29, 28, sorry.

In overall 3 to 4 year period, we are looking at 300 to 350 crores of revenue, additional revenue.

From this partnership?

Absolutely.

Got it. Got it. That's pretty clear. Last time, the legacy business, the decline was largely because, on a wire-wise basis, was largely because of the non-availability of the raw material?

Yes.

Or there was a... It's only because of raw material availability.

Yes, because the main primary supplier in India had to shut down the facility due to non-availability of their key raw material properly. So, we had those, I think, about two weeks of ore shutdown, which led to this. The demand is absolutely steady.

And starting Q2, we should see all those recouping, and then all the volume, we should be to the normal level, or there is still a challenge?

No, volumes is not an issue. Raw materials pricing is an issue, and availability of shipping vessels, I am sure this is across the industry.

Got it, got it. One last question. What is the now economical difference between Anisole to MEHQ versus HQ to MEHQ? Are we still competitive or do you see Chinese competition still being intense in the MEHQ and the value chain?

See, so far we are not seeing, otherwise you would not see these numbers, right?

Correct. So, we we we believe that HQ is still not as competitive for us to threaten the market share.

I think so.

Clear, clear. Thanks, Indhap, for all those answers and best of luck for the time. Thank you.

Thank you. Next question is from the line of Ankur Pairiwal from Access Capital. Please go ahead.

Yeah, hi, Siddharth. Thanks for the opportunity and congratulations for a good run for Pindal. First, you know, a clarification on this strategic collaboration. You said the product will be jointly marketed by you and the partners here. So, the global markets are divided that, you know, this X countries go to clean science and the balance go to you? Or how is it? And this three and a half, four billion dollars?

See, let me answer one thing at a time. See, they are based in Europe. They are highly, they are present there. And they have already conducted a lot of trials over the last couple of years and have established a solid customer network. Okay. So, there is no point in us duplicating those efforts. So, hence, there has been a clear geographical differentiation. Wherever they have done enough work, they will market it. Wherever they are not present and we are present, we will be doing it. So, it's a very, very collaborative partnership where we have very open discussions to understand who is where and wherever strengths to be needed, we will do the need for it. Because it is all going under co-branding.

Sure. So, this 3, 3.5 billion, you know, 3,350 crore revenue that you are talking of, this is as a product of, as a sort of, you know, output of this collaboration. Is it the case that you are manufacturing from them on their behalf as well? For whatever they sell, you will be manufacturing here in India? Or this 350 sale is only from your fresh sale as a B2C or B2B to B2C?

No, it is only from us. Their sales over and above. So say I am selling them, I am just giving an hypothetical example. If I am selling them at say 30 euro, that is my revenue. And if they sell at 40 euros, that is 10 euro is their revenue.

Yeah, which is fair, but your direct sale is this 300 crore target that you are talking of, and if you are manufacturing anything on the partner's behalf, that's a top-up, or everything is inclusive of this 350.

Our direct sales to the market is incremental to this year. No, 300 crore is only with them, because they have prescribed volume, which they have some understanding on, or commitments on. Over and up of whatever we develop, say if we sell 100 ton in India, that is over and up of this.

Okay. Okay. Got it. And fair to say that given that you are saying that this is, you know, further differentiating and more advanced versions of health, you know, grades, we were not supposed to manufacture these ones or there is some overlap and this will be having much higher realization here.

No, no, no. This is a further, better product, and one of its kind, and hence these are all patented products by there.

Sure. And, you know, whatever we are making on health, on using our tech, that continues as it is, which is the wrap-up that we are doing.

And one of our raw materials, 2020, which we will be making, will be a key starting material for this chemistry. So this is an additional market for our own 2020. Okay.

Okay, that's clear. Secondly, on Sorry, yeah, okay. Yeah, secondly, on, you know, the Kemin agreement, wherein we are supplying the key ingredients for food and feed, if you can put some light there.

