Welcome to the Aether Industries Q1 FY24 earnings 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 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. Nilesh Ghuge from HDFC Securities Limited. Thank you and over to you, sir. Thank you, Yusuf. Good afternoon all. On behalf of HDFC Securities, I welcome everyone to this Aether Industries conference call to discuss the results for the quarter-ended June 2023. From Aether Industries, we have with us today Dr. Aman Desai, Promoter and Whole-Time Director; Mr. Rohan Desai, Promoter and Whole-Time Director; Mr. Faiz Nagariya, Chief Financial Officer; and Ms. Shubhangi Desai, Executive IR. Without further ado, I will now hand over the floor to Ms. Shubhangi Desai to begin with the earnings call for Q1 FY24. Over to you, Shubhangi. Today, on July 26, 2023, our board has approved the financial results for the first quarter of fiscal year 2024, and we have released the same to the stock exchanges as well as updated the same on our website. Please note that this conference call is being recorded and a transcript of the same will be made available on the website of Aether Industries Limited and exchanges. Please also note that the audio of the conference call is the copyright material of Aether Industries Limited and cannot be copied, rebroadcast, 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. Aether 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. Dr. Aman Desai will begin by sharing the ongoing expansions and strategy of the company going forward, then Mr. Faiz Nagariya will cover the financial highlights for the period under review, and Mr. Rohan Desai will share a broad overview of Aether's business. Now, I shall hand over the call to Dr. Aman Desai for his opening remarks. Over to you, Dr. Aman. Thank you, Shubhangi. Good evening and a warm welcome to everybody on this call. I hope everybody's doing well, and I'm very happy to connect with all of you once again and discuss the performance of our company for the first quarter of the fiscal 2024. To begin with, in terms of strategy and expansions, all our expansion plans are advancing well as charted, and the strategies laid out for our growth trajectory are firmly in its place. Despite the current headwinds, which we believe are temporary, we stand strong on our core competencies of class-apart infrastructure, state-apart technology, a focus on core chemistries and technologies, and integrated systems. We have been investing strategically in these areas, as well as continuous investments in the human capital at Aether, as well as research and development emphasize their pivotal role in the sustained growth of our company. We have successfully raised INR 7,500 million or INR 750 crore through qualified institutional placements or QIP by issuing 80.12 lakh equity shares to 36 qualified institutional buyers, which would be deployed for funding CAPEX for Site 3, Site 5, meeting working capital requirements and general corporate purposes. The agro sector is currently witnessing an inventory reset year, which has hampered both our large-scale manufacturing as well as our contract-exclusive manufacturing business model. Foraying of the Chinese competition and restarting of the Chinese industry into a few of our products in the pharma sector has also impacted us. But for the most part, I do believe that we have been able to reasonably come through in this quarter because of our strong portfolio as well as the diversity in our business model as well as the end-industry application sectors. In the material science and oil and gas sectors, we are, I do believe, pioneers in the country in terms of tying up with the innovators of these fields in their R&D platforms going on towards commercialization. We have also made a few important announcements in this regard in this quarter, which I'll speak shortly about. In the CRAMS business model, we continue to see good growth, which helps us to continuously collaborate with the elite technocrats across the borders, and the contribution of large-scale manufacturing has remained dominant in this quarter, which is on the backdrop of the commercialization of new products in the new sites that we have upcoming that we have launched in this quarter and the last quarter. There is definitely a slowdown in the agro sector in this year as the agro companies are now destocking in a significant manner, but this is a cyclical event just like the pharma companies were undergoing in the last year. We do believe firmly this is a short-term phenomenon and the things will settle out in the third and the fourth quarters of this fiscal year. Demand certainly has been hit back in this quarter due to aggressive Chinese dumping, but as is always the case with this Chinese dumping scenario, China will not be able to sustain this as there are various other geopolitical and economic factors in play in China, which does portray a good future for the Indian specialty chemical market beyond the current temporary headwinds. A major development that came along from our side during this quarter was the execution of a letter of intent with one of the three major global oilfield services companies based in the U.S. This LOI letter of intent paved the way for the execution of a strategic supply agreement between the two companies within a few months of the LOI execution. The LOI specifies four strategic products of this new customer that will be contract manufactured by Aether as the first set of products. The individual volumes of these four products, as is mentioned in the LOI, totals to 16,000 metric tons per year with a significant revenue potential to the north of INR 300 crores per year from the fiscal 2025, which is the next fiscal. We do hope to see some contribution of this in the last quarter of this fiscal year as well. These products will be supplied to the global energy and oil and gas locations of this customer, including a significant supply within India, which will be in support of the Make in India moment. This project is being undertaken by us at Site 4 under Aether Specialty Chemicals Limited, which is a 100% wholly owned subsidiary of Aether, and the project work has already begun and is actually in full swing as we speak today. Another important announcement that we did during this quarter was the signing and the finalization of the licensing agreement with Saudi Aramco Technologies Company for the commercialization of the sustainable Converge Polyols technology. After working collaboratively over the last many years in the CRAMS business model, we are