Anupam Rasayan India Ltd (NSE:ANURAS) Q2 FY23 Earnings Concall dated Oct. 28, 2022
Corporate Participants:
Rahul Thkur — EY Investor Relation
Dr. Kiran Patel — Chairman
Anand Desai — Managing Director
Amit Khurana — CFO
Vishal Thakkar — Deputy CFO
Analysts:
S Ramesh — Nirmal Bang Equities — Analyst
Vidit Shah — IIFL Securities — Analyst
Unidentified Participant — — Analyst
Unidentified Speaker —
Rohan Kamat — Finterest Capital — Analyst
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Presentation:
Operator
Ladies and, gentlemen, good day and welcome to the Anupam Rasayan India Ltd Q2 FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in a listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Thakur from E&Y. Thank you and, over to you sir.
Rahul Thkur — EY Investor Relation
Hi, thank you. Hello and good evening, everyone. I’m pleased to welcome you all to Anupam Rasayan’s Earnings Call to discuss Q2 FY ’23. Please note a copy of all our disclosures are available on the Investor section of our website as well as on the stock exchanges. And if anything on this call, which reflects our outlook for the future or which could be constituted as a forward looking statement must in conjunction with the risks that the company faces. Today from the management side, we have with us Dr. Kiran Patel, Chairman; Mr. Anand Desai, Managing Director; Mr. Amit Khurana, CFO; and Mr. Vishal Thakkar, Deputy CFO.
I now hand over the call to Dr. Kiran Patel for his opening remarks, over to you sir.
Dr. Kiran Patel — Chairman
Thank you, Rahul. Thank you all. And welcome to everyone in the Q2 FY ’23 earnings call. I hope you all enjoyed the Deepavali festival [Indecipherable]. The last 24 months were [Indecipherable] inventory and economic challenges. Just as the world finds a solution to beat Covid, the Russia and Ukraine conflict created a second major economic crisis. Crude oil prices sky-rocketed further [Indecipherable] to Europe leading to an energy crisis in Europe. Inflation in the crude realized chemical fights build major trends [Indecipherable] at some point. Higher transportation costs, higher inflation accross the globe, higher interest rate, higher cost of raw-material, [Indecipherable] for many global companies since the Europe plus one strategy and its impact accross India. I will let Anand elaborate on how this has effected on the [Indecipherable] side.
[Indecipherable] of any company and its leadership [Technical Issues] of local and global challenges. As uninformed the first challenge of Covid recommended [Technical Issues] all our staff members were vaccinated. During the COVID period there were uninterrupted and interrupted production of all chemical materials meeting all our customer needs. Anupam posted [Technical Issues] and net all of the production and the projected numbers in-spite of the COVID challenge. Now let us focus on Q2 FY ’23. I am happy and proud that Anupam Rasayan has continued its robust growth and more importantly has also maintained the top of the demand. Natural question would be how did Anupam maintain both growth and margins in spite of the overwhelming odds. The answer is that Anupam Rasayan always works with a long term view. The robust R&D department allows us to develop niche products with complex chemistry and this ensures that we are [Technical Issues] with our partners and customers. Most often Anupam enjoys this open, transparent model. But many a times, Anupam is the primary or changeover supplier. This strategy has resulted in Anupam having 27 multinational customers. A good example is that there is no business in multinational with Japanese customer since 2016, but today the world [Technical Issues]. The transparent prosperous module allows that high quality complex molecules result in robust long-term relationship with a cash balance.
Our focus on sustainability [Technical Issues] remains strong. And [Technical Issues] of major international service provider and we are working very closely with them for designing and implementing that moved out-of-the managers [Technical Issues]. I am pleased to announce that our 5.4 MW solar power plant got commissioned in October 2022. We now have a total of 17.9 MW capacity, resulting in annual saving of around INR14 crores from FY ’24 onwards. Our longterm effects of ’23 on the [Technical Issues] barren land in Jhagadia, GIDC is going on as per our plan. The [Technical Issues] of our employee is highest priority for all of us at Anupam Rasayan. I express my gratitude and [Technical Issues] to all of the employees and especially those who were affected by the fire accident at our [Indecipherable] plant.
Thus we ensure the safety of all are being taken and for those who were affected, we have taken action to ensure life-long support to their families. Anand will talk about this in greater detail. I will now hand over the floor to Mr. Anand Desai our Managing Director, to take over the proceedings and advance off. Anand?
Anand Desai — Managing Director
Thank you, Dr. Patel. Hello and good evening to everyone. Welcome to our second-quarter FY ’23 earnings call. I hope all of you had a safe and and happy Diwali with your families. Before I [Technical Issues] business performance for the quarter, I will let [Technical Issues] of our plant. On 10th September a fire broke out in one out of the four units in Jhagadia Industrial Estate, in GIDC. Our fire response team along with fire brigade brought the fire in control [Technical Issues]. While the cause of fire is still under investigation it was [Technical Issues]. A total of six fatalities were reported and 18 employees were injured who have now been discharged. From the business perspective, I wanted to highlight, that [Technical Issues] for the lower capacity of all the six members [Technical Issues] in the company. And we have covered for loss of assets and loss of profits. We were all on [Technical Issues]. We did not see any significant impact of fire of plant reserves on our financials. We have appointed a high-level team to investigate the root cause. Learning from the analysis [Technical Issues] in the future. That said, we are continuing our cooperation with all the government authorities. I’m confident that we can soon be [Technical Issues].
