Clean Science and Technology Limited (NSE: CLEAN) Q4 FY23 earnings concall dated May. 18, 2023
Corporate Participants:
Siddharth Sikchi — Promoter and Executive Director
Pratik Bora — Vice President, Finance
Analysts:
Ankur Periwal — Axis Capital Limited — Analyst
Sanjesh Jain — ICICI Securities — Analyst
Arun Prasath — Avendus Spark — Analyst
Abhijit Akella — Kotak Securities — Analyst
Krishnan Parwani — JM Financial — Analyst
Rohit Nagra — Centrum Broking — Analyst
Chetan Thacker — ASK Investment Managers Limited — Analyst
Tanuj Mehta — Individual Investor — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Clean Science and Technology Limited Q4 FY23 Earnings Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you, and over to you, Ankur.
Ankur Periwal — Axis Capital Limited — Analyst
Yeah. Thanks, Ryan. Good afternoon, friends, and welcome to Clean Science and Technology Limited Q4 FY23 conference call.
The call as usual will be initiated with a brief management discussion on the quarter and full year performance, followed by an interactive Q&A session. Management team will be represented by Mr. Siddharth Sikchi, Promoter and Executive Director; Mr. Sanjay Parnerkar, Chief Financial Officer; and Mr. Pratik Bora, Vice President, Finance.
Over to you, Siddharth, for your initial comments.
Siddharth Sikchi — Promoter & Executive Director
Thank you, Ankur, and good evening, everyone.
First of all, I would like to thank all of you for taking time out to attend our earnings call FY23. I am very happy to connect with all of you again to discuss the performance of our company in the financial year FY23. I am pleased to inform that it has been a very strong performance by the company recording its highest ever revenue, EBITDA and PAT for a financial year amid the global macro challenges and volatile raw material prices. Also as mentioned in the last call, our manufacturing plants for HALS, Hindered Amine light Stabilizers 701 and 770 that got commercialized in our Unit 3 in mid of November has stabilized and ramping up as per our scheduled time frame. We have received good response from the domestic markets and recorded our maiden sales in Q4 FY23.
We aim to increase our sales gradually in the coming months, as we look forward to add new premium accounts in the domestic markets and make headway in the export market. Like most of our products, we are proud that HALS has been manufactured for the first time in India, and Clean Science as of now is the only manufacturer of this product in India of course. A little on financial highlights. This is the second continued year-on-year growth of more than 35% as total revenues recorded in FY23 of INR936 crore, which increased by 37% over FY22. As compared to FY22 in FY23, the exports revenue grew by 40% and domestic revenue grew by 30%. Revenue mix was 72% export and 28% domestic.
EBITDA increased to INR403 crore as against INR300 crore and year — 34% year-on-year. Input prices continues to be volatile throughout the year, but moderated and stabilized in H2 FY23, leading to strong margin recovery during this period. As a result, EBITDA margins at 48% remain stable at almost the same level as last year. PBT at INR405 crores and PAT at INR304 crores, both grew by 33% as compared to FY22. At INR191 crore approximately, the company incurred the highest capex in a financial year in the history of the company. In spite of the capex undertaken during the year, our balance sheet continues to be debt free with cash balance of approximately INR300 crores.
CRISIL recently upgraded the company’s long-term CRISIL to AA minus table and reaffirmed the short-term rating to CRISIL A1-plus. For the year our ROCE was 50% and RoNW was 30%. Our commitment to dividend distribution policy is highlighted by the fact that this was the first year we announced an interim dividend of 200%. In addition to this, the Board has recommended a final dividend of 300% also. For FY23, sales improvement was led by a combination of good volume growth and improved realization across all products. For this year, performance chemical, pharma and agro, and FMCG chemical contributed 69%, 19%, 11% respectively to the revenues. Derisking of revenue continues with the addition of new products and new customers. New products now contribute has improved to 9% of total revenues in FY23 as compared to 4% in FY22.
Contribution from Americas and Europe region is also increasing steadily. Capex update, we have incurred capex of INR191 crores during FY23 with majority of this going towards our new plant for HALS in Unit 3 and upgrading of our existing equipment for efficiency improvement. Of this, INR65 crore were invested in our subsidiary, the Clean Fino-Chem, CFCL, and all capex continues to be incurred through our internal assurance only. The construction activity at subsidiary Clean Fino-Chem Limited is on track. Various activities in this regard like site layout, initial civil construction and allied activities are progressing well. ESG. Since inception, we as a company are fully committed to sustainability and continuously implement several initiatives across the organization.
We are continuously upgrading our facilities and investing in various new technologies across all our manufacturing units that help us increase our energy efficiencies and improve our focus on 3R of reduce, recycle, and reuse. Our initiatives have helped us significantly to reduce water, energy consumption and also reduce emissions. We continue to increase our share of renewable energy. During the year our third solar plant was capitalized with 5 megawatt capacity, taking our total solar capacity to 17.4 megawatts. We are committed to continually improve — implement globally benchmarked ESG practices and sustainability as an integral part of our strategy.