now proceeding towards the commercialization of these sustainable polyols, and we are very excited to be starting off on this path. We continue to make robust investments towards R&D. Our R&D expenses for the first quarter stood at INR 124.6 million, i.e., 7.6% of our total revenues for the quarter were going towards R&D expenses. The strength of the R&D team grew from 233 in quarter four of fiscal 2023 to 262 in quarter one fiscal 2024, that is this quarter. As always, the pipeline in R&D is fully backed up for future molecules with plans to launch these molecules in the upcoming years in the Site 3+, Site 3++, Site 4, and Site 5 greenfield manufacturing sites in the business models of large-scale manufacturing as well as exclusive/contractual manufacturing. In this quarter itself, we have exhibited at the most important specialty chemical trade shows globally, which are the ChemExpo show in Mumbai, the ChemExpo show, the ChemSpec Europe show in Switzerland, the CPhI show in Japan, Tokyo, and the Chemicals America show in Savannah, USA, which gave a significant insight, as always, on the prospects for opportunities, the growth going forward, as well as continued meetings and tie-ups with some of our most important customers in the USA, Europe, and Japan. We are, as always, committed to what we have said in the past and will continue to deliver. We see a good turnaround in the third and the fourth quarters of this fiscal year and are hopeful to close out the fiscal year with good numbers and margins along with the various other developments which we've always talked about and which are in the pipeline. With that, I would like to conclude speaking, and I will now request our CFO Faiz to touch upon the financial highlights for the period under review. Faiz? Thank you, Dr. Aman, and good evening, everybody. I'm glad to inform you that the total revenue of the company stood at INR 1,638 million in the first quarter of fiscal year 2024, reflecting a flattish when compared to quarter one of fiscal year 2023. EBITDA has also been flattish year-on-year basis from INR 486 million to INR 474 million, thereby resulting in EBITDA margins of 29% in Q1. The PAT for Q1 for financial year 2024 stood at INR 202 million, which has also been flattish year-on-year based on Q1 of financial year 2023. PAT has been 18% as a percentage of the total revenues. The debtor cycle of the company is still stretched, but we have been able to bring down the debtor marginally from 145 days as on 31st March 2022 to 139 days as on June 30, 2023. We are continuously working on this area and are confident to bring it down much better by 2024 end. Now, I would request Mr. Rohan Desai to share a broad overview of Aether's business. Over to you. Thank you, Faiz, for the summary. The entire chemical industry is currently facing tough times with various segments experiencing stock corrections, especially agrochemical segments. Chinese companies have been dumping material into India after reopening their production facilities following the COVID lockdown, and the Chinese currency has also devalued significantly to aid in their dumping activities. Despite these challenges, there is a hope for demand normalization as orders are in hand to be supplied from quarter three of this fiscal year, which is expected to bring things back to normal. While raw material prices have stabilized on the lower side, benefiting the company with reduced COGS, the selling price of all the finished products has also corrected quite a bit. It has been for the first time in the history of the company that we have seen reduction in the average realization of the price of the products, which has gone down up to INR 100 per kilo as compared to the last quarter and the current quarter. With the new products that we have launched in the Site 3, the increase in turnovers of these products will help us to achieve the realization much better in the quarters to come. To save on major overheads like electricity costs, the company has installed 16 MW solar power plant, providing optimum outputs for three units of Aether Industries Limited. Further discussions for a hybrid power plant deal are already in advanced stages, which are projected to cover 80%-85% of the total electricity cost of all these three units, with plans to increase the capacity for future expansions. Continuous discussions with steam service providers have led to a decrease by 17% in the steam utility costs in the last 6-8 months. Coming to the three independent business models, in quarter one of financial year 2024, we have seen 63% of our total top line coming from large-scale manufacturing business model, 16% of our total top line coming from contract research and manufacturing services business model, and our third business model, which is contract exclusive manufacturing, contributed to 20% of our total top line. As always, we remain committed to delivering value to our shareholders and investors. With short-term challenges persisting, we firmly believe in the resilience of our business and the underlying fundamentals that have allowed us to thrive in the past. We are confident that these qualities, coupled with adaptability, will guide us through the trying period and position us for sustained growth in the future. Thank you, and back to you, Shubhangi. Thank you, Mr. Rohan. We shall now request the moderator to open the forum for question and answer. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Noel Vaz from Union Asset Management. Please go ahead. Hello. Can I be heard? Yes, sir. You are audible. Please go ahead. Yes. Yeah, I just had one question. So what I wanted to know is regarding the new molecules which are expected to come up in Site 3. I think you had mentioned that the realization should be better than the current realizations that the company enjoys. So which particular segment should this be coming from? And the particular. Yeah, coming from pharma segment. We are talking about Site 3. They are coming from pharma segments only, pharmaceutical segments. The expected revenue would be how much approximately? Expected revenue of Site 3 at maturity, which will be achieved in 2 years, will be INR 400 crore. Okay. Fine. Thank you. Also, one other question. So I had a series of questions about the polyol segment. So I just wanted to know what exactly is the realization that we are aiming for in that particular segment because I just had some doubts on that. So. Realizations and capacities? What exactly are we looking at right now? As low as $8 and as high as $13 per kilo. Okay. Thank