As Dr. Patel mentioned we’ve continued to deliver strong revenue growth with steady margins against a very uncertain economic backdrop. While standard revenues, increased by 25% year-on-year to INR310 crores. [Technical Issues] margins were consistent, driven by [Technical Issues]. I would like Mr. Vishal to speak on these on more detail. I would now like to highlight working philosophy of getting a long-term vision that Dr. Patel alluded to in his opening remarks. Our [Technical Issues] globally reputed chemical manufacturing company with respect to what [Technical Issues] quality, safety, and [Technical Issues] are the main pillars of this [Technical Issues] clients. Dr. Patel gave you examples of how we [Technical Issues] flat on-board and we have formidable client relations…
Operator
Sorry to interrupt, Mr. Desai, may we request you to hold your handset little closer to you, because your audio is sounding a bit muffled sir.
Anand Desai — Managing Director
Sure.
Operator
Thank you.
Anand Desai — Managing Director
Dr. Patel, give you examples of how we brought a new Japanese client on-board and with our formidable client relations, we expanded the relationship to build a solid product portfolio. This has been possible because of our continued efforts, process optimization, and expanding chemistry capabilities. Our experience working with multinational clients for more than two decades and our transparent [Indecipherable] module has helped us build a trusted long-term partnership with all our clients. Let me now discuss how this is helping us in what is mid term now as Europe plus one strategy going-forward.
Our long-standing relationship with the clients have made [Technical Issues] company for any challenge we face. In Europe as many of you know the energy crisis has created a challenging environment making it difficult to manufacture products at a reasonable cost. This has led to several multinational companies seeking to shift a part of the sourcing requirement from Europe to India. Along with China plus one trend [Technical Issues] now started seeing the benefits of this Europe plus one trend. With our latest announcement of signing two contracts with one of the major European crop protection complaint for supplying of two new life science inter-specialty chemicals. And in this we were able to deliver these products in a short period on the urgent request of our customer. This contract wins are a testament to our chemistry strengths, our ability to deliver products based on the requirement of customers. Moreover, more of these products were being manufactured in Europe and now the customer has decided to source these products exclusively from Anupam going-forward.
We are working with few more [Indecipherable] clients both in Europe as well as in the U.S. and expect 20 to 25 niche products to be added to Anupam’s product portfolio in the near-term as part of Europe plus one strategy. This has been in the works since last one and half to two years but with the Europe plus one situation, this has got an added urgency from the customer side now. Coming to the [Technical Issues], we have successfully on-boarded one of the largest specialty chemical companies based out of North-America and with this addition we now have 27 multinational customers across the globe. During the quarter we also commercialized one-product, new product taking the total products tally to 49. This new product, commercialized comes under the alloys and and contracts that you signed in FY 2022. So we will commercialize other products as well under the alloys and contracts. As mentioned in the previous earnings call, we continue to see strong demand for our clients under the positive impact of building a trusted partnership with clients is that we continue to see upward bias in all the contracted volumes with major customers. This makes us confident on delivering a strong performance we’re coming quarters and for the years.
Before I conclude I let you speak about another important highlight of the quarter. I am delighted to ensure you that we have completed our fundraising of these INR500 crores, two qualified institutional placement, response to our QIP was very positive and we now have long-term marquee investors along with our earlier marquee investors. The proceeds of these fund raise will accelerate our CapEx plan of which INR670 crores approximate to set-up multipurpose plants both in Sachin and Jhagadia. I will let our CFO, Amit Khurana discussed this in detail. Over to you Amit.
Amit Khurana — CFO
Thank you, sir. Good evening everyone. As Anand sir mentioned, we have completed a fundraise of INR500 crores and the funds will be deployed in carrying out brownfield expansions as Sachin and Jhagadia locations. I will now provide more insight into the planned capex. In our previous earnings call, I had highlighted capex of INR250 crores to support the alloys and contract signed was INR2,620 crores. Now along with this capex, we have accelerated our capex for chlorination products, which is worth INR420 crores. This will be divided into two projects with Project one at Sachin is for INR190 crore and project two at Jhagadia is for INR230 crores. Given all the capex projects mentioned above our brownfield in nature it is important to understand that it will be majorly for plant and machinery capex with an incremental asset of over 1.75 x. This will also, give us an incremental ROC of 20% plus. Our endeavor would be to finish this capex in the coming 18 to 24 months. It is also, important to note that we have a cash balance of INR192 crores, which will be sufficient to support the incremental fund requirement over the fund-raise for the overall capex.
As mentioned in the earlier calls we have now started seeing reduction in the inventory days. Our inventory days have reduced from 296 days to 273 days. This is a result of the proactive steps taken by our team by revising the pricing mechanism close and contracts so six months and reduction of cautionary inventory. Further, this has led to healthy OCF of INR97 crores for H1 FY ’23, which is higher than PAT for the period. We will continue to see the increase in operating cash flows, which will further improve the return ratios. These cash flows along with our current cash on-balance sheet, will ensure any further capital requirements for fulfillment of growth opportunities. I would also like to highlight that India Ratings has assigned a long-term issuer rating of A-plus to Anupam Rasayan. With this, I hand over the floor to our, Deputy CFO, Vishal [Foreign Speech], who will take you through the financials.
