Gujarat Fluorochemicals Limited (NSE: FLUOROCHEM) Q2 2025 Earnings Call dated Oct. 29, 2024
Corporate Participants:
Bir Kapoor — Chief Executive Officer
Kapil Malhotra — Business Head of Fluoropolymers
Akhil Jindal — Group CFO
Unidentified Speaker
Analysts:
Nitin Agarwal — Analyst
Rohit Nagraj — Analyst
Ketan Gandhi — Analyst
Arun Prasad — Analyst
Sanjesh Jain — Analyst
Unidentified Participant
Yash Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Gujarat Fluorochemical’s Q2 FY25 earnings conference call hosted by DAM Capital Advisors Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Nitin Agarwal. Thank you and over to you, sir.
Nitin Agarwal — Analyst
Thanks, Good afternoon, everyone. And a very warm welcome to Gujarat Fluorochemical’s Q2, post results Q2 FY25 earnings call, hosted by DAM Capital Advisors Limited. On the call today we are representing Gujarat Fluorochemicals Management, Dr. Bir Kapoor, Chief Executive Officer and other senior members of the management team. I will hand over the call to Dr. Kapoor to take it forward from here, and then we’ll open the floor for questions after his opening comments. Please go ahead, sir.
Bir Kapoor — Chief Executive Officer
Thank you, Nitin. Good afternoon, everyone, and a very warm welcome to all of you on GFL’s earnings call for the quarter ended 30th September 2024. I have with me here a management team including Mr. Akhil Jindal who’s our Group CFO; Mr. Manoj Agrawal, CFO of GSL and Mr. Kapil Malhotra, who is our Business Head of Fluoropolymers. The company announced its quarter 2 FY25 results at its Board meeting held today on 29th of October, 2024. The results along with the earning presentations are already available on the stock exchanges and on our website. I will briefly talk about the numbers and then give you an update on the business operations and outlook.
The company reported a consolidated revenue from operations for Q2 FY25 at INR1,188 crores, which is up by 1% on quarter and quarter basis, and up by 25% on year on year basis. Consolidated EBITDA for the period was INR295 crores, which is up by 13% on quarter and quarter, and up by 80% on year on year basis. The EBITDA margin for this quarter was 25%, which is up from 22% in the previous quarter. Consolidated PAT for quarter 2 FY25 was INR125 crores which is up by 12% on quarter and quarter basis. And up by 133% on year on year basis. The higher depreciation and interest expenses are on account of the higher capexes incurred primarily in the EV vertical. Once the revenue from this segment reaches optimal levels, the overall profitability and return ratio will significantly improve. We believe that going forward with capacity utilization picking up, operating leverage will kick in and will drive profitability and improve our return ratios. Once again, primarily from the battery chemicals vertical, along with pickup in fluoropolymers, where we are continuously moving up in the value chain with higher value added products.
Let me briefly take you through the performance of each business segment for the quarter. During the quarter, the production in the bulk chemical segment was around at full capacity, barring few days losses due to planned maintenance. Caustic prices, which have remained stagnant at lower level have now started moving up, and now we expect to see a significant improvement by quarter 4 FY25. MDC prices have also improved marginally during the quarter and we expected to come up, going forward. Within the fluorochemical segment, refrigerant prices have marginally improved during the quarter and are expected to further improve going forward. Specialty chemical remain muted during the quarter. However, margins and volumes are likely to improve from Q4 FY25 onward.
Let me talk about fluoropolymers. Fluoropolymer segments have shown a healthy improvement on year on year basis. While on the quarter on quarter basis, the revenue remains flat, this segment witnessed significant improvement in margin as well as revenue mix, which has changed towards higher value added rates of fluoropolymers. In new fluoropolymers over the past three quarters, we have been focusing on high value added grade and new fluoropolymers while exiting some of the fluoropolymers in the lower end segments. Elaborating on the above, qualification for our high value added grade fluoropolymers, which is used in automotive sectors and which is being driven by the government’s trust on increasing the proportion of ethanol blending, we have witnessed — we have achieved a qualification in this segment. Further, the grades required for semiconductor and EV sectors have also been developed and the qualification is in final stages. Overall, these developments should result in incremental revenues and better margins going forward. The exit of one of the legacy players by December ’24 will lead to substantial incremental business from quarter 1 FY26 for the higher value added fluoropolymer grades. There are encouraging signs of improvement in all three segments, bulk chemicals, fluorochemicals and fluoro polymers. which are expected to report growth and better margins from Q4 FY24, FY25 onwards.