Under CSR, our core focus area remains to promote education, environment, sustainability and health care. So the basic outlook remains with our new series of products and a strong R&D pipeline. We continue to focus on diversifying our product portfolio and expanding our geographical presence. HALS series and a couple of new interesting products are expected to commercialize during the year, which will add to the existing product portfolio. We have implemented all our projects on time and are pretty confident that our new facility of CFCL will also be commercialized and committed. Our strong financials, strengthening product portfolio, automated manufacturing facilities, global capacities focus on constant innovation and sustainability by applying Clean chemistry provide us with a solid foundation to create a sustainable road map, enabling us to deliver consistent growth going forward.
Thank you so much.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Sanjesh Jain with ICICI Securities. Please go ahead.
Sanjesh Jain — ICICI Securities — Analyst
Hi, good afternoon, Siddharth. Got few questions. First on the capex, we did INR193 crores this year. I think majority of it will be in the site 3. Can you help us understand what is left for next two years in terms of capex in site 3 and site 4?
Pratik Bora — Vice President, Finance
Yeah, sure. Hi, Sanjesh. Pratik, this side.
Sanjesh Jain — ICICI Securities — Analyst
Yeah. Hi, Pratik.
Pratik Bora — Vice President, Finance
Yeah. Hi. In terms of capex in the parent company, there will be very small maintenance capex. But in the subsidiary company, this year the capex could be INR180 odd crores and incremental capex will be announcing by Q3 or Q4, that will go for the next line of series of products.
Sanjesh Jain — ICICI Securities — Analyst
Now, this subsidiary capex, it is in the site 4, or it is in site 3?
Pratik Bora — Vice President, Finance
Yes. Site 4.
Sanjesh Jain — ICICI Securities — Analyst
Or Unit 4 or Unit 3?
Siddharth Sikchi — Promoter & Executive Director
Unit 4. Unit 3 in the parent company.
Sanjesh Jain — ICICI Securities — Analyst
Okay. Got it. And just INR180 crore will be largely towards HALS?
Pratik Bora — Vice President, Finance
Yes. Majority of that will be incurred this year. So it is primarily towards HALS.
Siddharth Sikchi — Promoter & Executive Director
Sanjesh, when we are implementing these capexes, it is also for the site development, which helps us when future products come online.
Sanjesh Jain — ICICI Securities — Analyst
So it includes utility, infra, and all those things, plus the capacity.
Siddharth Sikchi — Promoter & Executive Director
Admin, building, it includes the infrastructure, common ETP. It includes solvent storage tanks, the utility block, like the boiler houses, nitrogen plant. So it’s a common — I mean, the overall site development along with HALS. So when the newer facilities come up, the capex is lower because the basic infrastructure is already covered under the capex one, because it’s a greenfield project.
Pratik Bora — Vice President, Finance
Right. So I think even if this capex will largely go towards production block for a particular product.
Sanjesh Jain — ICICI Securities — Analyst
Got it. Just to understand in the first phase of commissioning of HALS, we did 3,000 metric ton, which you mentioned previously. And how much we will be adding in this next round of capacity?
Siddharth Sikchi — Promoter & Executive Director
No. So the capex one in Unit 3 is about 2,000 ton, not 3,000 ton.
Sanjesh Jain — ICICI Securities — Analyst
Okay.
Siddharth Sikchi — Promoter & Executive Director
That is one. And two is the totality of HALS will be close to 15,000 ton. And it is a combination of variety of products, not just one product. But all within the range of HALS.
Sanjesh Jain — ICICI Securities — Analyst
And when we say 15,000, how many years are we packed in here?
Siddharth Sikchi — Promoter & Executive Director
Three years to four years. I mean, the plant will be of these sizes, but, of course, gaining the market share and utilization will take about three years to four years time.
Sanjesh Jain — ICICI Securities — Analyst
Got it, got it. And the average realization is close to $8 to $10, right?
Siddharth Sikchi — Promoter & Executive Director
Right. You can assume that.
Sanjesh Jain — ICICI Securities — Analyst
Fair enough. Second, on the margin guidance and what we have delivered. If I remember, it’s probably the end of second quarter, we guided like we will be stable at 40%. In two quarters, we have done phenomenally well, no complaints. But do you want to relook at the margin guidance from the medium term, with 48% this quarter? How should one see the margins for next two years?
Pratik Bora — Vice President, Finance
Sanjesh, in terms of margin for parent company, there will be a steady — I mean, relatively a steady state of margin. But, of course, I mean, you can’t extrapolate Q4 margins, because this quarter we were benefited with a benign raw material prices also. In the subsidiary company, the margins as you would imagine would strengthen as the utilization level improve.