Vishal Thakkar — Deputy CFO
Thank you, Amit [Foreign Speech]. Hello everyone and thank you for joining us here today. I would like to briefly touch upon the key performance highlights for the quarter ended 30th September 2022 and, then we’ll open the floor for questions and answers before I proceed. I would urge you to go through the detailed presentation submitted to the Stock Exchange and uploaded on our website. Kindly note our numbers for the quarter and half year-on a consolidated basis also include 10 fact numbers which have been consolidating from 21st of May 2022.
I’ll first discuss the standalone financial highlights for the quarter ended September 30, 2022. [Indecipherable] revenue for the quarter two FY ’23 was at INR2,107 million as compared to INR2,489 million in Q2 FY ’22 up 25% Y-o-Y. EBITDA including other revenues was at INR898 million in Q2 FY ’23 as compared to INR697 million rupees in Q2 FY ’22, a growth of 29% Y-o-Y. This would also translate to a 29% EBITDA margin for the quarter. Profit-after-tax was at INR412 million in Q2 FY ’23 as compared to INR358 million in Q2 FY ’22. Growth of 15% Y-o-Y.
On a consolidated basis operating revenue for Q2 FY ’23 three was at INR3,862 million as compared to INR2,489 million rupees in Q2 FY ’22 two up 55%. EBITDA including other revenues was at INR1,012 million rupees in Q2 FY ’23 as compared to INR702 million in Q2 FY ’22, a growth of 44% Y-o-Y. Profit-after-tax was at INR478 million in Q2 FY ’23 as compared to INR361 million in Q2 FY ’22, growth of 33% Y-o-Y. Please note consolidated numbers for Q2 FY ’22 do not include entire [Phonetic] industries number. So please read accordingly.
Now moving on to the segment-wise performance for the Q2 FY ’23, our Life Science segment contributed around INR277 crore while other specialty chemical contributed around INR32 crore. In percentage terms, the life science segment contributed 90% of the total revenue and the balance came from other specialty chemicals. As far as revenue break-up is concerned in terms of geography, Q2 FY ’23 the contribution of Europe was 35%, India’s 31%, Japan 15% Singapore 13%, China 4%, and the remaining 2% came from North-America. Exports for the quarter was around 69% of our revenue and I believe export will continue to be a major contributor to our top-line going forward.
Our top 10 customers contributed 83% of the total revenue and there is total of 24 products that we provide to them. With that being said we will open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Participants are requested to use handsets while asking a question. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. We have the first question from the line of S. Ramesh from Nirmal Bang Equities please go ahead.
S Ramesh — Nirmal Bang Equities — Analyst
Hello, good evening and thank you very much. And wish you all very Happy Diwali and Christmas. And to start with, you mentioned accelerated capex in chlorination products. And with the capex of — something in the order of INR600 crores. So can we get as in terms of what is the promotional capex that will go into the chlorination projects and on [Indecipherable] share of formulation products compared to your current percentage share, although if you have overall [Technical Issues] are commissioned?
Anand Desai — Managing Director
Okay. I’ll take the question. Hello, Vishal [Foreign Speech] shall I answer this?
Vishal Thakkar — Deputy CFO
Yes, please.
Anand Desai — Managing Director
So thank you for your question. So basically all of these plants are basically [Technical Issues] plants and in which chlorination will probably will be one of the chemistry that will be taken into the product. Yes, there will be leaning more on the chlorination side. I am very sure [Phonetic] we have seen lot of activity from our customer site. And again some new industrial products which you have mentioned earlier we are going to launch in the coming years will be benefited in this new [Technical Issues].
S Ramesh — Nirmal Bang Equities — Analyst
Okay so in terms of the commercial impact of your capex, when do you see the full impact of the capex to be funded by the [Indecipherable] and what is the reason for the additional capex, because [Indecipherable] offered on the mentioned capex of INR419 crores so added another INR93 crores. So is it possible to give us the split of the total CapEx including the invoice number and when you see the full impact of the entire capex program?
Anand Desai — Managing Director
Vishal [Foreign Speech] you can add-on the full impact going forward [Phonetic] on the timeline, but only on the products, Mr. Ramesh what we’re seeing is that there is a huge demand from customers coming in for new products that we had been planning for last few years and based on those demand that is why we have expanded the capex currently and that is why we have gone forward [Indecipherable]. I think there will be some forward-leaning questions I will answer but I would not like to go into that right now. I just maybe one these statements are clear maybe it will more important than [Technical Issues]. So Vishal [Foreign Speech] you can add on the timeline for the project completion.
Vishal Thakkar — Deputy CFO
Sure Mr. Ramesh if you see when we said INR670 crores in the opening remarks also that is INR250 crores that we had earlier announced then INR220 plus INR190 crores these are the total three projects that we are undertaking and this we are — we are planning to complete in next 24 months, 18 to 24 months as Amit [Foreign Speech] had also mentioned in the opening remarks and within another one and a half to 2.5 years from then on is where we are expecting it to reach to the fairly full capacity of the plants by then. So that’s the kind of timeline that I would suggest.