Let me give you a quick update on the battery materials business, which is catering to EV and ESS segments. As you may be aware, that GFCL EV is one of the leading companies outside of China who have such a wide product range of battery materials, and it’s close to commercial production stage. With IRA regulation in the U.S., we expect good traction of our product in the U.S. markets. We have recently raised INR1,000 crores in our subsidiary, GFCL EV, at an equity valuation of INR25,000 crores, which is a validation of our capability and strong outlook in this segment. This fund raise is the first step towards meeting our capex requirements for the new business under GFCL EV.
In terms of the product portfolio, we are ready with our initial capacity for salt, which is LIPF6, electrolyte, PVDF binder, and additive. Also, we expect our LFP plant to come online in quarter 4 FY25. It is encouraging to note that our factory salt plant has reached the global quality benchmark. and is currently undergoing the ramp-up phase. As we are in the commercial ramp-up stage, the frequency of customer visits and audits from many of our customers have increased and product validations are underway. Initial validations have achieved positive results and discussion with few customers are moving towards commercial agreements closures. We expect commercial supplies to commence from quarter 4 FY25. With the impending commercial agreements, we believe that the capex intensity is going to increase further. And we expect to complete the cumulative CapEx of 5,000 crores by FY27 and cumulative CapEx of INR6,000 crores by FY28, which we indicated earlier. For this, our guidance continues at two times for the asset turnover and 25 times — 25% EBITDA margin or at optimal utilization level.
In conclusion for GFL as a whole, we are seeing a continued improvement in our financials. The slowdown in Europe and adverse business cycle have, however, impacted H1 and delayed our recovery with respect to our earlier plan. However, in view of the initiative which we have taken in the fluoropolymer segment and expected favorable changes in the market, we are expecting a substantial improvement for Q4 FY25 onwards.
With this, I would like to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question comes from Rohit Nagraj from Centrum Broking. Please go ahead.
Rohit Nagraj
Yeah, thanks for the opportunity. Also, first question is regarding the three segments. You have given, you know, substantially positive and optimistic outlook across the three segments. So just talking about individual segments on the commodity bulk chemicals, I think there is still lower capacity in the domestic market. So why we are seeing that there will be improvement in pricing. On fluoropolymers, as I suppose, globally auto is currently under slowdown. So again, why there is a positive, I mean, it is only related to one of the mobile players shutting down capacity and third in terms of fluorochemicals again on the ref gas, the pricing is still denying. Plus, there is availability in the market and fluorochemicals I think there are supplies coming from China. So what gives us confidence that things will start improving from only ’26? That’s my first question. Thank you.
Bir Kapoor
Thanks Rohit. Some of these points I touched upon in my opening statement. Let’s talk one by one. First is the bulk commodity where we are seeing strengthening of caustic prices, partly because of the improvement in the downstream demand for it, and also global caustic prices are coming up. Okay. And in our case, where we are fully utilizing employees, it’s a positive when the caustic prices improve. Coming to fluorochemicals. the fluorochemicals specialty chemical, of course, is a very small segment for us where we have seen intense competition from China earlier. However, going forward, we are expecting some improvement in the demand in downstream and agrochemicals, which we expect to improve next, the quarter 4 and FY26. In refrigerant case, what our reading is right now that as you know, that the quotas are being cut for R-22 significantly from next year onwards. And based on our past experience, with the reduction of quota, there’s always a significant hardening of prices. And based on our past experience, we expect to see a positive movement in terms of pricing as well as also the volume.
Coming back to fluoropolymers, you talked about the automotive segments and you talked about the automotive segment. When we look at our own product portfolio, we are looking at the specific product segments where we have a strength and there are new applications which is emerging, particularly what we talked about earlier was ethanol blending. Now as the automotives are moving towards ethanol blended fuel, there is a requirement for fluoropolymers at the new application, which is not there. So based on these things our growth that we are projecting or what we expecting the positive movement is with respect to the product portfolio and the grade, and the new polymer segment in which we are playing together. So this is what we have. And I would request Kapil that would like to add any point. Kapil Malhotra is our Business Head at fluoropolymers.
Kapil Malhotra
Thanks, Dr. Kapoor. Rohit, in fact, whatever Dr. Kapoor has said, is absolutely true in fluoropolymer segment. And even in the automotive segment, the demands are pretty steady. And as the ethanol blending takes away from 1st April next year in 2025, so we expect the demand to come forward from January itself onwards. And most of the grades which we are talking about, we’ve only got qualifications from our customer’s tier 1, tier2 and with OEMs over there. So that’s a positive statement which we have made, and we’re looking forward towards it in the future.
