Acutaas Chemicals (NSE:ACUTAAS) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Acutaas Limited Q2 FY 'twenty seven Earnings Conference Call hosted by Acutaas Securities Private Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Garekar from Equity Securities Private Limited. Thank you, and over to you, sir. Good evening, everyone, and thank you for joining us on ACUTAAS Chemicals 2Q FY 'twenty third earnings conference call.

0:45 Today, we have with us Acutaas Chemicals Management presented by Mr. Naresh Patel, Chairman and Managing Director Mr. Abhishek Patel, Vice President, Strategy and Mr. Bhavin Shah, Chief Financial Officer. I would now like to invite Mr. Bhavin Shah to initiate the proceedings. Over to you, sir. Thank you. Thank you, Siddharth. Good evening everyone. We are pleased to welcome you all to our earnings conference call to discuss Q2 and H1 FY twenty seven financials. Please note that a copy of our disclosure is available on the investor section of our website as well as on the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as forward looking statement must be reviewed in conjunction with the risk that the company may faces.

1:42 The conference call is being recorded and the transcript along with the audio of the same will be made available on the website of the company and exchanges. Please also note that the audio of the conference call is the copyright material of Acutaas Chemicals and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company. Now, I would like to hand over the floor to our CMD, Mr. For his opening statement. Over to you, sir. Thank you, Bhavin. Good evening, everyone. I hope you are all doing well.

2:30 With Diwali just around the corner, I would like to extend warm wishes from the Acutaas family to you and your loved ones. May this festival seasons bring you... Bring joy, prosperity, good health, and success to everyone. Wishing you and your family a very happy Diwali. I will start my remarks with pharmaceutical intermediate business. Demand environment remains robust, and whatever cost pressure we face due to geopolitical issues, we have been able to pass them on successfully. On the generic side, several large products are going off pattern. We have already developed intermediates for those products long base. Therefore, we are benefiting from our strategy of developing products ahead of the market.

3:16 Coming to CDMO, during our Q3 FY twenty twenty five earnings call, in January 2025, we had set our ambition of achieving INR1000 crores in CDMO revenue by FY twenty twenty eight. Based on the current orders of existing as well as new CDMO contracts, we now believe we will achieve this target one year ahead of schedule. It means in FY '27, we will be achieving this 1,000 crore. Here, I would like to highlight that we continue to add very exciting products to our CDMO pipeline. A couple of these products, we have potentially to become billion dollar product for our innovative customers. Here, I would like to say that the CDMO business will be double in next, three financial years. It means from 1,000 crore to new issue... New target we had set as 2,000 crore by FY 2013.

4:12 Now let me move to specialty chemicals. Starting with battery chemicals, from industry point of view, demand continues to exceed supply. I'm happy to say that this was our first quarter of commercial revenue from battery chemicals business. Initial commercial shipment of our third product were dispatched during last quarter. We will see a scale up of third product in coming quarters. We have also sent pilot scale validation batches of fourth product to the customer. Overall, the start is very encouraging and I believe we will see a very strong ramp up as we already have orders in our hand. Coming to semiconductor chemicals, I'm happy to say that we have integrated our plant in South Korea ahead of schedule.

5:00 This state of the art facility will manufacture chemicals that goes into photoresist, packaging material, etching materials and other semiconductor applications. We have been submitting multiple qualification batches to customers in South Korea, which showcased strong customer traction. I believe FY 2028 will be a year of ramp up for initial products, while we will continue to add more products into the basket. Moving to BFC. BFC is seeing strong order demand from its U. S. Customers, as well as we have started receiving orders from Korean and Japanese customers. During the last quarter, our US customer was acquired by another US based company. This caused a temporary pause in the shipments. Supplies have now resumed and operations are back to normal.

5:47 On commodity chemicals, freezing out of old product is going on as the plan and that is visible in our numbers as well. Turning to our performance for the quarter, we delivered strong revenue of 4,369 million, which is growth of 42.7% year on year. This was driven by strong performance of our Pharmaceutical Intermediate business, whereas specialty chemicals business was muted during the quarter. Since we are on track to achieve our CDMO earlier target ahead of time, we would now like to set our before I conclude, I would also like to revise our revenue growth guidance for current year from 25% to around 30%.

