AMI Organics Ltd (AMIORG) Q4 FY23 Earnings Concall Transcript

AMI Organics Ltd (NSE:AMIORG) Q4 FY23 Earnings Concall dated May. 15, 2023.

Corporate Participants:

Bhavin Shah — Chief Financial Officer

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Analysts:

Reena Shah — Elara Securities — Analyst

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Mitul Mehta — Lucky Investment Managers — Analyst

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Rikin Shah — Omkara Capital — Analyst

Tarun Shetty — Haitong Securities — Analyst

Dhaval Shah — Girik Capital — Analyst

Amar Mourya — AlfAccurate Advisors — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Aman Vij — Astute Investment Management — Analyst

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 and FY ’23 Earnings Conference Call of AMI Organics Limited, hosted by Elara Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Reena Shah from Elara Securities. Thank you and over to you.

Reena Shah — Elara Securities — Analyst

Thank you and good afternoon, everyone. We welcome you to AMI Organics Q4 and FY ’23 earnings conference call. We at Elara Capital would like to thank the management for giving us the opportunity to host this call and we would like to congratulate management for the best ever results.

Today, from the management side, we have Mr. Naresh Patel, Chairman and Managing Director; and Mr. Bhavin Shah, CFO of AMI Organics.

I would now like to hand over the call to Mr. Bhavin Shah for opening remarks. Thank you and over to you, sir.

Bhavin Shah — Chief Financial Officer

Thank you, Reena. Good afternoon, everyone. We are pleased to welcome you all to our earnings conference call to discuss Q4 ’23 financials.

Please note that a copy of our disclosure is available on the Investors 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 risks that the company faces. This 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 AMI Organics and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company.

With that, I would like to hand over the floor to our CMD, Mr. Naresh Patel, for his opening statement. Over to you sir.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Thank you, Bhavin. Good afternoon, everyone. I hope you all are doing well. A warm welcome to our Q4 FY ’23 earning call — conference call.

Before we jump to our update on our performance, I would like to take a couple of minutes to reflect on how FY ’23 has fared for us. It is no secret that the year began on a very challenging note with the ongoing war in Ukraine severely affecting supply chain, impacting commodity and gas prices, increase in raw material prices, among other. All these factors have added to significant cost pressure for all the companies. While supply side issues continue to pile up, we also saw muted demand environment across industries. While the start of the year was demanding, the situation has gradually improved as the year progressed, albeit at slower pace.

Moving to the current scenario. On the industrial front, things are on the mend [Phonetic]. Specifically on pharmaceutical segment, cost pressures have rationalized to great extent. An important update closer to home is that the Chinese chemical industry is back with a strong production and competitive price, which has started hurting many industries and players. I believe we will see more of it in coming quarters. While these factors play out in the industry, at AMI Organics, our business model is designed in such a way that the revival of the Chinese chemical industry has minimum to no bearing on us. To put into perspective, we never benefited from the shutting of plants in China with the COVID or supply chain issues. And second most important thing is that we remain a global market leader in our key products with China and other geographies in the second and third spot. So Chinese industry coming back strongly did not affect us.

On the demand side, we are witnessing gradual upswing in demand in half year of FY ’23. And I believe the revival will continue in H1 FY ’24. At AMI Organics, we have used this challenging year to create various growth drivers for the coming year. We’ll discuss these growth drivers one-by-one. I will start with Electrolyte Additives. I’m happy to inform you, as of today, we have received approval from six customers worldwide. We have also received plant scale trial commercial orders of few metric tons and we are also expecting bigger commercial orders during the current quarter. We believe the volume will be — will ramp up slowly as we progress through the year.

Looking at progress on the Electrolyte Additives segment, we have started working on the plans of expanding our capacity for this product. I will provide update on the same once our plans are finalized. One more important update on this one is that we have developed two more products in this segment. One of them is liquid electrolyte additive to increase the electrocapacity of the lithium-ion batteries and one more additive for solid-state battery. The products have been approved at the plant scale and are in advanced stage of validation.

Moving on to the second growth driver, we started working on initiatives to get into long-term contracts with customers, which improves our future revenue visibility. We have successfully signed some long-term LOI and contracts with some of our big customers on this front. The Fermion deal was one of the same line of talk. I am delighted to share that we have been able to expand the scope of our contract with Fermion and we have added a couple of high-value intermediates for the same. This means we will now be doing three advanced intermediates for the same which increase the value of our contract manifold.

The third growth driver for us would be new products. During the year, we have developed several niche Specialty Chemicals products which are at different stage of validation and approvals as we speak. Some of these products are very big when you look at our current size of business, and I will update you on these product as they reach certain milestones.

Last but not least, we announced the acquisition of 55% stake in Baba Fine Chemicals last month. At AMI Organics, our inorganic growth strategy is based on two elements: one, where we are either interested in buying the asset, which we can then use to expand our products; or the other, where we are able to gain access to new products and technology, which is difficult to create organically in short term. The acquisition of Baba Fine Chemicals falls under the second strategy, where we are gaining entry into a very-high entry barrier semiconductor industry. They have been in this industry since inception and they’re looking for an opportune partner who share their business ethic and chemistry capabilities. I’m happy and proud that they chose AMI Organics. On the financial side, they have strong balance sheet with zero debt. Overall, the acquisition fits perfectly in our strategy and chemistry capability. Overall, our organic pharmaceutical business will continue to grow strongly. And now we have some good growth lever lined up, which will boost the overall growth of the company.

