Ladies and gentlemen, good day and welcome to AMI Organics Limited Q2 FY24 earnings conference call hosted by Ambit Capital. 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 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. Prashant Nair from Ambit Capital. Thank you, and over to you, sir. Thank you, Enzo. Good morning, everyone, and welcome to the AMI Organics 2Q earnings call. We have with us Mr. Naresh Patel, Chairman and Managing Director, and Mr. Bhavin Shah, CFO of AMI Organics. I'll hand over the call to Bhavin for his opening remarks. Over to you, Bhavin. Thank you, Prashant. Good afternoon, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q2 FY24 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 or which could be construed as forward-looking statements must be reviewed in conjunction with the risks that the company faces. 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 a copyright material of AMI Organics and cannot be copied, rebroadcast, or attributed in press or media without specific and written consent of the company. With that, I would like to hand over the floor to our Chairman and Managing Director, Naresh Patel, for his opening statement. Over to you, sir. Thank you, Bhavin. Good afternoon, everyone. I hope you all are doing well. A warm welcome to our Q2 FY24 earnings call conference call. As we complete the first half of FY24, the global economy seems to be turning the corner. Despite persistent higher levels of inflation, there are emerging signs of inflation rates cooling in the coming quarters. Additionally, a resurgence in demand is ushering in a wave of growth, which bodes well for the global economic outlook. Even as things seem to be swinging in the direction of the economy, geopolitical tensions continue to cast a shadow of uncertainty, subtly impacting industry trends. Turning our attention to the industry landscape, there remains a consistent oversupply from China across the chemical value chain. This gulf has led to a decline in raw material costs, exerting downward pressure on the pricing of the finished goods across the industry. Even as things seem to be improving, Chinese production continues to outpace demand. That said, we are starting to see promising contraction in demand and supply gaps. Consequently, there is a cautious stabilization in raw material prices. This external environment will have some impact on AMI Organics' performance for the quarter. In Q2 FY24, we delivered INR 172 crore revenue from operations, which is 17% growth over the same period last year. While we were expecting higher growth this quarter, pricing pressure marginally scaled back the growth. In terms of margins, higher sales, lower margin products, and persistent pricing pressure throughout the quarter adversely affected our margins for the quarter. Nevertheless, with a clear order book in hand, we anticipate stronger performance in the second half of the year. I will let Bhavin discuss the numbers in detail later. Moving to the business update, let me begin with advanced pharmaceutical intermediate business. We face pricing pressures that affect the business till we were able to deliver 8% growth year-on-year. Additionally, the launch of one of our key products has been delayed by our customer, thereby impacting this quarter's growth. However, this is only deferred revenue that is expected to realize in either Q4 FY24 or Q1 FY25. This is, again, one of the reasons for lower margin for the quarter, as this is a very high-margin product. Sorry. On the Fermion deal, we have further extended the partnership with Fermion by adding one more advanced intermediate to our basket. We now have a total of three advanced intermediates for the product, which increases the total expected revenue considerably from this CDMO contract. For the previously signed advanced intermediates, we have already received the order, and we will start shipping them out from Ankleshwar facility from Q4 FY24. These will gradually translate to the revenue starting from Q4 FY24. Coming to the specific chemical business, we have introduced one more product, a UV absorber for the paint industry. I believe we will see revenue from this product coming into the numbers from Q3 FY24 onwards. For the existing products, the volume growth was good, but pricing pressures continued there. Overall, the specific chemicals business still delivered strong 72% growth on a year-on-year basis. Moving on, we continue negotiations with prospective customers in the electrolyte additive business. We are hoping to convert a couple of prospects in the current quarter. Turning to our acquisitions of Baba Fine Chemicals, we completed the acquisitions of controlling partnerships during the quarter. The firm is set to be subsidiarized by the newly incorporated entity, Baba Advanced Material Limited. It is important to note that the majority of H1 FY24 was dedicated to completing this acquisition, followed by an integration process to some extent. It has impacted the operation of Baba Fine Chemicals. Despite these operational challenges, we are committed to preserving the company's last year's revenue, and we are poised for exponential growth in the forthcoming years. Before I conclude, I would like to highlight that in our journey towards becoming a sustainable organization, the board of directors have approved a 15-megawatt captive solar power plant project entailing Capex of somewhere around INR 65-70 crore. If you recall, we already announced a 5-megawatt solar power plant previously, and the construction work for the same has commenced. This is expected to conclude by the end of this financial year. The new 16-megawatt solar power plant is in addition to the already