Sanjesh Jain — ICICI Securities — Analyst
Got it, got it. But I thought the China situation has turned slightly more aggressive for the commodity and the prices are going to fall more is what I can understand and what has been some of the commentaries from your peer who produces your raw material. So in the near-term, it is fair to assume that margins will remain robust considering that the raw material cycle is quite favorable for Clean Science?
Pratik Bora — Vice President, Finance
So I’ll tell you the raw material prices are definitely falling. Of course, there is more stiffer competition because the global everything has opened up. So there will be more competition compared to what we had over the last few quarters, but also the commodity cycles. The prices of commodity chemicals for instance phenol has fallen as high as 30%. So we will definitely be benefited by that. But of course, there will also be market — price reduction of our end product following the market trend.
Sanjesh Jain — ICICI Securities — Analyst
Got it, got it. So what should be a steady state margin Siddharth in the parent business? I can understand the subsidiary more from the parent business.
Siddharth Sikchi — Promoter & Executive Director
So you know Sanjesh, because these are again the prices are reducing. The demand of — overall global demand is slightly reducing, because of Europe factor, because of the US factor. So you will have to give me a couple of one-on-one quarter or two quarters to really give you a correct picture of what you should look at in the longer-term review.
Sanjesh Jain — ICICI Securities — Analyst
Fair enough. One last question, Siddharth. I know I am dragging, but just one last. This year, particularly this quarter, the volume growth looks quite softish considering what we have delivered in the last three quarters. Can you help us ascertain whether it’s a pricing decline or volume was slightly under pressure that we have pulled the margin. What has happened and what is the story on the revenue side?
Siddharth Sikchi — Promoter & Executive Director
So there is a lot of disturbance here. So our basic story remains there. So a lot of MNCs, a lot of our customers were holding stocks, because everybody was really worried about another lockdown or any other scenario. However, over the last two quarters that fear of any world ruled out, the freight costs had minimalized and they have come to pre-COVID levels. So now if you see this last quarter and maybe quarter one, there will be lot of destocking happening at our lot of customer places. And hence, everybody is trying to reduce their stock levels which everybody had amplified during the COVID year. So that is what you are seeing that there is a slight reduction in volume and of course, because of the commodity price falling, there is a realistic expectation of finished product also down and hence the combination of two.
Sanjesh Jain — ICICI Securities — Analyst
Got it. Fair enough. Thanks. Thanks for answering all those questions and best of luck for the coming quarters.
Siddharth Sikchi — Promoter & Executive Director
Thank you.
Operator
Thank you. Our next question comes from the line of Arun Prasath with Avendus Spark. Please go ahead.
Arun Prasath — Avendus Spark — Analyst
Good evening. Thank you for the opportunity. Siddharth, just continuing the discussion on this — especially on the FY23, we had a stellar year with a top line growth of close to 35 percentage. Obviously, this has three components; exchange rate, the rupee depreciation has helped, pricing has clearly has helped as compared to ’22 by volume growth. And going by the current commentary, it looks like the two of the three components are not going to be there in this year. So will the volume growth alone will result in a sustenance of our top line? How should we look at this from this perspective?
Siddharth Sikchi — Promoter & Executive Director
Mr. Prasath, sorry, there is lot of disturbance on your line. Can you split the questions into simpler components rather than a very long question?
Arun Prasath — Avendus Spark — Analyst
Okay. Hope, now you’re able to hear fairly.
Siddharth Sikchi — Promoter & Executive Director
Your voice is echoing actually.
Arun Prasath — Avendus Spark — Analyst
Is it better now?
Siddharth Sikchi — Promoter & Executive Director
Little better. Yeah.
Arun Prasath — Avendus Spark — Analyst
Yeah. So what I was asking is, we had a 36% growth in ’23, largely because of the three components. One is the rupee depreciation and then there is a pricing of the individual products were greater than ’22, and then there is a volume. But, looks like out of the three, two will not happen in this year, because rupee is more or less stabilized and you have — pricing is also, we are expecting a decline. So can volume growth can make up for these and help us sustain the growth? How should we look at it?
Siddharth Sikchi — Promoter & Executive Director
See, there are two aspects to it. In our typical business cycle, you typically get such one or two quarters when such aberration occurs where there is destocking happening or where is then there is a lower demand. But these quarters are also useful for consolidation. I mean, these are the quarters which separate us or separate — I mean, those are separated and there is lot of fraud in the market which also disappears. These are also the times when we keep working on our processes, because we have time to repair our maintenance of our plants as well. So these times are utilized for these activities.
However, I do not see that such parameters of quarter one will be for entire year. Probably there will be an improvement in quarter two or quarter three, and where we anticipate that the volume growth will again return. Of course, the commodity price still remain and is the crude oil price remains below $75 a barrel. And of course, if the commodity chemical prices are lower, then we do expect the finished product prices also to remain low. However, on absolute terms, in terms of volumes if the quarter three and quarter four, the volume recover then I think we are good to go.