I mean, the light is that we have very, very close relationships with the customer over the last decade, and I think they are increasing their demand. We are being fulfilling them. And because we would be making additional CAPEXs on some of these products, so we thought both of us decided to enter into a longer-term contract for a minimum period of five years, where we will be supplying their needs of these products, and that is where it is. So it's a very, very interesting collaboration for us because it's due to us and assure volumes from the largest customer in the world. So they currently buy BHA, BHT, TBHQ, which are all, and AP, these are all our product portfolio, which we supply to them, and we have now an exclusive, I mean, more or less, we will be there.

Sure. So, a few clarifications. One, you know, Kemin must be getting this source from somewhere, or was it captive for them, and whom are we replacing?

No, no, it was. So, Kemin is an end customer. They make formulation for pet food industry. So, they are a manufacturing company with global locations, and we will be supplying these cream.

Okay, so the customer continues, just that the size and scale is much higher now, and you are getting a five-year commitment. This is not a new customer. He continues to be an existing customer for 10 years. Will you just increase the wallet share with that customer? Sure, and will this commitment... Yeah, go ahead. Will this commitment... Sorry, will this commitment require you for another incremental capacity addition or the existing capacities are suffice to fund this?

No, we will need additional capacities and we have already started the process of that.

Sorry, there will be requirement of additional capacity, you said?

Yes, yes, yes.

Okay. Thank you. And third bit on, you know, the margin profile on the standalone side, while revenues have been, you know, you highlighted in your initial comments as well, the Q1Q increases largely led by pricing volumes are flat. The margin slight dip that we are seeing here, even on Q1Q or on YNY basis, is largely because of the pricing volatility, RM volatility, or there is a further pressure on the end product pricing also.

No, I think the major factor is the raw material pricing because of these Middle East prices. So you can see there has been a decline, I mean, increase in our RM prices.

Okay, so, and end product prices here remain stable. So, from a competitive intensity perspective, no changes at the global level.

Not at the moment.

Okay. Fair enough. And just on the standalone side, what could be the domestic export mix for the quarter? If you may help with that number, please.

65-35.

65-35. Okay. And lastly, if you can guide on the CAPEX, what should we take as an annual run rate going ahead, given there could be some capacity expansion times there?

Actually, we have not worked out in that detail, but it's not going to be...

Thank you.

Thank you. Next question is from the line of Abhijit Akhila from KIE. Please go ahead.

Good afternoon. Good afternoon. Thank you so much for taking my questions. First one, just on the supply chain disruptions that impacted volumes in the quarter. I was just wondering if that would be possible to share some, you know, color on how much better the earnings would have been. I know the quarter is already, you know, significantly improved. So, my compliments on that. But could it have been somewhat significantly better had it not been for these issues?

Yes, so, of course, we lost a couple of weeks. I think, to be precise, about two weeks or so in production. So, of course, if we would have been able to produce, we would have got higher revenues. That is number one. And number two was also with these all labor issues we faced because of these gas issues and all. That was another challenging time. So, if these issues weren't there, then I think we would have seen a better quarter.

So, things are looking much smoother now in the second quarter, is it?

Yes. The issues which I mentioned with availability of the prices are volatile. That is still an issue, but the availability is there, which was not the case in quarter one. So, yes. So, I think all those issues are now behind us, except the RM volatility.

Understood. And on the price hike side, were you able to fully pass along all the input cost increases that happened last quarter, or are there still some further increases that you are taking?

No, wherever we had long-term contracts, we are respecting most of them, and so in that case, we are not able to pass on. Also, it is not like, I mean, we were not able to pass on 100%. In some cases, we were able to pass a percentage of the price increase.

Okay, fair enough. So, compared to the June quarter results, which we are just seeing, we should not expect any significant price increases benefit next quarter, right?

Yes, price increase might be a big question.

Okay, understood. The second thing was just on this 300 odd crore revenue number that you quoted for the genius tie-up. Just wanted to clarify that this is a cumulative number.

