Ladies and gentlemen, good day, and welcome to Gujarat Fluorochemicals Limited Q3 FY24 results, followed EV business update conference call hosted by ICICI Securities. As a reminder, all participants' lines will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashvik Jain from ICICI Securities. Thank you, and over to you, sir. Thank you. Good evening, everyone. Thank you for joining on Gujarat Fluorochemicals Limited Q3 FY24 result, followed by EV business update conference call. We have Gujarat Fluorochemicals Limited management on call, represented by Dr. Bir Kapoor, CEO and MD, and other members of the senior management team. I would like to invite GFL management to initiate with opening remarks, post which we will have Q&A session. Over to you. Good evening, everyone. Very warm welcome to all of you on this GFL Quarter 3 FY 2024 earnings call. I have with me here our Group CFO, Mr. Akhil Jindal, our CFO, Mr. Manoj Agrawal, and also our Investment Relations Head, Hello, hello, sir. Can you speak louder? Can you keep the device closer to you? Your voice is- Is it better now? Yes, it's clear. Good evening, everyone. A very warm welcome to all of you on the GFL Q3 FY 2024 earnings call. I have with me here Mr. Akhil Jindal, our Group CFO, also Mr. Manoj Agrawal, our CFO of GFL, and Mr. Vibhu Agarwal, who's our Director of Investor Relations. The company announced its Q3 results at its board meeting held today, which is on seventh February 2024. The results, along with earnings presentations, are available on the stock exchange and on our website. I will briefly talk about the numbers and then give you an update on the business operations and the outlook. The company reported a consolidated revenue from operations for Q3 FY 2024 of INR 1,992 crores, 992 crores, up by 5% quarter-on-quarter. Consolidated EBITDA for this period was INR 206 crore, which is up by 26% on quarter-over-quarter basis. The EBITDA margin stood at 21% for quarter three, FY 2024, which is up by 400 basis points on quarter-over-quarter basis. Consolidated PAT for this quarter was INR 80 crore, which is up by 51% on quarter-over-quarter basis. Let me briefly take you through the performance of each business segments for this quarter. As we had guided in the previous call, we have started witnessing the signs of bottoming out and growth from here on. All three segments, which is fluoropolymers, bulk chemicals, and fluorochemicals, have performed in line with our expectations. Bulk chemical verticals saw a marginal lift from the previous quarter, and the prices are at nearly the same level as previous quarter, which we believe have bottomed out. The fluorochemical segments also witnessed marginal growth compared to previous quarter, primarily driven by refrigerant business, which had been at its all-time low in the previous quarter. The refrigerant business is expected to improve marginally from the next quarter. The specialty chemical continued to be at the same level due to dumping from China. The fluoropolymer segment saw a marginal decline from the previous quarter. The prices remained stable. However, the volume were marginally impacted due to the quarter due to holiday season in USA and Europe, which is a seasonality impact. We are seeing signs of growth in this segment in the current quarter, and we believe that destocking phenomena, which we had seen in previous quarter, seem to have been largely over, and we expect to see volume picking up from here on. As we had indicated in the last quarter, our endeavor is to move on to higher grades, which is continuing, and this, along with the exit of legacy player, should yield better results for GFL in this segment going forward. Additional fluoropolymer capacities that were recently set up are expected to result in continued increase in sales over the subsequent quarters. EV, green hydrogen, and semiconductor and solar, among others, emerging businesses should contribute to further increase in demand going forward.... We are definitely seeing green shoots of recovery and expect FY 2025 to be far better as compared to FY 2024 for this segment. We hope to come back to normal levels in the next few quarters. On our new vertical, the battery chemical, we have scheduled a detailed call immediately after this, where we elaborate our plans and outlook for this segment. This segment would be a major growth driver for us, starting FY 2026. Of the INR 1,500 crore CapEx that we had announced in the beginning of the quarter, we will be spending close to INR 1,000 crore-INR 1,100 crore this year, and rest will be staggered to the next year. With CapEx already incurred and some additional in the next financial year, we believe that we have built enough capacity in the fluoropolymers to be able to deliver growth for the next couple of years. Going forward, we expect our major CapExes to be incurred in our battery chemicals vertical. On the