Arun Prasath — Avendus Spark — Analyst
Okay.
Pratik Bora — Vice President, Finance
Rupee depreciation.
Arun Prasath — Avendus Spark — Analyst
Hello?
Pratik Bora — Vice President, Finance
Hi Arun, am I audible?
Arun Prasath — Avendus Spark — Analyst
Yes.
Pratik Bora — Vice President, Finance
Yeah. Rupees depreciation did not benefited — benefit us largely, because we undertake a hedging. So actually for the year, first half was and in the reported a negative forex. There wasn’t a gain in forex. No forex gain per se in the H1.
Arun Prasath — Avendus Spark — Analyst
Okay. So that means, this year we can expect some benefit, because you would have hedged at a much higher rates now?
Pratik Bora — Vice President, Finance
Yes. Relatively we should be, yeah.
Arun Prasath — Avendus Spark — Analyst
Understood. And then on the volume growth, Siddharth, just a follow-up question on that. Do you see any of your customers in, say, acrylic acid or its derivatives are adding capacity and the capacity coming online this year?
Siddharth Sikchi — Promoter & Executive Director
No, nobody is adding capacities. Everybody is trying to console. And I think that is what I just mentioned that this year could be a consolidation year for several of the businesses.
Arun Prasath — Avendus Spark — Analyst
Understood. And last time in the previous call, you mentioned that you are targeting 100 tonnes per month of HALS once you commission. How realistic, we are now? How closer to this target at this point of time?
Siddharth Sikchi — Promoter & Executive Director
So I mentioned that we should target about 100 tonne per month after a year of production and successful commercialization. So by the end of the year is what we are anticipating to touch that volume. So why did the import still remains at about 250 tonne to 300 tonne? I mean, I was on relative market terms that we will get about one-third of the Indian markets. So cost reduced because of the master batches consumption reducing, but I still I’m hopeful that we will be able to touch or gain 30% of Indian markets.
Arun Prasath — Avendus Spark — Analyst
Right. And whatever the initial feedbacks from the customers, master batch customers? What is it there?
Siddharth Sikchi — Promoter & Executive Director
We have had no rejection even on samples. Lot of places we have given test and in pilot samples which have been approved a lot of big accounts and we have now started supplying in tonnages. So I think that’s a very good sign. In fact, as we are speaking, we are also trying to open up in Europe and then trying to speak to some customers in Europe. Recently, we got approved at a global account who are based in multi-country. So the response is very good. And I think once we start our other zone of business or the other premium grades of HALS which are more expensive grades, I think the response will be faster.
Arun Prasath — Avendus Spark — Analyst
And in India domestic, we are — we already touch base with all the leading master batch manufacturers or just?
Siddharth Sikchi — Promoter & Executive Director
More or less, more or less. We have touch base with all of them. Some are in the approving phase, some are — have approved the pricing. All in all, the — I mean, the first cart which we hear from customer is that, I mean, they are really delighted to have a huge supplier base in India, because it is a key component in their entire master batch, which nobody has been able to successfully deliver to the quality at par with PFS standard.
Arun Prasath — Avendus Spark — Analyst
Understood. That’s very helpful, Siddharth. Just one — if I can squeeze in one last question for Pratik, of the INR190 crore capex we have done this year, in parent company we have done close to INR120 crores, of that how much is related to the HALS Unit 3 — in Unit 3?
Pratik Bora — Vice President, Finance
That’s close to INR50 crores, but this I’m talking only about the production block.
Arun Prasath — Avendus Spark — Analyst
Understood.
Pratik Bora — Vice President, Finance
Yeah.
Arun Prasath — Avendus Spark — Analyst
Okay, thank you very much. All the best for you, guys.
Operator
Thank you. Our next question comes from Ankur Periwal with Axis Capital Limited. Please go ahead.
Ankur Periwal — Axis Capital Limited — Analyst
Yeah, sure. Yeah. Thanks a lot. So okay, first question on the inventory situation, which you mentioned, slightly elevated inventory across the system. Just curious if this is a specific phenomenon maybe in the domestic market, or you are seeing the same in export market as well, given that on a quarterly basis, at least we see — especially on a quarterly run rate basis, Q4 is slightly softer on the domestic side.
Siddharth Sikchi — Promoter & Executive Director
So this we are — see, ultimately we are all related to each other. Even if there is a global slowdown or else global destocking, it also impacts my customer if they are based in India. Because ultimately either they are exporting or using it for domestic market. So the answer remains that this is a phenomenon, which is occurring globally, including us. So even in some places where we had very key ingredients, which were like very important for our company, where the stocks we had raised to 3x levels, because of all these turmoils of transit, now that we have realized that everything has returned to normalcy. Even we have started reducing our stock in line with our pre-COVID levels.