6:35 We are also raising our EBITDA margin guidance to 38 to 40, between 38 to 40% range from FY twenty seven. With that, I would now like to hand over to our Vice President of Strategy, Abhishek Patel, who will walk you through the detailed business update. Thank you, Nareshwai. Good evening, everyone. Let me share some additional insight into our business performance for the quarter. Starting with Advanced Pharmaceutical Intermediate segment. This segment delivered robust performance with revenue of thousand and $20,000,000 in Q2 FY twenty twenty seven, reflecting the strong year on year growth of 53.1%. CDMO business continued its strong growth trajectory supported by robust growth in core pharmaceutical business.

7:28 We are happy to share that we deliver more than 25% year on year growth in our core business this quarter driven by ramp up of new products as well as strong growth in top products. We are happy to share that we have received orders for new CDMO contracts, which are expected to start contributing revenue from as to FY 2027. Moving on to Specialty Chemicals segment. The revenue of quarter was $349,000,000, $349,000,000, which is down 20% Y o Y, driven by phasing out of old commodity products as well as temporary pause in shipment in VFC business due to ownership change of the U. S. Customer, as highlighted by KnowledgePipe.

8:14 I'm happy to share the shipments have started and we are very much on target to deliver a growth in BFC this year. Now turning to the CapEx. CapEx for H1 FY 'twenty seven was $1,239,000,000. It is spread across electrolyte additive project, pilot plant, IndyCam site and maintenance CapEx. Furthermore, for the full year, we believe our total CapEx would be around INR 3,000 million. So in as to FY 'twenty seven, we plan to do additional CapEx of INR $1,650,000,000 CapEx, which will be around which will have around 1,000 million for electronic grade chemicals, $450,000,000 for second phase of electrolyte additive CapEx and remaining will be for the maintenance CapEx.

9:09 Please note this calculation does not include planned R and D CapEx as well as the land acquisition. With that, I will now hand over our floor to our Chief Financial Officer, Pawin Shah, who will walk you through details related to financials. Over to you, Bhavin. Thank you, Abhishek. Bhai, I would like to briefly highlight the key performance metrics for the quarter and half year before we open the floor for questions. Let me start with quarterly performance. Revenue from operations for the quarter reached 4,369 million, representing 42.7% growth Y o Y. Gross profit for the quarter was 2,715 million reflecting 59% increase compared to the same period last year.

9:56 The gross margin expanded by six thirty seven basis points Y o Y to 62.1%. Gross margin was driven by higher contribution from pharma intermediate business compared to the same period last year. EBITDA for the quarter was $100,760,000,000, up 84.6% Y o Y. EBITDA margins were at 40.3%, up 914 basis points Y o Y. EBITDA margin was driven by expansion in gross margin as well as operating leverage. Rate for the quarter was 1,231 million, up 71.4% Y o Y. Paid margins for the quarter were at 28.2%, which show an expansion of 472 basis points Y o Y.

10:46 Moving on to the half yearly numbers. Revenue from operations for H1 FY 'twenty seven was thousand 666,000,000, representing 49.3% growth Y o Y. EBITDA for H1 FY 'twenty seven was 2,890 million, up 97.7% Y o Y. EBITDA margins were at 37.7%, up nine twenty two basis points Y o Y. That was the first half, FY twenty seven, was $100,981,000,000, up 71% Y o Y. That margin for H one FY twenty seven was at 25.8%, which show an expansion of 328 basis point y o y. Moving to the balance sheet item. Net cash and cash equivalents were around 3,009 million as of 09/30/2026.

11:42 Our working capital for the quarter stands at one hundred and fifteen days vis a vis ninety nine days in q one FY twenty seven. This was driven by higher data days. With that, I request the moderator to open the floor for questions. 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 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Abhijit from KIE.

12:43 Congratulations on the very strong results. Just on the new CDMO products that you mentioned, which will begin contributing in 2H, any sense you could give us on the revenues that we should expect in this financial year itself? And then when we are speaking about this target of doubling CDMO revenues in the next three years, how much would be the contribution of these newer products within that target? So I'm afraid that I'll not be able to share the product wise revenue guidance. That's the reason we are saying that we have... We are very much confident to close this year with a thousand crore revenue in CDMO segment because we have already got some good orders for the some of the products which were already validated few quarters back and now we are getting the orders. And we see a very good new business opportunity in this new CDMO as well as some of the CDMO pipeline, which we are expecting to get a good revenue generation in coming quarters and right years.