Moving on to our Q4 and yearly results. Starting with Q4 FY ’23, we delivered highest-ever quarterly number in Q4 at INR186 crore. This translates into close to 30% growth on year-on-year basis. Growth was by driven by Advance Pharmaceutical Intermediates business. On the full year number, we continued our strong momentum in FY ’23 achieving total revenue of over INR621 crore, which was higher than 19% when compared to last year. Our pharmaceutical business aided the growth for the year with 22% growth year-on-year, whereas Specialty Chemicals business grew slightly by 3%.

Our operating margin for the year were flat due to cost pressure, which I discussed during the start of my speech, which impacted our margin in H1. However, our margins rebounded strongly in H2, and we ended Q4 on 21.9% operating margin. I will let Bhavin discuss financial in details.

To conclude, I believe the challenging days are behind us and I am confident that we will continue the strong growth momentum in FY ’24 as well.

With that, I request our CFO, Mr. Bhavin Shah to discuss the financial with you. Over to you, Bhavin.

Bhavin Shah — Chief Financial Officer

Thank you, Naresh Bhai. Good afternoon, everyone. I would like to briefly touch upon the key performance highlights for the quarter and year ended 31st March 2023. And then we will open the floor for question-and-answers.

I will begin with quarterly updates. Revenue from operation for the quarter was at INR186 crore, up 29.8% compared to INR143 crore in Q4 ’22. The gross profit for the quarter was at INR81.3 crore, up 28.3% as compared to INR63.4 crore in Q4 ’22. The gross margin for the quarter was at 43.6%. Lower gross margin was due to high cost inventory which has been completely consumed by Q4 FY ’23.

EBITDA for the quarter was at INR40.8 crore, up 58.3% as compared to INR25.8 crore in Q4 ’22. On a sequential basis, EBITDA for the quarter increased by 32.5%. EBITDA margin for the quarter were at 21.9% compared to 18% in Q4 FY ’22 and 20.2% in Q3 FY ’23. We continue to improve EBITDA margin on a sequential basis as per our guidance. EBITDA margin in Q1 were 18.1% and we have been successful in gradually improving our EBITDA margin to 21.9%, an expansion of 380 basis points.

Now dissecting the margin further. I’m happy to report that EBITDA margin for the pharma business was 23.6% in Q4 FY ’23 and our margin on the Specialty Chemicals side were at around 11.1%. This is an improvement of 100 basis points. PAT for the quarter was at INR22.7 crore, up 27.6% on Y-o-Y basis, and 21.9% on a sequential basis. The PAT margin for the quarter were at 14.6% as compared to 14.8% in Q4 FY ’22 and flat as compared to Q3 FY ’23.

Coming on to full year FY ’23 updates. Revenue from operations for FY ’23 grew by 18.6% Y-o-Y to INR617 crore compared to INR520 crore in FY ’22. This was driven by advance pharma intermediate business, which grew strongly by 22% on Y-o-Y basis. Gross margin for the year were slightly below at 46.3% when compared to 47.5% in FY ’22.

EBITDA for the year came at INR123 crores, up 16.6% Y-o-Y compared to INR105 crore in FY ’22. EBITDA margin for the year remained flat at 19.9% as compared to 20.2% in FY 2022. If you adjust one-off items like loss on insurance claim, receivable and loss on sale of assets, our EBITDA margin for the year would be around 20.5%, which is slightly higher than the last year. PAT for the year was at INR83 crore, up 15.8% on Y-o-Y basis. PAT margin for the year was at 13.5%. Export for the year was at 59%, whereas domestic business was at 41%.

Coming to the balance sheet, we have a net debt free balance sheet with cash and cash equivalent of around INR59 crore. During the year, we have generated strong cash flow from operation of INR65 crore, which was driven by better working capital management. I believe we will continue to generate robust cash flow from operation in coming year as well. This will support our routine opex as well as capex.

With this, I conclude my remarks and request the moderator to open the floor for a question-and-answer session. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We have our first question from the line of Chirag Lodaya from Valuequest. Please go ahead.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Yeah, congratulations on good set of numbers. I have couple of questions. First on segmental margins, if you can help us understand what were the full year margins in Specialty Chemicals and Advance Intermediates division.

Bhavin Shah — Chief Financial Officer

So Chirag, full year margin for pharma business is 21.57% and specialty at 10.3%.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Okay. And how are we seeing margins going ahead segment-wise?