work in progress 5-megawatt solar power plant. I believe all this will help us nullify our electricity expenses once operational. Broadly speaking, deferment in product launch in certain markets by customers coupled with pricing pressure due to oversupply from China is expected to have some impact on the numbers. Even though we are expecting to deliver robust H2 FY24, overall, we are modifying our growth target from 20%-25% for the full year to 18%-22% growth from FY24. With that, I request our CFO, Mr. Bhavin Shah, to discuss the financials with you. Over to Bhavin. Thank you. Thank you, sir. Good afternoon, everyone. I would like to briefly touch upon the key performance highlights for the quarter and half-year ended 30 September 2023. Then we will open the floor for questions and answers. I'll begin with quarterly updates. Revenue from operation for the quarter was at INR 172 crore, up 7.3% as compared to INR 147 crore in Q2 FY23. The gross profit for the quarter was at INR 71 crore, which was flat when compared to the same period last year. The gross margin for the quarter was at 41%. There are a few reasons for lower gross margin. Let me discuss them in detail, starting with inventory. We had some high-cost inventory coupled with lower finished goods prices, and there is a pressure on gross margin. I would like to highlight that this impact was particularly for this quarter, and we will see our margins going back to previous levels from Q3 onwards as raw material prices have now stabilized. Another reason for lower gross margin was also product mix. If you notice, the majority of sales for the quarter was to the domestic market, which is always 2%-3% lower business. Also, if you see the specialty chemical business, which is low-margin business, has grown strongly during Q2, which also contributed to lower gross margin for the quarter. Moving on to EBITDA for the quarter was at INR 25 crore, down 11.8% as compared to INR 28 crore in Q2 FY23. EBITDA margins for the quarter were at 14.4% compared to 19.1% in Q2 FY23. The degrowth in EBITDA margin was driven by gross margin as well as higher employee costs due to annual increment of costs and hiring of employees for Ankleshwar factory. There was also one-off costs due to machinery breakdown during the quarter, and this has led to pressure on EBITDA for the quarter. PAT for the quarter was negative INR 17 crore. Please note that JV with AMI Onco-Theranostics was fully impaired on the grounds that it would take significant time to generate revenue due to its inherent long-term nature of its research activity and uncertain success rate, which resulted in negative PAT for the quarter. So adjusting for the impairment, PAT for the quarter Q2 FY24 would be at INR 14.7 crore. Moving on to H1 FY24 updates. Revenue from operations for H1 FY24 was at INR 326 crore, up 7.3% as compared to INR 278 crore in Q2 FY23. Gross profit for H1 FY24 was at INR 144 crore, up 7.3% on year-over-year basis. The gross margin for H1 FY24 was at 44.3%. EBITDA for H1 FY24 was at INR 59 crore, up 15.2% as compared to INR 51 crore in H1 FY23. EBITDA margins for H1 FY24 were at 18%. PET for H1 FY24 was at INR 5 crore, whereas adjusting the exceptional item, PET for H1 FY24, was INR 37 crore. Export for the quarter was at 54%, whereas domestic business was at 46%. Coming to the balance sheet, we have cash and cash equivalent of around INR 104 crore on consolidated basis as of 30 September 2023. Capex outlay for H1 FY24 was INR 105 crore. We are on the track to operationalize Block 1 in Ankleshwar unit from early part Q4 2024, and we hope to complete CapEx of remaining two blocks by the end of Q4 FY24. Therefore, from FY25, we are expecting the full Ankleshwar block to come online. Coming to working capital for half-year, improvement in debt days and better payable cycle health is our working capital leading to net working capital days of 100 days and improvement of 16 days over 31 March 2023. Overall, as Nareshbhai mentioned, we have a strong order book for H2 FY24, and therefore, we should see strong recovery on sequential basis in the coming quarter. With this, I conclude my remarks and request the moderator to open the floor for a question and answer session. Thank you. Thank you so much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. 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 Sudarshan Padmanabhan from JM Financial PMS. Please go ahead. Yeah. Thank you for taking my question. Sir, my question is to understand a bit more of what is happening in the industry. You had mentioned on the presentation, and as you have talked about, the downward pricing pressure, China coming and dumping the prices. In your expectations, do you see this to be more transitional in nature, or does it change something beyond just a transition for the next couple of quarters? Just want your opinion on that. Thank you, sir. Thank you very much for your question. I would like to speak on that. See, basically, in the model of AMI Organics business, it's not that much great impact of Chinese competitors. But the problem here with it is that our product competitors got cheaper raw material, and that has quoted at a lower price to the customers. So domestic, where the spot business are there based on the current price, whereas we have the long-term, at least one or two quarters stocks was there, that has impacted us to get the orders at a lower price compared to our cost. So that is how our top line is compromised with that. This happened in the last quarter and before that quarter, but now we understand that, and also, we already informed the customer the same thing. From here onwards, we see that it will not be impacting us for long, too, and