Ladies and gentlemen, good day, and welcome to the Q2 FY 2022 earnings conference call of Neogen Chemicals Limited. As a reminder, all participant 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. Nishid Solanki from CDR India. Thank you and over to you, sir. Thank you. Good afternoon, everyone, and welcome to Neogen Chemicals Q2 FY 2022 earnings conference call for analysts and investors. Joining us on the call today are senior members of the management team, including Dr. Harin Kanani, Managing Director, Mr. Anurag Surana, Director, and Mr. Ketan Vyas, Chief Financial Officer. We will commence the call with opening thoughts from the management team, post which we shall open the session for Q&A, where the management will be addressing to any queries that you may have. Let me leave you with our standard disclaimer here. Certain statements made or discussed on the conference call today may be forward-looking statements. The actual results may vary from these forward-looking statements. A detailed disclaimer in this regard is available in Neogen Chemicals Q2 FY 2022 earnings presentation. I would now like to invite Dr. Harin Kanani to begin by sharing his perspectives on the performance and the progress that the company has made. Thank you, and over to you, sir. Thank you, Nishid. Good afternoon, everyone, and welcome to our Q2 FY 2022 earnings conference call. I hope you had an opportunity to go through our results documents that were shared earlier and uploaded on stock exchanges website. I will take you through my views on the overall performance and key strategic drivers. Then our CFO, Mr. Ketan Vyas, will present you with financial overview during the period under review. During second quarter of this fiscal year, we demonstrated accelerated revenue performance, which were bolstered by high throughput levels at our plant with the contribution from our phase one expansion fully commissioned in September. Volume expansion came in despite several operational headwinds witnessed during the period under review. Our persistent focus on product and process innovation, as well as adherence to volume commitments made to our customers, has been our forte and we will continue to reinforce this to deliver superior performance. Now let me quickly share some key financial data points. In Q2 FY 2022, revenue growth stood at 38%, while EBITDA grew by 33% and profit after tax improved by robust 51%. Growth in organic chemicals was 35%, while inorganic chemicals revenue increased by 63%. As you may recall, DCM prices had corrected in Q2 of last year, resulting in lower base. Prices are back to normal levels in Q2 FY 2022. Accordingly, we have estimated a positive impact of INR 4.79 crores from pricing in our inorganic chemicals revenue in Q2 FY 2022. The rest has been driven mostly by volume growth. Moving on to some key developments. I am delighted to share that we have fully commissioned our phase I of expansion in September 2021. This was also our first major expansion from ground up to a world-class state of the art plant of specialty organic chemicals with focus on advanced intermediates, adhering to internationally followed best practices of safety and engineering protocols. This will significantly enhance our position in the chosen chemistries and will allow us to manufacture high margin value-added products based on multiple process stage chemistries. Based on solid demand for our products, we advanced our phase II project expansion timeline and commissioned the same in October 2021. This was earlier planned to come on stream towards the end of the year. Within this, we are fully capable and ready to achieve our stated revenue guidance for the next couple of years. Now turning your attention to some exciting initiatives that we are undertaking in the lithium-ion battery materials and CSM space. The board has approved an initial CapEx outlay of INR 35 crore to manufacture 250 metric tons per annum of electrolyte capacity for lithium-ion batteries, advanced chemistry cells, and developing a pilot facility to speed up process development, scale-up, and commercialization of specialty chemicals. We see number of projects with innovator customer increase with the commissioning of Dahej plant as well as overall site development at Baroda facility, which will be the main site for development of the lithium-ion related initiatives. The pilot electrolyte capacity for lithium-ion batteries is expected to be one of the first such plants in India and likely to be ready by end of Q3-Q4 FY 2023. This will enhance our total revenue potential to INR 700 crores- INR 725 crores in FY 2024 based on the contribution of initial sales of electrolyte and development molecules from the pilot plant based on the new CapEx. This will be our initial investment in this area, and we are working with our customers to decide further capacity needed and timing for the same. This is in line with our focus of foraying into high potential segment of lithium-ion battery materials on which we have been working with several customers over the last two years. As you may be aware, the government has announced INR 2 billion PLI scheme to support manufacturing and localization of advanced chemistry cell production units with focus on localization of supply chain, which is expected to benefit Neogen. Recently, on 22 October, the global tender was also released, and the timeline for execution for the same has been more clearly defined. This supportive policy action by the government and recent global emphasis initiatives on climate change control and positive response to EVs in India as well as across the world, we are seeing more and more of our potential customers crystallizing their investment plan in this area. As per industry estimates, the production of lithium cells in India is expected to touch around 160 GW hours by 2030 from negligible levels currently. This is expected to translate into the electrolyte demand of 50,000-70,000 metric tons by 2030, as per our internal estimates arrived at with customer discussions. This is a quantum leap in demand over the next decade. Our existing inorganic manufacturing capacities can further be expanded or modified to make internally the lithium salts and additives needed for the electrolytes, giving us the benefit of backward integration. Using our expertise for 30 years in lithium chemistry, we are confident of leveraging this opportunity, which will also significantly expand our addressable market size. I will now conclude by underlining the opportunities in the Indian chemical industry are immense, and Neogen will continue to deliver profitable growth performance that is driven by our recognized strength in niche chemistries. The focus will be to create sustained value enhancement for all the