you. Yeah, that is also my side. I'll just come back and get you. Thank you. The next question is from the line of Satadru Chakraborty from Chakraborty Family Office. Please go ahead. Yeah. Hello. My first question is really a bookkeeping question. The cost of material consumed, this is up 18% year-on-year, and then the effective tax rate that has really gone down year-on-year as well as quarter-on-quarter. So I just wanted to understand what exactly is happening. Is it inventory destocking that is happening? Is it raw material which is costing us more, and why do we see so much fluctuation in the tax rates? Yeah. So I will take the question for the tax rate. The tax rate, if you see, we have just installed the solar power plant last year, which was commissioned in July, but the plant started to give out the outputs from October. The installation, they had taken in October. So half-year depreciation was taken. This year, the full-year depreciation is taken, and the revenue is low this time in the first quarter. So it's INR 161 crore, and expenses are gone up. So the resulted PBT and the actual tax payable which comes is less. So the average tax has gone down because of the capitalization of the solar power plant, wherein the depreciation is 40% as per Income Tax. And the deferred tax liability also went down because of the increase in the gross block of the depreciation as per Income Tax Act. So the tax rates per se, what you're saying is in Q2, Q3, this will be slightly back up again in the 22%-23% range? Yes. It will come back. Yes, it will come back. As the revenue will increase, the tax rate will come back. It will come back to around 23%-24% for sure. Okay. And then the question really on the increase in the cost of material consumed. Any response to that? The increasing cost of raw materials consumed is basically a factor. It's a factor of the raw materials which are used, which were purchased at a higher price in the second quarter, which are used now because we keep an inventory of five months. Then the prices started going down. Those are now being used in the second quarter from now. We'll see a reduction in the raw materials consumed cost also. The major thing is the recovery which we are having, which has shown a decline, which is the reason for the increase in the raw material cost. Now, as we go in the second quarter, the raw material cost will still be going down because we have the inventories which are purchased at the rock bottom prices of the raw materials which were purchased recently. Mr. Chakrabarty, this is Rohan over here. The raw material prices have reduced in the last 60 days approximately, and there was a drastic fall which has happened, which is unseen before in Aether's history. So it was quite drastic, and hence, the raw material prices have almost reached the rock bottom as we speak. And as the inventory starts depleting, you will see the benefits out of the lower-cost raw materials. Makes sense. So then I think Q2, Q3, we might see some of this play out. Yes? Yes. Thanks. My second question really is on the contract manufacturing segment. So I see numbers down year-on-year and quarter-on-quarter, and you mentioned that the agriculture sector has been relatively weak. I just wanted to understand, get your color, and you said Chinese yuan has depreciated a lot, so their imports are cheaper and so on and so forth. I understand that. But my real question is so I know that you have lost price, but have you also lost volumes? And how do you see the sector, at least in the rest of this year? Because I understand that the agriculture sector recovery is probably not going to happen as much as we expect, right? So we were anticipating the contract renewal to happen in quarter one, which has been deferred to quarter two. And hence, that's the only change which we are seeing right now. This is moreover related with the destocking issues going on in the agrochemical sector. So demand is there, but they are all destocking at this moment and getting their inventories corrected. And so we are believing today that the demands will be back, and the contract will be completed in Q2, and we will see a full force of our molecules coming back in demand in Q3 and Q4 on the agrochemical side. Noted. Very helpful. I have a few questions, but I'll come back in the queue. Thank you. Thank you. Before we move to the next question, a reminder to the participant: anyone who wishes to ask a question may press star and one. Next question is from the line of Vipraw Srivastava from InCred Capital. Please go ahead. Yeah. Am I audible? Yes, you are audible. Okay. So my question was regarding the large-scale manufacturing division of the company. So just wanted to get a hang of stuff. So the new products which the company was supposed to launch, the intermediates for Dolutegravir and other APIs. So has this started contributing to the top line? Or I mean, what is the percentage contribution? Yes. It has started contributing to the top line as we speak. So all the products have been launched commercially, and they are already adding to the sales. However, with the softer demand, it is not picking up as per what we were looking for. But in Q2, Q3, Q4, we see it coming back in traction. They are not agrochemical intermediates. They are pharmaceutical intermediates. Right. So just a follow-up question on the Dolutegravir intermediate which you're supposed to be making. So Gilead has launched a drug called Descovy, which has rapidly gained market share in the US. It has 50% market share. So will it be a competition for our intermediate as far as the demand for the intermediates concern? Not on the shorter period of time, but over a longer period of time, how it sees acceptability in the market is to be seen. But in the shorter term, we do not see this as a big trouble for us. Okay. Okay. And one last question. So regarding the large-scale manufacturing, we make the intermediate for Methoxyfenozide, which is a pyrethroid, and pyrethroid prices have been coming down since the beginning of the year. So is it just a price decrease, or are you also seeing volume decline as far as MMBC is concerned, which is the intermediate for Methoxyfenozide? The volume has not declined. We are seeing the same level or some added demand which is coming up as a forecast. The only thing is it is being deferred from Q1- Q2. The discussions have been deferred because of the additional stock which they were holding, and they wanted to destock and correct the inventory position that they are in. So we are not