S Ramesh — Nirmal Bang Equities — Analyst
So, just to give some clarity on the renovation contracts you have and the capex which was on earlier of INR250 crores. So this additional capex and the overall number of — INR670 crores is it any additional capacity create to fall, expanding their order book. Can you get some light on that?
Vishal Thakkar — Deputy CFO
Can you explain it, or can you just repeat again and explain what you are trying to ask here?
S Ramesh — Nirmal Bang Equities — Analyst
Yeah so basically you had mentioned that this initial capex you had indicated last-time was for the [Indecipherable] contracts total of [Indecipherable]. So in addition to this you are spending another INR420 crore, so is there an overlap of capital expenditure [Technical Issues] alloys and contracts, already announced in the [Indecipherable] of additional capex or are you planning additional capacity in the business capabilities of building your future growth in terms of new contracts and [Indecipherable] you may add-in future.
Vishal Thakkar — Deputy CFO
Mr. Ramesh as we mentioned that yes, INR250 crores is what we have explained for the renovation contracts and others are for the capacities that we are creating as Anand [Foreign Speech] has mentioned for the new products and the additional demand that we have been seeing from our customers, both on the chlorination and other parts of the business and that’s what the balanced capital deployment will go for.
S Ramesh — Nirmal Bang Equities — Analyst
Okay thank you very much and all the best, I’ll join the queue.
Vishal Thakkar — Deputy CFO
Thank you.
Vidit Shah — IIFL Securities — Analyst
Thank you. [Operator Instructions] We’ll take our next question from the line of Vidit Shah from IIFL Securities, please go ahead. Hi, good evening and thanks for taking my question. So, just to take this point forward in terms of this additional capex that you’ve announced of roughly for INR25 to INR30 crores. Is this to do it this expansion and chlorination of that you mentioned on slide 15 with the revenue potential of [Indecipherable]. Is this capex going to be largely for the six to seven products that you — molecules that you mentioned out here?
Vishal Thakkar — Deputy CFO
Anand [Foreign Speech] should I take or?
Anand Desai — Managing Director
Yeah, yeah, you go ahead Vishal.
Vishal Thakkar — Deputy CFO
Okay, yes this will also cater to the 14 new products that we’ve mentioned in the slide as well on the chlorination and we will have some more capacity to do other products as well but largely yes it will also cater to the chlorination type of business which is what [Technical Issues] Slide 15. We have mentioned that there will be 14 new molecules that we have identified.
Vidit Shah — IIFL Securities — Analyst
Sure so. I mean so, just to understand the capex needs of this revenue potential. I mean is it safe to assume a 1.7 asset turn for this 220 to 260 potential? I mean, I’m just trying to figure out how much capex would be totally needed to sort of reach this revenue potential that you mentioned on slide 15, like with a [Indecipherable] asset turn it comes to roughly 1,000 crores of capex, so that would be another INR600 crore to get to full potential, would that be a fair understanding.
Vishal Thakkar — Deputy CFO
So this 220 to 260 what has been mentioned is the full potential going forward over a longer period of time when we say 14 molecules we are talking about a subset of this number and hence what we guided what we are mentioning is 1.75 is the minimum that we would expect from the capital deployment which will be [Indecipherable] to this 14 molecules but we plan that we may be able to do a better asset turn than that as well but for now we are only mentioning [Indecipherable]. But these are two different — so basically you may want to read 220 to 260 as a different number than the total 220 to 260 is the total that is around more than 20 molecules that we will be commercializing over a longer period of time and that’s what we’ve mentioned here.
Vidit Shah — IIFL Securities — Analyst
Okay. Got that. And in terms of margins of these molecules, will they be similar to the current margins that the company operates at?
Vishal Thakkar — Deputy CFO
There should be better, but let’s look at similar margins for now and then we can see as we go.
Vidit Shah — IIFL Securities — Analyst
Okay, understood. Secondly, my question was around this — these two new LOIs in the benefits of the Europe plus one that Anand bhai mentioned in the opening remarks. So if I look at Slide 14 the number of LOIs and the revenue potential has sort of remained the same, so how much revenue would these LOIs doing in addition to these five, seven — five, six LOIs that we’ve already signed. Would this INR2,600 crore number change materially because of these two LOIs that have come in?
Vishal Thakkar — Deputy CFO
So first is that the INR2,600 crores is the number which was for the quarter ended and LOIs were signed after that and that’s the reason the number has not been added onto it, however, that number should be around $10 odd billion in terms of, yes, in that context it will be a limited impact on the LOI contract if you were to see the total size.
Vidit Shah — IIFL Securities — Analyst
Okay. So $10 million is it?
Vishal Thakkar — Deputy CFO
Yes, that’s what.
Vidit Shah — IIFL Securities — Analyst
Okay, understood. And just one clarification on just the change in accounting that you’ve done. I missed the revenue number, the consolidated revenue number that you mentioned, but you happen to say that Tanfac has not been included in the consol revenue, but in the results your 1Q revenue seems to suggest that Tanfac has been consolidated with the minority interest being — could you just explain the accounting that you’ve done, how it’s going to be going forward?