Bir Kapoor
And one more thing that you asked about, Rohit, is about the legacy player going out. So while we have been saying the legacy player, but what we expect the full impact of that to be visible in FY26. Because the production of this legacy player is actually going to end only in December ’24. So while we were expecting, impact of that to be visible several quarters back, but unfortunately it has slowed down. And now we expect to see it ramping up and also in last several quarters, we have had our qualifications of our product approved with those customer segments. And we are fully ready right now to capture the demand that is being, that is going to be created by the production cut or the lack of volume availability from this legacy player.
Rohit Nagraj
Sure. This is helpful, sir. The second question is on the GFCL EV business. So we currently have invested 700 crore rupees. Again, one clarification, so effectively, considering the 2x asset turnover, it should yield us about 1,400 crores of revenues at 25% EBITDA margin. Is that understanding correct on this business?
Bir Kapoor
Broadly it is correct, Rohit. Let me give you a slight clarification on this. First of all, there is a period within which the qualification happens and when the asset comes in line. The optimal volume, which gets, utilization volume, which takes typically in the beginning, it takes longer. I would say four to six quarters. However, at the latest stage, this process actually is more rapid. So we are still maintaining as a turnover too. However, it has to be, you know, there’s a lag period between the time when we make this investments and the full optimal utilization is achieved.
Rohit Nagraj
Okay. Right. And just one clarification on this. So the existing fluoropolymer business, which we are reporting, it does not form part of GFCL EV, right?
Bir Kapoor
No, no, it does not.
Rohit Nagraj
That’s all from my side. Thank you. And all the best.
Bir Kapoor
Thank you, Rohit. Thank you.
Operator
Thank you. Participants, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two. If you have any follow up questions, you can rejoin the queue. The next question comes from Ketan Gandhi from Gandhi Securities. Please go ahead.
Ketan Gandhi
Sir, thank you so much for restructuring of the holding company of the GFL group, whereby after 20 years, you are unlocking the value, the huge value creation for the shareholder of the minority shareholder of the holding company. I think very few management takes care of their, you know, loyal shareholders by this kind of a demerger. So thank you so much for that. And sir, while de-merging this, we are doing some structuring regarding the wind business of the fluoro. So GFL will have any positive impact while this doing this restructuring.
Bir Kapoor
Thanks, Mr. Gandhi. I will let Akhil take this question, please.
Akhil Jindal
Yes. By virtue of this demerger, this is referred to make a premium structure where the ownership of GFCL will go directly to in the hand of the ultimate shareholder, which is the promoter. And to that effect I guess you know, the structure would become much more clear. And to that effect holding company of GFCL will be just holding the GFC assets rather than the combined and the mixed assets. I believe that going forward this would enable us to have a better distribution policy. It would enable us to have more funds go in the hand of all the shareholders. Because as and when the company becomes more and more cash positive, the intent is to move on to a distribution and a much firm dividend policy. So this is the positive effect that the shareholders of GFCL will see on a day to day basis. And this is our effort to clean up the structure without affecting the shareholders of GFL directly.
Ketan Gandhi
I understand that, sir. But my question is not pertaining to this. My question is, does GFL have any asset which will be merged into the holding company whereby we can get some kind of a, you know, cash infusion?
Akhil Jindal
No. That’s not the case because the holding company was — it was a holding company and it was having investment of two different companies which is now being claimed.
Ketan Gandhi
Okay, thank you. I have some more questions. I’ll join back in the queue.
Bir Kapoor
Thank you.
Operator
The next question comes from Arun Prasad from Avendus Spark. Please go ahead.
Arun Prasad
Good evening, good afternoon. Thank you for the opportunity. Dr. Bir Kapoor, the first question is on this production stockage of this large customer where we are confident that the fluoropolymer segment will grow. My question is how do you get this confidence that — so we have other competition also which is still, will be running. So, do you think that the redistribution of this volume to the remaining players will be in a fairer manner? And what kind of a fair share that you are expecting from this, from this stockage.
Bir Kapoor
Thank you so much, Arun, for asking, and I’ll make one comment and then let Mr. [Indecipherable] answer this. I think the confidence that we have is coming from the fact that we have already been qualified in a number of the customers who are currently taking product from this, you know, that we are talking about.
Unidentified Speaker
In fact, in the last investor call also, I had mentioned, that we are moving towards the higher value added grades and also the legacy player who is exiting is also in the higher value added grades. The benefit which we get is that we are moving to those applications where the space created by this legacy player is also fulfilled by us. And we expect a very good market share as a lot of our products which were drop in have already been approved. We have already started getting the businesses. And the other products which were being evaluated have either qualified or are under the advanced production qualifications. So by Q4 2025, we are expecting the incremental business to start coming much more rapidly. And we expect that market share is going to be good as the other two players and we people are forming the three major segments where we are going to compete with each other. So we are going to expect a very good market share over here.