13:56 That's the reason we are giving the 1,000 crores, INR 2,000 crores kind of guidance for next three years. But I'm afraid I will not be able to share any product wise revenue bifurcation. Okay. Got it. Just, I mean, maybe the number of products that you have that are getting commercialized this year. Could you talk about that? There are multiple products. As we said, the four products were already kind of validated few quarters back, and there are additional products which are getting commercialized this year. And there are eight to nine products in total, you can say that sales are getting into revenue stream in next one, one point five year time.

14:44 Understood. And the other one I just had was on the Specialty Chemicals side. Of the key growth projects you have there, battery chemicals, semiconductor chemicals and now this electronic grade. Could you please help us with the timeline for commencement of revenues from each of these? And what sort of trajectory we should expect from each of these? As we said last time that now we are phasing out some of our older legacy product related to parabens and MS. And those are getting replaced with some better margin and a futuristic product. In that context only, we have announced the CapEx related to bulk electronic grade chemical manufacturing.

15:30 As we just announced the CapEx, it will take one point five year time to get CapEx to get completed. So maybe by H1 FY 'twenty nine, we should be starting the production. But meanwhile, the battery products have already started contributing in the revenue pie and that's encouraging signals for us, especially our pharma our specialty chemical business side. Okay. Got it. Thank you so much, and I'll get back in the queue for any more. Sure. Thank you. Thank you. On the touch tone telephone.

16:19 The next question comes from the line of Aditya Ayal from HDFC Securities. Please go ahead. Hi. Am I Aditya? Yes, sir. Yes. Okay. So congratulations on a great set of numbers. So for the existing CDMO business, what kind of traction are we seeing for daratumumab in terms of product adoption, and what kind of revenue potential do we expect from this molecule, mister? So for daratumumab, we are not in position to comment anything about that product because it's not our product. It's a it's a innovator driven product, and that is very much very well covered in the market. So for that, I think it's better you refer all those already available public market information. What we are saying that based on the customers' requirement of that particular product as well as the other customer, based on that, we are guiding that our CDMO revenue should get doubled in next three years' time.

17:25 Okay. And for our unplaceable unit, what is the total amount that we invested and the utilization as of H1 FY 'twenty seven? For unit, we have invested INR330 crore. Utilization level for Q2 FY twenty seven was 30%. And so by FY twenty eight, we are expecting peak utilization for others? Yes. Yes. It should largely get filled up by FY twenty eight. And in this electronic grade chemical, when we say, do we mean battery grade or semiconductor grade chemical? Both. Both. It will be kind of trajectory will move forward for various grades.

18:17 Okay. So 50 one:one mix or what is it? Sorry? Madhul, is it fifty-fifty battery semiconductor grade or... As of now, are only doing with the electronic grade chemicals. Going forward, we'll have additional plan, but not it will be starting with electronic grade chemical only. The next question comes from the line of Mr. Siddharth Garekar from Equita Securities Private Limited. Please go ahead. Hi. So the first question on the electrolyte business, when we historically spoke about this business, the realization for this product, these products were closer to $10.12 dollars But in the last six, seven months, if you look at the prices, have moved up to $35 $30 $35 plus.

19:16 So how should we think about this business going ahead in terms of the realization and margin? So we were right from beginning, we are saying that we have already signed long term supply contract all in place. And based on that contract, we get the revised pricing based on the some of the key raw material price movement as well as the exchange rate fluctuation. So we are not riding on those some of the waves, wherein price fluctuation, we don't want to get benefit from those price fluctuation or when it gets down or we get down. It is more of a we look into our plate and we get a good profit wherein we get a timely payback of our investment and then look for a newer projects. These are what the policy philosophy what we are following.

20:08 Okay. Sir, so so when... From a modeling perspective, when we look at the revenue potential from these projects, should we assume, like, a asset turnover, or they would be more closer to spot prices given that raw material prices also could be volatile? No. For the for the understanding of your thing as as you know, it was near to kind of double digit kind of dollar value. So there will be additional some of the realization because of price movement, but it will not be kind of $30 $35 kind of pricing. It can be early teens kind of pricing scenario. Sir, second question on the Electronic Chemical business.

20:54 Given that it seems like a 2x asset turnover, where your realization are closer to $1.1.5 dollars, So can you give some sense on what kind of product this is and what would be the major end applications, and it would be more like a commodity chemical or or niche molecule in this space? First thing, we are not saying it is kind of two x kind of asset, and it will be three... At least three x kind of asset, and we are expecting there. We have not commented anything on the realization side. But what we are saying is it will be a kind of bulk electronic chemical and solvent products. Okay. Got it. And sir, any time lines for this still remains FY '29?