Of course, it's a cumulative number over the next four years.

Yes, understood. So the peak number in year four might be say some, you know, 100 crore plus minus somewhere in that range.

Yes, that's understanding is right.

Okay, great. Thank you. And on the Performance Chemical 1 and 2, I know you made some comments, but, you know, if it's possible to just share your thoughts on how both those projects are going?

Yeah, so the hydrofenone catapult I mentioned, we started the line somewhere in quarter three between October, November, December, the trials. The product trials started in the first couple of months. Of course, then we had these crisis, raw material shortages. So we were not dedicating too much raw material to that facility, but running our regular businesses. And again, we restarted the operations in April, again, quarter one. And now the plants are more or less stabilized. In the meantime, we took this period to sample with our all international existing customers. And most of the sampling processes are almost over. We've got some approval. And now, I think, starting August, September, the revenue should also start coming in. And plus, there will be operational efficiencies, improvements will also keep happening as we ramp up the capacities.

Great. Thank you so much. And just one last. Yeah, sorry.

Okay. And performance chemicals 2, the plant we expect to start in quarter 3, which would be November, December.

Yeah, in terms of the ramp up for Performance Chemical 2, any thoughts and on that aspect? I mean, just with regard to timelines, you know, should we expect a failure?

Let's see, quarter of three and quarter four will majorly go into setting up the lines and, you know, getting the right product quality. So we expect the major revenue should only come from quarter one next year.

Okay, great. And just one last thing from my side, on the Kemin agreement, congratulations on that, by the way.

Thank you.

So, how large is this customer as, you know, maybe a share of the overall world market for these relevant products? That was really the question, and I guess this agreement now basically preempts any other… You know, possible new entrant into these products from getting into a tie-up with this company, right? Yeah.

Absolutely. So he's the largest buyer of some of these ingredients, and the relationship now gives both of us, both Kemin and us, I mean, the strategic alliance where we make sure that there is no shortages, I mean, in all these. In these difficult times, we have been able to supply without any price hikes, which has given them that confidence over the last several years, and hence we have entered into this definitive five-year of contract. And yes, you are right that I do not see any scope for any other entrant or new entrant or any competitor from India or globally to get into this alliance.

Got it. Thank you so much, Siddharth, for all the questions. I wish you all the best.

Thank you.

Thank you. Next question is from the line of Saurabh Banik from Devis Consultant. Please go ahead.

Rakanun sir, congratulations on our set of numbers. Sir, as per your presentation in this quarter, you have mentioned that HALP stands for around 22% of state. So, I just would like to know from you, in FY27, FY28, how actually your plan for that house will constitute around which percentage of sales for our company, if you just give us a few colors on it?

So basically, I told you in terms of revenue, this year the target is between 250 to 300 crores, okay? So that could be around 30 to 35% of overall revenue growth. For the next financial year, let us work out and we will come back to you.

Okay, sir. Thank you so much for the information. And second, sir, on health, I just would like to know from you, in domestic and export, both markets, who are the core competitors for this product, as you have mapped out. So if you give us the information about this.

So we have two major competitors in Europe. They are mainly BASF and Sabo. And we have a couple of them in China. Major is Rian Lon and Su Pian, who is also called as United Chem.

Okay, sir. And lastly, on the financials front, in this quarter, on a consolidated basis, I have seen that other expenses, it is surged by around 13%. So, any primary reason for this?

I'm sure you're referring to other expenses, right?

Yeah, yeah. In other expenses, I've seen that in console level, it rises around 13%. So the primary reason is that you can...

Sequentially, there is a CSR impact. In quarter 4, there was a high expenditure towards CSR compared to quarter 1. And there was provisioning towards some other expenses which was done in quarter 4, which was not required in quarter 1. This has led to other expenses.

Okay, so can we assume is it one-off kind of things, right?

Yes, so quarter one, you can assume to be a sustainable number.