Arun Prasad
Going by what you said we are expecting a fair share of 33% from this player’s volume. Is it the right target.
Unidentified Speaker
Yeah, that’s a fair estimate, but it can be even better also because we are definitely trying to go for applications.
Arun Prasad
Is there any chance where we could be getting less than the fair share? Because we are probably from the different region and the local players would get preferential treatment from the customers?
Unidentified Speaker
No, I don’t think so. And we have a pretty good place in the market with the customers. Pretty well placed.
Arun Prasad
Secondly we spoke about this R-22 price increase after the quota begin, as you said, next year. When the R-22 price increases, typically that’s the downstream fluoropolymer price also goes up or it remains same and indirectly the spreads become contracted. How does this happen usually when the quota resets and the price goes up?
Bir Kapoor
So in our case, Arun, the situation is that it’s possible that there may be a — the R22 Is linked to one of the fluoropolymer. You cannot put all the fluoropolymer because a lot of polymers are have a different [Indecipherable] you know, it’s only the PTFE part. So it’s possible that with forming it up, that might be a change. However, for us, as we are backward integrated and also the R-22 is a small part of the cost overall for us. So, I don’t think there will be a significant impact on that overall margin squeeze.
Arun Prasad
Okay. The reason why I’m asking is when there is a volume decline that is usually compensated by the price increase of the end request, but in case of the integrated player this this is unlikely to play because unless and until the end product price also goes up. We will, as an integrated player, we stand to lose. Is it right estimation?
Bir Kapoor
Let me just clarify one more point here because the R-22 again has, it’s used as a feedstock and also used as a refrigerant. So price increase that we are talking about is in the refrigerant segments only, okay? Because the feedstock segments typically is is also under control segments and it may not have it.
Arun Prasad
Okay, so we will be diverting our ref gas volumes to the feedstock segment when this quota gets implemented.
Bir Kapoor
Sorry, Arun. We missed the last sentence that you said. I’m sorry.
Arun Prasad
Sorry. I was asking. So when this quota gets implemented, we will be shifting the volumes from the ref gas segment to the feedstock segment, right?
Bir Kapoor
Not really, because the ref gas allocated quota for us is anyway is fixed. And separate the — because for feedstock you know, it’s coming from our different plants. So it’s — I don’t think it impacts.
Arun Prasad
Understood, sir. So finally on the battery side you said on the Li-salt side the commercial agreements are are in the stages of closing stage. Can you just give us some understanding how many of these customers have a live operating plant where they can take this salt and ramp up their facility and then same as on the LFP cathode side, you said that Q4 will be starting but how many of your customers have a plant which can start consuming these products of ours?
Bir Kapoor
So Arun, most of the customers that we are talking to today have an operating plant. Again, this we are talking about a global set of customers. These are customers who already have ongoing plant, and a lot of it is somehow looking at de-risking their supply chain. So that’s one of the key part which I stated earlier. So they would like to de-risk it from a dependence on country. So I cannot really give you much detail on the customers, but I can tell you that the most of the discussion that we are having today are with the customer who are already using salt. And also in case of LFP they’re starting to ramp up their requirements. And LFP will take some time because there’ll be a qualification period involved in LFP It is just being a CAM material.
Arun Prasad
Understood. Can you give the combined capacity, manufacturing capacity of these customers? I’m not asking for the individual customer level, but the combined capacity, battery capacity of these players, customers with whom you are talking right now?
Bir Kapoor
It would be difficult for me to give, because when we talk about the market, we talk about the U.S. market, which is at several hundred gigawatt hours at the moment.
Arun Prasad
Understood. Thank you very much.
Operator
Thank you. [Operator Instructions] The next question comes from Sanjesh Jain from ICICI Securities. Please go ahead.
Sanjesh Jain
Hi. Good afternoon, sir. First of all, I do apologize, I got into the call late. Some of the questions may be interpreted in which case, you can choose not to answer it. I will read the transcript. Question on the gross profit margins. There is a good 200 basis point improvement quarter over quarter. If I look at the revenue mix that really hasn’t changed much, and absolute revenue has also been not to an extent which can drive 200 basis point. What has really led to sudden sharp increment in the margin. That’s number one. Number two whether it is sustainable and are there more headwinds?
