Navin Fluorine International Limited (NSE: NAVINFLUOR) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Vishad Mafatlal — Chairman
Nitin G. Kulkarni — Managing Director
Anish Ganatra — Chief Financial Officer
Analysts:
Bhavya Shah — Analyst
Sanjesh Jain — Analyst
Madhav Marda — Analyst
Sudarshan Padmanabhan — Analyst
Rohit Nagraj — Analyst
Ankur Periwal — Analyst
Jignesh Kamani — Analyst
Abhijit Akella — Analyst
Krishan Parwani — Analyst
Pranita — Analyst
Jason Soans — Analyst
Nirav Jimudia — Analyst
Keyur Pandya — Analyst
Surya Patra — Analyst
Presentation:
Operator
Ladies and gentlemen, this is the operator. We will be beginning with the conference call shortly. Request you to stay online and be patient. Thank you ladies and gentlemen, good day and welcome to the Navin Fluorine International Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Bhavia Shah from Orient Capital. Thank you, and over to you, sir.
Bhavya Shah — Analyst
Thank you. Welcome to the Q3 and Nine-Month FY ’25 Earnings conference call. Today on the call, we have with us Mr Vishar, Chairman; Mr Nitin Kulkarni, Managing Director; and Mr Ranish Kanatra, Chief Financial Officer of Navin Fluorine International Limited. This conference call may contain forward-looking statements about the company, which are based on opinion and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Our detailed safe-harbor statement is given on Page 2 of investor presentation of the company, which has been uploaded on the stock exchange and company website. With this, I now hand over the call to Mr Vishar Mafatla forward for his opening remarks. Over to you, sir.
Vishad Mafatlal — Chairman
Ladies and gentlemen, I would like to welcome you all to Q3 and Nine-Month FY ’25 earnings call. I am joined by our Managing Director, Mr Nitin Kulkarni; our CFO, Mr Anish Ghanatra; and Ms Payal from Orient Capital, our Investor Relations Advisor. I trust that everyone has had a chance to review our financial results and investor presentations, which have been made available on both the stock exchange and our company’s website. The environment in which we operate continues to be uncertain, driven by factors such as geopolitics and global macros. Despite these uncertainties, I am pleased to share that we have remained resilient and have committed to demonstrate adaptability in our operations. Our focused efforts combined with the strength of our relationship with our customers has allowed us to drive sustainable performance. I would like to highlight two key milestones we achieved in the last quarter. Firstly, we successfully commissioned our agro specialty plant at Dahej with an investment of INR540 crores. Secondly, in Q3 FY ’25, we surpassed revenue run-rate of INR600 crores. In HPP vertical, we secured better realizations by optimizing the product mix with improved capacity utilizations. In specialty Chemicals and CDMO verticals, we have continued to drive higher capacity utilization with a strong order book outlook. Our operating EBITDA for the last quarter has seen an increase of 95% Y-on-Y, achieving a sustainable EBITDA margin of 24.3%. We continue to drive discipline in cost management, maximizing operational efficiencies, generating robust cash flows and effectively managing risks to secure short-term performance and long-term strategic goals. Our priorities remain, one, manufacturing excellence with highest-level of HSE practices; two, deepening the relationship with existing customers while pursuing new customer acquisitions; three, disciplined project execution; four, pursuing growth opportunities within a tight financial framework. All these will result in long-term value-creation for all our stakeholders. I’m pleased to share that our Deva site has earned the gold medal in the EcoVadis assessment, recognizing our commitment to sustainability and responsible business practices. Thank you once again for your continued support. With that, I would like to now hand over to Nitin to provide a detailed overview of our operating and business performance during the quarter.
Nitin G. Kulkarni — Managing Director
Thank you, and good evening to everyone. I would like to start by appreciation am I audible.
Operator
Yes sir please go-ahead.
Nitin G. Kulkarni — Managing Director
Yeah so I would like to start by expressing my sincere appreciation for your time and ongoing support. As always, it is a pleasure to connect with all of you during our earnings call. I would like to share some updates regarding our operational progress and performance across our business verticals. We are pleased to announce the successful commissioning of our agro specialty plant at Dahej with an investment of INR540 crores. This project is significant step forward for us and I’m happy to report that the commercial dispatches have been started. Our focus remains on maximizing capacity utilization, enhancing productivity and driving efficiencies across all our business lines, while deepening relationships with all customers. These priorities will guide us as we bring new projects online and continue to explore growth opportunities for the future. Now let me take you through the performance of our business verticals. So HPP, HPP business has shown growth in the 3rd-quarter of FY ’25. The revenue from this segment rose from INR251 crore in-quarter three FY ’24 to INR306 crore in-quarter three FY ’25, reflecting a year-on-year growth of 22%. During the quarter, HPB business benefited from volume growth in HFO, R22, R32 and inorganic salt along with improved price realization across our products. The additional R32 capacity of 4,500 metric tons is progressing as planned and will be commissioned by February 2025. We remain constructive on the demand outlook for 32 in India and globally. We are engaged with few global measures for evaluating an enhancement of R32 capacities. Furthermore, we are making progress on our AHF project with an investment of INR450 crore and the project is on-track for commissioning by early FY ’26. On front, the specialty chemical business has shown revenue increase from INR175 crore in-quarter three FY ’24 to INR221 crore in-quarter three FY ’25, reflecting 26% growth year-on-year. A key driver of this growth has been the increased capacity utilization at both our Daresh and Surat plant. Looking ahead, we have strong order visibility for quarter-four FY ’25 and beyond, particularly with the ongoing ramp-up at Surat and Dahesh facilities. We are also introducing one new molecule in Q4 FY ’25 and second in Q1 FY ’26. On CDMO business, and the CDMO business revenue from this segment increased from INR73 crore in-quarter three FY ’24 to INR79 crore in-quarter three FY ’25, reflecting an 8% year-on-year growth. We remain optimistic about this segment, supported by strong order book for Q4 FY ’25. On the European CDMO front, I’m pleased to share that the registration formalities are in advanced-stage and direct dispatches commenced during this quarter. Looking ahead, projections for FY ’26 and beyond continue to remain strong with an order book for CY CY25 already secured. We also anticipate an additional molecule supply in FY ’26. We have received an order from major European customer with supply schedule for FY ’26. Furthermore, for our US-based major customer, we have received a scale-up order which supplies planned in Q4 FY ’25. Regarding the CGMP 4 project, the first phase of INR160 crore investment is progressing as planned and is expected to be commissioned by the end-of-quarter three FY ’26. In summary, we are pleased with the progress we have made across all our business verticals in Q3 FY ’25. On this note, I would like to hand over to Anish to brief you on financial performance. Over to you, Anish.