we will be recovering in our positioning in the market with our own margins as well as price. So we are reducing our inventory in terms of domestic requirement. Sir, in terms of gross margins, as you said, there has been a mixed impact and high-cost inventory. Two things, sir. Sir, how much of high-cost inventory are we still left with? And how do we see the recovery? I mean, should it be sharp recovery back to the 48%, or would it be more gradual over the next couple of quarters? High-cost inventory is not related to the COVID like that, but it is related to the sport business as well as the short-term only. Very drastically, we will go back to 48% in the next couple of quarters. That is already in line, and it is implemented like that. Sure, sir. And finally, before I join with you on the Fermion contract, I mean, now that we have signed newer products, I mean, we are expanding our relationship here. So how do we see the launches and the scale-up happening, say, in FY25 and beyond? And are we also looking at more such contracts with Fermion or even with, say, other clients which we want to forge and give more visibility to it? Yeah. So in our business plan, and whatever the distances we have with the innovators, out of that one is Fermion. And you can see also, in the last 1 year, we had signed 3 contracts with them for multiple supply of different intermediates, and it is ongoing. We are expecting a few more in the pipeline. And in that sense, only our new project, which is we are establishing in Ankleshwar, we are going to be inaugurating mid-December of this facility. And once it will be ready, then we have another few contracts with other clients as well in the pipeline in the discussion. It will be also coming into the basket. Sure, sir. One final question, if I may speak to. Now that Baba Fine Chemicals is in, and basically, the Baba Advanced Material is also going to be formed. Sir, on this exciting platform of electronics, I mean, how do we see the shape of happening here? Okay, I'm talking about more so from a two, three-year perspective. See, Baba Fine Chemicals is a strategic acquisition. This is in a two-way. The niche market, very strong position in the market in Photoresist, as well as it can be also helpful for us for our other electronic chemical business where we can use Baba Fine Chemicals technology. So it's a both-way. We had acquired Baba Fine Chemicals. So it has a strong position. It has a multiple product which is already developed in the system and yet not commercialized. So with this joint venture, we will be trying to promote this molecule in the resorbable market. And this is how we are targeting to grow the business in Baba Fine Chemicals in the semiconductor business. Sure, sir. Thanks a lot, sir. I'm done. Thank you. Hello? Hello? राहुलला फोन कर. The next question is from the line of Mr. Darshit Shah. Please go ahead, sir. Yeah. Am I audible? Yes, Dara, you are audible. Sure. Thank you for the opportunity. Sir, I have one question on where is this pricing pressure specifically on our advanced intermediate portfolio? If you could throw some more light on where are we facing problems here? See, the pharma, our main business is only in the advanced intermediate for pharma applications, and it has an overall pricing pressure was somewhere around from 30%-10% based on the commodity, or it is a very so it's from N-10 to N-1 like that. So overall, it has brought our EBITDA margin pressure of somewhere around 6%-7% on total because of the long-term the long-term supply contract is also related with the key raw material price variation. So that has also impacted on the current price of the raw material, and that has revised the purchase order. So this is how it was happening like that. Okay. And what would be the margins for both the segments, pharma intermediate and specialty chemical, for this quarter? Bavi? Specialty, it was 9.5%, and pharma, it is 11.21%. Sorry, for pharma intermediates, please? 11.21, 11.25%. Okay. Thank you so much, sir. Thank you so much. The next question is from the line of Karthik Iyer, who is an individual investor. Please go ahead, sir. Am I audible? Yes, sir, you are audible. Hi, sir. Thank you for taking my question. I just wanted to know the jump in the cost of RM and the change in work in progress is because it's gone up maybe 2, 2.5 times QOQ and YOY. So is that because of the acquisition of Baba Fine Chemicals, or is it just pricing pressure from China and headwinds that you experienced this quarter? Karthik, we didn't exactly get your question that you are mentioning 2.5 times means. Because if you look at your cost of materials consumed, right, it's gone up to about INR 150 crore from INR 71 crore and INR 58 crore QOQ and YOY. RM. Yeah. So RM, when we compare on QOQ basis, so it has moved from INR 78 crore-INR 100 crore. So as we explained mainly, this is mainly due to change in the product mix, higher sales of our low-margin specialty product. There is a pricing pressure in the pharma. So cumulatively, change in product mix, higher sales of specialty, and there is a pricing pressure. This helps change our. Raw material. Raw material cost. Okay. How much CapEx have we done for the year, and how much is left for the balance of the year? Till now, we have done around INR 104 crore of CapEx, and another INR 100 crore is left. INR 100-110 crores will be coming by year. Okay. And sir, has there been any traction with regards to the electrolyte business, and where do we stand on that? Electrolyte business is we are now in a good position. In this quarter, we will be going to begin our production. We already placed an order for the raw materials, and we are looking for supply start from