Bir Kapoor
What was the last statement? Sorry, Sanjesh. The last sentence that you said is…
Sanjesh Jain
Is the margin sustainable? Is this margin sustainable? And are there more scope to improve it?
Bir Kapoor
So any more questions? Shall I answer?
Sanjesh Jain
I will take one by one, because probably I came late, so I have a little bit more time.
Bir Kapoor
So, as we had indicated, that a lot of it is, as we are moving into the new fluoropolymers, our effort has always been to go up the high value added product grades where the margin is higher. So what we are seeing today is the result of what we have been talking about earlier. And moving towards a higher value added fluoropolymers and also which is in the new fluoropolymers grade. So, that’s the change of the product mix. And coming out of some of the lower value add segments is what is resulting into a jump in this overall margin that we talked about. And we believe it is sustainable because of the sticky nature of the business. And as we are getting more and more into these high value add segments, we expect these margins to be stable and sustainable.
Sanjesh Jain
Yes. And just now that we are this calendar year how are your discussion with your customer for next calendar year for fluoropolymer. We have an ambition to reach 2000 crores or 3000 crores of EBITDA by end of this fiscal year. And our exit run rate. Are we on course for that? And a growth from there is possible? That is the other one.
Bir Kapoor
Yeah. I think that one of the reasons why we have been talking positively about fluoropolymers is because ongoing discussion with our customers is quite positive, and that’s where our confidence emitting from. So I’ll let Kapil also add on to this point.
Kapil Malhotra
Yeah, you are absolutely right and we have been also maintaining the same statement throughout. And we have started seeing the results of that and from the next quarter we’ll start seeing results further on as the opening up of the new sectors, new applications in the semicon business also keeps on getting added. And as we said that we are under advanced stage of qualification and already got some qualifications with the customers. And whatever discussions we have been having on the business front with the customers, it is going in a very, very positive direction.
Sanjesh Jain
Very clear. A related point, we did push back the capex last year when things were softer. How does the capex pipeline look like? Are we completed the fluoropolymer capacity expansion from 700 to 1700 metric tons per month? We were looking at debottlenecking PTFE by 3000 metric tons per annum. And again, backward integration which we see. Where are we in all these capex cycles? And what is the plan for next year?
Kapil Malhotra
We are more or less completed those capexes that we are talking about. Except some of them, which I had mentioned earlier, we had delayed or staggered, particularly some ratios in PVDF, for example, where we have some capacity, but we have not added the full capacity there. Because we are waiting for the market to pick up and then add. We are prepared in terms of the monomer capacity being in place. However, on the downstream side, we have held back yet. However more or less if the new polymer capacity that we had projected we are more or less there except for PVDF.
Sanjesh Jain
And next year’s capex will be?
Bir Kapoor
It’s, I would — give us a quarter. We can tell you more about next year capex but right now, of course, you know, the focus is to to build the EV business and add capex there and rapidly picks up. So, however, in fluoropolymers we are prepared with respect to our complete backward integration. And as we see market requirement coming up I think we are well prepared to add capacities. All of these capacities are now going to be instrument to looking at the market conditions.
Sanjesh Jain
Now talking about the battery chemical restructuring, I really didn’t get the restructuring part of it. Can you kelp us understand what exactly restructuring are we doing, that’s number one. Number two, now that we have raised INR1000 crores in battery chemical, which allows us to further do the capex in achieving AFDC [Phonetic] we’ve got the electric subsidiary side. How do we look at that part of the fundraisers and what is the objective of the fundraisers?
Bir Kapoor
I’ll let Akhil answer the restructuring part first and then we’ll talk about the funding and the fundraisers.
Akhil Jindal
I think as I explained in one of the previous questions, it’s a simplification of the structure rather than anything, you know, anything complex around it. It’s just that the alignment of shareholdings of GFL directly in the — and of the ultimate shareholder is what our ultimate objective is. Also, we want the simplification of the structure that the holding company currently is having different businesses, different holdings, which is also being simplified in this whole process. So in effect, there is no direct impact on the shareholders of GFL directly. When I mean shareholders, I mean the outside shareholders other than the promoter family. And obviously, it will lead us to a better distribution policy as we go along. On the second part, which is the fundraising, this has been done for the GFL EV and this all is being put to use for the capex plan for GFL EV business, as Dr. Kapoor mentioned. We have roughly around INR5,000 crores of investment planned up till FY ’27, out of which almost INR1,000 crore is already invested. So this INR1,000 crore will enable us to be funded for the period of next, say, 12 to 18 months. And then the cash — the internal accruals and other thing will also start. So I guess this is the main objective that EV should start standing on its own feet in terms of the capex planning and funding its own investments. And this is the first initiative that we have taken in this company to fund from the outside sources rather than the GFCL internally.