Bhavin Shah — Chief Financial Officer

As we are guiding that our first target is to at least do our FY ’21 margin for pharma business, which we have already achieved in Q4, that is 23%. So we are — we would like to maintain this margin and would like to go further from here. As far as our specialty business is concerned, we have improved 100 basis point in last quarter and in coming quarters, we’ll see 50 to 100 basis point improvement quarter-on-quarter basis.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Right. And if you can throw more color on Specialty Chemicals division, what kind of ramp-up we are seeing next year. And you have also talked about few new products which are under pipeline and which will help to scale up the business, so some color on Specialty Chemicals, what to expect and what will drive the growth there.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

So I’ll take that. This is Naresh Patel. Specialty is our more focus area currently in AMI Organics. And we are — have a robust plan for growth in Specialty Chemicals and also phase out the old products of Gujarat Organics. And in that line, we have developed around 20 molecules in Specialty Chemicals segment in Gujarat Organics and some are already LOI signed and started qualification at the end of the customer. And these are all versatile application including electronic [Indecipherable], polymer industry as well as some paint industry, additive, [Indecipherable] as well as some electronic industry. So cumulatively, it will be bringing a lot of large volume and large value. We are targeting this year the Specialty Chemicals segment will grow around 25% to 30% against our normal growth of 20% to 25% of — 22% to 25% of our pharma industry.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Right. And coming to this new acquisition, which is undergoing, of Baba Fine Chem, if you can just help us understand what is the overall opportunity size for this company, because current revenue is quite small, it is a niche business, it looks like. So some color there, what kind of scale we can create maybe three, four years down the line.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Thanks. That’s a very right and very vast question you had asked this, because, currently, the size of the company is small, because it is running by the three scientists, R&Ds, they all are market scientists in the semiconductor industry having holdings, several patents in their name. And now, out of the two, one is already — got passed away in COVID and one is aged out, so he wants to exit and that opportunity we got to get the major stake in the Baba Fine Chem. Baba Fine Chem has a main application in photoresistors chemical in the semiconductor industry and they are making very high pure chemical passed for the Indian kind of PPT, normally we talk in PPM. But this is [Indecipherable] purity. So that is a very unique technology and capability of Baba Fine Chem, and upward going — while market is more than $2 billion in photoresistor chemicals. And so there’s a huge potential available. So by AMI Organics introducing a [Indecipherable], we can able to give them the operational leverages that will help them to grow the business.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

But any ballpark number, what to expect over, say, three, four years?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

It will be — definitely it will grow more than 3 to 4 times in upcoming years.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Okay, that is helpful. And lastly, bookkeeping question, what would be the capex for FY ’24?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Currently the capex for FY ’24 is just the capex which is ongoing and whereas once these electrolyte orders are start flooding, we will do some capex — plan some extra refill [Phonetic] capex for that and that capex will be in second half of FY ’24. We will announce it when — value of the capex once we are ready for that.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Ex of electrolyte, the overall number would be?

Bhavin Shah — Chief Financial Officer

Ex electrolyte, we are having a INR35 crore of maintenance capex and there will be additional capex for solar we are planning so that when we’ll announce that, so there will be a additional capex for that also. And we — so this is the capex plan for the year.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

And greenfield facility will have around INR160 crore, INR170 crore balance capex?

Bhavin Shah — Chief Financial Officer

Yes, greenfield capacity will have around INR160 crore, INR170 crore capex spending to be done in the year.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

So put together, INR200-crore-plus next year, right?

Bhavin Shah — Chief Financial Officer

Yes.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Okay, thank you and all the best.

Operator

Thank you. We have our next question from the line of Mitul Mehta from Lucky Investment Managers. Please go ahead.

Mitul Mehta — Lucky Investment Managers — Analyst

Good afternoon, sir. Congratulations on a very good pharma operating numbers. Sir, from the day we acquired Gujarat Organics till today, our numbers have not been up to the expectations. So can you help us to understand what sort of product portfolio are you building there? Are we — you think you can scale up the pharma business — I’m sorry, the Specialty Chemicals business in next two, three years? The current investment that we did when we acquired Gujarat Organics and working capital, the current ROCE looks very, very sub-optimal. So just wanted to get some color on that. My second question is on the Fermion contract. If you can help us to understand when does the delivery commence for Fermion and can we get some more color on this contract? I mean, this is going to be over, let’s say, 10 years or even further on? So can you help us to understand would be the questions.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Your number one question is where does Specialty Chemicals portfolio relate to Gujarat Organics. Let me tell you one thing, we acquired Gujarat Organics in April 2021. Since then, two to three years has just passed for the takeover and taking the management and all. Then we — three months we worked on what are the areas we need to be focused and we made a robust plan for that. And that is how we shifted all the manufacturing site from Ankleshwar to Jhagadia and we made the free land for our pharma expansion and that is without losing any single order. But the last year was mainly for the consolidation in terms of the product sustainability, technology upgradation. We had done a technology upgradation for methyl salicylate, we had done technology upgradation for parabens as well as we had done four or five new molecules which are commercialized in FY ’24 which are in the application in UV ray absorbents, and application in agro chemicals as well as in application in petrochemical industries. So these are the molecules we developed and started commercial orders in FY ’24.

So our target is to far sustain the business without losing the money and volume and then make sure that now this business will be replaced as well as grow with a new product and the margin and operating margin from 0% to bring to 10% and that we sustained for last eight quarters and now we are increasing. Last quarter, we increased by 100 basis point and now we are targeting to increase and bring it to 18% to 19% of margin in Specialty Chemicals in this year. So this is what we are doing in Specialty Chemicals segment. And revenue size will be up to 0.5 [Phonetic] times in next two to three years, which is our targeting. This is just a projection. It is just [Phonetic] for plan.