Okay, okay, okay. Thank you so much for the clarification. Okay, and wish you all the best for the FI 27 and FI 28 as well.

Thank you so much.

Thank you. Next question is from the line of Nilesh Gugge from HDFC Securities. Please go ahead.

Yeah, hi, hi, Siddharth. Siddharth, my question regarding this new house that you will be manufacturing through the collaboration. So, what differentiates these house from the house that currently clean science is manufacturing?

This is a very technical answer question, but I will still try and answer in the most simple way. I don't know, the two zeroes from zeroes. Oh, sorry, sorry. We make the free hydroxy, but with this company, we will be making the alcoxy halts, which are called as the NOR. So, these are higher grade of halts because they have, their performance is far higher and superior compared to the conventional halts which are made. However, these advanced levels of halts are also far more expensive. Compared to the traditional house. So that is why the applications are also niche compared to the traditional.

Okay, and what about the end user? The industry will remain more or less then, or it will be very specific to

the end user? Because of these higher grade, these are more applicable to agricultural film businesses. So, where higher and harsher environment is there, where these products are used. So, here is NOR. Where we anyways are present completely. So it will help us in cross-selling to the same customer.

Okay, okay. So, do you see that this new house will replace the overall house that is being used or consumed by the end user? Or will it be the totally new market creation?

For us, it will be a totally new market in terms of this particular segment of product. So, if a customer is using NOR, he will not replace it with the regular house.

Okay.

This will be a new segment of customers which will come up to us.

Okay. But as far as the global health market is concerned, will these replace the existing ones or it's a completely new market?

Completely new market. Which we were not catering at all today. The Norhals market is different. Which we were not catering, now we will start catering.

Okay. Okay. Thanks. Thanks a lot. Thanks.

The Norhals market is currently dominated by only BSF.

Okay. Okay. Okay. Yeah. Thanks. Thanks, sir. All the best.

Thank you, sir.

Yeah.

Thank you. Next question is from the line of Sanjish from ICICI Securities. Please go ahead.

Thanks, thanks, Adar, for taking my questions again. I've got two questions. One on the contract with the KMN. Now that they are signing up five years, are we giving in volume-based discount? What is an advantage from a KMN perspective for locking in the contract?

Sir, it is supply security.

It's a supply security. There is no additional commercial benefit we are transferring to them.

I think, I mean, these are little finer details, but I think you can consider supply security as the major outcome of this contract for both of them, for them, as well as for us, for the complete volume off-take. I mean, the off-take which they will take from us.

Got it. Second question on the Genesis 1. So the application

goes into agricultural films, which is a very large market in globally, and currently only, I think, more or less covered majorly by BSS.

But it goes as an additive, right? The use case remains the same. But just the application is agriculture film, which are spread across the field, right? That's the one you're talking about.

Agriculture, higher grade of agriculture. The normal, sometimes even the normal, some of the grades are also used, but these are for more harsher environment conditions, where more pesticides, sulfur, chlorine is present in the environment.

Got it. Are we putting up any fresh capacity because of the two contracts or this can be catered with the existing capacity?

No, no. Both are additional investments.

And what kind of number are we looking at here for the CAPEX?

So, We are working on it, but in terms of genus cam, I think the plant will start. So, where we are expecting for that particular product, we will be putting about 25 euros.

Got it. That's clear. That's clear. And can we in contract, what is the volume increase are we expecting from what they are buying us? What could be the quantum increase because of the contract and higher market share?

Sir, yes, it is not Cam-Lin. It is Cam-Lin.

Cam-Lin. Sorry, sorry. My bad.

My bad. Yeah. So, Cam-Lin is American. So, I mean, that gives you a lot of emphasis. So, Cam-Lin, probably, it will, our off-take will increase by 20 to 40 percent.

20 to 40 percent over five years.

Yeah.

Or you will start saying immediately.

Start immediately, probably in the next two, three months' time.