stakeholders while continuing to cement our leadership position. With that, I would request our CFO, Mr. Ketan Vyas, to share his views on the financial performance of Q2 FY 2022. Ketan, over to you. Thank you, Dr. Harin. Good afternoon, everyone, and welcome on the call. I will share the key financial highlights for the second quarter of FY 2021. All comparisons are on year-on-year basis and refer to standalone financial performance. In Q1 FY 2022, our revenues increased by 37% to INR 113.2 crores, largely driven by incremental contribution from phase I expansion. As you may be aware, the export incentive under RoDTEP was excluded for chemical and pharma industry by government in a notification issued in August 2021. Accordingly, a one-time charge was taken for reversal of benefit provision in FY 2021 and Q1 FY 2022 against the same, and accordingly, the revenues for Q2 FY 2022 includes an impact of INR 1.2 crores. EBITDA improved by 33% to INR 20.5 crores, translating to EBITDA margin of 18.1%. High utilization levels at our plant aided the EBITDA performance, notwithstanding several operational challenges faced during the quarter. Profit after tax stood at INR 11.2 crores, higher by 31%, driven by strong contribution from key product categories and expanded capacity. Reduction in effective tax rate due to higher revenues from SEZ facility and higher tax benefit of tax equalization linked to factoring of VAT also boosted profit after tax. In Q2 FY 2022, our domestic and export mix stood at 40% and 52% respectively. That concludes my opening remarks, and I now would request the moderator to open the forum for questions from participants. 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 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 Rohit Nagraj from Emkay Global. Please go ahead. Yeah, thanks for the opportunity and congrats on the commissioning of phase I and phase II, plus the development on the lithium ion battery side. The first question is on the electrolyte capacity. In terms of technology, if you could just let us know whether the technology is our own technology or it is taken from someone else. In terms of potential, you have said that INR 700 crore- INR 725 crore. Is this from the 250 metric tons capacity or something else? Thank you. Hi, Rohit. Thank you for the questions. Just to clarify, the INR 700 crore- INR 725 crore is the total capacity for Neogen. Where this 250 metric ton is going to contribute. If you may recall in our previous call, we had given a guidance that the existing capacity is sufficient enough to serve INR 650 crore-INR 675 crore. With this INR 35 crore CapEx, this can be increased by more or less close to around INR 50 crore, which also includes the lithium bit of the electrolyte business, as well as the pilot facility will also generate some revenue. Together, that is going to increase to INR 700 crore-INR 725 crore. As regards to the technology, the technology that we are currently designing, so it's still under the final stages of optimization. You know, looking at the speed at which this is happening, many decisions will be running in parallel. This is currently the technology which we are planning is designed in-house, and it's our own technology. All right, sir. Got it. The second question is on the long-term contracts. We had earlier indicated that we have a revenue visibility based on the order book of about INR 60 crore-INR 80 crore for FY 2022. We still stick to that and we'll be able to meet up for FY 2022, right? Yes. The long term contract will contribute in that range of INR 60 crore-INR 80 crore in the current FY 2022 financial year. All right, sir. Thanks so much and best of luck and Diwali wishes. I'll come back again. Thank you. Happy Diwali to you all. Thank you. The next question is from the line of Anshul Verdia from Edelweiss Wealth Research. Please go ahead. Thank you, sir, and congratulations on the good set of numbers. I have a couple of questions on the electrolyte CapEx with the company when they're going. One of them was answered on the previous question that INR 50 crore is a revenue opportunity which will come in FY 2024. It's safe to assume that INR 25 crore will come in FY 2023, since the plant will be operational in the second half? You know, this electrolyte is a developing story where finally we depend on, at least within India, our customers commissioning and fructifying their plants. As I mentioned in my opening remarks, with the PLI scheme, which was first announced, people who were considering this have started working more in focus. Some of them have decided on the technology. Some are still deciding the final technology of the cells, which they are going to use. Which will define the electrolytes, the specific electrolyte that they are needing and the composition of the same. We are very confident that at least by FY 2024, you know, that contribution will come. Also, the INR 50 crore which you added up, there is some contribution also coming in from our pilot facility as well, where the overall outcome of the INR 35 crore investment which we are setting up. I think, you know, for FY 2023 overall, like, since Dahej plant has just commissioned, some customers have already approved and more customer approvals are coming. It's that we would like as a management to wait up to Q4, where we can give you a better clarity on, you know, the FY 2023, and in that we can also address how much contribution will come from electrolyte as we will have a better clarity. For sure, by FY 2023, this pilot facility will fully contribute. Thank you. That's helpful. Just one follow on. First is how you plan to fund this CapEx incremental INR 35 crore. Second, I'm just trying to understand if this opportunity of lithium battery is such a big opportunity, then why, where we stand in comparison to other players? They would also be excited about this, and they would also start with the capacity building up. Any thoughts on the competitive advantage we have in going into this particular business? Your first question was, how are we going to fund this INR 35 crore? It will be a mix of our internal accruals and debt. You know, while, like, you know, there will be some time going for planning, so there will be some expense of that in Q4. Most of the expense for the fixed asset addition should happen in next year, Q1 and Q2. Mostly it will be for next year. This year there will be a limited impact in terms of increase in gross block because of this. That's answering your first question. Second is the competitive advantages which Neogen has. The advantage when it comes to making electrolyte, so there are three aspects. One is the lithium salt, which is part of the electrolyte. Neogen has been making lithium compounds. The major contributing