Sanjesh Jain
Got it. And what is this INR1,000 crore capex planned for in next 12 to 18 months?
Bir Kapoor
Yes, we have all the plans across we have raised right now. Okay. And the capex plan is — Sanjesh, we had given a broad number that INR5,000 crore by FY ’27 and INR6,000 by ’28. So it will be spread. And it would be difficult for me to say that what exactly, where exactly I will be spending INR1,000 crore or INR500 crore in next quarter or next four, five quarters. But the broad plan is what we have indicated. So INR1,000 crore raise is a step in that direction. It’s the first step as we mentioned in our opening statement. And capacity expansion applying to be mostly in the same product line that we talked about, which is which is salt and LFP plant and also electrolyte.
Sanjesh Jain
Got it, got it. So basically we have put up initial capacity and wherever we tie up for the larger capacity, that’s where the capex will be deployed. Will that be a right way to think?
Bir Kapoor
Exactly. That’s right. So basically, we have commercial scale. Our plan is to have all the products, the commercial scale plant ready and operating for qualifications, close the commercial deals and then expand or add capacities along with the customer requirements. This is the plan that will be.
Sanjesh Jain
Okay. And then you mentioned about certain things being put in the previous quarter, you did mention that Q3 onwards you will start.
Bir Kapoor
Sorry, once again I lost the last sentence, Sanjesh, please repeat that.
Operator
Sir, the line for Sanjesh, sir, has been dropped.
Bir Kapoor
Yeah, some problems. Okay. Thank you.
Operator
We’ll move on to the next question. The next question comes from Aditya Har from Sovilla [Phonetic] Investment Managers. Please go ahead.
Unidentified Participant
Good afternoon. My question was little more on the matter of — we’ve been facing pressure from China and you also spoke about situation in Europe. So can you throw a little more color on like how that has panned out and because the commentary is positive. So I just wanted to get some idea on that.
Bir Kapoor
Very difficult to — I mean, I’m sorry, could you come up again please? Yeah, and closer to your microphone, please.
Unidentified Participant
Yeah, yeah. So, is it better now?
Bir Kapoor
Yes, please, better. Yeah.
Unidentified Participant
So my question was more on the Chinese situation. So we’ve been facing a lot of pressure, especially because of the whole capacity there. And then you also mentioned today about the European market. So I just wanted to know how the situation has panned out and how is it right now like some color on how it is currently to get some idea of what we can expect.
Bir Kapoor
Yeah. So the way it is, yes, you’re right. And I presume you’re asking in context of battery chemicals. Is that right, Aditya?
Unidentified Participant
No, no. So fluorochemicals.
Bir Kapoor
See in fluoropolymers, obviously, we had a — are you talking about fluorochemicals?
Unidentified Participant
No, no, fluoropolymers
Bir Kapoor
So in fluoropolymers you know in most of the markets and the grade that we operate, we do not really have a direct competition with Chinese products. I think we have stated that earlier also. Clearly, having said that, you know, we have a competition with legacy player, established players and our effort in that segment has been primarily to go up the value chain, going and add high and higher value products. And we have been progressing in this journey for quite some time. And we believe that with the specialized material portfolio that we have in fluoropolymer is essentially — we are trying to capture the market, which is very, very-high end, whether it is the high-end of automotive segments or it’s the high-end of semicon or EV. So from that perspective, having a very high or the overcapacity on the fluoropolymer is not really the right reason for any kind of concern in the high value-added grade.
Unidentified Participant
Totally agree. So then my next question would be there was I mean a talk on the perfluoroalkoxy alkanes — the PFA then being banned. So what kind of message that would have?
Bir Kapoor
I presume you’re talking about the PFAS substances.
Unidentified Participant
Yeah, PFAS.
Bir Kapoor
PFAS, okay. So I think we have already given our view earlier also in the PFAS that PFAS is — it’s an area of concern. However, most of the regulatory authorities globally have taken a view that the fluoropolymers are not really are the PFAS of concerns because these are very long chain molecules, which do not actually migrate or are not going to the acos [Phonetic] medium. So fluoropolymers in a way are as a product is not really an area of concern related to PFAS.
Operator
Aditya, sir, you have any other follow-up questions?
Unidentified Participant
No, no. Thank you.
Operator
Thank you. The next question comes from Sanjesh Jain from ICICI Securities. Please go ahead, sir.