21:44 Yes, first half of FY 'twenty nine. It will take around one point five years to get completed in CapEx. Sir, and the last question is on the CD amount. So when do we expect the next round of CapEx given that now we have given a guidance for INR 2,000 crores by FY 'thirty? So next round of CapEx, as we just discussed that plant utilization at Angleshwar may get filled up by year 2028. So then that's the reason we are already starting with our future plan and that is for land acquisition. Then we'll plan for the next round of CapEx that size and scale will decide based on that. Okay, sir. Thank you so much. Thank you. The next question comes from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.

22:36 Yeah. Thank you, and congratulations on sustaining a strong execution yet again, Naresh, right? My questions are, first, as the Korea semiconductor facility moves from qualification into commercial ramp up in next fiscal, should we expect the initial economics to be somewhat lower at the company level given utilization and the startup costs before improving as the volumes scale up? I mean, what would need to happen for the business to reach its targeted steady state economics? That's my first question. Thank you. So, obviously, the plant was inaugurated last quarter only, and now it's a time time to first get the customer qualification process going. So that's the reason for this financial year, we are not giving any tall commitment. From next financial only it will have some revenue coming up. So obviously, it will not be a kind of huge revenue or profitability.

23:41 It will slowly ramp up, but the encouraging thing is we are getting a very good customer inquiry. We are already started submitting the sample as well as the pilot scale dispatches. And that's the kind of confidence we can get from that newer geography where we are operating. Sure. Helpful. And second, as CDMO programs move from launch into commercial scale, as you just highlighted, there can sometimes be an initial inventory will followed by normalization. So given the revised 2,000 crores CDMO target by FY 'thirty, how confident are you that this growth will increasingly be diversified across multiple customers and multiple molecules rather than concentrated in one or two molecules?

24:38 And if you could just broadly mention how many programs do you expect to become or how many programs you expect would be material contributors in, let's say, FY twenty eight? So as we already discussed that we have multiple products for which the validation basis were already submitted few quarters back. Now they have started giving the contribution in terms of commercial revenue and there are eight, 10 products already in pipeline. So that's the reason we are very confident that we will be again able to achieve this second milestone of INR 2,000 crore revenue by FY 'thirty despite of any cycle industry cycle moving up and down, we are confident that we will achieve those kind of revenue targets.

25:30 Excellent, excellent, sir. So just to clarify the second INR 1,000 crores, so 1,000 we will achieve this fiscal. The second 1,000 crore will be a lot more diversified and and broad based in terms of molecules and and customers. Right? Yes. Absolutely right. Yeah. Yeah. Thank you. Thank you. That's all. Thank you. The next question comes from the line of Nilesh Gruge from HDFC Securities. Please go ahead. Yeah. Thanks. Thanks for the opportunity. Just one question. When when we are saying a thousand crore of revenue in FY twenty seven, so what will be the utilization of our CDMO unit at Angaleshwar? And as you mentioned, there is no further CapEx required till 2,000 crore CDMO revenue. So what will be the utilization f I... In f I thirty when we achieve CDMO revenue of 2,000 crore?

26:30 So for last quarter, as we said, it was a utilization of 30%. So when we reach this end of this financial year, it should not be more than, let's say, 40% of the total utilization at Unit 2, Ankleshwar. For the future, it is difficult to say as of now because it's a function of multiple things, the volumes, the realization and the kind of processes. Okay. Thanks a lot. Thank you. The next question comes from the line of Parsh Dalia from Union AMC. Please go ahead. Yeah. Hi. Thank you for the opportunity. I just had one question.

27:16 So this is specifically on daroltomide. So Bayer's recent trial showed that given the risk of metastasis or death by fifty eight percent in high risk localized prostate cancer. So if this goes into approval, you know, without going into product specifics, how do we think about the volume opportunity if that indication expansions comes comes through? And directionally, do you have the capacity and contractual framework in place to support that meaningful step up of volumes over the next two to three years? So as you know, we are a intermediate supplier for this API called darutamide, and what you are talking about the formulation market and their indication. So at least being at the bottom of the pyramid, we are not able to comment anything on those programs.

28:07 But this is good for you or the market to understand how the products are going. For us, what we track is what we are getting from the customer and we should be the beneficiary whatever our customers is gaining in the market and that is what we see that we are getting a good traction in this product as well as for the next three years. And that is how we are going giving that good guidance also. Understood. Got it. But just extending the question to, let's say, if Bayer for the formulation opportunity, are there upside estimate? Do you reckon that? Sorry? Your voice is breaking. Sorry. Is it better now? Yes.