Vishal Thakkar — Deputy CFO
Sure. So basically what we were saying was that for FY ’23 post March — May 21 the consolidation is on a full basis. However, for FY ’22 the number has not been — the consolidated number in this has not been added, because that’s when we have not done an acquisition and hence, when you’re looking at a comparison, we want you to be aware that for FY ’22, there is no consolidation of Tanfac numbers whereas in FY ’23 post 21st March, the number has been added — 21st May, sorry, corrected on that — 21st May.
Vidit Shah — IIFL Securities — Analyst
Okay, understood. Fine. And, sir going forward it will be done on a full consolidation basis of 25%?
Vishal Thakkar — Deputy CFO
Yeah, it’s a full consolidation basis.
Vidit Shah — IIFL Securities — Analyst
Okay, cool. I’ll get back in line for further questions. Thank you.
Vishal Thakkar — Deputy CFO
Yes, thank you.
Operator
Thank you. Our next question is from the line of Rohan Gupta from Nuvama [Phonetic]. Please go ahead.
Unidentified Participant — — Analyst
Yeah. Hi, sir. Good evening and thanks for the opportunity. So you’ve given some explanation with the results from new capex, there’s still some doubts and clarifications. So one is that you are planning to spend another close to INR500 crore on — exclusively on fluorination capex. That is on top of INR250 crores for this year and maybe INR250 crores for next year. I mean, that for your initial guidance was that INR250 crores annual capex. So it means that including this INR500 crores, we are planning to spend another INR1,000 crores in — over next three, four months, first of all that — is that understanding correct sir?
Vishal Thakkar — Deputy CFO
No, when we are saying this number, we are saying INR250 crores for the year, so basically INR670 crores is what we are going to do capex from today till next 24 months that’s what we are seeing from now. That includes the INR250 crores of what guidance that we’ve given for the LOIs and contract and the other one. Second point on this when we said about the fluorination, it’s not only the fluorination, it’s the products as well as Anand bhai said, it is still to be multipurpose plants, not only about one product or one chemistry, but yes there will be a leaning towards catering to those 14 molecules which you’ve identified, but over and above that there will be enough capacity there.
Unidentified Participant — — Analyst
And, sir, [Indecipherable] capex, so you are guiding the three month on 7, 5x kind of asset turnover which is significantly higher than the currently we have 1, 1.75 asset turn which we are willing to achieve right now. So with the the 700 capex you see that, how much time, I mean see that, how much timing 24 months probably going to take for commissioning of the capex and how much time you think that will take further for taking it to almost to achieve that 1.75x asset turn?
Vishal Thakkar — Deputy CFO
Two years from then on, we should be looking at that number, two, two and a half year is — one and a half, two years plus six months is what we should look at, where we would be able to ramp it up fully, because again why I’m saying this is also because this assets will come on a sequential basis and not on a same day because all assets will be planned out in that phase as well, right, and that’s the reason I’m saying this number in a manner.
Unidentified Participant — — Analyst
Even in a phased manner that all the capex will be commissioned within 24 months and up beyond that you are saying that it will take another two years to achieve a 1.75x kind of a asset turn, right?
Vishal Thakkar — Deputy CFO
Correct, correct. And also just wanted to note that the current asset turn is also where we are — where this capacity should also give us a growth for the next two years so we should be reaching a similar asset turn from these assets as well. So it’s not that current assets will only give us 1 to 1.1x it is today but as we see the next next one 18 to 24 months the growth will come from the current capital assets.
Unidentified Participant — — Analyst
Sir in fluorination, so you have a history of doing this chemistry but I think that the confidence had increased after the Tanfac acquisition. So, have you got any kind of customer contract or the visibility of this capex, which are going to put up INR450 crore mainly cut into fluorination, what is the confidence level and how much it is backed by the customers contract right now?
Vishal Thakkar — Deputy CFO
Ananda, would you want to take this?
Anand Desai — Managing Director
No, you can go ahead.
Amit Khurana — CFO
Sure. So if you see here — if you see there has been then we mentioned also that 14 products, so then we have been in discussion with these customers for a long time, we have been developing these products in our R&D and lab, so it is not that we are starting the process now that process was done for last three to four years and more. And today with the Tanfac coming in the supply security coming in, is when the customers are now converting into demand and that’s where we have been able to talk about the ramp-up here, because our R&D and pilot samples and all others are — have been validated and that’s where we are coming from. So, the confidence that is there is pretty high from a — from this perspective because if you understand the product development phase is when there is a product developed, then there is an R&D, then there is a pilot phase and then you get into commercialization which this 14 molecules what we have mentioned in the Slide 15 is where we are practically at the sales of — and the twilight of of the commercialization phase and that’s where we are coming from and hence that’s the confidence that we have.
And in terms of interaction with the customers, customers have been pushing us for a lot many more products the kind of demand and the kind of confidence and the urgency with which the customers are requesting for the products and the supply is, it’s quite unprecedented compared to what we have been saying in last two years and what Dr. Kiran and Anand bhai in his opening remarks also mentioned about the Europe plus one and the interest coming in. We are seeing a very, very strong interest coming from all major customers, current and also few potential ones. Anand bhai, if you want to add something there.