Q4. Once we will start beginning our production, we will announce on the exchanges, and then supply also, we will announce on that. So all the audits and everything is finished by the customers. And now we got the green light to go ahead for the production. So first trial order is already confirmed, but production will be started once we get the raw material in our warehouse. Okay. Ankleshwar will start ramping up from March, I assume? Would that be? No, Ankleshwar will be inaugurated by mid-December, and it will be ramping up by January. So first, we will start with products, which is qualifying. It is a validation of the facility, so we will start production by January for the validation batches. And then full-fledged, it will be started by Q1, but Q4 will start contributing some revenues from Ankleshwar. Okay. Thank you so much, sir. All the best. Thank you. Thank you. The next question is from the line of Riken Shah from Omkara Capital. Please go ahead. Hi, Nareshbhai. So I just wanted to ask, in the last three months, what impacted the base business of advanced intermediates so drastically? I know you expanded on the RM pressure, but did we lose market share by any chance in some of the products? No, thank you, Mr. Riken. If we lose the market share, then we will not be growth. So to avert the losing the market share, we compromise in the top line, and this is how we maintain the market share. So the volume is already there. Only to remain in the market leader, we have to compromise on the top line. And that is the reason why this is a base the raw material prices, you can see, a little bit higher. Okay. Got it. My second question is, in terms of the UV absorber product which you mentioned, can you please give some details into the size, nature of the product, and margin profile? How different is the margin profile from your paraben and salicylic acid? So these UV absorbers are paint. It's not in the paint of the regular paint which we are using in the household. It's used in the painting, it's used in the metallic paint, which is for the automobile. And it is a new product which is developed by Swiss scientists, and we have a collaboration with them. So these applications are used by worldwide automobile, and they have a very good presence. These scientists are well-known in this industry. So we have finished the validation batches, and we already supplied a few quantities to them for distribution. Once it will be approved by everywhere, we will be expecting somewhere around 600-1,000 metric tons of the business of this. And the margin, which is what we are seeing in the specialty chemical segment, of 18%-19%, it will be going up. Okay. In terms of your Fermion contract, your basket of products has increased. So I mean, I know you cannot comment in terms of value, but if in percentage terms, with two molecules, you had X amount of value. So with the three products coming in, how much would the percentage of value have increased? It will be increased, but the exact number, I can't discuss because both are listed companies, and it is part of the contract, so I can't disclose the numbers. But definitely, it will be higher than what we have today. Yeah. So percentage-wise, if you can share. I had not actually worked on that, so I'm sorry for that. Sure, sir. So in the electrolyte business, sir, you mentioned about Q4 being the start of the supply. So I think what I'm trying to understand is we are way past the LOI mode in electrolytes. Is that what you alluded to? I didn't get your question. Can you repeat that, please? I meant that the LOI was signed much before, and now the execution will start. Is that what you said earlier for electrolytes? Yeah. We signed so many LOIs, but the LOIs are not valued, so that's how we don't disclose it. So once it will be valued, some affirmative or valued quantity or something like that, then we disclose that. So now we are in the stage of converting these LOIs into the form contract. So that is where before converting into the formal contract, the customer has visited and audited our facility. In the last 3 months, 2.5 months, we were having a lot of inspection in the facility, and it went well. So now we got a green light to go ahead for the production. So that's how we ordered the raw material from the supplier. And once it will be in our warehouse, we start the production. So this is a first trial production, is what you're saying? Yeah. Okay. And sir, the Fermion contract, in the presentation, you have mentioned it will start from Q4, FY 2024. So just how would that scale up gradually if your contract is for, let's say, 100 tons, for example? So then how do you scale from Q4, FY 2024 onwards? So the first is a qualification in Q4 where we do some validation batches, which will be used by Fermion and to make further synthesis and then final formulation. And so once this approval will come from the final regulatory authorities, then it will be ramped up. So FY25 will be the year where we will have the all qualification stage everywhere. And then FY25, second half, it will be fully ramped up. Okay. Full utilization in that part, in the second half of FY25. Yeah. Yeah. Okay, sir. And lastly, sir, now that Baba Fine Chemicals is integrated, so now what do we see? I mean, we have the long-term guidance of taking it to INR 200 crore. But just sort of a myopic question, for H2 of this year, are we seeing any scale-up over there? This year is a consolidation and integration year where we do all the integrations, transferring our system there, digitalizations and all, and also customer approvals because there are management changes. So customer needs to have to also give some approvals for management changes