factor in the electrolyte is the lithium salt which is inside, and that is also the heart of it. Some of the additives which also happen to be lithium additives. Neogen has now almost 30 years of experience in making this lithium salt. Some people also see a challenge to be able to source lithium, because, you know, the world is expecting lithium to be in a tight supply situation. I think Neogen's 30 years of experience of having worked with the top two, three companies in lithium, our experience to make very high purity lithium salts, where also we have to control PPM and PPB levels of impurities. This will help us, first of all, make, you know, this better. Also, as compared to other companies, Neogen has been already working on this for last two and a half years, working both with international customers as well as domestic customers who are interested. I think, you know, we kind of have a head start on that. Of course, there are, you know, global players who are also present who have been doing this. There is also a very large demand globally, not just in India, but everywhere. There could be some competition if the global players decide to come to India. Over time, you would have the India advantage and being present here in India and, whereas compared to other domestic players, they could have their own advantages. I think Neogen's advantage will be the lithium backward integration, using lithium and making lithium for last 30 years. Like, you know, having started two and a half years ago to understand intricacies of all the aspects of this. That's really helpful. Sir, we can expect there can be some dedicated client base plant coming up in the next 2-3 years if this is cleared up. Yeah. The idea is that we want to get started with this. You know, we at least have, like, almost like a commercial kind of plant, you know, outside of laboratory where it's a significant size and then, you know, you can multiply this or you can scale that up. For example, we make a plant for 250 metric ton. We can say, okay, we can make it four times bigger and it becomes 1,000, and then we can have four such lines or three such lines, whatever, depending on the volume. I think once we've done it at that scale, we'll have a better idea on detailed aspects of this technology. First, idea is to do that, and second is also to demonstrate that we can do this. Some of the customers have a requirement of this in FY, in the next financial year for their initial quantities. The idea is also to cater to them, so they also get a better understanding and experience of using new materials. As other customers come on board and have a better idea on the volumes, you know, we can plan our capacities in that way. Thank you, sir. Festival greetings and all the best for the upcoming quarters. Thank you. Thank you. Thank you so much. Thank you. The next question is from the line of Manish Jain from Moneylife Advisory. Please go ahead. Yeah. Thanks for the opportunity. My first question is, can we expect a significant ramp-up in revenue in the next two quarters since phase I and phase II organic capacity has now come online? Yes, I would say there will be some increase in revenue. Again, there are some additional customer approvals that is also required. The final, how much ramp-up will be there will depend upon, you know, how fast these customer approvals come. Sometime we have to make some quantity, give it to customers, then customer has to do testing. It will depend on some of these aspects. We are now confident to achieve the INR 450 crore revenue target, which we had estimated for this year. Roughly it requires us to do at least INR 125 crore in next two quarters, which seems doable with phase II capacity also available to some extent, some revenue contribution coming from there, as well as phase I being fully available. I would still keep INR 450 crore as my target, and then let's see how the customers and how Q3 goes, and then we'll have a better idea. Secondly, in relation to the new CapEx, whom do you expect the major consumer of this product to be like? Will it be the EV guys or consumer electronics or the renewable energy players? You know, maybe to better explain where we are in the value chain, let us say there is an EV vehicle maker, right, who's making EV. This EV maker buys batteries from someone or some of the EV maker may choose to make their own battery. That is happening even as of today. Inside the batteries, there are specific kind of multiple cells which are there. These are what are called as advanced chemistry cells or ACC in short. These advanced chemistry cells are right now not produced in a significant quantity in India. They are imported from China, Taiwan, Korea, Japan, et cetera. These will start getting manufactured. Now again, some of the EV companies may decide because, you know, battery is supposed to be a significant cost of the machine, and they may make the cells also. Some might be independent cell and battery producers who will basically make this cell. Now, for this cells, there are three main components, and you kind of given in our slide, you know, different components in a cell, in which, you know, our focus is currently on electrolyte. This is where lithium chemistry is present, and to some extent it is present in cathode. These are the two areas where our focus in there is electrolyte. The person who makes the cell will be our target. Now, of course, the final batteries can be sold to renewable as well as to EV. Based on the current estimates which are industry available, EV volume is going to be much higher as compared to renewables. It will also depend on how much renewables kind of pick up and, you know, how the entire shift from non-renewable to renewable happens. Overall, as a final industry, the EV is likely to be higher consumer as compared to renewables as things stand or the projections that we have seen, from the battery manufacturers' point of view. Okay. That's it from my side. All the best. Thank you. Thank you. The next question is from the line of Saurabh from Asian Markets Securities. Please go ahead. Thank you for the opportunity. Boss, from this new CapEx, so have we already have some understanding with the end customer for the supply of the initial 50 tons of EV production? Actually, part of the quantity has been, we have a clarity that detailed technical evaluations are going on, but still for part of it, we already have a clarity. Remaining, the customers are waiting for clarity from my side, you know, when can I get it ready so they can give me better clarity. This is what once the board has approved, we will freeze our timelines and can have more meaningful discussion with our customers, you know, their immediate requirement for the FY 2023 requirement. Yes, there