28:55 So I will just follow-up on that question. Let's say, the innovator sales, the formulation sales, is... Does this trial lead to a a meaningful upgrade in their numbers? We don't. We we are not very well placed to comment on whether that formulation market is how much they are going. I think that we will not be able to comment on this. Okay. No problem. Thank you so much. Thank you. A reminder for all the participants. Participants who wish to ask questions The next question comes from the line of Rohit Nagaraj from three sixty one Capital.

29:44 Congrats on a very strong set of numbers. So first question is on the CDMO front. So the INR 2,000 crore guidance for FY 'thirty, in terms of EBITDA margins, would it track the current margins on 1,000 crores? Or would there be some kind of a dilution that we're expecting? Largely, it should be in the same range what we are getting for the CDMA business as on this. And second question is on the semiconductor chemicals. Given that our plant is operational, we are probably sending the validation batches to the South Korean players. Are we also engaged with any of the Indian counterparts for validation?

30:35 And are there any immediate plans of... If not, are there any immediate plans of serving them? Thank you. So you are... When you are saying Indian, that means you are talking about Indian semiconductor manufacturing. You are referring to Indian semiconductor industry? Yeah. So the ecosystem which is getting developed now and which probably will be operational over the next couple of years. So what... As of now, whatever we have kept planned the capacity, that is for the... For IndiCam, it is a Korean ecosystem. And then after outside Korea, it is geography like Japan and Taiwan. From India, Baba Fine came again because that...

31:21 This ecosystem is yet not that matured, and we have already market available in the export market. So that's the reason we are targeting more of a Korea, Japan, US market only. That is where we are getting very good traction also. In future, when this ecosystem gets developed, we would be happy to part of that. But as of now, all that capacity as well as the business development largely focused on the exports market only. Sure. Just one clarification. In terms of products, once they get validated from our international customers, would it be relatively easier and with a shorter period of time frame to validate for the Indian counterparts? Let me answer this.

32:07 See, customer validation is their internal process. It's not that one customer, big customer approval means that that product can be used by someone else immediately. So, it's because their process and their requirements are different. So, the validation process is robust, long term time consuming, and it's a long term. So... But beauty is that ACUTAAS and IndiCam has a capability to produce very high end chemicals, and our process is validated. Our our manufacturing side is validated, that will help us to consider our Indian customer to as a based on the experience what we have. So that will this is an advantage against the other competitor of ours.

32:56 Perfect, sir. Thanks a lot for answering all the questions and all the best. Thank you. Thank you. The next question comes from the line of Bharat Shah from Bharat Shah Capital Ideas Private Limited. Please go ahead. Harish, to you and Acutaas team. Thank you, sir. Thank you, Bharat. Bye. Thank you. And I just wanted to have two important views. Over the last three to four years, we made a considerable progress in converting the sheet of our farm from commodity chemicals to the specialty and from limited relationships to more customers and sticky long term relationships.

33:57 Our margins, top line, and capital efficiency all reflect the painstaking work of the past. Now that we stand and good part of the CapEx for the future is under our belt. When you look at next five years, what are your key aspirations? And what are the milestones with which you would like to define ACUTAAS or AMI journey ahead? And secondly, if you stand at this important juncture, basically, achieved... Made a considerable progress, but many more important milestones are linked ahead.

34:46 What are your key apprehensions or challenges that you pursue? Well, guys, thank you a lot, first of all, for seeing our journey right when we started in IPO 2021 till today. You are always inspiring and motivating us. It's a journey which is now brewing the fruit of what we had done in last one decade and transforming family company into the structure and professional company, focusing on each area, starting from raw material secure to process strengthening to operational efficiency to manpower, upgrading technology implementation, process improvements, plant optimization, and at the end of the day, customer satisfaction.

35:39 This is a cumulative effort of our last one decade working, which is giving fruit now. Regarding what you say is the inspiration for next five years, I have a visibility of... For the generic as of... So many time I say that we have developed lot of molecule which having an expiry up to '2 thousand forty five. So this is how we are working in our research department for generic portfolio strengthening. Whereas for regulated market, we have a long term agreement with several customers, and that is also helping us to guide for next three years. We had devised our CDMO target from 1,000 to 2,000 crore based on this new CDMO as well as the old CDMO pipeline. And considering transforming company from pharma to specialty chemicals and multi multi applications for the chemistry, as I said, when we made it, it was a very very primary stage of the battery chemical. Now it is almost mature and having very strong traction from the customers.