Sanjesh Jain
Sorry, I got dropped off previously. Welcome back. Thank you, sir. Just I was asking on the battery chemical side. You mentioned in the previous call and you also highlighted even in the previous responses that you are looking to get certain approvals in the next one, two quarters. And in the previous call, you mentioned that there is possibility of a commercial supply starting from Q3. Are we on course for that? We, I think said that our supply or the revenue from the battery chemical will start trickling in from Q4 onwards and we are still maintaining. Our products are at qualification stage still. We have — because there are several steps in qualifications. At this point of time in some of our products, we are in the final stages of qualification, which is actually in the battery testing. That’s where we are. So as soon as we get the qualification, we expect our suppliers to start because on the commercial front, Sanjesh, we are ready in terms of supplies. And how has been the product so far, what has been the responses? What has been the area of improvement? Where are we exactly in the product life-cycle of commercialization? That’s number one. Number two, on the LFP, how is that progressing? Are we on course again in the Q4 to commercialize the plant.
Bir Kapoor
So let me answer the first question that in terms of qualification, there are several stages. We are at the final stages of qualification. We are getting a very good traction. And you know that we started the our plant several quarters back and we have been working on getting the benchmark quality and we have achieved that now, in terms of having a global benchmarks, and also very close to getting qualified. Okay, we are at the final stages of qualifications. So from that perspective, I think we are getting a good traction because once we have a commercial plant which is operating, we have a sample in our hand, the customer traction is very, very different, Sanjesh. And we are getting a very, very good response from customers and we have engaged with a very large set of customers on this. Coming back to your question on LFP, LFP, our plant would be mechanically complete very close to the end of the year. So we are probably maybe two months behind, I would say. We’ll be having a — but we’ll still have our production being there in the quarter 4 of this financial year. LFP, however, being a CAM material has a longer qualification cycle compared to salt. So that process, we have already started with lab samples. And as our commercial plant starts producing, the final stage of sample will go from the commercial plant for qualification.
Sanjesh Jain
And plant performance in terms of yield, pricing, profitability, are we able to achieve what we would have envisaged and how it is versus, say, Chinese peers? So it’s — it’s a little bit too premature for me to talk about that, but I’ll definitely give you an update once we ramp up the full capacity and start our supplies. But we are going step-by-step.
Bir Kapoor
The first thing is to get the benchmark quality, then ramp up the capacity and then look at them. We have no doubt in our mind of not meeting any of the global benchmarks either in terms of operative quality, operability or the efficiency parameters.
Sanjesh Jain
Very nice to hear all those. Thanks, Bir, for bearing with me and answering all those questions so patiently. Thank you again.
Bir Kapoor
You’re welcome as always.
Operator
Thank you. The next question comes from Yash Shah from Investec. Please go ahead.
Yash Shah
Hi, sir. Thank you for the opportunity. Sir, I just had one clarification question. Earlier in the call, you said that we would like to self-fund our capex for the EV business and which will require capex of about INR5,000 crores by INR27 crore and INR6,000 crores by ’28. Does it mean that we’ll be raising more INR4,000 crore and INR5,000 crores respectively for the EV business? And if so, through what mediums have we planned on that? That’s all, sir.
Bir Kapoor
Sure. Thank you.
Akhil Jindal
So as we mentioned, we have already invested close to INR1,000 crores in this business from the parent. INR1,000 crores is what we have raised in the market as we declared a few weeks back and also on this call. We are in advanced discussion with a sovereign fund to invest around $100 million. So that’s going to be our another source. Plus as and when required, we will go for another round of INR800,000 crores through this initiative. What it would mean is that close to INR3,000 to — I mean, INR3,500 crore will be invested through these sources and the rest will be by way of an internal accrual as Dr. Kapoor mentioned that most of these capacities will start coming in and will start contributing and having a free cash flow to fund the further capex. So our overall plan is to raise up to INR3,000 crores, INR3,000 crores to INR3700 crores, including the INR1,000 that we have already invested, that means additional INR2,500 crore of — and the balance would be through the internal accruals.
Yash Shah
Sir, do we expect to have internal accruals of INR1,500 crores to INR2,000 crores by FY ’26 to incur capex in ’27.
Akhil Jindal
Possible because we are giving the guidance up till FY ’27 of total INR5,000 crores. And if we have already raised 3,700 crores through internal — including the GFCL contribution, INR1,500 crores should be possible through the internal accruals over the next 2, 2.5 years.
Yash Shah
Yeah. Got it, sir. Got it. And one more question, sir. Incremental to this capex, what will be — what is the capex guidance for our base business, bulk chemicals, fluorochemicals and fluoropolymers?