and all. So that's the reason why this year is a little bit on a muted side. But from next year, it will be ramped up very exponentially. Okay, sir. Got it. Thank you so much. Thank you. Thank you. The next question is from the line of Nilesh Ghuge. Sorry, Nilesh Ghuge from HDFC Securities. Please go ahead. Yeah. Good afternoon, Bhavin. Good afternoon, Nareshbhai. Good afternoon. Yeah. Sir, firstly, congratulations for signing one more contract in CDMO for AMI, sir, if I look at the chemical business performance in the first half of FY 2024, so it has shown very robust performance this quarter. Also, if I knock off your subsidiary performance, the YOY growth was 32%. In 1Q, it was 25% YOY. So do you think that this kind of growth will sustain for the next few quarters in chemical business, excluding the subsidiary performance? Yeah. So you know much better than me. You are an analyst and economist. When the base is small, the growth is very high. You can see. But when the base is becoming sizable, the growth will be reduced. In any way, we are targeting to at least 2.5 times our specialty segment in the next couple of years, and that is where we are marching towards it. You can see also the performance is coming in specialty chemicals, and now every segment is recognizing and approving us. We are having some big numbers under negotiations with big buyers. If it will be happening in the next couple of weeks or maybe we will make an announcement, then you can see that, yes, it will be really a good move in specialty chemicals as well. Okay. Sir, I mean, you had reduced your revenue growth target for this year from 22%-25% to about in the range of 20%. So is it only because of the advanced intermediate or also because of the, you can say, the muted performance in your subsidiary company? No. So thanks for this question, Dhara. It's really important for me to tell to everyone. This is nothing to do with anything about our projections or our growth or our volume. This is really because of the top-line erosion. See, at the end of the day, your revenue growth is based on the top line, and this is where the price is muted. It's eroded on the sell-side. So that is the reason why this target is revised. Our volume will definitely grow at 20%-25%, and it will remain like that. It will be only because the value of the sales is eroded. That is the reason we revise the number. It may be go up. If the situation will go from the right side, then it will go up as well. Okay. So in your opening comment, you did mention that the volume growth was very strong in FY24 first half. But because of the prices, there is a decline in the top line. But can you quantify to some extent how much was the volume-driven growth and how much the impact because of the realization? You heard that? Okay. Right now, it's not on my hand, but I can give you one-on-one that as well whenever you are free. Okay, sir. Thank you. And just one last question to Bhavin. Sir, last quarter, our exports were about 39% of our top line, and I believe in last quarter, that number excludes the export from the Baba Fine Chemicals. Now you have restated your numbers for the previous quarter. So if you could help me out and get the exports for the last quarters, it will be of great help, Bhavin. So export last quarter without Baba was 37. So again, I need to work with Baba, so I can come back to you with that number separately. Yeah. Thanks. Thanks, Bhavin. Thanks, Nareshbhai. Thanks, Bhavin. These quarters. Thank you. Okay. The next question is from the line of Jason Soans from IDBI Capital. Please go ahead. Yeah, sir. Thanks for taking my question. So my first question, I just would want to know that, I mean, because the majority of our business would be contracted for our advanced pharmaceutical intermediates. But just as a percentage, how much is contracted, or do we do some kind of spot business as well? Yeah. Thanks. Thanks. So most of the export business is contracted, and the domestic business is fully spot business. And not only that, some of the new molecules which we are working with in export as well is spot-like. So our regular business, like we have business with Angelini and Fermion and all, and Medichem, these all are with the contract sign but with the relation with the price of the raw material. Okay. So as a percentage, how much would it be, I mean, roughly? It will be somewhere around 30%-40% of the revenue of the advanced. 30% would be spot? 30%-40%. Depends on the product mix. Yeah. 30% would be spot of the advanced pharmaceutical intermediates, right? And 50% contract. No, no. 40% is contract, and around 50% is spot. Okay. Of the advanced pharmaceutical intermediates. Okay. Okay. Sure. And sir, I just would want to know, so of this business, how much is exposed to the Chinese competitors? Of course, we know that the Chinese also are very large players in intermediates as well. So how much of your portfolio is basically exposed to Chinese competitors? As you mentioned that you are facing price erosion due to pricing pressure. So how much of this is exposed to Chinese competitors? So here, Chinese competitor issue is not an issue. Sorry. There is no Chinese competitor issue. It's our local competitor who knows what price we are selling from the data available in the export, which is a very big case. Then they don't have a contract. They have a spot price. Based on that, they got a reduction in the price with our customer. They were qualified. Customer is using as a platform to negotiate with us. Okay. Okay. Okay. Okay, sir. Okay. So sir, so just to simplify, just to clarify on the timing, sir, I mean, you did mention in the call before, so pricing pressure was 10%-30%. That's led to