Anand Desai — Managing Director
Yeah, Mr. Vishal, add-on to what Vishal bhai mentioned there that the Europe plus one strategy as well as the China performance is really playing out hard. The kind of demand and the inquiries from new products, both in the theory mentioned [Indecipherable]. It is unbelievable, I mean, the sulphuric acid price in India is one-fourth the price what is in Europe, taken definitely in the costs. I must say, [Indecipherable] but I think the difference is quite high. So people are desperate in Europe, of course, they have a long-term view, they have seen this in the past, so they will not take an urgent view, but at least a major movement will start from — of products, which are not high-margin or we can — not how you take the security products but then to be shifted out from Europe and it can be India and it can be China also.
But at the same time what we are seeing as far as China [Phonetic] is concerned, a major demand in our existing chemistry which and you see that most of the products that we have manufactured both Europe with it. And our major shift is surely happening and we will be able to give you more information in the coming three to five months. As I don’t want to give any statements now, any forward-looking statements right, but I think in the next three to five months, we will see a lot of — lot of information coming out from them as to what we have been doing in the last six to nine months and we have been focusing on long-term projects with customers this will be disbursed in ’25 and ’26 but on an urgent note, we are seeing this one for lower products to be shifted into India from Europe and that is where we are coming from.
Unidentified Participant — — Analyst
Okay. And that is literally the working capital. So you had mentioned that the working capital has come down and will the shift inventory for the customers there has also been reduced and in terms of the contract side also. I mean from the annual two half yearly. By year end if you think in guidance that what kind of inventory holding period you are targeting and from the current level, how much you can see the further reduction. And also in the new contract which you are taking all this in fluorination opportunity products demand I believe that the most of the customers profile remains the same. So from a new product or the new contract, are we still following the same mechanism what we had been following earlier or it is going to be completely different like for any other agrochemical players where the inventory requirement is not so high. So how does the arrangement on the new products here?
Vishal Thakkar — Deputy CFO
Okay. Let me address the first question first and then I’ll come to the second one. The first question about looking at the inventory levels as we mentioned, I think as we had also suggested in the opening year, opening quarter as well, the first part of this year as well, the remainder were to move back towards the historical level of the year before where we were and we will look at coming to those kind of numbers by the year end as well our cautionary inventory drops and our business in terms of the contract structure get amended and implemented so that’s the number we would like to be focusing on. And that would be a fair bit of limits from the working capital cycle in that sense.
And second on the newer contracts, you will appreciate that the way we had designed and structured our business is a more in-situ kind of a business where we are more part of our supply chain for our customers and when we are, we need to and there’ll be a mostly single or a primary supplier to our customer, there we would need to hold a particular level of inventory. However, if you see the business — the risk of inventory is practically not there for us, incentives because the price, volume — price and volume with both our past when even the carrying cost for the inventory is also borne by the customer in that sense. So to that extent, we will have a structure similar to what we have in our existing business, however we will keep on tightening that premise and getting focusing on a shorter-cycle as much as possible that needs to be a healthy mix of both being a responsible supplier to them and assuring them especially when we are a singular or a primary supplier so that will be healthy mix that we will try and focus on.
Unidentified Speaker —
Thank you. Thanks a lot.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rohan Kamat from Finterest Capital. Please go ahead.
Rohan Kamat — Finterest Capital — Analyst
Yeah, thank you for the opportunity. Sir my question is — my first question is basically on the six-month pricing. I just wanted to check whether it’s done for the — all the customers are not. And just follow-up on that what kind of inventory there was that are accepted for this year and next year?
Vishal Thakkar — Deputy CFO
Okay. So the first is that as we mentioned that around 60% to 70% of our revenues — contracted revenues are now on a six monthly basis. And second as we mentioned and as we guided in the last question itself, that we will endeavor to be moving back to the older inventory cycle levels that we had in the previous year. And going forward we will try and focus on compressing that as much as possible, but right now that’s the guidance that we could go with from now.
Rohan Kamat — Finterest Capital — Analyst
Okay sir. The second question is on the capex guidance, what kind of capex guidance do we have for financial year ’23 and financial year ’24?
Vishal Thakkar — Deputy CFO
So again, as we say that we are looking at — so in next — this year we should be looking at around INR250 crores of capital deployment and next year should be around INR350 crores to INR400 crores of capital deployment, we’ll come to that number more clarity between INR350 crores and INR400 crores by the next quarter then we’ll be able to give you a bit more clarity on that, but that’s the number you should go with for the FY allocation if you were to look at.
Rohan Kamat — Finterest Capital — Analyst
Okay. Thank you, sir.
Vishal Thakkar — Deputy CFO
Thank you.
Operator
Thank you. Next question is from the line of S Ramesh from Nirmal Bang Equities. Please go ahead.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Thank you for the follow-up. Just to understand the consolidation of Tanfac. Just trying to understand how you have done the raw consolidation and how you are arriving at the minority interest? Because if you look at the Tanfac itself and the way you consolidated, it’s difficult to understand how the numbers are available. Because excluding the consolidation and have you [Indecipherable] minority interests?
Vishal Thakkar — Deputy CFO
So if you look at the consolidation, we have done a line-by-line consultation at 100% payables for the opening one, and that starts from 21st May to 30th September and that’s the number that has been added, because on 21st May is there we’ve deemed to have a full — have a control over the company then the open offer was concluded. And then the minority interest comes post the PAT numbers that I mentioned and that’s what is mentioned below where the minority interest of 74% will be identified.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
No, the question is, if you look at the standalone number and consolidated number, the Tanfac [Indecipherable] INR8 crores profit. So you’re talking about a consolidated profit of INR478 million of INR47.8 crores compared to about 260 million of INR36 crores. And minority interest, it’s not all that 75% of the contact numbers will be processes I think about INR6 crores, so that’s where I think that’s for full year.