should be some revenue contribution of this in FY 2023. By FY 2024, for sure, we will have, you know, this being used fully and any additional volumes which we may have to add to kind of support the customer demand at that time. Anything in terms of the timeline for the customer approvals, like even after your plant gets fully commissioned, what is the timeline for the customer approvals so that you can go ahead with the expansion? You know, this is a new area for us as well as for majority of customers, at least in India. With some of the international customers which I have talked to, the timeline, the overall evaluation timeline can be three months to six months, even nine months, depending on how stringent is the customer. Not all of that will depend upon my plant getting ready, and some of the evaluations will also happen from the materials which I make in my R&D. I would say three to six months post the plant becoming ready. It can be sooner, it can, but that would be the normal expectation. Okay. The asset turnover will be similar to our inorganic segment? You know, currently we have just made investment into a relatively small size plant for what we are currently planning. I think it's like, you know, it's too early for us to define the asset terms. I think I would like to hold back answer on that till we have a better idea of our commercial plant capacity. One more finally on this, CapEx. You mentioned that you can also modify your existing inorganic plant. Now going ahead, do we see the possibility that with a limited CapEx we can scale up the manufacturing of these lithium salts in our existing plant? Yes. One is making the electrolyte will require a dedicated facility, but the salts which are required for the electrolyte, we can, you know, modify our existing plants or suppose depending on the quantity required, we may have to set up addition. But at least in the beginning couple of years, our existing plants with modification can make the salt, which will allow us to, you know, get the salts, the lithium salts required for the electrolytes up and running faster. In the meantime, get ready for the final electrolyte handling. Okay. This pilot facility which you are setting up, so is it for the existing molecules which are in the R&D stage or on the scale-ups still, or we are looking at the more newer molecules that will come through because of the you know this new expansion which is not completed? Yeah. You know, we already have a pilot facility. Let us say there are two, three reactors in my Karakhadi plant, two, three reactors in my Mahape plant, which are doing this trial. You know, what we want to do is because now with Dahej site coming in, as we have mentioned, that, you know, there are many global international giants whom we were not communicating very strongly till our Dahej plant was ready. As we approach this, we expect the number of projects, you know, that we will be handling will be much higher. At such point of time, having this dedicated facility, will help us speed up the developmental cycle so that, let's say, future CSM business or advanced intermediate business, we can shorten the developmental time. That's basically the purpose behind the pilot facility. Of course, it will also be equipped to make some of the lithium compounds or the new lithium salts also. In some sense, it will support both these initiatives with that pilot facility. Okay. Just last bit on the, you know, for FY 2023. What could be our revenue guidance? Can you achieve what we earlier guided for FY 2024 and FY 2023 itself? Could you repeat the question? Sorry, I- Talking about FY 2023 revenue guidance, can you achieve that INR 650-INR 675 crore revenue in FY 2023 itself, given both the, you know, CapEx and commercializing this year itself? Again, I just answered one of the previous callers I would wait till, you know, end of Q4, to basically give you a guidance for FY 2023, just because you know, how long customers are taking to approve this site and there are many moving pieces. Once we have a clarity on that, we can give a FY 2023 guidance. Like, you know, our total is, the total capacity that we have is, usable, let's say 650, can generate INR 650 crore-INR 675 crore. This new CapEx can add, you know, another INR 25 crore-INR 50 crore in FY 2024. We are quite confident that at least by FY 2024 we'll have a capacity to reach INR 700 crore-INR 725 crore. You know, if the market conditions remain the same, most likely by FY 2024 we should have all the approvals in place to have a full utilization and generate that revenue. For FY 2023, would like to hold till Q4. Okay. Thank you for your answer. Thank you. The next question is from the line of Manish Gupta from Solidarity. Please go ahead. Dr. Harin, you know, given the fact that, you know, this product, there could be a lot of demand for import substitution, this is something which we have a lot of experience in. What could be the gross margin, I think, for this new project vis-à-vis our existing business? You mean for the electrolytes? Yes. Okay. I think, when it comes to electrolytes, especially at a commercial scale, what is really first important for us to know is what is the final stable volumes which we are going to make. The first question, Mr. Manish, you'll have to answer is what is the volume? At that volume, what is the manufacturing cost and what is the price which the customer is willing to pay as compared to international? I think again, it's a bit too early for me to define gross margins at this point in time. One more aspect in this is also very high fluctuating lithium prices. You know how that lithium prices will also, like, factor into the gross margins is a bit early for me to explain at this point of time. One more factor also is that how much we are able to go backwards. For example, as I mentioned, whenever we will make, let's say the salt ourselves, because we are starting from basic, like lithium output or lithium carbonate or lithium hydroxide, the gross margins will be higher. If I was looking only at the electrolyte where I was buying the salt from somewhere else, then in that case the gross margin would have been lower. Therefore, again, I apologize, but, if you can give me some quarters to understand this, you know, and as I said before, we announce a plan for bulk commercial, volume plant, we'll have much better answer for this. At present it's a bit difficult to predict. Yeah. Actually, Dr. Hari, I'm not looking for specifics. I'm just trying to understand that the stuff what we are doing on electrolytes from a complexity, from an innovation perspective, is it more value add vis-a-vis our existing business? I'm trying to understand on first principles, are we doing more and more downstream stuff or is it, you