That's clear. Thanks, thanks, Siddharth, for answering all those questions. Thank you.

Thank you. Next question is from the line of Saurabh Banik from Devis Consultant. Please go ahead.

Thank you so much for giving me another opportunity, sir. Now, I would like to know from you that in this quarter, you have done 100% of CAPEX in Finochem Limited. So, sir, if you can please share us the long-term structural plan that you have built for this wholly owned subsidiary. So, that would be highly helpful.

So all the products now in future in the company will only happen in this subsidiary, which is clean Finocan. So all the businesses, all the new products, all the new lines will all happen in clean Finocan only as a company.

Thank you so much for the clarification. And finally, sir, as we all know, the geopolitical issues are actually continuing and all that. And this is unpredictable and uncertain, we all know it. But sir, how clean science is actually, you know, planning out or mapping out for, you know, going ahead for the rest of the three quarters? So if you please put some color on it, so that would be again very much helpful for us.

So basically, sir, this is all about supply chain, and we are trying our best to have all supply chain, all raw materials to be delivered and to be present so that there is no delay in any of our productions. So that we have planned quite well, and hopefully we should not see any stoppages in any of our facilities in the next coming quarters.

Okay, so that is what, I mean, fully confident you are that that stoppage will not even there. So, it's just a, casually, I'm just asking you. So, if you just give us a few, you know, information regarding it, I mean, it is 100% confirmed from your end, right?

Sorry, what is confirmed?

I mean, that supply... No, no, that supplication that you said, it will not stop that you are planning on mapping out, that you said, I mean, it is from your end totally, you are confident on it, that I am just asking.

See, I am not confident in the lock of the type, but...

Sir, that is uncertain and nobody can control.

Yeah, yes, yes, exactly your point. And nobody can control, so even I can not control it.

Yes, yes, yes, exactly. So, sir, as you said, just for that particular reason, I'll just ask you. So, if that happens, so that is definitely, you know, better for you and for everybody as well, sir. So, that is what I'll just ask you. Yes, sir. Thank you. So, we will take that update on Q2 as well, sir.

Thank you. Next question is from the line of Rohit Nagraj from 361 Capital. Please go ahead.

Thanks for the opportunity and good sequential performance plus the two new collaborations. First question, again on the Genius Scheme, in terms of tech transfer, is there any transfer fees or royalties that are attached to it or it is just CAPEX and then, okay, so it's purely CAPEX and then the revenues will start flowing in.

Absolutely.

And in terms of, since these Nordhals are probably niche set of products, the margins will be higher than the current margins on our entire basket?

Yes, technically it should be.

Perfect. And second question, in terms of health, you mentioned that this quarter was, there was almost 50% exports and 50% domestic, and the component of exports has increased tremendously. Is it because of the high-grade health that we are manufacturing where we've been able to sell into the exports market and where now we are seeing a good amount of traction?

See, the point is, over the last one year, these sampling paperwork, all this is happening. See, these are very large accounts which do not come very quickly. So, there has been a lot of back and forth which was happening to get approvals to these accounts. And we have now started seeing these approvals coming in, trial businesses happening, and now commercial shipments have started. So, this also gives the confidence that all the grades of house which we are producing today, which are... The higher grade as well as our commodity grades are now completely approved and at par quality with other competitors in line. So this gives that confidence, and now you can see these ramps are happening in advanced levels of health also. Plus, with this collaboration with GC, the further higher grade of advanced health will open doors to further more customers globally for us.

Right, and just one last clarification, compared to last quarter in terms of the supply chain, things have been better during the month of July?

Peter, supply issues have come down, definitely, because now I'm sure all other companies have also started importing and keeping those safety stocks. But the basic concern remains because of these volatility in these discussions between these particular countries. The prices of crude oil keeps moving, which impacts the prices of basic raw materials, which impacts our pricing. So there will be issues in profitability, but not with respect to supply position, is what my understanding is.