Anish Ganatra — Chief Financial Officer
Thank you, Nitin. Good evening all, and I welcome you all once again on the earnings call. Let me discuss the financial performance of the company in Q3 and Nine-Month FY ’25. Quarterly performance, we reported revenues of INR606 crores in Q3 FY ’25, an increase of 21% year-on-year and 17% quarter-on-quarter, led by an increase in revenue across all the segments. Operating EBITDA for Q3 FY ’25 was INR147 crores, a growth of 95% year-on-year and 37% quarter-on-quarter. Operating EBITDA margins stood at 24.3% as against 15.13% in Q3 FY ’24 and improving sequentially from 20.7% in Q2 FY ’25, reflecting higher realizations in HPP, higher capacity utilization at Dahej and Surat and efficiencies secured within businesses. Operating PBT for Q3 FY ’25 was INR98 crores as against INR33 crores in Q3 FY ’24 and INR66 crores in Q2 FY ’25, an increase of 195% year-on-year and 49% quarter-on-quarter. Profit-after-tax in Q3 FY ’25 stood at INR84 crores. Nine-Month performance. For nine months FY ’25, on a consolidated basis, the company reported net operating revenue of INR1,648 crores as against INR1,463 crore in Nine-Month FY ’24, reflecting a growth of 13%. Operating EBITDA stood at INR355 crores as against INR288 crore in Nine-Month FY ’24, up by 23%. Operating EBITDA margin for nine months stood at 21.5% as against 19.7% in the same-period last year. Profit-after-tax in nine months FY ’25 stood at INR194 crores. As at 31st December 2024, our net-debt to equity stood at 0.41 and net working capital days stood at 99 days of sales, well within the financial frame that we had indicated earlier. That’s all from my side. We’ll now open the lines for Q&A.
Questions and Answers:
Operator
Thank you, sir. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, let’s wait for a moment while the question queue assembles the first question is from the line of Sanjaysh Jain from ICICI Securities. Please go-ahead.
Sanjesh Jain
Good evening, sir. Thanks for taking my question. A couple of them. First on the Nectar project, we have started dispatches, but is the performance of the plant on the expected line in terms of yield operation and all? And has it been running on the expected line there?
Anish Ganatra
You want me to respond one-by-one or you want to put your questions.
Sanjesh Jain
I will put my questions first-in that case.
Anish Ganatra
Yes.
Sanjesh Jain
The question is on the CDMO. Particularly on the Permian product on the European MSA what we have signed. It appears to be one of your competition has been reporting a very strong number, while for us CDMO has been more like a flattish. Is that a lot of it will get captured from Q4? And from the registration perspective, now you said that you have started dispatching directly. Is it fair to assume that now the — with the registration probably completed soon, we should be scaling up and when you say we have secured the order for CY ’25, what is the quantum of order that we are talking about? And the third question is on a specialty. Domestic continues to do quite well and export is dull. Is that classification difference or there is a delivery difference, how should one read about it? And the last question is on the EHF. So once the HF plant start, what is the saving that we could do for as we are buying HF now from the outside market? These are my questions. Thank you.
Anish Ganatra
All right. Thanks a lot, Sanjesh. And firstly, again, thank you to you. I’m kind of remembering the time in Devas when you highlighted the cohortis.
Sanjesh Jain
Yeah, I wanted to comment itself.
Anish Ganatra
So I’m sure you picked that up. So thank you again for the feedback. All right. So on the Nectar project, Sanjesh, see, as you are aware, that’s a three-phase — there are three phases or three stages involved in that particular project. It’s a very complex chemistry involving a high-level — high degree of chlorination at high temperatures as well as then freezing at a very-high temperature. So you know, because it’s a complex chemistry, we are very, very clear that we want to ramp this project progressively, but in a safe and reliable manner. And this will ramp-up, but it will take its time. We are not going to rush, we’re not going to take any shortcuts. It will take some time to progress, okay? So that’s on the Nectar project. On CDMO for MSA, you talked about one of our competitors reporting a very strong number. See, frankly, our registration process is in a very advanced-stage. The customer is very confident of getting a favorable registration sometime in the timeframe of April or May. Meantime, they have started to take direct dispatches from us already and orders are in-place for calendar year ’25. Now these are initial orders. I will not give value to them at this stage. But rest assured, it will be at or equal or higher than where we are today for this calendar year. Okay. The other thing to remember is that for us, Fermion ramp-up will also be progressive and we continue to hold the view that we had indicated that for FY ’27, the $100 million target that we put for CDMO, 30% of that will come from this contract roughly. Yeah. So specialty, the division of export versus domestic is again a supply-chain factor. We basically, you know, get orders which are directed to supply domestically. So that’s how they get reported. But rest assured, the profile of the customers remains to be international and orders are prepared on contracts with them. So that’s again a nature of how the business is rather than being exports or domestic. AFF, your question was on, sorry.
Nitin G. Kulkarni
It is how much saving it is going to also.