balance sheet front, our return ratios have reduced during the financial year on account of higher capital expenditure towards setting up of additional capacities, and at the same time, the revenues have been affected majorly on account of destocking. We believe that this should reverse going forward, and currently, non-revenue generating assets will start contributing to the top line. A large part of the current CapEx is incurred in the battery material segments, and also the expenditure in the form of CWIP for various fluoropolymers, which is currently not contributing to the revenue and bottom line. As we had indicated, revenue from this segment will start to kick in from second half of FY 2025 onwards. The working capital base has also increased primarily on account of reduced sales. This is expected to reverse and improve significantly going forward as the overall revenue improves. I can assure you all that the growth fundamental of our core business is intact, and this phase is temporary, leading primarily due to the global destocking and low demand in some of the geographies. We have already started seeing signs of recovery, and we can assure you that, from here on, we expect to see quarter-on-quarter growth going forward. With this, I'll let Rohit now open for - open the floor for question and answer. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead, sir. Yeah, good afternoon, sir. Thanks for taking my question. I have a few of them. First, on the fluoropolymer business, last quarter, we said that we have pushed some of the CapEx to FY 25, and now that we are gaining confidence, when do you expect to resume that CapEx for fluoropolymer? And earlier we said that we are in the process to expand the new fluoropolymer capacity from 700 metric ton to 1,800 metric ton. When should we be able to reach that 1,800 metric ton capacity, and what is the ramp-up time we are anticipating now? That's my first one. Thank you. Hello. Thanks, thanks. Good afternoon. Good afternoon, sir. As we had said, the last quarter, that we are staggering our CapExes in view of the market situation. So clearly, we had anticipated overall CapEx of INR 1,500 crore, which is now going to be INR 1,000 crore-INR 1,100 crore. So the rest we expect to complete, in next two quarters of the next financial year. Regarding the utilization of this capacity, we had already mentioned that utilization of this capacity will take several quarters, particularly in fluoropolymers, which is the, you know, in the new fluoropolymers segment, particularly. So we would see this utilization becoming, probably next over one year period, probably four quarters. And this will, this will happen over a period of time because the capacity utilization requires great development, great approval process, which goes in a sequence, in a stepwise manner. It will take some time after CapEx is incurred, the capacity is in place. As of now, we have capacities in place and the plan to cater to whatever the growth that we expect to see in the fluoropolymer segments. Got it. Got it. One follow-up again, what you said last quarter, that the legacy players have built a large inventory in the market. Our business continuity. How is our discussion with the customer indicating when should they really start picking up on material from us? Is it second half, or it is in first half of 2025? And we were also in the process of developing FFKM, which is one of the large product from the existing player. Where are we in that process? Yes, Sanjesh. First of all, legacy player, we are already seeing, you know, inquiries. We are already engaged with some of our customers, and we expect that their existing stock will be depleted in next, 1-2 quarters. So we are most likely, I would say, next year's beginning or, I mean, middle of next year's financial year is what we expect to see the revenue stream or the impact of that showing up. Now, coming back to, FFKM that you asked, this is, again, as a part of our strategy to go up high up in the value chain. We are at the advanced stage of product development. This will, again, being a very high-end product, it will require some sort of approval process and the testing at the customer end, which we expect to see in probably, I would say, two quarters from now. We are ready with the product on the FFKM side? Almost there. Almost there. Got it, got it. One question- These are strategic initiatives, Sanjesh. I cannot share much on this. No, no, no, I appreciate that. I appreciate. One on the gross profit side, though, EBITDA margin has seen a good improvement sequentially. Gross profit has remained largely stable, at around 64%. With the rise in fluoropolymer business, we should be again inching back to that 66%-67% kind of a gross profit margin. Will that be the assumption? Yes, I, we expect that. I mean, with the fluoropolymer, we should probably be getting back to the same