seeing any problems on Methoxyfenozide molecule. Volume-wise, it is stable or increasing. As for the value, yes, it will correct in terms of the value because all the raw materials have decreased substantially. So we have to adjust the price accordingly. Thank you. Thanks a lot. That's all from my side. Thank you. Thank you. Next question is from the line of Akul Broachwala from Ocean Dial Asset Management. Please go ahead. Mr. Akul, your line is unmuted. Please go ahead. Hello? Am I audible? Yes, you are. Please go ahead. Yeah. Yeah. Yeah. So specifically taking this question on Site 3, so you mentioned that over the next 2 years, once this matures, you expect INR 400 crore of revenue. So you mentioned that we've already launched 3 products. And are there any further pipeline products which we plan to launch this calendar year? And basically, what's the timeline to scale this up in order to achieve this sort of revenues within this span of time? Is it completely that over the next within 6 months or so, you're able to ramp up the production and supply it, or what's the strategy behind this? So there are two different sites, Site 3 and Site 3++. Site 3 has five molecules. All five molecules have been launched. Site 3++ has three new molecules which are moreover on the agro side, two of agro and one more of material side, which will be launched in the due course of time as the site comes online. The site will come online in the next 12-14 months as of now. That is what we are seeing. So I believe you are talking about Site 3++, right? I was referring to actually Site 3 only, where you've launched five products. I further wanted to understand whether there are any further pipeline products which you plan to launch over the next couple of quarters also, or is this what Site 3 will constitute overall? The Site 3 will constitute five products. And we are looking as the businesses of the agrochemical sector are changing and the stock correction is happening, we will see the opportunity of the asset utilization and maybe launch one or two products in Q2 and Q3. Okay. Understood. And the supplies to Otsuka is also part of Site 3, or will it happen from the other side? Just wanted clarity on that. Otsuka's product is coming from Site 2. Okay. Okay. Fair enough. Thank you. Thank you. Reminder to the participant: anyone who wishes to ask a question may press star and one. Next question is from the line of Mr. Sanjesh Jain from ICICI Securities. Please go ahead. Mr. Sanjesh, your line is unmuted. Please go ahead. As there is no response from the current participant, we'll move to our next question from the line of Simar from Negen Capital. Please go ahead. Yeah. Hi. Good evening to everyone, and thank you for taking up the question. So in terms of the headroom for growth, we do have an international lever as well as the product mix. So how do you see the growth for the next year or so? We could not hear you properly, Mr. Simar. Can you just respond back? Yeah. Repeat this question, please? I'm audible, but is it much better right now? Yes. Please go ahead. Okay. Sure. Thank you. So in terms of the headroom for growth, we do have an international lever as well as the product mix. So could you say how much do you see the growth for the next financial year as well as a year or so? Before Q1, we were anticipating a robust growth happening in this financial year. Just in the last 60 days, the price crashed off all the raw materials. Most of the raw materials are available at all-time low. Even solvents and everything have crashed to the rock bottom. So we are trying our pushing our best right now to take it quarter on quarter, basically. And we believe that in Q3 and Q4, we'll be back to normal. That's what our belief is and our understanding is. And I think we will be able to come back to the original state more or less with this new advanced LOI signing which we have done and with the new 2 or 3 product launches which we are anticipating to do in the upcoming quarters to come. I don't have a number, but we believe that we will more or less reach the target which we had projected in the starting of the year. Okay. With the.... [crosstalk] Sorry. Go ahead. Sorry. Does this answer help you? Yeah. Yeah. Yeah. I got it, sir. Thank you. Thank you for this. I have another question. With the business mix, do you expect the number to be remaining the same, the pharma contributing upwards of 50% and agro around 20%-30%? No, actually. We expect that the agro and the others will pick up more in the next two quarters as compared to the first two quarters. The absolute number of the pharma will remain the same, but we are currently seeing a historical five-year cycle of agrochemical industry where it's resetting year and inventory restocking year. And so that's why in this quarter, especially, you've seen the agro component being quite small, and we anticipate that to come back reasonably well in the third and the fourth quarters. And so you'll see agro numbers going up. The pharma will remain where it is. And especially with the oilfield services company contribution coming in in the last quarter of this fiscal year, we anticipate the oil and gas and material sciences sector to also go up in the last quarter. We do anticipate continuing to equalize continuously these various portfolios that we are into. If I can slip in one last question. With respect to the contracts from Aramco, Otsuka, and Polaroid, can you elaborate how much growth that would be contributing to the revenue or the EBITDA margins in the next five years? The EBITDA margins will be in the 29%-30% range. That is what we are projecting at the moment. Anything above that would be good to have. We are targeting good margins in polyols business to start with on Otsuka, which are the primary two products which we are already manufacturing. We are seeing the EBITDA levels to be at the large-scale manufacturing EBITDA levels only. So you will not see a bump up on that part. In the oilfield services business alloy which we have done, we see the EBITDA margins to be at 28%-30% also. And in terms of the Polaroid contract research and manufacturing services, we see approximately 50%+ EBITDA margins, which is categorized as CRAMS for us. Again. That really helps. All right, sir. Thank you. And once again, thank you for your time, and I wish you continued success and growth. Thank you very much. Thank you. Next question is from the line of Satadhru Chakrabarty from Chakrabarty Family Office. Please go ahead. Yes. Hello. Yeah. Thanks for taking my questions. This