Anish Ganatra
You’re talking about the quantum, right?
Sanjesh Jain
Yeah. We are now buying from the outside market, right?
Anish Ganatra
See when for HS with the R32 capacity coming in, et-cetera, etc., we are going to be a big consumer ourselves on captive front. Plus you must remember that years ago, we actually exited or reduced our footprint in the merchant sales. So there is a huge opportunity that needs to be tapped over there and that’s exactly what we will do as the project comes into play and ramps-up.
Sanjesh Jain
How much external sale are we targeting or what the quantum we were doing earlier?
Anish Ganatra
Yeah. So, I think again Nitin that at one of the earlier sessions already talked about that our own demand would be good enough to contain up to about 25,000 to 27,000 metric tons. And we are looking to operate the external sort of will be in the range of 6,000 to 7,000 metric tons.
Sanjesh Jain
Got it. And one last question before I come back-in the queue. Yeah. Anish, sir, do you want to upgrade the margin guidance for next year now that we are already hitting 25%.
Anish Ganatra
I’m not going to upgrade. I had mentioned, if you remember when we were at 15%, Vishatbai and myself had put a journey out there 15 to 20 to 25, we are on that path and we have indicated that we would exit FY ’25 near ’25 or at ’25 and that’s exactly what we are working. Our aim here is to make this very sustainable, grounded in the in the kind of foundation of the company. And then as we move on and leverage comes in both with CDMO and HPP and specialty, we will see what we will see, but we will not guide anything beyond the 25% at this stage.
Sanjesh Jain
Fair enough, fair enough. Thanks everyone answering all those questions recently and best of luck for the coming quarters.
Operator
Thank you. Thank you. The next question is from the line of Madhav Marta from Phil Industries. Please go-ahead.
Madhav Marda
Hi, good evening. Thank you so much for your time once again. My first question was on the specialty Chemical business, especially the agro CDMO business which we do. Could you just give us some qualitative thoughts in terms of — I think you did sound confident about a good ramp-up in FY ’26 for the spec chem business. So are we seeing the cycle kind of turning finally after almost six, seven quarters of weakness, that’s my first question.
Anish Ganatra
Okay. Again, you want me to take them one-by-one or you want to put your questions out?
Madhav Marda
So my second question was just on the R32. There has been obviously some pricing positive, which has been playing out in recent times, probably led by better prices from China. So just wanted to get a sense from your side in terms of calendar year ’25, how do you all look at R22 pricing for us domestic and export market? Thank you.
Anish Ganatra
Okay. So on specialty, see, again with the AgChem sector, if you take a long-term fundamental view, that remains very, very constructive, okay? The demand for agri products is not going down. Additionally, if you look at some global statistics, there is a — there is a number out there which says that 40% of the produce actually gets lost to pests. So crop protection is quite significantly big. And thirdly, you must remember that agri also now plays a big role in energy transition through biofuels. So all these growth factors from a long-term point-of-view, there is — there is solid sort of fundamentals remain, right? Now in the near-term — in the near-term, we are going to see by pricing pressure, there’s no doubt about it. Like we said last-time, we were early to recognize this. We’ve played our sort of navigated that space, ensuring that our relationship with customers bring us the orders, give us the higher volumes and we work with them on newer molecules that they are bringing to the market in an accelerated fashion. Third thing, your point about R32 timing and China and pricing about calendar year ’25, see, again, it’s a factor of demand/supply, right? It’s market conditions. R32, we are very, very constructive about the market. And we believe that the pricing market should see upside from where we are now. Difficult to quantify what that it would look like, but certainly the market remains very constructive for secured in the upside.
Madhav Marda
Got it. Just on the agro part, I think when we said that we adjusted pricing to kind of ensure that we get our volume and plus come in with the new launches. So is it fair to say that in-quarter three, this pricing adjustment which you’ve taken is kind of already in the base or upper — I mean, each quarter it will reflect, but like quarter three, has that reflected for our base business already or there’s still some adjustment pending?
Anish Ganatra
No, so large amount of pricing on the existing products is already built-in, okay? Now I think I had also indicated earlier that at best from a consol point-of-view, this would be a 0.5%, 1% impact max between that range, okay. Now against that, how are we sort of responding to it. So this is not a transactional conversation with the customer, okay, foremost. It’s not just a pricing conversation, it’s a conversation to be part of their supply-chain network, giving them the value they are looking from a flexibility perspective, adaptability perspective, driving process improvements in their existing process, driving cost-down and in return, securing the higher volumes has also a play in the future roadmap of our innovator customers, yeah. So it’s a strategy that is being played out here and that’s the result of what you see in the numbers today. We’re seeing solid capacity utilization at Dahej and. I mean Dahej is an example. This quarter we’ve done on an average about 85% capacity utilization versus something like 40% to 50% in the last quarter.
Madhav Marda
Got it. Got it. Okay. Thank you so much. Thank you.
Operator
Thank you. A reminder to participants, please restrict yourselves to two questions. If you have any further questions, you may rejoin the queue. The next question is from the line of Sudarshan from JM Financial PMS., please go-ahead.
Sudarshan Padmanabhan
Yeah. Thank you for taking my question. Sir, my first question is on the CDMO side. I mean, if I’m looking at — you talked about the Fermian contract, but also the visibility over the two years with other products. You know, a lot of these products are under patent and there is a huge runway of growth. I mean, today when I’m talking about Fermian contract itself. I mean, they are trying to expand the product for other applications in oncology as well. So from that side, I mean beyond the $100 million, are we today in a spot where we have probably hit you know a kind of a sweet-spot with a few products hitting commercials, a few in the late-stage, which gives you visibility, not necessarily just for two years, but say three, four, five years with the growth engine that you see. Just wondering your thought process on the cycle. Understand.