36:48 Long term orders are expanding with us and now its commercial supply also started. So, slowly ramping up and is now self sustained. And the second stage is the semiconductor segment, which is very important for us because it's a very the beauty of semiconductor business is that everybody cannot be they start today and enter into market because it's a very technical driven, very high purity chemical production, and very customer seeking business. So that is helping us by acquiring Babafenkamp has opened our door right from the first day into the ecosystem. And then this ecosystem has to learn how to teach us how to go for the more pure material, and that's how we put Indicam in South Korea. So this is a... It's like a business is teaching us, we are learning very quickly, and we're implementing also very fast. This experience also helping us when there is a ecosystem start in India.

37:43 Today, there is no any demand for semiconductor chemical India because it's they have not started. And once the fabrics start, we are very few out of them having all the experience of very high pure chemical production, and that will help us to immediately cater the market in India as well. So this is how our aim is that in five years, this would be not known as a chemical pharma company, but as a chemical company having multiple avenues, which can be supply chemical in a different sector. And both in your opinion are tangible and more qualitative aspirations that you believe Army Organics is likely to fulfill in the upcoming five year journey?

38:43 And what possible apprehensions that you're getting in your mind or concerns about potential challenges? Let me just give some internal message at our end. As Narejbhai shared his vision that he want to create an organization which is not only focused on on a on a pharma chemical, but then we are getting into the multiple chemistry related to battery, related to semiconductor, related to electronics and there are other multiple areas where we are already working. For us internally as tangible, we were going to, let's say, on various parameters related to the capital deployment, Ultimately, the business has to be self sustained, standing on its own feet as well as generating a long term cash flow and sustainable growth in the future.

39:45 Like for the battery chemical, we started with two products, then we keep on adding multiple, the third and fourth products are already commercialized. And then it should generate a good cash flow every year and then comes the sustainability. In terms of sustainability, what we are doing is we are building a very good healthy customer relationship by not focusing as we discussed in last question only that we are not riding on those $30 $35 kind of pricing view rather than we are focusing more on the customer relationship. So these are how we want to convert this business into long term sustainable cash generating machine. And that is what we are focusing for each and every business what we are targeting.

40:31 It's not that we start the business today, we run for three years and then we want to just let it can go down. It has to be sustainable long term business only. That is what we are focusing on each of those businesses. And concerns, if any? Concerns are always there, and we have to find out the way out of the concern. There is a geopolitical issues out there, supply chain, logistic, operational, electricity, water. There are so many constraints that are always coming. You have to find out the way out of that. That is what we are doing, day to day operation. And for like a semiconductor ecosystem is happening in India, if it is delayed, it will be a delayed of implementation in India. So the similar kind of opportunity are also... It's a huge opportunity for Indian chemical manufacturer in India as well as abroad.

41:34 And whatever the current mindset of China free is helping Indian Indian chemical manufacturer on their own capacity to grab the opportunity which is available. So these are... Sometimes you grab a lot of opportunity, but you cannot able to grow all because of the competition as well. So these all things have to be considered, and this is what we do. Whenever we enter into segments, we first analyze everything, whether it is good for us, sustainable for us, long term, what will be the situation of the market and all, and then we enter in that segment. So this is what we we try at most that all the all the concern need to be covered, but then if an unexpected will come, that will be able to fix that.

42:21 Sure. Just one last thing. We've come a long way over last few decades from me to Acutaas, and we built a lot of tremendous strengths even as we still remain relatively rather modest in the size of turnover in finished, but rapidly progressing. Would you, Naresh, say that the coming decade will be the most defining and probably most momentous decade in the kind of future that you visualize given the opportunity in this space?

43:09 Absolutely, sir. That is what I said that last last decade was our foundation year, a decade where we done lot of feeding. Now the feeding one by one is giving us the fruits. So now for the next decade will be the more important decade for us in terms of getting fruits out of whatever we see there in last one decade. Sure. Thank you, Maharishma. All the very best. And to the entire ACUTAAS team for returning this transformation of the firm. Thank you, Bharat. Bye. Thank you very much. Happy Diwali. Thank you. The next question comes from the line of Prateek Dharamsi from Union Mutual Fund. Please go ahead. Yes. Thanks for giving the opportunity. Many congratulations, Harish Bhai, Abhishek Bhai for a splendid slate of numbers.