time, I really want to converge on basically the two potential future drivers. So starting with the oilfield company, you just mentioned the EBITDA margin and said that the revenues will potentially start either the last quarter of this financial year or definitely the 2025. I was just kind of thinking what kind of blended realization are we expecting for this? And if you could also throw a bit more light on what kind of molecule it is and also in the light of your funnel where you mentioned that is it really the first time manufactured in India? Does it have four steps? So whatever you could add on the molecule itself would be very helpful. Yeah. So this is one of the top three oilfield services companies in the US, and they are in the oilfield services area. And what we're going to be supplying them with is across four molecules itself, we have a combined volume of almost 1,300 metric tons per month. And so this is a high-volume area. This is a good fit to our core competencies of high-pressure technology and continuous flow technology. And so that's why it's of interest to us, in addition to, of course, being the strategic association with one of the top three leading oilfield services companies in the US and being in the non-pharma, non-agro sector, which is our continued goal to diversify. Because of the high volume, obviously, the average utilization is low. And so we're talking about a $3-$5 per kilo range on a per-kilo basis. But if you multiply those numbers into the volumes that I just mentioned, it's a potential to be a game changer for the company. And what we've always given guidance is that we are actively looking at various opportunities and various areas of innovation partnership with such companies where we are talking about such game-changing areas for API. And so that kind of speaks to the average realization part of your question. And in terms of the molecules, these are used in the oilfield services. But beyond that, I'm afraid the confidentiality agreements just from sharing more information. But as mentioned in the LOI, the strategic service agreement is strategic supply agreement is being currently constructed between the two companies. We are hopeful that we'll be able to disclose the name of the company as well as more details once this strategic agreement is finalized in the next few months. As you mentioned, this could be potentially game-changing for us. We are hopeful that we'll be seeing contributions in the last quarter of this fiscal year and with the full contribution with the new site in Site 4 in the next fiscal year. Thanks. A similar question on the Converge Polyols agreement also that you signed. So here, since you have not guided to any start date whatsoever, so I was just curious, what do you think of when you can potentially record revenue for this? Because I know there are some contracting pieces also left. And any idea of what kind of volumes and what kind of realizations are you potentially looking at this segment also? Maybe some light on the I probably think you cannot throw some light on the molecule itself, but anything apart from that would be helpful. So we are setting up 2 KTA plants as we speak. That is a production line which will have a manufacturing capacity of 2 KTA for Converge Polyols. We potentially see a sale of approximately 500 tons, yeah. Sorry. 500 tons in next financial year. 0.5 KTA, that is. Then 1 KTA in the subsequent year and the 2 KTA in the third year. Okay. Very helpful. And just the last question from my side. So Site 5, per se, for which you have also now gotten some money from the QIP placement that you did. In the document itself, it's mentioned INR 330 crores of CapEx. And I believe you mentioned sometime before that this will be a mix of contract manufacturing and CRAMS. So I was just wondering, is this exactly the Converge Polyols business that you plan to do here? And similar questions then, anything that you can share on the asset turn. And I think the realization piece you already mentioned. Yes. So Site 5 will not initially have Converge. We have not planned that over there. We have planned large-scale manufacturing business models, molecules, and contract exclusive manufacturing molecules in the first stage in Site 5. And usually, the asset turns at maturity is approximately 2x, and we are targeting 2x at this moment. Okay. Very helpful. Thank you, and all the best for the future quarters. Thank you. Thank you. Next question is from the line of Kishan Parvani from JM Financial. Please go ahead. Yeah. Hi, everyone. Thank you for taking my question. Just had 2 small clarifications, I would say. So the first is, I think you mentioned about 2-3 new product launches. Just wanted to understand under which business segment would these be? Two are in agrochemicals. They are intermediates of agrochemicals. One is the intermediate of materials science. Understood. And this would be in this fiscal, right? And you don't see a challenge? That is the next fiscal because the plant is being built up. Okay. So. Site 3++. Okay. Okay. So this fiscal, there is no new product addition. I mean, it is more like a ramp-up of whatever new product that you have launched in the last five to six months, correct? Yes. But now, we are projecting that we'll go for an earlier launch of two molecules out of these three. And if the assets permit us and if the utilization is not up to the mark. Understood. Just one last clarification is that see, I mean, we are already in the month of I mean, July end, right? In the month gone by, you see any hopes of bettering the run rate in second quarter versus what you have seen in first quarter? Just wanted to understand where do we stand in terms of recovery. I know it's slow. Yeah. So Q2 is a good challenge to have. If we can better in Q2, it will give us a good momentum in Q3 and Q4. So that's the target. Q3, Q4, we are looking at as per our understanding and estimates and discussing with the various customers which we have on contract exclusive manufacturing and large-scale manufacturing, we feel we will be at normal levels, back to normal levels. And with the inventory of raw materials coming in at an all-time low, it will also aid to the margins. So Q2 will be a challenging one for sure. But however, we are trying our best to make it a better one than this Q1. Understood. Understood. That is helpful. But I'll just pitch in one last one. So whatever run rate we saw in 4Q23, right, in terms of the top line, probably 3Q24 and 4Q24 could be much better than that. Is that a safe