Ankur Periwal — Axis Capital Limited — Analyst
Sure. And a second thing, you did mention that the RM prices are coming down and obviously there will be some pass-through of this RM deflation. Has it already started happening? And — or is it probably still sometime for that to happen?
Siddharth Sikchi — Promoter & Executive Director
No, it has already started. So what happens is when the market is soft and over that when the commodity prices are steeply followed, there is a very obvious expectation from customers to get a lower price.
Ankur Periwal — Axis Capital Limited — Analyst
Sure. The reason I asked that was that, you know, earlier, probably people would have or normally industry would have slightly elevated inventory and potentially there could have been some inventory — higher inventory — higher cost hitting inventory on the books. But in our margins that was not the case, even the gross margin expanded. So just curious on that side. So where I’m coming from is, is the gross margin expansion also only a function of RM deflation, lower RM costs or it’s also a function of better product mix?
Siddharth Sikchi — Promoter & Executive Director
Yeah. So Ankur, we don’t carry a very high inventory. It’s less than 30 days. So the gross margin benefit is because of the lower RM cost and of course, better product mix.
Ankur Periwal — Axis Capital Limited — Analyst
Okay. Fair enough.
Pratik Bora — Vice President, Finance
So we can get a much inventory gain, Ankur to say.
Ankur Periwal — Axis Capital Limited — Analyst
Yeah, perfect. And just lastly on the HALS side, 701 and 773 largely focusing on the domestic market, but you did mentioned expansion into Europe as a market and tapping the international customer. From a distribution network point of view, is it in place or it is work in progress and any time lines you can share there?
Siddharth Sikchi — Promoter & Executive Director
So 77 — sorry, 701, is not an Indian market product, it is mostly export. 770 is domestic. However, the point is that by December when we come up with the entire other basket, which will have global markets, so we are trying to start marketing and having distribution network globally. So by December, Jan, Feb, when we have these new products in line, the market network is already in place.
Ankur Periwal — Axis Capital Limited — Analyst
Sure. And have we started producing the samples for the other HALS range of products as well, which will go as a part of the pilot right now?
Siddharth Sikchi — Promoter & Executive Director
No, people are not interested in pilot samples, because these are very key ingredients in their supply chain. So they would want to test only the commercial samples and the same is the case with Indian suppliers also.
Ankur Periwal — Axis Capital Limited — Analyst
Okay. Okay, fair enough. That’s it from my side. Thank you.
Siddharth Sikchi — Promoter & Executive Director
Thank you, Ankur.
Operator
Thank you. Our next question comes from Abhijit Akella with Kotak Securities. Please go ahead.
Abhijit Akella — Kotak Securities — Analyst
Yeah. Good afternoon and thank you so much for taking my questions. Just a few things to clarify. One was on — has this 15,000 tonnes, should we expect that all of it comes on stream in — by December this year itself or will it be gradually spaced out thereafter?
Siddharth Sikchi — Promoter & Executive Director
See, what happens is in a chemical plant, when we set up a facility, we have to set up facility for the — I mean, if we have installed a capacity of 15,000, because it is very difficult to split into fragmented capacities. However, the utilization will be very low when we begin with, because, of course, the market has to absorb this capacity. So the installed capacity, the capex is already made for this 15,000 ton. However, the realization will start or as and when the market picks up.
Abhijit Akella — Kotak Securities — Analyst
Understood. And the total capex towards this entire 15,000 tonnes would be approximately how much?
Siddharth Sikchi — Promoter & Executive Director
Approximately INR300 crores, which also includes the site development, which I just discussed with the first question.
Abhijit Akella — Kotak Securities — Analyst
Sure. Understood that. And yeah, as you pointed out, it will take maybe three years to four years to fully sell out this 15,000 ton capacity, is that correct?
Siddharth Sikchi — Promoter & Executive Director
Yes.
Abhijit Akella — Kotak Securities — Analyst
Yeah. So probably FY24 we could maybe expect something like a 1,000 tonnes or so sales. And then FY25, I mean, would you have like some rough utilization number in mind?
Siddharth Sikchi — Promoter & Executive Director
Not like that, because FY23, the plant will only begin by December. The quarter four of FY24 will only go in sampling teething issues and all those things. So the real business will happen in FY25.
Abhijit Akella — Kotak Securities — Analyst
Right. Sure. Understood.
Siddharth Sikchi — Promoter & Executive Director
Yeah.
Abhijit Akella — Kotak Securities — Analyst
Also just to check with regard to growth drivers for the next two years to three years, besides the HALS range, you did mention in your opening remarks about a couple of other promising products. So are those likely to contribute significantly in the next couple of years, if you could — so if you could please share some color on that as well.