43:57 Just my question is on the new CDMO projects which you're working on. So you mentioned initially, you used to mention around four new projects or CDMOs you're working and now the number has gone up to seven, eight. Some color on the therapy would be really appreciated. Apart from you used to mention around INR50 crore each sort of molecule. Is the run rate similar or you are expecting some change to it? Is it accelerating based on how the commercial supplies are starting? So some more color on it would be really helpful. Thank you. For CDMA projects, because these are all innovative driven projects, we are not able to at least share any details related to their product or their therapeutic segment or their potential.

44:46 But as we generally say that for the non blockbuster product, 50 to 100 crore is the kind of range because that's the kind of revenue we can get it as a intermediate player. But as Naresh Bhai mentioned, there are some of the very exciting projects already going on and we see it as a better revenue possibility. And that gives the confidence that it will be a good growth engine in future also in terms of newer CDMO projects. Got it. Yes. Thank you and all the best. Thank you. Thank you. The next question comes from the line of Meet Vora from JM Financial. Please go ahead.

45:32 Thanks for the opportunity. Sir, what gives us the confidence to increase our EBITDA margin guidance to 38% to 40% beyond FY 2027 on a sustainable basis. This quarter, we have mentioned in our presentation that higher margins are led by gross margin and operating leverage. But will this operating leverage continue going into FY twenty eight as well? Or maybe this upgrade is more to do with higher contribution mix from CDMO? So first thing, at the material or the gross level, the margins are always function of the product mix. As you see that just our battery chemical business has just started in this quarter.

46:18 So that's the reason the large portion of the revenue is coming from the pharma intermediate and growth is driven by CDMO segment. That is where the high margin is coming. And with the kind of order books we have already in place for the H2 FY twenty twenty seven, we are confident to achieve this 1,000 crore mark, which converts into good kind of margin for FY twenty twenty seven. That's the reason we have raised our margin guidance. Related to operating leverage, obviously, as and when this revenue keeps on increasing within the same premises or the facility, the operating margin has to kick in as we just mentioned the 30% utilization level at Unit 2 and obviously, the very low utilization level at the our battery chemical business, the operating margin will keep on adding once those production level scales up.

47:20 So this 38 to 40% EBITDA margin guidance is for FY 2027 or this continues for FY '7. Okay. 20 Okay. Yes, that's it from my side. Thanks a lot and best of luck for coming quarters. Thanks. Thank you. The next question comes from the line of Siddharth Nagandhi from CWC. Please go ahead. Congratulations on a great set of numbers. Three questions from my end. On the pharma intermediates business, you mentioned that CDMO could achieve INR 1,000 crores on FY '27. Could you help us understand how much of that is already in the bag in H1, which is your pharma intermediates business, the innovator and generic split?

48:08 That is question one. The second question was on Dara... Darrow. Can you potentially double the supply from the same facility over the next two years, or would you need CapEx? And what is your current utilization and your wallet share in in this? And the third question was on the base business in specialty chemicals. So how many more quarters before this complete... The commodity chemicals completely go off business, and most of this will be will be the battery chemicals and the other specialty chemicals? Yeah. These were my three questions. For related to CDMO, first thing, we are not doing any generic work. We we are doing all the CDMO projects with the originator only. So these are all originator business, no generic fees over there. Related to what question related to what is in our bag, so as Nareeshbhai already mentioned, this INR 1,000 crore mark guidance for this financial that is based on the customer visibility and the contract in place. So that is very much very good achievable definitely achievable target for us. Your second question related to the kind of split in the business or the market share, we are not able to comment on this

49:38 because we only see what originator gives us as a business and that is what we are guiding. We are not concerned about the kind of who are getting what. Third question related to Specialty Chemical business. See, we have already started scaling down this old legacy product related to Parabin and MS. It takes some time because right at upfront, we cannot say no to the customer because they also need to develop their alternative vendor and supply line. So that's the reason it may take around one, one point five years to scale down this business. MS business, we may continue for some time because for there are some good customer already in place. So it will take some it may take some time beyond one and a half year also to scale down MS business.