levels of profitability in the gross margin. Got it. Got it. One, one last question, before I join back in the queue. On the CapEx side, I, I see the presentation, the CapEx for next year has been reduced to INR 500 crore. Any particular reason for, cutting the CapEx? Let's, let's not misinterpret it. Let me, let's really clarify it here. INR 500 crore is probably more like an ongoing business that we are talking about. What we have done this time now, Sanjesh, is going forward, since we are having a separate call on EV later today. Okay. This does not include the CapExes that we'll be incurring on the EV side. This is for the non-EV side of the business, 500. Absolutely. Which is- Oh. Which is, right, because we already have put in significant amount of CapEx now in the fluoropolymer, where the capacity has been built in. We will take some time to utilize it, so we'll... So our CapEx in the existing businesses in the fluoropolymer would probably start later on, but as of now, we are looking at the next year around INR 500 crore, which is, again, is a staggered from the last few quarters, you know that. So what will be the CapEx in the chemical inputs? As the overall CapEx, does the overall CapEx envelope changes for us or just mitigation? Not really. Overall CapEx does not impact. You will hear the EV story later on. Maybe it may go up in totality. Got it. Got it. Fair enough, sir. I will come back in the queue for more questions. Thank you. Best of luck for the coming quarters. Thanks, Sanjesh. Thank you. Thank you. The next question is from the line of Hansal, from Lakkar Securities Private Limited. Please go ahead. Yeah. Hi, good evening, sir. So obviously, it's encouraging to observe the positive developments, particularly with the growth in volumes and some sort of resolution to this destocking phenomena. And we're hopeful that, you know, we'd probably see price rationalization to follow through. Just, you know, taking it ahead from the previous question on the CapEx, slide 13 of the presentation has a footnote, regarding the FY 2025 CapEx, which excludes the GFCL EV CapEx. Now, I'm not sure if I should ask this question here or on the EV side, but I'll ask it anyway, since it's part of the GFL presentation. This CapEx, which we plan to do, apart from the INR 500 crore, ideally, you mentioned that it will obviously be funded through its own SPV. So, I mean, is there some dilution involved over there, or because I mean, or will it be debt? So I'm not really clear on that. And, you know, to follow through on that, you said that, you know, it seems to be without any recourse to the parent, GFCL. So, exactly what would that... What is the company emphasizing when it says no recourse to the parent, GFCL? I request to you that answer this at our EV call separately, because the EV business has its own CapEx, and right now we have separated it out, and I would- No, sure, sure, sir. I, I completely understand. I was just not sure whether I should ask it here or there, given that it was a part of the GFL presentation. I'll take this question up on the EV side. Thank you. Thank you so much, and all the best. No, no, thank you so much, and we'll, we will discuss, and share our plans in the EV call separately. Thank you, Mr. Kapoor. Thank you so much. ... The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. Am I audible, sir? Yes, I can hear you. Thanks, Rohit. Yeah, thanks. And congrats on the recovery in third quarter. So first question is on our guidance, which we had indicated during last call. And we had given that in the next couple of quarters, we'll see an improvement in margins, which has actually been delivered in Q3. And fully recovery in terms of margins, et cetera, should be in Q1 FY 2025. Even we had guided that FY 2025 should be better than FY 2023. I just want a little more, you know, probably if you can give us some granular details in terms of how things are likely to, you know, change from FY 2023 to 2025. Just to give a color on this, FY 2023, the bulk chemicals had a significantly high margin, which is normalized, so FY 2025 will be normalized margin scenario. In fluorochemicals, again, we were significantly benefited from the ref gas pricing, which has again normalized, and probably should be normalizing going forward. And in fluoropolymers also, we had a favorable pricing environment, plus the current, you know, higher stocking by one of the suppliers who is exiting was also not there. So if you can just give us a little more understanding, how things will populate over FY 2025 to be better than FY 2023, that would be helpful. Thank you. Yeah, I think, the way we are right now, you know, we are seeing a sign of growth and, green shoots emerging. Looking at the current situation, yes, we will—our margin will improve going forward in the subsequent quarters. Coming back to how FY 2025 would look like, it will probably be approaching