Anish Ganatra
Yeah, I get where you’re coming from,. So good question. Thank you for that. I mean, on the, again, at any given point in time, we are working with close to about 35 to 50 molecules, okay. And in any year, right? And roughly if I look at it, about 8 to 10 odd would be in the commercial space. So we’re not sort of just banking on one. Commercial or late-stage, right? And then the others are your early-stage molecules, which eventually provide the long-term pipeline as the — as they move into commercial. So it’s a combination of things. Are we in a sweet-spot or not difficult to tell, but we are certainly well-diversified in terms of our footprint across the portfolio.
Sudarshan Padmanabhan
Sure. And with respect to the capex, I mean, now that we have capex for, say, the Phase-1, typically you’re coming with INR160 odd crores that will come in the 3rd-quarter. I mean, do you think that probably with the scale-up that you’re seeing with the Permian contract and others, I mean, do we have enough plant probably to go in for a brownfield or what is our thought process in terms of developing the capacity?
Anish Ganatra
Yeah. Again,, I can’t remember if you visited Devas, but there is enough and more land available for two or more equivalent size of at the same-site with common infrastructure, common utilities, common sort of administrative support, R&D blocks, et-cetera. So there is enough scalability in the infrastructure. There’s no doubt about it. Obviously, we will be very, very disciplined in the way we look at any project and execute capex. Today, we’ve approved the INR160 crore Phase-1 part of the capex that’s expected to come on-stream in November. And as that ramps-up and as some of the other molecules that we are working on move to a higher-volume or a scale and there is visibility to that, we will quickly expand that. So as we are doing the Phase-1 of CGMP4, we are making sure that to do the Phase-2 of CGMP4 is an accelerated journey because the common infrastructure elements of one are actually being addressed as part of Phase-1 itself.
Sudarshan Padmanabhan
Sure. And one final question before I join back the queue is on the specialty chemical side, the two molecules. I mean, would there be — I mean these two molecules, are they in the agri space, the pharma space, you know, what is the kind of scale-up that we see in the near-term as well as from a longer-term perspective.
Anish Ganatra
Yeah, these are in the innovator ad chem space. Again, it’s part of the strategy as we said, we are playing into with our innovator customers to be part of the future pipeline. And more than the near-term value, what this does indicate is the — is the pipeline of new projects, new molecules coming in, which again at some point, you know can support further expansion and growth again.
Sudarshan Padmanabhan
Sure, thanks a lot. I’ll come back. Thank you.
Operator
Thank you. The next question is from the line of Rohit Nagaraj from B&K Securities. Please go-ahead.
Rohit Nagraj
Yeah. Thanks for the opportunity and congrats on good set of numbers. First question is on the AHF capacity. Based on our understanding, how many years we will be able to fulfill the capacity at optimal level barring the external sales. So how much time will it take maybe four years, five years to completely utilize the capacity for captive consumption?
Anish Ganatra
Yeah. Yeah. So see the AHF capacity that has been put on, I mean, like I’ve always said, that’s a license to dream project. It’s a project. If you can’t put — don’t have AHF, you have no license to grow in this business, right? So the idea here is to keep that capacity, make sure we expand it, but we expand it in a meaningful manner. Our eventual goal is to keep increasing the realization per kg of HF and that’s what we will strive to. So you know with the AHF capacity coming in, you should be looking to Naveen in the coming years to look for entry into higher and higher-value chain management.
Rohit Nagraj
Sure. The second question is in terms of the capex that we have planned. Now more or less all the projects are actually on-track and if we were to move for the next leg of project, I mean there is CGMP Phase-2 capex. But beyond that, on the HPP front, are we looking to debottleneck the Honeywell project or is there aspiration to go in for a brownfield expansion for the HPP, which we had anticipated sometimes ago? Thank you.
Anish Ganatra
Sorry, that’s still Rohit. No, I missed the name maybe. Rohit right? Yeah, yeah. Yeah, Rohit. So in terms of in terms of the capex going-forward, et-cetera, I mean, like we’ve said the capexes which are currently on-stream start to look at giving us line-of-sight to our FY ’27 growth. I think Nitin in his commentary has also referred to some conversations and engagements going on with global majors regarding a potential R32 expansion. We are also simultaneously and like we’ve said before again, that we always have a hopper of projects and these hopper of projects compete with each other in terms of driving value for Naveen and shareholders, right? So we will progress these offers and bring them to a stage of maturity. We continue to hold the fact that within this financial — coming financial year, FY ’26, hopefully in the first-half, you should see some announcement coming in.
Rohit Nagraj
That’s all from my side. Thank you and all the best.
Operator
The next question is from the line of Ankur Periwal from Axis Capital. Please go-ahead.
Ankur Periwal
Yeah, hi, sir. Thanks for the opportunity and congratulations on a good set of numbers. First question on the Specialty chemical side. You did mention that the INR540 crore capex, we will be ramping-up this project — the sales on this project gradually. Any timelines you can share when should we expect this business — this product to reach its optimum revenue run-rate?
Anish Ganatra
Yeah. So we had — when we sanctioned the capex with indicated a peak annual revenue of about INR515-odd crores, if I remember correctly. And we’ve said that would be done in two years from commissioning. I think we still hold that view. So we are in FY ’25. FY ’27, you should start to see it getting closer to its peak, if not the peak.
Ankur Periwal
Sure. And similar run-rate and timeline for the other capexes that we had commissioned, INR235 crores, one and INR125 crores.
Anish Ganatra
235 and.
Ankur Periwal
Calls special and I think.