a bit of a decline of 6%-7%. Whatever your long-term contracts are, due to the prevalent spot prices which are reduced, they have been renegotiated, and hence, there's a pressure on margins. Is that right? That should be right, right? Yeah. So in the next quarter, it will be already discussed during this one and a half month, and it is recovered everything. That's it. O kay. Okay. Okay, sir. Okay. Fine. Sure. And sir, just one thing, I mean, I just want to mention your Ankleshwar capacity is around, I believe, you invested on INR 190 crore. What's that with the asset turn target of around 3-3.5? Now, I just wanted to know, in terms of breakup, this Ankleshwar facility you had acquired from Gujarat Organics. Now, I just wanted to ask you just to clarify. I understand a certain portion is allotted to the Fermion and Block, and there is a certain portion probably will be doing specialty chemicals as well. So could you just give me a breakup as to what can come? I mean, what revenue can you generate and in what segment? What are you looking? What's the total plan for the Ankleshwar capacity? Ankleshwar is not for specialty, first of all. It is only for pharma. And there are three blocks. Out of their 33% capacity, we had allocated to Fermion, which is already fully booked. And we have still 66% capacity free for us, which will be fulfilling our future demand till FY27. Okay. And that's totally for API, right, for the advanced pharma block? Yes. This Ankleshwar full facility is only for pharma. Only for pharma. Okay. Okay. Sure. Sure, sir. And just one last thing, I just want to confirm. You said your business, in terms of 40% is contract and 50%-60% spot in your advanced pharma intermediates, right? Yeah. This is a product mix. We have a lot of products. So it's varying. So this quarter is like this. Next quarter, maybe change. Maybe. Maybe change. Yeah. Okay, sir. Thanks. Thanks. That's all from my side. Thank you. Thank you. The next question is from the line of Darshit Shah from Marcellus Investment Managers. Please go ahead. Hi. Hi, Nareshbhai. So firstly, on the Fermion and contracts, I believe we would be supplying three intermediates to Fermion. One, we are already. And if you could just give some timelines about the other two intermediate products, when could we start commercially supplying these two remaining intermediates? We are going to start validations of the two intermediates in Ankleshwar facility in December, second part. It will be supplied for validations to Fermion in Q4 FY 2024. Okay. So both the two intermediates or just the second one? Both. It is a program like that. So it will be validations. Then commercial supply will be starting H2 FY 2025. Got it. Got it. As far as your domestic business is concerned, you mentioned there were some price cuts by the domestic competitors. I just wanted to understand more on that. I mean, your customers would have named you in the DMF filing, right? Then how would they switch so easily to your PS? Sir, it's very simple. It's a buyer and seller. It's a reference price is used to negotiate. That's it. That's what I wanted to understand. Is there any lock-in in the domestic business we are present in, or is it purely based on? We know that we are part of the DMF, but we don't know who is the other part of the DMF, right? So they use the reference price. And what we had done is that we had not lost the business. Though we compromised a little bit in the margin, but we got the business. That is what we had done in last quarter. Okay. Got it. Got it. And you booked even questions for Bhavinbhai. Yes. Sir, can you speak a little bit loud because we are not able to hear you properly? Sure. Sure. Is it any better? Bhavin Shah, if you can explain how we accounted for the Baba Fine Chemicals acquisition, I can see some INR 35 crore goodwill acquisition. But how much is the corresponding asset increase? If you can just explain it line by line. No, I didn't exactly get your question. How did we account? If you can speak loud, that will be. How did we account for the Baba Fine Chemicals acquisition? So there is some goodwill increase in the balance sheet. And how much would be the corresponding asset increase? See, so if you see, for Baba Fine Chemicals, our investment value is around INR 68 crore. And after getting a real asset from there, our goodwill is around INR 54 crore. Okay. Got it. Asset increases would be around INR 68 crore, right? Yes. If you can just give the breakup for this INR 68 crore, what would be the key assets? 68, what would be the? Sir, we are not able to hear you properly. Can you speak loudly because it's very, very, very deep voice is coming? [Inaudible]I was just asking what would be the breakup of this INR 68 crore? Yeah. So see, we have paid INR 68 crore as an investment value, and there is a corresponding goodwill of INR 56 crore. And see, after removing asset and liability from their existing balance sheet, this goodwill has been created. So it includes fixed asset. It includes some of the data over there minus creditors and other liabilities. Okay. Understood. And lastly, what is our revenue recognition policy for the export business? Do we recognize once we ship the products from here or do we recognize on the date when customer receives the products? So see, primarily, we completely follow Ind AS 115, and it will depend on FOB, CIF, Incoterms. So when we pass on the liability, at that point in time, we recognize it according to Ind AS. Okay. Got it. Got it. Lastly, if I see the inventory days have almost increased from 100 days to 145 days. Any possible reason why is this the case? So see, we have now stocked up inventory specifically for Fermion and contract. So there