know, same in terms of complexity vis-a-vis what we do at present? Okay. In terms of complexity, let's say I would like to compare with lithium bromide, which we have been making for last 30 years. This is something which is used in engineering. As you know, we make lithium bromide, and then there is a certain. Like when you say electrolyte, it's kind of a formulation which you are making for lithium bromide, where we have to control impurities, we have to control some parameters, and we also have to have some additives to give the properties which it requires for performance. That would be my closest point of comparison. As compared to that, this is quite complex. Yes, we have experience of that. But the criticality or the degree of impurities required or control which is required is much higher in case of the electrolyte. From that point of view, yes, I would expect as compared to the lithium bromide sales to an engineering company, the electrolyte sales should have better margins overall. Your earlier question was, you know, gross margin. That's the part on which I'm right now not ready to answer was whether the gross margins will be better or at EBITDA level it will be better or, you know, because of a higher value, let's say, you know, what my expectation is that for an installed capacity or at a IRR level, it will be better. Yes, it will be more critical. Just as in engineering, once we tie up with the customer, we had those customers for 30 years. My hope is that if we can tie up with some such customers, now it will really establish a very long-term relationship, because like engineering, even in this case, the end users are not chemical companies. So they are actually looking for somebody to also bring in knowledge and experience from a chemistry point of view. So I think that's a role which, you know, with our experience we can try to play. If we do it successfully, it can be a very long business for Neogen, just as lithium bromide, which started in 1995, still is for us. Okay. Very clear. Thank you. Thank you. The next question is from the line of Nilesh Kuge from HDFC Securities. Please go ahead. Good afternoon, Dr. Harin. Good afternoon. Yeah. Doctor, actually my question is on this 315 Ah electrolyte capacity. Can you just elaborate on the competitive or the competition landscape from the domestic as well as the international players? Definitely there must be some international players who are currently ahead of Neogen, right? Where do we stand in terms of with competing the global player as well as the domestic players? I think, you know, to some extent, let's say when we are talking of the international players, yes, I mean, these international players have been making this and supplying this, for many years, so they have a better experience. To the best of my understanding, majority of them, the lithium salt producer is different and the electrolyte maker is different. One thing which Neogen is doing different is, we are doing it all in one shop, right? Some of the things or some of the decisions which we make in our lithium salts can help my final electrolyte formulation and there's a better coordination. I think this is one. Second is that right now they have many, many opportunities. They have opportunities in Europe, they have opportunity in U.S. with the speed at which the entire world is moving. You know, how much is their interest or how much resources they can give it to India, which also requires within a time, because India also wants to grow. You know, that's also another question, that will they have the India focus or would they how attracted they would be for India. That's the second. The third is, you know, they would have to start from scratch to set up the facility. Whether they can meet the timelines of the customers, because the customers want it, let's say, by a certain date. Whereas we have an existing facility, we have been, you know, this backward integration into lithium. All of these will help us to kind of do this, speed up the process and hopefully meet customer requests faster. Having said that, you know, we believe, I mean, there will be some competition or some of it might be imported, how much will be in India. I think all of these will juggle up over next 2-3 years, and we'll have a greater clarity. This is the advantage which I see over international players. Over domestic, you know, I guess I would say what I repeated earlier, that just the fact that we are doing lithium for last 30 years, we've been working on this for last two and a half years. As I mentioned also in my document, we already are in touch with some 8-9 customers. But, you know, we this is too early to call, so I don't know what other domestic companies who are thinking about this doing, and how far ahead they are. I can just guess that these are the things which gives Neogen at least some edge, to basically have a play in this area. Okay. Okay, thanks. My second question is on our existing business. Mm-hmm. I think in our last interaction you mentioned that you are negotiating with the 8-10 clients, and the molecule size is close to INR 25 crore-INR 60 crore per annum. Yes. Now with phase I, phase II already commissioned, at what stage are the current negotiations? What are the chances that you may announce new contract or anything in next couple of quarters? You know, I would like to announce, but the question is, I don't know, and see it happens when it happens. What I would say is that, yes, things are moving along. As I mentioned earlier, some of the ones who had tried pilot has now given us a first commercial order for trials. You know, some of the ones which were in R&D have given us a pilot order. Things are moving along. It's little bit difficult for me to predict again FY 2023. I would like to, again, do that by Q4 of this year to predict FY 2023. I still keep my guidance that FY 2024 we will try to have at least 20% of the revenue kind of coming in from CSM. That's a growth which I'm expecting. When can I announce, when will it happen, who it will be, what will be the size? I mean, these questions I'm not clear enough right now to answer with certainty. Okay. Okay, fair enough. My last question is on the balance sheet. The short-term debt has gone up, if I compare that with the end of FY 2021 number, and it has gone up to INR 1.3 billion from just INR 0.8 billion. Do you think the overall debt will increase further from the current level, by end of this financial year? Or what is your- Ketan, would you like to answer this? Yeah. I think as we look at our predictions for the next six months and within the volumes that we will achieve in next six months and short-term and the extent of what we spoke a little bit on lithium, I think our total debt should be around less than INR 300 crore. Short-term debt will look around at a similar level or marginally upward to meet the growth of the revenue that we'll take forward. Okay. Thanks, Ketan. Thanks, Dr. Harin. That's all from me. Thank you. Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Gaurav Chopra from Union AMC. Please go ahead. Oh, hi, sir. Thanks for taking my question. I just had one question again on this lithium opportunity. In your presentation, you had sort of mentioned in one slide that what is the composition of the cost of battery in terms of cathode materials, in terms of electrolyte. You also mentioned that what are you going to do in terms of basically you mentioned that electrolyte lithium or specialized cathode materials. Just wanted to understand from the opportunity perspective, what could be the opportunity size for Neogen in this total cost of battery? Hi, thanks for the question. You know, from as you see currently our focus and the clarity that we have is on the electrolyte segment. You know that electrolyte which generally contributes between 8%-10% of the cost of the final cell. Now, that is what basically we are clearly targeting. When it comes to cathode, there is one cathode material which is very commonly used or most popular is a category called NMC. So far we've not worked any on that. But there are some specialized cathode materials which we are working on, but they are relatively in an earlier stage of development, and we don't have also a clarity as a whole that how much of the material will be used for. How much of the industry use will be for NMC and how much for the cathode materials that we are targeting? I think for now, when we are thinking of it in terms of the business volumes, we are largely focusing on electrolytes, and this is where we currently are. I think as like as you mentioned in our presentation and in my opening call, the total demand by 2030 is expected to be like, you know, in the range of 50,000-70,000 metric tons if the 150 GWh capacity is put in place. Now, again, based on lithium prices, you know, these electrolyte prices also change, and it's a bit early to kind of predict in terms of how much crores it is. It will be in few thousands of crores by 2030. More important question from an immediate point of view is how it is going to ramp up and will it reach the 150 GWh which has been projected. I think those are the questions on which we will get a clarity in next one or two years. Got it. Now, just one question from my side again. You've mentioned that the majority of the CapEx will sort of follow in the first half of FY 2023. Is it safe to assume that if you do get a contract, if this capacity does sort of ramp up in the way it is being projected, is it easy for you to scale up the plants of all the electrolytes? I didn't understand your question. Can you repeat it one more time? Basically you said, the majority of CapEx for this project is going to happen in one half of FY 2023. Yeah. Basically, the amount taken to sort of commercialize this plant is appearing slightly low. My point is, in case this capacity for lithium cells sort of scales up the way it is projected to from your side, you will be able to ramp up your capacities as well in a shorter span. Yes. I think, you know, most of the investment that we are currently doing is for a relatively very small capacity, right? 250 metric ton per annum is relatively a very small size. Again, you know, it's a chicken and egg situation that there was not complete clarity from the customers. But in spite of that, there's as I mentioned in two answers, at least there were one or two customers who said we are going to have some initial trial runs or a trial plant which is gonna require so much quantity. Based on that, we've at least gone ahead and taken a decision. Now, based on my understanding and with the level that we are prepared, when my customer starts making a plan for making this cell, even if I start at that time making a plan for the electrolyte, my time will be shorter than the plant which is going to come up for manufacturing the cells. As and when my customer basically makes the final investment decision and breaks his ground for setting up the plant, I will be faster than them. Okay. Therefore, I don't expect much of a challenge. We are in very close communication with many of these customers trying to understand their need. They also understand Neogen's capabilities, appreciate Neogen's so many years of experience. Yes, I think we will have time to expand to meet the larger demand, you know, of our customers. Got it. Got it. I hope I answered that. That also I answered your question. Yeah. Thanks. Just last question from my side. You've also mentioned in your presentation that you're in discussion with some potential manufacturers, including overseas players. Yeah. The tied up capacity which you have just talked about, are these domestic players? They are, overseas players? The capacity what we mentioned? Sorry, please repeat. The capacity which you said that is partly tied up for your customers' R&D initiatives, initial contract. Yeah. There's a domestic player, and we are in more advanced discussion with one of the domestic player and international player as well for that. Got it. Yeah. That's it from my side. Thanks for answering my questions. Thank you. Thank you. A reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Ranjit Cirumalla from B&K Securities. Please go ahead. Yeah. Hi, sir. Thanks for providing this opportunity, and congratulations on your foray into lithium. Again, for being back to the lithium thing, I just wanted to understand how immune would we be to the disruption that is likely to happen in this particular technology. How should one view that, irrespective of the disruption in the technology? Probably the lithium salt would still be needed, and to that extent Neogen would be secure. Ranjit, thanks for this question, and this has been a question which we've been also asking ourselves, last two years. One of the things which we were waiting for, you know, is customer clarity. With higher interaction with the customers, with what we have talked, there seems to be quite a consensus that because of the property of lithium for having the highest charge to weight ratio, at least for EV, lithium will always be in the play. What form of lithium, you know, liquid electrolyte, solid electrolyte, different things which are happening, which can happen, but the lithium will be required. Lithium salt will be required. At least for next four to five years, people are thinking that the existing mix which we are targeting is going to remain. For next 4-5 years, the existing chemistry is likely to rule. There are some new things which are happening, but, you know, by the time