statement? Yes. Okay. Fair enough. That is helpful. Thank you so much and wish you all the best. Thank you, Kishan. Yeah. Thank you. Next question is from the line of Vipraw Srivastava from InCred Capital. Please go ahead. Hi. Thanks for taking my follow-up. So just wanted to understand one thing. So a lot of value of Aether comes from a strong R&D team, right? I mean, its research and development team is very well accredited. So just wanted to understand that what differentiates your R&D team from your peers? I mean, in terms of recruitment, from where you recruit, or what type of compensation you pay, how is your R&D team differentiated? I'm asking this because a lot of the value which Aether caters to is from this R&D team, right? So that's why I just wanted to know this. So if you can throw some light on this. Yeah, Vipraw, thanks for the question. Great question. We are built on R&D and the initial focus. The first 3, 4 years of the company, especially we did only R&D and built on that fundamental base. We have continued to build on that. R&D remains the face of the company. R&D remains the focus of the company. As you found out, almost 8% of the revenues go towards R&D. We foresee that continuing in the next quarters to come, in the next years to come, even as the absolute sales go up, the percentage of the R&D spend will remain the same. So the absolute R&D spend will continue to increase. So that remains the focus of the company, and that is what differentiates us. I think a big plus point, especially for API, has been that the promoter family and the top management is a great mix of techno-commercial excellence. So there's absolute technical excellence in the promoter family itself in terms of organic chemistry and chemical engineering, which helps us really drive from the top and focus on this R&D aspect of the focus of the company, which makes us not dependent on key critical decision-making on any other person outside of the promoter family, which I think is a huge advantage to the company with such R&D focus. Other than that, we have a team of, I think, more than 250 R&D scientists and engineers. We have eight research groups led by PhDs and PhD organic chemists who all report into the management. Okay. That's very helpful. Thanks. Thanks Thanks a lot. Ladies and gentlemen, we have the management line connected. Yeah. Sorry. Vipraw, I don't know why I lost you, but can you just did you hear any part of my answer? Yeah. Yeah. I heard you had 250-strong R&D team till that part. I heard. Yeah. And so we basically continue to invest into R&D. R&D remains the bedrock of the company. We have a global technology leadership team as well that's helping us on a continuous daily basis. We lead from the top. We have more than 250 scientists and engineers, and we are continuously adding more to the team. We have eight independent research groups led by PhD synthetic organic chemists who are completely independent and lead the entire projects from paper all the way up to commercialization. We invest in the top-notch analytical equipment across R&D. In terms of recruitment, since we lead from the top, we don't need to recruit competency, capability, or product knowledge. We build these ourselves from the ground up, which means we basically recruit a fundamentally good understanding of chemistry and chemical engineering, which is relatively easier to get and cheaper to get as well, if I may add. And so that kind of differentiates us as well in terms of the total spend that we have on, for example, our manpower and the R&D budget. And so it keeps us in line, which helps us to kind of invest money elsewhere into equipment and facilities and capabilities. We are on the way to doubling further our R&D, hopefully by next year or the year after that, where we are going to launch an entirely new R&D building adjacent to the current R&D building with essentially doubling of the infrastructure and the manpower. So very firm plans for R&D going forward. Okay. Thanks. That's the thing, I think. Thank you. Hello? Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your question to one per participant. The next question is from the line of Noel Vaz from Union Asset Management. Please go ahead. Hello. Can you hear me very well? Yes, we can hear you. Please go ahead. Yes. So I just wanted to just cover about Site 3+. So I think there are five molecules coming, two from materials science, three from agrochemicals. So Site 3+ you're talking about Site 3++? Yes. Yes. Sorry. 3++. Yes. Two are agrochemicals intermediates. One is material science intermediate. Okay. Okay. So the agrochem molecules, these are associated with crop protection or which particular segment? Yes. Crop protection. Okay. The end application, I mean, are they going towards generic or I mean, could we have some more detail of color on that? I mean. One is generic, and one is on one, I think, is generic now, and another is under patent. Okay. Thank you. T hat is all. Thank you. Next question is from the line of Mr. Sanjesh Jain from ICICI Securities. Please go ahead. Yeah. Good afternoon. Good afternoon, Mr. Jain. Yeah. Thanks. Thanks. Thanks for taking my question, and apologies for the last time. The first question on the agrochemical side, one of your larger peers has said that the problem may persist for a few more quarters. While we didn't make the mistake of seeing the revival from Q2, is that we are coming with the newer product, the rate is lower, is that what's helping us for a faster spree in the agrochemical? That's number one. Number two, on the currency side, that Chinese yuan has depreciated. Indian currency has been stable. Sorry to interrupt, Mr. Sanjesh Jain. You are having little troubles in your line. Can you please use handset? I am using handset only. Can you hear me now? I think it's a network issue. Apologies for that. Can you hear me now? Yes. Please go ahead. Yes. Yeah. Second, on the currency side, now that the Chinese yuan has depreciated while Indian currency has remained stable, do you think this could play a slight spoil sport in our margin assumption? And the last question is on the guidance. In the previous call when we spoke, we were hopeful of doing close to INR 1,000 crore of top line this year. Do you see any challenge for that? Do you see it could be pushed by a quarter or so? Yeah. Mr. Jain, so on the RMB side, there has been devaluation. The RMB devaluation aided the sales in China, basically. So they are able to dump at a better pricing even because the RMB has devalued. So that has helped them. Now it