is a strategic inventory built up for upcoming supply to Fermion. So that's why you can see a rise in the inventory days. Got it. So this 145 days would not come down significantly or would remain the same for coming quarters? So, strategically, we need to because validations can be started on time, and it has to be. Otherwise, we will miss the qualification window in the authorities. This window is open for a very short time. So, we have to be ready for everything. Got it. Got it. Thank you, Darshit. Thank you very much. Thank you. The next question is from the line of Nirali Gopani from Unique PMS. Please go ahead. Yeah. Hi. Thanks for the opportunity. So Nareshbhai, most of my questions have been answered. Just a question on this write-off that we have taken. So why a sudden decision to write off? And just a little bit of more background will be helpful. See, thanks for asking this question. In the early stage of evaluation, we had one of the investments we had done in a drug discovery platform when AMI Onco-Theranostics came into existence in partnership with Photolitec. The focus of the JV was to work on small oncotherapeutics. Sorry. I'm sorry. I got some call in the background. So the focus of the JV was to work on small oncotherapeutics. And it was going very well. The JV has done good in PET scan, and it moves to phase II. Now, one molecule and one is phase I. But our main focus is in our chemistry area. And this drug discovery is not core to us here at AMI Organics. And once we've seen that, okay, it's moving very sluggishly. So we decided not to have more carryover of this investment. And during the public offering also, we said that we considered this company as just a side investment. And so we decided to focus more on our current chemistry and our other investments, which we are focusing more to grow that. We decided to write off this investment. Okay. Okay. That's a promise, sir. Thank you. Thank you. The next question is from the line of Kalpit Narvekar from EFG Asset Management. Please go ahead. Hi. Thank you so much for taking my question, sir. My first question was on inventory levels. Some of the API manufacturers have mentioned that there's elevated inventory levels. Are you seeing that in your customers? So Kalpit, as I already answered earlier, that our inventory levels for the current quarter is on a higher side because there is a specific buildup of inventory for upcoming Fermion and contracts. So I don't. My question is. Yeah? Sorry. I mean, are you seeing elevated inventory levels at your customer side? No, I didn't get you exactly. Hello? So the customers who you sell the pharma intermediates to, right, are those customers having elevated inventory levels? Are they having high inventory at their end? Sir, we didn't know that, actually. Maybe due to some sluggishness in demand, maybe? No, no, no, no. If demand is an issue, then we should not be a top-line incremental. Demand is not an issue for us, for my customers. Yes, there is a request of price negotiation, but demand is still there. Understood. Thank you. My second question is on your manufacturing cost versus the manufacturing cost of Chinese suppliers. What is the difference in some of the key molecules that you supply? I'm extremely sorry. I couldn't be able to hear you properly. I think there might be something. No problem. Can you speak a little bit loudly? Can you hear me now? Yeah. Hi. Yes. Sorry for that. My question is basically, what is your manufacturing cost difference versus Chinese suppliers in some of your key molecules? Okay. Here are the manufacturing costs, our technology, and our approvals. These are all three factors which are making us different than the Chinese manufacturer. Most of the product, which is contributing around our top 10 products, which is contributing our revenue, we are dominating against China. And that is a cumulative of our product production capability, our documentation and approvals. And above all is our positioning in the DMF as well. Understood, sir. And one more follow-up on this, right? In your top 10, sorry, sorry, top 5 molecules, are you seeing a lot of Chinese supply coming into the market? And can you talk a little bit about near-term trends on this? Is it improving in the last month or so, or is it getting worse? So our top 5 product is mainly Trazodone, Dolutegravir, Oxcarbazepine, Entacapone. So there, we all are consistently performing at a growth, and it's still in the same situation. So we don't see any issues in the final product. But there are some pressure maybe from the raw material side because raw materials are common. And maybe some competitor or Indian competitor may be using this raw material as a cost, and it will be impacting on our final product price. Understood. Thank you for your time. Thank you. Thank you. The next question is from the line of Nilesh Ghuge from HDFC Securities. Please go ahead. Yeah. Thanks for the opportunity. So just one follow-up on Baba Fine Chemicals. So as you said that in the next 4-5 years, our top line may go to INR 200 crore-INR 250 crore. But looking at the current assets and the current chemistries, so when do you expect that our revenue will go to normalized level of FY23 in maybe the second half of FY24, or it will take more quarters to reach that level, at least FY23 level? So FY24 will be better than FY23 level. Sorry. FY25 will be better than FY23 level. FY24 will be the muted one. FY25 will be better than FY24. Okay. Thanks. Thanks a lot. That's all from me. Thank you. The next question is from the line of Suraj Nawandhar from Prithvi Finmart. Please go ahead. Hello, sir. Good afternoon. Sir, are we in talks with our customers for the rest of the 