Anish Ganatra
So see again all these peak annual revenue conversations are like a snapshot, right? I mean they true at the time when you make it. Ship prices change, volume change, et-cetera. But as we look at this and I’ll probably give you a flavor beyond what you’re asking for. But say if you’re looking at R32 capexes, you know the INR84 crore capex in HPP, we are well beyond the peak annual revenue. We had indicated 2x, we think we’ll be at 2.5 times in one year and so will be the new capacity coming in for R32. CGMP4, we had indicated 2x and we still hold that. That. And again, like I’ve said before, that will be FY ’27 as part of contributing to our aspiration of CDMO segment in that year. In terms of Orchid, we think that the peak annual revenues, it was a project that was commissioned in FY ’23 and we are looking — we should have been at peak at FY ’25, but I think we’ll be at peak in the next financial year based on the order book that we have currently for Orkid. We will exceed the number basically in FY ’26. For MPP, again, very similar, FY ’26, we have enough order book and line-of-sight to the order book to be very close to the peak annual revenue we had indicated. The dedicated MPP will also be similar. It will start — we had achieved peak revenue in FY ’24. But like we said, we are looking to secure higher volumes and play a different sort of strategic card here. So that also will start to see ramping-up and going up to a higher number as we look into FY ’26 numbers. So in the space because of the global challenges, I think there has been some delay in the peak revenue. There is no shying away from that. But you know our focus remains on ensuring that we secure the capacities, run the plants to full an optimal level, securing the operational efficiencies. And in FY ’26, we will — for the plants themselves in the specialties, most of them will be in the range of 90% plus utilization.
Ankur Periwal
Great, Anish. Thanks for the elaborate and detailed answer. Just one bit on our gross margin expansion in this quarter. If I look at quarter-on-quarter, we are largely flattish, while in the initial comments, you did mention HPP did saw a pricing as well as volume metric growth. So is it that the full benefit of that pricing is going to slow-down because that would have — should have been more margin-accretive? And second part here on our overheads, whether manpower or the opex, so pretty impressive control over there. Should we expect this run-rate to continue?
Anish Ganatra
Yeah. So our view on the — so let me take, when you say slowdown, you’re talking largely about the EBITDA number, right, slowing it down to the EBITDA. Correct. Right. So again, if I look at that journey of, 15 to 20 to ’25, right? I will say that 5% as we had always indicated is coming from operating leverage and that leverage now is the sustainable leverage given the line-of-sight we’ve got to the order books, okay. The other big chunk of that, which is a 4.5%, 4.9 odd percent of the journey from 15% to 25 is largely an effort of the team. The team is kind of working very hard to drive procurement efficiencies, margin improvements through both product mixes, placing the products, getting better realizations than what the market is getting and also simultaneously working towards securing fixed-cost savings. So that we believe is something that we had in our control and we’ve driven a lot of effort around that to bring the numbers in. And obviously, 0.4x, 4.4% is roughly the ForEx impact in this quarter. So if you see the journey from 15.1% to 24.3, this is what would sort of make it up. So that should give you a good sense of, you know, the fact that the margins are sustainable from where we are today.
Ankur Periwal
Yeah. Sure. Sure, Runesh. Thanks a lot for the elaborate answer. And all the best.
Operator
Thank you. The next question is from the line of Jignesh Kamani from Nippon Mutual Funds. Please go-ahead.
Jignesh Kamani
Congratulations for a good set of numbers. Just on the Specialty chemical side, so if you take a bit first up, we report close to around 20% kind of decline in our 3rd-quarter we witnessed close to 26% of the revenue growth. And at the same time, we commissioned the project Nectar also in November. So safe to assume even exo project Nectar, our specialty chemical grew in double-digit, you can say?
Anish Ganatra
Yeah, yeah, absolutely. I mean, the Nectar project only started dispatches on 9th of December. So its contribution to this quarter is not really that material.
Jignesh Kamani
And so from where the growth is coming because suddenly growth has picked-up drastically compared to first-half.
Anish Ganatra
I think again see over here, Dinesh, as we’ve always said before, we had started to work on this strategy. Nitin and the team had sort of picked this up and made sure that we connected with the customers, driving the value proposition with them, bringing the orders and also participating in the future growth of the innovators. So that strategy is in play and that’s what you’re seeing for us, you know. Now if you sort of again, if you look at our operations, that’s in the business itself, you know the drivers for this, when a customer comes and gives you higher-volume, they’re always looking for your team and their capability to drive efficiencies and process improvements. And we have been successful in demonstrating that with them start giving us a view of the order book in the coming year.
Jignesh Kamani
Understood. Second thing on the Project Niktar, so Inca client was supposed to, you can say, pick-up annually close to around INR300 crore kind of you can say quarter from us, you can say. And since this year it will present close to around four months, sir to assume that we will be doing around INR80 crore from the anchor client this year and maybe it will ramp-up to close to INR300 crore kind of level next year? And adding to that, we extended our product basket in the project sector and we were in discussion with three to four more clients. Any update on — you can say there on the — whether we are able to supply the commercial molecule to them and in whether the approval in stage.
Anish Ganatra
So I think again, see, with Project, like we said, the ramp-up will be progressive. We are prioritizing safety and reliability there. It will be slow. We do not — and we have learned from our earlier sort of lessons, all like all organizations evolve and learn from that, right? So FY ’25, you will see a ramp-up. It will not be a full 100% ramp-up. It will be a gradual ramp-up from where we are today. FY ’27, as I said, you should see the par that we’ve indicated, which necessarily means that next year, you should roughly see about 40% to 45% of the par coming in.
Jignesh Kamani
And update on the potential two or three customer apart from the anchor customer, which we are planning to help?
Anish Ganatra
Yeah. Which will be part of the plan as we said, given that we’ve just started now, which will be the plan in the coming years. So coming here, we’ll be meeting the customers’ requirement both for this molecule as well as for the additional molecule that the customer has funded, which we talked about before, if you remember. And also we will be doing some qualification batches for securing the FY ’27 order book.