has stabilized, I believe. So we are tracking it on a daily basis. If it appreciates, the prices of all the raw materials will automatically start correcting. That is what our understanding and assumption is. There are multiple factors, but there is one of the factors where in two weeks' time, the prices are able to they were able to correct the price by 2%-3% is just because their currencies were devaluing as compared to US dollars. In terms of the guidance, INR 1,000 crores was something which I don't know. We have never given the forward numbers to you or to anybody else. With the start of this year, we had targeted certain numbers, and we have fallen back on this in terms of quarter one. We think that with Q3, Q4 being stronger, we will reach in the nearby range. On the agrochemical cycle? Yes. So agrochemical cycle, yes, some of the peers have suggested that the whole year would be troublesome for agrochemical side. But there are a lot of products, and a lot of products play differently in the agro side. So we have very limited products. As such, we have three to four products as we speak only on the agro side, and we see the demand coming back in Q3 and Q4 for sure. Fair enough. It's more of a destocking issue only. It's not more related to the climate or something like that. Fair enough. Fair enough. Just one last question from my side. Before we turn it off, Mr. Jain, may I please request you to return the question queue as several participants are waiting for their turn? Yeah. No problem. Thank you. Thank you. Thank you for all the answers. Sorry, Mr. Jain. Sorry. No, no problem. No problem. I will come back on the queue. Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead. Hi, sir. Good evening. Thank you for taking my question. Sir, I have a question pertaining to Unit 3. I believe Unit 3 is up and running in this quarter, so wanted to understand how volume of price has been from Unit 3 and in total, and what was your average realization in this quarter? And second question is, I am seeing employee costs to. [audio distortion] Ms. Prerna Jhunjhunwala, there is some background disturbance coming from your end. I am actually traveling, so can I be a bit louder? Is it fine? Yes. No, but there's a lot of sound behind you. Yeah, because I am traveling, actually. So I will try to. You can bring it to us separately if you want. Yes, sir. Thank you. Next question is from the line of Jason Soans from IDBI Capital. Please go ahead. Yeah. Thanks for taking my question, sir. My question is at a little more broader level. So I just wanted to know clearly, in terms of the agrochemical cycle, there seems to be a down cycle setting in. And basically, it's being driven down through China, especially with all the raw materials, basically the inputs and the intermediates prices crashing down, and hence also finished goods prices also correcting. So I just want from you a sense of, in terms of what's the competitive intensity in terms of Indian specialty chemical companies as compared to the Chinese peers? Do you see this China resurgence? What is happening also affecting the sentiment for Indian specialty companies as well on ground? So the prices have corrected very sharply in terms of China dumping, and then the demand also not there. So both had a multiple effect onto the prices of all the raw materials and the finished products also. But we understand that this has reached the bottom as we speak. It cannot be sustained at this level throughout the whole year. And so we think that it will come back. It will start correcting too, and it will come back to its normal level in Q2 and maybe towards the end of Q2 or in the starting of Q3. That's what our understanding is. And then once it is back, I believe this will remain stable throughout the next financial year. So the whole Indian specialty chemical story has not lost its importance just because the Q1 of various companies have been affected because of this price correction. So if you see the last financial year also, Q1 was a tough one for the pharmaceutical-focused companies. But towards the end of the last financial year also, everything came back to normal, and everybody was quite positive on the pharmaceutical side. So the same thing is happening in the agrochemical side, and this will also come back to its normal course in the quarters to come. Sure, sir. So my question was basically with the Chinese resurgence, which was not there till probably 1.5-2 years. So they are coming back strongly. So I just wanted to know how is the momentum on the ground just in terms of China Plus One, Europe Plus One? If you are seeing any material change in the outlook, that's what I wanted. No, the outlook of the people has not changed. So the procurement teams are still believing that if they are selecting an Indian source, they would still stick to the Indian source. But obviously, if you see the ground reality, they also have a pressure to perform and to deliver a product to their customers at a competitive price. So if you are able to match the Chinese price, then you would obviously be the selected or the priority option for any procurement person through India or throughout the world. Sure. Thanks for that, sir. And just my second question. Sorry to interrupt, Mr. Jason. May I please request you to return to the question queue? Sure. Thank you. Thank you. Next question is from the line of Rohan Gupta from Nuvama. Please go ahead. Yeah. Hi, sir. Good evening, and thanks for the opportunity. Sir, just only one question. Sir, our business model is primarily identifying the opportunities or the products where there is no manufacturer in India and probably offering a better costing compared to other suppliers, primarily in China. That was the business model, and we were fairly doing well in that in identifying multiple products. What you just mentioned, sir, with the currency depreciation in Chinese yuan much sharper than Indian and increased manufacturing, you can say that aggression of this Chinese manufacturer, it has impacted us in the last two quarters and probably maybe in a couple of quarters more. Why do we think that this is just only a short-term phenomenon if the manufacturers in China remain aggressive and with the government support? Isn't it our business model is more susceptible to the Chinese supplies and in terms of our ability to protect the margin or gain market share? So our business model is not based on selling at an L1 price. It's lower than Chinese price. It is always to match the Chinese price, not go into a rat race of