Siddharth Sikchi — Promoter & Executive Director
So I could — I do not want to disclose the product lines we are doing, but of course, they are into our segments of performance chemical intermediates for pharma, agro. So there is an additional capex of INR200 crores, which we have lined up for these additional businesses, which I think we will start. Construction will commence from July, August this year. And these plants will all probably begin by mid of next year. So that is additional growth driver apart from HALS.
Abhijit Akella — Kotak Securities — Analyst
Right. This is made of FY25?
Siddharth Sikchi — Promoter & Executive Director
Yes.
Abhijit Akella — Kotak Securities — Analyst
Okay. Understood.
Siddharth Sikchi — Promoter & Executive Director
And these are none of the existing products more or less. These are all new products.
Abhijit Akella — Kotak Securities — Analyst
Sure. I got it. What about the capacities of the existing products itself, like MEHQ and BHA, et cetera that we have debottlenecked? Do we still have some leeway to grow over there and could those also contribute over the next two, three years?
Siddharth Sikchi — Promoter & Executive Director
Yeah, of course. So we have the leeway. There is still open volumes which we can supply and at any given point, if we see for some reason that these capacities are fully utilized, there is always an option to replicate the plants capacities in our Unit 4.
Abhijit Akella — Kotak Securities — Analyst
And the demand weakness that we’re seeing for the time being is that across the product range or is it concentrated to specific end use industries and products?
Siddharth Sikchi — Promoter & Executive Director
See, typically some of the products are doing well, some of the products are slow. So it’s a combination of both parts.
Abhijit Akella — Kotak Securities — Analyst
Okay.
Siddharth Sikchi — Promoter & Executive Director
And these are cycles, these keep changing. I mean, after a quarter or after two quarters, some of the businesses will start — they will pick up, some of the businesses will be slow. So it’s a really combination of all of them.
Abhijit Akella — Kotak Securities — Analyst
Yes. Understood. Is there an expectation that we need to pass on some of the raw material cost savings we have had starting the next quarter or so? Maybe like just a timing gap between the fall in raw material cost and negotiation of finished good prices downwards?
Siddharth Sikchi — Promoter & Executive Director
Yeah, that was mentioned that there is a combination when the commodity prices have sharply fallen. And then the demands are slow. I mean, our customers also excited because their customers are also expecting lower prices. So it’s a cycle and we have — and we are part of it.
Abhijit Akella — Kotak Securities — Analyst
Okay. Got it. Thank you so much and wish you all the best.
Siddharth Sikchi — Promoter & Executive Director
Thank you so much.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of Krishnan Parwani with JM Financial. Please go ahead.
Krishnan Parwani — JM Financial — Analyst
Yeah. Hi Siddharth and Pratik. Good evening, and thanks for taking my question. So just two clarifications on the previous question. So one is, we understand that you would not like to disclose the name of the products, but just wanted to understand the chemistry that probably those products was entailed and our model would be the same, would it be to focus on differentiated processes?
Siddharth Sikchi — Promoter & Executive Director
Yes. So these are newer chemistries, which we are doing. And these are also catalytic processes. These are — some of the products also have zero discharge, zero effluents. So the concept overall remains the same. And I think that is what we are going to take forward.
Krishnan Parwani — JM Financial — Analyst
Understood. And sorry, I think I’m not sure whether you’ve given any update on PTC. I mean, is it — are the problems resolved on the PTC side?
Siddharth Sikchi — Promoter & Executive Director
Not yet, boss. Not yet.
Krishnan Parwani — JM Financial — Analyst
Okay, thanks. And just one last one. On the capex front, I think you mentioned about INR200 crores of capex. So basically, can you break it down for like ’24 and ’25, what would be the number — I mean, capex number for the full year?
Pratik Bora — Vice President, Finance
Yeah. So Krishnan for this year we are guiding for a capex of around INR180 crores, FY24. This will go further for these new products, which will largely be during second — last quarter of — before or FY25.
Krishnan Parwani — JM Financial — Analyst
Okay. Perfect. Thank you so much for answering my questions. All the best. Thank you.
Operator
Thank you. Our next question comes from Rohit Nagra with Centrum Broking. Please go ahead.
Rohit Nagra — Centrum Broking — Analyst
Yeah. Thanks for the opportunity. Sir, on the new set of products, so the HALS series. Will our working capital requirement go up and given that we are also targeting the exports market, so will we have to keep our inventory levels elevated given that there will be some transit time? Thank you.
Siddharth Sikchi — Promoter & Executive Director
No nothing.
Rohit Nagra — Centrum Broking — Analyst
Okay, got it. And in terms of the new products that you just talked about the INR200 crores capex, so will it also have a similar kind of raw material basket or — and which can be sourced from domestic market or we will have to depend on imported raw material?
Pratik Bora — Vice President, Finance
That will be a combination of both.
Rohit Nagra — Centrum Broking — Analyst
Right, sure. That’s all from my side. Thank you, and best of luck.