Vishal Thakkar — Deputy CFO
Yeah. So Mr. Ramesh, the challenge is there is an elimination of INR1.4 crores, INR1.6 crores — INR1.4 crores of [Indecipherable].
Amit Khurana — CFO
INR1.5 crores of — INR1.8 crores dividend and intercompany profits which are there, which has been eliminated that’s the reason it is the number that it’s not looking like which is a 1.4 of dividend and 0.4 of intercompany profit, which has been knocked off and that’s the reason you are seeing these two different numbers. And then the minority interest comes below that.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
So this INR1.8 crores of I think whereas still being adjusted in the consolidated number.
Vishal Thakkar — Deputy CFO
That’s what I’m saying that INR8 crores was the profit for Tanfac, whereas if you see the consolidation is showing only INR6 crores of that and this is because of INR2 crores a little less than INR1.8 crores of adjustment which is a knocking off, because INR1.4 crores of the dividend which came from Tanfac to Anupam, which has to be knocked off and two is INR0.4 crores of profit from the business. So that’s where the reason, so 8 minus 1.4, minus 0.4 gives you 6 — that is in consolidation.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
And sorry to belabor the point, you hold about 26% stake in Tanfac so you should be consolidating at the net level you should be getting already 25% of Tanfac’s profits, right. So I’m just trying to understand how you can get INR6 crores out of that INR8 crores?
Vishal Thakkar — Deputy CFO
So because if you see below that line there is an adjustment that has shown a minority interest post PAT and that’s where the numbers are existing because this is consolidated on a line-by-line basis and not on a 25% shareholding basis that’s the reason these numbers there. If you go below that on the PFS, you will see there is an allocation for the minority interest as well.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Yeah. Let me ask in different way. The minority interest of the INR2 crores or 22 million you’re showing, does it include any other item, because [Indecipherable] it should be equivalent of 75% of context of it, because external shareholders own 75% right, including [Indecipherable] shareholders INR8 crores, INR6 crores should have been sent out, I just want to understand how it sold over INR8 crores?
Vishal Thakkar — Deputy CFO
So if you’re talking about September, September if you look at it there is a INR6.2 crores of non-controlling interest which is being existed on the net profit. If you see below down, there is an explanation given there as well, so INR47.3 crores is the comprehensive income, less net profit attributable to owners of the company, INR41.5 crores and non-controlling interest of INR6.2 crores has been mentioned in the CFS as we go down post the past, there is an excellent — there is the line which is going further down up. So if we open the financials that we have submitted to the Stock Exchange, we will be able to see that numbers, Mr. Ramesh.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
So you are saying, okay [Indecipherable] so this INR45.8 crores before the minority interest for the quarter, out of it INR6.2 crores is the minority, okay, okay, my apologies. Thank you very much.
Vishal Thakkar — Deputy CFO
No problem, Mr. Ramesh. This is the first time we are also consolidating so — everyone will take time to get to that, so no problem, please feel free.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
So the next, when you’re looking at is getting molecule and the increased capex, how are you positioning us into — so what’s your materials, how much of that is going to be captive, how much you have to import. And what is the arrangement for that and what is the additional impact which you’ll have on your increase in working capital?
Vishal Thakkar — Deputy CFO
Let me go first and let me answer that for now is that, our working capital cycle as we have said we will keep on driving it as we have mentioned in the earlier questions as well, so this increase in business will not expand our working capital but we’ll try and continue to compress as much as possible is the first statement. Second what we are saying in terms of supply chain, if you see with the acquisition of Tanfac, the import dependence is only looking like reducing. Today also less than 20% of our purchase will be imported and we will endeavor to keep it as low as possible. We are not seeing any significant change in terms of our purchase profile, in fact it is only going to go more towards the domestic consumption and the more vertical integration for us.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Sir if I may just ask a follow-up question. In terms of the increase in core working capital, the kind of capex you’re doing if you can get about INR1,400 crores of additional revenue [Indecipherable] working capital number of days. I think in place about another INR500 crores of additional working capital requirements. So how will you finance and will you need further net financing, would it be able to finance your operating cash flows, what is the company’s plan for that?
Vishal Thakkar — Deputy CFO
So Mr. Ramesh, if you see the kind of operating cash flow that we’ve generated for the first half and if you look at going forward, because this ramp-up is also looking over next few years. So operating cash flows will be — we’ll be able to suffice any requirement for the growth in terms of working capital. And also there is a bit of a compression as we had mentioned that our working capital will compress as we go forward and that will also ensure that the requirement for the working capital will be to that extent only. So, both put together we don’t see any external — any significant external requirement for our growth of our business from now.
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Okay. One last one from me, so between Europe plus and China plus strategy in terms of the customer profile, for your current and [Indecipherable] which you’re operating. Are you going to see your margin profile improve, as we move towards more of Europe plus customers, how do you see that going forward?