price decrease against China. The currency devaluation plus aggressiveness has been across the board. So it's not only at Aether's product, but every chemical product has seen this phenomenon where the product was dumped and the price has corrected quite a lot. Most of the raw materials or basic commodities have seen a rock bottom price, which has not been seen since the last 10 years also. And Chinese are selling without margins to start with, coupled with no demand. This has been fueled at a higher level where they are becoming very aggressive and impatient. But this is not going to last long, and this is going to be applied for everybody else. So it's not only Aether which is going to suffer, and the rest of the companies are going to make money, but it's going to be affecting everybody out here. And this is not a sustainable model. So it's not going to sustain for quite a long time. You cannot sell at a loss for a period of one year and not make any money and just keep on dumping material. And even if it happens with one product also, it's okay. It's not going to happen with all 20 products which we are supplying to, which we are competing with Chinese too. So I don't see a problem lasting long, but let's see how it turns up in Q2, Q3, and Q4. Thank you, sir. Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your question to one per participant. Next question is from the line of Shreyansh Doshi from Individual Investor. Please go ahead. Hey. Hi. Thank you for the opportunity. So my question only with regard to you mentioned about the R&D. So can you please help me to know how many patents did you have in the last six months, and what was last year's total patents you have done? Yeah. We are in the process development area. So typically, we do not patent. We typically keep it as a trade secret because process patent enforcement in the Indian-Asian regime is very difficult. So we typically tend to veer towards the preference of keeping it as a trade secret. But having said that, we have done three patent applications combined with our customers over the last couple of years, and these are in the works. But then we are inventors on that, but the patents will be owned by the customers because these are from the CRAMS projects that we do, so. Okay. Okay. Understood. Thank you. Just one more question is. You mentioned about purchasing with one of the Europe plants, starting with the small one. So can you please help us to know which one? You mean acquisitions? Yeah. So we are still in preliminary discussions with various people in the U.S. as well as Europe. And the idea is to be going for R&D capabilities and footprints, either extending our competencies or getting into new competencies, or a new client base would be the focus, especially in the R&D area. It would be a small acquisition, but there's just preliminary discussions still ongoing. Nothing is finalized yet. And of course, if and when we get to a finalization, we'll be keeping all the investors well-informed Okay. Thank you. Thank you. Thank you, sir. Thank you. Next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity. One question and one clarification. So one question. Basically, last year, we had got impacted because of the pharma slowdown. This year, probably because of agro slowdown. Obviously, these are the issues which are not in our hand. But what steps or what lessons that we have learned from this in terms of maybe the inventories that we keep or the contracts that we sign, the other factors which are impacting the business on a whole way? So are there any steps that we have taken? That's the first question. And on the clarification front, so we've said that all the raw material prices are coming down, and we will be able to protect the margins. But mathematically speaking, obviously, the EBITDA margins would look better. But the per-kg margins, whether they will decline and will that have an impact on the absolute EBITDA? Thank you. So I'll take the second question first. The absolute EBITDA, as the selling price decreases, the absolute EBITDA also will decrease. So what we have to do is to change the product mix or focus on high-value products more in this time to come. And then once the whole environment stabilizes, try and increase the price. So currently, yes, that is what absolute EBITDA will be affected if the top line is affected. That's because the first question in the lessons learned and the learnings and the pathways going forward, it's a great question, Rohit. We do believe firmly that the answer is what we have always said, actually. We have been focusing on this answer well before these problems in the current quarters have hit, which is diversification of the business model and the diversification of the industry spectrum and the focus on the R&D. So the R&D has to remain the focus. The R&D pipeline has to be filled with products and opportunities and areas of innovation. The focus has to be on diversification, not on pharma, not on agro, but in the other fields of material sciences and the additives and the flavor and fragrances and the oil and gas, especially, that we are focusing on currently. And so the current sustained focus is, of course, we are going to retain our hold on the pharmaceutical import substitutes and the focus on the agrochemical products that we are in, in addition to the relationships that we have curated very carefully over the last few years in the agrochemical innovator space, but also with an increasing focus on the oil and gas sector and the material sciences sector, which kind of speaks if you look at the announcements that we have made in the last quarter itself, these have all been in the non-pharma and the ag sectors. Diversifying out our business model further, diversifying out our industry applications further, and focusing on innovation, R&D, as the fundamental base of the company is going to be the answer. And if you've seen, I think we are far better as compared to the specialty chemical market because of the current headwinds. And I think that is because of the diversification that we have in terms of the R&D and the areas that we are in. Thanks, Rohit. Thank you. Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to the management for the closing comments. Thank you, everyone, for participating in the call. We hope that we have addressed the majority of your questions. If you still have any further questions, please feel free to reach out to us. Take care and have a great day ahead. Thank you. Thank you. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.