And in terms of Fermion contract, that is a long-term contract and it will be start supplying from Q3 of FY ’24. And that will be somewhere around — I can’t say the value because it’s a very big value and it will be mature — the full capacity supply will be starting FY ’25, because it is a pharma and it takes some time to register in 180 countries worldwide. So in FY Q3 and Q4, it will be giving us a sizable revenue. But from FY ’25, it will be giving us a full revenue. So this is how we are targeting Fermion. And in that contract only we had three more products in that, and that all three products is additional to the contract, so that will also help us to grow more numbers in the upcoming years.

Mitul Mehta — Lucky Investment Managers — Analyst

The three products that you mentioned are other than the product that we have with Fermion, right?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

So basically, we are doing the supply of a very well advanced intermediate in that three raw materials, which we are supposed to import from China, but that we made in-house, and now we’re consuming in-house. So that is an additional advantage for us to have not only the top line increase, but also the revenue and profitability also can be increased in that.

Mitul Mehta — Lucky Investment Managers — Analyst

So if I — I was just looking at some of the primary data releasing by their — on their presentation, it’s public information. So their current run-rate is about EUR180 million for the new [Indecipherable]. And so, if I annualize, that comes to roughly about EUR800 million. Currently, our supply is, let’s say, to begin in Q3 and will scale up in FY ’25. So at present, is it possible for you to reveal from whom they’re currently sourcing the intermediate?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

If you’ve done such a good research then — this product is growing at unexpectedly 300 times a year. So it will be — their expectation was whatever they expected in 2026, they already crossed in 2023, so it’s growing very fast and the basic API manufacturing plant in Fermion is fully utilized and the intermediate which they are trying to source from us, they are currently making in-house, they don’t have another source other that than us. So that this how they are increasing their capacity and we are going to make their intermediate in AMI Organics and the final API. So the growth rate of this product is so high, they want to move faster and all the capacity and all the technology, everything is available with us. So that is adding advantage to them.

Mitul Mehta — Lucky Investment Managers — Analyst

Is there a technology barrier in this particular product? Can they develop an alternative supplier? I mean, is there any alternative supplier who has…

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

They don’t have currently any alternate supply, and this is a CDMO kind of work where we do the development and the manufacturing of the product. So it’s all in the CDMO, CRMO, CDMO segment of AMI Organics.

Mitul Mehta — Lucky Investment Managers — Analyst

Okay. And sir, your thought on apixaban, I mean the anticoagulant family that we are currently supplying, how is the growth rate there? And do you also foresee that this particular segment can be a very big growth driver for us in the next two to three years?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yes, definitely our anticoagulant is always a key basket for AMI Organics, and that is the reason why we have developed all the anticoagulant basket which is currently launched or going to be launched, which include apixaban, rivaroxaban, edoxaban, betrixaban, all kind of — which have expiry year to 2035, we have full basket is ready. Apixaban and rivaroxaban is a growth driver for us for the next two years because it’s going to be launched and our generic player worldwide, more than 26 customer in apixaban. They are all ready to launch and also they won some litigation in the U.K. against the originator [Phonetic], so that will all cause to start business very faster. In rivaroxaban, now they have qualified us and they started putting order in Q4 to us — Q4 FY ’23. So now we are supplying to [Technical Issues]. So it’s a very good growth driver for us for anticoagulant segment.

Mitul Mehta — Lucky Investment Managers — Analyst

And sir, as far as edoxaban is concerned, seems to be a very competitive [Phonetic] product, it’s a new generation anticoagulant, which currently is selling very well in Japan. So are we going to play a significant role there also?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

We have already three customer in Japan who had qualified us.

Mitul Mehta — Lucky Investment Managers — Analyst

So Daiichi has already qualified us?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Daiichi not, because they are making all the chemicals themselves there. But rest of the all generic player had qualified us.

Operator

Mr. Mehta, I request you to come back in the queue, sir.

Mitul Mehta — Lucky Investment Managers — Analyst

Thank you very much.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Sudarshan Padmanabhan from JM Financial PMS. Please go ahead.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Yes, thank you for taking my questions and congrats on great set of numbers. So my question is also taking forward from the previous participant, when I’m looking at the next 18 months, we have multiple triggers: one the Fermion contract; then we have a new generation anticoagulant drug that is going to drive growth; and the three — third one would be the [Indecipherable] side, which can actually become fairly big products for us. In the context of the fact that we are operating the facility at around 75% on the pharma side and volumes obviously will drive operating leverage, I mean, do you think that this 20% to 25% kind of a growth that you have given on pharma and the 30% guidance, I mean, could basically be a little bit more on the conservative side? And could you also talk a little bit more beyond FY ’24 because some of these contracts are going to be more visible in FY ’25? So what is the upcoming [Phonetic] trend in terms of top line and margin that one can realistically expect?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Many thanks and very logical questions you had asked. So normally AMI Organics is always proactive in terms of product pipeline as well as the capability and productivity. So our Ankleshwar facility — upcoming facility which will be ready December ’24 for operational, so that will come with a very huge volume — 4 times volume than our Unit 1 in Surat. So that will be definitely help us to next FY ’24, FY ’25, FY ’26 growth of the pharma and also not only that, to make derisk ourselves if there is any delay in that, we had already started shifting our several chemistries like chlorination, nitration, diazotization, and esterification. Currently, we are making in a flow at a very high volume. So that has free our capacity also in Unit 1 as well. So that is how we can have a buffer of at least one, one and half quarters for us to sustain our growth rate in pharmaceutical in intermediates segment.