Jignesh Kamani
Understood. And my last question on, since now our capacity will commission shortly, and I can say — and we will be aiming to have a 6% to 7% kind of merchant. On the purity level to supply to EV, do we have a technology and capability or — or are we thinking in that line maybe not now maybe to get downline or we need to have a technology tie-up if you want to venture into high high-durity HF grade.
Anish Ganatra
So like I said, one of our focus areas on EHF is to improve the HF realization, yeah, per case per KGM. And in that sense, we are already working on at our end to develop high-purity, you know, a kind of HF in technological collaboration with partners, yeah. But at this stage, unfortunately, I’m unable to disclose any of that beyond what I’ve just said because of of commercial sensitivities, yeah.
Jignesh Kamani
Thanks a lot and all the best.
Anish Ganatra
Yeah. Thank you.
Operator
Thank you. The next question is from the line of Abhijit Akilia from Kotak Securities. Please go-ahead.
Abhijit Akella
Yeah, good evening and thank you so much. So Anish, by the R32 expansion project that Nitin and you alluded to earlier on the call for which your discussions are ongoing. Could you please give us some color around that? How large could the further expansion be, what timelines, how much capex, et-cetera?
Anish Ganatra
Abhijit, thanks for the question. Can I request some patience on that? The thing is for us the new R32 capacity is everywhere coming up, okay. So our sort of — these conversations develop because effectively what happens is when your new capacity comes in and you start seeing inquiries and you start seeing stronger inquiries, then obviously the conversation starts moving towards saying that can we do something more meaningful that’s more strategic than transactional, right? And that’s exactly the conversation happening. So just bear with us when we can disclose, we will disclose, but it is beyond.
Abhijit Akella
Okay.
Anish Ganatra
Yeah.
Abhijit Akella
Got it. The second one was just on the specialty chemicals disclosure about these two molecules being introduced in Q4 and Q1. And the third bullet point on that slide. So are these part of the multipurpose plant or something separate?
Anish Ganatra
No, no multipurpose plan. Multipurpose plan. This is securing the pipeline for future and securing a growth opportunity that can be taken in the future if appropriate.
Abhijit Akella
Got it. So this is part of the INR270 crore revenue potent.
Anish Ganatra
Yes, indeed.
Abhijit Akella
Understood. Understood. And finally.
Operator
Sorry to interrupt,, I would request you to rejoin the queue so that the management can address as many participants as possible. The next question is from the line of Krishnan Parwani from JM Financial. Please go-ahead.
Krishan Parwani
Yeah, hi, sir. Congrats on very strong set of numbers. Just two questions from my side. Firstly, on this INR30 crore Surat capex, I just wanted to understand would the sales be gradual in FY ’26 and peak in FY ’27? How would that be mind?
Anish Ganatra
So INR30 crore capex has got an asset turn of about 1.2-ish. And yes, you should expect that in the FY ’26 numbers to come in. That’s the case. Yeah, it’s already started. The project was commissioned and the work is planning work-in other sort of way as we speak.
Krishan Parwani
Understood. And on the CDMO side, in this presentation, you’ve mentioned that US major, the scale-up order received. So is it like a new contract that you know you are in the midst of signing or how is it? Can you please share some?
Anish Ganatra
This is still at a stage where we received the scale-up order. Last-time we — I think it is probably the one that you’re referring where we had got a process of a pre-process sort of order that we had received last quarter, which we delivered. We’ve now got a scale-up order for the same particular molecule. Yeah, and yes, eventually this may be one of those that will translate into the — into MSA. Like we’ve always said before, you know that we are working on certain commercial molecules and the idea is to bring in more Fermion type activity there, which can then sort of support the growth of CDMO beyond even the EUR100 million number that we said.
Krishan Parwani
Okay. So you do have the capacity in order to, let’s say, if you get the contracts, you have the capacity to execute it.
Anish Ganatra
Yes, of course. Yeah, yeah. Okay. I mean you will not be — Krishnan, you very well know that this is in this business, it takes time, right? So by the time you start doing work with the customer, it’s not a one-year relationship, it’s a multi-year relationship. So there is enough opportunity to bond and grow together.
Krishan Parwani
Understood, sir. Thank you very much for answering my questions, sir. Wish you all the best.
Anish Ganatra
Thanks.
Operator
The next question is from the line of Pranita [Phonetic] from Morgan Stanley. Please go-ahead.
Pranita
Thank you, sir. Thank you for the opportunity, sir. My question is on the CDMO outlook, especially for F ’26. Can you give us some color on that?
Anish Ganatra
CDMO outlook for FY ’26, again, we are — we are looking at a strong sort of growth from where we are today. But you know, this is something that is an active area of attention by the leadership team in terms of driving the sales and the relationships, okay? Some of the molecules that we are working on and have worked in the past, we are looking to get orders back again and that’s an ongoing journey. But we remain very constructive of the business in CDMO, driven by the inquiries we are receiving and just the plate of product portfolios that we are working on?
Pranita
Okay. Thank you, sir. Just one more question on the domestic refrigerant gas. I was wondering if you could give us some color on the domestic dynamics in terms of supply-and-demand. So I — what I see is that there’s a lot of new supply coming in from you guys and — but the current tightness, what is it — what is driving that? Is it the seasonality or is it something more fundamental?
Anish Ganatra
I think there is — so to answer your question there, the demand-supply on refrigerant gases and in particular on R32 is a global phenomenon. It’s not just India, okay. India does play a role. I mean OEMs and I’m sure you track those numbers and forecast by OEMs when they talk of what they expect from the R32 market in the next couple of years. And at the same time, the global demand is quite strong. So we are seeing a lot of inquiries from global majors and hence, again, I’m going to refer back to what Nitin brought up in his in his commentary. You know, it’s simply at our — you know the level of inquiry is such that level and the scale of the inquiry such that you move from a transaction to a strategic conversation.
Pranita
Thank you so much, sir. All the best. Yeah.