Operator
Thank you. Our next question comes from Arun Prasath with Avendus Spark. Please go ahead.
Arun Prasath — Avendus Spark — Analyst
Thanks for the follow-up indeed. Sir, I just wanted to talk about PBQ. Have we completely exhausted the capacity here and how is the domestic market looks like? And what else you are seeing in the export opportunity in this PBQ? Can you please scalable how big this molecule in the export market? Some color on the PBQ.
Siddharth Sikchi — Promoter & Executive Director
So PBQ is majorly an agro business. Right now that agro business is a little on a slower side. So we have, I mean, unused capacities and we are also now up to — I mean, we are supplying already to some European customers. And I think the volume growth will — I mean, I hope that we will see the volume growth probably in the quarter three this year.
Arun Prasath — Avendus Spark — Analyst
Okay. There is no domestic customers for this product?
Siddharth Sikchi — Promoter & Executive Director
There is major domestic customers, but ultimately these are all agro-based customers and the demand is slow with these agro customers.
Arun Prasath — Avendus Spark — Analyst
Right. Understood. And secondly on MEHQ. We are very confident that whenever the demand comes in, we will be able to add — replicate the existing plant and add capacities. Is it because others are not adding capacity in this product? Are we the only player who is going to add capacity in this, especially given the European players, looks like they were nowhere in the mode of adding capacity?
Pratik Bora — Vice President, Finance
See, it’s a very difficult question for me to answer on what others are trying to do, because we keep hearing a lot of names who are trying to get into this business. Our businesses to be as sharp in our price we have and try to get as much market share if we can. And when I said that the moment we realize that we are running out of capacities, because we do not want shortages of these products in the market, we can add up capacities in a time frame of nine months because we have done this already 3 times in our history.
Arun Prasath — Avendus Spark — Analyst
Okay, understood. And lastly on the new set of products that you are going to start constructing in this year, what is the end product category for these products?
Siddharth Sikchi — Promoter & Executive Director
So some will go into performance chemical category. These are series of products. Some might go into water treatment chemical, some might go into pharma intermediates.
Arun Prasath — Avendus Spark — Analyst
When you say, performance it is again into the polymer or any other category?
Siddharth Sikchi — Promoter & Executive Director
So in performances, I mean there are inhibitors again, so they will be used in a variety of industry.
Arun Prasath — Avendus Spark — Analyst
Okay. But not concentrated for — in the polymer.
Siddharth Sikchi — Promoter & Executive Director
No, not specifically into polymer.
Arun Prasath — Avendus Spark — Analyst
Okay. And this set of new products, what is the capex we are planning for these set of products?
Siddharth Sikchi — Promoter & Executive Director
Approximately INR200 crores.
Arun Prasath — Avendus Spark — Analyst
And similar asset turns and margins, that is what you’re anticipating?
Siddharth Sikchi — Promoter & Executive Director
Similar asset turn, yes. More or less once these products reach those case. And margins, I think these margins, we will have to [Indecipherable] parent business these margins came up after couple of years because of our improved yield efficiencies, getting premium customers on board. So it will always be a combination.
Arun Prasath — Avendus Spark — Analyst
Understood. Thanks, Siddharth. Thanks for the clarification.
Operator
Thank you. [Operator Instructions] Our next question comes from Ankur Periwal with Axis Capital Limited. Please go ahead.
Ankur Periwal — Axis Capital Limited — Analyst
Yes, Siddharth. Hi. Just few clarification and Pratik if you may pitch in. So the capex for facility four is INR180 crores, wherein then will have the full HALS plant up and running. And the second round of capex is INR200 crores, which is over and above the current capacity getting into new performance chemicals et cetera, right?
Siddharth Sikchi — Promoter & Executive Director
For the new products, right.
Ankur Periwal — Axis Capital Limited — Analyst
For the new products. So FY24 is INR180 crore capex, which will be largely HALS and then this INR200 crores odd for the new performance chemicals will be FY25?
Pratik Bora — Vice President, Finance
It will start partially in FY24, but by mid of FY25 will end these — I mean these products will be online.
Ankur Periwal — Axis Capital Limited — Analyst
Sure. So the revenue from these, let’s say, INR200 crore capex into performance chemical will start, let’s say in H2 of FY25.
Siddharth Sikchi — Promoter & Executive Director
Correct.
Pratik Bora — Vice President, Finance
FY26, yeah.
Ankur Periwal — Axis Capital Limited — Analyst
Yeah, fair enough. And any — if you can share product approval time frame over here, will it take three months, six months or it’s already work in progress?
Pratik Bora — Vice President, Finance
Some of the products will be very quick, because we are absolutely aware of those markets. We are aware of the customers and would be a little newer customers, so that might be between three to six months time frame. And our product will be far quicker, because we are already into anti-retroviral and this is also a product, which goes into anti-retroviral and we are going to replace the Chinese source. So I think that could be a little bit more quicker.