they are first of all tested, then have a kind of a smaller launch test, then somebody internationally who understands this technology well actually puts it for use and then, for example, India starts to put it for use, that's going to be at least 4-5, six years period. Even if the chemistry changes, we'll be able to kind of have enough time to adapt to that different chemistry within lithium cell. You know, I think, you know, the only other technology which people talk about are flow cells and sodium-based batteries. Or like, in the battery space. Again, they are mostly people are considering for renewables, where the weight is not, I mean, supporting the batteries for renewables, where weight is not such a big issue. But for EV still, I think large consensus is that it's going to be the lithium-based batteries so far. Anyway, but like, you know, this is also on our mind. Currently the commitment of CapEx, which we are doing, is very limited. Whenever we do a broader, larger CapEx in future, we would also want some kind of a customer assurances to, you know, minimize the risk from Neogen, if at all the technology were to change very fast. I hope it answers your question. Yes, sir, it does. Thank you very much for that. Follow on to that, you mentioned that you are working with eight, nine players or the customers who are expressing interest in the advanced chemistry, sir. So in the event we do go ahead, would customers like only one supplier or he will be like free to kind of procure from Neogen who is also supplying to his competitors? How would the dynamics going to work in that place? If I look at the international business, both things happen. Mostly it's one-on-one relationships, but sometimes some companies do have, I mean, the cell producers do have multiple suppliers. We'll see how it works in India. Sure, sir. One final question if I may. Now, with the electrolyte and the EV also kind of gaining traction and we have the CSM side, how are you going to spend your time on these two new fast-growing activities? Ranjit, so far my time was majorly behind getting Dahej plant started because that was my biggest worry because that's something Neogen's one of the biggest investments we've made. Ensuring that they are put to use productively was my largest time. Both CSM and lithium will remain my focus, will remain Neogen's focus. Even in terms of my R&D still, you know, CSM bit is taking more resources. From my time point of view, I think because we have a team in place, like, you know, our VP R&D or our site manager or our VP business development, who already have a good understanding of CSM business already. There's enough expertise within Neogen for CSM. I think my time hopefully will be going more towards lithium-ion battery than for CSM. We'll see. I mean, you know, again, sometimes lithium-ion is future and CSM requires something today. I have to be flexible and will be flexible that way. Sure, sir. Thank you for addressing my queries. Thank you very much. Thank you. The next question is from the line of Keshav from RakSan Investors. Please go ahead. Hi, sir. Thanks a lot for taking my question. Sir, for the two innovator multi-year contracts we have, are these products scaling up at the innovator end? I mean, are these off the pre-launch phase and fully commercial? Both of these are now commercial. One of them, if you recall, is a U.S.-based pharma customer. The pharma customer has already launched the product in U.S., and they are expecting also launch in Europe and Japan shortly. Similarly, the agro customer also has made the final product out of that. I'm not fully aware whether it will hit the market this year or next year. They've not shared that information with me. Basically, both of these are commercial and have been used by the customers now and the volumes will ramp up. Sir, you mentioned in one of the previous calls of assured off-take clause you have with them. It's a multi-year contract. For the products that are yet to launch, is there a kind of risk that they might not end up doing as they've planned? I mean, yes, in this particular case, both of them have launched the product and there is always that risk, but very rarely. I mean, to the best of my experience, you know, most of these companies have invested billions of dollars to reach to that stage where they are at launch. They don't give up without clarity for three years or five years at least. Maybe I can ask Mr. Swarnakar, who has many years of experience in this, to answer this. Swarnakar, would you like to add? Yeah. No, Harin, as you rightly mentioned, all these investments, you know, they are multi-billion dollar investments done by customers. These investments are done in phases. You know, they do investment in research. They do investment in data generation. In pharma, they do investment in phase I, phase II, phase III clinical trials. In agrochemical, they spend money on regulatory approvals in each country. All this money is never, ever spent without having a very, very clear visibility about, you know, the efficacy or any adverse effect of the product or anything like that. A product just dropping off the cliff is a very, very, very rare occurrence. I mean, theoretically it can happen, but it's a very rare occurrence. These companies are very careful about making these very large-scale investments. While, you know, an assured offtake actually means a take or pay, right? Nobody gives a take or pay kind of contract, but it's a very, very remote possibility that they would just, you know, stop suddenly. Sure. And- That's yeah. Just to add to that, you know, from our side, these reactors can be used for our own other molecules also. You know, worst-case scenario, okay, we may have some time to adjust, but we can make our own molecules. Wherever we had specific equipment which were designed specifically for this product, you kind of taken assurance from the customer that suppose if they don't complete the contract, then they kind of pay us to the unutilized portion for this equipment. To that way, some kind of a comfort has been taken from the business. Yeah. Most of these plants are consumable. Yeah. Great. Really helpful, sir. So recently I came across the mention of an industry trend in the CDMO space, like especially pharma. I'm not sure about agri, about innovators asking for multi-capability CDMO, CDMOs to provide the entire basket of services. I wanted to have your view in it. Like if we go through the vertical chain, now the product would move from different stages of intermediates onto the API. Would you feel that despite of this ask from the innovators to consolidate the supply chain, an intermediate manufacturer like us would rarely graduate to the API level and the API guy would not find as much value