Operator
Thank you. The next question is from the line of Jason Sones from IDBI Capital. Please go-ahead.
Jason Soans
So sir, thanks so much for taking my question. Just wanted to know, I mean, after some subdued quarters, we are again seeing some good recovery margins also recovering to a healthy the 24% levels. I just wanted to know are we looking at this ag-chem recovery? Is it sustainable? I mean, what are the — what is underneath it? Is it some demand improving, some channel restocking? Just wanted to know could it be an inflection point for the chemical sector to recover from here on with capex intensity, et-cetera picking-up from these levels or does the situation still remain quite difficult?
Anish Ganatra
Yeah. So again, see, this is not something that is by accident, right? I mean, we had said in Q3 of last year that we would drive the margins from 15% to 22% 25% and the focus and the priorities were set by the Chairman at the time and those priorities continue, right? So our focus is to make this very, very sustainable. And what has happened here is that while we have continued to work and work on things that we can control and make a meaningful difference internally, we have also adapted and navigated the market space by recognizing what the customer wants, what our strategic partners are looking for and working with them closely to secure the order book. Like I said, we were okay to compromise on the EBITDA margin per unit of AgChem product, but in the benefit — in the bigger benefit of a higher EBITDA number. And some of the results that you see today are a reflection of that strategy along with of course, the positive tailwind that you’ve seen in the HPP vertical.
Jason Soans
Sure. And sir, just wanted to also know that, I mean, you did give a quite a detailed outlook for the CDMO business. Before — some time back we’re getting some good demand traction from biotech pharma as well. So just wanted to know in terms of demand from biotech, how is the outlook from that side, from that vertical?
Anish Ganatra
And also just to add with that, with this ambiguity on the BioSecure Act, does that impact us or regardless of that, we are on a good and a firm footing in terms of the CDMO business? No. So Biosecure obviously turned out to be a lot more muted than anybody who expected it to be. Right. But I think what it did do is raise a question with every large customer and we are seeing the benefits of that. We’re also seeing higher inquiries coming in as a result of this. Our focus in CDMO is to work with innovators in therapeutic areas where we know there is potential in the future. So things like oncology, things like neurology, those are the areas we are sort of focused on in driving of course, at the end-of-the day, marrying that to our core capability on chemistry side.
Jason Soans
Sure, thanks. Thanks for answering my questions, sir. Thank you.
Operator
The next question is from the line of Nirav Jimudia from Anvil Research. Please go-ahead.
Nirav Jimudia
Yes, sir. Good evening and thanks for the opportunity. I have two questions. So first on the AHS side. So like we are on the verge of commissioning the plant. If you can share your thoughts on the availability of fluoride like which is being controlled by a few countries, Mexico, China and Africa mostly. So some of the reports also suggest that Chinese are fastly deplating their results for given the kind of 6 million, 7 million tonnes of production they are seeing currently, given the kind of ecosystem they are building on. So from a sustainability point-of-view, how the company’s plays in terms of the long-term availability and the contracts for floor spar? This is question number-one, sir.
Anish Ganatra
So in the same way that we have strategic relationship on our customer side, strategic relationship with our vendors on the floor spa. And we don’t see any supply risk-on that. Certainly not in — not even in the conversation, frankly. And I’m looking at, if I’m — if he has ever heard anything on supply risk.
Nitin G. Kulkarni
So definitely, we have not heard we have some multiple suppliers on a long-term contract basis. But the — this point is very well taken and we also know that we need to go beyond these contracts also to secure our floor spar supply. So if you look at our expansion or the new INR450 crore project of HF. So this particular plant can use any floor spar of any region right from the Mexico to China, to South Africa, to Vietnam, to Thailand and particularly, we have spent some money on the table just to ensure that this single infrastructure can help us to play with the multiple fluorespar sources to secure our supply — supplies of. So definitely, though we have a very strong relationship with our existing fluoride partners, we have also kept a cushion to ensure in case of any crisis, in case of any supply disruptions, we have other sources from where we can easily use the floor spar.
Anish Ganatra
Yeah. No, I think that’s great. I mean the — so as Nitin mentioned, there is a lot of flexibility built-up in the new plant to take diverse sources of those power.
Nirav Jimudia
Got it. Sir, second question is on the inorganic chloride business. So your FY ’24 annual report says that we had a decent amount of volume growth in FY ’24, but the pricing was under pressure. And given the kind of market leadership in aluminum potatium and the sodium fluoride, which we have been holding for quite a number of years, if you can share your thoughts here in terms of how this business is shaping up, whether this incremental AHF is dedicated for some of the newer products in the inorganic fluoride side? Some thoughts here. Thank you so much.
Anish Ganatra
Yeah, I’m going to look at Nitin to take that one.
Nitin G. Kulkarni
So, so we are basically, of course, the aluminum fluoride definitely no, we are not into that play since last, I think two or three decades. And our entire focus is into the salts which you spoke right now. And if you see compared to last year, our shift is towards the high-purity material. I’m not talking about here buzzwords like the electronic chemical related salt or the EV battery-related salt. But there is a niche segment where the high-purity KF as well as the sodium fluoride and the other inorganic salts are playing a role. And we have carved-out that particular area as the — our focus area and that is the reason, of course, there is a price pressure, but not while the way we are looking at the normal KF price in the market. So we have a blend of this product mix, which is as we said, we have worked on a certain product mix, which is giving us this opportunity to help to increase our contribution line, of course, by bringing in the operational efficiencies. And of course, that is going to be our focus area, plus there are certain inorganic salts which are finding application in pharmaceutical industry. And fortunately, that particular demand seen some uptick in last two quarters. So that is also helping us.
Nirav Jimudia
Got it. Sir, last clarification to Mr Anish. So has the increased prices of sulfuric acid fully factored in Q3 or some bit of cost increases have to be felt in Q4 also?