toward 23 better, but it'll probably be delayed by a few quarters, Rohit. Not exactly, may happen, but we will be started seeing, going beyond 23. Let me tell you why I was saying beyond 23, because you mentioned that the bulk chemical, and the upside on the refrigerant will not be there. However, on the fluoropolymers, if you look at it, that we are expecting significant growth, partly because of the investment that we have made, and we expect the growth to come from a new fluoropolymer segment, which is a higher end segment compared to the baseline fluoropolymer that we had earlier. So in a way, our growth story now in FY 2025, we are not accounting for, you know, the similar kind of uplift in, refrigerants, but a lot of it will come from the fluoropolymer segment. Okay. Sure. Sure, sir. And, I understand that this should be driven by both in terms of higher grades, which will entail higher margins and the volume growth that we are targeting. Is that correct assumption? Yes, because, you know, we have added capacities. Also there is one more reason we would like to mention here, that, in fluoropolymers, our investment is also on the backward integration to some degree, you know, our own, to have better margins. So all combination of all of these will probably result in a better margin in the fluoropolymer segment than what we have seen in the past. The top line and the bottom line both. Sure, sure. This is really helpful. The second question is on slide number 13, where we have given the RoE, ROC, and the footnote regarding the capital employed, and CWIP has been, you know, excluded. I believe that we will... I mean, generally, whenever we'll be, you know, providing capital employed, it will include the CWIP because that's an ongoing process at any point in time. So any specific reason of giving this particular ratio without using that? And a light question to this, I'm not too sure whether it will be taken in the second call or not, but just to mention it over here, incrementally, whenever we are providing our financials, would we be plugging the financials of the EV business as well? Because on a consolidated basis, the consolidation, if it is a 100% subsidiary, the consolidation will happen, and the ratios should actually reflect the investment in both the businesses. So just your color on this. Thank you. Yeah, thanks, Rohit. I would request, Akhil to take this question. Yeah. Hi, Rohit. So, what you're saying is right, from an absolutely accounting perspective, I'm not disputing what you said. I think from a, you know, real business operating practices, if you see the EV business are now being, you know, it's a subsidiary. All our investments in the subsidiary will have its own, you know, its own ratios and its own, you know, financials. Although, in the consolidation, it will, any which way, anyway will come. But from a ROC ROI perspective, our intention was to explain to the street two things: One, that on an operating basis, what are our ratios? Number one. Number two, if you separate out EV business, which has just started, I mean, you know, we just announced some commercial production now. How the EV business will shape up in the future will be handled in a separate call. So from a market perspective, we thought that operating numbers of what it is for the operating capacities is a good indicator of our profitability. And as we go along, as the capital work in progress will become a part of our operating capacities, that would also be reflected in that manner. So there's a, you know, a thing that we have done to explain to the market. On our operating capacity, what are the ratios? Just, just a clarification, sir. In terms of now, once the EV part of the business gets capitalized with LiPF6, et cetera, so how will we then, you know, show the ratios? So will it be including the EV and excluding the EV? I mean, we would—whether we will be bifurcating it or whether that will, that time it will be again consolidation or separation? Yeah. So, so on a consolidated basis, obviously the EV CapEx will be a part of our overall GFL balance sheet. But from a standalone perspective, from a financial ratio perspective, you will see the EV ratio as in a separate manner. So, naturally, it's a subsidiary of GFL. So in an overall consolidation, line by line consolidation, everything you will see the impact. But however, as a matter of abundant, you know, caution, we thought the operating capacity should be highlighted separately, and the return from that operating capacity be highlighted separately, so that people can understand what our real, real, you know, real ratios on, on our capacities, will be going forward. Sure. Thanks for answering both the questions, and best of luck, sir. Thank you. Thank you, Rohit. Thanks, Rohit. Thank you. Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi. Good evening, gentlemen. Thanks a lot for the opportunity. So first one on the HFC-32 project that you sort of shelved off earlier. I think our competitor is beefing up their CapEx to almost double the capacity in R-32. Do we have any plans to sort of resume that or put it under consideration? No, Archit, we do not have any plan of in R- 32 at the moment. We had some plans, you know that, and we shelved it, because, you know, we are getting into other areas, and, for a long-term sustainable, growth, we thought of, other opportunity which are available to us, to invest our CapEx. Sure, sir. No problem. The second one, not sure if I asked already to you, if you already answered this question, but, if you could provide an update on, the solar grade PVDF, the battery binder grade PVDF, and, the semiconductor grade PFA. Where are we in the, in the scheme of things towards development and commercial launches of these products? And, what's the expected timeline, of, of, introducing these products in the market? Yes, Archit. The solar grade PVDF, you know, we had a plan of setting up a film plant, which is a PVDF polymer film plant, which is under commissioning as we speak right now. We will soon announce its commercial production. It's at advanced stages right now. Okay. On PVDF, which is for a battery grade, we have developed several grades, which is again going through the lab phase. Lab testing has been over, even at some of the outside labs. And now this is, we are in touch with the OEMs to get it validated and certified. That's already moving. Coming back to the semicon grade PFA, we are already supplying. In fact, I had indicated that since some quarters back, that PFA semicon has several levels. We are already supplying to some semicon application PFA, and we are continuing in that direction to going to the next level of PFA for semicon application. Okay. That process is on, and we are already in that market segment. Oh, great, sir. Great. Sir, the PVDF, the grades, the first two grades that you spoke of, can we expect sales to begin in 2025 to be the first half, or is it still quite late in realizing sales at least? We expect to see the sales, probably, in the second half of next years, because, this next financial year. Because, part of the... You know, right now, the battery capacities outside China's are very, very limited. Okay? While our samples are already at the evaluation stage, the real growth we expect to happen, in the non-China, territory. And there, we expect to see probably in the 2026, 2027. However, as far as our own sales and the revenue, we probably would expect to see it from the, second half of next financial year. Got it, sir. Also, would this also be a part of the staggered increase in capacity that we're planning in new fluoropolymers, so just mind clear there, what would be the concentration of the incremental jump that we are seeing on a per month basis, which is the ramp I think we were at 1,100 TPM and our plan was to go to 1,800, 1,900 TPM in a staggered manner. So are these new grades of PVDF or PFA part of that, or this is completely different? And how do we see that part of the ramp up in the new fluoropolymers with the capacity expansion? Okay, no, these are part of the same capacity that we talked about earlier. So this ramp up will come over a period of time, because, once this PVDF gets qualified, this capacity will get utilized. Okay? So this will happen over a period of time. Sure, sir. One more very quick, Archit. When I said next financial, I meant 2025, 2026. I'm sorry. Did not have clarified it at that time. Sure. Okay. All right. So also on the ramp up that I was asking about, where are we in terms of the capacity that we might have added already in FY 2024? And what would be the balance that might spill over to FY 2025, wherein we would have already ramped up from 1,100-odd tons to 1,800-1,900 tons per month. That would be my last one. Thank you. See, in the battery chemical space, particularly, you know, if we... First of all, we cannot give you exactly the capacity utilization and the capacity number. However, all I can tell you is most of our investment, when we said that we have made in the new polymer, it was done primarily, a lot in the backward integration space. Okay. For example, in case of PVDF, a lot has happened in building up the capacities for monomer and VDF. So, as the market builds up, okay, we already have added capacity for PVDF reactor, and as market builds up, we'll keep on adding reactors to capture that. Okay? So as we see a growth increasing, which we have said will happen in over a next year or so. Would it be safe to assume that all the new this expansion wherein we were actually anticipating, you know, the fact that FY 2025 would see growth over FY 2023, or at least thus far with respect to business that we generated in FY 2023? I think that was largely a function of this CapEx in the new fluoropolymers. My limited question