Bir Kapoor
Right now, I think as we had indicated in this year, INR500 crores is what we had planned, 500 in GFL and 700 in EVs. I think we will give you a guidance probably in the next to next quarter probably sometime in January about the plans for the GFL. Because again will be primarily on the fluoropolymer focused.
Yash Shah
Okay. Yeah, okay, sir. Perfect. Thank you very much, sir.
Operator
Thank you. The next question comes from Rohit Nagraj from Centrum Broking. Please go ahead.
Rohit Nagraj
Yeah. Thanks for the follow-up. Sir, just again talking on the capex front, you just mentioned that we have — the GFL has invested INR1,000 crores, but this year’s capex plan is INR700 crores. So why there is a disparity?
Akhil Jindal
So when you said INR1,000 is up in the total for the EV business, which includes the amount of money invested in the previous year also. But — so I said up-to-date, the investment in GFCL EV business by the parent is INR1,000 crores.
Rohit Nagraj
Okay. And this will remain static. There will not be any incremental investment now.
Akhil Jindal
I mean, we hope to fund it from external sources that we have done it now and that’s where I get most of the fundraising activities that are going on, which we also mentioned in our previous quarterly call that we have got a lot of traction coming from various investors to fund the EV business. And in that direction, we have already raised INR1,000 crore in this quarter. And as and when there would be fund requirement, we would be further tapping the market on that count.
Rohit Nagraj
Fair enough. That is helpful. Sir, just second clarification. Now historically, we had consolidated margins of closer to 30% for the GFL business. Incrementally for the EV business, it will be about 25% as you have indicated. So going forward, do we see margins in the range of 25% to 30% for the consolidated entity, including the EV business?
Bir Kapoor
Yes, I think, you know consolidated guidance that we had given was actually — yes, Rohit. So what you’re asking is I understand is that GFCL EV, we are saying 25% and in GFL, we have been talking about 30% to 35%. Is that right?
Rohit Nagraj
Correct.
Bir Kapoor
Correct. That’s what we have been saying, although at the current scenario, the margins are standing at around 25% for GFL as well. But with the increase in the high value add polymer, we expect it to go up.
Rohit Nagraj
Okay. So this is helpful. Thanks a lot.
Operator
Thank you. The next follow-up question is from Aditya Har from Sovilla [Phonetic] Investment Managers. Please go ahead.
Unidentified Participant
Yeah, hi. Thank you for taking my question. So like there was this regulation on the Inflation Reduction Act, right, from the U.S. and there they spoke about how they want to phase out a particular company from the whole supply chain, at least attempt to do that. So I just wanted to get a sense of how quickly is that transition — I mean, now that it’s passed, how quickly do you expect that the transition will happen.
Bir Kapoor
You mean transition for battery chemicals because of the battery material. Okay, yeah, one of the key requirements of the IRA is that the subsidies which is being given on EV products by U.S. government that subsidies the components and the battery components and materials which goes into making those batteries should not really come from FEOC countries. That’s the main reason. And so it should be. So there are two parts to it. One is related to components and assembly of battery components. And second is with respect to the critical minerals should not be from any of the FEOC country, which is foreign entity of concern, which they have indicated the name of the several countries there. So we expect as it’s evolving to some part, it’s basically IRA Act is started from January ’25 and then it will slowly kick in, in terms of percentages of the non-FEOC components. And also in critical minerals, there should not be any component from FEOC countries and these critical component being fluorine and lithium at the moment. So it will phase it in, but the way we see it is all the growth which is going to come in in U.S. markets are primarily is none of that growth or even some of the existing businesses will come from any of the companies which are associated with FEOC. So this will have a very significant and rapid impact in next two to three years.
Unidentified Participant
Do you see the timeline to be two to three years for the transition?
Bir Kapoor
Right. So in some cases, it has already started and in some cases, for example, like salt, they had given a two-year time-frame, which has actually fully kick in from January ’27.
Unidentified Participant
Okay. Got it. Thank you.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Bir Kapoor
So thank you very much, Nitin. And I would like to thank each and every one of you for being part of this call. As I had mentioned in my opening statement, we are although in last two quarters because of several reasons, the growth was not as we expected it to be. However, going forward, the traction that we are seeing in the market, particularly driven by the fluoropolymers market segment, we expect to see a significant improvement and we expect from FY ’26 to be significantly better. And I think that from now onward, we are seeing a continuous improvement and we expect this journey to continue. And certainly FY ’26 will be lot better than the FY ’25.
So with this, I would like to thank you all and thanks for your interest in GFL. Thank you.
Operator
[Operator Closing Remarks]