In Specialty Chemicals, we have Unit 3, which is in Jhagadia. It’s running currently at 35% to 40% capacity and it has a capability to handle up to 80% in next two years. Not only that, in Unit 3 also, we have shifted Ankleshwar unit blocks there, which will helping us another 15% capacity, which is currently under installation — finishing of the installation. So that will also add another 15% capacity in specialty segment. So ongoing FY ’25, ’26, we have several contracts, which are in line, few are in [Technical Issues], few are in petrochemicals area, which are LOI already signed but we are not declaring the LOI because it’s — once we include it in the PLIs [Phonetic] and start converting into MoU, then we will disclose about the growth plan and value of these LOI in FY ’24 and ’25.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

On the margin side, sir? Because we are talking about 150 bps or so that even if you are not assuming that these contracts [Indecipherable] margin, the operating leverage itself should take care of the 100, 150 bps. So are we looking for a surprise on this side?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

We are conservative in terms of our comments and that’s why we are saying that 100, 150 basis point, whereas once these all high-value contracts will be in place, the margin definitely go up in that sense as well.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

And it will basically be 150 bps again for FY ’25 because will see again a volume growth as well as better margin. It should be — you would see margin expansion again and almost strong top line in FY ’25 as well over FY ’24. So we are looking at multiple here, not just one.

Bhavin Shah — Chief Financial Officer

So margin expansion is a continuous process. So as we grow, our revenue will grow, system process will be more mature. So currently we are at — running at 23% and we are looking at sustained margin improvement quarter-on — it is premature to speak anything about ’25 currently.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sir, just a small bookkeeping question, one on the current quarter gross margin. I mean there we see some kind of a deficit because of high-cost inventory or there’s a mix, but on a longer-term, the positive side is, we’ve seen a great reduction on the working capital. I mean, we have been able to release about INR40 crores to INR45 crores of cash on the inventory side. So can you talk a little bit more about the kind of work you’ve done on the working capital? And should this improvement continue and what’s our target in terms of working capital days?

Bhavin Shah — Chief Financial Officer

So, currently, on a average basis, on a — considering sales as a base, our working capital cycle is 108 days. And I’ll try to bring this at 100 days. So we are continuously working on it. We have improved our inventory days. We are trying to get more credit from the — our supplier. And our endeavor will be to reduce our receivable days by another 10 days.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sure. And on the near-term…

Operator

Mr. Padmanabhan sir, I request you to come back in the queue sir. There are other participants waiting.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sure, sure, thank you.

Operator

Thank you. We have our next question from the line of Rikin Shah from Omkara Capital. Please go ahead.

Rikin Shah — Omkara Capital — Analyst

Hi, am I audible?

Operator

Yes, sir.

Rikin Shah — Omkara Capital — Analyst

All right. So just expanding on to what’s discussed earlier. So in darolutamide, Nubeqa, which is the FDIF [Phonetic], in FY ’21, we saw EUR220 million sales. For FY ’22, it’s EUR466 million and now we have already reached EUR180 million target and Bayer’s aspiration is around EUR3 billion in two years or three years. So considering that materializes, that could — could that result in an intermediate market which was — perhaps [Phonetic] INR500 crores, INR600 crores?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Your calculation — based on the calculation, it may be, I’m not claiming these things because I’m not supposed to. But whatever you calculate, I hope it will be okay for you.

Rikin Shah — Omkara Capital — Analyst

All right. And in this, you mentioned there is no other suppliers so would we be the ones taking majority of the business?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

It will be 100% with us. We and Fermion, only two guys will manufacture this intermediate.

Rikin Shah — Omkara Capital — Analyst

All right, all right. And in terms of our anticoagulants portfolio, we are seeing genericization of apixaban in many geographies and many API players in India are also commenting for better growth on that end. So how the entire portfolio be managed? Because in India, perhaps the treatment is at rivaroxaban level. Right? And there could be a shift in treatment as well. So globally and in India, per se, how would our coagulant portfolio be shaping up going forward?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Basically for us, anticoagulant segment is completely a bundle of the product and this is the reason why we filed patent for both the product in apixaban and rivaroxaban, and we are holding process patent for both the intermediates. And we have a sizable customers also worldwide and all geography and these all are ready for launching. Some has already started launching products and all, so that for — it is immaterial for us whether rivaroxaban goes in the market or apixaban goes. For us, it’s like — it’s a bundle and we have capability to produce — in all the products we are doing up to N minus 1. So we have a huge advantage of selling the product in a large volume.