is, which I'm a bit confused about, is when do we see this capacity being added? That's the only question that I have. Thank you, sir. Yeah, I think there's a... Let me clarify here. The capacities that we're talking about, which we had said earlier, about 1,500 tons or so, okay, that capacity will come in place, probably in next quarter or so, and then it will get utilized over a period of time. I thought when I answered about adding more reactor, that was more related to the battery chemicals and the PVDF related to it. Okay? Because, because when-- if we look at what we have added in new polymer, we have added FKM, we have added PFA, we have added micropowders and PVDF. Okay, so it was a combination of these four. Okay, so what I had answered to you, probably, it may have been a little bit confusing, but what I answered to you earlier was only in context of PVDF, which is for EV segment. So you were asking about how the growth will happen with the EV. Okay. Is that clear, Archit? Sir, I'll probably take it offline with you. Sure, sure. Thank you. Thank you. Okay. All right. Thank you. The next question is from the line of Meet Vora from Emkay Global. Please go ahead. Yeah. Hi, sir. Thank you for taking my question. Just wanted to, sorry for harping on this again. Just wanted to clarify on our guidance for, growth over FY 2023 in FY 2025, or either numbers. So if I look at our historic numbers, our FY 2023 EBITDA of INR 1,900 crore, nearly half of that would have come because of three reasons. One is, higher, realization in base chemicals, higher pricing in F-gas, and, at the same time, higher pricing in fluoropolymers. Now, when we say that we are freezing our CapEx at this juncture of our fluoropolymers, because this is a long gestation business and capacities will get utilized over a period of time, what gives us the confidence that at least half of our EBITDA of FY 2023, can be compensated in FY 2025? So ideally, I think that we should see at least 100% growth in our fluoropolymers business for the erstwhile, you know, dip in the business growth. So just wanted to understand how will we see that at least passing through our growth numbers in FY 2025 versus 2023? I think, Meet, I have already said that in the previous call that, There was a, if you look at FY 2023 numbers, the EBITDA was partly contributed because of the high pricing in, in, bulk as well as refrigerant. Going forward, this will be missed primarily by the, fluoropolymers, and because that the high EBITDA number that you saw. Because fluoropolymers, multiple things are happening. As I said, we are adding, the fluoropolymers, the volume as well as the, the type of fluoropolymer which are being added are high-end polymers, which are the new polymers like that. So, so this will be made up by, growth in fluoropolymers primarily. Okay. Sure. Again, you need to look at the sort of the from the baseline to the increase due to the ref gas and also because of the, partly because of 125, if you recall at that time, okay? So, that will be taken care of partly by. And obviously, when you look at this year or the earlier quarter, a lot of it because of all the segment market has completely bottomed out, okay? So as we see, there's already a sign and some marginal improvement in the ref gas, which you saw this year, this quarter. Again, it will probably be marginally better than next year. Plus, even if the bulk chemical stays where it is, a lot of it will be made up by fluoropolymers. Sure. So that means that we are expecting at least 80%-90% growth in fluoropolymers or FY 2023 for that to get compensated. Obviously, the realizations of fluoropolymers have also gone down versus the FY 2023, in terms of volumes, basically. Yes, that's what our expectation is. Yes, partly, partly because of the new fluoropolymers and the higher volume and the higher margins both. Sure. Just one last question from my side. Whatever sales you will be doing for PVDF battery grade, going forward, will be registered, I mean, in terms of the revenue, under the EV subsidiary, or it will be under, GFL Limited itself? It will be under EV subsidiary. So... Sure, sir. Thanks. That's all from my side. Thanks. Thank you. Thank you. The next question is from the line of Sanjay Kular from Acme Private Limited. Please go ahead. Sir, again, my question is on the same topic, which is, you know, FY 2025 EBITDA will be greater than FY 2023. So, sir, are you confirming the guidance again in this con call? Sanjay, let me clarify here. Our position right now is that it'll probably be at par with FY 2023, not greater than FY 2023. And probably would be a, you know, a quarter here and there based on what we are seeing as the traction is coming up, or the growth rate, plus, could be plus minus 1 quarter or so. So it will be at similar levels as of FY 2023 going forward, in FY 2025. Okay. Thank you very much. Plus, give or take a quarter.