Vishal Thakkar — Deputy CFO
So margin profile I think, see, we have been always positioning ourselves with the European customers and European suppliers to that extent in terms of our supply to our customers. So we are typically replacing them most of the time. And there if you really see the margin profile, we don’t see it to be significantly different because it will better but right now as we had mentioned earlier also, we will keep with the guidance of the same margin profile if we do it better, it’s always good for all of us, but right now let’s go with the numbers that we have been guiding for now.
Operator
[Operator Instructions]
Ramesh Subramanian — Nirmal Bang Securities — Analyst
Yes, thank you very much. Appreciate it.
Operator
Thank you. Our next question comes from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Yeah. Thank you so much. You mentioned about increasing opportunities from Europe and customers looking more for us. So if you can speak a bit more about these opportunities, are they short-term, are they long-term based on the nature of inquiries that you’re getting also the kind of sectors that exposure that these inquiries are coming from? And also you mentioned that there is — the intensity is very high now, so does it mean that in future there is a scope that the ROCE that really probably used to demand earlier, can improve significantly going forward or do you think there is enough competition in the market for these kind of outsourcing opportunities that the ROCEs will remain at the levels that we have been doing, I mean, this 20% or do you think given the supply-demand dynamics the ROCE can be — in future can be even better given your demanding position now?
Vishal Thakkar — Deputy CFO
Anand bhai, would you want to take the question?
Anand Desai — Managing Director
Yes, give me a second. Yeah, so Dhruv, I think in case, we tend to prefer to take long-term franchise for the [Indecipherable] and that has been the orders [Indecipherable] company than in the large financial year, we will see so many products which have been — have a long-term perspective, even there are products which are in contracts but this we’ve been [Indecipherable] still today they are without a contract but issued to [Indecipherable] only and in some cases they have activities. So this model is [Indecipherable] we only look at a long-term agreement kind of further trended even if there is not a written argument but there has to be understanding between us and the customer and based on our relationship of last so many years, with all the majors, I think it’s very clear and in the future is if Europe situation changes, once the product comes out, there are so many things which are associated with it registrations internationally, locally, domestically a lot of things have to be taken into accounts over there and so when a customer give the products to — rather plans to take a product out from a certain manufacturer of the country, there are lot of issues involved.
It’s not a major reaction that today the prices are high here and so we’ll take it to India, China, it’s not that. I mean there is lot of spending going into that. Yes, Europe plus one situation is getting a impetus to that. Some quarters which we are planning in ’25 will be launched in ’23 itself, so yes, some products will be fast forwarded. But again coming back to your main point, we Anupam prefers to take products which are either long-term agreements or offtake agreement only, that is the plan and that is how we bought. And customers like that, they understand Anupam free of cost plus how you say the cost plus basis [Indecipherable] so they are also aware about it and all the costs that we’ve been incurred onto the products with emphasis so I think we’re are very clear on that path.
We tend to be a good supplier in that sense that we optimize the purpose, we share the benefit with the customer and ensure that these interests are arranged over a long-term period. So that will be the my answer to your first question, on the second part on the ROCE part, I’ll ask Vishal to take it.
Vishal Thakkar — Deputy CFO
Yeah, thank you, Anand bhai. See, on the ROCE side, as we said, yes, when we have a higher demand, we tend to have a better bargaining power, however, the way we see things is that, we look at sustainability, visibility and profitability and also we are completely important and we would want to have a long-term sustainable business with them so we will be looking at a good ROCE. However it has to be also making sense for the customer and it should be sustainable that they don’t look for other customers — other suppliers going forward. So the range that we have been suggesting which is 20-plus-percent ROCE should be there now how many percentage points we can always discuss as we go about primarily that’s where we will be looking at.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Sure. So basically you keep continue to target this 20% ROCE, at least versus ROCE —
Vishal Thakkar — Deputy CFO
Yeah, absolutely. And customers are more than happy to offer that.
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Appreciate it.
Anand Desai — Managing Director
And Dhruv, what to add over here, I mean, Anupam has been known to be a fair supplier, we did not take advantage of any benefits or issues in Europe or anywhere else. We have always tried to see our benefits not the — another, sorry, the customer benefit, not our benefit because that is what pays off in the longer-term and that is the hallmark of where Anupam stands, I mean, people, all customers appreciate and understand and we know for a fact that many of — most of the products that we offer are manufactured in Europe. And in the last 12 months, lot of things have happened in Europe, we have now taken an advantage of what’s happening over there. We see our benefit, we see our understanding of the business and we ensure that come out looking as a logical supplier, rational supplier and not take advantage. I mean, people do take advantage of customers in different situations which we prefer not to and customers appreciate that, customers are relevant, they are [Indecipherable], they remember for a long-time and — but we prefer to be a rational supplier and not take advantage of any — not only a customer, even a supplier, even a raw supplier for that matter. We are known to be a fair company and [Indecipherable].
Dhruv Muchhal — HDFC Mutual Fund — Analyst
Sure. Clear sir. Thank you so much and all the best. Thanks.
Operator
Thank you. Ladies and gentlemen that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.
Dr. Kiran Patel — Chairman
Thank you, everyone for your questions. 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 advisor and we’ll get back to you offline. Hope you have a good weekend, look forward to your continued support in our growth journey. Thank you, Happy Diwali once again to every one of you.
Operator
[Operator Closing Remarks]