Rikin Shah — Omkara Capital — Analyst

All right. And on the edoxaban and you touched upon a few things. So Daiichi is selling I think JPY97 billion worth of Lixiana. Right? So considering the generic market of edoxaban in Japan, how big of an opportunity can the intermediate side be worth?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Same as last time, I have to be say that it is — see, basically anticoagulant is a lifestyle disease and that is like an anti cardiovascular disease, similar kind of this and day-by-day the people having a lot of problem of this, which we saw from a very early — during our inception, so that’s why we put our portfolio in the segment. So we are ready with all N minus 1 in that as well. And we have a very good number of customers worldwide. And these are all big pharmas including Teva and there large manufacturers worldwide, they all are our customers who have qualified us as their raw material supplier. So we are also expecting the revenue coming in upcoming years from this side.

Rikin Shah — Omkara Capital — Analyst

All right. Then sir, last one from my end. On the electrolyte end, we have mentioned developing two new molecules. So you had mentioned in the earlier con-calls that we had vinylene and [Indecipherable]. So would it be possible to give some more color here about what’s in the pipeline?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

These two molecule we bought from the customer and it is under NDA, CDA agreement, accessory [Phonetic] manufacturing kind of thing. And these are molecules that’s used to — for high voltage batteries and for increasing the electrocapacity of the battery — lithium battery as well as one is for the solid-state battery. So this is what we have developed and. Both the molecules are outside China and they are qualified and now we are in process of larger-scale manufacturing compliances with them.

Operator

Thank you. We have our next question from the line of Tarun Shetty from Haitong Securities. Please go ahead.

Tarun Shetty — Haitong Securities — Analyst

Hi, am I audible?

Operator

Yes.

Tarun Shetty — Haitong Securities — Analyst

Yeah. Thank you for the opportunity and congratulations on the good set of numbers. Sir, on the Baba acquisition, I just wanted one clarification, 45% of your PAT would be booked under minority interest, is that understanding correct?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yeah, the 45% is one of the minority third partner which is the key partner of the Baba Fine Chem will be remain as a partner.

Tarun Shetty — Haitong Securities — Analyst

Okay. In one of your recent interviews you did claim to — even on this call, you just said that the revenue would grow around three to four-fold in the near-term. Could you give any rationale on this? Because I believe the Baba currently has only one customer that it is servicing. Does they have any exclusivity contract there or any kind of restriction on sales, anything that you can give color on?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yeah, the product which Baba Fine Chem is currently manufacturing and delivering to one customer is exclusively for them, but there are more than 40 products, which is already developed and commercial — on sample, that can be go to the world, apart from U.S., other segment like Japan, Korea and other countries. So there we started promoting this product in that country also.

Tarun Shetty — Haitong Securities — Analyst

Okay, okay. So basically your trajectory of four-fold growth on top line of Baba still stand.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yes.

Tarun Shetty — Haitong Securities — Analyst

Okay. And just on the margins, I believe currently it is 60%-plus and you did give recently again in the same interview that margins would be around 40%. Anything — any reason for this?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

See, when we — see, margin is a part of when the number and volume will grow also there is a — and then when you go from one layer to another segment of that, there will be some change in the margin side because of some operational and other compliances and other — not compliances, I think so, but other involvement, product capacity involvement and all that will increase the energy consumption and everything. So that will — so we are conservative in terms of 10% reduction in the margin, but definitely it is not like that, but which is conservative is better than bullish.

Tarun Shetty — Haitong Securities — Analyst

Okay. Just one final from my side. Can you give us an understanding of vinyl carbonate’s pricing right now? I believe it was trading around $14-odd or below — is it increased or decreased?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Which one?

Tarun Shetty — Haitong Securities — Analyst

Vinyl ethylene.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Vinyl carbonate is now almost at $10, $11. And chlorovinyl [Phonetic] carbonate is at $12. But we have a process where we can — in this also we can do good margin.

Tarun Shetty — Haitong Securities — Analyst

Okay. [Indecipherable] answering my questions, then I’ll come back later. Thank you.

Operator

Thank you. We have our next question from the line of Dhaval from Girik Capital. Please go ahead.

Dhaval Shah — Girik Capital — Analyst

Hello, Naresh Bhai. I have only one question on the electrolyte additives. So over next what timeframe should we assume some revenue to start coming for us?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

We will be expecting by H1 FY ’24, revenue will be start. So maybe in this quarter or latest by next quarter the invoicing [Phonetic] we will start to the customer. We already have some orders in our hand. But we are expecting some big orders from some customers, so we want to plan, clubbing the production together.

Dhaval Shah — Girik Capital — Analyst

Okay. And how will this revenue — what will be the size of revenue over two years period look like?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Revenue guideline is — I can say, it’s a very huge number, more than $2 billion, $3 billion industry where we are not expecting [Indecipherable]. The advantage for AMI Organics, or say, for Indian manufacturer is that the USA and other European countries has stopped buying any battery cells or anything which is generating from China. So that is then the added advantage is that any manufacturer basing out of China need to have a raw material from outside China. So that is helping us to boost ourselves in a faster mode of getting the orders and all.