Ankur Periwal — Axis Capital Limited — Analyst
Yeah, that was my next question that are these products replacement of some existing vendor with either Indian or International?
Pratik Bora — Vice President, Finance
I realize that you would ask this. So I thought, I’ll answer it. Go ahead.
Ankur Periwal — Axis Capital Limited — Analyst
Sure, And the asset turns as you mentioned are similar to the current business?
Pratik Bora — Vice President, Finance
Between 2.53, yeah, so it’s true.
Ankur Periwal — Axis Capital Limited — Analyst
Okay, that’s it from my side. Yeah. Thank you.
Siddharth Sikchi — Promoter & Executive Director
Thank you so much.
Operator
Thank you. Our next question comes from Abhijit Akella with Kotak Securities. Please go ahead.
Abhijit Akella — Kotak Securities — Analyst
Yeah. Thanks so much for taking my follow-up. Just one clarification with regard to the economics, we should expect on the newer products in general. So while I understand that the margin profile on these will be significantly lower than and what the parent company makes at least in the initial few years. From an ROCE perspective, how attractive would you say they would be? Would they be even more or less in the same ballpark as the parent company business or how would you see that trending over the next few years?
Siddharth Sikchi — Promoter & Executive Director
Yes. Abhijit, again as the capacities reach out to optimum utilization level, the endeavor is to club the ROCEs with the parent companies clocking. And then it will be again combination of asset turn which we are guiding for between five years to three years, but the margin — I mean, asset turn into margin, right, ROCE. So the margin profile as we have been guiding that as we penetrate into these markets as we get those premium customers as the utilization increases then the margins will start kicking in and hence ROCE is — but we are optimistic of 50% level as it is playing out in the parent company.
Abhijit Akella — Kotak Securities — Analyst
Understood. Got it. And in each of these products that we are entering, we are confident that we have some sort of technical edge that’s a prerequisite for us to get into these products. Is that a correct understanding?
Siddharth Sikchi — Promoter & Executive Director
More or less yes.
Abhijit Akella — Kotak Securities — Analyst
Okay, thank you so much and all the best.
Siddharth Sikchi — Promoter & Executive Director
Thanks.
Operator
Thank you. Our next question comes from Chetan Thacker with ASK Investment Managers Limited. Please go ahead.
Chetan Thacker — ASK Investment Managers Limited — Analyst
Good evening, Siddharth.
Siddharth Sikchi — Promoter & Executive Director
Good evening, sir.
Chetan Thacker — ASK Investment Managers Limited — Analyst
Yeah. Sir, just wanted to understand one thing, a small clarification. So FY24 revenues will be largely from our existing product basket. ’25 is when HALS starts to kick in and that ramps up over the next three years and mid of ’25 we get these new products, so that should start kicking in from mid ’25, ’26 largely that is a fair understanding?
Siddharth Sikchi — Promoter & Executive Director
Fair understanding. Only thing is the HALS, of course, the plant which have already commissioned for the 770 and 701, those will be additional in this year in this FY24.
Chetan Thacker — ASK Investment Managers Limited — Analyst
And sir, what is the total capacity of this 770 and 701, that has already been commissioned?
Siddharth Sikchi — Promoter & Executive Director
2,000 tonnes per annum installed capacity.
Chetan Thacker — ASK Investment Managers Limited — Analyst
Once the expanded comes in, the other unit comes in the total reach is 10,000.
Siddharth Sikchi — Promoter & Executive Director
15 plus 2.
Chetan Thacker — ASK Investment Managers Limited — Analyst
15 plus 2. Okay, great, sir. Thank you so much. Thanks a lot. All the best.
Operator
Thank you. Our next question comes from the line of Tanuj Mehta, an Investor. Please go ahead.
Tanuj Mehta — Individual Investor — Analyst
Yeah. Sir, good evening. Few of my questions have been answered. I just had a very broad question that seeing the way we are clocking our margins, which are nearly industry high, you know that some of our customers come to us for negotiation because you seeing that our margins are high as compared to what others make in the industry.
Siddharth Sikchi — Promoter & Executive Director
So when I also see some of my raw material suppliers clocking very high margins, I cannot go and tell them because the margins or the prices are related to the market prices. So if they are getting at a cheaper price than mine then there is a negotiation, if they do not get a better cheaper price environment, then there is no negotiation in that.
Tanuj Mehta — Individual Investor — Analyst
Okay, that’s it from my side.
Siddharth Sikchi — Promoter & Executive Director
Thanks.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Siddharth Sikchi — Promoter & Executive Director
So once again, thank you so much for taking time out to hear our earnings call. I hope I have been able — we enter peak — have been able to answer all of your queries and looking forward to, again speaking to you after our Q1 FY24. Thank you so much and have a great evening guys. Thank you. Bye-bye.
Operator
[Operator Closing Remarks]