to completely backward integrate? Would there be sort of an equilibrium somewhere in between? I'm not specifically aware of the specific trend or the discussion which you are referring to. Just looking at a business point of view, I think most of the times if an innovator is making this ask, it's to do with the questions where they have seen supply chain disruptions. Customer wants to make stability of supply. Suddenly a Chinese company stops, so because of that API producer is not able to meet it, then the customer insists that, "Hey, you should be able to make this on your own if needed." I think it's as long as we are the reliable supplier, you know, the customer would still want to continue for us to working on this at an intermediate level or advanced intermediate level. From whatever discussions I've had, I've seen, like especially in Europe, more and more companies wanting to get advanced intermediates from China, as far as I can tell. I think, at least from a Neogen perspective, there should not be a very big disruption. The biggest difference between us and a final API producer would be a completely USFDA approved site versus a site which has been, you know, following USFDA norms, which has been audited by the customer. I think there's a little bit of differences between the two sites also. We suddenly can't from tomorrow start making APIs. An API company, when it has an option of making APIs, which is already in demand, would not want to make intermediates or KSM, with a very short notice, unless it has supply security issues. This is just my views on that, but I think, let's see how it progresses. One last thing. Are we being conservative when we forecast the INR 650 crore top line? Is it potentially the minimum or maximum or it's our expectation to reach this level and sort of gradually increase utilizations? Because we already did INR 270 crore of revenues in organic in FY 2021. I can understand that newer capacities would be more for API and KSM and more of dedicated facilities. Are we saying that INR 650 crore is the max we can do or more like we'll start from this but potentially can scale more from the same capacities in the years to come? From the same capacity, it will depend upon, you know, how the product mix that we ultimately land on, the percentage of, you know, reactor capacity needed for a unit dollar, for a metric ton is required or per value of the final molecule is required. Yes, I mean, what we feel is that if my reactors are used, you know, we should be able to get INR 650 crore-INR 675 crore based on the based on the mix of molecules which we have in target. Okay? Like for example, if I were to do only bromine derivatives, it could be slightly higher, in terms of revenue, but then margins may have some other impact. This is kind of a mix. It's neither the minimum nor the maximum. Okay? With the existing capacity, that's what we can do. Again, as we stabilize more, we will have an idea on what is the maximum we can get out of the existing capacity. Thanks a lot, sir. Thanks a lot. Thank you. Ladies and gentlemen, we will take the last question from the line of Manan Shah from ICICI Securities. Please go ahead. Yeah. Thanks for the opportunity, sir. I have one question, and that is related to the base business. We have seen, you know, the price increase for the bromine from China by around 2x. How is that affecting our base business? I mean, is there any positive impact in terms of the international business inquiry for the advanced bromine intermediates? Because I think the domestic bromine prices are almost at the same level, if I'm not wrong. Can you please share thoughts on that? Yes. We have seen, for example, a lot more interest from our international customers in the last one month, since at least a news article came that Chinese bromine prices have doubled, or like have not doubled, but at least have increased significantly. Now, you know, China sometimes go through this cycle, so we'll have to see, first of all, how stable this is, whether it's short-term versus it's long-term. Because unlike India and Europe, China tends to be a month-to-month very high variable market. They don't have this annual contract kind of a concept that we have, or they fix a volume and do it. Sometimes the spot prices can be a bit misleading. We'll have to watch that. Yes, the immediate effect of that is that several international customers who were also relying on China and India have told us that, "Hey, you have new capacity. Can you give us some more quantities?" You know, we are also trying to see because most of these customers would require full commitment for next year. We also are talking to our suppliers to get a view of next year and see whether the customer would be interested with the new prices. The immediate outcome is, yes, we are getting more inquiries about business. We'll get to know next quarter. China, are they into advanced bromine intermediates also, or they are mainly into the bulk business? Actually I call three. One is bulk bromine derivative, which is the flame retardant, the water treatment, oil field, etc. That is what I call as bulk. Then I call as specialty bromine derivatives, which are like, you know, which basically don't have a demand of, like, more than 1,000, 2,000 tons per annum. Third, what I call is advanced intermediates, which we make. When we talk of advanced intermediates, we talk of molecules made, which can be bromine or non-bromine using this specialty bromine derivatives. I would say China is in all three spaces. Yes. They are present in bulk bromine also. They are there in specialty also, and to some extent they are there in the advanced intermediates also. We are witnessing demand from which space because of this thing? We are not into bulk, so I wouldn't know the answer on that. We are seeing inquiries on the specialty bromine space because that's the place where we have done, like, you know, where there's an immediate impact of bromine price. At an advanced level, the impact of bromine sometimes gets a bit limited because there are other factors which contribute more, other than bromine. Sure. Thank you so much, sir. Thank you. I now hand the conference over to the management for their closing comments. Over to you, sir. Thank you all the participants for joining the call. I hope we are able to satisfactorily respond to your questions. If you have any more questions, please feel free to contact our investor relations team, CDR India, and we will address them. Wishing all the participants festival greetings. Happy Diwali. Stay safe. Thank you again, and we look forward to connecting with you in the next quarter. Thank you. Ladies and gentlemen, on behalf of Neogen Chemicals Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.