Dhaval Shah — Girik Capital — Analyst

Okay, fine. And sir, just little bit more understanding on the electrolyte additives. So there is this electrolyte salts and then there is additives and then there is electrolyte formulation. So as we’re aware, there are many companies who are working on this product chain. So we are only into additives and the salt or also is the backward integration, we are going to make it or we’ll buy it from outside? Just help me understand this.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

See, normally AMI Organics never go for the competition to the customer, either it is in formulations, in API or in Specialty Chemicals and these electrolytes also we make the additives, which is one of the component of the formulation of electrolyte. And so we will be remain making additives or other chemicals which are used in the formulation. Salts are active part, which is manufactured by few of the companies playing in India as well as several companies in the world who are making the salts, but these all things are used to make the formulation.

Dhaval Shah — Girik Capital — Analyst

Okay, so that salt, so you will be selling it to other electrolytes — the formulation makers, the additives.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yeah, the formulation maker is buying salts and additives and solvents and then they make the formulation. So we — AMI Organics is focusing only on additives segment.

Dhaval Shah — Girik Capital — Analyst

Okay, so over a three period…

Operator

Mr. Dhaval, I request you to come back in the queue, sir.

Dhaval Shah — Girik Capital — Analyst

Sure.

Operator

Thank you. We have our next question from the line of Amar Mourya from AlfAccurate Advisors. Please go ahead.

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah. Thanks a lot for the opportunity. Most of my questions have been answered. Only two, three questions. First, sir, you are guiding for like the profitability improvement in the Specialty Chemicals. Something around 200 basis point margin improvement, let’s say, in the coming year for the specialty part, EBITDA margin?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yes, definitely it will become 200 basis points. It is more than that, but yes, definitely, 200 basis points is there.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay, okay and this is led by the flow chemistry which we had done? Is that because of that?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

It’s a mixture of technology, volume and the new products.

Amar Mourya — AlfAccurate Advisors — Analyst

Got it, got it. And secondly, sir, you are guiding for 25%-plus growth in specialty and 20% to 22% growth in the — basically your core pharma business. Right?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

This is based on the current projections we received from our customers.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay, okay. And when you say 150 basis point improvement in the margin, that is also in the pharma as well. Right?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

We are targeting to go to FY ’21 and then from then onwards it will be a tough job for us. So that will be our second part of our planning.

Amar Mourya — AlfAccurate Advisors — Analyst

Got it, got it. And third, sir, this Baba Chemical, I mean, if you see the growth rate, it has grown at a rate of 30% kind of growth. So going back, let’s say, in ’24, again, it will see the similar kind of trajectory?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Based on the current order in hand, yes, it will be — it look like similar kind of that.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. And sir, you talked about that you have a similarity in the chemistry of the Baba Fine Chem versus your existing chemistry. So if you can give us some understanding how it is basically related to your existing chemistry in specialty business.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

I think this is little bit confidential question, I cannot able to answer…

Amar Mourya — AlfAccurate Advisors — Analyst

Okay, fine, sir, fine, sir. Thank you, sir. Thanks a lot.

Operator

Thank you. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Yeah, thanks for the opportunity. Just one question. In our presentation on slide number 24 [Phonetic], we have talked about continuous flow reactors. So just wanted to understand, currently how much of our revenues are we generating from the CFR process and are these developed by us or are we buying it from third-party? And incrementally going-forward, after, say, three, four years, what is the [Indecipherable] on our current reactions and capability? What kind of revenue generation can be done from the CFR? Thank you.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

See, basically, we don’t make the dedicated product, flow reactors, we make the chemistry-driven flow reactors. In nitration, diazotization, esterification, these are the flow reactors where we do n number of products. In diazotization we are doing 11 products, in nitration we do nine products, in esterification we do 20 products. So it’s a chemistry-driven flow reactors design, multipurpose flow reactor so which will help us to switch over from one product to another product in a easy manner and we do these kind of — so we — and our single product is containing more than three, four, five reactions. So it is difficult to bifurcate how much revenue is coming from flow reactor. It is important that this flow reactor will help us to improve our operating efficiency as well as the effluent generation minimization and energy consumption minimization. So that is achieved by this flow reactor. In upcoming years, we are going to do the several two or three reactions like [Indecipherable] lithium and [Indecipherable] flow, which is our pipeline right now.

Rohit Nagraj — Centrum Broking — Analyst

Sure, thank you so much and best of luck, sir.

Operator

Thank you. We have our next question from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Good evening, sir. My first question is, if you can talk about other basket. How much does anticoagulant contribute to our revenues and, given the strong growth, where can we see this number in the next two, three years?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

See, normally, our product basket is well distributed and none of the basket is more than 15%. So, either it is antipsychotic, anticoagulant or anti-cancer. So it’s a very well wide distributed, so that if any basket will not perform, it will not impact badly on our performance. So currently anticoagulant basket is contributing 12% to the total revenue.