66% capacity that we have at our Ankleshwar facility? Yeah. We have some pipeline discussions with other customers for exclusive manufacturing for them. When can we see any concrete agreements regarding that capacity? It will come when it will be matured, sir. We are talking with them. We are in the process of qualifying our field polls and everything. So once it will be run through, then we will announce on that. But we are working on that. I was just asking for a very rough timeline, 4-6 months and 6-8 months, any ballpark timeline that you can give. Our ballpark is not on the contract basis, but we are targeting to complete fully operating full capacity by FY27. Okay. Okay. Just last question, how big is the opportunity in our new product that we have launched, UV Absorber? How big is the opportunity over there? It will be equivalent size of current base of these other organics. Okay. Okay. Thank you, sir. All the best. Thank you. Thank you so much. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Yeah. Good afternoon. So the first question is on the impact of the delay in the launch of product from one of your customers. Can you enumerate on what is the impact for the quarter and by how much has the delay, how has the product been delayed? Thank you very much, Gaganji. This question is I needed that question. Okay. The thing is that one of the we were one of the products which is going to be off-patent by 2026. One of our first-to-file generic players with whom we are working, he had qualified us since 10 years back. We started supplying this molecule expecting that they will get the approval in several geographies. But the original sued them, and they won one territory, but they lost the second territory. Because of this, they lost the battle. The flow which has to go has to be retarded, and it will be postponed by next year. So by FY 2025, it will be once again in a full phase. So these two quarters, Q2, Q3, and Q4, we have a little bit on a muted side of the sale of that product. Is it possible to tell which product is this? I can tell you, but I'm not allowed to do that because we have some long-term supply agreement with them. It is a very big product for us, an important product for us. Is it in the anticoagulants area? Yes. Okay. All right, sir. And secondly, I think you also mentioned that there was an impact of machinery breakdown. How much was the impact of the machinery breakdown on wholesale products? See, it is this much is a breakdown in terms of waste management area. So because of this breakdown, we have to other than we have an approval from the government of Gujarat Pollution Control Board that if we have a breakdown, we can dispose it to the common effluent treatment plant. So some quantity, we have to treat it outside territory. So because of that, some incremental cost is impacted in the balance. All right. If I look at your Q1 numbers, I mean, when you reported Q1 last quarter and now when you're reporting Q1, there's the restatement for Baba Fine Chemicals if I understand correctly. Can you give the contribution of Baba Fine Chemicals to the top line and net profits in both Q1 and Q2? Yes. So tell me what you're talking. See, for Baba, Q1 top line was INR 11 crore, and for Q2, it is INR 9 crore. Net profit? For Baba Fine Chemicals, net profit is around INR 14 crore. Sorry. Can you repeat the number? 14 crore. For 1H? Yeah. Yeah. 14 crore net profit on INR 20 crore top line? Yes. Okay. Also, if I look if I adjust for the exceptional that you have reported in the quarter and look at your effective tax rate, it seems high both for second quarter and for 1H. Have I understood it correctly? Has the tax rate gone up for you? And if so, what is the reason for that? See, tax rate remains the same. This is for standalone or for consolidated? I'm saying console. I'm saying if you see the on-recording key. Please. Yeah, Gagan, please. So I'm saying if you adjust for the write-off that you have taken, right, and just look at the recurring profits without the write-off, and you look at the tax rate both for the quarter and for 1H, it seems that the tax rate is higher year-over-year. I'm just trying to understand. Have I got it correct? And if so, then what is the reason for the higher tax rate? Gagan, tax rate is the same. We will not get any deduction for this write-off. On consolidated basis, if you are saying that, there is a different tax rate for Baba. Okay. What is the tax rate for Baba? It is currently a partnership firm. So it will be done based on the applicable rate for partnership, which is on a little higher side. Okay. Okay. All right. Got it, sir. And is it possible to understand the impact on the top line? I mean, breakdown of the top line growth in terms of volume growth and what has been the price impact on the top line? Just to understand volume versus value, how is it? In the broader way, it is between 6%-7% on the EBITDA margin. On a detailed breakdown, we can provide you one-on-one when we meet. Okay. Okay. Thank you, sir. I'll get back to you. Thank you so much. Ladies and gentlemen, due to time constraints, we will not be taking any further questions. I would now hand the conference over to the management for the closing remarks. Over to you, sir. Thank you, Ambit team, for hosting our conference call. Thank you, everyone, for your patience. We hope we have been able to answer most of your questions. If we have missed out on any of your questions, kindly reach out to our IR advisor, ENY, and we will get back to you offline. Thank you very much, and have a good day, and happy Diwali, and happy New Year to everyone. Thank you very much. Thank you so much, sir. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.