Perfect. Thanks a lot and all the best, sir.

Thank you so much.

Thank you. Next question is from the line of Shriyans Khatani from SG Securities. Please go ahead.

Hi, good afternoon, sir. I have one question on the health business. So, we have around 10,000 ton capacity. So, just trying to understand how much of that would be the higher grade, whereas like 7-0 to like 20-20.

We are not giving all these subdivisions. We are not getting into these subdivisions, but on more or less basis, to just give you a thumb rule, we would be probably 40-40% lower grade and balance would be higher grade. Which are these higher grades, I think, is too much detailing, but yeah, so this is the split 40-60 is what you can assume.

Got it. Sir, and are we currently in a position to produce nor-hairs, or that would require some plant and machinery?

No, I think it's a completely new setup, new technology, which we have acquired from this partner. So, yes, it's needed at Capex, and hopefully we'll start the production in Q3.

Okay, got it. So second question, I joined a little late, so maybe might be a repeated question. So on the performance chemical to plant, are we on track for September production beginning?

No, no, no. I think there will be delay because of all these labor issues we had over the last couple of months. So yeah, I think there would be a delay and we expect to plan to start in November-ish.

Okay, so that will be commercial production or trials in November?

Commercialization. So, I think between November and March will be stabilization phase, and you can expect any revenues from quarter one.

Okay, I see. Got it. All right, that's all from me. Thank you.

Thank you so much. Thank you. Next question is from the line of Manish, an individual investor. Please go ahead.

Hi, sir. I'm an audible.

Yes, sir.

Hi, sir. So thank you for the opportunity, sir. So I've been with you guys since the IPO days. So as a layman term, I had few queries. So the first query was regarding the HAL export, since we're exporting more HALs now. So do we see the EBITDA margin in the profit to increase for 2-3 years down the line?

And we see that the EBITDA margins will keep improving because as we get into sales of more and more higher grade, the EBITDA margins will keep improving. Plus, running the plant over the last couple of years, the operation efficiencies also kicks in. So we are very confident that the EBITDA margins will keep improving.

Second query is regarding, you know, the last two, three cornwall, you had issues because of the Chinese competitors that are affecting the business and also because of the tariff. So now we have a sort of idea about what tariff, when U.S. will impact on India, will put on India. So do we see any orders coming from the U.S. or inquiries from the U.S.? Is it good as of now? And has the China competitors going in?

I've been very, very steady.

Okay, sir. And the third thing is regarding the maintenance crisis. There are two parts to it. One part is the prices of the raw material, and the second part is the equipment cost. So now both are high, right? So that will impact our profitability maybe for some time in basis it's resolved. Is my understanding correct? Okay. And so the fourth part is, we had the Europe right in there, Europe being signed. It will be active, I think, next year. And we have a subsidiary in Netherlands. So that subsidiary is for the planning, for future planning, right? So we will be scheduled for all the plans for Europe. Is my understanding correct there as well?

No, we will be starting the subsidiary in mid-September and it will be operational starting there.

So, and that will cancel the red demons? Of course. Thank you, sir. Thank you so much, sir. We're just waiting to go with you very soon. And, sir, one more thing, and one more thing. Sir, from the last two calls, I was not able to ask any questions. Can you, do one thing, can you allocate 10 minutes of your comfort to retail investors at the end, so that if the retail investors have some queries, they can ask you, because we have only one medium to contact you, sir.

Absolutely, sir. No, sir, absolutely. I mean, there's no issues, absolutely, sir. Yes, sir.

Thank you very much, sir.

Thank you.

Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Siddharth Sikhi for closing comments. Over to you, sir.

Thank you all for attending the company's quarterly performance. I really appreciate all of you taking your time out. If there is still more clarity, you can reach out to us, but thank you so much. Have a good one, and have a great weekend.

Thank you, sir. On behalf of Clean Science and Technology Limited, that concludes this course. Thank you all for joining us today, and you may now disconnect your line.