Aman Vij — Astute Investment Management — Analyst

Okay, and say for next FY ’24 and FY ’25, which basket do you think will be the growth driver in this segment?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

All are growing in their space and manner, so every — it’s — what can I say that — because all the products are performing well and they are giving us a good drive for — that is the reason we could able to give the guidance of next 2 years.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. And second question is on the electrolyte segment. So you’ve talked about one product in the normal batteries and one for solid-state. So I thought we are doing two, DEC and FEC. So if you can correct my understanding on that part? As well as in terms of timeline, you’ve talked about you are expecting order this year, but this electrolyte business scaling, will it happen in the second half or do you think it will happen in next year only? And is it initially driven by domestic customers or international customers? If you can talk about that also.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

So we have four products now in electrolyte additives, two is DCV and FEC is — two is already matured and now in commercialization stage and two more is developed. One is in liquid and one is in a solid-state battery. So these are the two new ones, so total four products now we have. So I hope this is clarified to you. VCB and FEC, we already have some order in hand. So this year only it will be commercialize and go to the market and the customers are basing in outside India, and in India, there are two manufacturers who have taken a sample from us and they — some has also ordered some few Kgs. But they are still under evolution of themselves. So in India, we don’t have currently more than two customers and for the rest of the world, we have nine customers out there.

Aman Vij — Astute Investment Management — Analyst

Are there any non-Chinese customer or is it mostly…

Operator

Please come back in the queue, sir.

Aman Vij — Astute Investment Management — Analyst

Sure, sure, thank you.

Operator

Thank you. We have our next question from the line of Ridhima Goyal [Phonetic] from Acquaint Bee Ventures. Please go ahead.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Hi, Mr. Naresh. Most of my questions are answered. There’s just one question which is left. I just wanted to know what is the bifurcation between volume growth and pricing?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

This time I can say only volume growth, because price is already depressed — suppressed I can say. And this is also one of the reason that we could not reach to our top line. It is — top line is compromised by 2% to 3% because of the price reduction, because raw material was down, so this fully is the volume growth.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Okay, okay. And second question which I had was, I just wanted to know what is the revenue potential we have for the Fermion contract, like on a year-on-year basis as it is a longer-term contract? So…

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

We are not allowed to say that because our counterparty is also a public company. So top line, we will not announce.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Okay, okay and just one clarification, you said that the Ankleshwar unit — the greenfield capex which are doing on Ankleshwar unit, when will it get completed? Like, what is the timeline?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

December ’24.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

December ’24. And…

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Sorry, sorry, sorry, this is ’23, December ’23, FY ’24.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Okay, okay. So December ’23 and what is the asset turn we can expect from it?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Normally we do 3 times as our normal asset turn. Our asset turn is high, because we are a very high-value products and our products are ranging from INR2,000 to INR1 lakh. So because of that asset turn is very high.

Ridhima Goyal — Acquaint Bee Ventures — Analyst

Okay, okay. So — yeah, okay, yeah, that’s it. Thank you.

Operator

Thank you. We have our next question from the line of Rikin Shah from Omkara Capital. Please go ahead.

Rikin Shah — Omkara Capital — Analyst

Hi, thanks for taking my question again. I just wanted to ask in this presentation, I could observe that we have added Lianhetech as a client. So Lianhe is a very big player in the global custom synthesis market from China. So anything that has materialized here significantly?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Yes, we are supplying to Lianhe. Our China export is mainly to Lianhe.

Rikin Shah — Omkara Capital — Analyst

All right. Okay, that’s it. Thanks a lot.

Operator

Thank you. We have our next question from the line of Tarun Shetty from Haitong Securities. Please go ahead.

Tarun Shetty — Haitong Securities — Analyst

Yeah, just a couple of follow-ups. Just to understand the Baba deal structure again, we will not be raising any debt, and we will be giving up certain amount of preferred shares. Could we see what will be the amount of outstanding shares increase in — for this deal?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

The deal value, we already discussed INR68 crore. So according to INR68 crore, we will give the preferred share accordingly.

Tarun Shetty — Haitong Securities — Analyst

So there’ll be no cash involved in this deal?

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

There is a very minimum cash.

Tarun Shetty — Haitong Securities — Analyst

Okay, okay. The — on the balance sheet, I see there’s some sharp increment in current provisions. So could you help me understand why?

Bhavin Shah — Chief Financial Officer

So current provision is mainly — it is in line with the increase in turnover and sometimes what happens that few invoice are pending for booking, so that will go under provision for expenses.

Tarun Shetty — Haitong Securities — Analyst

Okay. And then lastly, I just missed be capex guidance for this year. Could you just repeat that?

Bhavin Shah — Chief Financial Officer

So for current year capex outlay will be ranging between INR200 crores to INR220 crores, including brownfield project of Ankleshwar.

Tarun Shetty — Haitong Securities — Analyst

Okay, okay. Yeah, that’s it from my side. Thank you.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir.

Nareshkumar Ramjibhai Patel — Executive Chairman & Managing Director

Thank you, Elara team, for hosting our conference call. Thank you everyone for your patience and we hope we have been able to answer most of your queries. If we have missed out on any of your questions, kindly reach out to our IR advisors E&Y and we will get back to you offline. Thank you very much and have a great day to you. Thank you very much.

Operator

[Operator Closing Remarks]