Nitin G. Kulkarni
I mean, until we are the net number.
Nirav Jimudia
My apologies are. Confirm.
Nitin G. Kulkarni
We haven’t experienced.
Anish Ganatra
We are it’s not — I mean, whatever it is it’s in the numbers, there’s nothing more to factor beyond that.
Nirav Jimudia
Perfect, perfect. Thank you so much, sir and wish you all the best.
Anish Ganatra
Thank you.
Operator
Thank you. The next question is from the line of Kirur Pandia from ICICI Prudential Life Insurance. Please go-ahead.
Keyur Pandya
Thank you for the opportunity. Just one bookkeeping question is on the new plant. So the full depreciation interest and OpEx has been factored in this quarter or that would be in next quarter and any specific reason for say Q-on-Q fall in employee cost? That is first question. Second, on your first question for fall in employee cost Q-on-Q.
Anish Ganatra
Okay. Okay.
Keyur Pandya
And second question is on CGMP3 capacity. So what is the peak revenue that we can do from CGMP3? Last I remembered was around say INR450 crore to INR500 crores. And if that is the case, I mean, is it fair to assume that in the first year of operation itself, CGMP IV would achieve a INR350 crore kind of revenue in FY ’27? These two questions.
Anish Ganatra
Okay. So your question on depreciation and interest for. Again, the asset was capitalized on 9th of December. So from 9th of December, depreciation and interest is charged into the P&L. And you will see the full-quarter effect obviously in the coming — in the 4th-quarter of this year and then going-forward, right? So that’s already factored in. On employee cost, we have a ESOP reversal over there of about INR5 crore. But we think the sustainable run-rate of for employee cost is going to be in the range of between INR70 crore to INR75 crore per quarter, okay? It’s not going to exceed that. In fact, it will probably be coming down from 75 onwards. If I was to take the reversal out. Okay. So this sort of again, if you see our percentage of our cost to sales on employee, you will see that in Q4, we’ll start to sort of bring it down more closer to 11% and it’s already at 11.5% in Q3.
Keyur Pandya
Okay. And on CDMO?
Anish Ganatra
Yeah. On CDMO, CGMP3, the CGMP3 again is a CGMP4, right? I think that’s what you meant that when that asset comes in, you will start to see whether the peak revenue will start immediately. Now CGMP4 is going to be — Phase-1 is going to be dedicated clearly to the Fermion contract. So there is already very close partnership between us and Fermion as the asset is being constructed. And the idea is to ramp it up very, very quickly as soon as it sort of comes on-stream, yeah. So hopefully, you should be able to see the peak revenue within the year and that’s what we indicated that FY ’27, you should start to see the number that we talked about.
Keyur Pandya
30% revenue of CGMP 3
Anish Ganatra
CGMP 3, 1, 2 and 3, you know, again, simply going by the past, which I think was in FY ’23, there is enough bandwidth to do up to about $50 million to $60 million to-1, 2 million and 3.
Keyur Pandya
Noted, sir. Thanks a lot and all the best. Thank you.
Operator
Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go-ahead.
Surya Patra
Yeah. Thanks for this opportunity, sir. So my first question is on the specialty chemical export domestic mix this quarter. It looks like that mix has reversed this quarter from the earlier trend. Anything to read-out of it, sir.
Anish Ganatra
Nothing other than the fact that supply is being made at the of global customer to their local supply-chain partners.
Surya Patra
Okay. So going ahead, so it is a quarter-specific story or so nothing to read-out of it or it can continue like this going ahead.
Anish Ganatra
It’s — these are campaign-driven things. So they could move from one campaign to another, very difficult to predict because see again the global innovators and I’ve said this before, they are looking at increasingly flexible supply-chain partners, not just with us, but with all their counterparts, right? So these — the flexibility means that some of these things will keep varying. I think in some sense, the export versus domestic will start to become more like a small.
Surya Patra
Okay. Just last question from my side is that, so this for the Nectar project, see, obviously, you have been consistently indicating that you have clear order book for FY ’25. So you have started building up visibility for ’26, sir for this visit.
Anish Ganatra
Firstly, again, project starting now the plan like we’ve always said, right? There is a dedicated portion and then voice is not audible. Yeah, is it better now? Can you hear me? Can you hear me?
Surya Patra
Yes, yes, sir.
Anish Ganatra
See, for Nectar project, like we’ve always said, right, there is a capacity which is for the dedicated portion and then there is a capacity to our own account. The way the ramp-up plan is to first fill-in the dedicated capacity because the technology belongs to the dedicated partner. We are working together in both the implementation of the project as also ramping it up. And like I said, we are also working towards making another molecule with some modifications at the behest of the same customer. So the first year will always be focused on completing the dedicated part of it. And as we do that, we will also create space to complete our qualification campaigns for the open part and that will come in the following year, which is why we had kind of always indicated that it’s a two-year journey to the park.
Surya Patra
Okay. Okay. There is no demand in cost equation or cost concern for this project to be successful or to see a kind of a meaningful ramp-up. There is nothing like that.
Anish Ganatra
No, nothing. I mean, nothing like that, but being cost-efficient is good for all seasons, right? So that push is always there, man.
Surya Patra
Okay. Okay. Sure, sir. Yeah. Thank you. Wish you all the best.
Operator
Thank you. Ladies and gentlemen, in the interest of time, we would take that as the last question. I would now like to hand the conference over to the management for the closing comments.
Vishad Mafatlal
All right. We’d like to thank you all for participation and all your support.
Anish Ganatra
Yeah. Thank you very much.
Nitin G. Kulkarni
Thank you. Thank you, everyone. Bye.
Operator
Ladies and gentlemen, on behalf of Naveen Floral International Limited, that concludes this conference. Thank you, and you may now disconnect your lines.