50:35 Got it. Sorry. Just a clarification on the first one. What I meant is not that CDMO is generic. What I meant is if I look at the advanced pharma intermediate segment, right, part of that is CDMO business and part of that is base business. If you could help us with that split. Okay. We... I'm sorry. Also, we are not giving those split also. We see completely as a pharma intermediate business only. But, definitely, it will cross a thousand crore market. We already committed for the year. So so... But but when you say when you say thousand crore crossing in that business, you mean not for the advanced pharma intermediate segment, only CDMO within that outside of the base business. Right? Yes. Yes. Yes.

51:28 Got it. Got it. Clear. The second one, while while clear on, you know, you're not looking at wallet share, could you give us some color in terms of Daro if you have to potentially double the Daro supply, right, will that need more CapEx, or are you... You know, where are you in terms of utilization of the facility there? And Gotcha. And how how should one look at that? As we said, the capacity utilization is 30% only, so there is some room available, but we are not disclosing anything about the... Whether it is able... Whether it is surprising the production requirement or not. Okay. Very clear. And and last question on South... The South Korea facility.

52:21 What are the markets that you will target for supply from this facility? Will it be Korea, Japan primarily? Are you looking at some cell manufacturers in India or Southeast Asia also? How should one think of that business? So for Korea, it's a semiconductor business. So our target customer photoresist and the fab industry and semiconductor consumption industry. It's not a kind of cell manufacturer and largely because those are based in Korea and Japan, these are our potential customer market. Understood. Sorry. Sorry. Got it. Got it. Thank you. Thank you very much, and wish you all the best.

53:08 Thank you. The next question comes from the line of Juhi Kumari from Magnolia Financial Services Limited. Please go ahead. Yes. Thanks for the opportunity, and congratulations on the strong set of numbers. My first question is regarding the battery electrolytes at latest production. It was expected to start in second quarter FY twenty twenty seven. So I just wanted to know that have the commercial supply begun and what was the revenue contribution during the current quarter? We have already started commercial supply for VC and FEC as well as the third product also ahead of the time. And the fourth product, the validation batches are already being supplied at a from a pilot scale. Our revenue contribution, we are not disclosing. It is just a start and ramp up is expected in next two to three quarters.

54:04 Okay. Sure. And my second question is regarding what portion of the remaining $49,000,000 specialty chemical revenue is still compromised of commodity chemicals scheduled for Zed? And once this phasing out is complete and BFC normalizes, what is the steady state quarterly revenue expectation from specialty chemicals? For specialty chemicals, we are not giving any split between old traditional specialty chemical product or the battery chemicals. But it will remain in this territory and with a ramp up from the battery chemical business. Overall, if there will be a there will overall, there will be a growth as against what number we have reported last financial year.

54:57 Okay. So we expect this to remain in a state where it has been in the first half FY twenty seven? Yes. Okay. And just one last question about the gross margin expansion that has expanded significantly to 62.1% this quarter. How much of this expansion came from raw material prices softening versus a structural shift in product mix towards higher margin? Gross margin expansion is a function of both product mix as well as the raw material base. So in total, it's a we cannot bifurcate between the raw material price escalation or the kind of product mix. It's a function of both.

55:50 Okay. So is there any like leverage that we have got from raw material price softening this quarter? No, no. We are not seeing that raw material price has softened in the quarter. In fact, that is not that is definitely not the case. Okay. Okay. Okay. Yes. Thanks for the answer and all the best for the coming quarters. Okay. The next question comes from the line of Basant Bansal from NBG Investments. Please go ahead. Yeah. Good evening,. My question to you is that in the first half, our pharma revenue is $6.95 crore. Can you tell me out of $6.95 crore, how much is CDMO?

56:39 I said 95 crore? 95 crore. I didn't understand. Your number. $6.95 crore. $69.04... $6.95 crore is our first half revenue from our vertical. So one time, please. Number. So sorry. Your voice is little echoing. You are saying after $6,956.95 No. No. I am saying... I'm I'm seeing your slide number six wherein the revenue from pharma intermediate vertically shown at $6.95 crore. I want to know out of this how much is CDMO. Okay. Oh, sorry. We are not disclosing those split, but in in sub segment of this pharma business.

57:31 Okay. Okay. And can you tell me in percentage terms if possible? Oh, again, sir, same thing, sir. Same thing. Okay. Okay. Okay. No problem. Thank you. Thank you. Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir. Thank you, ACUTAAS team, for hosting our conference call. We appreciate everyone's question and hope we are... We have addressed most of your queries. If you miss any of your questions, please reach out to our investor relations team, and we will get back to you promptly. Once again, thank you very much, and happy see... Customers.

58:18 Thank you. On behalf of Acutaas Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.